Moreover, the credit agreement allows Stratasys to apply for an extension of the credit facility of up to an additional $75 million upon the fulfillment of certain other conditions. However, no information has been provided on the interest rate related to the credit facility.
Per the agreement, Bank of America will act as the Administrative Agent and Swing Line Lender while Citibank, the banking arm of Citigroup (C), and HSBC Bank USA and National Association will be the Co-Syndication Agents. Silicon Valley Bank will be the Documentation Agent.
Apart from the fact that Stratasys plans to use the fund primarily for future acquisitions and investments for innovative product launches, it is worth noting that borrowing costs have also gone down significantly. So, this was a good time to obtain easy financing at compelling prices. Corporate bonds and borrowings from banks are in high demand as the U.S. treasuries are yielding low rates. We believe that the aforementioned moves by the company will provide it financial flexibility to drive long-term growth.
It is noteworthy that Stratasys has a decent cash balance of $615.7 million (Cash and cash equivalents, short-term bank deposits and restricted deposits) at the end of the recently concluded third quarter. Moreover, the company did not have any long-term debt on its balance sheet.
Also, Stratasys’ third-quarter results were encouraging as reported sales were better than expected, driven by solid performances from both the Product and Services segments. However, margins were impacted by the MakerBot acquisition and incremental investments.
Although these investments are expected to impact margins in the short run, product launches and global expansion will help Stratasys to generate incremental sales in the long run.
Stratasys operates a high-cost business model and competition from big and small players like 3D Systems Corp. (DDD) remains an added concern for the company. Nonetheless, the acquisition of MakerBot is expected to aid its 3D systems business growth.
Currently, Stratasys carries a Zacks Rank #3 (Hold).