Strengthened Financial Performance: The transaction is expected to be accretive to cash earnings per share within the first 12 months after closing. The merger is expected to create significant revenue synergies from increased sales, which will stem from the combined company's expanded sales reach and product portfolio, as well as from cross-selling of the complementary product portfolio to the existing combined customer base. Beginning 18 months after the close of the transaction, the combined company also expects to be generating between $7 and $8 million of annual net cost synergies, primarily resulting from several cost avoidance measures including the better allocation of current and future resources, the reduction in future recruitment costs, and the reduction in shared G&A expenses and corporate overhead, as the combined company continues to grow. In addition, the combined company expects to achieve between $3 and $4 million in annual tax savings also beginning 18 months after the transaction closes.
Attractive Long-Term Target Operating Model: On a pro forma basis, the combined company expects to significantly improve its long-term operating model compared with Stratasys' current standalone model. Longer-term, the combined company expects to achieve:
- Annual revenue growth of at least 20 percent;
- Non-GAAP operating income as a percent of sales of between 20 and 25 percent;
- An effective tax rate of between 15 and 20 percent; and
- Non-GAAP net income as a percent of sales of between 16 and 21 percent.
Approvals and Timing
The transaction, which is expected to be completed in the third quarter of 2012, is subject to, among other things, approval by Stratasys shareholders, registration of the Objet shares issuable to Stratasys shareholders with the Securities and Exchange Commission, the expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the satisfaction of regulatory requirements and other customary closing conditions. The approval by the Objet shareholders is required for certain actions related to the Merger. Stratasys has entered into a voting agreement with the Objet shareholders holding the requisite majority for said actions to secure the vote. The transaction will be taxable to Stratasys shareholders.
Preliminary First Quarter 2012 Financial Results
Today, Stratasys also announced preliminary financial results for the first quarter ended March 31, 2012. For the first quarter Stratasys expects to report revenue of approximately $45.0 million, a 31 percent increase compared with $34.3 million reported during the same period last year. Stratasys also expects to report non-GAAP net income of approximately $5.6 million to $6.3 million for the first quarter, or $0.27 to $0.29 per share, compared with $4.4 million, or $0.21 per share reported during the same period of last year. GAAP net income for the first quarter is expected to be approximately $4.3 million to $4.7 million, or $0.20 to $0.22 per share, compared with $5.0 million, or $0.23 per share, reported during the same period of last year. These numbers are preliminary and represent the most current information available to management. Stratasys plans to provide full financial results and updated 2012 guidance for Stratasys on a standalone basis during its first quarter financial results conference call scheduled for May 9, 2012. Items excluded in the non-GAAP calculation include amortization expense related to the acquisition of Solidscape, Inc. intangible assets; stock compensation expense; the gain on sale of an equity investment during the first quarter 2011; and the expenses associated with the company's current efforts to combine with Objet Ltd.