Stratasys Ltd.

Shane Glenn - Director of IR Scott Crump - Chairman and CEO Bob Gallagher - CFO

Troy Jensen - Piper Jaffray Steve Dyer - Craig-Hallum Brian Drab - William Blair Chad Bennett - Northland Capital Market Graeme Rein - Bares Capital Jim Ricchiuti - Needham & Company Chuck Murphy - Sidoti & Company Andy Schopick - Nutmeg Securities Ryan Thibodeaux - Maple Leaf Partners David Trossman - MTB Advisors

We will begin with the Safe Harbor statement. All statements herein that are not historical facts or that includes such words as expects, anticipates, projects, estimates, vision, planning, could, plan, believes 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 news release are forward-looking statements that involve risks and uncertainties. These include statements regarding projected revenue and income in future quarters; the size of the 3D printing market; our objectives for the marketing and sale of our Dimension and uPrint 3D printers, and our Fortus 3D production systems, particularly for use in direct digital manufacturing; our agreement with HP to expand the distribution and sales of our 3D printers, our WaveWash support removal system, the demand for proprietary consumables; the expansion of our paid parts service and our beliefs with respect to the growth and demand for our products.

Other risks and uncertainties that may affect our business include our ability to penetrate the 3D printing market; our ability to maintain the growth rates experienced in this and preceding quarters; our ability to introduce, produce and market new materials such as ULTEM and the market acceptance of these and other materials; the impact of competitive products and pricing; our timely development of new products and materials, and market acceptance of those products and materials; the success of our recent R&D initiative to expand the DDM capabilities of our core FDM technology and the success of our RedEye on demand and other paid parts services. 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 obligations 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.

The company uses these non-GAAP financial measures for evaluating comparable financial performance against prior periods. The appropriate reconciliations between non-GAAP and GAAP financial measures are provided in a table at the end of our press release.

Good morning and thank you for joining us to discuss our second quarter financial results. During the first quarter, we entered into a gain changing exclusive agreement with HP for the worldwide distribution of our 3D printers.

In addition, our consumable revenue grew by an impressive 25% to a record level during the second quarter. Our system unit sales also represented a quarterly record growing by 54% over last year.

We were proud to launch our new WaveWash easy to use, automated support removal system that further uniquely differentiates Stratasys competitively. Within Fortus, we continue to maintain a strong pipeline of orders driven by the improvement in business conditions within our core markets.

Thanks Scott. Total revenue is $30.1 million for the second quarter 2010, a 22% increase over the $24.6 million reported for the same period last year.

The company shift a record 682 units during the second quarter at 54% increase over last year. The strong unit growth was driven by growth in our 3D Printer unit system sales.

Domestic sales represented 56% of total revenue during the quarter and grew by 26% over last year. International sales were up 18% for the quarter.

The international sales were up was impacted by the decline in the Euro. Euro declined in the average first quarter rate resulted in 382,000 lowered Q2 revenue.

Second quarter products revenue was $23.8 million, a 31% increase over the $18.2 million reported for a same period last year. Two factors impacted our product revenue growth during the quarter.

First, 3D printer unit sales increased by 60% when compared to the second quarter of last year, driven by the new design jet we shift to HP as well as strong growth in our Stratasys brand of 3D printers. Although HP is only recently initiated their marketing programs, we believe they are having a positive impact on the market.

HP significantly exceeded their original forecast for the second quarter and reported that virtually all systems that sold through to end users. Reflecting the impact, our 3D printer unit sales within market served by HP which includes both design jet and Stratasys branded systems, increased by a 74% during the second quarter.

As I will address later in the call, HP is more focused on refining their goal market strategy during initial to better prepare for future expansion and accelerate its sales launch. The second item impacting our product revenue during the quarter was the 25% increase in our consumable revenue compared to last year.

This represents the positive trends that began in the fourth quarter of last year and we believe represents a positive leading indicator of our businesses going forward. Fortus sales were down slightly in the second quarter versus last year.

This was a function of timing as Fortus system bookings increased by 30% over the last year during the second quarter. Second quarter service revenue was $6.3 million, which was down slightly from the $6.4 million reported for the same period last year.

Our maintenance revenue declined by 13% during the second quarter compared to last year. The recent decline in maintenance revenue reflects an extension of the warranty period we implemented in early 2009 for most of our systems.

Revenue in our RedEye paid parts business increased by 20% in the second quarter compared to last year. This represents a positive trend that began last quarter as RedEye continues to recover from a period of overly competitive pricing that occurred during the recent recession.

Gross profit was $14.8 million for the second quarter of 2010, a 28% increase over the $11.6 million reported for the same period last year. Gross profit as a percentage of sales increased to 49.1% when compared to the 47% for the same period of last year.

The gross profit percentage was positively impacted by the growth in total revenue and service products and service revenue over last year as well as strong sales of our consumables and higher priced 3D printers. Gross profit as a percentage of sales declined sequentially from the 51.5% reported for the first quarter.

The sequential decline in gross profit percentage was driven by the weaker Euro, sales of our lower-margin HP design jet, and a mix shift within Fortus that it favored lower-margin 360mc over the higher-margin 400mc. Operating profit was $4 million from the second quarter of 2010, a 177% increase over the $1.5 million reported for the same period of last year.

Operating profit as a percentage for sales increased to 13.4% when compared to 5.9% for the same period of last year. Operating expenses increased by 6% over the last year to $10.7 million during the second quarter.

The biggest impact on operating expenses was a 54% increase in R&D expenditures, driven principally by development programs that support new product introductions such as the recent launch of our eco-friendly automated support removal system called WaveWash. In addition, the R&D offset from funds provided by our Fortune 500 Partner to develop DDM applications for our Fortus line was lower during the quarter at $274,000 versus $978,000 for the same period of last year.

SG&A expense in the second quarter included $262,000 of stock based compensation expense, net of tax, compared to $162,000 to the same period of last year. In other income, the second quarter included a relatively large foreign currency loss of $439,000.

This loss was the result of the significant appreciation of the dollar relative to the euro during the period. Pre-tax profit was $3.7 million to the second quarter compared to $1.3 million to the same period of last year.

Income tax expense amounted to $1.4 million for the second quarter for an effective rate of 37.2% compared to $450,000 or 34.7% for the same period of last year. The federal R&D credit has yet to be renewed for 2010 and we have accrued our tax liability accordingly.

This contributed to a tax rate in Q2 that is relatively high compared to the range we expect for 2010 of 34% to 37%. Assuming renewal of cash credit later this year, we will recruit some of our tax expense accrual.

Net income was 2.3 million for the second quarter compared to 850,000 for the same period last year. Non GAAP net income was $2.6 million or $0.12 per share compared to $1 million or $0.05 per share for the same period last year.

Non GAAP net income includes stock based compensation expense in both periods. A table provided within our press release, provides itemized details for all non GAAP items incurred during both periods.

We finished the period with approximately $72 million in cash and investment and we continue to be pleased by our management working capital. Inventory balances were $17.3 million at the end of the second quarter, which is up when compared to the $14.6 million at the end of fiscal 2009.

The increase in inventory was planned and driven principally by the anticipated introduction of our new WaveWash support removable system. The longer lead times required by suppliers as well as anticipation of stronger orders over the coming months.

Right now, we expect inventories well reduced as we move further through the last six month of the year. Accounts receivable with $21.7 million at the end of second quarter, which is up when compared to $19.3 million at the end of the fiscal year.

Day sales outstanding or DSO with 66 days, compared sequentially to 63 days at the end of the first quarter and compared to 68 days at the end of the fiscal 2009. And now, I would like to turn the call over to our Director of Investor Relations, Shane Glenn for comments regarding our outlook.

Thank you Bob. We appreciate the need to provide financial guidance to our shareholders and investment community.

We continue to observe an improvement in market conditions during the second quarter and we are optimistic about the coming periods. However, it remains difficult to predict our performance coming out of the deep recession as we move into our seasonally weakest quarter.

Consequently, we will continue as now provide financial guidance for 2010.

Thank you, Shane. We are optimistic that we can continue to observe a favorable business environment for the balance of the year.

The second quarter brought significant progress to our game changing collaboration with HP. In April, HP introduced and began shipping the new designs jet printer in five European countries which includes Germany, Italy, France, Spain and the UK and this HP division responsible for this collaboration is located in Spain.

In addition to using our existing channel, HP has added resellers within those five countries and has numerous additional resellers asking for the product line. As Bob mentioned, system orders from HP exceeded the original Q2 forecast and a sell through to end users has been strong.

We believe HP is already having a positive impact within the marketplace as our system sales grew significantly in those five countries. Although we are excited about these early signs of success and believe the collaboration is off to a great start, we are more excited about what these developments suggest about the future.

While the uPrint platform represents a major step in providing a full product solution that appeals to a broader market, we will continue to develop new products that provide the opportunity to accelerate future adoption. We will accomplish this by making systems that capitalize on a price-elastic market with products that are more reliable, easy to use, and office-friendly.

While our relationship with HP represents the game changing opportunity within 3D printing, you should not overlook the growth opportunity within our Fortus line of our 3D production systems.

In addition, companies have began to recognize the value of our technology for DDM applications including fixtures and assembly tools within the manufacturing applications. One example of this is the U.S.

army who recently purchased a 400mc to quickly produce jigs and fixtures as well as specialized repair tools to sustain the existing fleet of helicopters for all the branches of military. The FDM technology provides them with a quick response manufacturing capability to reduce repair times and overall vehicle ownership cost.

To further our goals within DDM, we are pleased to announce that we recently extended a collaboration with our Fortune 500 Partner, to develop new platforms for DDM applications. The contract extensions signed this month includes approximately $800,000 of additional R&D funds for 2010 to further develop our Fortus line for DDM.

This brings their total spending in price development project with Stratasys to approximately $5.5 million over past 5 years. They view this project as highly strategic and critical to future programs.

We are excited that the industry, that there are leading industry companies, shares our vision and recognizes the potential of our FDM technology for manufacturing of end-use parts. With the recent economic upturn and emerging DDM opportunities, we continue to see a strong pipeline relative to last year and we remain optimistic about a strong year within Fortus.

Okay, in summary, we are pleased with the progress in our relationship with HP and we believe that we are well positioned for a significant expansion in 3D printer sales in the future. I believe that HP will begin to execute a global expansion throughout 2011.

We believe that this is in the best interest of our shareholders. Business trends remained encouraging during the second quarter and we are optimistic about the remainder of 2010.

However, we will continue to conservatively manage our spending and resources given the difficulty in predicting market conditions over the near term. In addition, we are excited about the incremental growth opportunities provided by the emerging DDM applications within our Fortus line.

Hey good afternoon or good morning gentlemen.

Good morning Troy.

We are having an unusual mix in the quarter. Some of the things that have impacted strongly as I mentioned in the call, when we were hit by the euro as I think it moved on to the significantly lower rate in the previous quarter.

And then on HP, this has one two-part question here and for my follow-up. But can you let us know is HP going to be classified as domestic or international and then you had some comments in your press release about a $5 million a one-time charge?

Was that in Q2 or is that already reported in Q1?

Okay alright, well good look going forward guys.

Thanks.

Thanks, good morning guys.

Good morning.

Bob, are you willing to at least let us know if HP was a 10% customer in the quarter?

Okay. And then, did I hear that correctly, domestic was 56% of revenues in the quarter and leaving international to be 44%, which I would assume was driven a lot by HP?

You got the percentages correct which is really not a significant change from the overall percentages in the last quarter.

Okay. How should we think about operating expenses going forward?

It was just a touch higher maybe than I had modeled at least this quarter. Is this kind of a decent way to think about the run rate going forward?

Okay and then last question, I ran over my allotment here, but you had indicated the need for expansion here. What is that going to involve the CapEx I guess for the quarter or kind of looking out?

Yeah, we are not, we will give more color around that in future quarters.

Okay and then do you have the CapEx number for this quarter and also cash from operations?

Give us a second here.

No problem.

Okay, alright thank you.

Thanks.

Good morning.

Good morning.

Looking at the 60, you said 6-0, 60% growth rate of 3D printers. Is that right?

Correct.

Yes, we will try to give you some color around those numbers that relates to what we -- our uPrint and Design jet represented about 37% of the overall mix within the products. We consider the uPrint plus, we put that in with the legacy, because there is a differentiation in the margin of our products.

So the uPrint, the 1,200 SST and Elites represented at 60, the uPrint plus, excuse me, and even 1,200 SES represented 63% of the volume. Well the uPrint and the Design jets represented 37% of the volume.

Ok great and then, give us a little help on the interest income and other line and what we should expect going forward in the third and fourth quarters just on a directional basis?

So just to be clear, not much impact meaning that it should be roughly a wash on that line or close to zero or close to the second quarter result?

Close to wash on that line.

Correct.

Yes. No, I understand.

Going back to gross margin, I think you answered it, but do you have any more specifics? You gave three impacts on gross margins.

Is there a way to quantify those three things in terms of importance on the gross margin this quarter?

If you put them on the quarter of priority, you know, the shift in the mix within the Fortus with the number one item and probably equal then between the Euro as well as the impact of design jet versus uPrints

And then at Fortus, Fortus probably had over a 100 basis point impact just alone.

Yes. We continue to our investment in nothing below a AAA standard and we moved more of our investments in to our commercial paper of high grade commercial paper that has maturity, is more than 12 months.

Alright thanks.

Thanks Chad.

No, we can probably double our current capacity from where are right now but when you go into things like facility planning, as you can appreciate, there is a long lead time on some of those items in terms of if we need to acquire additional space and getting that space prepared. So some of those plans are longer term plans that you need to start to initiate in the near term.

So we are working today, we are working towards mid-term as well as our long term plans to grow.

Ok great and then the follow-up, have you seen any price changes on consumables or in the RedEye business?

Ok, thank you very much.

Thanks.

Thank you. Bob, did you say Fortus revenues were down year-over-year slightly?

Ok and just wanted to follow up on that is, the decline you saw and then similarly, the increase you saw in bookings. Is there any color you can provide as to whether there were some geographic dynamics at work there or specific vertical markets where you saw the change?

No, not really. Like I said, the bookings were strong and we saw strong bookings, both in the Far East as well in the Americas as it relates to quarters.

Okay, thank you.

Thanks.

Good morning guys

Morning Chuck.

I was just wondering if you could tell us how many distributors you had in Europe prior to the HP deal and how many you have now?

They have a lot of resellers asking for the product today. They want the product in these regions and once again, I think what they are looking to do is get the go-to-market strategy right before they add any additional resellers.

They have a lot of resellers asking for the product today. They want the product in these regions and once again, I think what they are looking to do is get the go-to-market strategy right before they add any additional resellers.

Okay. Could you say kind of what the profile of the distributors is these days?

I mean, are they selling mostly the 2D plotters? Are they also selling some CAM software or both?

It would be both.

Alright, thank you.

Chuck, thank you.

Yes Bob, a couple of just quick ones for you. Revenue recognition on the HP deal, you will be recognizing revenue on a sell in basis as opposed to our sell out from their channel?

Correct.

To the extent that we have that information from HP during those quarters, we will certainly do that.

Alright, how about for the year to date the revenue impact from just the FX?

If you took it versus the exchange rate that was in place at 12/31, the overall impact is just under $600,000.

Okay, thank you very much.

Hey good morning. Just a quick follow-up on that last question on the R&D credit, Bob, I believe you mentioned something about R&D being relatively flat for rest of the year.

Did that include the R&D offset?

Correct.

So the $2.6 million includes a $400,000 per quarter offset, right?

Correct.

So it would otherwise be $3 million?

Yes. Well, our spending will be higher, right.

Ok and the next question is I believe Bob, you said that uPrint plus Designjet was 37% of the, I guess, overall unit mix or dimension unit mix?

It was of the 3D printer.

That was uPrint, the basic uPrint and Designjet. We.

It’s 37% of the overall 3D printing.

The 3D printing. What we do is we is because of the higher margins on the uPrint plus, we kind of characterize it as a higher price system and so we just have the uPrint, the basic uPrint and the Designjet systems in that 37% number.

Okay. Last question on the CapEx in the quarter?

Could have been of the full year and --

The full quarter of the warrants that were issued to HP.

You have to check the –

Share account number?

Yes depending on the share price absolutely.

Alright thanks.

And the next question comes from the David Trossman with MTB Advisors. Please proceed.

Well, our strategy has been for the last nine years, a continued a reduction in product cost and a continued increase in the volume. So you can definitely expect continued reduction in some product costs but product costs that pertained to 3D printings and actually a broadening of our overall price range in order to go after more and more application.

Bob, you want to comment on whether we can discuss collaborations on this topic?

Thank you.

Of course.

Okay fine. All right, thank you.

Thank you.

Well, it was Q1 and we just started shipping a few systems at the end of the first quarter.

Got you.

And of course, HP launched their design jets in April, I believe April 19,Q2.

Got you, okay. In I guess kind of a similar question, so I mean, is it fair to assume that HP related stuff has no impact on the second quarter gross margin being a little bit low sequentially?

No, we indicated that, it did have an impact on the margins. We gave it as one of the three factors trying to keep away the euro impact.

Thank you.

Thank you.