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MarketScreener Homepage  >  Equities  >  Nyse  >  3D Systems Corporation    DDD

3D SYSTEMS CORPORATION

(DDD)
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3D : Management's Discussion and Analysis of Financial Condition and Results of Operations. (form 10-Q)

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10/30/2019 | 03:17pm EST
This discussion should be read in conjunction with the unaudited condensed
consolidated financial statements and the notes thereto included in Item 1 (the
"Financial Statements") of this Quarterly Report on Form 10-Q ("Form 10-Q"). We
are subject to a number of risks and uncertainties that may affect our future
performance that are discussed in greater detail in the sections entitled
"Forward-Looking Statements" at the end of this Item 2 and that are discussed or
referred to in Item 1A of Part II of this Form 10-Q.

Business Overview


3D Systems Corporation ("3D Systems" or the "Company" or "we" or "us") is a
holding company incorporated in Delaware in 1993 that 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 region ("APAC"). We provide comprehensive 3D
printing solutions, including 3D printers, materials, software, on demand
manufacturing services and digital design tools. Our solutions support advanced
applications in a wide range of industries and key verticals including
healthcare, aerospace, automotive and durable goods. Our precision healthcare
capabilities include simulation, Virtual Surgical Planning ("VSP™"), and
printing of medical and dental devices, models, surgical guides and instruments.
Our solutions, experience and expertise provide an end-to-end digital workflow
from design to prototyping to production. As the originator of 3D printing and a
shaper of future 3D solutions, for over 30 years we have been enabling
professionals and companies to optimize designs, transform workflows, bring
innovative products to market and drive new business models.

Customers can use our 3D solutions to design and manufacture complex and unique
parts, eliminate expensive tooling, produce parts locally or in small batches
and reduce lead times and time to market. A growing number of customers are
shifting from prototyping applications to also using 3D printing for production.
We believe this shift will be further driven by our continued advancement and
innovation of 3D printing solutions that improve durability, repeatability,
productivity and total cost of operation.

Summary of Third Quarter 2019 Financial Results


Total consolidated revenue for the quarter ended September 30, 2019 decreased by
5.6%, or $9.2 million, to $155.3 million, compared to $164.5 million for the
quarter ended September 30, 2018. These results reflect a decrease in printers
revenue due to the ordering patterns of a large enterprise customer and the exit
of our entertainment business, as well as industry decline in manufacturing
activity.

Healthcare revenue includes sales of products, materials and services for
healthcare-related applications, including simulation, training, planning,
anatomical models, surgical guides and instruments and medical and dental
devices. For the quarter ended September 30, 2019, healthcare revenue increased
by 6.3%, to $56.4 million, and made up 36.3% of total revenue, compared to $53.1
million, or 32.2% of total revenue, for the quarter ended September 30, 2018.
The results reflect an increase primarily in materials and services revenues.

For the quarter ended September 30, 2019, total software revenue from products
and services increased slightly by 0.1% to $24.6 million, and made up 15.8% of
total revenue, compared to $24.6 million, or 14.9% of total revenue, for the
quarter ended September 30, 2018.

Gross profit for the quarter ended September 30, 2019 decreased by 13.5%, or
$10.5 million, to $67.3 million, compared to $77.8 million for the quarter ended
September 30, 2018. Gross profit margin for the quarters ended September 30,
2019 and 2018 was 43.3% and 47.3%, respectively.

Operating expenses for the quarter ended September 30, 2019 decreased by 10.8%,
or $9.6 million, to $79.2 million, compared to $88.8 million for the quarter
ended September 30, 2018. Selling, general and administrative expenses for the
quarter ended September 30, 2019 decreased by 11.2%, or $7.3 million, to $58.3
million, compared to $65.6 million for the quarter ended September 30, 2018.
Research and development expenses for the quarter ended September 30, 2019
decreased by 9.7%, or $2.3 million, to $20.9 million, compared to $23.2 million
for the quarter ended September 30, 2018.

Our operating loss for the quarter ended September 30, 2019 was $11.9 million,
compared to an operating loss of $11.0 million for the quarter ended September
30, 2018.

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For the nine months ended September 30, 2019 and 2018, we generated $10.1
million and used $2.9 million of cash from operations, respectively, as further
discussed below. In total, our unrestricted cash balance at September 30, 2019
and December 31, 2018, was $127.6 million and $110.0 million, respectively. The
higher cash balance was the result of our borrowing on the Senior Credit
Facility, offset by repayment of amounts outstanding on the Prior Credit
Agreement as well as investments in our facilities and IT infrastructure. For
information on the Senior Credit Facility and the Prior Credit Agreement, see
Note 7.

Results of Operations

Comparison of revenue

Due to the relatively high price of certain 3D printers and a corresponding
lengthy selling cycle and relatively low unit volume of the higher priced
printers in any particular period, a shift in the timing and concentration of
orders and shipments from one period to another can affect reported revenue in
any given period.

In addition to changes in sales volumes, there are 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. 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.

Comparison of revenue by geographic region

The following tables set forth changes in revenue by geographic region for the quarters and nine months ended September 30, 2019 and 2018.

Table 1
(Dollars in thousands)                   Americas                                              EMEA                                           Asia Pacific                       Total
Revenue - third quarter 2018    $ 82,155            49.9  %       $ 55,020
          33.4  %       $ 27,336            16.6  %       $  164,511           100.0  %
Change in revenue:
Volume                            (8,506)          (10.4) %         10,919            19.8  %         (9,875)          (36.1) %           (7,462)           (4.5) %
Price/Mix                          4,227             5.1  %         (3,442)           (6.3) %           (137)           (0.5) %              648             0.4  %
Foreign currency translation         (50)           (0.1) %         (2,141)           (3.9) %           (234)           (0.9) %           (2,425)           (1.5) %
Net change                        (4,329)           (5.3) %          5,336             9.7  %        (10,246)          (37.5) %           (9,239)           (5.6) %
Revenue - third quarter 2019    $ 77,826            50.1  %       $ 60,356            38.9  %       $ 17,090            11.0  %       $  155,272           100.0  %



Consolidated revenue decreased by 5.6%, predominantly driven by lower sales
volume in the Asia Pacific and Americas regions driven by ordering patterns of a
large enterprise customer, on demand solutions and exiting the entertainment
business, partially offset by favorable sales volumes in the EMEA region
primarily driven by healthcare.

For the quarters ended September 30, 2019 and 2018, revenue from operations outside the U.S. was 51.3% and 50.6% of total revenue, respectively.

Table 2
(Dollars in thousands)                     Americas                                               EMEA                                           Asia Pacific                       Total
Revenue - nine months 2018       $ 254,941            50.3  %       $ 169,300            33.4  %       $ 82,707            16.3  %       $  506,948           100.0  %
Change in revenue:
Volume                             (32,949)          (12.9) %          21,379            12.6  %        (24,345)          (29.4) %          (35,915)           (7.1) %
Price/Mix                           12,837             5.0  %          (5,448)           (3.2) %         (2,143)           (2.6) %            5,246             1.0  %
Foreign currency translation          (488)           (0.2) %          (9,455)           (5.6) %         (1,812)           (2.2) %          (11,755)           (2.3) %
Net change                         (20,600)           (8.1) %           6,476             3.8  %        (28,300)          (34.2) %          (42,424)           (8.4) %
Revenue - nine months 2019       $ 234,341            50.5  %       $ 175,776            37.8  %       $ 54,407            11.7  %       $  464,524           100.0  %



                                       24
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Consolidated revenue decreased 8.4%, predominantly driven by lower sales volume
in the Americas and Asia Pacific regions which was largely driven by driven by
ordering patterns of a large enterprise customer in the prior year and the
unfavorable impact of foreign currency, particularly in EMEA, partially offset
by increased volume in the EMEA region primarily driven by healthcare and
favorable price/mix in the Americas driven by materials and production printers.

For the nine months ended September 30, 2019 and 2018, revenue from operations outside the U.S. was 51.0% and 50.7% of total revenue, respectively.

Comparison of revenue by class


We earn revenue from the sale of products, materials and services. The products
category includes 3D printers, healthcare simulators and digitizers, software
licenses, 3D scanners and haptic devices. The materials category includes a wide
range of materials to be used with our 3D printers, the majority of which are
proprietary, as well as acquired conventional dental materials. The services
category includes maintenance contracts and services on 3D printers and
simulators, software maintenance, on demand solutions and healthcare services.

The following tables set forth the change in revenue by class for the quarters and nine months ended September 30, 2019 and 2018.

Table 3
(Dollars in thousands)                   Products                                            Materials                                          Services                        Total
Revenue - third quarter 2018    $ 59,648            36.3  %       $ 40,274
          24.5  %       $ 64,589            39.3  %       $ 164,511           100.0  %
Change in revenue:
Volume                            (6,093)          (10.2) %          1,337             3.3  %         (2,706)           (4.2) %          (7,462)           (4.5) %
Price/Mix                            264             0.4  %            384             1.0  %              -               -  %             648             0.4  %
Foreign currency translation        (702)           (1.2) %           (606)           (1.5) %         (1,117)           (1.7) %          (2,425)           (1.5) %
Net change                        (6,531)          (10.9) %          1,115             2.8  %         (3,823)           (5.9) %          (9,239)           (5.6) %
Revenue - third quarter 2019    $ 53,117            34.2  %       $ 41,389            26.7  %       $ 60,766            39.1  %       $ 155,272           100.0  %



Consolidated revenue decreased 5.6%, predominantly due to lower products volume
which was driven by the impact of ordering patterns of a large enterprise
customer, partially offset by revenue from healthcare and metal printers. For
the quarters ended September 30, 2019 and 2018, revenue from printers
contributed $30.4 million and $36.8 million, respectively. Software revenue
included in the products category, including scanners and haptic devices,
contributed $13.3 million and $13.6 million for the quarters ended September 30,
2019 and 2018, respectively.

Services revenue decreased due to lower revenue from on demand solutions and
from the entertainment business, which the company exited in 2019, and the
unfavorable impact of foreign currency translation, partially offset by
increased revenue from healthcare. For the quarters ended September 30, 2019 and
2018, revenue from on demand manufacturing services contributed $23.1 million
and $26.3 million, respectively. For the quarters ended September 30, 2019 and
2018, software services revenue contributed $11.3 million and $11.0 million,
respectively.

Table 4
(Dollars in thousands)                     Products                                             Materials                                           Services                        Total
Revenue - nine months 2018       $ 188,016            37.1  %       $ 128,137            25.3  %       $ 190,795            37.6  %       $ 506,948           100.0  %
Change in revenue:
Volume                             (30,148)          (16.0) %          (3,614)           (2.8) %          (2,153)           (1.1) %         (35,915)          (19.9) %
Price/Mix                            2,674             1.4  %           2,572             2.0  %               -               -  %           5,246             3.4  %
Foreign currency translation        (3,978)           (2.1) %          (3,048)           (2.4) %          (4,729)           (2.5) %         (11,755)           (7.0) %
Net change                         (31,452)          (16.7) %          (4,090)           (3.2) %          (6,882)           (3.6) %         (42,424)           (8.4) %
Revenue - nine months 2019       $ 156,564            33.7  %       $ 124,047            26.7  %       $ 183,913            39.6  %       $ 464,524           100.0  %



                                       25
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Consolidated revenue decreased 8.4%, predominantly driven by the products
revenue category which was impacted by ordering patterns of a large enterprise
customer and unfavorable impacts of foreign currency translation, only partially
offset by revenue from recently launched printer models. For the nine months
ended September 30, 2019 and 2018, revenue from printers contributed $90.3
million and $120.2 million, respectively. Software revenue included in the
products category, including scanners and haptic devices, contributed $39.2
million and $39.5 million for the nine months ended September 30, 2019 and 2018,
respectively.

Materials revenue decreased due to lower sales volume and the unfavorable impact
of foreign currency, offset by a favorable impact from price/mix. The decline in
volume is driven by weaker demand for materials utilized in older printer
models, only partially offset by demand for new materials.

Services revenue decreased primarily due to the unfavorable impact of foreign
currency translation. For the nine months ended September 30, 2019 and 2018,
revenue from on demand manufacturing services contributed $69.7 million and
$79.3 million, respectively. For the nine months ended September 30, 2019 and
2018, software services revenue contributed $33.5 million and $33.0 million,
respectively.

Gross profit and gross profit margins

The following tables set forth gross profit and gross profit margins for the quarters and nine months ended September 30, 2019 and 2018.

Table 5
                                                           Quarter Ended September 30,
                                                  2019                                                          2018                                   
       Change in Gross Profit                     Change in Gross Profit

Margin

                                                          Gross Profit                             Gross Profit                                              Percentage
(Dollars in thousands)               Gross Profit            Margin           Gross Profit            Margin               $                 %                 Points                %
Products                                  8,339                15.7  %             17,522               29.4  %          (9,183)           (52.4) %               (13.7)           (46.6) %
Materials                                28,123                67.9  %             27,956               69.4  %             167              0.6  %                (1.5)            (2.2) %
Services                                 30,819                50.7  %             32,332               50.1  %          (1,513)            (4.7) %                 0.6              1.2  %
Total                              $     67,281                43.3  %       $     77,810               47.3  %       $ (10,529)           (13.5) %                (4.0)            (8.5) %


The decrease in total consolidated gross profit is due to the decrease in product sales, primarily lower sales of printers.


Products gross profit margin decreased primarily due to under absorption of
supply chain overhead resulting from lower production, in addition to the impact
of the mix of sales and inventory adjustments. A favorable mix of sales towards
higher gross profit margin service offerings and improvements in printer service
margins drove services gross profit margin improvements.

Table 6
                                                          Nine Months Ended September 30,
                                                   2019                                                            2018                                             Change in Gross Profit                     Change in Gross Profit Margin
                                                           Gross Profit                              Gross Profit                                                Percentage
(Dollars in thousands)               Gross Profit             Margin            Gross Profit            Margin                $                  %                 Points                 %
Products                                  28,434                 18.2  %             57,239                30.4  %         (28,805)            (50.3) %               (12.2)            (40.1) %
Materials                                 85,368                 68.8  %             90,852                70.9  %          (5,484)             (6.0) %                (2.1)             (3.0) %
Services                                  92,483                 50.3  %             93,750                49.1  %          (1,267)             (1.4) %                 1.2               2.4  %
Total                             $      206,285                 44.4  %       $    241,841                47.7  %       $ (35,556)            (14.7) %                (3.3)             (6.9) %


The decrease in total consolidated gross profit is due to the decrease in product sales, primarily lower sales of printers.

                                       26
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Products gross profit margin decreased primarily due to under absorption of supply chain overhead resulting from lower production and lower revenue, in addition to the impact of the mix of sales. Materials gross profit margin decreased as a result of the mix of sales. Services gross profit margin improved from a favorable mix of sales towards higher gross profit margin service offerings and improvements in printer service margin.

Operating expenses

The following tables set forth the components of operating expenses for the quarters and nine months ended September 30, 2019 and 2018.

Table 7
                                                                Quarter Ended September 30,
                                                        2019                                                        2018                                        Change
(Dollars in thousands)                      Amount               % Revenue            Amount             % Revenue               $                %
Selling, general and administrative
expenses                                     58,275                   37.5  %         65,600                  39.9  %         (7,325)           (11.2) %
Research and development expenses            20,940                   13.5  %         23,194                  14.1  %         (2,254)            (9.7) %
Total operating expenses               $     79,215                   51.0  %       $ 88,794                  54.0  %       $ (9,579)           (10.8) %



Selling, general and administrative expenses decreased primarily due to ongoing
reduced personnel and facility expenses related cost optimization efforts, lower
amortization from previously acquired intangible assets and decreased legal
expenses.

Research and development expenses decreased as we have completed projects related to new products and platforms brought to market in 2018, and prioritized investments in materials and software.

Table 8
                                                                Nine Months Ended September 30,
                                                         2019                                                           2018                                        Change
(Dollars in thousands)                       Amount                % Revenue             Amount             % Revenue               $                 %
Selling, general and administrative
expenses                                      195,036                   42.0  %         206,225                  40.7  %         (11,189)            (5.4) %
Research and development expenses              63,654                   13.7  %          71,788                  14.2  %          (8,134)           (11.3) %
Total operating expenses               $      258,690                   55.7  %       $ 278,013                  54.8  %       $ (19,323)            (7.0) %



Selling, general and administrative expenses decreased primarily due to ongoing
reduced personnel and facility expenses related cost optimization efforts as
well as lower amortization from previously acquired intangible assets.

Research and development expenses decreased as we have completed projects related to new products and platforms brought to market in 2018, and prioritized investments in materials and software.

                                       27
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Loss from operations

The following table sets forth (loss) income from operations by geographic region for the quarters and nine months ended September 30, 2019 and 2018.

Table 9
                                                                                                             Nine Months Ended
                                                Quarter Ended September 30,                                    September 30,
(Dollars in thousands)                            2019                  2018               2019                  2018
(Loss) income from operations:
Americas                                          (21,183)            (16,599)           (72,039)              (50,122)
EMEA                                                7,105                 386             13,499                (2,948)
Asia Pacific                                        2,144               5,229              6,135                16,898
Total                                       $     (11,934)$ (10,984)$ (52,405)$    (36,172)

See "Comparison of revenue by geographic region," "Gross profit and gross profit margins" and "Operating expenses" above.

Interest and other (expense) income, net


The following table sets forth the components of interest and other (expense)
income, net, for the quarters and nine months ended September 30, 2019 and 2018.

Table 10
                                                                                                            Nine Months Ended
                                                Quarter Ended September 30,                                   September 30,
(Dollars in thousands)                             2019                 2018              2019                 2018
Interest and other (expense) income, net
Foreign exchange (loss) gain                        (1,095)             1,035            (2,204)               2,888
Interest expense, net                                 (953)               (40)           (2,393)                 (35)
Other (expense) income, net                           (770)                32            (2,177)              (1,718)
Total interest and other (expense) income,
net                                         $       (2,818)$  1,027$ (6,774)$     1,135

The increase in total interest and other expense, net for the quarter ended September 30, 2019 as compared to the quarter ended September 30, 2018 was primarily driven by unfavorable foreign currency impacts, higher interest expense resulting from the Senior Credit Facility and losses recorded on investments.


The increase in total interest and other expense, net for the nine months ended
September 30, 2019, as compared to the nine months ended September 30, 2018, was
primarily driven by unfavorable foreign currency impacts, higher interest
expense resulting from the Senior Credit Facility put in place in the first
quarter of 2019 and the impairment of assets sold with the Entertainment
business recorded in the second quarter 2019; partially off-set by an adjustment
to the fair value of certain cost method investments in the first quarter of
2018.

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Net loss attributable to 3D Systems


The following tables set forth the primary components of net loss attributable
to 3D Systems for the quarters and nine months ended September 30, 2019 and
2018.

Table 11
                                                             Quarter Ended September 30,
(Dollars in thousands)                                         2019                  2018              Change
Loss from operations                                     $     (11,934)$ (10,984)$    (950)
Other non-operating items:
Interest and other (expense) income, net                        (2,818)              1,027             (3,845)
Provision for income taxes                                      (2,010)             (1,593)              (417)
Net loss                                                       (16,762)            (11,550)            (5,212)
Less: net income attributable to noncontrolling
interests                                                           81                   -                 81

Net loss attributable to 3D Systems Corporation$ (16,843)

     $ (11,550)$  (5,293)



Table 12
                                                            Nine Months Ended September 30,
(Dollars in thousands)                                          2019                   2018              Change
Loss from operations                                     $       (52,405)$ (36,172)$ (16,233)
Other non-operating items:                                                                                    -
Interest and other (expense) income, net                          (6,774)              1,135             (7,909)
Provision for income taxes                                        (5,793)             (6,086)               293
Net loss                                                         (64,972)            (41,123)           (23,849)
Less: net income attributable to noncontrolling
interests                                                            195                 246                (51)

Net loss attributable to 3D Systems Corporation$ (65,167)

$ (41,369)$ (23,798)




The increase in net loss for the quarter and nine months ended September 30,
2019, as compared to the quarter and nine months ended September 30, 2018, was
primarily driven by an increase in loss from operations. See "Gross profit and
gross profit margins" and "Operating expenses" above.

                                       29
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Liquidity and Capital Resources

Table 13
                                                                                                                  Change
                                         September 30,
(Dollars in thousands)                       2019             December 31, 2018             $                     %
Cash and cash equivalents                $  127,616$        109,998$  17,618                    16.0  %
Accounts receivable, net                    110,333                   126,618            (16,285)                  (12.9) %
Inventories                                 122,706                   133,161            (10,455)                   (7.9) %
                                            360,655                   369,777             (9,122)
Less:
Current portion of long term debt             3,025                         -              3,025                       -  %
Current right of use liabilities             10,797                       654             10,143                  1550.9  %
Accounts payable                             53,014                    66,722            (13,708)                  (20.5) %
Accrued and other liabilities                62,701                    59,265              3,436                     5.8  %
                                            129,537                   126,641              2,896
Operating working capital                $  231,118$        243,136$ (12,018)                   (4.9) %



We assess our liquidity in terms of our ability to generate cash to fund our
operating, investing and financing activities. In doing so, we review and
analyze our current cash on hand, the number of days our sales are outstanding,
inventory turns, capital expenditure commitments and accounts payable turns. Our
cash requirements primarily consist of funding of working capital and funding of
capital expenditures.

Cash flow from operations, cash and cash equivalents, and other sources of
liquidity such as bank credit facilities and issuing equity or debt securities,
are expected to be available and sufficient to meet foreseeable cash
requirements. During the first quarter of 2019, we entered into a 5-year $100.0
million senior secured term loan facility (the "Term Facility") and a 5-year
$100.0 million senior secured revolving credit facility (the "Revolving
Facility" and, together with the Term Facility, the "Senior Credit Facility"),
which replaced the Company's prior $150.0 million 5-year revolving, unsecured
credit facility (the "Prior Credit Agreement"), which was terminated in
connection with entry into the Senior Credit Facility. Borrowings under the
Senior Credit Facility were used to refinance existing indebtedness of $25,000
outstanding under the Prior Credit Agreement and will be used to support working
capital and for general corporate purposes. For additional information on the
Senior Credit Facility and the Prior Credit Agreement, see Note 7.

As a result of the Term Facility, the Company has exposure to floating interest
rates. To manage interest expense, the Company evaluates an appropriate mix of
fixed and floating rate debt. In July 2019, the Company entered into a floating
to fixed interest rate swap to reduce exposure to changes in floating interest
rates on the Term Facility. The interest rate swap has a notional value of
$50,000 and will expire on February 26, 2024, concurrent with the Term Facility.
The notional value will decline over the term of the interest rate swap as
amortization payments reduce the principal amount of the Term Facility. As a
result of the interest rate swap, the percentage of total principal debt
(excluding capital leases) that is subject to floating interest rates is
approximately 15%. The Company designated the swap as a cash flow hedge for
accounting treatment.

Cash held outside the U.S. at September 30, 2019 was $85.0 million, or 66.6% of
total cash and equivalents, compared to $73.3 million, or 66.7% of total cash
and equivalents at December 31, 2018. As our previously unremitted earnings have
been subjected to U.S. federal income tax, we expect any repatriation of these
earnings to the U.S. would not incur significant additional taxes related to
such amounts. However, our estimates are provisional and subject to further
analysis. Cash equivalents are comprised of funds held in money market
instruments and are reported at their current carrying value, which approximates
fair value due to the short term nature of these instruments. We strive to
minimize our credit risk by investing primarily in investment grade, liquid
instruments and limit exposure to any one issuer depending upon credit quality.
See "Cash flow" discussion below.

Days' sales outstanding (DSO) was 65 at September 30, 2019, compared to 69 days
for the year at December 31, 2018. Accounts receivable more than 90 days past
due increased to 12.0% of gross receivables at September 30, 2019, from 8.9% at
December 31, 2018. We review specific receivables periodically to determine the
appropriate reserve for accounts receivable.

                                       30
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The majority of our inventory consists of finished goods, including products,
materials and service parts. Inventory also consists of raw materials for
certain printers and service products. Inventory balances may fluctuate during
cycles of new product launch, commercialization and timing of ramp of production
and sales of products.

The changes that make up the other components of working capital not discussed
above resulted from the ordinary course of business. Differences between the
amounts of working capital item changes in the cash flow statement and the
balance sheet changes for the corresponding items are primarily the result of
foreign currency translation adjustments.

Cash flow


The following tables set forth components of cash flow for the nine months ended
September 30, 2019 and 2018.

Table 14
                                                                          Nine Months Ended September 30,
(Dollars in thousands)                                                        2019                  2018
Net cash provided by (used in) operating activities                    $       10,084$  (2,931)
Net cash used in investing activities                                         (18,389)            (29,550)
Net cash provided by (used in) financing activities                            27,333              (8,906)

Effect of exchange rate changes on cash, cash equivalents and restricted cash

                                                                (1,400)             (2,417)

Net increase (decrease) in cash, cash equivalents and restricted cash $

    17,628           $ (43,804)



Cash flow from operations

Table 15
                                                                         Nine Months Ended September 30,
(Dollars in thousands)                                                       2019                   2018
Net loss                                                              $       (64,972)$ (41,123)
Non-cash charges                                                               61,680              66,869
Changes in working capital and all other operating assets                      13,376             (28,677)
Net cash provided by (used in) operating activities                   $        10,084$  (2,931)



Cash provided by operating activities for the nine months ended September 30,
2019 was $10.1 million and cash used in operating activities for the nine months
ended September 30, 2018 was $2.9 million. Excluding non-cash charges, the net
loss resulted in a use of cash of $3.3 million for the nine months ended
September 30, 2019 and provided cash of $25.7 million for the nine months ended
September 30, 2018. Non-cash charges generally consist of depreciation,
amortization, and stock-based compensation.

Improvements in working capital provided cash of $13.4 million for the nine
months ended September 30, 2019 and working capital requirements used cash of
$28.7 million for the nine months ended September 30, 2018. In the nine months
ended September 30, 2019, drivers of working capital related to cash inflows
were a decrease in accounts receivable, inventory and an increase in deferred
revenues; partially offset by a decrease in accounts payable and accrued and
other current liabilities. In the nine months ended September 30, 2018, cash
outflows were driven by increases in inventory, prepaid expenses and a decreases
in accrued and other current liabilities; partially offset by an increase in
accounts payable and a decrease in accounts receivable.

                                       31
--------------------------------------------------------------------------------

Cash flow from investing activities

Table 16
                                               Nine Months Ended September 30,
(Dollars in thousands)                         2019                           2018
Purchases of property and equipment     $       (18,265)$ (28,323)
Proceeds from sale of assets                      1,620                           9
Other investing activities                       (1,744)                     (1,236)
Net cash used in investing activities   $       (18,389)                  $ 

(29,550)




The primary outflow of cash relates to investments in our facilities including
our customer innovation centers and healthcare and on-demand facilities as well
as continued investments in our IT infrastructure.

Cash flow from financing activities

Table 17
                                                                      Nine Months Ended September 30,
(Dollars in thousands)                                                    2019                2018
Proceeds from borrowings                                             $  100,000           $       -
Repayment of borrowings/long term debt                                  (66,013)                  -

Payments related to net-share settlement of stock based compensation (3,029)

             (5,723)
Purchase of noncontrolling interest                                      (2,500)                  -
Payments on earnout consideration                                             -              (2,675)
Other financing activities                                               (1,125)               (508)
Net cash provided by (used in) financing activities                  $   27,333$  (8,906)



Cash provided by financing activities was $27.3 million for the nine months
ended September 30, 2019 and cash used in financing activities was $8.9 million
for the nine months ended September 30, 2018. The primary inflow of cash for the
nine months ended September 30, 2019 relates to borrowing on the Term Facility,
partially offset by repayments of the Prior Credit Facility and Term Facility.

Recent Accounting Pronouncements

Refer to Note 1 - Basis of Presentation of the Notes to Financial Statements (Part I, Item 1 of this Form 10-Q) for further discussion.

Critical Accounting Policies and Significant Estimates


Our condensed consolidated financial statements are prepared in accordance with
GAAP. The preparation of these condensed consolidated financial statements
requires us to make certain estimates and assumptions that affect the reported
amounts of assets, liabilities, revenues, costs and expenses, and related
disclosures. On an ongoing basis, we evaluate our estimates and assumptions. Our
actual results may differ from these estimates under different assumptions or
conditions.

Except for the accounting policies related to lease accounting that were updated
as a result of adopting ASC Topic 842, there have been no changes to our
critical accounting policies and estimates described in the Annual Report on
Form 10-K for the year ended December 31, 2018 ("2018 Form 10-K"), filed with
the Securities and Exchange Commission ("SEC") on February 28, 2019, that have
had a material impact on our condensed consolidated financial statements and
related notes, other than the following:

                                       32
--------------------------------------------------------------------------------

Our EMEA, APAC and Americas reporting units carry approximately $182.2 million,
$35.5 million and $0 of goodwill, respectively, as of September 30, 2019.
Goodwill in the Americas region was written off in 2015. The net carrying values
of our long-lived assets in the EMEA, APAC, and Americas regions are
approximately $67.5 million, $7.4 million, and $69.3 million, respectively. In
our 2018 impairment testing, we determined the EMEA and APAC reporting units had
fair values substantially in excess of their carrying values (>100%). Our 2018
impairment testing also indicated no impairment of long-lived assets in the
Americas region as the undiscounted cash flows were substantially in excess of
the carrying value of long-lived assets (>59%). This headroom and recoverability
were driven by our forecasts of future operating performance as well as external
market indicators.

Our operating performance through September 30, 2019 has been negatively
impacted by macroeconomic factors, the decrease and mix of sales, and the
ordering patterns of a large enterprise customer. The Company is taking actions
to counter these factors, including reducing our cost structure by focusing on
cost of sales and operating expenses to drive future profitability. Based on
currently available information, the Company continues to believe the fair value
of the reporting units exceeds their carrying values and the carrying value of
our long-lived assets is recoverable. In the event that these matters are not
satisfactorily resolved, the Company could experience a triggering event or
impairment of its goodwill or long-lived asset balances in future periods.

Forward-Looking Statements


Certain statements made in this Form 10-Q that are not statements of historical
or current facts are forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. Forward-looking statements
involve known and unknown risks, uncertainties and other factors that may cause
our actual results, performance or achievements to be materially different from
historical results or from any future results expressed or implied by such
forward-looking statements. In many cases, you can identify forward-looking
statements by terms such as "believes," "belief," "expects," "estimates,"
"intends," "anticipates," or "plans" or the negative of these terms or other
comparable terminology.

Forward-looking statements are based upon management's beliefs, assumptions and
current expectations concerning future events and trends, using information
currently available, and are necessarily subject to uncertainties, many of which
are outside our control. Although we believe that the expectations reflected in
the forward-looking statements are reasonable, forward-looking statements are
not, and should not be relied upon as a guarantee of future performance or
results, nor will they necessarily prove to be accurate indications of the times
at or by which any such performance or results will be achieved. A number of
important factors could cause actual results to differ materially from those
indicated by the forward-looking statements. These factors include without
limitation:

•competitive industry pressures;
•our ability to deliver products that meet changing technology and customer
needs;
•our ability to identify strategic acquisitions, to integrate such acquisitions
into our business without disruption and to realize the anticipated benefits of
such acquisitions;
•impact of future write-off or write-downs of intangible assets;
•our ability to acquire and enforce intellectual property rights and defend such
rights against third party claims;
•our ability to protect our intellectual property rights and confidential
information, including our digital content, from third-party infringers or
unauthorized copying, use or disclosure;
•failure of our information technology infrastructure or inability to protect
against cyber-attack;
•our ability to generate net cash flow from operations;
•our ability to obtain additional financing on acceptable terms;
•our ability to comply with the covenants in our borrowing agreements;
•impact of global economic, political and social conditions and financial
markets on our business;
•fluctuations in our gross profit margins, operating income or loss and/or net
income or loss;
•our ability to efficiently conduct business outside the U.S.;
•our dependence on our supply chain for components and sub-assemblies used in
our 3D printers and other products and for raw materials used in our print
materials;
•our ability to manage the costs and effects of litigation, investigations or
similar matters involving us or our subsidiaries;
•product quality problems that result in decreased sales and operating margin,
product returns, product liability, warranty or other claims;
•our ability to retain our key employees and to attract and retain new qualified
employees, while controlling our labor costs;
•our exposure to product liability claims and other claims and legal
proceedings;
•disruption in our management information systems for inventory management,
distribution, and other key functions;
                                       33

--------------------------------------------------------------------------------


•compliance with U.S. and other anti-corruption laws, data privacy laws, trade
controls, economic sanctions, and similar laws and regulations;
•our ability to comply with the terms of the Administrative Agreement with the
U.S. Air Force and to maintain our status as a responsible contractor under
federal rules and regulations;
•changes in, or interpretation of, tax rules and regulations; and
•compliance with, and related expenses and challenges concerning, conflict-free
minerals regulations; and
•the other factors discussed in the reports we file with or furnishes to the SEC
from time to time, including the risks and important factors set forth in
additional detail in Item 1A. "Risk Factors" in the 2018 Form 10-K and in Part
II, Item 1A. "Risk Factors" in the Quarterly Reports on Form 10-Q for the
quarter ended March 31, 2019 (the "2019 Q1 Form 10-Q") and the quarter ended
June 30, 2019 (the "2019 Q2 Form 10-Q" and, together with the 2019 Q1 Form 10-Q
and this Form 10-Q, the "2019 Quarterly Reports").

Certain of these and other factors are discussed in more detail in Item 1A.
"Risk Factors" in the 2018 Form 10-K and in the 2019 Quarterly Reports. Readers
are cautioned not to place undue reliance on these forward-looking statements.
The forward-looking statements included herein are made only as of the date of
this Form 10-Q and we undertake no obligation to publicly update or review any
forward-looking statement made by us or on our behalf, whether as a result of
new information, future developments, subsequent events or circumstances or
otherwise. All subsequent written or oral forward-looking statements
attributable to us or individuals acting on our behalf are expressly qualified
in their entirety by the cautionary statements referenced above.

© Edgar Online, source Glimpses

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