Good day. Welcome to today's conference call to discuss Stratasys's first quarter 2026 financial results. My name is Daryl, and I'll be your operator for today's call. Now I'd like to hand the call over to Yonah Lloyd, Chief Communications Officer and Vice President of Investor Relations for Stratasys. Mr. Lloyd, please go ahead.
Good morning, everyone, and thank you for joining us to discuss our 2026 first quarter financial results. On the call with us today are our CEO, Dr. Yoav Zeif, and our CFO, Eitan Zamir. I would like to remind you that access to today's call, including the 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 provided 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 or referenced in Stratasys annual report on Form 20-F for the 2025 year. Please also refer to that annual report along with our reports filed with or furnished to the SEC throughout 2026 for additional operational and financial details. Reports on Form 6-K that are furnished to the SEC on a quarterly basis and throughout the year provide updated current information regarding the company's operating results and material developments concerning our company. 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. Non-GAAP to GAAP reconciliations are provided in tables in our slide presentation and today's press release. I will now turn the call over to our Chief Executive Officer, Dr. Yoav Zeif. Yoav?
Thank you, Yonah. Good morning, everyone, and thank you for joining us. Our first quarter results reflect the continued resilience of our operating model in a measured spending environment. Recurring revenue streams from consumables and customer support continues to provide stability, while printer purchasing timelines remained extended as customers exercise capital discipline amid ongoing global uncertainty. Meanwhile, we remain focused on executing our strategy to grow as we deepen our penetration into manufacturing. On a sequential basis, compared to the fourth quarter of 2025, consumables and services both grew slightly, and Stratasys Direct delivered over 10% sequential growth and 23% organically after divestments when compared to the first quarter of 2025, reinforcing the trajectory of our production parts business, as was the case for the full year 2025. The top three parts customers were again all U.S.-based drone-related companies.
Note that Stratasys Direct produces end-use parts across a wide variety of industrial applications, using Stratasys printers almost exclusively, demonstrating the versatility of our technologies and the view into its potential future benefits. At the same time, we continue to make meaningful strategic progress. Innovation, customer engagement, and market development remain the foundation of our long-term growth strategy, one that centers on secular megatrends of supply chain protection and operational efficiency, reshaping global manufacturing. Nowhere are these megatrends more pronounced than in aerospace and defense, where mission-critical performance requirements, supply chain resilience mandates, and expanding U.S. Department of Defense investments in advanced digital manufacturing are creating a strong structural demand environment. To that point, we believe Stratasys is uniquely positioned to win.
In a tariff-sensitive environment, in particular, our platform's ability to enable local, rapid, and cost-effective production is a genuine competitive advantage, one we continue to highlight in customer conversation and one we expect will accelerate adoption over time. Turning to new technology developments and customer activity. In aerospace and defense, we continue to demonstrate the depth and durability of our position this quarter. As a reminder, Stratasys has deployed thousands of systems across aerospace and defense production environments worldwide. We serve as a program of record for the US Air Force and NAVAIR. Our technology is embedded across active platforms from C-17 microvanes that save an estimated $14 million annually in Air Force fuel costs to certified flight-ready parts produced for the world's leading aircraft manufacturer.
Stratasys Direct, our parts manufacturing division, ships over 100,000 parts annually to the defense industry and operates under certified quality systems, including AS9100, ISO 9001, CMMC compliance, and ITAR requirements. This is not prototype stage or pilot stage engagement. This is production-scale additive manufacturing at operational tempo for the most demanding customers in the world. Against that backdrop, our selection in the first quarter for the U.S. Department of Defense's Joint Additive Manufacturing Acceptability IV Pilot Parts program is a meaningful endorsement. JAMA IV is a multi-million dollar initiative to accelerate the qualification and deployment of 3D-printed parts across military platforms, and Stratasys Direct was selected on the basis of its proven production role across thousands of active military systems.
The program positions us to extend our share of U.S. defense additive spending, a budget which surged 83% for fiscal year 2026, and continues to flow into qualification and deployment for the Department of Defense. More broadly, our customer engagement across leading aerospace contractors and OEM remained substantive, with use cases advancing through qualification pipelines from production tooling to certified flight-ready components. These cycles are long, but the outcomes generate durable recurring demand, encode in certification and workflow integration, exactly the kind of revenue profile that strengthens our business over time. We are seeing continued momentum in high reliability aerospace applications with thousands of parts in orbit leveraging our materials. In fact, on the recent Artemis II moon mission, hundreds of components produced with Stratasys Antero materials on our FDM system were flown, highlighting the maturity and scalability of additive manufacturing in space systems.
This is a strong validation of the high-performance applications of our materials and our position in mission-critical environment, reinforcing the growing role of additives in next-generation space and defense platforms. In dental, we reached an important regulatory milestone. TrueDent resins received CE Class IIa medical device certification, making TrueDent the first polychromatic monolithic 3D printed denture solution. Certified at this classification in Europe, a segment projected at $2.45 billion by 2028. This upgrade from the prior CE Class I designation expands TrueDent's indications to include long-term intraoral removables and crowns and bridges, broadening the range of restorative cases dental laboratories can address through a single integrated digital workflow. CE Class II is a regulatory classification clinicians and laboratories routinely expect for restorative dental materials.
Achieving it removes a meaningful adoption barrier, strengthens biocompatibility and safety confidence for clinicians and patients, and positions Stratasys to deepen penetration across European dental labs and clinics as digital denture production scales. Importantly, the transition to Class IIa requires no change to print setting, formulation, workflow, or shelf life on our J5 DentaJet platform, making this a frictionless extension of our commercial reach in regulated European regions. We believe we are building the commercial and regulatory foundation for meaningful growth in these verticals. On the material and software side, we continue to invest in extending what our install base can do. ULTEM 1010 resin is now available as filament for the F3300 printer, enabling the production of aerospace-grade high-temperature parts with the lowest coefficient of thermal expansion in FDM portfolio.
Optimized for composite tooling applications, ULTEM 1010 on the F3300 allows manufacturers to produce precision fixtures and tools that maintain reliability in demanding environments, and to do so faster at lower cost per part relative to prior configurations. On our PolyJet systems, we recently expanded ToughONE to be available on the J3 and J5 series. ToughONE is an advanced material engineered for strong, durable, functional prototyping as well as end-use parts. Materials extensions like these are designed to further drive consumables attach rate and deepen application coverage. On the software side, measurement-based warp adaptive modeling is being integrated into GrabCAD Print Pro, using measured dimension data to automatically correct warping on the Origin One P3 platform.
For complex parts like electrical connectors, precision jigs, and industrial fixtures, this eliminates the iterative correction cycle that have historically added time and cost, and it delivers a meaningfully better experience for customers scaling production on our DLP platforms. With that, I will turn the call to Eitan to review our financials. Eitan?
Thank you, Yoav, and good morning, everyone. Our first quarter results reflect continued execution against the operational priorities we established at the start of the year. In an environment where customers remain deliberate on capital spending, we maintained adjusted EBITDA profitability and generated positive operating cash flow. Outcomes that reflect both the structural improvement embedded in our cost model and the stability of our recurring revenue base. Let me get into the details. First quarter consolidated revenue was $132.7 million, down approximately 2.4% year-over-year. Product revenue in the first quarter was $88.8 million, compared to $93.8 million in the same period last year. Within product revenue, system revenue was $28.8 million, compared to $31.2 million in the same period last year.
Consumables revenue was $60 million, compared to $62.6 million in the same period last year. Service revenue, which includes Stratasys Direct, was $43.9 million, compared to $42.2 million in the same period last year, driven by 23% organic growth after the investments in Stratasys Direct as compared to the first quarter of 2025. Within service revenue, customer support revenue was $29.7 million, compared to $30 million in the same period last year. Now, turning to gross margins. GAAP gross margin was 41.7% for the quarter, compared to 44.3% for the same period last year. Non-GAAP gross margin was 46.3% for the quarter, compared to 48.3% in the same period last year.
The change was primarily due to the 180 bps impact of $2.4 million of year-over-year incremental tariff expense, as well as from lower revenue. While we typically do not reference sequential margin improvement, we believe that despite the reduction in revenue from fourth quarter, margins were sequentially flat, marking a positive mix efficiency. GAAP operating expenses were $81.9 million, compared to $72.6 million during the same period last year. The rise in expenses was primarily due to an increase in professional fees and the impact of foreign currency exchange due to the significant appreciation of the new Israeli shekel relative to the U.S. dollar. Non-GAAP operating expenses were $64.6 million, compared to $62.6 million during the same period last year.
The increase was primarily due to the impact of foreign currency exchange rates, given the increased strength of the shekel against the dollar of approximately $3.1 million. Regarding our consolidated earnings, GAAP operating loss for the quarter was $26.5 million, compared to a loss of $12.4 million for the same period last year. Non-GAAP operating loss for the quarter was $3.2 million, compared to operating income of $3 million for the same period last year. Adjusted EBITDA was $2 million for the quarter, compared to $8.2 million in the same period last year. The change in both was primarily due to the impact of approximately $5.3 million of FX and tariff pressures.
GAAP net loss for the quarter was $23.8 million or $0.28 per diluted share, compared to a net loss of $13.1 million or $0.18 per diluted share for the same period last year. non-GAAP net loss for the quarter was $1.3 million or $0.01 per diluted share, compared to a net income of $2.9 million or $0.04 per diluted share in the same period last year. From a cash flow perspective, we generated $2.4 million in operating cash flow in the first quarter, reflecting working capital discipline and the structural cost improvements we've embedded over the past several quarters. This builds on the $15.1 million in operating cash flow we delivered for the full year of 2025. We remain confident in our ability to expand cash generation as revenue scales through the years.
We ended the quarter with $237.8 million in cash equivalents, and short-term deposits. Our balance sheet remains strong and debt-free, providing the financial flexibility to continue investing in technology, market development, and inorganic opportunities to drive further growth. Regarding our outlook for 2026, our first quarter performance is consistent with the framework we established at the start of the year, and we are reiterating the full year guidance we provided on our last call. Revenues are expected to range between $565 million-$575 million, growing sequentially each quarter through the year, and we expect 2026 consumable revenue to increase over 2025. Please refer to the press release or slide presentation for further details. With that, let me turn the call back over to Yoav for closing remarks. Yoav?
Thank you, Eitan. Coming out of the first quarter, our customer engagement continues to increase, and our deal pipeline for 2026 and beyond continues to build, especially in defense. The strategic progress we share today reinforces the trajectory we plan for tomorrow. Our solutions for the defense industry are no longer just emerging, but are established, certified, and operating at scale across active military platforms. We have increased access to multi-billion dollar regulated European dental vertical with a product already proven and deployable without workflow disruption. Supported by positive operating cash flow and a debt-free balance sheet, we have built multiple opportunities to generate profitable growth, both through inorganic and organic opportunities, focusing on our position in high requirement use cases as we capitalize on the increased demand for additive manufacturing solutions. With that, let's open it up for questions. Operator?
Thank you. We'll now be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. The confirmation tone will indicate your line is in the question queue. You may press star two to remove your question form the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. We ask that you please limit yourself to one question to on follow up question. One moment please, while we call for your questions. Our first question has come from the line of Greg Palm with Craig-Hallum. Please proceed with your questions.
Thanks. Good morning. This is Jackson Schroeder on for Greg Palm. Wanted to start on this defense opportunity with everyone obviously seeing the top-line budget request. Curious if you could really talk on opportunities, particularly outside of drones, with what's happened in Iran, ammunitions or punishment. There's a lot of opportunities here, as well as that JAMA IV program. Just want to get some more color on that.
Thank you, Jackson, for the question. Let me take a step back and talk a little bit about aerospace and defense, because this is, to be honest, the leading vertical today with a very promising pipeline. When we are looking at aerospace and defense, what we are experiencing is part of what's going on in the industry. Practically, aerospace and defense, this industry is going through transformation globally, by the way, not only in the U.S. The transformation is both in terms of the increased budget, like numbers that we haven't seen in the past, and also new solutions like drones, but also ammunitions, missiles and others. We see it across the board, not only in drones. We have, for example, parts in missiles, which are a very strong growing area in defense.
No doubt that additive manufacturing, AM, is playing and probably will play a major role in this transformation because we deliver things that no other advanced manufacturing methodology can. We are more agile. We are in the front where we are versatile, we secure the supply chain, and we can deliver lightweight geometries that no other manufacturing methodology can. You put all this together Stratasys is in the best position to benefit from this transformation because we worked on this for years. We have relationship with the Department of Defense now, used to be Department of Defense. We have relationship with the large OEMs. Practically all the leaders in defense are sitting in our customer advisory board, and they are having an impact on our R&D as well, so they know what we are developing for them.
On top of it, we have relationship with key bodies that are adopting additive, like NAVAIR, like the US Air Force and others. We are talking here about very strong position that is also supported by our Stratasys Direct. Stratasys Direct grew 23% year-over-year, led by drones, but also other applications. We are in munition, we are in sustainment. Sustainment is major for us. Major for us. Because you take, for example, B-52, it needs to fly for the next 20 years. It will be 100 years old, almost 100 years old airplane. We are there. We already part of sustainment program of the U.S.
When you look at Stratasys Direct, our SDM unit, this is the best indicator that you can have for demand for OEM, for machine solutions in the future, because the parts business is practically indicating what the customers will adopt internally in the future. First thing that they are doing, they are ordering parts. We see it across the board, back to your question, across different applications. Drones are leading because this is kind of the best example of the transformation of this industry. You can see it also in the numbers. If I remember right, the U.S. Department of Defense is asking for 2027 for a $1.5 trillion budget, which is almost 45% increase year-over-year. $75 billion out of it is for advanced digital manufacturing, and additive will have a major part there.
We are excited about it. We are working with everybody. The pipeline, we have more confidence in our pipeline in aerospace and defense.
That's really exciting. Should we think about this as like Stratasys Direct being the real, I'd say, like indicator or driver of that, or should we look at like with these drone customers, will this kind of transition into like big system sales? Could that also happen to the government? How should we think about that?
Absolutely, both. Stratasys is directly the indicator because every day we are delivering parts for drones, large parts, small parts. By the way, in large parts, we have huge advantage because of our reliable FDM solution, industrial FDM solution, the F900 and the F3300, with unique materials that only Stratasys has. Probably in every large UAV, you will see Stratasys ULTEM parts. Not only there, it's also relationship with the Department of Defense and large appropriations that are targeting sustainment and also renew of the depots. I'll give you an example of shipyards. U.S. built less ships, battleships since World War II than China in the last year. That's what I heard in the Pentagon. What does it mean? It means that there is a lot to catch up.
If you want to catch up and fast, additive is the solution. We are experiencing the same thing also in Europe. Germany and Japan mainly, they need to catch up. The weakest way to catch up is additive manufacturing.
Thank you. Our next question has come from the line of Trevor Saar with William Blair. Please proceed with your questions.
Thanks. This is Trevor on for Brian. I wanted to stick with A&D if we can here. I'm trying to square your opportunity with some of your largest A&D customers on, you know, production versus prototyping. It'd be helpful to hear any kind of detail you could give or examples. You don't have to name a customer, obviously. How should we think about your development with some of these largest customers and where you are in your business with them on a production versus prototyping standpoint?
Great question, Trevor. Currently, we are focusing all the way on manufacturing, and the main areas are this drone transition or drone dominance is one of them. The other one is the sustainment, and the third one is everything which relate to maritime and catching up on the ability to be there with a renewed fleet, I would say. The main indication, as I said, it's going both in different direction, but the main indication now is Stratasys Direct. We shipped over 100,000 production parts annually. We have never seen it before in defense, this level of demand. We are working in different layers or different routes to the market. One is through the government.
We are very strong with the U.S. government, Also with other governments globally because we have the reputation, and we see their large programs that are being built, and allocation and assignment of budgets. Majority of this demand is production part, not prototypes. We also see demand for tooling. When you need to refresh or renew a depot, you need many tools. Same with shipyards. The fastest way to have tools is to print it. Tooling is also a major thing in Defense now. You need to put all those new lines of production, and there is nothing faster than additive manufacturing to equip those lines with tools. This is another area. One more, probably I can talk about it for hours, but I want to shed light on the fact that this is not only a U.S. phenomenon.
This is a global phenomenon. It's the strongest demand we see in the U.S. and also the innovation, but it's definitely a global phenomenon that we see more budget, more programs that are being now established, and we will see the demand over the next, you know, next quarter, but also years from now.
Great. This is very helpful.
We have a strong lines of solutions that can really match those requirements and the high requirements and the demand.
That's great. Thank you. I wanted to switch back over to dental. You gave some great detail there on the European market and that you project it to be $2.45 billion by 2028. I'm just trying to get a sense of what your specific opportunity is in the European 3D printed denture market, and maybe if you could give any kind of indication of where you expect your share might be within that market by 2028.
The dental market is one of the leading industries in adopting additive manufacturing because of the ability to personalize and in a very quick way. Traditionally, the dental market is, you know, labor-intensive, and we are bringing here solutions that solve two major issues in dental: the lack of professional labor, and the second one, we are dramatically, as an industry, as an additive manufacturing industry, we are dramatically reducing the chair time for the doctor, for the clinics, for the dentist. There is nothing more valuable for a dentist than his chair time. Our dentures, and we call it removables, we are focusing on removables. It's for restorative dental, so dentures, but also night guards. We are focusing there with our PolyJet technology. It's the only multi-material technology for dentists or for dental. What does it mean, multi-material?
It means that we can deliver parts that no one, no other technologies can. We are already established because in the U.S., our dentures are already working with the leading players like Affordable and Glidewell, and we plan to grow and to be the largest player in Europe because we have the first-mover advantage. We are the first player move with polychromatic dentures that receive the IIa class IIa. Great position to be in. It also opening up for us new application like partial dentures and crown and bridges, and we will see growth there.
Thank you. Our next question has come from the line of Alek Valero with Loop Capital Markets. Please proceed with your questions.
Yeah. Hi. Thank you for taking my question. Yeah, just kind of on that same point on TrueDent. You projected the European segment at $2.45 billion by 2028. I wanted to ask, how does this certification come sooner than you were expecting? What is the likelihood that we could see more certifications down the road, and how would that expand your TrueDent opportunity? Additionally, clarification question, is it $2.45 billion in addition to the American market?
The $2.4 billion-$2.5 billion is analyst projection in the European market. When we look at our TrueDent, it will definitely get into new applications that we were not there in the past, like as I said, partial dentures and crown and bridges. We have the first mover advantage there. In the U.S., it's a bigger opportunity. It's almost $5 billion when you look at removables. It's only the beginning. We are improving the material, we're improving the machines, we're improving the solution, we are improving the workflow. We are the first mover, but we are not, you know, we are not laying back and said, "Okay, this is it." We are building the foundations, and we are building the best offering for restorative dental. Once we have this foundation, I have no doubt that we will experience exceptional growth.
Got it. Super helpful. That's exciting. Just a quick follow-up. Two quarters ago, you mentioned the large tech company that bought some F3300s. Any update there and any color on what potential applications they could be using these your products for?
Unfortunately, we cannot share. I want to do something, you know, just to share one perspective, which I think is important because it's kind of connecting all the questions today. I want to state it very clearly. We are progressing according to our growth plan. This is a plan that we shared with you last quarter. It's true that Q1 is always the softer one. H1 are softer than H2. H2 is definitely defense-driven. We are maintaining our guidance. We are on plan. When I'm saying on plan, this will be the first year for three years now that we will grow. Our transition plan from prototyping to manufacturing, that we also shared with you in the past, will generate growth this year. Our transition is working.
Thank you. Our next question has come from the line of Kieran McCabe with Cantor Fitzgerald. Please proceed with your questions.
Hi. Yes, thank you. That's Kieran on for Troy Jensen. You mentioned that customer engagement continues to be strong or increasing, but customers are maintaining capital discipline. Can we read any insight into the Stratasys Direct organic growth as maybe a precursor to an inflection in system sales in the future at all? Thank you.
Hi, Kieran. Thanks for the question. As we mentioned earlier, FDM, the parts business, is an indicator to the behavior of the OEMs that follow. When we print parts, the cycle is very quick. We see the growth relatively quick. We demonstrated in Q1, 23% growth organically, as you mentioned. That's part of the confidence we have in the ability to with the strong pipeline that we see for the second half to grow also on the hardware and OEM business. We start to see it already in Q2. In Q2 this year, we expect to see a similar revenue to Q2 2025 levels.
Okay. My follow-up is that, you know, we have a strong balance sheet, no debt, cash on hand. You talked about some, you know, taking advantage of inorganic opportunities. Kind of can you provide any color maybe where you see some areas you want to add to or areas of interest on the inorganic side?
No doubt that we are aiming to leverage our balance sheet to capture inorganic opportunities, to strengthen our position in what we define as high requirement use cases. This is our strategy. Our strategy is to redeliver and capture high value in high requirement applications. We don't want to be in prototyping, in basic prototyping. We don't want to compete with solutions that deliver no value. They deliver value, but it's race to the bottom. We are focusing on the high end, on the high requirement applications. There are plenty of inorganic opportunities to capture in those areas. This is our direction. It's completely aligned with our strategy, and we are going to capture those opportunities.
Thank you. We've reached the end of our question and answer session. I'd now like to hand the call back over to Dr. Yoav Zeif for any closing comments.
Thank you for joining us. We look forward to updating you again next quarter.
Ladies and gentlemen, thank you so much. This does conclude today's teleconference. We appreciate your participation. You may disconnect your lines at this time, and enjoy the rest of your day.