6-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 6-K

REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13a-16 OR 15d-16

UNDER THE SECURITIES EXCHANGE ACT OF 1934

For the month of November 2022

Commission File Number 001-35751

STRATASYS LTD.
(Translation of registrant’s name into English)
c/o Stratasys, Inc.<br><br><br>9600 West 76th Street<br><br><br>Eden Prairie, Minnesota 55344	1 Holtzman Street, Science Park<br><br><br>P.O. Box 2496<br><br><br>Rehovot, Israel 76124
(Address of principal executive office)

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F. Form 20-F ☒ Form 40-F ☐

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): ____

Note: Regulation S-T Rule 101(b)(1) only permits the submission in paper of a Form 6-K if submitted solely to provide an attached annual report to security holders.

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): ____

The contents of this Report of Foreign Private Issueron Form 6-K (this “Form 6-K”), including Exhibits 99.1, 99.2 and 101 annexedhereto, are incorporated by reference into the Registrant’s registrationstatements on Form S-8, SEC file numbers 333-190963, 333-236880, 333-253694, 333-262951 and 333-262952, filed by the Registrant with theSEC on September 3, 2013, March 4, 2020, March 1, 2021,and February 24, 2022, respectively, and Form F-3, SEC file numbers333-251938 and 333-253780, filed by the Registrant with the SEC on January 7,2021 and March 2, 2021, respectively, as amended, and shall be a part thereoffrom the date on which this Form 6-K is furnished, to the extent not supersededby documents or reports subsequently filed or furnished.

QuarterlyFinancial Statements and Review ofResults and Prospects

On November 10, 2022, Stratasys Ltd., or Stratasys, released its financial results for the three and nine months ended September 30, 2022.

Attached hereto as Exhibit 99.1 are the unaudited, condensed consolidated financial statements of Stratasys for the three and nine months ended September 30, 2022 (including the notes thereto), or the Q3 2022 Financial Statements

Attached hereto as Exhibit 99.2 is Stratasys’ review of its results of operations and financial condition for the three and nine months ended September 30, 2022, including the following:

(i)

Operating and Financial Review and Prospects

(ii)

Quantitative and Qualitative Disclosures About Market Risk

(iii)

Legal Proceedings

(iv)

Risk Factors

Attached hereto as Exhibit 101 are the Q3 2022 Financial Statements, formatted in IXBRL (eXtensible Business Reporting Language), consisting of the following sub-exhibits:

Exhibit<br><br><br>Number	Document Description
EX-101.INS	IXBRL Taxonomy Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
EX-101.SCH	IXBRL Taxonomy Extension Schema Document
EX-101.CAL	IXBRL Taxonomy Calculation Linkbase Document
EX-101.DEF	IXBRL Taxonomy Extension Definition Linkbase Document
EX-101.LAB	IXBRL Taxonomy Label Linkbase Document
EX-101.PRE	IXBRL Taxonomy Presentation Linkbase Document
EX-104	Cover Page Interactive Data File – the cover page interactive data file does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	STRATASYS LTD.
Dated: November 10, 2022	By:	/s/ Eitan Zamir
	Name:	Eitan Zamir
	Title:	Chief Financial Officer

STRATASYS LTD.

Exhibit 99.1

STRATASYS LTD.

CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

FOR THE THREE AND NINE MONTHS ENDED

SEPTEMBER 30, 2022

(UNAUDITED)

INDEX TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2022

(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 |

STRATASYS LTD.

CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(Unaudited)

Consolidated Balance Sheets
(in thousands, except share data)
	September 30, 2022			December 31, 2021
ASSETS
Current assets
Cash and cash equivalents	150,672		$	243,179
Short-term deposits	198,056			259,000
Accounts receivable, net of allowance for credit losses of 0.7 million and 0.5 million as of September 30, 2022<br>and December 31, 2021	140,258			129,382
Inventories	170,434			129,147
Prepaid expenses	8,146			6,871
Other current assets	26,838			33,123
Total current assets	694,404			800,702
Non-current assets
Property, plant and equipment, net	194,214			203,295
Goodwill	64,844			65,144
Other intangible assets, net	129,682			152,244
Operating lease right-of-use assets	19,010			14,651
Long-term investments	143,928			28,667
Other non-current assets	21,309			12,519
Total non-current assets	572,987			476,520
Total assets	1,267,391		$	1,277,222
LIABILITIES AND EQUITY
Current liabilities
Accounts payable	67,957		$	51,976
Accrued expenses and other current liabilities	55,152			55,358
Accrued compensation and related benefits	34,862			44,684
Deferred revenues - short term	48,735			51,174
Operating lease liabilities - short term	6,977			7,276
Total current liabilities	213,683			210,468
Non-current liabilities
Deferred revenues - long term	23,581			21,133
Deferred income taxes - long term	4,084			7,341
Operating lease liabilities - long term	11,738			7,693
Contingent consideration - long term	38,551			53,478
Other non-current liabilities	27,028			21,095
Total non-current liabilities	104,982			110,740
Total liabilities	318,665		$	321,208
Contingencies (see note 12)
Equity
Ordinary shares, NIS 0.01 nominal value, authorized 180,000 thousand shares; 66,784 thousand shares and 65,677 thousand shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively	186			182
Additional paid-in capital	3,037,225			3,012,481
Accumulated other comprehensive loss	(14,223	)		(8,771	)
Accumulated deficit	(2,074,462	)		(2,047,878	)
Total equity	948,726			956,014
Total liabilities and equity	1,267,391		$	1,277,222

All values are in US Dollars.

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

STRATASYS LTD.

CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(Unaudited)

Consolidated Statements of Operations and Comprehensive Loss
(in thousands, except per share data)
	Three Months Ended September 30,						Nine Months Ended September 30,
		2022			2021			2022			2021
Revenues
Products	$	112,133		$	108,888		$	340,927		$	299,517
Services		50,059			50,121			151,297			140,686
		162,192			159,009			492,224			440,203
Cost of revenues
Products		55,916			54,820			176,421			151,471
Services		35,527			36,001			107,984			101,697
		91,443			90,821			284,405			253,168
Gross profit		70,749			68,188			207,819			187,035
Operating expenses
Research and development, net		23,145			22,645			71,489			65,683
Selling, general and administrative		63,230			67,462			195,085			184,353
		86,375			90,107			266,574			250,036
Operating loss		(15,626	)		(21,919	)		(58,755	)		(63,001	)
Gain from deconsolidation of subsidiary		39,136			-			39,136			-
Financial income (expense), net		452			(634	)		(2,080	)		(1,383	)
Income (loss) before income taxes		23,962			(22,553	)		(21,699	)		(64,384	)
Income tax expense (benefit)		3,298			(699	)		2,796			6,009
Share in profit (losses) of associated companies		(1,915	)		3,778			(2,089	)		1,229
Net income (loss)	$	18,749		$	(18,076	)	$	(26,584	)	$	(57,146	)
Net income (loss) per share - basic and diluted	$	0.28		$	(0.28	)	$	(0.40	)	$	(0.91	)
Weighted average ordinary shares outstanding - basic		66,772			65,018			66,356			62,888
Weighted average ordinary shares outstanding - diluted		67,038			65,018			66,356			62,888
Comprehensive income (loss)
Net income (loss)		18,749			(18,076	)		(26,584	)		(57,146	)
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments		(1,598	)		(2,247	)		(5,089	)		(2,105	)
Unrealized gains (losses) on derivatives designated as cash flow hedges		729			578			(363	)		2,579
Other comprehensive income (loss), net of tax		(869	)		(1,669	)		(5,452	)		474
Comprehensive income (loss)	$	17,880		$	(19,745	)	$	(32,036	)	$	(56,672	)

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

STRATASYS LTD.

CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(Unaudited)

Consolidated Statements of Changes in Equity
(in thousands)
Three and Nine Months Ended September 30, 2022
											Accumulated
					Additional						Other
	Ordinary Shares				Paid-In			Accumulated			Comprehensive			Total
	Number of shares		Par Value		Capital			deficit			Loss			Equity
Balance as of December 31, 2021	65,677	$	182	$	3,012,481		$	(2,047,878	)	$	(8,771	)	$	956,014
Issuance of shares in connection with stock-based compensation plans	731		3		152			-			-			155
Stock-based compensation	-		-		8,533			-			-			8,533
Comprehensive loss	-		-		-			(20,948	)		(1,053	)		(22,001	)
Balance as of March 31, 2022	66,408	$	185	$	3,021,166		$	(2,068,826	)	$	(9,824	)	$	942,701
Issuance of shares in connection with stock-based compensation plans	336		1		91			-			-			92
Stock-based compensation	-		-		8,831			-			-			8,831
Comprehensive loss	-		-		-			(24,385	)		(3,530	)		(27,915	)
Balance as of June 30, 2022	66,744	$	186	$	3,030,088		$	(2,093,211	)	$	(13,354	)	$	923,709
Issuance of shares in connection with stock-based compensation plans	40		-		13			-			-			13
Stock-based compensation	-		-		7,391			-			-			7,391
Other items					(267	)								(267	)
Comprehensive income (loss)	-		-		-			18,749			(869	)		17,880
Balance as of September 30, 2022	66,784	$	186	$	3,037,225		$	(2,074,462	)	$	(14,223	)	$	948,726

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

STRATASYS LTD.

CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(Unaudited)

Consolidated Statements of Changes in Equity
(in thousands )
Three and Nine Months Ended September 30, 2021
												Accumulated
						Additional						Other
	Ordinary Shares					Paid-In			Accumulated			Comprehensive			Total
		Number of shares		Par Value		Capital			deficit			Loss			Equity
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<br> 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
Issuance of shares in connection with stock-based<br> compensation plans		178		-		633			-			-			633
Stock-based compensation		-		-		7,977			-			-			7,977
Deferred tax assets in connection with public offering expenses		-		-		175			-			-			175
Comprehensive income (loss)		-		-		-			(20,159	)		931			(19,228	)
Balance as of June 30, 2021		65,396	$	181	$	2,992,833		$	(2,024,966	)	$	(6,703	)	$	961,345
Issuance of shares in connection with stock-based<br> compensation plans		71		1		692			-			-		$	693
Stock-based compensation		-		-		7,958			-			-			7,958
Expenses in connection with March 2021 public offering		-		-		(25	)		-			-			(25	)
Reduction of redeemable non-controlling interest		-		-		227			-			-			227
Comprehensive income (loss)		-		-		-			(18,076	)		(1,669	)		(19,745	)
Balance as of September 30, 2021		65,467	$	182	$	3,001,685		$	(2,043,042	)	$	(8,372	)	$	950,453

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

STRATASYS LTD.

CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(Unaudited)

Consolidated Statements of Cash Flows
in thousands	Nine Months Ended September 30,
		2022			2021
Cash flows from operating activities
Net loss	$	(26,584	)	$	(57,146	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Impairment of other long-lived assets		3,865			1,944
Depreciation and amortization		44,451			41,412
Stock-based compensation		24,755			23,140
Foreign currency transaction loss		13,978			4,210
Gain from deconsolidation of subsidiary		(39,136	)		-
Share in loss of associated companies		2,089			(1,229	)
Revaluation of investments		3,217			556
Other non-cash items, net		826			364
Change in cash attributable to changes in operating assets and liabilities:
Accounts receivable, net		(21,832	)		(17,023	)
Inventories		(64,286	)		8,271
Other current assets and prepaid expenses		3,898			(11,911	)
Other non-current assets		(17,003	)		3,834
Accounts payable		17,286			29,204
Other current liabilities		2,013			14,047
Deferred revenues		4,860			3,470
Deferred income taxes, net and uncertain tax positions		(301	)		(6,677	)
Other non-current liabilities		(9,385	)		(5,070	)
Net cash provided by (used in) operating activities		(57,289	)		31,396
Cash flows from investing activities
Cash paid for acquisitions, net of cash acquired		-			(6,669	)
Purchase of property and equipment		(11,761	)		(16,193	)
Investments in short-term bank deposits		(307,485	)		(249,000	)
Proceeds from short-term bank deposits		368,429			89,000
Purchase of intangible assets		(5,980	)		(1,219	)
Other investing activities		84			(85	)
Investments in unconsolidated entities		(67,274	)		(7,000	)
Net cash used in investing activities		(23,987	)		(191,166	)
Cash flows from financing activities
Proceeds from public offering, net of issuance costs		-			218,850
Proceeds from exercise of stock options		260			3,699
Payment of contingent consideration		(1,386	)		-
Other financing activities		(281	)		406
Net cash provided by (used in) financing activities		(1,407	)		222,955
Effect of exchange rate changes on cash, cash equivalents and restricted cash		(9,787	)		(2,413	)
Net change in cash, cash equivalents and restricted cash		(92,470	)		60,772
Cash, cash equivalents and restricted cash, beginning of period		243,293			272,216
Cash, cash equivalents and restricted cash, end of period	$	150,823		$	332,988
Supplemental disclosures of cash flow information:
Transfer of inventory to fixed assets		6,306			2,760
Transfer of fixed assets to inventory		123			844
Reconciliation of cash, cash equivalents and restricted cash reported in the consolidated balance sheets:
Cash and cash equivalents		150,672			332,871
Restricted cash included in other current assets		151			117
Total cash, cash equivalents and restricted cash shown in the consolidated statement of cash flows	$	150,823		$	332,988

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

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 1,700 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 require 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’s current estimates contemplate current and expected future conditions, as applicable, it is reasonably possible that actual conditions could differ from the Company’s 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 macroeconomic conditions that have been triggered in the wake of the COVID-19 pandemic or steps taken to counter it. The global economic environment that has set in after the COVID-19 pandemic remains uncertain, rapidly changing and difficult to predict. The magnitude and duration of, as well as the consequences of, global macroeconomic trends triggered, in large part, by the pandemic or the recovery from the pandemic, such as inflationary pressures and supply chain problems, are currently difficult to predict. As a result, the accounting estimates and assumptions underlying the Company’s financial statements may change over time. 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 and nine months ended September 30, 2022 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 Company’s audited consolidated financial statements and notes thereto for the year ended December 31, 2021, filed with the U.S. Securities and Exchange Commission (the “SEC”) on February 24, 2022 as part of the Company’s Annual Report on Form 20-F for such year.

Note 2. New Accounting Pronouncements

Accounting Pronouncements Adopted in 2022

In August 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2020-06 “Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815 – 40).” This guidance simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts on an entity’s own equity. The amendments to this guidance are effective for fiscal years beginning after December 15, 2021, and interim periods within those fiscal years. The Company adopted this guidance effective January 1, 2022, with no material impact on its consolidated financial statements.

Recently issued accounting pronouncements not yet adopted

In October 2021, the FASB issued ASU 2021-08 “Business Combinations (Topic 805), Accounting for Contract Assets and Contract Liabilities from Contracts with Customers”, which requires contract assets and contract liabilities acquired in a business combination to be recognized and measured by the acquirer on the acquisition date in accordance with Accounting Standards Codification (ASC) 606, Revenue from Contracts with Customers. The guidance will result in the acquirer recognizing contract assets and contract liabilities at the same amounts recorded by the acquiree. The guidance should be applied prospectively to acquisitions occurring on or after the effective date. The guidance is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. Early adoption is permitted, including in interim periods, for any financial statements that have not yet been issued. The Company is currently evaluating this guidance to determine the impact it may have on its consolidated financial statements.

STRATASYS LTD.

NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED)

Note 3. Certain Transactions

Investment in Xaar 3D Ltd. ("Xaar 3D")

During the fourth quarter of 2019, the Company entered into an agreement with Xaar plc (“Xaar”) to purchase additional shares of Xaar 3D that would increase its stake from 15 to 45 percent, with Xaar retaining the remaining 55 percent. Xaar and Stratasys had announced the formation of Xaar 3D Ltd in July 2018 for the purpose of developing Powder Bed Fusion (“PBF”) additive manufacturing solutions that Stratasys can bring to the market. In addition, the agreement included an option for Stratasys to acquire the remaining shares of Xaar 3D.

Following the additional investment, the Company considered the FASB guidance in accordance with ASC Topic 810 “Consolidation” regarding the propriety of implementing consolidation, for both the variable interest entity and voting model, or equity method accounting. The Company concluded that it should continue accounting for the investment according to the equity method, as it had retained the ability to exercise significant influence but did not control Xaar 3D. For its additional interest in Xaar 3D, the Company paid approximately $15.7 million.

The investment was presented under other non-current assets in the Company’s consolidated balance sheets.

On November 1, 2021 (the “Xaar 3D transaction date”) , the Company acquired the remaining 55% share of Xaar 3D, for an aggregate purchase price of $29.3 million. The Company paid cash upon closing and it is obligated to make additional earn-out payments and payments of royalties on products and services sales for up to 15 years.

The Xaar 3D transaction is reflected in accordance with ASC Topic 805, “Business Combinations”, using the acquisition method of accounting, with the Company as the acquirer. The Company accounted for the acquisition of the remaining equity of Xaar 3D as a step acquisition, which required re-measurement of the Company’s previous ownership interest to fair value prior to completing purchase accounting. Using step acquisition accounting, the Company increased the value of its previously-held equity investment to its fair value of $23.8 million, which resulted in a gain of approximately $14.4 million, recorded in the consolidated statements of operations in the fourth quarter of 2021. The acquisition of the remaining equity interest also resulted in the recognition of a previously unrealized foreign currency gain of $0.6 million, which was reclassified from accumulated other comprehensive income (OCI). The fair value of the previously held equity method investment was determined based upon a valuation of the acquired business, as of the date of acquisition, as detailed below.

The following table summarizes the fair value of the consideration transferred to Xaar 3D’s stockholders for the Xaar 3D transaction:

		U.S. $ in thousands
Cash payments	$	13,967
Contingent consideration at estimated fair value		15,314
Total consideration for 55% holding		29,281
Fair value of 45% holding		23,775
Total consideration	$	53,056

In accordance with ASC Topic 805, the estimated contingent consideration as of the Xaar 3D transaction date was included in the purchase price. The total contingent payments could reach a maximum aggregate amount of up to $21 million. 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 operating expenses.

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 at the Xaar 3D transaction date. The estimated fair values are preliminary and based on the information that was available as of November 1, 2021. Thus, the measurements of fair value that are 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	$	82
Goodwill		25,375
Intangible assets		45,000
Other assets		5,280
Total assets acquired		75,737
Net deferred tax liabilities		1,736
Other labilities		20,945
Total liabilities assumed		22,681
Net assets acquired	$	53,056

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 losses for the revaluation of an equity investment, in amounts of $0.9 million and $2.0 million in the three-month periods ended September 30, 2022 and 2021, respectively. A loss of $3.2 million and a loss of $1.2 million were recognized in the nine-month periods ended September 30, 2022 and 2021, respectively.

The entity in which the Company invested became public during the first quarter of 2021 and accordingly the investment is treated as a marketable equity investment. Prior to the first quarter of 2021, the investment was treated as a non-marketable equity investment without readily determinable fair value.

MakerBot and Ultimaker transaction

On August 31, 2022, Stratasys completed the merger of MakerBot (previously, a fully owned subsidiary) with Ultimaker and formed a new entity under the name Ultimaker. The Company recorded a net gain of $39.1 million from deconsolidation of MakerBot, representing the difference between the book value of MakerBot's net assets and the fair value allocated to such net assets in the transaction.

The Company accounts for its investment in the combined company according to the equity method in accordance with ASC Topic 323, as it has retained the ability to exercise significant influence but does not control the new entity. the Company recognized an equity method investment in a total amount of $105.6 million, representing a share of 46.5% in the new entity.

Covestro acquisition

On August 8, 2022, the Company announced it has signed a definitive agreement to acquire the additive manufacturing materials business of Covestro AG. The acquisition is expected to close during the first quarter of 2023. The purchase price is approximately $42.3 million (43 million euros), plus additional inventory, less certain liabilities. In addition, there is a potential earnout payment of up to $36.4 million (37 million euros), subject to the achievement of various performance metrics.

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 and nine months ended September 30, 2022 and 2021:

	Three months ended September 30,			Nine months ended September 30,
			2021			2021
	(U.S. in thousands)			(U.S. in thousands)
Americas
Systems		$	34,136		$	82,546
Consumables			31,474			90,415
Service			37,962			105,673
Total Americas			103,572			278,634
EMEA
Systems			10,214			30,393
Consumables			16,682			44,830
Service			7,165			20,279
Total EMEA			34,061			95,502
Asia Pacific
Systems			7,926			24,781
Consumables			8,456			26,552
Service			4,994			14,734
Total Asia Pacific			21,376			66,067
Total Revenues		$	159,009		$	440,203

All values are in US Dollars.

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 and nine months ended September 30, 2022 and 2021:

	Three months ended September 30,			Nine months ended September 30,
			2021			2021
	(U.S. in thousands)			(U.S. in thousands)
Revenues recognized at point in time from:
Products		$	108,888		$	299,517
Services			12,056			33,781
Total revenues recognized at point in time			120,944			333,298
Revenues recognized over time from:
Services			38,065			106,905
Total revenues recognized over time			38,065			106,905
Total Revenues		$	159,009		$	440,203

All values are in US Dollars.

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 conditioned on constraints other than the passage of time. The Company had no material contract assets as of September 30, 2022 and December 31, 2021.

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 September 30, 2022 and December 31, 2021 were as follows:

			December 31, 2021
	U.S. in thousands
Deferred revenue*		$	72,307

All values are in US Dollars.

*Includes $23.6 million and $21.1 million under long-term deferred revenue in the Company's consolidated balance sheets as of September 30, 2022 and December 31, 2021, respectively.

Revenue recognized in 2022 that was included in deferred revenue balance as of Dece

mber 31, 2021 was $10.6 million and $41.1

million for the three and nine months ended September 30, 2022.

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 September 30, 2022, the total RPO amounted to $103.6 million. The Company expects to recognize $77.5 million of this RPO during the next 12 months, $14.9 million over the subsequent 12 months and the remaining $11.2 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 and comprehensive loss. As of September 30, 2022 and December 31, 2021, the deferred commissions amounted to $8.9 million and $7.4 million, respectively.

STRATASYS LTD.

NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED)

Note 5. Inventories

Inventories consisted of the following as of the below balance sheet dates:

			December 31, 2021
	U.S. in thousands
Finished goods		$	58,784
Work-in-process			4,360
Raw materials			66,003
		$	129,147

All values are in US Dollars.

Note 6. Goodwill and Other Intangible Assets

Goodwill

Changes in the carrying amount of the Company’s goodwill during the nine months ended September 30, 2022 were as follows:

		U.S. in thousands
Goodwill as of January 1, 2022	$	65,144
Foreign currency translation adjustments		(300
Goodwill as of September 30, 2022	$	64,844

All values are in US Dollars.

STRATASYS LTD.

NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED)

Other Intangible Assets

Other intangible assets consisted of the following:

	September 30, 2022						December 31, 2021
						Net		Carrying Amount,					Net
			Accumulated			Book		Net of		Accumulated			Book
			Amortization			Value		Impairment		Amortization			Value
	U.S. in thousands
Developed technology		$	(276,273	)	$	110,873	$	406,578	$	(279,037	)	$	127,541
Patents			(8,681	)		8,015		16,220		(8,503	)		7,717
Trademarks and trade names			(13,750	)		2,511		26,055		(22,241	)		3,814
Customer relationships			(85,005	)		8,283		100,731		(87,559	)		13,172
Capitalized software development costs			(7,066	)		-		7,410		(7,410	)		-
		$	(390,775	)	$	129,682	$	556,994	$	(404,750	)	$	152,244

All values are in US Dollars.

Amortization expenses relating to intangible assets for the three-month periods ended September 30, 2022 and 2021 were approximately $9.0 million and $7.7 million, respectively. Amortization expenses relating to intangible assets for the nine month periods ended September 30, 2022 and 2021 were approximately $27.4 million and $23.0 million, respectively.

As of September 30, 2022, 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 3 months of 2022	$	9,842
2023		22,585
2024		18,530
2025		16,051
2026		15,957
2027 and thereafter		46,717
Total	$	129,682

Note 7. Net Income (Loss) Per Share

The following table presents the numerator and denominator of the basic and diluted net income (loss) per share computations for the three and nine months ended September 30, 2022 and 2021:

	Three Months Ended September 30,					Nine Months Ended September 30,
		2022		2021			2022			2021
	In thousands, except per share amounts					In thousands, except per share amounts
Numerator:
Net income (loss) for basic and diluted net income (loss) per share	$	18,749	$	(18,076	)	$	(26,584	)	$	(57,146	)
Denominator:
Weighted average shares - for basic net income (loss) per share		66,772		65,018			66,356			62,888
Weighted average shares - for diluted net income (loss) per share		67,038		65,018			66,356			62,888
Net income (loss) per share
Basic and diluted	$	0.28	$	(0.28	)	$	(0.40	)	$	(0.91	)

The computation of diluted net income (loss) per share excluded share awards of 4.1 million shares and 5.0 million shares for the three month ended September 30, 2022 and 2021, respectively, and 5.0 million shares for the nine month ended September 30, 2022 and 2021, respectively, because their inclusion would have had an anti-dilutive effect on the diluted net income (loss) per share.

STRATASYS LTD.

NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED)

Note 8. Income Taxes

The Company had income tax expense of $3.3 million for the three-month period ended September 30, 2022, compared to income tax benefit of $0.7 million for the three-month period ended September 30, 2021. The Company had income tax expense of $2.8 million for the nine-month period ended September 30, 2022, and income tax benefit of $6.0 million for the nine-month period ended September 30, 2021. The Company’s effective tax rate as of September 30, 2022, was primarily impacted by the geographic mix of its earnings and losses, as well as changes in its valuation allowance.

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:

	September 30, 2022				December 31, 2021
				Level 3		Level 2			Level 3
	(U.S. in thousands)
Assets:
Foreign exchange forward contracts not designated as hedging instruments			$	-	$	82		$	-
Foreign exchange forward contracts designated as hedging instruments				-		910			-
Liabilities:
Foreign exchange forward contracts not designated as hedging instruments		)		-		(89	)		-
Foreign exchange forward contracts designated as hedging instruments		)		-		(60	)		-
Total contingent consideration*				55,412		-			55,919
		)	$	55,412	$	843		$	55,919

All values are in US Dollars.

*Includes $16.9 million and $2.4 million under Accrued expenses and other current liabilities in the Company's consolidated balance sheets as of September 30, 2022 and December 31, 2021, respectively.

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 assets, accounts payable and other current liabilities. The fair value of these financial instruments approximates their carrying values.

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 2023.

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

		Fair Value					Notional Amount
					December 31,			September 30,		December 31,
	Balance sheet location				2021			2022		2021
		U.S. in thousands
Assets derivatives -Foreign exchange contracts, not designated as hedging instruments	Other current assets			$	82		$	24,156	$	12,380
Assets derivatives -Foreign exchange contracts, designated as cash flow hedge	Other current assets				910			14,362		60,408
Liability derivatives -Foreign exchange contracts, not designated as hedging instruments	Accrued expenses and other current liabilities		)		(89	)		34,026		33,047
Liability derivatives -Foreign exchange contracts, designated as hedging instruments	Accrued expenses and other current liabilities		)		(60	)		57,780		26,320
			)	$	843		$	130,324	$	132,155

All values are in US Dollars.

Foreign exchange contracts not designated as hedging instruments

As of September 30, 2022, the notional amounts of the Company’s outstanding exchange forward contracts, not designated as hedging instruments, were $58.2 million, and were used to reduce foreign currency exposures. With respect to such derivatives, gain of $2.9 million and loss of $0.9 million were recognized under financial expenses, net for the three-month periods ended September 30, 2022 and 2021, respectively and gain of $6.0 million and gain of $2.6 million were recognized under financial expenses, net for the nine-month periods ended September 30, 2022 and 2021, 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 expenses, net.

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

As of September 30, 2022, the Company had in effect foreign exchange forward contracts, designated as cash flow hedges for accounting purposes, for the conversion of $58.4 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 September 30, 2022, the Company had in effect foreign exchange forward contracts, designated as cash flow hedges for accounting purposes, for the conversion of 13.8 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.

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”), performance-based restricted share units (”PSUs”) and Employee Share Purchase Plan ("ESPP") were allocated as follows:

	Three Months Ended September 30,			Nine Months Ended September 30,
			2021			2021
	U.S in thousands			U.S in thousands
Cost of revenues		$	805		$	2,227
Research and development, net			1,764			5,058
Selling, general and administrative			5,389			15,855
Total stock-based compensation expenses		$	7,958		$	23,140

All values are in US Dollars.

A summary of the Company’s stock option activity for the nine months ended September 30, 2022 is as follows:

	Number of Options		Weighted Average Exercise Price
Options outstanding as of January 1, 2022	1,732,368		28.85
Granted	-		-
Exercised	(24,852	)	10.41
Forfeited	(35,421	)	26.80
Options outstanding as of September 30, 2022	1,672,095		29.17
Options exercisable as of September 30, 2022	1,365,231		32.04

As of September 30, 2022, the unrecognized compensation cost of $1.3 million related to all unvested, equity-classified stock options is expected to be recognized as an expense over a weighted-average period of 2.35 years.

STRATASYS LTD.

NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED)

A summary of the Company’s RSUs and PSUs activity for the nine months ended September 30, 2022 is as follows:

	Number of RSUs and PSUs		Weighted Average Grant Date Fair Value
Unvested as of January 1, 2022	3,082,798		26.36
Granted	1,904,310		22.29
Vested	(1,077,117	)	24.87
Forfeited	(590,724	)	24.60
Unvested as of September 30, 2022	3,319,267		24.82

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 September 30, 2022, the unrecognized compensation cost of $59 million related to all unvested, equity-classified RSUs and PSUs is expected to be recognized as expense over a weighted-average period of 2.40 years.

Employee Stock Purchase Plan

On October 2021, the Company adopted the 2021 Employee Stock Purchase Plan (the “ESPP”). According to the ESPP, eligible employees may use up to 15% of their salaries to purchase ordinary shares. The price of an ordinary share purchased under the ESPP is equal to 85% of the lower of the fair market value of the ordinary share on the beginning of each offering period or on the purchase date. The first offering period commenced on June 1, 2022 and will end on November 30, 2022.

In accordance with ASC Topic 718, the ESPP is considered compensatory and, as such, results in recognition of stock-based compensation expenses.

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 nine months ended September 30, 2022 and 2021, respectively:

	Nine Months Ended September 30, 2022
				Foreign Currency<br>Translation<br>Adjustments			Total
	U.S. in thousands
Balance as of January 1, 2022			$	(10,343	)	$	(8,771	)
Other comprehensive income (loss) before reclassifications		)		(5,089	)		(5,595	)
Amounts reclassified from accumulated<br> other comprehensive loss				-			143
Other comprehensive loss		)		(5,089	)		(5,452	)
Balance as of September 30, 2022			$	(15,432	)	$	(14,223	)

All values are in US Dollars.

STRATASYS LTD.

NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED)

	Nine Months Ended September 30, 2021
				Foreign Currency<br>Translation<br>Adjustments			Total
	U.S. in thousands
Balance as of January 1, 2021		)	$	(7,173	)	$	(8,846	)
Other comprehensive income before<br> reclassifications				(2,105	)		322
Amounts reclassified from accumulated<br> other comprehensive loss				-			152
Other comprehensive income				(2,105	)		474
Balance as of September 30, 2021			$	(9,278	)	$	(8,372	)

All values are in US Dollars.

c. Rights plan

On July 24, 2022, the Company’s Board of Directors adopted a rights plan (the “Rights Plan”) to protect the interests of the Company’s shareholders. Each Right entitles the registered holder thereof to purchase from the Company one Ordinary Share at a price of $0.01 per share, subject to adjustment, once the Rights become exercisable, and subject to the exercise terms and conditions thereof described in the Rights Agreement. The rights would become exercisable only if an entity, person, or group acquires beneficial ownership of 15% or more of the Company’s outstanding ordinary shares in a transaction not approved by the Company’s Board. The Rights Plan has a 364-day term, expiring on July 24, 2023.

The adoption of the Rights Plan is intended to protect the long-term interests of Stratasys and all Stratasys shareholders. The Rights Plan is designed to reduce the likelihood that any entity, person, or group would gain control of, or significant influence over, Stratasys through the open-market accumulation of the Company’s shares without appropriately compensating all Stratasys shareholders for control. The Rights Plan will encourage anyone seeking to gain a significant interest in Stratasys to negotiate directly with the Board prior to attempting to control or significantly influence the Company. Further to those goals, the Rights may cause substantial dilution to a person or group that acquires 15% or more of the ordinary shares, par value NIS 0.01, of the Company (“Ordinary Shares”) or any existing holder of 15% or more of the Ordinary Shares who shall acquire any additional Ordinary Shares.

d. Public offering of ordinary shares

During March 2021, the Company completed a public offering of its ordinary shares that raised $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 $1.3 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

During the fourth quarter of 2021, the Company reached preliminary settlement on an employee-related litigation matter in the US. The financial statements for the period ended September 30, 2022 and the year ended December 31, 2021 include a provision in respect of this settlement.

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.

  EDGAR HTML

Exhibit 99.2

OPERATING AND FINANCIAL REVIEW AND PROSPECTS.

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited consolidated financial statements and the related notes included as Exhibit 99.1 to the Report of Foreign Private Issuer on Form 6-K to which this Operating and Financial Review and Prospects is attached, or the Form 6-K. The discussion below contains forward-looking statements (within the meaning of the United States federal securities laws) that are based upon our current expectations and are subject to uncertainty and changes in circumstances. Actual results may differ materially from these expectations due to inaccurate assumptions and known or unknown risks and uncertainties, including those identified in “Forward-Looking Statements and Factors that May Affect Future Results of Operations”, below, as well in the “Risk Factors” in Item 3.D of our Annual Report on Form 20-F for the year ended December 31, 2021, filed with the Securities and Exchange Commission, or SEC, on February 24, 2022, or our 2021 Annual Report, as updated by the “Risk Factors” section below.

Overview of Business and Trend Information

We are a global leader in connected, polymer-based 3D printing solutions, across the entire manufacturing value chain. Leveraging distinct competitive advantages that include a broad set of best-in-class 3D printing platforms, software, a materials and technology partner ecosystem, innovative leadership, and global GTM infrastructure, we are positioned to capture share in a significant and growing global marketplace, with a focus on manufacturing, which we view as having the largest and fastest growing total addressable market.

Our approximately 1,700 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. Our products and comprehensive solutions improve product quality, development time, cost, and time-to-market. Our 3D ecosystem of solutions and expertise includes 3D printers, materials, software, expert services, and on-demand parts production.

A series of recent acquisitions and other transactions has strengthened our leadership in various facets of our business, and have added incremental growth engines to our platform. Our acquisition, in December 2020, of Origin Laboratories, Inc., or Origin, significantly strengthened our leadership in mass production for polymer 3D printing. Origin’s pioneering approach to additive manufacturing of end-use parts has enabled us to serve a large market with manufacturing-grade 3D printers, utilizing P^3^ Programmable PhotoPolymerization. Our acquisition, in the first quarter of 2021, of UK-based RP Support Ltd., or RPS, a provider of industrial stereolithography 3D printers and solutions, provided us with a complementary technology that further expanded our polymer suite of solutions across the product life cycle. Similarly, our acquisition, in November 2021, of all remaining shares of Xaar 3D Ltd. or Xaar, has begun to accelerate our growth in production-scale 3D printing. The recently completed transaction between our former subsidiary, MakerBot, a leader in desktop 3D printing, and Ultimaker, gave us a significant (approximately 46.5%) stake in a new entity that has a broad technology offering, a larger scale, and that is well-capitalized and is therefore better equipped to compete in the attractive desktop 3D printing segment. Our October 2022 acquisition of quality assurance software company Riven, a Berkeley, California-based start-up, enables us to fully integrate its cloud-based software solution into our GrabCAD^®^ Additive Manufacturing Platform, thereby enabling more manufacturing customers to adopt Stratasys solutions for end-use parts production. Our announced acquisition of Covestro’s additive manufacturing business will give us the ability to accelerate innovative developments in 3D printing materials and to thereby further grow adoption of our newest technologies, including our Origin P3™, Neo^®^ stereolithography, and H350™ printers, with which Covestro’s resins can be used.

Business Performance in Macro-Economic Environment

Our current outlook, as well as our results of operations for the three and nine month periods ended September 30, 2022, should be evaluated in light of current global macroeconomic conditions, including challenging trends that have arisen in the post-COVID-19 period. Our revenues in the first nine months of 2022 evidenced a significant improvement over the corresponding period in 2021, during which our recovery from the COVID-19 pandemic was ongoing, but incomplete. Our revenues during the nine-month period ended September 30, 2022 grew by 11.8% on a year-over-year basis, compared to the nine months ended September 30, 2021, when the COVID-19 pandemic was still adversely impacting our revenues. Our improved performance in the nine months ended September 30, 2022, was primarily driven by a 23.2% increase in systems revenues, a 5.8% increase in consumables revenues, and a 7.5% increase in services revenues (in each case, compared to the corresponding period of 2021). Our revenues in the first nine months of 2022 surpassed pre-COVID-19 levels (an improvement of 3.4% compared to the first nine months of 2019), signaling that we have achieved full recovery from the pandemic with respect to our top-line results.

In the first nine months of 2022, we worked at full-capacity on a global basis, with a high percentage of our employees throughout the world having received vaccines against COVID-19 over the course of the previous year.

We continue to closely monitor macro-economic conditions, including supply chain problems, inflation and other trends that have been impacting economic activity on a global scale in the aftermath of the COVID-19 pandemic, and which may also adversely affect us. We have been assessing, on an ongoing basis, the implications of those global conditions for our operations, supply chain, liquidity, cash flow and customer orders, and have been acting in an effort to mitigate adverse consequences as needed. We estimate that those conditions have impacted us most notably by limiting our ability to increase our gross margins and our operating margins more significantly in the short-term, given the increased cost of goods and operating expenses associated with global supply chain problems and inflation. Assuming that those logistical issues and inflationary pressures ease, and the global economy remains relatively stable, we expect that those margins will improve, as we execute on our growth plans. That improvement is also contingent on the global economy remaining open generally, as it was during the first nine months of 2022, during which the COVID-19 pandemic itself no longer had an adverse impact on our results of operations.

Specific developments that may potentially impact our operating performance in an adverse manner include:

further actions taken by central banks in Europe and the U.S. to increase interest rates as a means to slow down inflation, which may worsen credit/financing conditions for our customers who purchase our products;
potential contraction of economic activities and recessionary conditions that could arise as a result of interest rate increases and a decrease in consumer demand;
any further government-mandated shutdowns in China due to COVID-19 outbreaks, which could slow down our supply chain; and
the continued depreciated value of the Euro relative to the U.S. dollar, which has been having and may continue to have an adverse impact on the U.S.- denominated value of our European-derived revenues for purposes of our financial statements.

We cannot provide any assurances as to the extent of our resilience to the adverse impact of these specific developments in future periods.

We ended the third quarter of 2022 with $348.7 million in cash, cash equivalents and short-term deposits. We believe that we are well suited to continue to manage the current global macro-economic climate with a strong balance sheet and no debt, while focusing on cost controls and cash generation. We have continued to selectively apply certain research and development cost controls, which we began doing at the start of the COVID-19 pandemic, while ensuring that our NPI programs are well-funded, and we plan to continue investing as needed in order to support our new product development programs.

Summary of Financial Results

Our unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America, or GAAP. In the opinion of our management, all adjustments considered necessary for a fair statement of the unaudited condensed consolidated financial statements have been included herein and are of a normal recurring nature. The following discussion compares the actual results, on a GAAP basis, for the three and nine months ended September 30, 2022 with the corresponding periods of 2021.

Results of Operations

Comparison of Three Months Ended September 30, 2022 to Three Months Ended September 30, 2021

The following table sets forth certain statement of operations data for the periods indicated:

	Three Months Ended September 30,
	2022				2021
		U.S. in thousands	% of<br>Revenues			U.S. in thousands	% of<br>Revenues
Revenues	$	162,192	100.0	%	$	159,009	100.0	%
Cost of revenues		91,443	56.4	%		90,821	57.1	%
Gross profit		70,749	43.6	%		68,188	42.9	%
Research and development, net		23,145	14.3	%		22,645	14.2	%
Selling, general and administrative		63,230	39.0	%		67,462	42.4	%
Operating loss		(15,626	(9.6	)%		(21,919	(13.8	)%
Gain from deconsolidation of subsidiary		39,136	24.1	%		-	0.0	%
Financial income (expenses), net		452	0.3	%		(634	(0.4	)%
Income (loss) before income taxes		23,962	14.8	%		(22,553	(14.2	)%
Income tax (benefit) expense		3,298	2.0	%		(699	(0.4	)%
Share in losses of associated companies		(1,915	(1.2	)%		3,778	2.4	%
Net income (loss)		18,749	11.6	%		(18,076	(11.4	)%

All values are in US Dollars.

Discussion of Results of Operations

Revenues

Our products and services revenues in the three months ended September 30, 2022 and 2021, as well as the percentage change reflected thereby, were as follows:

	Three Months Ended September 30,
			2021	% Change
	U.S. in thousands
Products		$	108,888	3.0	%
Services			50,121	(0.1	)%
Total Revenues		$	159,009	2.0	%

All values are in US Dollars.

Products Revenues

Revenues derived from products (including systems and consumable materials) increased by $3.2 million, or 3.0%, for the three months ended September 30, 2022, as compared to the three months ended September 30, 2021. Revenues derived from products excluding divestitures grew on a constant currency basis by 10.5%, as compared to the three months ended September 30, 2021.

Revenues derived from systems increased by $4.0 million, or 7.7%, for the three months ended September 30, 2022, as compared to the three months ended September 30, 2021. Systems revenues reflected the highest third quarter total in six years, strengthened by the continued ramp-up of sales of the Origin One. Revenues derived from systems excluding divestitures grew on a constant currency basis by 18.9%, as compared to the three months ended September 30, 2021.

Revenues derived from consumables decreased by $0.8 million, or 1.4%, for the three months ended September 30, 2022, as compared to the three months ended September 30, 2021. Revenues derived from consumables excluding divestitures grew on a constant currency basis by 3.4%, as compared to the three months ended September 30, 2021.

Services Revenues

Services revenues (including SDM, maintenance contracts, time and materials and other services) decreased by $0.1 million for the three months ended September 30, 2022, or 0.1%, as compared to the three months ended September 30, 2021. Revenues derived from services excluding divestitures grew on a constant currency basis by 2.1%, as compared to the three months ended September 30, 2021.Within services revenues, customer support revenue, which includes revenue generated mainly by maintenance contracts on our systems, increased by 4.7%.

Revenues by Region

Revenues and the percentage of revenues by region for the three months ended September 30, 2022 and 2021, as well as the percentage change in revenues in each such region reflected thereby, were as follows:

	Three Months Ended September 30,
	2022				2021				% Change
		U.S.$ in thousands	% of<br>Revenues			U.S.$ in thousands	% of<br>Revenues
Americas*	$	107,453	66.3	%	$	103,572	65.2	%	3.7	%
EMEA		31,460	19.4	%		34,061	21.4	%	(7.6	)%
Asia Pacific		23,279	14.3	%		21,376	13.4	%	8.9	%
	$	162,192	100.0	%	$	159,009	100.0	%	2.0	%

* Represent the United States, Canada and Latin America

Revenues in the Americas region increased by $3.9 million, or 3.7%, to $107.5 million for the three months ended September 30, 2022, compared to $103.6 million for the three months ended September 30, 2021. The increase was in all revenue streams.

Revenues in the EMEA region decreased by $2.6 million, or 7.6%, to $31.5 million for the three months ended September 30, 2022, compared to $34.1 million for the three months ended September 30, 2021. On a constant currency basis, when using the prior year period’s exchange rates, revenues increased by $1.9 million, or 5.6%.

Revenues in the Asia Pacific region increased by $1.9 million, or 8.9%, to $23.3 million for the three months ended September 30, 2022, compared to $21.4 million for the three months ended September 30, 2021. The increase was primarily driven by higher systems revenues. On a constant currency basis, when using the prior year period’s exchange rates, revenues increased by $3.6 million, or 16.6%.

Gross Profit

Gross profit from our products and services, as well as the percentage change reflected thereby, was as follows:

	Three Months Ended September 30,
			2021
	U.S. in thousands			Change in %
Gross profit attributable to:
Products		$	54,068	4.0	%
Services			14,120	2.9	%
		$	68,188	3.8	%

All values are in US Dollars.

Gross profit as a percentage of revenues from our products and services was as follows:


	2022		2021
Gross profit as a percentage of revenues from:
Products	50.1	%	49.7	%
Services	29.0	%	28.2	%
Total gross profit	43.6	%	42.9	%

Gross profit attributable to products revenues increased by $2.1 million, or 4.0%, to $56.2 million for the three months ended September 30, 2022, compared to gross profit of $54.1 million for the three months ended September 30, 2021. Gross profit attributable to products revenues as a percentage of products revenues increased to 50.1% for the three months ended September 30, 2022, compared to 49.7% for the three months ended September 30, 2021.

Gross profit attributable to services revenues increased by $0.4 million, or 2.9%, to $14.5 million for the three months ended September 30, 2022, compared to $14.1 million for the three months ended September 30, 2021. Gross profit attributable to services revenues as a percentage of services revenues in the three months ended September 30, 2022 increased to 29.0%, as compared to 28.2% for the three months ended September 30, 2021.

Gross margin benefited from operational efficiencies and the divestment of MakerBot, during the third quarter of 2022 compared to the third quarter of 2021.

Operating Expenses

The amount of each type of operating expense for the three months ended September 30, 2022 and 2021, as well as the percentage change reflected thereby, and total operating expenses as a percentage of our total revenues in each such quarter, were as follows:

	Three Months Ended September 30,
			2021	% Change
	U.S. in thousands
Research and development, net		$	22,645	2.2	%
Selling, general and administrative			67,462	(6.3	)%
			90,107	(4.1	)%

All values are in US Dollars.

Operating expenses were $86.4 million in the third quarter of 2022, compared to operating expenses of $90.1 million in the third quarter of 2021. The decrease in operating expenses and the decrease in operating expenses as a percentage of our revenues - from 56.7% to 53.3% - reflected our improved operating efficiencies.

Research and development expenses, net increased by $0.5 million, or 2.2%, to $23.1 million for the three months ended September 30, 2022, compared to $22.6 million for the three months ended September 30, 2021. The amount of research and development expenses constituted 14.3% of our revenues for the three months ended September 30, 2022, as compared to 14.2% for the three months ended September 30, 2021.

Our research and development expenses were impacted by the timing of project spending and product launches, based on our portfolio management. We continue to invest in strategic long-term initiatives that include advancements in our core FDM and PolyJet technologies and in our new powder-based and photopolymer-based, SAF and P^3^ technologies, advanced composite materials, software and development of new applications which will enhance our current solutions offerings.

Selling, general and administrative expenses decreased by $4.2 million, or 6.3%, to $63.2 million for the three months ended September 30, 2022, compared to $67.5 million for the three months ended September 30, 2021.The decrease in these expenses reflected the trend of [improved operating efficiencies that we have been implementing in our operations since the onset of the COVID-19 pandemic in 2020]. The amount of selling, general and administrative expenses constituted 39.0% of our revenues for the three months ended September 30, 2022, as compared to 42.4% for the three months ended September 30, 2021.

Operating Loss

Operating loss and operating loss as a percentage of our total revenues were as follows:

	Three Months Ended September 30,
				2021
	U.S. in thousands
Operating loss		)	$	(21,919	)
Percentage of revenues		)%		(13.8	)%

All values are in US Dollars.

Operating loss amounted to $15.6 million for the three months ended September 30, 2022, compared to an operating loss of $21.9 million for the three months ended September 30, 2021. Our operating loss decreased both on an absolute basis and as a percentage of our revenues in the third quarter of 2022 compared to the third quarter of 2021, reflecting our improved operating efficiencies and business scalability, which resulted in modest gross margin growth and lower operating expenses.

Gain From Deconsolidation Of Subsidiary

On August 31, 2022, we completed the previously-announced merger of our subsidiary MakerBot with Ultimaker, into a new company that had been created under the name Ultimaker. The transaction was accounted for as an equity method investment, and, accordingly, we recorded an investment of $105.6 million, and a net gain from deconsolidation of MakerBot of $39.1 million.

Financial Income (Expenses), net

Financial income, net, which was primarily comprised of foreign currencies effects, interest income and interest expenses, was $0.5 million for the three months ended September 30, 2022, compared to $0.6 million of financial expenses, net for the three months ended September 30, 2021.

Income Taxes

Income tax (benefit) expense and income tax (benefit) expense as a percentage of net income (loss) before taxes, as well as the percentage change in each, year over year, reflected thereby, were as follows:

	Three Months Ended September 30,
				2021
	U.S. in thousands					Change in %
Income tax (benefit) expense			$	(699	)	(571.8	)%
As a percent of income (loss) before income taxes		%		(3.1	)%	344.1	%

All values are in US Dollars.

We had an effective tax rate of 13.8% for the three-month period ended September 30, 2022, compared to an effective tax rate of (-3.1)% for the three-month period ended September 30, 2021. Our effective tax rate in the third quarters of each of 2022 and 2021 was primarily impacted by the geographic mix of foreign taxable earnings and losses, as well as changes in our valuation allowance.

Share in Profit (Loss) of Associated Companies

Share in profit (loss) of associated companies reflects our proportionate share of the profits of unconsolidated entities accounted for by using the equity method of accounting. During the three months ended September 30, 2022, the loss from our proportionate estimated share of the losses of our equity method investments was $1.9 million, compared to a profit of $3.8 million in the three months ended September 30, 2021. The foregoing losses was attributable to our equity investment in the new merged entity Ultimaker and MakerBot following the deconsolidation, in the third quarter of 2022, of MakerBot which was previously held as a subsidiary of Stratasys.

Net Income (Loss) and Net Income (Loss) Per Share

Net income (loss), and net income (loss) per share were as follows:

	Three Months Ended September 30,
				2021
	U.S. in thousands
Net income (loss)			$	(18,076	)
Percentage of revenues		%		(11.4	)%
Basic and diluted income (loss) per share			$	(0.28	)

All values are in US Dollars.

Net income was $18.7 million for the three months ended September 30, 2022 compared to net loss of $18.1 million for the three months ended September 30, 2021. The income is primarily attributable to the gain from deconsolidation of MakerBot.

Net income per share was $0.28 for the three months ended September 30, 2022 as compared to net loss per share of $0.28 for the three months ended September 30, 2021. The weighted average fully diluted share count was 67.0 million during the three months ended September 30, 2022, compared to 65.0 million during the three months ended September 30, 2021.

Results of Operations

Comparison of Nine Months Ended September 30, 2022 to Nine Months Ended September 30, 2021

The following table sets forth certain statement of operations data for the periods indicated:

	Nine Months Ended September 30,
	2022				2021
		U.S. in thousands	% of<br>Revenues			U.S. in thousands	% of<br>Revenues
Revenues	$	492,224	100.0	%	$	440,203	100.0	%
Cost of revenues		284,405	57.8	%		253,168	57.5	%
Gross profit		207,819	42.2	%		187,035	42.5	%
Research and development, net		71,489	14.5	%		65,683	14.9	%
Selling, general and administrative		195,085	39.6	%		184,353	41.9	%
Operating loss		(58,755	(11.9	)%		(63,001	(14.3	)%
Gain from deconsolidation of subsidiary		39,136	8.0	%		-	0.0	%
Financial expenses, net		(2,080	(0.4	)%		(1,383	(0.3	)%
Loss before income taxes		(21,699	(4.4	)%		(64,384	(14.6	)%
Income tax expense		2,796	0.6	%		6,009	1.4	%
Share in profit (loss) of associated companies		(2,089	(0.4	)%		1,229	0.3	%
Net loss		(26,584	(5.4	)%		(57,146	(13.0	)%

All values are in US Dollars.

Discussion of Results of Operations

Revenues

Our products and services revenues in the nine months ended September 30, 2022 and 2021, as well as the percentage change reflected thereby, were as follows:

	Nine Months Ended September 30,
			2021	% Change
	U.S. in thousands
Products		$	299,517	13.8	%
Services			140,686	7.5	%
Total Revenues		$	440,203	11.8	%

All values are in US Dollars.

Products Revenues

Revenues derived from products (including AM systems and consumable materials) increased by $41.4 million, or 13.8%, for the nine months ended September 30, 2022, as compared to the nine months ended September 30, 2021.

Revenues derived from systems increased by $32.0 million, or 23.2% for the nine months ended September 30, 2022 as compared to the nine months ended September 30, 2021. The increase in systems revenues reflected a strong nine-month period ended September 30, 2022, which was strengthened by the launch of the Origin One 3D printer in mid-February 2022, and the first full quarter of H350 sales in the second quarter of 2022.

Revenues derived from consumables increased by $9.4 million, or 5.8%, for the nine months ended September 30, 2022, as compared to the nine months ended September 30, 2021. The increase in consumables reflects the impact of strong systems sales throughout 2021 and their initial flow-through to consumables as initial materials began to be replenished in the first nine months of 2022.

Services Revenues

Services revenues (including SDM, maintenance contracts, time and materials and other services) increased by $10.6 million for the nine months ended September 30, 2022, or 7.5%, as compared to the nine months ended September 30, 2021. Within services revenues, customer support revenue, which includes revenue generated mainly by maintenance contracts on our systems, increased by 7.9%.

Revenues by Region

Revenues and the percentage of revenues by region for the nine months ended September 30, 2022 and 2021, as well as the percentage change in revenues in each such region reflected thereby, were as follows:

	Nine Months Ended September 30,
	2022				2021				% Change
		U.S.$ in thousands	% of<br>Revenues			U.S.$ in thousands	% of<br>Revenues
Americas*	$	313,245	63.6	%	$	278,634	63.3	%	12.4	%
EMEA		106,727	21.7	%		95,502	21.7	%	11.8	%
Asia Pacific		72,252	14.7	%		66,067	15.0	%	9.4	%
	$	492,224	100.0	%	$	440,203	100.0	%	11.8	%

* Consists of United States, Canada and Latin America

Revenues in the Americas region increased by $34.6 million, or 12.4%, to $313.2 million for the nine months ended September 30, 2022, compared to $278.6 million for the nine months ended September 30, 2021. The increase was in all revenue streams.

Revenues in the EMEA region increased by $11.2 million, or 11.8%, to $106.7 million for the nine months ended September 30, 2022, compared to $95.5 million for the nine months ended September 30, 2021. The increase was primarily driven by higher products revenues.

Revenues in the Asia Pacific region increased by $6.2 million, or 9.4%, to $72.3 million for the nine months ended September 30, 2022, compared to $66.1 million for the nine months ended September 30, 2021. The increase was primarily driven by higher systems revenues.

Gross Profit

Gross profit from our products and services, as well as the percentage change reflected thereby, were as follows:

	Nine Months Ended September 30,
			2021
	U.S. in thousands			Change in %
Gross profit attributable to:
Products		$	148,046	11.1	%
Services			38,989	11.1	%
		$	187,035	11.1	%

All values are in US Dollars.

Gross profit as a percentage of revenues from our products and services was as follows:


	2022		2021
Gross profit as a percentage of revenues from:
Products	48.3	%	49.4	%
Services	28.6	%	27.7	%
Total gross profit	42.2	%	42.5	%

Gross profit attributable to products revenues increased by $16.5 million, or 11.1%, to $164.5 million for the nine months ended September 30, 2022, compared to gross profit of $148.0 million for the nine months ended September 30, 2021. Gross profit attributable to products revenues as a percentage of products revenues decreased to 48.3% for the nine months ended September 30, 2022, compared to 49.4% for the nine months ended September 30, 2021.

Gross profit attributable to services revenues increased by $4.3 million, or 11.1%, to $43.3 million for the nine months ended September 30, 2022, compared to $39.0 million for the nine months ended September 30, 2021. Gross profit attributable to services revenues as a percentage of services revenues in the nine months ended September 30, 2022 increased to 28.6%, as compared to 27.7% for the nine months ended September 30, 2021.

The above gross profit results were impacted by growth in logistics and materials costs, reflecting global inflationary trends, offset by our increased revenues from systems and consumables, along with operational efficiencies and the divestment of MakerBot, during the first nine months of 2022 compared to the first nine months of 2021.

Operating Expenses

The amount of each type of operating expense for the nine months ended September 30, 2022 and 2021, as well as the percentage change reflected thereby, and total operating expenses as a percentage of our total revenues in each such period, were as follows:

	Nine Months Ended September 30,
				2021		% Change
	U.S. in thousands
Research and development, net			$	65,683		8.8	%
Selling, general and administrative				184,353		5.8	%
			$	250,036		6.6	%
Percentage of revenues		%		56.8	%

All values are in US Dollars.

Operating expenses were $266.6 million in the nine months ended September 30, 2022, compared to operating expenses of $250.0 million in the nine months ended September 30, 2021. The increase in operating expenses was driven primarily by the impact of the addition of the operating expenses of three recently-acquired companies— Xaar, Origin, and RPS— to our consolidated results of operations, as well as higher commissions based on our increased revenues.

Research and development expenses, net increased by $5.8 million, or 8.8%, to $71.5 million for the nine months ended September 30, 2022, compared to $65.7 million for the nine months ended September 30, 2021. The amount of research and development expenses constituted 14.5% of our revenues for the nine months ended September 30, 2022, as compared to 14.9% for the nine months ended September 30, 2021.

Our research and development expenses were impacted by the timing of project spending and product launches, based on our management of our product portfolio. We continue to invest in strategic long-term initiatives that include advancements in our core FDM and PolyJet technologies and in our new powder-based and photopolymer-based, SAF and P^3^ technologies, advanced composite materials, software and development of new applications which will enhance our current solutions offerings.

Selling, general and administrative expenses increased by $10.7 million, or 5.8%, to $195.1 million for the nine months ended September 30, 2022, compared to $184.4 million for the nine months ended September 30, 2021. The increase in these expenses reflected the trend of increased operating activity which began in 2021 and carried over with even greater strength into the first nine months of 2022. The amount of selling, general and administrative expenses constituted 39.6% of our revenues for the nine months ended September 30, 2022, as compared to 41.9% for the nine months ended September 30, 2021.

The decrease in each category of operating expenses as a percentage of our revenues in the first nine months of 2022 compared to the first nine months of 2021 reflects our improved operational efficiencies.

Operating Loss

Operating loss and operating loss as a percentage of our total revenues were as follows:

	Nine Months Ended September 30,
				2021
	U.S. in thousands
Operating loss		)	$	(63,001	)
Percentage of revenues		)%		(14.3	)%

All values are in US Dollars.

Operating loss amounted to $58.8 million for the nine months ended September 30, 2022, compared to an operating loss of $63.0 million for the nine months ended September 30, 2021, reflecting both a decrease in our absolute operating loss, and a decrease in our operating loss as a percentage of our revenues in the first nine months of 2022 compared to the first nine months of 2021.

Gain From Deconsolidation Of Subsidiary

Financial Expenses, net

Financial expenses, net, which were primarily comprised of foreign currencies effects, interest income and interest expenses, were $2.1 million for the nine months ended September 30, 2022 and $1.4 million for the nine months ended September 30, 2021.

Income Taxes

Income tax expense and income tax expense as a percentage of net loss before taxes, as well as the percentage change in each, year over year, reflected thereby, were as follows:

	Nine Months Ended<br>September 30,
				2021
	U.S. in thousands					Change in %
Income tax expense			$	6,009		(53.5	)%
As a percent of loss before income taxes		)%		(9.3	)%	38.1	%

All values are in US Dollars.

We had an effective tax rate of (-12.9)% for the nine-month period ended September 30, 2022, compared to an effective tax rate of (-9.3)% for the nine-month period ended September 30, 2021. Our effective tax rate in the nine months ended September 30, 2022 was primarily impacted by the geographic mix of foreign taxable earnings and losses, as well as changes in our valuation allowance.

Share in profit (Loss) of Associated Companies

Share in profit (loss) of associated companies reflects our proportionate share of the profits of unconsolidated entities accounted for by using the equity method of accounting. During the nine months ended September 30, 2022, the loss from our proportionate estimated share of the losses of our equity method investments was $2.1 million, compared to a profit of $1.2 million in the nine months ended September 30, 2021. The foregoing losses was attributable to our equity investment in the new merged entity Ultimaker and MakerBot following the deconsolidation, in the first nine months of 2022, of MakerBot which was previously held as a subsidiary of Stratasys.

Net Loss and Net Loss Per Share

Net loss, and net loss per share were as follows:

	Nine Months Ended September 30,
				2021
	U.S. in thousands
Net loss		)	$	(57,146	)
Percentage of revenues		)%		(13.0	)%
Basic and diluted net loss per share		)	$	(0.91	)

All values are in US Dollars.

Net loss for the first nine months ended September 30, 2022 was $26.6 million, compared to a net loss of $57.1 million for the nine months ended September 30, 2021, reflecting a decrease in our net loss, and a decrease in our net loss as a percentage of our revenues in the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021. The decrease is primarily attributable to the gain from the deconsolidation of MakerBot.

Net loss per share was $0.40 and $0.91 for the nine months ended September 30, 2022 and 2021, respectively. The weighted average fully diluted share count was 66.4 million for the nine months ended September 30, 2022, compared to 62.9 million for the nine months ended September 30, 2021.

Supplemental Operating Results on a Non-GAAP Basis

The following non-GAAP data, which excludes certain items as described below, are non-GAAP financial measures. Our management believes that these non-GAAP financial measures are useful information for investors and shareholders of our company in gauging our results of operations (i) on an ongoing basis after excluding mergers, acquisitions and divestments related expense or gains and restructuring-related charges or gains, legal provisions and (ii) excluding non-cash items such as stock-based compensation expenses, acquired intangible assets amortization, including intangible assets amortization related to equity method investments, impairment of long-lived assets and goodwill, revaluation of our investments and the corresponding tax effect of those items.

The items adjusted in our non-GAAP results either do not reflect actual cash outlays that impact our liquidity and our financial condition, or have a non-recurring impact on the statement of operations, as assessed by management. These non-GAAP financial measures are presented to allow investors to better understand how management assesses our performance for internal planning and forecasting purposes. The limitations of using these non-GAAP financial measures as performance measures are that they provide a view of our results of operations without including all items indicated above during a period, which may not provide a comparable view of our performance to other companies in our industry. Investors and other readers should consider non-GAAP measures only as supplements to, not as substitutes for or as superior measures to, the measures of financial performance prepared in accordance with GAAP. Reconciliation between results on a GAAP and non-GAAP basis is provided in the table below.

Reconciliation of GAAP to Non-GAAP Results of Operations

The following tables present the GAAP measures, the corresponding non-GAAP amounts and the related non-GAAP adjustments for the applicable periods:

			Three Months Ended September 30,
				2022			Non-GAAP			2022		2021			Non-GAAP			2021
				GAAP			Adjustments			Non-GAAP		GAAP			Adjustments			Non-GAAP
			U.S. dollars and shares in thousands (except per share amounts)
		Gross profit (1)	$	70,749		$	7,990		$	78,739	$	68,188		$	8,507		$	76,695
		Operating income (loss) (1,2)		(15,626	)		20,149			4,523		(21,919	)		23,739			1,820
		Net income (loss) (1,2,3)		18,749			(15,423	)		3,326		(18,076	)		18,592			516
		Net income (loss) per diluted share (4)	$	0.28		$	(0.23	)	$	0.05	$	(0.28	)	$	0.29		$	0.01
(1	)	Acquired intangible assets amortization expense					6,941								5,495
		Non-cash stock-based compensation expense					1,061								804
		Restructuring and other related costs					(12	)							67
		Impairment charges					-								2,141
							7,990								8,507
(2	)	Acquired intangible assets amortization expense					2,138								2,205
		Non-cash stock-based compensation expense					6,330								7,154
		Impairment of long-lived assets					-								1,242
		Restructuring and other related costs					1,309								210
		Revaluation of investments					901								2,025
		Contingent consideration					394								197
		Other expenses					1,087								2,199
							12,159								15,232
							20,149								23,739
(3	)	Corresponding tax effect					2,993								(376	)
		Equity method related amortization, divestments and impairments					571								(4,771	)
		Gain from deconsolidation of subsidiary					(39,136	)							-
						$	(15,423	)						$	18,592
(4	)	Weighted average number of ordinary<br> shares outstanding- Diluted		67,038						67,038		65,018						65,950

			Nine Months Ended September 30,
				2022			Non-GAAP			2022		2021			Non-GAAP			2021
				GAAP			Adjustments			Non-GAAP		GAAP			Adjustments			Non-GAAP
			U.S. dollars and shares in thousands (except per share amounts)
		Gross profit (1)	$	207,819		$	27,593		$	235,412	$	187,035		$	22,192		$	209,227
		Operating income (loss) (1,2)		(58,755	)		67,235			8,480		(63,001	)		59,657			(3,344	)
		Net income (loss) (1,2,3)		(26,584	)		32,295			5,711		(57,146	)		52,284			(4,862	)
		Net income (loss) per diluted share (4)	$	(0.40	)	$	0.49		$	0.09	$	(0.91	)	$	0.83		$	(0.08	)
(1	)	Acquired intangible assets amortization expense					20,861								16,368
		Non-cash stock-based compensation expense					3,041								2,226
		Restructuring and other related costs					(174	)							1,457
		Impairment charges					3,865								2,141
							27,593								22,192
(2	)	Acquired intangible assets amortization expense					6,581								6,598
		Non-cash stock-based compensation expense					21,714								20,914
		Impairment of long-lived assets					-								2,664
		Restructuring and other related costs					1,864								2,370
		Revaluation of investments					3,217								556
		Contingent consideration					1,197								590
		Other expenses					5,069								3,773
							39,642								37,465
							67,235								59,657
(3	)	Corresponding tax effect					3,219								(2,770	)
		Equity method related amortization, divestments and impairments					571								(4,603	)
		Finance expenses					406								-
		Gain from deconsolidation of subsidiary					(39,136	)							-
						$	32,295							$	52,284
(4	)	Weighted average number of ordinary<br> shares outstanding- Diluted		66,356						67,007		62,888						62,888

Liquidity and Capital Resources

A summary of our statements of cash flows is as follows:

	Nine Months Ended September 30,
				2021
	U.S in thousands
Net loss		)	$	(57,146	)
Depreciation and amortization				41,412
Impairment of other long-lived assets				1,944
Stock-based compensation				23,140
Foreign currency transactions loss				4,210
Gain from deconsolidation of subsidiary		)		-
Other non-cash item, net				(309	)
Change in working capital and other items		)		18,145
Net cash provided by (used in) operating activities		)		31,396
Net cash provided by (used in) investing activities		)		(191,166	)
Net cash provided by (used in) by financing activities		)		222,955
Effect of exchange rate changes on cash, cash equivalents and restricted cash		)		(2,413	)
Net change in cash, cash equivalents and restricted cash		)		60,772
Cash, cash equivalents and restricted cash, beginning of period				272,216
Cash, cash equivalents and restricted cash, end of period				332,988

All values are in US Dollars.

Our cash, cash equivalents and restricted cash balance decreased to $155.0 million as of September 30, 2022 from $243.3 million as of December 31, 2021. The decrease in cash, cash equivalents and restricted cash in the nine months ended September 30, 2022 was primarily $57.3 million of cash used in operating activities and $24.0 million of cash used in investing activities.

Cash used in operatingactivities

We used $57.3 million of cash in operating activities during the nine months ended September 30, 2022. That cash use reflected our $26.6 million net loss, as reduced to eliminate non-cash charges included in net loss, such as $44.5 million of depreciation and amortization, $24.8 million of share-based compensation expenses, and gain from deconsolidation of subsidiary of $39.1 million. Changes in our working capital balances, which adjustments had an unfavorable net impact of $84.8 million on our cash flows, which changes were mainly driven by increased inventory purchases.

Cash used in investing activities

We used $24.0 million of cash in our investing activities during the nine months ended September 30, 2022. The net cash use during the nine months ended September 30, 2022, mostly reflects $67.3 million used investments in unconsolidated entities, and $11.8 million that we invested for the purchase of property and equipment, partly offset by net proceeds that we withdrew from short-term bank deposits.

Cash used in financing activities

We used $1.4 million of cash in financing activities during the nine months ended September 30, 2022. These financing activities were mostly related to contingent consideration that we paid for acquisitions, in an aggregate amount of $1.4 million.

Capital resources and capital expenditures

Our total current assets amounted to $694.4 million as of September 30, 2022, of which $348.7 million consisted of cash, cash equivalents, short-term deposits and restricted cash. Total current liabilities amounted to $213.7 million. Most of our cash and cash equivalents and short-term deposits are held in banks in Israel and in the U.S.

The credit risk related to our accounts receivable is limited due to the relatively large number of customers and their wide geographic distribution. In addition, we seek to reduce the credit exposure related to our accounts receivable by imposing credit limits, conducting ongoing credit evaluation, and by implementing account monitoring procedures, as well as credit insurance for many of our customers.

We believe that we will have adequate cash and cash equivalents to fund our ongoing operations and that these sources of liquidity will be sufficient to satisfy our capital expenditure and working capital needs for the next twelve months.

Critical Accounting Estimates

We have prepared our consolidated financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America. This has required us to make estimates, judgments and assumptions that affected the amounts we reported. Actual results may differ from those estimates. To better understand our business activities and those accounting policies that are important to the presentation of our financial condition and results of operations and that require management's subjective judgements, please see our 2021 Annual Report. We base our judgements on our experience and various assumptions that we believe to be reasonable under the circumstances.

Forward-Looking Statements and Factors That May Affect Future Results of Operations

Certain information included in or incorporated by reference into the Report of Foreign Private Issuer on Form 6-K to which this Operating and Financial Review is appended, or the Form 6-K, may be deemed to be “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements are those that predict or describe future events or trends and that do not relate solely to historical matters. You can generally identify forward-looking statements as statements containing the words “may,” “will,” “could,” “should,” “expect,” “anticipate,” “intend,” “estimate,” “believe,” “project,” “plan,” “assume” or other similar expressions, or negatives of those expressions, although not all forward-looking statements contain these identifying words.

These forward-looking statements may include, but are not limited to, statements regarding our future strategy, future operations, projected financial position, proposed products, estimated future revenues, projected costs, future prospects, the future of our industry and results that might be obtained by pursuing management’s current plans and objectives.

You should not place undue reliance on our forward-looking statements because the matters they describe are subject to certain risks, uncertainties and assumptions that are difficult to predict. Our forward-looking statements are based on the information currently available to us and speak only as of the date of the Form 6-K. Over time, our actual results, performance or achievements may differ from those expressed or implied by our forward-looking statements, and such difference might be significant and materially adverse to our shareholders. We undertake no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise.

Important factors that could cause actual results, developments and business decisions to differ materially from those anticipated in these forward-looking statements include, among other things:

•

the extent of our success at introducing new or improved products and solutions that gain market share;

•

the extent of growth of the 3D printing market generally;

•

changes in our overall strategy, including as related to any restructuring activities and our capital expenditures;

•

the impact of shifts in prices or margins of the products that we sell or services we provide;

•

the impact of competition and new technologies;

•

impairments of goodwill or other intangible assets in respect of companies that we acquire;

•

the extent of our success at efficiently and successfully integrating the operations of various companies that we have acquired or may acquire;

•

the degree of our success at locating and acquiring additional value-enhancing, inorganic technology that furthers our business plan to lead in the realm of polymers;

the adverse impact that recent global interruptions and delays involving freight carriers and other third parties have been and may continue to have on our supply chain and distribution network, and, consequently, our ability to successfully sell both our existing and newly-launched 3D printing products;
the adverse effects that inflation, and actions taken to reduce inflation, such as increased interest rates, are having or may have on the macro-economic environment, and the degree of our resilience (and that of our customers and suppliers) to those effects, which may have significant consequences for our operations, financial position and cash flows;
global market, political and economic conditions, and in the countries in which we operate in particular;

•

government regulations and approvals;

•

litigation and regulatory proceedings;

•

infringement of our intellectual property rights by others (including for replication and sale of consumables for use in our systems), or infringement of others’ intellectual property rights by us;

potential cyber attacks against, or other breaches to, our information technologies systems;

• the extent of our success at maintaining our liquidity and financing our operations and capital needs;

•

impact of tax regulations on our results of operations and financial conditions;

the remaining duration and severity of the global COVID-19 pandemic; and

•

those factors referred to in Item 3.D, “Key Information - Risk Factors”, Item 4, “Information on the Company”, and Item 5, “Operating and Financial Review and Prospects” in our 2021 Annual Report, as supplemented herein, as well as in other portions of the 2021 Annual Report Readers are urged to carefully review and consider the various disclosures made throughout the Form 6-K, our 2021 Annual Report, and in our other reports filed with or furnished to the SEC, which are designed to advise interested parties of the risks and factors that may affect our business, financial condition, results of operations and prospects.

QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

Reference is made to Item 11, “Quantitative and Qualitative Disclosures About Market Risk” in our 2021 Annual Report.

LEGAL PROCEEDINGS

We are subject to various litigation and other legal proceedings from time to time. For a discussion of our litigation status, see Note 12-“Contingencies” in the notes to our unaudited condensed consolidated interim financial statements attached as Exhibit 99.1 to the Form 6-K.

RISK FACTORS

Adverse macro-economic trends such asinflation and supply chain problems have been adversely affecting, and maycontinue to adversely affect, potentially in a more material manner (includingdue to measures taken to reduce their impact), our business, results ofoperations and financial condition.

Certain global macro-economic trends that were triggered, in large part, by the COVID-19 pandemic and the world’s reaction to it, have been adversely impacting the global economic environment in the post-pandemic period. Supply chain delays, initially caused by closures during the pandemic, and rising shipping costs, which have been exacerbated by the ongoing Russian invasion of the Ukraine, have contributed towards inflationary pressures on many goods and commodities globally. The infusion of money into circulation as part of a “loose” monetary policy to encourage consumer spending, along with historically low interest rates for an extended period of time, which were designed to ease economic conditions during the pandemic, further triggered upwards pressure on prices of goods and services. The high rates of inflation globally have caused governments and central banks to act to curb inflation, including by raising interest rates, which may potentially stifle economic activity and cause a recession, whether in individual countries or regions, or globally.

We cannot predict what impact these current or prospective macro-economic trends may have on our target markets and our expected results of operations. For example, rising interest rates which are meant to slow down inflation may worsen credit/financing conditions for our customers and adversely impact their ability to purchase our products.

In light of these uncertainties, we continue to monitor the cost-control measures that we first implemented in February 2020, when the COVID-19 pandemic began, some of which we have maintained in place since that time.

While we believe that we are well-positioned to withstand the current adverse macro-economic trends, given our balance sheet (primarily due to our cash reserves and lack of debt) and our emphasis on operational efficiencies and execution, we continue to monitor the situation, assessing further implications for our operations, supply chain, liquidity, cash flow and customer orders, in an effort to mitigate potential new adverse consequences should they arise. However, there is no assurance that we will succeed at doing so.

A potential downturn could also have a material adverse impact on our business partners’ stability and financial strength. Given the uncertainties associated with these trends in the aftermath of the COVID-19 pandemic, it is difficult to fully predict the magnitude of their effects on our, and our business partners’, business, financial condition and results of operations.

The guidance that we provide for 2022 may lack the degree of certainty that we once had in providing guidance, due to the number of variables surrounding the current macro-economic environment.

The trends associated with the current economic environment may also have the effect of amplifying many of the other risks described under the caption “Item 3. Key Information— D. Risk Factors” in our 2021 Annual Report.

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 6-K

REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13a-16 OR 15d-16

UNDER THE SECURITIES EXCHANGE ACT OF 1934

Note: Regulation S-T Rule 101(b)(1) only permits the submission in paper of a Form 6-K if submitted solely to provide an attached annual report to security holders.

CONTENTS

SIGNATURES

Exhibit 99.1

STRATASYS LTD.

CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

FOR THE THREE AND NINE MONTHS ENDED

SEPTEMBER 30, 2022

INDEX TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2022

STRATASYS LTD.

CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

STRATASYS LTD.

CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

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

STRATASYS LTD.

CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

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

STRATASYS LTD.

CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

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

STRATASYS LTD.

CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

STRATASYS LTD.

NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED)

Note 1. Business Description and Basis of Presentation

Note 2. New Accounting Pronouncements

Accounting Pronouncements Adopted in 2022

STRATASYS LTD.

NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED)

Investment in Xaar 3D Ltd. ("Xaar 3D")

STRATASYS LTD.

NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED)

STRATASYS LTD.

NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED)

Note 4. Revenues

STRATASYS LTD.

NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED)

mber 31, 2021 was $10.6 million and $41.1

STRATASYS LTD.

NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED)

Note 5. Inventories

Note 6. Goodwill and Other Intangible Assets

Goodwill

STRATASYS LTD.

NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED)

Other Intangible Assets

Note 7. Net Income (Loss) Per Share

STRATASYS LTD.

NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED)

Note 9. Fair Value Measurements

Financial instruments measured at fair value

STRATASYS LTD.

NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED)

Note 10. Derivative instruments and hedging activities

Foreign exchange contracts not designated as hedging instruments

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

Cash Flow Hedging - Hedges of forecasted foreign currency revenue

STRATASYS LTD.

NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED)

Note 11. Equity

a. Stock-based compensation plans

STRATASYS LTD.

NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED)

b. Accumulated other comprehensive loss

STRATASYS LTD.

NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED)

d. Public offering of ordinary shares

Note 12. Contingencies

Legal proceedings