Stratasys (SSYS -2.88%)Q4 2024 Earnings CallMar 05, 2025, 8:30 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Greetings, and welcome to the Stratasys Q4 2024 earnings conference call and webcast. At this time, all participants are in a listen-only mode. [Operator instructions] A question-and-answer session will follow the formal presentation. [Operator instructions] As a reminder, this conference is being recorded.

It's now my pleasure to turn the call over to Yonah Lloyd, chief communications officer and VP of investor relations. Yonah, please go ahead, sir.

Yonah Lloyd -- Chief Communications Officer and Vice President, Investor Relations

Good morning, everyone, and thank you for joining us to discuss our 2024 fourth quarter and full-year 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 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 reports on Form 20-F for the 2023 year and for the 2024 year, which will be filed with the SEC within the coming few days. Please also refer to our operating and financial review and prospects for 2023 and 2024, which were included as Item 5 of our annual reports on Form 20-F for 2023 and 2024. Please also see the press release that announces our earnings for the fourth quarter of 2024, which is attached as Exhibit 99.1 to a report on Form 6-K that we are furnishing to the SEC today. 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?

Yoav Zeif -- Chief Executive Officer

Thank you, Yonah. Good morning, everyone, and thank you for joining us. In 2024 and early 2025, we took several key steps to enhance our leadership and strengthen our position at the forefront of additive manufacturing. Despite the industrywide challenges due to macro headwinds, our recent commitment to right-size the company and deliver profits and cashflow was executed successfully.

Further demonstrating the resilience of our operating model and effectiveness of our team. We also shared with you our strategy to be laser focused on the most compelling applications, particularly ones that center around full scale production. As we share each year, in 2024, we generated 36% of our revenues from manufacturing, up from 34% in 2023, and up from just over 25% when we started tracking in 2020. We expect to see this percentage grow every year to a point where the majority of our business will be derived from end-part manufacturing.

The strength of our offering is our ability to deliver measurable value through best-in-class solutions that enable our customers to scale their additive manufacturing operations effectively. These solutions are the growth engine that will drive our revenue and profit over time. And our customer trust is reflected in the continued strong levels of engagement, despite prolonged capital spending constraints. This challenging environment resulted in revenues being off 6.9% for the year after backing our divestment, yet our adjusted gross margin for the year expanded by 100 basis points to 49.2%, reflecting our continued focus on cost controls and operating efficiencies.

Importantly, in the fourth quarter, we delivered $14.5 million of adjusted EBITDA and 9.6% margin and $0.12 adjusted EPS together. We remain confident that when capital spending constraint is, our operational efficiencies will result in sustainably higher profitability in the coming years. We continue to maintain a healthy balance sheet of $150.7 million in cash and equivalent and no debt. This provides stability and optionality that will support our growth through both organic investment and accretive acquisition opportunities.

This financial strength will be bolstered by the upcoming $120 million investment in Stratasys by Fortissimo Capital, which is targeted to close in second quarter. At that time, we look forward to welcoming Fortissimo's Founder and Managing Partner, Yuval Cohen, to join our board, who brings more than 30-years of successful, innovation-driven investing experience. Now, let me touch on some of our fourth quarter and more recent updates. Fused Deposition Modeling, the technology invented by Stratasys and commercialized under the Stratasys FDM trademark is the world's most popular 3D printing technology.

And we continue to innovate and enhance its capabilities for production at scale. As an example, in the fourth quarter, we launched the Fortus FDC filament dryer, a cabinet system that uses Stratasys patented FDM technology to maintain drying conditions for storage of consumable filament materials, increasing printer uptime by up to 2.7 times, while eliminating moisture-related printing defects. This system, designed for continuous operation, represents a breakthrough in manufacturing efficiency for our large-scale production customers, and is a key addition to our end-to-end solution that our customers have asked us to deliver. We continue to expand FDM's capabilities to address our target applications.

We launched Polycarbonate ESD, a specialized material that addresses critical needs in electronic manufacturing, particularly for tools and fixtures requiring electrostatic discharge protection. And we have enhanced our Ultem 9085 material with expanded layer height capabilities and new color options. These materials are significant enablers for our defense partners that manufacture spare parts, and we have already seen an uptick in materials sales to the U.S. Air Force as a result.

Additionally, for Origin P3 DLP platform, we have added more than 30 new materials, including validating a new material by Forward AM, specifically designed for injection molding tooling. This exemplifies our commitment to production grade manufacturing solution, positioning P3 to deliver injection molding quality across various applications from automotive components to precision flow adapters. We also announced several partnership and customer success updates. I'm particularly excited to highlight a key customer win with ArcelorMittal, one of the world's largest steel manufacturers.

Their adoption of FDM with GrabCAD software at their European Research Center demonstrate the versatility and effectiveness of our solutions in traditional manufacturing environments, where they have achieved significant reductions in lead time and enhanced design capabilities for tooling, previously unattainable through conventional machining methods. Switching to automotive, where we continue to set trends, we will name the official 3D printing partners of NASCAR. This multi-year agreement makes Stratasys the exclusive provider of 3D printing solutions for NASCAR in the creation of parts, tools, and to aid in accelerating design. This represents further penetration into the racing sector as more parts produced by traditional technologies will now come from our system.

In aerospace, 3E EOS, a leader in electro-optic system, announced that it significantly expanded its line of strategy systems, including the addition of multiple FDM 3D printers, bringing its fleet to 15. Its wide array of capabilities includes our F3300, NEO 800, F900, F770, Origin One models, and SAF technologies. 3E is establishing a dedicated additive manufacturing center to support prototyping, tooling, and production. And its expanded use of additive will allow the company to produce critical components much more quickly, and at a saving of roughly 40% versus traditional manufacturing methods.

And to help further drive customer success, we are announcing the promotion of chief revenue officer to the position of chief revenue officer. Based in our Germany office, Andy has been with Stratasys for over 15-years. Since 2018, he has managed our EMEA business, transforming it into a stronger contributor under his leadership, and was recently appointed head of our APAC business as well. As CRO, Andy will enhance our global go-to-market strategy to help ensure customer satisfaction and retention and further build on the long-term partnership with our resellers' ecosystem.

With Andy in this role, we look forward to further strengthening our position and accelerating the widespread adoption of our solutions. Now, switching to dental. We were excited that the TrueDent resin is available for sale in Europe as a CE Mark Class 1 medical device. TrueDent is now set to deliver a scalable, efficient, and high-quality solution for denture production for dental labs and clinicians across Europe, which is expected to be nearly a $2.5 billion opportunity by 2028.

Interest in the TrueDent resin is already strong, with many customers committed to onboarding early this year. And in our Medical business, we recently announced the results of joint research conducted with Siemens Healthineers, which demonstrated the unprecedented accuracy of 3D printed medical imaging phantoms to replicate human anatomy. By offering patient-specific anatomical models that accurately replicate anatomy and pathologies, hospitals and imaging centers can enhance the calibration and performance of CT scanners, ensuring more accurate diagnostics, improve patients' outcome, and lower costs. Turning to software.

I'm excited to share some significant developments that strengthen our product offering and demonstrate our commitment to innovation. Our new GrabCAD IoT platform is transformative solution to help our customer improve their utilization and uptime by providing accurate real-time data, predictive maintenance, and a more efficient support plan. This represents a major step forward in digitizing customer interactions across our entire ecosystem of 3D printers, software and services. We are pleased to note that GrabCAD print software suite now supports all five of our core technologies.

This unified software approach streamlines operations for our customers and reinforce our position as a comprehensive end-to-end solutions provider. To sum up, time and again, some of our most exciting use cases are in the most demanding environments and under the most unforgiving conditions from high-speed auto racing to space travel to the advancement of state-of-the-art medical techniques. We continue to deliver differentiated products and solutions to customers as we further penetrate production applications at scale. The stage is set for return to growth based on accelerated adoption of additive manufacturing as macroeconomic conditions slowly improve.

I will now turn the call over to Eitan to share the financial results and our initial outlook for 2025. Eitan?

Eltan Zamir -- Chief Financial Officer

Thank you, Yoav, and good morning, everyone. Our fourth quarter results reflect solid execution against the ongoing backdrop of adverse macroeconomic factors and related pressures. Our customer engagements remain strong and we believe will translate into meaningful growth once headwinds abate. As a reminder, the cost-saving initiative we announced last year took effect primarily in the fourth quarter.

As we review both the quarterly and annual results, the fourth quarter results are more indicative of the future impact of these initiatives on an annualized basis. In general, our results demonstrate the resilience our diversified offering provides throughout the cycle, enabling us to raise our profitability and cashflow expectations for 2025. Now, let me dive deeper into the numbers. For the fourth quarter, consolidated revenue of $150.4 million was down 3.8%, as compared to the same period last year.

Product revenue in the fourth quarter fell by 4.8% to $105.1 million, compared to the same period last year. Within product revenue, systems revenue was off slightly, declining 1.5% to $46.7 million, compared to the same period last year. As constrained capital budgets continue to impact customer buying behaviors for new systems. Consumable revenue in the fourth quarter was $58.4 million, down 7.3%, compared to $63 million in the same period last year.

Service revenue was $45.3 million for the fourth quarter of 2024, relatively flat, compared to $45.9 million in the same period last year. Within service revenue, customer support revenue was relatively flat, compared to the same period last year. For the full-year 2024 consolidated revenue declined 8.8% to $572.5 million, compared to $627.6 million in 2023. After backing out the Stratasys Direct Service Bureau, the investments, the revenue decline was 6.9%.

Product revenue in 2024 was $392 million, compared to $433.7 million in 2023. Within product revenue, system revenue in 2024 was $140.3 million, compared to $187.7 million in 2023. Consumables revenue was up 2.3% to $251.7 million in 2024, compared to $246 million in 2023. We expect consumables revenue in 2025 to increase over 2024.

For the full-year of 2024, service revenue was $180.5 million, compared to $193.9 million in 2023. After backing out the Stratasys Direct Service Bureau divestment, 2024 service revenue was flat year over year. Within service revenue, customer support revenue in 2024 was flat, compared to 2023. Now, turning to gross margins, GAAP gross margin was 46.3% for the quarter, compared to 44.7% for the same period last year.

Non-GAAP gross margin was 49.6% for the quarter, compared to 48.8% for the same period last year. The year-over-year improvement in gross margin was the result of operational efficiency and cost saving efforts. GAAP gross margin was 44.9% for the full-year 2024, compared to 42.5% for the same period last year. Non-GAAP gross margin improved 100 basis point to 49.2% for the full-year, as compared to 48.2% in 2023.

The full-year improvement in non-GAAP gross margin was a result of operational efficiency and cost saving efforts. GAAP operating expenses were $79.4 million for the quarter, compared to $64.1 million during the same period last year as a result of non-recurring revaluation gain that reduced GAAP operating expenses in the fourth quarter of 2023. Non-GAAP operating expenses improved, decreasing to $65.2 million for the quarter, compared to $74.3 million during the same period last year, as we benefited from our cost saving initiative. Non-GAAP operating expenses were 43.4% of revenue for the quarter, compared to 47.5% for the same period last year, driven primarily by the cost-saving measures associated with the restructuring plan we announced in the second-half of 2024, the financial effects of which were realized in the fourth quarter of 2024.

For the full-year, non-GAAP operating expenses were 48.4% of revenue, as compared to 46.2% in 2023, primarily due to lower revenue in 2024. In absolute dollar terms, non-GAAP operating expenses were $13.3 million lower in 2024, as compared to 2023, due in part to the cost-saving measures from our restructuring plan. Regarding our consolidated earnings for the quarter, GAAP operating loss for the quarter was $9.7 million, compared to operating income of $5.7 million for the same period last year, due primarily to the non-recurring revaluation gain that reduced GAAP operating expenses in the fourth quarter of 2023. Non-GAAP operating income for the quarter was $9.4 million, compared to $2 million for the same period last year.

The increase reflects the lower opex as a percentage of revenue driven by the cost savings. GAAP net loss for the quarter was $41.9 million, or $0.59 per diluted share, compared to a net loss of $15 million or $0.22 per diluted share for the same period last year. During the quarter, we took a non-cash impairment charge of $30.1 million or $0.42 per share related to our investment in Ultimaker, a key cause for a larger GAAP net loss in the quarter. Non-GAAP net income for the quarter was $8.5 million, or $0.12 per diluted share, compared to net income of $1.6 million, or $0.02 per diluted share in the same period last year.

Adjusted EBITDA was $14.5 million for the quarter, compared to $7.7 million in the same period last year. This equates to 9.6% EBITDA margins, compared to 4.9% in the fourth quarter of 2023. Regarding our consolidated earnings for the full-year 2024, GAAP operating loss was $85.7 million, compared to a loss of $87.6 million for 2023. Non-GAAP operating income for the year was $4.9 million, compared to $12.6 million in 2023.

This equates to 0.9% non-GAAP operating margin, compared to 2% in 2023. GAAP net loss for the year was $120.3 million, or $1.70 per diluted share, compared to a net loss of $123.1 million, or $1.79 per diluted share for last year. Non-GAAP net income for the year was $4.2 million or $0.06 per diluted share, compared to $7.7 million or $0.11 per diluted share last year. Adjusted EBITDA was $26 million in 2024, compared to $35 million in 2023, reflecting lower revenues that more than offset the improvement in margins.

We generated $7.4 million of cash in our operations during the fourth quarter, compared to a use of $7.7 million of cash from operations in the same quarter last year. This resulted in positive free cash flow in the quarter. The improvement was due to improvement in our working capital, and we expect further improvement in 2025 as we benefit from fully realizing the cost-saving measures from our restructuring plan. For the full-year, we generated $7.8 million of cash from operations, compared to using $61.6 million of cash in 2023.

During the quarter, we repurchased 266,000 shares of stock at an average price of $7.5 per share for a cost of approximately $2 million. We had approximately $48 million remaining capacity on our share repurchase authorization at year-end. We ended the quarter with $150.7 million in cash, cash equivalents and short-term deposits, compared to $144 million at the end of the third quarter of 2024. Our balance sheet and cash generation profile remain strong, supporting our interest to capitalize on value enhancing opportunities.

As Yoav mentioned, our strong balance sheet and cash positions are set to be further enhanced with a prospective $120 million investment from Fortissimo. Now, let me turn to our outlook for 2025 based on the expectation that the global softness in capital equipment purchasing will continue. We expect 2025 revenue to be in a range of $570 million to $585 million with revenues growing sequentially each quarter through the year resulting in higher revenues in the second-half of the year, as compared to the first. We expect the first quarter to have the softest revenue and margin profile on a relative basis to the rest of the year.

Non-GAAP gross margin for 2025 is expected to be in a range of 48.8% to 49.2% with the second-half stronger than the first-half based primarily on the expected rise in revenue throughout the year. In 2025, we expect our non-GAAP operating expenses to range between $254 million to $257 million. Continued improvement in profitability is an important objective, and for 2025, we expect to see growth across the profit metrics. For 2025, we expect non-GAAP operating margins to be in the range of 4% to 5% of revenue, with the second-half stronger than the first-half, based on the anticipated rise in revenue throughout the year.

We expect a GAAP net loss of $68 million to $53 million, or $0.93 to $0.72 per diluted share and non-GAAP net income of $20 million to $26 million, or $0.28 to $0.35 per diluted share for 2025. Adjusted EBITDA for 2025 is expected to be in the range of 7.8% to 8.5% of revenue, or $44 million to $50 million. We expect our capital expenditures for 2025 to range between $25 million and $30 million. Finally in 2025, we expect to deliver improved operating and free cash flow at higher levels than 2024.

With that, let me turn the call back over to Yoav for closing remarks. Yoav?

Yoav Zeif -- Chief Executive Officer

Thank you, Eitan. Before we move to questions, I want to take a moment to acknowledge our global team. Their professionalism, dedication, and hard work continues to drive strong customer engagement and excitement for our solutions. I have personally met many of our key customers across industries over the last few months.

The resounding message is that the increased use of additive manufacturing in their businesses is most certainly expected once spending constraints are lifted. We also see and feel the enthusiasm and excitement at all of the largest trade shows and industry events. There is no question that when our solution ramp and deliver the exceptional capabilities, our significant growth and corresponding operating leverage and margin expansion will follow. We have taken the difficult, but necessary step to right size the business for today.

Without sacrificing R&D resources for innovation and while maintaining the ability to scale quickly as capital spending eases. We believe that as the next growth phase of additive manufacturing emerges, we are well positioned to lead for today and into the future. We are excited for what 2025 and beyond holds for strategies. With that, let's open it up for questions.

Operator?

Questions & Answers:

Operator

[Operator instructions] Our first question is coming from Greg Palm from Craig-Hallum. Your line is now live.

Greg Palm -- Analyst

Yes. Thanks. Hey, everyone. Maybe just a little bit more kind of color on kind of what you're seeing out there in the marketplace, customer feedback, given everything going on.

And then, can you just kind of help us a little bit more with kind of the cadence of the year? It sounds like revenue building sequentially, but any more details on how that looks from the modeling standpoint would be helpful?

Yoav Zeif -- Chief Executive Officer

Hi, Greg. Thank you for the question, it's Yoav. That's a super important question, because we are in a time period of the downturn in our industry and everything looks dark and gray, but this is not the case with our customers. Just three weeks ago we had a customer advisory board in Florida, the top corporate in the world, the leaders of additive manufacturing in those companies, 14 of them.

And we are forgetting as an industry and as a capital market, we are forgetting the basics and the value proposition of additive, because in manufacturing there are requirements that only additive can deliver. For example, low volume, high mix, special geometries and assembly of parts, consolidation of parts, ensure the supply chain resiliency, personalization, improve sustainability. Only additive can do it, and especially in a world of uncertainty and geopolitical tension and trade wars. So we are so focusing on the high interest rate and the constraint of capital expenditure that we forget that long-term the world will manufacture, manufacturing will be digital and this digitization process will benefit the entire industry.

So when we are talking with customers, back to your question. They are saying to us, focus on what you're doing, reliability, accuracy, OEE, the effectiveness of our equipment, the total cost of ownership, and enable our engineers to use more additive. So I'm very optimistic. Yes, we feel the short-term constraints, but over time I see us going out of there and our customers are happy with our solution.

The F3300 has great feedback. We expect to sell more in 2025. We expect to expand our reach within those same customers, by the way, to new site. It will be gradual, because we are in a downturn period, but it has nothing about the long-term of this industry or even the mid-short-term.

Greg Palm -- Analyst

Yes, OK that's helpful. And then, as it relates to the gross margin guide for '25 specifically, I'm wondering, you know, what are you building in, in terms of, you know, negative impacts or headwinds from either logistics or tariffs. It, you know, obviously for the year it implies a lower gross margin relative to the run rate in the second-half of 2024? So I was just curious if you can give us a little bit of what your built-in assumptions are?

Eltan Zamir -- Chief Financial Officer

Thanks, Greg for the question, it's Eitan. So first of all, I start saying that our actual 2024 gross margin was in 2024 was 49.2%, which is an improvement of 100 basis points, compared to last year. And I think you've followed us for quite many years. That's a very solid gross margin for Stratasys and also in general for the industry, which enabled us to grow and also to invest to grow the business further.

Now, as far as it concerned with 2025, I'll say a few things. First of all, we kept the gross margin in very similar level for 2025. But then it's a mix of different things. We continue to invest, of course, in the business and in growing the business and in the production.

On the other hand, there will be some savings from the restructuring plan that we introduced last year. Many significant part of that was already achieved, but there are still some savings that will come in 2025. The mix of products, of course, impacts the 2025 growth margin. But overall, as you can see, very solid, continue to be 49 in the 49 level, which is very good and very promising for the future.

And within 2025, when you think about the quarter in 2025, it will improve sequentially quarter-by-quarter throughout 2025. And maybe a word about the tariffs, Yoav.

Yoav Zeif -- Chief Executive Officer

So I think the tariff has two sides to it. One is how it impacts us and the other one is how it impacts our customers. In terms of us, we have, I won't say thank god, but it's been for a long time of planning. Vast majority of what we are doing is in a secured zone, so we are quite immune.

Most of our FDM is being produced in the U.S., so the tariff has no impact on it. And the rest of our production, most of it is in Israel, which has a free trade agreement. And FDM is our largest business, and the U.S. is our largest region.

So we are in a good shape regarding the tariff. And I'm looking at our customers on the other side. This is a huge opportunity for us because no matter how, what's the level of the tariff, if you bring the machine to the specific country and you produce onshore near the customer, you don't pay the tariff. Which we see here a global opportunity just a week ago.

I was with a large, actually large logistic customer, port operator, and they see the uncertainty, and they have an interest to see how they are creating capabilities in additive to handle the uncertainties, the geopolitical tension, the potential broken supply chain, and also the impact of tariffs. And this is coming from our customers.

Greg Palm -- Analyst

Yes, it seems like it could be a big opportunity. I will leave it there. I look forward to seeing you all next month at Rapid. Thanks.

Yoav Zeif -- Chief Executive Officer

Thank you.

Eltan Zamir -- Chief Financial Officer

Thanks, Greg.

Operator

Thank you. The Next question is coming from Brian Drab from William Blair. Your line is now live.

Unknown speaker -- -- Analyst

Good morning, guys. This is Tyler here for Brian. Thanks for taking my questions. Just starting off, I wanted to know -- I know you're mostly exposed to the U.S., but is there anything to note for organic revenue growth in 2025? Are there any anticipated FX, headwinds or recent divestitures that we should think about? Then I'll have a follow-up.

Yoav Zeif -- Chief Executive Officer

Thanks, Tyler. So, other than a relatively small impact of one of the SDM businesses, the Stratasys Direct Businesses that we divested in the middle of 2024. There is nothing significant as far as it's concerned with the divestment or inorganic as you model. And on the FX side, of course, we do have business in Europe and based on how the euro behaves throughout 2025, that could have some impact.

And we're also operating in countries like Israel. However, we normally and I think we've discussed this in the past, we hedge a significant part of our exposure on the most significant currencies that are not U.S. dollar. So the impact is relatively small.

Unknown speaker -- -- Analyst

OK, thank you. And in your slide, you said the denture market opportunity by 2028 is $2.5 billion. That's on a global basis, correct? And then, could you provide your estimate of the total TAM today? And how will you capture more sharing this market and what differentiates you from the other additive competitors? Thank you.

Eltan Zamir -- Chief Financial Officer

Thank you, Tyler, for the question. So we are very proud in our denture solution. Practically we're the one innovating a new solution for denture which is monoblock dentures with very high aesthetic, low price, and the ability completely to transform the business model of dentures, which today, dentists don't like dentures. To be honest, because it's between six to eight meetings, models, and you need to come back and in the time that the patients feel that it's really fitting, the dentist already lost a lot of money.

And we are coming with a new solution with a very large damage like $2.5 billion in Europe and another $5 billion to $6 billion in the Americas. And we are the leader here in terms of being ahead of the industry in terms of the technology. We believe that it will still be gradual over next year, but we have also large plans how to penetrate the market. We already signed several large dentures with several large denture companies.

And the adoption of dentals is so core to our 3D printing industry, we believe that we will be able, together with some organic and inorganic moves, to create a position ahead of competition and ahead of the entire dental industry, because practically we are disrupting it. And it's an industry that knows how to adopt additives. And now we are coming with a very simple, high-end solution. We are very optimistic.

Unknown speaker -- -- Analyst

OK. Appreciate it. I'll pass it along.

Operator

Thank you. Our next question is coming from Troy Jensen from Cantor Fitzgerald. Your line is now live.

Troy Jensen -- Analyst

Hey, gentlemen. Congrats on the fourth quarter results.

Eltan Zamir -- Chief Financial Officer

Thank you.

Troy Jensen -- Analyst

Hey. So I guess maybe Eitan for you, consumables are down 7% year over year, but they've also been down consecutively three consecutive quarters here on a sequential basis. And I'd guess the installed base has been growing, right, as you're shipping more systems into the customer. So can you just touch about consumables and why they declined three consecutive quarters?

Eltan Zamir -- Chief Financial Officer

Sure. Thanks, Troy. So maybe I'll start saying that I think that in the last year, throughout the discussions with the analysts on the earnings call, we always discussed a range of consumable as a quarterly average kind of run rate. Q4 was lower than that average run rate, but it was, I consider Q4 as an outlier.

It does not reflect, it does not represent what we see for the future for the quarter of 2025. Actually in 2025, you know, we're already more than two months into the quarter. We actually see that we're back on track to levels that are similar to last year and will be higher than the Q4 numbers that we announced today. And when I think about the full-year of 2025, we expect, and that I think also address your question.

We expect 2025 full-year to be higher than the 2024 full-year and that's after 2024 was already higher by $5.6 million from the full-year of 2023. So we do see utilization increasing and we do expect 2025 to have overall higher consumable compared to 2024.

Troy Jensen -- Analyst

Great, perfect. And also for you, Eitan, I just want to talk about long-term investments and it's down $40 million sequentially. What's in that? Is this all just equity investments? Is there any financial instruments? Is the $32 million loss that you talked about, is that the reason for the $40 million decline?

Eltan Zamir -- Chief Financial Officer

Thanks, Troy. So this one item is largely related to our equity investment in Ultimaker. We as you remember, we divested that business two and a half years ago and that was part of our strategic decision to not to play on the low-end and to focus on manufacturing and mass production. So that's a business that we do not control.

But of course, from an accounting perspective, we have to take our share in that situation. And that's what we did, but it's nothing more than that.

Troy Jensen -- Analyst

OK, but the $80 million, is that all just equity in Ultimaker or is there other things in there?

Eltan Zamir -- Chief Financial Officer

Where do you see $80 million?

Troy Jensen -- Analyst

In the balance sheet, your long-term investment category.

Eltan Zamir -- Chief Financial Officer

I know that's, so we invest in quite many minority investments, but each one of them is a very small portion, similar to what you see others are doing, and these are opportunities that we're involved with, and when it becomes more interesting and relevant, we decide whether we want to increase our position or not.

Troy Jensen -- Analyst

Got it, so it's all equity, not financials. OK, and then for you Yoav, can you talk about acquisition targets? Obviously, you're raising more capital and you guys are profitable and have a decent balance sheet. So hardware, software, materials, what interests you most?

Yoav Zeif -- Chief Executive Officer

Whatever will announce shareholder value more. And we have a strategy, a very clear strategy. We are very proud of the vote of confidence from Fortissimo. They are really well established and successful investors in technology and innovation.

And remember, they decided to invest in Stratasys with a significant premium analog company, which it's a sign that there are opportunities out there and the best operator to capture those opportunities is Stratasys. By the way, we also demonstrated it because we committed at the end of Q3 last year, after a tough start of H1, we committed to savings. We were committing -- we committed to profitability and cash flow, and we delivered on all of them. 49.6% margin, 5.6% EBITDA, $7.4 million of cash flow.

It doesn't exist in our industry. We are the top performer and operator in this industry. And then, you combined it with an investor that sees the opportunities in the market and says where I should put my money in order to capture those opportunities. And you want to put your money where there are execution capabilities and in a company that is consistent, because you look at our guidance, we are growing slowly, but we have a strong business model.

We secure the $40 million of savings that we committed to and next year in our guidance, measure-by-measure, we are better year over year and now we just need to wait to the manufacturing sector to come back to normal and you will see growth, you will see growth in revenue and profitability. And there are plenty of opportunities out there and we learn a lot about this industry over the last few years. Really, you know it. We have had opportunities to widespread due diligence across the industry.

So we have good understanding what's going on out there, who are the right targets and which one of them will better support our long-term strategy and create a lot of value to our shareholders in the short-term and in the long-term. And you know, also market prices of the assets are more favorable these days. So when you combine the operational capabilities, the profitable model that we have with the recurrent revenue, the strong balance sheet now with Fortissimo with focused strategy on manufacturing and use cases, and the overall proven abilities of 3D printing, Stratasys is the right solution and we know and we have a plan what to do with the money.

Operator

Thank you. [Operator instructions] Our next question is coming from Jim Ricchiuti from Needham & Company. Your line is now live.

James Ricchiuti -- Analyst

Thanks. Most of my questions have been answered, but I just want to follow-up on the way you're viewing 2025. It sounds like you're assuming, obviously continued challenging market conditions? And does that offset benefits from new products? And maybe if you could talk a little bit about the market verticals that you have perhaps more confidence in? It sounds like dental being one of them, but I don't want to put words in your mouth. And which markets you might be more cautious on or geographies?

Eltan Zamir -- Chief Financial Officer

Thank you, Jim. Yes, we are cautious. And what we see is a soft market. This is the reality.

But it's only a cycle. There are ups and downs in this cycle. We are now in a down period. But as I said, the fundamental of the value proposition of 3D printing is there and the customers know it.

OK, this is the most important thing. Then getting to 2025, we have quite good pipeline visibility and we have confidence in our guidance, but it takes into consideration the softness of the market. So we have pipeline visibility. We see the customer engagement.

Even in such a downturn, 14 this is just an example, 14 top executives from 14 top corporates came from all over the world to Florida to sit with us and tell us what they are looking from our solutions. So there is an engagement there. We are also improving our offering constantly. As you said, there are new product.

This year, a lot of focus on material and software. We believe this is very profitable part of our business. And again, the current geopolitical situation in 2025 is a great tailwind for the industry and for us. A great tailwind.

OK, now there is kind of, you know, the entire political environment is kind of looking for what's next. But it will stable and it will be a new state of the world. And in this new state of the world, the basic value proposition of additive will be enhanced, because with geopolitical, with dynamics, with uncertainty, with this type of world, it's a great support for additive. And I give you now examples for the verticals, because that's a great question.

Definitely dental, because this is a vertical of early adopters, and we focus on dentures. We believe the best solution there. Then it's all about aerospace and defense, because the world is highly concerned about the stability and the budget of aerospace and defense are skyrocketing. And we see more also in Europe now.

We are the leader in aerospace and defense spare parts. Then it's about tooling, which is a huge opportunity to $12 billion market and we are the leader also in tooling. And I would say those are the three. Aerospace defense, tooling, and dental.

James Ricchiuti -- Analyst

OK, thanks for that color. When you talk about pipeline visibility and you talk about the way you're viewing second-half, first-half? Do you actually have relatively good visibility that gives you the confidence about second-half? Or are you just assuming, like a lot of folks, that we see some improvement in the macro environment?

Eltan Zamir -- Chief Financial Officer

So it's both. We believe macro will be better in the next, because of, you know, less uncertainty. Things will be clear. But we also have a pipeline.

And we have stages in the pipeline. And we have probabilities of this pipeline. The unknown is the sales cycle. Over the last two and a half years, the sales cycle increased for the entire industry and also for Stratasys.

But with the current sales cycle, we have good visibility and that's the way we build our guidance. Who knows? We don't have the crystal ball. If sales cycle will double themselves, probably we will not be in a good shape. But if they will reduce and get back to normal, we will be in a better shape.

And what is important is that we are solid and strong also with flat revenues. That is the way we build the company. So we achieved our commitment in a challenging environment. We have really unheard of EBITDA in our industry.

With a strong business model. With improved performance also in a soft market, that's what we expect for next year. Now, I think for a minute, what will happen once the manufacturing cycle will be back to normal, because at the end, you need to manufacture it. Then it's a completely different story.

James Ricchiuti -- Analyst

Got it. Thank you.

Operator

Thank you. Next question is coming from Ananda Baruah from Loop Capital Markets. Your line is now live.

Ananda Baruah -- Analyst

Yes. Hey. Good afternoon, guys. Thanks for taking the question.

Happy New Year. And congrats on the solid results here. I guess a bigger picture one, if I could, to the extent that you guys have thought about this or have had conversations about this, you know, this whole idea that's popped up over the last 12-months, more prominently, AI factories and factory automation with Gen AI, if that continues, and I give it continues to be propagated increasingly, if that were to manifest, as that manifests. How does -- like what impact does that have on your production businesses? Does it help it? Does it hurt it? Is it neutral? Just in any context around that, we'd just love to get your early thoughts on that? Thanks.

Eltan Zamir -- Chief Financial Officer

Thank you, Ananda, for the wishes and also for the question. AI is essential for us. We acquired a company called Riven that are developing an AI, we have already a product, that correct the deviation of the path. You scan it, you put it back, and we build a big database, and you can practically anticipate the deviations of the printing and correct it before printing.

But this is only one example. We have a whole set of use cases that we are working on it. Based on Riven, we build a group of people that are focusing on AI. And I believe AI will be essential in additive manufacturing.

And also the transition within manufacturing, taking a step back and looking at the big picture, the transition from analog manufacturing to digital manufacturing has to go somehow through 3D printing. Because we are versatile. We are working with a file. And AI can build the file, AI can manage the files.

So this is like an integral part of the future. The future of manufacturing goes with AI. And we are one of the tools that will make this transition much easier. And we are investing in it.

I'll give you a few use cases. For example, predictive maintenance is an important thing, an important feature that we are working on it. AI can do amazingly well there, because we have all the data from the machine, because we just launched this new IoT platform, it's in the script. And we discussed it with our customers, with our customer's advisory board.

What do they want to see in AI? And we have a whole list and we focus on three of them. Of course, I will not share it here. But we are working with our customer to enable them to adopt additive and digital manufacturing together. Bottom line, AI-centric production system will strongly support additive.

I have no doubt.

Ananda Baruah -- Analyst

And that includes, thanks for that detail. And that includes the increased use of robotics and manufacturing processes as well?

Eltan Zamir -- Chief Financial Officer

I assume so, yes. And by the way, robots or the whole robot industry is our significant customer of us, because we -- you need to change the end of arm and replacement and to be versatile with the functionality of the robot and most of them are doing it with 3D printing, mainly with FDM.

Ananda Baruah -- Analyst

Thank you. Thanks a lot, guys.

Operator

Thank you. We reach the end of our question-and-answer session. I'd like to turn the floor back over to Yoav for further closing comments.

Yoav Zeif -- Chief Executive Officer

So thank you. Before thanking everybody, I want to invite everybody that is online to visit us at the Rapid Show in April in Detroit. We will demonstrate very important solutions there. And also, many of our customers will be there.

So you can hear from our customers firsthand what do they think about Stratasys. So thank you for joining us. Looking forward to updating you again next quarter.

Operator

[Operator signoff]

Duration: 0 minutes

Call participants:

Yonah Lloyd -- Chief Communications Officer and Vice President, Investor Relations

Yoav Zeif -- Chief Executive Officer

Eltan Zamir -- Chief Financial Officer

Greg Palm -- Analyst

Eitan Zamir -- Chief Financial Officer

Unknown speaker -- -- Analyst

Troy Jensen -- Analyst

James Ricchiuti -- Analyst

Jim Ricchiuti -- Analyst

Ananda Baruah -- Analyst

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