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What changed in 3D SYSTEMS CORP's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of 3D SYSTEMS CORP's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+456 added−330 removedSource: 10-K (2024-08-13) vs 10-K (2023-03-16)

Top changes in 3D SYSTEMS CORP's 2023 10-K

456 paragraphs added · 330 removed · 213 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

54 edited+32 added−27 removed48 unchanged
Biggest changeTo date, our program has focused 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 has been expanded to include two additional human organs.
Biggest changeIn 2017, we entered into an arrangement that combined our 3D printing expertise and capabilities in human tissue engineering with the regenerative medicine and biotechnology expertise of a key strategic partner, with a long-term goal of developing the capability to 3D print lungs that will allow patients with end-stage lung disease to receive transplants that will enable them to enjoy long and active lives.
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 and plastics (including biocompatible materials for medical use), wax and bioprinting 4 b.
Our proficiency in providing industry focused application and solution development for customers includes a number of internal assets and capabilities, including: 4 a. A full range of additive manufacturing hardware technologies and materials to address needs in metals and plastics (including biocompatible materials for medical use), wax and bioprinting b.
Over her 22-year career, Ms. Nordstrom has also held multiple leadership roles at PricewaterhouseCoopers, Target, and US Bank. Joseph Zuiker , Executive Vice President of Engineering and Operations . Dr. Zuiker has served as Executive Vice President of Engineering and Operations since December 2022. Prior to joining 3D Systems, Dr.
Over her 22-year career, Ms. Nordstrom has also held multiple leadership roles at PricewaterhouseCoopers, Target, and US Bank. Joseph Zuiker , Executive Vice President, Engineering and Operations . Dr. Zuiker has served as Executive Vice President of Engineering and Operations since December 2022. Prior to joining 3D Systems, Dr.
Effective December 2022, she was further appointed as the Company’s Chief Administrative Officer. 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 business ethics, corporate compliance, corporate sustainability, and internal audit and risk management.
Effective December 2022, she was further appointed as the Company’s Chief Administrative Officer. Prior to joining 3D Systems, from May 2016 through July 2021, Ms. Nordstrom was Senior Vice President and Chief Risk & Compliance Officer at MTS Systems Corporation, where she was the leader of business ethics, corporate compliance, corporate sustainability, and internal audit and risk management.
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. Research and Development The 3D printing industry continues to experience rapid technological change and developments in hardware, software and materials.
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. 8 Research and Development The 3D printing industry continues to experience rapid technological change and developments in hardware, software and materials.
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.
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 established 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.
Item 1. Business General 3D Systems Corporation (“3D Systems” or the “Company” or “we,” "our" or “us”) markets our products and services through subsidiaries in North America and South America (collectively referred to as “Americas”), Europe and the Middle East (collectively referred to as “EMEA”) and the Asia Pacific and Oceania region (collectively referred to as “APAC”).
Item 1. Business General 3D Systems Corporation (“3D Systems” or the “Company” or “we,” "our" or “us”) markets our products and services through subsidiaries in North America and South America (collectively referred to as “Americas”), Europe and the Middle East (collectively referred to as “EMEA”) and Asia Pacific and Oceania (collectively referred to as “APAC”).
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 marketing and communications teams support our demand generation activities by providing marketing campaigns, digital presence and outreach, and event and targeted vertical seminar engagements. 7 We promote and sell our solutions globally through a direct sales force, channel partners and, in certain geographies, appointed distributors.
The outcome is the ability to improve the quality of prints, optimize design structure, shorten design to manufacturing lead time and minimize manufacturing costs. 6 Since the acquisition of Oqton, Inc.
The outcome is the ability to improve the quality of prints, optimize design structure, shorten design to manufacturing lead time and minimize manufacturing costs. Since the acquisition of Oqton, Inc.
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, 2022.
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, 2023.
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, 2022 and 2021 we held 1,358 and 1,332 patents worldwide, respectively. At December 31, 2022 and 2021, we had 360 and 261 pending patent applications worldwide, respectively.
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, 2023 and 2022 we held 1,381 and 1,358 patents worldwide, respectively. At December 31, 2023 and 2022, we had 350 and 360 pending patent applications worldwide, respectively.
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 16, 2023. All of our executive officers serve at the pleasure of the Board of Directors.
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 August 13, 2024. All of our executive officers serve at the pleasure of the Board of Directors.
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.
While the outsourced supplier of a small mix of our printers has 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.
Our facilities engaged in such activities are subject to periodic compliance audits by applicable regulatory authorities. 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 financial position.
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 financial position.
Zuiker also worked for General Electric from December 1995 to August 2011 in various roles of increasing responsibility, including General Manager of GE Gasification Technology, General Manager of GE Hydro Technology, and Six Sigma Master Black Belt.
Zuiker also worked for General Electric from December 1995 to August 2011 in various roles of increasing responsibility, including General Manager of GE Gasification Technology, General Manager of GE Hydro Technology, and Six Sigma Master Black Belt. Andrew W. B. Wright , Senior Vice President, General Counsel and Secretary . Mr.
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. 11 Michael Turner , Executive Vice President and Chief Financial Officer . Mr.
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 Integra Lifesciences Holdings Corporation. 12 Jeffrey D. Creech , Executive Vice President and Chief Financial Officer . Jeffrey D.
During 2022, we in-sourced the manufacturing of multiple printing platforms from contract manufacturing partners in order to realize improvements in production quality, cost efficiency, and inventory management. We produce materials at our facilities in Rock Hill, South Carolina, Marly, Switzerland and Soesterberg, Netherlands.
During 2023, we continued our work to in-source the manufacturing of multiple printing platforms from contract manufacturing partners in order to realize improvements in production quality, cost efficiency, and inventory management, which resulted in the termination of outsourcing arrangements in the U.S. and Switzerland. We produce materials at our facilities in Rock Hill, South Carolina, Marly, Switzerland and Soesterberg, Netherlands.
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 production environments, during 2022 we made a number of targeted investments and entered into partnership arrangements designed to broaden and enhance our product offering of 3D printing solutions and to expand addressable markets for our Industrial Solutions and Healthcare Solutions segments.
Scale that includes significant and diverse experience in production parts and applications combined with a global reach to service our customers worldwide During 2023 we made targeted investments and partnerships designed to broaden and enhance our product offering of 3D printing solutions and to expand addressable markets for our Industrial Solutions and Healthcare Solutions segments.
Our competitors operate both globally and regionally, and many of them have well-recognized brands and product lines. 9 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 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 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.
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. 6 Our 3D printers are sold with a warranty period ranging from 90 days to one year.
For the years ended December 31, 2022, 2021, and 2020, one customer accounted for approximately 23%, 22% and 13% of our consolidated revenue, respectively. We expect to maintain our relationship with this customer.
For the years ended December 31, 2023, 2022, and 2021, one customer accounted for approximately 15%, 23% and 22% of our consolidated revenue, respectively. We expect to maintain our relationship with this customer. Seasonality Historically, our results of operations were subject to seasonal factors.
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 Corporate Development Officer & Chief Legal Officer and Secretary . 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. Reji Puthenveetil , Executive Vice President, Additive Solutions and Chief Commercial Officer . Mr.
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.
We plan to continue to provide internal funding to support Systemic Bio during the early stages of its growth, including for product development and customer acquisition activities. 5 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.
We provide comprehensive 3D printing and digital manufacturing solutions, including 3D printers for plastics and metals, materials, software, and digital design tools. Our solutions support advanced applications in two key industry verticals: Healthcare Solutions (which includes dental, medical devices, personalized health services and regenerative medicine) and Industrial Solutions (which includes aerospace, defense, transportation and general manufacturing).
Our solutions support advanced applications in two key industry verticals: Healthcare Solutions (which includes dental, medical devices, personalized health services and regenerative medicine) and Industrial Solutions (which includes aerospace, defense, transportation and general manufacturing).
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 to extend our technologies to new applications. Accordingly, our ongoing R&D programs are intended to enable us to continue technology advancement and develop innovative new solutions for the marketplace.
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 to extend our technologies to new applications.
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.’ Our talent acquisition, outreach, and community engagement activities focus on attracting top, diverse talent.
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 execute talent programs throughout the year in support of our commitment to maintain and engage our diverse workforce.
There are no family relationships among any of our executive officers or directors. Name and Current Position Age as of March 16, 2023 Jeffrey A. Graves 61 President and Chief Executive Officer Michael Turner 47 Executive Vice President and Chief Financial Officer Charles W. Hull 83 Executive Vice President and Chief Technology Officer for Regenerative Medicine Andrew M.
There are no family relationships among any of our executive officers or directors. Name and Current Position Age as of August 13, 2024 Jeffrey A. Graves 63 President and Chief Executive Officer Jeffrey D. Creech 61 Executive Vice President and Chief Financial Officer Charles W.
Development of new technologies or techniques not encompassed by the patents that we own or license may result in additional future competition.
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.
Our second strategy involves utilizing our bio-printing technology to manufacture non-organ human tissue scaffolds for use in transplantation and surgical reconstruction applications. We believe that continued progress in this area could result in significantly improved health outcomes for patients as well as open up attractive new growth markets and therapeutic applications for 3D printed, vascularized soft-tissue scaffolds.
We believe that continued progress in this area could result in significantly improved health outcomes for patients, as well as open up attractive new growth markets and therapeutic applications for 3D printed, vascularized soft-tissue scaffolds. The Tissue Program is currently an internal R&D program that combines our 3D printing, materials, and bio-printing capabilities and expertise.
As part of our broader software strategy, we are working to integrate 3D System’s legacy stand-alone software applications into Oqton’s legacy MOS, so that we can offer our customers a complete cloud-based software solution to automate and control their entire digital manufacturing process from order to delivery.
("Oqton") in 2021, we have also offered an intelligent, cloud-based MOS platform to customers that need to integrate a broad range of advanced manufacturing and automation technologies, including additive manufacturing (AM) solutions, in their production workflows. 3D System’s legacy stand-alone software applications are integrated into Oqton’s legacy MOS, so that we can offer our customers a complete cloud-based software solution to automate and control their entire digital manufacturing process from order to delivery.
Diversity, Equity & Inclusion Employees span the Americas (57%), EMEA (34%), and APAC (9%) with approximately 879 employees located outside the U.S.
Inclusion and Belonging Employees span the Americas (56%), EMEA (35%), and APAC (9%) with approximately 44% of our employees located outside the U.S.
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.
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. 11 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.
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.
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.
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 spent 25 years as a management consultant for Group Newhouse helping companies, such as Lockheed Martin, Xcel Energy, Kia Motors, and Thales Group. Phyllis Nordstrom , Executive Vice President, Chief People Officer and Chief Administrative Officer . Ms. Nordstrom has served as Executive Vice President, Chief People and Culture Officer and Chief Compliance Officer since August 2021.
We believe that the above-described acquisitions, partnerships, and software development efforts, as well as other initiatives begun during 2022, will accelerate the adoption of additive manufacturing in our target industrial and healthcare end-markets and open up profitable future growth opportunities for our company.
We believe that the above-described investments during 2023, will accelerate the adoption of additive manufacturing in our target industrial and healthcare end-markets and open up profitable future growth opportunities for our company. Realizing the full benefit of these growth-oriented initiatives will require us to make additional investments in operations and development activities during 2024 and beyond.
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 bio-printing solutions, we also offer research protocols that include bio-ink, consumable and reagent recommendations.
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. Software and Related Products We provide digital design tools, including software, scanners and haptic devices.
Healthcare Solutions Services As part of our precision healthcare solutions services, we provide surgical planning, modeling, prototyping and manufacturing services.
Healthcare Solutions Services As part of our precision healthcare solutions 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.
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.
This supplier carries out quality control procedures on our printers prior to their shipment to customers and has 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.
Production and Suppliers In order to carry out the assembly and refurbishment of our 3D printer hardware, we utilize a combination of in-house operations as well as outsourcing arrangements with selected design, engineering and contract manufacturing companies in the U.S., Switzerland and Belgium.
Production and Suppliers In order to carry out the assembly and refurbishment of our 3D printer hardware, we utilize a combination of in-house operations and a limited outsourcing arrangement with a contract manufacturing company in Belgium from which we purchase finished printers pursuant to forecasts and customer orders that we supply.
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. 8 Our equipment assembly and materials blending activities, advanced manufacturing services and certain R&D activities are subject to compliance with applicable federal, state and local provisions regulating the storage, use and discharge of materials into the environment.
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 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.
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.
The 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.
In support of this, we offer a wide variety of market competitive benefits to employees around the world. The 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.
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.
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.
As of December 31, 2022, we had 2,032 full-time and part-time employees, compared to 1,721 full-time and part-time employees as of December 31, 2021. 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.
Our U.S. employees are not 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.
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.
We engage directly with employees to provide updates on our strategic priorities and Company progress, as well as solicit feedback through regular communications, global all-hands meetings, and business town hall updates. 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.
Currently, drug development is an expensive and time-consuming process, and many drug therapies that appear promising during pre-clinical trials fail during human clinical trials. We believe that “organs-on-chips” can accelerate the drug development process and reduce the cost of pre-clinical drug testing, as well as reduce the pharmaceutical industry’s reliance on animal testing.
Our third area of focus seeks to utilize our bio-printing capabilities to design and manufacture 3D-printed vascularized “organs-on-chips” for use in drug development by pharmaceutical industry customers. Currently, drug development is an expensive and time-consuming process, and many drug therapies that appear promising during pre-clinical trials fail during human clinical trials.
Realizing the full benefit of these growth-oriented initiatives will require us to make additional investments in operations and development activities during 2023 and beyond. Investing in Regenerative Medicine As an early and continuing innovator in additive manufacturing, we have significant experience in bringing this technology to new markets.
Investing in Regenerative Medicine As an early and continuing innovator in additive manufacturing, we have significant experience in bringing this technology to new markets. Within our Healthcare Solutions segment, a portion of our business focuses on opportunities for additive manufacturing to be applied to regenerative medicine.
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. During 2022, we made significant progress in our organ printing development program, which we are conducting together with a key strategic partner.
To date, our efforts in the area of regenerative medicine have consisted primarily of pre-commercial bio-technology research and development ("R&D") in the areas described below. Each year, end-stage organ failure kills millions of people, and the supply of donated organs is insufficient to meet the needs of patients seeking transplantation.
Human Capital At 3D Systems, our mission 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 development and engagement opportunities to enable a culture of innovation, and ensuring a safe and healthy work environment.
Human Capital At 3D Systems, our mission is to deliver leading additive solutions for industrial and healthcare applications.
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.
Talent Management & Engagement Our Company is advancing additive manufacturing through ongoing product innovation, and as such we recognize the importance of the retention, growth, and development of our employees – employees are necessary to achieving our long-term success.
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.
Puthenveetil has served as Executive Vice President, Additive Solutions and Chief Commercial Officer since January 2024. He previously served as Executive Vice President, Industrial Solutions since July 2020. In January 2024, Mr. Puthenveetil was appointed Executive Vice President, Additive Solutions. Prior to joining the Company, Mr.
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 extend our focus of inclusion within our local communities and strive to make a positive impact by serving our underserved populations through our 3D Gives Back volunteer program. Compensation & Benefits We design our compensation programs to be competitive and equitable to support employees in sharing in the success of 3D Systems.
Johnson 48 Executive Vice President, Chief Corporate Development Officer, Chief Legal Officer and Secretary Menno Ellis 50 Executive Vice President, Healthcare Solutions Reji Puthenveetil 54 Executive Vice President, Industrial Solutions Phyllis Nordstrom 44 Executive Vice President, Chief People and Culture Officer and Chief Administrative Officer Joseph Zuiker 58 Executive Vice President of Engineering and Operations Jeffrey A.
Hull 85 Executive Vice President and Chief Technology Officer for Regenerative Medicine Reji Puthenveetil 56 Executive Vice President, Additive Solutions and Chief Commercial Officer Phyllis Nordstrom 46 Executive Vice President, Chief People Officer and Chief Administrative Officer Joseph Zuiker 60 Executive Vice President, Engineering and Operations Andrew W. B. Wright 55 Senior Vice President, General Counsel and Secretary Jeffrey A.
In 2022, we continued to expand our focus and investments in the application of additive manufacturing for regenerative medicine. Currently, our efforts in the area of regenerative medicine consist mainly of pre-commercial research and development ("R&D") and involve three strategies. The first strategy is the use of additive manufacturing for human organ transplantation.
Accordingly, our first area of focus is the use of additive manufacturing for human organ transplantation.
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Among these investments were the acquisitions of Titan Additive LLC (“Titan”), Kumovis GmbH ("Kumovis"), and dp polar GmbH (“dp polar”). Titan is a pellet-based extrusion platform that addresses customer applications requiring large build volumes at a significantly lower cost.
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We provide comprehensive 3D printing and digital manufacturing solutions, including 3D printers for plastics and metals, materials, software, and services, including maintenance, advanced manufacturing and applications engineering.
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Kumovis is an extrusion platform that utilizes medical-grade, high-performance polymers such as PEEK (polyether ether ketone) to print implantable medical devices and surgical instruments with attractive performance qualities. dp polar has designed a 3D printing platform that utilizes a unique rotating build platform to enable true high-speed mass production of customized polymer components.
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Among these investments was the acquisition of Wematter AB (publ) (“Wematter”). Wematter is an affordable, turnkey, closed-loop selective laser sintering solution accessible for smaller manufacturing environments that addresses a wide range of applications including industrial, medical devices and equipment and academic markets. In addition, during 2023, we acquired a minority ownership interest in Theradaptive, Inc.
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Also during 2022, we signed a joint venture agreement with the Saudi Arabian Industrial Investments company (“Dussur”) with the goal of expanding the use of additive manufacturing within the Kingdom of Saudi Arabia and surrounding geographies. We also acquired a minority ownership interest in Enhatch Inc. (“Enhatch”) during 2022.
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(“Theradaptive”), a biopharmaceutical company focused on targeted regenerative therapeutics through a proprietary protein-engineering platform that can be used to coat implants and devices and to achieve hyper-local delivery for patients. In addition to our investment in Theradaptive, we entered into a partnership with Theradaptive to act as its exclusive 3D printing partner.
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As part of this relationship, 3D Systems and Enhatch will incorporate the automation and artificial intelligence capabilities of Enhatch’s Intelligent Surgery Ecosystem into 3D Systems’ proven workflow for patient-specific surgical planning solutions. In addition, we believe that developing our software capabilities is an important driver of our future growth.
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In 2021, this program was expanded to also focus on developing the capability to print scaffolds for livers and kidneys, for which research continued through the start of 2024.
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We made significant internal investments during 2022 to further enhance our capability to offer a comprehensive suite of 3D printing software applications. We are working to integrate 3D System’s legacy stand-alone software applications such as Geomagic, 3D Sprint, and 3DXpert into the Oqton Manufacturing Operating System ("MOS") that we acquired in 2021.
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Beginning in the first quarter of 2024, due to changes to our arrangement with and funding from our key strategic partner, the Company’s continuing organ program returned to focusing on developing the capability to print human lung scaffolds, for which the related R&D efforts will continue to be primarily funded by our key strategic partner.
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The goal of this effort is to create a unified cloud-based software solution that will enable users to automate and control their entire digital manufacturing workflow from order to delivery.
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Given the loss of funding for research on kidney and livers from our key strategic partner, those programs were discontinued during the first quarter of 2024. Our second area of focus involves utilizing our bio-printing technology to manufacture non-organ human tissue scaffolds for use in transplantation and surgical reconstruction applications (the "Tissue Program").
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We are making our new software platform available to the entire additive industry, including both customers and competitors, as a means to accelerate the adoption of additive manufacturing in high-volume production applications across multiple industry segments.
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We believe that “organs-on-chips” can accelerate the drug development process and reduce the cost of pre-clinical drug testing, as well as reduce the pharmaceutical industry’s reliance on animal testing. During 2023, our wholly-owned biotech company, Systemic Bio, continued its R&D work in this area and entered into its first commercial contracts with pharmaceutical industry customers.
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This program was first established in 2017 and combines our legacy 3D printing expertise, as well as new capabilities in human tissue engineering from our acquisition of Volumetric Biotechnologies, Inc. ("Volumetric") in 2021, with the regenerative medicine and biotechnology expertise of our partner.
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We provide these services, spare parts and field support either directly or through a network of reseller partners.
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During 2022, we pursued this strategy as an internal development program that combines our legacy 3D printing capabilities with bio-printing and materials expertise that we have gained through our Volumetric acquisition, as well as through our work on the human lung program with our development partner. 5 Our third regenerative medicine strategy seeks to utilize our bio-printing capabilities to design and manufacture 3D-printed vascularized “organs-on-chips” for use in drug development by pharmaceutical industry customers.
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Stronger demand for our products historically occurred in our fourth quarter primarily due to our customers’ capital expenditure budget cycles and our sales compensation incentive programs. Our first and third quarters historically were our weakest quarters for overall unit demand. The first quarter was typically a slow quarter for capital expenditures in general.
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During 2022, we formed a new wholly-owned biotech company called Systemic Bio in order to accelerate our progress in this area.
Added
Our equipment assembly and materials blending activities, advanced manufacturing services and certain R&D activities are subject to compliance with applicable federal, state and local provisions regulating the storage, use and discharge of materials into the environment. Our facilities engaged in such activities are subject to periodic compliance audits by applicable regulatory authorities.
Removed
Systemic Bio will combine 3D Systems’ legacy expertise in high-resolution 3D printing with advanced capabilities in bioprinting and biomaterials gained from our 2021 acquisition of Allevi, Inc. to design and market 3D-printed, vascularized “organs-on-chips” for sale to pharmaceutical industry customers.
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Accordingly, our ongoing R&D programs are intended to enable us to continue technology advancement and develop innovative new solutions for the marketplace. 9 Sustainability We deliver leading additive solutions for industrial and healthcare applications using innovative 3D printing technologies, powered by the expertise of our global team. Innovation is core to who we are and how we work.
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We plan to provide internal funding to support Systemic Bio during the early stages of its growth, including for activities such as R&D facility expansion, product development and customer acquisition.
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Our solutions enable our customers to meet key product needs and advance their business models. Looking to the future, sustainability will be an integral part of our innovation to address the evolving needs of our customers. The effects of climate change and the heightened social, economic, and health challenges around the globe are transforming our business.
Removed
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.
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We are considering these important topics as we design and execute our sustainability strategy. Our sustainability strategy is organized into four pillars: Empowering Innovation, Evolving the Future of Manufacturing, Advancing Customer Solutions, and Upholding Responsible Business Practices. Empowering Innovation We are focused on empowering innovation through our people to drive industry-leading solutions to maintain a competitive edge in additive manufacturing.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeWhile 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. 12 Operational & Financial Risk Factors Our uneven sales cycle makes planning and inventory management difficult and future financial results less predictable.
Biggest changeWhile 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, operating results, liquidity or financial condition in the future. 13 Operational & Financial Risk Factors Current macro-economic trends have been adversely affecting, and could continue to adversely affect, our business, results of operations and financial condition due to their impact on the industries in which we and our customers operate, and due to the unknown speed, extent and nature of the reversal of those trends.
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.
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, and warranty or other claims that could result in significant expenses and harm to our reputation.
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.
Furthermore, 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.
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. 18 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.
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. 21 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.
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. 17 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.
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. 20 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.
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.
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 in U.S. dollars rather than their respective functional currencies.
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.
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. 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 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 default on our debt obligations, become insolvent or be forced to declare bankruptcy.
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 business strategy and we could default on our debt obligations, become insolvent or be forced to declare bankruptcy.
This customer may terminate its contracts or materially reduce its 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.
This customer may terminate its contracts or may materially further reduce its requested levels of products or services at any time. The further loss of revenue from, 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.
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; 16 • 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.
Acquisitions involve certain risks and uncertainties, including, among others, the following: • The inability to successfully improve operating efficiency and reduce costs through our restructuring initiative; • 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. 19 Historically, we have grown organically and from acquisitions, and we intend to continue to grow in such manner.
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.
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 product, service and technology capabilities that address the increasingly sophisticated and varied needs of prospective customers, particularly in the area of printer speeds, materials functionality and environmental impacts. • Respond to technological advances and emerging industry standards and practices on a cost-effective and timely basis; or • Recruit or retain key technology employees.
Management, including our Chief Executive Officer and Chief Financial Officer, assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2022. Based on its assessment, management has concluded that the Company did not maintain effective internal control over financial reporting as of December 31, 2022, due to the following two material weaknesses.
Management, including our Chief Executive Officer and Chief Financial Officer, assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2023. Based on its assessment, management has concluded that the Company did not maintain effective internal control over financial reporting as of December 31, 2023, due to the following material weaknesses. 1.
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.
Intellectual property disputes and litigation may be costly and can be disruptive to our business operations by diverting the attention and energy of management and key technical personnel, and by increasing our costs of doing business.
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.
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, environmental, 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. 23 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.
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.
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.
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.
In addition, at any time, certain suppliers may decide to discontinue production of a part or raw material that we use, or may not have supplies available due to supplier business disruption. Any unanticipated change in the sources of our supplies, or unanticipated supply limitations, could increase production or related costs and consequently reduce margins.
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 regenerative medicine business requires us to develop products that enable the application of additive manufacturing to human organ transplantation, non-organ human applications and organ models used for drug discovery and development. These initiatives may require significant investment and technical achievement of viable product candidates may not be achieved.
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.
We may experience significant quarterly fluctuations in gross profit margins or operating income or loss due to the impact of the mix of products, offerings, geographic areas and distribution channels we use to sell our products, materials and offerings from period to period.
However, if we have additional violations of one or more export control laws, trade sanctions, or government contracting laws, we could be subject to various civil or criminal penalties, significant compliance, litigation or settlement costs, other losses, or a diversion of management’s attention from other business concerns and have a material adverse effect on our business, results of operations and financial condition.
However, if we are found to have violated one or more export control laws, trade sanctions or government contracting laws, we could be subject to various civil or criminal penalties, significant compliance, litigation, settlement costs or other losses, which could divert management’s attention from other business concerns, resulting in a material adverse effect on our business, results of operations and financial condition.
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. 21 Item 1B.
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. 25 We are no longer eligible to use a Form S-3 registration statement, which could impair our capital-raising activities.
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. Failure to comply with the terms of our settlement agreements with the U.S.
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.
In October 2017, we received an administrative subpoena from the Bureau of Industry and Security of the Department of Commerce (“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 October 2017, we received an administrative subpoena from the 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.
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.
Doing business on a worldwide basis requires us to comply with the laws and regulations of the U.S. government and various other foreign jurisdictions. These laws and regulations place restrictions on our operations, trade practices, partners and investments.
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.
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 R&D programs are intended to enable us to maintain technological leadership.
As of December 31, 2022, 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 ability to service and/or refinance our remaining 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 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.
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.
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.
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. Changes in, or interpretation of, tax rules and regulations may impact our effective tax rate and future profitability.
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. 13 Changes in business conditions may cause goodwill and other intangible assets to become impaired.
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.
If we are unable to collect our receivables, or are required to take additional reserves, our results of operations and cash flow from operations will be adversely affected. 14 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.
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 business strategy.
The Company responded to these two subpoenas and will continue to fully cooperate with the U.S. Department of Justice (“DOJ“) in the related investigation. Over the past several months, the Company engaged in settlement discussions with DDTC, BIS, and DOJ to settle the potential export control violations described above.
The Company responded to these two subpoenas and fully cooperated with the U.S. Department of Justice (“DOJ“) in the related investigation. During the year ended December 31, 2023, the Company engaged in settlement discussions with DDTC, BIS, and DOJ to settle the potential export control violations described above.
The material weaknesses described above were initially identified at December 31, 2020 and continued to exist at December 31, 2022.
Certain of the material weaknesses described above (items 1 and 2) were initially identified at December 31, 2020 and continued to exist at December 31, 2023.
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.
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.
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.
Additionally, we purchase raw chemicals and packaging that are used in our materials, as well as certain of those materials, from third-party suppliers. 15 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 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.
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. 24 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.
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.
While we recorded an impairment charge of $279.8 million related to our goodwill during 2023, 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.
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. 15 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.
Servicing and/or refinancing 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.
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.
High demand exists for senior management and other key employees with experience in additive manufacturing and certain technical skills, and there can be no assurance that we will be able to attract and retain such talent. We experience intense competition for qualified talent.
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.
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.
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.
We believe that to remain competitive we must continually enhance and improve the functionality and features of our products, services and technologies.
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.
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.
We may also be subject to negative publicity related to these matters that could harm our reputation, reduce demand for our solutions and services, result in employee attrition and negatively impact our stock price. 19 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 may also be subject to negative publicity related to these matters, which could harm our reputation, reduce demand for our products, solutions and services, result in employee attrition and negatively impact our stock price.
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. 20 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.
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.
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.
While we aim to provide competitive compensation packages to attract and retain senior management and key employees and engage in regular succession planning for these positions, larger competitors with more resources available to them can make it difficult for us to successfully compete for key talent.
In addition, while collecting information responsive to the above-referenced subpoena, our internal investigation identified potential violations of the International Traffic in Arms Regulations administered by the Directorate of Defense Trade Controls of the Department of State (“DDTC”) and potential violations of the Export Administration Regulations administered by the BIS.
In addition, while collecting information responsive to the above-referenced subpoena, our internal investigation identified potential violations of the ITAR administered by the DDTC and potential violations of the EAR administered by the BIS.
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.
We are a U.S. based, multinational company subject to taxation in multiple U.S. and foreign tax jurisdictions.
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.
The occurrence of any of these events could adversely affect our internal operations, the services we provide to our customers, impact our financial results and reputation, or result in litigation, fines, and penalties.
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.
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.
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.
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.
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.
Accordingly, our failure to comply with these or other covenants of the Indenture could result in an event of default which, if not cured or waived, could result in the acceleration of our debt or cause us to incur special interest payments.
Additionally, this concentration exposes us to concentrated credit risk, as a significant portion of our accounts receivable may be from a single customer.
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 of operations and cash flow from operations will be adversely affected.
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.
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 have experienced revenue concentration with a large customer that for the years ended December 31, 2023, 2022, and 2021 represented approximately 15%, 23% and 22% of our consolidated revenue, respectively.
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.
For further information regarding the non-compliance with the terms of the Indenture, refer to Note 26 to the consolidated financial statements included in Item 8 of this Form 10-K. 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.
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.
We experience cybersecurity threats, threats to our information technology infrastructure, and unauthorized attempts to gain access to our sensitive information. We face threats that vary from those common to most industries, to more advanced and persistent threats from highly organized adversaries who target us because of the products and services we provide.
Compliance with the terms of these agreements, which impose remedial measures such as a Special Compliance Officer to monitor the Company’s export compliance programs, could continue to impose significant costs and burdens on us.
See Note 23, “Commitments and Contingencies,” to our consolidated financial statements included in Part II, Item 8, “Financial Statements and Supplementary Data” of this Form 10-K for additional information. 22 Compliance with the terms of these agreements, which impose remedial measures such as a Special Compliance Officer to monitor the Company’s export compliance programs, could continue to impose significant costs and burdens on us.
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.
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. 18 Our operations and business performance could suffer if we are unable to attract and retain senior management or other key employees.
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. We depend on external vendors and suppliers for the components and spare parts for our 3D printers and for chemicals and packaging used in our materials.
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. 14 Our uneven sales cycle makes planning and inventory management difficult and future financial results less predictable.
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.
Our success depends largely on our ability to attract, hire, develop, and retain senior management and key employees, such as engineers, scientists, and other key skilled employees supporting our products and services. Our senior management team is critical to the leadership of our business operations and the development and execution of our business strategy.
Supply and logistical disruptions that began during the COVID-19 pandemic continue for many of our 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.
If these relationships were to terminate or these or other disruptions, such as extreme weather events, worsen, our business could be disrupted while we locate alternative sources of supply and our expenses may increase. We purchase components and sub-assemblies for our printers from third-party suppliers that we provide to our customers as spare parts.
We face some uncertainty in our business environment due to a variety of challenges, including changes in customer demand.
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 and a recent decline in our market capitalization as a result of a decrease in our stock price.
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.
Our business could be adversely impacted in the event of a failure of our information technology infrastructure or a successful cyber-attack. We extensively rely on information technology systems and networks to operate our Company and meet our business objectives. Due to evolving cybersecurity threats, it has and will continue to be difficult to prevent, detect, mitigate, and remediate cybersecurity incidents.
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.
If we cannot attract and retain sufficiently qualified talent, such as engineers, scientists, and other key technically skilled employees, or have an adequate succession plan in place, we may be unable to develop, commercialize, and sell new or existing products and services.
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.
When changes occur within senior management or within key employee roles, we are required to manage the continuity of our business, and typically incur incremental costs including search costs, relocation costs, and timing associated with onboarding and knowledge transfer.
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.
Furthermore, increasing competition for critical technical skills in the regions surrounding our facilities could require us to pay more to hire and retain key employees, thereby increasing labor costs. Business Strategy Risk Factors We have made, and may make in the future, strategic acquisitions and divestitures that may involve significant risks and uncertainties.
Removed
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.
Added
Certain global macro-economic trends have been adversely impacting the global economic environment and have contributed towards inflationary pressures on many goods, commodities and services globally.
Removed
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.
Added
The high rates of inflation globally have caused governments and central banks to act to curb inflation, including by raising interest rates, which is intended to temper economic activity and which, if more powerful than intended, could trigger recessionary conditions in individual countries or regions, or globally.
Removed
The COVID-19 pandemic created sporadic delays on the inbound supply chain at our partners and our own facilities that have not been fully resolved. Continued delays on both inbound and outbound logistics have also created challenges.
Added
These macro-economic trends have been impacting our target markets and our results of operations. For example, rising interest rates, which are meant to slow down inflation, have been worsening credit/financing conditions for our customers and adversely impacting their ability to purchase our products.
Removed
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.
Added
While we believe that we are well-positioned to withstand the current adverse macro-economic trends, given our balance sheet (primarily due to our reserves of cash and cash equivalents) and our emphasis on operational efficiencies and execution, we continue to monitor the situation, assessing further implications for our operations, supply chain, liquidity, cash flow and customer orders, in an effort to mitigate potential new adverse consequences should they arise.
Removed
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.
Added
However, there is no assurance that we will succeed at doing so. Current or future downturns could also have a material adverse impact on our business partners’ stability and financial strength.
Removed
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.
Added
Given the uncertainties associated with these trends in the current macro-economic environment, it is difficult to fully assess the magnitude of their effects on our, and our business partners’, business, financial condition and results of operations. The trends associated with the current economic environment may also have the effect of amplifying many of the other risks described herein.
Removed
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.
Added
During the year ended December 31, 2023, the revenue recognized from this large customer declined approximately 41% as compared to the year ended December 31, 2022. Generally, our contracts do not contain guarantees of minimum duration, revenue levels, or profitability.
Removed
On February 27, 2023, the Company settled these matters with all three agencies. See Note 23, “Commitments and Contingencies,” to our consolidated financial statements included in Part II, Item 8, “Financial Statements and Supplementary Data” of this Form 10-K for additional information.
Added
Additionally, such quality problems may result in a diversion of management time and attention and harm to our reputation. We also sell end-use parts to customers in the aerospace, medical, and semiconductor industries and 3D printing systems to customers in the aerospace industry, which carry with them a greater potential for liability claims against us.
Removed
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.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeItem 2. Properties Our headquarters are located in Rock Hill, South Carolina. As of December 31, 2022, we own minimal facilities and we lease approximately 1.1 million square feet, in the U.S (725 thousand square feet), EMEA (311 thousand square feet) and APAC (47 thousand square feet).
Biggest changeItem 2. Properties Our headquarters are located in Rock Hill, South Carolina. As of December 31, 2023, we own minimal facilities, and we lease facilities in the U.S., EMEA, and APAC.
Removed
The Healthcare Solutions segment accounted for approximately 198 thousand square feet, while the Industrial Solutions segment accounted for approximately 223 thousand square feet. Approximately 662 thousand square feet are mixed use facilities.
Added
Our leased facilities support our Healthcare Solutions segment, Industrial Solutions segment, and Corporate functions and consist of office space, manufacturing facilities, and warehouse or storage space that supports the distribution of our products.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeItem 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. Item 4. Mine Safety Disclosures Not applicable. PART II
Biggest changeItem 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. Item 4. Mine Safety Disclosures Not applicable. 27 PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeAlso, see Note 18 to the consolidated financial statements in Item 8 of this Form 10-K. 22 Issuer purchases of equity securities Total number of shares (or units) purchased Average price paid per share (or unit) October 1, 2022 - October 31, 2022 12,470 $ 8.53 November 1, 2022 - November 30, 2022 6,401 10.56 December 1, 2022 - December 31, 2022 67,575 7.92 Total 86,446 a $ 8.20 b a.
Biggest changeIssuer purchases of equity securities Total number of shares (or units) purchased Average price paid per share (or unit) October 1, 2023 - October 31, 2023 83,032 $ 4.25 November 1, 2023 - November 30, 2023 7,063 4.66 December 1, 2023 - December 31, 2023 12,649 5.81 Total 102,744 a $ 4.47 b a.
Issuance of Unregistered Securities and Issuer Purchases of Equity Securities We did not repurchase any of our equity securities in the open market during 2022; however, shares of common stock were surrendered to us for payment of tax withholding obligations in connection with the vesting of restricted stock awards and units pursuant to our Amended and Restated 2015 Incentive Stock Plan.
Issuance of Unregistered Securities and Issuer Purchases of Equity Securities We did not repurchase any of our equity securities in the open market during 2023; however, shares of common stock were surrendered to us for payment of tax withholding obligations in connection with the vesting of restricted stock awards and units pursuant to our Amended and Restated 2015 Incentive Stock Plan.
Stock Performance Graph The graph below shows, for the five years ended December 31, 2022, the cumulative total return on an investment of $100 assumed to have been made on December 31, 2017 in our common stock. For purposes of the graph, cumulative total return assumes the reinvestment of all dividends.
Stock Performance Graph The graph below shows, for the five years ended December 31, 2023, the cumulative total return on an investment of $100 assumed to have been made on December 31, 2018 in our common stock. For purposes of the graph, cumulative total return assumes the reinvestment of all dividends.
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 March 7, 2023, our outstanding common stock was held by approximately 1,523 stockholders of record.
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 August 5, 2024, our outstanding common stock was held by approximately 1,186 stockholders of record.
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.
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 17 to the consolidated financial statements in Item 8 of this Form 10-K.
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. 23 COMPARISON OF 5-YEAR CUMULATIVE TOTAL RETURN December 31, 2017 December 31, 2018 December 31, 2019 December 31, 2020 December 31, 2021 December 31, 2022 3D Systems Corporation $ 100 $ 118 $ 101 $ 121 $ 249 $ 86 NYSE Composite Index 100 91 115 123 148 134 S&P Small-Cap 600 Information Technology Index 100 91 127 162 206 160 Item 6.
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. 28 COMPARISON OF 5-YEAR CUMULATIVE TOTAL RETURN December 31, 2018 December 31, 2019 December 31, 2020 December 31, 2021 December 31, 2022 December 31, 2023 3D Systems Corporation $ 100 $ 86 $ 103 $ 212 $ 73 $ 62 NYSE Composite Index 100 126 135 162 147 167 S&P Small-Cap 600 Information Technology Index 100 140 178 226 176 213 Item 6.
Removed
Issuances of Unregistered Securities On October 4, 2022, we completed the acquisition of dp polar GmbH, a German corporation (“dp polar”), pursuant to a Stock Purchase Agreement, dated as of August 5, 2022, between the Company and the shareholders of dp polar.
Removed
As part of the consideration with respect to the closing of the acquisition, after customary closing adjustments, the Company issued 794,988 shares of the Company’s Common Stock to shareholders of dp polar for an aggregate stock consideration value of $7.3 million.
Removed
The shares of Common Stock were issued in a transaction undertaken in reliance on Section 4(a)(2) of Securities Act of 1933, as amended (the “Securities Act”), and/or Rule 506 of Regulation D promulgated under the Securities Act.
Removed
An additional payment of $2.2 million via the issuance of 249,865 shares of Common Stock is possible upon the continued employment of a certain key individual from dp polar through October 4, 2024.
Removed
The issuance of the shares of the Company’s Common Stock was exempt from registration because the issuance did not involve a public offering and each shareholder of dp polar that received shares of Common Stock in the transaction agreed to lock-up provisions of at least one year and acknowledged that such shares of Common Stock may not be offered, sold, pledged, assigned or transferred unless a registration statement with respect thereto is effective under the Securities Act and applicable state securities laws or an exemption from registration exists.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeSummary of Financial Results for the Years Ended December 31, 2022 and 2021 Year Ended December 31, (in thousands) 2022 2021 Revenue: Products $ 395,396 $ 428,742 Services 142,635 186,897 Total revenue 538,031 615,639 Cost of sales: Products 237,386 245,169 Services 86,412 106,692 Total cost of sales 323,798 351,861 Gross profit 214,233 263,778 Operating expenses: Selling, general and administrative 244,181 227,697 Research and development 87,071 69,150 Total operating expenses 331,252 296,847 Loss from operations (117,019) (33,069) Interest and other (expense) income, net (3,790) 352,609 (Loss) income before income taxes (120,809) 319,540 (Provision) benefit for income taxes (2,140) 2,512 Net (loss) income before redeemable non-controlling interest (122,949) 322,052 Less: net (loss) attributable to redeemable non-controlling interest (238) — Net (loss) income attributable to 3D Systems Corporation $ (122,711) $ 322,052 Consolidated revenue Total consolidated revenue for the year ended December 31, 2022 decreased $77.6 million or 12.6% to $538.0 million, compared to $615.6 million for the same period last year, primarily driven by divestitures of non-core businesses and the negative impacts of foreign exchange, partially offset by higher sales volumes.
Biggest changeFor further information regarding Adjusted EBITDA, see “Reconciliation of non-GAAP Measures” below. 36 Consolidated Financial Results for the Years Ended December 31, 2023 and 2022 Year Ended December 31, (in thousands) 2023 2022 Revenue: Products $ 328,731 $ 395,396 Services 159,338 142,635 Total revenue 488,069 538,031 Cost of sales: Products 203,258 237,386 Services 88,390 86,412 Total cost of sales 291,648 323,798 Gross profit 196,421 214,233 Operating expenses: Selling, general and administrative 210,172 244,181 Research and development 89,466 87,071 Intangible and Goodwill Impairments 302,787 — Total operating expenses 602,425 331,252 Loss from operations (406,004) (117,019) Interest and other income (expense), net 43,692 (3,790) (Loss) income before income taxes (362,312) (120,809) Benefit (provision) for income taxes 641 (2,140) Loss on equity method investment, net of income taxes (1,282) — Net (loss) income before redeemable non-controlling interest (362,953) (122,949) Less: net loss attributable to redeemable non-controlling interest (265) (238) Net (loss) income attributable to 3D Systems Corporation $ (362,688) $ (122,711) Other Financial Data: Adjusted EBITDA $ (26,258) $ (5,781) Operating Results for the year ended December 31, 2023 compared to the year ended December 31, 2022 Consolidated revenue The following table sets forth changes in our products and services revenue for the year ended December 31, 2023 and 2022.
The joint venture is to enable the development of Saudi Arabia's domestic additive manufacturing production capabilities, consistent with the Kingdom’s ‘Vision 2030,’ which is focused on diversification of the economy and long-term sustainability.
The joint venture is to enable the development of Saudi Arabia's domestic additive manufacturing production capabilities, consistent with the Kingdom’s ‘Vision 2030,’ which is focused on diversification of the economy and long-term sustainability.
The most significant estimates and assumptions relate to the determination of (1) the fair values of identified intangible assets (e.g., developed technology, trade names) and (2) the period and pattern of amortization for intangible assets that are assigned a definite life.
The most significant estimates and assumptions relate to the determination of (1) the fair values of identified intangible assets (e.g., developed technology and trade names) and (2) the period and pattern of amortization for intangible assets that are assigned a definite life.
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.
We architect solutions specific to customers’ needs through a combination of materials, hardware platforms, software, professional services and advanced manufacturing – creating a path to integrating additive manufacturing into traditional production environments. As a result, manufacturers achieve design freedom, increase agility, scale production and improve their overall total cost of operation.
Cash flow from financing activities For the year ended December 31, 2022, the cash flow used in financing activities was $13.8 million primarily due to taxes paid related to the net-share settlement of equity awards of $10.9 million and the $2.3 million payment for the acquisition of a non-controlling interest.
For the year ended December 31, 2022, the cash flow used in financing activities was $13.8 million primarily due to taxes paid related to the net-share settlement of equity awards of $10.9 million and the $2.3 million payment for the acquisition of a non-controlling interest.
Business Overview 3D Systems Corporation (“3D Systems” or the “Company” or “we,” "our" or “us”) markets our products and services through subsidiaries in North America and South America (collectively referred to as “Americas”), Europe and the Middle East (collectively referred to as “EMEA”) and the Asia Pacific and Oceania region (collectively referred to as “APAC”).
Business Overview 3D Systems Corporation (“3D Systems” or the “Company” or “we,” "our" or “us”) markets our products and services through subsidiaries in North America and South America (collectively referred to as “Americas”), Europe and the Middle East (collectively referred to as “EMEA”) and Asia Pacific and Oceania (collectively referred to as “APAC”).
Each of the non-financial milestones, which individually triggers a specific earnout payment if achieved prior to an agreed upon date of either December 31, 2030 or December 31, 2035, is based upon specific advances in regenerative medicine related to lungs or tissue organs.
Each of the seven non-financial milestones, which individually triggers a specific earnout payment if achieved prior to an agreed upon date of either December 31, 2030 or December 31, 2035, is based upon specific advances in regenerative medicine related to lungs or tissue organs.
See Note 8 to the consolidated financial statements in Item 8 of this Form 10-K for further discussion. Business combinations and purchase accounting We apply purchase accounting to transactions that meet the definition of business combinations.
See Note 6 to the consolidated financial statements in Item 8 of this Form 10-K for further discussion. Business combinations and purchase accounting We apply purchase accounting to transactions that meet the definition of business combinations.
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 “Risk Factors” in Part I, Item 1A and “Forward-Looking Statements”. All amounts are in thousands, except share and per share amounts, or as otherwise indicated.
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 “Risk Factors” in Part I, Item 1A and “Forward-Looking Statements.” All amounts are in thousands, except share and per share amounts, or as otherwise indicated.
On April 1, 2022, we completed the acquisition of 100% of Titan for an all-cash purchase price of $39.0 million. Titan, which is part of the Industrial Solutions segment, is a pellet-based extrusion platform that addresses customer applications requiring large build volumes, superior performance, and improved productivity at significantly lower cost.
Titan Additive LLC On April 1, 2022, we completed the acquisition of 100% of Titan Additive LLC ("Titan") for an all-cash purchase price of $39.0 million. Titan, which is part of the Industrial Solutions segment, is a pellet-based extrusion platform that addresses customer applications requiring large build volumes, superior performance, and improved productivity at significantly lower cost.
Recent Accounting Pronouncements See Note 2 to the consolidated financial statements in Item 8 of this Form 10-K for a discussion of recent accounting pronouncements.
Recent Accounting Pronouncements See Note 2 to the consolidated financial statements in Item 8 of this Form 10-K for a discussion of recent accounting pronouncements. 52
In addition, the Company has granted performance-based stock units (“PSUs”) with vesting terms that are based upon four individually-measured, non-financial milestones to other employees who work on advancements in regenerative medicine related to lungs and tissue organs.
In addition, the Company has granted performance-based stock units (“PSUs”), with vesting terms that are based upon four individually-assessed, non-financial milestones, to other employees who work on advancements in regenerative medicine related to lungs and tissue organs.
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 long-term revenue and expense forecasts, profit margins, discount rates and terminal growth rates. We developed these assumptions based on the market risks unique to each reporting unit.
We estimate the fair value of our reporting units based primarily on the discounted projected cash flows of their underlying operations, which requires us to make assumptions about estimated cash flows, including long-term revenue and expense forecasts, profit margins, discount rates and terminal growth rates. We develop these assumptions based on the market risks unique to each reporting unit.
In addition to changes in sales volumes, there are three other primary drivers of changes in revenue from one period to another: (1) divestitures, (2) the combined effect of changes in product mix and average selling prices and (3) the impact of fluctuations in foreign currencies.
In addition to changes in sales volumes, there are two other primary drivers of changes in revenue from one period to another: (1) the combined effect of changes in product mix and average selling prices and (2) the impact of fluctuations in foreign currencies.
For discussion related to the results of operations and changes in financial condition for fiscal 2021 compared to fiscal 2020, refer to Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations in our fiscal 2021 Form 10-K. Our fiscal 2021 Form 10-K was filed with the SEC on March 1, 2022.
For discussion related to our results of operations and changes in financial condition for fiscal 2022 compared to fiscal 2021, refer to Part II, Item 7. "Management’s Discussion and Analysis of Financial Condition and Results of Operations" ("MD&A") in our fiscal 2022 Form 10-K. Our fiscal 2022 Form 10-K was filed with the SEC on March 16, 2023.
Material Cash Requirements The Company's material cash requirements consist of the following contractual and other obligations: Indebtedness At December 31, 2022, we had $460 million of outstanding 0% convertible notes which mature in November of 2026.
Material Cash Requirements The Company's material cash requirements consist of the following contractual and other obligations: Indebtedness At December 31, 2023, we had $324.9 million of outstanding 0% convertible notes which mature in November of 2026.
We provide comprehensive 3D printing and digital manufacturing solutions, including 3D printers for plastics and metals, materials, software, and digital design tools. Our solutions support advanced applications in two key industry verticals: Healthcare Solutions and Industrial Solutions.
We provide comprehensive 3D printing and digital manufacturing solutions, including 3D printers for plastics and metals, materials, software, and services, including maintenance, advanced manufacturing and applications engineering. Our solutions support advanced applications in two key industry verticals: Healthcare Solutions and Industrial Solutions.
We 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.
We assess the recoverability of the carrying value of assets (or asset groups) held for use based upon a review of undiscounted projected cash flows. Impairment losses, where identified, are measured as the excess of the carrying value of a long-lived asset (or asset group) over its estimated fair value, as determined using discounted projected cash flows.
In March 2022, the Saudi Arabian Industrial Investments Company ("Dussur") and 3D Systems signed an agreement to form a joint venture intended to expand the use of additive manufacturing within the Kingdom of Saudi Arabia and surrounding geographies, including the Middle East and North Africa.
National Additive Manufacturing Innovation ("NAMI") Joint Venture In March 2022, Dussur and 3D Systems signed an agreement to form a joint venture intended to expand the use of additive manufacturing within the Kingdom of Saudi Arabia and surrounding geographies, including the Middle East and North Africa.
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 base our estimates on past experience and other assumptions that we believe are reasonable under the circumstances, and we evaluate these estimates on an ongoing basis. We refer to accounting estimates of this type as critical accounting estimates, which we discuss further below. We have reviewed our critical accounting estimates with the Audit Committee of our Board of Directors.
Based on these assessments, we may record a reserve for specific customers, as well as a general reserve and allowance for returns and discounts.
Based on these assessments, we may record a reserve for specific customers, as well as a general reserve and allowance for expected credit losses.
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 doing so, we have to make estimates and assumptions that affect the amounts we reported as assets, liabilities, revenues, expenses, gains and losses, as well as related disclosures of contingent assets and liabilities. In some cases, we reasonably could have applied different estimates and/or assumptions.
The usage of different assumptions would result in the assignment of different fair values to the acquired identifiable intangible assets and the resulting assignment of purchase consideration to goodwill.
The usage of different assumptions would result in the assignment of different fair values to the acquired identifiable intangible assets and, accordingly, also impact the amount of purchase consideration assigned to goodwill.
Leases The Company had operating and financing lease obligations (inclusive of interest) of $65.3 million at December 31, 2022, primarily related to real estate and equipment leases, of which approximately $11.6 million in payments are expected over the next twelve months.
Leases The Company had operating and financing lease obligations (inclusive of interest) of $107.8 million at December 31, 2023, primarily related to real estate and equipment leases, of which approximately $17.2 million in payments are expected over the next twelve months.
Cash held outside the U.S. at December 31, 2022 was $58.4 million, or 15.0% of total cash and cash equivalents, compared to $62.7 million, or 7.9% of total cash and cash equivalents at December 31, 2021.
Cash held outside the U.S. at December 31, 2023 was $65.8 million, or 19.8% of total cash and cash equivalents, compared to $58.4 million, or 15.0% of total cash and cash equivalents at December 31, 2022.
A change in management’s assumptions or estimates regarding the probability and/or timing of achievement of a milestone in connection with management’s quarterly reassessment can materially impact the amount of compensation expense recognized for the respective and future periods as follows: • A change in assumptions that results in a milestone first being deemed probable of achievement will result in the recognition of incremental compensation expense in the Company’s consolidated statement of operations; • A change in assumption regarding the timing of achievement of a milestone will result in the acceleration or deceleration of the recognition of future compensation expense, as well as the potential recognition of an expense catch-up or reversal adjustment in the period of change; and/or • A change in assumption that results in a milestone no longer being deemed probable of achievement will result in a full reversal of previously recognized expense. 40 The Company is currently recognizing compensation expense based upon the assumed achievement of one Volumetric earnout payment milestone for which the potential amount due to the Sellers will be $65 million and one PSU milestone for which the aggregate grant date fair value of the outstanding and unvested awards is $4.5 million.
A change in management’s assumptions or estimates regarding the probability and/or timing of achievement of a milestone in connection with management’s quarterly reassessment can materially impact the amount of compensation expense recognized for the respective and future periods as follows: • A change in assumptions that results in a milestone first being deemed probable of achievement will result in the recognition of incremental compensation expense in the Company’s consolidated statement of operations in the respective period; • A change in assumption regarding the timing of achievement of a milestone will result in the acceleration or deceleration of the recognition of future compensation expense; and/or • A change in assumption that results in a milestone no longer being deemed probable of achievement will result in a full reversal of previously recognized expense in the respective period. 51 Prior to the year ended December 31, 2023, the Company had been recognizing compensation expense related to (1) one Volumetric milestone-based payment, for which the potential amount due to the Sellers would be $65.0 million, and (2) one PSU milestone (“the RegMed Awards”), for which the aggregate grant date fair value of the outstanding and unvested awards was $4.5 million as of December 31, 2022, as the related Volumetric earnout and RegMed Award milestone was deemed probable of achievement.
Consolidated research and development expense Research and development ("R&D") expense for the year ended December 31, 2022 increased $17.9 million, or 25.9%, to $87.1 million, as compared to $69.2 million for the same period last year.
Consolidated research and development expense R&D expense for the year ended December 31, 2023 increased $2.4 million, or 2.8%, to $89.5 million, as compared to $87.1 million for the same period last year.
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.
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.
Once the joint venture is formed, 3D Systems will own approximately 49% and is committed to an initial investment of about $6.5 million, of which $3.4 million has been deposited in an escrow account and is reported as restricted cash within other assets on the balance sheet as of December 31, 2022.
Upon entering into the agreement with Dussur, 3D Systems committed to an initial investment in the joint venture of approximately $6.5 million, of which $3.4 million had been deposited into an escrow account as of December 31, 2022 and, accordingly, was reported as restricted cash within other assets on the December 31, 2022 balance sheet.
Liquidity and Capital Resources The following table sets forth the net liquidity and capital resources at December 31, 2022, and 2021.
Liquidity and Capital Resources The following table sets forth the Company's operating working capital at December 31, 2023, and 2022.
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, short-term investments, 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.
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.
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.
See Note 2 to the consolidated financial statements in Item 8 of this Form 10-K for a summary of our significant accounting policies.
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.
We are unable to estimate the maximum potential impact of these indemnification provisions on our future results of operations. To the extent permitted under Delaware law, we indemnify our directors and officers for certain events or occurrences, when the director or officer is, or was, serving at our request in such capacity, subject to limited exceptions.
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.
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. At December 31, 2023, cash and cash equivalents and short-term investments totaled $331.5 million and decreased $237.2 million since December 31, 2022.
Additional future investments are contingent upon the achievement of certain milestones by the joint venture. The impact on the Company’s financial position, results of operations and cash flows is not expected to be material other than the cash outflow(s) related to the initial and contingent investments.
The impact of this investment on the Company’s future financial position and cash flows is expected to be limited to cash outflow(s) related to future investments, if required. Additional future investments are contingent upon the achievement of certain milestones by the joint venture or separate agreement by the parties to the joint venture to invest additional capital.
Regenerative Medicine earnout payments and performance-based stock units In connection with the acquisition of Volumetric on December 1, 2021, the Company could be required to pay up to $355.0 million in earnout payments to Volumetric’s former owners (“Sellers”) based upon the achievement of up to seven non-financial milestones.
Regenerative medicine earnout payments and performance-based stock units Upon acquiring Volumetric on December 1, 2021, the Company became subject to potential aggregate acquisition-related earnout payments of up to $355.0 million that will be due to Volumetric’s former owners (“Sellers”) if seven individually assessed non-financial milestones are achieved.
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, divestitures or foreign exchange.
As used in this Management’s Discussion and Analysis of Financial Condition and Results of Operations, the price and mix effects relate to changes in revenue that are not able to be specifically related to changes in unit volume or foreign exchange. How We Assess the Performance of Our Business We manage operations through the two business segments described above.
The acquisition’s near-term impact on the Company’s results of operations and cash flows is expected to be dilutive. On April 1, 2022, we completed the acquisition of 93.75% of Kumovis for an all-cash purchase price of $37.7 million. $3.6 million of the purchase price is deferred for up to fifteen months from the closing date.
Kumovis GmbH On April 1, 2022, we completed the acquisition of 93.75% of Kumovis GmbH ("Kumovis") for an all-cash purchase price of $37.9 million. $3.6 million of the purchase price was deferred for up to fifteen months from the closing date and was paid in July 2023.
Year Ended December 31, (in thousands, except per share amounts) 2022 2021 (Loss) income before income taxes $ (120,809) $ 319,540 (Provision) benefit for income taxes (2,140) 2,512 Net (loss) income before redeemable non-controlling interest (122,949) 322,052 Less: net (loss) attributable to redeemable non-controlling interest (238) — Net (loss) income attributable to 3D Systems Corporation $ (122,711) $ 322,052 Net (loss) income per common share: Basic $ (0.96) $ 2.62 Diluted $ (0.96) $ 2.55 We recorded a $2.1 million tax provision and a $2.5 million tax benefit for the years ended December 31, 2022 and 2021, respectively.
Year Ended December 31, (in thousands, except per share amounts) 2023 2022 Loss before income taxes $ (362,312) $ (120,809) Benefit (provision) for income taxes 641 (2,140) Loss on equity method investment, net of income taxes (1,282) — Net loss before redeemable non-controlling interest (362,953) (122,949) Less: net loss attributable to redeemable non-controlling interest (265) (238) Net loss attributable to 3D Systems Corporation $ (362,688) $ (122,711) Net loss per common share: Basic $ (2.79) $ (0.96) Diluted $ (2.79) $ (0.96) For the year ended December 31, 2023, we reported a tax benefit of $0.6 million, as compared to a tax provision of $2.1 million for the year ended December 31, 2022.
The product categories include 3D printers and corresponding materials, healthcare simulators (which was divested in third quarter of 2021), digitizers, software licenses, 3D scanners and haptic devices. The majority of materials used in our 3D printers are proprietary.
The product categories include 3D printers and corresponding materials, digitizers, software licenses, 3D scanners and haptic devices. The majority of materials used in our 3D printers are proprietary. The services categories include maintenance contracts and services on 3D printers, software maintenance, software as a service subscriptions and healthcare solutions services.
The $118.1 million decrease in cash flow from operating activities during the year ended December 31, 2022, as compared to the prior year, is primarily due to the $84.0 million increase in losses from operations and the $49.6 million increase in working capital (excluding cash, cash equivalents and short-term investments).
Cash used in operating activities for the year ended December 31, 2022 was $70.0 million due to the reported loss from operations and the $49.6 million increase in working capital (excluding cash, cash equivalents and short-term investments) from December 31, 2021.
Consolidated selling, general and administrative expense Selling, general and administrative ("SG&A") expense for the year ended December 31, 2022 increased $16.5 million, or 7.2%, to $244.2 million, compared to $227.7 million for the same period last year.
Consolidated selling, general and administrative expense Selling, general and administrative ("SG&A") expense for the year ended December 31, 2023 decreased $34.0 million, or 13.9%, to $210.2 million, compared to $244.2 million for the year ended December 31, 2022.
The process requires a significant level of estimation and use of judgment by management, particularly to estimate the fair value of our reporting units.
This process requires a significant level of estimation and use of judgment by management – particularly to (1) estimate the fair value of each of our reporting units and (2) determine the carrying value of each of our reporting units, since we do not maintain separate balance sheets for our reporting units.
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.
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. 48 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.
Similarly, changes in the planned usage of the acquired identifiable intangible assets and/or their estimated economic lives, if any, could impact the recoverability of the assets and/or amortization period and expense attributable to the assets in the future. 39 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.
Goodwill & other long-lived assets, including intangible assets Long-lived assets, including intangible assets We review long-lived assets (or asset groups), including intangible assets subject to amortization, for impairment whenever events or changes in circumstances indicate that the carrying value of an asset (or asset group) may not be recoverable.
We also obtained warrants to purchase additional shares of Enhatch and the right to purchase, in the future, the remaining shares of Enhatch that 3D Systems does not own if certain revenue targets are achieved. Enhatch's Intelligent Surgery Ecosystem provides technologies which streamline and scale the design and delivery of patient-specific medical devices by automating the process.
(“Enhatch”), the developer of the Intelligent Surgery Ecosystem. We simultaneously entered into a collaboration and supply agreement with Enhatch. We also obtained warrants to purchase additional shares of Enhatch and the right to purchase, in the future, the remaining shares of Enhatch that 3D Systems does not own, if certain revenue targets are achieved.
Incorporating these capabilities into 3D Systems’ workflow for patient-specific solutions, which includes advanced software, expert treatment planning services, custom implants, instrumentation design, and industry-leading production processes, will help more efficiently meet the growing demand for personalized medical devices. 26 During the third quarter of 2022, the Company recorded an impairment charge of $2.8 million related to the carrying value of its investment in Enhatch.
Enhatch's Intelligent Surgery Ecosystem provides technologies which streamline and scale the design and delivery of patient-specific medical devices by automating the process. Incorporating these capabilities into 3D Systems’ workflow for patient-specific solutions, which includes advanced software, expert treatment planning services, custom implants, instrumentation design, and industry-leading production processes, will help more efficiently meet the growing demand for personalized medical devices.
Changes to management’s assumptions regarding the probability and/or timing of achievement of these remaining milestones could significantly increase the amount of compensation expense recognized by the Company.
Further changes to management’s assumptions regarding the probability and/or timing of achievement of the RegMed Award milestones or, alternatively, changes to the arrangements or circumstances that provide for compensation to be paid upon the achievement of the RegMed Award milestones, could significantly impact the amount of compensation expense recognized by the Company in the future.
Kumovis, which is part of the Healthcare Solutions segment, utilizes polyether ether keton or “PEEK” materials, which have properties that lend it to many medical applications, including many implant applications, that fit into our personalized healthcare s olutions operations. The acquisition’s near-term impact on the Company’s results of operations and cash flows is expected to be dilutive.
Kumovis, which is part of the Healthcare Solutions segment, utilizes polyether ether keton or “PEEK” materials, which have properties that lend it to many medical applications that fit into our personalized healthcare solutions operations, including many implant applications. Certain of Kumovis's applications remain subject to FDA approval before they will result in the recognition of revenue.
The investing cash outflows in 2022 included investments of $384.4 million of excess cash in short-term investments offset by $200.3 million proceeds from the sales and maturities of such investments, the cash used for acquisitions of $103.7 million, and capital expenditures of $20.9 million.
The investing cash inflows in 2023 included sales and maturities of short-term investments of $180.9 million, offset by cash used for acquisitions of $29.2 million and capital expenditures of $27.2 million.
In addition, there was a decrease in accrued liabilities primarily due to lower incentive compensation accruals, partially offset by a reduction in accounts receivable due to lower revenue. Cash provided by operating activities for the year ended December 31, 2021 was $48.1 million. Working capital used cash of $0.7 million for the year ended December 31, 2021.
In addition, there was a decrease in accrued liabilities primarily due to lower incentive compensation accruals, partially offset by a reduction in accounts receivable due to lower revenue.
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.
The nature of our sales and 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.
Such circumstances may 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.
We review goodwill for impairment annually and, between annual impairment assessments, when circumstances indicate that the likelihood of an impairment is greater than 50%. Such circumstances may 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.
Other Contractual Commitments Convertible Note We were in compliance with all covenants of the outstanding 0% convertible notes due November 2026 as of December 31, 2022. 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.
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.
For further discussion, regarding our provision/benefit for income taxes see Note 2 and Note 22 to the consolidated financial statements in Item 8 of this Form 10-K.
Refer to our discussion of "Critical Accounting Estimates" and Note 17 to the consolidated financial statements included in Item 8 of this Form 10-K for additional details.
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.
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.
Year Ended December 31, (in thousands) 2022 2021 Interest and other (expense) income, net Foreign exchange (loss) gain, net $ (4,424) $ 1,681 Interest income (expense), net 6,541 (1,902) Other (expense) income, net (5,907) 352,830 Total interest and other (expense) income, net $ (3,790) $ 352,609 For the year ended December 31, 2022, foreign exchange (loss) gain, net, as compared to the same period last year, reported a loss due to the strengthening of the U.S.
Year Ended (in thousands) December 31, 2023 December 31, 2022 Interest and other income (expense), net Foreign exchange loss, net $ (4,825) $ (4,424) Interest income, net 16,210 6,541 Other income (expense), net 32,307 (5,907) Total interest and other income (expense), net $ 43,692 $ (3,790) For the year ended December 31, 2023, interest income, net increased $9.7 million, as compared to the year ended December 31, 2022.
Cash flow Cash flow from operations For the year ended December 31, 2022, cash used in operating activities was $70.0 million and cash provided by operating activities for the year ended December 31, 2021 was $48.1 million.
Cash flow from investing activities For the year ended December 31, 2023, cash provided by investing activities was $124.8 million compared to $308.4 million of cash used in investing activities for the year ended December 31, 2022.
Additional future investments are contingent upon achievement of certain milestones by the joint venture. The impact on the Company’s financial position, results of operations and cash flows is not expected to be material other than the cash outflow(s) related to the initial and contingent investments.
The future impact that participation in the joint venture will have on the Company’s financial position and cash flows is not expected to be material other than any potential cash outflow(s) that may be required to fund future investments in the joint venture.
These specific reserves are re-evaluated and adjusted as additional information is received that impacts the amount reserved. 38 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.
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 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 standard costing, which approximates the first-in, first-out method.
We regularly assess the likelihood of adverse outcomes resulting from these examinations and assessments to determine the adequacy of our provision for income taxes.
For more information on the Company's leases, refer to Note 7 to the consolidated financial statements in Item 8 of this Form 10-K. 36 Dussur In March 2022, we and the Saudi Arabian Industrial Investments Company ("Dussur") signed an agreement to form a joint venture intended to expand the use of additive manufacturing within the Kingdom of Saudi Arabia and surrounding geographies, including the Middle East and North Africa.
We believe the acquisition of Titan will open up new markets in the Industrial Solutions segment. 33 National Additive Manufacturing Innovation ("NAMI") Joint Venture In March 2022, the Saudi Arabian Industrial Investments Company (“Dussur”) and 3D Systems signed an agreement to form a joint venture intended to expand the use of additive manufacturing within the Kingdom of Saudi Arabia and surrounding geographies, including the Middle East and North Africa.
SG&A expense was impacted by the Company’s acquisitions of Titan, Kumovis, and dp polar during fiscal year 2022, as well as the Company's acquisitions of Volumetric and Oqton during the fourth quarter of 2021, each of which was consolidated for the full year ended December 31, 2022.
In addition, SG&A expense for the year ended December 31, 2023 is impacted by the acquisitions of Titan and Kumovis on April 1, 2022 and dp polar on October 4, 2022, as each of these acquired businesses was consolidated for the full year ended December 31, 2023, as compared to only part of our fiscal year ended December 31, 2022.
R&D expense was impacted by the Company’s acquisitions of Titan, Kumovis, and dp polar during fiscal year 2022, as well as the Company's acquisitions of Volumetric and Oqton during the fourth quarter of 2021, each of which was consolidated for the full year ended December 31, 2022.
In addition, R&D expense for the year ended December 31, 2023 is impacted by the acquisitions of Titan and Kumovis on April 1, 2022 and dp polar on October 4, 2022, as each of these acquired businesses was consolidated for the full year ended December 31, 2023, as compared to only part of our fiscal year ended December 31, 2022.
On October 4, 2022, we completed the acquisition of dp polar, a German-based designer and manufacturer of the industry’s first additive manufacturing system designed for true high-speed mass production of customized components, for $26.7 million, of which $19.6 million was paid in cash and the remainder was paid via the issuance of the Company’s common stock.
The investment in Theradaptive is not expected to materially impact our future financial position, results of operations, or cash flows. dp polar GmbH On October 4, 2022, we completed the acquisition of dp polar, a German-based designer and manufacturer of a manufacturing system designed for high-speed mass production of customized components, for $25.9 million, which includes $19.6 million paid in cash at closing, $7.1 million paid at closing via the issuance of the Company’s common stock, and an estimated post-closing purchase price adjustment of $0.8 million due to the Company from the sellers.
For the year ended December 31, 2022, Corporate operating expenses increased by 14.7 million compared to the same period last year.
Services revenue For the year ended December 31, 2023, services revenue increased by $16.7 million, or 11.7%, as compared to the year ended December 31, 2022.
Our two key verticals span a range of industries. Healthcare S olutions includes dental, medical devices, personalized health services and regenerative medicine. Our Industrial S olutions vertical includes aerospace, defense, transportation and general manufacturing.
Our reportable segments are based upon the industry verticals that they serve. For Healthcare S olutions, those industry verticals include dental, medical devices, personalized health services and regenerative medicine. For Industrial S olutions, those industry verticals include aerospace, defense, transportation and general manufacturing.
Consolidated operating loss Our operating loss for the year ended December 31, 2022 was $117.0 million, compared to a $33.1 million operating loss for the same period last year, due to lower gross profit and higher SG&A and R&D expenses as discussed above.
Consolidated operating loss Our operating loss for the year ended December 31, 2023 was $406.0 million, compared to a $117.0 million operating loss for the year ended December 31, 2022.
Change (Dollars in thousands) December 31, 2022 December 31, 2021 $ % Cash and cash equivalents $ 388,134 $ 789,657 $ (401,523) (50.8) % Short-term investments 180,603 — 180,603 — % Accounts receivable, net 93,886 106,540 (12,654) (11.9) % Inventories 137,832 92,887 44,945 48.4 % 800,455 989,084 (188,629) (19.1) % Less: Current lease liabilities 9,036 8,344 692 8.3 % Accounts payable 53,826 57,366 (3,540) (6.2) % Accrued and other liabilities 55,571 76,994 (21,423) (27.8) % 118,433 142,704 (24,271) Operating working capital $ 682,022 $ 846,380 $ (164,358) (19.4) % 34 We assess our liquidity in terms of our ability to generate cash to fund our operating, investing and financing activities.
Change (Dollars in thousands) December 31, 2023 December 31, 2022 $ % Cash and cash equivalents $ 331,525 $ 388,134 $ (56,609) (14.6) % Short-term investments — 180,603 (180,603) (100.0) % Accounts receivable, net 101,497 93,886 7,611 8.1 % Inventories 152,188 137,832 14,356 10.4 % 585,210 800,455 (215,245) (26.9) % Less: Current operating lease liabilities 9,924 8,343 1,581 19.0 % Accounts payable 49,757 53,826 (4,069) (7.6) % Accrued and other liabilities 49,460 56,264 (6,804) (12.1) % 109,141 118,433 (9,292) (7.8) % Operating working capital $ 476,069 $ 682,022 $ (205,953) (30.2) % We assess our liquidity in terms of our ability to generate cash to fund our operating, investing and financing activities.
An additional payment of $2.2 million via the issuance of 249,865 shares of the Company’s common stock is possible upon the continued employment of a certain key individual from dp polar through October 4, 2024.
An additional payment of $2.2 million, consisting of the issuance of 249,865 shares of the Company’s common stock, could be required if a key individual from dp polar's management team continues to provide service to the Company through December 31, 2024.
In addition, the Company has not commenced the recognition of compensation expense related to (1) $290 million of Volumetric earnout payments and (2) outstanding PSUs with an aggregate grant date fair value of $13.6 million because the related milestones were not deemed probable of achievement as of December 31, 2022.
As a result of the reversal of all previously recognized expense during the year ended December 31, 2023, the Company has not recognized any compensation expense related to (1) the $355.0 million of potential Volumetric earnout payments provided for in the Volumetric acquisition agreement or (2) the outstanding RegMed Awards with an aggregate grant date fair value of $17.2 million.
Once the joint venture is formed, 3D Systems will own approximately 49% and is committed to an initial investment of about $6.5 million, of which $3.4 million has been deposited in an escrow account and is reported as restricted cash within other assets on the balance sheet as of December 31, 2022.
In February 2023, the Company became a shareholder in the joint venture and now owns 49% of its common stock. 3D Systems was committed to an initial investment of approximately $6.5 million of cash into the joint venture, all of which has been funded as of December 31, 2023.
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.
Refer to Note 9 to the consolidated financial statements included in Item 8 of this Form 10-K for additional details.
Sources of Funding to Satisfy Material Cash Requirements The Company believes that it has the financial resources needed to meet its cash requirements. 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.
Cash requirements for periods beyond the next twelve months will depend on, among other things, the Company’s profitability and its ability to manage working capital requirements. Other Contractual Commitments Convertible Note As of December 31, 2023, we were in compliance with all covenants of the outstanding 0% convertible notes due November 2026.
For the year ended December 31, 2021, the cash flow provided by financing activities was $405.8 million due to net cash proceeds from the issuance of the convertible note of $446.5 million, the repayment of the remaining balance of the outstanding 5-year $100.0 million secured term loan facility of $21.4 million, the taxes paid related to net-share settlement of equity awards of $12.6 million and the payment for the acquisition of a non-controlling interest of $6.3 million.
For the year ended December 31, 2022, cash used in investing activities was $308.4 million, which included investments of $384.4 million of excess cash in short-term investments offset by $200.3 million proceeds from the sales and maturities of such investments, cash used for acquisitions of $103.7 million, and capital expenditures of $20.9 million . 46 Cash flow from financing activities For the year ended December 31, 2023, the cash flow used in financing activities was $106.5 million primarily due to the repayment of long-term debt of $100.6 million and taxes paid related to the net-share settlement of equity awards of $5.2 million.
See Note 15 to the consolidated financial statements in Item 8 of this Form 10-K for further discussion. 37 Critical Accounting Policies and Significant Estimates We prepare our consolidated financial statements in accordance with U.S. Generally Accepted Accounting Principles ("GAAP").
There is no assurance that the policy limits will be sufficient to cover all damages, if any. Critical Accounting Estimates We prepare our consolidated financial statements in accordance with U.S. Generally Accepted Accounting Principles ("GAAP").
(Dollars in thousands) Products Services Total Revenue — 2021 $ 428,742 69.6 % $ 186,897 30.4 % $ 615,639 100.0 % Change in revenue: Volume 6,120 1.4 % 10,888 5.8 % 17,008 2.8 % Divestitures (22,965) (5.4) % (48,707) (26.1) % (71,672) (11.6) % Price/mix 1,187 0.3 % — — % 1,187 0.2 % Foreign currency translation (17,688) (4.1) % (6,443) (3.4) % (24,131) (3.9) % Net change (33,346) (7.8) % (44,262) (23.7) % (77,608) (12.6) % Revenue — 2022 $ 395,396 73.5 % $ 142,635 100.0 % $ 538,031 100.0 % For the year ended December 31, 2022, the decrease in products revenue was due to divestitures, and the negative impacts of foreign exchange, partially offset by higher sales volumes and favorable sales price/mix.
(Dollars in thousands) Products Services Total Revenue — year ended December 31, 2022 $ 395,396 73.5 % $ 142,635 26.5 % $ 538,031 100.0 % Change in revenue: Volume (70,454) (17.8) % 15,980 11.2 % (54,474) (10.1) % Price/mix 2,724 0.7 % — — % 2,724 0.5 % Foreign currency translation 1,065 0.3 % 723 0.5 % 1,788 0.3 % Net change (66,665) (16.9) % 16,703 11.7 % (49,962) (9.3) % Revenue — year ended December 31, 2023 $ 328,731 67.4 % $ 159,338 32.6 % $ 488,069 100.0 % 37 Products revenue For the year ended December 31, 2023, products revenue decreased by $66.7 million, or 16.9%, as compared to the year ended December 31, 2022.
For the year ended December 31, 2022, Industrial Solutions gross profit decreased compared to the same period last year primarily due to divestitures of $16.8 million and inflationary cost pressures, partially offset by an increase in sales volumes.
Services gross profit and gross profit margin For the year ended December 31, 2023, gross profit from services sales increased $14.7 million, or 26.2%, as compared to the year ended December 31, 2022. The increase in gross profit from services sales was primarily driven by the $16.7 million, or 11.7%, increase in services revenue.
For the years ended December 31, 2022 and 2021, products revenue from Healthcare Solutions contributed $179.4 million and $217.7 million, respectively. The decreased products revenue in Healthcare Solutions is primarily due to the impact of divestitures of $23.0 million, and lower sales volumes in the dental market, partially offset by higher volumes and favorable sales price/mix in other markets.
Adjusted EBITDA For the year ended December 31, 2023, Adjusted EBITDA for our Healthcare Solutions segment decreased $17.3 million, or 30.9%, as compared to the year ended December 31, 2022, primarily due to (1) our lower sales to the dental market, including the segment's lower printer sales to a key customer, (2) the decrease in product sales into other markets, and (2) the increase in R&D costs incurred related to regenerative medicine, partially offset by increases in services revenue and a favorable impact of price/mix on the segment's product revenue. 44 Industrial Solutions Revenue For the year ended December 31, 2023, Industrial Solutions revenue decreased $2.2 million, or 0.8%, as compared to the year ended December 31, 2022.
The following table sets forth changes in our products and services revenue for the years ended December 31, 2022 and 2021.
Refer to Note 10 to the consolidated financial statements included in Item 8 of this Form 10-K for additional details. Net loss The following table sets forth our net loss for the years ended December 31, 2023, and 2022.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeFor the year ended December 31, 2021, the aggregate foreign currency gain included in net income was $1.7 million. 41 Commodity prices We are exposed to price volatility related to raw materials and energy products used in conjunction with our printer assembly and print materials blending processes.
Biggest changeCommodity prices We are exposed to price volatility related to raw materials and energy products used 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.
In 2022, approximately 39.4% of our net sales and a significant portion of our costs are attributable to entities with functional currencies other than the U.S. 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.
In 2023, approximately 43.0% of our net sales and a significant portion of our costs are attributable to entities with functional currencies other than the U.S. 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.
For the year ended December 31, 2022, a hypothetical change of 10% in foreign currency exchange rates would have caused changes in revenue and total operating expenses of approximately $21.2 million and $22.0 million, respectively, assuming all other variables remained constant. For the year ended December 31, 2022, the aggregate foreign currency loss included in net income was $4.4 million.
For the year ended December 31, 2023, a hypothetical change of 10% in foreign currency exchange rates would have caused changes in revenue and total operating expenses of approximately $21.0 million and $32.4 million, respectively, assuming all other variables remained constant.
We also, when we consider it appropriate, enter into foreign currency contracts to hedge exposures arising from these transactions. We had $0 and $43.0 million in notional foreign currency exchange contracts outstanding as of December 31, 2022 and 2021, respectively. The fair value of the contracts outstanding at December 31, 2021 was not material.
We also, when we consider it appropriate, enter into foreign currency contracts to hedge exposures arising from these transactions. As of December 31, 2023 and 2022, we had no foreign currency exchange contracts outstanding.
Generally, we acquire such components at market prices and do not use financial instruments to hedge commodity prices. For the year ended December 31, 2022, a hypothetical 10% change in commodity prices for raw materials would have caused a change to cost of sales of approximately $20.2 million.
For the year ended December 31, 2023, a hypothetical 10% change in commodity prices for raw materials would have caused a change to cost of sales of approximately $16.2 million.

Other DDD 10-K year-over-year comparisons