Basis of Presentation

9 Months Ended

Sep. 30, 2022

Organization, Consolidation and Presentation of Financial Statements [Abstract]

(1) Basis of Presentation

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

The unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) and the rules and regulations of the Securities and Exchange Commission (“SEC”) applicable to interim reports. Accordingly, they do not include all the information and notes required by GAAP for complete financial statements and should be read in conjunction with the audited financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2021 (“2021 Form 10-K”). Our annual reporting period is the calendar year.

In the opinion of management, the unaudited condensed consolidated financial statements contain all adjustments, consisting of adjustments of a normal recurring nature, necessary to present fairly the financial position, results of operations, and cash flows for the periods presented. The results of operations for the three and nine months ended September 30, 2022 are not necessarily indicative of the results to be expected for the full year. The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements. Actual results may differ from those estimates and assumptions.

The COVID-19 pandemic continues to impact the global economy, disrupt global supply chains, and create significant volatility in the financial markets. These factors have resulted in inflationary and cost pressures that have significantly increased, and continue to adversely impact, our production and distribution costs, including costs of spare parts and materials, packaging materials, and freight. We continue to experience pressure on our supply chain due to strained transportation capacity, lack of sufficient labor availability, and manufacturing backlogs. In addition, the Russia conflict with Ukraine led to our exit from the Russian market early this year, and the conflict continues to exacerbate inflationary cost pressures and supply chain constraints which are negatively impacting the global economy and our business.

Due to the COVID-19 pandemic, our affiliates, employees, suppliers, customers, and others have been restricted or prevented from conducting normal business activities, including shutdowns, travel restrictions and other actions that may be requested or mandated by governmental authorities. While these restrictions have eased since 2021, if the COVID-19 pandemic resurges, governmental authorities may reimpose additional health and safety requirements which could again restrict or prevent normal business activities. Our offices are currently open and business travel has resumed, with safety measures in place and in accordance with local guidance.

We are managing our operations, continuing to monitor the ongoing impacts of COVID-19, and reviewing guidance from international and domestic authorities. We remain committed to protecting our employees, delivering for our customers, and supporting our communities.

The COVID-19 pandemic and other factors impacting the current economic environment, such as inflation, weak economic conditions, including the possibility of a recession, and equity market volatility continued to impact our reported results for the year ended December 31, 2021, as well as the three and nine months ended September 30, 2022. We are unable to predict the longer-term impact that these factors may have on our business, results of operations, financial position or cash flows. The extent to which our operations may be impacted will depend largely on future developments, which are highly uncertain and cannot be accurately predicted, including the severity or resurgence of a COVID-19 outbreak, actions by government authorities to contain an outbreak or treat its impact, actions by government authorities to address inflationary and cost pressures, and the severity, length, and potential expansion of the conflict in Ukraine. The impacts of these uncertain global health, economic and geopolitical conditions could result in reduced customer demand due to delays in purchasing decisions or the reduction in their use of our services, further supply chain disruptions, including the shortages of critical components, and continued disruptions to, and volatility in, the financial markets. Events surrounding the global economy, geopolitics, and the COVID-19 pandemic continue to evolve. Although we believe that we will ultimately emerge from these events well positioned for long-term growth, uncertainties remain and, as such, we cannot reasonably estimate the duration or extent of these adverse factors on our business, results of operations, financial position, or cash flows.

As of January 1, 2021, we determined that the Company has two reportable segments: Healthcare and Industrial. Prior to this determination, the Company reported its consolidated results in a single reportable segment. The change in segment reporting as of January 1, 2021 was the result of changes to how the chief operating decision maker (“CODM”) assesses the financial performance of the Company and changes in the decision-making process driving future operating performance. As a result of

this re-segmentation, the Company performed a quantitative analysis to assess for potential impairment of our goodwill immediately following the re-segmentation. Based on available information and analysis as of January 1, 2021, we determined that the fair values of both our Healthcare and Industrial reporting units exceeded their carrying values.

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

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

During the fourth quarter ended December 31, 2021, we became aware that certain amounts related to the purchase of non-controlling interests previously presented as investing cash outflows should have been reported as financing cash outflows within the statements of cash flows. The error affected the previously issued statements of cash flows for the three, six and nine month periods within the December 31, 2021, and 2020 annual periods as well as the annual periods ended December 31, 2020, and 2019. We note that this change did not impact the as reported net increase (decrease) in cash, cash equivalents and restricted cash within the annual 2020 and 2019 statements of cash flows or the interim statements of cash flows for the years ended December 31, 2021, and 2020. We further note that this reclassification did not affect our balance sheet, statements of operations, statements of comprehensive income (loss) and statements of stockholders' equity. We evaluated the materiality, including both quantitative and qualitative considerations, of this presentation-only error and concluded it was not material to any previously reported quarter or year-end financial statement. The impact of the change on our previously reported statement of cash flows for the nine months ended September 30, 2021 is to increase net cash provided by investing activities by $4,000 and to decrease cash used in financing activities by $4,000.


	Nine Months Ended September 30, 2021
	As Reported		Changed		Revised

Net cash provided by operating activities	$	62,652	$	—	$	62,652

Net cash provided by investing activities	395,641		4,000		399,641

Net cash (used in) financing activities	(32,202)		(4,000)		(36,202)

Effect of exchange rate changes on cash, cash equivalents and restricted cash	(7,737)		—		(7,737)

Net increase in cash, cash equivalents and restricted cash	$	418,354	$	—	$	418,354

Summary of Significant Accounting Policies

Short-Term Investments

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

Redeemable Non-controlling Interest

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

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

Recently Adopted Accounting Standards

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