UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________________

FORM 10-Q

☒    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended SeptemberJune 30, 20212022
OR
☐    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________to____________

Commission File No. 001-34220
__________________________

ddd-20220630_g1.jpg

3D SYSTEMS CORPORATION
(Exact name of Registrant as specifiedSpecified in its Charter)
__________________________
Delaware95-4431352
(State or Other Jurisdiction of
Incorporation or Organization)		(I.R.S. Employer
Identification No.)

333 Three D Systems Circle
Rock Hill, South Carolina 29730
(Address of Principal Executive Offices and Zip Code)

(Registrant’s Telephone Number, Including Area Code): (803) 326-3900
_________________________

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading SymbolName of each exchange on which registered
Common Stock, par value $0.001 per shareDDDNew York Stock Exchange

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer☒Accelerated filer☐
Non-accelerated filer☐Smaller reporting company☐
Emerging growth company☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the SecuritiesExchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.) Yes ☐ No ☒
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
Shares of Common Stock, par value $0.001 per share, outstanding as of NovemberAugust 4, 2021: 127,729,3492022: 130,281,318
1

3D SYSTEMS CORPORATION
Form 10-Q
For the Quarter Ended SeptemberThree and Six Months ended June 30, 20212022

TABLE OF CONTENTS
PART I — FINANCIAL INFORMATION
Item 1. Financial Statements.
3
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
2534
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
3550
Item 4. Controls and Procedures.
3550
PART II — OTHER INFORMATION
Item 1. Legal Proceedings.
3652
Item 1A. Risk Factors.
3652
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
3953
Item 6. Exhibits.
4154

2

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements.

3D SYSTEMS CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except par value)(In thousands, except par value)September 30, 2021 (unaudited)December 31, 2020(In thousands, except par value)June 30, 2022 (unaudited)December 31, 2021
ASSETSASSETSASSETS
Current assets:Current assets:Current assets:
Cash and cash equivalentsCash and cash equivalents$502,752 $75,010 Cash and cash equivalents$298,834 $789,657 
Accounts receivable, net of reserves — $3,470 and $4,39289,926 114,254 
Short-term investmentsShort-term investments339,386 — 
Accounts receivable, net of reserves — $3,280 and $2,445Accounts receivable, net of reserves — $3,280 and $2,445107,013 106,540 
InventoriesInventories89,325 116,667 Inventories106,001 92,887 
Prepaid expenses and other current assetsPrepaid expenses and other current assets25,963 33,145 Prepaid expenses and other current assets44,608 42,653 
Current assets held for sale— 18,439 
Total current assetsTotal current assets707,966 357,515 Total current assets895,842 1,031,737 
Property and equipment, netProperty and equipment, net57,720 75,356 Property and equipment, net55,864 57,257 
Intangible assets, netIntangible assets, net30,251 28,083 Intangible assets, net70,005 45,835 
GoodwillGoodwill139,906 161,765 Goodwill382,498 345,588 
Right of use assetsRight of use assets44,514 48,620 Right of use assets45,832 46,356 
Deferred income tax assetDeferred income tax asset3,475 6,247 Deferred income tax asset4,715 5,054 
Assets held for sale— 31,684 
Other assetsOther assets21,271 23,785 Other assets27,200 17,272 
Total assetsTotal assets$1,005,103 $733,055 Total assets$1,481,956 $1,549,099 
LIABILITIES AND EQUITY
LIABILITIES, REDEEMABLE NON-CONTROLLING INTEREST, AND EQUITYLIABILITIES, REDEEMABLE NON-CONTROLLING INTEREST, AND EQUITY
Current liabilities:Current liabilities:Current liabilities:
Current portion of long-term debt$— $2,051 
Current right of use liabilitiesCurrent right of use liabilities8,176 9,534 Current right of use liabilities8,465 8,344 
Accounts payableAccounts payable44,946 45,174 Accounts payable62,226 57,366 
Accrued and other liabilitiesAccrued and other liabilities78,152 69,812 Accrued and other liabilities54,849 76,994 
Customer depositsCustomer deposits9,405 7,750 Customer deposits6,153 7,281 
Deferred revenueDeferred revenue27,509 30,302 Deferred revenue30,675 28,027 
Current liabilities held for sale— 11,107 
Total current liabilitiesTotal current liabilities168,188 175,730 Total current liabilities162,368 178,012 
Long-term debt, net of deferred financing costsLong-term debt, net of deferred financing costs— 19,218 Long-term debt, net of deferred financing costs448,081 446,859 
Long-term right of use liabilitiesLong-term right of use liabilities45,533 48,469 Long-term right of use liabilities46,139 47,420 
Deferred income tax liabilityDeferred income tax liability3,142 4,716 Deferred income tax liability3,710 2,173 
Liabilities held for sale— 2,952 
Other liabilitiesOther liabilities39,090 51,247 Other liabilities35,851 32,254 
Total liabilitiesTotal liabilities255,953 302,332 Total liabilities696,149 706,718 
Commitments and contingencies (Note 14)Commitments and contingencies (Note 14)00Commitments and contingencies (Note 14)00
Redeemable noncontrolling interestRedeemable noncontrolling interest2,149 — 
Stockholders’ equity:Stockholders’ equity:Stockholders’ equity:
Common stock, $0.001 par value, authorized 220,000 shares; issued 126,758 and 127,626127 128 
Common stock, $0.001 par value, authorized 220,000 shares; shares issued and outstanding 130,304 and 128,375Common stock, $0.001 par value, authorized 220,000 shares; shares issued and outstanding 130,304 and 128,375130 128 
Additional paid-in capitalAdditional paid-in capital1,410,576 1,404,964 Additional paid-in capital1,525,734 1,501,210 
Treasury stock, at cost — 1,623 shares and 3,494 shares(10,492)(22,590)
Accumulated deficitAccumulated deficit(615,051)(943,303)Accumulated deficit(681,011)(621,251)
Accumulated other comprehensive lossAccumulated other comprehensive loss(36,010)(8,476)Accumulated other comprehensive loss(61,195)(37,706)
Total stockholders’ equityTotal stockholders’ equity749,150 430,723 Total stockholders’ equity783,658 842,381 
Total liabilities and stockholders’ equity$1,005,103 $733,055 
Total liabilities, redeemable noncontrolling interests and stockholders’ equityTotal liabilities, redeemable noncontrolling interests and stockholders’ equity$1,481,956 $1,549,099 

See accompanying notes to condensed consolidated financial statements.
3

3D SYSTEMS CORPORATION
CONDENSED CONSOLIDATED STATEMENTSOFOPERATIONS
(Unaudited)

Quarter Ended September 30,Nine Months Ended September 30,Three Months Ended June 30,Six Months Ended June 30,
(in thousands, except per share amounts)(in thousands, except per share amounts)2021202020212020(in thousands, except per share amounts)2022202120222021
Revenue:Revenue:Revenue:
ProductsProducts$108,884 $78,296 $311,170 $220,248 Products$103,774 $108,638 $204,325 $202,286 
ServicesServices47,212 57,880 153,599 164,340 Services36,271 53,919 68,721 106,387 
Total revenueTotal revenue156,096 136,176 464,769 384,588 Total revenue140,045 162,557 273,046 308,673 
Cost of sales:Cost of sales:Cost of sales:
ProductsProducts64,252 48,213 180,251 147,950 Products65,331 62,635 123,803 115,999 
ServicesServices27,529 29,336 86,958 85,712 Services21,576 30,917 42,310 59,429 
Total cost of salesTotal cost of sales91,781 77,549 267,209 233,662 Total cost of sales86,907 93,552 166,113 175,428 
Gross profitGross profit64,315 58,627 197,560 150,926 Gross profit53,138 69,005 106,933 133,245 
Operating expenses:Operating expenses:Operating expenses:
Selling, general and administrativeSelling, general and administrative65,737 59,065 176,800 167,213 Selling, general and administrative64,404 61,463 119,819 111,063 
Research and developmentResearch and development15,786 18,866 49,987 55,107 Research and development20,772 17,602 42,384 34,201 
Impairment of goodwill— 48,300 — 48,300 
Total operating expensesTotal operating expenses81,523 126,231 226,787 270,620 Total operating expenses85,176 79,065 162,203 145,264 
Loss from operationsLoss from operations(17,208)(67,604)(29,227)(119,694)Loss from operations(32,038)(10,060)(55,270)(12,019)
Interest and other income (expense), netInterest and other income (expense), net315,859 (2,419)354,396 (7,598)Interest and other income (expense), net329 (316)(1,954)38,537 
Income (loss) before income taxes298,651 (70,023)325,169 (127,292)
Benefit (provision) for income taxes(5,995)(2,866)3,083 (2,472)
Net income (loss)$292,656 $(72,889)$328,252 $(129,764)
(Loss) income before income taxes(Loss) income before income taxes(31,709)(10,376)(57,224)26,518 
(Provision) benefit for income taxes(Provision) benefit for income taxes(1,289)744 (2,573)9,078 
Net (loss) income before redeemable non-controlling interestNet (loss) income before redeemable non-controlling interest$(32,998)$(9,632)$(59,797)$35,596 
Less: net (loss) attributable to redeemable noncontrolling interestsLess: net (loss) attributable to redeemable noncontrolling interests(37)— (37)— 
Net (loss) income attributable to 3D Systems CorporationNet (loss) income attributable to 3D Systems Corporation$(32,961)$(9,632)$(59,760)$35,596 
Net income (loss) per common share:
Net (loss) income per common share:Net (loss) income per common share:
BasicBasic$2.39 $(0.61)$2.69 $(1.12)Basic$(0.26)$(0.08)$(0.47)$0.29 
DilutedDiluted$2.34 $(0.61)$2.63 $(1.12)Diluted$(0.26)$(0.08)$(0.47)$0.28 
Weighted average shares outstanding:Weighted average shares outstanding:Weighted average shares outstanding:
BasicBasic122,663118,527 122,178 116,216 Basic127,703122,147127,218 121,931 
DilutedDiluted125,289118,527 124,839 116,216 Diluted127,703122,147127,218 125,069 

See accompanying notes to condensed consolidated financial statements.


4

3D SYSTEMS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME (LOSS)
(Unaudited)
Quarter Ended September 30,Nine Months Ended September 30,
(in thousands)2021202020212020
Net income (loss)$292,656 $(72,889)$328,252 $(129,764)
Other comprehensive income (loss), net of taxes:
Pension adjustments125 (47)334 130 
Derivative financial instruments— 11 721 (413)
Foreign currency translation(15,277)11,214 (37,501)8,079 
Foreign currency translation reclassification - sales of Cimatron and Simbionix2,431 — 8,912 — 
Total other comprehensive income (loss), net of taxes(12,721)11,178 (27,534)7,796 
Total comprehensive income (loss), net of taxes$279,935 $(61,711)$300,718 $(121,968)
Three Months Ended June 30,Six Months Ended June 30,
(in thousands)2022202120222021
Net (loss) income$(32,998)$(9,632)$(59,797)$35,596 
Other comprehensive (loss) income , net of taxes:
Pension plan adjustments165 28 266 209 
Derivative financial instruments— — — 721 
Foreign currency translation(16,386)3,385 (19,732)(22,224)
Unrealized loss on short-term investments(528)— (4,023)— 
Foreign currency translation reclassification - sale of business— — — 6,481 
Total other comprehensive (loss) income, net of taxes(16,749)3,413 (23,489)(14,813)
Total comprehensive (loss) income, net of taxes$(49,747)$(6,219)$(83,286)$20,783 
Less: Comprehensive (loss) attributable to redeemable non-controlling interest$(37)$— $(37)$— 
Total comprehensive (loss) income attributable to 3D Systems Corporation$(49,710)$(6,219)$(83,249)$20,783 

See accompanying notes to condensed consolidated financial statements.

5

3D SYSTEMS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended September 30,
(in thousands)20212020
Cash flows from operating activities:
Net income (loss)$328,252 $(129,764)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization26,292 34,830 
Stock-based compensation43,991 16,621 
Provision for inventory obsolescence and revaluation1,100 10,894 
Loss on hedge accounting de-designation and termination721 1,235 
Provision for bad debts620 1,039 
Gain on the disposition of businesses, property, equipment and other assets(351,981)434 
Provision for deferred income taxes and reserve adjustments(9,380)— 
Impairment of goodwill and assets— 54,072 
Changes in operating accounts:
Accounts receivable(2,151)12,668 
Inventories7,095 (23,987)
Prepaid expenses and other current assets5,338 (15,376)
Accounts payable15,517 (9,166)
Deferred revenue and customer deposits5,401 2,714 
Accrued and other liabilities(9,859)6,309 
All other operating activities1,696 4,828 
Net cash provided by (used in) operating activities62,652 (32,649)
Cash flows from investing activities:
Purchases of property and equipment(14,814)(11,015)
Proceeds from sale of assets and businesses, net of cash427,664 552 
Business acquisitions, net of cash acquired(10,936)— 
Purchase of noncontrolling interest(4,000)(12,500)
Other investing activities(2,273)504 
Net cash provided by (used in) investing activities395,641 (22,459)
Cash flows from financing activities:
Proceeds from revolving credit facilities— 20,000 
Payments on revolving credit facilities— (20,000)
Repayment of borrowings/long-term debt(21,392)(26,547)
Proceeds from issuance of common stock— 25,003 
Proceeds from inventory financing agreements— 2,509 
Payments related to net-share settlement of stock-based compensation(10,386)(5,034)
Other financing activities(424)296 
Net cash used in financing activities(32,202)(3,773)
Effect of exchange rate changes on cash, cash equivalents and restricted cash(7,737)526 
Net increase (decrease) in cash, cash equivalents and restricted cash418,354 (58,355)
Cash, cash equivalents and restricted cash at the beginning of the period (a)
84,711 134,617 
Cash, cash equivalents and restricted cash at the end of the period (a)
$503,065 $76,262 
Supplemental cash flow information
Lease assets obtained in exchange for new lease liabilities (excludes adoption)$2,088 $— 
Cash interest payments$1,234 $1,836 
Cash income tax payments (receipts), net$(1,514)$2,861 
Transfer of equipment from inventory to property and equipment, net (b)
$1,610 $671 
Stock issued for acquisition$2,989 $— 
Six Months Ended June 30,
(in thousands)20222021
Cash flows from operating activities:
Net (loss) income$(59,797)$35,596 
Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities:
Depreciation and amortization18,198 17,890 
Stock-based compensation20,061 30,576 
Unrealized gain on exchange rate— (2,100)
Provision for inventory obsolescence and revaluation97 1,100 
Loss on hedge accounting de-designation and termination— 721 
Provision for bad debts1,042 800 
(Gain) on the disposition of businesses, property, equipment and other assets— (37,240)
Provision (benefit) for deferred income taxes and reserve adjustments628 (9,014)
Asset impairment24 — 
Changes in operating accounts:
Accounts receivable(6,173)12,476 
Inventories(16,609)9,132 
Prepaid expenses and other current assets(2,981)(1,065)
Accounts payable6,168 3,424 
Deferred revenue and customer deposits(704)(531)
Accrued and other liabilities1,618 (23,020)
All other operating activities217 3,231 
Net cash (used in) provided by operating activities(38,211)41,976 
Cash flows from investing activities:
Purchases of property and equipment(10,368)(8,204)
Purchases of short-term investments(384,450)— 
Sales and maturities of short-term investments41,044 — 
Proceeds from sale of assets and businesses, net of cash— 54,747 
Acquisitions and other investments, net(83,312)(10,912)
Other investing activities— (306)
Net cash (used in) provided by investing activities(437,086)35,325 
Cash flows from financing activities:
Repayment of borrowings/long-term debt— (21,392)
Debt issuance cost(16)— 
Purchase of noncontrolling interest(2,300)(4,000)
Payments related to net-share settlement of stock-based compensation(10,047)(6,629)
Other financing activities(324)(423)
Net cash used in financing activities(12,687)(32,444)
Effect of exchange rate changes on cash, cash equivalents and restricted cash(2,047)2,902 
Net (decrease) increase in cash, cash equivalents and restricted cash(490,031)47,759 
Cash, cash equivalents and restricted cash at the beginning of the period(a)
789,970 84,711 
Cash, cash equivalents and restricted cash at the end of the period(a)
$299,939 $132,470 

a.The amounts for cash and cash equivalents shown above include restricted cash of $313$1,105 and $998$626 as of SeptemberJune 30, 20212022, and 2020,2021, respectively, and $313, $540, and $952 as of December 31, 2020,2021 and 2019,2020, respectively, which were included in Otherprepaid expenses and other assets net and $9,161 as of December 31, 2020, which was included in Current assets held for sale inon the condensed consolidated balance sheets.
b.Inventory is transferred from inventory to property and equipment at cost when we require additional machines for training or demonstration or for placement into on-demand manufacturing services locations.sheet.

See accompanying notes to condensed consolidated financial statements.
6

3D SYSTEMS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Unaudited)

Quarters Ended September 30, 2021 and 2020
Common Stock
(in thousands, except par value)Par Value $0.001Additional Paid In CapitalTreasury StockAccumulated DeficitAccumulated Other Comprehensive Income (Loss)Total Stockholders' Equity
June 30, 2021$127 $1,407,900 $(10,492)$(907,707)$(23,289)$466,539 
Payments related to net-share settlement of stock-based compensation— (3,757)— — — (3,757)
Shares issued to acquire assets and businesses— (511)— — — (511)
Stock-based compensation expense— 6,944 — — — 6,944 
Net income— — — 292,656 — 292,656 
Pension adjustment— — — — 125 125 
Foreign currency translation adjustment— — — — (12,846)(12,846)
September 30, 2021$127 $1,410,576 $(10,492)$(615,051)$(36,010)$749,150 
June 30, 2020$124 $1,377,468 $(22,590)$(850,584)$(40,990)$463,428 
Repurchase of stock4 23,785 — — — 23,789 
Stock-based compensation expense— 3,012 — — — 3,012 
Net loss— — — (72,889)— (72,889)
Pension adjustment— — — — (47)(47)
Derivative financial instrument gain— — — — 11 11 
Foreign currency translation adjustment— — — — 11,214 11,214 
September 30, 2020$128 $1,404,265 $(22,590)$(923,473)$(29,812)$428,518 
Three Months Ended June 30, 2022 and 2021
Common Stock
(in thousands, except par value)SharesPar Value $0.001Additional Paid In CapitalTreasury StockAccumulated DeficitAccumulated Other Comprehensive Income (Loss)Total Stockholders' Equity
March 31, 2022130,365 $130 $1,519,242 $— $(648,050)$(44,446)$826,876 
Stock-based compensation expense— — 7,843 — — — 7,843 
Shares issued related to net-share settlement of stock-based compensation(61)— (1,351)— — — (1,351)
Net loss— — — — (32,961)— (32,961)
Unrealized loss on short-term investments— — — — — (528)(528)
Pension plan adjustments— — — — — 165 165 
Foreign currency translation adjustment— — — — — (16,386)(16,386)
June 30, 2022130,304 $130 $1,525,734 $— $(681,011)$(61,195)$783,658 
March 31, 2021126,484 $126 $1,397,276 $(10,492)$(898,075)$(26,702)$462,133 
Shares issued related to net-share settlement of stock-based compensation155 1 (3,881)— — — (3,880)
Shares issued to acquire assets and businesses157 — 3,500 — — — 3,500 
Stock-based compensation expense— 11,005 — — — 11,005 
Net loss— — — (9,632)— (9,632)
Pension plan adjustments— — — — 28 28 
Foreign currency translation adjustment— — — — 3,385 3,385 
June 30, 2021126,796 $127 $1,407,900 $(10,492)$(907,707)$(23,289)$466,539 

See accompanying notes to condensed consolidated financial statements.









7


3D SYSTEMS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Continued)
(Unaudited)

Nine Months Ended September 30, 2021 and 2020
Common Stock
(in thousands, except par value)Par Value $0.001Additional Paid In CapitalTreasury StockAccumulated DeficitAccumulated Other Comprehensive Income (Loss)Total 3D Systems Corporation Stockholders' EquityEquity Attributable to Noncontrolling InterestsTotal Stockholders' Equity
December 31, 2020$128 $1,404,964 $(22,590)$(943,303)$(8,476)$430,723 $— $430,723 
Repurchase of stock1 (10,387)— — — (10,386)— (10,386)
Shares issued to acquire assets and businesses— 2,989 — — — 2,989 — 2,989 
Stock-based compensation expense— 25,106 — — — 25,106 — 25,106 
Net income— — — 328,252 — 328,252 — 328,252 
Pension Adjustment— — — — 181 181 — 181 
Gain on pension plan - unrealized— — — — 153 153 — 153 
Termination of derivative instrument— — — — 721 721 — 721 
Retirement of treasury shares(2)(12,096)12,098 — — — — — 
Foreign currency translation adjustment— — — — (28,589)(28,589)— (28,589)
September 30, 2021$127 $1,410,576 $(10,492)$(615,051)$(36,010)$749,150 $— $749,150 
December 31, 2019$120 $1,371,564 $(18,769)$(793,709)$(37,047)$522,159 $(8,263)$513,896 
Repurchase of stock8 23,782 (3,821)— — 19,969 — 19,969 
Acquisition of non-controlling interest— (7,702)— — (561)(8,263)8,263 — 
Stock-based compensation expense— 16,621 — — — 16,621 — 16,621 
Net loss— — — (129,764)— (129,764)— (129,764)
Pension adjustment— — — — 130 130 — 130 
Derivative financial instrument loss— — — — (1,648)(1,648)— (1,648)
De-designation of derivative instrument— — — — 1,235 1,235 — 1,235 
Foreign currency translation adjustment— — — — 8,079 8,079 — 8,079 
September 30, 2020$128 $1,404,265 $(22,590)$(923,473)$(29,812)$428,518 $— $428,518 

See accompanying notes to condensed consolidated financial statements.

Six Months Ended June 30, 2022 and 2021
Common Stock
(in thousands, except par value)SharesPar Value $0.001Additional Paid In CapitalTreasury StockAccumulated DeficitAccumulated Other Comprehensive Income (Loss)Total Stockholders' Equity
December 31, 2021128,375 128 1,501,210 $— (621,251)$(37,706)$842,381 
Shares issued related to net-share settlement of stock-based compensation1,929 2 (10,048)— — — (10,046)
Stock-based compensation expense— — 34,572 — — — 34,572 
Net loss— — — — (59,760)— (59,760)
Pension plan adjustments— — — — — 266 266 
Unrealized loss on short-term investments— — — — — (4,023)(4,023)
Foreign currency translation adjustment— — — — — (19,732)(19,732)
June 30, 2022130,304 130 1,525,734 $— (681,011)$(61,195)$783,658 
December 31, 2020127,626 $128 $1,404,964 $(22,590)$(943,303)$(8,476)$430,723 
Shares issued related to repurchase of stock874 1 (6,630)— — — (6,629)
Shares issued to acquire assets and businesses157 — 3,500 — — — 3,500 
Stock-based compensation expense— — 18,162 — — — 18,162 
Net income— — — — 35,596 — 35,596 
Pension plan adjustments— — — — — 209 209 
Termination of derivative instrument— — — — — 721 721 
Retirement of treasury shares(1,861)(2)(12,096)12,098 — — — 
Foreign currency translation adjustment— — — — — (15,743)(15,743)
June 30, 2021126,796 $127 $1,407,900 $(10,492)$(907,707)$(23,289)$466,539 
8

3D SYSTEMS CORPORATION
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

(1) Basis of Presentation

The accompanying unaudited condensed consolidated financial statements include the accounts of 3D Systems Corporation and all majority-owned subsidiaries and entities in which a controlling interest is maintained (“3D Systems” or the “Company” or “we”“we,” “our,” or “us”"us"). All significant intercompany transactions and balances have been eliminated in consolidation.

The unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) and the rules and regulations of the Securities and Exchange Commission (“SEC”) applicable to interim reports. Accordingly, they do not include all the information and notes required by GAAP for complete financial statements and should be read in conjunction with the audited financial statements included in our Annual Report on Form 10-K for the year ended December 31, 20202021 (“20202021 Form 10-K”). Our annual reporting period is the calendar year.

In the opinion of management, the unaudited condensed consolidated financial statements contain all adjustments, consisting of adjustments of a normal recurring nature, necessary to present fairly the financial position, results of operations, and cash flows for the periods presented. The results of operations for the quarterthree and ninesix months ended SeptemberJune 30, 20212022 are not necessarily indicative of the results to be expected for the full year. The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements. Actual results may differ from those estimates and assumptions.

As weThe COVID-19 pandemic continues to impact the global economy, disrupt global supply chains, and create significant volatility in the financial markets. These factors have resulted in inflationary and cost pressures that have significantly increased, and continue to closely monitoradversely impact, our production and distribution costs, including costs of spare parts and materials, packaging materials, and freight. We are also experiencing pressure on our supply chain due to strained transportation capacity, lack of sufficient labor availability, and manufacturing backlogs. In addition, Russia’s invasion of Ukraine has led to further economic disruption. While we do not operate in Ukraine, the impact of the conflict led to our exit from the Russian market in 2022. Additionally, the conflict continues to exacerbate inflationary cost pressures and supply chain constraints which are negatively impacting the global economy and our business.

Due to the COVID-19 pandemic, our top priority remains the healthaffiliates, employees, suppliers, customers, and safety of our employeesothers have been and their families and communities. Our Crisis Response Steering Committee regularly reviews and adapts our protocols based on evolving research and guidance related to the virus. While essential operations continue, wemay continue to restrictbe restricted or prevented from conducting normal business activities, including shutdowns, travel restrictions and meetings, publish pertinent information,other actions that may be requested or mandated by governmental authorities. We have reopened our offices and adaptresumed business travel, with safety measures in place and in accordance with local guidance.

We are managing our operations, continuing to a world where many in our workforce are remotemonitor the ongoing impacts of COVID-19, and those coming on-site are following new safety measures. The company has selectively reopened its offices in certain of our locationsreviewing guidance from international and where local conditions and regulation allow, our employees have begun to return to working on-site.domestic authorities. We continue to watch conditions and regulations and remain committed to protecting our employees, delivering for our customers, and supporting our communities. We are subject to the mandatory vaccination and workplace safety protocols of the United States Federal Government Executive Order on Ensuring Adequate COVID Safety Protocols for Federal Contractors, and the COVID-19 Workplace Safety Guidance for Federal Contractors and Subcontractors issued by the Safer Federal Workforce Task Force. Accordingly, we have adopted a policy to comply with the mandate that all U.S. employees be vaccinated within the mandated timeframe.

Our operations in North AmericaThe COVID-19 pandemic and South America (collectively referred to as “Americas”), Europe andother factors impacting the Middle East (collectively referred to as “EMEA”) and the Asia Pacific region (“APAC”) expose us to risks associated with public health crises and epidemics/pandemics,current economic environment, such as inflation, weak economic conditions, including the COVID-19 pandemic. While the COVID-19 pandemicpossibility of a recession, and equity market volatility continued to impact our reported results for the quarteryears ended SeptemberDecember 31, 2021 and 2020, as well as the three and six months ended June 30, 2021, we2022. We are unable to predict the longer-term impact that the pandemicthese factors may have on our business, results of operations, financial position or cash flows. The extent to which our operations may be impacted by the dynamic nature of the COVID-19 pandemic will depend largely on future developments, which are highly uncertain and cannot be accurately predicted, including the severity or resurgence of thea COVID-19 outbreak, and actions by government authorities to contain thean outbreak or treat its impact. Furthermore,impact, actions by government authorities to address inflationary and cost pressures, and the severity, length, and potential expansion of the conflict in Ukraine. The impacts of these uncertain global health, economic and geopolitical conditions could result in reduced customer demand due delays in purchasing decisions or the reduction in their use of our services, further supply chain disruptions, including the shortages of critical components, and the continued disruptions to, and volatility in, the financial marketsmarkets. Events surrounding the global economy, geopolitics, and the COVID-19 pandemic continue to evolve. Although we believe that we will ultimately emerge from these events well positioned for long-term growth, uncertainties remain unknown.and, as such, we cannot reasonably estimate the duration or extent of these adverse factors on our business, results of operations, financial position, or cash flows.

As of January 1, 2021, we determined the Company has 2 reportable segments, Healthcare and Industrial. The Company previously only reported its consolidated results in 1 segment. This change in segment reporting as of January 1, 2021 was
9

the result of changes to how the chief operating decision maker (“CODM”) assesses the financial performance of the Company and in the decision-making process driving future operating performance. As a result of this re-segmentation, the Company performed a quantitative analysis for potential impairment of our goodwill immediately following the re-segmentation. Based on available information and analysis as of January 1, 2021, we determined the fair value of the Healthcare and Industrial reporting units exceeded their carrying values.

9

Fair value was determined using a combination of an income approach, which estimates fair value based upon projections of future revenues, expenses, and cash flows discounted to its present value, and a market approach. The valuation methodology and underlying financial information included in the Company's determination of fair value required significant judgments by management. The principal assumptions used in the Company's discounted cash flow analysis consisted of (a) the long-term projections of future financial performance and (b) the weighted-average cost of capital of market participants, adjusted for the risk attributable to the Company and the industry in which it operates. Under the market approach, the principal assumption included an estimate for a control premium.

All dollar amounts and other amounts presented in the accompanying footnotes are presented in thousands, except for per share information.

During the firstfourth quarter ended MarchDecember 31, 2021, we became aware that certain amounts related to the purchase of non-controlling interests previously presented as investing cash outflows should have been reported as financing cash outflows within ourthe statements of operationscash flows. The error affected the previously issued statements of cash flows for the three, six and nine month periods within the December 31, 2021, and 2020 annual periods as products cost of sales related to services cost of sales.well as the annual periods ended December 31, 2020, and 2019. We note that this change did not impact the total costas reported net increase (decrease) in cash, cash equivalents and restricted cash within the annual 2020 and 2019 statements of sales line item was not affected.cash flows or the interim statements of cash flows for the years ended December 31, 2021, and 2020. We further note that this errorreclassification did not affect our gross profit, loss from operations, net income (loss), consolidated balance sheets orsheet, statements of cash flow.operations, statements of comprehensive income (loss) and statements of stockholders' equity. We evaluated the materiality, including both quantitative and qualitative considerations, of this presentation-only error and concluded it was not material to any previously reported quarter or year-end financial statement. The following schedule depictsimpact of the effectchange on our previously reported statementsstatement of operations.cash flows for the six months ended June 30, 2021 is to increase net cash provided by investing activities by $4,000 and to decrease cash used in financing activities by $4,000.
Quarter Ended September 30, 2020Nine Months Ended September 30, 2020
(in thousands)As reported (a)ChangeRevisedAs reported (a)ChangeRevised
Cost of sales:
Products$50,038 $(1,825)$48,213 $153,069 $(5,119)$147,950 
Services27,511 1,825 29,336 80,593 5,119 85,712 
Total cost of sales$77,549 $— $77,549 $233,662 $— $233,662 

(a) As reported
Six Months Ended June 30, 2021
As ReportedChangedRevised
Net cash provided by operating activities$41,976 $— $41,976 
Net cash provided by investing activities31,325 4,000 35,325 
Net cash (used in) financing activities(28,444)(4,000)(32,444)
Effect of exchange rate changes on cash, cash equivalents and restricted cash2,902 — 2,902 
Net increase in cash, cash equivalents and restricted cash$47,759 $— $47,759 
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Summary of Significant Accounting Policies

Short-term investments
A portion of the company's excess cash is invested in short-term investments. The company's short-term investment accounting policy is that securities with maturities greater than 90 days at the time of purchase that are available for operations in the next 12 months are classified as short-term investments. The Company’s short-term investments primarily consist of investment grade bonds, certificates of deposit, commercial paper, and short maturity bond funds all with a remaining maturity of generally less than twelve months at the date of purchase and are classified as available for sale. Interest and dividends on these investments are recorded into income when earned.

Redeemable Noncontrolling Interest
In connection with the 93.75% acquisition of Kumovis on April 1, 2022, as discussed in Note 2, the Company recorded a redeemable non-controlling interest (RNCI). The RNCI represents amounts derived from Note 25noncontrolling shareholders’ interest in Kumovis which is controlled but not wholly owned by 3D Systems and for which 3D Systems' obligation to redeem the minority shareholders’ interest is governed by a put/call relationship. Subsequent to the consolidated financial statementsinitial fair value measurement, which is currently in process as part of business combination accounting, the RNCI is recorded at the greater of its redemption value or its' carrying value at the end of each reporting period. If the RNCI is carried at its redemption value, the difference between the redemption value and the carrying value would be adjusted at the end of each reporting period through additional paid in capital. The Company will also perform a quarterly assessment to determine if the aforementioned redemption value exceeds the fair value of the RNCI. If the redemption value of the RNCI exceeds its fair value, the excess will reduce the net income attributable to 3D Systems shareholders.

All other significant accounting policies described in the Form 10-K for the year ended December 31, 2020 and as disclosed in Note 1 to the consolidated financial statements as of and for the quarter ended March 31, 2021.2021 remain unchanged.

Recently Adopted Accounting Standards

In December 2019,October 2021, the Financial Accounting StandardsStandard Board (“FASB”("FASB") issued Accounting StandardsStandard Update (“ASU”("ASU") 2019-12, “Income Taxes2021-08, "Business Combinations (Topic 740)805) - SimplifyingAccounting for Contract Assets and Contract Liabilities from Contracts with Customers", which amends the Accounting for Income Taxes,” which simplifiesStandards Codification ("ASC") 805 to add contract assets and contract liabilities to the accounting for income taxes by eliminating somelist of exceptions to the general approachrecognition and measurement principles that apply to business combinations and to “require that an entity (acquirer) recognize and measure contract assets and contract liabilities acquired in Accounting Standards Codification 740, Income Taxes. Ita business combination in accordance with Topic 606.” While primarily related to contract assets and contract liabilities that were accounted for by the acquiree in accordance with ASC 606, “the amendments also clarifies certain aspectsapply to contract assets and contract liabilities from other contracts to which the provisions of Topic 606 apply, such as contract liabilities from the existing guidance to promote more consistent application. This standard is effective for calendar-yearsale of nonfinancial assets within the scope of Subtopic 610-20.” For public business entities, the amendments in 2021 andthis Update are effective for fiscal years beginning after December 15, 2022, including interim periods within that year, and earlythose fiscal years. Early adoption of the amendments is permitted. The Company early adopted this guidance duringstandard in the first quarter of 2021. The implementation2022, and it did not have a material effectan impact on our financial position orthe results of operations.operations, cash flows or financial position.

No other new accounting pronouncements, issued or effective during 2021, have had or are expected to have a significant impact on our consolidated financial statements.

(2) DispositionsDivestitures and Acquisitions

DispositionsDivestitures

On January 1, 2021, we completedThere have been no dispositions during the sale of 100% of the issued and outstanding equity interests of Cimatron Ltd. ("Cimatron"), the subsidiary that operated the Company’s Cimatron integrated CAD/CAM software for tooling business and its GibbsCAM CNC programming software business, for approximately $64,173, after certain adjustments and excluding $9,476 of cash amounts transferred to the purchaser. We recorded a gain on the sale of $32,047 included within Interest and other income (expense), net on the accompanying condensed consolidated statements of operations for the ninesix months ended SeptemberJune 30, 2021. Additionally, at the time of the sale, we recognized a gain of $6,481 for accumulated foreign currency translation gain previously included in Accumulated other comprehensive loss (“AOCL”), which is included within Interest and other income (expense), net. This disposed of business would have been included within the Industrial segment.2022.

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OnIn September 9, 2021, we completed the sale of the non-French assets of the Company’s On Demand Manufacturing business. On September 20, 2021, the Company completed the sale of the French assets of the On Demand Manufacturing business. Collectively, this was the Company’s sale of the On Demand Manufacturing business (“ODM”("ODM"). ODM was sold for $82,000, excluding certain customary closing adjustments. We recorded a gain on the sale of $39,273$38,490 included within Interest and other income (expense), net on the accompanying condensed consolidated statements of operations for the three and nine monthsyear ended September 30,December 31, 2021. We are finalizing closing adjustments with the purchaser including but not limited to working capital adjustments, lease assignments as well as final transfer of net assets sold. ODM iswas primarily included within the Industrial segment. At closing, the Company and the purchaser entered into a supply agreement and a transition services agreement pursuant to which the Company will provide certain information technology, corporate finance, tax, treasury, accounting, human resources and payroll, sales and marketing, operations, facilities and other customary services to support the purchaser in the ongoing operation of ODM for a period of time post-closing. At June 30, 2022 only the supply agreement is active.

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On August 24, 2021, we completed the sale of 100% of the issued and outstanding equity interests of Simbionix USA Corporation, which ownsowned our global medical simulation business (“Simbionix”), for $305,000, excluding certain closing adjustments and excluding $6,794 of cash transferred to the purchaser. We recorded a gain on the sale of $271,786$271,404 included within Interest and other income (expense), net on the accompanying consolidated statements of operations for the year ended December 31, 2021. Additionally, we recognized a gain of $2,431 for accumulated foreign currency translation gain previously included in Accumulated other comprehensive loss (“AOCL”), which is included within Interest and other income (expense), net, for the year ended December 31, 2021. Simbionix was included within the Healthcare segment.

On January 1, 2021, we completed the sale of 100% of the issued and outstanding equity interests of Cimatron Ltd. (“Cimatron”), the subsidiary that operated the Company’s Cimatron integrated CAD/CAM software for tooling business and its GibbsCAM CNC programming software business, for approximately $64,173, after certain adjustments and excluding $9,476 of cash amounts transferred to the purchaser. We recorded a gain on the sale of $32,047 included within Interest and other income (expense), net on the accompanying condensed consolidated statements of operations for the three and ninesix months ended SeptemberJune 30, 2021. Additionally, at the time of the sale, we recognized a gain of $2,431$6,481 for accumulated foreign currency translation gain previously included in AOCL, which is included within Interest and other income (expense), net. We are finalizingnet, for the six months ended June 30, 2021. Cimatron would have been included within the Industrial segment.

Acquisitions/Investments

On April 1, 2022, we completed the acquisition of 93.75% of Kumovis GmbH ("Kumovis") for an all-cash purchase price of $37,726, before customary closing adjustments, plus an estimated RNCI of $2,418. $3,628 of the cash payment is deferred for up to fifteen months from the closing date. Kumovis, which is part of the Healthcare segment and reporting unit, utilizes polyether ether keton or “PEEK” materials, which has properties that lend it to many medical applications, including many implant applications, that fit into our personalized healthcare operations. The acquisition’s near term impact on the Company’s results of operations and cash flows are expected to be dilutive.

In conjunction with the purchaserKumovis acquisition, the Company and the non-controlling shareholders entered into a put/call option agreement whereby the Company has the option to purchase from the non-controlling shareholders and the non-controlling shareholders have the option to sell to the Company the remaining 6.25% ownership interest of Kumovis at a later date based on an exercise price to be calculated based on the achievement of pre-determined revenue and gross profit targets.50% of the Kumovis common shares related to the put/call can be exercised upon the achievement of an initial revenue and gross profit target while the remaining 50% can be exercised upon the achievement of a second revenue and gross profit target. If one or both sets of targets are not met after 5.75 years from the acquisition date, there is a floor strike price that must be exercised.Up to 50% of the exercise price can be paid in Company commons stock at the election of 3D Systems.This arrangement results in an RNCI for which an estimated fair value of $2,418 was recorded as of the acquisition date.The actual fair value of the RNCI is in process of being determined as part of business combination accounting.

We accounted for the acquisition of Kumovis using the acquisition method as prescribed by ASC 805, "Business Combinations" (“ASC 805”). In accordance with valuation methodologies described in ASC 820, "Fair Value Measurement" (“ASC 820”), the acquired assets and assumed liabilities were recorded at their estimated fair values as of the date of the Kumovis acquisition. Below is the fair value of consideration transferred.

(in thousands)
Cash Paid at acquisition$34,098 
Deferred cash consideration3,628 
Estimated Fair Value of RNCI2,418 
Total fair value of consideration transferred$40,144 

Shown below is the preliminary purchase price allocation, which summarizes the fair value of the assets and liabilities assumed, at the date of acquisition:
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(in thousands)
Current assets, including cash acquired of $125$1,408 
Intangible assets:
Product technology$7,886 
Trade name5,602 
Total intangible assets13,488 
Goodwill26,277 
Other assets705 
Liabilities:
Accounts payable and accrued liabilities$332 
Deferred revenue70 
Deferred Tax Liability1,332 
Total liabilities1,734 
Net assets acquired$40,144 

As of June 30, 2022, the purchase price allocation for Kumovis is preliminary. The Company has performed a preliminary valuation of the fair market value of acquired assets and liabilities and continues to review and adjust the values. Additionally, the Company is in the process of determining the acquisition date fair value of the RNCI.The Company is also reviewing the final closing balance sheets and may adjust the assets and liabilities based on its final review. The Company is also in the process of completing the pre-acquisition tax returns to determine the final tax positions, including net operating losses and any required valuation allowance. The final purchase price allocations will be completed when the Company has finished and reviewed the valuations, the acquired balance sheets and the pre-acquisition tax returns. The final allocations could differ materially from the preliminary allocations. The final allocations may include changes in allocations to acquired intangible assets and goodwill, changes to assets and liabilities, including but not limited to working capital adjustments, settlementtax assets and liabilities, including deferred taxes and changes to the RNCI. The estimated useful lives of intercompany transactions and lease assignments. Simbionix is included within the Healthcare segment.acquired intangible assets are also preliminary.

Acquisitions

On April 1, 2022, we completed the 100% acquisition of Titan Additive LLC ("Titan") for an all-cash purchase price of $39,500, before customary closing adjustments. Titan, which is part of Industrial segment and reporting unit, is a pellet-based extrusion platform that addresses customer applications requiring large build volumes, superior performance, and improved productivity at significantly lower cost. We believe the acquisition of Titan will open up new markets in the Industrial segment. The impact of the acquisition is not expected to have a near-term material impact to the Company's financial position, statement of operations or cash flows.

We accounted for the acquisition of Titan using the acquisition method as prescribed by ASC 805.In accordance with valuation methodologies described in ASC 820, the acquired assets and assumed liabilities were recorded at their estimated fair values as of the date of the Titan acquisition.

Shown below is the preliminary purchase price allocation, which summarizes the fair value of the assets and liabilities assumed, at the date of acquisition:

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(in thousands)
Current assets$661 
Intangible assets:
Product technology$9,370 
Trade name5,580 
Total intangible assets14,950 
Goodwill24,043 
Other assets479 
Liabilities:
Accounts payable and accrued liabilities$223 
Deferred revenue410 
Total liabilities633 
Net assets acquired$39,500 

As of June 30, 2022, the purchase price allocation for Titan is preliminary. The Company has performed a preliminary valuation of the fair market value of acquired assets and liabilities and continues to review and adjust the values.The Company is also reviewing the final closing balance sheets and may adjust the assets and liabilities based on its final review. The Company is also in the process of completing the pre-acquisition tax returns in order to determine the final tax positions, including net operating losses and any required valuation allowance. The final purchase price allocations will be completed when the Company has finished and reviewed the valuations, the acquired balance sheets and the pre-acquisition tax returns. The final allocations could differ materially from the preliminary allocations. The final allocations may include changes in allocations to acquired intangible assets and goodwill, changes to assets and liabilities, including but not limited to tax assets and liabilities, including deferred taxes. The estimated useful lives of acquired intangible assets are also preliminary.

In March 2022, we and the Saudi Arabian Industrial Investments Company ("Dussur") signed an agreement to form a joint venture intended to expand the use of additive manufacturing within the Kingdom of Saudi Arabia and surrounding geographies, including the Middle East and North Africa. The joint venture is to enable the development of Saudi Arabia's domestic additive manufacturing production capabilities, consistent with the Kingdom’s ‘Vision 2030,’ which is focused on diversification of the economy and long-term sustainability. Once the joint venture is formed, 3D Systems will own approximately 49% and is committed to an initial investment of about $6,500. Additional future investments are contingent upon achievement of certain milestones by the joint venture. The expected impact on the Company’s financial position, results of operations and cash flows are not expected to be material other than the cash outflow(s) related to the initial and contingent investments.

In March 2022, we made a $10,000 investment in convertible preferred shares for an approximate 26.6% ownership in Enhatch Inc. ("Enhatch"), the developer of the Intelligent Surgery Ecosystem, and simultaneously entered into a collaboration and supply agreement with Enhatch. We also obtained warrants to purchase additional shares of Enhatch and the right to purchase, in the future, the remaining shares of Enhatch that 3D Systems does not own if certain revenue targets are achieved. Enhatch's Intelligent Surgery Ecosystem provides technologies which streamline and scale the design and delivery of patient-specific medical devices by automating the process. Incorporating these capabilities into 3D Systems’ workflow for patient-specific solutions, which includes advanced software, expert treatment planning services, custom implants and instrumentation design, and industry-leading production processes, which will help more efficiently meet the growing demand for personalized medical devices. The expected impact on the Company’s financial position, results of operations and cash flows is not expected be material other than potential future cash used to exercise the warrants or call option. The investment, including the call option and warrants, is recorded in other assets on the consolidated balance sheet.

As of the investment date, a fair value was determined for each element, the convertible preferred shares, the call option and the warrant, for which the total fair value of all three was $10,000. After the investment date, the convertible preferred shares and call option are recorded at their initial fair value and are evaluated for impairment or the existence of an orderly and observable transaction indicating a change in value is appropriate for which the adjustment will be recorded through the statement of operations. The warrants will be marked to market on a quarterly basis with the changes in value recorded through the statement of operations. The fair value of the convertible preferred shares/call option and warrant as of the investment date was $9,670 and $330, respectively.

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On November 1, 2021, we acquired Oqton, Inc. (“Oqton”), for $187,425, of which $106,785 was paid in cash and the remainder was paid via the issuance of 2,553 shares of the Company’s common stock having a fair value at the date of issuance of $80,697. The acquisition’s near term impact on the Company’s results of operations and cash flows are expected to be dilutive. Oqton's operating results are reported in the Industrial segment. We incurred approximately $1,780 of acquisition related expenses.

Oqton is a software company that creates an intelligent, cloud-based Manufacturing Operating System (MOS) platform tailored for flexible production environments that increasingly utilize a range of advanced manufacturing and automation technologies, including additive manufacturing solutions, in their production workflows. The cloud-based solution leverages the Industrial Internet of Things, artificial intelligence, and machine learning technologies to deliver a solution for customers to automate their digital manufacturing workflows, scale their operations and enhance their competitive position. The Oqton acquisition will allow the Company to expand its existing additive manufacturing software suite to the entire additive industry.

We accounted for the acquisition of Oqton using the acquisition method as prescribed by ASC 805. In accordance with valuation methodologies described in ASC 820, the acquired assets and assumed liabilities were recorded at their estimated fair values as of the date of the Oqton acquisition.

Shown below is the preliminary purchase price allocation, which summarizes the fair value of the assets and liabilities assumed, at the date of acquisition:

(in thousands)
Current assets, including cash acquired of $3,454$8,344 
Intangible assets:
Product technology$12,600 
Trade name7,300 
Total intangible assets19,900 
Goodwill165,611 
Other assets703 
Liabilities:
Accounts payable and accrued liabilities$6,643 
Deferred revenue490 
Total liabilities7,133 
Net assets acquired$187,425 

The Company has performed a preliminary valuation of the fair market value of acquired assets and liabilities. The Company is also reviewing the final closing balance sheets and may adjust the assets and liabilities based on its final review. The Company is also in the process of completing the final 2021 tax returns in order to determine the final tax positions, including net operating losses and any required valuation allowance. The final purchase price allocation will be completed when the Company has finished and reviewed the valuations, the acquired balance sheets and the pre-acquisition tax returns. The final allocations could differ materially from the preliminary allocations. The final allocations may include changes in allocations to acquired intangible assets and goodwill, changes to assets and liabilities, including but not limited to tax assets and liabilities, including deferred taxes. The estimated useful lives of acquired intangible assets are also preliminary.

On December 1, 2021, we acquired Volumetric Biotechnologies, Inc. (“Volumetric”), for $40,173 of which $24,814 was paid in cash and the remainder was paid via the issuance of 720 shares of the Company's common stock having a fair value on the date of issuance of $15,358. Additional payments of up to $355,000 are possible upon the attainment of 7 non-financial milestones through December 31, 2030 to 2035 and the continued employment of certain key individuals from Volumetric. Any additional payments made will be paid approximately half in cash and half in shares of the Company’s common stock. The additional payments are considered compensation expense which will be recorded ratably from the time a milestone is deemed probable of achievement to the estimated time of achievement. Any compensation expense recorded will be reversed if the milestone is no longer probable of achievement. NaN of the 7 milestones is considered probable of achievement for which $3,979 and $7,959 of expense was recorded in the three and six months ended June 30, 2022. Volumetric is part of the Healthcare reporting unit and segment. The acquisition’s near-term impact on the Company's results of operations and cash flows are expected to be dilutive. The impact of potential share issuance related to the achievement of milestones is not included in dilutive shares until the milestone is met. We incurred approximately $1,306 of acquisition related expenses.

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Volumetric’s mission is to develop the ability to manufacture human organs using bioprinting methods and the underlying technologies required to create these highly complex biological structures. With this acquisition, 3D Systems seeks to expand our capabilities and capacity in 3D printing related to bio-printing and regenerative medicine. Combining 3D Systems' regenerative medicine group with Volumetric’s highly complementary skill sets of biological expertise and cellular engineering is expected to accelerate our core regenerative medicine strategies which include the bio-printing of human organs, additional non-organ applications and bio-printing technologies for research labs.

We accounted for the acquisition of Volumetric using the acquisition method as prescribed by ASC 805. In accordance with valuation methodologies described in ASC 820, the acquired assets and assumed liabilities were recorded at their estimated fair values as of the date of acquisition.

Shown below is the updated preliminary purchase price allocation, which summarizes the fair value of the assets and liabilities assumed, as of the date of the Volumetric acquisition:

(in thousands)
Current assets, including cash acquired of $389$3,143 
Intangible assets:
Developed Technology$1,100 
Distributor Relationship400 
Total intangible assets1,500 
Goodwill37,492 
Other assets1,194 
Liabilities:
Accounts payable and accrued liabilities3,156 
Total liabilities3,156 
Net assets acquired$40,173 

As of June 30, 2022, the purchase price allocation for Volumetric is preliminary. The Company has performed a valuation of the fair market value of acquired assets and liabilities and continues to review and adjust the values. The Company is also reviewing the final closing balance sheets and may adjust the assets and liabilities based on its final review. The Company is also in the process of completing the final 2021 tax returns in order to determine the final tax positions, including net operating losses and any required valuation allowance. The final purchase price allocation will be completed when the Company has finished and reviewed the valuations, the acquired balance sheets and the pre-acquisition tax returns. The final allocation could differ materially from the preliminary allocations. The final allocations may include changes in allocations to acquired intangible assets and goodwill, changes to assets and liabilities, including but not limited to tax assets and liabilities, including deferred taxes. The estimated useful lives of acquired intangible assets are also preliminary.

In May 6, 2021, we purchased Allevi, Inc. to expand regenerative medicine initiatives into medical and pharmaceutical research and development laboratories. Additionally, onin June 15, 2021, we closed the acquisition of a German software firm, Additive Works GmbH (“Additive”). Additive expands the simulation capabilities for rapid optimization of industrial-scale 3D printing processes. The purchase price for both acquisitions, individually and combined, and the expected impacts onto the Company’s financial position, results of operations and cash flows are not material.

On September 8, 2021, we entered into an Agreement and Plan of Merger with Oqton, Inc. (“Oqton”), to acquire Oqton for approximately $180,000, subject to customary closing conditions and adjustments, with an estimated $106,000 to be paid in cash and the remaining portion to be paid in shares of the Company’s Common Stock. We closed the Oqton acquisition on November 1, 2021. The purchase price is expected to impact our financial position via the reduction of cash and an increase in common shares outstanding and intangible assets, including goodwill. The acquisition’s near term impact on the Company’s results of operations and cash flows are expected to be dilutive. We are currently evaluating which segment Oqton goodwill will be assigned to.

Oqton is a software company that creates an intelligent, cloud-based Manufacturing Operating System (MOS) platform tailored for flexible production environments that increasingly utilize a range of advanced manufacturing and automation technologies, including additive manufacturing (AM) solutions, in their production workflows. The cloud-based solution leverages the Industrial Internet of Things, artificial intelligence, and machine learning technologies to deliver a solution for customers to automate their digital manufacturing workflows, scale their operations and enhance their competitive position.

Acquisitions of Noncontrolling Interests

As of September 30, 2021, we owned 100% of the capital and voting rights of Robtec, a service bureau and distributor of 3D printing and scanning products in Brazil. Approximately 70% of the capital and voting rights of Robtec were acquired on November 25, 2014. On January 7, 2020, we made a payment equal to the redemption price of $10,000 and acquired the remaining 30% of the capital and voting rights.

As of December 31, 2018, the Company owned approximately 70% of the capital and voting rights of Easyway, a service bureau and distributor of 3D printing and scanning products in China. Approximately 65% of the capital and voting rights of Easyway were acquired on April 2, 2015, and an additional 5% of the capital and voting rights of Easyway were acquired on July 19, 2017 for $2,300. The remaining 30% of the capital and voting rights of Easyway were acquired on January 21, 2019 for $13,500 to be paid in installments over four years for which $4,000$2,300 and $2,500$4,000 were paid in the first nine monthshalf of 2022 and 2021, and 2020, respectively. As of June 30, 2022 there are no more installments due.

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(3) Revenue

We account for revenue in accordance with ASC Topic 606, “Revenue from Contracts with Customers.”

Performance Obligations

A performance obligation is a promise in a contract to transfer a distinct good or service to the customer and is the unit of account in ASC Topic 606. A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied.

At SeptemberJune 30, 2021,2022, we had $151,515$127,096 of outstanding performance obligations, comprised of deferred revenue, customer order backlog and customer deposits. We expect to recognize approximately 68%87.9% of deferred revenue as revenue within the next twelve months, an additional 5%8.0% by the end of 20222023 and the remaining balance thereafter.

Revenue Recognition

Revenue is recognized when control of the promised products or services is transferred to customers in an amount that reflects the consideration we expect to receive in exchange for those products or services. We enter into contracts that can include various combinations of products and services, which are generally capable of being distinct and accounted for as separate performance obligations. Many of our contracts with customers include multiple performance obligations. For such arrangements, we allocate revenue to each performance obligation based on its relative stand-alone selling price (“SSP”). Revenue is recognized net of allowances for returns and any taxes collected from customers, which are subsequently remitted to governmental authorities. The amount of consideration received and revenue recognized may vary based on changes in marketing incentive programs offered to our customers. Our marketing incentive programs take many forms, including volume discounts, trade-in allowances, rebates and other discounts.

A majority of our revenue is recognized at the point in time when products are shipped or services are delivered to customers. Please see below for further discussion.

Hardware and Materials

Revenue from hardware and material sales is recognized when control has transferred to the customer, which typically occurs when the goods have been shipped to the customer, risk of loss has transferred to the customer and we have a present right to payment. In limited circumstances, when printer or other hardware sales include substantive customer acceptance provisions, revenue is recognized either when customer acceptance has been obtained, customer acceptance provisions have lapsed, or we have objective evidence that the criteria specified in the customer acceptance provisions have been satisfied.

Printers and certain other products include a warranty under which we provide maintenance for periods up to one year. For these initial product warranties, estimated costs are accrued at the time of the sale of the product. These cost estimates are established using historical information on the nature, frequency and average cost of claims for each type of printer or other product as well as assumptions about future activity and events. Revisions to expense accruals are made as necessary based on changes in these historical and future factors.

Software

We also market and sell software tools that enable our customers to capture and customize content using our printers, design optimization and simulation software, and reverse engineering and inspection software. Software does not require significant modification or customization and the license provides the customer with a right to use the software as it exists when made available. Revenue from these software licenses is recognized either upon delivery of the product or upon delivery of a key code which allows the customer to download the software. Customers may purchase post-sale support. Generally, the first year of post-sale support is included as part of the initial software sale but subsequent years are optional. This optional support is considered a separate obligation from the software and is deferred at the time of sale and subsequently recognized ratably over future periods.

12

Collaboration and Licensing Agreements

17

We enter into collaboration and licensing agreements with third parties. The nature of the activities to be performed and the consideration exchanged under the agreements varies on a contract-by-contract basis. We evaluate these agreements to determine whether they meet the definition of a customer relationship for which revenue is recorded. These contracts may contain multiple performance obligations and may contain fees for licensing, research and development services, contingent milestone payments upon the achievement of developmental contractual criteria and/or royalty fees based on the licensees’ product revenue. We determine the revenue to be recognized for these agreements based on an evaluation of the distinct performance obligations, the identification and evaluation of material rights, the estimation of variable consideration and the determination of the pattern on transfer of control for each distinct performance obligation. The Company recognized $1,475$3,342 and $1,029$2,040 in revenue related to collaboration arrangements with customers for the quarters ended SeptemberJune 30, 20212022 and 2020,2021, respectively. The Company recognized $5,322$5,774 and $2,676$3,847 related to collaboration arrangements with customers for the ninesix months ended SeptemberJune 30, 20212022 and 2020,2021, respectively.

Services

We offer training, installation and non-contract maintenance services for our products. Additionally, we offer maintenance contracts customers can purchase at their option. For maintenance contracts, revenue is deferred at the time of sale based on the stand-alone selling prices of these services and costs are expensed as incurred. Deferred revenue is recognized ratably over the term of the maintenance period on a straight-line basis. Revenue from training, installation and non-contract maintenance services is recognized at the time of performance of the service.

We have also recently commenced selling software as a service whereby the customer has the right to access the software. Revenue is recognized ratably over the related subscription period as our performance obligation to provide access to the software is progressively fulfilled over the stated term of the contract.

ODM and healthcare service sales are included within services revenue and revenue is recognized upon shipment or delivery of the parts or performance of the service, based on the terms of the arrangement. We sold ODM in the third quarter of 2021. See Note 2.

Terms of Sale

Shipping and handling activities are treated as fulfillment costs rather than as an additional promised service. We accrue the costs of shipping and handling when the related revenue is recognized. Our incurred costs associated with shipping and handling are included in product cost of sales.

Credit is extended, and creditworthiness is determined, based on an evaluation of each customer’s financial condition. New customers are generally required to complete a credit application and provide references and bank information to facilitate an analysis of creditworthiness. Customers with a favorable profile may receive credit terms that differ from our general credit terms. Creditworthiness is considered, among other things, in evaluating our relationship with customers with past due balances.

Our terms of sale generally provide payment terms that are customary in the countries where we transact business. To reduce credit risk in connection with certain sales, we may, depending upon the circumstances, require significant deposits, letters of credit or payment in full prior to shipment. For maintenance services, we either bill customers on a time-and-materials basis or sell maintenance contracts that provide for payment in advance on either an annual or other periodic basis.

Significant Judgments

Our contracts with customers often include promises to transfer multiple products and services to a customer. For such arrangements, we allocate revenues to each performance obligation based on its relative SSP.

Judgment is required to determine the SSP for each distinct performance obligation in a contract. For the majority of items, we estimate SSP using historical transaction data. We use a range of amounts to estimate SSP when we sell each of the products and services separately and need to determine whether there is a discount to be allocated based on the relative SSP of the various products and services. In instances where SSP is not directly observable, such as when the product or service is not sold separately, we determine the SSP using information that may include market conditions and other observable inputs.

In some circumstances, we have more than one SSP for individual products and services due to the stratification of those products and services by customers, geographic region or other factors. In these instances, we may use information such as the size of the customer and geographic region in determining the SSP.

1318

The determination of SSP is a regular process and information is reviewed regularly in order to ensure SSP reflects the most current information or trends.

The nature of our marketing incentives may lead to consideration that is variable. Judgment is exercised at contract inception to determine the most likely outcome of the contract and resulting transaction price. Ongoing assessments are performed to determine if updates are needed to the original estimates.

Contract Balances

The timing of revenue recognition, billings and cash collections results in billed accounts receivable, unbilled receivables (contract assets), and customer deposits and deferred revenues (contract liabilities) on the condensed consolidated balance sheets. Timing of revenue recognition may differ from the timing of invoicing to customers. We record a receivable when revenue is recognized at the time of invoicing, or unbilled receivables when revenue is recognized prior to invoicing. For most of our contracts, customers are invoiced when products are shipped or when services are performed resulting in billed accounts receivables for the remainder of the owed contract price. Unbilled receivables generally result from items being shipped or services being performed where the customer has not been charged, but for which revenue had been recognized. We typically bill in advance for installation, training and maintenance contracts as well as extended warranties, resulting in deferred revenue. Changes in contract asset and liability balances were not materially impacted by any other factors for the ninesix months ended SeptemberJune 30, 2021.2022.In circumstances where a customer arrangement results in both a contract asset and contract liability these assets and liabilities are netted for balance sheet presentation purposes.

For the ninesix months ended SeptemberJune 30, 2021,2022, we recognized revenue of $30,457$20,996 related to our contract liabilities at December 31, 20202021. For the ninesix months ended SeptemberJune 30, 2020,2021, we recognized revenue of $27,041$24,740 related to our contract liabilities at December 31, 2019.2020.

Practical Expedients and Exemptions

We generally expense sales commissions when incurred because the amortization period would be one year or less. These costs are recorded within selling, general and administrative expenses.

(4) Segment Information

Effective January 1, 2021, we changed our segment reporting under ASC 280 Segment Reporting. For periods prior to January 1, 2021, we operated under 1 operating segment, consistent with the information that was presented to our CODM. Effective January 1, 2021, we have identified 2 operating segments, Healthcare and Industrial.

This change in reportable segments was necessitated as a result of changes to our enterprise wide financial reporting to reflect the re-organization of the business into the Healthcare and Industrial verticals that were launched January 1, 2021 at the request of our CODM. These changes resulted in revisions to the financial information provided to the CODM on a recurring basis in his evaluation of financial performance of the Company and in the decision-making process driving future operating performance. The CODM does not review disaggregated assets on a segment basis; therefore, such information is not presented. In addition, the changes made to our enterprise wide financial reporting system were prospective and prevent historical financial information for the Healthcare and Industrial segments to be available other than for revenue which has been disclosed below. We have evaluated potential alternatives to generate comparative prior period financial information for the Healthcare and Industrial segments, and believe that the practicality exception as proscribed in ASC 280 Segment Reporting is applicable due to the high degree of difficulty involved and the significant expense associated with overhauling the structure of legacy financial systems.

1419

The following tables set forth our net sales and operating results by segment:
Quarter Ended September 30,
202120202021
(in thousands)Net Sales (a)Operating Profit
Operations by segment:
Healthcare$76,365 $59,498 $9,054 
Industrial79,731 76,678 13,198 
Total$156,096 $136,176 22,252 
General corporate expense, net (b)
(39,460)
Operating loss, as reported(17,208)
Interest and other expense, net315,859 
Income before income taxes$298,651 
Three Months Ended June 30,
20222021
HealthcareIndustrialConsolidatedHealthcareIndustrialConsolidated
(in thousands)
Revenue(a)
$71,746 $68,299 $140,045 $82,826 $79,731 $162,557 
Cost of sales45,130 41,777 86,907 44,207 49,345 93,552 
Gross profit26,616 26,522 $53,138 38,619 30,386 69,005 
Less:
Segment operating expenses17,747 24,058 41,805 16,366 20,528 36,894 
Segment operating income8,869 2,464 11,333 22,253 9,858 32,111 
General corporate expense, net(b)
43,371 42,171 
Operating (loss)$(32,038)$(10,060)


Nine Months Ended September 30,
202120202021
(in thousands)Net Sales (a)Operating Profit
Operations by segment:
Healthcare$231,712 $160,926 $51,100 
Industrial233,057 223,662 35,678 
Total$464,769 $384,588 86,778 
General corporate expense, net (b)
(116,005)
Operating loss, as reported(29,227)
Interest and other income, net354,396 
Income before income taxes$325,169 
Six Months Ended June 30,
20222021
HealthcareIndustrialConsolidatedHealthcareIndustrialConsolidated
(in thousands)
Revenue(a)
$136,091 $136,955 $273,046 $155,347 $153,326 $308,673 
Cost of sales84,762 81,351 166,113 82,865 92,563 175,428 
Gross profit51,329 55,604 $106,933 72,482 60,763 133,245 
Less:
Segment operating expenses34,757 46,854 81,611 30,436 38,283 68,719 
Segment operating income$16,572 $8,750 25,322 $42,046 $22,480 64,526 
General corporate expense, net(b)
80,592 76,545 
Operating (loss)$(55,270)$(12,019)
a.Approximately 45.9%43.6% and 50.5%43.9% of sales for the quartersthree months ended SeptemberJune 30, 20212022 and 2020,2021, respectively, and 44.5%44.1% and 51.7%43.8% of sales for the ninesix months ended SeptemberJune 30, 20212022 and 2020,2021, respectively, were located outside of the U.S.
b.General corporate expense, net includes expenses not specifically attributable to our segments for functions such as corporate human resources, finance, and legal, information technology, including salaries, benefits, and other related costs.costs, company wide incentive compensation and stock-compensation.

(5) Leases

We have various lease agreements for our facilities, equipment and vehicles with remaining lease terms ranging from one to sixteen years. We determine if an arrangement contains a lease at inception. Some leases include the options to purchase, terminate or extend for one or more years; these options are included in the right-of-use (“ROU”) asset and liability lease term when it is reasonably certain an option will be exercised. Our leases do not contain any material residual value guarantees or material restrictive covenants.

Most of our leases do not provide an implicit rate; therefore, we use our incremental borrowing rate based on the information available at the commencement date to determine the present value of the future lease payments.

Certain of our leases include variable costs. Variable costs include non-lease components that were incurred based upon actual terms rather than contractually fixed amounts. In addition, incremental lease payments that are indexed to a change in rate or index are considered variable costs. Because the ROU asset and lease liability recorded on the balance sheet was determined based upon factors considered at the commencement date, subsequent changes in the rate or index that were not contemplated, result in variable expenses being incurred when actual payments differ from estimated payments.

20

On February 25, 2021, the Company entered into an agreement to amend its lease for its corporate office and extended the term. As part of this agreement, the Company sold land owned adjacent to our corporate office for $400$389 and entered into a lease with the buyer of the land for a new building, containing approximately 80,000 to 100,000 rentable square feet, to be constructed and funded by the lessor.lessor up to a certain amount. The initial lease terms, as amended, for both the existing building and the expansion site extend through August 2037. The lease for the new building will not commence until construction is substantially complete and the total estimated lease payments as of June 30, 2022 are $16,875 which are not included in the lease information below as the lease has not commenced. Additionally, we entered into a lease for a new building in Littleton, CO containing approximately 50,000 rentable square feet to be constructed and funded by the lessor up to a certain amount. The lease term is for ten years upon commencement which is when construction is substantially complete.
15

The total estimated lease payments at June 30, 2022 are $14,233 which are not included in the lease information below as the lease has not yet commenced.

Components of lease cost (income) wereare as follows:
Quarter Ended September 30,Nine Months Ended September 30,
(in thousands)2021202020212020
Operating lease cost$2,461 $3,014 $6,756 $9,020 
Loss due to remeasurement— 1,627 — 1,627 
Finance lease cost - amortization expense151 241 444 681 
Finance lease cost - interest expense57 167 176 495 
Short-term lease cost— 52 — 105 
Variable lease cost422 205 1,215 498 
Sublease income(141)(155)(424)(459)
Total$2,950 $5,151 $8,167 $11,967 
Three Months Ended June 30,Six Months Ended June 30,
(in thousands)2022202120222021
Operating lease cost$2,386 $2,669 $4,573 $5,182 
Finance lease cost - amortization expense153 156312 306 
Finance lease cost - interest expense49 62102 125 
Short-term lease cost268 37431 91 
Variable lease cost579 7041,117 984 
Sublease income(63)(156)(127)(313)
Total$3,372 $3,472 $6,408 $6,375 

Balance sheet classifications at SeptemberJune 30, 20212022 and December 31, 20202021 are summarized below:
September 30, 2021December 31, 2020June 30, 2022December 31, 2021
(in thousands)(in thousands)Right of use assetsCurrent right of use liabilitiesLong-term right of use liabilitiesRight of use assetsCurrent right of use liabilitiesLong-term right of use liabilities(in thousands)Right of use assetsCurrent right of use liabilitiesLong-term right of use liabilitiesRight of use assetsCurrent right of use liabilitiesLong-term right of use liabilities
Operating LeasesOperating Leases$40,573 $7,611 $41,333 $40,586 $8,562 $38,296 Operating Leases$42,459 $7,826 $42,610 $42,502 $7,711 $43,359 
Finance LeasesFinance Leases3,941 565 4,200 8,034 972 10,173 Finance Leases3,373 639 3,529 3,854 633 4,061 
TotalTotal$44,514 $8,176 $45,533 $48,620 $9,534 $48,469 Total$45,832 $8,465 $46,139 $46,356 $8,344 $47,420 

Our future minimum lease payments as of SeptemberJune 30, 20212022 under operating lease and finance leases, with initial or remaining lease terms in excess of one year, wereare as follows:
June 30, 2022
(in thousands)Operating LeasesFinance Leases
Remainder of 2022$5,295 $399 
2023$9,995 $775 
2024$8,403 $729 
2025$6,483 $680 
2026$5,797 $603 
Thereafter$26,999 $1,605 
Total lease payments$62,972 $4,791 
Less: imputed interest$(12,536)$(623)
Present value of lease liabilities$50,436 $4,168 
September 30, 2021
(in thousands)Operating LeasesFinance Leases
Years ending September 30:
2021$2,628 $216 
20229,302 819 
20238,149 792 
20246,639 746 
20255,271 699 
Thereafter30,546 2,465 
Total lease payments62,535 5,737 
Less: imputed interest(13,591)(972)
Present value of lease liabilities$48,944 $4,765 
21

Supplemental cash flow information related to our leases for the ninesix months ending SeptemberJune 30, 20212022 and SeptemberJune 30, 20202021 were as follows:
(in thousands)September 30, 2021September 30, 2020
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash outflow from operating leases$6,938 $9,654 
Operating cash outflow from finance leases$176 $493 
Financing cash outflow (inflow) from finance leases$484 $186 
16

(in thousands)June 30, 2022June 30, 2021
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash outflow from operating leases$5,075 $5,521 
Operating cash outflow from finance leases102 125 
Financing cash outflow from finance leases$324 $329 
Weighted-average remaining lease terms and discount rate for our leases as of SeptemberJune 30, 2021,2022, were as follows:
September 30, 2021June 30, 2022
OperatingFinancingOperatingFinancing
Weighted-average remaining lease term (in years)Weighted-average remaining lease term (in years)9.07.6Weighted-average remaining lease term (in years)8.36.8
Weighted-average discount rateWeighted-average discount rate5.53%4.64%Weighted-average discount rate5.55%4.56%

(6) Inventories

Components of inventories at SeptemberJune 30, 20212022 and December 31, 20202021 are summarized as follows:
(in thousands)(in thousands)September 30, 2021December 31, 2020(in thousands)June 30, 2022December 31, 2021
Raw materialsRaw materials$23,994 $23,762 Raw materials$32,985 $23,530 
Work in processWork in process6,124 5,912 Work in process7,997 5,173 
Finished goods and partsFinished goods and parts59,207 86,993 Finished goods and parts65,019 64,184 
InventoriesInventories$89,325 $116,667 Inventories$106,001 $92,887 
We record a reserve to the carrying value of our inventory to reflect the rapid technological change in our industry that impacts the market for our products. The inventory reserve was $17,108$16,041 and $20,125$16,509 as of SeptemberJune 30, 20212022 and December 31, 2020,2021, respectively.

At SeptemberJune 30, 2021,2022, our obligation to repurchase inventory, included in accrued and other liabilities on our condensed consolidated balance sheets, was $371,$1,482, relating to the sale of inventory to an assembly manufacturer and we had a commitment of $5,681$5,775 with the assembling manufacturer to purchase certain materials and supplies they acquired from third parties. At SeptemberJune 30, 2021,2022, inventory held at assemblers was $3,123.$2,768. Additionally, $764 and $502 of inventory was transferred to property and equipment during the quarters ended June 30, 2022 and 2021, respectively.

In the second quarter of 2022 we notified one of our contract manufacturers of our intent to terminate the manufacturing services arrangement and in-source the assembly and production process. The exit agreement was finalized in July 2022 and includes a $1,670 exit fee accrued in the second quarter of 2022 and the commitment to purchase $23,913 of inventory from the assembly manufacturer and $369 of fixed assets. Part of the inventory purchased was prepaid during previous quarters for $8,892 which resulted in a net payment of $17,060 in July 2022.

1722

(7) Goodwill and Intangible Assets

The following table summarizes the activity in goodwill:
Six Months Ended June 30, 2022
HealthcareIndustrialConsolidated
(in thousands)Gross GoodwillImpairmentsNet GoodwillGross Goodwill ImpairmentsNet GoodwillGross GoodwillImpairmentsNet Goodwill
Balance at beginning of year$121,970 $(32,055)$89,915 $298,002 $(42,329)$255,673 $419,972 $(74,384)$345,588 
Acquisitions25,065 — 25,065 22,357 — 22,357 47,422 — 47,422 
Foreign currency translation adjustments(4,531)— (4,531)(5,981)— (5,981)(10,512)— (10,512)
Total goodwill$142,504 $(32,055)$110,449 $314,378 $(42,329)$272,049 $456,882 $(74,384)$382,498 

Nine Months Ended September 30, 2021
HealthcareIndustrialConsolidated
(in thousands)Gross GoodwillDispositions, Acquisitions and ImpairmentsNet GoodwillGross GoodwillDispositions, Acquisitions and ImpairmentsNet GoodwillGross GoodwillDispositions, Acquisitions and ImpairmentsNet Goodwill
Balance at beginning of year$101,767 $(32,055)$69,712 $134,382 $(42,329)$92,053 $236,149 $(74,384)$161,765 
Additions and adjustments (a)
$— $(14,961)$(14,961)$— $(1,519)$(1,519)$— $(16,480)$(16,480)
Foreign currency translation adjustments$(2,319)$— $(2,319)$(3,060)$— $(3,060)$(5,379)$— $(5,379)
Total goodwill$99,448 $(47,016)$52,432 $131,322 $(43,848)$87,474 $230,770 $(90,864)$139,906 

December 31, 2021
HealthcareIndustrialConsolidated
(in thousands)Gross GoodwillImpairmentsNet GoodwillGross GoodwillImpairmentsNet GoodwillGross GoodwillImpairmentsNet Goodwill
Balance at beginning of year$101,767 $(32,055)$69,712 $134,382 $(42,329)$92,053 $236,149 $(74,384)$161,765 
Acquisitions39,182 — 39,182 170,033 — 170,033 209,215 — 209,215 
Dispositions(15,598)— (15,598)(3,873)— (3,873)(19,471)— (19,471)
Adjustments(900)— (900)900 — 900 — — — 
Foreign currency translation adjustments(2,481)— (2,481)(3,440)— (3,440)(5,921)— (5,921)
Total goodwill$121,970 $(32,055)$89,915 $298,002 $(42,329)$255,673 $419,972 $(74,384)$345,588 
a.
The 2021 additions/adjustments for the Healthcare and Industrial segments in the table above relate to the acquisitions of Allevi and Additive of $3,278 as well as the dispositions of ODM and Simbionix of $19,397. The goodwill related to the Cimatron disposition was included in net assets held for sale as of December 31, 2020.


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Intangible assets, net, other than goodwill, at SeptemberJune 30, 20212022 and December 31, 20202021 are summarized as follows:
September 30, 2021December 31, 2020
(in thousands)
Gross (a)
Accumulated AmortizationNet
Gross (a)
Accumulated AmortizationNetWeighted Average Useful Life Remaining (in years)
Intangible assets with finite lives:
Customer relationships$59,059 $(50,063)$8,996 $71,123 $(56,682)$14,441 3.1
Acquired technology17,302 (16,199)1,103 42,472 (41,201)1,271 6.0
Trade names13,775 (10,150)3,625 17,477 (16,506)971 1.9
Patent costs21,384 (11,502)9,882 19,828 (10,999)8,829 4.8
Trade secrets19,755 (18,590)1,165 20,188 (18,216)1,972 1.8
Acquired patents16,252 (15,889)363 16,317 (15,723)594 7.8
Other14,626 (9,509)5,117 19,793 (19,788)5 6.1
Total intangible assets$162,153 $(131,902)$30,251 $207,198 $(179,115)$28,083 5.1

June 30, 2022December 31, 2021
(in thousands)GrossAccumulated AmortizationNetGrossAccumulated AmortizationNetWeighted Average Useful Life Remaining (in years)
Intangible assets with finite lives:
Customer relationships$49,886 $(45,145)$4,741 $53,062 $(45,613)$7,449 2.3
Acquired technology36,290 (6,301)29,989 17,518 (5,430)12,088 6.5
Trade names31,227 (11,020)20,207 20,448 (10,438)10,010 11.1
Patent costs20,836 (11,600)9,236 21,852 (11,812)10,040 11.0
Trade secrets19,585 (19,130)455 19,924 (18,971)953 0.6
Acquired patents16,202 (15,945)257 16,257 (15,945)312 6.4
Other13,031 (7,911)5,120 12,982 (7,999)4,983 3.9
Total intangible assets$187,057 $(117,052)$70,005 $162,043 $(116,208)$45,835 7.6
a.Change in gross carrying amounts consists primarily of charges for license and patent costs, foreign currency translation, acquisitions and divestitures.
Amortization expense related to intangible assets was $2,690$3,302 and $7,619$5,980 for the quarterthree and ninesix months ended SeptemberJune 30, 2021,2022, respectively, compared to $4,260$2,502 and $12,806$4,929 for the quarterthree and ninesix months ended SeptemberJune 30, 2020,2021, respectively.

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(8) Accrued and Other Liabilities

Accrued liabilities at SeptemberJune 30, 20212022 and December 31, 20202021 are summarized as follows:
(in thousands)(in thousands)September 30, 2021December 31, 2020(in thousands)June 30, 2022December 31, 2021
Compensation and benefitsCompensation and benefits$34,961 $24,629 Compensation and benefits$18,749 $39,846 
Accrued taxesAccrued taxes9,112 19,836 
Vendor accrualsVendor accruals17,465 18,762 Vendor accruals10,752 9,045 
Accrued taxes14,683 14,952 
Legal contingencies and exit cost accrualsLegal contingencies and exit cost accruals10,070 — 
Product warranty liabilityProduct warranty liability3,611 3,585 
Accrued professional feesAccrued professional fees1,989 2,263 
Accrued otherAccrued other2,710 6,138 Accrued other566 2,419 
Product warranty liability3,489 2,348 
Accrued professional fees3,174 1,773 
Royalties payable1,670 1,210 
TotalTotal$78,152 $69,812 Total$54,849 $76,994 

Other long-term liabilities at SeptemberJune 30, 20212022 and December 31, 20202021 are summarized as follows:
(in thousands)(in thousands)September 30, 2021December 31, 2020(in thousands)June 30, 2022December 31, 2021
Long-term employee indemnityLong-term employee indemnity$4,893 $12,228 Long-term employee indemnity$4,780 $5,237 
Long-term tax liabilityLong-term tax liability6,108 15,532 Long-term tax liability5,946 6,099 
Defined benefit pension obligationDefined benefit pension obligation9,400 10,228 Defined benefit pension obligation8,171 8,911 
Long-term deferred revenueLong-term deferred revenue16,983 6,163 Long-term deferred revenue7,235 10,244 
Other long-term liabilitiesOther long-term liabilities1,706 7,096 Other long-term liabilities9,719 1,763 
TotalTotal$39,090 $51,247 Total$35,851 $32,254 

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(9) Borrowings

Convertible Notes

On November 16, 2021 the Company issued $460,000 in aggregate principal amount of its 0% Convertible Senior Notes due November 15, 2026 (the “Notes”) pursuant to an Indenture, dated November 16, 2021 (the “Indenture”), between the Company and The Bank of New York Mellon, N.A., as trustee. The net proceeds from the offering of the Notes were $446,549 after deducting the initial purchasers’ discounts and commissions and offering expenses payable by the Company in the amount of $13,481 for which $11,826 is unamortized at June 30, 2022. The annual effective interest rate of the Notes is 0.594% when including purchasers' discounts and commissions and offering expenses incurred by the Company. The Notes are senior, unsecured obligations of the Company, will not bear regular interest and the principal amount of the Notes will not accrete. The Notes will mature on November 15, 2026, unless earlier redeemed, repurchased or converted in accordance with the terms of the Notes. The Notes will be convertible at the option of the holders at any time prior to the close of business on the business day immediately preceding August 15, 2026, only under the following circumstances: (1) during any calendar quarter commencing after the calendar quarter ending on March 31, 2022 (and only during such quarter), if the last reported sale price of the Company’s common stock, par value $0.001 per share (the “Common Stock”), is greater than or equal to 130% of the conversion price for each of at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter on each applicable trading day; (2) during the 5 business day period after any 5 consecutive trading day period (the “measurement period”) in which the trading price (as defined in the Indenture) per $1 principal amount of Notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price per share of the Common Stock and the conversion rate on each such trading day; (3) if the Company calls such Notes for redemption, at any time prior to the close of business on the second scheduled trading day immediately preceding the redemption date; and (4) upon the occurrence of specified corporate events, including a Fundamental Change (as defined in the Indenture), or distributions of the Common Stock. On or after August 15, 2026, until the close of business on the second scheduled trading day immediately preceding the maturity date, holders may convert all or any portion of their Notes at any time, at the option of the holder regardless of the foregoing circumstances. Upon conversion, the Company will pay cash up to the aggregate principal amount of the Notes to be converted and pay or deliver, as the case may be, cash, shares of the Common Stock, or a combination of cash and shares of the Common Stock, at the Company’s election, in respect of the remainder, if any, of the Company’s conversion obligation in excess of the aggregate principal amount of the Notes being converted. The Notes have an initial conversion rate of 27.8364 shares of Common Stock per $1 principal amount of Notes (which is subject to adjustment in certain circumstances). This is equivalent to an initial conversion price of approximately $35.92 per share. The conversion rate is subject to customary adjustments under certain circumstances in accordance with the terms of the Indenture. Holders of the Notes have the right to require the Company to repurchase for cash all or a portion of their Notes at 100% of their principal amount, plus any accrued and unpaid special interest, upon the occurrence of a Fundamental Change. The Company is also required to increase the conversion rate for holders who convert their Notes in connection with a Fundamental Change or convert their Notes that are called for redemption, as the case may be, prior to the maturity date. The Company may not redeem the Notes prior to November 20, 2024. The Notes are redeemable, in whole or in part, for cash at the Company’s option at any time, and from time to time, on or after November 20, 2024 and before the 41st scheduled trading day immediately preceding the maturity date, but only if the last reported sale price per share of the Common Stock has been at least 130% of the conversion price then in effect for a specified period of time. The Notes are the Company’s senior unsecured obligations and will rank senior in right of payment to any of the Company’s existing and future indebtedness that is expressly subordinated in right of payment to the Notes; rank equal in right of payment to any of the Company’s future unsecured indebtedness that is not so subordinated; be effectively subordinated in right of payment to any of the Company’s existing and future secured indebtedness to the extent of the value of the collateral securing such indebtedness; and structurally subordinated to all existing and future indebtedness and other liabilities (including trade payables) of current or future subsidiaries of the Company. The Indenture also contains covenants, events of default and other provisions which are customary for offerings of convertible notes. We are in compliance with all covenants. At June 30, 2022 the fair value of the Notes is $325,657. This is based on the quoted market price where the volume of activity is limited and not active and thus this is deemed a Level 2 fair value measurement.

The Company incurred $666 and $1,331 of debt issuance cost accretion for the three and six months ended June 30, 2022. Debt issuance cost accretion of $1,335, $2,682, $2,698, $2,714 and $2,396 are expected to be incurred in the remaining six months of 2022 and in 2023, 2024, 2025 and 2026, respectively.

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Credit Facility

We had a 5-year $100,000 senior secured revolving credit facility (the “Senior Credit Facility”) to support working capital and general corporate purposes. The Senior Credit Facility also included a 5-year $100,000 senior secured term loan facility (the “Term Facility”) that was fully repaid and terminated in the first quarter of 2021, as discussed below.2021. Effective August 24, 2021, we terminated the 5-year $100,000 Senior Credit Facility. The Senior Credit Facility contained customary covenants, some of which required us to maintain certain financial ratios, that determinedetermined the amounts available and terms of borrowings and events of default. We were in compliance with all covenants through the date of termination.

Borrowings under the Senior Credit Facility were subject to interest at varying spreads above quoted market rates and a commitment fee was paid on the total unused commitment. We had a balance of $21,392 outstandingThe interest rate on the TermSenior Credit Facility was 1.9% at December 31, 2020. On January 1, 2021, the Company completed the sale of Cimatron. A portion of the proceeds from the sale were used to repay the outstanding balance on the Term Facility. The Term Facility was fully repaid and terminated in the first quarter of 2021. Concurrent with the repayment of the Term Facility, we terminated the interest rate swap, resulting in a marked-to-market payment of $712.swap. See Note 10 for additional information.

For the six months ended June 30, 2022, and 2021, the cash interest paid was $102 and $1058, respectively.

(10) Hedging Activities and Financial Instruments

Derivatives Designated as Hedging Instruments

Interest Rate Swap Contract

On July 8, 2019, we entered into a $50,000 interest rate swap contract, designated as a cash flow hedge, to minimize the risk associated with the variability of cash flows in interest payments from variable-rate debt due to fluctuations in the one-month USD-LIBOR, subject to a 0% floor, through February 26, 2024. Changes in the interest rate swap were expected to offset the changes in cash flows attributable to fluctuations of the one-month USD-LIBOR for the interest payments associated with our variable-rate debt.

19

On January 4, 2021, in connection with the repayment and termination of the Term Facility, we terminated the interest rate swap agreement which requiredand recorded a marked-to-market termination payment of $712 paid in January 2021. Amounts previously recognized in AOCI of $721 were released and reclassified into Interest and other income (expense), net on the accompanying condensed consolidated statements of operations and comprehensive income (loss)expense for the ninesix months ended SeptemberJune 30, 2021.

The notional amount and fair value of the derivativeThere were no derivatives designated as hedging instruments on our balance sheet at June 30, 2022 or December 31, 2020 was2021.

Derivatives Not Designated as follows:
(in thousands)Balance Sheet locationNotional amountFair value
December 31, 2020
Interest rate swap contractOther liabilities$15,000 $(700)
Hedging Instruments

Foreign Currency Contracts

We conduct business in various countries using both the functional currencies of those countries and other currencies to effect cross border transactions. As a result, we are subject to the risk that fluctuations in foreign exchange rates between the dates that those transactions are entered into and their respective settlement dates will result in a foreign exchange gain or loss. When practicable, we endeavor to match assets and liabilities in the same currency on our balance sheet and those of our subsidiaries in order to reduce these risks. When appropriate, we enter into foreign currency contracts to hedge exposures arising from those transactions. We have elected not to prepare and maintain the documentation to qualify for hedge accounting treatment under ASC 815, “Derivatives and Hedging,” and therefore, all gains and losses (realized or unrealized) are recognized in Interest and other expense, net in the condensed consolidated statements of operations and comprehensive income (loss). Depending on their fair value at the end of the reporting period, derivatives are recorded either in prepaid expenses and other current assets or in accrued liabilities on the condensed consolidated balance sheets.

We had $84,665$47,500 and $101,781$43,000 in notional foreign exchange contracts outstanding as of SeptemberJune 30, 20212022 and December 31, 2020,2021, respectively. The fair values of these contracts were not material.

We translate foreign currency balance sheets from each international businesses’ functional currency (generally the respective local currency) to U.S. dollars at end-of-period exchange rates, and statements of earnings at average exchange rates for each period. The resulting foreign currency translation adjustments are a component of other comprehensive income (loss). We do not hedge the fluctuation in reported revenue and earnings resulting from the translation of these international operations’ results into U.S. dollars.

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(11) Net Income (Loss) Per Share

Basic net income (loss) per share is calculated by dividing net income (loss) by the weighted average number of common shares outstanding during the applicable period. Diluted net income (loss) per share incorporates the additional shares issuable upon assumed exercise of stock options and the vesting of restricted stock and restricted stock units, except in such case when their inclusion would be anti-dilutive.
Quarter Ended September 30,Nine Months Ended September 30,Three Months Ended June 30,Six Months Ended June 30,
(in thousands, except per share amounts)(in thousands, except per share amounts)2021202020212020(in thousands, except per share amounts)2022202120222021
Numerator:
Net income (loss)$292,656 $(72,889)$328,252 $(129,764)
Denominator:
Numerator for basic and diluted net income (loss) per share:Numerator for basic and diluted net income (loss) per share:
Net income (loss) attributable to 3D Systems CorporationNet income (loss) attributable to 3D Systems Corporation$(32,961)$(9,632)$(59,760)$35,596 
Denominator for net income (loss) per share:Denominator for net income (loss) per share:
Weighted average shares - basicWeighted average shares - basic122,663 118,527 122,178 116,216 Weighted average shares - basic127,703 122,147 127,218 121,931 
Dilutive securities2,626 — 2,661 — 
Dilutive effect of shares issuable under stock based compensation and other plans(1)
Dilutive effect of shares issuable under stock based compensation and other plans(1)
— — — 3,138 
Weighted average shares - dilutedWeighted average shares - diluted125,289 118,527 124,839 116,216 Weighted average shares - diluted127,703 122,147 127,218 125,069 
Anti-dilutive shares of stock based compensation awards which are excluded from the dilutive shares above(2)
Anti-dilutive shares of stock based compensation awards which are excluded from the dilutive shares above(2)
496 2,816 1,066 3,138 
Net income (loss) per share - basicNet income (loss) per share - basic$2.39 $(0.61)$2.69 $(1.12)Net income (loss) per share - basic$(0.26)$(0.08)$(0.47)$0.29 
Net income (loss) per share - dilutedNet income (loss) per share - diluted$2.34 $(0.61)$2.63 $(1.12)Net income (loss) per share - diluted$(0.26)$(0.08)$(0.47)$0.28 

(1) The dilutive impact of share awards for the three and six months ended June 30, 2022 and the three months ended June 30, 2021 are deemed anti-dilutive because we had a net loss for these periods.
20(2) Excludes the impact of shares contingently issuable upon the achievement of certain milestones in the Volumetric acquisition as discussed in Note 2. Additionally, it excludes 5,213 and 4,439 shares for the three and six months ended June 30, 2022, respectively, and 2,207 and 1,886 shares for the three and six months ended June 30, 2021, respectively, which are deemed fully or partially repurchased based on the calculation which requires certain assumptions regarding the assumed proceeds that will hypothetically repurchase unvested restricted shares and outstanding stock options.

On November 16, 2021, the Company issued $460,000 in aggregate principal amount of its 0% Convertible Senior Notes due November 15, 2026 as discussed in Note 9. The Notes’ impact to diluted shares will be calculated using the if-converted method as prescribed in ASU 2020-06. The Notes will increase the diluted share count when the average share price over a quarterly or annual reporting period is greater than $35.92, the conversion price of the Notes. For the quarterthree and ninesix months ended SeptemberJune 30, 2020,2022, the effect of dilutive securities, including non-vested stock optionsNotes were anti-dilutive on a stand-alone basis because the average share price during those periods did not exceed the conversion price and restricted stock awards/units, was excluded from the denominator for the calculation of diluted net loss per share because we recognizedhad a net loss for the periodsthree and their inclusion would be anti-dilutive. Dilutive securities excluded for the quarter and ninesix months ended SeptemberJune 30, 2021, were 2,029 and 2,284, respectively. Dilutive securities excluded for the quarter and nine months ended September 30, 2020, were 4,453 and 4,453, respectively.2022.

On August 5, 2020, we entered into an Equity Distribution Agreement for an At-The-Market equity offering program (“ATM Program”) under which we could have issued and sold, from time to time, shares of our common stock. On January 6, 2021, following the closing of the sale of Cimatron and the receipt of the related purchase price proceeds, the Company terminated the ATM Program. No shares of our stock were issued under the ATM Program in 2021.

(12) Fair Value Measurements

Fair value is the exchange price to sell an asset or transfer a liability (an exit price) in an orderly transaction between market participants at the measurement date. Fair value measurements use market data or assumptions market participants would use in pricing the asset or liability, including assumptions about risk and the risks inherent in the inputs to the valuation technique. These inputs may be readily observable, corroborated by market data, or generally unobservable. Valuation techniques maximize the use of observable inputs and minimize the use of unobservable inputs. The accounting guidance for fair value measurements and disclosures establishes a three-level fair value hierarchy:

•Level 1 - Inputs are based on quoted prices in active markets for identical assets and liabilities.
•Level 2 - Inputs are based on observable inputs other than quoted prices in active markets for identical or similar assets and liabilities.
•Level 3 - One or more inputs are unobservable and significant.

Financial and nonfinancial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.


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Cash equivalents, short-term investments and Israeli severance funds and derivatives are valued utilizing the market approach to measure fair value for financial assets and liabilities. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities.

Assets and liabilities measured at fair value on a recurring basis are summarized below:
Fair Value Measurements as of September 30, 2021
(in thousands)Level 1Level 2Total
Description
Cash equivalents (a)
$305,432 $— $305,432 
Israeli severance funds (b)
$— $1,982 $1,982 
Fair Value Measurements as of December 31, 2020
(in thousands)Level 1Level 2Total
Description
Cash equivalents (a)
$199 $— $199 
Israeli severance funds (b)
$— $6,422 $6,422 
Derivative financial instruments (c)
$— $(700)$(700)
Fair Value Measurement As of June 30, 2022
Fair Value MeasurementBalance Sheet Classification
Fair Value LevelCost BasisUnrealized Gains (Losses)Fair ValueCash and Cash EquivalentsShort-term Investments and Marketable SecuritiesOther Assets
Money market fundsLevel 1$123,437 $— $123,437 $123,437 $— $— 
Certificates of DepositLevel 22,609 (4)2,605 — 2,605 — 
Commercial paperLevel 231,265 — 31,265 5,136 26,129 — 
Short-Term Bond Mutual FundLevel 2100,242 (601)99,641 — 99,641 — 
Corporate bonds(1)
Level 2214,428 (3,418)211,010 — 211,011 — 
Israeli severance fundsLevel 2— — — — — 1,840 
Total$471,981 $(4,023)$467,958 $128,573 $339,386 $1,840 
a.
Cash equivalents include funds held in money
(1) Includes $1,871 and $1,863 of cost basis and fair market instruments and are reported at their current carrying value which approximates fair value due to the short-term naturerespectively, with a weighted average maturity of these instruments and are included in cash and cash equivalents in the condensed consolidated balance sheet.
b.We partially fund a liability for our Israeli severance requirement through monthly deposits into fund accounts, the value of these contributions is recorded to non-current assets on the condensed consolidated balance sheet.
c.Derivative instruments are reported based on published market prices for similar assets or are estimated based on published market prices for similar assets or are estimated based on observable inputs such as interest rates, yield curves, credit risks, spot and future commodity prices and spot and future exchange rates. See Note 10 for additional information on our derivative financial instruments.1.3 years.

We did not have any transfers of assets and liabilities between Level 1, Level 2 and Level 3 of the fair value measurement hierarchy during the ninesix months ended SeptemberJune 30, 2021.2022.

Additionally, as discussed in Note 2, the Enhatch warrants are measured at fair value on a recurring basis and are considered Level 3 in the fair value hierarchy. The value at June 30, 2022 was $330 and there was no change from the investment date fair value. The balance is recorded in other non-current assets. The fair value of the warrant was determined via a valuation as of the investment date and on June 30, 2022 using a Monte Carlo simulation which included, but are not limited to, a number of assumptions such as financial projections, equity and revenue volatility, risk free rates, comparable company financial metrics, correlations, risk factors and rates of returns.


Fair Value Measurements as of December 31, 2021
(in thousands)Level 1Level 2Level 3Total
Description
Money market funds a
$485,521 $— $— $485,521 
Israeli severance funds b
$— $2,070 $— $2,070 

a.Money market funds at December 31, 2021 are recorded in cash and cash equivalents.
b.We partially fund a liability for our Israeli severance requirement through monthly deposits into fund accounts, the value of these contributions are recorded to non-current assets on the consolidated balance sheet.

In addition to the assets and liabilities included in the above table, certain of our assets and liabilities are measured at fair value on a non-recurring basis. This includes goodwill and other intangible assets which are measured at fair value at acquisition and adjusted to fair value only if their fair value falls below the initial fair value. For further discussion on the valuation techniques and inputs used in the fair value measurement of goodwill and other intangible assets, see Notes 1, 2 and 7. Additionally, the Enhatch convertible preferred stock investment and the related call option are measured at fair value on a non-recurring basis for which a fair value adjustment will be made if there are any impairments or observable and orderly transactions undertaken by Enhatch which provides evidence/support of a price change.


(13) Income taxesTaxes

We maintain the exception under ASC 740-270-30-36(b), “Accounting“Accounting for Income Taxes,,” for jurisdictions that do not have reliable estimates of ordinary income due to the volatility in the industry.income. Based on the continued global financial uncertainty due to the COVID-19 pandemic and volatility in the industry, we have continued to use a year-to-date methodology in determining the effective tax rate for the quarterthree and ninesix months ended SeptemberJune 30, 2021.2022.

2128

For the quarterthree and ninesix months ended SeptemberJune 30, 2021, the Company’s effective tax rate was 2.0% and (0.9)%, respectively. For the quarter and nine months ended September 30, 2020,2022, the Company’s effective tax rate was (4.1)% and (1.9)(4.5)%, respectively. For three and six months ended June 30, 2021, the Company’s effective tax rate was 7.2% and (34.2)%, respectively. The difference between the statutory tax rate and the effective tax rate for the quarterthree and ninesix months ended SeptemberJune 30, 2022, is primarily driven by a full valuation allowance in various jurisdictions and return to provision adjustments. The difference between the statutory tax rate and the effective tax rate for the three and six months ended June 30, 2021, is primarily driven by the reduction of a liability for uncertain tax positions which includes the release noted in the paragraph below, the foreign rate differential between the U.S. tax rate and foreign tax rates, valuation allowances in the U.S., and differences in book and tax stock bases related to the divestitures of Cimatron and Simbionix. The difference between the statutory tax rate and the effective tax rate for the quarter and nine months ended September 30, 2020 is primarily driven by the foreign rate differential between the U.S. tax rate and foreign tax rates, impairmentpresence of non-deductible goodwill, and the changea full valuation allowance in U.S. tax law allowing for the carryback of certain U.S. net operating losses (“NOLs”) as explained in the paragraph below.

In response to the global pandemic resulting from the COVID-19 pandemic, the U.S. government enacted tax legislation on March 27, 2020 under the Coronavirus Aid Relief, and Economic Security Act (“CARES Act”). This legislation allowed us to carryback NOLs generated in the 2018 and 2019 tax years up to five years. A tax receivable was recorded during the first quarter of 2020 for the anticipated carryback in the amount of $8,900, along with associated uncertain tax positions of $5,700. During the fourth quarter of 2020, additional uncertain tax positions of $3,200 were recorded to fully reserve the $8,900 related to the carryback. During the first quarter of 2021, the Company received two favorable private letter rulings triggering release of the uncertain tax positions for $8,900. As of the close of the quarter ended September 30, 2021, the entire refund has been received by the Company.various jurisdictions.

(14) Commitments and Contingencies

We lease certain of our facilities and equipment under non-cancelable operating and finance leases. See Note 5.

We have an inventory purchase commitment with an assembling manufacturer.manufacturer related to normal operations through June 30, 2022, as well as related to the termination of the agreement. See Note 6 for additional information regarding thisthe commitments of the recurring inventory purchase commitment.purchases and the agreement termination.

Litigation

Export Controls and Government Contracts Compliance Matter

In October 2017, we received an administrative subpoena from the Bureau of Industry and Security of the Department of Commerce (“BIS”) requesting the production of records in connection with possible violations of U.S. export control laws, including with regard to our Quickparts.com, Inc. subsidiary. In addition, while collecting information responsive to the above-referenced subpoena, our internal investigation identified potential violations of the International Traffic in Arms Regulations administered by the Directorate of Defense Trade Controls of the Department of State (“DDTC”) and potential violations of the Export Administration Regulations administered by the BIS. On June 8, 2018 and thereafter, we submitted voluntary disclosures to BIS and DDTC identifying numerous potentially unauthorized exports of technical data.

As part of our ongoing review of trade compliance risks and our cooperation with the government, on November 20, 2019, we submitted to the U.S. Treasury Department’s Office of Foreign Assets Control (“OFAC”) an initial notice of voluntary disclosure regarding potential violations of economic sanctions related to Iran. We continued to investigate this issue and filed a final disclosure with OFAC on May 20, 2020. We have and will continue to implement compliance enhancements to our export controls, trade sanctions, and government contracting compliance program to address the issues identified through our ongoing internal investigation and will cooperate with DDTC and BIS, as well as the U.S. Departments of Justice, Defense, Homeland Security and Treasury in their ongoing reviews of these matters. In connection with these ongoing reviews, in August 2020, the Company received 2 federal grand jury subpoenas issued by the U.S. District Court for the Northern District of Texas. The Company responded to these 2 subpoenas and will continue to fully cooperate with the U.S. Department of Justice in the related investigation.

In addition, on July 19, 2019, we received a notice of immediate suspension of federal contracting from the United States Air Force, pending the outcome of an ongoing investigation. The suspension applied to 3D Systems, its subsidiaries and affiliates, and was related to the potential export controls violations involving our ODM business described above. Under the suspension, we were generally prohibited from receiving new federal government contracts or subcontracts from any executive branch agency as described in the provisions of 48 C.F.R Subpart 9.4 of the Federal Acquisition Regulation. The suspension allowed us to continue to perform current federal contracts, and also to receive awards of new subcontracts for items under $35 and for items considered commercially available off-the-shelf items. The Air Force lifted the suspension on September 6, 2019 following the execution of a two-year Administrative Agreement with us. We are now eligible to obtain and perform U.S. government contracts and subcontracts without restrictions. Under the Administrative Agreement, we were monitored and evaluated by independent monitors who will reportreported to the Air Force on our compliance with the terms of the Company’s Ethics & Compliance Program, including its overall culture, government contracting compliance program, and export controls compliance program. The Air Force terminated the Administrative Agreement and associated monitorship early on August 12, 2021 after the monitors found that we had satisfied the requirements of the Administrative Agreement.
22


Although we cannot predict the ultimate resolution of these matters, we have incurred and expect to continue to incur significant legal costs and other expenses in connection with responding to the U.S. government agencies. Based on the progress of this matter, at June 30, 2022 we recorded an estimate of costs we expect to incur to resolve these matters which is included below.



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Shareholder Suits

The Company and certain of its current and former executive officers have been named as defendants in a consolidated putative stockholder class action lawsuit pending in the United States District Court for the Eastern District of New York. The action is styled In re 3D Systems Securities Litigation, No. 1:21-cv-01920-NGG-TAM (E.D.N.Y.) (the “Securities Class Action”). On July 14, 2021, the Court appointed a Lead Plaintiff for the putative class and approved his choice of Lead Counsel. Lead Plaintiff filed his Consolidated Amended Complaint (the “Amended Complaint”) on September 13, 2021, alleging that defendants violated the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and SEC Rule 10b-5 promulgated thereunder by making false and misleading statements and omissions, and that the current and former executive officers named as defendants are control persons under Section 20(a) of the Exchange Act. The Amended Complaint was filed on behalf of stockholders who purchased shares of the Company’s common stock between May 6, 2020 and March 5, 2021, and seeks monetary damages on behalf of the purported class. The deadline for defendantsDefendants moved to move, answer, or otherwise respond todismiss the Amended Complaint on February 15, 2022, the motion was fully briefed in May 2022 and is currently November 12, 2021.pending. On April 15, 2022, the Company was informed the SEC is conducting a formal investigation of the Company related to, among other things, the allegations in the Securities Class Action and the Company received a subpoena from the SEC for the production of documents and information related to its investigation as a follow on to a previous voluntary request for documents. The Company is cooperating with the SEC.

The Company has been named as a nominal defendant and certain of its current and former executive officers and directors have been named as defendants in derivative lawsuits pending in the United States District Court for the Eastern District of New York, and the South Carolina Court of Common Pleas for the 16th Circuit, York County, and the Supreme Court of the State of New York, Kings County. The actions are styled Nguyen v. Joshi, et al., No. 21-cv-03389-DG-CLP21-cv-03389-NGG-TAM (E.D.N.Y.) (the “New York Derivative“Nguyen Action”), Lesar v. Graves, et al., No. 2021CP4602308 (S.C., Ct. of Common Pleas for the 16th Judicial Cir., Cty. of York) (the “Lesar Action”), and Scanlon v. Graves, et al., No. 2021CP4602312 (S.C., Ct. of Common Pleas for the 16th Judicial Cir., Cty. of York) (together with the Lesar Action, the “South Carolina Derivative Actions”(the “Scanlon Action”), Bohus v. Joshi, et al., No. 22-cv-2203-CBA-RML (E.D.N.Y.) (the “Bohus Action”) and Fernicola v. Clinton, et al., No. 512613/2022 (N.Y., Kings County Supreme Court) (the "Fernicola Action"). The ComplaintComplaints in the New York Derivative Action,Nguyen and Bohuhs Actions, which waswere filed on June 15, 2021 assertsand April 18, 2022, respectively, assert breach of fiduciary duty claims against all defendants and claims for contribution under the federal securities laws against certain of the defendants. The Complaints in the South Carolina Derivative Actions,Lesar Action and the Scanlon Action, which were filed on July 26, 2021, assert breach of fiduciary duty and unjust enrichment claims against defendants. The Complaint in the Fernicola Action was filed on May 2, 2022 and asserts claims for breach of fiduciary duty and waste of corporate assets against the director defendants. On August 27, 2021, the New YorkNguyen Action was stayed until 30 days after the earlier of: (i) the close of discovery in the Securities Class Action, or (ii) the deadline for appealing a dismissal of the Securities Class Action with prejudice. On October 26, 2021, the Lesar Action and the Scanlon Action were consolidated into a single stockholder derivative action, styled as In Re 3D Systems Corp. Shareholder Derivative Litigation, No. 2021CP4602308 (S.C., Ct. of Common Pleas for the 16th Judicial Cir., Cty. Of York) (the “South Carolina Derivative Action”). On March 3, 2022, the South Carolina Derivative Action was stayed until 30 days after the earlier of: (i) the close of discovery in the Securities Class Action, or (ii) the deadline for appealing a dismissal of the Securities Class Action with prejudice. On June 16, 2022, the Bohus Action was consolidated with the Nguyen Action (the "E.D.N.Y. Derivative Action"). The E.D.N.Y. Derivative Action is stayed until 30 days after the earlier of: (i) the close of discovery in the Securities Class Action, or (ii) the deadline for appealing a dismissal of the Securities Class Action with prejudice. Defendants' deadline to move, answer, or otherwise respond to the complaint in the Fernicola Action, is August 15, 2022.

The Company believes the claims alleged in the putative securities class action and derivative lawsuits are without merit and the Company intends to defend itself and its current and former officers vigorously.

Other

We are involved in various other legal matters incidental to our business. Although we cannot predict the results of the litigation with certainty, we believe that the disposition of all these various other legal matters will not have a material adverse effect, individually or in the aggregate, on our consolidated results of operations, consolidated cash flows or consolidated financial position.

In connection with the foregoing matters, we are estimating our expected costs at $8,400 as of June 30, 2022.

(15) Restructuring and Exit Activity Costs

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In June 2022, we notified one of our contract manufacturers of our intention to terminate the manufacturing services agreement and in-source the printer assembly and production in July 2022. In connection with the termination, we incurred a $1,670 exit fee which was accrued as of June 30, 2022 and paid in July 2022. The expense was recorded in selling, general and administrative as part of general corporate expenses. Additionally, we have a commitment to purchase $23,913 of inventory and $369 of fixed assets from the contract manufacturer which was paid in July of 2022. Part of the inventory purchased was prepaid during previous quarters for $8,892 which resulted in a net cash payment of $17,060 in July 2022.

On August 5, 2020, we announced, in connection with the new strategic focus, a restructuring plan intended to align our operating costs with current revenue levels and to better position the Company for future sustainable and profitable growth. The restructuring plan included a reduction of nearly 20% of our workforce, with the majority of the workforce reduction completed by December 31, 2020. We completed the restructuring efforts in the second quarter of 2021. Cost reduction efforts included reducing the number of facilities and examining every aspect of our manufacturing and operating costs. We incurred cash charges for severance, facility closing and other costs, primarily in the second half of 2020, and continued to incur additional charges through the second quarter of 2021, when we finalized all the actions to be taken. Non-cash charges related to these actions were $6,400 and are included in facility closing costs. We also divested parts of the business that did not align with this strategic focus. See Note 2.

23

In connection with the restructuring plan, we recorded pre-tax costs during the nine months ended September 30, 2021, included within Selling, general and administrative in the condensed consolidated income statement, and incurred total costs as follows:
(in thousands)(in thousands)Costs Incurred during 2020Costs Incurred during the nine months ended September 30, 2021Total Costs Incurred(in thousands)Costs Incurred during 2020Costs Incurred during the six months ended June 30, 2021Total Costs Incurred Through June 30, 2021
Severance, termination benefits and other employee costsSeverance, termination benefits and other employee costs$12,914 $660 $13,574 Severance, termination benefits and other employee costs$12,914 $660 $13,574 
Facility closing costsFacility closing costs6,470 640 7,110 Facility closing costs6,470 640 7,110 
Other costsOther costs668 (179)489 Other costs668 (179)489 
TotalTotal$20,052 $1,121 $21,173 Total$20,052 $1,121 $21,173 

The liabilities at SeptemberJune 30, 2021 related to these costs were principally recorded in accrued expenses in the condensed consolidated balance sheets and were as follows:
(in thousands)(in thousands)Liability at December 31, 2020Costs Incurred during 2021Costs Paid During 2021Non-cash adjustmentsLiability at September 30, 2021(in thousands)Balance at December 31, 2020Costs Incurred during the six months ended June 30, 2021Cost paid during 2021Non-cash adjustmentsLiability at June 30, 2021
Severance, termination benefits and other employee costsSeverance, termination benefits and other employee costs$7,173 $660 $(7,833)$— $— Severance, termination benefits and other employee costs$7,173 $660 $(7,768)$— $65 
Facility closing costsFacility closing costs— 640 (640)— — Facility closing costs— 640 (640)— — 
Other costsOther costs— (179)0179 — Other costs— (179)— 611 432 
TotalTotal$7,173 $1,121 $(8,473)$179 $— Total$7,173 $1,121 $(8,408)$611 $497 


(16) Stock-Based Compensation

Presented below is a summary of the stock-based compensation cost and associated tax benefit included in the accompanying consolidated statements of operations:

Three Months Ended June 30,Six Months Ended June 30,
2022202120222021
Stock-based compensation expense$7,403 $19,525 $20,061 $30,576 
Tax benefit$— $— $— $— 

Included in the above expenses for the three and six months ended June 30, 2022 is ($2,429) and $1,841, respectively, and $8,520, and $12,413 for the three and six months ended June 30, 2021, respectively, pertaining to annual incentive compensation which is paid in Company shares. Additionally, the above expense for the three and six months ended June 30, 2022 includes $1,990 and $3,980 related to the Volumetric contingent consideration milestones as discussed in Note 2.

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During the three and six months ended June 30, 2022, the Company granted 357 and 3,163 shares of restricted stock which had a weighted average grant date fair value of $10.28 per share and $14.35 per share, respectively. The restricted stock awards generally vest ratably over three years, except for those awards granted to settle the accrued incentive compensation liability at December 31, 2021 for which the awards vested immediately.

During the three months ended June 30, 2022, the Company also granted325 of market based awards whereby the number of shares that ultimately vest are based on the three year performance of the Company's share price as compared to an index.These awards were valued using a Monte Carlo simulation and the grant date fair value is $28.71 per share.

Unrecognized stock-based compensation expense at June 30, 2022 was $71,459 which is expected to be recognized over a weighted average period of 2.6 years.

The following tables summarize information relating to restricted stock vesting:
Six Months Ended June 30,
(in thousands)20222021
Vesting of restricted stock:
Fair value of shares vested$45,489 $30,866 
Tax benefit realized upon vesting$— $— 
Number of shares vested3,028 1,133 


(17) Redeemable Noncontrolling interest

In connection with the 93.75% acquisition of Kumovis on April 1, 2022, as discussed in Notes 1 and 2, the Company recorded a redeemable non-controlling interest (RNCI).The RNCI represents noncontrolling shareholders’ interest in Kumovis which iscontrolled but not wholly owned by 3D Systems and for which 3D Systems obligation to redeem the minority shareholders’ interest is governed by a put/call relationship. Subsequent to the initial measurement at fair value, which is currently in process as part of business combination accounting, the RNCI is recorded at the greater of its redemption value or its’ carrying value at the end of each reporting period. If the RNCI is carried at its redemption value, the difference between the redemption value and the carrying value would be adjusted at the end of each reporting period through additional paid in capital. The Company will also perform a quarterly assessment to determine if the aforementioned redemption value exceeds the fair value of the RNCI.If the redemption value of the RNCI exceeds its fair value, the excess will reduce the net income attributable to 3D Systems shareholders.

The following table shows changes in the RNCI related to the acquisition of Kumovis:

Six Months Ended June 30,
(in thousands)20222021
Balance at January 1, 2022$— $— 
Fair value at the date of acquisition (1)
2,418 — 
Net Loss(37)— 
Translation Adjustments(232)— 
Balance at June 30, 2022$2,149 $— 
(1) Fair value as the date of acquisition is an estimate.The fair value of the RNCI is currently being determined as part of the business combination accounting

(18) Subsequent Events

We have evaluated subsequent events throughIn the date these financial statements were issuedsecond quarter of 2022 we notified our contract assembly manufacturer of our intent to terminate the manufacturing services arrangement and determined thatin-source the following subsequent events are requiredassembly and production process. The exit agreement was finalized in July 2022 and includes a $1,670 exit fee accrued in the second quarter of 2022, and the commitment to be disclosed:purchase $23,913 of inventory and $369 of fixed assets from the assembly manufacturer. Part of the inventory purchased was prepaid during previous quarters for $8,892 which resulted in a net cash payment of $17,060 in July 2022.

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On October 27, 2021,August 8, 2022, we announced that we entered into an Agreement and Plan of Merger with Volumetric Biotechnologies, Inc. (“Volumetric”), pursuant to which the Company agreedagreement to acquire Volumetricdp polar GmbH (dp polar), a German-based designer and manufacturer of the industry’s first additive manufacturing system designed for a purchase pricetrue high-speed mass production of $45,000 subject to customary closing adjustments, with up to an additional $355,000 linked to the attainmentcustomized components for €30,000 of milestone achievements through December 31, 2035. Purchase price payments, including payments upon attainment of milestone achievements,which €20,000 will be paid approximately half in cash and the remaining half in sharesremainder will paid via the issuance of the Company’s common stock. CompletionCentral to dp polar’s patented continuous printing process is a large-scale, segmented, rotating print platform that eliminates the start/stop operations of virtually all additive manufacturing platforms. With dp polar’s technology and patented polar coordinate control, the transaction is expectedprint heads remain stationary above the rotating platform, providing a continuous print process. We expect to occur duringclose the acquisition in the fourth quarter of 2021. The purchase price is expected to impact our financial position via the reduction of cash and an increase in common shares outstanding and intangible assets, including goodwill. Volumetric will be part of the Healthcare segment. The acquisition’s impact on the Company's results of operations and cash flows are expected to be dilutive.

Volumetric’s mission is to develop the ability to manufacture human organs using bioprinting methods and the underlying technologies required to create these highly complex biological structures. With this acquisition, 3D Systems will expand our capabilities and capacity in 3D printing related to bio-printing and regenerative medicine. Combining 3D Systems regenerative medicine group with Volumetric’s highly complementary skill sets of biological expertise and cellular engineering is expected to accelerate our core regenerative medicine strategies which include the bio-printing of human organs, additional non-organ applications and bio-printing technologies for research labs.

On November 1, 2021 the Company completed the acquisition of Oqton, Inc. See Note 2.2022.

2433


Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis should be read together with the unaudited condensed consolidated financial statements and the notes thereto included in Item 1, (the “Financial Statements”) and Part I, Item 1A of this Quarterly Report on Form 10-Q (“Form 10-Q”). Also, we are subject to a number of risks and uncertainties that may affect our future performance that are discussed in greater detail under the heading "Forward Looking Statements" below and in the sections entitled “Forward-Looking Statements” at the end of this Item 2 and that are discussed or referred to inPart I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2021 ("2021 Form 10-K") under the heading "Risk Factor" and below in Part II, ofItem 1A in this Form 10-Q.

Business Overview

3D Systems Corporation (“3D Systems” or the “Company” or “we”“we,” "our" or “us”) markets our products and services through subsidiaries in North America and South America (collectively referred to as “Americas”), Europe and the Middle East (collectively referred to as “EMEA”) and the Asia Pacific and Oceania region (“APAC”(collectively referred to as “APAC”). We provide comprehensive 3D printing and digital manufacturing solutions, including 3D printers for plastics and metals, materials, software, on-demand manufacturing services (this business was sold in September of 2021), and digital design tools. Our solutions support advanced applications in two key industry verticals: Healthcare (which includes dental, medical devices, and personalized health services)services and regenerative medicine) and Industrial (which includes aerospace, defense, transportation and general manufacturing). We have over 3035 years of experience and expertise which have proven vital to our development of an ecosystem and end-to-end digital workflow solutions which enable customers to optimize product designs, transform workflows, bring innovative products to market and drive new business models.

As of January 1, 2021, we determined theThe Company has two reportable segments, Healthcare and Industrial, whereas the Company previously only reported its consolidated results in one reportable segment. Prior year Healthcare and Industrial revenue amounts discussed herein have been recast to conform with current year presentation.Industrial.

New Strategic FocusOverview and RestructuringStrategy

Our business portfolio is well-balanced across endIn May 2020, our Chief Executive Officer and President, Dr. Jeffrey Graves, was hired. Dr. Graves undertook an initial assessment of the Company and developed the purpose statement to be the leader in enabling additive manufacturing solutions for applications in growing markets and geographies and includes athat demand high degree of businesses serving critical sectors such as healthcare, aerospace and durable goods. On August 5, 2020, wereliability products. He announced a four-phased plan to enable this vision: reorganize into two key industry verticals (Healthcare and Industrial), restructure to gain efficiencies, divest non-core assets, and invest for future growth.

As part of our strategic focus and reorganization and a restructuring plan, we have organized into two key verticals. This structure allows us to align our solution-oriented approach with deep industry and customer knowledge. Our two key verticals span a range of industries. Healthcare includes dental, medical devices, personalized health services and regenerative medicine. Our Industrial vertical includes aerospace, defense, transportation and general manufacturing. We architect solutions specific to customers’ needs through a combination of materials, hardware platforms, software, professional services and advanced manufacturing – creating a path to integrating additive manufacturing into traditional production environments. As a result, manufacturers achieve design freedom, increase agility, scale production and improve overall total cost structureof operation. Our technologies and process knowledge enable hundreds of thousands of production parts to the level of revenues. Webe made through additive manufacturing each day.

In conjunction with our four-phased plan, we completed theour initial restructuring efforts in the second quarter of 2021. Cost reduction efforts includeincluded reducing the number of facilities and examining every aspect of our manufacturing and operating costs. We incurred cash chargesHowever, given the current macroeconomic challenges, we will continue to look for severance, facility closing and other costs, primarily in the second half of 2020, and continuedways to incur additional charges throughmanage costs. In the second quarter of 2021, when2022, we finalized allnotified one of our printer assembly outsourcing partners of our intent to terminate the actionsmanufacturing services arrangement and in-source our printer assembly and production process, as we believe this is an opportunity to be taken. We incurred total charges of $21.1 million for severance, facility closingsimprove customer delivery and other costs in accomplishing these efforts, including non-cash charges of $6.4 million which are included in facility closingreduce costs. We alsocompleted the in-sourcing in July of 2022.

Divestitures (see Note 2 of the Financial Statements for further details)

In conjunction with our four-phased plan, we divested parts of theour business that dodid not align with thisour strategic focus. Seefocus on additive manufacturing. The divestitures were completed in 2021, with net proceeds totaling $421.5 million. In January 2021, we sold Cimatron Ltd., which operated our Cimatron integrated CAD/CAM software for the tooling business and its GibbsCAM CNC programming software business, in August 2021 we sold our Simbionix line of surgical simulators for and in September 2021 we sold our On Demand Manufacturing ("ODM"). These divestitures represent the completion of our planned divestitures of non-core assets as part of the strategic plan noted above.

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Acquisitions (See Note 2 of the Financial Statements for Further Details)

The last phase of the plan was to invest in growth. Once the restructuring phase and Note 15the divestitures of non-core assets were complete, the company made several acquisitions and investments.

On April 1, 2022, we completed the acquisition of 93.75% of Kumovis GmbH ("Kumovis") for an all-cash purchase price of $37.7 million, before customary closing adjustments. The payment of $3.6 million is deferred for up to fifteen months from the closing date. Kumovis, which is part of the Healthcare segment, utilizes polyether ether keton or “PEEK” materials, which has properties that lend it to many medical applications, including many implant applications, that fit into our personalized healthcare operations. The impact of the acquisition is not expected to have a near-term material impact to the consolidatedCompany's financial statementsposition, statement of operations or cash flows.

On April 1, 2022, we completed the 100% acquisition of Titan Additive LLC ("Titan") for an all-cash purchase price of $39.5 million, before customary closing adjustments. Titan, which is part of Industrial segment, is a pellet-based extrusion platform that addresses customer applications requiring large build volumes, superior performance, and improved productivity at significantly lower cost. We believe the acquisition of Titan will open up new markets in the Industrial segment. The impact of the acquisition is not expected to have a near-term material impact to the Company's financial position, statement of operations or cash flows.

In March 2022, the Saudi Arabian Industrial Investments Company ("Dussur") and we signed an agreement to form a joint venture intended to expand the use of additive manufacturing within the Kingdom of Saudi Arabia and surrounding geographies, including the Middle East and North Africa. The joint venture is to enable the development of Saudi Arabia's domestic additive manufacturing production capabilities, consistent with the Kingdom’s ‘Vision 2030,’ which is focused on diversification of the economy and long-term sustainability. Once the joint venture is formed, 3D Systems will own approximately 49% and is committed to an initial investment of about $6.5 million. Additional future investments are contingent upon achievement of certain milestones by the joint venture. The expected impact on the Company’s financial position, results of operations and cash flows will not be material other than the cash outflow(s) related to the initial and contingent investments.

In March 2022, we made a $10.0 million investment for an approximate 26.6% ownership in Enhatch Inc. ("Enhatch"), the developer of the Intelligent Surgery Ecosystem, and simultaneously entered into a collaboration and supply agreement with Enhatch. We also obtained warrants to purchase additional discussion.shares of Enhatch and the right to purchase, in the future, the remaining shares of Enhatch that 3D Systems does not own if certain revenue targets are achieved. Enhatch's Intelligent Surgery Ecosystem provides technologies which streamline and scale the design and delivery of patient-specific medical devices by automating the process. Incorporating these capabilities into 3D Systems’ workflow for patient-specific solutions, which includes advanced software, expert treatment planning services, custom implants and instrumentation design, and industry-leading production processes will help more efficiently meet the growing demand for personalized medical devices. The expected impacts on the Company’s financial position, results of operations and cash flows are not material other than potential future cash used to exercise the warrants or call option.

On December 1, 2021, we acquired Volumetric Biotechnologies, Inc. (“Volumetric”), for $40.2 million. Additional payments of up to $355.0 million are possible upon the attainment of seven non-financial milestones through December 31, 2030 and 2035 and the continued employment of certain key individuals from Volumetric. Volumetric’s mission is to develop the ability to manufacture human organs using bioprinting methods and the underlying technologies required to create these highly complex biological structures. With this acquisition, 3D Systems expanded our capabilities and capacity in 3D printing related to bio-printing and regenerative medicine. Combining 3D Systems' regenerative medicine group with Volumetric’s highly complementary skill sets of biological expertise and cellular engineering is expected to accelerate our core regenerative medicine strategies which include the bio-printing of human organs, additional non-organ applications and bio-printing technologies for research labs. The acquisition’s near-term impact on the Company's financial position, results of operations and cash flows are expected to be dilutive. Volumetric's operating results are reported in the Healthcare segment.

35

On November 1, 2021, we acquired Oqton, Inc. (“Oqton”), for $187.4 million. Oqton is a software company that creates an intelligent, cloud-based Manufacturing Operating System (MOS) platform tailored for flexible production environments that increasingly utilize a range of advanced manufacturing and automation technologies, including additive manufacturing solutions, in their production workflows. The cloud-based solution leverages the Industrial Internet of Things, artificial intelligence, and machine learning technologies to deliver a solution for customers to automate their digital manufacturing workflows, scale their operations and enhance their competitive position. The Oqton acquisition will allow the Company to expand its existing additive manufacturing software suite to the entire additive industry. Oqton's operating results are reported in the Industrial segment and the acquisition’s near term impact on the Company’s financial position, results of operations and cash flows are expected to be dilutive.

In May 2021, we purchased Allevi, Inc. to expand regenerative medicine initiatives into medical and pharmaceutical research and development laboratories. Additionally, in June 2021, we closed the acquisition of a German software firm, Additive Works GmbH (“Additive”). Additive expands the simulation capabilities for rapid optimization of industrial-scale 3D printing processes. The purchase price for both acquisitions, individually and combined, and the impacts to the Company’s financial position, results of operations and cash flows are not material.

COVID-19 Pandemic Responseand Current Economic Environment

As weThe COVID-19 pandemic continues to impact the global economy, disrupt global supply chains, and create significant volatility in the financial markets. These factors have resulted in inflationary and cost pressures that have significantly increased, and continue to closely monitoradversely impact, our production and distribution costs, including costs of spare parts and materials, packaging materials, and freight. We are also experiencing pressure on our supply chain due to strained transportation capacity, lack of sufficient labor availability, and manufacturing backlogs. In addition, Russia’s invasion of Ukraine has led to further economic disruption. While we do not operate in Ukraine, the impact of the conflict led to our exit from the Russian market in 2022. Furthermore, the conflict continues to exacerbate inflationary cost pressures and supply chain constraints which are negatively impacting the global economy and our business.

Furthermore, customer demand for our products may be impacted by macroeconomic conditions such as weak economic conditions, including a recession, inflation, stagflation, equity market volatility, supply chain challenges, or other negative economic factors in the U.S. or other nations as well as geopolitical events, such as the Russia-Ukraine war. For example, under these conditions, our customers may delay purchasing decisions or reduce their use of our services. Further, in the event of a recession our suppliers, distributors, and other third-party partners may suffer their own financial and economic challenges and as a result they may demand pricing accommodations, delay payment, or become insolvent, which could harm our ability to meet our customer demands or collect revenue or otherwise could harm our business. Similarly, disruptions in financial and/or credit markets may impact ofour ability to manage normal commercial relationships with our customers, suppliers and creditors. Thus, if general macroeconomic conditions deteriorate, our business and financial results could be materially and adversely affected.

Due to the COVID-19 pandemic, our top priority remains the healthaffiliates, employees, suppliers, customers, and safety of our employeesothers have been and their families and communities. Our Crisis Response Steering Committee regularly reviews and adapts our protocols based on evolving research and guidance related to the virus. While operations continue, wemay continue to restrictbe restricted or prevented from conducting normal business activities, including shutdowns, travel restrictions and meetings, publish pertinent information,other actions that may be requested or mandated by governmental authorities. We have reopened our offices and adapt to a world where manyresumed business travel, with safety measures in our workforce are remoteplace and those coming on-site are following new safety measures. In certain of our locations, wherein accordance with local conditions and regulations allow, our employees have begun to return to working on-site. guidance.

We continue to watch conditions and regulations and remain committed to protecting our employees, delivering for our customers, and supporting our communities.

We are subject to the mandatory vaccination and workplace safety protocols of the United States Federal Government Executive Order on Ensuring Adequate COVID Safety Protocols for Federal Contractors, and the COVID-19 Workplace Safety Guidance for Federal Contractors and Subcontractors issued by the Safer Federal Workforce Task Force. Accordingly, we have adopted a policy to comply with the mandate that all U.S. employees be vaccinated within the mandated timeframe. The mandate could result in employee attrition for us, which could materially and adversely affect our financial condition and results of operations. Additional information regarding COVID-19 risks appears in Part II, Item 1A, “Risk Factors” of this Form 10-Q.
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Looking Forward

Our operations in Americas, EMEA and APAC expose us to risks associated with public health crises and epidemics/pandemics, such as the COVID-19 pandemic. While the COVID-19 pandemic and other factors impacting the current economic environment continued to impact our reported results, for the quarter ended September 30, 2021, we are unable to predict the longer-term impact that the pandemicthese factors may have on our business, results of operations, financial position or cash flows. The extent to which our operations may be impacted by the dynamic nature of the COVID-19 pandemic will depend largely on future developments, which are highly uncertain and cannot be accurately predicted, including the severity or resurgence of thea COVID-19 outbreak, and actions by government authorities to contain thean outbreak or treat its impact. Furthermore,impact, actions by government authorities to address inflationary and cost pressures, and the severity, length, and potential expansion of the conflict in Ukraine. The impacts of a potential worsening of laborthese uncertain global economic and geopolitical conditions could result in further supply chain disruptions, including the shortages of critical components, changes in demand for our products and theservices and continued disruptions to, and volatility in, the financial marketsmarkets. Events surrounding the global economy, geopolitics, and the COVID-19 pandemic continue to evolve. Although we believe that we will ultimately emerge from these events well positioned for long-term growth, uncertainties remain unknown.and, as such, we cannot reasonably estimate the duration or extent of these adverse factors on our business, results of operations, financial position, or cash flows.


36






Summary of ThirdSecond Quarter 20212022 Financial Results

Quarter Ended September 30,
(in thousands, except per share amounts)20212020
Revenue:
Products$108,884 $78,296 
Services47,212 57,880 
Total revenue156,096 136,176 
Cost of sales:
Products64,252 48,213 
Services27,529 29,336 
Total cost of sales91,781 77,549 
Gross profit64,315 58,627 
Operating expenses:
Selling, general and administrative65,737 59,065 
Research and development15,786 18,866 
Impairment of goodwill— 48,300 
Total operating expenses81,523 126,231 
Loss from operations$(17,208)$(67,604)

Three Months Ended June 30,Six Months Ended June 30,
(in thousands, except per share amounts)2022202120222021
Revenue:
Products$103,774 $108,638 $204,325 $202,286 
Services36,271 53,919 68,721 106,387 
Total revenue140,045 162,557 273,046 308,673 
Cost of sales:
Products65,331 62,635 123,803 115,999 
Services21,576 30,917 42,310 59,429 
Total cost of sales86,907 93,552 166,113 175,428 
Gross profit53,138 69,005 106,933 133,245 
Operating expenses:
Selling, general and administrative64,404 61,463 119,819 111,063 
Research and development20,772 17,602 42,384 34,201 
Total operating expenses85,176 79,065 162,203 145,264 
Loss from operations$(32,038)$(10,060)$(55,270)$(12,019)

Total consolidated revenue for the thirdsecond quarter of 2021 increased 14.6%2022 decreased 13.8% compared to the same period last year, driven by growthdivestitures of non-core businesses in both the Healthcare and Industrial segments. Revenues from divested businesses in the second quarter of 2021 were $27.0 million, including $13.1 million in Healthcare and $13.9 million in Industrial. Revenue from Healthcare increased 28.3%decreased 13.4% to $76.4$71.7 million, and Industrial revenue decreased 14.3% to $68.3 million, both compared to the same period last year, driven by strong demand for dental applicationsyear. Decreases were due to divestitures, the cessation of sales to Russian customers, as well as the negative impacts of foreign exchange, partly offset by the impactcontinued solid demand of 2021 divestitures.our Healthcare and Industrial sales increased 4.0% to $79.7 million, compared to the same period last year, primarily due toproducts and services despite the continued recovery from the economic slowdown due to the pandemic partly offset by the impact of 2021 divestitures.challenging macro-economic environment and supply chain disruptions.

Gross profit for the quarter ended SeptemberJune 30, 2021 increased2022 decreased by 9.7%23.0%, or $5.7$15.9 million, to $64.3$53.1 million, compared to $58.6$69.0 million for the quarter ended SeptemberJune 30, 2020.2021. Gross profit margin for the quarters ended SeptemberJune 30, 2022 and June 30, 2021 were 37.9% and September 30, 2020 was 41.2% and 43.1%42.4%, respectively. The decrease in gross profit margin was primarily due to the impacta result of 2021 divestitures, increased logistics andcost inflation, supply chain pressures, higher freight costs during 2021, volume based pricing impacts on certain key accounts and changes in revenue estimates on certain collaboration arrangements.an unfavorable product mix.

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Operating expenses for the quarter ended SeptemberJune 30, 2021 decreased2022 increased by 35.4%7.7%, or $44.7$6.1 million, to $81.5$85.2 million, compared to $126.2$79.1 million for the quarter ended SeptemberJune 30, 2020 primarily due to both 2020 cost optimization expenses and a goodwill impairment charge incurred in the third quarter of 2020.2021. Selling, general and administrative (“SG&A”) expenses for the quarter ended SeptemberJune 30, 20212022 increased by 11.3%4.8%, or $6.7$2.9 million, to $65.7$64.4 million, compared to $59.1$61.5 million for the same period last year. For the quarter ended SeptemberJune 30, 2020, which2022, SG&A expenses included $11.9$11.0 million of restructuring expenses related to our 2020 cost optimization program.estimated legal and other settlement costs. Research and development (“R&D”) expenses for the quarter ended SeptemberJune 30, 2021 decreased2022 increased by 16.3%18.0%, or $3.1$3.2 million, to $15.8$20.8 million, compared to $18.9$17.6 million for the quarter ended September 30, 2020. A goodwill impairment charge of $48.3 million was recorded in the quarter ended September 30, 2020 compared to no impairment charge in 2021.same period last year. The remaining combined net increase in SG&A and R&D expense changes reflect spending in targeted areas to support future growth, including corporate infrastructure and expenses is due to higherfrom acquired companies, offset by lower incentive compensation resultingexpense and the absence of expenses from better than expected performance in 2021 compared to internal targets, a one-time $9.8 million bonus paid to Simbionix employees in connection with the divestiture, investments in the business, increase in stock compensation expenses, and expenses related to acquisitions. Incentive compensation in the third quarter of 2020 was de minimus. The combined net increase in SG&A and R&D expenses in the quarter ended September 30, 2020 were partly offset by benefits from the 2020 cost optimization plan.divested businesses.

Our operating loss for the quarter ended SeptemberJune 30, 20212022 was $17.2$32.0 million, compared to $67.6a $10.1 million loss for the quarter ended SeptemberJune 30, 2020. The2021 due to lower loss was driven bygross margins and higher revenue and gross profit dollars, benefits from the 2020 cost optimization plan, and the absence of a goodwill impairment charge and cost optimization expenses in 2021, partly offset by higher net combined SG&A and R&D expenses as noteddiscussed above.

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Results of Operations

Revenue

Current year revenue has improved as the prior year was negatively impacted by the effects of the COVID-19 pandemic, most severely toward the end of the first quarter 2020 and into the second quarter of 2020, as many of our customers were shut down or on a significantly reduced level of activity. Additionally, given the relatively high price of certain 3D printers and a corresponding lengthy selling cycle, as well as relatively low unit volume of the higher priced printers in any particular period, a shift in the timing and concentration of orders and shipments from one period to another can materially affect reported revenue in any given period.

In addition to changes in sales volumes, there are two other primary drivers of changes in revenue from one period to another: (1) the combined effect of changes in product mix and average selling prices and (2) the impact of fluctuations in foreign currencies. As used in this Management’s Discussion and Analysis, the price and mix effects relate to changes in revenue that are not able to be specifically related to changes in unit volume.Background

We earn revenue from the sale of products and services through our Healthcare and Industrial segments. The product categories include 3D printers and corresponding materials, healthcare simulators (which was divested in third quarter of 2021), digitizers, software licenses, 3D scanners and haptic devices. The majority of materials used in our 3D printers are proprietary. The services category includes maintenance contracts and services on 3D printers and simulators, software maintenance, software as a service subscriptions, on-demand solutions (which was divested in the third quarter of 2021) and healthcare services.

Given the relatively high price of certain 3D printers and a corresponding lengthy selling cycle, as well as relatively low unit volume of the higher-priced printers in any particular period, a shift in the timing and concentration of orders and shipments from one period to another can materially affect reported revenue in any given period.

In addition to changes in sales volumes, there are three other primary drivers of changes in revenue from one period to another: (1) divestitures, (2) the combined effect of changes in product mix and average selling prices and (3) the impact of fluctuations in foreign currencies. As used in this Management’s Discussion and Analysis, the price and mix effects relate to changes in revenue that are not able to be specifically related to changes in unit volume, divestitures or foreign exchange.
38





Three months ended June 30, 2022 compared with the three months ended June 30, 2021

The following tablestable set forth our operating results by segment:
Three Months Ended June 30,
20222021
HealthcareIndustrialConsolidatedHealthcareIndustrialConsolidated
(in thousands)
Revenue$71,746 $68,299 $140,045 $82,826 $79,731 $162,557 
Cost of sales45,130 41,777 86,907 44,207 49,345 93,552 
Gross profit26,616 26,522 $53,138 38,619 30,386 69,005 
Less:
Segment operating expenses17,747 24,058 41,805 16,366 20,528 36,894 
Segment operating income$8,869 $2,464 11,333 $22,253 $9,858 32,111 
General corporate expense, net (a)
43,371 42,171 
Operating (loss)$(32,038)$(10,060)
(a) - General corporate expense, net includes expenses not specifically attributable to our segments for functions such as human resources, finance, legal, information technology, including salaries, benefits, and other related costs, company wide incentive compensation and stock-compensation.

Revenue

The following table sets forth the change in revenue for the third quarter and ninethree months ended SeptemberJune 30, 20212022 and 2020.2021.

Table 1
(Dollars in thousands)(Dollars in thousands)ProductsServicesTotal(Dollars in thousands)ProductsServicesTotal
Revenue — third quarter 2020$78,296 $57,880 $136,176 
Revenue — second quarter 2021Revenue — second quarter 2021$108,638 $53,919 $162,557 
Change in revenue:Change in revenue:Change in revenue:
VolumeVolume36,532 46.7 %(11,940)(20.6)%24,592 18.1 %Volume5,996 5.5 %1,708 3.2 %7,704 4.7 %
DivestituresDivestitures(9,311)(8.6)%(17,755)(32.9)%(27,066)(16.7)%
Price/MixPrice/Mix(5,954)(7.6)%58 0.1 %(5,896)(4.3)%Price/Mix2,451 2.3 %— — %2,451 1.5 %
Foreign currency translationForeign currency translation10 — %1,214 2.1 %1,224 0.9 %Foreign currency translation(4,000)(3.7)%(1,600)(3.0)%(5,600)(3.4)%
Net changeNet change30,588 39.1 %(10,668)(18.4)%19,920 14.6 %Net change(4,864)(4.5)%(17,647)(32.7)%(22,511)(13.8)%
Revenue — third quarter 2021$108,884 $47,212 $156,096 
Revenue — second quarter 2022Revenue — second quarter 2022$103,774 $36,272 $140,046 

27

Total consolidated revenue for the thirdsecond quarter of 20212022 compared to the same period last year increased 14.6%decreased 13.8%, primarily due to divestitures of non-core businesses, the negative impact of foreign exchange and the cessation of sales to Russian customers, partially offset by higher product volume from the continued rebound from the adverse impacts of the COVID-19 pandemic in the prior yearsolid demand for our products and a favorable foreign currency impact partially offset by unfavorable price/mixservices despite challenging macroeconomic and divestitures. Recurring revenue, which includes service and materials, was $101.4 million and $96.9 million for the quarters ended September 30, 2021 and 2020, respectively.geopolitical conditions.

For the quartersthree months ended SeptemberJune 30, 20212022 and 2020,2021, products revenue from Healthcare contributed $55.5$50.8 million and $36.6$57.8 million, respectively, and products revenue from Industrial contributed $53.4$53.0 million and $41.7$50.8 million, respectively. The higherdecreased products revenue in Healthcare and Industrial was primarily due to higher volume fromdivestitures and the continued rebound from adversenegative impacts of the COVID-19 pandemic in the prior year. Healthcare revenue experienced continued strength in the dental market.foreign exchange. The higherincreased products revenue in Industrial was primarily due to higher volumes, foreign currency impact, partially offset by unfavorable price/mix and divestitures.the negative impacts of foreign exchange.

For the quartersthree months ended SeptemberJune 30, 20212022 and 2020,2021, services revenue from Healthcare contributed $20.8$20.9 million and $23.0$25.0 million, respectively, and services revenue from Industrial contributed $26.4$15.3 million and $34.9$28.9 million, respectively. The lower services revenue in Healthcare and in Industrialboth segments was primarily due to divestitures.

For the quartersthree months ended SeptemberJune 30, 20212022 and 2020,2021, revenue from operations outside the U.S. was 45.9%43.6% and 50.5%43.9% of total revenue, respectively.

Table 2
(Dollars in thousands)ProductsServicesTotal
Revenue — nine months 2020$220,248 $164,340 $384,588 
Change in revenue:
Volume88,146 40.0 %(15,632)(9.5)%72,514 18.9 %
Price/Mix(3,659)(1.7)%92 0.1 %(3,567)(0.9)%
Foreign currency translation6,435 2.9 %4,799 2.9 %11,234 2.9 %
Net change90,922 41.3 %(10,741)(6.5)%80,181 20.8 %
Revenue — nine months 2021$311,170 $153,599 $464,769 

Total consolidated revenue increased 20.8% for the nine months ended September 30, 2021 compared to the same period last year, primarily due to increased volume from the continued rebound from the adverse impacts of the COVID-19 pandemic in the prior year and foreign currency impact. Recurring revenue, which includes service and materials, was $304.2 million and $273.4 million for the nine months ended September 30, 2021 and 2020, respectively.

For the nine months ended September 30, 2021 and 2020, products revenue from Healthcare contributed $163.0 million and $98.5 million, respectively, and products revenue from Industrial contributed $148.2 million and $121.7 million, respectively. The higher products revenue in Healthcare was due to continued strength in the dental market. The higher products revenue in Industrial was primarily due to higher volumes, favorable price/mix and foreign currency impact, partially offset by divestitures.

Services revenue for the nine months ended September 30, 2021 decreased primarily due to lower volumes, which was partially offset by the favorable impact of foreign currency translation. For the nine months ended September 30, 2021 and 2020, services revenue from Healthcare contributed $68.8 million and $62.3 million, respectively, and services revenue from Industrial contributed $84.8 million and $102.0 million, respectively. The higher services revenue in Healthcare was due to strong sales in both dental and medical applications; whereas, the lower services revenue in Industrial was due to lower on-demand volume and divestitures.

For the nine months ended September 30, 2021 and 2020, revenue from operations outside the U.S. was 44.5% and 51.7% of total revenue, respectively.

2839


Gross profit and gross profit margins

The following tables settable sets forth gross profit and gross profit margins for the quarters and ninethree months ended SeptemberJune 30, 20212022, and 2020.2021.

Table 3
Quarter Ended September 30,Three Months Ended June 30,
20212020Change in Gross ProfitChange in Gross Profit Margin20222021
(Dollars in thousands)(Dollars in thousands)Gross ProfitGross Profit MarginGross ProfitGross Profit Margin$%Percentage Points%(Dollars in thousands)Gross ProfitGross Profit MarginGross ProfitGross Profit Margin
ProductsProducts$44,632 41.0 %$30,083 38.4 %$14,549 48.4 %2.6 6.8 %Products$38,443 37.0 %$46,003 42.3 %
ServicesServices19,683 41.7 %28,544 49.3 %(8,861)(31.0)%(7.6)(15.4)%Services14,695 40.5 %23,002 42.7 %
TotalTotal$64,315 41.2 %$58,627 43.1 %$5,688 9.7 %(1.9)(4.4)%Total$53,138 37.9 %$69,005 42.4 %

For the quarterthree months ended SeptemberJune 30, 2021,2022, as compared to the same period last year, the increasedecrease in total consolidated, product and services gross profit and gross profit margin was predominantly due to the higher sales volume as previously discussed, partially offset by divestitures. Productsproduct mix changes from divestitures and inflationary pressures. Healthcare gross profit increaseddecreased $12.0 million compared to the prior year comparable period and gross profit margin of 37.1% in 2022 decreased from 46.6% in the same period in 2021. The year over year decrease in Healthcare gross profit margin was due to product mix changes primarily due to higher sales volume as well as an improveddivestitures and inflationary pressures, particularly freight and component costs. Industrial gross profit decreased $3.9 million compared to the prior year comparable period and gross profit margin due toof 38.8% in 2022 increased from 38.1% in the significantly improved capacity utilization. Servicesprior year comparable period. The year over year increase in gross profit decreasedmargin was primarily due to the impact of divestitures and lower on-demand volume.

Table 4
Nine Months Ended September 30,
20212020Change in Gross ProfitChange in Gross Profit Margin
(Dollars in thousands)Gross ProfitGross Profit MarginGross ProfitGross Profit Margin$%Percentage Points%
Products$130,919 42.1 %$72,298 32.8 %$58,621 81.1 %9.3 28.4 %
Services66,641 43.4 %78,628 47.8 %(11,987)(15.2)%(4.4)(9.2)%
Total$197,560 42.5 %$150,926 39.2 %$46,634 30.9 %3.3 8.4 %

For the nine months ended September 30, 2021, as compared to the same period last year, the increase in total consolidated gross profit was predominantly due to the higher sales volume as previously discussed, and the end of life inventory charge recorded in the quarter ended June 30, 2020, partiallyproduct mix changes, partly offset by divestitures. Products gross profit increased primarily due to higher sales volume as well as an improved gross profit margin due to significantly improved capacity utilizationinflationary pressures, particularly in freight and the end of life inventory charge recorded in the quarter ended June 30, 2020. Services gross profit decreased primarily due to the impact of divestitures and lower on-demand volume.component costs.

Operating expenses

The following tables settable sets forth the components of consolidated operating expenses, for the quarters and ninethree months ended SeptemberJune 30, 20212022 and 2020.2021.

Table 5
Quarter Ended September 30,Three Months Ended June 30,
20212020Change20222021
(Dollars in thousands)(Dollars in thousands)Amount% RevenueAmount% Revenue$%(Dollars in thousands)Amount% RevenueAmount% Revenue
Selling, general and administrative expensesSelling, general and administrative expenses$65,737 42.1 %$59,065 43.4 %$6,672 11.3 %Selling, general and administrative expenses$64,404 46.0 %$61,463 37.8 %
Research and development expensesResearch and development expenses15,786 10.1 %18,866 13.9 %(3,080)(16.3)%Research and development expenses20,772 14.8 %17,602 10.8 %
Impairment of goodwill— — %48,300 35.5 %(48,300)(100.0)%
Total operating expensesTotal operating expenses$81,523 52.2 %$126,231 92.7 %$(44,708)(35.4)%Total operating expenses$85,176 60.8 %$79,065 48.6 %

For the quarterthree months ended SeptemberJune 30, 2021,2022, as compared to the same period last year, SG&A expenses increased predominantly due to higher stock-based compensation$11 million of expenses for estimated costs from legal contingencies and incentive compensation reflecting better than expected operating performance
29

compared to internal targets, a one-time $9.8other settlements, expenses from acquired companies, $4.0 million bonus paid to Simbionix employeesof Volumetric contingent consideration expense, and an increase in connection with the divestiture,merger and acquisition expenses, partially offset by lower incentive compensation and the realizationabsence of cost savingsexpenses from the prior year cost optimization program and divestitures. SG&A expenses in the third quarter of 2020 included $11.9 million of restructuring expenses related to the 2020 cost optimization program. See Note 15 to the consolidated financial statements for additional discussion regarding restructuring.divested businesses.

For the quarterthree months ended SeptemberJune 30, 2021,2022, as compared to the same period last year, R&D expenses decreasedincreased due to a reductioncontinued investments in collaboration arrangementgrowth initiatives and expenses from acquisitions, partly offset by the absence of expenses from divested businesses.
40




Six months ended June 30, 2022 compared with the six months ended June 30, 2021

The following table set forth our operating results by segment:
Six Months Ended June 30,
20222021
HealthcareIndustrialConsolidatedHealthcareIndustrialConsolidated
(in thousands)
Revenue$136,091 $136,955 $273,046 $155,347 $153,326 $308,673 
Cost of sales84,762 81,351 166,113 82,865 92,563 175,428 
Gross profit51,329 55,604 $106,933 72,482 60,763 133,245 
Less:
Segment operating expenses34,757 46,854 81,611 30,436 38,283 68,719 
Segment operating income$16,572 $8,750 25,322 $42,046 $22,480 64,526 
General corporate expense, net (a)
80,592 76,545 
Operating (loss)$(55,270)$(12,019)
(a) - General corporate expense, net includes expenses not specifically attributable to our segments for functions such as morehuman resources, finance, legal, information technology, including salaries, benefits, and other related costs, company wide incentive compensation and stock-compensation.

Revenue

The following table sets forth the change in revenue for the six months ended June 30, 2022 and 2021.


(Dollars in thousands)ProductsServicesTotal
Revenue — six months 2021$202,286 $106,387 $308,673 
Change in revenue:
Volume28,237 14.0 %(410)(0.4)%27,827 9.0 %
Divestitures(17,611)(8.7)%(34,658)(32.6)%(52,269)(16.9)%
Price/Mix(1,829)(0.9)%— — %(1,829)(0.6)%
Foreign currency translation(6,758)(3.3)%(2,597)(2.4)%(9,355)(3.0)%
Net change2,039 1.0 %(37,665)(35.4)%(35,626)(11.5)%
Revenue — six months 2022$204,325 $68,722 $273,047 

Total consolidated revenue for the six months ended June 30, 2022 compared to the same period last year decreased 11.5%, primarily due to divestitures of these typesnon-core businesses in both the Healthcare and Industrial segments, the negative impacts of arrangements were recorded as revenueforeign exchange and cost of sales, and cost savingsthe exit from Russia, partially offset by higher volume from the prior year restructuring programcontinued solid demand for our products despite challenging macroeconomic and geopolitical conditions.

For the six months ended June 30, 2022 and 2021, products revenue from Healthcare contributed $98.0 million and $107.4 million, respectively, and products revenue from Industrial contributed $106.3 million and $94.9 million, respectively. The decreased products revenue in Healthcare was primarily due to divestitures. The increase in Industrial products revenue was primarily due to higher volumes, partially offset by the negative impact of foreign exchange.

For the six months ended June 30, 2022 and 2021, services revenue from Healthcare contributed $38.0 million and $47.9 million, respectively, and services revenue from Industrial contributed $30.7 million and $58.5 million, respectively. The lower services revenue in both segments was primarily due to divestitures.

For the quartersix months ended SeptemberJune 30, 2020, an impairment2022 and 2021, revenue from operations outside the U.S. was 44.1% and 43.8% of goodwilltotal revenue, respectively.

41


Gross profit and gross profit margins

The following table sets forth gross profit and gross profit margins for the six months ended June 30, 2022 and 2021.

Six Months Ended June 30,
20222021
(Dollars in thousands)Gross ProfitGross Profit MarginGross ProfitGross Profit Margin
Products$80,522 39.4 %$86,287 42.7 %
Services26,411 38.4 %46,958 44.1 %
Total$106,933 39.2 %$133,245 43.2 %

For the six months ended June 30, 2022, as compared to the same period last year, the decrease in consolidated, product and services gross profit and gross profit margin percentage was recorded. There was no impairmentpredominantly due to product mix changes, divestitures and inflationary pressures. Healthcare gross profit decreased $21.2 million compared to the prior year comparable period and gross profit margin of goodwill37.7% in the six months ended June 30, 2022, decreased from 46.7% in the same period of 2021. The year over year decrease in Healthcare gross profit margin was due to product mix changes primarily due to divestitures and inflationary pressures, particularly freight and component costs. Industrial gross profit decreased $5.2 million compared to the prior year comparable period and gross profit margin of 40.6% in the six months ended June 30, 2022 increased from 39.6% in the same period of 2021. The year over year increase in gross profit margin was primarily due to product mix changes, partly offset by inflationary pressures, particularly in freight and component costs.

Table 6Operating expenses
Nine Months Ended September 30,
20212020Change
(Dollars in thousands)Amount% RevenueAmount% Revenue$%
Selling, general and administrative expenses$176,800 38.0 %$167,213 43.5 %$9,587 5.7 %
Research and development expenses49,987 10.8 %55,107 14.3 %(5,120)(9.3)%
Impairment of goodwill— — %48,300 12.6 %(48,300)(100.0)%
Total operating expenses$226,787 48.8 %$270,620 70.4 %$(43,833)(16.2)%

The following table sets forth the components of consolidated operating expenses for the six months ended June 30, 2022 and 2021.

Six Months Ended June 30,
20222021Change
(Dollars in thousands)Amount% RevenueAmount% Revenue$%
Selling, general and administrative expenses$119,819 43.9 %$111,063 36.0 %$8,756 7.9 %
Research and development expenses42,384 15.5 %34,201 11.1 %8,183 23.9 %
Total operating expenses$162,203 59.4 %$145,264 47.1 %$16,939 11.7 %

For the ninesix months ended SeptemberJune 30, 2021,2022, as compared to the same period last year, SG&A expenses increased predominantly due to higher stock-based compensation$11 million of expenses for estimated costs from legal contingencies and incentive compensation reflecting better than expected operating performance compared to internal targets, a one-time $9.8other settlements, expenses from acquired companies, $8.0 million bonus paid to Simbionix employeesof Volumetric contingent consideration expense and an increase in connection with the divestiture,merger and acquisition expenses, partially offset by lower incentive compensation and the realizationabsence of cost savingsexpenses from the prior year restructuring program and divestitures. SG&A expenses for the nine months ended September 30, 2020 included $11.9 million of restructuring expenses related to our 2020 cost optimization program. See Note 15 to the consolidated financial statements for additional discussion regarding restructuring.divested businesses.

For the ninesix months ended SeptemberJune 30, 2021,2022, as compared to the same period last year, R&D expenses decreasedincreased due to a reductioncontinued investments in collaboration arrangementsgrowth initiatives and expenses as morefrom acquisitions, partly offset by the absence of these types of arrangements were recorded as revenue and cost of sales, and cost savingsexpenses from the prior year restructuring program and divestitures.divested businesses.

For the nine
42



Three and six months ended SeptemberJune 30, 2020, an impairment of goodwill was recorded. There was no impairment of goodwill in the same period of 2021.2022 compared with three and six months ended June 30, 2021

Loss from operations

The following table sets forth loss from operations for the quartersthree and ninesix months ended SeptemberJune 30, 20212022 and 2020.2021.

Table 7
Quarter Ended September 30,Nine Months Ended September 30,Three Months Ended June 30,ChangeSix Months Ended June 30,Change
(Dollars in thousands)(Dollars in thousands)2021202020212020(Dollars in thousands)20222021$%20222021$%
Loss from operations:Loss from operations:$(17,208)$(67,604)$(29,227)$(119,694)Loss from operations:$(32,038)$(10,060)$(21,978)218.5 %$(55,270)$(12,019)$(43,251)359.9 %

The decreaseincrease in loss from operations for the quarterthree and ninesix months ended SeptemberJune 30, 2021,2022, as compared to the same prior year periods, was primarily driven by an increase inlower revenue, andlower gross profit cost savings from the prior year cost optimization program, the absence of a goodwill impairment charge and restructuring expenses related to our 2020 cost optimization program and divestitures partly offset by higher stock and incentive compensation expenses, as previously discussed.operating expenses.

See “Revenue,” “Gross profit and gross profit margins” and “Operating expenses” above.

30

Interest and other income (expense), net

The following table sets forth the components of interest and other income (expense), net, for the quartersthree and ninesix months ended SeptemberJune 30, 20212022 and 2020.

Table 8
Quarter Ended September 30,Nine Months Ended September 30,
(Dollars in thousands)2021202020212020
Interest and other income (expense), net
Foreign exchange gain (loss)$222 $(601)$2,279 $(1,584)
Interest income (expense), net19 (611)(1,230)(3,699)
Other income (expense), net315,618 (1,207)353,347 (2,315)
Total interest and other income (expense), net$315,859 $(2,419)$354,396 $(7,598)
2021.


Three Months Ended June 30,ChangeSix Months Ended June 30,Change
(Dollars in thousands)20222021$20222021$
Foreign exchange (loss) gain$(1,211)$(72)$(1,139)$(3,429)$2,057 $(5,486)
Interest income (expense), net1,825 (211)2,036 1,990 (1,249)3,239 
Other income (expense), net(285)(33)(252)(515)37,729 (38,244)
Total interest and other income (expense), net$329 $(316)$645 $(1,954)$38,537 $(40,491)

Foreign exchange (loss) gain, (loss), net, for the ninethree and six months and quarter ended SeptemberJune 30, 2021,2022, as compared to the prior year periods, improvedreported a loss due to the favorable movements instrengthening of the EUR/USDU.S. Dollar relative to the Euro, British Pound and GBP/USD exchanges rates.other currencies which negatively impacted non-U.S. Dollar denominated assets held by U.S. Dollar functional currency entities and U.S. Dollar liabilities held by non-U.S. Dollar functional currency entities.

InterestThe Company earned $1.8 million of net interest income (expense), net, decreased for the quarter and ninethree months ended SeptemberJune 30, 2021, as2022, and $2.0 million of net interest for the six months ended June 30, 2022, due to significantly higher cash and short-term investments in the first half of 2022 compared to the prior year periods primarily due to lower interest expensefirst half of 2021 due to the repayment of the 5-year $100 million senior secured term loan facility (the "Term Facility") in the first quarter of 2021 and interest income related to cash proceeds from the Cimatron, ODM,2021 divestitures and Simbionix divestitures. The year over year benefits forconvertible debt issuance, partly offset by non-cash interest expense related to the nineconvertible notes. This compares to the three and six months ended SeptemberJune 30, 2021 were partially offset bywhen the realization of losses previously recognizedCompany had significantly less in accumulated other comprehensive resulting fromcash and short-term investments and there was a $0.7 million loss on the termination of thean interest rate swap in connection with the payoff of the outstanding term loan in the first quarter of 2021.
Other income (expense), net for the ninesix months ended SeptemberJune 30, 2021, as2022, was a loss of $0.5 million compared to a gain of $37.7 million in the nine months ended September 30, 2020, increasedcomparable 2021 period primarily due to the $343.1 million gain on the divestituressale of Cimatron, ODM and Simbionix, and a $8.9 million favorable foreign exchange gain related to the Cimatron and Simbionix divestitures. Other income (expense), net, for the quarter ended September 30, 2021, as compared to the quarter ended September 30, 2020, increased primarily due to the $311.1 million gain on the divestitures of ODM and Simbionix, and a $2.4 million favorable foreign exchange gain related to the Simbionix sale.Cimatron.

Net income (loss)

The following tables settable sets forth the primary components of net income (loss) for the quartersthree and ninesix months ended SeptemberJune 30, 20212022 and 2020.2021.

Table 9
Quarter Ended September 30,
(Dollars in thousands, except per share amounts)20212020Change
Loss from operations$(17,208)$(67,604)$50,396 
Other non-operating items:
Interest and other income (expense), net315,859 (2,419)318,278 
Benefit (provision) for income taxes(5,995)(2,866)(3,129)
Net income (loss)$292,656 $(72,889)$365,545 
Weighted average shares - basic122,663 118,527 
Weighted average shares - diluted125,289 118,527 
Net income (loss) per share - basic$2.39 $(0.61)
Net income (loss) per share - diluted$2.34 $(0.61)


The net income for the quarter ended September 30, 2021, as compared to the net loss in the prior year period, was primarily
3143

driven by
Three Months Ended June 30,
(Dollars in thousands, except per share amounts)20222021Change
Loss from operations$(32,038)$(10,060)$(21,978)
Other non-operating items:
Interest and other income (expense), net329 (316)645 
(Provision) benefit for income taxes(1,289)744 (2,033)
Net (loss) income$(32,998)$(9,632)$(23,366)
Less: net (loss) attributable to redeemable noncontrolling interests(37)— (37)
Net (loss) income attributable to 3D Systems Corporation$(32,961)$(9,632)$(23,329)
Weighted average shares - basic and diluted127,703 122,147 5,556 
Net (loss) income per share - basic and diluted$(0.26)$(0.08)$(0.18)

Net loss attributable to 3D Systems for the three months ended June 30, 2022, was $32,961, as compared to a decreaseloss of $9,632 for the comparable period in 2021 due to the previously discussed changes in revenue, gross profit, operating expense and interest and other income/(expense), net.

Six Months Ended June 30,
(Dollars in thousands, except per share amounts)20222021Change
Loss from operations$(55,270)$(12,019)$(43,251)
Other non-operating items:
Interest and other income (expense), net(1,954)38,537 (40,491)
(Provision) benefit for income taxes(2,573)9,078 (11,651)
Net (loss) income$(59,797)$35,596 $(95,393)
Less: net (loss) attributable to redeemable noncontrolling interests(37)— (37)
Net (loss) income attributable to 3D Systems Corporation$(59,760)$35,596 $(95,356)
Weighted average shares - basic127,218 121,931 5,287 
Weighted average shares - diluted127,218 125,069 2,149 
Net (loss) income per share - basic$(0.47)$0.29 $(0.76)
Net (loss) income per share - diluted$(0.47)$0.28 $(0.75)

Net loss from operationsattributable to 3D Systems for the six months ended June 30, 2022, was $59,760, as compared to a loss of $35,596 for the six months ended June 30, 2022 due to the previously discussed changes in revenue, gross profit, operating expense and the gain on the divestitures of ODMinterest and Simbionix, as previously discussed.other income/(expense), net.

Table10
Nine Months Ended September 30,
(Dollars in thousands)20212020Change
Loss from operations$(29,227)$(119,694)$90,467 
Other non-operating items:
Interest and other income (expense), net354,396 (7,598)361,994 
Benefit (provision) for income taxes3,083 (2,472)5,555 
Net income (loss)$328,252 $(129,764)$458,016 
Weighted average shares - basic122,178 116,216 
Weighted average shares - diluted124,839 116,216 
Net income (loss) per share - basic$2.69 $(1.12)
Net income (loss) per share - diluted$2.63 $(1.12)
44

The net income for the nine months ended September 30, 2021, as compared to the net loss from the prior year period, is primarily due to the decrease in the loss from operations and the gain on the sales of Cimatron, ODM, and Simbionix, as previously discussed.

Liquidity and Capital Resources

We assess our liquidity in terms of our ability to generate cash to fund our operating, investing and financing activities. In doing so, we review and analyze our current cash on hand, the number of days our sales are outstanding, inventory turns, capital expenditure commitments and accounts payable turns. Our cash requirements, excluding acquisitions, primarily consist of fundingCash Flow

The Company currently funds its operations, including working capital and capital expenditures.

At September 30, 2021, we hadexpenditures, and acquisitions through cash, on hand of $503.1 million, including restricted cash equivalents and no outstanding debt. Cash on hand, including restricted cashshort-term investments and cash classifiedfinancing activities as held for sale, increased $418.4 million since December 31, 2020. The higher cash balance resulted from proceeds of $427.3 from the Cimatron, ODM, and Simbionix divestitures and $62.7 million of cash flow from operations, partially offset by $21.4 million for repayments of debt, $14.8 million for capital expenditures, $10.9 million for current acquisitions, $10.4 million related to net settlement of stock-based compensation, and $4.0 million payments related to a prior acquisitions. Cash flow from operations was impacted by withholding taxes of $6.6 million related to the Cimatron divestiture.

For the nine months ended September 30, 2021, we generated $62.7 million of cash from operations, primarily driven by the increase in operating income and better working capital management. For the nine months ended September 30, 2020, we used $32.6 million of cash from operations. Our unrestricted cash balance at September 30, 2021 and December 31, 2020, was $502.8 million and $75.0 million, respectively. The higher cash balance resulted from $427.3 in net proceeds from the Cimatron, ODM, and Simbionix divestitures and $62.7 million of cash flow from operations, partially offset by $21.4 million for repayments of debt, $4.0 million for payments related to a prior acquisition, $10.9 million for current acquisitions, $10.4 million related to share settlement of stock-based compensation, and $14.8 million for capital expenditures.

On January 1, 2021, the Company completed the sale of 100% of the issued and outstanding equity interests of Cimatron, for approximately $64.2 million, before certain adjustments and excluding $9.5 million of cash amounts transferred to the purchaser. On August 24, 2021, we completed the sale of our medical simulation business, Simbionix, for approximately $305.0 million, before certain adjustments and excluding $6.8 million of cash amounts transferred to the purchaser. On September 9, 2021 we completed the sale of our ODM business for approximately $82 million, before certain adjustments.

necessary. We expect that cash, flow from operations, cash and cash equivalents and short-term investments, and other sources of liquidity, such as issuing equity or debt securities, subject to market conditions, will be available and sufficient to meet all foreseeable cash requirements. The following is a summary of the changes in the Company’s cash flows followed by a brief discussion of these changes:

Six Months Ended June 30,
20222021Dollar Change
Cash flow (used in)/provided by operating activities$(38,211)$41,976$(80,187)
Cash flow (used in)/provided by investing activities(a)
$(437,086)$35,325$(472,411)
Cash flow (used in) financing activities$(12,687)$(32,444)$19,757

(a) - Includes investing cash of $339.4 million into net short-term investments in 2022

Cash flow (used in)/provided by operating activities

Cash used by operating activities for the six months ended June 30, 2022 was $38.2 million, while cash provided by operating activities for the six months ended June 30, 2021, was $42.0 million. The decrease is due to the higher net losses in the six months ended June 30, 2022 compared to the same period in 2021 and unfavorable changes in working capital. Inventory balances increased throughout the first half of 2022 to manage supply chain challenges and there were unfavorable changes in accounts receivables for the six months ended June 30, 2022 compared to the six months ended June 30, 2021.

Cash flow (used in)/provided by investing activities

For the six months ended June 30, 2022, cash flow used in investing activities was $437.1 million compared to $35.3 million of cash provided by investing activities for the six months ended June 30, 2021. The primary cash outflows in 2022 related to net investments of $339.4 million of excess cash in short-term investments, the acquisitions of Titan and Kumovis, the investment in Enhatch and capital expenditures. For the six months ended June 30, 2021, the primary inflows of cash related to proceeds from the sale of Cimatron partly offset by capital expenditures and the acquisitions of Allevi and Additive Works.

Cash flow (used in) financing activities

Cash used in financing activities was $12.7 million for the six months ended June 30, 2022, and $32.4 million for the six months ended June 30, 2021. The primary outflow of cash for the six months ended June 30, 2022 related to payments for the net-share settlement of stock based compensation and the payment for the acquisition of a non-controlling interest. The primary outflow of cash for the six months ended June 30, 2021 related to the repayment of the remaining balance of the then outstanding 5-year $100.0 million secured term loan facility, the net-share settlement of stock based compensation and the payment for the acquisition of a non-controlling interest.

Cash and Cash Equivalents and Short-Term Investments

At June 30, 2022, we had cash, cash equivalents and short-term investments on hand of $639.3 million including restricted cash, compared to $789.7 million at December 31, 2021. The decrease is primarily due to cash used in operations of $38.2 million, payments related to acquisitions of $83.3 million, capital expenditures of $10.4 million and payments related to net-share settlement of stock-based compensation of $10.0 million.

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Cash held outside the U.S. at SeptemberJune 30, 20212022 was $56.1$57.9 million, or 11.2%19.4% of total cash and cash equivalents, compared to $49.7$62.5 million, or 66.2%7.9% of total cash and cash equivalents, at December 31, 2020.2021. As our previously unremitted earnings have been subjected to U.S. federal income tax, we expect any repatriation of these earnings to the U.S. would not incur significant federal and state taxes. However, these dividends are subject to foreign withholding taxes that are estimated to result in the Company incurring tax costs in excess of the cost to obtain cash through other means. Cash equivalents are primarily comprised of funds held in money market instruments and are reported at their current carrying value, which approximates fair value due to the short termshort-term nature of these instruments. Short-term investments primarily consist of investment grade bonds, certificates of deposit, commercial paper and short maturity bond funds all with maturities of generally less than twelve months. We strive to minimize our credit risk by investing primarily in investment grade, liquid instruments and limit exposure to any one issuer depending upon credit quality. See “
Cash flow” discussion below.

Material Cash flowRequirements

Cash flow from operationsThe Company's material cash requirements consist of the following contractual and other obligations:

Cash provided by operating activities for the nine months ended September 30, 2021 was $62.7 million, while cash used in operating activities for the nine months ended September 30, 2020 was $32.6 million.Indebtedness

Working capital providedAt June 30, 2022, we had $460.0 million of outstanding 0% convertible notes which mature in November of 2026 (the “Notes”). Management may consider pursuing additional long-term financing, market conditions permitting, when it is appropriate in light of cash of $21.3 millionrequirements for the nine months ended September 30, 2021 and used cash of $26.8 million for the nine months ended September 30, 2020. For the nine months ended September 30, 2021, working capital changes impacting related to cash inflows were a decreaseoperations or other strategic opportunities, which could result in inventory, and prepaid expenses and other current assets, an increase in accounts payable, and deferred revenue, partially offset by an increase in accounts receivable, and a decrease in accrued and other liabilities, driven by withholding tax payments related to the Cimatron sale.higher financing costs.

For the nine months ended September 30, 2020, drivers of working capital related to cash outflows were an increase in accounts receivable, and a decrease in deferred revenue and customer deposits, and accrued and other current liabilities, partially offset by an increase in inventory, prepaid expenses and other current assets, and a decrease in accounts payable.Purchase Commitments

Cash flow from investing activitiesWe have purchase commitments under legally enforceable agreements for goods and services with defined terms as to quantity, price, and timing of delivery. Additionally, in connection with our termination of manufacturing services agreement with our contract manufacturer, as discussed in Notes 6, 15 and 18 to the Financial Statements, we made a cash payment of approximately $17.1 million in July of 2022 to fulfill our inventory and fixed asset purchase obligations and to pay an exit fee.

For the nine months ended September 30, 2021, cash flow provided from investing activities was $395.6 million compared to $22.5 million cash used in investing activities for the nine months ended September 30, 2020. The primary cash inflows related to the net proceeds from the divestitures of Cimatron, ODM and Simbionix, partially offset by capital expenditures and payments related to current acquisitions and prior year noncontrolling interest purchases. For the nine months ended September 30, 2020, the primary outflows of cash related to the purchases of noncontrolling interest and capital expenditures. Capital expenditures were $14.8 million and $11.0 million for the nine months ended September 30, 2021 and 2020, respectively.Leases

Cash flow fromThe Company had operating and financing activitieslease obligations of $67.8 million at June 30, 2022, primarily related to real estate and equipment leases, of which approximately $5.7 million in payments are expected over the remainder of 2022. Additionally, the Company has $31.1 million in lease obligations at June 30, 2022 for which the leases have not commenced as the facilities are under construction by the landlord. For more information on the Company's leases, refer to Note 5 to the Financial Statements.

Sources of Funding to Satisfy Material Cash used in financing activities was $32.2 million for the nine months ended September 30, 2021, and $3.8 million for the nine months ended September 30, 2020. The primary outflow of cash for the nine months ended September 30, 2021 related to repayment of the Term Facility and settlements of stock-based compensation. The primary outflow of cash for the nine months ended September 30, 2020 related to partial repayment of the Term Facility and settlements of stock-based compensation, partially offset by proceeds from the issuance of common stock.Requirements

The Company believes that it has the financial resources needed to meet its cash requirements over the next twelve months. Cash requirements for periods beyond the next twelve months will depend, among other things, on the Company’s profitability and its ability to manage working capital requirements. The Company may also borrow from various sources as described above.

Other Contractual Commitments

Convertible Notes

We were in compliance with all covenants of the Notes as of June 30, 2022.

Other

We are committed to an initial investment of about $6.5 million related to our recently formed Saudi Arabia joint venture as described in Note 2 to the Financial Statements. Additional future investments in this relationship are contingent upon achievement of certain milestones by the joint venture.

Indemnification

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In the normal course of business we periodically enter into agreements to indemnify customers or suppliers against claims of intellectual property infringement made by third parties arising from the use of our products. Historically, costs related to these indemnification provisions have not been significant. We are unable to estimate the maximum potential impact of these indemnification provisions on our future results of operations.

To the extent permitted under Delaware law, we indemnify our directors and officers for certain events or occurrences while the director or officer is, or was, serving at our request in such capacity, subject to limited exceptions. The maximum potential amount of future payments we could be required to make under these indemnification obligations is unlimited; however, we have directors’ and officers’ insurance coverage that may enable us to recover future amounts paid, subject to a deductible and to the policy limits.

Recent Accounting Pronouncements

Refer to Note 1 to the Consolidated Financial Statements (Part I, Item 1 of this Form 10-Q) for further discussion.

Critical Accounting Policies and Significant Estimates

Our condensed consolidated financial statements are prepared in accordance with GAAP. The preparation of these condensed consolidated financial statements requires us to make certain estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, costs and expenses, and related disclosures. On an ongoing basis, we evaluate our estimates and assumptions. Our actual results may differ from these estimates under different assumptions or conditions.

As of the date of this report, there have been no changes to our critical accounting policies and estimates described in the Annual Report on2021 Form 10-K for the year ended December 31, 2020 (“2020 Form 10-K”), filed with the Securities and Exchange Commission (“SEC”) on March 5, 2021 that have had a material impact on our condensed consolidated financial statements and related notes.notes other than the implementation of policies for Short-Term Investments and Redeemable Non-Controlling Interests as described in Note 1 to the Financial Statements.

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Forward-Looking Statements

Certain statements made in this Form 10-Q that are not statements of historical or current facts are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from historical results or from any future results expressed or implied by such forward-looking statements. In many cases, you can identify forward-looking statements by terms such as “believes,” “belief,” “expects,” “may,” “will,” “estimates,” “intends,” “anticipates,” or “plans” or the negative of these terms or other comparable terminology.

Forward-looking statements are based upon management’s beliefs, assumptions and current expectations concerning future events and trends, using information currently available, and are necessarily subject to uncertainties, many of which are outside our control. Although we believe that the expectations reflected in the forward-looking statements are reasonable, forward-looking statements are not, and should not be relied upon as a guarantee of future performance or results, nor will they necessarily prove to be accurate indications of the times at or by which any such performance or results will be achieved. A number of important factors could cause actual results to differ materially from those expressed in or implied by the forward-looking statements. These factors include without limitation:

•impact of production, supply, contractual and other disruptions, including facility closures, furloughs and labor shortages or attrition as a result of vaccination requirements, due to the spread of the COVID-19 pandemic;
•impact on our business as a result of macroeconomic events, including Russia-Ukraine war and other geopolitical risks, recession, supply chain disruptions and foreign exchange volatility;
•our ability to deliver products that meet changing technology and customer needs;
•our ability to identify strategic acquisitions, to integrate such acquisitions into our business without disruption and to realize the anticipated benefits of such acquisitions;
•impact of future write-off or write-downs of goodwill and intangible assets;
•the concentration of revenue and credit risk exposure from our largest customer;
•our ability to acquire and enforce intellectual property rights and defend such rights against third party claims;
•our ability to protect our intellectual property rights and confidential information, including our digital content, from third-party infringers or unauthorized copying, use or disclosure;
•failure of our information technology infrastructure or inability to protect against cyber-attack;
•our ability to predict quarterly sales and manage product inventory due to uneven sales cycle;
•our ability to continue to generate net cash flow from operations;
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•our ability to service our debt and ability to raise funds necessary to settle conversions of the Notes in cash, repay the Notes at maturity, or repurchase the Notes in the case of a fundamental change;
•our ability to remediate material weaknesses in our internal controls over financial reporting and maintain effecteffective internal controls;
•fluctuations in our gross profit margins, operating income or loss and/or net income or loss;
•our ability to efficiently conduct business outside the U.S.;
•our dependence on our supply chain for components and sub-assemblies used in our 3D printers and other products and for raw materials used in our print materials;
•our ability to manage the costs and effects of litigation, investigations or similar matters involving us or our subsidiaries;
•product quality problems that result in decreased sales and operating margin, product returns, product liability, warranty or other claims;
•our ability to retain our key employees and to attract and retain new qualified employees, while controlling our labor costs;
•our exposureability to product liability claimssuccessfully develop and other claims and legal proceedings;commercialize regenerative medicine products ourselves, or in conjunction with development partners;
•disruption in our management information systems for inventory management, distribution, and other key functions;
•compliance with U.S. and other anti-corruption laws, data privacy laws, trade controls, economic sanctions, and similar laws and regulations;
•our ability to maintain our status as a responsible contractor under federal rules and regulations;
•changes in, or interpretation of, tax rules and regulations; and
•the other factors discussed in the reports we file with or furnish to the SEC from time to time, including the risks and important factors set forth in additional detail in Item 1A. “Risk Factors” in the 20202021 Form 10-K and this Form 10-Q.

Readers are cautioned not to place undue reliance on these forward-looking statements. The forward-looking statements included herein are made only as of the date of this Form 10-Q and we undertake no obligation to publicly update or revise any forward-looking statement made by us or on our behalf, whether as a result of new information, future developments, subsequent events or circumstances or otherwise, except as required by law. All subsequent written or oral forward-looking statements attributable to us or individuals acting on our behalf are expressly qualified in their entirety by the cautionary statements referenced above.


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Item 4. Controls and Procedures.

Evaluation of disclosure controls and procedures

As of June 30, 2022, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act) pursuant to Rules 13a-15 and 15d-15 under the Exchange Act. These controls and procedures are designed to provide reasonable assurance that the information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, in a manner to allow timely decisions regarding required disclosures. Based on this evaluation, management has concluded that our disclosure controls and procedures were not effective as of June 30, 2022 because of the material weaknesses in internal control over financial reporting discussed below.

Our management, including our Chief Executive Officer and Chief Financial Officer, concluded that material weaknesses in internal control over financial reporting existed at December 31, 2021. While the Company is in process of remediating the material weaknesses by this year end, they continued to exist as of June 30, 2022. These material weaknesses relate to a lack of certain controls, or improper execution of designed control procedures in the following areas:

•for certain non-standard contracts and non-standard contract terms;
•over the review of internally prepared reports and analyses utilized in the financial closing process; and
•for the calculation of the Company’s provision for income taxes, including for material non-routine transactions.

The combination of control deficiencies that resulted in these material weaknesses were partially related to employee training, resulting in a gap in knowledge or skills needed to properly execute the designed controls or perform an effective review over certain manual controls related to the financial statement close process. In addition, certain control deficiencies related to the timely review of transactions that were infrequent in nature.

Remediation Plan
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The first two material weaknesses described above (the “2020 Materials Weaknesses”) were initially identified at December 31, 2020 and continued to exist at December 31, 2021. However, as a result of the remediation plan we commenced in January 2021, the volume of control deficiencies that aggregated into the 2020 Material Weaknesses at December 31, 2021 were significantly reduced compared to 2020. The remediation plan we began in January 2021 is designed to improve our internal control over financial reporting and remediate the related control deficiencies that led to these material weaknesses. To fully remediate the 2020 Material Weaknesses in 2022, we are executing the following additional remediation actions, which commenced in the first quarter of 2022:

1.Hire additional staff with appropriate accounting, finance, operational and technology knowledge and experience in the design and execution of controls. Specifically, we hired several additional individuals with relevant accounting experience in the second quarter of 2022. We also retained additional interim personnel and consultants to assist with the execution of controls in the first and second quarter of 2022.
2.Re-design ineffective controls or processes. We retained an outside firm with expertise in the design and
execution of internal controls over financial reporting to examine our control designs and perform a root cause analysis as to why certain controls have not been and continue to not be properly executed.
3.Implement or enhance software to improve our financial close and reporting process. We are in process of enhancing our account reconciliation software and implementing software to facilitate the recording of journal entries, transaction matching and task management. We are also implementing revenue accounting software and integrating a significant non-U.S. subsidiary onto our enterprise resource planning system.
4.Established a formal controls governance committee in the first quarter of 2022 to manage and enhance the oversight and execution of internal controls. The controls governance committee consists of
members of senior leadership, which meets monthly or more frequently as needed.

In addition to the remediation plan for the 2020 Material Weaknesses discussed above, we have supplemented our remediation plan to address the tax material weakness identified at December 31, 2021, and plan to implement a number of remediation actions in 2022 to address this tax material weakness, including:

1.Retained a consulting firm to facilitate the implementation of a tax accounting and reporting solution for our tax provision process.
2.Redesigned controls related to the accounting for the income tax process. We are executed these controls for the second quarter of 2022 and plan to test their operating effectiveness after we complete our second quarter financial reporting.
3.Engaged a third party to review our quarterly and annual tax accounting calculations.
4.Hire additional experienced resources with backgrounds in income tax accounting. We are in process of recruiting additional experienced tax accounting personnel to assist with the design and execution of tax accounting controls.

The planned or in process remedial actions discussed above are in addition to the following remediation actions completed in 2021 and 2022 to address the 2020 Material Weaknesses:

1.Hired an experienced Chief Accounting Officer (CAO), along with additional accounting personnel some of whom possess public company accounting and financial reporting technical expertise.
2.Enhanced the monthly close process to improve the timeliness of recording entries which permits more time to
review and analyze financial statement accounts and to execute control procedures.
3.Trained new and existing accounting and finance personnel as well as key personnel in other functions such as, operations, sales, business development, human resources, legal and supply chain on the newly enhanced, developed and implemented policies and procedures.
4.Trained relevant personnel as to the proper design and execution of control procedures and noted the importance of the ongoing execution and maintenance of control process and procedures.
5.Modified existing software to capture non-standard terms and conditions related to certain customer contracts.
6.Designed and tested a significant number of additional business process and information technology controls throughout 2021.
7.Formally enhanced, developed, and implemented policies, procedures and processes relating to our accounting and financial reporting.

We are in process of remediating all material weaknesses and are striving to successfully implement enhanced control processes and have a sufficient period of operational effectiveness to evidence material weakness remediation in 2022. However, as we continue to evaluate, and work to improve our internal control over financial reporting, management may determine that additional measures to address control deficiencies or modifications to the remediation plan are necessary. Therefore, we cannot assure you when we will remediate such weaknesses, nor can we be certain that additional actions will not be required or the incremental costs of any such additional actions. Moreover, we cannot assure you that additional material weaknesses will not arise in the future.
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Changes in Internal Control over Financial Reporting

We are in the process of implementing certain changes in our internal control over financial reporting to remediate the material weaknesses that existed at December 31, 2021, as described above. The implementation of the material aspects of our remediation plan commenced are ongoing. Except as noted above with respect to the implementation of the remediation plan, there have been no additional changes in our internal control over financial reporting during the quarter ended June 30, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Item 3. Quantitative and Qualitative Disclosures about Market Risk.

For a discussion of market risks at December 31, 2020,2021, refer to Item 7A. “Quantitative and Qualitative Disclosures about Market Risk” in the 20202021 Form 10-K. During the first ninesix months of 2021,2022, there were no material changes or developments that would materially alter the market risk assessment performed as of December 31, 2020.2021.

Item 4. Controls and Procedures.

Evaluation of disclosure controls and procedures

As of SeptemberJune 30, 2021,2022, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”))Act) pursuant to Rules 13a-15 and 15d-15 under the Exchange Act. These controls and procedures wereare designed to provide reasonable assurance that the information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, in a manner to allow timely decisions regarding required disclosures. Based on this evaluation, management has concluded that our disclosure controls and procedures were not effective as of SeptemberJune 30, 20212022 because of the material weaknesses in internal control over financial reporting discussed below.

Our management, including our Chief Executive Officer and Chief Financial Officer, have concluded that the following material weaknesses in internal control over financial reporting existed at December 31, 2021. While the Company is in process of remediating the material weaknesses by this year end, they continued to exist as of December 31, 2020 and were in the process of being remediated as of SeptemberJune 30, 2021:

•Lack2022. These material weaknesses relate to a lack of certain controls, or improper execution of designed control procedures in the following areas:

•for certain non-standard contracts and non-standard contract terms, andterms;
•Lack of certain controls, or improper execution of designed control procedures, over the review of internally prepared reports and analyses utilized in the financial closing process; and
•for the calculation of the Company’s provision for income taxes, including for material non-routine transactions.

The combination of control deficiencies that resulted in these material weaknesses were partially related to employee training, resulting in a gap in knowledge or skills needed to properly execute the designed controls or perform an effective review over certain manual controls related to the financial statement close process. In addition, certain control deficiencies related to the timely review of transactions that were infrequent in nature.

Remediation Plan

The first two material weaknesses described above (the “2020 Materials Weaknesses”) were initially identified at December 31, 2020 and continued to exist at December 31, 2021. However, as a result of the remediation plan we commenced in January 2021, the volume of control deficiencies that aggregated into the 2020 Material Weaknesses at December 31, 2021 were significantly reduced compared to 2020. The remediation plan we began in January 2021 is designed to improve our internal control over financial reporting and remediate the related control deficiencies that led to these material weaknesses. To fully remediate the 2020 Material Weaknesses in 2022, we are executing the following additional remediation actions, which commenced in the first quarter of 2022:

1.Hire additional staff with appropriate accounting, finance, operational and technology knowledge and experience in the design and execution of controls. Specifically, we hired several additional individuals with relevant accounting experience in the second quarter of 2022. We also retained additional interim personnel and consultants to assist with the execution of controls in the first and second quarter of 2022.
2.Re-design ineffective controls or processes. We retained an outside firm with expertise in the design and
execution of internal controls over financial reporting to examine our control designs and perform a root cause analysis as to why certain controls have not been and continue to not be properly executed.
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3.Implement or enhance software to improve our financial close and reporting process. We are workingin process of enhancing our account reconciliation software and implementing software to remediatefacilitate the recording of journal entries, transaction matching and task management. We are also implementing revenue accounting software and integrating a significant non-U.S. subsidiary onto our enterprise resource planning system.
4.Established a formal controls governance committee in the first quarter of 2022 to manage and enhance the oversight and execution of internal controls. The controls governance committee consists of members of senior leadership, which meets monthly or more frequently as needed.

In addition to the remediation plan for the 2020 Material Weaknesses discussed above, we have supplemented our remediation plan to address the tax material weaknesses throughweakness identified at December 31, 2021, and plan to implement a number of remediation actions in 2022 to address this tax material weakness, including:

1.Retained a consulting firm to facilitate the development and implementation of more formal policies, processesa tax accounting and documentation procedures relatingreporting solution for our tax provision process.
2.Redesigned controls related to the accounting for the income tax process. We are executed these controls for the second quarter of 2022 and plan to test their operating effectiveness after we complete our second quarter financial reporting as well asreporting.
3.Engaged a third party to review our quarterly and annual tax accounting calculations.
4.Hire additional experienced resources with backgrounds in income tax accounting. We are in process of recruiting additional experienced tax accounting personnel to assist with the hiringdesign and execution of atax accounting controls.

The planned or in process remedial actions discussed above are in addition to the following remediation actions completed in 2021 and 2022 to address the 2020 Material Weaknesses:

1.Hired an experienced Chief Accounting Officer (CAO), the hiring ofalong with additional accounting personnel some of whom possess public company accounting and financial reporting technical expertise.
2.Enhanced the trainingmonthly close process to improve the timeliness of recording entries which permits more time to
review and analyze financial statement accounts and to execute control procedures.
3.Trained new personnel and existing personnel in new roles on proper execution of designed control procedures. In addition, we engaged outside consultants to advise on changes in the design of our controlsaccounting and procedures, implementation of our remediation activities and to advise on technical accounting matters. In conjunction with our remediation efforts and based upon input of internalfinance personnel and external consultants, we have developed a remediation plan that includes implementation of the policies, processes and procedures described above as well as implementation or enhancementskey personnel in other functions such as, operations, sales, business development, human resources, legal and supply chain on the newly enhanced, developed and implemented policies and procedures.
4.Trained relevant personnel as to the proper design and execution of supportingcontrol procedures and noted the importance of the ongoing execution and maintenance of control process and procedures.
5.Modified existing software to capture non-standard terms and conditions related to certain customer contracts.
6.Designed and tested a significant number of additional business process and information technology infrastructure. In ordercontrols throughout 2021.
7.Formally enhanced, developed, and implemented policies, procedures and processes relating to execute our remediation plan, we have put into place a program infrastructure that includes a project planaccounting and timelines developedfinancial reporting.

We are in consultation with process owners at the Company. We meet regularly to assess execution of our remediation plan, identify risks to execution of the plan and allocate resources as needed. We believe that our remediation plan is sufficient to remediate the identifiedremediating all material weaknesses and strengthen our internalare striving to successfully implement enhanced control over financial reporting.processes and have a sufficient period of operational effectiveness to evidence material weakness remediation in 2022. However, as we continue to evaluate, and work to improve our internal control over financial reporting, management may determine that additional measures to address control deficiencies or modifications to the remediation plan are necessary. Therefore, we cannot provide assurance as toassure you when the Companywe will remediate such weaknesses, nor can we be certain that additional actions will not be required or the incremental costs of any such additional actions. Moreover, we cannot provide assuranceassure you that additional material weaknesses will not arise in the future.

Changes in Internal Control over Financial Reporting

As a resultWe are in the process of the implementation of the material aspects of this remediation plan, including engaging outside consultants to advise on technical matters, implementing certain processes related to completeness and accuracy and beginning to train existing personnel on the execution of designed control procedures, there were changes in our internal control over financial reporting to remediate the material weaknesses that occurredexisted at December 31, 2021, as described above. The implementation of the material aspects of our remediation plan commenced are ongoing. Except as noted above with respect to the implementation of the remediation plan, there have been no additional changes in our internal control over financial reporting during the quarter ended SeptemberJune 30, 20212022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.


PART II — OTHER INFORMATION

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Item 1. Legal Proceedings.

The information set forth in “Export Controls and Government Contracts Compliance Matter,” “Shareholder Suits,” and “Other” in Note 14 – Commitments and Contingencies to the Financial Statements in Part I, Item 1 of this Form 10-Q is incorporated herein by reference.

Item 1A. Risk Factors.

There are no material changes to the risk factors previously disclosed in our 20202021 Form 10-K in response to Item 1A to Part I of Form 10-K other than below.

The COVID-19 pandemic could materially adversely affect our financial conditionWe face risks related to recession, inflation, stagflation, other economic conditions and results of operations.geopolitical risks.

The novel strain of the coronavirus identified in China in late 2019 (COVID-19) has globally spread throughout other areasCustomer demand for our products may be impacted by macroeconomic conditions such as Asia, Europe,weak economic conditions, including a recession, inflation, stagflation, equity market volatility, supply chain challenges, foreign currency exchange volatility or other negative economic factors in the Middle East, and North America and has resulted in authorities imposing, and businesses and individuals implementing, numerous unprecedented measures to try to contain the virus,U.S. or other nations as well as geopolitical events, such as travel bans and restrictions, quarantines, shelter-in-place/stay-at-home and social distancing orders, and shutdowns. These measures have impacted andthe Russia-Ukraine war.For example, under these conditions, our customers may further impact our workforce and operations, the operationsdelay purchasing decisions or reduce their use of our customers,products or services. Further, in the event of a recession our suppliers, distributors, and those ofother third-party partners may suffer their own financial and economic challenges and as a result they may demand pricing accommodations, delay payment, or become insolvent, which could harm our respective vendors, suppliers, and partners. Each of the countriesability to meet our customer demands or collect revenue or otherwise could harm our business. Similarly, disruptions in which we operate has been affected by the ongoing outbreak and taken measures to try to contain it. The ultimate impact and efficacy of government measures and potential future measures is currently unknown.

There is continued uncertainty regarding the business impacts from such measures and potential future measures. While we have been able to continue our operations through a combination of work-from-home and social distancing policies implemented to protect employees, these measures have resulted in reduced workforce availability at some of our sites. Restrictions on our access to customer facilitiesfinancial and/or credit markets may impact our ability to meetmanage normal commercial relationships with our customers, suppliers and creditors. In addition, a significant adverse change in the business climate, including changes in customer demand, and could have a material adverse effect on our financial condition and results of operations, particularly if prolonged. Our customers have experienced, and may continue to experience, disruptions in their operations, which can result in delayed, reduced, or canceled orders, or collection risks, which may adversely affect the value of our resultsgoodwill or intangible assets and trigger an evaluation of operations.

The pandemic has significantly increased economicthe amount of the recorded goodwill and demand uncertainty. It is possible that the current outbreak and continued spread of COVID-19 will continue to cause an economic slowdown. There is a significant degree of uncertainty and lack of visibility as to the extent and duration of any such slowdown or recession. Risks related to a slowdown or recession may harm our long-term ability to do business, adversely affect our sales, costs, results of operations and cash flow. Given the significant economic uncertainty and volatility created by the pandemic, it is difficult to predict the nature and extent of impacts on demand for our products and services. These expectations are subject to change without warning and investors are cautioned not to place undue reliance on them.

The spread of COVID-19 has caused us to modifyintangible assets. Thus, if general macroeconomic conditions deteriorate, our business practices (including employee travel, employee work locations, cancellation of physical participation in meetings, events and conferences, and social distancing measures), and we may take further actions as may be required by government authorities or that we determine are in the best interests of our employees, customers, partners, vendors, and suppliers. Work-from-home and other measures introduce additional operational risks, including cybersecurity risks, and have affected the way we conduct our product development and testing, customer support, and other activities, which could have an adverse effect on our operations. There is no certainty that such measures will be sufficient to mitigate the risks posed by the virus, and illness and workforce disruptions could lead to unavailability of key personnel and harm our ability to perform critical functions.

We are subject to the mandatory vaccination and workplace safety protocols issued by the Safer Federal Workforce Task Force on September 24, 2021, requiring, among other things, covered employees of covered federal contractors and subcontractors to be fully vaccinated against COVID-19 within the mandated timeframe, with limited exceptions for those legally entitled to an accommodation. The extent to which these requirements may impact our business remains uncertain, but may cause, among other things, reduced employee morale, the loss of employees, increased costs, supply chain disruptions, and other business disruptions, all of which could have an adverse impact on our business operations and financial results.results could be materially and adversely affected.

We depend on external vendors, suppliers and outsourcingsupply chain partners for the components, assemblysub-assemblies and spare parts ofused in our 3D printers and for chemicals and packaging used in our materials. The ongoing COVID-19 pandemic has caused supply laborchain and logistical disruptions have caused delays for both our outsourcing partners and supply chain partners. If these relationships were to terminate or these disruptions continue or worsen, our business could be disrupted while we locate alternative sources of supply and our expensescosts may increase.

We have outsourced the assembly of certain of our printers to selected design and manufacturing companies to assemble our printers.third party suppliers. In carrying out these outsourcing activities, we face a number of risks, including, among others, the following:
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•The risk that the parties that we retain to perform assembly activities may not perform in a satisfactory manner;
•The risk of disruption in the supply of printers or other products to our customers if such third parties either fail to perform in a satisfactory manner or are unable to supply us with the quantity of printers or other products that are needed to meet thenthe current customer demand;
•The risk of work delays or supply chain disruptions stemming from governmental efforts to contain the COVID-19 pandemic; and
•The risk of insolvency of suppliers, as well as the risks that we face, as discussed below, in dealing with a limited number of suppliers.

We also purchase components and sub-assemblies for our printers from third-party suppliers that we use in the assembly of our printers and provide to our customers as spare parts. Additionally, we purchase raw chemicals and packaging that are used in our materials, as well as certain of those materials, from third-party suppliers.

While there are typically several potential suppliers of parts for our products, we currently choose to use only one or a limited number of suppliers for several of these items, including our lasers, materials and certain jetting components. Our reliance on a single or limited number of suppliers involves many risks, including, among others, the following:

•Potential shortages of some key components;
•Disruptions in the operations of these suppliers;
•Product performance shortfalls; and
•Reduced control over delivery schedules, assembly capabilities, quality and costs.

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The COVID-19 pandemic hasand macroeconomic events have created sporadic delays on the inbound supply chain at our partners and our own facilities. Additional delays on both inbound and outbound logistics have also created challenges. We continue to identify alternative solutions, but an inability to source from alternative suppliers in a timely manner could impact on our ability to fulfill the current customer demand.

While we believe that, if necessary, we can obtain all the components necessary for our spare parts and materials from other manufacturers, we require any new supplier to become “qualified” pursuant to our internal procedures, which could involve evaluation processes of varying durations. Our spare parts and raw chemicals used in our materials production are subject to various lead times. In addition, at any time, certain suppliers may decide to discontinue production of a part or raw material that we use. Any unanticipated change in the sources of our supplies, or unanticipated supply limitations, could increase production or related costs and consequently reduce margins.

If our forecasts exceed actual orders, we may hold large inventories of slow-moving or unusable parts, which could have an adverse effect on our cash flow, profitability and results of operations. Inversely, we may lose orders if our forecast is low and we are unable to meet demand. There is considerable uncertainty on the business impact from current measures and potential future measures to contain the spread of the COVID-19 pandemic on our vendors, suppliers, and partners, especially if such measures are in effect for an extended period of time. If disruptions to global businesses from the pandemic continue or worsen, our business could face greater supply chain delays and difficulty shipping or receiving products and materials, which could have a material adverse effect on our financial condition and results of operations.

The loss of, continued reduction or substantial decline in revenue from larger clients could have a material adverse effect on our revenues, profitability and liquidity.

We experience revenue concentration with alarge customer that represented approximately 13% of our consolidated revenue in 2020 and is expected to represent over 20% of our consolidated revenues for 2021 after adjustment for the impact of recent divestitures on our full year financial results. Generally, our contracts do not contain guarantees of minimum duration, revenue levels, or profitability. This customer may terminate its contracts or materially reduce its requested levels of service at any time. The loss of, deterioration of the financial condition of, or a significant change to the business of this customer could have a material adverse effect on our business, financial condition, and results of operations. Additionally, this concentration exposes us to concentrated credit risk, as a significant portion of our accounts receivable may be from a single customer. If we are unable to collect our receivables, or are required to take additional reserves, our results and cash flows will be adversely affected.

We are subject to U.S. and other anti-corruption laws, trade controls, economic sanctions and similar laws and regulations. Our failure to comply with these laws and regulations could subject us to civil, criminal and administrative penalties and harm our reputation.

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Doing business on a worldwide basis requires us to comply with the laws and regulations of the U.S. government and various foreign jurisdictions. These laws and regulations place restrictions on our operations, trade practices, partners and investments.

In particular, our operations are subject to U.S. and foreign anti-corruption and trade control laws and regulations, such as the Foreign Corrupt Practices Act (“FCPA”) and United Kingdom Bribery Act (the “Bribery Act”), export controls and economic sanctions programs, including those administered by the U.S. Treasury Department’s Office of Foreign Assets Control (“OFAC”), the State Department's Directorate of Defense Trade Controls (“DDTC”) and the Bureau of Industry and Security (“BIS”) of the Department of Commerce. As a result of doing business in foreign countries and with foreign customers, we are exposed to a heightened risk of violating anti-corruption and trade control laws and sanctions regulations.

As part of our business, we may deal with state-owned business enterprises, the employees of which are considered foreign officials for purposes of the FCPA’s prohibition on providing anything of value to foreign officials for the purposes of obtaining or retaining business or securing any improper business advantage. In addition, the provisions of the Bribery Act extend beyond bribery of foreign public officials and also apply to transactions with individuals that a government does not employ. Some of the international locations in which we operate lack a developed legal system and have higher than normal levels of corruption. Our continued expansion outside the U.S., including in Brazil, China, India and developing countries, and our development of new partnerships worldwide, could increase the risk of FCPA, OFAC or Bribery Act violations in the future.

As an exporter, we must comply with various laws and regulations relating to the export of products and technology from the U.S. and other countries having jurisdiction over our operations. In the U.S., these laws include the International Traffic in Arms Regulations (“ITAR”) administered by the DDTC, the Export Administration Regulations (“EAR”) administered by the BIS and trade sanctions against embargoed countries and destinations administered by OFAC. The EAR governs products, parts, technology and software which present military or weapons proliferation concerns, so-called “dual use” items, and ITAR governs military items listed on the United States Munitions List. Prior to shipping certain items, we must obtain an export license or verify that license exemptions are available. Any failures to comply with these laws and regulations could result in fines, adverse publicity and restrictions on our ability to export our products, and repeat failures could carry more significant penalties. Moreover, these laws and regulations are dynamic and may change in ways that impact our business. As an example, the Department of Commerce is expected to implement new EAR controls on additive manufacturing items and technologies that could impact our ability to sell our products abroad.

Violations of anti-corruption and trade control laws and sanctions regulations are punishable by civil penalties, including fines, denial of export privileges, injunctions, asset seizures, debarment from government contracts and revocations or restrictions of licenses, as well as criminal fines and imprisonment and could harm our reputation, create negative shareholder sentiment and affect our share value. We have established policies and procedures designed to assist our compliance with applicable U.S. and international anti-corruption and trade control laws and regulations, including the FCPA, the Bribery Act and trade controls and sanctions programs administered by OFAC, the DDTC and BIS, and have trained our employees to comply with these laws and regulations. However, there can be no assurance that all of our employees, consultants, agents or other associated persons will not take actions in violation of our policies and these laws and regulations. Additionally, there can be no assurance that our policies and procedures will effectively prevent us from violating these regulations in every transaction in which we may engage or provide a defense to any alleged violation. In particular, we may be held liable for the actions that our joint venture partners take inside or outside of the United States, even though our partners may not be subject to these laws. Such a violation, even if our policies prohibit it, could have an adverse effect on our reputation, business, financial condition and results of operations. In addition, various state and municipal governments, universities and other investors maintain prohibitions or restrictions on investments in companies that do business with sanctioned countries, persons and entities, which could adversely affect our reputation, business, financial condition and results of operations.

We disclosed potential violations of U.S. export controls laws to the U.S. federal government that resulted in multiple investigations. We have implemented compliance processes and procedures to identify and prevent potential future violations of export control laws, trade sanctions, and government contracting laws and regulations, and continue to review our government contracting compliance risks and potential violations. Based on the disclosures and investigations, the U.S. Air Force temporarily suspended us from certain new federal contracts and orders in July 2019 and lifted that suspension in September 2019 following the execution of an Administrative Agreement with the Company. The commencement of a separate action by another governmental agency would result in decreased revenues and additional harm to our reputation and otherwise adversely affect our business, operating results and financial condition.

In October 2017, we received an administrative subpoena from BIS requesting the production of records in connection with possible violations of U.S. export control laws, including with regard to our Quickparts.com, Inc. subsidiary. In addition, while collecting information responsive to the above-referenced subpoena, our internal investigation identified potential violations of ITAR administered by DDTC and potential violations of the Export Administration Regulations administered by BIS.
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On June 8, 2018 and thereafter, we submitted voluntary disclosures to BIS and DDTC identifying numerous potentially unauthorized exports of technical data. As part of our ongoing review of trade compliance risks and our cooperation with the government, on November 20, 2019, we submitted to the U.S. Treasury Department’s Office of Foreign Assets Control (“OFAC”) an initial notice of voluntary disclosure regarding potential violations of economic sanctions related to Iran. We continued to investigate this issue and filed a final disclosure with OFAC on May 20, 2020. We have and will continue to implement compliance enhancements to our export controls, trade sanctions, and government contracting compliance program to address the issues identified through our ongoing internal investigation and will cooperate with DDTC and BIS, as well as the U.S. Departments of Justice, Defense, Homeland Security and Treasury in their ongoing reviews of these matters. In connection with these ongoing reviews, in August 2020, the Company received two federal grand jury subpoenas issued by the U.S. District Court for the Northern District of Texas. The Company responded to these two subpoenas and will continue to fully cooperate with the U.S. Department of Justice in the related investigation.

In addition, on July 19, 2019, we received a notice of immediate suspension of federal contracting from the United States Air Force, pending the outcome of an ongoing investigation. The suspension applied to 3D Systems, its subsidiaries and affiliates, and was related to export controls violations involving 3D Systems’ On Demand manufacturing business described above. Under the suspension, we were generally prohibited from receiving new federal government contracts or subcontracts from any executive branch agency as described in the provisions of 48 C.F.R Subpart 9.4 of the Federal Acquisition Regulation. The suspension allowed us to continue to perform current federal contracts, and also to receive awards of new subcontracts for items under $35,000 and for items considered commercially available off-the-shelf items. The Air Force lifted the suspension on September 6, 2019 following the execution of a two-year Administrative Agreement with the Company. The Company is now eligible to obtain and perform U.S. government contracts and subcontracts without restrictions. Under the Administrative Agreement, the Company was monitored and evaluated by independent monitors who reported to the Air Force on the Company’s compliance with the terms of the Company’s Ethics & Compliance Program, including its overall culture, government contracting compliance program, and export controls compliance program. The Air Force terminated the Administrative Agreement and associated monitorship early on August 12, 2021 after the monitors found that the Company had satisfied the requirements of the Administrative Agreement. The commencement of separate actions by other agencies of the federal government could result in reinstatement of the suspension or debarment from future federal contracting, which would result in decreased revenues and additional harm to our reputation and otherwise adversely affect our business, operating results and financial condition.

Although we cannot predict the ultimate resolution of these matters, we have incurred and expect to continue to incur significant legal costs and other expenses in connection with responding to the U.S. government agencies.

Since 2018, we have implemented new compliance procedures to identify and prevent potential violations of export controls laws, trade sanctions, and government contracting laws and regulations and created a Compliance Committee of the Board of Directors to further enhance board oversight of compliance risks. As we continue to implement additional compliance enhancements, we may discover additional potential violations of export controls laws, trade sanctions, and/or government contracting laws in the future. If we identify any additional potential violations, we may submit voluntary disclosures to the relevant agencies and cooperate with such agencies on any related investigations.

If the U.S. government finds that we have violated one or more export controls laws, trade sanctions, or government contracting laws, we could be subject to various civil or criminal penalties. By statute, these penalties can include but are not limited to fines, which by statute may be significant, denial of export privileges, and suspension or debarment from participation in U.S. government contracts. We may also be subject to contract claims based upon such violations. Any assessment of penalties or other liabilities incurred in connection with these matters could harm our reputation and customer relationships, create negative investor sentiment, and affect our share value. In connection with any resolution, we may also be required to undertake additional remedial compliance measures and program monitoring. We cannot at this time predict when the U.S. government agencies will conclude their investigations or determine an estimated cost, if any, or range of costs, for any penalties, fines or other liabilities to third parties that may be incurred in connection with these matters.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

Recent Issuances of Unregistered Securities

None

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Issuer Purchases of Equity Securities

The following table provides information about purchases of equity securities that are registered pursuant to Section 12 of the Exchange Act for the quarter ended SeptemberJune 30, 2021:2022:
Total number of shares (or units) purchasedAverage price paid per share (or unit)
Shares delivered or withheld pursuant to restricted stock awards
July 1, 2021 - July 31, 20211,372 $25.90 
August 1, 2021 - August 31, 202153,877 $29.08 
September 1, 2021 - September 30, 202172,665 $31.25 
127,914 (a)$30.28 (b)
Total number of shares (or units) purchasedAverage price paid per share (or unit)
Shares delivered or withheld pursuant to restricted stock awards
April 1, 2022 - April 30, 2022— (a)$— (b)
May 1, 2022 - May 31, 2022134,479 (a)$10.19 (b)
June 1, 2022 - June 30, 20221,658 (a)$10.12 (b)
136,137 (a)$10.19 (b)
a.(a) - Reflects shares of common stock surrendered to the Company for payment of tax withholding obligations in connection with the vesting of restricted stock.
b.(b) - The average price paid reflects the weighted average market value of shares withheld for tax purposes.

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Item 6. Exhibits.
Stock Purchase Agreement, dated July 28, 2021, by and between 3D Systems, Inc. and Surgical Science Sweden AB (Incorporated by Reference to Exhibit 2.1 of the Registrant's Current Report on Form 8-K filed on July 30, 2021.)
Agreement and Plan of Merger, dated September 8, 2021, by and among 3D Systems Corporation, Oqton, Inc., 3DS Merger Sub 1, Inc., 3DS Merger Sub 2 Inc., and Shareholder Representative Services LLC, solely in its capacity as the representative, agent and attorney-in-fact of the Sellers. (Incorporated by reference to the Exhibit 2.1 of the Registrant's Current Report on Form 8-K filed on September 9, 2021.)
First Amendment to the Agreement and Plan of Merger, dated October 29, 2021, by and among 3D Systems Corporation, Oqton, Inc., 3DS Merger Sub 1, Inc., 3DS Merger Sub 2 Inc., and Shareholder Representative Services LLC, solely in its capacity as the representative, agent and attorney-in-fact of the Sellers.
Agreement and Plan of Merger, dated October 27, 2021, by and among 3D Systems Corporation, Volumetric Biotechnologies, Inc., Texans Merger Sub I, Inc., Texans Merger Sub II, Inc., and Fortis Advisors LLC, solely in its capacity as the Stockholders' Representative. (Incorporated by reference to Exhibit 2.1 of the Registrant's Current Report on Form 8-K filed on October 28, 2021.)
First Amendment to the Asset Purchase Agreement, dated June 1, 2021, by and among 3D Systems, Inc., Quickparts.com Inc., 3D Systems Italia Srl, Sd Systems France Sarl, 3D Systems Europe Limited, 3D Systems GmbH, QP 3D Acquisition, Inc., and 3D Systems Corporation.
3.1Certificate of Incorporation of Registrant. (Incorporated by reference to Exhibit 3.1 to Form 8-B filed on August 16, 1993, and the amendment thereto, filed on Form 8-B/A on February 4, 1994.)
3.2Amendment to Certificate of Incorporation filed on May 23, 1995. (Incorporated by reference to Exhibit 3.2 to Registrant’s Registration Statement on Form S-2/A, filed on May 25, 1995.)
Certificate of Amendment of Certificate of Incorporation filed with Secretary of State of Delaware on May 19, 2004. (Incorporated by reference to Exhibit 3.1 of the Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2004, filed on August 5, 2004.)
Certificate of Amendment of Certificate of Incorporation filed with Secretary of State of Delaware on May 17, 2005. (Incorporated by reference to Exhibit 3.1 of the Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2005, filed on August 1, 2005.)
Certificate of Amendment of Certificate of Incorporation filed with the Secretary of State of Delaware on October 7, 2011.  (Incorporated by reference to Exhibit 3.1 to Form 8-K, filed on October 7, 2011.)
Certificate of Amendment of Certificate of Incorporation filed with the Secretary of State of Delaware on May 21, 2013. (Incorporated by reference to Exhibit 3.1 of the Registrant’s Current Report on Form 8-K filed on May 22, 2013.)
Amended and Restated By-Laws of 3D Systems Corporation. (Incorporated by reference to Exhibit 3.1 of Registrant’s Current Report on Form 8-K filed on March 15, 2018.)
Indenture, dated as of November 16, 2021, between 3D Systems Corporation and The Bank of New York Mellon Trust Company, N.A., as trustee. (Incorporated by reference to the Exhibit 4.1 of the Registrant’s Current Report on Form 8-K filed on November 17, 2021.)
Form of 0% Convertible Notes due 2026 (included in Exhibit 4.1). (Incorporated by reference to the Exhibit 4.2 of the Registrant’s Current Report on Form 8-K filed on November 17, 2021.)
Amended and Restated 2015 Incentive Plan of 3D Systems Corporation. (Incorporated by reference to Exhibit 10.1 of the Registrants Current Report on Form 8-K filed on May 26, 2002.)
Employment Agreement, dated August 30, 2021,4, 2022, by and between 3D Systems Corporation and Phyllis Nordstrom.Michael Turner. (Incorporated by reference to Exhibit 10.1 of the Registrant's Current Report on Form 8-K filed on August 5, 2022.)
31.1†
Certification of Principal Executive Officer filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 dated November 8, 2021.August 9, 2022.
31.2†
Certification of Principal Financial Officer filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 dated November 8, 2021.August 9, 2022.
32.1†
Certification of Principal Executive Officer filed pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 dated November 8, 2021.August 9, 2022.
32.2†
Certification of Principal Financial Officer filed pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 dated November 8, 2021.August 9, 2022.
101.INS†XBRL Instance Document - the instance document does not appear in the Interactive Data file because its XBRL tags are embedded within the Inline XBRL document.
101.SCH†XBRL Taxonomy Extension Schema Document.
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101.CAL†XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF†XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB†XBRL Taxonomy Extension Label Linkbase Document.
101.PRE†XBRL Taxonomy Extension Presentation Linkbase Document.
104Cover Page Interactive Data File - this data file does not appear in the Interactive Data file because its XBRL tags are embedded within the Inline XBRL document.
* Management contract or compensatory plan or arrangement.
† Exhibits filed herein. All exhibits not so designated are incorporated by reference to a prior filing, as indicated.
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SIGNATURESIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
3D Systems Corporation
By/s/ Jagtar NarulaWayne Pensky
Jagtar NarulaWayne Pensky
Interim Chief Financial Officer
(principal financial officer)


By/s/ Michael Crimmins
Michael Crimmins
Senior Vice President and Chief Accounting Officer
(principal accounting officer)


Date: November 8, 2021August 9, 2022

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