| Divestitures and Acquisitions | (2) Divestitures and Acquisitions Divestitures ODM In September 2021, we completed the sale of the Company’s On Demand Manufacturing business ("ODM") for $82,000, excluding certain customary closing adjustments. We recorded a gain on the sale of $38,490 within Interest and other income (expense), net on the accompanying consolidated statements of operations for the three and nine months ended September 30, 2021. ODM was primarily included within the Industrial segment. At closing, the Company and the purchaser entered into a supply agreement and a transition services agreement pursuant to which the Company will provide certain information technology, corporate finance, tax, treasury, accounting, human resources and payroll, sales and marketing, operations, facilities and other customary services to support the purchaser in the ongoing operation of ODM for a period of time post-closing. At September 30, 2022 only the supply agreement is active. Simbionix On August 24, 2021, we completed the sale of 100% of the issued and outstanding equity interests of Simbionix USA Corporation, which owned our global medical simulation business, for $305,000, excluding certain closing adjustments and excluding $6,794 of cash transferred to the purchaser. We recorded a gain on the sale of $271,404 within Interest and other income (expense), net on the accompanying consolidated statements of operations for the three and nine months ended September 30, 2021. Additionally, we recognized a gain of $2,431 for accumulated foreign currency translation gains previously included in Accumulated other comprehensive loss (“AOCL”), which is included within Interest and other income (expense), net, for the three and nine months ended September 30, 2021. Simbionix was included within the Healthcare segment. Cimatron On January 1, 2021, we completed the sale of 100% of the issued and outstanding equity interests of Cimatron Ltd. (“Cimatron”), the subsidiary that operated the Company’s Cimatron integrated CAD/CAM software for tooling business and its GibbsCAM CNC programming software business, for approximately $64,173, after certain adjustments and excluding $9,476 of cash amounts transferred to the purchaser. We recorded a gain on the sale o f $32,047 within Interest and other income (expense), net on the accompanying condensed consolidated statements of operations for the nine months ended September 30, 2021. Additionally, at the time of the sale, we recognized a gain of $6,481 for accumulated foreign currency translation gains previously included in AOCL, which is included within Interest and other income (expense), net, for the nine months ended September 30, 2021. Cimatron was included within the Industrial segment. Acquisitions/Investments Kumovis On April 1, 2022, we completed the acquisition of 93.75% of Kumovis GmbH ("Kumovis") for an all-cash purchase price of $37,726, plus an estimated RNCI of $1,559. $3,628 of the cash payment is deferred for up to fifteen months from the closing date. Kumovis, which is part of the Healthcare segment and reporting unit, utilizes polyether ether keton or “PEEK” materials, which has properties that lend it to many medical applications, including many implant applications, that fit into our personalized healthcare operations. The acquisition’s near term impact on the Company’s results of operations and cash flows are expected to be dilutive. In conjunction with the Kumovis acquisition, the Company and the non-controlling shareholders entered into a put/call option agreement, whereby the Company has the option to purchase from the non-controlling shareholders and the non-controlling shareholders have the option to sell to the Company the remaining 6.25% ownership interest of Kumovis, at a later date for an exercise price calculated based on the achievement of pre-determined revenue and gross profit targets. Fifty percent of the Kumovis common shares related to the put/call can be exercised upon the achievement of an initial revenue and gross profit target while the remaining 50% can be exercised upon the achievement of a second revenue and gross profit target. If one or both sets of targets are not met after 5.75 years from the acquisition date, there is a floor strike price that must be exercised. Up to 50% of the exercise price can be paid in Company commons stock at the election of 3D Systems. This arrangement results in an RNCI for which an estimated fair value of $1,559 was recorded as of the acquisition date. The actual fair value of the RNCI is in process of being determined as part of business combination accounting. We accounted for the acquisition of Kumovis using the acquisition method, as prescribed by ASC 805, "Business Combinations" (“ASC 805”). In accordance with valuation methodologies described in ASC 820, "Fair Value Measurement" (“ASC 820”), the acquired assets and assumed liabilities were recorded at their estimated fair values as of the date of the Kumovis acquisition. Below is the fair value of consideration transferred. (in thousands) Cash paid at acquisition $ 34,098 Deferred cash consideration 3,628 Estimated fair value of RNCI 1,559 Total fair value of consideration transferred $ 39,285 Shown below is the updated preliminary purchase price allocation, which summarizes the fair values of the assets acquired and liabilities assumed, at the date of acquisition: (in thousands) Current assets, including cash acquired of $125 $ 1,407 Intangible assets: Product technology $ 20,770 Trade name 5,802 Total intangible assets 26,572 Goodwill 16,925 Other assets 705 Liabilities: Accounts payable and accrued liabilities $ 332 Deferred revenue 70 Deferred tax liability 5,922 Total liabilities 6,324 Net assets acquired $ 39,285 As of September 30, 2022, the purchase price allocation for Kumovis continues to be preliminary. During the three months ended September 30, 2022, the Company updated its preliminary valuation of the fair value of acquired assets and assumed liabilities. As a result of the incremental valuation procedures performed during the current quarter, the preliminary acquisition-date fair values assigned to the acquired product technology and trade name intangible assets were increased by $12,884 and $200 respectively. The increases in the fair values of these intangible assets were primarily offset by a corresponding decrease in the amount of goodwill recognized as of the acquisition-date and resulted in the recognition of a $576 cumulative catch-up adjustment to amortization expense, which has been recorded to reflect the revised acquisition-date fair values assigned to the intangible assets. Additionally, the incremental valuation procedures performed during the current quarter resulted in a reduction of $859 to the acquisition-date fair value of the RNCI, as well as an increase of $4,590 related to the deferred tax liability balance recorded as of the acquisition date, each of which resulted in corresponding adjustments to goodwill. The Company continues to review the final closing balance sheet of Kumovis and may further adjust the acquisition-date fair values of acquired assets and assumed liabilities based on this review. The Company also continues to review Kumovis’s pre-acquisition tax returns to determine the final tax positions, including net operating losses and any required valuation allowance. The final purchase price allocations will be completed when the Company has finished its valuation activities and the review of Kumovis’s closing balance sheet and the pre-acquisition tax returns. The final allocations could differ materially from the current preliminary allocations. The final allocations may include (1) changes in allocations to acquired intangible assets and goodwill, (2) changes to other assets and liabilities, including but not limited to tax assets and liabilities, inclusive of deferred taxes, and (3) changes to the initial acquisition-date RNCI balance. The estimated useful lives of acquired intangible assets are also preliminary. Titan On April 1, 2022, we completed the acquisition of 100% of Titan Additive LLC ("Titan") for an all-cash purchase price of $39,040. Titan, which is part of the Industrial segment and reporting unit, is a pellet-based extrusion platform that addresses customer applications requiring large build volumes, superior performance, and improved productivity at significantly lower cost. We believe the acquisition of Titan will open up new markets in the Industrial segment. The impact of the acquisition is not expected to have a near-term material impact to the Company's financial position, statement of operations or cash flows. We accounted for the acquisition of Titan using the acquisition method, as prescribed by ASC 805. In accordance with valuation methodologies described in ASC 820, the acquired assets and assumed liabilities were recorded at their estimated fair values as of the date of the Titan acquisition. Shown below is the updated preliminary purchase price allocation, which summarizes the fair values of the assets acquired and liabilities assumed, at the date of acquisition: (in thousands) Current assets $ 661 Intangible assets: Product technology $ 15,940 Trade name 5,580 Total intangible assets 21,520 Goodwill 17,351 Other assets 169 Liabilities: Accounts payable and accrued liabilities $ 251 Deferred revenue 410 Total liabilities 661 Net assets acquired $ 39,040 As of September 30, 2022, the purchase price allocation for Titan continues to be preliminary. During the three months ended September 30, 2022, the Company updated its preliminary valuation of the fair value of acquired assets and assumed liabilities. As a result of the incremental valuation procedures performed during the current quarter, the preliminary acquisition-date fair value assigned to the acquired product technology intangible asset was increased by $6,570. This increase in fair value was primarily offset by a corresponding decrease in the acquisition-date fair value of goodwill and resulted in the recognition of a $338 cumulative catch-up adjustment to amortization expense, which has been recorded to reflect the revised acquisition-date fair value of the product technology intangible asset. The Company continues to review the final closing balance sheet of Titan and may further adjust the acquisition-date fair values of acquired assets and assumed liabilities based on this review. The Company also continues to review Titan’s pre-acquisition tax returns in order to determine the final tax positions, including net operating losses and any required valuation allowance. The final purchase price allocations will be completed when the Company has finished its valuation activities and the review of Titan’s closing balance sheet and the pre-acquisition tax returns. The final allocations could differ materially from the current preliminary allocations. The final allocations may include (1) changes in allocations to acquired intangible assets and goodwill and (2) changes to other assets and liabilities, including but not limited to tax assets and liabilities, inclusive of deferred taxes. The estimated useful lives of acquired intangible assets are also preliminary. 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. 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. Once the joint venture is formed, 3D Systems will own approximately 49% and is committed to an initial investment of about $6,500. Additional future investments are contingent upon achievement of certain milestones by the joint venture. The expected impact on the Company’s financial position, results of operations and cash flows are not expected to be material other than the cash outflow(s) related to the initial and contingent investments. Enhatch In March 2022, we made a $10,000 investment in convertible preferred shares for an approximate 26.6% ownership interest in Enhatch Inc. ("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 ("call option") 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. Incorporating these capabilities into 3D Systems’ workflow for patient-specific solutions, which includes advanced software, expert treatment planning services, custom implants and instrumentation design, and industry-leading production processes, will help more efficiently meet the growing demand for personalized medical devices. The expected impact on the Company’s financial position, results of operations and cash flows is not expected be material other than potential future cash used to exercise the warrants or call option. The investment, including the embedded call option and the warrants, are recorded in other assets on the consolidated balance sheet. As of the investment date, a fair value was determined for each element of the Enhatch transaction, including the convertible preferred shares, inclusive of the embedded call option, and the warrants, for which the total fair value was $10,000. As of the investment date, the fair value of the convertible preferred shares, inclusive of the embedded call option, and warrants were $9,670 and $330, respectively. The convertible preferred shares and call option were recorded at their initial fair value and are subsequently evaluated for impairment or the existence of an orderly and observable transaction indicating that a change in carrying value is appropriate, for which the adjustment will be recorded through the statement of operations. The warrants are marked to market on a quarterly basis, with the changes in value recorded through the statement of operations. During the three months ended September 30, 2022, the Company recorded an impairment charge of $2,770 related to the carrying value of the convertible preferred stock, inclusive of the embedded call option, held in Enhatch. This impairment charge was the result of lower than projected revenues recognized by Enhatch during the quarter, as well as a reduction to near-term forecasted revenues due to a delay in receiving certain regulatory approvals. In addition, the carrying value of the Enhatch warrants, which are required to be recorded at their fair value as of the end of each quarter, was reduced from $330 to $200 during the three months ended September 30, 2022. The Company has recorded the impairment charge related to its Enhatch investment, as well as the change in the value of the Enhatch warrants, within Interest and other income (expense), net on the statements of operations for the three and nine months ended September 30, 2022. See Note 12 for additional information related to Enhatch. Oqton On November 1, 2021, we acquired Oqton, Inc. (“Oqton”) for $187,775, of which $107,078 was paid in cash, and the remainder was paid via the issuance of 2,553 shares of the Company’s common stock having a fair value at the date of issuance of $80,697. The acquisition’s near term impact on the Company’s results of operations and cash flows is expected to be dilutive. Oqton's operating results are reported in the Industrial segment. We incurred approximately $1,780 of acquisition related expenses. Oqton is a software company that creates an intelligent, cloud-based Manufacturing Operating System ("MOS") platform tailored for flexible production environments that increasingly utilize a range of advanced manufacturing and automation technologies, including additive manufacturing solutions, in their production workflows. The cloud-based solution leverages the Industrial Internet of Things, artificial intelligence, and machine learning technologies to deliver a solution for customers to automate their digital manufacturing workflows, scale their operations and enhance their competitive position. The Oqton acquisition will allow the Company to expand its existing additive manufacturing software suite to the entire additive industry. We accounted for the acquisition of Oqton using the acquisition method, as prescribed by ASC 805. In accordance with valuation methodologies described in ASC 820, the acquired assets and assumed liabilities were recorded at their estimated fair values as of the date of the Oqton acquisition. Shown below is the current preliminary purchase price allocation, which summarizes the fair values of the assets acquired and liabilities assumed, at the date of acquisition: (in thousands) Current assets, including cash acquired of $7,603 $ 8,344 Intangible assets: Product technology $ 12,600 Trade name 7,300 Total intangible assets 19,900 Goodwill 165,904 Other assets 760 Liabilities: Accounts payable and accrued liabilities $ 6,643 Deferred revenue 490 Total liabilities 7,133 Net assets acquired $ 187,775 The Company has performed a preliminary valuation of the fair value of acquired assets and assumed liabilities. The Company is also reviewing the final closing balance sheets and may adjust the assets and liabilities based on its final review. The Company is also in the process of completing the final 2021 tax returns in order to determine the final tax positions, including net operating losses and any required valuation allowance. The final purchase price allocation will be completed when the Company has finished and reviewed the valuations, the acquired balance sheets and the pre-acquisition tax returns. The final allocations could differ materially from the preliminary allocations. The final allocations may include changes in allocations to acquired intangible assets, goodwill, and changes to assets and liabilities, including but not limited to tax assets and liabilities, including deferred taxes. The estimated useful lives of acquired intangible assets are also preliminary. Volumetric On December 1, 2021, we acquired Volumetric Biotechnologies, Inc. (“Volumetric”) for $40,173, of which $24,814 was paid in cash, and the remainder was paid via the issuance of 720 shares of the Company's common stock having a fair value on the date of issuance of $15,358. Additional payments of up to $355,000 are possible upon (1) the attainment of seven non-financial milestones each of which requires achievement prior to either December 31, 2030 or December 31, 2035 and (2) the continued employment of certain key individuals from Volumetric. Any additional payments made will be paid approximately half in cash and half in shares of the Company’s common stock. The additional payments are considered compensation expense which will be recorded ratably from the time a milestone is deemed probable of achievement through the estimated time of achievement. Any compensation expense recorded will be reversed if the milestone is no longer deemed probable of achievement. As of September 30, 2022, one of the seven milestones is considered probable of achievement, for which $3,980 and $11,939 of expense was recorded in the three and nine months ended September 30, 2022. Volumetric is part of the Healthcare reporting unit and segment. The acquisition’s near-term impact on the Company's results of operations and cash flows is expected to be dilutive. The impact of potential share issuance related to the achievement of milestones is not included in dilutive shares until the milestone is met. We incurred approximately $1,306 of acquisition-related expenses. Volumetric’s mission is to develop the ability to manufacture human organs using bioprinting methods and the underlying technologies required to create these highly complex biological structures. With this acquisition, 3D Systems seeks to expand our capabilities and capacity in 3D printing related to bio-printing and regenerative medicine. Combining 3D Systems' regenerative medicine group with Volumetric’s highly complementary skill sets of biological expertise and cellular engineering is expected to accelerate our core regenerative medicine strategies which include the bio-printing of human organs, additional non-organ applications and bio-printing technologies for research labs. We accounted for the acquisition of Volumetric using the acquisition method, as prescribed by ASC 805. In accordance with valuation methodologies described in ASC 820, the acquired assets and assumed liabilities were recorded at their estimated fair values as of the date of acquisition. Shown below is the current preliminary purchase price allocation, which summarizes the fair values of the acquired assets and liabilities assumed, as of the date of the Volumetric acquisition: (in thousands) Current assets, including cash acquired of $389 $ 3,143 Intangible assets: Developed Technology $ 1,100 Distributor Relationship 400 Total intangible assets 1,500 Goodwill 37,492 Other assets 1,194 Liabilities: Accounts payable and accrued liabilities 3,156 Total liabilities 3,156 Net assets acquired $ 40,173 As of September 30, 2022, the purchase price allocation for Volumetric is preliminary. The Company has performed a valuation of the fair value of acquired assets and assumed liabilities and continues to review and adjust the values. The Company is also reviewing the final closing balance sheets and may adjust the assets and liabilities based on its final review. The Company is also in the process of completing the final 2021 tax returns in order to determine the final tax positions, including net operating losses and any required valuation allowance. The final purchase price allocation will be completed when the Company has finished and reviewed the valuations, the acquired balance sheets and the pre-acquisition tax returns. The final allocation could differ materially from the preliminary allocations. The final allocations may include changes in allocations to acquired intangible assets and goodwill, and changes to assets and liabilities, including but not limited to tax assets and liabilities, including deferred taxes. The estimated useful lives of acquired intangible assets are also preliminary. Other In May 2021, we purchased Allevi, Inc. ("Allevi") to expand regenerative medicine initiatives into medical and pharmaceutical research and development laboratories. Additionally, in June 2021, we closed the acquisition of a German software firm, Additive Works GmbH (“Additive”). Additive expands the simulation capabilities for rapid optimization of industrial-scale 3D printing processes. The purchase price for both acquisitions, individually and combined, and the impacts to the Company’s financial position, results of operations and cash flows are not material. Acquisitions of Non-controlling Interests As of December 31, 2018, the Company owned approximately 70% of the capital and voting rights of Easyway, a service bureau and distributor of 3D printing and scanning products in China. Approximately 65% of the capital and voting rights of Easyway were acquired on April 2, 2015, and an additional 5% of the capital and voting rights of Easyway were acquired on July 19, 2017 for $2,300. The remaining 30% of the capital and voting rights of Easyway were acquired on January 21, 2019 for $13,500, which was paid in installments. Of the total installment payments made, $2,300 and $4,000 were paid in the first nine months of 2022 and 2021, respectively. As of September 30, 2022, there are no more installments due. |
