3D SYSTEMS CORPORATION
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") 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 (this business was sold in September of 2021), and digital design tools. Our solutions support advanced applications in two key industry verticals: Healthcare (which includes dental, medical devices and personalized health services) and Industrial (which includes aerospace, defense, transportation and general manufacturing). 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. As ofJanuary 1, 2021 , we determined the Company has two reportable segments, Healthcare and Industrial, whereas the Company previously only reported its consolidated results in one reportable segment. Prior year Healthcare and Industrial revenue amounts discussed herein have been recast to conform with current year presentation.
New Strategic Focus and Restructuring
Our business portfolio is well-balanced across end markets and geographies and includes a high degree of businesses serving critical sectors such as healthcare, aerospace and durable goods. OnAugust 5, 2020 , we announced a strategic focus and reorganization and a restructuring plan to align our cost structure to the level of revenues. We completed the restructuring efforts in the second quarter of 2021. Cost reduction efforts include reducing the number of facilities and examining every aspect of our manufacturing and operating costs. We incurred cash charges for severance, facility closing and other costs, primarily in the second half of 2020, and continued to incur additional charges through the second quarter of 2021, when we finalized all the actions to be taken. We incurred total charges of$21.1 million for severance, facility closings and other costs in accomplishing these efforts, including non-cash charges of$6.4 million which are included in facility closing costs. We also divested parts of the business that do not align with this strategic focus. See Note 2 and Note 15 to the consolidated financial statements for additional discussion.
COVID-19 Pandemic Response
As we continue to closely monitor the global impact of the COVID-19 pandemic, our top priority remains the health and safety of our employees and their families and communities. OurCrisis Response Steering Committee regularly reviews and adapts our protocols based on evolving research and guidance related to the virus. While operations continue, we continue to restrict travel and meetings, publish pertinent information, and adapt to a world where many in our workforce are remote and those coming on-site are following new safety measures. In certain of our locations, where local conditions and regulations allow, our employees have begun to return to working on-site. We continue to watch conditions and regulations and remain committed to protecting our employees, delivering for our customers and supporting our communities. We are subject to the mandatory vaccination and workplace safety protocols of the United States Federal Government Executive Order on Ensuring Adequate COVID Safety Protocols for Federal Contractors, and the COVID-19 Workplace Safety Guidance for Federal Contractors and Subcontractors issued by theSafer Federal Workforce Task Force . Accordingly, we have adopted a policy to comply with the mandate that allU.S. employees be vaccinated within the mandated timeframe. The mandate could result in employee attrition for us, which could materially and adversely affect our financial condition and results of operations. Additional information regarding COVID-19 risks appears in Part II, Item 1A, "Risk Factors" of this Form 10-Q. 25 --------------------------------------------------------------------------------
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 continued to impact our reported results for the quarter endedSeptember 30, 2021 , 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 the severity or resurgence of the outbreak and actions by government authorities to contain the outbreak or treat its impact. Furthermore, the impacts of a potential worsening of labor and supply chain disruptions, including shortages of critical components, and the continued volatility in the financial markets remain unknown.
Summary of Third Quarter 2021 Financial Results
Quarter Ended (in thousands, except per share amounts) 2021 2020 Revenue: Products$ 108,884 $ 78,296 Services 47,212 57,880 Total revenue 156,096 136,176 Cost of sales: Products 64,252 48,213 Services 27,529 29,336 Total cost of sales 91,781 77,549 Gross profit 64,315 58,627 Operating expenses: Selling, general and administrative 65,737 59,065 Research and development 15,786 18,866 Impairment of goodwill - 48,300 Total operating expenses 81,523 126,231 Loss from operations$ (17,208) $ (67,604) Total consolidated revenue for the third quarter of 2021 increased 14.6% compared to the same period last year, driven by growth in both the Healthcare and Industrial segments. Revenue from Healthcare increased 28.3% to$76.4 million , compared to the same period last year, driven by strong demand for dental applications partly offset by the impact of 2021 divestitures. Industrial sales increased 4.0% to$79.7 million , compared to the same period last year, primarily due to the continued recovery from the economic slowdown due to the pandemic partly offset by the impact of 2021 divestitures. Gross profit for the quarter endedSeptember 30, 2021 increased by 9.7%, or$5.7 million , to$64.3 million , compared to$58.6 million for the quarter endedSeptember 30, 2020 . Gross profit margin for the quarters endedSeptember 30, 2021 andSeptember 30, 2020 was 41.2% and 43.1%, respectively. The decrease in gross profit margin was primarily due to the impact of 2021 divestitures, increased logistics and supply chain costs during 2021, volume based pricing impacts on certain key accounts and changes in revenue estimates on certain collaboration arrangements. 26 -------------------------------------------------------------------------------- Operating expenses for the quarter endedSeptember 30, 2021 decreased by 35.4%, or$44.7 million , to$81.5 million , compared to$126.2 million for the quarter endedSeptember 30, 2020 primarily due to both 2020 cost optimization expenses and a goodwill impairment charge incurred in the third quarter of 2020. Selling, general and administrative ("SG&A") expenses for the quarter endedSeptember 30, 2021 increased by 11.3%, or$6.7 million , to$65.7 million , compared to$59.1 million for the quarter endedSeptember 30, 2020 , which included$11.9 million of restructuring expenses related to our 2020 cost optimization program. Research and development ("R&D") expenses for the quarter endedSeptember 30, 2021 decreased by 16.3%, or$3.1 million , to$15.8 million , compared to$18.9 million for the quarter endedSeptember 30, 2020 . A goodwill impairment charge of$48.3 million was recorded in the quarter endedSeptember 30, 2020 compared to no impairment charge in 2021. The combined net increase in SG&A and R&D expenses is due to higher incentive compensation resulting from better than expected performance in 2021 compared to internal targets, a one-time$9.8 million bonus paid to Simbionix employees in connection with the divestiture, investments in the business, increase in stock compensation expenses, and expenses related to acquisitions. Incentive compensation in the third quarter of 2020 was de minimus. The combined net increase in SG&A and R&D expenses in the quarter endedSeptember 30, 2020 were partly offset by benefits from the 2020 cost optimization plan. Our operating loss for the quarter endedSeptember 30, 2021 was$17.2 million , compared to$67.6 million for the quarter endedSeptember 30, 2020 . The lower loss was driven by higher revenue and gross profit dollars, benefits from the 2020 cost optimization plan, and the absence of a goodwill impairment charge and cost optimization expenses in 2021, partly offset by higher net combined SG&A and R&D expenses as noted above.
Results of Operations
Revenue
Current year revenue has improved as the prior year was negatively impacted by the effects of the COVID-19 pandemic, most severely toward the end of the first quarter 2020 and into the second quarter of 2020, as many of our customers were shut down or on a significantly reduced level of activity. Additionally, given the relatively high price of certain 3D printers and a corresponding lengthy selling cycle, as well as relatively low unit volume of the higher priced printers in any particular period, a shift in the timing and concentration of orders and shipments from one period to another can materially 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. We earn revenue from the sale of products and services through our Healthcare and Industrial segments. The product categories include 3D printers and corresponding materials, healthcare simulators (which was divested in third quarter of 2021), digitizers, software licenses, 3D scanners and haptic devices. The majority of materials used in our 3D printers are proprietary. The services category includes maintenance contracts and services on 3D printers and simulators, software maintenance, on-demand solutions (which was divested in the third quarter of 2021) and healthcare services.
The following tables set forth the change in revenue for the third quarter and
nine months ended
Table 1 (Dollars in thousands) Products Services Total Revenue - third quarter 2020$ 78,296 $ 57,880 $ 136,176 Change in revenue: Volume 36,532 46.7 % (11,940) (20.6) % 24,592 18.1 % Price/Mix (5,954) (7.6) % 58 0.1 % (5,896) (4.3) % Foreign currency translation 10 - % 1,214 2.1 % 1,224 0.9 % Net change 30,588 39.1 % (10,668) (18.4) % 19,920 14.6 % Revenue - third quarter 2021$ 108,884 $ 47,212 $ 156,096 27
-------------------------------------------------------------------------------- Total consolidated revenue for the third quarter of 2021 compared to the same period last year increased 14.6%, primarily due to higher product volume from the continued rebound from the adverse impacts of the COVID-19 pandemic in the prior year and a favorable foreign currency impact partially offset by unfavorable price/mix and divestitures. Recurring revenue, which includes service and materials, was$101.4 million and$96.9 million for the quarters endedSeptember 30, 2021 and 2020, respectively. For the quarters endedSeptember 30, 2021 and 2020, products revenue from Healthcare contributed$55.5 million and$36.6 million , respectively, and products revenue from Industrial contributed$53.4 million and$41.7 million , respectively. The higher products revenue in Healthcare and Industrial was primarily due to higher volume from the continued rebound from adverse impacts of the COVID-19 pandemic in the prior year. Healthcare revenue experienced continued strength in the dental market. The higher products revenue in Industrial was primarily due to higher volumes, foreign currency impact, partially offset by unfavorable price/mix and divestitures. For the quarters endedSeptember 30, 2021 and 2020, services revenue from Healthcare contributed$20.8 million and$23.0 million , respectively, and services revenue from Industrial contributed$26.4 million and$34.9 million , respectively. The lower services revenue in Healthcare and in Industrial was due to divestitures.
For the quarters ended
Table 2 (Dollars in thousands) Products Services Total Revenue - nine months 2020$ 220,248 $ 164,340 $ 384,588 Change in revenue: Volume 88,146 40.0 % (15,632) (9.5) % 72,514 18.9 % Price/Mix (3,659) (1.7) % 92 0.1 % (3,567) (0.9) % Foreign currency translation 6,435 2.9 % 4,799 2.9 % 11,234 2.9 % Net change 90,922 41.3 % (10,741) (6.5) % 80,181 20.8 % Revenue - nine months 2021$ 311,170 $ 153,599 $ 464,769 Total consolidated revenue increased 20.8% for the nine months endedSeptember 30, 2021 compared to the same period last year, primarily due to increased volume from the continued rebound from the adverse impacts of the COVID-19 pandemic in the prior year and foreign currency impact. Recurring revenue, which includes service and materials, was$304.2 million and$273.4 million for the nine months endedSeptember 30, 2021 and 2020, respectively. For the nine months endedSeptember 30, 2021 and 2020, products revenue from Healthcare contributed$163.0 million and$98.5 million , respectively, and products revenue from Industrial contributed$148.2 million and$121.7 million , respectively. The higher products revenue in Healthcare was due to continued strength in the dental market. The higher products revenue in Industrial was primarily due to higher volumes, favorable price/mix and foreign currency impact, partially offset by divestitures. Services revenue for the nine months endedSeptember 30, 2021 decreased primarily due to lower volumes, which was partially offset by the favorable impact of foreign currency translation. For the nine months endedSeptember 30, 2021 and 2020, services revenue from Healthcare contributed$68.8 million and$62.3 million , respectively, and services revenue from Industrial contributed$84.8 million and$102.0 million , respectively. The higher services revenue in Healthcare was due to strong sales in both dental and medical applications; whereas, the lower services revenue in Industrial was due to lower on-demand volume and divestitures.
For the nine months ended
28
--------------------------------------------------------------------------------Gross profit and gross profit margins
The following tables set forth gross profit and gross profit margins for the
quarters and nine months ended
Table 3
Quarter Ended September 30,
2021 2020 Change in Gross Profit Change in Gross Profit Margin
Gross Profit Gross Profit(Dollars in thousands) Gross Profit Margin Gross Profit Margin $ % Percentage Points % Products$ 44,632 41.0 %$ 30,083 38.4 %$ 14,549 48.4 % 2.6 6.8 % Services 19,683 41.7 % 28,544 49.3 % (8,861) (31.0) % (7.6) (15.4) % Total$ 64,315 41.2 %$ 58,627 43.1 %$ 5,688 9.7 % (1.9) (4.4) % For the quarter endedSeptember 30, 2021 , as compared to the same period last year, the increase in total consolidated gross profit was predominantly due to the higher sales volume as previously discussed, partially offset by divestitures. Products gross profit increased primarily due to higher sales volume as well as an improved gross profit margin due to the significantly improved capacity utilization. Services gross profit decreased primarily due to the impact of divestitures and lower on-demand volume. Table 4 Nine Months Ended September 30, 2021 2020 Change in Gross Profit Change in Gross Profit Margin Gross Profit Gross Profit
(Dollars in thousands) Gross Profit Margin Gross Profit Margin $ % Percentage Points % Products$ 130,919 42.1 %$ 72,298 32.8 %$ 58,621 81.1 % 9.3 28.4 % Services 66,641 43.4 % 78,628 47.8 % (11,987) (15.2) % (4.4) (9.2) % Total$ 197,560 42.5 %$ 150,926 39.2 %$ 46,634 30.9 % 3.3 8.4 % For the nine months endedSeptember 30, 2021 , as compared to the same period last year, the increase in total consolidated gross profit was predominantly due to the higher sales volume as previously discussed, and the end of life inventory charge recorded in the quarter endedJune 30, 2020 , partially offset by divestitures. Products gross profit increased primarily due to higher sales volume as well as an improved gross profit margin due to significantly improved capacity utilization and the end of life inventory charge recorded in the quarter endedJune 30, 2020 . Services gross profit decreased primarily due to the impact of divestitures and lower on-demand volume.
Operating expenses
The following tables set forth the components of operating expenses for the
quarters and nine months ended
Table 5
Quarter Ended September 30,
2021 2020 Change
(Dollars in thousands) Amount % Revenue Amount % Revenue $ %
Selling, general and administrative
expenses $ 65,737 42.1 % $ 59,065 43.4 % $ 6,672 11.3 %
Research and development expenses 15,786 10.1 % 18,866 13.9 % (3,080) (16.3) %
Impairment of goodwill - - % 48,300 35.5 % (48,300) (100.0) %
Total operating expenses $ 81,523 52.2 % $ 126,231 92.7 % $ (44,708) (35.4) %
For the quarter ended
29
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compared to internal targets, a one-time $9.8 million bonus paid to Simbionix
employees in connection with the divestiture, partially offset by the
realization of cost savings from the prior year cost optimization program and
divestitures. SG&A expenses in the third quarter of 2020 included $11.9 million
of restructuring expenses related to the 2020 cost optimization program. See
Note 15 to the consolidated financial statements for additional discussion
regarding restructuring.
For the quarter ended September 30, 2021 , as compared to the same period last
year, R&D expenses decreased due to a reduction in collaboration arrangement
expenses as more of these types of arrangements were recorded as revenue and
cost of sales, and cost savings from the prior year restructuring program and
divestitures.
For the quarter ended
Table 6
Nine
Months Ended
2021 2020 Change
(Dollars in thousands) Amount % Revenue Amount % Revenue $ %
Selling, general and administrative expenses$ 176,800 38.0 %$ 167,213 43.5 %$ 9,587 5.7 % Research and development expenses 49,987 10.8 % 55,107 14.3 % (5,120) (9.3) % Impairment of goodwill - - % 48,300 12.6 % (48,300) (100.0) % Total operating expenses$ 226,787 48.8 %$ 270,620 70.4 %$ (43,833) (16.2) % For the nine months endedSeptember 30, 2021 , compared to the same period last year, SG&A expenses increased predominantly due to higher stock-based compensation and incentive compensation reflecting better than expected operating performance compared to internal targets, a one-time$9.8 million bonus paid to Simbionix employees in connection with the divestiture, partially offset by the realization of cost savings from the prior year restructuring program and divestitures. SG&A expenses for the nine months endedSeptember 30, 2020 included$11.9 million of restructuring expenses related to our 2020 cost optimization program. See Note 15 to the consolidated financial statements for additional discussion regarding restructuring. For the nine months endedSeptember 30, 2021 , compared to the same period last year, R&D expenses decreased due to a reduction in collaboration arrangements expenses as more of these types of arrangements were recorded as revenue and cost of sales, and cost savings from the prior year restructuring program and divestitures.
For the nine months ended
Loss from operations
The following table sets forth loss from operations for the quarters and nine
months ended
Table 7
Quarter Ended September 30, Nine Months Ended September 30,
(Dollars in thousands) 2021 2020 2021 2020
Loss from operations: $ (17,208) $ (67,604) $ (29,227) $ (119,694)
The decrease in loss from operations for the quarter and nine months ended
September 30, 2021 , as compared to the prior year periods, was primarily driven
by an increase in revenue and gross profit, cost savings from the prior year
cost optimization program, the absence of a goodwill impairment charge and
restructuring expenses related to our 2020 cost optimization program and
divestitures partly offset by higher stock and incentive compensation expenses,
as previously discussed.
See "Revenue," "Gross profit and gross profit margins" and "Operating expenses" above.
30
--------------------------------------------------------------------------------Interest and other income (expense), net
The following table sets forth the components of interest and other income
(expense), net, for the quarters and nine months ended
Table 8
Quarter Ended September 30, Nine Months Ended September 30,
(Dollars in thousands) 2021 2020 2021 2020
Interest and other income (expense), net
Foreign exchange gain (loss) $ 222 $ (601) $ 2,279 $ (1,584)
Interest income (expense), net 19 (611) (1,230) (3,699)
Other income (expense), net 315,618 (1,207) 353,347 (2,315)
Total interest and other income (expense),
net $ 315,859 $ (2,419) $ 354,396 $ (7,598) Foreign exchange gain (loss), net, for the nine months and quarter ended
Interest income (expense), net, decreased for the quarter and nine months endedSeptember 30, 2021 , as compared to the prior year periods primarily due to lower interest expense due to the repayment of the 5-year$100 million senior secured term loan facility (the "Term Facility") in the first quarter of 2021 and interest income related to cash proceeds from theCimatron , ODM, and Simbionix divestitures. The year over year benefits for the nine months endedSeptember 30, 2021 were partially offset by the realization of losses previously recognized in accumulated other comprehensive resulting from the termination of the interest rate swap in first quarter of 2021. Other income (expense), net, for the nine months endedSeptember 30, 2021 , as compared to the nine months endedSeptember 30, 2020 , increased primarily due to the$343.1 million gain on the divestitures ofCimatron , ODM and Simbionix, and a$8.9 million favorable foreign exchange gain related to theCimatron and Simbionix divestitures. Other income (expense), net, for the quarter endedSeptember 30, 2021 , as compared to the quarter endedSeptember 30, 2020 , increased primarily due to the$311.1 million gain on the divestitures of ODM and Simbionix, and a$2.4 million favorable foreign exchange gain related to the Simbionix sale. Net income (loss)
The following tables set forth the primary components of net income (loss) for
the quarters and nine months ended
Table 9
Quarter Ended September 30,
(Dollars in thousands, except per share amounts) 2021 2020 Change
Loss from operations $ (17,208) $ (67,604) $ 50,396
Other non-operating items:
Interest and other income (expense), net 315,859 (2,419) 318,278
Benefit (provision) for income taxes (5,995) (2,866) (3,129)
Net income (loss) $ 292,656 Weighted average shares - basic 122,663
118,527
Weighted average shares - diluted 125,289
118,527
Net income (loss) per share - basic $ 2.39$ (0.61) Net income (loss) per share - diluted $ 2.34
The net income for the quarter ended
31
--------------------------------------------------------------------------------driven by a decrease in loss from operations and the gain on the divestitures of ODM and Simbionix, as previously discussed.
Table 10
Nine Months Ended September 30,
(Dollars in thousands) 2021 2020 Change
Loss from operations $ (29,227) $ (119,694) $ 90,467
Other non-operating items:
Interest and other income (expense), net 354,396 (7,598) 361,994
Benefit (provision) for income taxes 3,083 (2,472) 5,555
Net income (loss) $ 328,252 Weighted average shares - basic 122,178
116,216
Weighted average shares - diluted 124,839
116,216
Net income (loss) per share - basic$ 2.69 $ (1.12) Net income (loss) per share - diluted$ 2.63
The net income for the nine months endedSeptember 30, 2021 , as compared to the net loss from the prior year period, is primarily due to the decrease in the loss from operations and the gain on the sales ofCimatron , ODM, and Simbionix, as previously discussed.
Liquidity and Capital Resources
We assess our liquidity in terms of our ability to generate cash to fund our operating, investing and financing activities. In doing so, we review and analyze our current cash on hand, the number of days our sales are outstanding, inventory turns, capital expenditure commitments and accounts payable turns. Our cash requirements, excluding acquisitions, primarily consist of funding working capital and capital expenditures. AtSeptember 30, 2021 , we had cash on hand of$503.1 million , including restricted cash, and no outstanding debt. Cash on hand, including restricted cash and cash classified as held for sale, increased$418.4 million sinceDecember 31, 2020 . The higher cash balance resulted from proceeds of$427.3 from theCimatron , ODM, and Simbionix divestitures and$62.7 million of cash flow from operations, partially offset by$21.4 million for repayments of debt,$14.8 million for capital expenditures,$10.9 million for current acquisitions,$10.4 million related to net settlement of stock-based compensation, and$4.0 million payments related to a prior acquisitions. Cash flow from operations was impacted by withholding taxes of$6.6 million related to theCimatron divestiture. For the nine months endedSeptember 30, 2021 , we generated$62.7 million of cash from operations, primarily driven by the increase in operating income and better working capital management. For the nine months endedSeptember 30, 2020 , we used$32.6 million of cash from operations. Our unrestricted cash balance atSeptember 30, 2021 andDecember 31, 2020 , was$502.8 million and$75.0 million , respectively. The higher cash balance resulted from$427.3 in net proceeds from theCimatron , ODM, and Simbionix divestitures and$62.7 million of cash flow from operations, partially offset by$21.4 million for repayments of debt,$4.0 million for payments related to a prior acquisition,$10.9 million for current acquisitions,$10.4 million related to share settlement of stock-based compensation, and$14.8 million for capital expenditures. OnJanuary 1, 2021 , the Company completed the sale of 100% of the issued and outstanding equity interests ofCimatron , for approximately$64.2 million , before certain adjustments and excluding$9.5 million of cash amounts transferred to the purchaser. OnAugust 24, 2021 , we completed the sale of our medical simulation business, Simbionix, for approximately$305.0 million , before certain adjustments and excluding$6.8 million of cash amounts transferred to the purchaser. OnSeptember 9, 2021 we completed the sale of our ODM business for approximately$82 million , before certain adjustments. We expect that cash flow from operations, cash and cash equivalents, and other sources of liquidity, such as issuing equity or debt securities subject to market conditions, will be available and sufficient to meet all foreseeable cash requirements. 32 -------------------------------------------------------------------------------- Cash held outside theU.S. atSeptember 30, 2021 was$56.1 million , or 11.2% of total cash and cash equivalents, compared to$49.7 million , or 66.2% of total cash and cash equivalents, atDecember 31, 2020 . 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 federal and state taxes. However, these dividends are subject to foreign withholding taxes that are estimated to result in the Company incurring tax costs in excess of the cost to obtain cash through other means. Cash equivalents are comprised of funds held in money market instruments and are reported at their current carrying value, which approximates fair value due to the short term nature of these instruments. We strive to minimize our credit risk by investing primarily in investment grade, liquid instruments and limit exposure to any one issuer depending upon credit quality. See "Cash flow" discussion below.
Cash flow
Cash flow from operations
Cash provided by operating activities for the nine months endedSeptember 30, 2021 was$62.7 million , while cash used in operating activities for the nine months endedSeptember 30, 2020 was$32.6 million . Working capital provided cash of$21.3 million for the nine months endedSeptember 30, 2021 and used cash of$26.8 million for the nine months endedSeptember 30, 2020 . For the nine months endedSeptember 30, 2021 , working capital changes impacting related to cash inflows were a decrease in inventory, and prepaid expenses and other current assets, an increase in accounts payable, and deferred revenue, partially offset by an increase in accounts receivable, and a decrease in accrued and other liabilities, driven by withholding tax payments related to theCimatron sale. For the nine months endedSeptember 30, 2020 , drivers of working capital related to cash outflows were an increase in accounts receivable, and a decrease in deferred revenue and customer deposits, and accrued and other current liabilities, partially offset by an increase in inventory, prepaid expenses and other current assets, and a decrease in accounts payable.
Cash flow from investing activities
For the nine months endedSeptember 30, 2021 , cash flow provided from investing activities was$395.6 million compared to$22.5 million cash used in investing activities for the nine months endedSeptember 30, 2020 . The primary cash inflows related to the net proceeds from the divestitures ofCimatron , ODM and Simbionix, partially offset by capital expenditures and payments related to current acquisitions and prior year noncontrolling interest purchases. For the nine months endedSeptember 30, 2020 , the primary outflows of cash related to the purchases of noncontrolling interest and capital expenditures. Capital expenditures were$14.8 million and$11.0 million for the nine months endedSeptember 30, 2021 and 2020, respectively.
Cash flow from financing activities
Cash used in financing activities was$32.2 million for the nine months endedSeptember 30, 2021 , and$3.8 million for the nine months endedSeptember 30, 2020 . The primary outflow of cash for the nine months endedSeptember 30, 2021 related to repayment of the Term Facility and settlements of stock-based compensation. The primary outflow of cash for the nine months endedSeptember 30, 2020 related to partial repayment of the Term Facility and settlements of stock-based compensation, partially offset by proceeds from the issuance of common stock.
Recent Accounting Pronouncements
Refer to Note 1 to the Consolidated 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, 2020 ("2020 Form 10-K"), filed with theSecurities and Exchange Commission ("SEC") onMarch 5, 2021 that have had a material impact on our condensed consolidated financial statements and related notes. 33 --------------------------------------------------------------------------------
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," "may," "will," "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 expressed in or implied by the forward-looking statements. These factors include without limitation: •impact of production, supply, contractual and other disruptions, including facility closures, furloughs and labor shortages or attrition as a result of vaccination requirements, 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 goodwill and intangible assets; •the concentration of revenue and credit risk exposure from our largest customer; •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 predict quarterly sales and manage product inventory due to uneven sales cycle; •our ability to continue to generate net cash flow from operations; •our ability to remediate material weaknesses in our internal controls over financial reporting and maintain effect internal controls; •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 maintain our status as a responsible contractor under federal rules and regulations; •changes in, or interpretation of, tax rules and regulations; and •the other factors discussed in the reports we file with or furnish to theSEC from time to time, including the risks and important factors set forth in additional detail in Item 1A. "Risk Factors" in the 2020 Form 10-K and this 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 revise 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, except as required by law. 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. 34
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