Monday, May 13, 2013

After the Close: Stratasys Reports (Negative) Operational Cash Flow

Stratasys Ltd (NASDAQ: SSYS) released a 1st quarter 2013 press release this morning before the market opened, followed by an 60 minute conference call at 8:30am est.

The Press Released focused on positive NON GAAP performance and attributed their weak GAAP performance due to merger expenses.
(from the press release:
  • "Non-GAAP net income of $17.6 million for the first quarter, or $0.43 per diluted share, represents a 40% increase over the pro forma non-GAAP $12.6 million, or $0.32 per diluted share, reported for the same period last year.
  • GAAP net income for the first quarter was a loss of $15.5 million, or ($0.40) per share, versus a pro forma loss of $8.4 million, or ($0.23) per share, for the same period last year."
The stock opened up @ $85.57, and after trading over 2.3 million shares closed the day @ $85.34. Shares are trading at 9 TIMES SALES! 

There was approximately 20 Bullish Press Releases made throughout the trading day from Investor's Business Daily, Motley Fool, and SeekingAlpha.
All the headlines spoke about : "IS A BUY", "EARNINGS BEAT", "Unusually High Volume", "Price Target Increase", "ADVANCE",  "Upgrade", "Price Target Increase", "Unleash", "Craze", "Monster Volume", "Solid", Rally" to name a few..It sounded like the Internet Bubble Age when Wall Street was enamored with the DOT.COM Hype.

What bothered me all day is that all the press releases and conference call made no mention of the company's statement of cash flow. A dozen analyst participated in the Q & A on the conference call and not one asked about cash flow.

It wasn't until 6pm this evening that the statement of cash flow was disclosed, and oh boy, it was WEAK!

Operational Cash Flow for the 1st Quarter 2013 stayed negative for the third consecutive quarter. 
Q1 2012 + $6,878,000
Q1 2013 -$12,252,000 (-278%)

Q4 2011  +$9,551,000
Q4 2012  -$815,000 (-109%)

Q3 2011  +$5,935,000
Q3 2012  -$9,629,000 (-262%)

Trailing Twelve months ending March 31,2012 : + $25,782,000
Trailing Twelve months ending March 31,2013   - $17,637,000 (-168%)

On April 13, 2012, the day prior to announcing the merger, shares of SSYS were under $35.00, with 21 million shares outstanding (for a $735 million market capitalization.)

So this is more than a stock going from $35 to $82 per share, this is about a company market capitalization going from $735 million to $3.2 billion in 1 year...when all they did was merge with another company to have the combined entity report $1.4 million Operating cash flow for 2012!

  • April 2012 : 21 million shares outstanding at $35 a share.

Market cap was $775 million

  • March 23,2013 38.5 million shares outstanding at $72 a share. Market cap was $2.7 billion

  • Today 41.1 million shares outstanding @ $84 a share. market cap is $3.4 billion

Carrying $822 million of GOODWILL is another great line item. and the HALF BILLION DOLLAR increase in INTANGIBLE assets

  • Company will add 4 million shares outstanding on January 1st 2014 for authorized issuance of stock to management.

Today's numbers included a $300,000 tax credit. no mention of it anywhere.
  • From March Year end SEC disclosure:Q1 will have this $300,000 tax credit,
    •  In January of 2013, the President of the U.S. signed into law The American Taxpayer Relief Act of 2012, which contained provisions that retroactively extended the U.S. research and experimentation tax credit to 2012 and 2013. Because the extension did not occur by December 31, 2012, the Company’s effective income tax rate for 2012 did not include the benefit of the credit for 2012. However, because the credit was retroactively extended to include 2012, the Company expects to recognize the full benefit of the 2012 credit in the first quarter of 2013. The Company estimates that its credit for 2012 is approximately $300,000. That amount will be reported as a discrete income tax benefit in the first quarter of 2013.

(THe original deal of the combined entities was valued at $1.4 billionchanged to $2.2 billion in Piper Merger disclosure during Q3 2013 in this DEF Proxy, and was changed again December (according to most recent 20F annual report, where Objet alone was valued at $1.4 billion:.

    As described in note 2, in December 2012, for accou
    nting purposes, Stratasys, Inc. was deemed to have
    acquired Objet for a purchase price of
    $1,341 million, and as a result, the Company recogn
    ized $797.1 million in goodwill.

Only problem now is OBJET shareholders will need to get liquid. 6 month period is June 1,2013 (December 3rd 2012 was close of deal). Expect 45% of shares outstanding to be registered within 3 weeks.
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