The following discussion and analysis should be read together 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"). Also, 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 inDelaware in 1993 that markets our products and services through subsidiaries inNorth America andSouth America (collectively referred to as "Americas"),Europe and theMiddle East (collectively referred to as "EMEA") and theAsia Pacific region ("APAC"). We provide comprehensive 3D printing and digital manufacturing solutions, including 3D printers for plastics and metals, materials, software, on demand manufacturing services and digital design tools. Our solutions support advanced applications in a wide range of industries and verticals, including healthcare, dental, aerospace, automotive and durable goods. Our precision healthcare capabilities include simulation; Virtual Surgical Planning (VSP®)("VSP"); and printing of medical and dental devices, models, and surgical guides and instruments. We have over 30 years of experience and expertise which have proven vital to our development of an ecosystem and end-to-end digital workflow solutions which enable customers to optimize product 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, reliability, repeatability and total cost of operations.
COVID-19 Pandemic Response
Our top priority during the ongoing COVID-19 pandemic remains the health and safety of our employees and their families. As global governments institute restrictions on commercial operations, we are working to ensure our compliance while also maintaining business continuity for operations. While no company is immune to global economic challenges, our business portfolio is well-balanced across end markets and geographies, and includes a high degree of businesses serving critical sectors such as the healthcare, aerospace and durable goods. Our balance sheet is well positioned and had$112.8 million of cash and cash equivalents atMarch 31, 2020 , and a committed revolving credit facility maturing in 2024 with$42.2 million of credit available atMarch 31, 2020 . We are in discussions with our lenders to ensure continued availability of funds in future quarters given the prospect of further economic downturn.
Our Employees
We are in the midst of what is a historic deployment of remote work and digital access to services. OurCrisis Response Steering Committee is highly engaged with local site leaders across our company in safeguarding the well-being of our employees and minimizing the spread of this infection. Employees whose tasks can be done offsite have been instructed to work from home. Approximately 80% of our total personnel continue to work from home. We only allow employees in our facilities who are essential to the facilities' operations under best practices guidelines on maintaining physical distancing, utilizing enhanced cleaning protocols and usage of personal protective equipment.
Our Customers
We are committed to our customers to enable the support they need to continue providing vital services and tools. Our global businesses and manufacturing sites remain operational to meet customer needs during the pandemic in compliance with the orders and restrictions imposed by government authorities in each of our locations, and we are working with our customers to meet their specific shipment needs. While the pandemic has created minor delays on the inbound supply chain at our partners and our own facilities and both inbound and outbound logistical challenges, we have been able to identify alternative solutions such that none of the issues have had a material impact on our ability to fulfill demand. 20 --------------------------------------------------------------------------------
Our Community
Our team has worked hard to connect people in need during this pandemic with those who can help using digital manufacturing solutions. Together with our committed partners and customers, we have worked to architect solutions specific to user needs through a combination of materials, hardware platforms, software and professional services. This helps to integrate additive manufacturing into traditional production environments and allows companies to reduce dependency on the supply chain, manufacture parts internally or make them on demand. Additionally, the COVID-19 pandemic has created the need for protective measures for both healthcare professionals and patients resulting from bottlenecks and shortages in the worldwide supply of personal protective equipment and other vital medical devices and equipment. In response. we asked our network of partners, customers and others within the additive manufacturing community to circumvent the supply chain and help produce these parts as quickly as possible, to meet the urgent needs of the healthcare sector as they care for patients and contain the spread of the COVID-19 virus. We received offers from the community for everything from printer materials, usage of facilities for printing, engineers' time and expertise and even offers to fund efforts. We believe that collaboration like this will be key to saving lives. We have collaborated with our additive manufacturing community on several projects to combat the effect of the pandemic. We identified face shields as being something additive manufacturing could quickly support. We designed and developed a high efficiency face shield frame. Our printers can output 100 face shields every 24 hours. We offer this the data file free of charge to the additive manufacturing community in order to enable others who have an SLS printer to go from CAD file to production in minutes. Lonati SpA, a manufacturing company based inBrescia, Italy , deployed our ProX SLS 6100 printer with DuraForm materials to 3D print more than 100 venturi ventilator valves for respiratory machines. These valves were designed, developed, produced and delivered in just three days, evidencing the key capabilities of our technology and the value proposition of fast response time. We now have ventilator projects going on all over the world, including in hospitals, and we are working with the National Health Service in theUnited Kingdom on venturi valves that can be deployed quickly and close to the point of care. With the recent trend of moving from ventilators to CPAP masks for treatment of infected patient, we have been involved in the production of CPAP adapter components, turning what would have been a one to two month project into a solution on day one, with unit build time of just over one hour and a finished product the same day. Finally, as widespread diagnostic testing of COVID-19 begins to ramp, there are known shortages of diagnostic tools such as nasal swabs. Our customers have been looking at repurposing dental and industrial Figure 4 printers to 3D print nasal swabs using dental and industrial grade resins as well as medical grade nylon 12. A single Figure 4 printer has demonstrated the ability to produce over 18,000 swabs per week. We have received interest from both hospitals and OEMs and are currently engaged in clinical validations with several teams. These activities demonstrate our thought leadership in additive manufacturing, our commitment to partnering with our community in combating the pandemic and a balanced approach to how our industry can quickly address supply and demand needs amid COVID-19.
Looking Forward
Our operations inAmericas , EMEA and APAC expose us to risks associated with public health crises and epidemics/pandemics, such as the COVID-19 pandemic. While the COVID-19 pandemic has impacted the Company's reported results for the first quarter, we are unable to predict the longer term impact that the pandemic may have on our business, results of operations, financial position or cash flows. The extent to which our operations may be impacted by the dynamic nature of the COVID-19 pandemic will depend largely on future developments, which are highly uncertain and cannot be accurately predicted, including new information which may emerge concerning the severity of the outbreak and actions by government authorities to contain the outbreak or treat its impact. Furthermore, the impacts of a potential worsening of global economic conditions and the continued disruptions to, and volatility in the financial markets remain unknown. Additional information regarding COVID-19 risks appears in Part II, Item 1A, "Risk Factors" of this Form 10-Q. 21 --------------------------------------------------------------------------------
Summary of First Quarter 2020 Financial Results
Total consolidated revenue for the quarter endedMarch 31, 2020 decreased by 11.4%, or$17.3 million , to$134.7 million , compared to$152.0 million for the quarter endedMarch 31, 2019 . These results reflect a 35.5% decrease in printers revenue and a 12.8% decrease from on demand manufacturing revenue as our customers purchases were impacted by the COVID-19 pandemic. Materials revenue decreased 0.1% to$41.4 million . 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 endedMarch 31, 2020 , healthcare revenue decreased by 7.3%, to$46.3 million , and made up 34.4% of total revenue, compared to$50.0 million , or 32.9% of total revenue, for the quarter endedMarch 31, 2019 . For the quarter endedMarch 31, 2020 , total software revenue from products and services decreased by 7.7% to$21.2 million , and made up 15.7% of total revenue, compared to$23.0 million , or 15.1% of total revenue, for the quarter endedMarch 31, 2019 . Gross profit for the quarter endedMarch 31, 2020 decreased by 13.0%, or$8.6 million , to$57.1 million , compared to$65.7 million for the quarter endedMarch 31, 2019 . Gross profit margin for the quarters endedMarch 31, 2020 andMarch 31, 2019 was 42.4% and 43.2%, respectively. Operating expenses for the quarter endedMarch 31, 2020 decreased by 13.4%, or$11.7 million , to$75.4 million , compared to$87.0 million for the quarter endedMarch 31, 2019 . Selling, general and administrative expenses for the quarter endedMarch 31, 2020 decreased by 13.8%, or$9.0 million , to$56.1 million , compared to$65.1 million for the quarter endedMarch 31, 2019 . Research and development expenses for the quarter endedMarch 31, 2020 decreased by 12.1%, or$2.7 million , to$19.2 million , compared to$21.9 million for the quarter endedMarch 31, 2019 . Lower operating expenses reflect savings from 2019 cost optimization activities as well as short term cost savings from reduced hiring, travel, and outside service expenses.
Our operating loss for the quarter ended
For the quarters endedMarch 31, 2020 andMarch 31, 2019 , we used$2.3 million and$15.2 million of cash from operations, respectively, as further discussed below. In total, our unrestricted cash balance atMarch 31, 2020 andDecember 31, 2019 , was$112.8 million and$133.7 million , respectively. The lower cash balance was primarily the result of the$10.0 million payment to acquire the remaining capital and voting rights of the noncontrolling interest inBrazil ,$4.4 million in capital expenditures, and a$3.2 million negative effect of exchange rates. Results of Operations Comparison of revenue Due to the relatively high price of certain 3D printers and a corresponding lengthy selling cycle as well as relatively low unit volume of the higher priced printers in any particular period, a shift in the timing and concentration of orders and shipments from one period to another can affect reported revenue in any given period. In addition to changes in sales volumes, there are two other primary drivers of changes in revenue from one period to another: (1) the combined effect of changes in product mix and average selling prices and (2) the impact of fluctuations in foreign currencies. As used in this Management's Discussion and Analysis, the price and mix effects relate to changes in revenue that are not able to be specifically related to changes in unit volume. 22 --------------------------------------------------------------------------------
Comparison of revenue by geographic region
The following table sets forth changes in revenue by geographic region for the
quarters ended
Table 1 (Dollars in thousands) Americas EMEA Asia Pacific Total Revenue - first quarter 2019$ 73,703 48.5 %$ 59,644 39.2 %$ 18,633 12.3 %$ 151,980 100.0 % Change in revenue: Volume (8,749) (11.9) % 927 1.6 % (5,367) (28.8) % (13,189) (8.7) % Price/Mix (981) (1.3) % (3,500) (5.9) % 1,484 8.0 % (2,997) (2.0) % Foreign currency translation (171) (0.2) % (604) (1.0) % (314) (1.7) % (1,089) (0.7) % Net change (9,901) (13.4) % (3,177) (5.3) % (4,197) (22.5) % (17,275) (11.4) % Revenue - first quarter 2020$ 63,802 47.4 %$ 56,467 41.9 %$ 14,436 10.7 %$ 134,705 100.0 % Consolidated revenue decreased by 11.4%, predominantly driven by lower sales volume in theAmericas andAsia Pacific regions driven by plastics printers, on demand manufacturing, healthcare, and exiting the entertainment business in the prior year and unfavorable price/mix in the EMEA region driven by metals/material and healthcare; partially offset by favorable sales volume for metals printers in theAmericas region.
For the quarters ended
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 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 table sets forth the change in revenue by class for the quarters
ended
Table 2 (Dollars in thousands) Products Materials Services Total Revenue - first quarter 2019$ 50,917 33.5 %$ 41,430
27.3 %$ 59,633 39.2 %$ 151,980 100.0 % Change in revenue: Volume (12,045) (23.7) % 2,021 4.9 % (3,165) (5.3) % (13,189) (8.7) % Price/Mix (1,307) (2.6) % (1,690) (4.1) % - - % (2,997) (2.0) % Foreign currency translation (133) (0.3) % (384) (0.9) % (572) (1.0) % (1,089) (0.7) % Net change (13,485) (26.5) % (53) (0.1) % (3,737) (6.3) % (17,275) (11.4) % Revenue - first quarter 2020$ 37,432 27.8 %$ 41,377 30.7 %$ 55,896 41.5 %$ 134,705 100.0 % Consolidated revenue decreased 11.4%, predominantly due to lower products volume which was driven by plastics and software. For the quarters endedMarch 31, 2020 and 2019, revenue from printers contributed$19.3 million and$29.9 million , respectively. Software revenue included in the products category, including scanners and haptic devices, contributed$10.8 million and$12.2 million for the quarters endedMarch 31, 2020 and 2019, respectively.
For the quarters ended
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Gross profit and gross profit margins
The following table sets forth gross profit and gross profit margins for the
quarters ended
Table 3 Quarter Ended March 31, 2020 2019 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$ 1,422 3.8 %$ 7,750 15.2 %$ (6,328) (81.7) % (11.4) (75.0) % Materials 28,491 68.9 % 28,837 69.6 % (346) (1.2) % (0.7) (1.0) % Services 27,219 48.7 % 29,118 48.8 % (1,899) (6.5) % (0.1) (0.2) % Total$ 57,132 42.4 %$ 65,705 43.2 %$ (8,573) (13.0) % (0.8) (1.9) %
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. Total gross profit margin reflects favorable mix.
Operating expenses
The following table sets forth the components of operating expenses for the
quarters ended
Table 4 Quarter Ended March 31, 2020 2019 Change (Dollars in thousands) Amount % Revenue Amount % Revenue $ % Selling, general and administrative expenses$ 56,106 41.7 %$ 65,107 42.8 %$ (9,001) (13.8) % Research and development expenses 19,244 14.3 % 21,903 14.4 % (2,659) (12.1) % Total operating expenses$ 75,350 55.9 %$ 87,010 57.2 %$ (11,660) (13.4) % Selling, general and administrative expenses decreased due to lower employee costs from 2019 cost structure activities as well as short term cost savings from reduced hiring, travel, and outside service expenses.
Research and development expenses decreased due to lower employee costs from 2019 cost structure activities as well as lower program spend.
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Loss from operations
The following table sets forth (loss) income from operations by geographic
region for the quarters ended
Table 5
Quarter Ended March 31, (Dollars in thousands) 2020 2019 (Loss) income from operations: Americas$ (22,087) $ (26,832) EMEA 2,228 2,917 Asia Pacific 1,641 2,610 Total$ (18,218) $ (21,305)
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 ended
Table 6 Quarter Ended March 31, (Dollars in thousands) 2020 2019 Interest and other (expense) income, net Foreign exchange (loss) gain$ (112) $ (1,039) Interest expense, net (1,038) (576) Other (expense) income, net (1,414) 414 Total interest and other (expense) income, net$ (2,564) $
(1,201)
The increase in total interest and other expense, net, for the quarter endedMarch 31, 2020 as compared to the quarter endedMarch 31, 2019 was primarily driven by losses recorded on investments. 25 --------------------------------------------------------------------------------
Net loss attributable to 3D Systems
The following table sets forth the primary components of net loss attributable
to 3D Systems for the quarters ended
Table 7 Quarter Ended March 31, (Dollars in thousands) 2020 2019 Change Loss from operations$ (18,218) $ (21,305) $ 3,087 Other non-operating items: Interest and other (expense) income, net (2,564) (1,201) (1,363) Benefit (provision) for income taxes 1,858 (1,844) 3,702 Net loss (18,924) (24,350) 5,426 Less: net income attributable to noncontrolling interests - 44 (44)
Net loss attributable to
Weighted average shares, basic and diluted 114,590
113,267
Net loss per share - basic and diluted$ (0.17)
The decrease in net loss for the quarter endedMarch 31, 2020 , as compared to the quarter endedMarch 31, 2019 , was primarily driven by a decrease in loss from operations and the tax benefit associated with certain net operating loss tax carrybacks, partially offset by losses recorded on investments. See "Gross profit and gross profit margins" and "Operating expenses" above, and Note 12.
Liquidity and Capital Resources
Table 8 Change (Dollars in thousands) March 31, 2020 December 31, 2019 $ % Cash and cash equivalents$ 112,776 $ 133,665 $ (20,889) (15.6) % Accounts receivable, net 108,769 109,408 (639) (0.6) % Inventories 113,240 111,106 2,134 1.9 % 334,785 354,179 (19,394) Less: Current portion of long term debt 2,506 2,506 - - % Current right of use liabilities 9,416 9,569 (153) (1.6) % Accounts payable 55,862 49,851 6,011 12.1 % Accrued and other liabilities 50,803 63,095 (12,292) (19.5) % 118,587 125,021 (6,434) Operating working capital$ 216,198 $ 229,158 $ (12,960) (5.7) % 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 working capital and capital expenditures. 26 -------------------------------------------------------------------------------- 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. We hold a 5-year$100,000 senior secured term loan facility (the "Term Facility") and a 5-year$100,000 senior secured revolving credit facility (the "Revolving Facility" and, together with the Term Facility, the "Senior Credit Facility") that are intended to support working capital and general corporate purposes. The Senior Credit Facility is scheduled to mature onFebruary 26, 2024 , at which time all amounts outstanding thereunder will be due and payable. As ofMarch 31, 2020 , we have availability under the Revolving Facility of$42.2 million . For additional information on the Senior Credit Facility, see Note 7 to the condensed consolidated financial statements in this Form 10-Q. Cash held outside theU.S. atMarch 31, 2020 was$72.9 million , or 64.7% of total cash and equivalents, compared to$75.7 million , or 56.5% of total cash and equivalents atDecember 31, 2019 . As our previously unremitted earnings have been subjected toU.S. federal income tax, we expect any repatriation of these earnings to theU.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 73 atMarch 31, 2020 , compared to 67 days for the year atDecember 31, 2019 . Accounts receivable more than 90 days past due decreased to 10.3% of gross receivables atMarch 31, 2020 , from 12.1% atDecember 31, 2019 . We review specific receivables periodically to determine the appropriate reserve for accounts receivable. 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 up 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
Cash flow from operations
Cash used in operating activities for the quarters endedMarch 31, 2020 andMarch 31, 2019 was$2.3 million and$15.2 million , respectively. Excluding non-cash charges, the net loss provided cash of$1.0 million for the quarter endedMarch 31, 2020 and used cash of$4.6 million for the quarter endedMarch 31, 2019 . Non-cash charges generally consist of depreciation, amortization, and stock-based compensation. Working capital used cash of$3.3 million and$10.6 million for the quarters endedMarch 31, 2020 andMarch 31, 2019 , respectively. In the quarter endedMarch 31, 2020 , drivers of working capital related to cash outflows were an increase in prepaid expenses and inventory and a decrease in other accrued liabilities; partially offset by a increase in deferred revenue and accounts payable. In the quarter endedMarch 31, 2019 , cash outflows were mainly due to lower accounts payable, lower accrued liabilities and investments in inventory to support of new product commercialization, partially offset by an increase deferred revenues related to software and system maintenance contracts.
Cash flow from investing activities
For the quarters ended
Cash flow from financing activities
Cash provided by financing activities was$1.2 million and$73.7 million for the quarters endedMarch 31, 2020 andMarch 31, 2019 , respectively. The primary inflow of cash for the quarter endedMarch 31, 2020 relates to the proceeds from the inventory financing agreements, partially offset by settlements of stock-based compensation and repayment of the Term Facility. The primary inflow of cash for the quarter endedMarch 31, 2019 relates to borrowing on the Term Facility, partially offset by repayments of the Prior Credit Facility and Term Facility. 27 --------------------------------------------------------------------------------
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. As of the date of this report, there have been no changes to our critical accounting policies and estimates described in the Annual Report on Form 10-K for the year endedDecember 31, 2019 ("2019 Form 10-K"), filed with theSecurities and Exchange Commission ("SEC") onFebruary 26, 2020 that have had a material impact on our condensed consolidated financial statements and related notes, other than the following: Our EMEA, APAC andAmericas reporting units carry approximately$182.9 million ,$35.3 million and$0 of goodwill, respectively, as ofMarch 31, 2020 .Goodwill in theAmericas region was written off in 2015. The net carrying values of our long-lived assets in the EMEA, APAC, andAmericas regions are approximately$63.6 million ,$6.8 million , and$62.8 million , respectively. In our 2019 impairment testing, we determined the EMEA and APAC reporting units had fair values in excess of their carrying values. Our 2019 impairment testing also indicated no impairment of long-lived assets in theAmericas region as the undiscounted cash flows were in excess of the carrying value of long-lived assets. This headroom and recoverability were driven by our forecasts of future operating performance as well as external market indicators. Our operating performance throughMarch 31, 2020 has been negatively impacted by macroeconomic factors, the decrease and mix of sales, and the effect of the COVID-19 pandemic. 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. Refer to discussion of the COVID-19 Pandemic in this Management's Discussion and Analysis. As a results of these matters, the Company experienced a triggering event in the current quarter and performed a quantitative analysis for potential impairment of its goodwill or long-lived asset balances. Based on currently available information and analysis as ofMarch 31, 2020 , 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 another 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: •impact of production, supply, contractual and other disruptions, including facility closures and furloughs, due to the spread of the COVID-19 pandemic; •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; 28
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•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 natural disasters, public health issues (including the COVID-19 pandemic), and other catastrophic events; •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 theU.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; •compliance withU.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 theU.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 theSEC from time to time, including the risks and important factors set forth in additional detail in Item 1A. "Risk Factors" in the 2019 Form 10-K and in Part II, Item 1A of the Form 10-Q. 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.
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