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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 September 30, 2023
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
__________________________

Image1.jpg

3D SYSTEMS CORPORATION
(Exact name of Registrant as Specified in its Charter)
__________________________
Delaware
95-4431352
(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 filerAccelerated filer
Non-accelerated filerSmaller 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 Exchange 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 November 6, 2023: 133,434,049
1


3D SYSTEMS CORPORATION
Form 10-Q
For the Nine Months Ended September 30, 2023

TABLE OF CONTENTS



2





PART I — FINANCIAL INFORMATION

Item 1. Financial Statements.
3D SYSTEMS CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)

(in thousands, except par value) September 30, 2023December 31, 2022
ASSETS
Current assets:
Cash and cash equivalents$445,554 $388,134 
Short-term investments 180,603 
        Accounts receivable, net of reserves — $3,315 and $3,114
104,516 93,886 
Inventories153,005 137,832 
Prepaid expenses and other current assets36,638 33,790 
Total current assets739,713 834,245 
Property and equipment, net
63,535 58,072 
Intangible assets, net71,536 90,230 
Goodwill391,325 385,312 
Right-of-use assets
73,020 42,746 
Deferred income tax asset7,042 7,038 
Other assets46,583 28,970 
Total assets$1,392,754 $1,446,613 
LIABILITIES, REDEEMABLE NON-CONTROLLING INTEREST AND EQUITY
Current liabilities:
Current lease liabilities
$10,684 $9,036 
Accounts payable46,108 53,826 
Accrued and other liabilities43,575 55,571 
Customer deposits6,793 6,911 
Deferred revenue30,768 26,464 
Total current liabilities137,928 151,808 
Long-term debt, net of deferred financing costs451,520 449,510 
Long-term lease liabilities
71,295 41,779 
Deferred income tax liability10,178 7,631 
Other liabilities20,367 44,181 
Total liabilities691,288 694,909 
Commitments and contingencies (Note 18)
Redeemable non-controlling interest1,928 1,760 
Stockholders’ equity:
Common stock, $0.001 par value, authorized 220,000 shares; shares issued 133,575 and 131,207 as of September 30, 2023 and December 31, 2022, respectively
133 131 
Additional paid-in capital1,570,150 1,547,597 
Accumulated deficit(813,982)(743,962)
Accumulated other comprehensive loss(56,763)(53,822)
Total stockholders’ equity699,538 749,944 
Total liabilities, redeemable non-controlling interest and stockholders’ equity$1,392,754 $1,446,613 
    

See accompanying notes to condensed consolidated financial statements.
3


3D SYSTEMS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)

Three Months EndedNine Months Ended
(in thousands, except per share amounts)September 30, 2023September 30, 2022September 30, 2023September 30, 2022
Revenue:
Products$80,415 $96,337 $253,968 $300,662 
Services43,376 35,916 119,253 104,637 
Total revenue123,791 132,253 373,221 405,299 
Cost of sales:
Products47,427 58,042 153,442 181,845 
Services21,014 21,541 67,315 63,851 
Total cost of sales68,441 79,583 220,757 245,696 
Gross profit55,350 52,670 152,464 159,603 
Operating expenses:
Selling, general and administrative33,355 65,579 150,623 185,398 
Research and development21,982 20,796 66,953 63,180 
Impairment of intangible assets13,597  13,597  
Total operating expenses68,934 86,375 231,173 248,578 
Loss from operations(13,584)(33,705)(78,709)(88,975)
Interest and other income (expense), net2,602 (3,502)9,691 (5,456)
(Loss) income before income taxes(10,982)(37,207)(69,018)(94,431)
(Provision) benefit for income taxes(174)(338)(404)(2,911)
(Loss) on equity method investment, net of income taxes
(605) (747) 
Net (loss) income before redeemable non-controlling interest(11,761)(37,545)(70,169)(97,342)
Less: net (loss) income attributable to redeemable non-controlling interest(57)(147)(149)(184)
Net (loss) income attributable to 3D Systems Corporation$(11,704)$(37,398)$(70,020)$(97,158)
Net (loss) income per common share:
Basic$(0.09)$(0.30)$(0.54)$(0.77)
Diluted$(0.09)$(0.30)$(0.54)$(0.77)
Weighted average shares outstanding:
Basic130,263 127,991 129,780 127,478 
Diluted130,263 127,991 129,780 127,478 

See accompanying notes to condensed consolidated financial statements.
4


3D SYSTEMS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(Unaudited)

Three Months EndedNine Months Ended
(in thousands)September 30, 2023September 30, 2022September 30, 2023September 30, 2022
Net (loss) before redeemable non-controlling interest
$(11,761)$(37,545)$(70,169)$(97,342)
Other comprehensive (loss) income, net of taxes:
Pension plan adjustments(31)156 (42)422 
Foreign currency translation(7,352)(22,135)(3,227)(41,867)
Unrealized gain (loss) on short-term investments
 2,370 328 (1,653)
Total other comprehensive (loss) income, net of taxes:(7,383)(19,609)(2,941)(43,098)
Total comprehensive (loss), net of taxes
(19,144)(57,154)(73,110)(140,440)
Less: comprehensive (loss) attributable to redeemable non-controlling interest
(57)(147)(149)(184)
Comprehensive (loss) attributable to 3D Systems Corporation
$(19,087)$(57,301)$(72,961)$(140,624)

See accompanying notes to condensed consolidated financial statements.

5


3D SYSTEMS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended
(in thousands)September 30, 2023September 30, 2022
Cash flows from operating activities:
Net (loss) income before redeemable non-controlling interest$(70,169)$(97,342)
Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities:
Depreciation, amortization and accretion of debt discount27,054 28,264 
Stock-based compensation15,140 31,508 
Loss on short-term investments6 2,609 
Non-cash operating lease expense6,552 4,796 
Provision for inventory obsolescence and revaluation6,061 646 
Provision for bad debts197 329 
Loss (gain) on the disposition of businesses, property, equipment and other assets51 (365)
Provision for deferred income taxes and reserve adjustments
141 1,666 
Loss on equity method investment747  
Asset impairment14,856 2,359 
Changes in operating accounts:
Accounts receivable(11,706)(1,513)
Inventories(23,106)(30,342)
Prepaid expenses and other current assets(2,790)2,562 
Accounts payable(7,717)(1,666)
Deferred revenue and customer deposits1,351 (3,468)
Accrued and other liabilities(16,066)12,387 
All other operating activities(12,495)(4,879)
Net cash (used in) provided by operating activities(71,893)(52,449)
Cash flows from investing activities:
Purchases of property and equipment(20,995)(17,055)
Purchases of short-term investments (384,406)
Sales and maturities of short-term investments180,925 112,050 
Acquisitions and other investments, net of cash acquired(29,241)(84,705)
Net cash provided by (used in) investing activities130,689 (374,116)
Cash flows from financing activities:
Purchase of non-controlling interests (2,300)
Taxes paid related to net-share settlement of equity awards(4,752)(10,195)
Other financing activities(463)(486)
Net cash (used in) provided by financing activities(5,215)(12,981)
Effect of exchange rate changes on cash, cash equivalents and restricted cash1,561 (7,911)
Net increase (decrease) in cash, cash equivalents and restricted cash
55,142 (447,457)
Cash, cash equivalents and restricted cash at the beginning of the year (a)
391,975 789,970 
Cash, cash equivalents and restricted cash at the end of the period (a)
$447,117 $342,513 
Supplemental cash flow information
Lease assets obtained in exchange for new lease liabilities$37,513 $2,422 
Cash interest payments231 148 
Cash income tax payments, net4,815 3,575 
Transfer of equipment from inventory to property and equipment, net (b)
1,316 1,063 

(a)The amounts for cash and cash equivalents and restricted cash shown above include restricted cash of $118 and $114 as of September 30, 2023 and December 31, 2022, respectively, which are included in prepaid expenses and other current assets. In addition, included in cash and cash equivalents and restricted cash above as of September 30, 2023, and December 31, 2022 is $1,445 and $3,727, respectively, of restricted cash included in other non-current assets.
(b)Inventory is transferred to property and equipment at cost when we require additional machines for training or demonstration or for placement into on demand manufacturing services locations.

See accompanying notes to condensed consolidated financial statements.
6


3D SYSTEMS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Three Months Ended September 30, 2023 and 2022
(Unaudited)

Common Stock
(in thousands, except par value)Shares
Par Value $0.001
Additional Paid-In CapitalAccumulated DeficitAccumulated Other Comprehensive Income (Loss)Total Stockholders' Equity
June 30, 2023133,504 $133 $1,562,529 $(802,278)$(49,380)$711,004 
Shares issued, vested & expired under equity incentive plans100 — — — — — 
Shares withheld related to net-share settlement of equity awards(29)— (188)— — (188)
Stock-based compensation expense— — 7,870 — — 7,870 
Net (loss) attributable to 3D Systems Corp.— — — (11,704)— (11,704)
Pension plan adjustment— — — — (31)(31)
Redeemable non-controlling interest redemption value in excess of carrying value— — (61)— — (61)
Foreign currency translation adjustment— — — — (7,352)(7,352)
September 30, 2023133,575 $133 $1,570,150 $(813,982)$(56,763)$699,538 
June 30, 2022130,304 $130 $1,525,734 $(681,011)$(61,195)$783,658 
Shares withheld related to net-share settlement of equity awards115 — (108)— — (108)
Stock-based compensation expense— — 8,175 — — 8,175 
Net loss— — — (37,398)— (37,398)
Pension plan adjustments— — — — 156 156 
Redeemable non-controlling interest redemption value in excess of carrying value— — (462)— — (462)
Unrealized loss on short-term investments— — — — 2,370 2,370 
Foreign currency translation adjustment— — — — (22,135)(22,135)
September 30, 2022130,419 $130 $1,533,339 $(718,409)$(80,804)$734,256 












3D SYSTEMS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Nine Months Ended September 30, 2023 and 2022
(Unaudited)
Common Stock
(in thousands, except par value)Shares
Par Value $0.001
Additional Paid-In CapitalAccumulated DeficitAccumulated Other Comprehensive Income (Loss)Total Stockholders' Equity
December 31, 2022131,207 $131 $1,547,597 $(743,962)$(53,822)$749,944 
Shares issued, vested & expired under equity incentive plans2,886 2 — — — 2 
Shares withheld related to net-share settlement of equity awards(518)— (4,752)— — (4,752)
Stock-based compensation expense— — 27,626 — — 27,626 
Net (loss) attributable to 3D Systems Corp.— — — (70,020)— (70,020)
Pension plan adjustment— — — — (42)(42)
Unrealized gain on short-term investments— — — — 328 328 
Redeemable non-controlling interest redemption value in excess of carrying value— — (321)— — (321)
Foreign currency translation adjustment— — — — (3,227)(3,227)
September 30, 2023133,575 $133 $1,570,150 $(813,982)$(56,763)$699,538 
December 31, 2021128,375 $128 $1,501,210 $(621,251)$(37,706)$842,381 
Shares withheld related to net-share settlement of equity awards2,044 2 (10,155)— — (10,153)
Stock-based compensation expense— — 42,746 — — 42,746 
Net loss— — — (97,158)— (97,158)
Pension plan adjustments— — — — 422 422 
Redeemable non-controlling interest redemption value in excess of carrying value— — (462)— — (462)
Unrealized loss on short-term investments— — — — (1,653)(1,653)
Foreign currency translation adjustment— — — — (41,867)(41,867)
September 30, 2022130,419 $130 $1,533,339 $(718,409)$(80,804)$734,256 

See accompanying notes to condensed consolidated financial statements.
7

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 and wholly-owned subsidiaries and entities in which a controlling interest is maintained (“3D Systems” or the “Company” or “we” or “our” or “us”). All significant intercompany accounts and transactions have been eliminated in consolidation. 

A non-controlling interest in a subsidiary reflects an ownership interest in a majority-owned subsidiary that is not attributable to the Company. For the periods presented, the Company's financial statements include a redeemable non-controlling interest (“RNCI”), which has been reported in temporary equity in the consolidated balance sheets. The net income (loss) attributable to the RNCI is presented as an adjustment to the Company's consolidated net income (loss) to arrive at net income (loss) attributable to 3D Systems Corporation in the consolidated statements of operations and consolidated statements of comprehensive income (loss). Furthermore, adjustments to record the RNCI at its redemption value are recorded to additional paid-in capital, and the excess redemption value is recognized as a reduction to the net income, or increase to the net loss, attributable to 3D Systems’ shareholders for purposes of reporting earnings or loss per share. See Note 11 for a summary of the activity related to the reported RNCI balance during the period.

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, our unaudited condensed consolidated financial statements do not include all of 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, 2022 (“2022 Form 10-K”). The year-end balance sheet data reported on our unaudited condensed consolidated balance sheet has been derived from the balance sheet included in our 2022 Form 10-K.

The Company believes that the disclosures included in this Form 10-Q are adequate to make the information presented not misleading. In the opinion of management, the unaudited condensed consolidated financial statements include 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 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.

Our annual reporting period is the calendar year. Our results of operations for the three and nine months ended September 30, 2023 are not necessarily indicative of the results to be expected for the full year. All dollar amounts and other amounts presented in the accompanying footnotes are presented in thousands, except for per share information.

Summary of Significant Accounting Policies

The significant accounting policies included in our 2022 Form 10-K have been updated as follows.

Goodwill

Goodwill is the excess of the cost of an acquired entity over the amounts assigned to the assets acquired and liabilities assumed in a business combination. Goodwill is not amortized. Goodwill is tested for impairment annually during the fourth quarter of each year, and is tested for impairment between annual tests if an event occurs or circumstances change that would indicate the carrying amount may be impaired. Impairment testing for goodwill is done at a reporting unit level, with all goodwill assigned to a reporting unit.

The test for impairment of goodwill requires the Company to make several estimates related to projected future cash flows to determine the fair value of the goodwill reporting units. The Company calculates the excess of each reporting unit's fair value over its carrying amount, including goodwill, utilizing a discounted cash flow analysis and other valuation techniques, as deemed appropriate. Internal operational budgets and long-range strategic plans are used as a basis for the cash flow analysis. The Company also utilizes assumptions for working capital, capital expenditures, and terminal growth rates. The discount rate applied to the cash flow analysis is based on the weighted average cost of capital (“WACC”) for each reporting unit. An impairment is recognized when the carrying amount of the reporting unit’s net assets exceeds the estimated fair value of the reporting unit.

8

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




During the quarter ended September 30, 2023, the Company experienced a significant decline in its market capitalization as a result of a decrease in its stock price, and during the month ended September 30, 2023, the Company’s market capitalization fell slightly below its consolidated stockholders’ equity balance. We do not consider this to constitute a sustained decrease in the Company’s stock price as of September 30, 2023. Furthermore, the Company performed a qualitative goodwill impairment assessment as of September 30, 2023 and concluded that it is not more likely than not that the fair value of either of its reporting units is less than the reporting unit’s carrying value as of September 30, 2023. As a result, we concluded that no triggering event had occurred that would require the Company to perform a quantitative goodwill impairment test for either of its two reporting units as of September 30, 2023. However, the Company’s market capitalization has declined further since September 30, 2023, and if such a decline results in the estimated fair value of either of our reporting units being lower than the respective reporting unit’s carrying value, the Company would need to record a non-cash goodwill impairment charge, which could be material, in a future period – including as of our upcoming annual impairment testing date of November 1, 2023 (reflecting our annual goodwill impairment testing date commencing as of the current fiscal year).

Variable Interest Entities (VIEs)

Upon making an investment in an entity, we assess whether the entity is a VIE. The determination of whether an entity in which we hold a direct or indirect variable interest is a VIE is based on several factors, including whether the entity’s total equity investment at risk upon inception is sufficient to finance the entity’s activities without additional subordinated financial support. We make judgments regarding the sufficiency of the equity at risk based first on a qualitative analysis, and then a quantitative analysis, if necessary.

We analyze any investments in VIEs to determine if we are the primary beneficiary. We perform this assessment at the time that we become involved with a VIE and reevaluate our conclusion upon the occurrence of a reconsideration event. In evaluating whether we are the primary beneficiary, we evaluate our direct and indirect economic interests in the entity. Determining which reporting entity, if any, is the primary beneficiary of a VIE is primarily a qualitative approach focused on identifying which reporting entity has both (1) the power to direct the activities of a VIE that most significantly impact such entity’s economic performance and (2) the obligation to absorb losses or the right to receive benefits from such entity that could potentially be significant to such entity. Performance of such analysis requires the exercise of judgment, and we consider a variety of factors in identifying the entity that holds the power to direct matters that most significantly impact a VIE’s economic performance including, but not limited to, the ability to direct a VIE’s operating decisions and activities. In addition, we consider the rights of other investors to participate in those decisions.

We concluded that our investments in Theradaptive and the Saudi Arabian Industrial Investments Company ("Dussur") are each a VIE. These investments are not consolidated because we concluded that the Company is not the primary beneficiary. As of September 30, 2023, our maximum exposure to losses associated with the VIEs is limited to the $13,782 carrying value of our investments in the VIEs, which is included in other assets on our condensed consolidated balance sheet. We have no other investments in unconsolidated entities that have been determined to be VIEs.

Equity Securities without a Readily Determinable Value

We recognize investments in equity securities without a readily determinable fair value at cost minus impairment. We assess these investments for potential impairment if an event occurs or circumstances change that would indicate the carrying amount may be impaired. If applicable, impairment charges taken with respect to these investments are reported within interest and other income (expense), net in the consolidated statements of operations in the period in which an investment becomes impaired (see Note 7).

Equity Method of Accounting

The Company accounts for an investment in a joint venture using the equity method of accounting because it does not have a controlling interest and is not the primary beneficiary; however, the Company has the ability to exert significant influence. Under the equity method of accounting, the initial investment is recorded at cost, and the investment is subsequently adjusted for the Company’s proportionate share of the net earnings or losses and other comprehensive income or loss of the investee. Intra-entity profits or losses associated with the Company’s equity method investment are eliminated until realized by the investee in transactions with third parties. Income or loss from this investment is recorded as a separate line item in the consolidated statements of operations on a three-month lag. We evaluate material events occurring during the three-month lag period to determine whether the effects of such events should be disclosed in our financial statements. The Company will evaluate its investment in the joint venture for impairment whenever events or changes in circumstances indicate that the carrying amount of the investment may not be recoverable.
9

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





Other Accounting Policy Updates

All other significant accounting policies described in the 2022 Form 10-K remain unchanged.

(2) Acquisitions

Wematter

On July 1, 2023, the Company completed the previously announced acquisition of Wematter AB (“Wematter”), a Swedish 3D printer manufacturer that will broaden 3D Systems’ Selective Laser Sintering (SLS) portfolio. Wematter's reported results are expected to be included in our Industrial Solutions segment. The acquisition resulted in the Company acquiring 100% of the outstanding voting interest of Wematter. Consideration for this acquisition consisted of approximately $10,224 in cash, subject to customary post-closing adjustments. The Company also may be required to pay an additional €2,000 in cash, contingent upon the achievement of certain post-closing performance conditions and the continued employment of certain key Wematter employees for two years after the closing date. If earned, the €2,000 is expected to be recognized as compensation expense over the two-year service period that the key employees must remain employed at 3D Systems. As of September 30, 2023, management believes that the achievement of the post-closing performance conditions is probable and, accordingly, the Company has commenced the recognition of the related compensation expense. In addition, the Company incurred $847 of acquisition-related expenses that are reported in selling, general and administrative expenses in the condensed consolidated statements of operations.

In a separate transaction, the Company had extended a loan to Wematter during the three months ended June 30, 2023. The carrying value of the Wematter loan was $942 as of the acquisition date, and was previously reported in prepaid and other current assets on the Company's condensed consolidated balance sheet as of June 30, 2023. Upon the close of the acquisition, we determined that the loan was effectively settled in the business combination as a preexisting contractual relationship. No gain or loss was recognized in connection with the effective settlement, as the carrying value of the loan was not materially different from the pricing for a current market transaction for similar items. The effective settlement of this loan receivable results in an increase to the consideration transferred in connection with this transaction (i.e., above the cash consideration paid) and a corresponding increase to goodwill.

We accounted for the acquisition of Wematter 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 Wematter acquisition.
10

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





Shown below is the preliminary purchase price allocation, which summarizes the fair values of the assets acquired and liabilities assumed at the date of acquisition:
(in thousands)
Current assets, including cash acquired of $148
$835 
Intangible assets:
Trade names
$1,487 
Product technology
2,231 
Customer relationships
347 
Total intangible assets4,065 
Goodwill6,878 
Other assets475 
Liabilities:
Accounts payable and accrued liabilities$794 
Long term liabilities293 
Total liabilities1,087 
Net assets acquired$11,166 

The goodwill recognized is attributable to synergies that are expected to enhance and expand the Company’s overall product portfolio and opportunities in new and existing markets, future products that have yet to be determined and Wematter’s assembled workforce. This goodwill is not expected to be deductible for tax purposes.

The following table presents the finite-lived intangible assets acquired and their respective estimated useful lives:

Useful Life
Trade names
5
Product technology
15
Customer relationships
10

As of September 30, 2023, the purchase price allocation for Wematter is preliminary. The Company continues to review the final closing balance sheet of Wematter and may further adjust the acquisition-date fair values of acquired assets and assumed liabilities based on this review. The Company also continues to review Wematter’s 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 its valuation activities and the review of Wematter’s closing balance sheet and the pre-acquisition tax returns. These final allocations could differ materially from the current preliminary allocations. The final allocations may include (1) changes in the preliminary allocations to acquired intangible assets and goodwill and (2) changes in the preliminary allocations to other assets and liabilities, including but not limited to tax assets and liabilities, inclusive of deferred taxes. The estimated useful lives of acquired intangible assets are also preliminary.

The post-acquisition revenues of Wematter included in our condensed consolidated statements of operations for both the three and nine months ended September 30, 2023 are immaterial and, accordingly, Wematter's results are dilutive to our earnings.

Unaudited Pro Forma Financial Information

The following unaudited pro forma financial information summarizes the combined results of the Company and Wematter as if the acquisition had occurred on January 1, 2022. The pro forma results have been prepared for comparative purposes only, and do not necessarily represent what the results of operations would have been had the acquisition been completed on January 1, 2022. In addition, these pro forma results are not intended to be a projection of future operating results and do not reflect synergies that might be achieved.

11

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




The unaudited pro forma financial information includes adjustments for the pro forma impact of our preliminary purchase price allocation, including the amortization for newly acquired intangible assets, the impact of transaction costs, and the alignment of accounting policies. Transaction costs have been included in the pro forma results for the periods ended September 30, 2022, consistent with the pro forma assumption that the acquisition occurred on January 1, 2022. Pro forma revenue information has not been presented, as pre-acquisition revenue reported by Wematter was not material and, accordingly, the impact on our reported consolidated revenue also would not have been material. Pro forma net loss is not presented in the table below for the three months ended September 30, 2023 because Wematter's results are reflected in 3D Systems consolidated numbers for the full period.

Three Months Ended
September 30,
Nine Months Ended
September 30,
(in thousands)202220232022
Net (loss) income attributable to 3D Systems Corporation
$(38,407)$(71,076)$(100,185)

dp polar

On October 4, 2022, we completed the acquisition of 100% of dp polar GmbH (“dp polar”), a German-based designer and manufacturer of a manufacturing system designed for true high-speed mass production of customized components, for $25,866 (including customary post-closing adjustments), which includes $19,604 paid in cash at closing, $7,091 paid at closing via the issuance of the Company’s common stock, and a provisional $829 estimated post-closing purchase price adjustment due to the Company from the sellers. See Note 12 for the discussion of an earnout arrangement with a key individual from dp polar.

The Company acquired dp polar for access to dp polar's patented continuous printing process. Central 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 print heads remain stationary above the rotating platform, providing a continuous print process.

We accounted for the acquisition of dp polar 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 dp polar acquisition.

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

(in thousands)
Current assets, including cash acquired of $243
$301 
Intangible assets:
In-process research and development$4,989 
Trade name3,930 
Total intangible assets8,919 
Goodwill17,090 
Other assets765 
Liabilities:
Accounts payable and accrued liabilities$364 
Deferred tax liability845 
Total liabilities1,209 
Net assets acquired$25,866 

The goodwill recognized in connection with this acquisition is attributable to synergies that are expected to enhance and expand the Company’s overall product portfolio and opportunities in new and existing markets, future products that have yet to be determined and dp polar’s assembled workforce. This goodwill will not be deductible for tax purposes.

12

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




Kumovis

On April 1, 2022, we completed the acquisition of 93.75% of Kumovis GmbH (“Kumovis”) for an all-cash purchase price of $37,875 (including customary post-closing adjustments), plus an estimated RNCI of $1,559. $3,628 of the cash payment was deferred for up to fifteen months from the closing date, and was paid in July 2023. Kumovis, which is part of the Healthcare Solutions segment and reporting unit, utilizes polyether ether keton or “PEEK” materials, which has properties that lend it to many medical applications that fit into our personalized healthcare solutions operations, including many implant applications.

In conjunction with the Kumovis acquisition, the Company and the non-controlling shareholders entered into a put/call option agreement, whereby, at a later date, 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 in Kumovis for an exercise price calculated based on the achievement of pre-determined revenue and gross profit targets. Fifty percent 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 have not been met within 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 common stock at the election of 3D Systems. This arrangement results in the recognition of RNCI, for which an estimated fair value of $1,559 was recorded as of the acquisition date.

We accounted for the acquisition of Kumovis using the acquisition method, as prescribed by ASC 805, and we have completed the allocation of the final purchase price. 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 Kumovis acquisition. The table below reflects the fair value of both the consideration transferred and the RNCI attributable to this acquisition:

(in thousands)
Cash paid at acquisition$34,098 
Deferred cash consideration3,628 
Estimated fair value of RNCI1,559 
Post-closing net working capital adjustment149 
Total fair value of consideration transferred$39,434 

Shown below is the final purchase price allocation, summarizing the fair values of the assets acquired and liabilities assumed at the date of acquisition:

(in thousands)
Current assets, including cash acquired of $125
$1,407 
Intangible assets:
Product technology$20,770 
Trade name5,802 
Total intangible assets26,572 
Goodwill17,618 
Other assets705 
Liabilities:
Accounts payable and accrued liabilities$332 
Deferred revenue70 
Deferred tax liability6,466 
Total liabilities6,868 
Net assets acquired$39,434 

13

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




The goodwill recognized in connection with this acquisition is attributable to synergies that are expected to enhance and expand the Company’s overall product portfolio and opportunities in new and existing markets, future products that have yet to be determined and Kumovis’s assembled workforce. This goodwill will not be deductible for tax purposes.

Titan

On April 1, 2022, we completed the acquisition of 100% of Titan Additive LLC (“Titan”) for an all-cash purchase price of $39,040. Titan, which is part of the Industrial Solutions 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 Solutions segment.

We accounted for the acquisition of Titan using the acquisition method, as prescribed by ASC 805, and we have completed the allocation of the purchase price. Shown below is the final purchase price allocation, summarizing the fair values of the assets acquired and liabilities assumed, as determined at the date of acquisition in accordance with valuation methodologies described in ASC 820:

(in thousands)
Current assets$661 
Intangible assets:
Product technology$15,940 
Trade name5,580 
Total intangible assets21,520 
Goodwill17,430 
Other assets68 
Liabilities:
Accounts payable and accrued liabilities$229 
Deferred revenue410 
Total liabilities639 
Net assets acquired$39,040 

The goodwill recognized in connection with this acquisition is attributable to synergies that are expected to enhance and expand the Company’s overall product portfolio and opportunities in new and existing markets, future products that have yet to be determined and Titan’s assembled workforce. This goodwill is deductible for tax purposes.

Acquisitions of Non-controlling Interests

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. The remaining 30% of the capital and voting rights of Easyway were acquired on January 21, 2019 for $13,500, which has been paid in installments. The Company made the final installment payment of $2,300 related to the acquisition of the remaining 30% interest in Easyway during the three months ended March 31, 2022.

(3) Revenue

Revenue is recognized when control of the promised products or services is transferred to customers.

Performance Obligations

At September 30, 2023, we had $62,579 of outstanding performance obligations, comprised of deferred revenue, customer order backlog and customer deposits. We expect to recognize approximately 90.0% of the $39,418 of deferred revenue and customer deposits as revenue within the next twelve months, an additional 4.0% by the end of 2024 and the remaining balance thereafter.

14

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




Collaboration and Licensing Agreements

We enter into collaboration and licensing agreements with third parties. The nature of the activities to be performed and the consideration exchanged under these 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 should be 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 contractual developmental 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 of transfer of control for each distinct performance obligation. During the three and nine-month periods ended September 30, 2023, the Company recognized $7,896 and $16,099, respectively, of revenue related to collaboration arrangements with customers. During the three and nine-month periods ended September 30, 2022, the Company recognized $3,301 and $9,075, respectively, of revenue related to collaboration arrangements with customers.

Our revenue recognized under collaboration and licensing agreements for the three and nine months ended September 30, 2023 includes the effect of the Company increasing its estimate of the variable consideration included in the transaction price related to one of its licensing agreements. The increase in estimated recognizable variable consideration was due to (1) the execution of a modification to the related customer contract and (2) the Company's determination that incremental revenue attributable to milestone payments that are contingent upon the achievement of contractual developmental criteria would be earned under the modified contract. As a result, during the quarter ended September 30, 2023, the Company recognized incremental services revenue of $4,452, which reduced our reported basic and diluted loss per share by $0.03 and $0.03, respectively, for each of the three and nine months ended September 30, 2023.

Contract Balances

During the nine months ended September 30, 2023, we recognized revenue of $23,498 related to our contract liabilities at December 31, 2022. During the nine months ended September 30, 2022, we recognized revenue of $28,850 related to our contract liabilities at December 31, 2021.

Contract assets were $7,379 and $677 as of September 30, 2023 and December 31, 2022, respectively. The increase in the contract assets balance as of September 30, 2023 primarily relates to the increase in the estimated variable consideration included in the transaction price related to one of the Company's collaboration and licensing agreements (refer to the discussion above of Collaboration and Licensing Agreements), which has resulted in the recognition of incremental revenue for which the Company did not have the right to invoice as of the balance sheet date.

Revenue Concentrations

For the three and nine months ended September 30, 2023, one customer accounted for approximately 10.7% and 14.4% of our consolidated revenue, respectively. For the three and nine months ended September 30, 2022, one customer accounted for approximately 20.8% and 24.1% of our consolidated revenue, respectively. We expect to maintain our relationship with this customer.
15

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





Revenue by geographic region for the three and nine months ended September 30, 2023 and 2022 was as follows:
Three Months Ended
(in thousands)September 30, 2023September 30, 2022
Americas$69,714 $80,455 
EMEA43,141 36,913 
APAC10,936 14,885 
Total$123,791 $132,253 
United States (included in Americas above)$68,840 $78,910 

Nine Months Ended
(in thousands)September 30, 2023September 30, 2022
Americas$214,956 $234,511 
EMEA127,150 122,788 
APAC31,115 48,000 
Total$373,221 $405,299 
United States (included in Americas above)$211,717 $231,557 

(4) Inventories

Components of inventories at September 30, 2023 and December 31, 2022 are summarized as follows:
(in thousands)September 30, 2023December 31, 2022
Raw materials$61,314 $59,907 
Work in process3,922 4,972 
Finished goods and parts87,769 72,953 
Total inventories$153,005 $137,832 

The inventory reserve was $16,711 and $15,550 as of September 30, 2023 and December 31, 2022, respectively.

In the second quarter of 2023, 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 June 2023 and included a $450 exit fee expensed in the second quarter of 2023. There is an associated commitment to purchase $2,735 of inventory from the assembly manufacturer as of September 30, 2023.

16

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




(5) Intangible Assets

Intangible Assets with Finite Lives

At September 30, 2023 and December 31, 2022, the Company's intangible assets with finite lives were as follows:

September 30, 2023December 31, 2022
(in thousands)
Gross
Accumulated AmortizationNet
Gross
Accumulated AmortizationNet
Intangible assets with finite lives:
Customer relationships$51,160 $(49,417)$1,743 $51,137 $(48,695)$2,442 
Acquired technology45,894 (11,925)33,969 55,480 (10,707)44,773 
Trade names30,496 (13,705)16,791 35,930 (12,455)23,475 
Patent costs18,714 (10,823)7,891 18,673 (10,909)7,764 
Acquired patents16,426 (14,716)1,710 17,499 (15,661)1,838 
Other13,170 (9,120)4,050 13,255 (8,765)4,490 
Total intangible assets$175,860 $(109,706)$66,154 $191,974 $(107,192)$84,782 

Impairment of Intangible Assets with Finite Lives

During the quarter ended September 30, 2023, the Company concluded that it is more likely than not that it will sell or otherwise dispose of Oqton MOS, a business which the Company acquired in 2021. Oqton MOS represents a discrete asset group within the Industrial Solutions segment, as its identifiable cash flows are largely independent of the cash flows of other groups of assets and liabilities within the Industrial Solutions segment. Based upon the Company's expectation that it will sell or otherwise dispose of Oqton MOS, the long-term cash flow forecast for this asset group was revised. The revised long-term cash flow forecast indicated that the carrying amounts of Oqton MOS's long-lived assets, consisting primarily of product technology and trade name intangible assets initially recorded when Oqton MOS was acquired, may not be recoverable. Accordingly, the carrying value of Oqton MOS's long-lived assets was tested for impairment based upon an estimate of the associated discounted future cash flows. This fair value measurement approach required the use of Level 3 fair value measurement inputs, as defined in Note 19. As the present value of the estimated future cash flows expected to result from the use and eventual disposition of the asset group is less than the carrying value of the asset group, during the quarter ended September 30, 2023, the Company recognized $13,597 of impairment charges related to the acquired technology and trade names included in the Oqton MOS asset group.

Amortization of Intangible Assets with Finite Lives

Amortization expense related to our intangible assets with finite lives was $3,179 and $9,676 for the three and nine months ended September 30, 2023, respectively, compared to $4,293 and $10,273 for the three and nine months ended September 30, 2022, respectively. Amortization expense for intangible assets is estimated to be $2,085 for the remainder of 2023, $8,318 in 2024, $8,029 in 2025, $7,083 in 2026 and $6,733 in 2027.

Indefinite-Life Intangible Assets (Excluding Goodwill)

Total intangible assets reported on our September 30, 2023 and December 31, 2022 consolidated balance sheets include in-process research and development (“IPR&D”), which the Company recognized as an acquired indefinite-life intangible asset in connection with its acquisition of dp polar on October 4, 2022 (see Note 2). The carrying value of this indefinite-life intangible asset was $5,382 and $5,448 as of September 30, 2023 and December 31, 2022, respectively.

17

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




(6) Goodwill

The following table reflects the changes in the carrying amount of goodwill by reporting unit for the nine months ended September 30, 2023:
Nine Months Ended September 30, 2023
HealthcareIndustrialConsolidated
(in thousands)
Gross Goodwill
ImpairmentsNet GoodwillGross GoodwillImpairmentsNet GoodwillGross GoodwillImpairmentsNet Goodwill
Balance at beginning of year$143,431 $(32,055)$111,376 $316,265 $(42,329)$273,936 $459,696 $(74,384)$385,312 
Acquisitions and measurement period adjustments
1,005 — 1,005 7,735 — 7,735 8,740 — 8,740 
Foreign currency translation adjustments(1,175)— (1,175)(1,552)— (1,552)(2,727)— (2,727)
Balance at end of period$143,261 $(32,055)$111,206 $322,448 $(42,329)$280,119 $465,709 $(74,384)$391,325 

The effect of foreign currency exchange rates in the table above reflects the impact on goodwill of amounts recorded in currencies other than the U.S. dollar in the financial statements of foreign subsidiaries and the resulting effect of foreign currency translation between the applicable functional currency and the U.S. dollar.
18

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





(7) Investments and Notes Receivable

The Company holds various investments in equity and debt instruments that are included in other assets on our condensed consolidated balance sheets. The following table summarizes our investment balances as of September 30, 2023 and December 31, 2022:

(in thousands)September 30, 2023December 31, 2022
Equity investments under the equity method of accounting$5,782 $ 
Equity investments without readily determinable fair values20,962 12,953 
Other(1)
200 200 
Total equity investments
$26,944 $13,153 
Long-term note receivable(2)
$530 $515 
Total notes receivable$530 $515 

(1) Reflects warrant investment carried at fair value. The fair value of these warrants is measured using Level 3 fair value measurement inputs. Refer to Note 19 for a description of these inputs.
(2) Includes interest amounts that have been accrued on, recorded to and reported as part of the notes receivable balance.

Equity Investments under the Equity Method of Accounting

Dussur

In March 2022, we and 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. 3D Systems had committed to an initial investment in the joint venture of approximately $6,500, of which $3,435 had been deposited into an escrow account as of December 31, 2022 and, accordingly, was reported as restricted cash within other assets on the December 31, 2022 balance sheet. In February 2023, the Company officially became a shareholder in the joint venture. During April 2023, the $3,435 held in escrow, as well as the additional amount of approximately $3,065 owed to the joint venture as of March 31, 2023, was deposited into a bank account of the joint venture for use in its operations. Additional future investments in the joint venture are contingent upon the achievement of certain milestones. As of September 30, 2023, the Company owns 49% of the joint venture's common stock. The impact of this investment on the Company’s future financial condition and cash flows is expected to be limited to the cash outflow(s) related to any future contingent investments, if required.

The Company accounts for the joint venture under the equity method of accounting, which requires the Company to recognize its proportionate share of the joint venture's reported net income or loss. Due to the timing of when the joint venture's reported financial information is expected to be available, the Company records amounts required to be recognized pursuant to the equity method of accounting on a one quarter lag. For the three and nine months ended September 30, 2023, Company has recorded and separately reported a loss on equity method investment in the condensed consolidated statements of operations.

19

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




Equity Investments without Readily Determinable Fair Values

Theradaptive

In June 2023, we made an $8.0 million investment in Theradaptive, Inc. ("Theradaptive"), via the purchase of Series A Preferred Stock, pursuant to which we hold an approximate 9.15%, or 8.25% fully-diluted, ownership interest in Theradaptive. Theradaptive is currently developing a protein that encourages bone growth. This biotechnology could be applied to 3D printed metal splints for patients who otherwise may require amputation of a limb because the lost bone is too vast to replace with a splint. The Company expects to account for its investment in Theradaptive on a cost basis, subject to assessment for impairment, as (1) the fair value of Theradaptive's equity is not readily determinable and (2) the investment is not subject to the equity method of accounting due to the Company's lack of significant influence. The investment in Theradaptive is not expected to materially impact our future financial position, results of operations, or cash flows. No impairment charges were recognized with respect to this investment during the three or nine month periods ended September 30, 2023.

Enhatch

In March 2022, we made a $10,000 investment in convertible preferred shares for an approximate 26.6% ownership interest in Enhatch Inc. (“Enhatch”), the developer of the Intelligent Surgery Ecosystem. We simultaneously entered into a supply agreement with Enhatch. We also obtained warrants to purchase additional shares of Enhatch, as well as the right to purchase in the future (“call option”) the remaining shares of Enhatch that 3D Systems does not own if certain revenue targets are achieved. As of the original investment date, the fair values of the convertible preferred shares, inclusive of the embedded call option, and warrants were bifurcated and were $9,670 and $330, respectively. The investment, including the embedded call option and the warrants, is recorded in other assets on the consolidated balance sheets.

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.

As of September 30, 2023 and December 31, 2022, the reported carrying value of the Company's convertible preferred stock investment in Enhatch, inclusive of the call option, is $6,900, which reflects the cumulative impact of $2,770 of historical impairment charges that have been recognized since the date of the original investment. These impairment charges were recorded during the three months ended September 30, 2022. No impairment charges were recognized with respect to this investment during the three or nine month periods ended September 30, 2023.

(8) Leases

We have various lease agreements for our facilities, equipment and vehicles with remaining lease terms ranging from one to fifteen years. During the nine months ended September 30, 2023, two buildings previously under construction were completed and became available for use by the Company as leased premises. As a result, these leases were deemed to have commenced during the period. Additionally, during the nine months ended September 30, 2023, we extended material existing leases related to two buildings with office and production spaces. Rented spaces under these new and extended leases totaled 396,100 square feet. As of September 30, 2023, the aggregate remaining minimum base lease payments related to the new building leases and extended leases described above total $47,634 and consist of $1,006, $4,516, $5,093, $5,234, $5,380, and $26,405 due, respectively, during the years ended December 31, 2023, 2024, 2025, 2026, 2027 and thereafter.

Classifications of the lease amounts reported on our balance sheets as of September 30, 2023 and December 31, 2022 are summarized below:
September 30, 2023December 31, 2022
(in thousands)Right-of-use assetsCurrent lease liabilitiesLong-term lease liabilitiesRight-of-use assetsCurrent lease liabilitiesLong-term lease liabilities
Operating leases$60,973 $9,616 $59,428 $39,502 $8,343 $38,499 
Finance leases12,047 1,068 11,867 3,244 693 3,280 
Total$73,020 $10,684 $71,295 $42,746 $9,036 $41,779 

20

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




(9) Accrued and Other Liabilities

Short-Term Accrued Liabilities

Accrued liabilities at September 30, 2023 and December 31, 2022 are summarized as follows:
(in thousands)September 30, 2023December 31, 2022
Compensation and benefits$15,492 $19,814 
Accrued taxes9,633 10,694 
Legal contingencies4,850 9,948 
Product warranty liability2,409 3,677 
Other accrued liabilities11,191 11,438 
Total$43,575 $55,571 

Changes in the product warranty obligation for the nine months ended September 30, 2023 and 2022 are summarized below:
(in thousands)Beginning BalanceSettlements MadeAccruals for Warranties IssuedEnding Balance
September 30, 2023$3,677 $(2,983)$1,715 $2,409 
September 30, 2022$3,585 $(5,266)$5,257 $3,576 

Other Long-Term Liabilities

Other liabilities at September 30, 2023 and December 31, 2022 are summarized as follows:
(in thousands)September 30, 2023December 31, 2022
Long-term employee indemnity$4,634 $4,817 
Long-term tax liability5,568 5,711 
Defined benefit pension obligation4,963 5,050 
Long-term deferred revenue1,858 4,974 
Earnout liability 17,244 
Legal contingencies2,916 6,096 
Other long-term liabilities428 289 
Total$20,367 $44,181 

The reduction in the earnout liability balance is the result of the reversal of all previously recognized expense attributable to a potential post-acquisition milestone-based payment related to the Company's 2021 acquisition of Volumetric Biotechnologies, Inc. ("Volumetric"). During the three months ended September 30, 2023, the Company reversed the accrued compensation expense related to the potential earnout payment as the related milestone is no longer deemed probable of being achieved. Refer to Note 12 for additional details regarding the earnout arrangement and the financial impact of this milestone-based payment no longer being deemed probable of being paid.


21

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




(10) Borrowings

On November 16, 2021, the Company issued $460,000 in aggregate principal amount of 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 $446,534 after deducting the initial purchasers’ discounts and commissions and offering expenses payable by the Company in the amount of $13,466, of which $8,480 is unamortized at September 30, 2023. 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 their terms.

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, is equal to or greater than 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 five business day period after any five 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 common stock, or a combination of cash and shares of 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. As of September 30, 2023, none of the conditions that would trigger the right to convert the Notes had been met.

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 as of September 30, 2023. At September 30, 2023, the fair value of the Notes is $331,297. 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 $671 and $2,010 of debt issuance cost accretion for the three and nine months ended September 30, 2023, respectively, as compared to $670 and $2,006 for the three and nine months ended September 30, 2022, respectively. Debt issuance cost accretion of $673, $2,698, $2,714, and $2,395 is expected to be incurred in the remaining three months of 2023 and in 2024, 2025 and 2026, respectively.



22

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




(11) Redeemable Non-Controlling Interest

Upon consummation of the Company's acquisition of Kumovis, existing shareholders of Kumovis retained a 6.25% ownership interest in Kumovis that the Company reports as RNCI due to put and call terms that could result in the Company redeeming this remaining ownership interest at a future date (see Note 2). The following table shows changes in the reported RNCI balance during the nine months ended September 30, 2023:

Nine Months Ended
September 30, 2023
(in thousands)
Balance at December 31, 2022
$1,760 
Net loss
(149)
Redemption value in excess of carrying value
321 
Translation adjustments
(4)
Balance at September 30, 2023
$1,928 

The following table shows changes in the reported RNCI balance during the nine months ended September 30, 2022:
Nine Months Ended
September 30, 2022
(in thousands)
Balance at December 31, 2021
$ 
Fair value at the date of acquisition1,559 
Net Loss(184)
Redemption value in excess of carrying value462 
Translation Adjustments(183)
Balance at September 30, 2022
$1,654 

(12) Stock-Based Compensation

Stock Incentive Plans

2015 Incentive Plan

The Company is authorized to grant shares of restricted stock, restricted stock units (“RSUs”), stock appreciation rights, cash incentive awards and options to purchase shares of Common Stock to employees and non-employees inclusive of directors pursuant to its 2015 Incentive Plan (the “2015 Plan”). The 2015 Plan also designates measures that may be used for performance-based awards and market-based awards. The vesting period for awards granted under the 2015 Plan is generally determined by the Board of Directors at the date of the grant. Generally, the awards vest one third each year, over 3 years.

Systemic Bio Phantom Unit Plan

During the three months ended September 30, 2023, we began granting phantom unit awards ("Phantom Units") under a new compensation plan designed for employees and non-employees performing services for Systemic Bio, a wholly-owned subsidiary of 3D Systems Corporation. All awards granted under the plan are subsidiary-level awards.

23

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




The Phantom Units granted under the plan include both a time-based vesting condition (generally 4 years, subject to acceleration in connection with specified liquidity events) and a market condition that is met if (1) the value of Systemic Bio exceeds a specified multiple of the capital invested in this subsidiary (the "hurdle") and (2) the business achieves a specified minimum internal rate of return. The market condition will be assessed upon (A) a trigger event (e.g., change-in-control, IPO, or plan expiration of December 31, 2030) and/or (B) an interim liquidity event (defined as January 1, 2028) that occurs prior to a trigger event. All awards granted under the plan will be liability-classified due to our intention to settle these awards with cash; although, we have discretion to partially or fully settle these awards in equity upon vesting. Liability classification of the awards requires them to be remeasured at their fair value at the end of each reporting period. Due to the presence of the market-condition and the fact that Systemic Bio does not have a readily available share price, the awards are valued using a Monte Carlo simulation with the assistance of a third party valuation firm.

Other Compensation Arrangements that Include Share Settlement

Regenerative Medicine Earnout Payments and Performance-Based Stock Units

On December 1, 2021, the Company acquired Volumetric. Pursuant to the terms of the related acquisition agreement, the Company may be required to pay milestone-based payments of up to $355,000 in the aggregate, all of which are incremental to the acquisition purchase price, upon (1) the achievement of seven discrete non-financial milestones that require attainment prior to either December 31, 2030 or December 31, 2035 and (2) the continued employment of certain key individuals from Volumetric. Each potential milestone-based payment is considered compensation expense, which the Company will recognize ratably from the point in time when a milestone is deemed probable of achievement through the estimated date of achievement. Each milestone payment will be settled approximately half in cash and half in shares of the Company’s Common Stock and, accordingly, the portion of the Company’s accrued liability (see Note 9) that is ultimately expected to be settled with the Company’s common stock is reflected in the disclosure of stock-based compensation included herein.

In addition, the Company has granted performance-based stock units (“PSUs”), with vesting terms that are based upon four individually-measured, non-financial milestones, to other employees who work on advancements in regenerative medicine related to lungs and tissue organs. The PSUs associated with each individual milestone are recognized as compensation expense over the period commencing on the date that the respective milestone is deemed probable of being met through the anticipated date of achievement.

Prior to the quarter ended September 30, 2023, the Company recognized compensation expense related to (1) one Volumetric milestone-based payment, for which the potential amount due to the sellers would be $65,000, and (2) one PSU milestone (“the RegMed Awards”), for which the aggregate grant date fair value of the outstanding and unvested awards was $4,773 as of June 30, 2023, as the related milestone was deemed probable of achievement. During the quarter ended June 30, 2023, as a result of the Company's decision to reduce budgeted funding related to the research and development efforts required to achieve the milestone, the estimated timing for achievement of both the Volumetric milestone and the PSU milestone shifted from the end of fiscal year 2025 to the end of fiscal year 2026. During the quarter ended September 30, 2023, the Company decided to further reduce its budgeted funding for the research and development related to the Volumetric Earnout and RegMed Award milestone, which resulted in the Company concluding that it is no longer probable that the milestone will be achieved by the end of the term of the Volumetric Earnout arrangement or prior to the expiration of the RegMed Awards. In concluding that the Volumetric and RegMed Award milestone would no longer be achieved, the Company reversed all of the previously accrued compensation expense, one half of which was expected to be settled with common shares, which had an income statement impact of $21,527 and $18,392 for the three and nine-months ended September 30, 2023, respectively. The reversals of the previously expensed Volumetric Earnout and RegMed Award reduced our reported net loss per basic and diluted share of common stock by $0.17 and $0.14 for the three and nine months ended September 30, 2023, respectively.

dp polar Earnout

On October 4, 2022, the Company acquired dp polar. Pursuant to the terms of the related acquisition agreement, the Company may be required to pay an additional $2,229, incremental to the acquisition purchase price, which will be settled via the issuance of 250 shares of the Company’s Common Stock. The issuance and vesting of these shares is contingent on the continued service of a certain key individual from dp polar through October 4, 2024. Upon assessment, management concluded that this potential obligation for the payment of an additional 250 shares of Common Stock will be accounted for as compensation expense recognized over the required service period of the individual to whom the amount will potentially be paid and, accordingly, the related expense is reflected in the disclosure of stock-based compensation included herein. During the nine months ended September 30, 2023, we modified the service period of this arrangement to end on December 31, 2024. The impact of this modification on stock-based compensation expense is immaterial.
24

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





Stock-Based Compensation Activity and Expense

2015 Incentive Plan

During the three and nine months ended September 30, 2023, the Company granted 111 and 3,990 shares of restricted stock, respectively, which had a weighted-average grant date fair value of $8.11 and $10.95 per share, respectively. The restricted stock awards generally vest ratably over three years, except for those awards that the Company granted to settle a portion of its accrued annual bonus liability at December 31, 2022, which were fully vested immediately upon issuance.

The restricted stock granted during the nine months ended September 30, 2023 included 681 shares of market-based awards, whereby the number of shares that ultimately vest will be based upon 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 was $18.91 per share.

The following table shows the stock-based compensation expense recognized during the three and nine months ended September 30, 2023 and 2022:
Three Months Ended
September 30,
Nine Months Ended
September 30,
(in thousands)2023202220232022
Stock-based compensation expense$(3,142)$11,447 $15,140 $31,508 
Tax benefit$ $ $ $ 

Included in stock-based compensation expense recognized for the three and nine months ended September 30, 2023 are $(1,055) and $0, respectively, and $1,282 and $3,123 for the three and nine months ended September 30, 2022, respectively, of accrued expense pertaining to annual bonus incentive compensation for which settlement is ultimately expected to occur using shares of the Company’s Common Stock. Also included in stock-based compensation expense are $(10,140) and $(8,640) for the three and nine months ended September 30, 2023, respectively, and $1,989 and $5,969 for the three and nine months ended September 30, 2022, respectively, which relate to the portion of the Volumetric Earnout expense reversed or recognized during each period that is expected to be settled using the Company’s Common Stock. Further, stock-based compensation expense for the three and nine months ended September 30, 2023 includes $175 and $727, respectively, of expense related to the dp polar earnout arrangement. Finally, stock-based compensation expense includes $(1,246) and $(1,113) for the three and nine months ended September 30, 2023, respectively, and $254 and $746 for the three and nine months ended September 30, 2022, respectively, of expense related to the RegMed awards.

As of September 30, 2023, there was $52,508 of unrecognized stock-based compensation expense related to all unvested share-based payment awards that the Company expects to recognize over a weighted-average period of 2.0 years.

Systemic Bio Phantom Unit Plan

During the three months ended September 30, 2023, we granted 589 units under the Systemic Bio Phantom Unit Plan, all of which remained outstanding as of September 30, 2023. Compensation expense attributable to these awards is being recognized over 40.5 months or 48 months, based upon the recipient. As the awards include graded, time-based vesting and a market condition, compensation expense is being recognized under the graded vesting (accelerated attribution) method. Compensation expense and the associated liability recognized during the three months ended September 30, 2023 were $183.

25

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




(13) Interest and Other Income (Expense), Net

Interest and other income (expense), net consisted of the following amounts for the three and nine months ended September 30, 2023 and 2022:

Three Months EndedNine Months Ended
(in thousands)September 30, 2023September 30, 2022September 30, 2023September 30, 2022
Interest and other income (expense), net
Foreign exchange (loss), net
$(2,202)$(764)$(3,847)$(4,193)
Interest income, net
4,909 2,029 13,118 4,019 
Other (expense) income, net(105)(4,767)420 (5,282)
Total interest and other income (expense), net$2,602 $(3,502)$9,691 $(5,456)

Interest and other income (expense), net includes (1) interest income of $5,841 and $15,730 for the three and nine months ended September 30, 2023, respectively, and $2,753 and $6,103 for the three and nine months ended September 30, 2022, respectively, and (2) interest expense of $932 and $2,612 for the three and nine months ended September 30, 2023 respectively, and $724 and $2,084 for the three and nine months ended September 30, 2022, respectively.

(14) Income Taxes

We maintain the exception under ASC 740-270-30-36(b), “Accounting for Income Taxes,” for jurisdictions that do not have reliable estimates of ordinary income. Based on volatility in the industry, we have continued to use a year-to-date methodology in determining the effective tax rate for the three and nine months ended September 30, 2023.

For the three and nine months ended September 30, 2023, the Company’s effective tax rate was (1.6)% and (0.6)%, respectively. For the three and nine months ended September 30, 2022, the Company’s effective tax rate was (0.9)% and (3.1)%, respectively. The differences between the U.S. statutory tax rate and the effective tax rates for the three and nine months ended September 30, 2023 and September 30, 2022 are primarily driven by a full valuation allowance in various jurisdictions.

26

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




(15) Net Earnings (Loss) Per Share

Basic net income (loss) per share is calculated by dividing net income (loss) attributable to 3D Systems’ Common Stock shareholders by the weighted average number of Common Stock shares outstanding during the applicable period. Diluted net income (loss) per share incorporates the additional shares issuable upon the assumed exercise of stock options, the vesting of restricted stock and RSUs, and the assumed conversion of debt, except in such cases when (1) the inclusion of such shares or potential shares would be anti-dilutive or (2) when the vesting of restricted stock or RSUs is contingent upon one or more performance conditions that have not been met as of the balance sheet date.

Three Months EndedNine Months Ended
(in thousands, except per share amounts)September 30, 2023September 30, 2022September 30, 2023September 30, 2022
Numerator for basic and diluted net (loss) income per share:
Net (loss) income attributable to 3D Systems Corporation$(11,704)$(37,398)$(70,020)$(97,158)
Redeemable non-controlling interest redemption value in excess of carrying value(61)(462)(321)(462)
Net (loss) income attributable to common stock shareholders$(11,765)$(37,860)$(70,341)$(97,620)
Denominator for net (loss) income per share: