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The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited 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, 2021, filed with the Securities and Exchange Commission, or SEC, on February 24, 2022, or our 2021 Annual Report, as updated by the “Risk Factors” section below.

We are a global leader in connected, polymer-based 3D printing solutions, across the entire manufacturing value chain. Leveraging distinct competitive advantages that include a broad set of best-in-class 3D printing platforms, software, a materials and technology partner ecosystem, innovative leadership, and global GTM infrastructure, we are positioned to capture share in a significant and growing global marketplace, with a focus on manufacturing, which we view as having the largest and fastest growing total addressable market.

Our approximately 1,700 granted and pending additive technology patents to date have been used to create models, prototypes, manufacturing tools, and production parts for a multitude of industries including aerospace, automotive, transportation, healthcare, consumer products, dental, medical, and education. Our products and comprehensive solutions improve product quality, development time, cost, and time-to-market. Our 3D ecosystem of solutions and expertise includes 3D printers, materials, software, expert services, and on-demand parts production.

A series of recent acquisitions and other transactions has strengthened our leadership in various facets of our business. Our acquisition, in December 2020, of Origin Laboratories, Inc., or Origin, significantly strengthened our leadership in mass production for polymer 3D printing. Origin’s pioneering approach to additive manufacturing of end-use parts has enabled us to serve a large market with manufacturing-grade 3D printers, utilizing P³ Programmable PhotoPolymerization. Our acquisition, in the first quarter of 2021, of UK-based RP Support Ltd., or RPS, a provider of industrial stereolithography 3D printers and solutions, provided us with a complementary technology that further expanded our polymer suite of solutions across the product life cycle. Similarly, our acquisition, in November 2021, of all remaining shares of Xaar 3D Ltd. or Xaar, has begun to accelerate our growth in production-scale 3D printing. The prospective transaction between our subsidiary, MakerBot, a leader in desktop 3D printing, and Ultimaker, gives us a significant (approximately 45.6%) stake in a new entity that has a broad technology offering, a larger scale, and that is well-capitalized and is therefore better equipped to compete in the attractive desktop 3D printing segment.

Our current outlook, as well as our results of operations for the three and six month periods ended June 30, 2022, should be evaluated in light of current global macroeconomic conditions, including challenging trends that have arisen in the post-COVID-19 period. Our revenues in the initial six months of 2022 evidenced a strong recovery from the periods most impacted by the COVID-19 pandemic, which recovery began already (to a more modest degree) in the first quarter of 2021 and continued throughout 2021. Our revenues during the six-month period ended June 30, 2022 grew by 17.4% on a year-over-year basis, compared to the six months ended June 30, 2021, when the COVID-19 pandemic adversely impacted our revenues more significantly. Our improved performance in the six months ended June 30, 2022, was primarily driven by a 32.7% increase in systems revenues, a 9.7% increase in consumables revenues, and a 11.8% increase in services revenues (in each case, compared to the corresponding period of 2021). Our revenues in the first six months of 2022 surpassed pre-COVID-19 levels (an improvement of 3.6% compared to the first six months of 2019), signaling that we have achieved full recovery from the pandemic with respect to our top-line results.

We continue to closely monitor macro-economic conditions, including supply chain problems, inflation and other trends that have been impacting economic activity on a global scale in the aftermath of the COVID-19 pandemic, and which may also adversely affect us. We have been assessing, on an ongoing basis, the implications of those global conditions for our operations, supply chain, liquidity, cash flow and customer orders, and have been acting in an effort to mitigate adverse consequences as needed. We estimate that those conditions have impacted us most notably by limiting our ability to increase our gross margins and our operating margins more significantly in the short-term, given the increased cost of goods and operating expenses associated with global supply chain problems and inflation. Assuming that those logistical issues and inflationary pressures ease, and the global economy remains relatively stable, we expect that those margins will improve, as we execute on our growth plans. That improvement is also contingent on the global economy remaining open generally, as it was during the first half of 2022, during which the COVID-19 pandemic itself did not have a material adverse impact on our results of operations.

We ended the second quarter of 2022 with $441.5 million in cash, cash equivalents and short-term deposits. We believe that we are well suited to continue to manage the current global macro-economic climate with a strong balance sheet and no debt, while focusing on cost controls and cash generation. We have continued to selectively apply certain research and development cost controls, which we began doing at the start of the COVID-19 pandemic, while ensuring that our NPI programs are well-funded, and we plan to continue investing as needed in order to support our new product development programs.

Our unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America, or 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 and six months ended June 30, 2022 with the corresponding periods of 2021.

Comparison of Three Months Ended June 30, 2022 to Three Months Ended June 30, 2021

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

	Three Months Ended June 30,
	2022					2021
		U.S. $ in thousands		% of Revenues			U.S. $ in thousands		% of Revenues
Revenues	$	166,603		100.0	%	$	147,005		100.0	%
Cost of revenues		99,210		59.5	%		83,735		57.0	%
Gross profit		67,393		40.5	%		63,270		43.0	%
Research and development, net		24,346		14.6	%		22,437		15.3	%
Selling, general and administrative		66,592		40.0	%		63,557		43.2	%
Operating loss		(23,545	)	(14.1	)%		(22,724	)	(15.5	)%
Financial expenses, net		(1,170	)	(0.7	)%		(372	)	(0.3	)%
Loss before income taxes		(24,715	)	(14.8	)%		(23,096	)	(15.7	)%
Income tax benefit		429		0.3	%		4,368		3.0	%
Share in losses of associated companies		(99	)	(0.1	)%		(1,431	)	(1.0	)%
Net loss		(24,385	)	(14.6	)%		(20,159	)	(13.7	)%

Our products and services revenues in the three months ended June 30, 2022 and 2021, as well as the percentage change reflected thereby, were as follows:

Revenues derived from products (including systems and consumable materials) increased by $15.4 million, or 15.4%, for the three months ended June 30, 2022, as compared to the three months ended June 30, 2021.

Revenues derived from systems increased by $13.3 million, or 29.2%, for the three months ended June 30, 2022, as compared to the three months ended June 30, 2021. Systems revenues reflected the highest second quarter total in four years, strengthened by the continued ramp-up of sales of the Origin One and H350 mass production systems.

Services revenues (including SDM, maintenance contracts, time and materials and other services) increased by $4.2 million for the three months ended June 30, 2022, or 9%, as compared to the three months ended June 30, 2021. Within services revenues, customer support revenue, which includes revenue generated mainly by maintenance contracts on our systems, increased by 9.1%.

Revenues and the percentage of revenues by region for the three months ended June 30, 2022 and 2021, as well as the percentage change in revenues in each such region reflected thereby, were as follows:

	Three Months Ended June 30,
	2022				2021				% Change
		U.S.$ in thousands	% of Revenues			U.S.$ in thousands	% of Revenues
Americas*	$	107,225	64.4	%	$	92,949	63.2	%	15.4	%
EMEA		35,212	21.1	%		32,523	22.1	%	8.3	%
Asia Pacific		24,166	14.5	%		21,533	14.7	%	12.2	%
	$	166,603	100.0	%	$	147,005	100.0	%	13.3	%

Revenues in the Americas region increased by $14.3 million, or 15.4%, to $107.2 million for the three months ended June 30, 2022, compared to $92.9 million for the three months ended June 30, 2021. The increase was in all revenue streams.

Revenues in the EMEA region increased by $2.7 million, or 8.3%, to $35.2 million for the three months ended June 30, 2022, compared to $32.5 million for the three months ended June 30, 2021. The increase was primarily driven by higher systems revenues. On a constant currency basis, when using the prior year period’s exchange rates, revenues increased by $6.6 million, or 20.4%.

Revenues in the Asia Pacific region increased by $2.6 million, or 12.2%, to $24.2 million for the three months ended June 30, 2022, compared to $21.5 million for the three months ended June 30, 2021. The increase was primarily driven by higher systems revenues.

Gross profit from our products and services, as well as the percentage change reflected thereby, was as follows:

Gross profit as a percentage of revenues from our products and services was as follows:

Gross profit attributable to products revenues increased by $4 million, or 7.9%, to $54.6 million for the three months ended June 30, 2022, compared to gross profit of $50.6 million for the three months ended June 30, 2021. Gross profit attributable to products revenues as a percentage of products revenues decreased to 47.2% for the three months ended June 30, 2022, compared to 50.4% for the three months ended June 30, 2021.

Gross profit attributable to services revenues increased by $0.1 million, or 0.9%, to $12.8 million for the three months ended June 30, 2022, compared to $ 12.7 million for the three months ended June 30, 2021. Gross profit attributable to services revenues as a percentage of services revenues in the three months ended June 30, 2022 decreased to 25.2%, as compared to 27.2% for the three months ended June 30, 2021.

The above gross profit results were impacted by growth in logistics and materials costs, reflecting global inflationary trends, offset by our increased revenues from systems and consumables and raised pricing, along with operational efficiencies, during the second quarter of 2022 compared to the second quarter of 2021.

The amount of each type of operating expense for the three months ended June 30, 2022 and 2021, as well as the percentage change reflected thereby, and total operating expenses as a percentage of our total revenues in each such quarter, were as follows:

Operating expenses were $90.9 million in the second quarter of 2022, compared to operating expenses of $86.0 million in the second quarter of 2021. The increase in operating expenses was driven primarily by the impact of the recent acquisition of Xaar, as well as higher commissions based on the higher revenue. The decrease in operating expenses as a percentage of our revenues—from 58.5% to 54.6%- reflected our improved operating efficiencies.

Research and development expenses, net increased by $1.9 million, or 8.5%, to $24.3 million for the three months ended June 30, 2022, compared to $22.4 million for the three months ended June 30, 2021. The amount of research and development expenses constituted 14.6% of our revenues for the three months ended June 30, 2022, as compared to 15.3% for the three months ended June 30, 2021.

Our research and development expenses were impacted by the timing of project spending and product launches, based on our portfolio management. We continue to invest in strategic long-term initiatives that include advancements in our core FDM and PolyJet technologies and in our new powder-based and photopolymer-based, SAF and P3 technologies, advanced composite materials, software and development of new applications which will enhance our current solutions offerings.

Selling, general and administrative expenses increased by $3.0 million, or 4.8%, to $66.6 million for the three months ended June 30, 2022, compared to $63.6 million for the three months ended June 30, 2021. The increase in these expenses reflected the trend of increased operating activity that began in 2021 and has intensified during the first and second quarters of 2022. The amount of selling, general and administrative expenses constituted 40.0% of our revenues for the three months ended June 30, 2022, as compared to 43.2% for the three months ended June 30, 2021.

Operating loss and operating loss as a percentage of our total revenues were as follows:

Operating loss amounted to $23.5 million for the three months ended June 30, 2022, compared to an operating loss of $22.7 million for the three months ended June 30, 2021. While increasing on an absolute basis, our operating loss decreased as a percentage of our revenues in the second quarter of 2022 compared to the second quarter of 2021, reflecting our improved operating efficiencies.

Financial expenses, net, which was primarily comprised of foreign currencies effects, interest income and interest expenses, was $1.2 million for the three months ended June 30, 2022, compared to financial expenses, net of $0.4 million for the three months ended June 30, 2021.

Income tax benefit and income tax benefit as a percentage of net loss before taxes, as well as the percentage change in each, year over year, reflected thereby, were as follows:

We had an effective tax rate of 1.7% for the three-month period ended June 30, 2022, compared to an effective tax rate of 18.9% for the three-month period ended June 30, 2021. Our effective tax rate in the second quarter of 2022 was primarily impacted by the geographic mix of foreign taxable earnings and losses, as well as our valuation allowance.

Share in losses of associated companies reflects our proportionate share of the profits of unconsolidated entities accounted for by using the equity method of accounting. During the three months ended June 30, 2022, the loss from our proportionate share of the losses of our equity method investments was $0.1 million, compared to a loss of $1.4 million in the three months ended June 30, 2021. The foregoing decrease in losses was attributable to our acquisition, in the fourth quarter of 2021, of Xaar which was previously held as an equity investment.

Net loss was $24.4 million for the three months ended June 30, 2022 compared to net loss of $20.2 million for the three months ended June 30, 2021.

Net loss per share was $0.37 for the three months ended June 30, 2022 as compared to net loss per share of $0.31 for the three months ended June 30, 2021. The weighted average fully diluted share count was 66.6 million during the three months ended June 30, 2022, compared to 64.9 million during the three months ended June 30, 2021.

The absolute increase in net loss and basic and diluted net loss per share, as well as that increase as a percentage of our revenues, resulted from the aggregate impact of the foregoing line items in our results of operations in the second quarter of 2022 as compared to the second quarter of 2021.

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

Our products and services revenues in the six months ended June 30, 2022 and 2021, as well as the percentage change reflected thereby, were as follows:

Revenues derived from products (including AM systems and consumable materials) increased by $38.2 million, or 20.0%, for the six months ended June 30, 2022, as compared to the six months ended June 30, 2021.

Revenues derived from systems for the six months ended June 30, 2022 increased by $27.9 million, or 32.7% as compared to the six months ended June 30, 2021. The increase in systems revenues reflected a strong six-month period ended June 30, 2022, which was strengthened by the launch of the Origin One 3D printer in mid-February 2022 and the first full quarter of H350 sales in the second quarter of 2022.

Revenues derived from consumables increased by $10.2 million, or 9.7%, for the six months ended June 30, 2022, as compared to the six months ended June 30, 2021. The increase in consumables reflects the impact of strong systems sales throughout 2021 and their initial flow-through to consumables as initial materials began to be replenished in the first half of 2022.

Services revenues (including SDM, maintenance contracts, time and materials and other services) increased by $10.7 million for the six months ended June 30, 2022, or 11.8%, as compared to the six months ended June 30, 2021. Within services revenues, customer support revenue, which includes revenue generated mainly by maintenance contracts on our systems, increased by 9.6%.

Revenues and the percentage of revenues by region for the six months ended June 30, 2022 and 2021, as well as the percentage change in revenues in each such region reflected thereby, were as follows:

Revenues in the Americas region increased by $30.7 million, or 17.6%, to $205.8 million for the six months ended June 30, 2022, compared to $175.1 million for the six months ended June 30, 2021. The increase was in all revenue streams.

Revenues in the EMEA region increased by $13.8 million, or 22.5%, to $75.3 million for the six months ended June 30, 2022, compared to $61.4 million for the six months ended June 30, 2021. The increase was primarily driven by higher products revenues.

Revenues in the Asia Pacific region increased by $4.3 million, or 9.6%, to $49.0 million for the six months ended June 30, 2022, compared to $44.7 million for the six months ended June 30, 2021. The increase was primarily driven by higher systems revenues.

Gross profit from our products and services, as well as the percentage change reflected thereby, were as follows:

Gross profit as a percentage of revenues from our products and services was as follows:

Gross profit attributable to products revenues increased by $14.3 million, or 15.2%, to $108.3 million for the six months ended June 30, 2022, compared to gross profit of $94.0 million for the six months ended June 30, 2021. Gross profit attributable to products revenues as a percentage of products revenues decreased to 47.3% for the six months ended June 30, 2022, compared to 49.3% for the six months ended June 30, 2021.

Gross profit attributable to services revenues increased by $3.9 million, or 15.7%, to $28.8 million for the six months ended June 30, 2022, compared to $24.9 million for the six months ended June 30, 2021. Gross profit attributable to services revenues as a percentage of services revenues in the six months ended June 30, 2022 increased to 28.4%, as compared to 27.5% for the six months ended June 30, 2021.

The above gross profit results were impacted by growth in logistics and materials costs, reflecting global inflationary trends, offset by our increased revenues from systems and consumables, along with operational efficiencies, during the second quarter of 2022 compared to the second quarter of 2021.

The amount of each type of operating expense for the six months ended June 30, 2022 and 2021, as well as the percentage change reflected thereby, and total operating expenses as a percentage of our total revenues in each such quarter, were as follows:

Operating expenses were $180.2 million in the six months ended June 30, 2022, compared to operating expenses of $159.9 million in the six months ended June 30, 2021. The increase in operating expenses was driven primarily by the impact of the addition of the operating expenses of three recently-acquired companies— Xaar, Origin, and RPS— to our consolidated results of operations, as well as higher commissions based on our increased revenues.

Research and development expenses, net increased by $5.3 million, or 12.3%, to $48.3 million for the six months ended June 30, 2022, compared to $43.0 million for the six months ended June 30, 2021. The amount of research and development expenses constituted 14.6% of our revenues for the six months ended June 30, 2022, as compared to 15.3% for the six months ended June 30, 2021.

Our research and development expenses were impacted by the timing of project spending and product launches, based on our management of our product portfolio. We continue to invest in strategic long-term initiatives that include advancements in our core FDM and PolyJet technologies and in our new powder-based and photopolymer-based, SAF and P3 technologies, advanced composite materials, software and development of new applications which will enhance our current solutions offerings.

Selling, general and administrative expenses increased by $15.0 million, or 12.8%, to $131.9 million for the six months ended June 30, 2022, compared to $116.9 million for the six months ended June 30, 2021. The increase in these expenses reflected the trend of increased operating activity which began in 2021 and carried over with even greater strength into the first half of 2022. The amount of selling, general and administrative expenses constituted 40.0% of our revenues for the six months ended June 30, 2022, as compared to 41.6% for the six months ended June 30, 2021.

The decrease in each category of operating expenses as a percentage of our revenues in the first half of 2022 compared to the first half of 2021 reflects our improved operational efficiencies.

Operating loss and operating loss as a percentage of our total revenues were as follows:

Operating loss amounted to $43.1 million for the six months ended June 30, 2022, compared to an operating loss of $41.1 million for the six months ended June 30, 2021. While increasing on an absolute basis, our operating loss decreased as a percentage of our revenues in the first half of 2022 compared to the first half of 2021.

Financial expenses, net, which were primarily comprised of foreign currencies effects, interest income and interest expenses, were $2.5 million for the six months ended June 30, 2022 and $0.7 million for the six months ended June 30, 2021.

Income tax benefit and income tax benefit as a percentage of net loss before taxes, as well as the percentage change in each, year over year, reflected thereby, were as follows:

We had an effective tax rate of 1.1% for the six-month period ended June 30, 2022, compared to an effective tax rate of 12.7% for the six-month period ended June 30, 2021.Our effective tax rate in the six months ended June 30, 2022 was primarily impacted by the geographic mix of foreign taxable earnings and losses, as well as our valuation allowance.

Share in losses of associated companies reflects our proportionate share of the losses of unconsolidated entities accounted for by using the equity method of accounting. During the six months ended June 30, 2022, the loss from our proportionate share of the earnings of our equity method investments was $0.2 million, compared to a loss of $2.5 million in the six months ended June 30, 2021. The foregoing decrease in losses was attributable to our acquisition, in the fourth quarter of 2021, of Xaar which was previously held as an equity investment.

Net loss was $45.3 million for the six months ended June 30, 2022 compared to a net loss of $39.1 million for the six months ended June 30, 2021. While increasing on an absolute basis, our net loss decreased as a percentage of our revenues in the six months ended June 30, 2022 compared to the six months ended June 30, 2021.

Net loss per share was $0.69 and $0.63 for the six months ended June 30, 2022 and 2021, respectively. The weighted average fully diluted share count was 66.2 million for the six months ended June 30, 2022, compared to 61.8 million for the six months ended June 30, 2021.

The absolute increase in net loss and basic and diluted net loss per share, as well as the decrease in net loss as a percentage of our revenues, resulted from the aggregate impact of the foregoing line items in our results of operations in the first six months of 2022 as compared to the corresponding period in 2021.

The following non-GAAP data, which excludes certain items as 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 (i) on an ongoing basis after excluding mergers, acquisitions and divestments related expense or gains and restructuring-related charges or gains, legal provisions and (ii) excluding non-cash items such as stock-based compensation expenses, acquired intangible assets amortization, including intangible assets amortization related to equity method investments, impairment of long-lived assets and goodwill, revaluation of our investments and the corresponding tax effect of those items.

The items adjusted in our non-GAAP results either do not reflect actual cash outlays that impact our liquidity and our financial condition, or have a non-recurring impact on the statement of operations, as assessed by management. These non-GAAP financial measures are presented to allow investors to better understand how management assesses our performance for internal planning and forecasting purposes. 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 items indicated above during a period, which may not provide a comparable view of our performance to other companies in our industry. Investors and other readers should consider non-GAAP measures only as supplements to, not as substitutes for or as superior measures to, the measures of financial performance prepared in accordance with GAAP. Reconciliation between results on a GAAP and non-GAAP basis is provided in the table below.

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

	Six Months Ended June 30,
		2022			2021
	U.S $ in thousands
Net loss	$	(45,333	)	$	(39,070	)
Depreciation and amortization		29,924			27,695
Impairment of other long-lived assets		3,865			-
Stock-based compensation		17,364			15,182
Foreign currency transactions loss		10,318			3,311
Other non-cash items, net		2,658			2,232
Change in working capital and other items		(57,705	)		19,036
Net cash provided by (used in) operating activities		(38,909	)		28,386
Net cash provided by (used in) investing activities		63,172			(177,676	)
Net cash provided by (used in) by financing activities		(864	)		222,796
Effect of exchange rate changes on cash, cash equivalents and restricted cash		(7,413	)		(1,869	)
Net change in cash, cash equivalents and restricted cash		15,986			71,637
Cash, cash equivalents and restricted cash, beginning of period		243,293			272,216
Cash, cash equivalents and restricted cash, end of period		259,279			343,853

Our cash, cash equivalents and restricted cash balance increased to $259.3 million as of June 30, 2022 from $243.3 million as of December 31, 2021. The increase in cash, cash equivalents and restricted cash in the six months ended June 30, 2022 was primarily due to $63.2 million of cash generated by investing activities, partially offset by $38.9 million of cash used in operating activities.

We used $38.9 million of cash in operating activities during the six months ended June 30, 2022. That cash use reflects our $45.3 million net loss, as adjusted downwards to eliminate non-cash charges included in net loss, such as $29.9 million of depreciation and amortization, $17.4 million of share-based compensation expenses and a $10.3 million loss from foreign currency transactions, as offset in part, by elimination of changes in our working capital balances, which adjustments had an unfavorable net impact of $57.7 million on our cash flows, which changes were mainly driven by increased inventory purchases.

We generated $63.2 million of cash from our investing activities during the six months ended June 30, 2022. The increase was mostly attributable to $76.6 million of net proceeds that we withdrew from short-term bank deposits, partly offset by cash that we invested for the purchase of property and equipment, and for investments in unconsolidated entities.

We used $0.9 million of cash in financing activities during the six months ended June 30, 2022. These financing activities were mostly related to contingent consideration that we paid for acquisitions, in an aggregate amount of $1.4 million.

Our total current assets amounted to $782.2 million as of June 30, 2022, of which $441.5 million consisted of cash, cash equivalents, short-term deposits and restricted cash. Total current liabilities amounted to $199.5 million. Most of our cash and cash equivalents and short-term deposits are held in banks in Israel and in the U.S.

The credit risk related to our accounts receivable is limited due to the relatively large number of customers and their wide geographic distribution. In addition, we seek to reduce the credit exposure related to our accounts receivable by imposing credit limits, conducting ongoing credit evaluation, and by implementing account monitoring procedures, as well as credit insurance for many of our customers.

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 better understand our business activities and those accounting policies that are important to the presentation of our financial condition and results of operations and that require management's subjective judgements, please see our 2021 Annual Report. We base our judgements 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 to which this Operating and Financial Review is appended, 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 the 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.

the extent of our success at introducing new or improved products and solutions that gain market share;

changes in our overall strategy, including as related to any restructuring activities and our capital expenditures;

the impact of shifts in prices or margins of the products that we sell or services we provide;

impairments of goodwill or other intangible assets in respect of companies that we acquire;

the extent of our success at efficiently and successfully integrating the operations of various companies that we have acquired or may acquire;

the degree of our success at locating and acquiring additional value-enhancing, inorganic technology that furthers our business plan to lead in the realm of polymers;

infringement of our intellectual property rights by others (including for replication and sale of consumables for use in our systems), or infringement of others’ intellectual property rights by us;

• the extent of our success at maintaining our liquidity and financing our operations and capital needs;

impact of tax regulations on our results of operations and financial conditions;

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 2021 Annual Report, as supplemented herein, as well as in other portions of the 2021 Annual Report Readers are urged to carefully review and consider the various disclosures made throughout the Form 6-K, our 2021 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 2021 Annual Report.

We are subject to various litigation and other legal proceedings from time to time. For a discussion of our litigation status, see Note 12-“Contingencies” in the notes to our unaudited condensed consolidated interim financial statements attached as Exhibit 99.1 to the Form 6-K.

Adverse macro-economic trends such as inflation and supply chain problems have been adversely affecting, and may continue to adversely affect, potentially in a more material manner (including due to measures taken to reduce their impact), our business, results of operations and financial condition.

Certain global macro-economic trends that were triggered, in large part, by the COVID-19 pandemic and the world’s reaction to it, have been adversely impacting the global economic environment in the post-pandemic period. Supply chain delays, initially caused by closures during the pandemic, and rising shipping costs, which have been exacerbated by the ongoing Russian invasion of the Ukraine, have contributed towards inflationary pressures on many goods and commodities globally. The infusion of money into circulation as part of a “loose” monetary policy to encourage consumer spending, along with historically low interest rates for an extended period of time, which were designed to ease economic conditions during the pandemic, further triggered upwards pressure on prices of goods and services. The high rates of inflation globally have caused governments and central banks to act to curb inflation, including by raising interest rates, which may potentially stifle economic activity and cause a recession, whether in individual countries or regions, or globally.

We cannot predict what impact these current or prospective macro-economic trends may have on our target markets and our expected results of operations. For example, rising interest rates which are meant to slow down inflation may worsen credit/financing conditions for our customers and adversely impact their ability to purchase our products.

While we believe that are well-positioned to withstand the current adverse macro-economic trends, given our balance sheet (primarily due to our cash reserves and lack of debt) and our emphasis on operational efficiencies and execution, we continue to monitor the situation, assessing further implications for our operations, supply chain, liquidity, cash flow and customer orders, in an effort to mitigate potential new adverse consequences should they arise. However, there is no assurance that we will succeed at doing so.

A potential downturn could also have a material adverse impact on our business partners’ stability and financial strength. Given the uncertainties associated with these trends in the aftermath of the COVID-19 pandemic, it is difficult to fully predict the magnitude of their effects on our, and our business partners’, business, financial condition and results of operations.

	Six Months Ended June 30,
		2022		2021
	U.S. $ in thousands				Change in %
Gross profit attributable to:
Products	$	108,289	$	93,978	15.2	%
Services		28,781		24,869	15.7	%
	$	137,070	$	118,847	15.3	%

			Three Months Ended June 30,
				2022			Non-GAAP		2022		2021			Non-GAAP		2021
				GAAP			Adjustments		Non-GAAP		GAAP			Adjustments		Non-GAAP
			U.S. dollars and shares in thousands (except per share amounts)
		Gross profit (1)		$67,393			$11,914		$79,307		$63,270			$6,616		$69,886
		Operating income (loss) (1,2)		(23,545	)		25,479		1,934		(22,724	)		20,133		(2,591	)
		Net income (loss) (1,2,3)		(24,385	)		25,560		1,175		(20,159	)		18,581		(1,578	)
		Net income (loss) per diluted share (4)	$	(0.37	)	$	0.39	$	0.02	$	(0.31	)	$	0.29	$	(0.02	)


(1)		Acquired intangible assets amortization expense					6,954							5,518
		Non-cash stock-based compensation expense					1,080							788
		Restructuring and other related costs					15							310
		Impairment charges					3,865							-
							11,914							6,616

(2)		Acquired intangible assets amortization expense					2,218							2,200
		Non-cash stock-based compensation expense					7,751							7,189
		Restructuring and other related costs					-							350
		Revaluation of investments					1,255							2,201
		Contingent consideration					596							202
		Other expenses					1,745							1,375
							13,565							13,517
							25,479							20,133

(3)		Corresponding tax effect and other expenses					81							(1,552)
							$25,560							$18,581

(4	)	Weighted average number of ordinary shares outstanding- Diluted		66,568					67,070		64,908					64,908

		Six Months Ended June 30,
			2022			Non-GAAP			2022		2021			Non-GAAP			2021
			GAAP			Adjustments			Non-GAAP		GAAP			Adjustments			Non-GAAP
		U.S. dollars and shares in thousands (except per share amounts)
	Gross profit (1)	$	137,070		$	19,603		$	156,673	$	118,847		$	13,685		$	132,532
	Operating income (loss) (1,2)		(43,129	)		47,086			3,957		(41,082	)		35,918			(5,164	)
	Net income (loss) (1,2,3)		(45,333	)		47,718			2,385		(39,070	)		33,692			(5,378	)
	Net income (loss) per diluted share (4)	$	(0.69	)	$	0.73		$	0.04	$	(0.63	)	$	0.54		$	(0.09	)


(1)	Acquired intangible assets amortization expense					13,920								10,873
	Non-cash stock-based compensation expense					1,980								1,422
	Restructuring and other related costs					(162	)							1,390
	Impairment charges					3,865								-
						19,603								13,685

(2)	Acquired intangible assets amortization expense					4,443								4,393
	Non-cash stock-based compensation expense					15,384								13,760
	Restructuring and other related costs					555								2,159
	Revaluation of investments					2,316								(1,469	)
	Contingent consideration					803								393
	Other expenses					3,982								2,997
						27,483								22,233
						47,086								35,918

(3)	Corresponding tax effect and other expenses					632								(2,226	)
					$	47,718							$	33,692

(4)	Weighted average number of ordinary shares outstanding- Diluted		66,151						67,071		61,796						61,796