11-04-2015: Stratasys recorded a historic financial loss of -$938 million

MakerBot was responsible

On November 4, 2015, Stratasys announced its third quarter 2015 financial results, reporting a staggering loss of -$938 million—an unprecedented figure for the AM industry. This epic financial loss stemmed from asset write-downs rather than operational sales performance. It was primarily due to a goodwill impairment related to the prior acquisition of MakerBot, alongside disappointing results in Stratasys’ core segments.

In Q3 2015, Stratasys generated revenue of $167.6 million, representing a -17.7% decline compared to the same period a year earlier. The net loss of -$938 million translated to a per-share loss of -$18.06. However, on a non-GAAP basis, the company posted a modest net income of $0.7 million, or $0.01 per share. This disparity was due to necessary accounting write-downs on assets rather than operating performance.

The primary component of this loss was a $910 million goodwill impairment, broken down into two main segments: MakerBot, which saw its third goodwill write-down, and Stratasys’ enterprise business activities. MakerBot, acquired by Stratasys in 2013 for a total of $403 million, continued to underperform financially. The estimated impairment for MakerBot ranged from $436 million to $476 million, exceeding its original purchase price. The remaining portion of the impairment was attributed to the enterprise segment, where asset values were reduced due to lowered projections for future cash flows.

These intangible asset impairments reflected that prior acquisitions had been overvalued in terms of expected benefits, with a significant impact on the company’s balance sheet. For investors, such write-downs are cautionary indicators regarding future earnings. The $910 million impairment notably decreased Stratasys’ book value, affecting financial ratios and risk assessments. While it did not affect immediate cash flow, it signaled to the market that the company had over-invested in assets whose value now required substantial adjustment.

Stratasys continued efforts to improve operational efficiency, initiating a reorganization of MakerBot’s structure. However, these results marked a turning point, forcing the company to re-evaluate its operating model and approach future decisions with greater caution.

Eight months after these results were announced, in June 2016, then-CEO David Reis retired. Reis had been one of the architects of the Stratasys-Objet merger, but also had signed the acquisition agreement for MakerBot.

So if you’ve ever wondered how it happened that 11 years ago a Stratasys share was worth nearly $135, and now it’s just over $7, the story above is a key piece of evidence in that case.

Source: www.stratasys.com