Docoh
Loading...

SSYS Stratasys

Filed: 5 May 21, 11:33am

Exhibit 99.1

STRATASYS LTD.

CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED

MARCH 31, 2021

(UNAUDITED)

 

1

 

 

INDEX TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2021

(UNAUDITED)

 

Item

 

Page

Consolidated Balance Sheets

 

2

Consolidated Statements of Operations and Comprehensive Loss

 

3

Consolidated Statements of Changes in Equity

 

4-5

Consolidated Statements of Cash Flows

 

6

Notes to Condensed Consolidated Interim Financial Statements

 

7-18

1

STRATASYS LTD.

CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(Unaudited)

Consolidated Balance Sheets      
(in thousands, except share data)      
   March 31, 2021   December 31, 2020 
       
ASSETS      
Current assets      
Cash and cash equivalents $421,398  $272,092 
Short-term Deposits  109,000   27,000 
Accounts receivable, net of allowance for credit losses of $0.9 million as of March 31, 2021 and December 31, 2020  102,780   106,068 
Inventories  124,199   131,672 
Prepaid expenses  10,345   6,717 
Other current assets  16,745   16,943 
Total current assets  784,467   560,492 
Non-current assets      
Property, plant and equipment, net  199,382   201,232 
Goodwill  38,074   35,694 
Other intangible assets, net  131,619   131,569 
Operating lease right-of-use assets  19,089   21,298 
Other non-current assets  43,299   39,717 
Total non-current assets  431,463   429,510 
Total assets $1,215,930  $990,002 
      
LIABILITIES AND EQUITY      
Current liabilities      
Accounts payable $28,062  $16,987 
Accrued expenses and other current liabilities  29,283   31,061 
Accrued compensation and related benefits  30,937   25,659 
Deferred revenues - short term  49,413   49,165 
Operating lease liabilities - short term  8,941   9,282 
Total current liabilities  146,636   132,154 
Non-current liabilities      
Deferred revenues - long term  14,074   14,227 
Operating lease liabilities - long term  10,501   12,567 
Contingent consideration  40,234   37,400 
Other non-current liabilities  32,470   34,059 
Total non-current liabilities  97,279   98,253 
Total liabilities $243,915  $230,407 
      
Contingencies (see note 12)      
      
Redeemable non-controlling interests  227   227 
      
Equity      
Ordinary shares, NIS 0.01 nominal value, authorized 180,000 thousand shares; 65,218 thousand shares and 56,617 thousand shares issued and outstanding at March 31, 2021 and December 31, 2020, respectively  181   155 
Additional paid-in capital  2,984,048   2,753,955 
Accumulated other comprehensive loss  (7,634  (8,846
Accumulated deficit  (2,004,807  (1,985,896
Total equity  971,788   759,368 
Total liabilities and equity $1,215,930  $990,002 

The accompanying notes are an integral part of these condensed consolidated interim financial statements.

2

STRATASYS LTD.

CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(Unaudited)

Consolidated Statements of Operations and Comprehensive Loss    
 
Three Months Ended March 31,
in thousands, except per share data 2021   2020 
    
Revenues     
Products$90,324  $83,172 
Services 43,865   49,735 
 134,189   132,907 
Cost of revenues     
Products 46,920   39,248 
Services 31,692   33,789 
  78,612   73,037 
     
Gross profit 55,577   59,870 
    
Operating expenses     
Research and development, net 20,601   24,194 
Selling, general and administrative 53,334   55,576 
 73,935   79,770 
     
Operating loss (18,358  (19,900
     
Financial expenses, net (377  (829
     
Loss before income taxes (18,735  (20,729
Income tax expenses (benefit) (942  221 
     
Share in losses of associated companies (1,118  (838
     
Net loss$(18,911 $(21,788
     
Net loss attributable to non-controlling interests -   (85
     
Net loss attributable to Stratasys Ltd.$(18,911 $(21,703
     
Net loss per ordinary share attributable to Stratasys Ltd. - basic and diluted$(0.32 $(0.40
     
Weighted average ordinary shares outstanding. - basic and diluted 58,616   54,544 
     
Comprehensive loss     
Net loss (18,911  (21,788
Other comprehensive income (loss), net of tax:     
Foreign currency translation adjustments (961  (1,954
Unrealized gains (losses) on derivatives designated as cash flow hedges 2,173   822 
Other comprehensive income (loss), net of tax 1,212   (1,132
Comprehensive loss (17,699  (22,920
              Less: comprehensive loss attributable to non-controlling interests -   (85
Comprehensive loss attributable to Stratasys Ltd.$(17,699 $(22,835
     
 

The accompanying notes are an integral part of these condensed consolidated interim financial statements.

3

STRATASYS LTD.

CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(Unaudited)

Consolidated Statements of Changes in Equity      
(in thousands )            
Three Months Ended March 31, 2021 and 2020      
         Accumulated  
     Additional  Other  
 Ordinary SharesPaid-InAccumulatedComprehensiveTotal
 Number of sharesPar ValueCapitaldeficitLossEquity
Balance as of December 31, 2020 56,617  155  2,753,955  (1,985,896 (8,846 759,368 
Issuance of shares in connection with stock-based compensation plans 670  2 2,881  -  -  2,883 
Stock-based compensation -  -  7,205  -  -  7,205 
Public offering of ordinary shares, net 7,931  24  218,851  -  -  218,875 
Deferred tax assets in connection with public offering expenses -  -  1,156  -  -  1,156 
Comprehensive income (loss) -  -  -  (18,911 1,212  (17,699
Balance as of March 31, 2021$65,218 $181 $2,984,048 $(2,004,807$(7,634$971,788 
 
 
 
4

STRATASYS LTD.

CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(Unaudited)

Consolidated Statements of Changes in Equity    
(in thousands )           
Three Months Ended March 31, 2021 and 2020    
          Accumulated  
      Additional   Other 
  Ordinary Shares Paid-In Accumulated Comprehensive Total
  Number of shares Par Value Capital deficit Loss Equity
Balance as of December 31, 2019  54,441   148   2,706,894   (1,542,175  (7,716  1,157,151 
Issuance of shares in connection with stock-based compensation plans  358  1  29  -  -  30 
Stock-based compensation  -  -  4,907  -  -   4,907 
Comprehensive loss  -   -   -   (21,703  (1,132  (22,835
Balance as of March 31, 2020 $54,799  $149  $2,711,830  $(1,563,878 $(8,848 $1,139,253 

 

The accompanying notes are an integral part of these condensed consolidated interim financial statements.

 

5

STRATASYS LTD.

CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(Unaudited)

Consolidated Statements of Cash Flows     
   Three Months Ended March 31,
in thousands   2021   2020 
      
Cash flows from operating activities     
Net loss  $(18,911 $(21,788
      
Adjustments to reconcile net loss to net cash provided by operating activities:     
Depreciation and amortization   13,802   12,457 
Stock-based compensation   7,205   4,907 
Foreign currency transaction loss   4,181   3,428 
Deferred income taxes   (1,774  (409
Share in losses of associated companies   1,118   838 
Revaluation of investments   (3,670  - 
Other non-cash items, net   193   201 
      
Change in cash attributable to changes in operating assets and liabilities:     
Accounts receivable, net   2,620   16,541 
Inventories   7,046   (5,659
Other current assets and prepaid expenses   (3,775  3,519 
Other non-current assets   1,595   902 
Accounts payable   10,197   (3,086
Other current liabilities   6,453   9,047 
Deferred revenues   (433  (2,154
Other non-current liabilities   (3,096  (7,470
Net cash provided by operating activities   22,751   11,274 
      
Cash flows from investing activities     
Cash paid for acquisitions, net of cash acquired   (6,356  - 
Purchase of property and equipment   (4,012  (6,291
Investments in short-term bank deposits   (109,000  - 
Proceeds from short-term bank deposits   27,000   - 
Net proceeds from divestitures of subsidiaries and associated companies   -   1,000 
Purchase of intangible assets   (278  (413
Other investing activities   (98  206 
Net cash used in investing activities   (92,744  (5,498
      
Cash flows from financing activities     
Proceeds from public offering, net of issuance costs   218,875   - 
Proceeds from exercise of stock options   2,883   30 
Other financing activities   407   - 
Net cash provided by financing activities   222,165   30 
      
Effect of exchange rate changes on cash, cash equivalents and restricted cash   (2,872  (2,116
      
Net change in cash, cash equivalents and restricted cash   149,300   3,690 
Cash, cash equivalents and restricted cash, beginning of period   272,216   293,597 
      
Cash, cash equivalents and restricted cash, end of period  $421,516  $297,287 
      
Supplemental disclosures of cash flow information:     
Transfer of inventory to fixed assets   884   832 
Transfer of fixed assets to inventory   210   5 
      
     

The accompanying notes are an integral part of these condensed consolidated interim financial statements.

6

STRATASYS LTD.

NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED)

 

Note 1. Business Description and Basis of Presentation

 

Stratasys Ltd. (collectively with its subsidiaries, the “Company” or “Stratasys”) is a global leader in connected, polymer-based 3D printing solutions, across the entire manufacturing value chain. The Company leverages its competitive advantages, which include a broad set of best-in-class 3D printing platforms, software, a materials and technology partner ecosystem, innovative leadership, and global GTM infrastructure, in order to position itself to capture share in a significant and growing global marketplace, with a focus on manufacturing.  The Company’s approximately 1,600 granted and pending additive technology patents to date have been used to create models, prototypes, manufacturing tools, and production parts for a multitude of industries including aerospace, automotive, transportation, healthcare, consumer products, dental, medical, and education. Stratasys’ products and comprehensive solutions improve product quality, development time, cost, and time-to-market. The Company’s 3D ecosystem of solutions and expertise includes 3D printers, materials, software, expert services, and on-demand parts production.

The condensed consolidated interim financial information herein is unaudited; however, such information reflects all adjustments (consisting of normal, recurring adjustments), which are, in the opinion of management, necessary for a fair statement of results for the interim period. The condensed consolidated interim financial statements include the accounts of Stratasys Ltd. and its subsidiaries. All intercompany accounts and transactions, including profits from intercompany sales not yet realized outside the Company, have been eliminated in consolidation.

The Company's financial statements are prepared in conformity with U.S. generally accepted accounting principles (“GAAP”), which requires the Company to make estimates based on assumptions about current and, for some estimates, future economic and market conditions which affect reported amounts and related disclosures in its financial statements. Although the Company current estimates contemplate current and expected future conditions, as applicable, it is reasonably possible that actual conditions could differ from the Company expectations, which could materially affect its results of operations and financial position.

In particular, a number of estimates have been and will continue to be affected by the ongoing COVID-19 pandemic. The severity, magnitude and duration of, and recovery from, as well as the economic consequences of, the COVID-19 pandemic, remain uncertain, rapidly changing and difficult to predict. As a result, the accounting estimates and assumptions may change over time in response to COVID-19. Such changes could have an additional impact on the Company’s long-lived asset and intangible asset valuation; inventory valuation; assessment of the annual effective tax rate; and the allowance for expected credit losses and bad debt.

The results of operations for the three months ended March 31, 2021 are not indicative of results that could be expected for the entire fiscal year. Certain financial information and footnote disclosures normally included in the annual consolidated financial statements prepared in accordance with GAAP have been condensed or omitted. The reader is referred to the audited consolidated financial statements and notes thereto for the year ended December 31, 2020, filed with the U.S. Securities and Exchange Commission (the “SEC”) as part of the Company’s Annual Report on Form 20-F for such year on March 1, 2021.

 

Note 2. New Accounting Pronouncements

 

Accounting Pronouncements Adopted in 2021

In December 2019, the FASB issued new guidance to simplify the accounting for income taxes by removing certain exceptions to the general principles and simplification of areas such as franchise taxes, step-up in tax basis goodwill, separate entity financial statements and interim recognition of enactment of tax laws or rate changes The guidance will be effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020, with early adoption permitted. The Company adopted this guidance effective January 1, 2021, with no material impact on its consolidated financial statements.

7

STRATASYS LTD.
NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED)
 
Note 3. Certain Transactions
 
 Origin acquisition
 
 On December 31, 2020 (the “Origin transaction date”) the Company acquired 3D printing start-up Origin Laboratories Inc. (“Origin”) for an aggregate purchase price of $97.1 million (the “Origin transaction”), including cash and shares. The acquisition enables Stratasys to expand its leadership through innovation in the fast-growing mass production parts market with a next-generation photopolymer platform. Stratasys expects Origin’s proprietary Programmable PhotoPolymerization (P3) technology to be an important growth engine for the Company. The acquisition was aimed at fortifying the Company's leadership in polymers and production applications of 3D printing in industries such as dental, medical, tooling, and select industrial, defense, and consumer goods markets.
 
In exchange for 100% of the outstanding shares of Origin the Company issued 1,488 thousand ordinary shares, paid cash upon closing, and is obligated to pay additional payments (combination of cash and shares) subject to performance-based earn-outs over 3 years.
 
The Origin transaction is reflected in accordance with ASC Topic 805, “Business Combinations”, using the acquisition method of accounting with the Company as the acquirer.
 
The following table summarizes the fair value of the consideration transferred to Origin stockholders for the Origin transaction:
 
 
 U.S. $ in thousands
Cash payments$33,025
Issuance of ordinary shares to Origin stockholders 26,636 
Contingent consideration at estimated fair value 37,400 
Total consideration$97,061 
 
 
 The fair value of the ordinary shares issued was determined based on the closing market price of the Company’s ordinary shares on the Origin transaction date.
 
In accordance with ASC Topic 805, the estimated contingent consideration as of the Origin transaction date was included in the purchase price. The total contingent payments could reach to a maximum aggregate amount of up to $40 million. Approximately 50% of the payments shall be settled in cash, and 50% shall be settled through the issuance of ordinary shares. The estimated fair value of the contingent consideration is based on management’s assessment of whether, and at what level, the financial metrics will be achieved, and the present value factors associated with the timing of the payments. This fair value measurement is based on significant unobservable inputs in the market and thus represents a Level 3 measurement within the fair value hierarchy. Changes in the fair value of contingent consideration will be recorded in Consolidated Statements of Operations and Comprehensive Loss. Refer to note 9. 
 
An additional payment of $6 million, which is subject to the founders' retention over 3 years, will be recorded as compensation expense over the retention period. Compensation expenses for the three-month period ended March 31, 2021 were approximately $1.1 million.
8

STRATASYS LTD.
NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED)
 
The following table summarizes the estimated fair values of the assets acquired and liabilities assumed, based on the information that is available as of March 31, 2021. Thus, the measurements of fair value reflected are subject to changes and such changes could be significant. The preliminary allocation of the purchase price to assets acquired and liabilities assumed is as follows:
 
 
 Allocation of Purchase Price
 (U.S. $ in thousands)
Cash and cash equivalents$2,083 
Goodwill 36,379 
Intangible assets 71,125 
Other assets 4,364 
Total assets acquired 113,951 
  
Net deferred tax liabilities 14,007 
Other labilities 2,883 
Total liabilities assumed 16,890 
  
Net assets acquired$97,061 
 
The allocation of the purchase price to net assets acquired and liability assumed resulted in the recognition of an intangible asset related to developed technology of $71 million. This intangible asset has a useful-life of 10 years. The fair value estimate of the developed technology is determined using a variation of the income approach known as the “Multi-Period Excess Earnings Approach”. This valuation technique estimates the fair value of an asset based on market participants’ expectations of the cash flows an asset would generate over its remaining useful life. The net cash flows were discounted to present value.
 
Pro forma information giving effect to the acquisition has not been provided as the impact of the transaction for purposes of Stratasys' consolidation results of operations and financial condition would not be material.
 
  RPS acquisition
 
 On February 16, 2021 the Company acquired RP Support Limited (“RPS”), a provider of industrial stereolithography 3D printers and solutions. In exchange for 100% of the outstanding shares of RPS, the Company paid cash upon closing and is obligated to make additional payments (in cash), subject to performance-based criteria, via earn-out payments over two years.
 
  Marketable equity investment
 
The Company recognized in the first quarter of 2021 an income of $3.7 million for revaluation of an equity investment. In prior periods the investment was treated as a non-marketable equity investment without readily determinable FV. The entity has become public during the first quarter and accordingly the investment is now treated as a marketable equity investment.
 
9

STRATASYS LTD.

NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED)

 

Note 4. Revenues

Disaggregation of Revenues

The following table presents the Company’s revenues disaggregated by geographical region (based on the Company's customers' locations) and revenue type for the three months ended March 31, 2021 and 2020:

 

 Three months ended March 31,
  2021  2020
 (U.S. $ in thousands)
Americas    
Products$49,568  $48,244 
Service 32,545   38,329 
Total Americas 82,113   86,573 
     
EMEA    
Products 22,501   20,747 
Service 6,417   6,173 
Total EMEA 28,918   26,920 
     
Asia Pacific    
Products 18,255   14,181 
Service 4,903   5,233 
Total Asia Pacific 23,158   19,414 
     
Total Revenues$134,189  $132,907 

The following table presents the Company’s revenues disaggregated based on the timing of revenue recognition (at a specific point in time or over the course of time) for the three months ended March 31, 2021 and 2020:

 

  Three months ended March 31,
   2021  2020
  (U.S. $ in thousands)
Revenues recognized in point in time from:     
Products $90,324  $83,172 
Services  10,601   10,644 
Total revenues recognized in point in time  100,925   93,816 
      
      
Revenues recognized over time from:     
Services  33,264   39,091 
Total revenues recognized over time  33,264   39,091 
      
Total Revenues $134,189  $132,907 
10

STRATASYS LTD.

NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED)

 

Contract Assets and Contract Liabilities

Contract assets are recorded when the Company's right to consideration is conditional on constraints other than the passage of time. The Company had no material contract assets as of March 31, 2021 and December 31, 2020.

Contract liabilities include advance payments and billings in excess of revenue recognized, which are primarily related to advanced billings for service type warranty. Contract liabilities are presented under deferred revenues. The Company's deferred revenues as of March 31, 2021 and December 31, 2020 were as follows:

 

  March 31,December 31,
  2021 2020
  U.S. $ in thousands
     
Deferred revenue*  63,487   63,392 

*Includes $14.1 million and $14.2 million under long term deferred revenue in the Company's consolidated balance sheets as of March 31, 2021 and December 31, 2020, respectively.

Revenue recognized in 2021 that was included in deferred revenue balance as of December 31, 2020 was $18.4 million for the three months ended March 31, 2021.

Remaining Performance Obligations

Remaining Performance Obligations (RPO) represent contracted revenue that has not yet been recognized, which includes deferred revenue and amounts that will be invoiced and recognized as revenue in future periods. As of March 31, 2021, the total RPO amounted to $89.7 million. The Company expects to recognize $74.9 million of this RPO during the next 12 months, $9.2 million over the subsequent 12 months and the remaining $5.6 million thereafter.

Incremental Costs of Obtaining a Contract

Sales commissions earned mainly by the Company’s sales agents are considered incremental costs of obtaining a contract with a customer, as the Company expects the benefit of those commissions to be longer than one year. The majority of the sales commissions are not subject to capitalization, as the commission expense is recognized as the related revenue is recognized. Sales commissions for initial contracts related to the service type warranty are deferred and then amortized on a straight-line basis over the expected customer relationship period if the Company expects to recover those costs. Amortization expense is included in selling, general and administrative expenses in the consolidated statements of operations. As of March 31, 2021 and December 31, 2020, the deferred commissions amounted to $5.3 million and $5.0 million, respectively.

 

11

STRATASYS LTD.

NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED)

 

Note 5. Inventories

Inventories consisted of the following:

 

  March 31, December 31,
  2021 2020
  U.S. $ in thousands
Finished goods $52,845  $61,297 
Work-in-process  3,739   3,163 
Raw materials  67,615   67,212 
 $124,199  $131,672 

 

Note 6. Goodwill and Other Intangible Assets

Goodwill

Changes in the carrying amount of the Company’s goodwill for the three months ended March 31, 2021 were as follows:

 

  U.S. $ in thousands
   
Goodwill as of January 1, 2021 $35,694 
Goodwill acquired*  1,716 
Foreign currency translation adjustments and other  664 
Goodwill as of March 31, 2021 $38,074 

*The goodwill was acquired as part of RPS acquisition. See Note 3.

  
During the third quarter of 2020, the Company had noted that indicators of potential impairment existed which required an interim goodwill impairment analysis for Stratasys-Objet reporting unit. These indicators included longer and deeper than expected reduction in the business, refinement to the company’s business focus into additional inorganic technologies and sustained decline in the Company’s market capitalization during the past two quarters, all, primarily as a result of the COVID-19 impact on the global economy and the Company’s business.
 
As a result of the factors discussed above, the Company revisited its assumptions supporting the cash flow projections for its Stratasys-Objet reporting unit, including: (i) the expected duration and depth of revenue reduction and certain revenue growth assumptions; (ii) the associated operating profit margins; and (iii) the long term growth rate. In estimating the discounted cash flow, the Company used the following key assumptions: the Company currently expects it will take approximately two years to regain the loss of revenue and return to its pre COVID-19 activity levels considering the impact of both volume and price with a similar effect on profitability. Following such period, the Company expects to return to similar growth rates as estimated in prior valuations. The Company assumes a long term terminal growth rate of 2.5%, which is lower than the 3.1% used in prior valuations. In addition, changes in business focus due to introduction of new technologies is expected to lower the total revenues related to the Stratasys-Objet reporting unit. The resulting cash flow amounts were discounted using the same discount rate of 13.5%.
 
Based on the revised cash flow projections, the value of the reporting unit had decreased below its carrying value, and the Company recorded in the third quarter of 2020, goodwill impairment charge of $386.2 million, the entire reporting unit’s goodwill.
12

STRATASYS LTD.
NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED)
  

Other Intangible Assets

Other intangible assets consisted of the following:

 

  March 31, 2021 December 31, 2020
   Carrying Amount,      Net  Carrying Amount,   Net
   Net of   Accumulated   Book  Net of Accumulated Book
   Impairment   Amortization   Value  Impairment Amortization Value
  U.S. $ in thousands
Developed technology $365,207  $(265,352 $99,855  $357,863  $(260,123 $97,740 
Patents  17,894   (8,812  9,082   17,699   (8,487  9,212 
Trademarks and trade names  26,031   (21,397  4,634   26,036   (21,114  4,922 
Customer relationships  100,883   (82,835  18,048   101,107   (81,413  19,695 
Capitalized software development costs  7,410   (7,410  -   7,410   (7,410  - 
  $517,425  $(385,806 $131,619  $510,115 $(378,547$131,569 

Amortization expenses relating to intangible assets for the three-month period ended March 31, 2021 and 2020 were approximately $7.5 million and $6.2 million, respectively.

As of March 31, 2021, the estimated amortization expenses relating to intangible assets for each of the following future periods were as follows:

  Estimated
  amortization expense
  (U.S. $ in thousands)
Remaining 9 months of 2021 $22,840 
2022  28,662 
2023  14,081 
2024  10,185 
2025 and thereafter  55,851 
Total  131,619 
 

 

Note 7. Net Loss Per Share

The following table presents the numerator and denominator of the basic and diluted net loss per share computations for the three months ended March 31, 2021 and 2020:

  Three Months Ended March 31,
   2021   2020 
  In thousands, except per share amounts
Numerator:     
Net loss attributable to Stratasys Ltd. for basic and diluted loss per share  (18,911  (21,703
    
Denominator:      
Weighted average shares - for basic and diluted net loss per share  58,616   54,544 
      
Net loss per share attributable to Stratasys Ltd.      
Basic and diluted $(0.32 $(0.40

The computation of diluted net loss per share excluded share awards of 5.4 million shares and 5.3 million shares for the three months ended March 31, 2021 and 2020, respectively, because their inclusion would have had an anti-dilutive effect on the diluted net loss per share.

 

Note 8. Income Taxes

The Company had income tax benefit of $0.9 million for the three-month period ended March 31, 2021 compared to income tax expenses of $0.2 million for the three-month period ended March 31, 2020. The Company’s effective tax rate as of March 31, 2021 was primarily impacted by the geographic mix of its earnings and losses, as well as a valuation allowance on losses of the Company's US subsidiaries. 

 

13

STRATASYS LTD.

NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED)

 

Note 9. Fair Value Measurements

 

Financial instruments measured at fair value

The following table summarizes the Company’s financial assets and liabilities that are carried at fair value on a recurring basis, in its consolidated balance sheets:

 March 31, 2021 December 31, 2020
 Level 2 Level 3 Level 2 Level 3
 (U.S. $ in thousands)
Assets:       
Foreign exchange forward contracts not designated as hedging instruments$41   -  $56   - 
Foreign exchange forward contracts designated as hedging instruments 754   -   793   - 
        
Liabilities:       
Foreign exchange forward contracts not designated as hedging instruments (252  -   (1,098  - 
Foreign exchange forward contracts designated as hedging instruments (140  -   (1,584  - 
Contingent consideration -   40,234   -   37,400 
 $403  $40,234  $(1,833 $37,400 

The Company’s foreign exchange forward contracts are classified as Level 2, as they are not actively traded and are valued using pricing models that use observable market inputs, including interest rate curves and both forward and spot prices for currencies (Level 2 inputs).

Contingent consideration represents liabilities recorded at fair value in connection with acquisitions, and thus represents a Level 3 measurement within the fair value hierarchy (refer to Note 3).

Other financial instruments consist mainly of cash and cash equivalents, short-term deposits, current and non-current receivables, accounts payable and other current liabilities. The fair value of these financial instruments approximates their carrying values.

 

14

STRATASYS LTD.

NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED)

 

Note 10. Derivative instruments and hedging activities

Since the Company conducts its operations globally, it is exposed to global market risks and to the risk that its earnings, cash flows and equity could be adversely impacted by fluctuations in foreign currency exchange rates. The Company enters into transactions involving foreign currency exchange derivative financial instruments. The Company manages its foreign currency exposures on a consolidated basis, which allows the Company to net exposures and take advantage of any natural hedging. The transactions are designed to manage the Company’s net exposure to foreign currency exchange rates and to reduce the volatility of earnings and cash flows associated with changes in foreign currency exchange rates. The Company does not enter into derivative transactions for trading purposes.

The Company is primarily exposed to foreign exchange risk with respect to recognized assets and liabilities and forecasted transactions denominated in the New Israeli Shekel (“NIS”), Euro, GBP, Korean Won, Chinese Yuan and the Japanese Yen. The gains and losses on the hedging instruments partially offset losses and gains on the hedged items. Financial markets and currency volatility may limit the Company’s ability to hedge these exposures. These contracts mature through December 2021.

The following table summarizes the consolidated balance sheets classification and fair values of the Company’s derivative instruments:

 

    Fair Value Notional Amount
    March 31, December 31, March 31, December 31,
  Balance sheet location 2021 2020 2021 2020
    U.S. $ in thousands
Assets derivatives -Foreign exchange contracts, not designated as hedging instruments Other current assets $41  $56  $10,981  $36,882 
Assets derivatives -Foreign exchange contracts, designated as cash flow hedge Other current assets  754   793   50,316   10,417 
Liability derivatives -Foreign exchange contracts, not designated as hedging instruments Accrued expenses and other current liabilities  (252  (1,098  44,078   37,999 
Liability derivatives -Foreign exchange contracts, designated as hedging instruments Accrued expenses and other current liabilities  (140  (1,584  18,473   50,186 
    $403  $(1,833 $123,848  $135,484 

Foreign exchange contracts not designated as hedging instruments

As of March 31, 2021, the notional amounts of the Company’s outstanding exchange forward contracts, not designated as hedging instruments, were $55.1 million, and were used to reduce foreign currency exposures. With respect to such derivatives, gains of $2.2 million and of $1.5 million were recognized under financial income (expenses), net for the three-month period ended March 31, 2021 and 2020, respectively. Such gains or losses partially offset the foreign currency revaluation changes of the balance sheet items. These foreign currencies revaluation changes are also recognized under financial income (expenses), net.

Cash Flow Hedging - Hedges of forecasted foreign currency payroll and other operating expenses

As of March 31, 2021, the Company had in effect foreign exchange forward contracts, designated as cash flow hedges for accounting purposes, for the conversion of $29.3 million into NIS. The Company uses short-term cash flow hedge contracts to reduce its exposure to variability in expected future cash flows resulting mainly from payroll costs and other operating expenses denominated in NIS. The changes in fair value of those contracts are included in the Company’s accumulated other comprehensive loss.

 

Cash Flow Hedging - Hedges of forecasted foreign currency revenue

As of March 31, 2021, the Company had in effect foreign exchange forward contracts, designated as cash flow hedges for accounting purposes, for the conversion of 33.0 million Euro into U.S. dollars. The Company transacts business in U.S. dollars and in various other currencies. The Company may use foreign exchange or forward contracts to hedge certain cash flow exposures resulting from changes in these foreign currency exchange rates. These foreign exchange contracts, carried at fair value, have maturities of up to twelve months. The Company enters into these foreign exchange contracts to hedge a portion of its forecasted foreign currency denominated revenue in the normal course of business and accordingly, they are not speculative in nature.

15

 STRATASYS LTD.

NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED)

 

Note 11. Equity

a. Stock-based compensation plans

Stock-based compensation expenses for equity-classified stock options, restricted share units (“RSUs”) and performance-based restricted share units (PSUs) were allocated as follows:

 

  Three Months Ended
  March 31,
  2021 2020
  U.S $ in thousands
     
Cost of sales $634  $402 
Research and development, net  1,424   1,556 
Selling, general and administrative  5,147   2,949 
Total stock-based compensation expenses $7,205  $4,907 

A summary of the Company’s stock option activity for the three months ended March 31, 2021 is as follows:

 

  Number of OptionsWeighted Average Exercise Price
Options outstanding as of January 1, 2021 $2,102,529 $28.06 
Granted  46,366  3.15 
Exercised  (137,220 21.01 
Forfeited  (13,439 36.26 
Options outstanding as of March 31, 2021  1,998,236  27.91 
Options exercisable as of March 31, 2021 $1,619,049 $30.82 

As of March 31, 2021, the unrecognized compensation cost of $3.4 million related to all unvested, equity-classified stock options is expected to be recognized as an expense over a weighted-average period of 3.3 years.

 

16

STRATASYS LTD.

NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED)

 

A summary of the Company’s RSUs and PSUs activity for the three months ended March 31, 2021 is as follows:

 

  Number of RSUs and PSUsWeighted Average Grant Date Fair Value
Unvested as of January 1, 2021 $2,801,116 $21.08 
Granted  1,201,186  34.62 
Vested  (533,533 22.56 
Forfeited  (110,731 20.69 
Unvested as of March 31, 2021 $3,358,038 $25.70 

The fair value of RSUs and PSUs is determined based on the quoted price of the Company’s ordinary shares on the date of the grant.

As of March 31, 2021, the unrecognized compensation cost of $76 million related to all unvested, equity-classified RSUs and PSUs is expected to be recognized as expense over a weighted-average period of 2.7 years.

 

b. Accumulated other comprehensive loss

The following tables present the changes in the components of accumulated other comprehensive income (loss), net of taxes, for the three months ended March 31, 2021 and 2020, respectively:

 

  Three Months Ended March 31, 2021
  Net Unrealized Gain (Loss) on Cash Flow Hedges  Foreign Currency Translation Adjustments  Total
  U.S. $ in thousands
         
Balance as of January 1, 2021 $(1,673  $(7,173  $(8,846
Other comprehensive income (loss) before reclassifications  1,607    (961   646 
Amounts reclassified from accumulated other comprehensive loss  566    -    566 
Other comprehensive income (loss)  2,173    (961   1,212 
Balance as of March 31, 2020 $500   $(8,134  $(7,634

 

17

STRATASYS LTD.

NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED)

 

  Three Months Ended March 31, 2020
  Net Unrealized Gain (Loss) on Cash Flow Hedges  Foreign Currency Translation Adjustments  Total
  U.S. $ in thousands
         
Balance as of January 1, 2020 $(10  $(7,706  $(7,716
Other comprehensive income (loss) before reclassifications  849    (1,954   (1,105
Amounts reclassified from accumulated other comprehensive loss  (27   -    (27
Other comprehensive income (loss)  822    (1,954   (1,132
Balance as of March 31, 2020 $812   $(9,660  $(8,848

 

c. Public offering of ordinary shares

During March 2021, the Company completed a capital raise of $218.9 million, net of underwriting discounts and offering expenses. The total number of shares sold by the Company in the public offering was 7,931,034.
 
       A deferred tax asset in an amount of $1.2 million was recorded in respect of a tax benefit, arising from the underwriting discounts and offering expenses, as an increase to Additional Paid-In Capital.
 

Note 12. Contingencies

Legal proceedings

The Company is a party to various legal proceedings from time to time, the outcome of which, in the opinion of management, will not have a significant effect on the financial position, profitability or cash flows of the Company.

    

 

 
900000 900000 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 18400000 0 0 0 0 0 0 0 0 0 0 0 0 false --12-31 Q1 2021 2021-03-31 6-K 1 Holtzman Street P.O. Box 2496 Science Park Rehovot IL 76124 0001517396 001-35751 STRATASYS LTD.