3D Systems (DDD) 10-Q2024 Q3 Quarterly report

The accompanying unaudited condensed consolidated financial statements include the accounts of 3D Systems Corporation and all majority-owned and wholly-owned subsidiaries and entities in which a controlling interest is maintained (“3D Systems” or the “Company” or “we” or “our” or “us”). All significant intercompany accounts and transactions have been eliminated in consolidation. Certain prior period amounts have been reclassified to conform to the current year presentation.

A non-controlling interest in a subsidiary reflects an ownership interest in a majority-owned subsidiary that is not attributable to the Company. For the periods presented, the Company's financial statements include a redeemable non-controlling interest, which has been reported in temporary equity on the Company's condensed consolidated balance sheets. The net loss attributable to this redeemable non-controlling interest is presented as an adjustment to the Company's consolidated net loss to arrive at the net loss attributable to 3D Systems Corporation in the condensed consolidated statements of operations and condensed consolidated statements of comprehensive loss. Furthermore, adjustments to record this redeemable non-controlling interest at its redemption value are recorded to additional paid-in capital, and the excess redemption value is recognized as a reduction to net income, or increase to net loss, attributable to 3D Systems’ shareholders for purposes of reporting earnings or loss per share. See Note 11 for additional details regarding the circumstances under which this non-controlling interest will become redeemable, as well as a summary of the activity related to the redeemable non-controlling interest balances reported during the periods presented.

The unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) and the rules and regulations of the Securities and Exchange Commission (“SEC”) applicable to interim reports. Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements and should be read in conjunction with the audited financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2023 (“2023 Form 10-K”). The Company believes that the disclosures included in this Form 10-Q are adequate to make the information presented not misleading. In the opinion of management, the unaudited condensed consolidated financial statements contain all adjustments, consisting of adjustments of a normal recurring nature, necessary to present fairly the Company's financial position, results of operations, and cash flows for the periods presented. The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements. Actual results may differ from those estimates and assumptions.

Our annual reporting period is the calendar year. The Company's results of operations for the three and nine months ended September 30, 2024 are not necessarily indicative of the results to be expected for the full year. All dollar amounts and other amounts presented in the accompanying footnotes are presented in thousands, except for per share information.

We review long-lived assets ("asset groups") that are held for use for impairment whenever events or changes in circumstances indicate that the carrying value of an asset group may not be recoverable. The carrying value of an asset group that is held for use is not recoverable if it exceeds the sum of the undiscounted cash flows that are expected to result from the asset group's use and eventual disposition. If we determine that an asset group's carrying value is not recoverable, we must then compare the asset group's carrying value to its estimated fair value and record any excess carrying value over fair value as an impairment loss. Any impairment loss that is recognized is required to be allocated to the long-lived assets of an asset group on a pro rata basis, using the relative carrying amounts of the long-lived assets comprising the asset group, except that the loss allocated to an individual long-lived asset shall not reduce its carrying amount below its fair value whenever that fair value is determinable without undue cost and effort.

During the three months ended September 30, 2024, the Company concluded that, based on reported losses and negative cash flows for both current and historical reporting periods, combined with the significant decline in the Company's stock price during the period, were indicators that the primary asset group underlying the Company's core operations should be tested for recoverability. Upon assessing this asset group for recoverability, the Company concluded that the asset group's carrying value exceeded the undiscounted cash flows that the asset group was expected to generate over the estimated remaining useful life of the asset group's primary asset, which was deemed to be acquired technology. Accordingly, the Company further tested this asset group for impairment as of September 30, 2024, using projected discounted cash flows, as well as a market approach based upon revenue multiples, to estimate the asset group's fair value. These valuation approaches required the application of Level 3 valuation inputs (as defined in Note 18).

For the three and nine months ended September 30, 2024, the Company recorded an aggregate impairment loss of $42,288, within "Asset impairment charges" on our condensed consolidated statements of operations, as a result of concluding that the carrying value of the primary asset group underlying the Company's core operations exceeded the fair value of the asset group as of September 30, 2024. After consideration of the relative carrying values of the long-lived assets comprising this asset group, as well as the long-lived asset fair values below which asset carrying amounts should not be impaired, the Company recorded impairment charges of $31,198, $5,911, and $5,179 (representing the allocation of the aggregate impairment charge of $42,288) to intangible assets; property and equipment; and right-of-use assets, respectively. The Company estimated the fair values of the intangible assets and right-of-use assets included in the asset group using the income approach and estimated the fair value of the property and equipment included in the asset group using the cost approach. The estimation of the fair values of all classes of long-lived assets to which the impairment charge has been allocated required the application of Level 3 valuation inputs, as defined in Note 18. Refer to Note 5 and Note 8 for additional details regarding the allocation of the impairment loss to intangible assets and right-of-use assets, respectively.

The significant accounting policies described in our 2023 Form 10-K remain unchanged.

On July 1, 2023, the Company completed the acquisition of 100% of the outstanding voting interest of Wematter AB (“Wematter”), a Swedish 3D printer manufacturer that broadens 3D Systems’ Selective Laser Sintering (SLS) portfolio. Consideration for this acquisition consisted of approximately $10,224 in cash, subject to customary post-closing adjustments. The Company also may be required to pay an additional €2,000 in cash, contingent upon the achievement of certain post-closing performance conditions and the continued employment of certain key Wematter employees for two years after the closing date of the acquisition. This €2,000 is required to be recognized as compensation expense over the key employees' required service period, if deemed probable of being earned. As of September 30, 2024, management does not believe that achievement of the post-closing performance conditions is probable.

In a separate transaction, the Company previously extended a loan to Wematter during the three months ended June 30, 2023. We determined that this loan, representing a preexisting contractual relationship, was effectively settled upon the close of the acquisition of Wematter. No gain or loss was recognized in connection with the effective settlement, as the carrying value of the loan was not materially different from the pricing of similar current market transactions. The effective settlement of this loan receivable resulted in an increase of $942 to the consideration transferred in connection with this transaction (i.e., above the cash consideration paid) and a corresponding increase to goodwill.

Shown below is the final purchase price allocation, which summarizes the fair values of the assets acquired and liabilities assumed at the date of acquisition:

The goodwill recognized in connection with this acquisition is attributable to synergies that are expected to enhance and expand the Company’s overall product portfolio and opportunities in new and existing markets, future products that have yet to be determined and Wematter’s assembled workforce. This goodwill will not be deductible for tax purposes.

The following table presents the finite-lived intangible assets acquired and their respective estimated useful lives:

The following unaudited pro forma financial information summarizes the combined results of the Company and Wematter as if the acquisition of Wematter had occurred on January 1, 2022. The pro forma results have been prepared for comparative purposes only, and do not necessarily represent what our results of operations would have been had the acquisition been completed on January 1, 2022. In addition, these pro forma results are not intended to be a projection of future operating results and do not reflect synergies that might be achieved.

The unaudited pro forma financial information includes adjustments for the pro forma impact of the allocation of the purchase price recognized in connection with the acquisition of Wematter (as summarized above). These adjustments primarily relate to the impact of incremental amortization expense attributable to newly acquired and recognized intangible assets. Pro forma revenue information has not been presented, as pre-acquisition revenue reported by Wematter was not material and, accordingly, the impact on our reported consolidated revenue also would not have been material for the period presented. The table below does not include the presentation of a pro forma net loss attributable to 3D Systems Corporation for the three months ended September 30, 2023 because Wematter's results are reflected in 3D Systems consolidated numbers for the full three month period.

Revenue is recognized when control of the promised products or services is transferred to customers. A majority of our revenue is recognized at the point in time when products are shipped or delivered and the point in time when services are delivered to our customers. However, we also enter into service contracts and collaboration agreements with customers, for which we typically are required to recognize revenue over time.

At September 30, 2024, we had $100,187 of unrecognized revenue comprised of $44,914 of deferred revenue and customer deposits as well as cancellable and non-cancellable customer order backlog. This $100,187 excludes variable consideration totaling $46,000, which will not be included in contract transaction price for purposes of revenue recognition until management is able to conclude that it is probable that the inclusion of such amounts will not result in a subsequent significant reversal of the cumulative amount of revenue recognized. We expect to recognize approximately 93.5% of the deferred revenue and customer deposits as revenue within the next twelve months, and the remaining balance thereafter.

We enter into collaboration and licensing arrangements with third parties. The nature of the activities to be performed and the consideration exchanged under these arrangements varies on a contract-by-contract basis. We evaluate these arrangements to determine whether they meet the definition of a customer relationship for which revenue should be recorded and recognized. These contracts may contain multiple performance obligations and may contain fees for licensing, research and development services, contingent milestone payments upon the achievement of contractual developmental criteria and/or royalty fees based on the licensees’ product revenue. We determine the revenue to be recognized under these arrangements based upon an evaluation of the distinct performance obligations; the identification and evaluation of material rights; the estimation of the amount of variable consideration to be included in transaction price, as well as the timing for inclusion of such variable consideration; and the amount of transaction price assigned to and the pattern of transfer of control for each distinct performance obligation. This typically results in the recognition of revenue over time using a cost-to-cost percentage of completion model to measure the progress of the transfer of control. During the three and nine months ended September 30, 2024, the Company recognized $1,974 and $5,820, respectively, of revenue related to collaboration arrangements with customers. During the three and nine months ended September 30, 2023, the Company recognized $7,896 and $16,099, respectively, of revenue related to collaboration arrangements with customers.

Our accounts receivable, contract asset and contract liability balances as of September 30, 2024 and December 31, 2023 were as follows:

During the three months ended September 30, 2024, we recognized revenue of $6,452 related to our contract liabilities at December 31, 2023. During the nine months ended September 30, 2024, we recognized revenue of $28,903 related to our contract liabilities at December 31, 2023.

For the three and nine months ended September 30, 2024, one customer accounted for approximately 19.9% and 17.4% of our consolidated revenue, respectively. For the three and nine months ended September 30, 2023, the same customer accounted for approximately 10.7% and 14.4% of our consolidated revenue, respectively. We expect to maintain our relationship with this customer.

Revenue by geographic region for the three and nine months ended September 30, 2024 and September 30, 2023, which is determined based upon the geographic region in which a sale originates, was as follows:

The components of inventories at September 30, 2024 and December 31, 2023 are summarized as follows:

At September 30, 2024 and December 31, 2023, all of our intangible assets had finite lives, and the carrying values of our intangible assets were as follows:

As previously discussed in Note 1, during the three months ended September 30, 2024, the Company concluded that the carrying value of the primary asset group underlying the Company's core operations was impaired, resulting in the allocation of $31,198 of the $42,288 impairment charge to intangible assets. The impairment charge allocated to intangible assets reduced the carrying values of customer relationships, acquired technology, and trade names by $328, $23,205, and $7,665, respectively. All intangible asset impairment charges have been recorded within "Asset impairment charges" on our condensed consolidated statements of operations.

Amortization expense related to intangible assets was $7,929 and $12,068 for the three and nine months ended September 30, 2024, respectively, compared to $3,179 and $9,676 for the three and nine months ended September 30, 2023, respectively. Amortization expense for intangible assets is estimated to be $776 for the remainder of 2024, $3,097 in 2025, $2,493 in 2026, $1,973 in 2027 and $1,643 in 2028.

All goodwill reported as of September 30, 2024 and December 31, 2023 is allocated to our Healthcare Solutions reportable segment, which is also the reporting unit to which all goodwill is assigned for purposes of goodwill impairment testing. As a result of the significant decline in the trading price of our common stock and our market capitalization during the three months ended September 30, 2024, as well as reduced long-term cash flow forecasts prepared in connection with the Company's recently commenced long-range planning process, the Company concluded that the performance of an interim period goodwill impairment test was required as of September 30, 2024. This assessment required the Company to compare the carrying value of our Healthcare Solutions reporting unit as of September 30, 2024 to the reporting unit's fair value. We estimated the fair value of our Healthcare Solutions reporting unit based upon projections of future revenues, expenses, and cash flows discounted to their present value, as well as the application of a market approach. The use of forecasted cash flows for purposes of this interim period goodwill impairment analysis required the application of Level 3 fair value measurement inputs, as defined in Note 18.

Upon completion of the interim period goodwill impairment test performed as of September 30, 2024, the Company concluded that the carrying value of the Healthcare Solutions reporting unit, after adjustment for long-lived asset impairment charges described in Note 1, Note 5 and Note 8, exceeded its fair value by $101,445. This result of our interim period impairment test is primarily attributable to lower forecasted cash flows prepared for the reporting unit in connection with the Company's most recently commenced annual long-range planning process, as compared to the cash flow forecasts prepared for purposes of our last annual goodwill impairment test performed as of November 1, 2023. Consistent with the results of our interim period goodwill impairment test, for the three and nine months ended September 30, 2024, we have recognized an impairment charge of $101,445 related to the goodwill balance that was assigned to the Healthcare Solutions reporting unit. This goodwill impairment charge is reported within "Asset impairment charges" on our condensed consolidated statements of operations.

The following table reflects the changes in the carrying amount of goodwill assigned to our Healthcare Solutions reportable segment and reporting unit during the nine months ended September 30, 2024:

The Company holds various investments in equity and debt instruments that are reported in Other assets on our condensed consolidated balance sheets. The following table summarizes our investment balances as of September 30, 2024 and December 31, 2023:

We have concluded that two of our investments are VIEs. These investments are not consolidated in our financial statements because we concluded that the Company is not the primary beneficiary. As of September 30, 2024, our maximum exposure to losses associated with the VIEs is limited to the $13,302 carrying value of our investments in the VIEs, which is included in other assets on our condensed consolidated balance sheet. We have no other investments in unconsolidated entities that have been determined to be VIEs.

As of September 30, 2024 and December 31, 2023, short-term finance lease obligations of $1,492 and $1,770 are included in accrued and other liabilities on our condensed consolidated balance sheet, and long-term finance lease obligations of $11,019 and $11,458 are included in other long-term liabilities on our condensed consolidated balance sheet.

During the three months ended September 30, 2024, we entered into a lease for a new building in Frankfurt, Germany, which will contain approximately 57,000 rentable square feet, and will be constructed and funded by the lessor up to a certain amount. The lease term is for 5 years upon commencement, which will be when construction is substantially complete. Estimated base rent lease payments related to this new lease total $3,643 at September 30, 2024. These base rent lease payments are not included in the lease balances discussed above, as the lease has not yet commenced.

Accrued and other liabilities at September 30, 2024 and December 31, 2023 are summarized as follows:

Changes in our accrued product warranty liability balance during the nine months ended September 30, 2024 and September 30, 2023 are summarized below:

The Company previously issued 0% Convertible Senior Notes due November 15, 2026 (the "Notes"), pursuant to an Indenture dated November 16, 2021 (the “Indenture”) between the Company and The Bank of New York Mellon, N.A., as trustee (the "Trustee"). The related principal, unamortized deferred issuance costs and carrying values as of September 30, 2024 and December 31, 2023 were as follows:

The Notes are convertible at the option of the holders at any time prior to the close of business on the business day immediately preceding August 15, 2026, only under the following circumstances: (1) during any future calendar quarter (and only during such quarter), if the last reported sale price of the Company's common stock, par value $0.001 per share (the “Common Stock”), is equal to or greater than 130% of the conversion price for each of at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter on each applicable trading day; (2) during the five business day period after any five consecutive trading day period (the “measurement period”) in which the trading price (as defined in the Indenture) per $1 principal amount of Notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price per share of the Common Stock and the conversion rate on each such trading day; (3) if the Company calls such Notes for redemption at any time prior to the close of business on the second scheduled trading day immediately preceding the redemption date; and (4) upon the occurrence of specified corporate events, including a Fundamental Change (as defined in the Indenture), or distributions of the Common Stock. On or after August 15, 2026, until the close of business on the second scheduled trading day immediately preceding the maturity date, holders may convert all or any portion of their Notes at any time, at the option of the holder, regardless of the foregoing circumstances. Upon conversion, the Company will pay cash up to the aggregate principal amount of the Notes to be converted and pay or deliver, as the case may be, cash, shares of Common Stock, or a combination of cash and shares of Common Stock, at the Company’s election, in respect of the remainder, if any, of the Company’s conversion obligation in excess of the aggregate principal amount of the Notes being converted. Holders of the Notes have the right to require the Company to repurchase for cash all or a portion of their Notes at 100% of their principal amount, plus any accrued and unpaid special interest, upon the occurrence of a Fundamental Change. The Company is also required to increase the conversion rate for holders who convert their Notes in connection with a Fundamental Change or convert their Notes that are called for redemption, as the case may be, prior to the maturity date. As of September 30, 2024, none of the circumstances that would permit the holders of the Notes to exercise their conversion option had occurred.

The Notes are redeemable, in whole or in part, for cash at the Company’s option at any time, and from time to time, on or after November 20, 2024 and before the 41st scheduled trading day immediately preceding the maturity date, but only if the last reported sale price per share of the Common Stock has been at least 130% of the conversion price then in effect for a specified period of time.

In March 2024, the Company repurchased $110,492 of the Notes for $87,218, including transaction expenses. The repurchased Notes were retired upon receipt, and the retirement of the debt obligations was accounted for as an extinguishment of debt. The repurchase of the Notes at a discount resulted in the recognition of a gain of $21,518, after transaction expenses and the write-off of related debt issuance costs, which is reported in other income, net on the Company’s condensed consolidated statement of operations for the nine months ended September 30, 2024.

At September 30, 2024, the estimated fair value of the Notes is $178,611. This is based on the quoted market price of the Notes where the volume of activity is limited and not active and, thus, this is deemed a Level 2 fair value measurement.

For each of the periods presented in our condensed consolidated financial statements, the Company holds a 93.75% controlling interest in a consolidated foreign subsidiary that was acquired on April 1, 2022. The remaining 6.25% non-controlling interest in this foreign subsidiary is subject to redemption at a future date upon either (1) the exercise of a put option by the holder of the underlying shares or a call option by the Company, each of which is subject to the subsidiary achieving certain specified conditions, or (2) the passage of time subsequent to the date on which this subsidiary was acquired.

The put and call rights related to 50% of the common shares underlying this redeemable non-controlling interest ("RNCI") can be exercised upon the achievement of an initial revenue and gross profit target, while the put and call rights related to the remaining 50% of the common shares underlying the RNCI can be exercised upon the achievement of a second revenue and gross profit target. The exercise prices at which the shares underlying the RNCI can be put by their holders or called by the Company are determined based upon whether the consolidated foreign subsidiary achieves either or both of the predetermined revenue and gross profit targets. If either (1) one or both sets of revenue and gross margin targets are not achieved by the consolidated foreign subsidiary within specified time periods or (2) neither the put or call options are exercised within specified time periods despite the achievement of one or both sets of targets, the exercise price for the put and call options will be set at a floor strike price for periods thereafter. Up to 50% of the exercise price can be paid in shares of Common Stock at the election of 3D Systems.

Changes to the Company's RNCI balance during the nine months ended September 30, 2024 and 2023 are summarized below:

The Company is authorized to grant shares of restricted stock, restricted stock units (“RSUs”), stock appreciation rights, cash incentive awards and options to purchase shares of Common Stock to employees and non-employee directors pursuant to its 2015 Incentive Plan (the “2015 Plan”). The 2015 Plan also designates measures that may be used for performance awards and market-based awards. The vesting period for awards granted under the 2015 Plan is generally determined by the Board of Directors at the date of the grant. Generally, the awards vest one third each year, over 3 years. The total number of shares of Common Stock reserved and available for distribution under the 2015 Plan, including the total number of shares of Common Stock that can be issued pursuant to stock options, is 29,235 shares. This represents an increase of 4,000 shares during the three months ended September 30, 2024, pursuant to the approval of stockholders at the 2024 meeting of stockholders.

During the year ended December 31, 2023, we began granting phantom unit awards ("Phantom Units") under a new compensation plan designed for employees and non-employees performing services for Systemic Bio, a wholly-owned subsidiary of 3D Systems Corporation. All awards granted under the plan are subsidiary-level awards. During the three and nine months ended September 30, 2024, we granted 0 and 94 Phantom Units under the plan and recognized $(2,130) and $(32) of compensation expense related to all granted awards, respectively. During the three and nine months ended September 30, 2023, we recognized $183 of compensation expense related to all granted awards.

The Phantom Units granted under the plan include both a time-based vesting condition (generally 4 years, subject to acceleration in connection with specified liquidity events) and a market condition that is met if (1) the value of Systemic Bio exceeds a specified multiple of the capital invested in this subsidiary (the "hurdle") and (2) the business achieves a specified minimum internal rate of return. The market conditions will be assessed upon (A) a trigger event (e.g., change in control, IPO or plan expiration of December 31, 2030) and/or (B) an interim liquidity event (defined as January 1, 2028) that occurs prior to a trigger event. All awards under the plan will be liability-classified due to our intention to settle these awards with cash; although, we have discretion to partially or fully settle these awards in equity upon vesting. Liability classification of the awards requires them to be remeasured at their fair value at the end of each reporting period. Due to the presence of the market-condition and the fact that Systemic Bio does not have a readily available share price, the awards are valued using a Monte Carlo simulation with the assistance of a third-party valuation firm. This valuation requires significant judgment regarding the input of various assumptions and estimates, which include the projected cash flows of (including projected capital invested in) Systemic Bio, the probability and/or timing of a trigger event or a liquidity event, the expected stock price volatility for selected public companies with comparable characteristics to Systemic Bio, the discount for the lack of marketability of Systemic Bio as a privately-held company, and the risk-free interest rate.

The third-party valuation as of September 30, 2024 resulted in a decrease in the estimated fair value of the Phantom Units and a corresponding $2,569 impact to the expense recognized during the three and nine months ended September 30, 2024, primarily as a result of a change regarding the estimated probability and timing for the occurrence of a trigger event. This change in estimate reduced our basic and diluted loss per share by $0.02 for the three and nine months ended September 30, 2024.

On December 1, 2021, the Company acquired Volumetric Biotechnologies, Inc. (“Volumetric”). Pursuant to the terms of the related acquisition agreement, the Company was potentially subject to aggregate earnout payments of up to $355,000 (i.e., incremental to the previously paid acquisition purchase price). These earnout payments would be triggered by (1) the achievement of seven discrete non-financial milestones, each of which required attainment prior to either December 31, 2030 or December 31, 2035, and (2) the continued employment of certain Volumetric key employees. Each potential milestone-based payment was deemed to be compensation expense that the Company would recognize ratably from the point in time when a milestone was deemed probable of achievement through the estimated time of achievement. Each milestone payment, if earned, would be expected to be settled approximately half in cash and half in shares of Common Stock and, accordingly, expense recognized for the portion of this earnout that is expected to be settled with shares of Common Stock would be reflected in the disclosure of stock-based compensation included herein, if and when accrued.

In February 2024, the Company informed the former owners of Volumetric, to whom the acquisition-related earnout payments of up to $355,000 could have potentially become payable, that four of the seven milestone-related earnout payments, each of which was related to kidney and liver research, were terminated. These four milestone-based earnout payments were terminated in accordance with the terms of the Volumetric acquisition agreement, based upon a determination that achievement was no longer financially viable due to the loss of the funding required from the Company's key strategic partner for the related research and development efforts. Upon termination of the four milestone-based earnout payments, the Company's maximum liability for earnout payments attributable to the acquisition of Volumetric was reduced to $175,000, which would be payable if (1) each of the three remaining non-financial, science-based milestones was achieved within the timeframes set forth in the Volumetric acquisition agreement and (2) the certain key individuals from Volumetric continue to be employed.

On April 29, 2024, two key employees from Volumetric ("Volumetric Key Employees"), who were required to be employed at the time of achievement of each non-financial, science-based milestone outlined in the Volumetric acquisition agreement for each related acquisition earnout payment to become payable, resigned from their positions with the Company. As a result of the resignation of the Volumetric Key Employees, all parties to which the remaining three milestone-based earnout payments totaling $175,000 were potentially payable were notified that such amount was no longer eligible to be earned. While the Volumetric Key Employees claim that their terminations were for good reason, which would preserve the rights to milestone-based earnout payments under the Volumetric acquisition agreement, the Company vigorously denies this claim. Refer to Note 17 for further details regarding the resignation of the certain Volumetric Key Employees and all related actions occurring thereafter.

Prior to the quarter ended September 30, 2023, the Company recognized compensation expense based upon the assumed achievement of (1) one of the Volumetric milestones for which the potential earnout payment due to the sellers would be $65,000 and (2) one RegMed Award milestone for which the aggregate grant date fair value of the outstanding and unvested awards was $4,773. During the three months ended September 30, 2023, the Company decided to reduce its budgeted funding for the research and development related to the respective Volumetric earnout and RegMed Award milestones, which resulted in the Company concluding that it was no longer probable that these milestones would be achieved by the end of the term of the Volumetric earnout arrangement or prior to the expiration of the RegMed Awards. In concluding that the Volumetric and RegMed Award milestone would no longer be achieved, the Company reversed all of the previously accrued compensation expense, one half of which was expected to be settled with Common Stock shares, which had an income statement impact of $21,527 and $18,392 for the three and nine-months ended September 30, 2023, respectively. The reversals of the previously expensed Volumetric earnout and RegMed Award reduced our reported net loss per basic and diluted share of Common Stock by $0.17 and $0.14 for the three and nine months ended September 30, 2023, respectively. As a result of the budget reduction and the cancellation of all seven Volumetric earnout milestones described above, the Company recognized $0 of compensation expense related to the Volumetric earnout and RegMed Awards during the three and nine months ended September 30, 2024, and no liability related to the Volumetric earnout was recognized on our balance sheets as of September 30, 2024 and December 31, 2023.

During the three and nine months ended September 30, 2024, the Company granted 2,105 and 2,165 shares of restricted stock, respectively, which had a weighted-average grant date fair value of $1.70 and $1.82 per share, respectively. The restricted stock awards generally vest ratably over three years.

The following table shows the stock-based compensation expense recognized during the three and nine months ended September 30, 2024 and September 30, 2023.

Included in stock-based compensation expense recognized for the three and nine months ended September 30, 2024 are $844 and $3,118, respectively, and $(1,055) and $0, for the three and nine months ended September 30, 2023, respectively, of accrued expense pertaining to annual incentive compensation for which settlement would ultimately occur using shares of Common Stock. Also included in stock-based compensation expense for the three and nine months ended September 30, 2024 are $0 and $0, respectively, and $(10,140) and $(8,640) for the three and nine months ended September 30, 2023, respectively, which relate to the RegMed Awards and the portion of the recognized Volumetric earnout expense expected to be settled using the shares of Common Stock. Finally, stock-based compensation expense for the three and nine months ended September 30, 2024 includes $0 and $975, respectively, and $175 and $727 for the three and nine months ended September 30, 2023, respectively, of expense related to the dp polar earnout arrangement that is required to be settled in shares of Common Stock.

As of September 30, 2024, there was $20,752 of unrecognized stock-based compensation expense related to all unvested share-based payment awards that the Company expects to recognize over a weighted-average period of 1.6 years.

We maintain the exception under ASC 740-270-30-36(b), “Accounting for Income Taxes,” for jurisdictions that do not have reliable estimates of ordinary income. Accordingly, we have used a year-to-date methodology in determining the effective tax rate for the three and nine months ended September 30, 2024.

Basic net loss per share is calculated by dividing net loss attributable to 3D Systems’ Common Stock stockholders by the weighted average number of shares of Common Stock outstanding during the applicable period. Diluted loss per share incorporates the additional shares issuable upon the assumed exercise of stock options, the vesting of restricted stock and RSUs, and the assumed conversion of debt, except in such case when (1) the inclusion of such shares or potential shares would be anti-dilutive or (2) when the vesting of restricted stock or RSUs is contingent upon one or more performance conditions that have not been met as of the balance sheet date.

The following table presents the potentially dilutive shares that have been excluded from the computation of diluted net loss per share attributable to Common Stock stockholders because their effect is considered anti-dilutive for the three and nine months ended September 30, 2024 and 2023, respectively.

For the three and nine months ended September 30, 2024, the table above excludes an estimate of 826 shares for the payment of accrued incentive compensation that is expected to be settled in shares (Refer to Note 12). This share estimate is based on the liabilities recorded at September 30, 2024 for the fiscal year 2024 incentive compensation arrangement, divided by the Company's year-to-date average share price of $3.77 per share. As of September 30, 2024, there are no contingently issuable shares related to the Volumetric earnout arrangement discussed in Note 12.

For the three and nine months ended September 30, 2023, the table above excludes an estimate of 110 shares that are contingently issuable under the dp polar earnout arrangement, as discussed in Note 12. As of September 30, 2023, there are no contingently issuable shares related to the Volumetric earnout arrangement or the fiscal year 2023 annual incentive compensation plan.

The Company previously issued 0% Convertible Senior Notes due November 15, 2026, as discussed in Note 10. The Notes’ impact to diluted weighted average shares outstanding is required to be calculated using the if-converted method as prescribed in ASC 260. The Notes will increase the diluted weighted average shares outstanding when the average share price over a quarterly or annual reporting period is greater than $35.92 per share, the conversion price of the Notes. For the three and nine months ended September 30, 2024 and 2023, the Notes were anti-dilutive on a stand-alone basis because the average share price during these periods did not exceed the conversion price, and because we reported a net loss for each of the respective periods.

The changes in the balances of accumulated other comprehensive loss by component are as follows: