Good day, ladies and gentlemen, and welcome to the Second Quarter 2012 Stratasys Earnings Conference Call. My name is Janetta, and I will be your operator for today. At this time, all participants are in listen-only mode. Later we will conduct a question-and-answer session. (Operator Instructions) As a reminder this conference is being recorded for replay purposes. I will now like to turn the conference over to your host for today, Mr. Shane Glenn, Director of Investor Relations. Please proceed.

Thanks, Janetta. Good morning, everyone, and thank you for joining us to discuss our second quarter results. On the call with us today are Scott Crump, Chairman and CEO of Stratasys, and Bob Gallagher, CFO of Stratasys. Following the prepared remarks, we will open the call for questions. An audio replay of the call will also be available on our website later today. Statements made during this call about Stratasys’ beliefs, intension and expectations, including statements regarding the expected timing and ultimate closing of the merger of Stratasys and Objet Limited, as well as the benefits thereof are forward-looking statements. The statements involve risks and uncertainties, both known and unknown, that may cause actual results to differ materially from those projected in this presentation. Actual results may differ materially due to a number of factors, including risks and uncertainties relating to Stratasys’ ability to penetrate the 3D printing market, Stratasys’ ability to introduce, produce and market consumable materials and market acceptance of these materials; the impact of competitive pricing and products; Stratasys’ timely development of new products and materials and market acceptance of those products and materials; the success of Stratasys’ recent R&D initiative to expand the DDM capabilities of its core FDM technology; the success of Stratasys’ RedEye On Demand and other paid parts services; and Stratasys’ ability to complete its transaction with Objet Limited on the proposed terms and schedule, and achieve the anticipated benefits of the transaction. These and another applicable factors are discussed in the presentation and in Stratasys’ filing with the Securities and Exchange Commission, including its report on Form 10-K for the year ended 12/31/2011 and subsequent filings. Any forward-looking statements included in this presentation are as of the date they are given, and Stratasys does not intend to update them if its views…

Good morning, and thank you for joining us to discuss our financial results. We are very pleased with our second quarter performance. Total revenue expanded to a record $49.4 million for the second quarter, an increase of 31% over last year. Non-GAAP operating profit was also impressive increasing by 38% over last year, and we just raised our revenue and non-GAAP earnings guidance for 2012. As we observed in the past several quarters, the second quarter benefitted from a strong sales of our higher margin Fortus 3D production systems which grew by 126% compared to last year. This strong performance in our Fortus line also helped drive impressive consumable revenue growth of 34% year-over-year during the second quarter. Consumable revenue continues to benefit from the expanding use of direct digital manufacturing applications which maintain relatively higher consumable utilization rate. We continue to believe the emerging market for DDM applications is at the beginning of a multi-secular growth opportunity. Orders for our revolutionary new Mojo 3D printer were strong during the quarter, following the new products introduction in May. Mojo revenue during the quarter was minimal given customer ships that didn’t commence until the final days of the quarter, according to our plan. We believe Mojo is an ideal product to combine with our new channel development initiatives deemed at growing the sales of our most affordable products. We have now recruited and trained 120 new sales agents that will focus on our most affordable products including our uPrint line and our new Mojo 3D printer. We also introduced an exciting new product within our Solidscape subsidiary, which I will discuss in more detail later in the call. And of course we are most excited about our announced plan to combine with Objet, a leading global manufacturer and distributor of 3D printing and rapid prototyping systems. We have made substantial progress in planning for the combined organization and remain on track for a third quarter closing of the transaction. Combing with Objet will expand our reach and provide a complementary product line that we can leverage into a rapidly growing market opportunity. I will return later to discuss these developments in more detail, but first I would like to turn the call over to our CFO, Bob Gallagher, who will provide the highlights of our second quarter results. Here’s Bob.

Thanks, Scott. Total revenue was a record $49.4 million for the second quarter, a 31% increase over the $37.8 million reported for the same period last year. The company shipped a total of 776 units during the second quarter versus 735 last year. As we have observed over the past four quarters, our Fortus 3D production unit sales were very strong during the period, increasing by 3x during the second quarter over last year. This strong growth has been driven in part by the successful introduction of the 250MC last fall. The 250 MC is positioned very close to our Dimension 3D printer line within the market place and is generating significant interest from customers that would have otherwise purchased a Dimension 3D printer. Similar to prior periods, this likely skewed the unit growth trends during the quarter by favoring our higher-end Fortus systems over our lower end 3D printers. However, in addition to the 250MC, we also generated strong growth in our Fortus 400 MC and 900MC platforms, driven by the growing demand for direct digital manufacturing. Excluding the impact of the 250 MC Fortus system units still grew by 43% in the second quarter over last year. Regardless of how you slice it, Fortus system sales continue to be impressive. Unit shipments of our Dimension and uPrint 3D printers were down 20% during the second quarter over last year. For the reasons we just discussed and similar to previous quarters, we believe that Fortus 250 MC introduction had a moderating impact on our 3D printer sales during the period. In addition, our resellers are focusing on the Fortus in an effort to capitalize on the growing demand for direct digital manufacturing applications, which is why we are developing a separate channel to focus on our most affordable products.…

Thank you, Bob. Stratasys revised its financial guidance for the fiscal year ending December 31, 2012 as follows. Revenue guidance of $193 million to $198 million versus our previous guidance of $183 million to $193 million. Non-GAAP earnings guidance of $1.31 to $1.38 per share versus previous guidance of $1.29 to $1.38 per share. GAAP earnings guidance of $0.83 to $0.98 versus our previous guidance of $0.97 to $1.13 per share. The revision in GAAP earnings guidance is primarily a reflection of the inclusion of the additional estimated impact of Objet transaction related expenses, most of which are not tax deductible. Financial guidance does not reflect the potential combined performance of Stratasys and Objet, nor does it include some of the estimated incremental transaction related cost that would be incurred upon the transaction’s closing. In addition to excluding the impact of expenses associated with the proposed combination with Objet, non-GAAP earnings guidance excludes the impact of stock-based compensation expense and the amortization expense of acquired Solidscape intangibles. Qualitatively, we continue to observe a favorable market environment for our products and we are assuming that will continue through 2012. However, we are assuming that the growth in our Fortus systems sales will moderate in the coming months relative to the very high levels we have recently observed, given we have now reached the anniversary date for the introduction of the Fortus 250MC. We should also note that the normal seasonal weakness we generally observe during the third quarter was mitigated last year by the launch of the Fortus 250MC. Within 3D printing, we are assuming that our new initiatives will lead to higher sales of our 3D printers in the coming months, driven by the introduction of Mojo and the implementation of our new sales agent program. Overall, we are very optimistic about the balance of the year. Now I would like to turn the call back to Scott Crump.

Thank you, Shane. Based on our strong second quarter performance, we are looking forward to a great year. As Bob mentioned, our higher margin Fortus line continued its strong positive sales momentum into the second quarter. The 900MC and 400MC have been particularly strong for customers using the system for DDM applications within the aerospace and automotive sectors. Manufacturers are recognizing the value of our technology for end-use part production, especially for fixtures and assembly tools used in manufacturing. In addition, the capabilities of our technology allow for the production of complex geometries that would be impossible to produce through conventional processes. We believe the evaluation and adoption of our proprietary FDM technology as a viable manufacturing alternative is still in the early stages of development. We are pleased that we recently announced a joint initiative with the U.S. Department of Energy at Oak Ridge National Laboratory to further develop our technology for manufacturing applications. The Oak Ridge projects aims to develop our FDM technology for mainstream manufacturing processes by improving FDM quality as well as the development of carbon fiber reinforced materials to produce strong, lightweight component. The project includes several million dollars of funding to be invested over the coming years for system and material development. We believe this project could lead to additional manufacturing uses for our proprietary technology. We are also excited about our new Solidscape system we introduced during the second quarter, called 3Z PRO 3D printer. The new 3Z represents a significant development within our Solidscape subsidiary. The new system includes an improved user interface and new material. The new materials are easier to work with while continuing to produce with high precision high castability. In addition to the added functionality, we should also note that the new 3Z system has achieved a significant…

(Operator Instructions) Your first question comes from the line of Troy Jensen with Piper Jaffray. Please proceed.

Good morning, and congratulations on a nice quarter. So first question, if you can talk a little bit on the HP relationship. I would be curious to know who initiated talks end the partnership, and then if there is any callbacks on the share you issued to the company?

Yeah, I think it’s important to focus on the reasons we don’t have that relationship anymore. And it really comes down to the relationship didn’t work financially for us. It’s as simple as that. Given the volumes and pricing within the channel, it simply was a financial decision.

And then on the call back? In terms of call back on the shares issued, are those also...?

No, there is none.

Okay. Then my follow up on the Object, did you guys accelerate the accretion timeframe here? I think Scott mentioned -- and then also any update you can give to us on Objet’s first half growth or the assumptions of growth post close?

Troy, the comments we made this morning regarding accretion are a little bit more positive than what we stated originally when we announced the merger. I think when we originally announced the merger we thought -- we projected that the combination would be accretive within a year, post closing. Now we are seeing that we believe it would be accretive immediately post closing. So that is a step-up from what we said earlier.

And in terms of Objet’s financials, we are not a position where we can comment on them at this time. We will guidance on the combined Stratasys and Object following the close of the transaction. Our current expectation is that the guidance for the combined company will be given at some point within the first two quarters after closing.

Your next question comes from the line of Tim Mulrooney with William Blair. Please proceed. Tim Mulrooney - William Blair & Company: I have a question about your guidance. For this you have raised revenue guidance and then narrowed EPS guidance. So can you talk about the factors there, whether it was higher than expected operating expenses or gross margin that led you to do that.

Yeah, Tim, there is a few things at play here. I think we are expecting stronger growth of our 3D printers in the second half as we are two quarters through the year here and evaluating, looking at the second half. Generally, 3D printers are lower margins relative to the higher Fortus 3D production systems which we expect to have a more moderate growth in the second half which we have been seeing now for the last couple of quarters. Another factor is Europe and the yield decline which has a negative implication on margin, absent any price changes that we have within that region. The factors when you look at, we have begun to evaluate selling 3D printers through the sales agent model. There is a little bit of a different revenue recognition with the sales agent. The sales agent recognize the gross sales in revenue and then you subtract the commission out of the operating expense line. Whereas sales of our 3D printers into resellers, we recognize the net revenue for those systems. So what that essentially causes is higher revenue, given the way you recognize that and some higher operating expenses as you back the commission out of the operating expense line. Tim Mulrooney - William Blair & Company: And then just a follow up. I think you gave detail on our 3D printer units and revenue, and I know on your high-end Fortus units the revenue was up 126 year-over-year. Can you give us any detail on unit growth year-over-year?

Yeah, Fortus units were up about, I think 3x year-over-year. But once again, keep in mind that that includes the 250 introduction that we have in this quarter. We didn’t have that in the same quarter for last year. So it was about 3x over last year.

Your next question comes from the line of Andrea James with Dougherty & Company. Please proceed. Andrea James - Dougherty & Company: Just taking a step back a little bit, I was wondering if you could give us maybe an updated assessment of the competitive landscape. You know there has been a lot of industry consolidation, new players being introduced and also it looks like there is some innovations in injection molding and rapid delivery from CNC machines. So I was just curious to get what you think, if any of that poses a competitive threat also in light of what the Objet merger, what that means for you guys.

Well, from a revenue competition around the world, there is not any, let's say radical or significant material changes. We do see Z Corp. systems mainly in the education market, from a competition standpoint. We compete on the high-end, mostly in the Europe area with EOS SLS system. And then in the -- well in the service side, the service bureau side, there is definitely amount of consolidation of service bureaus, primarily in the U.S. by 3D Systems.

You know one of things I think is important to keep in mind, Andrea, is that the fact that there is 14 million CAD seats out there, over 5 million 3D CAD seats out there. That number continues to grow. I think we are in an industry where there is a lot of room for a lot of growth. Andrea James - Dougherty & Company: That’s very helpful. Thanks so much. And also it looks like your Europe sales were up about 18% you said this is [like concern]. Is that because of the verticals are strong that you targeting or do you think it’s just broader awareness of 3D systems across the board and under-penetration?

I think it’s broader awareness and the fact that we have a great value proposition for the customer.

Your next question comes from the line of Steve Dyer with Craig-Hallum. Please proceed.

Bob, I think, I don’t know if I missed it, Solidscape revenues in the quarter?

We didn’t breakout Solidscape’s revenue separately for the quarter because we had two months in there for last year and three months in there for this year. We don’t report that as a separate vertical.

And then service costs has been elevated here for a couple of quarters. Can you just talk a little bit about what's behind that?

Yeah, it’s a combination of -- as we said we are selling higher rate of maintenance on our Fortus systems which are lower maintenance margins then we have on some of our 3D printers. In addition to that, some of the growth that we have had within our RedEye has been for non-FDM services. We have been -- RedEye started offering in the beginning of the year a lot of different non-FDM services in order to capture more of the customers’ mindshare. In the short-term this is a strategy that’s impacting the service margin but we believe will drive sales in proprietary parts longer term. So we are going to have some lower margins within our service business in the near-term, but we don’t think it’s a trend if you look out long-term that will be sustained.

Okay. And with respect to the Mojo launch, what sort of the channel strategy in terms of how much sell-in will there be? You know back when you launched the uPrint, each or a variety of buyers took a fair amount kind of initially. Is that what you expect that they’ll, because it’s lower end they will keep a decent amount of inventory on hand?

Yeah, we don’t expect a similar channel sale there, Steve, because you know the sales agent program is set up avoid significant levels of inventory made by the channel. In many cases we are shipping directly to the customer, so the sales agent is not taking title. So while we do expect Mojo to be contributing to the third quarter, we do not expect a big channel event like we have seen for some of our prior product introductions.

Okay. Very helpful. And then last question just on operating expenses, and I guess primarily with color on how much more maybe in there for acquisition related expenses in Q3, Bob?

I am sorry, I missed that. Could you repeat that?

Just looking for a little bit of help with OpEx in Q3 and in particular how much more maybe in there for the acquisition related cost?

Yeah, in the second half of the year we expect the acquisition related cost to probably be somewhere in that $4 million to $6 million range.

With an emphasis on Q3, I would guess?

Yeah, absolutely.

(Operator Instructions) Your next question comes from the line of [Patrick Wu with Battle Road Research]. Please proceed.

Very good job, great quarter. Quick question on the sort of your expectations for the full run rate when you guys go have Mojo rolled out for the quarter? I think you guys said 275 systems have been ordered for Q2 that should be delivered in Q3. But what is the full run rate you guys expect there to be?

Yeah, Patrick, we haven’t really projected that. We are obviously still early in the product launch. We see big potential for the product but we haven’t really projected what we think that the Mojo in its current incarnation can generate. I think one of the things I will reiterate that Scott said in his comments, is that Mojo’s a new platform for us. We believe it’s a revolutionary product with a very critical price point under $10,000 and that we see that there is a potential to sell thousands per year with that platform. But we haven’t made any specific estimates or projections, or communicated that regarding the current products.

Moving on to the HP relationship, obviously it has ended. But I am just thinking, from your strategic perspective, are there any possible relationships down the road on the hatch that you guys might be looking at. Obviously, you guys are in the thick of things with object and all those things that you guys might be tiding up right now, but just down the road, do you guys imagine that it could be a possibility as well.

Well, you know, we are in a very visible industry and I think those are the types of things you comment on more when they happen as to speculate on whether are we doing it.

That’s fair. Just one quick one. I think you guys may have already answered it. But do you guys expect, it seems like SG&A expense have gone up this quarter. You probably, like I said you probably have already talked about it earlier, but do you guys expect that to continue for the rest of the year or something that you guys see as a quarter off thing?

Well, one of the things that we mentioned within the quarter specifically is that we had a -- with the Mojo on we had high advertising and marketing costs associated with the product launch, as well as a meeting for our resellers and our agents during the quarter. And we didn’t have a similar event in Q2 of 2011. So there were some specific items within the quarter. At the same time we still had a need to continue to invest in developing our channel, but probably not at the same level that we saw in Q2.

Yeah, Patrick, let me add on to that, the Mojo launch event, the reseller event that we put on was over $600,000 in expense for that particular event that we had with our resellers.

Your next question comes from the line of [Andy Shopeick] a private investor. Please proceed.

Bob, I am curious to ask you, with respect to that HP agreement, as I recall, there were warrants and/or stock that was involved in the initial agreement. I think it was 500,000 warrants and I know they were convertible at something in the high teens. What has happened to those warrants? Were they all converted, has HP sold those shares? Is there any financial implications with respect to that aspect of the agreement?

You know that is a separately filed public agreement that’s out there. And those are taken into consideration in our computation of our diluted earnings per share.

Okay. You don’t wish to be any more specific than that I assume?

I shouldn’t be commenting on HP, what HP is doing. I need to comment on Stratasys is doing.

This concludes the Q&A session for today's call. I will now like to turn the call back over to Mr. Scott Crump for any closing remarks.

Okay, in conclusion, we are well positioned for the long-term. We have continued to see momentum in our Fortus product line. In addition our consumable business continues to benefit primarily from our growing installed base of Fortus systems and higher utilization trends provided by DDM applications. We are very excited about the introduction of our new products and we believe these can drive market expansions to a new level. Finally, we look forward to combining with Objet. This is an important transaction for our companies and for the industry. We believe this combination will create significant value for all of our stakeholders. And that we look forward to an exciting future. We would like to thank you for your interest in Stratasys and we look forward to speaking with you again next quarter. Good bye.

Ladies and gentlemen, that concludes today's conference. Thank you for your participation. You may now disconnect. Have a great day.