Attached files
Conference
Call Script – [January 19th, 2010; 7:00 a.m. CST]
Opening Comments
Speaker:
Shane Glenn
SLIDE
#1
Good morning and welcome to the conference
call to discuss today’s exciting announcement surrounding the agreement between
Stratasys and HP for the manufacture and distribution of 3D printing products
worldwide.
SLIDE
#1.1
We would like to remind everyone that you are
invited to listen to the conference call and view an accompanying slide
presentation via live web cast.
The web cast can be accessed within the
Investor Section of the Stratasys home page, at www.Stratasys.com, or directly
by clicking on the link included in our press release.
A replay of the web cast with slides will be
available for approximately 90 days after the event and can be accessed in the
same manner as the live web cast.
Please note that participation in the Q&A
session that follows our prepared remarks today will only be possible
telephonically.
Instructions on how to ask a question will be
provided at the start of the Q&A session.
Representing Stratasys executive management on
the conference call today is the Chairman and CEO of Stratasys, Scott Crump; the
company’s CFO, Bob Gallagher; as well as Stratasys VP of Marketing, John
Cobb.
We will spend the first part of the call
reviewing the key components of the agreement; we will then follow with a
discussion of the strategic importance of the agreement; and conclude by opening
up the call to questions.
Forward
Looking Statement
SLIDE
#2
Before we begin, I would like to remind
everyone listening of our Forward Looking Statement. All statements herein that
are not historical facts or that include such words as “expects”, “anticipates”,
“projects”, “estimates”, “vision”, “planning”, “could”, “believes”, “potential”,
or similar words, constitute forward-looking statements covered by the safe
harbor protection of the Private Securities Litigation Reform Act of 1995.
Except for the historical information herein, the matters discussed in this
conference call are forward-looking statements that involve risks and
uncertainties.
1
Actual results may differ from those expressed or implied in our
forward-looking statements. These statements represent beliefs and expectations
only as of the date they were made. We may elect to update forward-looking
statements, but we expressly disclaim any obligation to do so, even if our
beliefs and expectations change. In addition to the statements described above,
such forward-looking statements include the risks and uncertainties described
more fully in our reports filed or to be filed with the Securities and Exchange
Commission, including our annual reports on Form 10-K and quarterly reports on
Form 10-Q.
Agreement
Overview
SLIDE
#3
Now for a general overview of the
agreement:
The agreement announced today by Stratasys and
HP is for the manufacture and distribution of 3D printing products
worldwide.
The initial products are based on the
Stratasys patented Fused Deposition Modeling, or FDM,
technology.
These products will be manufactured by
Stratasys and distributed by HP under the HP brand.
HP has said it will begin with a phased
roll-out later this year in the countries of France, Germany, Italy, Spain and
the United Kingdom.
HP has not yet determined when or where it
will distribute Stratasys printers in other countries, although the intent of
the agreement is for worldwide distribution.
All current Stratasys resellers in the five
affected countries are eligible to apply to become resellers of the HP-brand 3D
printer.
The agreement is exclusive between both
parties.
HP has agreed to only distribute 3D printers
manufactured by Stratasys across all markets. In turn, Stratasys will not enter
into a similar distribution relationship.
HP will provide specific details and pricing
when the products are available for distribution.
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Stratasys plans to begin shipping
products to HP within the next few months.
HP’s Graphic Solutions
Business – part of the company’s $24-billion Imaging and Printing Group – will
execute the distribution agreement. HP is a leading provider of Designjet and
Scitex large-format printing solutions, and Indigo digital solutions for
commercial and industrial printing, inkjet high-speed production solutions and
specialty printing systems.
SLIDE #4
This agreement will have
an impact on the selling of our Stratasys-brand 3D printing products going
forward.
Stratasys will continue
to sell its full line of 3D printers in all countries worldwide, except within
the countries addressed by HP.
For the countries
covered by HP, Stratasys will sell all its 3D printers except for those sold
under the HP brand.
The distribution of 3D
production systems under the Fortus brand will not be affected. Stratasys will
continue to distribute the Fortus products through its existing reseller
network, with a focus on developing new Direct Digital Manufacturing, or DDM,
applications.
We anticipate this
agreement will have a positive impact on Fortus system sales.
And again, worldwide
distribution is the ultimate goal of the 3D printing agreement with HP.
A final point to
note:
HP has been
granted a warrant to purchase 500,000 shares of Stratasys common
stock. This warrant vests immediately and has a strike price calculated from the
20-day average market price prior to the agreement’s signing.
SLIDE #5
Now for the strategic
implications of this agreement, I will turn the call over to our CEO, Scott
Crump.
Strategic Overview
Speaker: Scott Crump
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Good morning everyone.
Today we are announcing
a major step in advancing our 3D printing strategy through an agreement with HP
for the worldwide distribution of 3D printers.
We believe this
agreement represents a defining moment for our company and a watershed event for
our industry.
SLIDE #6
Eight years ago, we
launched the first successful 3D Printer at under 30 thousand dollars - proving
a significant inflection point in our industry.
Last year, we
established another major milestone by introducing the uPrint 3D printer
platform, the world’s first personal 3D printer.
We believe that the
uPrint family of products has significantly advanced our 3D printing product
strategy by improving upon several key product characteristics critical to our
ongoing success.
We believe Stratasys has
reached a major inflection point in our ability to significantly expand the use
of 3D printers worldwide.
In recent months we have
communicated our ongoing focus on expanding our distribution footprint, allowing
us to fully appreciate the sales potential within our target market.
With this agreement, we
have now started to accomplish that goal.
SLIDE #7
In 2008, HP approached
Stratasys as HP began an assessment of the 3D printing market. This assessment
included an evaluation of the market’s potential, as well as the commercially
available 3D printing technologies.
HP concluded that the
market represents an attractive growth opportunity and that millions of 3D
designers using 2D printers are ready to bring their designs to life in
3D.
We believe HP’s decision
was further confirmation that a significant market opportunity exists among the
millions of designers, engineers and architects that are using 3D CAD today.
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SLIDE #8
HP also concluded that
the Stratasys FDM technology represented the best platform to develop products
for this emerging market; and that Stratasys was the ideal partner for
developing future opportunities in 3D printing.
We believe the
competitive implications of this conclusion are significant.
We believe HP’s decision
confirmed our long-standing position that our products provide the best product
solution within our industry.
FDM is a proven additive
fabrication technology that produces models in highly durable, production-grade
thermoplastics. The technology is affordable, easy-to-use, office friendly and
reliable. These characteristics make our technology ideal for 3D
printing.
SLIDE #9
Given the undeveloped
nature of our industry, we believe product awareness and channel development is
critical to our ongoing success.
When we first entered
the 3D printer market, we recognized the need to develop a productive reseller
network.
We spent years
developing relationships with an extensive global reseller network that is
well-trained, highly-motivated and exclusive to our 3D printers.
This channel remains a
valuable asset to our company and will be eligible to become resellers of
HP-brand 3D printers in affected countries.
Our current channel has
driven strong growth in our 3D printer unit volume, and we believe is very
capable of growing our 3D printer sales from 2 thousand to over 5 thousand
systems per year.
However, we believe that
we are ready for a major step function in unit volume which requires us to build
upon our current distribution strategy.
This made partnering
with HP an easy decision.
SLIDE #10
We believe HP’s
unmatched sales and distribution capabilities are the ideal complement to our
current channel.
Given HP’s brand
awareness and extensive marketing organization, HP has the potential of
developing thousands of reseller locations worldwide.
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HP has demonstrated success within
our target market in the past by capturing a dominant position for large-format
2D printers.
Combined with our
industry leading FDM technology, we believe that this could allow us to
significantly expand our 3D printer sales.
SLIDE #11
We now have the right
solution, with the right partner, targeting a significantly under-penetrated
market with millions of potential customers.
SLIDE #11.1
We continue to believe a
worldwide market for 500,000 systems exists for 3D printers serving the existing
installed base of 3D CAD users worldwide.
We should note that this
excludes any consideration for additional growth in the 3D CAD market that is
likely in the coming years.
A significant number of
designers, engineers and especially architects have yet to adopt 3D CAD
designing tools.
SLIDE #12
We believe Stratasys
could become a $500 million revenue company in five years; shipping 50,000 units
per year; with a significant portion of our sales coming from high-margin
consumable revenue. In addition, we believe we could generate significant
operating leverage in future years.
Of course this assumes
an eventual worldwide rollout, as well as its timing and success.
We are very excited
about this agreement.
OK, I will return with
some closing comments, but first we would like to address any questions you
might have.
Q&A Session
Speaker: Shane Glenn
During the Q&A
segment of today’s call, we will be addressing only questions related directly
to our agreement with HP. So we ask that you please defer any questions
regarding our recently completed fourth quarter until we hold our regularly
scheduled year-end conference call in February.
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Operator, please open the call for questions.
Closing
Comments
Speaker:
Scott Crump
SLIDE
#13
In closing, I would like to reiterate our
belief that this agreement represents a defining moment for our
company.
We have a lot of work to do to make this a
success, but I am confident we are up to the challenge.
I would also like to take a moment and thank
our employees and strategic partners for their hard work and dedication in
getting us to this defining moment.
We look forward to talking with you at our
next quarterly conference call.
Good Bye.
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