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 March 31, 2022

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

__________________________

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 class	Trading Symbol	Name of each exchange on which registered
Common Stock, par value $0.001 per share	DDD	New 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 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 May 5, 2022: 130,337,955

1

3D SYSTEMS CORPORATION

Form 10-Q

For the Quarter Ended March 31, 2022

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.	29
Item 3. Quantitative and Qualitative Disclosures About Market Risk.	39
Item 4. Controls and Procedures.	40
PART II — OTHER INFORMATION
Item 1. Legal Proceedings.	39
Item 1A. Risk Factors.	39
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.	39
Item 6. Exhibits.	42

2

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements.

3D SYSTEMS CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except par value)	March 31, 2022 (unaudited)		December 31, 2021
ASSETS
Current assets:
Cash and cash equivalents	$	389,270	$	789,657
Short-term investments	356,340		—
Accounts receivable, net of reserves — $3,464 and $2,445	100,341		106,540
Inventories	101,647		92,887
Prepaid expenses and other current assets	40,130		42,653
Total current assets	987,728		1,031,737
Property and equipment, net	54,827		57,257
Intangible assets, net	46,205		45,835
Goodwill	340,695		345,588
Right of use assets	44,440		46,356
Deferred income tax asset	4,548		5,054
Other assets	28,120		17,272
Total assets	$	1,506,563	$	1,549,099
LIABILITIES AND EQUITY
Current liabilities:
Current right of use liabilities	8,299		8,344
Accounts payable	57,347		57,366
Accrued and other liabilities	46,258		76,994
Customer deposits	5,314		7,281
Deferred revenue	33,020		28,027
Total current liabilities	150,238		178,012
Long-term debt, net of deferred financing costs	447,534		446,859
Long-term right of use liabilities	45,283		47,420
Deferred income tax liability	2,181		2,173
Other liabilities	34,451		32,254
Total liabilities	679,687		706,718
Commitments and contingencies (Note 14)
Stockholders’ equity:
Common stock, $0.001 par value, authorized 220,000 shares; issued 130,365 and 128,375	130		128
Additional paid-in capital	1,519,242		1,501,210
Accumulated deficit	(648,050)		(621,251)
Accumulated other comprehensive loss	(44,446)		(37,706)
Total stockholders’ equity	826,876		842,381
Total liabilities and stockholders’ equity	$	1,506,563	$	1,549,099

See accompanying notes to condensed consolidated financial statements.

3

3D SYSTEMS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

	Quarter Ended March 31,
(in thousands, except per share amounts)	2022		2021
Revenue:
Products	$	100,551	$	93,648
Services	32,450		52,468
Total revenue	133,001		146,116
Cost of sales:
Products	58,472		53,364
Services	20,734		28,512
Total cost of sales	79,206		81,876
Gross profit	53,795		64,240
Operating expenses:
Selling, general and administrative	55,415		49,600
Research and development	21,612		16,599
Total operating expenses	77,027		66,199
Loss from operations	(23,232)		(1,959)
Interest and other (expense) income , net	(2,283)		38,853
(Loss) income before income taxes	(25,515)		36,894
(Provision) benefit for income taxes	(1,284)		8,334
Net (loss) income	$	(26,799)	$	45,228
Net (loss) income per common share:
Basic	$	(0.21)	$	0.37
Diluted	$	(0.21)	$	0.36
Weighted average shares outstanding:
Basic	126,728		121,705
Diluted	126,728		125,070

See accompanying notes to condensed consolidated financial statements.

4

3D SYSTEMS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

(Unaudited)

	Quarter Ended March 31,
(in thousands)	2022		2021
Net (loss) income	$	(26,799)	$	45,228
Other comprehensive (loss) income , net of taxes:
Pension adjustments	101		181
Derivative financial instruments	—		721
Foreign currency translation	(3,346)		(25,609)
Unrealized loss on short-term investments	(3,495)		—
Foreign currency translation reclassification - sale of Cimatron	—		6,481
Total other comprehensive (loss), net of taxes	(6,740)		(18,226)
Total comprehensive (loss) income , net of taxes	$	(33,539)	$	27,002

See accompanying notes to condensed consolidated financial statements.

5

3D SYSTEMS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	Quarter Ended March 31,
(in thousands)	2022		2021
Cash flows from operating activities:
Net (loss) income	$	(26,799)	$	45,228
Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities:
Depreciation and amortization	9,147		9,102
Stock-based compensation	12,658		11,050
Unrealized gain on exchange rate	(439)		—
Provision for inventory obsolescence and revaluation	(517)		—
Loss on hedge accounting de-designation and termination	—		721
Provision for bad debts	1,076		(142)
Loss (Gain) on the disposition of businesses, property, equipment and other assets	137		(39,401)
Provision (benefit) for deferred income taxes and reserve adjustments	466		(8,889)
Asset impairment	40		—
Changes in operating accounts:
Accounts receivable	3,173		15,941
Inventories	(8,822)		2,699
Prepaid expenses and other current assets	2,225		(2,303)
Accounts payable	277		1,665
Deferred revenue and customer deposits	1,901		1,552
Accrued and other liabilities	(8,679)		(17,491)
All other operating activities	(969)		8,721
Net cash (used in) provided by operating activities	(15,125)		28,453
Cash flows from investing activities:
Purchases of property and equipment	(4,079)		(3,878)
Purchases of short-term investments	(366,005)		—
Sales and maturities of short-term investments	6,170		—
Proceeds from sale of assets and businesses, net of cash	—		54,747
Acquisitions and other investments, net	(9,335)		—
Other investing activities	40		(306)
Net cash (used in) provided by investing activities	(373,209)		50,563
Cash flows from financing activities:
Repayment of borrowings/long-term debt	—		(21,392)
Purchase of noncontrolling interest	(2,300)		(4,000)
Payments related to net-share settlement of stock-based compensation	(10,052)		(2,749)
Other financing activities	(166)		(196)
Net cash used in financing activities	(12,518)		(28,337)
Effect of exchange rate changes on cash, cash equivalents and restricted cash	464		(2,434)
Net (decrease) increase in cash, cash equivalents and restricted cash	(400,388)		48,245
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)	$	389,582	$	132,956

a.The amounts for cash and cash equivalents shown above include restricted cash of $312 and $516 as of March 31, 2022 and 2021, respectively, and $312 as of December 31, 2021. respectively, which were included in prepaid expenses and other assets on the condensed consolidated balance sheet.

See accompanying notes to condensed consolidated financial statements.

6

3D SYSTEMS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(Unaudited)

	Quarters Ended March 31, 2022 and 2021
	Common Stock
(in thousands, except par value)	Par Value $0.001		Additional Paid In Capital		Treasury Stock		Accumulated Deficit		Accumulated Other Comprehensive Income (Loss)		Total Stockholders' Equity
December 31, 2021	$	128	$	1,501,210	$	—	$	(621,251)	$	(37,706)	$	842,381
Payments related to net-share settlement of stock-based compensation	2		(8,696)		—		—		—		(8,694)
Stock-based compensation expense	—		26,728		—		—		—		26,728
Net loss	—		—		—		(26,799)		—		(26,799)
Pension adjustment	—		—		—		—		101		101
Unrealized loss on short-term investments	—		—		—		—		(3,495)		(3,495)
Foreign currency translation adjustment	—		—		—		—		(3,346)		(3,346)
March 31, 2022	$	130	$	1,519,242	$	—	$	(648,050)	$	(44,446)	$	826,876
December 31, 2020	$	128	$	1,404,964	$	(22,590)	$	(943,303)	$	(8,476)	$	430,723
Payments related to net-share settlement of stock-based compensation	—		(2,749)		—		—		—		(2,749)
Stock-based compensation expense	—		7,157		—		—		—		7,157
Net income	—		—		—		45,228		—		45,228
Pension adjustment	—		—		—		—		181		181
Termination of derivative instrument	—		—		—		—		721		721
Retirement of treasury shares	(2)		(12,096)		12,098		—		—		—
Foreign currency translation adjustment	—		—		—		—		(19,128)		(19,128)
March 31, 2021	$	126	$	1,397,276	$	(10,492)	$	(898,075)	$	(26,702)	$	462,133

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-owned subsidiaries and entities in which a controlling interest is maintained (“3D Systems” or the “Company” or “we,” “our,” or "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, 2021 (“2021 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 quarter ended March 31, 2022 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.

In March 2020, the World Health Organization declared the outbreak of coronavirus (“COVID-19”) a global pandemic. The COVID-19 pandemic has negatively impacted the global economy, disrupted global supply chains, and created significant volatility and disruption of financial markets. These factors have resulted in inflationary and cost pressures that have significantly increased, and continue to adversely 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 shutdowns in China, strained transportation capacity, lack of sufficient labor availability, and manufacturing backlogs. In addition, the invasion of Ukraine by Russia in early 2022 has led to further economic disruption. While we do not operate in Ukraine and while our operations in Russia are not material, the conflict has exacerbated inflationary cost pressures and supply chain constraints which have negatively impacted the global economy and our business.

Due to the COVID-19 pandemic, our affiliates, employees, suppliers, customers and others have been and may continue to be restricted or prevented from conducting normal business activities, including as a result of shutdowns, travel restrictions and other actions that may be requested or mandated by governmental authorities. We have reopened our offices and begun business travel, with safety measures in place and in accordance with local guidance. Additionally, we implemented a hybrid-work program globally, providing more flexibility for employees to work remotely. We continue to monitor local transmission rates and regulatory guidance, and remain committed to protecting our employees, delivering for our customers, and supporting our communities.

While the COVID-19 pandemic and other factors impacting the current economic environment continued to impact our reported results for the years ended December 31, 2021 and 2020, as well as the quarter ended March 30, 2022, we are unable to predict the longer-term impact that these factors may have on our business, results of operations, financial position or cash flows. The extent to which our operations may be impacted will depend largely on future developments, which are highly uncertain and cannot be accurately predicted, including the severity or resurgence of a COVID-19 outbreak, actions by government authorities to contain an outbreak or treat its 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 economic and geopolitical conditions could result in further supply chain disruptions, including the shortages of critical components, and continued disruptions to, and volatility in, the financial markets. Recent 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 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.

8

Our operations 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 regions (collectively referred to as "APAC") expose us to risks associated with public health crises and epidemics/pandemics, such as the COVID-19 pandemic. While the COVID-19 pandemic continued to impact our reported results for the quarter ended in March 31, 2022 and 2021, we are unable to predict the longer-term impact that the pandemic 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 the outbreak and actions by government authorities to contain the outbreak or treat its impact. Furthermore, the impacts of uncertain global economic conditions, further supply chain disruptions, including the shortages of critical components, and the continued disruptions to, and volatility in, the financial markets remain unknown.

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

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

During the fourth quarter ended December 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 the statements of cash 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 well as the annual periods ended December 31, 2020 and 2019. We note that this change did not impact the as reported net increase (decrease) in cash, cash equivalents and restricted cash within the annual 2020 and 2019 statements of cash flows or the interim statements of cash flows for the years ended December 31, 2021 and 2020. We further note that this reclassification did not affect our balance sheet, statements of 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 depicts the effect on our previously reported interim statement of cash flows for the three months ended March 31, 2021.

	Three Months Ended March 31, 2021
	As Reported		Changed		Revised
Net cash provided by operating activities	$	28,453	$	—	$	28,453
Net cash provided by investing activities	46,563		4,000		50,563
Net cash (used in) financing activities	(24,337)		(4,000)		(28,337)
Effect of exchange rate changes on cash, cash equivalents and restricted cash	(2,434)		—		(2,434)
Net increase in cash, cash equivalents and restricted cash	$	48,245	$	—	$	48,245

9

Summary of Significant Accounting Policies

In the first quarter of 2022, we invested a portion of our excess cash in short-term investments. Our 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 with a remaining maturity of less than twelve months at the date of purchase, certificates of deposit and short maturity bond funds and are classified as available for sale. Interest and dividends on these investments are recorded into income when earned.

All other significant accounting policies described in the Form 10-K for the year ended December 31, 2021 remain unchanged.

Recently Adopted Accounting Standards

In October 2021, the Financial Accounting Standard Board ("FASB") issued ASU 2021-08, "Business Combinations (Topic 805) - Accounting for Contract Assets and Contract Liabilities from Contracts with Customers", which amends ASC 805 to add contract assets and contract liabilities to the list of exceptions to the recognition 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 a 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 apply to contract assets and contract liabilities from other contracts to which the provisions of Topic 606 apply, such as contract liabilities from the sale of nonfinancial assets within the scope of Subtopic 610-20.” For public business entities, the amendments in this Update are effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. Early adoption of the amendments is permitted. The Company early adopted this standard in the first quarter of 2022, and it did not have an impact on the results of operations, cash flows or financial position.

(2) Dispositions and Acquisitions

Dispositions

There have been no dispositions for the quarter ended March 31, 2022.

On September 2021, we completed the sale of the Company’s On Demand Manufacturing business ("ODM") for $82,000, excluding certain adjustments. We recorded a gain on the sale of $38,490 included within Interest and other income (expense), net on the accompanying consolidated statements of operations for the year ended December 31, 2021. ODM was 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.

On August 24, 2021, we completed the sale of 100% of the issued and outstanding equity interests of Simbionix USA Corporation, which owned 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 $271,404 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 months ended March 31, 2021. Additionally, at the time of the sale, we recognized a gain of $6,481 for accumulated foreign currency translation gain previously included in AOCL, which is included within Interest and other income (expense), net for the three months ended March 31, 2021. Cimatron would have been included within the Industrial segment.

10

Acquisitions/Investments

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 impacts on the Company’s financial position, results of operations and cash flows are not material other than the cash outflow(s) related to the initial and contingent investments.

In March 2022, we made a $10,000 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 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. The investment, including the call option and warrants, is recorded in Other Assets on the consolidated balance sheet and the fair value of each in total approximates the initial investment value. The fair value is considered level 3 based on the fair value hierarchy.

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 were not material.

In November 1, 2021, we acquired Oqton, Inc. (“Oqton”), for $187,482, excluding customary closing adjustments, 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 Accounting Standards Codification ("ASC") 805, "Business Combinations". In accordance with valuation methodologies described in ASC 820, "Fair Value Measurement", the acquired assets and assumed liabilities were recorded at their estimated fair values as of the date of the Oqton acquisition.

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

11

(in thousands)
Current assets, including cash acquired of $3,454			$	8,344
Intangible assets:
Product technology	$	12,600
Trade name	7,300
Total intangible assets			19,900
Goodwill			165,611
Other assets			760
Liabilities:
Accounts payable and accrued liabilities	$	6,643
Deferred revenue	490
Total liabilities			7,133
Net assets acquired			$	187,482

On December 1, 2021, we acquired Volumetric Biotechnologies, Inc. (“Volumetric”), for $40,172 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 seven non-financial milestones through December 31, 2030 and 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. Per reassessment as of March 31, 2022, one of the seven milestones is considered probable of achievement for which $1,990 of expense was recorded in the three months ended March 31, 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.

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:

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(in thousands)
Current assets, including cash acquired of $389			$	3,143
Intangible assets:
Developed Technology	$	1,100
Distributor Relationship	500
Total intangible assets			1,600
Goodwill			37,659
Other assets			1,194
Liabilities:
Accounts payable and accrued liabilities	3,424
Total liabilities			3,424
Net assets acquired			$	40,172

As of March 31, 2022, the purchase price allocations for both Oqton and Volumetric are preliminary. The Company has performed a valuation of the fair market value of acquired assets and liabilities of both Oqton and Volumetric 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 for both companies 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 updated preliminary allocations. The final allocations may include changes in allocations to acquired intangible assets, changes to assets and liabilities including but not limited to tax assets and liabilities, including deferred taxes, as well as goodwill. The estimated useful lives of acquired intangible assets are also preliminary.

Acquisitions of Noncontrolling 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. 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 $2,300 and $4,000 were paid in the first three months of 2022 and 2021, respectively.

(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 March 31, 2022, we had $154,297 of outstanding performance obligations, comprised of deferred revenue, customer order backlog and customer deposits. We expect to recognize approximately 88.0% of deferred revenue as revenue within the next twelve months, an additional 9% by the end of 2023 and the remaining balance thereafter.

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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.

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 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 $2,432 and $1,807 related to collaboration arrangements with customers for the quarters ended March 31, 2022 and 2021, respectively.

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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.

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.

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Contract Balances

The timing of revenue recognition, billings and cash collections results in billed accounts receivable, unbilled receivables (contract assets), 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 three months ended March 31, 2022.

For the three months ended March 31, 2022, we recognized revenue of $11,895 related to our contract liabilities at December 31, 2021. For the three months ended March 31, 2021, we recognized revenue of $14,473 related to our contract liabilities at December 31, 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 identified two 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 following tables set forth our operating results by segment:

	Three Months Ended March 31,
	2022						2021
	Healthcare		Industrial		Consolidated		Healthcare		Industrial		Consolidated
(in thousands)
Revenue(a)	$	64,345	$	68,656	$	133,001	$	72,521	$	73,595	$	146,116
Cost of sales	39,632		39,574		79,206		38,658		43,218		81,876
Gross profit	24,713		29,082		$	53,795	33,863		30,377		64,240
Less:
Segment operating expenses	17,010		22,796		39,806		14,070		17,755		31,825
Segment operating income	$	7,703	$	6,286	13,989		$	19,793	$	12,622	32,415
General corporate expense, net(b)					37,221						34,374
Operating (loss)					$	(23,232)					$	(1,959)

a.Approximately 44.6% and 43.8% of sales for the quarters ended March 31, 2022 and 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, including salaries, benefits, and other related costs, incentive compensation and stock-compensation.

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(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.

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 $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 up to a certain amount. The 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 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. The total estimated lease payments are $14,233 which are not included in the lease information below as the lease has not commenced.

Components of lease cost (income) are as follows:

	Quarter Ended March 31,
(in thousands)	2022		2021
Operating lease cost	$	2,378	$	2,695
Finance lease cost - amortization expense	161		207
Finance lease cost - interest expense	53		124
Short-term lease cost	109		54
Variable lease cost	1,174		280
Sublease income	(172)		(156)
Total	$	3,703	$	3,204

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Balance sheet classifications at March 31, 2022 and December 31, 2021 are summarized below:

	March 31, 2022						December 31, 2021
(in thousands)	Right of use assets		Current right of use liabilities		Long-term right of use liabilities		Right of use assets		Current right of use liabilities		Long-term right of use liabilities
Operating Leases	$	40,707	$	7,651	$	41,378	$	42,502	$	7,711	$	43,359
Finance Leases	3,733		648		3,905		3,854		633		4,061
Total	$	44,440	$	8,299	$	45,283	$	46,356	$	8,344	$	47,420

Our future minimum lease payments as of March 31, 2022 under operating lease and finance leases, with initial or remaining lease terms in excess of one year, are as follows:

	March 31, 2022
(in thousands)	Operating Leases		Finance Leases
Remainder of 2022	$	7,695	$	633
2023	$	9,242	$	818
2024	$	7,604	$	769
2025	$	5,667	$	721
2026	$	5,028	$	647
Thereafter	$	26,452	$	1,731
Total lease payments	$	61,688	$	5,319
Less: imputed interest	$	(12,659)	$	(766)
Present value of lease liabilities	$	49,029	$	4,553

Supplemental cash flow information related to our leases for the three months ending March 31, 2022 and March 31, 2021 were as follows:

(in thousands)	March 31, 2022		March 31, 2021
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash outflow from operating leases	$	2,634	$	2,560
Operating cash outflow from finance leases	$	53	$	97
Financing cash outflow from finance leases	$	166	$	196

Weighted-average remaining lease terms and discount rate for our leases as of March 31, 2022, were as follows:

	March 31, 2022
	Operating	Financing
Weighted-average remaining lease term (in years)	8.6	7.1
Weighted-average discount rate	5.44%	4.56%

(6) Inventories

Components of inventories at March 31, 2022 and December 31, 2021 are summarized as follows:

(in thousands)	March 31, 2022		December 31, 2021
Raw materials	$	24,665	$	23,530
Work in process	8,463		5,173
Finished goods and parts	68,519		64,184
Inventories	$	101,647	$	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 $15,877 and $16,509 as of March 31, 2022 and December 31, 2021, respectively.

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At March 31, 2022, our obligation to repurchase inventory, included in accrued and other liabilities on our condensed consolidated balance sheets, was $2,581, relating to the sale of inventory to an assembly manufacturer and we had a commitment of $5,775 with the assembling manufacturer to purchase certain materials and supplies they acquired from third parties. At March 31, 2022, inventory held at assemblers was $537. Additionally, $21 and $456 of inventory was transferred to property and equipment during the quarters ended March 31, 2022 and 2021, respectively.

(7) Goodwill and Intangible Assets

The following table summarizes the activity in goodwill:

	Three Months Ended March 31, 2022
	Healthcare						Industrial						Consolidated
(in thousands)	Gross Goodwill		Impairments		Net Goodwill		Gross Goodwill		Impairments		Net Goodwill		Gross Goodwill		Impairments		Net Goodwill
Balance at beginning of year	$	121,970	$	(32,055)	$	89,915	$	298,002	$	(42,329)	$	255,673	$	419,972	$	(74,384)	$	345,588
Acquisitions (a)	(961)		—		(961)		(1,966)		—		(1,966)		(2,927)		—		(2,927)
Foreign currency translation adjustments	(847)		—		(847)		(1,119)		—		(1,119)		(1,966)		—		(1,966)
Total goodwill	$	120,162	$	(32,055)	$	88,107	$	294,917	$	(42,329)	$	252,588	$	415,079	$	(74,384)	$	340,695

a.The Acquisition amounts in Gross Goodwill for both the Healthcare and Industrial segments relate to purchase price adjustments for Volumetric and Oqton, respectively, which were acquired in 2021.

	December 31, 2021
	Healthcare						Industrial						Consolidated
(in thousands)	Gross Goodwill		Impairments		Net Goodwill		Gross Goodwill		Impairments		Net Goodwill		Gross Goodwill		Impairments		Net Goodwill
Balance at beginning of year	$	101,767	$	(32,055)	$	69,712	$	134,382	$	(42,329)	$	92,053	$	236,149	$	(74,384)	$	161,765
Acquisitions	39,182		—		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

Intangible assets, net, other than goodwill, at March 31, 2022 and December 31, 2021 are summarized as follows:

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	March 31, 2022						December 31, 2021
(in thousands)	Gross (a)		Accumulated Amortization		Net		Gross (a)		Accumulated Amortization		Net		Weighted Average Useful Life Remaining (in years)
Intangible assets with finite lives:
Customer relationships	$	52,304	$	(46,076)	$	6,228	$	53,062	$	(45,613)	$	7,449	2.8
Acquired technology	19,891		(5,793)		14,098		17,518		(5,430)		12,088		5.2
Trade names	20,947		(10,854)		10,093		20,448		(10,438)		10,010		18.9
Patent costs	21,146		(11,740)		9,406		21,852		(11,812)		10,040		10.5
Trade secrets	19,837		(19,130)		707		19,924		(18,971)		953		1.1
Acquired patents	16,240		(15,958)		282		16,257		(15,945)		312		6.1
Other	13,457		(8,066)		5,391		12,982		(7,999)		4,983		9.4
Total intangible assets	$	163,822	$	(117,617)	$	46,205	$	162,043	$	(116,208)	$	45,835	8.5

a.Change in gross carrying amounts consists of adjustments to the Oqton and Volumetric purchase price allocation as well as foreign currency translation.

Amortization expense related to intangible assets was $2,678 and $2,427 for the three months ended March 31, 2022, and March 31, 2021, respectively.

(8) Accrued and Other Liabilities

Accrued liabilities at March 31, 2022 and December 31, 2021 are summarized as follows:

(in thousands)	March 31, 2022		December 31, 2021
Compensation and benefits	$	22,527	$	39,846
Accrued taxes	8,946		19,836
Vendor accruals	6,534		9,045
Product warranty liability	3,576		3,585
Accrued professional fees	2,857		2,263
Accrued other	941		1,593
Royalties payable	877		826
Total	$	46,258	$	76,994

Other long-term liabilities at March 31, 2022 and December 31, 2021 are summarized as follows:

(in thousands)	March 31, 2022		December 31, 2021
Long-term employee indemnity	$	5,125	$	5,237
Long-term tax liability	6,175		6,099
Defined benefit pension obligation	8,711		8,911
Long-term deferred revenue	8,894		10,244
Other long-term liabilities	5,546		1,763
Total	$	34,451	$	32,254

(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 $12,492 is unamortized at March 31, 2022. The annual effective interest rate of the Notes is 0.594% when

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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 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 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 March 31, 2022 the fair value of the Notes is $389,500. This is based on the quoted market price where the volume of activity is not active and thus this is deemed a level 2 fair value measurement.

The Company incurred $664 of debt issuance cost accretion in the first quarter of 2022. Debt issuance cost accretion of $2,005, $2,679, $2,695, $2,711 and $2,394 are expected to be incurred in the remaining nine months of 2022 and in 2023, 2024, 2025 and 2026, respectively.

Credit Facility

We had a