# 3D SYSTEMS CORP (DDD) FY 2024 MD&A

Verbatim Item 7 Management's Discussion and Analysis from 3D SYSTEMS CORP's 10-K for fiscal year 2024.

SEC filing source: https://www.sec.gov/Archives/edgar/data/910638/000091063825000005/ddd-20241231.htm
Accession: 0000910638-25-000005
Filing date: 2025-03-27
Report date: 2024-12-31
Extracted structurally from real Item 7 body heading to real Item 7A/8 boundary. Published MD&A gate trimmed front/tail over-capture.
Confidence: high

Company profile: /company/DDD/
All MD&A years: /company/DDD/mda/
Previous year: /company/DDD/mda/fy2023/ (FY 2023)
Next year: /company/DDD/mda/fy2025/ (FY 2025)

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis should be read together with our consolidated financial statements, and notes thereto, included in Item 8 of this Form 10-K. Certain statements contained in this discussion may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements involve a number of risks, uncertainties and other factors that could cause actual results to differ materially from those reflected in any forward-looking statements. See “Risk Factors” in Part I, Item 1A and “Forward-Looking Statements.”

For discussion related to our results of operations and changes in financial condition for fiscal 2023 compared to fiscal 2022, refer to Part II, Item 7. "Management’s Discussion and Analysis of Financial Condition and Results of Operations" ("MD&A") in our fiscal 2023 Form 10-K. Our fiscal 2023 Form 10-K was filed with the SEC on August 13, 2024. Discussion of our segment results for fiscal 2023 compared to fiscal 2022 have been included herein due to the retroactive application of the change in our segment measure of profitability to gross profit for all periods reported in our segment footnote. Refer to Note 21 for additional details.

Business Overview

3D Systems Corporation (“3D Systems” or the “Company” or “we,” "our" or “us”) markets our products and services through subsidiaries in North America and South America (collectively referred to as “Americas”), Europe and the Middle East (collectively referred to as “EMEA”) and Asia Pacific and Oceania (collectively referred to as “APAC”). We provide comprehensive 3D printing and digital manufacturing solutions, including 3D printers for plastics and metals, materials, software, and services, including maintenance, advanced manufacturing and applications engineering. Our solutions support advanced applications in two key industry verticals: Healthcare Solutions and Industrial Solutions. We have over 35 years of experience and expertise, which have proven vital to our development of an ecosystem and end-to-end digital workflow solutions that enable customers to optimize product designs, transform workflows, bring innovative products to market and drive new business models.

The Company has two reportable segments: Healthcare Solutions and Industrial Solutions. Our reportable segments are based upon the industry verticals that they serve. For Healthcare Solutions, those industry verticals include dental, medical devices, personalized health services and regenerative medicine. For Industrial Solutions, those industry verticals include aerospace, defense, transportation and general manufacturing. We architect solutions specific to customers’ needs through a combination of materials, hardware platforms, software, professional services and advanced manufacturing – creating a path to integrating additive manufacturing into traditional production environments. As a result, manufacturers achieve design freedom, increase agility, scale production and improve their overall total cost of operation. Our technologies and process knowledge enable over a million production parts to be made through additive manufacturing each day.

Recent Developments

Fiscal Year 2023 Restructuring Plan

Restructuring Plan Objectives and Status of Execution

In 2023, the Company commenced a multi-faceted restructuring plan (the “2023 Restructuring Plan”) which was intended to improve operating efficiencies throughout the organization and drive long-term value creation. The key initiatives of the plan were announced in 2023 and included:

•improving manufacturing efficiencies related to the Company’s European metal printer operations by (1) in-sourcing certain metal printer platforms into the Company’s Riom, France manufacturing facility and (2) co-locating the engineering and manufacturing of in-sourced metal printer products in order to improve cycle time from development to production;

•reducing headcount throughout all functions and areas of the Company; and

•rationalizing the Company's geographic footprint through the exit of leased facilities.

As of December 31, 2024, the Company has completed its in-sourcing activities. Actions taken to reduce headcount under the 2023 Restructuring Plan commenced during the year ended December 31, 2023 and were completed during the year ended December 31, 2024.

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During the fourth quarter of 2023, as part of its efforts to rationalize its geographic footprint, the Company began identifying and evaluating opportunities to exit leased facilities, whether by early termination of a lease, non-renewal of a lease, or ceasing use with an intent to sublease a facility. As part of these restructuring efforts, during the year ended December 31, 2024, the Company (1) partially or fully exited 18 leased facilities that were identified as part of the Company's plan and (2) commenced active marketing efforts to sublease the available space in facilities that were either partially or fully exited, but have a continuing lease. The Company exited one additional lease in the first quarter of 2025, and has now exited all facilities identified as part of its facilities rationalization plan under the 2023 Restructuring Plan.

2023 Restructuring Plan Costs, Cash Settlements and Recognized Liabilities

Headcount Reductions

We incurred a total of $8.2 million in severance and termination benefit costs related to headcount reductions between inception of our 2023 Restructuring Plan and the completion of headcount reductions under the plan during the year ended December 31, 2024. These costs were generally recognized when probable and estimable because they were typically determined consistent with the Company’s past practices or statutory law. Accordingly, a substantial portion of the severance and termination benefit costs attributable to our 2023 Restructuring Plan were recorded during our fiscal year ended December 31, 2023, while the execution of the headcount reductions and the settlements of the associated costs continued into and throughout our fiscal year ended December 31, 2024. During the year ended December 31, 2024, as a result of a decision to continue operating certain facilities (i.e., a change to the original 2023 Restructuring Plan), the Company reduced its accrual for certain severance and termination benefit costs that had previously been recorded to cost of sales. This reduction to the Company's severance and termination benefits accrual was substantially offset by new accruals for incremental headcount reductions that were recorded to selling, general, and administrative expense and research and development expense. Refer to the tables that follow for additional details.

The following table provides details regarding the net severance, termination benefit and other employee costs that were incurred (or reversed) under our 2023 Restructuring Plan and amounts that were settled with cash during the years ended December 31, 2024 and 2023, as well as the related accrued liability balances included in our consolidated balance sheets as of December 31, 2024 and 2023:

[[GREPCENT_TABLE]]
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[[/GREPCENT_TABLE]]

The financial statement impacts of (1) severance, termination benefits and other employee costs that were incurred under our 2023 Restructuring Plan during the years ended December 31, 2024 and 2023 and (2) adjustments recorded with respect to the liability recognized under the 2023 Restructuring Plan during the year ended December 31, 2024 are reflected in our consolidated statements of operations as follows:

[[GREPCENT_TABLE]]
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[[/GREPCENT_TABLE]]

a.Only restructuring costs recorded to cost of sales have been included in our reported segment results, as gross profit is our measure of segment profitability. All severance and termination costs recorded to costs of sales are included in our Healthcare segment and, accordingly, are reflected in the Healthcare segment's reported gross profit. There were no facility termination costs or impairment costs included in the amounts reported for consolidated or segment cost of sales. See Note 21 for the reported gross profit for each of our reportable segments.

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Facilities Rationalization

Since inception of the 2023 Restructuring Plan, we have incurred $0.6 million in lease termination costs. During 2023, we recorded $0.6 million in incremental impairment charges related to certain fixed assets that have been retired in connection with the Company’s restructuring. However, since inception of our 2023 Restructuring Plan, with the exception of certain amounts paid to terminate certain leases early, our consolidated financial statements have not reflected material transactions or charges resulting from the decisions to cease the use of facilities for our own operations because the facilities for which we have a continuing leases (and any related assets, as applicable) generally have not yet qualified to be measured for impairment separate from the asset group to which they have historically belonged, which typically occurs when we have entered into a sublease.

Other Strategic Business Decisions and Cost Saving Initiatives

Geomagic

In December 2024, the Company entered into a definitive agreement for the sale of its Geomagic software business ("Geomagic"), which is included in our Industrial Solutions segment, to Hexagon AB for $123 million, subject to customary adjustments. The divestiture is expected to be completed by the end of the second quarter of 2025, subject to the satisfaction of certain closing conditions. The Company determined that the associated assets and liabilities met the held for sale criteria during December 2024. Accordingly, the Company classified $3.2 million of assets and $10.3 million of liabilities as held for sale in the Company’s consolidated balance sheet as of December 31, 2024. No loss was recognized to measure the disposal group at the lower of its carrying value or fair value less costs to sell. The disposal group has not been presented as a discontinued operation in the accompanying consolidated financial statements because the sale of Geomagic does not represent a strategic shift that will have a major effect on the Company’s operations.

Oqton

The Company previously disclosed during the year ended December 31, 2023 that it is more likely than not that Oqton, Inc. ("Oqton") MOS would be sold or otherwise disposed of. In connection with the expectation to sell or otherwise dispose of Oqton MOS, management previously assessed whether the carrying value of this asset group’s long-lived assets was recoverable, and determined that it was not recoverable. As a result, the Company recorded a $13.6 million charge to recognize the full impairment of the asset group's intangible assets during the year ended December 31, 2023.

During May 2024, the Company completed the sale of the portion of the Oqton MOS business that was focused on the dental market ("Oqton Dental") in exchange for a de minimis amount of cash, resulting in the transfer of a limited portion of Oqton MOS's personnel and a de minimis amount of fixed assets. The sale of Oqton Dental did not qualify as a discontinued operation, as it did not represent a strategic shift that will have a major effect on the Company's overall business operations; however, the transfer of personnel is expected to provide cost savings from the date of the disposal of Oqton Dental. The Company continues to evaluate strategic alternatives related to the remaining portion of Oqton MOS that the Company continues to hold.

2025 Restructuring Plan

In March 2025, the Company authorized the next phase of its multi-faceted cost savings and restructuring initiative (the “2025 Restructuring Plan”). The 2025 Restructuring Plan includes initiatives to deliver sustainable growth and profitability, enabled by a streamlining of both infrastructure and business processes, while consistently investing in core research and development activities to support long-term growth opportunities. The expected annual savings from the 2025 Restructuring Plan are significant and will begin to be realized beginning in the first half of 2025.

Acquisitions/Investments

The Company made the following significant acquisitions and investments during our fiscal years ended December 31, 2024, December 31, 2023, and December 31, 2022.

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Acquisition of Wematter

In July 2023, the Company completed the acquisition of Wematter AB (“Wematter”), a Swedish 3D printer manufacturer, for which post-acquisition results are included in our Industrial Solutions segment. The acquisition broadens 3D Systems’ Selective Laser Sintering (SLS) portfolio. Consideration for this acquisition consisted of approximately $10.2 million in cash, subject to customary post-closing adjustments. The Company also may be required to pay an additional €2.0 million in cash, contingent upon the achievement of certain post-closing performance conditions and the continued employment of certain key employees of Wematter for two years after the closing date of the acquisition. As of December 31, 2024, management does not believe that achievement of the post-closing performance conditions is probable.

Theradaptive, Inc.

In June 2023, we made an $8.0 million investment in Theradaptive, Inc. ("Theradaptive") via the purchase of Series A Preferred Stock. 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 has accounted 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.

National Additive Manufacturing Innovation ("NAMI") Joint Venture

In March 2022, the Saudi Arabian Industrial Investments Company (“Dussur”) and 3D Systems 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. Upon entering into the agreement with Dussur, 3D Systems committed to an initial investment in the joint venture of approximately $6.5 million. In February 2023, the Company became a shareholder in the joint venture and owns 49% of the joint venture's common stock. During April 2023, $3.4 million held in escrow, as well as the additional amount of approximately $3.1 million owed to the joint venture, was deposited into a bank account of the joint venture for use in its operations. In May 2024, the Company and Dussur each made an incremental investment of $2.5 million in the joint venture. During December 2024, the Company entered into a short-term non-interest-bearing loan agreement with NAMI whereby NAMI borrowed $2.0 million to finance its working capital and capital expenditure requirements. Additional future investments in the joint venture are contingent upon agreement by the parties to the joint venture to invest additional capital.

Enhatch Inc.

In March 2022, we made a $10.0 million investment in Enhatch Inc. (“Enhatch”), the developer of the Intelligent Surgery Ecosystem, in exchange for shares of Enhatch convertible preferred stock, a warrant to purchase common 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 (the “call option”). We simultaneously entered into a collaboration and supply agreement with Enhatch. 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, instrumentation design, and industry-leading production processes, will help more efficiently meet the growing demand for personalized medical devices.

In December 2024, the Company entered into an amended and restated warrant agreement with Enhatch which restated the terms of the warrant received in connection with the Company's March 2022 investment in their entirety by increasing the number of Enhatch common shares that may be purchased, decreasing the exercise price, modifying the exercise conditions, eliminating the net settlement feature, and accelerating the expiration date to June 1, 2025. In December 2024 and January 2025, the Company exercised the first tranche of the warrant for $0.6 million in cash and the second tranche of the warrant for $0.6 million in cash, respectively. The Company initially measured and recorded the Enhatch common shares purchased upon the exercise of the first and second tranche of the warrant at their estimated acquisition date fair values. Effective upon the exercise of the first tranche of the amended and restated warrant agreement in December 2024, due to the Company's ability to exert significant influence over the financial and operating policies of Enhatch, the Company began accounting for its investment in Enhatch common shares under the equity method of accounting. Under the equity method of accounting, the Company is required to recognize its proportionate share of Enhatch's reported net income or loss, which the Company recognizes on a one quarter lag. If the remaining underlying exercise conditions of the warrant are achieved, the Company may be required to pay up to an additional $0.9 million of cash to purchase Enhatch common shares prior to the warrant expiration on June 1, 2025.

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Investing in Regenerative Medicine

Within our Healthcare Solutions segment, a portion of our business focuses on opportunities for additive manufacturing to be applied to regenerative medicine. To date, our efforts in the area of regenerative medicine have consisted primarily of pre-commercial bio-technology research and development (“R&D”) in the areas described below.

Our first area of focus is the use of additive manufacturing for human organ transplantation, with a long-term goal of helping patients with end-stage disease receive transplants that will enable them to enjoy long and active lives. This program combines our 3D printing expertise and capabilities in human tissue engineering with the regenerative medicine and biotechnology expertise of a key strategic partner. Through the start of 2024, our program focused on developing the capability to print organ scaffolds for human lungs, kidneys and livers. However, beginning in the first quarter of 2024, due to changes to our arrangement with and funding from our key strategic partner, the Company’s continuing organ program shifted its focus to developing the capability to print human lung scaffolds, for which the related R&D efforts will continue to be primarily funded by our key strategic partner.

Our second area of focus seeks to utilize our bio-printing capabilities to design and manufacture 3D-printed vascularized “organs-on-chips” for use in drug development by pharmaceutical industry customers through our wholly-owned biotech company, Systemic Bio. We believe that “organs-on-chips” can accelerate the drug development process and reduce the cost of pre-clinical drug testing, as well as reduce the pharmaceutical industry’s reliance on animal testing. Systemic Bio combines 3D Systems’ legacy expertise in high-resolution 3D printing with advanced capabilities in bioprinting and biomaterials to design and market 3D-printed, vascularized “organs-on-chips”. During the year ended December 31, 2023, Systemic Bio entered into its first commercial contracts with pharmaceutical industry customers.

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Background

We earn revenue from the sale of products and services through our Healthcare Solutions and Industrial Solutions segments. The product categories include 3D printers and corresponding materials, digitizers, software licenses, 3D scanners and haptic devices. The majority of materials used in our 3D printers are proprietary. The services categories include maintenance contracts and services on 3D printers, software maintenance, software as a service subscriptions and healthcare solutions services.

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

In addition to changes in sales volumes, there are two other primary drivers of changes in revenue from one period to another: (1) the combined effect of changes in product mix and average selling prices and (2) the impact of fluctuations in foreign currencies. As used in this MD&A, the price and mix effects relate to changes in revenue that are not able to be specifically attributed to changes in unit volume or changes in foreign exchange rates.

Consolidated Financial Results for the Years Ended December 31, 2024 and 2023

[[GREPCENT_TABLE]]
[["","Year Ended December 31,"],["(in thousands)","2024","","2023"],["Revenue:"],["Products","$","279,178","","","$","328,731"],["Services","160,943","","","159,338"],["Total revenue","440,121","","","488,069"],["Cost of sales:"],["Products","175,859","","","203,258"],["Services","100,084","","","88,390"],["Total cost of sales","275,943","","","291,648"],["Gross profit","164,178","","","196,421"],["Operating expenses:"],["Selling, general and administrative","210,132","","","210,172"],["Research and development","86,479","","","89,466"],["Asset impairment charges","144,967","","","302,787"],["Total operating expenses","441,578","","","602,425"],["Loss from operations","(277,400)","","","(406,004)"],["Non-operating income:"],["Foreign exchange gain (loss), net","2,452","","","(4,825)"],["Interest income","7,302","","","19,511"],["Interest expense","(2,564)","","","(3,301)"],["Other income, net","20,214","","","32,307"],["Total non-operating income (loss)","27,404","","","43,692"],["Loss before income taxes","(249,996)","","","(362,312)"],["(Provision) benefit for income taxes","(2,193)","","","641"],["Loss on equity method investment, net of income taxes","(3,404)","","","(1,282)"],["Net loss before redeemable non-controlling interest","(255,593)","","","(362,953)"],["Less: net loss attributable to redeemable non-controlling interest","\u2014","","","(265)"],["Net loss attributable to 3D Systems Corporation","$","(255,593)","","","$","(362,688)"]]
[[/GREPCENT_TABLE]]

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Operating Results for the Year Ended December 31, 2024 Compared to the Year Ended December 31, 2023

Consolidated revenue

The following table sets forth factors contributing to the changes in our products and services revenue for the year ended December 31, 2024, as compared to our products and services revenue reported for the year ended December 31, 2023.

[[GREPCENT_TABLE]]
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[[/GREPCENT_TABLE]]

Products revenue

For the year ended December 31, 2024, products revenue decreased by $49.6 million, or 15.1%, as compared to the year ended December 31, 2023. Industrial Solutions products revenue decreased $31.7 million primarily due to lower sales volume. The decrease in products sales volumes in our Industrial Solutions segment was reflective of lower materials sales to customers in the service bureaus and jewelry markets and lower printer sales to customers in the consumer auto and academic markets.

Healthcare Solutions products revenue decreased by $17.9 million, or 14.4% as compared to the year ended December 31, 2023, primarily due to a decline in printer sales volume in the dental market, including lower printer sales to a key customer, and unfavorable price/mix due to a significant increase in the volume of material sales to our key customer in the dental industry at lower pricing. These declines were partially offset by an overall increase in materials sales volumes.

Services revenue

For the year ended December 31, 2024, services revenue increased by $1.6 million, or 1.0%, as compared to the year ended December 31, 2023. Higher sales volume resulted in an increase of $10.8 million, which was partially offset by an $8.7 million reversal of revenue in the year ended December 31, 2024 due to a change in estimate under a collaboration arrangement in the Healthcare Solutions segment as discussed below. Services revenue increased $7.2 million in our Industrial Solutions segment, which was partially offset by a decline of $5.6 million in our Healthcare Solutions segment.

The volume increase in our Healthcare Solutions services revenue was due to higher personalized healthcare solutions revenue and printer service maintenance agreements of $3.2 million. The volume increase in our Healthcare Solutions services revenue was more than offset by an $8.7 million reversal of revenue in the year ended December 31, 2024 due to a cumulative catch-up adjustment under a collaboration arrangement as the Company determined that incremental revenue attributable to milestone payments that are contingent upon the achievement of contractual development criteria are no longer probable of being earned.

The volume increase in our Industrial Solutions services revenue was primarily related to increases in revenue generated from parts manufacturing and hardware maintenance services.

Total revenue

Total consolidated revenue for the year ended December 31, 2024 decreased by $47.9 million, or 9.8%, to $440.1 million, compared to $488.1 million for the year ended December 31, 2023. This decrease was primarily driven by the $31.7 million impact of lower products sales volumes and the $17.0 million unfavorable impact of price/mix on products revenue, which was partially offset by the $2.1 million impact of the increase in services revenue. Refer to the detailed discussions above.

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Consolidated gross profit

[[GREPCENT_TABLE]]
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[[/GREPCENT_TABLE]]

Gross profit for the year ended December 31, 2024 decreased $32.2 million, or 16.4%, to $164.2 million, compared to $196.4 million for the year ended December 31, 2023. Gross profit margin for the year ended December 31, 2024 decreased to 37.3%, as compared to 40.2%, for the year ended December 31, 2023, primarily driven by the decrease in both our products and services gross profit margin (as discussed in greater detail below).

Products gross profit and gross profit margin

For the year ended December 31, 2024, gross profit from products sales decreased by $22.2 million, or 17.7%, as compared to the year ended December 31, 2023. The most significant contributors to the decrease in our products gross profit margin for the year ended December 31, 2024 were (1) a $6.0 million increase in the provision recorded for inventory obsolescence during the year ended December 31, 2024, as compared to the year ended December 31, 2023, (2) lower sales volume and (3) unfavorable manufacturing variances.

Services gross profit and gross profit margin

For the year ended December 31, 2024, gross profit from services sales decreased $10.1 million, or 14.2%, as compared to the year ended December 31, 2023. The decrease in services gross profit was primarily driven by a decrease in revenue recognized under a collaboration arrangement as the Company determined that incremental revenue attributable to milestone payments that are contingent upon the achievement of contractual development criteria are no longer probable of being earned. As there was no direct cost associated with the milestone revenue under the collaboration arrangement; therefore, the entire $8.7 million reversal of revenue in the year ended December 31, 2024 contributed to a decrease in our reported gross profit.

Consolidated selling, general and administrative expense

Selling, general and administrative ("SG&A") expense for the year ended December 31, 2024 decreased $0.1 million to $210.1 million, compared to $210.2 million for the year ended December 31, 2023.

The primary drivers of the $0.1 million decrease in SG&A expense are as follows:

[[GREPCENT_TABLE]]
[["Primary drivers (in thousands)","Increase / (Decrease)"],["Volumetric earnout reversal","$","17,244"],["Compensation and benefits","(20,132)"],["Audit, legal and third-party consulting costs","5,868"],["Other","(3,020)"],["Total change","$","(40)"]]
[[/GREPCENT_TABLE]]

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Volumetric earnout

Prior to the year ended December 31, 2023, the Company had been accruing for a $65 million potential earnout payment (compensation expense) because the Company had concluded that a non-financial, scientific milestone included in the acquisition agreement related to the Company's December 2021 acquisition of Volumetric was probable of achievement. However, during the year ended December 31, 2023, the Company concluded that this non-financial, scientific milestone was no longer probable of achievement given a reduction in the budgeted funding for the related R&D efforts. As a result, the Company reversed all of the previously recognized earnout expense related to the milestone during the year ended December 31, 2023. The Company did not recognize any earnout expense related to the milestone during the year ended December 31, 2024, and as a result of events that have occurred during the year, the Company notified the sellers of Volumetric that they are no longer eligible to earn any of the milestone-based earnout payments contemplated in the Volumetric acquisition agreement. Refer to the discussions in Note 17 and Note 22 to the consolidated financial statements for additional details regarding the Company's cancellations of the Volumetric sellers' rights to future earnout payments, as well as actions taken in response to these cancellations.

Compensation and benefits

Compensation and benefits costs decreased by $20.1 million for the year ended December 31, 2024, as compared to the year ended December 31, 2023. This decrease was primarily driven by a $13.7 million decrease in stock-based compensation expense (excluding the Volumetric earnout expense subject to settlement in shares of our common stock and discussed above), and a $5.1 million decrease in severance expense. The decrease in stock-based compensation expense for the year ended December 31, 2024 is primarily due to (1) the delayed grant of fiscal year 2024 annual share-based payment awards under the Company's 2015 Incentive Plan until September and October of 2024, as compared to fiscal year 2023 annual share-based payment award grants occurring in April 2023, and (2) a decrease in the overall grant date fair value of 2024 annual share-based payment awards under the Company's 2015 Incentive Plan, as compared to previous years' awards that vested during or before the year ended December 31, 2024.

Severance expense decreased by $5.1 million for the year ended December 31, 2024 due to higher severance and termination benefit costs that were recorded to SG&A expense during the year ended December 31, 2023 in connection with our 2023 Restructuring Plan. Under our 2023 Restructuring Plan, employee severance and termination benefit costs generally were recognized when probable and estimable because they are typically being determined consistent with the Company’s past practices or statutory law. Furthermore, the classification of these severance and termination benefit costs in our consolidated statements of operations is based upon the classification of the ordinary compensation expense attributable to the impacted employees.

Audit, legal and third-party consulting costs

Audit, legal and third-party consulting costs increased $5.9 million for the year ended December 31, 2024, as compared to the year ended December 31, 2023, due to the significant increases in the cost to complete our fiscal year 2023 audit, including costs paid to our former independent registered public accounting firm and third-party accounting and finance consulting support costs. The increases in audit and third-party consulting costs were partially offset by lower acquisition-related legal costs as compared to the year ended December 31, 2023.

Consolidated research and development expense

R&D expense for the year ended December 31, 2024 decreased $3.0 million, or 3.3%, to $86.5 million, as compared to $89.5 million for the same period last year. The decrease was primarily driven by a $3.9 million decrease in employee compensation and benefit costs, a $1.9 million decrease in materials costs and a $0.6 million decrease in external workforce cost. These decreases were partially offset by a $3.8 million increase in R&D expense related to the Company's discontinued kidney and liver regenerative medicine program.

Asset impairment charges

During the year ended December 31, 2024, we recorded aggregate impairment charges of $145.0 million related to intangible assets (inclusive of goodwill) and tangible assets as compared to $302.8 million in impairment charges recorded during the year ended December 31, 2023. The following table summarizes the impairment charges recorded during the years ended December 31, 2024 and 2023:

39

[[GREPCENT_TABLE]]
[["","Year Ended"],["Nature of Impairment Charge (in thousands)","December 31, 2024","","December 31, 2023"],["Goodwill","$","101,445","","","$","279,808"],["Indefinite-life intangible asset (dp polar IPR&D)","\u2014","","","5,554"],["Finite-life intangible assets","32,432","","","17,425"],["Property and equipment","5,911","","","\u2014"],["Right-of-use assets","5,179","","","\u2014"],["Total impairment charges","$","144,967","","","$","302,787"]]
[[/GREPCENT_TABLE]]

Impairment charges recorded during the year ended December 31, 2024

As a result of the significant decline in the trading price of our common stock and our market capitalization during the three months ended September 30, 2024, as well as reduced long-term cash flow forecasts prepared in connection with the Company's long-range planning process, the Company concluded that the performance of an interim period goodwill impairment test was required as of September 30, 2024. Upon completion of this interim period goodwill impairment test, the Company concluded that the carrying value of the Healthcare Solutions reporting unit exceeded its fair value by $101.4 million and recognized this amount within asset impairment charges on our consolidated statement of operations.

In addition, during the three months ended September 30, 2024, the Company concluded that there were indicators that the primary asset group underlying the Company's core operations should be tested for recoverability based on reported losses and negative cash flows for both current and historical reporting periods, combined with the significant decline in the Company's stock price during the period. Upon assessing this asset group for recoverability, the Company concluded that the asset group's carrying value exceeded the undiscounted cash flows that the asset group was expected to generate over the estimated remaining useful life of the asset group's primary asset, which was deemed to be acquired technology. Accordingly, the Company further tested this asset group for impairment as of September 30, 2024. As a result of concluding that the carrying value of the primary asset group underlying the Company's core operations exceeded the fair value of the asset group as of September 30, 2024, the Company recorded an aggregate impairment loss of $42.3 million within asset impairment charges on our consolidated statement of operations. After consideration of the relative carrying values of the long-lived assets comprising this asset group, as well as the long-lived asset fair values below which asset carrying amounts should not be impaired, the Company recorded impairment charges of $31.2 million, $5.9 million, and $5.2 million (representing the allocation of the aggregate impairment charge of $42.3 million) to intangible assets; property and equipment; and right-of-use assets, respectively. An additional intangible asset impairment charge of $1.2 million was recognized in the three months ended December 31, 2024.

Impairment charges recorded during the year ended December 31, 2023

The $279.8 million goodwill impairment charge recorded for the year ended December 31, 2023 reflected the impairment of goodwill that had been assigned to our Industrial Solutions reporting unit based upon the result of our annual goodwill impairment test. This outcome of our annual goodwill impairment test reflected the significant and sustained drop in the Company's stock price and market capitalization leading up to and as of the testing date, as well as the significantly higher carrying value (including the goodwill balance) of our Industrial Solutions reporting unit compared to our Healthcare Solutions reporting unit. Refer to Note 9 to the consolidated financial statements included in Item 8 of this Form 10-K for additional details on the 2024 and 2023 impairment charges.

For the year ended December 31, 2023, we recognized impairment charges related to (1) our indefinite-life intangible asset balance, consisting solely of dp polar's IPR&D, and (2) certain of our finite-life intangible assets, consisting of intangible assets included in our Oqton MOS and dp polar asset groups. These impairment charges were triggered by the Company's decision to cease the development of dp polar's IPR&D for the foreseeable future and the Company's conclusion that it would more likely than not sell or otherwise dispose of Oqton MOS. Based upon a determination that the dp polar and Oqton MOS intangible assets were no longer expected to produce or contribute to the production of positive cash flows for the Company, the Company recorded impairment charges to write their carrying values down to $0. Refer to our discussion of "Other Strategic Business Decisions and Cost Saving Initiatives" and Note 8 to the consolidated financial statements included in Item 8 of this Form 10-K for additional details.

40

Consolidated operating loss

Our operating loss for the year ended December 31, 2024 was $277.4 million, compared to a $406.0 million operating loss for the year ended December 31, 2023. The decrease in our operating loss was primarily attributable to a decrease in non-cash impairment charges of $157.8 million, which was partially offset by a $32.2 million decrease in gross profit. Refer to the discussions of our financial statement line items above for additional details.

Non-Operating Income for the Year Ended December 31, 2024 compared to the Year Ended December 31, 2023

The following table sets forth the components of non-operating income for the year ended December 31, 2024 and 2023.

[[GREPCENT_TABLE]]
[["","","Year Ended"],["(in thousands)","","December 31, 2024","","December 31, 2023"],["Non-operating income:"],["Foreign exchange gain (loss), net","","$","2,452","","","$","(4,825)"],["Interest income","","7,302","","","19,511"],["Interest expense","","(2,564)","","","(3,301)"],["Other income, net","","20,214","","","32,307"],["Total non-operating income","","$","27,404","","","$","43,692"]]
[[/GREPCENT_TABLE]]

Foreign exchange gain (loss), net

Foreign exchange gain (loss), net increased $7.2 million for the year ended December 31, 2024, primarily due to realized and unrealized gains related to our foreign operations.

Interest income

For the year ended December 31, 2024, interest income decreased as compared to the year ended December 31, 2023 due to the Company's lower cash and cash equivalent balances during the year ended December 31, 2024.

Interest expense

For the year ended December 31, 2024, interest expense decreased due to the Company's repurchases of debt in December 2023 and March 2024. In connection with each of these repurchases of debt, the Company wrote off a portion of the unamortized debt issuance costs, which resulted in lower amortization of debt issuance costs within interest expense for the year ended December 31, 2024.

Other income, net

For the year ended December 31, 2024, other income, net, decreased $12.1 million primarily due to the recognition of a $21.5 million gain on the extinguishment of debt during the year ended December 31, 2024, compared to the recognition of a $32.2 million gain on the extinguishment of debt during the year ended December 31, 2023.

41

Net loss

The following table sets forth our net loss for the years ended December 31, 2024 and 2023.

[[GREPCENT_TABLE]]
[["","Year Ended December 31,"],["(in thousands, except per share amounts)","2024","","2023"],["Loss before income taxes","$","(249,996)","","","$","(362,312)"],["(Provision) benefit for income taxes","(2,193)","","","641"],["Loss on equity method investment, net of income taxes","(3,404)","","","(1,282)"],["Net loss before redeemable non-controlling interest","(255,593)","","","(362,953)"],["Less: net loss attributable to redeemable non-controlling interest","\u2014","","","(265)"],["Net loss attributable to 3D Systems Corporation","$","(255,593)","","","$","(362,688)"],["Net loss per common share:"],["Basic","$","(1.94)","","","$","(2.79)"],["Diluted","$","(1.94)","","","$","(2.79)"]]
[[/GREPCENT_TABLE]]

For the year ended December 31, 2024, we reported income tax expense of $2.2 million, as compared to an income tax benefit of $0.6 million for the year ended December 31, 2023. The Company's effective tax rates for the years ended December 31, 2024 and 2023 were significantly below blended U.S. and foreign jurisdictions' statutory tax rates due to (1) the Company's reported losses and (2) the maintenance of a valuation allowance against the Company's deferred tax assets based upon the Company's conclusion that it is more likely than not that its deferred tax assets will not be realized in various tax jurisdictions.

The decrease in the net loss attributable to 3D Systems for the year ended December 31, 2024, as compared to the net loss attributable to 3D Systems for the year ended December 31, 2023, was primarily driven by the period-over period decrease in the Company's consolidated operating loss reported for the year ended December 31, 2024, partially offset by lower non-operating income reported for the year ended December 31, 2024, as compared to the year ended December 31, 2023. In addition, the Company reported a $3.4 million loss on equity method investment, net of income taxes, for the year ended December 31, 2024, as compared to a $1.3 million loss on equity method investment for the year ended December 31, 2023.

Segment Financial Results of Operations for the Years Ended December 31, 2024 and 2023

The following table presents the revenue and gross profit amounts reported by each of our segments for the years ended December 31, 2024 and 2023:

[[GREPCENT_TABLE]]
[["","Revenue","","Gross Profit"],["","Year Ended","","Year Ended"],["(in thousands)","December 31, 2024","","December 31, 2023","","Change","","December 31, 2024","","December 31, 2023","","Change"],["Healthcare Solutions","$","189,736","","","$","213,216","","","$","(23,480)","","","$","73,499","","","$","85,150","","","$","(11,651)"],["Industrial Solutions","250,385","","","274,853","","","(24,468)","","","90,679","","","111,271","","","(20,592)"],["Total Company","$","440,121","","","$","488,069","","","$","(47,948)","","","$","164,178","","","$","196,421","","","$","(32,243)"]]
[[/GREPCENT_TABLE]]

Healthcare Solutions

Revenue

For the year ended December 31, 2024, Healthcare Solutions revenue decreased $23.5 million, or 11.0%, as compared to the year ended December 31, 2023. This decrease in segment revenue was primarily due to a decrease in products revenue of $17.9 million, primarily reflective of our lower sales to the dental market, but also inclusive of lower printer sales to customers in the medical devices and other non-dental markets. Service revenue was down $5.6 million driven by a decrease in the estimated recognizable variable consideration related to a collaboration agreement which was partially offset by higher personalized healthcare solutions revenue and printer service maintenance agreements.

42

Gross Profit

For the year ended December 31, 2024, gross profit for our Healthcare Solutions segment decreased $11.7 million, or 13.7%, as compared to the year ended December 31, 2023, primarily due to (1) a decrease in the estimated recognizable variable consideration related to a collaboration arrangement (2) our lower sales to the dental market, including the segment's lower printer sales to a key customer, (3) the decrease in products revenue from other markets, and (4) unfavorable price/mix on the segment's products revenue, which was partially offset by increases in materials revenue in the dental market and increases in services revenue.

Industrial Solutions

Revenue

For the year ended December 31, 2024, Industrial Solutions revenue decreased $24.5 million, or 8.9%, as compared to the year ended December 31, 2023. The decrease was primarily due to a $31.7 million decrease in products revenue reflective of lower materials sales to customers in the service bureaus and jewelry markets and lower printer sales to customers in the consumer auto and academic markets, which were partially offset by the favorable impact of price/mix primarily related to materials sales. The decrease in products revenue was partially offset by a $7.2 million increase in services revenue related to parts manufacturing and hardware maintenance services.

Gross Profit

For the year ended December 31, 2024, gross profit for our Industrial Solutions segment decreased $20.6 million, or 18.5%, as compared to the year ended December 31, 2023, which was primarily driven by the unfavorable impact of volume on products revenue, partially offset by the increase in services revenue.

Segment Financial Results of Operations for the Years Ended December 31, 2023 and 2022

The following table presents the revenue and gross profit amounts reported by each of our segments for the years ended December 31, 2023 and 2022:

[[GREPCENT_TABLE]]
[["","Revenue","","Gross Profit"],["","Year Ended","","Year Ended"],["(in thousands)","December 31, 2023","","December 31, 2022","","Change","","December 31, 2023","","December 31, 2022","","Change"],["Healthcare Solutions","$","213,216","","","$","260,988","","","$","(47,772)","","","$","85,150","","","$","98,767","","","$","(13,617)"],["Industrial Solutions","274,853","","","277,043","","","(2,190)","","","111,271","","","115,466","","","(4,195)"],["Total Company","$","488,069","","","$","538,031","","","$","(49,962)","","","$","196,421","","","$","214,233","","","$","(17,812)"]]
[[/GREPCENT_TABLE]]

Healthcare Solutions

Revenue

For the year ended December 31, 2023, Healthcare Solutions revenue decreased $47.8 million, or 18.3%, as compared to the year ended December 31, 2022. This decrease in segment revenue was primarily due to a $48.2 million, or 31.9%, decrease in sales to the dental market, including lower printer sales to a key customer. Total product revenue for the segment decreased by $55.6 million, primarily reflective of our lower sales to the dental market, but also inclusive of lower printer sales to customers in the medical devices and other non-dental markets.

43

The decrease in product sales for the segment was partially offset by a $7.8 million increase in services revenue for the segment. The increase in services revenue was partially driven by the recognition of incremental variable consideration revenue, inclusive of a $4.5 million cumulative catch-up adjustment, that related directly to the inclusion of $6.5 million of additional milestone payments (representing variable consideration) in the total transaction price of a regenerative medicine collaboration and licensing revenue agreement during the year ended December 31, 2023. The additional milestone-based payments were deemed probable of being earned under revised contract terms that took effect upon the execution of an amendment to the collaboration and licensing revenue agreement during the year ended December 31, 2023. Our Healthcare Solutions' services revenue also increased due to higher personalized healthcare solutions revenue.

Gross Profit

For the year ended December 31, 2023, gross profit for our Healthcare Solutions segment decreased $13.6 million, or 13.8%, as compared to the year ended December 31, 2022, primarily due to lower sales to the dental market, including lower printer sales to a key customer, and the decrease in products sales into other markets. This was partially offset by the increase in our services revenue which includes $4.5 million of incremental variable consideration revenue recognized by our Healthcare Solutions segment on a cumulative catch-up basis, upon concluding that additional milestone-based payments related to a collaboration and licensing revenue agreement were probable of being earned. As there were no direct costs (e.g., costs of goods sold) associated with this incremental collaboration and licensing revenue, the entire $4.5 million contributed to an increase in our reported gross profit

Industrial Solutions

Revenue

For the year ended December 31, 2023, Industrial Solutions revenue decreased $2.2 million, or 0.8%, as compared to the year ended December 31, 2022. This decrease in segment revenue is primarily attributable to a $11.1 million decrease in products revenue reflective of (1) lower printer sales to customers in the jewelry market, resulting from a delay in the Company's release of a new printer model, and (2) an unfavorable impact of price/mix, primarily due to discounted pricing on certain product classes in response to competition and to increase future revenue. The decrease in product revenue was partially offset by an $8.9 million increase in services revenue related to parts manufacturing and hardware maintenance services.

Gross Profit

For the year ended December 31, 2023, gross profit for our Industrial Solutions segment decreased $4.2 million, or 3.6%, as compared to the year ended December 31, 2022, which was primarily driven by lower printer sales volume and unfavorable price/mix on products revenue, partially offset by the increase in services revenue.

44

Liquidity and Capital Resources

The following table sets forth the Company's operating working capital at December 31, 2024, and 2023.

[[GREPCENT_TABLE]]
[["","","","Change"],["(Dollars in thousands)","December 31, 2024","","December 31, 2023","","$","","%"],["Cash and cash equivalents","$","171,324","","","$","331,525","","","$","(160,201)","","","(48.3)","%"],["Accounts receivable, net","101,471","","","101,497","","","(26)","","","\u2014","%"],["Inventories","118,530","","","152,188","","","(33,658)","","","(22.1)","%"],["","391,325","","","585,210","","","(193,885)","","","(33.1)","%"],["Less:"],["Current operating lease liabilities","9,514","","","9,924","","","(410)","","","(4.1)","%"],["Accounts payable","41,833","","","49,757","","","(7,924)","","","(15.9)","%"],["Accrued and other liabilities","45,488","","","49,460","","","(3,972)","","","(8.0)","%"],["","96,835","","","109,141","","","(12,306)","","","(11.3)","%"],["Operating working capital","$","294,490","","","$","476,069","","","$","(181,579)","","","(38.1)","%"]]
[[/GREPCENT_TABLE]]

We assess our liquidity in terms of our ability to generate cash to fund our operating, investing and financing activities. In doing so, we review and analyze our current cash on hand, the number of days our sales are outstanding, inventory turns, capital expenditure commitments and accounts payable turns. Our cash requirements, excluding acquisitions, primarily consist of funding working capital and capital expenditures. Differences between the amounts of working capital item changes in the cash flow statement and the balance sheet changes for the corresponding items are primarily the result of foreign currency translation adjustments.

At December 31, 2024, cash and cash equivalents totaled $171.3 million and decreased $160.2 million since December 31, 2023. This decrease resulted primarily from the use of $87.2 million for the early extinguishment of long-term debt, cash used in operations of $44.9 million, acquisitions and other investments, net of cash acquired of $3.0 million, and capital expenditures of $16.1 million.

Cash held outside the U.S. at December 31, 2024 was $63.8 million, or 37.3%, of total cash and cash equivalents, compared to $65.8 million, or 19.8%, of total cash and cash equivalents at December 31, 2023. As our previously unremitted earnings have been subjected to U.S. federal income tax, we expect any repatriation of these earnings to the U.S. would not incur significant federal and state taxes. However, these dividends are subject to foreign withholding taxes that are estimated to result in the Company incurring tax costs in excess of the cost to obtain cash through other means. Cash equivalents are comprised of funds held in money market instruments and are reported at their current carrying value, which approximates fair value due to the short-term nature of these instruments. We strive to minimize our credit risk by investing primarily in investment grade, liquid instruments and limit exposure to any one issuer depending upon credit quality. See “Cash flow” discussion below.

Cash flow

The Company currently funds its operations, including working capital requirements, capital expenditures and investments by using cash on hand; cash equivalents; cash flow from operations, which can vary widely from quarter to quarter; and financing activities, as necessary. We expect that cash flow from operations, cash and cash equivalents, and other sources of liquidity, such as issuing equity or debt securities, subject to market conditions, will be available and sufficient to meet all foreseeable cash requirements. The following is a summary of the changes in the Company’s cash flows, followed by a brief discussion of these changes:

45

[[GREPCENT_TABLE]]
[["","","Year Ended"],["(in thousands)","","December 31, 2024","","December 31, 2023","","Change"],["Net cash used in operating activities","","$","(44,887)","","","$","(80,695)","","","$","35,808"],["Cash flow (used in) provided by investing activities","","(19,025)","","","124,784","","","(143,809)"],["Cash flow used in financing activities","","(91,265)","","","(106,469)","","","15,204"]]
[[/GREPCENT_TABLE]]

Cash flow from operations

For the year ended December 31, 2024, cash used in operating activities was $44.9 million compared to $80.7 million for the year ended December 31, 2023. The $35.8 million decrease in cash used in operating activities during the year ended December 31, 2024 is primarily due to $15.8 million of cash generated during the year ended December 31, 2024 relating to the Company's efforts to reduce its inventory, as compared to $20.6 million of cash used during the year ended December 31, 2023 as a result of an increase in the Company's inventory on-hand related to the Company's decision to in-source activities from contract manufacturers. Cash flow from operations was also positively impacted by general improvements in working capital management.

Cash flow from investing activities

For the year ended December 31, 2024, cash used in investing activities was $19.0 million compared to $124.8 million of cash provided by investing activities for the year ended December 31, 2023. The investing cash outflows in 2024 included cash used for long-term investments of $3.0 million and capital expenditures of $16.1 million.

The investing cash inflows in 2023 included sales and maturities of short-term investments of $180.9 million, offset by cash used for acquisitions of $29.2 million and capital expenditures of $27.2 million.

Cash flow from financing activities

For the year ended December 31, 2024, the cash flow used in financing activities was $91.3 million primarily due to the use of $87.2 million for the early extinguishment of long-term debt and taxes paid related to the net-share settlement of equity awards of $2.7 million.

For the year ended December 31, 2023, the cash flow used in financing activities was $106.5 million primarily due to the use of $100.6 million for the extinguishment of long-term debt and taxes paid related to the net-share settlement of equity awards of $5.2 million.

Material Cash Requirements

The Company's material cash requirements consist of the following contractual commitments and other obligations:

Indebtedness

At December 31, 2024, we had $214.4 million of outstanding 0% convertible notes which mature in November of 2026. Management may consider pursuing additional long-term financing when it is appropriate in light of cash requirements for operations or other strategic opportunities, which could result in higher financing costs. As of December 31, 2024, we were in compliance with all covenants of the outstanding 0% convertible notes due November 2026.

Purchase Commitments

We have purchase commitments under legally enforceable agreements for goods and services with defined terms as to quantity, price and timing of delivery. The Company has purchase commitments in excess of a year primarily related to printer assemblies, inventory, capital expenditures, and software licenses. As of December 31, 2024, such purchase commitments totaled $15.4 million, with $9.3 million expected to be purchased within the next twelve months.

46

Leases

The Company had operating and financing lease obligations (inclusive of interest) of $97.6 million at December 31, 2024, primarily related to real estate and equipment leases, of which approximately $15.9 million in payments are expected over the next twelve months. For more information on the Company's leases, refer to Note 11 to the consolidated financial statements in Item 8 of this Form 10-K.

National Additive Manufacturing Innovation ("NAMI") Joint Venture

In March 2022, Dussur and 3D Systems 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. In February 2023, the Company became a shareholder in the joint venture and now owns 49% of its common stock. 3D Systems was committed to an initial investment of approximately $6.5 million of cash into the joint venture, all of which was funded as of December 31, 2023. In May 2024, the Company and Dussur each made an incremental investment of $2.5 million in the joint venture. In December 2024, the Company, along with the majority shareholder, signed a Shareholder Resolution agreeing to continue to support the ongoing business of NAMI for at least the next twelve months. The Company does not expect to make an additional capital contribution in 2025.

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. For the years ended December 31, 2024 and December 31, 2023, the Company reported a loss on equity method investment in its consolidated statements of operations. The carrying values of the Company's equity method investment at December 31, 2024 and 2023 are $4.3 million and $5.2 million, respectively. During December 2024, the Company entered into a short-term, non-interest bearing loan agreement with NAMI whereby NAMI borrowed $2.0 million to finance its working capital and capital expenditures requirements. The loan matures on June 30, 2025 and is being accounted for at cost, which approximates fair value as of December 31, 2024. During December 2024, NAMI used the loan proceeds to remit payment to the Company for trade receivables outstanding.

Enhatch Inc.

In December 2024, the Company entered into an amended and restated warrant agreement with Enhatch that restated the terms of the original warrant in their entirety by increasing the number of Enhatch common shares that may be purchased, decreasing the exercise price, modifying the exercise conditions, eliminating the net settlement feature, and changing the expiration date to June 1, 2025. In December 2024 and January 2025, the Company exercised the first tranche of the warrant for $0.6 million in cash and the second tranche of the warrant for $0.6 million in cash, respectively. If the underlying exercise conditions are achieved, the Company may be required to pay up to an additional $0.9 million of cash to purchase Enhatch common shares prior to the warrant expiration on June 1, 2025.

Sources of Funding to Satisfy Material Cash Requirements

The Company believes that it has the financial resources needed to meet its cash requirements during the next twelve months. Cash requirements for periods beyond the next twelve months will depend on, among other things, the Company’s profitability and its ability to manage working capital requirements.

Indemnification

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

To the extent permitted under Delaware law, we indemnify our directors and officers for certain events or occurrences, when the director or officer is, or was, serving at our request in such capacity, subject to limited exceptions. The maximum potential amount of future payments we could be required to make under these indemnification obligations is unlimited; however, we have directors’ and officers’ insurance coverage that may enable us to recover future amounts paid, subject to a deductible and to the policy limits. There is no assurance that the policy limits will be sufficient to cover all damages, if any.

47

Critical Accounting Estimates

We prepare our consolidated financial statements in accordance with U.S. Generally Accepted Accounting Principles ("GAAP"). In doing so, we make estimates and assumptions that affect the amounts we reported as assets, liabilities, revenues, expenses, gains and losses, as well as related disclosures of contingent assets and liabilities. In some cases, we reasonably could have applied different estimates or assumptions and changes in our accounting estimates are reasonably likely to occur from period to period. Accordingly, actual results could differ materially from our estimates. To the extent that there are material differences between our estimates and actual results, our financial condition or results of operations will be affected. We base our estimates on past experience and other assumptions that we believe are reasonable under the circumstances, and we evaluate these estimates on an ongoing basis. We refer to accounting estimates of this type as critical accounting estimates, which we discuss further below. We have reviewed our critical accounting estimates with the Audit Committee of our Board of Directors.

See Note 2 to the consolidated financial statements in Item 8 of this Form 10-K for a summary of our significant accounting policies.

Revenue recognition

Revenue is recognized for the amount of consideration we expect to receive in exchange for products or services when control of those promised products or services is transferred to customers, which generally occurs when the goods have been shipped or delivered to the customer, risk of loss has transferred to the customer, and we have a present right to payment.

We enter into contracts that include various combinations of products and services that are generally capable of being distinct and are accounted for as separate performance obligations. For such arrangements, we allocate revenue to each performance obligation based on its relative standalone selling price (“SSP”). Judgment is required to determine the SSP for each distinct performance obligation in a contract. In some instances, 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 other 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, expected cost plus margin 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 an ongoing process, and information is reviewed regularly in order to ensure SSP reflects the most current information or trends.

The nature of our sales and marketing incentives may lead to consideration that is variable in the form of discounts based on volumes purchased, trade in allowances, rebates or other discounts. We estimate variable consideration based on the expected value approach, which required judgment in the identification of possible outcomes and in assessing the probability of those outcomes, or the most likely amount approach, which required judgement to identify the most likely amount in a range of amounts. Our estimates are based on historical experience, contract terms and other factors. Ongoing assessments are performed to determine if updates are needed to the original estimates.

We enter into collaboration arrangements that we may be required to account for in accordance with Accounting Standards Codification ("ASC") Topic 606, “Revenue from Contracts with Customers," because our collaboration partner meets the definition of a customer. When these arrangements provide an opportunity for the Company to earn milestone payments based upon the achievement of agreed-upon contract objectives, we must assess if and when it is appropriate to include those milestone payments, which represent variable consideration, in the contract's transaction price. This assessment, which impacts the timing and the amount of revenue recognized under a collaboration arrangement accounted for in accordance with ASC 606, requires management to conclude that it is probable that a significant reversal of the amount of cumulative revenue recognized with respect to a collaboration agreement will not occur as a result of including one or more milestone payments in the arrangement's transaction price, including when any uncertainty associated with the achievement of such milestones is ultimately resolved. The evaluation of when it is appropriate to include amounts earned upon the achievement of milestones in a contract's transaction price requires the application of significant assumptions and judgments, which management reassesses at the end of each reporting period.

See Note 2 and Note 5 to the consolidated financial statements in Item 8 of this Form 10-K for further discussion.

48

Allowance for credit losses

In evaluating the collectability of our accounts receivable, we assess a number of factors, including specific customers’ abilities to meet their financial obligations to us, the length of time receivables are past due, historical collection experience, current economic conditions, and reasonable and supportable forecasts. Based on these assessments, we may record a reserve for specific customers, as well as establish an allowance for expected credit losses related to our accounts receivable as a whole. If circumstances related to specific customers change, or economic conditions deteriorate such that our past collection experience is no longer relevant, our estimate of the recoverability of our accounts receivable could be further reduced from the levels provided for in the consolidated financial statements.

We evaluate specific accounts for which we believe a customer may have an inability to meet their financial obligations (for example, aging over 90 days past due or bankruptcy). In these cases, we use our judgment, based on available facts and circumstances, and record a specific reserve for that customer to reduce the receivable to an amount we expect to collect. These specific reserves are re-evaluated and adjusted as additional information is received that impacts the amount reserved. 

Income taxes 

We are subject to income taxes in the U.S. and foreign jurisdictions. Significant judgment is required in evaluating our uncertain tax positions and determining our provision for income taxes.

Although we believe we have adequately reserved for our uncertain tax positions, no assurance can be given that the final tax outcome of these matters will not be different. We adjust these reserves in light of changing facts and circumstances, such as the closing of a tax audit or the refinement of an estimate. To the extent that the final tax outcome of these matters is different than the amounts recorded, such differences will affect the provision for income taxes and the effective tax rate in the period in which such determination is made.

The provision for income taxes includes the effect of reserve provisions and changes to reserves that are considered appropriate, as well as the related net interest and penalties. In addition, we are subject to the continuous examination of our income tax returns by the Internal Revenue Service (“IRS”) and other tax authorities which may assert assessments against us. We regularly assess the likelihood of adverse outcomes resulting from these examinations and assessments to determine the adequacy of our provision for income taxes.

See Note 2 and Note 18 to the consolidated financial statements in Item 8 of this Form 10-K for further discussion.

Inventories

Inventories are stated at the lower of cost or net realizable value, with cost being determined using standard costing, which approximates the first-in, first-out method.

The inventory reserve is a critical estimate as there is rapid technological change in our industry impacting the market for our products, and there is significant judgment in estimating the amount of spare parts to keep on hand to service previously sold printers for periods of up to 10 or more years.

See Note 6 to the consolidated financial statements in Item 8 of this Form 10-K for further discussion.

Business combinations and purchase accounting

We apply purchase accounting to transactions that meet the definition of business combinations. When applying purchase accounting, we are required to estimate the fair value of the assets acquired and liabilities assumed in a business combination as of the acquisition date, for which the Company engages a third-party valuation specialist to assist. The application of purchase price accounting oftentimes results in the identification and valuation of intangible assets that may not have been previously recognized on the balance sheet of the acquired company. The amount of purchase price paid in excess of the net assets acquired is recorded as goodwill.

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The fair values of acquired assets and assumed liabilities are estimated in accordance with accounting standards which define fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. Management must apply judgment when identifying the intangible assets acquired as part of a business combination, as well as when determining the appropriate valuation technique to be applied to all acquired assets and assumed liabilities. Management also must make significant estimates and assumptions when determining the inputs for inclusion in the related valuation models. The fair values of the net assets acquired are determined primarily using Level 3 inputs (inputs that are unobservable to the marketplace participant).

The most significant estimates and assumptions relate to the determination of (1) the fair values of identified intangible assets (e.g., developed technology and trade names) and (2) the period and pattern of amortization for intangible assets that are assigned a definite life. The fair values of acquired intangible assets primarily have been determined based on projected cash flows attributable to the operations of the acquiree. The projected cash flows include various assumptions, including estimated revenue growth rates, operating margins, R&D expenditures, capital expenditures, royalty rates, and appropriate risk-adjusted discount rates used to discount the projected cash flows. The usage of different assumptions would result in the assignment of different fair values to the acquired identifiable intangible assets and, accordingly, also impact the amount of purchase consideration assigned to goodwill. Similarly, changes in the planned usage of the acquired identifiable intangible assets and/or their estimated economic lives, if any, could impact the recoverability of the assets and/or amortization period and expense attributable to the assets in the future.

Goodwill & other long-lived assets, including intangible assets

Long-lived assets, including intangible assets

We review long-lived assets (or asset groups), including intangible assets subject to amortization, for impairment whenever events or changes in circumstances indicate that the carrying value of an asset (or asset group) may not be recoverable. We assess the recoverability of the carrying value of assets (or asset groups) held for use based upon a review of undiscounted projected cash flows. Impairment losses, where identified, are measured as the excess of the carrying value of a long-lived asset (or asset group) over its estimated fair value, as determined using discounted projected cash flows. Our estimation of discounted projected cash flows requires us to make certain assumptions, including long-term revenue and expense forecasts, profit margins, discount rates and terminal growth rates.

See Note 2, Note 7, Note 8 and Note 11 to the consolidated financial statements in Item 8 of this Form 10-K for discussion of the long-lived asset impairment charges recognized during the years ended December 31, 2024 and 2023.

Goodwill

Goodwill represents the amount by which the purchase price paid to consummate a business combination exceeds the fair value of the identifiable tangible and intangible assets acquired and liabilities assumed in the business combination. Goodwill is required to be assigned to a reporting unit for purposes of subsequent measurement and, as of December 31, 2024 and 2023, all of our reported goodwill was assigned to our Healthcare reporting unit.

We assess goodwill for impairment at least annually and, between annual impairment assessments, when circumstances indicate that there is a likelihood of greater than 50% that the carrying value of a reporting unit, inclusive of any assigned goodwill, exceeds the reporting unit’s fair value. On a forward-looking basis, such circumstances may include (1) a significant and sustained decrease in the trading price or our common stock that may suggest that the fair value of the Company and, accordingly, the fair value of our Healthcare reporting unit has declined, (2) a significant adverse change in the business climate for our Healthcare reporting unit, (3) a significant adverse change in the performance of our Healthcare reporting unit and/or (4) a decision to dispose of a significant portion of our Healthcare reporting unit.

When required to be performed, a quantitative goodwill impairment test compares the carrying value of a reporting unit to its fair value, and a goodwill impairment charge results when the reporting unit’s carrying value exceeds its fair value. The performance of a quantitative goodwill impairment test requires management to apply significant estimates and judgment – particularly to (1) estimate the fair value of the Company and each of our reporting units and (2) determine the carrying value of each of our reporting units, since we do not maintain separate balance sheets for our reporting units.

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We estimate the fair value of our reporting units based primarily upon discounted cash flow projections for their underlying operations, which requires us to make significant assumptions regarding estimated cash flows, including long-term revenue and expense forecasts, profit margins, discount rates and terminal growth rates. We develop these assumptions based on the market risks unique to each reporting unit. In addition to the use of discounted cash flow projections, when appropriate, our estimates of the fair values of our reporting units include the results of applying the guideline company valuation method, which is a market approach. The application of the guideline company valuation method requires us to make judgments regarding (1) the appropriate set of comparable publicly traded guideline peer companies for which observable market multiples should be considered and (2) the appropriate multiple(s) to select from the range of multiples that may be observed for those guideline companies. We separately use reasonable and consistent allocation methodologies and approaches to allocate asset and liability balances to our reporting units when an account balance is not directly attributable to a specific reporting unit.

As a result of the goodwill impairment charge recognized in connection with our quantitative interim period goodwill impairment test performed as of September 30, 2024, the carrying value of our Healthcare reporting unit was reduced to equal the fair value of the reporting unit as of such date. Accordingly, the remaining goodwill assigned to our Healthcare reporting unit could become subject to additional impairment upon any decrease in the estimated fair value of the Healthcare reporting unit or any increase in the estimated carrying value of the Healthcare reporting unit. Factors that could result in a decrease in the estimated fair value of the Healthcare reporting unit include, but are not limited to, (1) failure to achieve the forecasted operating results and/or cash flows reflected in the projections utilized for purposes of the September 30, 2024 interim period goodwill impairment test, (2) a downward revision to the cash flows forecasted for future reporting periods, (3) an increase in the discount rate applied to forecasted cash flows due to changes in factors such as market interest rates or the selected company-specific risk premium, (4) a change in the estimated terminal growth rate for our Healthcare reporting unit, and/or (5) changes in observable market multiples for comparable publicly traded guideline peer companies. Due to (A) both the nature of and extensive period of time covered by the cash flow projections developed for purposes of our September 30, 2024 goodwill impairment test and (B) the use of market information as of a point in time to derive other key assumptions required for our September 30, 2024 goodwill impairment test, there is inherent uncertainty and risk in the underlying estimates, assumptions, and judgments that were utilized to estimate the fair value of our Healthcare reporting unit as of September 30, 2024. Accordingly, over time, the key estimates, assumptions, and judgments that were used to estimate the fair value of our Healthcare reporting unit may change due to factors such as changes in market conditions and/or the actual performance of our Healthcare reporting unit. Similarly, over time, the carrying value of our Healthcare reporting unit could increase due to factors such as capital expenditures and/or the composition of the assets and liabilities of the Company and the underlying process and estimates required to allocate assets and liabilities that are not directly attributable to a specific reporting unit between/amongst our reporting units. Any unfavorable changes to the key estimates, assumptions, judgments or inputs utilized in our most recent quantitative goodwill impairment – either on an individual basis or in the aggregate – could result in the recognition of additional impairment charges in the future.

See Note 2 and Note 9 to the consolidated financial statements in Item 8 of this Form 10-K for discussion of the goodwill impairment charges recognized during the years ended December 31, 2024 and 2023. Our annual goodwill impairment test performed for the year ended December 31, 2022 did not result in the recognition of a goodwill impairment charge.

Regenerative medicine earnout payments and performance-based stock units

Upon acquiring Volumetric on December 1, 2021, the Company became subject to potential aggregate acquisition-related earnout payments of up to $355.0 million that would be due to Volumetric’s former owners (“Sellers”) if seven individually assessed non-financial milestones were achieved. Each of the seven non-financial milestones, which individually triggered a specific earnout payment if achieved prior to an agreed upon date of either December 31, 2030 or December 31, 2035, was based upon specific advances in regenerative medicine related to lungs or tissue organs. For each milestone, payment was only due to the extent that the Sellers continue to be employed by the Company at the time that a milestone was achieved. As the earnout payments require the continued employment of Volumetric’s Sellers, the Company recognized each individual earnout payment as compensation expense over the period commencing on the date that the related milestone was deemed probable of achievement through the anticipated date of achievement.

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

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As the milestones that trigger the Volumetric earnout payments and the vesting of the PSUs were (1) based upon scientific and technological advancements that were expected to require multiple years of R&D to achieve and (2) subject to significant known and unknown risks and uncertainties, management was to apply significant assumptions and judgment at each balance sheet date to assess both the probability of achievement and expected timing of achievement. A change in management’s assumptions or estimates regarding the probability and/or timing of achievement of a milestone in connection with management’s quarterly reassessment could materially impact the amount of compensation expense recognized for the respective and future periods as follows:

•A change in assumptions that resulted in a milestone first being deemed probable of achievement would result in the recognition of incremental compensation expense in the Company’s consolidated statement of operations in the respective period;

•A change in assumption regarding the timing of achievement of a milestone would result in the acceleration or deceleration of the recognition of future compensation expense; and/or

•A change in assumption that results in a milestone no longer being deemed probable of achievement would result in a full reversal of previously recognized expense in the respective period.

Prior to the year ended December 31, 2023, the Company had been recognizing compensation expense related to (1) one Volumetric milestone-based payment, for which the potential amount due to the Sellers would be $65.0 million, and (2) one PSU milestone (“the RegMed Awards”), for which the aggregate grant date fair value of the outstanding and unvested awards was $4.5 million as of December 31, 2022, as the related Volumetric earnout and RegMed Award milestone was deemed probable of achievement. During the year ended December 31, 2023, the Company decided to reduce its budgeted funding for the R&D related to the Volumetric earnout and RegMed Award milestone, which resulted in the Company concluding that it was no longer probable that the milestone would be achieved by the end of the term of the Volumetric earnout arrangement or prior to the expiration and cancellation of the RegMed Awards. In concluding that the Volumetric and RegMed Award milestone would no longer be achieved, the Company reversed all of the previously accrued compensation expense, one half of which was expected to be settled with common shares, which had an income statement impact of $18.4 million for the year ended December 31, 2023.

As a result of the reversal of all previously recognized expense during the year ended December 31, 2023, the Company did not recognize any compensation expense during the year ended December 31, 2023 related to (1) the $355.0 million of potential Volumetric earnout payments provided for in the Volumetric acquisition agreement or (2) the outstanding RegMed Awards with an aggregate grant date fair value of $17.2 million. The Company did not recognize any of this expense because none of the related non-financial milestones were deemed probable of achievement as of December 31, 2023.

Additionally, in February 2024, the Volumetric Sellers were informed that four of the seven milestones included in the Volumetric acquisition agreement were terminated. The termination of these milestones, which related to kidney and liver research, was based upon a determination that their achievement was no longer financially viable due to the loss of the funding required from the Company's key strategic partner for the related R&D efforts. As a result of the termination of the four milestones in February 2024, for periods subsequent to December 31, 2023, the Company's maximum liability for the Volumetric earnout payments related to the remaining three milestones was $175.0 million.

Furthermore, on April 29, 2024, the key employees from Volumetric, who were required to be employed at the time of achievement of each science-based milestone outlined in the Volumetric acquisition agreement in order for each related acquisition earnout payment to become payable, resigned from their positions with the Company. As a result of the resignation of the key employees for whom continued employment was required for any of the remaining earnout payments to become payable, the parties to which the remaining three earnout payments totaling $175.0 million were potentially payable were notified that such amount was no longer eligible to be earned. For further information concerning the termination of the Volumetric milestones related to potential earnout payments, refer to Note 22 to the consolidated financial statements included in Item 8 of this Form 10-K.

Further changes to management’s assumptions regarding the probability and/or timing of achievement of the RegMed Award milestones or, alternatively, changes to the arrangements or circumstances that provide for compensation to be paid upon the achievement of the RegMed Award milestones, could significantly impact the amount of compensation expense recognized by the Company in the future.

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Systemic Bio Phantom Plan

During the year ended December 31, 2023, we began granting phantom unit awards ("Phantom Units") under a new compensation plan designed for employees and non-employees performing services for Systemic Bio, a wholly-owned subsidiary of 3D Systems. All awards granted under the plan are subsidiary-level awards. The Phantom Units granted under the plan include both a time-based vesting condition (generally 4 years, subject to acceleration in connection with specified liquidity events) and a market condition that is met if (1) the value of Systemic Bio exceeds a specified multiple of the capital invested in this subsidiary (the "hurdle") and (2) the business achieves a specified minimum internal rate of return. The market condition will be assessed upon (A) a trigger event (e.g., change-in-control, IPO, or plan expiration of December 31, 2030) and/or (B) an interim liquidity event (defined as January 1, 2028) that occurs prior to a trigger event. All awards granted under the plan are liability-classified due to our intention to settle these awards with cash; although, we have discretion to partially or fully settle these awards in equity upon vesting. Liability classification of the awards requires them to be remeasured at their estimated fair value at the end of each reporting period. Due to the presence of the market-condition and the fact that Systemic Bio does not have a readily available share price, the awards are valued using a Monte Carlo simulation with the assistance of a third-party valuation firm. This valuation requires significant judgment regarding the input of various assumptions and estimates, which include the projected cash flows of (including projected capital invested in) Systemic Bio, the probability and/or timing of a trigger event or a liquidity event, the expected stock price volatility for selected public companies with comparable characteristics to Systemic Bio, the discount for the lack of marketability of Systemic Bio as a privately-held company, and the risk-free interest rate. A change in management’s judgment regarding these assumptions or estimates can materially impact the periodic measurement of the liability and the related amount of compensation expense recognized in the Company’s consolidated financial statements.

Recent Accounting Pronouncements

See Note 2 to the consolidated financial statements in Item 8 of this Form 10-K for a discussion of recent accounting pronouncements.