Stratasys Ltd 6-K, filed Nov 10, 2022
Stratasys Ltd. (SSYS)
About this 6-K
Stratasys Ltd filed this 6-K on November 10, 2022.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form
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
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(Translation of registrant’s name into English) |
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c/o Stratasys, Inc. 9600 West 76th Street Eden Prairie, Minnesota 55344 |
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(Address of principal executive office) |
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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): ____
CONTENTS
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:
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Exhibit Number |
Document Description |
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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 |
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EX-101.SCH |
IXBRL Taxonomy Extension Schema Document |
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EX-101.CAL |
IXBRL Taxonomy Calculation Linkbase Document |
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EX-101.DEF |
IXBRL Taxonomy Extension Definition Linkbase Document |
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EX-101.LAB |
IXBRL Taxonomy Label Linkbase Document |
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EX-101.PRE |
IXBRL Taxonomy Presentation Linkbase Document |
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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.
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STRATASYS LTD. | |
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Dated: November 10, 2022 |
By: |
/s/ Eitan Zamir |
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Name: |
Eitan Zamir |
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Chief Financial Officer |
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)
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Item |
Page | |
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Consolidated Balance Sheets |
2 | |
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Consolidated Statements of Operations and Comprehensive Loss |
3 | |
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Consolidated Statements of Changes in Equity |
4-5 | |
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Consolidated Statements of Cash Flows |
6 | |
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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 | $ | $ | ||||||
| Short-term deposits | ||||||||
| Accounts receivable, net of allowance for credit losses of $ | ||||||||
| Inventories | ||||||||
| Prepaid expenses | ||||||||
| Other current assets | ||||||||
| Total current assets | ||||||||
| Non-current assets | ||||||||
| Property, plant and equipment, net | ||||||||
| Goodwill | ||||||||
| Other intangible assets, net | ||||||||
| Operating lease right-of-use assets | ||||||||
| Long-term investments | ||||||||
| Other non-current assets | ||||||||
| Total non-current assets | ||||||||
| Total assets | $ | $ | ||||||
| LIABILITIES AND EQUITY | ||||||||
| Current liabilities | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued expenses and other current liabilities | ||||||||
| Accrued compensation and related benefits | ||||||||
| Deferred revenues - short term | ||||||||
| Operating lease liabilities - short term | ||||||||
| Total current liabilities | ||||||||
| Non-current liabilities | ||||||||
| Deferred revenues - long term | ||||||||
| Deferred income taxes - long term | ||||||||
| Operating lease liabilities - long term | ||||||||
| Contingent consideration - long term | ||||||||
| Other non-current liabilities | ||||||||
| Total non-current liabilities | ||||||||
| Total liabilities | $ | $ | ||||||
| Contingencies (see note 12) | ||||||||
| Equity | ||||||||
| Ordinary shares, NIS | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated other comprehensive loss | ( | ) | ( | ) | ||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total equity | ||||||||
| Total liabilities and equity | $ | $ |
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 | $ | $ | $ | $ | ||||||||||||||
| Services | ||||||||||||||||||
| Cost of revenues | ||||||||||||||||||
| Products | ||||||||||||||||||
| Services | ||||||||||||||||||
| Gross profit | ||||||||||||||||||
| Operating expenses | ||||||||||||||||||
| Research and development, net | ||||||||||||||||||
| Selling, general and administrative | ||||||||||||||||||
| Operating loss | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||
| Gain from deconsolidation of subsidiary | ||||||||||||||||||
| Financial income (expense), net | ( | ) | ( | ) | ( | ) | ||||||||||||
| Income (loss) before income taxes | ( | ) | ( | ) | ( | ) | ||||||||||||
| Income tax expense (benefit) | ( | ) | ||||||||||||||||
| Share in profit (losses) of associated companies | ( | ) | ( | ) | ||||||||||||||
| Net income (loss) | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||||
| Net income (loss) per share - basic and diluted | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||||
| Weighted average ordinary shares outstanding - basic | ||||||||||||||||||
| Weighted average ordinary shares outstanding - diluted | ||||||||||||||||||
| Comprehensive income (loss) | ||||||||||||||||||
| Net income (loss) | ( | ) | ( | ) | ( | ) | ||||||||||||
| Other comprehensive income (loss), net of tax: | ||||||||||||||||||
| Foreign currency translation adjustments | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||
| Unrealized gains (losses) on derivatives designated as cash flow hedges | ( | ) | ||||||||||||||||
| Other comprehensive income (loss), net of tax | ( | ) | ( | ) | ( | ) | ||||||||||||
| Comprehensive income (loss) | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||||
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 | $ | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||
| Issuance of shares in connection with stock-based compensation plans | ||||||||||||||||||||||||
| Stock-based compensation | - | |||||||||||||||||||||||
| Comprehensive loss | - | ( | ) | ( | ) | ( | ) | |||||||||||||||||
| Balance as of March 31, 2022 | $ | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||
| Issuance of shares in connection with stock-based compensation plans | ||||||||||||||||||||||||
| Stock-based compensation | - | |||||||||||||||||||||||
| Comprehensive loss | - | ( | ) | ( | ) | ( | ) | |||||||||||||||||
| Balance as of June 30, 2022 | $ | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||
| Issuance of shares in connection with stock-based compensation plans | - | - | - | |||||||||||||||||||||
| Stock-based compensation | - | - | - | - | ||||||||||||||||||||
| Other items | ( | ) | ( | ) | ||||||||||||||||||||
| Comprehensive income (loss) | - | - | - | ( | ) | |||||||||||||||||||
| Balance as of September 30, 2022 | $ | $ | $ | ( | ) | $ | ( | ) | $ |
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 | $ | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||
| Issuance of shares in connection with stock-based compensation plans | ||||||||||||||||||||||||
| Stock-based compensation | - | |||||||||||||||||||||||
| Public offering of ordinary shares, net | ||||||||||||||||||||||||
| Deferred tax assets in connection with public offering expenses | - | |||||||||||||||||||||||
| Comprehensive income (loss) | - | ( | ) | ( | ) | |||||||||||||||||||
| Balance as of March 31, 2021 | $ | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||
| Issuance of shares in connection with stock-based compensation plans | ||||||||||||||||||||||||
| Stock-based compensation | - | |||||||||||||||||||||||
| Deferred tax assets in connection with public offering expenses | - | |||||||||||||||||||||||
| Comprehensive income (loss) | - | ( | ) | ( | ) | |||||||||||||||||||
| Balance as of June 30, 2021 | $ | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||
| Issuance of shares in connection with stock-based compensation plans | - | - | $ | |||||||||||||||||||||
| Stock-based compensation | - | - | - | - | ||||||||||||||||||||
| Expenses in connection with March 2021 public offering | - | - | ( | ) | - | - | ( | ) | ||||||||||||||||
| Reduction of redeemable non-controlling interest | - | - | - | - | ||||||||||||||||||||
| Comprehensive income (loss) | - | - | - | ( | ) | ( | ) | ( | ) | |||||||||||||||
| Balance as of September 30, 2021 | $ | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||
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 | $ | ( | ) | $ | ( | ) | |||
| Adjustments to reconcile net loss to net cash provided by operating activities: | |||||||||
| Impairment of other long-lived assets | |||||||||
| Depreciation and amortization | |||||||||
| Stock-based compensation | |||||||||
| Foreign currency transaction loss | |||||||||
| Gain from deconsolidation of subsidiary | ( | ) | |||||||
| Share in loss of associated companies | ( | ) | |||||||
| Revaluation of investments | |||||||||
| Other non-cash items, net | |||||||||
| Change in cash attributable to changes in operating assets and liabilities: | |||||||||
| Accounts receivable, net | ( | ) | ( | ) | |||||
| Inventories | ( | ) | |||||||
| Other current assets and prepaid expenses | ( | ) | |||||||
| Other non-current assets | ( | ) | |||||||
| Accounts payable | |||||||||
| Other current liabilities | |||||||||
| Deferred revenues | |||||||||
| Deferred income taxes, net and uncertain tax positions | ( | ) | ( | ) | |||||
| Other non-current liabilities | ( | ) | ( | ) | |||||
| Net cash provided by (used in) operating activities | ( | ) | |||||||
| Cash flows from investing activities | |||||||||
| Cash paid for acquisitions, net of cash acquired | ( | ) | |||||||
| Purchase of property and equipment | ( | ) | ( | ) | |||||
| Investments in short-term bank deposits | ( | ) | ( | ) | |||||
| Proceeds from short-term bank deposits | |||||||||
| Purchase of intangible assets | ( | ) | ( | ) | |||||
| Other investing activities | ( | ) | |||||||
| Investments in unconsolidated entities | ( | ) | ( | ) | |||||
| Net cash used in investing activities | ( | ) | ( | ) | |||||
| Cash flows from financing activities | |||||||||
| Proceeds from public offering, net of issuance costs | |||||||||
| Proceeds from exercise of stock options | |||||||||
| Payment of contingent consideration | ( | ) | |||||||
| Other financing activities | ( | ) | |||||||
| Net cash provided by (used in) financing activities | ( | ) | |||||||
| Effect of exchange rate changes on cash, cash equivalents and restricted cash | ( | ) | ( | ) | |||||
| Net change in cash, cash equivalents and restricted cash | ( | ) | |||||||
| Cash, cash equivalents and restricted cash, beginning of period | |||||||||
| Cash, cash equivalents and restricted cash, end of period | $ | $ | |||||||
| Supplemental disclosures of cash flow information: | |||||||||
| Transfer of inventory to fixed assets | |||||||||
| Transfer of fixed assets to inventory | |||||||||
| Reconciliation of cash, cash equivalents and restricted cash reported in the consolidated balance sheets: | |||||||||
| Cash and cash equivalents | |||||||||
| Restricted cash included in other current assets | |||||||||
| Total cash, cash equivalents and restricted cash shown in the consolidated statement of cash flows | $ | $ | |||||||
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
Note 2. New Accounting Pronouncements
Accounting Pronouncements Adopted in 2022
| U.S. $ in thousands | |||
| Cash payments | $ | ||
| Contingent consideration at estimated fair value | |||
| Total consideration for | |||
| Fair value of | |||
| Total consideration | $ |
| Allocation of Purchase Price | |||
| (U.S. $ in thousands) | |||
| Cash and cash equivalents | $ | ||
| Goodwill | |||
| Intangible assets | |||
| Other assets | |||
| Total assets acquired | |||
| Net deferred tax liabilities | |||
| Other labilities | |||
| Total liabilities assumed | |||
| Net assets acquired | $ |
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, | ||||||||||||||
| 2022 | 2021 | 2022 | 2021 | ||||||||||||
| (U.S. $ in thousands) | (U.S. $ in thousands) | ||||||||||||||
| Americas | |||||||||||||||
| Systems | $ | $ | $ | $ | |||||||||||
| Consumables | |||||||||||||||
| Service | |||||||||||||||
| Total Americas | |||||||||||||||
| EMEA | |||||||||||||||
| Systems | |||||||||||||||
| Consumables | |||||||||||||||
| Service | |||||||||||||||
| Total EMEA | |||||||||||||||
| Asia Pacific | |||||||||||||||
| Systems | |||||||||||||||
| Consumables | |||||||||||||||
| Service | |||||||||||||||
| Total Asia Pacific | |||||||||||||||
| Total Revenues | $ | $ | $ | $ | |||||||||||
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, | ||||||||||||||
| 2022 | 2021 | 2022 | 2021 | ||||||||||||
| (U.S. $ in thousands) | (U.S. $ in thousands) | ||||||||||||||
| Revenues recognized at point in time from: | |||||||||||||||
| Products | $ | $ | $ | $ | |||||||||||
| Services | |||||||||||||||
| Total revenues recognized at point in time | |||||||||||||||
| Revenues recognized over time from: | |||||||||||||||
| Services | |||||||||||||||
| Total revenues recognized over time | |||||||||||||||
| Total Revenues | $ | $ | $ | $ | |||||||||||
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:
| September 30, 2022 | December 31, 2021 | ||||||
| U.S. $ in thousands | |||||||
| Deferred revenue* | $ | $ | |||||
*Includes $
Revenue recognized in 2022 that was included in deferred revenue balance as of December 31, 2021 was $
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 $
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 $
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:
| September 30, 2022 | December 31, 2021 | ||||||
| U.S. $ in thousands | |||||||
| Finished goods | $ | $ | |||||
| Work-in-process | |||||||
| Raw materials | |||||||
| $ | $ | ||||||
Note 6. Goodwill and Other Intangible Assets
Goodwill
| U.S. $ in thousands | ||||
| Goodwill as of January 1, 2022 | $ | |||
| Foreign currency translation adjustments | ( | ) | ||
| Goodwill as of September 30, 2022 | $ |
Other Intangible Assets
Other intangible assets consisted of the following:
| September 30, 2022 | December 31, 2021 | |||||||||||||||||||||||
| Carrying Amount, | Net | Carrying Amount, | Net | |||||||||||||||||||||
| Net of | Accumulated | Book | Net of | Accumulated | Book | |||||||||||||||||||
| Impairment | Amortization | Value | Impairment | Amortization | Value | |||||||||||||||||||
| U.S. $ in thousands | ||||||||||||||||||||||||
| Developed technology | $ | $ | ( | ) | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Patents | ( | ) | ( | ) | ||||||||||||||||||||
| Trademarks and trade names | ( | ) | ( | ) | ||||||||||||||||||||
| Customer relationships | ( | ) | ( | ) | ||||||||||||||||||||
| Capitalized software development costs | ( | ) | ( | ) | ||||||||||||||||||||
| $ | $ | ( | ) | $ | $ | $ | ( | ) | $ | |||||||||||||||
Amortization expenses relating to intangible assets for the three-month periods ended September 30, 2022 and 2021 were approximately $
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 | $ | |||
| 2023 | ||||
| 2024 | ||||
| 2025 | ||||
| 2026 | ||||
| 2027 and thereafter | ||||
| Total | $ |
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 | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||||
| Denominator: | |||||||||||||||
| Weighted average shares - for basic net income (loss) per share | |||||||||||||||
| Weighted average shares - for diluted net income (loss) per share | |||||||||||||||
| Net income (loss) per share | |||||||||||||||
| Basic and diluted | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||||
The computation of diluted net income (loss) per share excluded share awards of
STRATASYS LTD.
NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED)
Note 8. Income Taxes
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 2 | Level 3 | Level 2 | Level 3 | ||||||||||||
| (U.S. $ in thousands) | |||||||||||||||
| Assets: | |||||||||||||||
| Foreign exchange forward contracts not designated as hedging instruments | $ | $ | $ | $ | |||||||||||
| Foreign exchange forward contracts designated as hedging instruments | |||||||||||||||
| Liabilities: | |||||||||||||||
| Foreign exchange forward contracts not designated as hedging instruments | ( | ) | ( | ) | |||||||||||
| Foreign exchange forward contracts designated as hedging instruments | ( | ) | ( | ) | |||||||||||
| Total contingent consideration* | |||||||||||||||
| $ | ( | ) | $ | $ | $ | ||||||||||
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 | |||||||||||||||||
| September 30, | December 31, | September 30, | December 31, | |||||||||||||||
| Balance sheet location | 2022 | 2021 | 2022 | 2021 | ||||||||||||||
| U.S. $ in thousands | ||||||||||||||||||
| Assets derivatives -Foreign exchange contracts, not designated as hedging instruments | Other current assets | $ | $ | $ | $ | |||||||||||||
| Assets derivatives -Foreign exchange contracts, designated as cash flow hedge | Other current assets | |||||||||||||||||
| Liability derivatives -Foreign exchange contracts, not designated as hedging instruments | Accrued expenses and other current liabilities | ( | ) | ( | ) | |||||||||||||
| Liability derivatives -Foreign exchange contracts, designated as hedging instruments | Accrued expenses and other current liabilities | ( | ) | ( | ) | |||||||||||||
| $ | ( | ) | $ | $ | $ | |||||||||||||
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 $
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 $
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
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, | ||||||||||||||
| 2022 | 2021 | 2022 | 2021 | ||||||||||||
| U.S $ in thousands | U.S $ in thousands | ||||||||||||||
| Cost of revenues | $ | $ | $ | $ | |||||||||||
| Research and development, net | |||||||||||||||
| Selling, general and administrative | |||||||||||||||
| Total stock-based compensation expenses | $ | $ | $ | $ | |||||||||||
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 | |||||||
| Granted | |||||||
| Exercised | ( | ) | |||||
| Forfeited | ( | ) | |||||
| Options outstanding as of September 30, 2022 | |||||||
| Options exercisable as of September 30, 2022 |
As of September 30, 2022, the unrecognized compensation cost of $
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 | |||||||
| Granted | |||||||
| Vested | ( | ) | |||||
| Forfeited | ( | ) | |||||
| Unvested as of September 30, 2022 |
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 $
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
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 | |||||||||||
| Net Unrealized Gain (Loss) on Cash Flow Hedges | Foreign Currency Translation Adjustments | Total | |||||||||
| U.S. $ in thousands | |||||||||||
| Balance as of January 1, 2022 | $ | $ | ( | ) | $ | ( | ) | ||||
| Other comprehensive income (loss) before reclassifications | ( | ) | ( | ) | ( | ) | |||||
| Amounts reclassified from accumulated other comprehensive loss | |||||||||||
| Other comprehensive loss | ( | ) | ( | ) | ( | ) | |||||
| Balance as of September 30, 2022 | $ | $ | ( | ) | $ | ( | ) | ||||
STRATASYS LTD.
NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED)
| Nine Months Ended September 30, 2021 | |||||||||||
| Net Unrealized Gain (Loss) on Cash Flow Hedges | Foreign Currency Translation Adjustments | Total | |||||||||
| U.S. $ in thousands | |||||||||||
| Balance as of January 1, 2021 | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||
| Other comprehensive income before reclassifications | ( | ) | |||||||||
| Amounts reclassified from accumulated other comprehensive loss | |||||||||||
| Other comprehensive income | ( | ) | |||||||||
| Balance as of September 30, 2021 | $ | $ | ( | ) | $ | ( | ) | ||||
d. Public offering of ordinary shares
Note 12. Contingencies
Legal proceedings
The Company is a party to various legal proceedings from time to time, the outcome of which, in the opinion of management, will not have a significant effect on the financial position, profitability or cash flows of the Company.
OPERATING AND FINANCIAL REVIEW AND PROSPECTS.
Overview of Business and Trend Information
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.
- 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.
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 Revenues | U.S. $ in thousands | % of 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 | )% | ||||||||
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, | |||||||||||||||
| 2022 | 2021 | % Change | |||||||||||||
| U.S. $ in thousands | |||||||||||||||
| Products | $ | 112,133 | $ | 108,888 | 3.0 | % | |||||||||
| Services | 50,059 | 50,121 | (0.1 | )% | |||||||||||
| Total Revenues | $ | 162,192 | $ | 159,009 | 2.0 | % | |||||||||
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.
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 Revenues | U.S.$ in thousands | % of 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, | ||||||||||||
| 2022 | 2021 | |||||||||||
| U.S. $ in thousands | Change in % | |||||||||||
| Gross profit attributable to: | ||||||||||||
| Products | $ | 56,217 | $ | 54,068 | 4.0 | % | ||||||
| Services | 14,532 | 14,120 | 2.9 | % | ||||||||
| $ | 70,749 | $ | 68,188 | 3.8 | % | |||||||
Gross profit as a percentage of revenues from our products and services was as follows:
| Three Months Ended September 30, | ||||||||
| 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.
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, | ||||||||||||
| 2022 | 2021 | % Change | ||||||||||
| U.S. $ in thousands | ||||||||||||
| Research and development, net | $ | 23,145 | $ | 22,645 | 2.2 | % | ||||||
| Selling, general and administrative | 63,230 | 67,462 | (6.3 | )% | ||||||||
| 86,375 | 90,107 | (4.1 | )% | |||||||||
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 P3 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, | |||||||||
| 2022 | 2021 | ||||||||
| U.S. $ in thousands | |||||||||
| Operating loss | $ | (15,626 | ) | $ | (21,919 | ) | |||
| Percentage of revenues | (9.6 | )% | (13.8 | )% | |||||
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, | |||||||||||||
| 2022 | 2021 | ||||||||||||
| U.S. $ in thousands | Change in % | ||||||||||||
| Income tax (benefit) expense | $ | 3,298 | $ | (699 | ) | (571.8 | )% | ||||||
| As a percent of income (loss) before income taxes | 13.8 | % | (3.1 | )% | 344.1 | % | |||||||
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, | ||||||||
| 2022 | 2021 | |||||||
| U.S. $ in thousands | ||||||||
| Net income (loss) | $ | 18,749 | $ | (18,076 | ) | |||
| Percentage of revenues | 11.6 | % | (11.4 | )% | ||||
| Basic and diluted income (loss) per share | $ | 0.28 | $ | (0.28 | ) | |||
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 Revenues | U.S. $ in thousands | % of 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 | )% | |||||||
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, | ||||||||||||
| 2022 | 2021 | % Change | ||||||||||
| U.S. $ in thousands | ||||||||||||
| Products | $ | 340,927 | $ | 299,517 | 13.8 | % | ||||||
| Services | 151,297 | 140,686 | 7.5 | % | ||||||||
| Total Revenues | $ | 492,224 | $ | 440,203 | 11.8 | % | ||||||
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 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 Revenues | U.S.$ in thousands | % of 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, | ||||||||||||
| 2022 | 2021 | |||||||||||
| U.S. $ in thousands | Change in % | |||||||||||
| Gross profit attributable to: | ||||||||||||
| Products | $ | 164,506 | $ | 148,046 | 11.1 | % | ||||||
| Services | 43,313 | 38,989 | 11.1 | % | ||||||||
| $ | 207,819 | $ | 187,035 | 11.1 | % | |||||||
Gross profit as a percentage of revenues from our products and services was as follows:
| Nine Months Ended September 30, | ||||||||
| 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, | ||||||||||||
| 2022 | 2021 | % Change | ||||||||||
| U.S. $ in thousands | ||||||||||||
| Research and development, net | $ | 71,489 | $ | 65,683 | 8.8 | % | ||||||
| Selling, general and administrative | 195,085 | 184,353 | 5.8 | % | ||||||||
| $ | 266,574 | $ | 250,036 | 6.6 | % | |||||||
| Percentage of revenues | 54.2 | % | 56.8 | % | ||||||||
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 P3 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, | |||||||||
| 2022 | 2021 | ||||||||
| U.S. $ in thousands | |||||||||
| Operating loss | $ | (58,755 | ) | $ | (63,001 | ) | |||
| Percentage of revenues | (11.9 | )% | (14.3 | )% | |||||
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
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 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 September 30, | |||||||||||||
| 2022 | 2021 | ||||||||||||
| U.S. $ in thousands | Change in % | ||||||||||||
| Income tax expense | $ | 2,796 | $ | 6,009 | (53.5 | )% | |||||||
| As a percent of loss before income taxes | (12.9 | )% | (9.3 | )% | 38.1 | % | |||||||
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, | ||||||||
| 2022 | 2021 | |||||||
| U.S. $ in thousands | ||||||||
| Net loss | $ | (26,584 | ) | $ | (57,146 | ) | ||
| Percentage of revenues | (5.4 | )% | (13.0 | )% | ||||
| Basic and diluted net loss per share | $ | (0.40 | ) | $ | (0.91 | ) | ||
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.
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.
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 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 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, | |||||||
| 2022 | 2021 | ||||||
| U.S $ in thousands | |||||||
| Net loss | $ | (26,584 | ) | $ | (57,146 | ) | |
| Depreciation and amortization | 44,451 | 41,412 | |||||
| Impairment of other long-lived assets | 3,865 | 1,944 | |||||
| Stock-based compensation | 24,755 | 23,140 | |||||
| Foreign currency transactions loss | 13,978 | 4,210 | |||||
| Gain from deconsolidation of subsidiary | (39,136 | ) | - | ||||
| Other non-cash item, net | 6,132 | (309 | ) | ||||
| Change in working capital and other items | (84,750 | ) | 18,145 | ||||
| Net cash provided by (used in) operating activities | (57,289 | ) | 31,396 | ||||
| Net cash provided by (used in) investing activities | (23,987 | ) | (191,166 | ) | |||
| Net cash provided by (used in) by 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 | |||||
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 operating activities
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.
Critical Accounting Estimates
Forward-Looking Statements and Factors That May Affect Future Results of Operations
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.
•
the extent of our success at introducing new or improved products and solutions that gain market share;
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the extent of growth of the 3D printing market generally;
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changes in our overall strategy, including as related to any restructuring activities and our capital expenditures;
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the impact of shifts in prices or margins of the products that we sell or services we provide;
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the impact of competition and new technologies;
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impairments of goodwill or other intangible assets in respect of companies that we acquire;
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the extent of our success at efficiently and successfully integrating the operations of various companies that we have acquired or may acquire;
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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;
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government regulations and approvals;
•
litigation and regulatory proceedings;
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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;
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impact of tax regulations on our results of operations and financial conditions;
- the remaining duration and severity of the global COVID-19 pandemic; and
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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