Yonah Lloyd - Stratasys Ltd. Elchanan Jaglom - Stratasys Ltd. Lilach Payorski - Stratasys Ltd. David Reis - Stratasys Ltd..

Troy D. Jensen - Piper Jaffray & Co. Brian P. Drab - William Blair & Co. LLC Wamsi Mohan - Bank of America Merrill Lynch Ananda Baruah - Loop Capital Markets LLC Shannon S. Cross - Cross Research LLC Hendi Susanto - Gabelli & Company, Inc. David Ryzhik - Susquehanna Financial Group LLLP Ben Z. Rose - Battle Road Research Ltd..

Good morning, ladies and gentlemen, and welcome to the Q3 2018 Stratasys Earnings Conference Call. As a reminder, this conference call is being recorded. I would now like to turn the call over to your host, Yonah Lloyd..

Thank you. Good morning, everyone. And thank you for joining us to discuss our third quarter financial results. On the call with us today are Elan Jaglom, Interim CEO; David Reis, Vice Chairman and Head of our Board's Oversight Committee, joining by telephone; and Lilach Payorski, our CFO.

I'll remind you that access to today's call, including the prepared slide presentation, is available online at the web address provided in our press release. In addition, a replay of today's call, including access to the slide presentation, will also be available and can be accessed through the Investor Relations section of our website.

Please note that some of the information you will hear during our discussion today will consist of forward-looking statements, including without limitation, those regarding our expectations as to our future revenue, gross margin, operating expenses, taxes and other future financial performance and our expectations for our business outlook.

All statements that speak to future performance, events, expectations or results are forward-looking statements. Actual results or trends could differ materially from our forecast.

For risks that could cause actual results to be materially different from those set forth in forward-looking statements, please refer to the risk factors discussed in Stratasys' Annual Report on Form 20-F for the 2017 year filed with the SEC on February 28, 2018, and in our report on Form 6-K, along with the related press release concerning our earnings for the third quarter of 2018, which we have furnished to the SEC today.

Stratasys assumes no obligation to update any forward-looking statements or information which speak as of their respective dates. As in previous quarters, today's call will include GAAP and non-GAAP financial measures. The non-GAAP financial measures should be read in combination with our GAAP metrics to evaluate our performance.

Certain non-GAAP to GAAP reconciliations are provided in the table contained in our slide presentation and in today's press release. Now I would like to turn the call over to our Interim CEO, Elan Jaglom.

Elan?.

Thank you, Yonah. Good morning, everyone and thank you for joining today's call.

We're pleased with our third quarter results that showed a continued recovery in high-end systems orders which began the previous quarter as well as improved results in Stratasys Direct Manufacturing and steady growth in the recurring consumable and consumer support revenues.

I will return later in the call to provide an update on our search for new Chief Executive Officer and David will provide more details regarding the highlights of the quarter and other key developments. But first I will turn the call over to our CFO, Lilach Payorski who will review the details of our financial results.

Lilach?.

Thank you, Elan, and good morning, everyone. Total revenue in the third quarter was $162 million compared to $155.9 million for the same period last year, up 4%. After adjusting for the sale of our divested entities this quarter, on a like-for-like basis, total revenue was up 6%.

GAAP operating income for the third quarter was $3.4 million compared to operating loss of $6.9 million for the same period last year. Non-GAAP operating income for the third quarter was $8.2 million compared to operating income of $8.1 million for the same period last year.

Product revenue in the third quarter was $109.6 million, an increase of 1.1% compared to the same period last year and 3.8% excluding the divested entities. Within product revenue, system revenue for the quarter was flat compared to the same period last year but was up 3.3% after adjusting for the divested entities.

Consumable revenue increased by 2.6% compared to the same period last year, and up 4.3% excluding the divested entities. Services revenue in the third quarter was $52.4 million, an increase of 10.4% compared to the same period last year driven by growth of customer support revenues and strong performance at Stratasys Direct Manufacturing.

Within services revenue, customer support revenue, which includes revenue generated mainly by maintenance contracts on our systems, increased by 7.4% compared to the same period last year driven primarily by growth in our installed base of systems and improvement in our service contracts attach rate.

GAAP gross margin was 48.7% for the quarter compared to 48.3% for the same period last year. Non-GAAP gross margin was 52.1% for the third quarter compared to 52.5% for the same period last year driven by the composition of our revenue sources.

Non-GAAP product gross margin increased to 60.6% compared to 59.6% for the same period last year driven by product mix. Non-GAAP service gross margin was 34.5% compared to 36.3% for the same period last year, reflecting increased investment in our customer service and support operation.

GAAP operating expenses decreased by 8% to $75.6 million for the third quarter as compared to the same period last year primarily due to the net gain from divestment.

Non-GAAP operating expenses increased by 3.4% to $76.3 million for the third quarter as compared to the same period last year, reflecting our continued R&D investment in long-term initiatives, including advancement in our core FDM and PolyJet technologies as well as our new metal additive manufacturing platform, advanced composite material and software and application development.

The company generated $5 million cash from operations during the third quarter as compared to $4.6 million of cash generated in the third quarter last year. We ended the third quarter with $348.9 million in cash and cash equivalents compared to $346.7 million at the end of the second quarter of 2018.

Inventory increased slightly to $118.1 million compared to $117 million in the second quarter of 2018. Accounts receivable increased to $129.5 million compared to $123.5 million as of the end of the second quarter of 2018, with days sales outstanding or DSO on 12-month trailing revenue at 71.

To recap, our revenue results are in line with expectations and reflect the continuation of a recovery in high-end system sales. We are pleased with the continued improvement at Stratasys Direct Manufacturing which contributed to growth in overall service revenue.

Our continued growth in recurring revenue from consumable and customer support is encouraging and demonstrates the continued health of our installed base of systems.

We are pleased with our operating expense control which resulted in a reduction in G&A as we increase investments in long-term initiatives to support our technological leadership and expand our addressable market.

We continue our trend of positive cash generation from operating activity and believe we maintain a healthy balance sheet, and are well prepared to take advantage of opportunities moving forward. I would now like to turn the call back over to Elan..

Thank you, Lilach. As we noted on the last call, the company's Board of Directors has established an Executive Search Committee composed of myself and Victor Leventhal, the Chairman of our Compensation Committee, to help identify a new Chief Executive Officer.

Vic and I have been actively interviewing candidates, a few of whom have gone deeper into the process and we have met or spoken with other members of our board.

We are confident that the people on our short list are strong leaders with relevant global operational experience and we look forward to announcing a new CEO when we have completed the search. I would like now to ask David to provide more detailed information regarding the results of the quarter.

David?.

Thank you, Elan. In the first quarter, we were pleased with our continued commitment we are observing from our customers, reflected in the strong sales of high-end production systems as well as ongoing strength in recurring revenue from consumables and services which is notable despite the decline in system sales we experienced early in the year.

We are pleased with the increased level of customer commitment. We continue to see as customer move beyond qualification and validation phase around application to expanding their their capacity in true production environments.

As an example, we spoke in the first quarter of last year about how Siemens Mobility was pioneering the use of Stratasys FDM 3D printing technology by producing customized final production parts for German transport service provider.

In mid-September, Siemens Mobility announced it has opened its first digital rail maintenance center, the Siemens Mobility RRX Rail Service Center in Germany.

The new maintenance depot expects to service over 100 trains every month and offers the highest level of digitization in the rail industry with advanced FDM 3D printers from Stratasys as the heart of their service operation. Inventory increase – sorry.

Additionally, in August, in IMTS manufacturing exhibition, we showcased multiple customers in our booth and highlighted the unique application that they are addressing with our technology today including FedEx, who are developing efficiency in their supply chain as they work to deploy additive manufacturing facilities closer to customers as part of their FedEx Forward Depots service offering.

SLS (sic) [SSL], an aerospace customer using our FDM technology for rapid-response customized high-temperature lay-up tooling that previously would have been done with CNC.

Lockheed Martin, leveraging our new Antero PEKK advanced thermoplastic to create highly repeatable parts that meet strict mechanical functions and dimensional requirements for space travel.

And Penske NASCAR division showing multiple 3D printed end-use parts that their production managers can create in a single day compared to multiple days using traditional machine methods.

Looking beyond manufacturing applications that our technology can address today, we are excited about our progress in developing new innovative solution across our FDM and PolyJet platform that we believe will expand our addressable market in advanced manufacturing over next years.

We are pleased with the progress being made in the development of our new metal additive manufacturing platform for short run production and expect to have greater engagement with our development partners next year as we move through the stages towards commercialization.

We're encouraged with the improved performance and strategy of direct manufacturing.

SDM is benefiting for organizational change we made early in the year to bring it direct under North America sales organization and leverage the synergy between our parts and our hardware business as well as strong growth in manufacturing orders led by metal part production and an increase in large more complex projects and programs from our top customers, particularly aerospace.

Specifically in the third quarter, we were pleased to see several large customers significantly growing their order size and increasingly relying on SDM for production parts and development needs.

And as we have discussed in the past, the mix of SDM the business has shift significantly towards more profitable additive manufacture parts over those made conventionally. I would now like to turn the call over to our VP of Investor Relation, Yonah, who will provide greater detail on our 2018 financial guidance.

Yonah?.

Thank you, David. We are updating our guidance for 2018 as follows. Total revenue in the range of $670 million to $680 million compared to the previous guidance of $670 million to $700 million.

GAAP net loss of $10 million to $2 million or $0.19 to $0.04 per diluted share compared to previous guidance of net loss of $41 million to $25 million or $0.75 to $0.46 per diluted share.

Non-GAAP net income in the range of $27 million to $30 million or $0.50 to $0.55 per diluted share compared to previous guidance of net income of $16 million to $27 million or $0.30 to $0.50 per diluted share. Non-GAAP operating margin is still expected to be in the range of 4.5% to 6%.

Capital expenditures are projected to be $25 million to $35 million compared to the previous projection of $30 million to $40 million.

Our guidance reflects increased investments in R&D, tools, materials and additional resources aimed at expanding our addressable markets by accelerating our development efforts for the new metal additive manufacturing platform, further advancements based on our FDM and PolyJet technologies and specific go-to-market initiatives to deepen our customer engagement.

Non-GAAP earnings guidance excludes $34 million of projected amortization of intangible assets, $16 million to $17 million of share-based compensation expense, net gains from divestitures of $23 million to $22 million and reorganization-related expense of $6 million to $7 million and includes between negative $1 million in tax expenses to $1 million in tax income related to non-GAAP adjustments.

The estimated non-GAAP tax rate for 2018 is impacted by the ongoing non-cash valuation allowance on deferred tax assets that we expect to record throughout the year on U.S. losses. Given the expected ongoing negative impact of not recording a tax benefit on U.S.

tax losses on our net income as well as significant quarter to quarter variability in our non-GAAP tax rate, the company believes non-GAAP operating income is the best measure of our performance.

Appropriate reconciliations between GAAP and non-GAAP financial measures are provided in the table at the end of our press release and slide presentation with itemized detail concerning the non-GAAP financial measures. Operator, you may now open the call for questions..

Your first question comes from the line of Troy Jensen from Piper. Your line is open..

Hey, gentlemen congrats on the improving results here..

Thanks, Troy..

Thanks..

Hey, so quickly and maybe for David, I guess, or Lilach high-end systems were strong this quarter.

Did you see that strength across all verticals and I guess I'm trying to figure out when we really expect to see the aerospace vertical start to significantly inflect?.

So – okay. So we saw strength for the second quarter in a row mainly what we call government, was mainly military and aerospace. But I think if you look backwards let's say four, five quarters we see strength in all the manufacturing areas including auto, aerospace and military..

Would you expect to see a more meaningful acceleration in the aerospace business?.

I think – we talked about it last quarter and also on the earlier. It takes time with aerospace for customers to move from testing and validating to real production. And in certain companies, with certain partners, we see this process starting, gradually.

And I think that as customer will gain confidence, we're going to see acceleration of the use of especially FDM for tooling and end-use parts in those segments and specifically in aerospace..

Okay. That's fair. But I wanted you David – sorry about that.

Could you just give us your thoughts on HP's color launch and whether or not that impacted PolyJet now or if you think it will in future quarters?.

I think totally it did not impact PolyJet and I was very happy to hear that HP is following us going into color. I think that color will become the standard for prototyping in the coming few years. And it's kind of a mindset change in the user base. And – so I'm happy that other companies are going into this area.

And I think that technology-wise we are by far best positioned to lead this change from point of view of technology and quality. So I'm not concerned about it. And I'm happy that other competitors are going into this area..

Okay. If I could get one more question and I'll cede the floor, but can you just talk about materials. I think they're up 2.6%, maybe a little bit more when you factored out some of the divestitures.

But – I mean that growth rate that you think is sustainable or is that kind of below historical trends?.

Troy, I think there are two parameters on consumer consumption. One of them is the direct derivative of the number of printers we sold during the current quarter and last quarter.

The other one has to do with the utilization, which is directly related to the number of applications that we are able to provide our installed base over time and improving workflows and so and so forth. So I think that we are happy to see that the consumption goes up despite the fact that we had slower Q1 in machine sales. And it's directly related.

So as we will go back to growth in – or more substantial growth in hardware sales, you're going to see an increase in consumables. And we are doing progress, not all across the board, but many segments improving the application and workflow side, which is resulting in increased consumption.

To summarize, I think that I will estimate that in the future, as we are going to continue recovering hardware sales and continue providing better workflows and application knowledge to customers, we should see higher growth in consumables..

Perfect. All right. Well, good luck, going forward..

Thank you..

Your next question comes from the line of Brian Drab from William Blair. Your line is open..

Hi. Thanks for taking my questions. I just wanted to ask first on operating expense. You laid this out nicely on slide 10. The R&D seems to have stepped up materially, sequentially by a few million, and SG&A is down a bit.

Can you give us any help on what to expect in the fourth quarter of 2018 and end of the quarters in 2019?.

Good morning. So in terms of cadence of operating expenses, usually Q4 is our strongest quarter also from a revenue perspective. So I would expect to see operating expenses going up as a result as well.

In terms of R&D expenses, it's going along with what we communicated earlier in the year in terms of increasing our investment in our core technology and FDM technology and as well as in metal, and adding additional application. The spending on R&D is really based on project lifecycle and timing of the project.

So not necessarily there is specific seasonality in R&D, it's more about like I mentioned about the project lifecycle. So we would expect OpEx in Q4 to be higher due to seasonality of the revenue as well as run rate on R&D will continue to be probably a similar level..

Okay. Got it.

And then could you give a little more of an update on some of the technologies that you're developing, specifically within Evolve and Falcon and just a summary of how that is progressing? And also maybe a reminder of your ownership structure there and how those technologies and their potential success could impact your results down the road..

So we reported earlier this year that we divested out Evolve. So currently those results are not – they are not part of the operating income. We are basically taking our share in Evolve results. We are maintaining a minority interest in those entity. And the results will be basically below the line.

We are not anticipate to see a significant result or impact on our financials significantly as a result of that..

Okay. Just curious if you could comment on why, if those are such interesting technologies why they would be structured that way and just seems like it would have been great if you could have benefited more from those exciting technologies. I'm just curious. Thanks..

Brian?.

Your next question....

Oh, okay. Go ahead. I'm sorry, go ahead..

Your next question comes from the line of Wamsi Mohan from Bank of America. Your line is open..

Yes. Thank you. Good morning. Thanks for the update on the CEO search. Sounds like you're getting somewhat close. Is this something we should expect you will announce this quarter? It's hard to sort of really underwrite the long-term strategic direction of the company till you announce a new CEO that either articulates or reiterates the strategy.

So is this something that's fairly near term? And I have a follow-up please..

Well, yeah, yeah. So we've been actively searching for a CEO. As we've been announcing, we interviewed some people, some very good candidates. It's not something that I can say short, like because for that I would have to have a contract and we don't have a contract. So, so we are very actively doing it.

And we are looking for somebody who will be an outstanding leader with global operation experience, strong investor background and we have some very good candidates. So when we are ready to announce, we will do so. We said it'll take us maybe nine months or so.

We are within this range and believe me, we want to do it as soon as we can and as soon as we have some announcement, we'll let you guys know..

Okay. Thank you. And as a follow-up, can you talk a little bit if you think the proposed China tariffs are having any impact on your business or what you're hearing from your customers as potential impact.

And also I was wondering if you could give us some clarity on whether foreign exchange movement has created any impact on your results in this quarter and what you're anticipating for the fourth quarter as well? Thank you..

Okay, so Lilach can handle it. So go ahead Lilach..

Yeah, thank you. Good morning. So we definitely watch closely and carefully all the changes that are coming through the U.S. tariff change would impose and changes. And currently, specifically to our business, we do not see a significant impact from a cost perspective. But there are probably going to be some, but it's not going to be so significant.

And we are addressing alternatives or any other alternative from a cost perspective to address it.

What's the?.

FX..

The FX. The FX question, this quarter we did not – the FX didn't impact us so significantly. There was no so significant fluctuation on the euro. It's minor impact, about $500,000 on the revenue..

Thank you..

Your next question comes from the line of Ananda Baruah from Loop Capital. Your line is open..

Hi, yes, thanks for taking the question guys and congrats on the solid results.

Could you just, for us, summarize or go through what you'd like us to think of as being the 2019 drivers of the business and what will be the things that you guys will be focusing on and if you can give us some sense of how those might layer kind of through the year that would be helpful as well? And then I have a quick follow-up..

Okay, I'll take it, David. Good morning. We believe and you saw it in Q3 that we have a potential to go back to reasonable growth rates. We're going to focus on two areas. One of them is on our infrastructure and sales operations. I think globally we can do better in order to improve our top line both on the sales side and the marketing.

On the back of it, and as you saw with our R&D budget, we are spending significant amount of money to develop a great product in all the areas that we are active, the manufacturing side, with our SDM line, with the best rapid prototyping systems based on PolyJet technology and remakable.

So next year and 2020 are going to be about launches of very interesting products and improving the overall operation as far as sales and marketing globally which we hope will result in return to, even improve top line growth compared what you see in Q3..

David that's very helpful. I appreciate it. And just quick follow-up.

Can you just remind us from a metals perspective, how you view what your differentiation will be even if it's at a higher level at this point, kind of relative to what's been out there and now HP has divulged a little more information as well, would just love to get your thoughts on Stratasys differentiation? Thanks..

Again, I cannot spend too much about it, but we are developing a unique technology, which we believe. but has to be proven in the coming quarters and years, that is very suitable for remanufacturing of metal parts. It's different than the other technologies. I think it will be more suitable to production, less expensive.

And as we said in the script, we are in the process of engaging with a few substantial partners around the world together to develop and finally define the exact way the system is going to operate. But we are relatively advancing the process. And when we are ready we're going to announce and give more information..

Ananda, it's Yonah. On the formnext exhibition in two weeks in Frankfurt, we'll have some representatives there from the metal team and we'll be providing a little bit more detail there. So if you or anyone else, of course, on the call can make it there, you'll get certainly more information at that..

That's great. That's great. Thanks a lot guys..

Your next question comes from the line of Shannon Cross with Cross Research. Your line is open..

Thank you very much for taking my question. I'm curious about within SDM your attach rates for services and I assume warranty and maintenance in that. And maybe you can talk about what – what you've been doing to increase that.

And then how big this opportunity could be over time?.

Shannon, did you ask about SDM or FDM?.

Oh, is this – sorry. I asked about like your – the services, this is not FDM. No.

So basically what you can – I saw from your transcript and some of that – your prepared remarks that you were starting to increase the amount of attach you had of maintenance and other services with your products I believe which is helping to drive some of the services revenue.

Is that correct?.

Yeah. Yes so – yeah we saw – we see a continuous increase in growth in services revenue, contract maintenance and time and material, maintenance as a result of increasing of attach rate of customers to buy those renewal maintenance as well as increasing of installed base.

So this is – basically it's a – we actually experienced this for more than couple of quarters in a row. So it validates that our customers are using the machine and needs our additionally added value to bring together with the maintenance that is bring value to customers.

They choose to actually renew contracts and they continue get the involvement with Stratasys and they have the result services..

And I guess what I'm trying to figure out is within your installed base, is this an opportunity to go in and sell additional services into your installed base so that there'll be incremental growth above and beyond what you're seeing just from a product – attach with new product sales or is this not something where we can expect that you're going to be able to sign incremental services and contracts with people currently in your installed base..

Sure..

Yeah, definitely – okay, go ahead David..

Again, we need to remember obviously that a major part of our business is providing consumables to our customers.

So the fact that we are all able to show our customers that full service contracts are good for them usually resulting in higher level of satisfaction, which is a derivative of off time of the machine, which translates to higher consumables. So it's all connected together.

So there's a big effort to build full service contract because we know from past experience that customers which are full service – which are full service contracts are typically A, happier; B, their uptime is higher and therefore they're using more consumables.

So the effort is a cross-company effort which results both from revenue and the service side of it, but indirectly impacts also consumable sales..

Okay, thank you. And then David, can you talk a little bit, I think over sort of 2018, at least a feeling I got from our conversations with your company is that, it was sort of a pause year for the industry, and that there's a lot of technologies being developed.

Obviously, metal was growing not something you were necessarily, directly benefiting from..

Yeah..

And so I guess just in terms of your conversations with customers and your position, I mean, do you think we're getting to the point where 2019 is more of a benefit from all the investments made in 2018 and frankly in 2017 as well or do you think the industry is just – it's sort of slow and steady, so there's not necessarily an inflection we should look for?.

Totally, I don't view the notion that the industry is slowing.

I think that some companies, including ourselves and few other major players, find ourselves in a different environment in which there's, at least on paper, much more competition, which is by the way not direct competition, it's more mindshare and in some cases pocket share indirect competition.

I think that and I hope that in the coming one or two years the picture will crystalize also in the eyes of our customers and as a result of it they will be able to take decisions faster, because one of the things that we saw – we talked about it in previous calls – is there is a slowdown in the pace in which customers take decision to buy equipment because at least it seems that the offering is growing and terms are confusing.

So I think this possibly should kind of get clearer in the coming one or two years. And I think there's a chance that the situation overall will improve because at least in Stratasys we are working on and investing a lot of money in developing new and improved technologies.

So I think this combination, again you're asking me this will happen beginning 2019, end 2019, beginning 2020, end of 2020. I think in the short and medium term, I would hope and expect to seeing improvements..

Thank you very much..

Your next question comes from the line of Hendi Susanto from Gabelli. Your line is open..

Good morning, Elan, David and Lilach and thank you for taking my questions..

Good morning, Hendi..

Good morning..

One question.

Would you be able to share some puts and takes on your main reasons why you take down the top end of your full year revenue guidance?.

Yes. Now after we already concluded three quarters into the year and we had a visibility for the remaining of the year, we believe that adjusting the guidance and narrow the range to $670 million to $680 million, it definitely provide a bit of visibility to you in terms of what's going to – how the fourth quarter will look like.

We believe this range is achievable. Remind you that the fourth quarter is traditionally our highest quarter from a seasonality perspective. And we believe that we will be able to meet those narrow guidance.

One thing to noted is that we will likely be landing closer to the $670 million, but still we are keeping the $670 million to the $680 million range..

Got it. Thank you. That's very helpful..

Your next question comes from the line of David Ryzhik with Susquehanna Financial Group. Your line is open..

Hi, thanks so much for taking the question. Would love to dig deeper into the SDM parts strength. I think it grew 12% year-over-year.

Maybe in your discussions with customers, are the increased parts orders a function of them testing your systems, which could lead to hardware sales or would you consider them kind of independent standalone parts business? And have they given you visibility over the next few quarters, do you think this kind of strength is sustainable? And I have a follow-up..

Maybe I'll answer the first part first. We said in the script that a few quarters ago we basically connected the SDM with our North America operation, and one of the reasons that we've done so is to try and create synergies between two sales infrastructure.

Obviously, and we said it also on the call, there is a growth in SDM of production on the digital side compared to convention. Some of the digital is using of course Stratasys equipment and product. And I believe it will have the impact on also customer decisions to buy those equipment when volume or different reasons they want to do it in-house.

As for projection going forward, I think we should expect to benefit from the synergies between the two organizations. Hopefully will result – will continue to grow..

Great. Thank you, David. And would love to get an update on F123 and MakerBot, specifically F123. On F123 side, just would love any color there, and on MakerBot, it sounds like you guys have some new product introductions on the way.

David, will love to get your thoughts on the market on desktop opportunity, how you view it and what we can expect from MakerBot over the next – over the coming year?.

So first of all MakerBot is performing in line or even better than what we expected with different elements. Obviously, I cannot disclose information about new product, but we have also a substantial R&D operation going with MakerBot.

In respect to the overall market, I think it's also this market that will go through some rationalization over the coming quarters, and I expect MakerBot, which is today by the way a major player there, to continue a major player in this market..

And David with regard to your question on the F123, we also have some exciting innovations and plans for that scheduled for next year. So, you'll have to stay tuned on that one..

Yeah..

Okay. Great. Thanks again..

Thank you..

Your next question comes from the line of Ben Rose from Battle Road Research. Your line is open..

Yes, good morning. And congratulations on the results in a tough market. Question for you, David. Referencing what you said earlier in terms of the market being – there's more competition in the market, yet there's opportunity for growth. You spoke last quarter about HP and how Stratasys wants to take the fight more directly to HP.

I'm wondering if now that the Jet Fusion has been in the market for some time after HP tried to freeze the market before it's delivery, are you now seeing customers more clear on what your value proposition is relative to HP?.

Yes – yes. I think – again, I said it earlier. I think that there was – in the past few years, we saw a lot of new competition entering the market and initially and even still today there is some confusion about the different benefits of the different products for a very large variety of industries and applications.

I think customers are gradually learning what is good for what. And again I think that we're lucky we're in a growing market and the market will become a very large market I hope in the coming few years.

And I don't – again I said many times, the issue is not with direct competition, the issue is – FDM, for example, is a great technology for the manufacturing space. There are lot of areas in manufacturing that probably FDM is the best technology around, okay, with almost no competition, okay.

Nevertheless, when other players are coming into the market, the customers are hesitating. They have to learn, they have to test. And I think that we are in that process of each one of those technologies becoming clear to the audience and people will know where to place which technology.

And because I think overall market will grow and will continue to grow, I think that direct competition will be less – will be less significant..

Okay. Thank you very much..

Okay. Thank you all for joining today's call. We look forward to seeing those of you who will be attending the annual formnext exhibition in Frankfurt later this month. And we're happy to be speaking to you all early next year. Thank you..

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation and have a wonderful day. You may all disconnect..