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 June 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

__________________________

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 August 4, 2023: 133,476,512.

1

3D SYSTEMS CORPORATION

Form 10-Q

For the Six Months Ended June 30, 2023

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	31
Item 3. Quantitative and Qualitative Disclosures About Market Risk	52
Item 4. Controls and Procedures	53
PART II - OTHER INFORMATION
Item 1. Legal Proceedings	54
Item 1A. Risk Factors	54
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	55
Item 3. Defaults Upon Senior Securities	55
Item 4. Mine Safety Disclosures	55
Item 5. Other Information	55
Item 6. Exhibits	55

2

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements.

3D SYSTEMS CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(in thousands, except par value)	June 30, 2023		December 31, 2022
ASSETS
Current assets:
Cash and cash equivalents	$	490,444	$	388,134
Short-term investments	1,135		180,603
Accounts receivable, net of reserves — $3,009 and $3,114	96,786		93,886
Inventories	156,153		137,832
Prepaid expenses and other current assets	40,395		33,790
Total current assets	784,913		834,245
Property and equipment, net	62,789		58,072
Intangible assets, net	85,130		90,230
Goodwill	387,934		385,312
Right-of-use assets	66,076		42,746
Deferred income tax asset	4,805		7,038
Other assets	40,050		28,970
Total assets	$	1,431,697	$	1,446,613
LIABILITIES, REDEEMABLE NON-CONTROLLING INTEREST AND EQUITY
Current liabilities:
Current lease liabilities	$	10,286	$	9,036
Accounts payable	59,023		53,826
Accrued and other liabilities	47,239		55,571
Customer deposits	7,330		6,911
Deferred revenue	30,032		26,464
Total current liabilities	153,910		151,808
Long-term debt, net of deferred financing costs	450,848		449,510
Long-term lease liabilities	64,451		41,779
Deferred income tax liability	7,923		7,631
Other liabilities	41,610		44,181
Total liabilities	718,742		694,909
Commitments and contingencies (Note 18)
Redeemable non-controlling interest	1,951		1,760
Stockholders’ equity:
Common stock, $0.001 par value, authorized 220,000 shares; shares issued 133,504 and 131,207 as of June 30, 2023 and December 31, 2022, respectively	133		131
Additional paid-in capital	1,562,529		1,547,597
Accumulated deficit	(802,278)		(743,962)
Accumulated other comprehensive loss	(49,380)		(53,822)
Total stockholders’ equity	711,004		749,944
Total liabilities, redeemable non-controlling interest and stockholders’ equity	$	1,431,697	$	1,446,613

    

See accompanying notes to condensed consolidated financial statements.

3

3D SYSTEMS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

	Three Months Ended				Six Months Ended
(in thousands, except per share amounts)	June 30, 2023		June 30, 2022		June 30, 2023		June 30, 2022
Revenue:
Products	$	89,165	$	103,774	$	173,553	$	204,325
Services	39,029		36,271		75,877		68,721
Total revenue	128,194		140,045		249,430		273,046
Cost of sales:
Products	56,135		65,331		106,015		123,803
Services	22,043		21,576		46,301		42,310
Total cost of sales	78,178		86,907		152,316		166,113
Gross profit	50,016		53,138		97,114		106,933
Operating expenses:
Selling, general and administrative	58,983		64,404		117,268		119,819
Research and development	22,762		20,772		44,971		42,384
Total operating expenses	81,745		85,176		162,239		162,203
Loss from operations	(31,729)		(32,038)		(65,125)		(55,270)
Interest and other income (expense), net	3,214		329		7,089		(1,954)
(Loss) income before income taxes	(28,515)		(31,709)		(58,036)		(57,224)
(Provision) benefit for income taxes	(222)		(1,289)		(230)		(2,573)
(Loss) on equity method investment	(142)		—		(142)		—
Net (loss) income before redeemable non-controlling interest	(28,879)		(32,998)		(58,408)		(59,797)
Less: net (loss) income attributable to redeemable non-controlling interest	16		(37)		(92)		(37)
Net (loss) income attributable to 3D Systems Corporation	$	(28,895)	$	(32,961)	$	(58,316)	$	(59,760)
Net (loss) income per common share:
Basic	$	(0.22)	$	(0.26)	$	(0.45)	$	(0.47)
Diluted	$	(0.22)	$	(0.26)	$	(0.45)	$	(0.47)
Weighted average shares outstanding:
Basic	129,907		127,703		129,535		127,218
Diluted	129,907		127,703		129,535		127,218

See accompanying notes to condensed consolidated financial statements.

4

3D SYSTEMS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(Unaudited)

	Three Months Ended				Six Months Ended
(in thousands)	June 30, 2023		June 30, 2022		June 30, 2023		June 30, 2022
Net loss before redeemable non-controlling interest	$	(28,879)	$	(32,998)	$	(58,408)	$	(59,797)
Other comprehensive (loss) income, net of taxes:
Pension plan adjustments	(11)		165		(11)		266
Foreign currency translation	712		(16,386)		4,125		(19,732)
Unrealized (loss) gain on short-term investments	19		(528)		328		(4,023)
Total other comprehensive (loss) income, net of taxes:	720		(16,749)		4,442		(23,489)
Total comprehensive loss, net of taxes	(28,159)		(49,747)		(53,966)		(83,286)
Less: comprehensive gain (loss) attributable to redeemable non-controlling interest	16		(37)		(92)		(37)
Comprehensive loss attributable to 3D Systems Corporation	$	(28,175)	$	(49,710)	$	(53,874)	$	(83,249)

See accompanying notes to condensed consolidated financial statements.

5

3D SYSTEMS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	Six Months Ended
(in thousands)	June 30, 2023		June 30, 2022
Cash flows from operating activities:
Net (loss) income before redeemable non-controlling interest	$	(58,408)	$	(59,797)
Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities:
Depreciation, amortization and accretion of debt discount	18,442		18,198
Stock-based compensation	18,282		20,061
Loss on short-term investments	6		—
Non-cash operating lease expense	4,025		—
Provision for inventory obsolescence and revaluation	4,550		97
Provision for bad debts	100		1,042
Loss (gain) on the disposition of businesses, property, equipment and other assets	57		—
Benefit for deferred income taxes and reserve adjustments	—		628
Loss on equity method investment	142		—
Asset impairment	1,187		24
Changes in operating accounts:
Accounts receivable	(2,597)		(6,173)
Inventories	(24,469)		(16,609)
Prepaid expenses and other current assets	(4,556)		(2,981)
Accounts payable	4,381		6,168
Deferred revenue and customer deposits	1,870		(704)
Accrued and other liabilities	(6,836)		1,618
All other operating activities	(2,445)		217
Net cash (used in) provided by operating activities	(46,269)		(38,211)
Cash flows from investing activities:
Purchases of property and equipment	(13,549)		(10,368)
Purchases of short-term investments	—		(384,450)
Sales and maturities of short-term investments	179,790		41,044
Acquisitions and other investments, net of cash acquired	(15,654)		(83,312)
Net cash provided by (used in) investing activities	150,587		(437,086)
Cash flows from financing activities:
Debt issuance costs	—		(16)
Purchase of non-controlling interests	—		(2,300)
Taxes paid related to net-share settlement of equity awards	(4,564)		(10,047)
Other financing activities	(362)		(324)
Net cash (used in) provided by financing activities	(4,926)		(12,687)
Effect of exchange rate changes on cash, cash equivalents and restricted cash	645		(2,047)
Net (decrease) increase in cash, cash equivalents and restricted cash	100,037		(490,031)
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)	$	492,012	$	299,939

Supplemental cash flow information
Lease assets obtained in exchange for new lease liabilities	$	26,368	$	1,922
Cash interest payments	95		55
Cash income tax payments, net	4,013		8,496
Transfer of equipment from inventory to property and equipment, net (b)	$	2,360	$	21

(a)The amounts for cash and cash equivalents and restricted cash shown above include restricted cash of $1,277 and $114 as of June 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 June 30, 2023 and December 31, 2022 is $291 and $3,727, respectively, of restricted cash, which, is included in other non-current assets. The amounts for cash and cash equivalents and restricted cash shown above include restricted cash of $1,105 and $313 as of June 30, 2022 and December 31, 2021, respectively.

(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 June 30, 2023 and 2022

(Unaudited)

	Common Stock
(in thousands, except par value)	Shares	Par Value $0.001		Additional Paid-In Capital		Accumulated Deficit		Accumulated Other Comprehensive Income (Loss)		Total Stockholders' Equity
March 31, 2023	131,164	$	131	$	1,553,038	$	(773,383)	$	(50,100)	$	729,686
Shares issued, vested & expired under equity incentive plans	2,621	2		—		—		—		2
Shares withheld related to net-share settlement of equity awards	(281)	—		(2,449)		—		—		(2,449)
Stock-based compensation expense	—	—		12,112		—		—		12,112
Net (loss) attributable to 3D Systems Corp.	—	—		—		(28,895)		—		(28,895)
Pension plan adjustment	—	—		—		—		(11)		(11)
Unrealized gain on short-term investments	—	—		—		—		19		19
Redeemable non-controlling interest redemption value in excess of carrying value	—	—		(172)		—		—		(172)
Foreign currency translation adjustment	—	—		—		—		712		712
June 30, 2023	133,504	$	133	$	1,562,529	$	(802,278)	$	(49,380)	$	711,004
March 31, 2022	130,365	$	130	$	1,519,242	$	(648,050)	$	(44,446)	826,876
Shares issued related to net-share settlement of stock-based compensation	(61)	—		(1,351)		—		—		(1,351)
Stock-based compensation expense	—	—		7,843		—		—		7,843
Net (loss) attributable to 3D Systems Corp.	—	—		—		(32,961)		—		(32,961)
Pension adjustment	—	—		—		—		165		165
Unrealized loss on short-term investments								(528)		(528)
Foreign currency translation adjustment								(16,386)		(16,386)
June 30, 2022	130,304	$	130	$	1,525,734	$	(681,011)	$	(61,195)	$	783,658

3D SYSTEMS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

Six Months Ended June 30, 2023 and 2022

(Unaudited)

	Common Stock
(in thousands, except par value)	Shares	Par Value $0.001		Additional Paid-In Capital		Accumulated Deficit		Accumulated Other Comprehensive Income (Loss)		Total Stockholders' Equity
December 31, 2022	131,207	$	131	$	1,547,597	$	(743,962)	$	(53,822)	$	749,944
Shares issued, vested & expired under equity incentive plans	2,786	2		—		—		—		2
Shares withheld related to net-share settlement of equity awards	(489)	—		(4,564)		—		—		(4,564)
Stock-based compensation expense	—	—		19,756		—		—		19,756
Net (loss) attributable to 3D Systems Corp.	—	—		—		(58,316)		—		(58,316)
Pension plan adjustment	—	—		—		—		(11)		(11)
Unrealized gain on short-term investments	—	—		—		—		328		328
Redeemable non-controlling interest redemption value in excess of carrying value	—	—		(260)		—		—		(260)
Foreign currency translation adjustment	—	—		—		—		4,125		4,125
June 30, 2023	133,504	$	133	$	1,562,529	$	(802,278)	$	(49,380)	$	711,004
December 31, 2021	128,375	$	128	$	1,501,210	$	(621,251)	$	(37,706)	$	842,381
Shares issued related to net-share settlement of stock-based compensation	1,929	2		(10,048)		—		—		(10,046)
Stock-based compensation expense	—	—		34,572		—		—		34,572
Net (loss) attributable to 3D Systems Corp.	—	—		—		(59,760)		—		(59,760)
Pension adjustment	—	—		—		—		266		266
Unrealized loss on short-term investments								(4,023)		(4,023)
Foreign currency translation adjustment								(19,732)		(19,732)
June 30, 2022	130,304	$	130	$	1,525,734	$	(681,011)	$	(61,195)	$	783,658

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, they 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 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 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. The results of operations for the three and six months ended June 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

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.

8

3D SYSTEMS CORPORATION

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

In connection with our investment in Theradaptive in June 2023 (See Note 7), we concluded that Theradaptive was a VIE. We also concluded that we are not the primary beneficiary. As of June 30, 2023, our maximum exposure to losses associated with this VIE is limited to the $8,000 carrying value of our investment in Theradaptive, which is reported in other assets in our condensed consolidated balance as of June 30, 2023. 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. No impairment charges were recorded during the three and six months ended June 30, 2023 or 2022.

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. Intercompany 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 will be 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.

Other Accounting Policy Updates

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

(2) Acquisitions

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 the industry’s first additive manufacturing system designed for true high-speed mass production of customized components, for $25,201 (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 $1,494 estimated post-closing purchase price adjustment due to the Company from the sellers. See Note 12 for 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. This business and its technology are expected to contribute to the operations of the Company's Healthcare Solutions and Industrial Solutions segments. 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, “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 dp polar acquisition.

9

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 $243			$	301
Intangible assets:
In-process research and development	$	4,989
Trade name	3,930
Total intangible assets			8,919
Goodwill			16,425
Other assets			765
Liabilities:
Accounts payable and accrued liabilities	$	364
Deferred tax liability	845
Total liabilities			1,209
Net assets acquired			$	25,201

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 is not expected to be deductible for tax purposes.

As of June 30, 2023, the purchase price allocation for dp polar continues to be preliminary. The continued review of dp polar's tax positions during the three months ended June 30, 2023 resulted in adjustments to dp polar's opening balance sheet to (1) reduce deferred tax assets (previously reported in other assets on dp polar's opening balance sheet) by $1,611 and (2) recognize a deferred tax liability balance of $845. These adjustments to dp polar's opening balance sheet deferred tax asset and deferred tax liability balances resulted in the recording of a corresponding increase of $2,456 to the amount of goodwill recognized on dp polar's opening balance sheet.

The Company continues to review the final closing balance sheet of dp polar 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 dp polar’s pre-acquisition tax returns to determine the final tax positions, including net operating losses and any required valuation allowance. Furthermore, the estimated post-closing purchase price adjustment of $1,494 related to the finalization of dp polar's closing balance sheet net working capital and dp polar's closing balance sheet debt-like items remains provisional, subject to an agreement on such amount by the Company and dp polar's sellers.

Final purchase price allocations will be completed when (1) the Company has finished its valuation activities and review of dp polar’s closing balance sheet and pre-acquisition tax returns and (2) the post-closing purchase price adjustment has been agreed upon by the Company and dp polar's sellers. Final purchase price allocations could differ materially from the current preliminary allocations and may include (i) changes to the preliminary allocations to acquired intangible assets and goodwill and/or (ii) changes to 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.

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 is 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.

10

3D SYSTEMS CORPORATION

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

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 consideration	3,628
Estimated fair value of RNCI	1,559
Post-closing net working capital adjustment	149
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 name	5,802
Total intangible assets			26,572
Goodwill			17,618
Other assets			705
Liabilities:
Accounts payable and accrued liabilities	$	332
Deferred revenue	70
Deferred tax liability	6,466
Total liabilities			6,868
Net assets acquired			$	39,434

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 is not expected to 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.

11

3D SYSTEMS CORPORATION

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

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 name	5,580
Total intangible assets			21,520
Goodwill			17,430
Other assets			68
Liabilities:
Accounts payable and accrued liabilities	$	229
Deferred revenue	410
Total liabilities			639
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 expected to be 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 June 30, 2023, we had $62,706 of outstanding performance obligations, comprised of deferred revenue, customer order backlog and customer deposits. We expect to recognize approximately 89.5% of the $40,172 of deferred revenue and customer deposits as revenue within the next twelve months, an additional 5.0% by the end of 2024 and the remaining balance thereafter.

12

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 six-month periods ended June 30, 2023, the Company recognized $3,463 and $8,203, respectively, of revenue related to collaboration arrangements with customers. During the three and six-month periods ended June 30, 2022, the Company recognized $3,342 and $5,774, respectively, of revenue related to collaboration arrangements with customers.

Contract Balances

During the six months ended June 30, 2023, we recognized revenue of $18,007 related to our contract liabilities at December 31, 2022. During the six months ended June 30, 2022, we recognized revenue of $20,996 related to our contract liabilities at December 31, 2021.

Contract assets, consisting of unbilled receivables, were $1,268 and $677 as of June 30, 2023 and December 31, 2022, respectively.

Revenue Concentrations

For the three and six months ended June 30, 2023, one customer accounted for approximately 18.9% and 16.3% of our consolidated revenue, respectively. For the three and six months ended June 30, 2022, one customer accounted for approximately 24.8% and 25.7% of our consolidated revenue. We expect to maintain our relationship with this customer.

Revenue by geographic region for the three and six months ended June 30, 2023 and 2022 was as follows:

	Three Months Ended
(in thousands)	June 30, 2023		June 30, 2022
Americas	$	76,594	$	79,807
EMEA	41,199		44,935
APAC	10,401		15,303
Total	$	128,194	$	140,045
United States (included in Americas above)	$	75,093	$	79,021

	Six Months Ended
(in thousands)	June 30, 2023		June 30, 2022
Americas	$	145,243	$	154,056
EMEA	84,009		85,875
APAC	20,178		33,115
Total	$	249,430	$	273,046
United States (included in Americas above)	$	142,878	$	152,645

13

3D SYSTEMS CORPORATION

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

(4) Inventories

Components of inventories at June 30, 2023 and December 31, 2022 are summarized as follows:

(in thousands)	June 30, 2023		December 31, 2022
Raw materials	$	64,169	$	59,907
Work in process	3,695		4,972
Finished goods and parts	88,289		72,953
Total inventories	$	156,153	$	137,832

The inventory reserve was $16,397 and $15,550 as of June 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, as well as the commitment to purchase $6,552 of inventory from the assembly manufacturer.

(5) Intangible Assets

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

	June 30, 2023						December 31, 2022
(in thousands)	Gross		Accumulated Amortization		Net		Gross		Accumulated Amortization		Net
Intangible assets with finite lives:
Customer relationships	$	51,939	$	(50,180)	$	1,759	$	51,137	$	(48,695)	$	2,442
Acquired technology	55,931		(14,059)		41,872		55,480		(10,707)		44,773
Trade names	36,210		(13,965)		22,245		35,930		(12,455)		23,475
Patent costs	18,822		(11,040)		7,782		18,673		(10,909)		7,764
Acquired patents	17,526		(15,797)		1,729		17,499		(15,661)		1,838
Other	13,331		(9,129)		4,202		13,255		(8,765)		4,490
Total intangible assets	$	193,759	$	(114,170)	$	79,589	$	191,974	$	(107,192)	$	84,782

The Company’s total intangible assets reported on the balance sheet include an indefinite-life intangible asset related to dp polar in-process research and development (“IPR&D”). The carrying value of this indefinite-life intangible asset was $5,541 and $5,448 as of June 30, 2023 and December 31, 2022.

Amortization expense related to intangible assets was $3,258 and $6,497 for the three and six months ended June 30, 2023, respectively, compared to $3,303 and $5,980 for the three and six months ended June 30, 2022, respectively. Amortization expense for intangible assets is estimated to be $4,665 for the remainder of 2023, $11,133 in 2024, $11,058 in 2025, $8,399 in 2026 and $7,317 in 2027.

14

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 six months ended June 30, 2023:

	Six Months Ended June 30, 2023
	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	$	143,431	$	(32,055)	$	111,376	$	316,265	$	(42,329)	$	273,936	$	459,696	$	(74,384)	$	385,312
Measurement period adjustments	673		—		673		525		—		525		1,198		—		1,198
Foreign currency translation adjustments	614		—		614		810		—		810		1,424		—		1,424
Balance at end of period	$	144,718	$	(32,055)	$	112,663	$	317,600	$	(42,329)	$	275,271	$	462,318	$	(74,384)	$	387,934

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.

15

3D SYSTEMS CORPORATION

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

(7) Investments and Notes Receivable

The following table summarizes our equity investment and notes receivable balances as of June 30, 2023:

(in thousands)	Balance sheet location	June 30, 2023		December 31, 2022
Equity investments under the equity method of accounting	Other assets	$	6,387	$	—
Equity investments without readily determinable fair values	Other assets	20,963		12,953
Other(1)	Other assets	200		200
Total Equity investments		$	27,550	$	13,153
Short-term note receivable	Prepaid and other current assets	$	983	$	—
Long-term note receivable(2)	Other assets	525		515
Total notes receivable		$	1,508	$	515

(1) Reflects warrant investment carried at fair value.

(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 and, as of June 30, 2023, owns 49% of the joint venture's common stock. 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. 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 months ended June 30, 2023, Company has recorded and separately reported a loss on equity method investment on the condensed consolidated statement of operations.

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 the fair value of Theradaptive's equity is not readily determinable and 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.

16

3D SYSTEMS CORPORATION

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

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 sheet.

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 June 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 taken since the date of the original investment. No impairment charges were recognized with respect to this investment during the three and six-month periods ended June 30, 2023 and June 30, 2022.

Short-Term Note Receivable

In April 2023, the Company and Wematter AB ("Wematter") entered into a loan and security agreement, pursuant to which the Company agreed to loan Wematter up to €1,200 via advances of up to €600, €300 and €300 occurring in April 2023, May 2023, and June 2023, respectively. Advances of the full amounts permitted under the loan and security agreement were made in April 2023 and May 2023. Pursuant to the loan and security agreement, the amounts advanced to Wematter (1) accrue interest at a non-compounded interest rate of 10% per annum (subject to an adjustment to 12% per annum upon the occurrence of an event of default) from the dates that the advances were made through the date that each is paid in full and (2) mature on April 24, 2024. Notwithstanding the agreed upon interest rate and maturity date, if the Company were to acquire Wematter prior to the date upon which the advances to Wematter become due for repayment, as was being contemplated at the time that the loan and security agreement was executed, the outstanding receivable balance related to amounts loaned to Wematter would be automatically reduced on a dollar for dollar basis by the amounts advanced plus any accrued interest thereon — except for any portion of the advanced amounts used to pay accrued pre-closing taxes, which would be deducted from the agreed up initial acquisition purchase price. Refer to Note 21 for details of the Company's acquisition of Wematter, which was consummated on July 3, 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 three months ended March 31, 2023, a new 100,000 square foot building that was being constructed adjacent to our corporate office became available for use by the Company. As a result, the lease was deemed to have commenced during that period. The total estimated base rent lease payments commenced in December of 2022, prior to our occupancy of the building. Additionally, during the three months ended June 30, 2023, we extended existing leases related to two buildings with office and production spaces totaling 246,100 square feet. As of June 30, 2023, the aggregate remaining minimum base lease payments related to the new building lease and extended leases described above total $34,500 and consist of $1,593, $3,247, $3,797, $3,912, $4,031, and $17,920 due, respectively, during the years ended December 31, 2023, 2024, 2025, 2026, 2027 and thereafter.

17

3D SYSTEMS CORPORATION

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

Classifications of the lease amounts reported on our balance sheet as of June 30, 2023 and December 31, 2022 are summarized below:

	June 30, 2023						December 31, 2022
(in thousands)	Right-of-use assets		Current lease liabilities		Long-term lease liabilities		Right-of-use assets		Current lease liabilities		Long-term lease liabilities
Operating leases	$	63,026	$	9,590	$	61,361	$	39,502	$	8,343	$	38,499
Finance leases	3,050		696		3,090		3,244		693		3,280
Total	$	66,076	$	10,286	$	64,451	$	42,746	$	9,036	$	41,779

(9) Accrued and Other Liabilities

Accrued liabilities at June 30, 2023 and December 31, 2022 are summarized as follows:

(in thousands)	June 30, 2023		December 31, 2022
Compensation and benefits	$	17,222	$	19,814
Accrued taxes	7,778		10,694
Legal contingencies	4,812		9,948
Product warranty liability	2,921		3,677
Other accrued liabilities	14,506		11,438
Total	$	47,239	$	55,571

Other liabilities at June 30, 2023 and December 31, 2022 are summarized as follows:

(in thousands)	June 30, 2023		December 31, 2022
Long-term employee indemnity	$	4,716	$	4,817
Long-term tax liability	5,581		5,711
Defined benefit pension obligation	5,119		5,050
Long-term deferred revenue	2,809		4,974
Earnout liability	20,246		17,244
Legal contingencies	2,853		6,096
Other long-term liabilities	286		289
Total	$	41,610	$	44,181

Changes in the product warranty obligation for the six months ended June 30, 2023 and 2022 are summarized below:

(in thousands)	Beginning Balance		Settlements Made		Accruals for Warranties Issued		Ending Balance
June 30, 2023	$	3,677	$	(1,920)	$	1,164	$	2,921
June 30, 2022	$	3,585	$	(4,049)	$	4,075	$	3,611

(10) Borrowings

Convertible Notes

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 $9,152 is unamortized at June 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.

18

3D SYSTEMS CORPORATION

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

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 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 June 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 June 30, 2023. At June 30, 2023, the fair value of the Notes is $349,848. 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 $670 and 1,339 of debt issuance cost accretion for the three and six months ended June 30, 2023, respectively, as compared to $666 and $1,331 for the three and six months ended June 30, 2022, respectively. Debt issuance cost accretion of $1,344, $2,698, $2,714, and $2,395 is expected to be incurred in the remaining six months of 2023 and in 2024, 2025 and 2026, respectively.

19

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 six months ended June 30, 2023:

	Six Months Ended June 30, 2023
(in thousands)
Balance at December 31, 2022	$	1,760
Net loss	(92)
Redemption value in excess of carrying value	260
Translation adjustments	23
Balance at June 30, 2023	$	1,951

The following table shows changes in the reported RNCI balance during the six months ended June 30, 2022:

	Six Months Ended June 30, 2022
(in thousands)
Balance at December 31, 2021	$	—
Fair value at the date of acquisition	2,418
Net Loss	(37)
Translation Adjustments	(232)
Balance at June 30, 2022	$	2,149

(12) Stock-Based Compensation

Stock Incentive Plans

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.

Other Compensation Arrangements that Include Share Settlement

Regenerative Medicine Earnout Payments and Performance-Based Stock Units

On December 1, 2021, the Company acquired Volumetric Biotechnologies, Inc. (“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.

20

3D SYSTEMS CORPORATION

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

During the three and six months ended June 30, 2023 and 2022, the Company recognized compensation expense based upon the assumed achievement of (1) one Volumetric earnout payment milestone, for which the potential amount due to the sellers will be $65,000, and (2) one PSU milestone, for which the aggregate grant date fair value of the outstanding and unvested awards is $4,773 and $4,052, respectively, as of June 30, 2023 and 2022. Achievement of both the Volumetric earnout payment milestone and the PSU milestone is anticipated to occur as of the end of fiscal year 2026, which represents a change in estimate made during this quarter-ended June 30, 2023 from the previously anticipated timing of achievement at the end of fiscal year 2025. As the achievement of this scientific milestone is a performance condition that triggers the payment of compensation and/or the vesting of stock-based compensation awards under certain of the Company's employee compensation arrangements, the extension of the estimated timeline to achievement resulted in (1) the reversal of $4,175 of previously recognized earnout expense attributable to the Company's 2021 acquisition of Volumetric (the "Volumetric Earnout"), of which $2,088 was accrued to be paid out with Common Stock, with a corresponding adjustment to the related accrued liability; (2) the reversal of $360 of previously recognized stock-based compensation expense related to certain performance-based stock compensation awards that vest based upon the achievement of the scientific milestone (the "RegMed Awards"); (3) a reduction of $783 to the ongoing quarterly run rate at which future expense attributable to the Volumetric Earnout is expected to be recognized, of which $392 relates to the portion of expense expected to settled with the Company's Common Stock; and (4) a reduction of $60 to the ongoing quarterly run rate at which future expense attributable to the RegMed Awards is expected to be recognized. This change in estimate resulted in a benefit of $0.03 and $0.04 per basic and diluted share for the three and six months ended June 30, 2023.

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 employment 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 should 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.

Stock-Based Compensation Activity and Expense

During the three and six months ended June 30, 2023, the Company granted 3,783 and 3,879 shares of restricted stock, respectively, which had a weighted-average grant date fair value of $11.02 and $11.03 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 three months ended June 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 six months ended June 30, 2023 and 2022:

	Three Months Ended June 30,				Six Months Ended June 30,
(in thousands)	2023		2022		2023		2022
Stock-based compensation expense	$	7,990	$	7,403	$	18,282	$	20,061
Tax benefit	$	—	$	—			$	—

21

3D SYSTEMS CORPORATION

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

Included in stock-based compensation expense recognized for the three and six months ended June 30, 2023 are $397 and $1,055, respectively, and $(2,429) and $1,841 for the three and six months ended June 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 $(489) and $1,501 for the three and six months ended June 30, 2023, respectively, and $1,990 and $3,980 for the three and six months ended June 30, 2022, respectively, which relate to the portion of the Volumetric earnout expense 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 six months ended June 30, 2023 includes $277 and $552, respectively, of expense related to the dp polar earnout arrangement. Finally, stock-based compensation expense includes $(143) and $134 for the three and six months ended June 30, 2023, respectively, and $248 and $492 for the three and six months ended June 30, 2022, respectively, of expense related to the regenerative medicine PSUs.

As of June 30, 2023, there was $63,701 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 2.3 years.

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

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

	Three Months Ended				Six Months Ended
(in thousands)	June 30, 2023		June 30, 2022		June 30, 2023		June 30, 2022
Interest and other income (expense), net
Foreign exchange (loss) gain, net	$	(1,273)	$	(1,211)	$	(1,645)	$	(3,429)
Interest income (expense), net	4,404		1,825		8,209		1,990
Other (expense) income, net	83		(285)		525		(515)
Total interest and other income (expense), net	$	3,214	$	329	$	7,089	$	(1,954)

Interest and other income (expense), net includes (1) interest income of $5,343 and $9,889 for the three and six months ended June 30, 2023, respectively, and $2,525 and $3,350 for the three and six months ended June 30, 2022, respectively, and (2) interest expense of $939 and $1,680 for the three and six months ended June 30, 2023 respectively, and $700 and $1,360 for the three and six months ended June 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 six months ended June 30, 2023.

For the three and six months ended June 30, 2023, the Company’s effective tax rate was (0.8)% and (0.4)%, respectively. For the three and six months ended June 30, 2022, the Company’s effective tax rate was (4.1)% and (4.5)%, respectively. The differences between the U.S. statutory tax rate and the effective tax rates for the three and six months ended June 30, 2023 and June 30, 2022 are primarily driven by a full valuation allowance in various jurisdictions.

(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.

22

3D SYSTEMS CORPORATION

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

	Three Months Ended				Six Months Ended
(in thousands, except per share amounts)	June 30, 2023		June 30, 2022		June 30, 2023		June 30, 2022
Numerator for basic and diluted net (loss) income per share:
Net (loss) income attributable to 3D Systems Corporation	$	(28,895)	$	(32,961)	$	(58,316)	$	(59,760)
Redeemable non-controlling interest redemption value in excess of carrying value	(172)		—		(260)		—
Net (loss) income attributable to common stock shareholders	$	(29,067)	$	(32,961)	$	(58,576)	$	(59,760)
Denominator for net (loss) income per share:
Weighted average shares – basic	129,907		127,703		129,535		127,218
Dilutive effect of shares issuable under stock based compensation and other plans(1)	—		—		—		—
Weighted average shares – diluted	129,907		127,703		129,535		127,218
Net income (loss) per share – basic	$	(0.22)	$	(0.26)	$	(0.45)	$	(0.47)
Net income (loss) per share – diluted	$	(0.22)	$	(0.26)	$	(0.45)	$	(0.47)

(1) Equity awards are deemed anti-dilutive for the three and six month periods ended June 30, 2023 and 2022 because we reported a net loss for these periods.

The following table presents the potentially dilutive shares that have been excluded from the computation of diluted earnings (loss) per share attributable to Common Stock shareholders because their effect is considered anti-dilutive for the three and six months ended June 30, 2023 and 2022:

	Three and Six Months Ended
(in thousands)	June 30, 2023	June 30, 2022
Restricted stock and restricted stock units	6,680	4,890
Stock options	420	420
Total	7,100	5,310

For the three and six months ended June 30, 2023, the table above excludes the following: (1) an estimate of 1,047 shares contingently issuable upon the achievement of one milestone in the Volumetric earnout arrangement, as discussed in Note 12; (2) an estimate of 109 shares for the payment of accrued annual bonus incentive compensation that is expected to be settled in shares; and (3) an estimate of 92 shares that are contingently issuable under the dp polar earnout arrangement, as discussed in Note 12. These share estimates are based upon the aggregate liabilities reported at June 30, 2023 for the Volumetric earnout arrangement, a ratable portion of the fiscal year 2023 annual bonus incentive compensation expected to be settled using shares of the Company's Common Stock and the dp polar earnout arrangement, divided by the Company's year-to-date average share price of $9.67 per share.

For the three and six months ended June 30, 2022, the table above excludes the following: (1) an estimate of 319 shares contingently issuable to settle the June 30, 2022 liability accrued for the assumed achievement of one milestone in the Volumetric earnout arrangement, as discussed in Note 12, and (2) an estimate of 111 shares for the payment of the portion of the fiscal year 2022 annual bonus incentive compensation that was accrued as of June 30, 2022 and expected to be settled in shares. These share estimates are based upon the aggregate liabilities reported at June 30, 2022 for the Volumetric earnout arrangement and a ratable portion of the fiscal year 2022 annual bonus incentive compensation that was settled using shares of the Company's Common Stock in the current quarter, divided by the Company's year-to-date average share price of $14.54 per share.

On November 16, 2021, the Company issued $460,000 in aggregate principal amount of 0% Convertible Senior Notes due November 15, 2026, as discussed in Note 10. The Notes’ impact to diluted shares will be calculated using the if-converted method as prescribed in ASC 260. The Notes will increase the diluted share count when the Company's average share price over an interim or annual reporting period is greater than $35.92 per share, the conversion price of the Notes. For the three and six months ended June 30, 2023 and 2022, the Notes were anti-dilutive on a stand-alone basis because the Company's average share price during these periods did not exceed the conversion price, and because we reported a net loss for each of the respective periods.

23

3D SYSTEMS CORPORATION

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

(16) Accumulated Other Comprehensive Loss

For the three and six months ended June 30, 2023 and 2022, the changes in the balances of accumulated other comprehensive loss by component are as follows:

	Three Months Ended June 30, 2023
(in thousands)	Foreign currency translation adjustment		Defined benefit pension plan		Unrealized loss on short-term investments		Total
Balance at March 31, 2023	$	(50,781)	$	700	$	(19)	$	(50,100)
Other comprehensive income (loss)	712		—		—		712
Amounts reclassified from accumulated other comprehensive income (loss) a	—		(11)		19		8
Balance at June 30, 2023	$	(50,069)	$	689	$	—	$	(49,380)
	Six Months Ended June 30, 2023
(in thousands)	Foreign currency translation adjustment		Defined benefit pension plan		Unrealized loss on short-term investments		Total
Balance at December 31, 2022	$	(54,194)	$	700	$	(328)	$	(53,822)
Other comprehensive income (loss)	4,125		12		108		4,245
Amounts reclassified from accumulated other comprehensive income (loss) a	—		(23)		220		197
Balance at June 30, 2023	$	(50,069)	$	689	$	—	$	(49,380)
	Three Months Ended June 30, 2022
(in thousands)	Foreign currency translation adjustment		Defined benefit pension plan		Unrealized loss on short-term investments		Total
Balance at March 31, 2022	$	(38,810)	$	(2,141)	$	(3,495)	$	(44,446)
Other comprehensive income (loss)	(16,386)		109		(528)		(16,805)
Amounts reclassified from accumulated other comprehensive income (loss) (a)	—		56		—		56
Balance at June 30, 2022	$	(55,196)