EDGAR 10-K Filing

Company CIK: 910638
Filing Year: 2022
Filename: 910638_10-K_2022_0000910638-22-000013.json

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ITEM 1. BUSINESS
Item 1. Business
General
3D Systems Corporation (“3D Systems” or the “Company” or “we” or “us”) provides comprehensive 3D printing and digital manufacturing solutions, including 3D printers for plastics, metals, wax and bioinks, materials, software, advanced manufacturing services and digital design tools. Our solutions support advanced applications in two key industry verticals: Healthcare (which includes dental, medical devices, personalized health services and regenerative medicine) and Industrial (which includes aerospace, defense, transportation and general manufacturing). We market our products and services through subsidiaries and channel partners in North America and South America (collectively referred to as “Americas”), Europe, the Middle East, and Africa (collectively referred to as "EMEA") and Asia-Pacific and Oceania (collectively referred to as "APAC").
Business Strategy
Accelerating Additive Manufacturing Adoption
We partner with customers to enable them to adopt and scale additive manufacturing in their production environments. We believe that our additive manufacturing capabilities can help customers solve a number of design and manufacturing challenges - such as improved lead times, enhanced design freedom, part consolidation and the ability for mass customization. We believe we have both the scale and the breadth of technologies, encompassing hardware platforms, materials and software, that our customers require for the successful implementation of additive manufacturing into their design and manufacturing processes. Using a strong application focus in each of our two business segments, we integrate our printer, material and software technologies in unique combinations to solve a customer’s product need. Once complete, we can scale the process for the customer to a certain production level through our Advanced Manufacturing solutions, and, with increasing demand, we can enable a customer to continue scaling to high volumes. This transfer of the workflow involves providing the printing systems, materials and software, along with the process definition, that results in a seamless transfer of capability to the manufacturer. We expect the result of this approach to drive recurring revenue streams as customers adopt additive manufacturing solutions and consume materials to produce parts, utilize software to manage the print process and manufacturing operations, and make use of our service offerings for maintenance and upgrades. Our proficiency in providing industry focused application and solution development for customers includes a number of internal assets and capabilities, including:
a.A full range of additive manufacturing hardware technologies and materials to address needs in metals, plastics, wax and bioprinting
b.A services infrastructure that includes industry and technology application experts, customer innovation and advanced manufacturing centers and post-sale service and support
c.A software suite that enables end-to-end additive manufacturing including design, simulation, process management and manufacturing execution
d.Scale that includes significant and diverse experience in production parts and applications combined with a global reach to service our customers worldwide
As part of our strategy to enable customers to adopt additive manufacturing, in November 2021 we acquired Oqton, a software company that is a leader in the creation of a new breed of intelligent, cloud-based Manufacturing Operating System (MOS) platform. This platform is tailored for flexible production environments that increasingly utilize a range of advanced manufacturing and automation technologies, including additive manufacturing solutions, in their production workflows. The cloud-based solution leverages the Industrial Internet of Things, artificial intelligence, and machine learning technologies to deliver solutions to customers seeking to automate their digital manufacturing workflows, scale their operations and enhance their competitive position. In addition, in May 2021, we announced the acquisition of Additive Works, a Germany-based software company focused upon simulation-based optimization and automation of the additive manufacturing print preparation and workflow. This highly automated simulation software increases productivity by reducing set-up time while improving product yield, throughput, and component performance.
Investing in Regenerative Medicine
As an early and continuing innovator in additive manufacturing, we have significant experience in bringing this technology to new markets. In 2021, we announced an expansion of our focus and investments in the application of additive manufacturing for regenerative medicine. Our approach in regenerative medicine involves three strategies. The first strategy is the use of additive manufacturing for human organ transplantation. Each year, end-stage organ failure kills millions of people. However, the supply of donated organs is insufficient to meet the needs of patients seeking transplantation. In 2021, we announced an expansion of our organ printing development program, including our work with a key strategic partner. This program was first established in 2017 and combines our 3D printing expertise with the regenerative medicine and biotechnology expertise of our partner. To date, our program has had a focus on developing the capability to print scaffolds for human lungs, with a long-term goal of allowing all patients with end-stage lung disease to receive transplants which will enable them to enjoy long and active lives. Based upon the progress made toward this goal, the program was expanded to include two additional human organs.
Our second strategy involves the application of our bio-printing technology to non-organ human applications. We are focused on internal development, often in conjunction with strategic or development partners, of applications that combine our bio-printing and materials expertise with the application expertise of our partners.
Our third regenerative medicine strategy extends our bio-printing technologies into research labs, providing advanced printing systems and unique biological materials to those that advance the science of medicine. We believe our ability to print high-precision, three-dimensional vascularized cellular structures can be used in a number of research areas such as the development of new, more effective drug therapies.
To support our regenerative medicine efforts, in December 2021 we acquired Volumetric, a biotech company whose mission is to develop the ability to manufacture human organs using bioprinting methods and the underlying technologies required to create these highly complex biological structures. This acquisition is expected to supplement and expand our existing capabilities in bioprinting and regenerative medicine. In addition, in May 2021, we announced the acquisition of Allevi, a developer of bioprinting solutions, comprising of bioprinters, biomaterials, and specialized laboratory software.
Products
We offer our customers a comprehensive range of 3D printers, materials, software, and digital design tools.
3D Printers and Materials
Our 3D printers transform digital data input generated by 3D design software, Computer Aided Design (“CAD”) software or other 3D design tools, into printed parts using several unique print engines that employ proprietary, additive layer by layer building processes with a variety of materials. As part of our solutions oriented strategy, we offer a broad range of 3D printing technologies including Stereolithography (SLA), Selective Laser Sintering, Direct Metal Printing, MultiJet Printing, ColorJet Printing and extrusion and SLA based bioprinting. Our printers utilize a wide range of materials, the majority of which are proprietary materials that we develop, blend, and market. Our comprehensive range of materials includes plastic, nylon, metal, composite, elastomeric, wax, polymeric dental materials and biocompatible materials. We augment and complement our portfolio of engineered materials with materials that we purchase or develop with third parties under private label and distribution arrangements.
We work closely with our customers to optimize the performance of our materials in their applications. Our expertise in materials science and formulation, combined with our processes, software and equipment, enables us to provide unique solutions and help our customers select the material that best meets their needs with optimal cost and performance results.
As part of our solutions approach, our currently offered printers, with the exception of direct metal printers and bioprinters, have built-in intelligence to make them integrated, closed systems. For these integrated printers, we furnish materials specifically designed for use in those printers, which are packaged in smart cartridges and utilize material delivery systems. These integrated materials are designed to enhance system functionality, productivity, reliability and materials' shelf life, in addition to providing our customers with a built-in quality management system and a fully integrated workflow solution.
For our bioprinting solutions, we also offer research protocols that include bioink, consumable and reagent recommendations. These protocols cover pre-print preparation of cells and biomaterials, 3D printing parameter setting, and post-print processes. Our protocols are utilized by research organizations to run experiments, share research findings, and enhance the utilization of our bioprinters.
Software and Related Products
We provide digital design tools, including software, scanners and haptic devices. We offer solutions for product design, simulation, mold and die design, 3D scan-to-print, reverse engineering, production machining, metrology, inspection and manufacturing workflows. These products are designed to enable a seamless workflow for customers and are marketed under brand names such as Geomagic®. We also offer 3D Sprint and 3DXpert, proprietary software to prepare and optimize CAD data and manage the additive manufacturing processes. These software products provide automated support building and placement, build platform management, print simulation and print queue management capabilities. The outcome is the ability to improve the quality of prints, optimize design structure, shorten design to manufacturing lead time and minimize manufacturing costs.
For our bioprinters, we offer Bioprint Pro as a software solution that allows researchers to design and bioprint repeatable experiments. Bioprint Pro includes experiment-based workflows, basic CAD modeling, and optimized biomaterial presets.
Services
Maintenance and Training Services
We provide a variety of customer services, local application support and field support on a worldwide basis for our products, including installation of new printers at customers’ sites, maintenance agreements, periodic hardware upgrades and software updates. We also provide services to assist our customers and partners in developing new applications for our technologies, to facilitate the use of our technology for specific applications, to train customers on the use of our printers and to maintain our printers at customers’ sites. We provide these services, spare parts and field support either directly or through a network of reseller partners. We employ customer-support sales engineers to support our worldwide customer base, and we seek to continue to strengthen and enhance our partner network and service offerings.
Our 3D printers are sold with a warranty period ranging from 90 days to one year. After the warranty period, we generally offer service contracts that enable our customers to continue service and maintenance coverage. These service contracts are offered with various levels of support and options, and are priced accordingly. One entitlement of our service contracts is our service engineers provide regularly scheduled preventive maintenance visits to customer sites. Additionally, we provide training to our partners to enable them to also perform these services. Another contract entitlement on select printer models is proactive remote troubleshooting capability through our 3DConnect Service IoT platform. From time to time, we also offer upgrade kits for certain of our printers that enable our existing customers to take advantage of new or enhanced printer capabilities. In some cases, we have discontinued upgrade support and maintenance agreements for certain of our older legacy printers.
Advanced Manufacturing
As part of our strategy to help customers adopt additive manufacturing, we offer advanced manufacturing services through facilities in the Americas and EMEA regions. These facilities supplement customer manufacturing environments by allowing them to test and ramp production using our solutions before transitioning production to their environment. This allows us to provide application and production expertise and refine the production process as part of our solutions approach. As the process is validated and volumes ramp, customers may choose to move production to their facilities using equipment, materials, software and services that they purchase from us. These facilities operate under stringent quality systems and are also utilized by customers in regulated industries such as healthcare and aerospace & defense for sustained outsourced production of
hundreds of thousands of parts per year.
Software Services
In addition to our software license products, we offer software maintenance and cloud-software subscriptions, which includes updates and support for our licensed software products. Our licensed software is sold with a maintenance service that generally covers a period of one year. After this initial period, we offer single and multi-year maintenance contracts that enable our customers to continue coverage. These software service contracts typically include free software updates and various levels of technical support. In addition, we offer Oqton as a cloud based-manufacturing operating system designed to automate digital production workflows, enable machine monitoring, end-to-end manufacturing visibility and production traceability. For our cloud subscription solutions, customer support and software updates are included as part of the solution.
Healthcare Services
As part of our precision healthcare services, we provide surgical planning, modeling, prototyping and manufacturing services. We offer printing and finishing of medical and dental devices, anatomical models and surgical guides and tools, as well as modeling, design and planning services, including VSP™ surgical planning solutions.
Global Operations
We operate in the Americas, EMEA and APAC regions, and market our products and services in those areas as well as to other parts of the world.
In maintaining operations outside the United States (the “U.S.”), we expose our business to risks inherent in such operations, including currency exchange rate fluctuations. Information on foreign exchange risk appears in Part I, Item 1A, “Risk Factors,” Part II, Item 7A, “Quantitative and Qualitative Disclosures about Market Risk” and Part II, Item 8, “Financial Statements and Supplementary Data,” of this Form 10-K.
Marketing and Customers
Our Go-to-Market strategy focuses on an integrated approach that is directed at providing comprehensive design to manufacturing solutions meeting the broad spectrum of our customer needs. We utilize a wide range of marketing tools to generate demand and create awareness for our products and services worldwide. Our marketing and communications teams support our demand generation activities by providing marketing campaigns, digital presence and outreach, and event and targeted vertical seminar engagements.
We promote and sell our solutions globally through a direct sales force, channel partners and, in certain geographies, appointed distributors. Our customer success organization includes sales professionals, application engineers, vertical specialists, and other support teams throughout the Americas, EMEA and APAC regions. These teams are responsible for providing complete service to our customers and channel partners, from a technical consultation to the sale of our software, printer, and services products.
Our application engineers collaborate closely with our customers to solve complex design and additive manufacturing challenges, leveraging our technology, software, materials and services to develop advanced applications across healthcare and industrial segments. Additionally, our Customer Innovation Centers provide access to the resources necessary to develop, validate, and commercialize customer applications.
We sell our software solutions, including our Oqton manufacturing operating system software, through a dedicated software sales team. Our software may be sold to customers with 3D printing equipment from competitive equipment manufacturers and, in some cases, we resell our software through these manufacturers.
Our customers include major companies as well as small and midsize businesses in a broad range of industries, including medical, dental, automotive, aerospace, durable goods, government, defense, technology, jewelry, electronics, education, consumer goods, energy, biotechnology and others. For the years ended December 31, 2021, 2020, and 2019, one customer accounted for approximately 22%, 13% and 11% of our consolidated revenue, respectively. We expect to maintain our relationship with this customer.
Production and Suppliers
We outsource our 3D printer assembly and refurbishment activities to selected design, engineering and manufacturing companies in the U.S., Switzerland and Belgium. We purchase finished printers from these suppliers pursuant to forecasts and customer orders that we supply to them. These suppliers also carry out quality control procedures on our printers prior to their shipment to customers. As part of these activities, these suppliers have responsibility for procuring the components and sub-assemblies either from us or third-party suppliers, which are sourced from a geographically diverse mix of countries. While the outsourced suppliers of our printers have responsibility for the supply chain and inventory of components for the printers they assemble, the components, parts and sub-assemblies that are used in our printers are generally available from several potential suppliers.
We produce materials at our facilities in Rock Hill, South Carolina, Marly, Switzerland and Soesterberg, Netherlands. We also have arrangements with third parties who blend certain materials according to our specifications that we sell under our own brand names, and we purchase certain complementary materials from third parties for resale to our customers.
Our equipment assembly and materials blending activities, advanced manufacturing services and certain research and development activities are subject to compliance with applicable federal, state and local provisions regulating the storage, use and discharge of materials into the environment. We believe that we are in compliance, in all material respects, with such regulations as currently in effect, and we expect continued compliance with them will not have a material adverse effect on our capital expenditures, results of operations or consolidated financial position.
As a company with global operations, we are subject to the laws of the U.S. and multiple foreign jurisdictions in which we operate and the rules and regulations of various governing bodies, which may differ among jurisdictions. Compliance with these laws, rules and regulations has not had, and is not expected to have, a material effect on our capital expenditures, results of operations or competitive position as compared to prior periods.
Research and Development
The 3D printing industry continues to experience rapid technological change and developments in hardware, software and materials. Consequently, we have ongoing research and development programs to develop new products and to enhance our portfolio of products and services, as well as to improve and expand the capabilities of our solutions. Our efforts are often augmented by development arrangements with research institutions, including universities, customers, suppliers, assembly and design firms, engineering companies, materials companies, governments and other partners.
We are also engaged in various research and development efforts related to regenerative medicine. These efforts include the application of 3D printing technologies to the development of transplantable organs and non-organ human applications. These efforts are expected to result in new products that we will market directly or in conjunction with development or channel partners.
In addition to our internally developed technology platforms, we have acquired products and technologies developed by others by acquiring business entities that held ownership rights to such products and technologies. In other instances, we have licensed or purchased the intellectual property rights of technologies developed by third parties through agreements that may obligate us to pay a license fee or royalty, typically based upon a dollar amount per unit or a percentage of the revenue generated by such products.
Intellectual Property
We regard our technology platforms and materials as proprietary and seek to protect them through copyrights, patents, trademarks and trade secrets. At December 31, 2021 and 2020 we held 1,332 and 1,269 patents worldwide, respectively. At December 31, 2021 and 2020, we had 261 and 312 pending patent applications worldwide, respectively. The principal issued patents covering aspects of our various technologies will expire at varying times through the year 2034.
In addition, we are a party to various licenses that have had the effect of broadening the range of the patents, patent applications and other intellectual property available to us.
We have also entered into licensing or cross-licensing arrangements with various companies in the U.S. and other countries that enable those companies to utilize our technologies in their products or that enable us to use their technologies in our products. Under certain of these licenses, we are entitled to receive, or we are obligated to pay, royalties for the sale of licensed products in the U.S. or in other countries. The amount of such royalties was not material to any of our annual results of operations or financial position for the three-year period ended December 31, 2021.
We believe that, while our patents and licenses provide us with a competitive advantage, our success also depends on our marketing, business development, applications know-how and ongoing research and development efforts. Accordingly, we believe the expiration of any of the patents, patent applications, or licenses discussed above would not be material to our business or financial position.
Competition
We compete with other suppliers of 3D printers, materials, software and healthcare solutions as well as with suppliers of conventional manufacturing solutions. We compete with these suppliers for customers as well as channel partners for certain of our products. Development of new technologies or techniques not encompassed by the patents that we own or license may result in additional future competition.
Our competitors operate both globally and regionally, and many of them have well-recognized brands and product lines.
We believe principal competitive factors include the functionality and breadth of our technology and materials, process and application know-how, total cost of operation of the solution, product reliability and the ability to provide a complete solution to meet customer needs. We believe that our future success depends on our ability to provide high-quality solutions, introduce new products and services to meet evolving customer needs and market opportunities, and extend our technologies to new applications. Accordingly, our ongoing research and development programs are intended to enable us to continue technology advancement and develop innovative new solutions for the marketplace.
Human Capital
At 3D Systems, our purpose is to deliver leading additive solutions for industrial and healthcare applications. In support of this purpose, our priority is to invest in our people by focusing on bringing in top talent, providing training and development opportunities to strengthen capabilities and skills, and ensuring a safe and healthy work environment. As of December 31, 2021, 1,721 full-time and part-time employees, compared to 1,995 full-time and part-time employees as of December 31, 2020, were employed at 3D Systems. None of our U.S. employees are covered by collective bargaining agreements; however, some employees outside the U.S. are subject to local statutory employment and labor arrangements. We have not experienced any material work stoppages and believe that our relations with our employees are satisfactory.
Talent Development & Engagement
Through our operating history and experience with technological innovation, we appreciate the importance of retention, growth, and development of our employees - our employees are key to achieving long-term success. Our goal is to foster a workplace culture and employee experience that drives innovation with purpose, profitable growth, and delivers ‘extraordinary’ to our customers. To do so, we have programs for acquiring strategic talent, developing our teams to build key capabilities and skills, and engaging, motivating, and retaining our employees to do their best work. We regularly survey our employees to seek their feedback in areas such as culture, career development, inclusivity, integrity, and employee success. To address the evolving needs of our business, we perform strategic workforce and succession planning as well as ongoing evaluation of our organizational design, culture, and values.
Diversity, Equity & Inclusion
Employees span the Americas (54%), Europe, Middle East and Africa (36%), and Asia-Pacific (10%) with approximately 819 employees located outside the U.S. This global representation promotes diversity of thought, experiences, culture, and backgrounds that enhances our ability to deliver innovative solutions to our customers, in support of our company value to ‘build great teams.’ We are committed to fostering an engaged, diverse, inclusive, safe, and purpose-driven culture where employees have equitable opportunities for success. As we execute our talent management strategy, diversity, equity, and inclusion is a key element that influences our measures of success. We monitor the representation of our global employees across the company.
Compensation & Benefits
We design our compensation programs to be competitive and equitable to support employees in sharing in the success of 3D Systems. We tailor our compensation programs to attract and retain top talent to drive success in our current business priorities and emerging strategies. Additionally, we recognize that employees thrive when they have the resources to meet their needs and the time and support to succeed in their professional and personal lives. In support of this, we offer a wide variety of market competitive benefits to employees around the world. Our Compensation Committee of the Board of Directors oversees the design of executive compensation and equity plans, which are designed to align executive pay to the delivery of long-term
shareholder value.
Workplace Health & Safety
We are committed to creating a safe, secure, healthy, and injury-free work environment for our employees, customers, partners,
and visitors. Our focus is on reducing significant safety risks and driving a strong safety culture through communication, awareness, and visible leadership. To assist in achieving this commitment, we provide substantial safety trainings and necessary equipment at all facilities, educating and encouraging our employees to proactively identify and eliminate unsafe actions and conditions. We have specific safety programs in place for those working in potentially high-hazard environments. We monitor injury and illness health and safety metrics across our organization to continually evaluate our safety programs to meet the needs of our teams.
COVID-19
Our top priority is the health and safety of our employees and their families and communities, as we continue to manage our business through the COVID-19 pandemic. Throughout the COVID-19 pandemic, our leadership regularly reviewed and adapted our COVID-19 protocols based on evolving research and guidance. We have reopened our offices and begun business travel, with safety measures in place and in accordance with local guidance. Additionally, we implemented a hybrid-work program globally, providing more flexibility for employees to work remotely. We continue to monitor local transmission rates and regulatory guidance, and remain committed to protecting our employees, delivering for our customers, and supporting our communities. We are subject to vaccination and workplace safety protocols of the United States Federal Government Executive Order on Ensuring Adequate COVID Safety Protocols for Federal Contractors, and the COVID-19 Workplace Safety Guidance for Federal Contractors and Subcontractors issued by the Safer Federal Workforce Task Force. In support of a safe work environment, we have a vaccine policy for our U.S. employees, and a visitor policy to ensure those visiting our sites are taking the necessary health and safety precautions.
Available Information
Refer to our website to learn more about our company culture, code of conduct, values, and sustainability initiatives. Our website address is www.3DSystems.com. The information contained on our website is neither a part of, nor incorporated by reference into, this Form 10-K or any other document that we file with or furnish to the Securities and Exchange Commission (“SEC”). We make available free of charge through our website our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, amendments to those reports and other documents that we file with the SEC, as soon as reasonably practicable after we electronically file them with, or furnish them to, the SEC.
Many of our corporate governance materials, including our Code of Conduct, Code of Ethics for Senior Financial Executives and Directors, Corporate Governance Guidelines, current charters of each of the standing committees of the Board of Directors and our corporate charter documents and by-laws are available on our website.
Information about our Executive Officers
The information appearing in the table below sets forth the position or positions held by each of our executive officers and his or her age as of March 1, 2022. All of our executive officers serve at the pleasure of the Board of Directors. There are no family relationships among any of our executive officers or directors.
Name and Current Position Age as of March 1, 2022
Jeffrey A. Graves 60
President and Chief Executive Officer
Jagtar Narula 51
Executive Vice President and Chief Financial Officer
Charles W. Hull 82
Executive Vice President and Chief Technology Officer for Regenerative Medicine
Andrew M. Johnson 47
Executive Vice President, Chief Legal Officer and Secretary
Menno Ellis 49
Executive Vice President, Healthcare Solutions
Reji Puthenveetil 53
Executive Vice President, Industrial Solutions
David Leigh 54
Executive Vice President, Chief Technology Officer For Additive Manufacturing
Phyllis Nordstrom 43
Executive Vice President, Chief People and Culture Officer and Chief Compliance Officer
Jeffrey A. Graves, President and Chief Executive Officer. Dr. Graves was appointed the Company’s President and Chief Executive Officer in May 2020. Prior to joining the Company, from 2012 to May 2020, Dr. Graves served as Chief Executive Officer, President and Director of MTS Systems Corporation, a global supplier of test, simulation, and measurement systems. From 2005 until 2012, Dr. Graves served as President and Chief Executive Officer of C&D Technologies, Inc. Dr. Graves also held leadership roles with Kemet Corporation, an electronic component manufacturing company, as Chief Operating Officer from 2001 to 2003 and Chief Executive Officer from 2003 to 2005. Previously, he held a number of leadership and technical roles with General Electric, Rockwell Automation and Howmet Corporation. In addition to serving on the Company's Board of Directors, Dr. Graves serves on the board of directors of Hexcel Corporation.
Jagtar Narula, Executive Vice President and Chief Financial Officer. Mr. Narula was appointed the Company’s Executive Vice President and Chief Financial Officer in September 2020. Prior to joining the Company, Mr. Narula served as Senior Vice President of Corporate Strategy and Business Development for Blackbaud, Inc. where he also previously led investor relations and financial planning. Additionally, he held finance leadership positions of increasing responsibility at Xerox, General Electric and with private equity.
Charles W. Hull, Executive Vice President, Chief Technology Officer for Regenerative Medicine. Mr. Hull is a founder of the Company and has served on our Board of Directors since 1993. He has served as Chief Technology Officer since 1997, as Executive Vice President since 2000 and as Chief Technology Officer for Regenerative Medicine since 2021. Mr. Hull has also previously served in various other executive capacities at the Company since 1986, including Chief Executive Officer, Vice Chairman of the Board of Directors and President and Chief Operating Officer.
Andrew M. Johnson, Executive Vice President, Chief Legal Officer and Secretary. Mr. Johnson has served as Executive Vice President and Chief Legal Officer since November 2014. He served as Interim President and Chief Executive Officer, Chief Legal Officer and Secretary from October 2015 to April 2016 and as Vice President, General Counsel and Secretary from April 2012 to November 2014. Previously, he served as Assistant General Counsel and Assistant Secretary.
Menno Ellis, Executive Vice President, Healthcare Solutions. Mr. Ellis has served as Executive Vice President, Healthcare Solutions since July 2020. He joined the Company in December 2016 as Senior Vice President Strategy and Vertical Markets. He served as Senior Vice President and General Manager of the Plastics Business Unit, and is now responsible for the Healthcare Solutions group, which encompasses Dental, Medical and Simulations businesses. Prior to joining the Company, he spent 20 years in management and business consulting services with an emphasis on sustainable, long-term revenue growth.
Reji Puthenveetil, Executive Vice President, Industrial Solutions. Mr. Puthenveetil has served as Executive Vice President, Industrial Solutions since July 2020. Prior to joining the Company, Mr. Puthenveetil spent 25 years as a management consultant for Group Newhouse helping companies, such as Lockheed Martin, Xcel Energy, Kia Motors, and Thales Group. Mr. Puthenveetil's work across multiple industries led to the design of a clear strategy for growth and ensuring organizational capability and alignment for execution.
David Leigh, Executive Vice President, Chief Technology Officer Additive Manufacturing. Dr. Leigh has served as Executive Vice President, Chief Technology Officer for Additive Manufacturing since June 2021. He has more than 30 years of experience in the additive manufacturing industry. Prior to his role with 3D Systems, from January 2019 to May 2021 Dr. Leigh served as the Chief Technology Officer (global) and Chief Operations Officer (North America) for EOS GmbH, an additive manufacturing equipment vendor, and from August 2015 to December 2018 he served as Senior Vice President of Emerging Technologies for Vulcan Labs, a subsidiary of Stratasys, Ltd. Dr. Leigh also founded Harvest Technologies which was a pioneer in end-use parts applications in aerospace and established one of the first AS9100 certified additive manufacturing facilities.
Phyllis Nordstrom, Executive Vice President, Chief People and Culture Officer and Chief Compliance Officer. Ms. Nordstrom has served as Executive Vice President, Chief People and Culture Officer and Chief Compliance Officer since August 2021. Prior to joining 3D Systems, from May 2016 to July 2021, Ms. Nordstrom was Senior Vice President and Chief Risk & Compliance Officer at MTS Systems Corporation where she was the leader of corporate sustainability, business ethics, internal audit, and corporate compliance. Over her 22 year career, Ms. Nordstrom has also held multiple leadership roles at PricewaterhouseCoopers, Target, and US Bank.

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ITEM 1A. RISK FACTORS
Item 1A. Risk Factors
You should carefully read the following discussion of significant factors, events and uncertainties when evaluating our business and the forward-looking information contained in this Form 10-K. The events and consequences discussed in these risk factors could materially and adversely affect our business, operating results, liquidity and financial condition. While we believe we have identified and discussed below the key risk factors affecting our business, these risk factors do not identify all the risks we face, and there may be additional risks and uncertainties that we do not presently know or that we do not currently believe to be significant that may have a material adverse effect on our business, performance or financial condition in the future.
Operational & Financial Risk Factors
Our uneven sales cycle makes planning and inventory management difficult and future financial results less predictable.
Our quarterly sales often have reflected a pattern in which a disproportionate percentage of each quarter’s total sales occur towards the end of the quarter, in particular for sales of hardware and software products. This uneven sales pattern makes predicting net revenue, earnings, cash flow from operations and working capital for each financial period difficult, increases the risk of unanticipated variations in our quarterly results and financial condition and places pressure on our inventory management and logistics systems. If predicted demand is substantially greater than orders, there may be excess inventory. Alternatively, if orders substantially exceed predicted demand, we may not be able to fulfill all of the orders received in each quarter and such orders may be canceled. Depending on when they occur in a quarter, developments such as an information systems failure, component pricing movements, component shortages or global logistics disruptions could adversely impact our inventory levels and results of operations in a manner that is disproportionate to the number of days in the quarter affected.
The variety of products that we sell could cause significant quarterly fluctuations in our gross profit margins, and those fluctuations in margins could cause fluctuations in operating income or loss and net income or loss.
We continuously work to expand and improve our products, materials and services offerings, geographic areas in which we operate and the distribution channels we use to reach various target product applications and customers. This variety of products, applications, channels and regions involves a range of gross profit margins that can cause substantial quarterly fluctuations in gross profit and gross profit margins depending upon the mix of product shipments from quarter to quarter. Additionally, the introduction of new products or services may further heighten quarterly fluctuations in gross profit and gross profit margins due to manufacturing ramp-up and start-up costs. We may experience significant quarterly fluctuations in gross profit margins or operating income or loss due to the impact of the mix of products, channels or geographic areas in which we sell our products from period to period.
Our products and services may experience quality problems from time to time that can result in decreased sales and operating margin, product returns, product liability, warranty or other claims that could result in significant expenses and harm to our reputation.
We sell complex hardware and software products, materials and services that can contain undetected design and manufacturing defects or errors when first introduced or as enhancements are released that, despite testing, are not discovered until after the product has been installed and used by customers. Sophisticated software and applications, such as those sold by us, may contain “bugs” that can unexpectedly interfere with the software’s intended operation. Defects may also occur in components and products we purchase from third parties. There can be no assurance we will be able to detect and fix all defects in the hardware, software, materials and services we sell. Failure to do so could result in lost revenue, product returns, product liability, delayed market acceptance of those products and services, claims from distributors, end-users or others, increased end-user service and support costs, and significant warranty claims and other expenses to correct the defects, diversion of management time and attention and harm to our reputation.
Changes in, or interpretation of, tax rules and regulations may impact our effective tax rate and future profitability.
We are a U.S. based, multinational company subject to taxation in multiple U.S. and foreign tax jurisdictions. Our future effective tax rates could be adversely affected by changes in statutory tax rates or interpretation of tax rules and regulations in jurisdictions in which we do business, changes in the amount of revenue or earnings in the countries with varying statutory tax rates, or by changes in the valuation of deferred tax assets and liabilities. The U.S. Tax Cuts and Jobs Act is one such example of legislation that impacts our effective tax rate and tax posture. For additional details see Note 22 to the consolidated financial statements in Item 8 of this Form 10-K.
In addition, we are subject to audits and examinations of previously filed income tax returns by the Internal Revenue Service and other domestic and foreign tax authorities. We regularly assess the potential impact of such examinations to determine the adequacy of our provision for income taxes and have reserved for potential adjustments that we expect may result from the current examinations. We believe such estimates to be reasonable; however, there is no assurance that the final determination of any examination will not have an adverse effect on our operating results and financial position.
Changes in business conditions may cause goodwill and other intangible assets to become impaired.
Goodwill and other intangible assets are subject to an impairment test on an annual basis and when circumstances indicate that an impairment is more likely than not. Such circumstances include a significant adverse change in the business climate or a decision to dispose of a business or product line. We face some uncertainty in our business environment due to a variety of challenges, including changes in customer demand. While we have not recorded an impairment to our goodwill since the third quarter of 2020, we may experience additional unforeseen circumstances that adversely affect the value of our goodwill or intangible assets and trigger an evaluation of the amount of the recorded goodwill and intangible assets. Future write-offs of goodwill or other intangible assets as a result of an impairment in the business could materially adversely affect our results of operations and financial condition.
The COVID-19 pandemic could materially adversely affect our financial condition and results of operations.
The novel strain of the coronavirus identified in China in late 2019 (“COVID-19”) has globally spread throughout other areas such as Asia, Europe, the Middle East, and North America and has resulted in authorities imposing, and businesses and individuals implementing, numerous unprecedented measures to try to contain the virus, such as travel bans and restrictions, quarantines, shelter-in-place/stay-at-home and social distancing orders, and shutdowns. These measures have impacted and may further impact our workforce and operations, the operations of our customers, and those of our respective vendors, suppliers, and partners. Each of the countries in which we operate has been affected by the outbreak and new variants and taken measures to try to contain it. The ultimate impact and efficacy of government measures and potential future measures is currently unknown.
There is continued uncertainty regarding the business impacts from such measures and potential future measures. While we have been able to continue our operations through a combination of work-from-home, social distancing and mandatory vaccinations in certain geographies - policies implemented to comply with government regulations and protect employees, these measures have resulted in reduced workforce availability at some of our sites. Restrictions on our access to customer facilities may impact our ability to meet customer demand and could have a material adverse effect on our financial condition and results of operations, particularly if prolonged. Our customers have experienced, and may continue to experience, disruptions in their operations, which can result in delayed, reduced, or canceled orders, or collection risks, and which may adversely affect our results of operations.
The pandemic has significantly increased economic and demand uncertainty. It is possible that the current outbreak and continued spread of COVID-19 and new variants will continue to cause an economic slowdown. There is a significant degree of uncertainty and lack of visibility as to the extent and duration of any such slowdown or recession. Risks related to a slowdown or recession may harm our long-term ability to do business, adversely affect our sales, costs, results of operations and cash flow. Given the significant economic uncertainty and volatility created by the pandemic, it is difficult to predict the nature and extent of impacts on demand for our products and services. These expectations are subject to change without warning and investors are cautioned not to place undue reliance on them.
The spread of COVID-19 has caused us to continuously evaluate and, in some cases, modify our business practices (including employee travel, employee work locations, cancellation of physical participation in meetings, events and conferences, and social distancing measures), and we may take further actions as may be required by government authorities or that we determine are in the best interests of our employees, customers, partners, vendors, and suppliers. Work-from-home and other measures introduce additional operational risks, including cybersecurity risks, and have affected the way we conduct our product development and testing, customer support, and other activities, which could have an adverse effect on our operations. There is no certainty that such measures will be sufficient to mitigate the risks posed by the virus, and illness and workforce disruptions could lead to unavailability of key personnel and harm our ability to perform critical functions.
We depend on external vendors, suppliers and outsourcing partners for the components, assembly and spare parts
of our 3D printers and for chemicals and packaging used in our materials. The ongoing COVID-19 pandemic has caused supply and logistical disruptions for both our outsourcing partners and supply chain partners. If these relationships were to terminate or these disruptions worsen, our business could be disrupted while we locate alternative sources of supply and our expenses may increase.
We have outsourced to selected design and manufacturing companies the assembly of our printers. In carrying out these outsourcing activities, we face a number of risks, including, among others, the following:
•The risk that the parties that we retain to perform assembly activities may not perform in a satisfactory manner;
•The risk of disruption in the supply of printers or other products to our customers if such third parties either fail to perform in a satisfactory manner or are unable to supply us with the quantity of printers or other products that are needed to meet then current customer demand;
•The risk of work delays or supply chain disruptions stemming from governmental efforts to contain the COVID-19 pandemic; and
•The risk of insolvency of suppliers, as well as the risks that we face, as discussed below, in dealing with a limited number of suppliers.
We purchase components and sub-assemblies for our printers from third-party suppliers that we provide to our customers as spare parts. Additionally, we purchase raw chemicals and packaging that are used in our materials, as well as certain of those materials, from third-party suppliers.
While there are typically several potential suppliers of parts for our products, we currently choose to use only one or a limited number of suppliers for several of these items, including our lasers, materials and certain jetting components. Our reliance on a single or limited number of suppliers involves many risks, including, among others, the following:
•Potential shortages of some key components;
•Disruptions in the operations of these suppliers;
•Product performance shortfalls; and
•Reduced control over delivery schedules, assembly capabilities, quality and costs.
The COVID-19 pandemic has created sporadic delays on the inbound supply chain at our partners and our own facilities. Additional delays on both inbound and outbound logistics have also created challenges. We continue to identify alternative solutions, but an inability to source from alternative suppliers in a timely manner could impact on our ability to fulfill demand.
While we believe that, if necessary, we can obtain all the components necessary for our spare parts and materials from other manufacturers, we require any new supplier to become “qualified” pursuant to our internal procedures, which could involve evaluation processes of varying durations. Our spare parts and raw chemicals used in our materials production are subject to various lead times. In addition, at any time, certain suppliers may decide to discontinue production of a part or raw material that we use. Any unanticipated change in the sources of our supplies, or unanticipated supply limitations, could increase production or related costs and consequently reduce margins.
If our forecasts exceed actual orders, we may hold large inventories of slow-moving or unusable parts, which could have an adverse effect on our cash flow, profitability and results of operations. Inversely, we may lose orders if our forecast is low and we are unable to meet demand. There is considerable uncertainty on the business impact from current measures and potential future measures to contain the spread of the COVID-19 pandemic on our vendors, suppliers, and partners, especially if such measures are in effect for an extended period of time. If disruptions to global businesses from the pandemic continue or worsen, our business could face greater supply chain delays and difficulty shipping or receiving products and materials, which could have a material adverse effect on our financial condition and results of operations.
The loss of, continued reduction or substantial decline in revenue from larger clients could have a material adverse effect on our revenues, profitability and liquidity.
We experience revenue concentration with a large customer that represents over 20% of our consolidated revenue. Generally, our contracts do not contain guarantees of minimum duration, revenue levels, or profitability. This customer may terminate their contracts or materially reduce their requested levels of products or services at any time. The loss of, deterioration of the financial condition of, or a significant change to the business of this customer could have a material adverse effect on our business, financial condition, and results of operations. Additionally, this concentration exposes us to concentrated credit risk, as a significant portion of our accounts receivable may be from a single customer. If we are unable to collect our receivables, or are required to take additional reserves, our results and cash flows will be adversely affected.
If we do not generate net cash flow from operations and if we are unable to raise additional capital, our financial condition could be adversely affected and we may not be able to execute our growth strategy.
We cannot assure you that we will continue to generate cash from operations or identify and secure other potential sources to fund future working capital needs and meet capital expenditure requirements.
If we are unable to generate such cash flow, we may be required to adopt one or more alternatives, such as selling assets, restructuring or incurring additional debt or obtaining additional equity capital on terms that may be onerous or highly dilutive. Our ability to obtain additional capital or refinance any indebtedness will depend on, among other things, the capital markets, our financial condition at such time and the terms and conditions of any such financing or indebtedness. We may not be able to engage in any of these activities or engage in these activities on desirable terms, which could result in a default on our debt obligations.
The lack of additional capital resulting from any inability to generate cash flow from operations or to raise equity or debt financing could force us to substantially curtail or cease operations and would, therefore, have an adverse effect on our business and financial condition. Furthermore, we cannot assure you that any necessary funds, if available, would be available on attractive terms or that they would not have a significantly dilutive effect on our existing stockholders. If our financial condition were to worsen and we become unable to attract additional equity or debt financing or enter into other strategic transactions, we would not be able to execute our growth strategy and we could become insolvent or be forced to declare bankruptcy.
Our business could be adversely impacted in the event of a failure of our information technology infrastructure or adversely impacted by a successful cyber-attack.
We have experienced cyber security threats, threats to our information technology infrastructure and unauthorized attempts to gain access to our sensitive information. Prior cyber-attacks directed at us have not had a material impact on our business or financial results; however, this may not continue to be the case in the future. Cyber security assessment analyses undertaken by us have identified and prioritized steps to fortify our cyber security safeguards. We have and will continue to implement additional security measures and processes which enhance our ability to detect and respond to a cyber-attack. We have increased our cyber breach insurance and implemented company-wide cyber security awareness training as well as dedicated certain personnel to address this threat. Despite the implementation of these safeguards, there can be no assurance that we will adequately protect our information or that we will not experience any future successful attacks. The threats we face vary from attacks common to most industries to more advanced and persistent, highly organized adversaries who target us because of the products and services we provide. If we are unable to protect sensitive information, our customers or governmental authorities could question the adequacy of our threat mitigation and detection processes and procedures. Due to the evolving nature of these security threats, however, the impact of any future incident cannot be predicted.
We may need to expend significant additional resources to modify our cyber security protective measures, to investigate and remediate vulnerabilities or other exposures or to make required notifications, and we may be subject to litigation and financial losses. These costs related to cyber or other security threats or disruptions may not be fully insured or indemnified by other means. Occurrence of any of these events could adversely affect our internal operations, the services we provide to our customers, our financial results or our reputation; or such events could result in the loss of competitive advantages derived from our research and development efforts or other intellectual property or early obsolescence of our products and services.
Our operations could suffer if we are unable to attract and retain key management or other key employees.
Our success depends upon the performance of our senior management and other key personnel. Our senior executive team is critical to the management of our business and operations, as well as to the development and execution of our strategy. When changes occur at our senior management level, as well as for key personnel, we typically incur incremental costs including search costs and relocation costs. High demand exists for senior management and other key personnel (including scientific, technical and sales personnel) in the 3D printing industry, and there can be no assurance that we will be able to attract and retain such personnel. We experience intense competition for qualified personnel.
While we intend to continue to provide competitive compensation packages to attract and retain key personnel and engage in regular succession planning for these positions, some of our competitors for these employees have greater resources and more experience, making it difficult for us to compete successfully for key personnel. If we cannot attract and retain sufficiently qualified technical employees for our research and development and manufacturing operations, we may be unable to develop and commercialize new products or new applications for existing products. Furthermore, possible shortages of key personnel, including engineers, in the regions surrounding our facilities could require us to pay more to hire and retain key personnel, thereby increasing our costs.
Servicing our debt may require a significant amount of cash, and we may not have sufficient cash or the ability to raise the funds necessary to settle conversions of the 0% convertible senior notes due 2026 ("the Notes") in cash, repay the Notes at maturity, or repurchase the Notes as required following a fundamental change.
As of December 31, 2021 we had $460 million outstanding of the Notes. Our ability to refinance our indebtedness, including the Notes, or to make cash payments in connection with any conversions of the Notes, depends on our future performance, which is subject to economic, financial, competitive, and other factors beyond our control. Our business may not generate cash flow from operations in the future sufficient to service our debt and make necessary capital expenditures. If we are unable to generate such cash flow, we may be required to adopt one or more alternatives, such as selling assets, restructuring debt, or obtaining additional debt financing or equity capital on terms that may be onerous or highly dilutive. Our ability to refinance our indebtedness will depend on the capital markets and our financial condition at such time. We may not be able to engage in any of these activities or engage in these activities on desirable terms, which could result in a default on our debt obligations. In addition, any of our future debt agreements may contain restrictive covenants that may prohibit us from adopting any of these alternatives. Our failure to comply with these covenants could result in an event of default which, if not cured or waived, could result in the acceleration of our debt.
In the event the conditional conversion feature of the Notes is triggered, holders of Notes will be entitled to convert the Notes at any time during specified periods at their option. If one or more holders elect to convert their Notes, we would be required to settle any converted principal through the payment of cash, which could adversely affect our liquidity. In addition, even if holders do not elect to convert their Notes, we could be required under applicable accounting rules to reclassify all or a portion of the outstanding principal of the Notes as a current rather than long-term liability, which would result in a material reduction of our net working capital.
In addition, holders of the Notes have the right to require us to repurchase all or a portion of their Notes upon the occurrence of a fundamental change (as defined in the applicable indenture governing the Notes) at a repurchase price equal to 100% of the principal amount of the Notes to be repurchased. If the Notes have not previously been converted or repurchased, we will be required to repay such Notes in cash at maturity.
Our ability to make required cash payments in connection with conversions of the Notes, repurchase the Notes in the event of a fundamental change, or to repay or refinance the Notes at maturity will depend on market conditions and our future performance, which is subject to economic, financial, competitive, and other factors beyond our control. We also may not use the cash proceeds we raised through the issuance of the Notes in an optimally productive and profitable manner. As a result, we may not have enough available cash or be able to obtain financing at the time we are required to repurchase or repay the Notes or pay cash with respect to Notes being converted.
Business Strategy Risk Factors
We have made, and may make in the future, strategic acquisitions and divestitures that may involve significant risks and uncertainties. We may not realize the anticipated benefits of past or future acquisitions and integration of these acquisitions may disrupt our business and divert management attention. Likewise, our potential future divestitures may be unsuccessful and negatively impact our business.
From time to time, we evaluate acquisition candidates that fit our business objectives. Acquisitions involve certain risks and uncertainties, including, among others, the following:
•Difficulty in integrating newly acquired businesses and operations in an efficient and cost-effective manner, which may also impact our ability to realize the potential benefits associated with the acquisition;
•The risk that significant unanticipated costs or other problems associated with integration may be encountered;
•The challenges in achieving strategic objectives, cost savings and other anticipated benefits;
•The risk that our marketplaces do not evolve as anticipated and that the technologies acquired do not prove to be those needed to be successful in the marketplaces that we serve;
•The risk that we assume significant liabilities that exceed the limitations of any applicable indemnification provisions or the financial resources of any indemnifying party;
•The inability to maintain a relationship with key customers, vendors and other business partners of the acquired businesses;
•The difficulty in maintaining controls, procedures and policies during the transition and integration;
•The potential loss of key employees of the acquired businesses;
•The risk of diverting management attention from our existing operations;
•Difficulties in coordinating geographically disparate organizations and corporate cultures and integrating management personnel with different business backgrounds;
•The potential failure of the due diligence process to identify significant problems, liabilities or other challenges of an acquired company or technology;
•The risk that we incur significant costs associated with such acquisition activity that may negatively impact our operating results before the benefits of such acquisitions are realized, if at all;
•The entry into marketplaces where we have no or limited direct prior experience and where competitors have stronger marketplace positions;
•The exposure to litigation or other claims in connection with our assuming claims or litigation risks from terminated employees, customers, former shareholders or other third parties; and
•The risk that historical financial information may not be representative or indicative of our results as a combined company.
Historically, we have grown organically and from acquisitions, and we intend to continue to grow in such manner. Our infrastructure will require, among other things, continued development of our financial and management controls and management information systems, management of our sales channel, continued capital expenditures, the ability to attract and retain qualified management personnel and the training of new personnel. We cannot be sure that our infrastructure, systems, procedures, business processes and managerial controls will be adequate to support the growth in our operations. Any delays in, or problems associated with, implementing, or transitioning to, new or enhanced systems, procedures, or controls to accommodate and support the requirements of our business and operations and to effectively and efficiently integrate acquired operations may adversely affect our ability to meet customer requirements, manage our product inventory, and record and report financial and management information on a timely and accurate basis. These potential negative effects could prevent us from realizing the benefits of an acquisition transaction or other growth opportunity.
Likewise, we have in the past, and may in the future, divest certain business operations. Divestitures involve a number of risks, including the diversion of management's attention, significant costs and expenses, goodwill and other intangible asset impairment charges, the loss of customer relationships and cash flow, and the disruption of operations in the affected business. Failure to timely complete or consummate a divestiture may negatively affect valuation of the affected business or result in restructuring charges.
In the event of an unsuccessful acquisition or divestiture, our competitive position, revenues, results of operations and financial condition could be adversely affected.
We believe that our future success depends on our ability to deliver products and services that meet changing technology and customer needs.
Our business may be affected by rapid technological change, changes in user and customer requirements and preferences, frequent new product and service introductions embodying new technologies and the emergence of new standards and practices, any of which could render our existing products and proprietary technology obsolete. Accordingly, our ongoing research and development programs are intended to enable us to maintain technological leadership. We believe that to remain competitive we must continually enhance and improve the functionality and features of our products, services and technologies. However, there is a risk that we may not be able to:
•Develop or obtain leading technologies useful in our business;
•Enhance our existing products;
•Develop new products, services and technologies that address the increasingly sophisticated and varied needs of prospective customers, particularly in the area of printer speeds and materials functionality;
•Respond to technological advances and emerging industry standards and practices on a cost-effective and timely basis; or
•Recruit or retain key technology employees.
If we are unable to meet changing technology and customer needs, our competitive position, revenue, results of operations and financial condition could be adversely affected.
The success of our regenerative medicine efforts depends on developing and commercializing products, either ourselves or in conjunction with development partners, that are subject to technical and market risks.
Our regenerative medicine business requires us to develop products that enable the application of additive manufacturing to human organ transplantation and other non-organ human applications. These initiatives may require significant investment and technical achievement of viable product candidates may not be achieved. Our development efforts remain subject to risks including but not limited to unanticipated technical or other hurdles to commercialization. Any products developed through our research efforts are subject to safety, regulatory and efficacy risks that may result in delays to commercialization, cause us to incur additional expenses or fail to achieve commercialization. In addition, any products that achieve commercialization and regulatory approval are subject to market risks including reimbursement from third-party payers and competition from existing or new products that aim to address similar indications.
Regulatory, Legislative and Legal Risk Factors
We are subject to U.S. and other anti-corruption laws, trade controls, economic sanctions and similar laws and regulations. Our failure to comply with these laws and regulations could subject us to civil, criminal and administrative penalties and harm our reputation.
Doing business on a worldwide basis requires us to comply with the laws and regulations of the U.S. government and various foreign jurisdictions. These laws and regulations place restrictions on our operations, trade practices, partners and investments.
In particular, our operations are subject to U.S. and foreign anti-corruption and trade control laws and regulations, such as the Foreign Corrupt Practices Act (“FCPA”) and United Kingdom Bribery Act (the “Bribery Act”), export controls and economic sanctions programs, including those administered by the U.S. Treasury Department’s Office of Foreign Assets Control (“OFAC”), the State Department's Directorate of Defense Trade Controls (“DDTC”) and the Bureau of Industry and Security (“BIS”) of the Department of Commerce. As a result of doing business in foreign countries and with foreign customers, we are exposed to a heightened risk of violating anti-corruption and trade control laws and sanctions regulations.
As part of our business, we may deal with state-owned business enterprises, the employees of which are considered foreign officials for purposes of the FCPA’s prohibition on providing anything of value to foreign officials for the purposes of obtaining or retaining business or securing any improper business advantage. In addition, the provisions of the Bribery Act extend beyond bribery of foreign public officials and also apply to transactions with individuals that a government does not employ. Some of the international locations in which we operate lack a developed legal system and have higher than normal levels of corruption. Our continued expansion outside the U.S., including in Brazil, China, India and developing countries, and
our development of new partnerships worldwide, could increase the risk of FCPA, OFAC or Bribery Act violations in the future.
As an exporter, we must comply with various laws and regulations relating to the export of products and technology from the U.S. and other countries having jurisdiction over our operations. In the U.S., these laws include the International Traffic in Arms Regulations (“ITAR”) administered by the DDTC, the Export Administration Regulations (“EAR”) administered by the BIS and trade sanctions against embargoed countries and destinations administered by OFAC. The EAR governs products, parts, technology and software which present military or weapons proliferation concerns, so-called “dual use” items, and ITAR governs military items listed on the United States Munitions List. Prior to shipping certain items, we must obtain an export license or verify that license exemptions are available. Any failures to comply with these laws and regulations could result in fines, adverse publicity and restrictions on our ability to export our products, and repeat failures could carry more significant penalties.
Violations of anti-corruption and trade control laws and sanction regulations are punishable by civil penalties, including fines, denial of export privileges, injunctions, asset seizures, debarment from government contracts and revocations or restrictions of licenses, as well as criminal fines and imprisonment and could harm our reputation, create negative shareholder sentiment and affect our share value. We have established policies and procedures designed to assist our compliance with applicable U.S. and international anti-corruption and trade control laws and regulations, including the FCPA, the Bribery Act and trade controls and sanctions programs administered by OFAC, the DDTC and BIS, and have trained our employees to comply with these laws and regulations. However, there can be no assurance that all of our employees, consultants, agents or other associated persons will not take actions in violation of our policies and these laws and regulations. Additionally, there can be no assurance that our policies and procedures will effectively prevent us from violating these regulations in every transaction in which we may engage or provide a defense to any alleged violation. In particular, we may be held liable for the actions that our joint venture partners take inside or outside of the United States, even though our partners may not be subject to these laws. Such a violation, even if our policies prohibit it, could have an adverse effect on our reputation, business, financial condition and results of operations. In addition, various state and municipal governments, universities and other investors maintain prohibitions or restrictions on investments in companies that do business with sanctioned countries, persons and entities, which could adversely affect our reputation, business, financial condition and results of operations.
We disclosed potential violations of U.S. export controls laws to the U.S. federal government that resulted in multiple investigations. We have implemented compliance processes and procedures to identify and prevent potential future violations of export control laws, trade sanctions, and government contracting laws and regulations, and continue to review our government contracting compliance risks and potential violations. Failure to comply with the terms of the Administrative Agreement or the commencement of a separate action by another governmental agency would result in decreased revenues and additional harm to our reputation and otherwise adversely affect our business, operating results and financial condition.
In October 2017, we received an administrative subpoena from BIS requesting the production of records in connection with possible violations of U.S. export control laws, including with regard to our former Quickparts.com, Inc. subsidiary. In addition, while collecting information responsive to the above-referenced subpoena, our internal investigation identified potential violations of ITAR administered by DDTC and potential violations of the Export Administration Regulations administered by BIS.
On June 8, 2018 and thereafter, we submitted voluntary disclosures to BIS and DDTC identifying numerous potentially unauthorized exports of technical data. As part of our ongoing review of trade compliance risks and our cooperation with the government, on November 20, 2019, we submitted to OFAC an initial notice of voluntary disclosure regarding potential violations of economic sanctions related to Iran. We continued to investigate this issue and filed final disclosures with OFAC on May 20, 2020 and December 21, 2021. We have and will continue to implement compliance enhancements to our export controls, trade sanctions, and government contracting compliance program to address the issues identified through our ongoing internal investigation and will cooperate with DDTC and BIS, as well as the U.S. Departments of Justice, Defense, Homeland Security and Treasury in their ongoing reviews of these matters. In connection with these ongoing reviews, in August 2020, the Company received two federal grand jury subpoenas issued by the U.S. District Court for the Northern District of Texas. The Company responded to these two subpoenas and will continue to fully cooperate with the U.S. Department of Justice in the related investigation.
Although we cannot predict the ultimate resolution of these matters, we have incurred and expect to continue to incur significant legal costs and other expenses in connection with responding to the U.S. government agencies.
Since 2018, we have implemented new compliance procedures to identify and prevent potential violations of export controls laws, trade sanctions, and government contracting laws and regulations and created a Compliance Committee of the Board of Directors to further enhance board oversight of compliance risks. As we continue to implement additional compliance enhancements, we may discover additional potential violations of export controls laws, trade sanctions, and/or government contracting laws in the future. If we identify any additional potential violations, we will submit voluntary disclosures to the relevant agencies and cooperate with such agencies on any related investigations.
If the U.S. government finds that we have violated one or more export controls laws, trade sanctions, or government contracting laws, we could be subject to various civil or criminal penalties. By statute, these penalties can include but are not limited to fines, which by statute may be significant, denial of export privileges, and suspension or debarment from participation in U.S. government contracts. We may also be subject to contract claims based upon such violations. Any assessment of penalties or other liabilities incurred in connection with these matters could harm our reputation and customer relationships, create negative investor sentiment, and affect our share value. In connection with any resolution, we may also be required to undertake additional remedial compliance measures and program monitoring. We cannot at this time predict when the U.S. government agencies will conclude their investigations or determine an estimated cost, if any, or range of costs, for any penalties, fines or other liabilities to third parties that may be incurred in connection with these matters.
We derive a significant portion of our revenue from business conducted outside the U.S. and are subject to the risks of doing business outside the U.S.
We face many risks inherent in conducting business activities outside the U.S. that, unless managed properly, may adversely affect our profitability, including our ability to collect amounts due from customers. While most of our operations outside the U.S. are conducted in highly developed countries, our operations could be adversely affected by, among others, the following:
•Unexpected changes in laws, regulations and policies of non-U.S. governments relating to investments and operations, as well as U.S. laws affecting the activities of U.S. companies abroad;
•Changes in regulatory requirements, including export controls, tariffs and embargoes, other trade restrictions, competition, corporate practices and data privacy concerns;
•Political policies, political or civil unrest, terrorism or epidemics and other similar outbreaks;
•Fluctuations in currency exchange rates;
•Limited protection for the enforcement of contract and intellectual property rights in some countries;
•Difficulties in staffing and managing foreign operations;
•Operating in countries with a higher incidence of corruption and fraudulent business practices;
•Potentially adverse changes in taxation;
•The impact of public health epidemics on employees and the global economy; and
•Other factors, depending upon the specific country in which we conduct business.
These uncertainties may make it difficult for us and our customers to accurately plan future business activities and may lead our customers in certain countries to delay purchases of our products and services. More generally, these geopolitical, social and economic conditions could result in increased volatility in global financial markets and economies.
The consequences of terrorism or armed conflicts are unpredictable, and we may not be able to foresee events that could have an adverse effect on our market opportunities or our business. We are uninsured for losses and interruptions caused by terrorism, acts of war and similar events.
While the geographic areas outside the U.S. in which we operate are generally not considered to be highly inflationary, our foreign operations are sensitive to fluctuations in currency exchange rates arising from, among other things, certain intercompany transactions that are generally denominated, for example, in U.S. dollars rather than their respective functional currencies.
Moreover, our operations are exposed to market risk from changes in interest rates and foreign currency exchange rates and commodity prices, which may adversely affect our results of operations and financial condition. We seek to minimize these risks through regular operating and financing activities and, when we consider it to be appropriate, through the use of derivative financial instruments. However, our efforts to minimize our exposure to market risks from changes in interest rates, foreign currency exchange rates and commodity prices may prove to be insufficient or unsuccessful.
We may incur substantial costs enforcing or acquiring intellectual property rights and defending against third-party claims as a result of litigation or other proceedings.
In connection with the enforcement of our own intellectual property rights, the acquisition of third-party intellectual property rights or disputes related to the validity or alleged infringement of third-party intellectual property rights, including patent rights, we have been, and may in the future be, subject to claims, negotiations or complex, protracted litigation. Intellectual property disputes and litigation may be costly and can be disruptive to our business operations by diverting attention and energies of management and key technical personnel, and by increasing our costs of doing business. Although we have successfully defended or resolved past litigation and disputes, we may not prevail in any ongoing or future litigation and disputes, which could adversely affect our results of operations and financial condition.
Third-party intellectual property claims asserted against us could subject us to significant liabilities, require us to enter into royalty and licensing arrangements on unfavorable terms, prevent us from assembling or licensing certain of our products, subject us to injunctions restricting our sale of products, cause severe disruptions to our operations or the marketplaces in which we compete or require us to satisfy indemnification commitments with our customers, including contractual provisions under various license arrangements. In addition, we may incur significant costs in acquiring the necessary third-party intellectual property rights for use in our products. Any of these could seriously harm our business.
We may not be able to protect our intellectual property rights and confidential information, including our digital content, from third-party infringers or unauthorized copying, use or disclosure.
Although we defend our intellectual property rights and endeavor to combat unlicensed copying and use of our digital content and intellectual property rights through a variety of techniques, preventing unauthorized use or infringement of our rights (“piracy attacks”) is inherently difficult. If our intellectual property becomes subject to piracy attacks, our business may be harmed.
Additionally, we endeavor to protect the secrecy of our digital content, confidential information and trade secrets. If unauthorized disclosure of our trade secrets occurs, we could potentially lose trade secret protection. The loss of trade secret protection could make it easier for third parties to compete with our products by copying previously confidential features, which could adversely affect our business, results of operations, revenue and operating margins. We also seek to protect our confidential information and trade secrets through the use of non-disclosure agreements. However, there is a risk that our confidential information and trade secrets may be disclosed or published without our authorization, and in these situations it may be difficult and/or costly for us to enforce our rights.
Material weaknesses in our internal control over financial reporting could result in material misstatements in our financial statements not being prevented or detected, which could affect investor confidence in the accuracy and completeness of our financial statements and could negatively impact on our stock price and financial condition.
As a public company, we are required to comply with Section 404 of the Sarbanes-Oxley Act. If we fail to abide by the applicable requirements of Section 404, regulatory authorities, such as the SEC, could subject us to sanctions or investigation, and our independent registered public accounting firm may not be able to certify as to the effectiveness of our internal control over financial reporting pursuant to an audit of our controls. Even effective internal controls can provide only reasonable assurance with respect to the preparation and fair presentation of financial statements. Accordingly, our internal control over financial reporting may not prevent or detect misstatements because of their inherent limitations, including the possibility of human error, the circumvention or overriding of controls, or fraud.
During the preparation of our financial statements for the period ended December 31, 2020, management identified two material weaknesses in our internal control over financial reporting related to a lack of certain controls, or improper execution of designed control procedures, (1) for certain non-standard contracts and non-standard contract terms and (2) over the review of internally prepared reports and analyses utilized in the financial closing process. These combination of control deficiencies were partially related to employee turnover, resulting in a temporary shortage of personnel with appropriate knowledge or skills to perform an effective review during our financial statement close process. In addition, certain control deficiencies related to the completeness and review of transactions that were infrequent in nature. These control deficiencies could have resulted in a misstatement of accounts and disclosures that could have resulted in a material misstatement of our annual or interim consolidated financial statements that would not have been prevented or detected. Accordingly, management has determined that these control deficiencies constitute material weaknesses.
During the preparation of our financial statements for the period ended December 31, 2021, management completed its assessment of the effectiveness of our internal controls over financial reporting and concluded that the two previously identified material weaknesses had not been fully remediated, although the number of control deficiencies that resulted in these material weaknesses had been reduced. An additional material weakness was identified relating to the calculation of the Company's
provision for income taxes, including for material non-routine transactions. The control deficiencies outstanding at December 31, 2021 were partially related to employee training, resulting in a lack of knowledge or skill level to properly execute the designed controls or perform an effective review over certain manual controls related to the financial statement close process. In addition, certain control deficiencies related to the timely review of transactions that were infrequent in nature.
As further described in Item 9A, Management's Report on Internal Control over Financial Reporting, we began implementing a remediation plan in January 2021 designed to improve our internal control over financial reporting through the development and implementation of more formal policies, processes and documentation procedures relating to our financial reporting, the hiring of additional accounting personnel and the training of new personnel and existing personnel in new roles on proper execution of designed control procedures. In 2021, we engaged outside consultants to advise on changes in the design of our controls and procedures and to advise on technical accounting matters. In continuation of this remediation plan and to address the additional tax material weakness, in 2022, we plan to hire additional staff with appropriate accounting, finance, operational and technology knowledge and experience in the design and execution of controls, redesign ineffective controls or processes, implement software to enhance our financial close and reporting and tax processes as well as establish a formal controls governance committee.
While we believe our remediation plans described above should remediate the material weaknesses, we cannot provide assurance of when the material weaknesses will be remediated, nor can we be certain of whether additional actions will be required or the costs of any such actions. Moreover, we cannot provide assurance that additional material weaknesses will not arise in the future. While the material weaknesses discussed in Item 9A, Management's Report on Internal Control over Financial Reporting, did not result in material misstatements of our annual or interim consolidated financial statements, any failure to remediate the material weaknesses, or the identification of new material weaknesses in our internal control over financial reporting, could result in material misstatements in our financial statements that may continue undetected, negatively impacting the public perception of the Company and our securities and cause us to fail to meet our reporting and financial obligations or incur significant additional costs to remediate the material weaknesses, each of which could negatively affect our stock price, harm our ability to raise capital on favorable terms in the future or otherwise have a negative impact on our financial condition.
General Risk Factors
Our common stock price has been and may continue to be volatile.
The market price of our common stock has experienced, and may continue to experience, considerable volatility. Between January 1, 2020 and December 31, 2021, the trading price of our common stock has ranged from a low of $4.60 per share to a high of $56.50 per share. Numerous factors could have a significant effect on the price of our common stock, including those described or referred to in this “Risk Factors” section of this Form 10-K, as well as, among other things:
•Our perceived value in the securities markets;
•Overall trends in the stock market;
•Announcements of changes in our forecasted operating results or the operating results of one or more of our competitors;
•The impact of changes in our results of operations, our financial condition or our prospects;
•Market conditions for providers of products and services such as ours;
•Executive level management uncertainty or change;
•Changes in recommendations or revenue or earnings estimates by securities analysts; and
•Announcements of acquisitions by us or one of our competitors.

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ITEM 1B. UNRESOLVED STAFF COMMENTS
Item 1B. Unresolved Staff Comments
None.

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ITEM 2. PROPERTIES
Item 2. Properties
Our headquarters are located in Rock Hill, South Carolina. As of December 31, 2021, we own minimal facilities and we lease approximately 1.0 million square feet, in the U.S (624 thousand square feet), EMEA (302 thousand square feet) and APAC (28 thousand square feet). The Healthcare segment accounted for approximately 252 thousand square feet, while the industrial segment accounted for approximately 457 thousand square feet. Approximately 300 thousand square feet are mixed use facilities.

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ITEM 3. LEGAL PROCEEDINGS
Item 3. Legal Proceedings
Information relating to legal proceedings is included under the header "Litigation" in Note 23 to the consolidated financial statements in Item 8 of this Form 10-K, which is incorporated by reference into this Item 3.

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ITEM 4. MINE SAFETY DISCLOSURE
Item 4. Mine Safety Disclosures
Not applicable.
PART II

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ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Our common stock is listed on the New York Stock Exchange (“NYSE”) under the trading symbol “DDD.”
As of February 23, 2022, our outstanding common stock was held by approximately 1,503 stockholders of record. This figure does not reflect the beneficial ownership of shares held in a nominee's name.
Dividends
We do not currently pay, and have not paid, any dividends on our common stock, and we currently intend to retain any future earnings for use in our business. Any future determination as to the declaration of dividends on our common stock will be made at the discretion of the Board of Directors and will depend on our earnings, operating and financial condition, capital requirements and other factors deemed relevant by the Board of Directors, including the applicable requirements of the Delaware General Corporation Law, which provides that dividends are payable only out of surplus or current net profits.
The payment of dividends on our common stock may be restricted by the provisions of credit agreements or other financing documents that we may enter into or the terms of securities that we may issue from time to time. Currently, no such agreements or documents limit our declaration of dividends or payments of dividends.
Issuance of Unregistered Securities and Issuer Purchases of Equity Securities
We did not repurchase any of our equity securities in the open market during the year ended 2021, however, shares of common stock were surrendered to us for payment of tax withholding obligations in connection with the vesting of restricted stock awards pursuant to our 2015 Incentive Stock Plan. For information regarding the securities authorized for issuance under our equity compensation plans, see “Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters-Equity Compensation Plans” in Item 12 of this Form 10-K. Also see Note 18 to the consolidated financial statements in Item 8 of this Form 10-K. We did not engage in any unregistered sales of equity securities in 2021.
Issuer purchases of equity securities
Total number of shares (or units) purchased Average price paid per share (or unit)
October 1, 2021 - October 31, 2021 14,885 $ 27.67
November 1, 2021 - November 30, 2021 15,650 24.33
December 1, 2021 - December 31, 2021 67,252 21.54
Total 97,787 a
$ 22.92 b
a.Represents shares of common stock surrendered to us for payment of tax withholding obligations in connection with the vesting of restricted stock.
b.The average price paid reflects the average market value of shares withheld for tax purposes.
Stock Performance Graph
The graph below shows, for the five years ended December 31, 2021, the cumulative total return on an investment of $100 assumed to have been made on December 31, 2016 in our common stock. For purposes of the graph, cumulative total return assumes the reinvestment of all dividends. The graph compares such return with those of comparable investments assumed to have been made on the same date in (a) the NYSE Composite Index, and (b) the S&P Small-Cap 600 Information Technology Index, which are published market indices with which we are sometimes compared.
Although total return for the assumed investment assumes the reinvestment of all dividends on December 31 of the year in which such dividends were paid, we paid no cash dividends on our common stock during the periods presented.
COMPARISON OF 5-YEAR CUMULATIVE TOTAL RETURN
December 31, 2016 December 31, 2017 December 31, 2018 December 31, 2019 December 31, 2020 December 31, 2021
3D Systems Corporation $ 100 $ 65 $ 77 $ 66 $ 79 $ 162
NYSE Composite Index 100 119 108 136 146 176
S&P Small-Cap 600 Information Technology Index 100 110 100 140 179 227

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ITEM 6. SELECTED FINANCIAL DATA
Item 6. Reserved

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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis should be read together with the selected consolidated financial data and 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, as discussed more fully in this Form 10-K. See “Forward-Looking Statements” and “Risk Factors” in Part I, Item 1A. All amounts are in thousands, except share and per share amounts, or as otherwise indicated.
For discussion related to the results of operations and changes in financial condition for fiscal 2020 compared to fiscal 2019, refer to Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations in our fiscal 2020 Form 10-K, which was filed with the SEC on March 5, 2021.
Overview and Strategy
In May 2020, our Chief Executive Officer and President, Dr. Jeffrey Graves, was hired. Dr. Graves undertook an initial assessment of the Company and developed the purpose statement to be the leader in enabling additive manufacturing solutions for applications in growing markets that demand high reliability products. He announced a four-phased plan to enable this vision: reorganize into two key industry verticals (Healthcare and Industrial), restructure to gain efficiencies, divest non-core assets, and invest for future growth.
As part of our strategic plan, we have organized into two key verticals. This structure allows us to align our solution-oriented approach with deep industry and customer knowledge. Our two key verticals span a range of industries. Healthcare includes dental, medical devices, personalized health services and regenerative medicine. Our Industrial vertical includes 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 overall total cost of operation. Our technologies and process knowledge enable hundreds of thousands of production parts to be made through additive manufacturing each day.
We completed our restructuring efforts in the second quarter of 2021. Cost reduction efforts have included reducing the number of facilities and examining every aspect of our manufacturing and operating costs.
Divestitures
In conjunction with our four-phased plan, we divested parts of our business that did not align with our strategic focus on additive manufacturing. In January 2021 we sold Cimatron Ltd., which operated our Cimatron integrated CAD/CAM software for the tooling business and its GibbsCAM CNC programming software business, for $64.2 million. In August 2021 we sold our Simbionix line of surgical simulators for $305.0 million, and in September 2021 we sold our On Demand Manufacturing ("ODM") business for $82.0 million. All sale amounts are before customary closing adjustments.
We have now completed our planned divestitures of non-core assets and are focused on the strategic growth of our core additive manufacturing business.
Acquisitions
On November 1, 2021, we acquired Oqton, Inc. (“Oqton”), for $188.2 million, excluding customary closing adjustments. We paid $107.5 million in cash and issued 2,552,904 shares of the Company’s Common Stock. The acquisition’s near term impact on the Company’s results of operations and cash flows are expected to be dilutive. Oqton's operating results will be reported in the Industrial segment.
On December 1, 2021, we acquired Volumetric Biotechnologies, Inc. (“Volumetric”), for $40.2 million of which $24.8 million was paid in cash and the remainder was paid via the issuance of 720,022 shares of the Company's common stock. Additional payments of up to $355.0 million are possible which are linked to the attainment of several non-financial milestones through December 31, 2030 and 2035 and continued employment of certain key individuals from Volumetric. Any additional payments made will be paid approximately half in cash and half in shares of the Company’s common stock. The additional payments are considered compensation expense which will be recorded ratably from the time a milestone is deemed is probable of achievement to the estimated date of achievement. Any compensation expense recorded will be reversed if the milestone is no longer probable of achievement. Volumetric will be part of the Healthcare reporting unit and segment. The acquisition’s near-
term impact on the Company's results of operations and cash flows are expected to be dilutive.
COVID-19 Pandemic Response
Our top priority is the health and safety of our employees and their families and communities, as we continue to manage our business through the COVID-19 pandemic. Throughout this past year, our leadership regularly reviewed and adapted our COVID-19 protocols based on evolving research and guidance. We have reopened our offices and begun business travel, with safety measures in place and in accordance with local guidance. Additionally, we implemented a hybrid-work program globally, providing more flexibility for employees to work remotely. We continue to monitor local transmission rates and regulatory guidance, and remain committed to protecting our employees, delivering for our customers, and supporting our communities. We are subject to vaccination and workplace safety protocols of the United States Federal Government Executive Order on Ensuring Adequate COVID Safety Protocols for Federal Contractors, and the COVID-19 Workplace Safety Guidance for Federal Contractors and Subcontractors issued by the Safer Federal Workforce Task Force. In support of a safe work environment, we have a vaccine policy for our U.S. employees, and a visitor policy to ensure those visiting our sites are taking the necessary health and safety precautions.
2021 Summary
Year Ended December 31,
(in thousands, except per share amounts) 2021 2020
Revenue:
Products $ 428,742 $ 332,799
Services 186,897 224,441
Total revenue 615,639 557,240
Cost of sales:
Products 245,169 220,415
Services 106,692 113,450
Total cost of sales 351,861 333,865
Gross profit 263,778 223,375
Operating expenses:
Selling, general and administrative 227,697 219,895
Research and development 69,150 74,143
Impairment of goodwill - 48,300
Total operating expenses 296,847 342,338
Loss from operations $ (33,069) $ (118,963)
On August 5, 2020, we announced, in connection with the new strategic focus and organizational realignment, a restructuring plan intended to align our operating costs with current revenue levels and better position the Company for future sustainable and profitable growth. See Note 25 in Item 8 of this Form 10-K.
Total consolidated revenue for the year ended December 31, 2021 increased 10.5% or $58.4 million, despite divesting non-core businesses in 2021, to $615.6 million, compared to $557.2 million for the year ended December 31, 2020, driven by growth in the Healthcare segment.
Revenue from Healthcare increased 24.2% to $306.2 million for the year ended December 31, 2021, compared to $246.4 million for the year ended December 31, 2020, driven by strong demand for dental applications partly offset by the impact of 2021 divestitures. Industrial sales decreased 0.4% to $309.5 million for the year ended December 31, 2021, compared to $310.8 million for the year ended December 31, 2020, primarily due to the impact of 2021 divestitures, partly offset by continued strengthening of the economy in 2021.
Gross profit for the year ended December 31, 2021 increased by 18.1%, or $40.4 million, to $263.8 million, compared to $223.4 million for the year ended December 31, 2020. Gross profit margin for the years ended December 31, 2021 and 2020 was 42.8% and 40.1%, respectively. The increase in gross profit margin was primarily a result of prior year end of life inventory charges and cost optimization expenses, as well as better absorption of supply chain overhead in 2021 resulting from higher production.
Operating expenses for the year ended December 31, 2021 decreased by 13.3%, or $45.5 million, to $296.8 million, compared to $342.3 million for the year ended December 31, 2020 primarily due to significantly lower cost optimization expenses in 2021 and a goodwill impairment charge incurred in 2020, with no similar goodwill impairment in 2021. Selling, general and administrative ("SG&A") expenses for the year ended December 31, 2021 increased by 3.5%, or $7.8 million, to $227.7 million, compared to $219.9 million for the year ended December 31, 2020, primarily due to higher incentive compensation resulting from better than expected performance in 2021 compared to internal targets, a one-time $9.8 million bonus paid to Simbionix employees in connection with the divestiture, investments in the business, increase in stock compensation expenses, and expenses related to acquisitions, partially offset by a decrease in cost optimization expenses. Research and development ("R&D") expenses for the year ended December 31, 2021 decreased by 6.7%, or $5.0 million, to $69.2 million, compared to $74.1 million for the year ended December 31, 2020, primarily due to divestitures and cost savings from the prior year restructuring program. In 2020, we recorded a non-cash goodwill impairment charge of $48.3 million compared to no impairment charge in 2021. See Note 11 to the consolidated financial statements in Item 8 of this Form 10-K for additional discussion.
Our operating loss for the year ended December 31, 2021 was $33.1 million, compared to an operating loss of $119.0 million for the year ended December 31, 2020. The lower loss was driven by higher revenue and gross profit dollars, benefits from the 2020 cost optimization plan, and the absence of a goodwill impairment charge and reduced cost optimization expenses in 2021, partly offset by higher net SG&A expenses as noted above.
Results of Operations for 2021 and 2020
Comparison of revenue
Current year revenue has improved as the prior year was negatively impacted by the effects of the COVID-19 pandemic, most severely during the first half of 2020, as many of our customers were shutdown or on a significantly reduced level of activity, partially offset by the impact of divestitures. Additionally, 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 affect reported revenue in any given period.
In addition to changes in sales volumes, there are three 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, (2) the impact of fluctuations in foreign currencies and (3) the impact of business divested in 2021. As used in this Management’s Discussion and Analysis, the price and mix effects relate to changes in revenue that are not able to be specifically related to changes in unit volume, foreign exchange and divestitures.
We earn revenue from the sale of products and services through our Healthcare and Industrial segments. The products categories include 3D printers and corresponding materials, healthcare simulators (which was divested in the third quarter of 2021), digitizers, software licenses, 3D scanners and haptic devices. The services category includes maintenance contracts and services on 3D printers and simulators (which was divested in the third quarter of 2021), software maintenance and cloud-based software subscriptions, on-demand solutions (which was divested in the third quarter of 2021) and healthcare services.
The following table sets forth changes in revenue for the years ended December 31, 2021 and 2020.
Table 1
(Dollars in thousands) Products Services Total
Revenue - 2020 $ 332,799 59.7 % $ 224,441 40.3 % $ 557,240 100.0 %
Change in revenue:
Volume 137,856 41.4 % 16,386 7.3 % 154,242 27.7 %
Divestitures (26,050) (7.8) % (57,134) (25.5) % (83,184) (14.9) %
Price/Mix (21,885) (6.6) % 92 - % (21,793) (3.9) %
Foreign currency translation 6,022 1.8 % 3,112 1.4 % 9,134 1.6 %
Net change 95,943 28.8 % (37,544) (16.7) % 58,399 10.5 %
Revenue - 2021 $ 428,742 69.6 % $ 186,897 30.4 % $ 615,639 100.0 %
Total consolidated revenue increased 10.5%. In addition to changes in sales volumes, there are three 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, (2) the impact of fluctuations in foreign currencies and 3) the impact of businesses divested in 2021. As used in this Management’s Discussion and Analysis, the price and mix effects relate to changes in revenue that are not able to be specifically related to changes in unit volume, foreign exchange and divestitures. Recurring revenue, which includes service and materials, was $396.9 million and $381.6 million for the years ended December 31, 2021 and 2020, respectively. The increase in recurring revenue in 2021 was primarily due to an increase in material sales volume, partially offset by divestitures.
For the years ended December 31, 2021 and 2020, products revenue from Healthcare contributed $217.7 million and $159.6 million, respectively, and products revenue from Industrial contributed $211.0 million and $173.2 million, respectively. The higher products revenue in Healthcare was primarily due to continued strength in the dental market. The increased products revenue in Industrial was primarily due to higher volumes, favorable price/mix and foreign currency impact, partially offset by divestitures.
Services revenue for the year ended December 31, 2021 decreased primarily due to divestitures, partially offset by the impact of less severe COVID restrictions in 2021 and the favorable impact of foreign currency translation. For the years ended December 31, 2021 and 2020, services revenue from Healthcare contributed $88.4 million and $86.9 million, respectively, and services revenue from Industrial contributed $98.5 million and $137.6 million, respectively. The higher services revenue in Healthcare was due to strong sales in medical devices, partially offset by divestitures. The lower services revenue in Industrial was due to divestitures, partially offset by the impact of less severe COVID restrictions in 2021.
For the years ended December 31, 2021 and 2020, revenue from operations outside the U.S. was 44.6% and 50.6% of total revenue, respectively.
Gross profit and gross profit margins
The following table sets forth gross profit and gross profit margins for the years ended December 31, 2021 and 2020.
Table 2
Year Ended December 31,
2021 2020 Change in Gross Profit Change in Gross Profit Margin
(Dollars in thousands) Gross Profit Gross Profit Margin Gross Profit Gross Profit Margin $ % Percentage Points %
Products $ 183,573 42.8 % $ 112,384 33.8 % $ 71,189 63.3 % 9.0 26.6 %
Services 80,205 42.9 % 110,991 49.5 % (30,786) (27.7) % (6.6) (13.3) %
Total $ 263,778 42.8 % $ 223,375 40.1 % $ 40,403 18.1 % 2.7 6.7 %
The increase in gross profit margin was primarily a result of prior year end of life inventory charges and cost optimization expenses, as well as better absorption of supply chain overhead in 2021 resulting from higher production, offset by the impact of divestitures. See Note 8 to the consolidated financial statements in Item 8 of this Form 10-K for additional discussion.
.Products gross profit increased primarily due to higher sales volume as well as significantly improved capacity utilization and the end-of-life inventory charge of $10.9 million recorded in 2020. Services gross profit decreased primarily due to the impact of divestitures.
Operating expenses
The following table sets forth the components of operating expenses for the years ended December 31, 2021 and 2020.
Table 3
Year Ended December 31,
2021 2020 Change
(Dollars in thousands) Amount % Revenue Amount % Revenue $ %
Selling, general and administrative expenses $ 227,697 37.0 % $ 219,895 39.5 % $ 7,802 3.5 %
Research and development expenses 69,150 11.2 % 74,143 13.3 % (4,993) (6.7) %
Impairment of goodwill - - % 48,300 8.7 % (48,300) (100.0) %
Total operating expenses $ 296,847 48.2 % $ 342,338 61.4 % $ (45,491) (13.3) %
SG&A expenses increased primarily due to higher incentive compensation resulting from better than expected performance in 2021 compared to internal targets, a one-time $9.8 million bonus paid to Simbionix employees in connection with the divestiture, investments in the business, increase in stock compensation expenses, and expenses related to acquisitions, partially offset by a decrease in cost optimization expenses. SG&A expenses for 2020 included $20.1 million of restructuring expenses related to our 2020 cost optimization program. See Note 25 to the consolidated financial statements for additional discussion regarding restructuring.
R&D expenses decreased primarily due to divestitures and cost savings from the prior year restructuring program.
For the year ended December 31, 2021, there were no impairment charges to goodwill. For the year ended December 31, 2020, we recorded a non-cash goodwill impairment charge of $48.3 million, related to the EMEA reporting unit, that was ultimately
due to the negative impact on the business environment as a result of the COVID-19 pandemic. See Note 11 to the consolidated financial statements in Item 8 of this Form 10-K for additional discussion.
Loss from operations
The following table sets forth loss from operations for the years ended December 31, 2021, and 2020.
Table 4
Year Ended December 31,
(Dollars in thousands) 2021 2020
Loss from operations: $ (33,069) $ (118,963)
The decrease in loss from operations for the year ended December 31, 2021, as compared to the prior year period, was primarily driven by an increase in revenue and gross profit, cost savings from the prior year cost optimization program, the absence of a goodwill impairment charge and reduced restructuring expenses related to our 2020 cost optimization program and divestitures, partly offset by higher stock and incentive compensation expenses, as previously discussed.
See “Comparison of Revenue,” “Gross profit and gross profit margins” and “Operating expenses” above.
Interest and other income (expense), net
The following table sets forth the components of interest and other income (expense), net, for the years ended December 31, 2021 and 2020.
Table 5
Year Ended December 31,
(Dollars in thousands) 2021 2020
Interest and other income (expense), net
Foreign exchange loss $ 1,681 $ (4,762)
Interest expense, net (1,902) (3,991)
Other income (expense), net 352,830 (15,694)
Total interest and other expense, net $ 352,609 $ (24,447)
Foreign exchange gain (loss), net, for the year ended December 31, 2021, as compared to the prior year period, improved due to the favorable movements in the EUR/USD and GBP/USD exchanges rates.
Interest expense, net, decreased for the year ended December 31, 2021, as compared to the prior year period primarily due to lower interest expense due to the repayment of the 5-year $100 million senior secured term loan facility (the "Term Facility") in the first quarter of 2021 and interest income related to cash proceeds from the Cimatron, ODM, and Simbionix divestitures as well as our $460 million convertible notes offering. The year over year benefits for the year ended December 31, 2021 were partially offset by the realization of losses previously recognized in accumulated other comprehensive loss resulting from the termination of the interest rate swap in the first quarter of 2021.
Other income (expense), net, for the year ended December 31, 2021, as compared to the year ended December 31, 2020, increased primarily due to the $350.9 million gain on the divestitures of Cimatron, ODM and Simbionix, including an $8.9 million favorable foreign exchange gain related to the Cimatron and Simbionix divestitures.
Benefit and provision for income taxes
We recorded a $2.5 million tax benefit and a $6.2 million provision for income taxes for the years ended December 31, 2021 and 2020, respectively.
In 2021, our benefit reflected $6.6 million in U.S. tax benefit and $4.1 million of tax expense in foreign jurisdictions. In 2020, our provision reflected $1.8 million in U.S. tax expense and $4.4 million of tax expense in foreign jurisdictions.
During 2021 and 2020, we concluded that it is more likely than not that our deferred tax assets will not be realized in certain jurisdictions, including the U.S. and certain foreign jurisdictions; therefore, we have a valuation allowance recorded against our deferred tax assets on our consolidated balance sheets totaling $91.2 million and $123.1 million as of December 31, 2021 and 2020, respectively.
For further discussion, see Note 2 and Note 22 to the consolidated financial statements in Item 8 of this Form 10-K.
Net income (loss)
The following table sets forth the primary components of net income (loss) attributable to 3D Systems for the years ended December 31, 2021 and 2020.
Table 6
Year Ended December 31,
(Dollars in thousands) 2021 2020 Change
Loss from operations $ (33,069) $ (118,963) $ 85,894
Other non-operating items:
Interest and other income (expense), net 352,609 (24,447) 377,056
Benefit (provision) for income taxes 2,512 (6,184) 8,696
Net income (loss) $ 322,052 $ (149,594) $ 471,646
Weighted average shares, basic 122,867 117,579
Weighted average shares, diluted 126,334 117,579
Income (loss) per share, basic $ 2.62 $ (1.27)
Income (loss) per share, diluted $ 2.55 $ (1.27)
The net income for the year ended December 31, 2021, as compared to the net loss for year ended December 31, 2020, was primarily driven by a decrease in loss from operations and the gain on the divestitures of Cimatron, ODM and Simbionix, as previously discussed. See “Gross profit and gross profit margins”, “Operating expenses”, and Interest and other income (expense), net above.
Liquidity and Capital Resources
Table 7
Change
(Dollars in thousands) December 31, 2021 December 31, 2020 $ %
Cash and cash equivalents $ 789,657 $ 75,010 $ 714,647 952.7 %
Accounts receivable, net 106,540 114,254 (7,714) (6.8) %
Inventories 92,887 116,667 (23,780) (20.4) %
989,084 305,931 683,153
Less:
Current portion of long term debt - 2,051 (2,051) (100.0) %
Current right of use liabilities 8,344 9,534 (1,190) (12.5) %
Accounts payable 57,366 45,174 12,192 27.0 %
Accrued and other liabilities 76,994 69,812 7,182 10.3 %
142,704 126,571 16,133
Operating working capital $ 846,380 $ 179,360 $ 667,020 371.9 %
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.
At December 31, 2021, cash on hand which includes; cash and cash equivalents and restricted cash totaled $790.0 million, increased $705.3 million since December 31, 2020. The higher cash balance resulted from proceeds of $421.1 million from the Cimatron, ODM, and Simbionix divestitures, $446.5 million of proceeds from the issuance of convertible notes, and $48.1 million of cash flow from operations, partially offset by $21.4 million for repayments of debt, $18.8 million for capital expenditures, $139.7 million for current acquisitions, $12.6 million related to net settlement of stock-based compensation, and $6.3 million of payments related to previously purchased non-controlling interests. Cash flow from operations was negatively impacted by withholding taxes of $6.6 million related to the Cimatron divestiture.
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.
Cash held outside the U.S. at December 31, 2021 was $62.7 million, or 7.9% of total cash and cash equivalents, compared to $49.7 million, or 66.2% of total cash and cash equivalents, at December 31, 2020. 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.
The changes that make up the other components of working capital not discussed above resulted from the ordinary course of business. 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, acquisitions and divestitures.
Cash flow
Cash flow from operations
Cash provided by operating activities for the year ended December 31, 2021 was $48.1 million and cash used in operating activities for the year ended December 31, 2020 was $20.1 million.
Working capital used cash of $0.7 million for the year ended December 31, 2021 and used cash of $7.3 million for the year ended December 31, 2020. For the year ended December 31, 2021, working capital changes related to cash inflows were a decrease in inventory and an increase in accounts payable, partially offset by an increase in accounts receivable, and prepaid expenses and other current assets, and a decrease in deferred revenue, and other liabilities.
For the year ended December 31, 2020, drivers of working capital related to cash outflows were an increase in accounts receivable, inventory, and prepaid expenses and other current assets, and a decrease in accounts payable, partially offset by an increase in deferred revenue and customer deposits and accrued and other current liabilities.
Cash flow from investing activities
For the year ended December 31, 2021, cash flow provided from investing activities was $260.6 million compared to $11.7 million of cash used in investing activities for the year ended December 31, 2020. Cash inflows related to the net proceeds from the divestitures of Cimatron, ODM and Simbionix, partially offset by capital expenditures and payments related to current acquisitions. For the year ended December 31, 2020, the primary outflows of cash related to capital expenditures. Capital expenditures were $18.8 million and $13.6 million for the years ended December 31, 2021 and 2020, respectively.
Cash flow from financing activities
Cash provided by financing activities was $405.8 million for the year ended December 31, 2021, while cash used in financing activities was $19.5 million for the year ended December 31, 2020. The primary inflow of cash for the year ended December 31, 2021 related to proceeds from the issuance of the convertible note partially offset by the repayment of the Term Facility, the settlements of stock-based compensation and payments related to previously purchased non-controlling interests. The primary outflow of cash for the year ended December 31, 2020 related to partial repayment of the Term Facility, payments related to previously purchased non-controlling interests, and settlements of stock-based compensation, partially offset by proceeds from the issuance of common stock.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements and do not utilize any “structured debt,” “special purpose” or similar unconsolidated entities for liquidity or financing purposes.
Material Cash Requirements
The Company's material cash requirements consist of the following contractual and other obligations:
Indebtedness
At December 31, 2021, we had $460,000 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.
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.
Leases
The Company has operating and financing lease obligations of $69,849 at December 31, 2021, primarily related to real estate and equipment leases, of which approximately $11,000 in payments are expected over the next twelve months. Additionally, the Company has $31,108 in lease obligations for which the leases have not commenced as the facilities are under construction by the landlord. For more information on the Company's leases, refer to Note 7 to the consolidated financial statements.
Sources of Funding to Satisfy Material Cash Requirements
The Company believes that it has the financial resources needed to meet its cash requirements and expects to have positive operating cash flow in 2022. Cash requirements for periods beyond the next twelve months will depend, among other things, on the Company’s profitability and its ability to manage working capital requirements. The Company may also borrow from various sources as described above.
Other Contractual Commitments
Convertible Note
We were in compliance with all covenants of the Note as of December 31, 2021.
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 while 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.
Financial Instruments
We conduct business in various countries using both the functional currencies of those countries and other currencies to effect cross border transactions. As a result, we are subject to the risk that fluctuations in foreign exchange rates between the dates that those transactions are entered into and their respective settlement dates will result in a foreign exchange gain or loss. When practicable, we endeavor to match assets and liabilities in the same currency on our balance sheet and those of our subsidiaries in order to reduce these risks. When appropriate, we enter into foreign currency contracts to hedge exposures arising from those transactions. We had $43.0 million and $101.8 million in notional foreign exchange contracts outstanding as of December 31, 2021 and 2020, respectively. The fair value of these contracts was not material. We have elected not to prepare and maintain the documentation to qualify for hedge accounting treatment under ASC 815, “Derivatives and Hedging,” and therefore, all gains and losses (realized or unrealized) are recognized in Interest and other expense, net in the consolidated statements of operations and comprehensive income (loss). Depending on the fair value at the end of the reporting period, derivatives are recorded either in prepaid and other current assets or in accrued liabilities in the consolidated balance sheets.
We do not hedge for trading or speculative purposes, and our foreign currency contracts are generally short-term in nature, typically maturing in 90 days or less.
See Note 15 to the consolidated financial statements in Item 8 of this Form 10-K for further discussion.
Critical Accounting Policies and Significant Estimates
We prepare our consolidated financial statements in accordance with U.S. Generally Accepted Accounting Principles ("GAAP"). In doing so, we have to make estimates and assumptions that affect our reported amounts of assets, liabilities, revenues, expenses, gains and losses, as well as related disclosure of contingent assets and liabilities. In some cases, we could reasonably have used different accounting policies and estimates. In some cases, changes in the 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 these 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 policies and estimates, which we discuss further below. We have reviewed our critical accounting policies and 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 significant accounting policies and the effect on our financial statements.
Revenue recognition
Revenue is recognized when control of the promised products or services is transferred to customers in an amount that reflects the consideration we expect to receive in exchange for those products or services. A majority of our revenue is recognized at the point in time when products are shipped or services are delivered to customers.
We enter into contracts that can include various combinations of products and services, which are generally capable of being distinct and accounted for as separate performance obligations. Many of our contracts with customers include multiple performance obligations. For such arrangements, we allocate revenue to each performance obligation based on its relative standalone selling price (“SSP”). Judgment is required to determine the SSP for each distinct performance obligation in a contract. For the majority of items, we estimate SSP using historical transaction data. We use a range of amounts to estimate SSP when we sell each of the products and services separately and need to determine whether there is a discount to be allocated based on the relative SSP of the various products and services. In instances where SSP is not directly observable, such as when the product or service is not sold separately, we determine the SSP using information that may include market conditions and other observable inputs.
In some circumstances, we have more than one SSP for individual products and services due to the stratification of those products and services by customers, geographic region or other factors. In these instances, we may use information such as the size of the customer and geographic region in determining the SSP.
The determination of SSP is an ongoing process and information is reviewed regularly in order to ensure SSP reflects the most current information or trends.
The nature of our marketing incentives may lead to consideration that is variable. Judgment is exercised at contract inception to determine the expected value of the contract and resulting transaction price. Ongoing assessments are performed to determine if updates are needed to the original estimates.
See Note 2 and Note 5 to the consolidated financial statements in Item 8 of this Form 10-K for further discussion.
Allowance for doubtful accounts
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 and historical collection experience. Based on these assessments, we may record a reserve for specific customers, as well as a general reserve and allowance for returns and discounts. 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. One customer represents significant concentration of credit risk, as they represent greater than 10% of our total accounts receivable.
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.
Inventories
Inventories are stated at the lower of cost or net realizable value, with cost being determined using 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 8 to the consolidated financial statements in Item 8 of this Form 10-K for further discussion.
Goodwill & Other Long-Lived Assets, Including Intangible Assets
We review long-lived assets, including intangible assets subject to amortization, for impairment whenever events or changes in circumstances indicate that the carrying value of the asset may not be recoverable. We assess the recoverability of the carrying value of assets held for use based on a review of undiscounted projected cash flows. Impairment losses, where identified, are measured as the excess of the carrying value of the long-lived asset over its estimated fair value as determined by discounted projected cash flows.
Goodwill represents the purchase price paid in excess of the fair value of net tangible and intangible assets acquired in a business combination. We review goodwill for impairment annually or when circumstances indicate that the likelihood of an impairment is greater than 50%. Such circumstances include a significant adverse change in the business climate for one of our reporting units or a decision to dispose of a reporting unit or a significant portion of a reporting unit. The test for goodwill impairment compares the fair value of each of reporting unit to its respective carrying value. The process requires a significant level of estimation and use of judgment by management, particularly the estimate of the fair value of our reporting units. Our reporting units are Healthcare and Industrial. Prior to January 1, 2021 our reporting units were the Americas, EMEA and APAC.
Long-lived assets (including ROU Assets) and amortizable intangible assets are reviewed for recoverability whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.
We estimate the fair value of our reporting units based primarily on the discounted projected cash flows of the underlying operations, which requires us to make assumptions about estimated cash flows, including profit margins, long-term forecasts, discount rates and terminal growth rates. We developed these assumptions based on the market risks unique to each reporting unit.
As of December 31, 2021, we have approximately $0.6 million of goodwill that is deductible for tax purposes.
As of September 30, 2020, we experienced a triggering event due to a drop in our stock price, which ultimately had been negatively impacted by the business environment as a result of the COVID-19 pandemic, and performed a quantitative analysis for potential impairment of our goodwill and long-lived asset balances. Based on available information and analysis as of September 30, 2020, we determined the carrying value of the EMEA reporting unit exceeded its fair value and recorded a non-cash goodwill impairment charge of $48.3 million. We determined the fair value of the Americas and APAC reporting units exceeded their carrying values and the carrying value of our long-lived assets is recoverable for all reporting units.
Fair value was determined using a combination of an income approach, which estimates fair value based upon projections of future revenues, expenses, and cash flows discounted to its present value, and a market approach. The valuation methodology and underlying financial information included in the Company's determination of fair value required significant judgments by management. The principal assumptions used in the Company's discounted cash flow analysis consisted of (a) the long-term projections of future financial performance and (b) the weighted-average cost of capital of market participants, adjusted for the risk attributable to the Company and the industry in which it operates. Under the market approach, the principal assumption included an estimate of multiples of various financial metrics of comparable companies.
We conducted our annual goodwill impairment test for the years ended December 31, 2021 and 2020 as of November 30, 2021 and 2020, respectively. There was no goodwill impairment for the year ended December 31, 2021. We had an immaterial amount of other long lived asset impairment charges for the year ended December 31, 2021.
Contingencies
We record an estimated loss from a contingency when information indicates that it is probable that an asset has been impaired or a liability has been incurred at the date of the financial statements and the amount of the loss can be reasonably estimated. Accounting for contingencies requires us to use our judgment and the ultimate resolution of our exposure related to these matters may change as further facts and circumstances become known.
See Note 23 to the consolidated financial statements in Item 8 of this Form 10-K for further discussion.
Recent Accounting Pronouncements
See Note 2 to the consolidated financial statements in Item 8 of this Form 10-K for recently issued accounting standards, including the expected dates of adoption and expected impact to the consolidated financial statements upon adoption.

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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
We are exposed to market risks from fluctuations in interest rates, foreign currency exchange rates and commodity prices, which may adversely affect our results of operations and financial condition. We seek to minimize these risks through regular operating and financing activities and, when we consider it to be appropriate, through the use of derivative financial instruments. We do not purchase, hold or sell derivative financial instruments for trading or speculative purposes.
Interest rates
Our earnings exposure related to movements in interest rates is primarily derived from variable interest rate deposits. At December 31, 2021, we had $585.4 million in variable-rate accounts. A hypothetical interest rate change of 10% would not have a material impact on annualized interest income.
Foreign exchange rates
Because we conduct our operations in many areas of the world involving transactions denominated in a variety of currencies, our results of operations as expressed in U.S. dollars may be significantly affected by fluctuations in rates of exchange between currencies. These fluctuations could be significant. In 2021, approximately 44.6% of our net sales and a significant portion of our costs were denominated in currencies other than the dollar. We generally are unable to adjust our non-dollar local currency sales prices to reflect changes in exchange rates between the dollar and the relevant local currency. As a result, changes in exchange rates between the U.S. Dollar and the Euro, Japanese Yen, British Pound, South Korean Won or other currencies in which we receive sale proceeds have a direct impact on our operating results. These impacts are partly offset by expenses incurred in the same currency as the sales. There is normally a time lag between our sales and collection of the related sales proceeds, exposing us to additional currency exchange rate risk.
When practicable, we endeavor to match assets and liabilities in the same currency on our U.S. balance sheet and those of our subsidiaries in order to reduce these risks. We also, when we consider it appropriate, enter into foreign currency contracts to hedge exposures arising from those transactions.
At December 31, 2021, a hypothetical change of 10% in foreign currency exchange rates would cause a change in revenue and expense of approximately $27.5 million and $15.7 million, respectively, assuming all other variables remained constant.
We enter into foreign currency forward contracts to reduce the effect of fluctuating foreign currencies. At December 31, 2021, we had notional forward exchange contracts outstanding of $43.0 million. We believe these foreign currency forward contracts and the offsetting underlying commitments, when taken together, do not create material market risk.
For the year ended December 31, 2021 the aggregate foreign currency gain or loss included in net income was $1.7 million.
Commodity prices
We are exposed to price volatility related to raw materials and energy products in conjunction with our printer assembly and print materials blending processes. Generally, we acquire such components at market prices and do not use financial instruments to hedge commodity prices. At December 31, 2021, a hypothetical 10% change in commodity prices for raw materials would cause a change to cost of sales of approximately $7.1 million.

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Item 8. Financial Statements and Supplementary Data
Our consolidated financial statements and the related notes, together with the Report of Independent Registered Public Accounting Firm thereon, are set forth below beginning on page and are incorporated herein by reference.

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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Not applicable.

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ITEM 9A. CONTROLS AND PROCEDURES
Item 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our management, including the Chief Executive Officer and Chief Financial Officer, conducted an evaluation of the effectiveness of our disclosure controls and procedures, pursuant to Exchange Act Rule 13a-15(e), as of December 31, 2021. Disclosure controls refer to controls and other procedures designed to ensure that information required to be disclosed in the reports we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the rules and forms of the SEC, and to provide reasonable assurance that we accumulate and communicate such information to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions about required disclosure.
Based on this evaluation, our management, including our Chief Executive Officer and Chief Financial Officer, concluded that, as of December 31, 2021, our disclosure controls and procedures were not effective due to the material weaknesses in our internal control over financial reporting, as further described below.
Management’s Report on Internal Control over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f). Our internal control framework and processes were designed to provide reasonable assurance to management and the Board of Directors regarding the reliability of financial reporting and the preparation of our consolidated financial statements for external purposes in accordance with GAAP. Our internal control over financial reporting includes those policies and procedures that:
• Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of our assets;
• Provide reasonable assurance that transactions are recorded properly to allow for the preparation of financial
statements in accordance with GAAP and that our receipts and expenditures are being made only in accordance with
authorizations of our management and directors; and
• Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or
disposition of our assets that could have a material effect on the consolidated financial statements.
Because of its inherent limitations, a system of internal control over financial reporting can provide only reasonable assurance and may not prevent or detect misstatements. Further, because of changing conditions, effectiveness of internal control over financial reporting may vary over time.
Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we performed an assessment of the effectiveness of our internal control over financial reporting based on the framework described in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on this assessment, we concluded that we did not maintain effective internal control over financial reporting as of December 31, 2021, due to an aggregation of certain control deficiencies that resulted in three material weaknesses identified below, although the volume of control deficiencies that aggregated into our previously reported material weakness has been significantly reduced.
A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis.
The material weaknesses present relate to a lack of certain controls, or improper execution of designed control procedures (1) for certain non-standard contracts and non-standard contract terms; (2) over the review of internally prepared reports and analyses utilized in the financial closing process; and (3) for the calculation of the Company's provision for income taxes including for material non-routine transactions. The combination of control deficiencies that resulted in these material weaknesses were partially related to employee training, resulting in a lack of knowledge or skill level to properly execute the designed controls or perform an effective review over certain manual controls related to the financial statement close process. In addition, certain control deficiencies related to the timely review of transactions that were infrequent in nature.
The effectiveness of our internal control over financial reporting as of December 31, 2021 has been audited by BDO USA, LLP, an independent registered public accounting firm, as stated in their report included in Item 8 of this Form 10-K.
Remediation Plan for Material Weaknesses as of December 31, 2020
To address the two material weaknesses identified at December 31, 2020, we began implementing a remediation plan in January 2021 designed to improve our internal control over financial reporting and remediate the related control deficiencies that led to these material weaknesses. The remediation plan included the following remedial actions:
a.Formally enhanced, developed, and implemented policies, procedures and processes relating to our financial reporting.
b.Hired an experienced Chief Accounting Officer (CAO), along with additional accounting personnel some of whom possess public company accounting and reporting technical expertise.
c.Engaged outside consultants to advise on changes in the design of our controls and procedures, implementation of our remediation activities and to advise on technical accounting matters.
d.Enhanced the global control environment, including testing in 2021 of a significant number of additional business process and information technology controls.
e.Trained new and existing accounting and finance personnel as well as key personnel in other functions such as, but not limited to, operations, sales, business development, human resources, legal and supply chain on the newly enhanced, developed and implemented policies and procedures.
f.Trained personnel noted in the above bullet as to the proper design and execution of control procedures and noted the importance of the ongoing execution and maintenance of control process and procedures.
g.Implemented software to manage and administer account reconciliations.
h.Modified existing software to capture non-standard terms and conditions related to customer contracts.
i.Enhanced the monthly close process to improve the timeliness of recording entries which permits more time to review and analyze financial statement accounts and to execute control procedures.
j.Revamped and expanded our internal disclosure processes to provide greater representation across functions and improve opportunities to identify matters requiring accounting disposition or disclosures.
After an assessment of the impact of the remediation actions commenced in 2021, we determined that the two material weaknesses identified at December 31, 2020 were not fully remediated as of December 31, 2021, but the volume of control deficiencies that aggregated into the previously reported material weaknesses has been significantly reduced. To fully remediate these material weaknesses, we plan to continue enhancements to our internal controls over financial reporting in 2022. These additional remediation actions include:
a.Hiring additional staff with appropriate accounting, finance, operational and technology knowledge and experience in the design and execution of controls,
b.Re-designing ineffective controls or processes,
c.Implementing software to enhance our financial close and reporting process, and
d.Establishing a formal controls governance committee to manage and enhance the oversight and execution of internal controls.
Remediation Plan for Material Weaknesses as of December 31, 2021
In addition to the remediation plan for the two material weaknesses discussed above, to address the tax material weakness present at December 31, 2021, we plan to implement a number of remediation actions including:
a. Implementing software enhancements, including a tax reporting solution for our tax provision process
b. Redesigning controls related to the accounting for the income tax process
c. Engaging a third party to review our quarterly and annual tax calculations
d. Hiring additional experienced resources with backgrounds in income tax accounting
We are committed to the remediation of all material weaknesses and expect to successfully implement enhanced control processes and have a sufficient period of operational effectiveness to evidence material weakness remediation in 2022. However, as we continue to evaluate, and work to improve our internal control over financial reporting, management may determine that additional measures to address control deficiencies or modifications to the remediation plan are necessary. Therefore, we cannot assure you when we will remediate such weaknesses, nor can we be certain that additional actions will not be required or the costs of any such additional actions. Moreover, we cannot assure you that additional material weaknesses will not arise in the future.
Changes in Internal Control Over Financial Reporting
Other than the remediation efforts described above with respect to the two material weaknesses identified at December 31, 2020, there were no changes in our internal control over financial reporting that occurred during the quarter ended December 31, 2021, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. The tax material weakness described above was identified after December 31, 2021. Accordingly, we are in the process of implementing certain changes in our internal controls to remediate this tax material weakness as described above. The implementation of the material aspects of these additional remediation efforts began in the first quarter of fiscal year 2022.

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ITEM 9B. OTHER INFORMATION
Item 9B. Other Information
None.

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ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Item 10. Directors, Executive Officers and Corporate Governance
The information required in response to this Item will be set forth in our Proxy Statement for our 2022 Annual Meeting of Stockholders (“Proxy Statement”) under the captions “Proposal One: Election of Directors,” “Corporate Governance Matters,” “Delinquent Section 16(a) Reports,” “Corporate Governance Matters-Code of Conduct and Code of Ethics,” “Corporate Governance Matters-Corporate Governance and Nominating Committee,” and “Corporate Governance Matters-Audit Committee.”

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ITEM 11. EXECUTIVE COMPENSATION
Item 11. Executive Compensation
The information in response to this Item will be set forth in our Proxy Statement under the captions “Director Compensation,” “Executive Compensation,” “Corporate Governance Matters-Compensation Committee,” and “Executive Compensation-Compensation Committee Report.”

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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Except as set forth below, the information required in response to this Item will be set forth in our Proxy Statement under the caption “Security Ownership of Certain Beneficial Owners and Management.”
Equity Compensation Plans
The following table summarizes information about the equity securities authorized for issuance under our compensation plans as of December 31, 2021. For a description of these plans, please see Note 18 to the consolidated financial statements in Item 8 of this Form 10-K.
(in thousands, except exercise price) Number of securities to be issued upon exercise of outstanding stock options, warrants and rights Weighted average exercise price of outstanding options, warrants and rights a
Number of securities remaining available for future issuance under equity compensation plans b
Equity compensation plans approved by stockholders:
Stock options 420 $ 13.26
Restricted stock units 1,914
Total 2,334 4,258
a.The weighted-average exercise price is only applicable to stock options.
b.The number of securities remaining available for future issuance for stock options, restricted stock units, and stock awards for non-employee directors is approved in total and not individually with respect to these items.

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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Item 13. Certain Relationships and Related Transactions and Director Independence
The information required in response to this Item will be set forth in our Proxy Statement under the captions “Corporate Governance Matters-Director Independence” and “Corporate Governance Matters-Related Party Transaction Policies and Procedures.”

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ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
Item 14. Principal Accounting Fees and Services
The information in response to this Item will be set forth in our Proxy Statement under the caption “Proposal Three: Ratification of Selection of Independent Registered Accounting Firm-Fees of Independent Registered Public Accounting Firm.”
PART IV

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ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
Item 15. Exhibits, Financial Statement Schedules
(a)(3) Exhibits
The following exhibits are included as part of this filing and incorporated herein by this reference:
2.1
Share Purchase Agreement, dated November 2, 2020, by and among 3D Systems, Inc., 3D Systems Corporation and ST Acquisition Co. (Incorporated by reference to Exhibit 2.1 of the Registrant's Current Report on Form 8-K filed November 4, 2020.)
2.2
First Amendment to Share Purchase Agreement, dated December 31, 2020, by and among ST Acquisition Co., 3D Systems, Inc. and 3D Systems Corporation (Incorporated by reference to Exhibit 2.1 to Registrant's Current Report on Form 8-K, filed January 4, 2021.)
2.3
Asset Purchase Agreement, dated June 1, 2021, by and among 3D Systems, Inc., Quickparts.com, Inc., 3D Systems Italia Srl, 3D Systems France Sarl, 3D Systems Europe Limited, 3D Systems GmbH, QP 3D Acquisition, Inc., and 3D Systems Corporation. (Incorporated by reference to Exhibit 2.1 of the Registrant’s Current Report on Form 8-K files on June 2, 2021.)
2.4
First Amendment to the Asset Purchase Agreement, dated June 1, 2021, by and among 3D Systems, Inc., Quickparts.com Inc., 3D Systems Italia Srl, Sd Systems France Sarl, 3D Systems Europe Limited, 3D Systems GmbH, QP 3D Acquisition, Inc., and 3D Systems. (Incorporated by reference Exhibit 2.5 to Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2021, filed November 8, 2021.)
2.5†
Second Amendment to the Asset Purchase Agreement, dated June 1, 2021, by and among 3D Systems, Inc., Quickparts.com Inc., 3D Systems Italia Srl, Sd Systems France Sarl, 3D Systems Europe Limited, 3D Systems GmbH, QP 3D Acquisition, Inc., and 3D Systems Corporation.
2.6
Stock Purchase Agreement, dated July 28, 2021, by and between 3D Systems, Inc. and Surgical Science Sweden AB. (Incorporated by reference to Exhibit 2.1 of the Registrant’s Current Report on Form 8-K files on July 30, 2021.)
2.7
Agreement and Plan of Merger, dated September 8, 2021, by and among 3D Systems Corporation, Oqton, Inc., 3DS Merger Sub 1, Inc., 3DS Merger Sub 2 Inc., and Shareholder Representative Services LLC, solely in its capacity as the representative, agent and attorney-in-fact of the Sellers. (Incorporated by reference to the Exhibit 2.1 of the Registrant’s Current Report on Form 8-K filed on September 9, 2021.)
2.8
First Amendment to the Agreement and Plan of Merger, dated October 29, 2021, by and among 3D Systems Corporation, Oqton, Inc., 3DS Merger Sub 1, Inc., 3DS Merger Sub 2 Inc., and Shareholder Representative Services LLC, solely in its capacity as the representative, agent and attorney-in-fact of the Sellers.
2.9
Agreement and Plan of Merger, dated October 27, 2021, by and among 3D Systems Corporation, Volumetric Biotechnologies, Inc., Texans Merger Sub I, Inc., Texans Merger Sub II, Inc., and Fortis Advisors LLC, solely in its capacity as the Stockholders' Representative. (Incorporated by reference to Exhibit 2.1 of the Registrant's Current Report on Form 8-K filed on October 28, 2021.)
3.1 Certificate of Incorporation of Registrant. (Incorporated by reference to Exhibit 3.1 to Registrant’s Form 8-B filed on August 16, 1993, and the amendment thereto, filed on Form 8-B/A on February 4, 1994.)
3.2 Amendment to Certificate of Incorporation filed on May 23, 1995. (Incorporated by reference to Exhibit 3.2 to Registrant’s Registration Statement on Form S-2/A, filed on May 25, 1995.)
3.3
Certificate of Amendment of Certificate of Incorporation filed with Secretary of State of Delaware on May 19, 2004. (Incorporated by reference to Exhibit 3.1 to Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2004, filed on August 5, 2004.)
3.4
Certificate of Amendment of Certificate of Incorporation filed with Secretary of State of Delaware on May 17, 2005. (Incorporated by reference to Exhibit 3.1 to Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2005, filed on August 1, 2005.)
3.5
Certificate of Amendment of Certificate of Incorporation filed with the Secretary of State of Delaware on October 7, 2011. (Incorporated by reference to Exhibit 3.1 to Registrant’s Current Report on Form 8-K filed on October 7, 2011.)
3.6
Certificate of Amendment of Certificate of Incorporation filed with the Secretary of State of Delaware on May 21, 2013. (Incorporated by reference to Exhibit 3.1 to Registrant’s Current Report on Form 8-K filed on May 22, 2013.)
3.7
Amended and Restated By-Laws. (Incorporated by reference to Exhibit 3.1 to Registrant’s Current Report on Form 8-K, filed on March 15, 2018.)
4.1
Specimen Common Stock Certificate. (Incorporated by reference to Exhibit 4.1 to Registrant’s Registration Statement on Form S-3 (Registration No. 333-182065), filed on June 12, 2012.)
4.2
Description of Common Stock. (Incorporated by reference to Exhibit 4.2 to Registrant's Annual Report on Form 10-K for the year ended December 31, 2020, filed on February 26, 2020.)
4.3*
Amended and Restated 2015 Incentive Plan of 3D Systems Corporation effective September 3, 2020. (Incorporated by reference to Exhibit 4.1 to Registrant's Quarterly Report on Form 10-Q for the quarter ended September 30, 2020, filed on November 5, 2020.)
4.4*
Appendix A to the 2015 Incentive Plan of 3D Systems Corporation effective May 19, 2015. (Incorporated by reference to Exhibit 10.3 to Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2015, filed on August 6, 2015.)
4.5*
Form of Restricted Stock Award Agreement under the Amended and Restated 2015 Incentive Plan. (Incorporated by reference to Exhibit 4.5 to Registrant’s Annual Report on Form 10-K for the year ended December 31, 2020, filed on May 5, 2021.)
4.6*
Form of Restricted Stock Unit Award Agreement under the Amended and Restated 2015 Incentive Plan. (Incorporated by reference to Exhibit 4.6 to Registrant’s Annual Report on Form 10-K for the year ended December 31, 2020, filed on May 5, 2021.)
4.7*
Form of Stock Option Award Agreement under the Amended and Restated 2015 Incentive Plan. (Incorporated by reference to Exhibit 4.10 to Registrant's Annual Report on Form 10-K for the year ended December 31, 2019, filed on February 26, 2020.)
4.8*
Form of Restricted Stock Award Agreement with Share Price Vesting Conditions (Incorporated by reference to Exhibit 4.17 to Registrant’s Annual Report on Form 10-K for the year ended December 31, 2016, filed on February 28, 2017.)
4.9*
Revised Form of Performance-Based Restricted Stock Unit Award Agreement under the Amended and Restated 2015 Incentive Plan. (Incorporated by reference to Exhibit 4.10 to Registrant’s Annual Report on Form 10-K for the year ended December 31, 2020, filed on May 5, 2021.)
4.10
Indenture, dated as of November 16, 2021, between 3D Systems Corporation and The Bank of New York Mellon Trust Company, N.A., as trustee. (Incorporated by reference to the Exhibit 4.1 of the Registrant’s Current Report on Form 8-K filed on November 17, 2021.)
4.11
Form of 0% Convertible Notes due 2026 (included in Exhibit 4.10). (Incorporated by reference to the Exhibit 4.2 of the Registrant’s Current Report on Form 8-K filed on November 17, 2021.)
10.1
Lease Agreement dated February 8, 2006 between the Registrant and KDC-Carolina Investments 3, LP. (Incorporated by reference to Exhibit 99.1 to Registrant’s Current Report on Form 8-K, filed on February 10, 2006.)
10.2
First Amendment to Lease Agreement dated August 7, 2006 between the Registrant and KDC-Carolina Investments 3, LP. (Incorporated by reference to Exhibit 10.1 to Registrant’s Current Report on Form 8-K, filed on August 14, 2006.)
10.3
Second Amendment to Lease Agreement effective as of October 6, 2006 to Lease Agreement dated February 8, 2006 between 3D Systems Corporation and KDC-Carolina Investments 3, LP. (Incorporated by reference to Exhibit 10.1 to Registrant’s Current Report on Form 8-K, filed on October 10, 2006.)
10.4
Third Amendment to Lease Agreement effective as of December 18, 2006 to Lease Agreement dated February 8, 2006 between 3D Systems Corporation and KDC-Carolina Investments 3, LP. (Incorporated by reference to Exhibit 10.1 to Registrant’s Current Report on Form 8-K, filed on December 20, 2006.)
10.5
Fourth Amendment to Lease Agreement effective as of February 26, 2007 to Lease Agreement dated February 8, 2006 between 3D Systems Corporation and KDC-Carolina Investments 3, LP. (Incorporated by reference to Exhibit 10.1 to Registrant’s Current Report on Form 8-K, filed on March 1, 2007.)
10.6
Fifth Amendment to Lease Agreement effective as of March 17, 2011 to Lease Agreement dated February 8, 2006 between 3D Systems Corporation and KDC-Carolina Investments 3, LP. (Incorporated by reference to Exhibit 10.1 to Registrant’s Form 8-K, filed on March 21, 2011.)
10.7
Amended and Restated Lease Agreement dated February 25, 2021 between 3D Systems Corporation and 3D Fields, LLC. (Incorporated by reference to Exhibit 10.7 to Registrant’s Annual Report on Form 10-K for the year ended December 31, 2020, filed on May 5, 2021.)
10.8
Credit Agreement, dated February 27, 2019, among 3D Systems Corporation, HSBC Bank USA, National Association, as Administrative Agent, Sole Lead Arranger and Sole Bookrunner, the guarantors party thereto, and the other lenders party thereto. (Incorporated by reference to Exhibit 10.10 of the Registrant's Annual Report on Form 10-K for the year ended December 31, 2018, filed on February 28, 2019).
10.9
Security Agreement, dated February 27, 2019, among 3D Systems Corporation, 3D Holdings, LLC, 3D Systems, Inc., and HSBC Bank USA, National Association, as Administrative Agent. (Incorporated by reference to Exhibit 10.11 of the Registrant's Annual Report on Form 10-K for the year ended December 31, 2018, filed on February 28, 2019).
10.10
First Amendment, dated September 30, 2019, to the Credit Agreement, dated February 27, 2019, among 3D Systems Corporation, HSBC Bank USA, National Association, as Administrative Agent, Sole Lead Arranger and Sole Bookrunner, the guarantors party thereto, and the other lenders party thereto. (Incorporated by reference to Exhibit 10.2 of the Registrant's Annual Report on Form 10-Q for the quarter ended September 30, 2019, filed on October 30, 2019).
10.11
Second Amendment, dated October 9, 2020, to the Credit Agreement, dated February 27, 2019, among 3D Systems Corporation, HSBC Bank USA, National Association, as Administrative Agent, Swing Loan Lender and Issuing Lender, the guarantors party thereto, and the other lenders party thereto (Incorporated by reference to Exhibit 10.1 of the Registrant’s Current Report on Form 8-K filed October 14, 2020.)
10.12*
Charles W. Hull Consulting Arrangement (Incorporated by reference to Exhibit 10.1 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2010, filed on July 29, 2010.)
10.13*
Employment Agreement, dated August 4, 2016, between 3D Systems Corporation and Charles W. Hull. (Incorporated by reference to Exhibit 10.1 to Registrant's Current Report on Form 8-K, filed August 8, 2016.)
10.14*
Employment Agreement, dated June 15, 2016, between 3D Systems Corporation and Andrew M. Johnson. (Incorporated by reference to Exhibit 10.2 to Registrant’s Current Report on Form 8-K, filed on June 16, 2016.)
10.15*
3D Systems Corporation Change of Control Severance Policy (Incorporated by reference to Exhibit 10.1 to the Registrant's Current Report on Form 8-K, filed February 23, 2018.)
10.16*
Employment Agreement, dated May 11, 2020, between 3D Systems Corporation and Dr. Jeffrey A. Graves (Incorporated by reference to Exhibit 10.1 of the Registrant’s Current Report on Form 8-K filed May 14, 2020.)
10.17*
Employment Agreement, dated August 21, 2020, between 3D Systems Corporation and Jagtar Narula (Incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed August 26, 2020.)
10.18*
Employment Agreement, dated November 21, 2016, between 3D Systems Corporation and Menno Ellis (Incorporated by reference to Exhibit 10.3 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2020, filed November 5, 2020.)
10.19*
Employment Agreement, dated October 1, 2020, between 3D Systems Corporation and Reji Puthenveetil (Incorporated by reference to Exhibit 10.4 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2020, filed November 5, 2020.)
10.20*
Amendment No. 1 to the Employment Agreement, dated February 22, 2021, between 3D Systems Corporation and Reji Puthenveetil. (Incorporated by reference to Exhibit 10.30 to Registrant’s Annual Report on Form 10-K for the year ended December 31, 2020, filed on May 5, 2021.)
10.21*
Consulting Agreement, dated October 1, 2020, between 3D Systems Corporation and Reji Puthenveetil (Incorporated by reference to Exhibit 10.5 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2020, filed November 5, 2020.)
10.22*
Amended and Restated Employment Agreement, dated January 1, 2021, between 3D Systems Corporation and Jeff Blank. (Incorporated by reference to Exhibit 10.32 to Registrant’s Annual Report on Form 10-K for the year ended December 31, 2020, filed on May 5, 2021.)
10.23*
Employment Agreement, dated June 28, 2021, between 3D Systems Corporation and David K. Leigh. (Incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2021, filed August 9, 2021.)
10.24*
Employment Agreement, dated August 30, 2021, by and between 3D Systems Corporation and Phyllis Nordstrom. (Incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2021, filed November 8, 2021.)
10.25
Equity Distribution Agreement, dated August 5, 2020, by and among 3D Systems Corporation and Truist Securities, Inc. and HSBC Securities (USA) Inc. (Incorporated by reference to Exhibit 1.1 of Registrant’s Current Report on Form 8-K filed on August 5, 2020.)
21.1†
Subsidiaries of Registrant.
23.1†
Consent of Independent Registered Public Accounting Firm.
31.1†
Certification of Principal Executive Officer filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 dated March 1, 2022.
31.2†
Certification of Principal Financial Officer filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 dated March 1, 2022.
32.1†
Certification of Principal Executive Officer filed pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 dated March 1, 2022.
32.2†
Certification of Principal Financial Officer filed pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 dated March 1, 2022.
101.INS† Inline XBRL Instance Document - the instance document does not appear in the Interactive Data file because the its XBRL tags are embedded within the Inline XBRL document.In
101.SCH† Inline XBRL Taxonomy Extension Scheme Document
101.CAL† Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF† Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB† Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE† XBRL Taxonomy Extension Presentation Linkbase Document
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* Management contract or compensatory plan or arrangement
† Exhibits filed herein. All exhibits not so designated are incorporated by reference to a prior filing, as indicated.