Stock-Based Compensation

9 Months Ended

Sep. 30, 2023

Share-Based Payment Arrangement [Abstract]

(12) Stock-Based Compensation

Stock Incentive Plans

2015 Incentive Plan

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

Systemic Bio Phantom Unit Plan

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

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

Other Compensation Arrangements that Include Share Settlement

Regenerative Medicine Earnout Payments and Performance-Based Stock Units

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

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

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

dp polar Earnout

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

Stock-Based Compensation Activity and Expense

2015 Incentive Plan

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

The restricted stock granted during the nine months ended September 30, 2023 included 681 shares of market-based awards, whereby the number of shares that ultimately vest will be based upon the three-year performance of the Company's share price as compared to an index. These awards were valued using a Monte Carlo simulation, and the grant date fair value was $18.91 per share.

The following table shows the stock-based compensation expense recognized during the three and nine months ended September 30, 2023 and 2022:


	Three Months Ended September 30,				Nine Months Ended September 30,
(in thousands)	2023		2022		2023		2022
Stock-based compensation expense	$	(3,142)	$	11,447	$	15,140	$	31,508
Tax benefit	$	—	$	—	$	—	$	—

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

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

Systemic Bio Phantom Unit Plan

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