The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and the related notes included as Exhibit 99.1 to the Report of Foreign Private Issuer on Form 6-K to which this Operating and Financial Review and Prospects is attached, or the Form 6-K. The discussion below contains forward-looking statements (within the meaning of the United States federal securities laws) that are based upon our current expectations and are subject to uncertainty and changes in circumstances. Actual results may differ materially from these expectations due to inaccurate assumptions and known or unknown risks and uncertainties, including those identified in “Forward-looking Statements and Factors that May Affect Future Results of Operations”, below, as well in the “Risk Factors” in Item 3.D of our Annual Report on Form 20-F for the year ended December 31, 2014, or our 2014 Annual Report.

We are a leading global provider of additive manufacturing, or AM, solutions for the creation of parts used in the processes of designing and manufacturing products and for the direct manufacture of end parts. Our solutions include products ranging from entry-level desktop 3D printers to systems for rapid prototyping, or RP, and large production systems for direct digital manufacturing, or DDM. We also develop, manufacture and sell materials for use with our systems and provide related services offerings. We believe that the range of 3D printing consumable materials that we offer, consisting of 38 Polyjet and FDM cartridge-based materials, five SCP inkjet-based materials and 138 non-color digital materials, and over 1,000 color variations, is the widest in the industry. Our service offerings include Stratasys Direct Manufacturing printed parts services as well as our professional services. We provide products and services to our global customer base through our offices in North America and internationally, including: Shanghai, China; Frankfurt, Germany; Genoa, Italy; São Paulo, Brazil; Bangalore, India; Tokyo, Japan; and Hong Kong, as well as through our worldwide network of more than 280 agents and resellers. Additionally, through the MakerBot transaction, we have added an online sales channel. We have more than 2,800 employees and hold more than 800 granted or pending patents worldwide.

During April 2015, we updated our previously announced investment plan. While we remain confident in our long-term market prospects, in light of the current growth environment, we re-examined our 2015 operating plans and took immediate action to adjust near-term capital expenditures for the remainder of 2015. As a part of the updated investment plan, we reduced our capital expenditures plans for 2015 to a level of $80 to $110 million, as opposed to the previously announced plan for capital expenditures in a level of $160 to $200 million. Our commitment to the multi-year investment plan that focuses on enhancing vertical industry solutions, expands customer support services, accelerates product development, and builds an enhanced sales and marketing infrastructure will remain unchanged.

Our ability to implement our strategy is subject to numerous uncertainties, many of which are described under the section captioned “Forward-looking Statements and Factors That May Affect Future Results of Operations” in this Exhibit 99.2 to the Form 6-K as well as, under Item 3.D, “Risk Factors” and Item 5, “Operating and Financial Review and Prospects” in our 2014 Annual Report. We cannot ensure that our efforts will be successful.

In April 2015, we initiated a reorganization plan within MakerBot that is intended to focus efforts at MakerBot on improving and iterating products, growing the 3D ecosystem, and expanding our presence in the professional, education and consumer markets (“MakerBot Reorganization”). This reorganization initiative includes a reduction in the number of MakerBot employees and closing of MakerBot’s three retail stores. Through the MakerBot Reorganization, we expect to achieve costs savings, economies of scale and to better position MakerBot’s market penetration. Costs related to the MakerBot Reorganization will be incurred commencing the second quarter of 2015.

On February 10, 2015, we acquired certain assets and assumed certain liabilities of Intelligent CAD/CAM Technology Ltd., a Hong Kong company. This acquisition is expected to enable us to expand our operations in the Chinese market.

On July 14, 2014, or the Solid Concepts transaction date, we completed the acquisition of 100% of the outstanding shares of Solid Concepts Inc., or Solid Concepts, an independent additive manufacturing service bureau, for a total consideration of approximately $185.4 million.

In exchange for 100% of the outstanding shares of Solid Concepts, we issued 978,601 ordinary shares, paid cash upon closing in the amount of $40.1 million and were obligated to make an additional holdback cash payment in the amount of $3.8 million that was deferred for six months and was paid in January 2015. In addition, we are obligated to pay deferred payments in three separate annual installments after the Solid Concepts transaction date. The deferred payments were evaluated and recorded at a fair value of $43.6 million as of the Solid Concepts transaction date.

Under the terms of the definitive agreement, certain of Solid Concepts’ employees may also qualify for retention-related and other payments of $77.0 million, based on our share price as of the Solid Concepts transaction date, of which $19.6 million was paid in cash upon closing and expensed as incurred. The remaining retention payments will be paid in three separate annual installments. Based on our share price as of March 31, 2015, the remaining retention payments will amount to approximately $30.3 million.

Subject to certain requirements for cash payments, we retain the discretion to settle any of the amounts payable to Solid Concepts shareholders and employees in our shares, cash or any combination of the two. These amounts are also subject to certain adjustments based on our share price.

We believe that the acquisitions of Solid Concepts and Harvest, combined with our RedEye Service, had created a leading strategic platform to meet a broad range of customers’ additive manufacturing needs and provide opportunities to leverage our direct manufacturing services capabilities. These acquisitions had also enabled us to enhance our expertise in parts production, as well as materials and systems knowhow. We believe that the integration with our existing RedEye Service enables us to provide our customers with full service offerings that provide a variety of technologies and custom manufacturing solutions, and supports our expansion into end-use-parts production and vertical market applications.

Following the acquisitions of Solid Concepts and Harvest, we formed Stratasys Direct Manufacturing, or SDM, a paid-parts service from our three AM service companies – Solid Concepts, Harvest, and RedEye. SDM is a provider of 3D printing and custom AM services, offering AM capabilities encompassing a wide range of technologies allowing for plastic and metal parts for rapid prototyping and production processes.

Our unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America, (“GAAP”). In the opinion of our management, all adjustments considered necessary for a fair statement of the unaudited condensed consolidated financial statements have been included herein and are of a normal recurring nature. The following discussion compares the actual results, on a GAAP basis, for the three months ended March 31, 2015 with the corresponding period in 2014.

The following table sets forth certain statement of operations data for the periods indicated:

	Three Months Ended March 31,
	2015					2014
	U.S. $ in			% of		U.S. $ in			% of
	thousands			Net sales		thousands			Net sales
Net sales	$	172,731		100.0	%	$	150,941			100.0	%
Cost of sales		126,643		73.3	%		73,213			48.5	%
Gross profit		46,088		26.7	%		77,728			51.5	%
Research and development, net		27,238		15.8	%		16,771			11.1	%
Selling, general and administrative		102,608		59.4	%		67,617			44.8	%
Goodwill impairment		150,400		87.1	%		-			0.0	%
Change in fair value of obligations
in connection with acquisitions		(13,256	)	-7.7	%		(7,495	)		-5.0	%
Operating income (loss)		(220,902	)	-127.9	%		835			0.6	%
Financial expense, net		(5,124	)	-3.0	%		(1,336	)		-0.9	%
Loss before income taxes		(226,026	)	-130.9	%		(501	)		-0.3	%
Income taxes		(9,622	)	-5.6	%		(4,588	)		-3.0	%
Net income (loss) attributable to Stratasys Ltd.		(216,288	)	-125.2	%		4,087			2.7	%

Net sales of our products and services, as well as the percentage change, were as follows:

	Three Months Ended March 31,
	2015		2014		% Change
	U.S. $ in thousands
Products	$	126,667	$	129,252	-2.0%
Services		46,064		21,689	112.4%
	$	172,731	$	150,941	14.4%

Our results for the three months ended March 31, 2015 were lower than expected across most geographies and industries compared to growth levels we have experienced historically, excluding revenues for both consumables and customer support, which grew as expected. We believe that the overall shortfall was due primarily to the following:

Revenues derived from products (including AM systems, consumable materials and other products) decreased by $2.6 million for the three months ended March 31, 2015, or 2.0%, as compared to the three months ended March 31, 2014.

The decrease in products sales of 2.0% was driven by a decrease in MakerBot revenues, slow adoption of high-end systems and the negative impact from foreign currency exchange fluctuations, which were partially offset by strong business performance for consumables offerings.

The number of systems shipped in the three months ended March 31, 2015 decreased to 7,536 units as compared to 8,802 units shipped in the three months ended March 31, 2014. The decrease in the number of systems shipped was primarily due decrease in MakerBot unit sales.

Consumables net sales for the three months ended March 31, 2015 increased by 17.6% as compared to the three months ended March 31, 2014. The increase was driven by acceleration in customer usage and our growing installed base of systems. In particular, the strong sales of our Production series and high-end Design series systems in prior periods contributed to strong consumables sales growth given their relatively higher consumable utilization rates. The increase in consumables net sales was also driven by new high performance consumable materials for the use in various applications, which were launched subsequent to March 31, 2014.

We believe that our growing installed base is a positive indicator of consumables revenues growth in future periods.

Services revenues (including SDM, maintenance and other services) increased by $24.4 million for the three months ended March 31, 2015, or 112.4%, as compared to the three months ended March 31, 2014. The increase in services revenues was primarily attributable to the inclusion of SDM revenues, which relates to acquisitions completed after March 31, 2014. Service revenues also increased organically from maintenance contracts and service parts, reflecting our growing installed base of systems.

Net sales and the percentage of net sales by region, as well as the percentage change, were as follows:

Net sales for the three months ended March 31, 2015 in the North America region increased as compared to the three months ended March 31, 2014, due to strong demand for our consumables offerings, as well as the inclusion of SDM net sales in the North America region.

Net sales for the three months ended March 31, 2015 in the Asia Pacific region increased as compared to the three months ended March 31, 2014, primarily due to the expanding of our products and solutions to additional territories of the Asia Pacific region, partially offset by negative impact of foreign currency translation.

Net sales for the three months ended March 31, 2015 in the EMEA region decreased as compared to the three months ended March 31, 2014. In local currencies terms, net sales for the three months ended March 31, 2015 in the EMEA region increased as compared to the three months ended March 31, 2014. Net sales in the EMEA region were negatively impacted by approximately $6.8 million primarily due to the devaluation of the Euro against the U.S. dollar, on a constant currency basis when compared to the same period last year.

Gross profit for our products and services, as well as the percentage change, were as follows:

	Three Months Ended March 31,
	2015		2014		% Change
	U.S. $ in thousands
Gross profit attributable to:
Products	$	28,296	$	68,230	-58.5%
Services		17,792		9,498	87.3%
	$	46,088	$	77,728	-40.7%

Gross profit as a percentage of net sales for our products and services, as well as the percentage change, were as follows:

	Three Months Ended March 31,
	2015		2014		% Change
Gross profit as a percentage of revenues from:
Products	22.3	%	52.8	%	-57.7%
Services	38.6	%	43.8	%	-11.8%
Total gross profit	26.7	%	51.5	%	-48.2%

Gross profit attributable to products sales decreased by $39.9 million, or 58.5%, to $28.3 million for the three months ended March 31, 2015 as compared to $68.2 million for the three months ended March 31, 2014. Gross profit attributable to products sales as a percentage of revenue decreased to 22.3% for the three months ended March 31, 2015 as compared to 52.8% for the three months ended March 31, 2014.

The decrease in gross profit attributable to products sales was primarily due to impairment charges related to certain of MakerBot’s developed technology intangible assets of $29.8 million, product mix, which was mainly due to sales that favored our lower-margin Production series and lower-end Design series systems, an overall decline in capacity utilization at MakerBot and flat intangible asset amortization expenses.

Gross profit attributable to services increased by $8.3 million, or 87.3%, to $17.8 million for the three months ended March 31, 2015 as compared to $9.5 million for the three months ended March 31, 2014. Gross profit attributable to services as a percentage of services revenues in the three months ended March 31, 2015 decreased to 38.6%, as compared to 43.8% for the three months ended March 31, 2014. The increase in gross profit from services primarily reflects the inclusion of SDM operations in the three months ended March 31, 2015, which also resulted in a decrease in services gross margin as a percentage of services revenues.

The amount of each type of operating expense, as well as the percentage change and total operating expenses as a percentage of our total net sales, were as follows:

Research and development expenses, net for the three months ended March 31, 2015 increased by $10.5 million, or 62.4%, as compared to the three months ended March 31, 2014. The increase was primarily due to an increase in headcount to support new research and development initiatives. The headcount increase is partially attributable to our acquisitions and reflects our continued investments in research and development projects, focusing on enhancing our AM technologies and developing consumables that offer an even broader array of physical, mechanical and aesthetic properties, aimed at broadening user applications.

Research and development expense, net as a percentage of sales increased to 15.8% in the three months ended March 31, 2015 as compared to 11.1% in the three months ended March 31, 2014. This increase reflects our intention to continue to invest in research and development in order to bring a broad range of hardware and materials solutions as well as software solutions to create a leading 3D printing ecosystem. We are dedicated to effectively introduce our innovative technologies to the market in a timely manner.

Selling, general and administrative expenses for the three months ended March 31, 2015 amounted to $102.6 million, compared to $67.6 million for the three months ended March 31, 2014. Selling, general and administrative expenses for the three months ended March 31, 2015 as percentage of net sales were 59.4% as compared to 44.8% for the three months ended March 31, 2014.

The increase of our selling, general and administrative expenses was primarily attributed to impairment charges related to MakerBot’s customer relationships intangible assets of $13.4 million, the inclusion of SDM operations together with post-merger integration expenses relating to our new SDM branding initiatives, which added $9.6 million, higher expenses for strategic and marketing initiatives, and costs of expanding our sales and marketing infrastructure, as well as headcount increase to support our continuing growth.

During the three months ended March 31, 2015, we recorded a goodwill impairment charge of $150.4 million related to our MakerBot reporting unit. The main factors for this non-cash and non-tax-deductible expense included a decrease of MakerBot product and service revenues in the first quarter of 2015 as compared to the fourth quarter of 2014 and below our previous projections, and lower forecasted profitability due to current trends in the 3D desktop market. For further information, see note 4 to our unaudited condensed consolidated financial statements attached as Exhibit 99.1 to the Form 6-K.

During the three months ended March 31, 2015, we recorded a gain of $13.3 million, compared to gain of $7.5 million for the three months ended March 31, 2014, due to the revaluation of obligations in connection with acquisitions. The gain recorded during the three months ended March 31, 2015 was due to revaluation of the deferred consideration as part of the Solid Concepts transaction. The gain recorded during the three months ended March 31, 2014 was due to the revaluation of earn out obligations in connection with the MakerBot transaction.

Operating income (loss) and operating income (loss) as a percentage of our total net sales, were as follows:

Operating loss for the three months ended March 31, 2015 amounted to $220.9 million compared to operating income of $0.8 million for the three months ended March 31, 2014. The operating loss was primarily attributable to non-cash impairment charges related to MakerBot’s goodwill and certain of its other intangible assets of $193.6 million as well as higher selling, general and administrative expenses. The operating loss was partially offset by gain due to revaluation of obligations in connection with acquisitions as described above.

Financial expense, net which is mainly comprised of foreign currencies effects and interest expense, net amounted to $5.1 million for the three months ended March 31, 2015, compared to financial expense, net of $1.3 million for the three months ended March 31, 2014. The increase was primarily due to foreign currency transaction losses due to changes in the rate of exchange between the U.S. dollar and the local currencies in the markets in which we operate (primarily the Euro), which are partially related to intercompany receivables and payables denominated in a foreign currency, partially offset by revaluation of forward contracts that hedged the corresponding currency exposure.

Income taxes and income taxes as a percentage of net loss before taxes, as well as the percentage change, were as follows:

	Three Months Ended
	March 31,
	2015			2014
	U.S. $ in thousands						% Change
Income taxes	$	(9,622	)	$	(4,588	)	109.7	%

As a percent of loss before
income taxes		4.3	%		915.8	%

Our effective tax rate for the three months ended March 31, 2015 and 2014 was 4.3% and 915.8%, respectively. Our effective tax rate has varied significantly due to changes in the mix of taxable income and tax loss between the U.S. and Israel.

Our effective tax rate for the three months ended March 31, 2015 was impacted by impairment of goodwill associated with the Makerbot acquisition, which is non-tax deductible, and therefore had a significant impact on the effective tax rate for the three months ended March 31, 2015.

The income of $7.5 million attributable to the change in fair value of the Company’s earn-out obligations in the three months ended March 31, 2014, was non-taxable, and therefore had a significant impact on the effective tax rate in this period.

Net Income (Loss) and Net Income (Loss) Per Share Attributable to Stratasys Ltd.

Net income (loss) and net income (loss) per diluted share attributable to Stratasys Ltd., were as follows:

Net loss attributable to Stratasys Ltd. for the three months ended March 31, 2015 was $216.3 million as compared to net income of $4.1 million for the three months ended March 31, 2014. This increase of the net loss attributable to Stratasys Ltd. was due to the factors that were previously discussed, primarily the impairment charges related to MakerBot goodwill and certain of its intangibles assets and the increase in our selling, general and administrative expenses, which were partially offset by gain due to revaluation of obligations in connection with acquisitions and higher income tax benefit.

Diluted loss per share was $4.24 for the three months ended March 31, 2015, compared to net income per share of $0.08 for the three months ended March 31, 2014. The weighted average fully diluted share count for the three months ended March 31, 2015 was 51.0 million, compared to 51.2 million for the three months ended March 31, 2014.

The following non-GAAP data, which excludes the categories of expenses described below, are non-GAAP financial measures. Our management believes that these non-GAAP financial measures are useful information for investors and shareholders of our company in gauging our results of operations (x) on an ongoing basis after excluding merger and acquisition related expense, and (y) excluding non-cash charges such as share-based compensation, amortization of intangible assets, one time write-off of deferred tax assets, and impairment charges that either do not reflect actual cash outlays that impact our liquidity and our financial condition or have a non-recurring impact on the income statement, as assessed by management. These non-GAAP financial measures are presented to permit investors to more fully understand how management assesses our performance. The limitations of using these non-GAAP financial measures as performance measures are that they provide a view of our results of operations without including all events during a period, such as the effects of merger-related, non-cash compensation and other charges, and may not provide a comparable view of our performance to other companies in our industry. The presentation of these non-GAAP measures is not meant to be considered in isolation or as an alternative to any measure of financial performance calculated in accordance with GAAP.

The following tables present the GAAP measures, the corresponding non-GAAP amounts and related non-GAAP adjustments for the applicable periods:

Our cash and cash equivalents balance decreased to $423.0 million at March 31, 2015 from $442.1 million at December 31, 2014. The decrease in cash and cash equivalents in the three months ended March 31, 2015 was due to cash used in investing activities in an amount of $11.7 million, cash of $9.7 million used in financing activities and cash flows provided by operating activities in an amount of $3.9 million.

Our cash and cash equivalents balance decreased to $407.2 million at March 31, 2014 from $414.1 million at December 31, 2013. The decrease was primarily due to net cash used in investing activities of $10.9 million, offset by net cash provided by operating activities of $4.9 million.

We generated cash from operating activities of $3.9 million during the three months ended March 31, 2015. The net loss of $216.4 million was favorably adjusted due to non-cash charges for impairment of goodwill and other intangible assets of $193.6 million, depreciation and amortization of $28.9 million, stock-based compensation expense of $9.8 million and foreign currency translation loss of $8.7 million, which was primarily due to the devaluation of the Euro against the U.S dollar. Changes in deferred income taxes of $13.8 million and non-cash changes in the fair value of obligations in connections with acquisitions of $13.3 million unfavorably affected cash from operating activities. Changes in working capital items consisted mainly of an increase in inventories of $15.3 million, partially offset by a decrease in accounts receivables of $4.6 million and an increase in accounts payable of $10.1 million. The increase in inventory reflects our investments in new product introductions and our supply flexibility.

During the three months ended March 31, 2014, we generated cash from operating activities of $4.9 million. The net income of $4.1 million was favorably adjusted due to non-cash charges in depreciation and amortization and stock-based compensation expense partially offset by the change in the fair value of earn-out obligations. Non-cash items that unfavorably affected cash from operating activities were mainly the changes in deferred income taxes of $5.9 million and the changes in working capital of $15.7 million.

We used cash of $11.7 million in our investing activities during the three months ended March 31, 2015. Cash was primarily used to purchase property and equipment and to fund our acquisitions, which was partially offset by cash provided by the change in short-term bank deposits.

Property, plant and equipment purchases totaled $14.4 million. Our principal property and equipment purchases were for the enhancement of our manufacturing capabilities of our facilities in the United States and for our facility in Germany.

We used cash of $3.8 million to fund our merger and acquisitions during the three months ended March 31, 2015.

Cash of $8.7 million was provided by proceeds from short-term bank deposits due to the maturity of those deposits in the three months ended March 31, 2015.

In the three months ended March 31, 2014, we used cash of $10.9 million in our investing activities primarily due to purchases of property and equipment to support our manufacturing capabilities of our facilities in the United States and Israel as well as our offices in Germany.

We used cash of $9.7 million in our financing activities during the three months ended March 31, 2015. Cash of $11.6 million was used to finance our obligations in connections with acquisitions and was offset by proceeds of $2.0 million from the exercise of stock options.

In the three months ended March 31, 2014, we used cash of $0.9 million in our financing activities. A cash payment of $2.2 million in connection with the acquisition of a non-controlling interest was offset by exercises of stock options and the related excess tax benefit, which provided cash of $1.3 million.

Our total current assets amounted to $762.3 million as of March 31, 2015, of which $424.9 million consisted of cash and cash equivalents and short-term bank deposits. Total current liabilities amounted to $239.9 million. Our cash and cash equivalents and short-term bank deposits are primarily held in banks in Israel, Switzerland and the U.S., with only minor amounts subject to any restrictions on movement of balances within our company and our subsidiaries.

Our credit risk of our accounts receivable is limited due to the relatively large number of customers and their wide geographic distribution. In addition, we try to reduce the credit exposures of our accounts receivable by credit limits, credit insurance for most of our customers, ongoing credit evaluation and account monitoring procedures.

In February 2015, we announced our new long-term investment plan to help enable growth, maintain market leadership and meet future opportunities. We may make additional investments in property, plant and equipment, expansion of our operations into additional geographies, information technology, or IT, human resources and sales and marketing required for future growth. We re-examined our operating plans for 2015 and updated our estimate for capital expenditure to a level of $80 to $110 million. We believe that we will have adequate cash and cash generated from operating activities to fund our ongoing operations and that these sources of liquidity will be sufficient to satisfy our capital expenditure requirements for the next twelve months.

Pursuant to a credit agreement, dated November 7, 2013, with Bank of America, N.A., or BofA, as administrative agent and swing line lender, and the other lenders party thereto, our company (via Stratasys International Ltd., our wholly-owned subsidiary, which serves as borrower) has in place a five-year revolving credit facility in an aggregate principal amount of up to $250 million. The revolving credit facility permits swing line loans of up to the lesser of: (1) $25 million and (2) the aggregate commitments of all of the lenders. All of the obligations under the credit agreement are unconditionally guaranteed by our company and by our (and the borrower’s) active U.S. and Israeli subsidiaries.

The credit agreement contains customary representations and warranties, and affirmative and negative covenants. The negative covenants include, without limitation, restrictions on indebtedness, liens, investments, and certain dispositions. The negative covenants are each subject to a number of specific exceptions, as well as broader exceptions that are a function of our consolidated financial status. These broader exceptions include, among other things, the ability of our company, the borrower, or any of their subsidiaries to make investments, consummate acquisitions (as such terms are defined in the credit agreement), and incur additional unsecured indebtedness in the form of convertible unsecured bonds or similar convertible securities, as long as certain conditions are met. During April 2015 we borrowed an additional $125 million under the credit facility to support the funding of the expected growth of our business. Including amounts previously borrowed, we have $175 million principal amount of debt outstanding under the revolving credit facility.

We believe that we were in compliance with the all covenants under the credit agreement as of March 31, 2015. For a more complete description of the credit facility, please see “Item 5. Operating and Financial Review and Prospects—B. Liquidity and Capital Resources—Revolving Credit Facility” in our 2014 Annual Report.

As discussed in note 2 to our condensed consolidated financial statements, we acquired Solid Concepts on July 14, 2014. At the closing, we paid approximately $162 million as part of the purchase price and other related expenses, of which $60 million was paid in cash and $98 million was paid in our shares; the $4 million balance of the initial purchase price was deferred for six months and was paid in cash during January 2015. The remaining related payments, including deferred consideration and retention bonus payments, are subject to certain adjustments based on our share price. Based on our share price as of March 31, 2015, the total undiscounted amount of the deferred payments consideration and retention bonus will amount to approximately $56.1 million. Subject to certain requirements for cash payments, we retain the discretion to settle any of the amounts payable under the Solid Concepts transaction in our shares, cash or any combination of the two. We believe that our existing cash reserves and our revolving credit facility will be adequate to permit us to make the cash payments if we choose to pay the remaining amount in cash.

As part of our business strategy, we plan to consider and, as appropriate, make acquisitions of other businesses, products, product rights or technologies. Our cash reserves, revolving credit facility and other liquid assets may be inadequate to consummate such acquisitions and it may be necessary for us to issue shares or raise substantial additional funds in the future to complete future transactions. In addition, as a result of our acquisition efforts, we are likely to experience significant charges to earnings and significant cash outflows for mergers and related expenses (whether or not our efforts are successful) that may include transaction costs, closing costs or costs of restructuring activities.

We have prepared our consolidated financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America. This has required us to make estimates, judgments, and assumptions that affected the amounts we reported. Actual results may differ from those estimates. To facilitate the understanding of our business activities, certain accounting policies that are important to the presentation of our financial condition and results of operations and that require management’s subjective judgments are described in our 2014 Annual Report. We base our judgments on our experience and various assumptions that we believe to be reasonable under the circumstances.

Forward-looking Statements and Factors That May Affect Future Results of Operations

Certain information included in or incorporated by reference into the Report of Foreign Private Issuer on Form 6-K of which this Operating and Financial Review is a part, or the Form 6-K, may be deemed to be “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements are those that predict or describe future events or trends and that do not relate solely to historical matters. You can generally identify forward-looking statements as statements containing the words “may,” “will,” “could,” “should,” “expect,” “anticipate,” “intend,” “estimate,” “believe,” “project,” “plan,” “assume” or other similar expressions, or negatives of those expressions, although not all forward-looking statements contain these identifying words.

These forward-looking statements may include, but are not limited to, statements regarding our future strategy, future operations, projected financial position, proposed products, estimated future revenues, projected costs, future prospects, the future of our industry and results that might be obtained by pursuing management’s current plans and objectives.

You should not place undue reliance on our forward-looking statements because the matters they describe are subject to certain risks, uncertainties and assumptions that are difficult to predict. Our forward-looking statements are based on the information currently available to us and speak only as of the date of this Form 6-K. Over time, our actual results, performance or achievements may differ from those expressed or implied by our forward-looking statements, and such difference might be significant and materially adverse to our shareholders. We undertake no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise.

Important factors that could cause actual results, developments and business decisions to differ materially from those anticipated in these forward-looking statements include, among other things:

Readers are urged to carefully review and consider the various disclosures made throughout the Form 6-K, our 2014 Annual Report, and in our other reports filed with or furnished to the SEC, which are designed to advise interested parties of the risks and factors that may affect our business, financial condition, results of operations and prospects.

Reference is made to Item 11 “Quantitative and Qualitative Disclosures about Market Risk” in our 2014 Annual Report.

We are subject to various litigation and other legal proceedings. For a discussion of certain of these matters that we deem to be material to our company, see Note 10-“Contingencies” in the notes to our unaudited condensed consolidated financial statements attached as Exhibit 99.1 to the Form 6-K.

●	Net sales in the three months ended March 31, 2015 were $172.7 million as compared to net sales of $150.9 million in the three months ended March 31, 2014, representing an increase of 14.4%. Net sales increased by approximately 20% on a constant currency basis when compared to the same period last year.
●	Continued the integration process of SDM to create a leading strategic platform for our direct manufacturing service following the acquisitions of Solid Concepts and Harvest Technologies.
●	Recorded a non-cash, non-tax-deductible goodwill impairment charge of $150.4 million and a non-cash charge for other intangible assets impairment of $43.2 million.

●	Net loss attributable to Stratasys Ltd. of $216.3 million, or $4.24 per diluted share, as compared to net income of $4.1 million or $0.08 per diluted share, for the three months ended March 31, 2014.
●	Cash flows provided by operating activities amounted to $3.9 million in the three months ended March 31, 2015 as compared to $4.9 million in three months ended March 31, 2014.
●	Announced an updated near-term plan for capital expenditures of $80 to $110 million for 2015, while remaining committed to our multi-year investment plan.

●	A decline in relevant capital spending within certain regions and industries, particularly in North America;
●	Negative impact from foreign currencies translation, which unfavorably impacted net sales by approximately $7.8 million, when net sales are translated on a constant currency basis;
●	Increased M&A activity among a few of our largest channel partners in North America, which contributed to a slower than expected sales ramp up amongst those partners;

●	The introduction of eight additional products over the course of the second half of 2014 to complete the Connex Triple Jetting Technology portfolio resulted in slower than expected adoption of the high-end Connex platforms within the channel.
●	Following accelerated growth in Asia Pacific and Japan over the past several years, a slower than expected channel ramp-up in certain parts of the region.

		Three Months Ended March 31,
		2015			Non-GAAP			2015			2014		Non-GAAP			2014
		GAAP			Adjustments			Non-GAAP			GAAP		Adjustments			Non-GAAP
		U.S. dollars and shares in thousands (except per share amounts)
	Gross profit (1)	$	46,088		$	47,321		$	93,409		$	77,728	$	14,396		$	92,124
	Operating income (loss) (1,2)		(220,902	)		220,126			(776	)		835		21,919			22,754
	Net income (loss) attributable to
	Stratasys Ltd. (1,2,3)		(216,288	)		218,312			2,024			4,087		16,511			20,598
	Diluted net income (loss) per share attributable
	to Stratasys Ltd. (4)	$	(4.24	)	$	4.28		$	0.04		$	0.08	$	0.32		$	0.40

(1)	Impairment of other intangible assets					29,782								-
	Acquired intangible assets amortization expense					14,905								13,460
	Non-cash stock-based compensation expense					1,833								912
	Merger and acquisition related expense					801								24
						47,321								14,396

(2)	Goodwill impairment					150,400								-
	Impairment of other intangible assets					13,423								-
	Acquired intangible assets amortization expense					6,456								5,364
	Non-cash stock-based compensation expense					7,927								5,824
	Change in fair value of obligations in connection with acquisitions					(13,256	)							(7,495	)
	Merger and acquisition related expense					7,855								3,830
						172,805								7,523
						220,126								21,919

(3)	Tax expense related to adjustments					(1,814	)							(5,408	)
					$	218,312							$	16,511

(4)	Weighted average number of ordinary shares outstanding- Diluted
			50,956						52,341			51,240					51,240

●	our ability to continue efficiently and successfully integrate the operations of Stratasys, Inc. and Objet Ltd. after their merger as well as MakerBot, Solid Concepts, Harvest and GrabCAD after their acquisition and to successfully establish and execute effective post-acquisition integration plans;
●	the overall global economic environment;
●	the impact of competition and new technologies;
●	general market, political and economic conditions in the countries in which we operate;
●	projected capital expenditures and liquidity;
●	changes in our strategy;
●	government regulations and approvals;
●	changes in customers’ budgeting priorities;
●	failure of demand for our products and services to grow as expected;
●	reduction in our profitability due to shifting in our product mix too far into lower margin products or our shifting in our revenues mix significantly towards our AM services business.
●	possible additional liability relating to parts manufactured by our digital manufacturing services;
●	litigation and regulatory proceedings; and
●	those factors referred to in Item 3.D “Key Information - Risk Factors”, Item 4, “Information on the Company”, and Item 5, “Operating and Financial Review and Prospects” in our 2014 Annual Report, as well as in the 2014 Annual Report generally.