Greetings and welcome to Stratasys' Q4 and Full Year 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Mr. Yonah Lloyd, Chief Communications Officer and Vice President of Investor Relations.

Good morning, everyone. And thank you for joining us to discuss our 2021 fourth quarter and year-end financial results. On the call with us today are our CEO, Dr. Yoav Zeif, and our new 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 you will hear 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 2021 year, which we filed with the SEC over the course of the next day. Please also refer to our Operating and Financial Review and Prospects for the 2021 year, which is included as item five of that annual report, as well as the press release that announces our earnings for the fourth quarter of and full year 2021, which is attached as an exhibit to a report on Form 6-K that we are furnishing to the SEC today. In order to obtain updated information throughout the year concerning our quarterly results of operations, and the risks and other factors that most impact those results, please see the quarterly earnings press releases and our quarterly Operating and Financial Review and Prospects, each of which will be attached as an exhibit to a report on Form 6-K that we will furnish to the SEC on a quarterly basis over the course of the year. 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'll 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. Stratasys had a strong quarter with over 17% revenue growth compared to the same period last year, driven by the highest system sales since Q4 of 2018. Each of our technologies and all of our region’s contributed to this growth. I will share a general overview of our achievements and milestones in 2021. And after our financials and guidance, I will conclude with some thoughts for 2022. Stratasys today is in a very different place than it was at the beginning of 2021. Until last year, our business had been centered around two core technologies FDM and PolyJet. And while we maintain leadership in these areas, this limited portfolio meant we were missing opportunities to participate more fully in the fast growing application at the heart of the ship from prototyping to manufacturing. And we had not developed and launched meaningful product upgrades in a number of years. It was critical to evaluate the entire business and target strategic investment to evolve our product portfolio. We established our strategy to be the first choice in polymer 3D printing, encompassing the entire product lifecycle with multiple technologies and complete solution for superior application fit, across design, manufacturing and healthcare. We believe this approach provide the largest total addressable market in the industry. This strategic focus drove us to specifically increase our exposure to manufacturing applications. A year ago, we shared that in 2020 over 25% of our revenues came from manufacturing. We are pleased to say that for 2021 it was 29% and we expect 2022 manufacturing sales to grow at least 20%. Clearly, our focus on manufacturing is working. We accomplish this with new system, tailored to manufacturing at scale, a software platform to integrate the entire manufacturing…

Thank you, Yoav, and good morning, everyone. Before I begin my remarks, I would also like to personally thank Lilach for her guidance in the over two years I've been with Stratasys. Her contribution and commitment to the company have been a fundamental part of our success. And I'm honored to be assuming the role as CFO at this time in our journey. Now turning to the numbers, the fourth quarter of 2021 was another period of successful execution for our company. We delivered the highest quarterly total revenue and highest quarterly system revenue in three years. Cash generated from operating activities was positive for the sixth consecutive quarter. For the fourth quarter, total revenue was $167 million, a 17.3% increase from the prior year quarter, driven primarily by strength in system sales, which was the highest in 12 quarters and is typically a driver for future consumable sales. Total revenue was up 5% sequentially from the third quarter and was 4.3% higher as compared to pre-pandemic Q4 2019 levels. On a constant currency basis, total revenue increased 18.3% year-over-year. Product revenue in the fourth quarter was $118 million, an increase of 19% compared to the same period last year, or 20.1% on a constant currency basis. Within product revenue, system revenue increased 25.9% to $61.8 million compared to the same period last year and increased by 26.9% on a constant currency basis. Consumables revenue increased by 12.3% to $56.3 million compared to the same period last year, and increased by 13.6% on a constant currency basis. Service revenue was $49 million, an increase of 13.3% compared to the same period last year. On a constant currency basis, service revenue increased by 14%. With in service revenue, customer support revenue increased by 7%, compared to the same period last year,…

Thank you, Eitan. 2021 was a transformative year for Stratasys in many ways. We vastly improved our offering, strengthen the balance sheet and invested in technology, positioning us for continued growth in the years to come. We experienced our largest contract in company history with a $20 million order from US Navy for 25 F900 manufacturing system. Importantly, this is more than just a one time sale. We are fully qualified and selected as an additive production partner opening the manufacturing door for us. And we expect to scale adoption quickly. We had another large long-term F900 sale as well to a leading global OEM. These and other manufacturing related deals demonstrate market confidence in the use of Stratasys technologies as the market shift from rapid prototyping to through manufacturing, a clear signal the 3D printing industry has reached this important inflection point. In 2022, we will advance our efforts to strengthen our leadership in polymer 3D printing. We have established the foundations for long-term growth based on leading polymer 3D printing system complemented by continuous innovation across our portfolio. Two key components of this efforts include the H350 and the Origin One, both products have been well received in the better programs and we believe this system will help to more than double our addressable market over time. Equipped with best-in-class offerings, unmatched go-to-market network and support infrastructure, a strong balance sheet, and the best 3D printing talent relentlessly focused on execution, we are positioned for sustained growth and strong stakeholder returns as we further build on our momentum in 2022. Looking ahead, we are energized and excited for the future of Stratasys. With that, let's open it up for questions. operator?

Thank you. At this time, we will be conducting a question-and-answer session. [Operator Instructions] Our first question is from Greg Palm with Craig-Hallum Capital Group. Please go ahead.

Yes thanks. Congrats on the continued progress here and Eitan congrats on your transition to CFO, look forward to working with you more closely going forward.

Thank you, Greg.

I guess I wanted to just start off on new product contribution and I guess, the question more lays upon the feedback and traction out in the marketplace and what you're seeing and hearing from both your installed base and new customers and again, this is specific to the new products?

Hi Greg. Good to talk with you. Great question. We are fully geared to leverage the new product in the market. Just think about thousands of customers that we have out there and hundreds of partners that just need to sell one or two or three more technologies to the same customer. And we have fantastic new product in the market. And I can go briefly -- start with the SAF, great pipeline, solid pipeline and really unmatched quality of power. I'm amazed every time that I see the flexibility of this machine and the ability really to compete with injection molding. And I go to the Origin, we just finalize the delta and move to general availability and no, we're not hearing great, but we had great remarks and great from our customer both industrial customers and dental customers. The main advantages of this machine, this is a unique patented layer separation, really a complete different way of running DLP Systems and the result is an unmatched part quality, speed and reliability. And we really look forward to provide to you and to the public more information throughout the year on the performance of those two machines. We also introduced the RPS, great results above our expectations. Also the DentaJet, on the PolyJet side when you combine it with dental Origin. It's an amazing, great portfolio, new portfolio that we have that is very attractive to the dental industry. So when you combine all of it together, practically we have new products in each one of our technologies. I start with the PolyJet, the J35, the MediJet, the DentaJet. I'll move to FDM, we have F770, which is the largest build chamber -- in the longest build chamber in the industry, really great traction in the market. Then I move to the SAF and the Origin and the RPS, we are really geared to grow based on the new products.

That's helpful. And I guess, Yoav, when you joined, I think. you talked a lot about Stratasys being kind of a One Stop shop for customers looking to invest in additive. And now that you have the product portfolio sort of set, are you seeing any tangible evidence of this happening? I don't know whether that's market share gains, maybe that's just increasing sort of wallet share spend, within existing customers or maybe just new growth with new customers, but what's your thought on how that strategy is playing out?

Short answer is yes, but let me elaborate on it. We already have two automotive players, OEMs using the all five technologies, which is amazing. And why it's so important, because manufacturer’s bottom line, when you look at manufacture, they prefer to have one provider with one ecosystem, with one production environment, with someone they can count on. And this is exactly what we are bringing to the market. We have -- we are not selling technology. We are selling the best solution that fixed your problem. We are coming to solve problems to our customers. This is a completely different position in the market compared to where we were two years ago. And it works. And of course, this is just the beginning, but we are very encouraging from what we're seeing in the market. And from the discussion I have with customers on a weekly basis.

Okay. Perfect. I'll hop back in the queue. Thanks and good luck.

Thank you. Our next question is from Troy Jensen with Lake Street Capital. Please go ahead.

Hey ,gentlemen congrats on the good quarter and the good year.

Thank you.

I guess, my first question I want to talk -- you're very welcome. Can you just talk about your Q1 guide seems much better than normal seasonality and I guess you feel like on the balance sheet deferred revs were up slightly quarter-over-quarter. I just wondering was there any constraints in Q4 that held backing sales and are they flowing into Q1, or is the better than normal seasonality really just the H350 starting to launch.

Hi, Troy. Good morning. A good question. There were no constraints in Q4. The increase is driven by our new products as well as our other technologies, our whole technologies and we started the year with a strong backlog.

Okay, perfect. And can you just confirm you did have H350 revenues in Q4. And then I expected to ship the origin for revenues in Q1 also?

Yes. In Q4, we already had the SAF product and in Q1, we will start – we started shipping Origin and we'll have revenue from Origin in Q1.

Awesome. Okay, congrats. Good luck this year and I'll follow up on offline.

Thank you.

Thank you. Our next question is from Jared Maymon wtih Berenberg. Please go ahead.

Hey, good morning, guys. And congrats on the strong results. First question for me. I'm just wondering with the Origin One Dental VSM, you know some big customers trialing that yet and how likely do you think the opportunity is there to take share with that product?

So – thank you for the question. Of course, we ran our total beta program with large and some medium and also some small customers to make sure that we are covering the whole range. And we got fantastic feedback from the beta. So we are very encouraging. It's really a unique value proposition in industrial dental, in terms of the quality of the past, the accuracy and the speed. And this is only the beginning. So we can do many different applications with one platform. You can go to the Origin, in Dental, in Tooling, in model, the liner, denture, spleens, guards, stamps, bridges and when you combine it also with our PolyJet, we are covering the old range and this is a really great value proposition to medium and large dental customers that we are targeting.

Yes, Jared, it’s Yonah, I would just add on top of that quickly that as strong as the aligner market has shown to be the good adopter of this technology over time. We see dentures as an even larger market opportunity. And so we and the Origin system, we discussed when we first announced it a little over a year ago that that was one of the – going to be one of the target markets. So we really look forward to updating the market around that particular end use at the appropriate time.

Great. Perfect, good to hear. And then I'm just curious, you mentioned briefly you have a team that's deploying some capital in various opportunities and one of those you call that was continuous fiber. Is there any color you can you can provide on this?

And you know, I – we received this question so many times, so it's good to that you read it. We have a very strong balance sheet. So we have to use it in the best way that will generate returns to our stakeholders. And we believe that the best way to do it is to focus on our strategy. We have a laser sharp strategy on Polymer manufacturing. We are doing really well on the growth side and creating the most sustainable, strongest company in the industry. And this is very attractive to many startups. So we are being approached by many startup and we decided to establish an investment arm. We call it Stratasys Ventures, but it's all about accelerating the implementation of our strategy. We know exactly where the gaps that we have mainly in the workflow and exactly where are the needs and the gaps in the industry. And we are bringing the go to market, so we are investing in very exciting technologies like we said in the script, like continuous carbon fiber. We just recently invested in 90 labs that have a very unique way of having x, y and z continuous carbon fiber, not in the x, y. We just – they just closed 17 million round and we were there and other companies that we cannot elaborate now. But it's a very strong pipeline for external innovation that will help together with our great people in R&D, to make sure that we are keeping our technological leadership in this market, because our machines are the most reliable, they are most repeatable in the market with the highest throughput and this is what manufacturer looks for out there and we can deliver it internally and externally. And we have a very clear framework how to do it.

Got it. Thanks, Yoav.

Thank you. Our next question is from Jim Ricchiuti with Needham & Company. Please go ahead.

Hi. Thank you. Question I had is just with respect to the comment that I believe you made regarding the gross margin pressures being temporary, and I'm like to follow-up on that, and maybe drill down a little bit more. Are you anticipating just the mix of revenues benefiting your gross margins the scale up in volume, or are you taking some other measures to – to offset some of the pressures that you're facing because it doesn't sound like some of these cost issues are necessarily going away?

Hi, Jim

Hi.

Good morning.

Good morning.

It’s a good question. So first, one part is the anticipated improvement in logistics and raw materials in the future, but we also proactively as we scale-up our business as the new products become more mature to optimize and to improve our margins in our processes?

Okay. Just with respect to your outlook for 2022 on the revenue side, maybe you could talk a little bit about which of the verticals do you see the biggest growth potential? I think you're clearly, it sounds like you're excited about what you're seeing in the dental market. But I wonder, if you could just give us a little bit more color in terms of how you're thinking about the year from the standpoint of vertical markets?

Thank you for the question. We by definition, when we launched our new strategy going for manufacturing, and what we – what we call end-use part. We decided that we are going to focus on a much larger market to increase the total addressable market, both because of the new technologies, but not less important because of new verticals and new applications. So of course, we have our verticals like the government and the defense and Aero and auto, and we're doing really well there. But within that, we want to shift from prototyping to manufacturing. We were the first company in this industry to say 25% of what we are selling is going to end use power. In 2021 we’re already 29% and believe that it will keep growing. This share will keep growing above 20% every year. So the strategy works. So where we focus manufacturing and healthcare manufacturing across many verticals, from consumer go to Aero and auto. And when you go from manufacturing to healthcare, healthcare is mainly dental. But also not less important is the whole PSP, what we call presurgical planning, where we are sitting on the best technology in the industry. We are the only one who can deliver real imitation of anatomic models where you can really imitate the tissue. We just launched this year, what we call digital anatomy creator, where the surgeon or the radiologist can really imitate the tissue and customize it to the different patients. And we believe it will position us as the leader when insurance and reimbursement will occur in this area because it is saving life. So bottom line manufacturing and healthcare.

Thank you.

Thank you. Our next question is from Ashley Ellis with Cross Research. Please go ahead.

Hi. Thank you for taking my questions. I was wondering if we could dig a little bit deeper into the revenue guidance. You're obviously going against some pretty tough comparisons and system revenue and I know you're launching the origin and [indiscernible] ramp up, but how should we think about system growth versus your recurring revenues, your consumables and customer support? Should we expect that there should be some sort of follow on from the strong system sales in 2021? And then I have a follow up. Thank you.

Thank you, Ashley. It's a good question. We're very excited about 2022 and we expect all our streams to grow. And hardware will be the driver for the increase, but consumable and services will follow.

And are you factoring any software contribution into the revenue guidance?

Asley, if you want to -- software is not going to yet be meaningful. It's sort of just starting to launch through, as we mentioned earlier, there'll be some software licensing revenue was going to start to get as we do the open materials, which is beginning in the back half of the year on the F450. But we'll be sure to update you as software becomes a more meaningful part of the revenue.

Yeah. And if I may add, we are going to launch new software products in 2022.

Okay. And then you have could you talk about the decision to open up the FDM printers to third party materials? Why now and then? Is there the potential you could open up your PolyGen systems in the future?

I would say it's an act of leadership. We are leading this industry from prototyping to manufacturing. We had a very thorough analysis and many discussions manufacturers out there and we identified the barriers and one of the barrier is the variety of materials they can use for real manufacturing applications. So it's clear to us that it's better to be in manufacturing and sell 1000s of stone, instead of few kilos per machine and to have a much better unit economics and to support our customers, bottom line is delivering higher value to our customers and the open material it's all about innovation and partnering around innovation. Because it's not that we open it, without any responsibility on the quality of the part. This is a hybrid model, a controlled open material model where we are working together with our customers in three tiers. We have Tier 1 which is preferred. We already announced it, its exclusive for Stratasys. The second one is certified. We are certifying other suppliers, third-party suppliers, but it meets our standards. And then we have exploratory where everyone can innovate and do better things, but it's FDM. We are focused -- all this new innovative model is focusing on manufacturing. So it's FDM itself and its Origin. And we get great feedback from our customers. And which will allow us not to introduce one or two or three new materials a year and you will see because it's in the roadmap, but to double or triple the amount of new materials that we are introducing. And we see it also in RPS for example. It's open. It's doing really well and it gives us a competitive edge and a lot of value to our customers and to us. So bottom line, when we are talking about opening the material, it's not about having now a model that is where we are losing responsibility or compromising on the quality, its exactly the opposite. It's about giving more value to our customers in a responsible way and making sure that we are creating the value indicates to everyone. For PolyJet, no current plans to open it up, because it's prototyping and it's a completely different type of needs. We have most of the material needed for prototyping. So it's focusing on manufacturing, doing it with our customers, they love it and also they appreciate the leadership here.

Thank you very much.

Thank you. You next question is from Paul Chung with JPMorgan. Please go ahead.

Hi. Thanks for taking my questions. So can you talk about the interesting things you're doing in in aerospace? Can you expand on the Boom partnership? The Navy -- US Navy contracts and how you see those relationships evolving? And then maybe, kind of potentially leading to interest from other customers and how material can this part of the business contribute to growth? And then I have a follow-up.

Thank you, Paul, for this question. I think it's a reflection of how we are partnering with our customers to change the world. Not less than that. So I'll take the Navy for example. This is the ultimate example of distributed manufacturing. So people are talking about it for years, for decades about distributed manufacturing. We are working with the government, we are working with the Navy, to really implement distributed manufacturing. So they're all supply chain issues, long supply chains. We are going to have F900 machines within the U.S., outside of the U.S., globally to create spare parts. That's amazing and I want to thank the Navy and the U.S. government for taking it together with us, taking all the industry a step forward. It's a real manufacturing opportunity across all government bodies and also take it to boom, it's a great example of innovation in action. So we started with them only with prototyping, just to cut their development cycle and to save significant time. And I believe, we saved two to three years and even more, because this ability of the engineer, to think about it -- about something and then print it at the same day to check it is remarkable. But they took it to different fixtures and tooling and then to -- and use that. I visited there and it's like you see parts within the most exciting new generations of passengers’ aircraft, and it is 3D printed. It's amazing. I learned a lot from both those customers. And this is part of the DNA of Stratasys. We worked with our customers to make sure that they will be more successful and that 3D printing will be significant in manufacturing. And we have many more of that.

Great. Thanks for that. Cool stuff. So just on cash flow, you managed inventory levels really well and seeing some funding benefits from kind of longer accounts payable days. But if you could expand on how you managed the inventory level so effectively this year? And then, how do we think about kind of working cap dynamics in 2022? And then can you grow cash from operating in 2022, keep the streak of kind of positive quarterly operating cash kind of ongoing? Thank you.

Thank you. It's a good question. We're not guiding on cash flow. But on one hand, we continue to invest -- we continue to increase and to purchase inventory to be prepared for the growth during 2022. And we do have the over $500 million of cash to invest. So we're very positive about 2022 as far as its concerned with cash flow, but we do not guide on cash flow.

Great. Thank you.

Thank you. Our next question is from Wamsi Mohan with Bank of America. Please go ahead.

Yes. Thank you. I just wanted to follow up on the cash flow question. If we look at your midpoint of your operating income guidance, it's about $18 million improvement on a year on year basis, which is great to see in 2022. Maybe if you don't want to give an explicit cash flow guide. Can you talk about some of the underlying puts and takes that might influence how that increase or decrease in cash flow might trend relative to that increase in operating income? And I have a follow up.

So the -- without guidance. Thank you, Wamsi, first of all. Without guiding on cash flow, when you think about cash flow compared to operating income, you take into account all the working capital elements. As then mentioned earlier, we continue to invest and try to increase our inventory and will continue doing this during 2022 and this should also be taken into account when you model cash flow for 2020.

Okay. Thank you for that. And then, if I think about the excitement that you're really showing around new products and some of the potential contribution from that, especially in the back half of the year, is there any way for you to talk about in your revenue guide of all at mid teens for the year or somewhere close to that growth? How many points of growth do you think these new products can contribute in year one, year two, like I'm sure you have a plan that sort of thinks about contributions sort of on a more ongoing basis? Can you maybe help us think through how much -- how we should be thinking about revenue growth on a more sustainable basis and particularly contribution from these new products? I mean, you essentially felt like you're going from two platform to this multi platform approach and that's really resonating with your clients. So, if '22 was maybe some sort of transition year or launch year in some ways, '23 we should start to see some more acceleration from that. So just trying to parse through, how many points of growth maybe you can see stacking up over the next few years? Any color there would be helpful. Thank you.

Right. Thank you for the question. We do not provide guidance on this specific product. However, I can say that in 2022 expect all of our technologies to increase compared to 2021. Naturally, the launches of Xaar and Origin will have a significant impact in 2022 compared to 2021. But we do expect that all of our products and all of our technologies will generate growth in the future and after 2022.

Okay. Thank you, so much. Good luck.

Thank you. Our next question is from Ananda Baruah with Loop Capital. Please go ahead.

Hey, thanks, guys. Congrats on the ongoing momentum and really appreciate you guys taking the questions. I guess just two quick ones if I could. Going back to Paul's question, you guys, you provided some really good contact on the Navy relationship as to what's driving sort of driving business with them. Could you provide us some context in a general sense of what customers are doing that's leading to the increase momentum, the ongoing momentum and yes, in a tangible way for us? And then I have a really quick follow up. Thanks.

Hi Ananda, thank you very much for the question. It’s a great time to be proud of the additive manufacturing industry. I didn't plan it, but I'm lucky because, customers understand the global trends. And they understand also that additive will be proud of the manufacturing of the future. So everybody's spending now their future in manufacturing the plant of the future, the micro plant of the future, customization, 4.0 -- industry 4.0, et cetera, et cetera, et cetera. And then the pandemic with all the supply chain issues that we are facing as well, the ultimate creator, the ultimate stone for us is to start engaging with our customers. So you take together the -- like the most fundamental trends that we are experiencing now, the supply chain need, the customization, especially in healthcare, the need for sustainability and lighter part in order to use this fuel and the innovation in so many areas, like in electric vehicles, and the need for new geometry for this, additive is the best solution and the Navy deal proved it. Manufacturer’s can distribute the digital inventory worldwide. You don't need physical inventory, you can have digital inventory and you can provide parts wherever they are needed. So people understand it. And the moment they understand it, they are looking for a partner, they can interact with in order to develop those plans of the future. And I think we are positioned quite well, because we are a one-stop shop with one operating system with one material platform with one software platform and with a lot of reputation, reliability and repeatability and the ability to deliver. So it's a very exciting time for us.

That’s super, super helpful. I appreciate the context. And my quick follow-up is just on the op margin guide, for 2022, I believe you said about 2%. Can you just describe for us what are the puts and the take, and I guess really what I'm wondering is like what are the things that allow you to begin to expand as operating margins as I'm assuming as we go through 2023?

Thank you. So when we think about 2022 and over 2% margin, we have the growth, the significant growth in our revenue, and when we think about OpEx, it will decrease as a percentage of revenue. During 2022, however, we continue to invest in our growth driver’s origin, staff and healthcare and operating margins can expand longer term due to a number of factor, including the increase in consumable adding software that is coming with higher margins and the entire business, the entire revenue increase that we expect…

…to scale. Yes, got it.

If I may add, I think that's exactly the right direction, but if I may add, it's a combination of external and internal forces. Externally, we do believe that the current logistic cost is not sustainable. We believe that the second half of the year, maybe next year at the end of this year, we see better results because of the capacity in C [ph] because of the port issue. It will solve itself. This ongoing crisis that fuel itself will somewhat solve itself as well. So this is on the external side. But we don't base our projection only on external forces, we based our projections on activities and what we are doing, being proactive. And we believe that telling more hardware means that we sell more consumables, selling more consumable, better gross margin. We are investing in higher efficiencies across the company. We are lowering the production costs. What we can do internally? We take control over our destiny and we design for cost and we add software and we have NPIs. So we are working on it. We're not coming here and saying this margin will be better. We are working on it. It will be better.

That's really helpful. Thank you guys so much.

Thank you. Our next question is from Noelle Dilts with Stifel. Please go ahead.

Hi, guys and thanks for taking my question. First, I was hoping you could comment on if you're seeing any notable differences in demand from a geographic perspective. If you know how your what you're seeing in Europe versus the US and Asia? Thanks.

So, great question. We are not in general, we are not giving the details, but I can give you the high level trends -- share with you the high level trends. So it's kind of a combination of recovery and innovation, I would say. So we see that EMEA, which was lagging compared to the US in adoption of new technology in many verticals, aero and auto are catching up. So we see very nice results from our EMEA region. And then we see also great results from the US and then Asia. So this is a more or less the ranking, but I believe it's only a matter of the pandemic and the recovery from the pandemic. So Asia they adopted a more strict, I would say, Omicron policy. So we see which is not in Europe and not the case in the US, but bottom-line across the geographies. We see really good demand and the growth across region is positive and looks really good.

Okay. Great. Thank you. And second, I was hoping you could just expand a little bit on what your acquisition pipeline looks like as you look out over the next year or two. You know, I mean, maybe details on are you seeing more smaller deals or larger deals and what's your appetite for, you know, for M&A as you look at 2022? Thanks.

We have a very structured framework for business development activities. Starting from a acquisition -- but about the bottom-line -- if I start with the bottom-line, this time is about accelerating our strategy -- the implementation of our strategy. We don't do anything, which is not within the strategy. But within the strategy, there are so many opportunities. We started with acquisitions of base technologies, and now we are moving – I would say to the next phase which is about really strengthening those technologies, but investing a lot in workflow and materials. So we are moving down the road. We have the base technology now we need to make sure that they have the full solution which is the best and this is materials. This is workflow software and also a lot of collaboration. So it's a combination of investment and collaboration. Bottom-line we increased dramatically the size of our investment team and we believe that a combination of external and internal innovation will put us completely in a different way and we secure our technological leadership.

Thanks so much.

Thank you. Our next question is from Brian Drab with William Blair. Please these go ahead.

Hi, good morning. This is Blake Keating on for Brian.

Good morning Blake.

Brian ended up being double booked, but wanted to get clarity on a couple items. What is different about 2022 in terms of your revenue visibility compared with 2019 because in 2019, your initial guidance between $670 million and $700 million in revenue and reported $636 million in the end. So, what's driving the competence this year?

Hi Blake. Good question. We feel very confident about our ability to meet the 2022 numbers. We started with a strong backlog of the year and with the new product and also the existing technologies, we feel confident in being able to meet the guidance.

Thank you. And then how should we reconcile below the EBIT guidance implies about $14 million to $15 million in EBIT with the adjusted EPS guidance, is it tax rate or how should we think about it?

Sorry Blake. Could you say that again, we didn't hear the last part of your question?

Yes, how should we reconcile the difference the EBIT guidance of about $14 million to $15 million to the net income guidance -- the adjusted EPS guidance, is it tax rate or what's the -- how should we get down to it?

So, Blake it's a good question. There is no between the EBIT and the net income, there are no significant items, one-timers as far as it's concerned. So, when you look on our tax NRM, financial income in the past, you can use similar levels to model 2022.

Got it. Thank you, I'll pass it along.

Our next question is from Greg Palm with Craig-Hallum Capital Group. Please go ahead.

Yes. Thanks. Just for one quick follow-up or hopefully quick, but I want to take a stab at long-term operating margin guidance. So, commentary suggests double-digit operating margins, which would be a pretty big step-up relative to sort of anything you've done in the last five, six, seven years. So, I guess, are you targeting a certain year or a certain level of revenue to maybe achieve this? Help us understand your thought process behind it if you can?

Thank you, Greg for the question. When we think about the longer term, the next few years, as mentioned earlier, first we expect the gross margins to go back to the level of 50% and then -- which will contribute the bottom-line. And then when we think about OpEx, so we believe that in the next few years as revenue grow, we will be able to leverage our scale and we already have the right infrastructure and to be able to increase revenue significantly, and then increase OpEx much less than the increase in revenue.

Yes and if I may add, this is the entire strategy here. We have the infrastructure to do many, many more things, and to sell many, many more products with the same infrastructure. We need that – we have some – we need the patience, but not too long. I don't think – I don't think not thinking talking here about a long horizon's of dozens of years. We have the infrastructure, we need to leverage the infrastructure and that's exactly what we are doing. So this is on the financial side. But the most important thing in profitability is to deliver value to our customers. And we believe that, no one can deliver this level of value and we base it on very, very simple things. One, we have laser sharp strategy on polymer manufacturing, and we already showed it as we move from 25% to 29% of our total sales all-in-one year. We have well defined growth engines that are working the technology, the software platform, their material platform and use cases that we are developing. We have execution that, it's a new level of execution within Stratasys, this year, 30 products 2021, 30 products this is a completely new level of execution. And most importantly, customers – our customers are loyal and trust us, and work together with us in collaboration to make this happen and to create this value. Then you – when you translate it, we have double-digit operating income like Eitan described, very optimistic on this.

I mean, you're going to see some operating leverage this year. But, I don't want to put words in your mouth. But it plans out – it sounds like it almost should sort of get better in the out years. I mean, is that kind of the right way to think about it? I mean, that's what the math implies to get to double-digit?

It's a journey of two to three years that you will see notably stronger results on the operating income. But we are here to build the strongest 3D printing company in the industry with sustainable, profitable growth. That's exactly what we are doing. We are balancing between profitability and sustainable growth. And the result is our digital operating income.

Okay. Fair enough. Appreciate the color. Thanks.

Thank you. Ladies and gentlemen, we have reached the end of the question-and-answer session. And I would like to turn the call back to Mr. Yoav Zeif for closing remarks.

Thank you for joining us. Stay safe and healthy. Looking forward to updating you again next quarter.

Thank you. This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.