STRATASYS LTD. Q4 FY2024 earnings call

Management Statement and Operational Highlights:

• In 2024 and early 2025, steps were taken to enhance leadership in additive manufacturing despite macro headwinds, successfully right-sizing the company to deliver profits and cashflow.
• Fourth quarter updates: Launched Fortus FDC filament dryer, a cabinet system to increase printer uptime; introduced Polycarbonate ESD and enhanced Ultem 9085 material; Origin P3 DLP platform added over 30 new materials.
• Partnerships and customer successes: Key win with ArcelorMittal, named official 3D printing partner of NASCAR, 3E EOS expanded use of Stratasys 3D printers.
• Promoted Chief Revenue Officer; TrueDent resin available in Europe as a CE Mark Class 1 medical device; joint research with Siemens Healthineers on medical imaging phantoms; GrabCAD IoT platform launched to improve customer utilization and uptime.

Segment Performance:

• 2024 Highlights: In 2024, 36% of revenues were from manufacturing, up from 34% in 2023 and 25% in 2020.
• Fourth Quarter 2024: Consolidated revenue was $150.4 million, down 3.8% y-o-y. Product revenue fell 4.8% to $105.1 million; systems revenue declined 1.5% to $46.7 million; consumable revenue was $58.4 million, down 7.3%; service revenue was $45.3 million, flat y-o-y. GAAP gross margin was 46.3% for the quarter, non-GAAP gross margin was 49.6%. Non-GAAP operating expenses were $65.2 million, down from $74.3 million y-o-y. Adjusted EBITDA was $14.5 million, 9.6% margin.
• Full-Year 2024: Consolidated revenue was $572.5 million, down 8.8% y-o-y. Product revenue was $392 million, down 9.5% y-o-y; systems revenue was $140.3 million, down 25.3% y-o-y; consumable revenue was $251.7 million, up 2.3% y-o-y; service revenue was $180.5 million, down 6.9% y-o-y. GAAP gross margin was 44.9% for the year, non-GAAP gross margin improved to 49.2%. Non-GAAP operating expenses were 48.4% of revenue, down from 46.2% in 2023. Adjusted EBITDA was $26 million, down from $35 million in 2023.

Guidance:

• 2025 revenue expected in range of $570 million to $585 million, growing sequentially each quarter with second-half revenues higher than first-half.
• Non-GAAP gross margin expected in range of 48.8% to 49.2%, second-half stronger than first-half.
• Non-GAAP operating expenses expected to range between $254 million to $257 million.
• Non-GAAP operating margins expected in range of 4% to 5% of revenue, second-half stronger than first-half.
• GAAP net loss expected in range of $68 million to $53 million, non-GAAP net income expected in range of $20 million to $26 million.
• Adjusted EBITDA expected in range of $44 million to $50 million, 7.8% to 8.5% of revenue.
• Capital expenditures expected to range between $25 million and $30 million.
• Expect improved operating and free cash flow in 2025.

Risks:

• Actual results could differ materially from forward-looking statements.
• Refer to risk factors in Stratasys' annual reports on Form 20-F for 2023 and 2024, including macroeconomic environment changes, sales cycle variability, tariff impacts, and fluctuations in equity investments.

Q: Greg Palm asked about market feedback and revenue cadence in 2025.

A: Yoav Zeif stated customers are optimistic about additive manufacturing's value proposition, focusing on reliability, accuracy, and total cost of ownership; revenue expected to grow sequentially in 2025.

Q: Greg Palm inquired about gross margin guide for 2025 and tariffs.

A: Eitan Zamir said 2025 gross margin expected in range, with sequential improvement; Yoav Zeif noted FDM production mostly in U.S. and Israel, immune to tariffs, and tariffs present opportunity for onshore production.

Q: Brian Drab asked about organic revenue growth in 2025 and FX headwinds.

A: Yoav Zeif said minor impact from divestment, FX impact small due to hedging; Eitan Zamir discussed denture market opportunity of $2.5 billion in Europe and plans to penetrate it.

Q: Troy Jensen asked about consumables decline and long-term investments.

A: Eitan Zamir said Q4 consumables decline was an outlier, expect growth in 2025; long-term investments mostly in equity, including Ultimaker.

Q: Troy Jensen asked about acquisition targets.

A: Yoav Zeif said will pursue opportunities that enhance shareholder value, focusing on hardware, software, materials that fit strategic focus.

Q: Jim Ricchiuti asked about pipeline visibility and second-half outlook.

A: Eitan Zamir said both macro improvement and pipeline visibility contribute to guidance, with focus on aerospace, defense, tooling, and dental verticals.

Q: Ananda Baruah asked about AI impact on production businesses.

A: Eitan Zamir said AI is essential for additive manufacturing, with use cases like predictive maintenance and file management, strongly supporting additive production.