DESKTOP METAL, INC. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Form 10-Q)

This Quarterly Report on Form 10-Q contains forward-looking statements. All
statements contained in this Quarterly Report on Form 10-Q other than statements
of historical fact, including statements regarding our future operating results
and financial position, our business strategy and plans, market growth, trends,
events, and our objectives for future operations, are forward-looking
statements. The words "may," "will," "expect," "anticipate," "believe,"
"intend," "project," "could," "would," "estimate," "potential," "continue,"
"plan," "target," or the negative of these words or similar expressions are
intended to identify forward-looking statements.

The forward-looking statements included herein are based on current expectations
of management. Actual results may differ from those expressed in forward-looking
statements due to additional factors, including those set forth in Item 1A.
"Risk Factors" elsewhere in this Quarterly Report on Form 10-Q. Although we
believe that expectations reflected in the forward-looking statements are
reasonable, we cannot guarantee future results, performance, or achievements.
The events and circumstances reflected in our forward-looking statements may not
be achieved or occur, and actual results could differ materially from those
projected in the forward-looking statements. Moreover, we operate in an evolving
environment. New risk factors and uncertainties may emerge from time to time,
and it is not possible for management to predict all risk factors and
uncertainties. As a result of these factors, we cannot assure you that the
forward-looking statements in this Quarterly Report on Form 10-Q will prove to
be accurate. Except as required by applicable law, we do not plan to publicly
update or revise any forward-looking statements contained herein, whether as a
result of any new information, future events, changed circumstances, or
otherwise.

You should read this Quarterly Report on Form 10-Q in its entirety and be aware that our actual future results may differ materially from what we expect. We qualify all of our forward-looking statements with these cautionary statements.

Company overview

Desktop Metal is pioneering a new generation of additive manufacturing
technologies focused on Additive Manufacturing 2.0, the volume production of end
use parts. We offer a comprehensive portfolio of integrated additive
manufacturing solutions comprised of hardware, software, materials and services
with support for metals, polymers, elastomers, ceramics, sands, composites, wood
and biocompatible materials. Our solutions span use cases across the product
life cycle, from product development to mass production and aftermarket
operations, and they address an array of industries, including automotive,
healthcare and dental, consumer products, heavy industry, aerospace, machine
design and research and development.

Our growth strategy begins with a commitment to research and development. Since
our founding in 2015, we have invested significant resources in research and
development towards building an extensive portfolio of proprietary and
differentiated technologies with a focus on making additive manufacturing an
easy-to-use, economic and scalable solution. These technologies represent the
cornerstones of our future product introductions, are critical to enhancing our
existing offerings, and are supported by over 950 patents or pending patent
applications. Our additive manufacturing platforms, which leverage these
technologies for the production of tools and end-use parts, enable businesses to
address their specific goals through a range of solutions that span price
points, throughput levels and operating environments.

Our product platforms offer several key advantages over competitive additive
manufacturing systems including breakthrough print speeds, competitive part
costs, accessible workflows and software, turnkey solutions and support for an
extensive library of qualified materials, the sale of which represent a
recurring revenue stream from customers of our additive manufacturing solutions
in addition to system consumables and other services, such as installation,
training and technical support. As a result of these strengths, our solutions
are lowering the barriers to adopting additive manufacturing and unlocking new
applications where conventional manufacturing has customarily held cost and
volume advantages. Across printers, parts and materials, we intend to continue
investing to advance our current technology portfolio and develop new
technologies that allow us to serve a broader customer base and reach new
verticals, thereby expanding our addressable market and driving adoption of
Additive Manufacturing 2.0.

We leverage our core competencies in technology innovation and product
development by marketing and selling our Additive Manufacturing 2.0 solutions
through a leading global distribution network, managed and augmented by our own
internal sales and marketing teams. This distribution network, which covers over
65 countries around the world, is composed of sales and distribution
professionals with decades of experience in digital manufacturing technologies
and works alongside our direct sales force to market and sell products across a
range of industries and price points. Similarly, our internal manufacturing
and
supply chain teams to work

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collaboratively with our internal engineering department and third-party
contract manufacturers to scale up initial prototypes for commercialization and
volume commercial shipments. Together, our hybrid distribution and manufacturing
approaches allow us to produce, sell and service our products at-scale in global
markets and create substantial operating leverage as we execute our strategy.

Our proprietary technology solutions also serve as the foundation for product
parts offerings in which we which we directly manufacture parts for sale to our
customers with a focus on key applications and verticals in which additive
manufacturing can provide significant design, performance, cost and supply chain
advantages relative to conventional manufacturing. These offerings will enable
us to provide a more holistic suite of solutions for our customers and enable
the accelerated adoption of our Additive Manufacturing 2.0 solutions across
select high-value production applications, which we refer to as "killer apps",
including, but not limited to, medical and dental devices, fluid power systems,
and sustainable, end-use wood parts. We believe such offerings will not only
create a high-margin revenue stream, but will also facilitate lead generation
for our additive manufacturing systems at scale and enable high-performance and
specialized applications using new materials ahead of broader market
introduction.

Operating results

For the three and nine months ended September 30, 2022, we recognized revenues
of $47.1 million and $148.5 million, respectively, and incurred net losses of
$60.8 million and $428.0 million, respectively. As of September 30, 2022, we
used cash in operating activities of $150.8 million, and we ended the period
with $217.3 million of cash, cash equivalents, and short-term investments. As of
September 30, 2022, we had $67.0 million in cash and cash equivalents, $150.3
million in short-term liquid investments, and current liabilities of $98.3
million.

Recent Developments

ExOne Acquisition
On November 12, 2021, we acquired The ExOne Company, or ExOne, pursuant to an
Agreement and Plan of Merger dated August 11, 2021. The total purchase price was
$613.0 million consisting of cash consideration of $201.4 million and 48,218,063
shares of our Class A Common Stock with a fair value of $411.6 million as of the
close of business on the transaction date.

Convertible debt offering

On May 13, 2022, we issued $100.0 million principal amount of our 6.0%
Convertible Senior Notes due 2027 ("2027 Notes"). The 2027 Notes were issued
pursuant to, and are governed by, an indenture, dated as of May 13, 2022,
between us and U.S. Bank Trust Company, National Association, as trustee.
Pursuant to the purchase agreement between us and the initial purchasers of the
2027 Notes, we granted the initial purchasers an option to purchase up to an
additional $15.0 million principal amount of 2027 Notes, which was exercised on
May 19, 2022.

Restructuring

On June 10, 2022, the Board of Directors approved a strategic integration and
cost optimization initiative that includes a global workforce reduction of
approximately 12%, facilities consolidation, and other operational savings
measures (the "Initiative"). The purpose of the Initiative is to streamline our
operational structure, reducing our operating expenses and managing our cash
flows. We have commenced workforce reductions in the United States and are
reviewing workforce changes in other countries, the timing of which will vary
according to local regulatory requirements. We are also conducting a facility
rationalization assessment and assessing other operational savings measures.
Lease termination costs associated with the Initiative have yet to be
determined, pending completion of the facility rationalization assessment. Other
costs related to operational savings measures associated with the Initiative
have yet to be determined.

As a result of the Initiative, we anticipate $20.0 million of cost savings to be
realized in the second half of 2022 and at least $100.0 million of aggregate
cost savings to be realized from June 2022 through June 2024. We anticipate that
the Initiative will be substantially complete by the end of 2023.

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COVID-19

In March 2020, the World Health Organization declared the outbreak of COVID-19 a
pandemic. In response to the pandemic, governments around the world implemented
safety precautions which included quarantines, travel restrictions, business
closures, cancellations of public gatherings and other measures as they deemed
necessary. Many organizations and individuals, including our company and
employees, took additional steps to avoid or reduce infections, including
limiting travel and staying home from work. These measures disrupted normal
business operations and had significant negative impacts on businesses and
financial markets worldwide. In 2021, with the availability of vaccines against
COVID-19, restrictions on social, business travel and government activities and
functions in certain areas of the world began to be lifted, but infection rates
continue to fluctuate and new variants continue to appear, leading to continued
uncertainty about the pandemic. While we have largely returned to our normal
operations, we continue to monitor our operations and government recommendations
to maintain readiness to implement modifications if conditions warrant.

Early in the COVID-19 pandemic we experienced several adverse impacts, including
extended sales cycles to close new orders for our products, delays in shipping
and installing orders due to closed facilities and travel limitations and delays
in collecting accounts receivable. In particular, businesses across an array of
vertical markets temporarily reduced capital expenditure budgets globally as
they sought to preserve liquidity to ensure the longevity of their own
operations, which we believe temporarily impacted demand for purchases of our
additive manufacturing solutions. In addition, facility closures at our
third-party contract manufacturers and key suppliers caused delays and
disruptions in product manufacturing, which impacted our costs and our ability
to ship products purchased by our customers in a timely manner. While we have
experienced some improvement from the severity of these negative impacts, the
ongoing pandemic may continue to impact business operations worldwide, including
as a result of port congestion, supplier delays and labor shortages, which may
increase our costs and impact our path to profitability.

In the long-term, we believe that the COVID-19 pandemic and the subsequent
disruptions in global supply chains and logistics networks will encourage
organizations to reassess their supply chain structure and may accelerate their
adoption of solutions such as additive manufacturing, which could allow for
greater flexibility through decentralized production capabilities, on-demand
inventory resiliency, reductions in supply chain complexity and a reduced
reliance on overseas manufacturing.

Main factors affecting operating results

We believe that our performance and future success depend on many factors that
present significant opportunities for us, but also pose risks and challenges,
including those discussed below and in "Risk Factors" section of this Quarterly
Report on Form 10-Q.

Adoption of our additive manufacturing solutions

We believe the world is at an inflection point in the adoption of additive
manufacturing solutions and that we are well-positioned to take advantage of
this opportunity across an array of industries due to our proprietary
technologies and global distribution capabilities. We expect that our results of
operations, including revenue and gross margins, will fluctuate for the
foreseeable future as businesses continue to shift away from conventional
manufacturing processes towards additive manufacturing for end-use parts. Our
turnkey and volume production solutions are designed to empower businesses to
realize the full benefits of additive manufacturing at-scale, including
geometric and design flexibility, mass customization and supply chain
engineering, among others. The degree to which potential and current customers
recognize these benefits and invest in our solutions will affect our financial
results.

Pricing, product cost and margins

We offer customers a range of additive manufacturing solutions spanning multiple
price points, materials, throughput levels, operating environments and
technologies to enable them to find the solution that achieves their specific
goals. Pricing for these products may vary by region due to market-specific
supply and demand dynamics and product lifecycles, and sales of certain products
have, or are expected to have, higher gross margins than others. As a result,
our financial performance depends, in part, on the mix of products we sell
during a given period. In addition, we are subject to price competition, and our
ability to compete in key markets will depend on the success of our investments
in new technologies and cost improvements as well as our ability to efficiently
and reliability introduce cost-effective additive manufacturing solutions for
our customers.

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Continuous investment and innovation

We believe that we are a leader in mass production and turnkey additive
manufacturing solutions, offering breakthrough technologies that enable high
throughput and ease­of­use through our broad product portfolio. Our performance
is significantly dependent on the investment we make in our research and
development efforts and on our ability to be at the forefront of the additive
manufacturing industry. It is essential that we continually identify and respond
to rapidly evolving customer requirements, develop and introduce innovative new
products, enhance existing products and generate customer demand for our
solutions. We believe that investment in our additive manufacturing solutions
will contribute to long­term revenue growth, but it may adversely affect our
near­term profitability.

Commercial launch of products

We continually invest in the development of new products and enhancements to
existing products to meet constantly evolving customer demands, and during the
nine months ended September 30, 2022, we launched a number of new products.
Prior to commercialization of new products, we must complete final testing,
procurement and manufacturing ramp up of these products in-house or at our
third-party contract manufacturers, as applicable. Any delays in successful
completion of these steps may impact our ability to generate revenue from these
products.

Acquisitions and Transaction Costs

Our growth relies heavily on the successful integration of acquired companies,
including our ability to realize the anticipated business opportunities from
combining operations in an efficient and effective manner. We expect that the
results of our operations will fluctuate as we continue to integrate these
businesses, and the technologies, products, and services that they offer.
Additionally, our results of operations will be impacted by non-recurring
transaction-related costs, including integration costs, severance costs and
other costs associated with these acquisitions.

Macroeconomic conditions

The current macroeconomic environment is impacting our customers financially and
operationally. Customers and potential customers are facing significant
financial pressure as supply chain constraints and inflation drive up operating
costs and rising interest rates make access to credit more expensive. In recent
months, the consumer price index has increased substantially. In addition,
during inflationary periods, interest rates have historically increased. In
March 2022, the Federal Reserve began, and is expected to continue, to raise
interest rates in an effort to curb inflation. As a consequence of these
financial pressures, some customers may be lowering their capital investment
plans and tightening their operational budgets, which may result in extended
sales cycles, delayed purchasing decisions, and pricing pressure for our
solutions. Higher interest rates may also impact our ability to obtain debt
financing at attractive rates. While we reported revenue growth in the third
quarter of 2022, we experienced less revenue growth than we expected, due to the
negative impact of customers delaying purchase decisions amidst an uncertain
macroeconomic backdrop.

Results of Operations

Comparison of the three months ended September 30, 2022and September 30, 2021

Revenue

The following table shows the revenue from each of our revenue sources, as well as the percentage of total revenue and the change from the previous year.

                                          For the Three Months Ended 

September 30,

                                              2022                         2021                  Change in Revenues
(Dollars in thousands)               Revenue     % of Total       Revenue     % of Total             $             %
Products Revenue                     $ 42,937            91 %     $ 23,949            94 %     $      18,988        79 %
Services Revenue                        4,149             9 %        1,489             6 %             2,660       179 %
Total Revenue                        $ 47,086           100 %     $ 25,438           100 %     $      21,648        85 %


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Total revenue for the three months ended September 30, 2022 and 2021 was
$47.1 million and $25.4 million, respectively, an increase of $21.7 million, or
85%. The increase in total revenue was attributable to an increase in revenue
from both products and services.

We sold more products during the three months ended September 30, 2022, as
compared to the three months ended September 30, 2021, leading to an
approximately 79% increase in product revenue. This was primarily the result of
an increase in unit shipments across a more varied product mix during the third
quarter of 2022 and additional revenue in connection with acquisitions that
occurred during 2021.

Services revenue increased approximately 179% during the three months ended
September 30, 2022, as compared to the three months ended September 30, 2021,
primarily due to an increase in support and installation revenue from increased
shipments during the period and additional revenue in connection with
acquisitions.

The following table shows revenue by geographic region, as well as the percentage of total revenue and the change from the prior period.

                                           For the Three Months Ended 

September 30,

                                               2022                         2021                 Change in Revenues
(Dollars in thousands)                 Revenue     % of Total      Revenue     % of Total           $             %
Americas                              $  32,072            68 %    $ 18,561            73 %    $     13,511        73 %
EMEA (Europe, the Middle East and
Africa)                                  10,384            23 %       5,358            21 %           5,026        94 %
APAC (Asia­Pacific)                       4,630            10 %       1,519             6 %           3,111       205 %
Total Revenue                         $  47,086           101 %    $ 25,438           100 %    $     21,648        85 %


Total revenue increased during the three months ended September 30, 2022,
compared to the three months ended September 30, 2021, due to an increase in
unit shipments in all regions across a more varied product mix and additional
revenue in connection with acquisitions.

Cost of sales

Total cost of sales during the three months ended September 30, 2022 and 2021
was $47.4 million and $21.5 million, respectively, an increase of $25.9 million
or 120%. The increase in total cost of sales was driven primarily by an increase
in product cost of sales, which resulted from increased product sales.

Gross profit and gross margin

The following table shows gross margin (loss) by revenue stream, as well as the change in gross margin in dollars from the prior period.

                                            For the Three Months Ended September 30,         Change in Gross
                                                 2022                       2021                  Profit
(Dollars in thousands)                                     Gross Profit    
                    $           %
Products                                  $             (702)        $             3,499   $    (4,201)   (120) %
Services                                                  393                        456           (63)    (14) %
Total                                     $             (309)        $             3,955   $    (4,264)   (108) %

Total gross profit (loss) during the three months ended September 30, 2022 and
2021 was ($0.3) million and $4.0 million, respectively. The decrease in gross
profit of $4.3 million was driven by reduced absorption of fixed overhead, a
less favorable product mix sold and increases in transportation and freight
costs. Additionally, we incurred a one-time excess and obsolescence charge of
$3.1 million related to the Initiative described above.

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The following table shows gross margin by revenue stream, as well as the change in gross margin from the prior period.

              For the Three Months Ended September 30,         Change in Gross Margin
                   2022                      2021             Percentage

                            Gross Margin                         Points           %
Products                    (2) %                      15 %          (0.17)       (113) %
Services                      9 %                      31 %          (0.22)        (71) %
Total                       (1) %                      16 %          (0.17)       (106) %


Total gross margin for the three months ended September 30, 2022 and 2021 was
(1)% and 16%, respectively. The decrease in total gross margin was primarily due
to one-time excess and obsolescence charges in connection with the Initiative
described above, an increase in amortization expense within cost of sales from
acquisitions, and a less favorable product mix.

Research and development

Research and development expenses during the three months ended
September 30, 2022 and 2021 were $22.4 million and $19.3 million, respectively,
an increase of $3.1 million, or 16%. The increase in research and development
expenses was largely due to 2021 acquisitions which added $2.8 million in
research and development expenses as well as a $0.9 million increase in payroll
costs associated with additional hiring at the end of 2021. The increase is
partially offset by a decrease of $0.6 million in stock compensation costs
associated with the Initiative described above.

Sales and Marketing

Sales and marketing expenses during the three months ended September 30, 2022
and 2021 were $16.2 million and $13.2 million, respectively, an increase of $3.0
million, or 23%. The increase in sales and marketing expenses was primarily due
to increased expense related to acquired entities of $2.4 million. In addition,
compensation costs increased $2.0 million related to sales personnel hiring to
support the launch and commercialization of new products. We incurred $0.9
million of restructuring charges included in sales and marketing expenses in
connection with the Initiative described above. Additionally, there was growth
of $0.6 million in marketing program spend driven primarily by the
commercialization of new products and related marketing efforts. These increases
were partially offset by a reduction in partner commission expenses of $1.1
million.

General and administrative

General and administrative expenses during the three months ended
September 30, 2022 and 2021 were $18.9 million and $19.8 million, respectively,
an decrease of $0.9 million, or 5%. The decrease in general and administrative
expenses was primarily due to a decrease of $6.7 million in accounting, auditing
and legal fees due to a reduction in merger and acquisition activity. This
decrease was partially offset by an increase in expense related to acquired
entities of $2.7 million. Additionally, stock-based compensation costs increased
by $0.8 million, attributable to the amendment to the 2022 bonus program. We
incurred $0.3 million in restructuring charges included in general and
administrative expenses in connection with the Initiative described above.

Currently researching and development assets acquired

There were no in-process research and development assets acquired during the
three months ended September 30, 2022. We recognized $15.2 million of in-process
research and development assets acquired during the three months ended
September 30, 2021, attributable to the Meta Additive acquisition in 2021, in
which we paid $15.2 million in cash, inclusive of transaction costs. As the
acquired in-process research and development assets were deemed to have no
current or alternative future use, the entire amount was recognized as expense
in the consolidated statement of operations for the three months ended
September 30, 2021.

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Goodwill Impairment

No goodwill impairment charge was recorded during the three months ended
September 30, 2022 and 2021.

Change in fair value of warrant liability

There was no change in fair value of warrant liability during the three months
ended September 30, 2022, and 2021. As of March 2, 2021, all Private Placement
Warrants were exercised and there was no outstanding warrant liability.

Interest charges

Interest expense during the three months ended September 30, 2022 and 2021 was
$0.7 million and $0.0 million, respectively, an increase of $0.7 million.
Interest expense increased due to the increase in accrued interest on the 2027
Notes.

Interest and other (expense) income, net

Interest and other (expense) income, net during the three months ended
September 30, 2022 and 2021 was ($1.7) million and ($3.8) million, respectively.
The decrease during the three months ended September 30, 2022, is attributable
to a loss on the investment in equity securities of a publicly-traded company.

Income taxes

We recorded an income tax expense of $0.6 million during the three months ended
September 30, 2022, compared to an income tax benefit of $0.5 million during for
the three months ended September 30, 2021. The increase was primarily due to the
valuation allowance provided against certain German deferred tax assets during
the three months ended September 30, 2022.

We have provided a valuation allowance for all of our deferred tax assets as a
result of our historical net losses in the jurisdictions in which we operate,
except for Japan and Belgium. We continue to assess our future taxable income by
jurisdiction based on our recent historical operating results, the expected
timing of reversal of temporary differences, various tax planning strategies
that we may be able to enact in future periods, the impact of potential
operating changes on our business and our forecast results from operations in
future periods based on available information at the end of each reporting
period. To the extent that we are able to reach the conclusion that deferred tax
assets are realizable based on any combination of the above factors in a single,
or multiple, taxing jurisdictions, a reversal of the related portion of our
existing valuation allowances may occur.

Comparison of the nine months ended September 30, 2022 and 2021

The following table shows the revenue from each of our revenue sources, as well as the percentage of total revenue and the change from the previous year.

                                         For the Nine Months Ended 

September 30,

                                              2022                       2021               Change in Revenues
(Dollars in thousands)                Revenue     % of Total    Revenue     % of Total         $             %
Product Revenue                      $ 135,085            91 %  $ 51,820            93 %  $     83,265       161 %
Service Revenue                         13,381             9 %     3,908             7 %         9,473       242 %
Total Revenue                        $ 148,466           100 %  $ 55,728           100 %  $     92,738       166 %


Total revenue for the nine months ended September 30, 2022 and 2021 was $148.5
million and $55.7 million, respectively, an increase of $92.8 million, or 167%.
The increase in total revenue was attributable to an increase in revenue from
both products and services.

We sold more products during the nine months ended September 30, 2022, as
compared to the nine months ended September 30, 2021, leading to an
approximately 161% increase in product revenue. This was primarily the result of
an increase in unit shipments across a more varied product mix during the first
two quarters of 2022 and additional revenue in connection with acquisitions
that
occurred during 2021.

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Services revenue increased approximately 242% during the nine months ended
September 30, 2022, as compared to the nine months ended September 30, 2021,
primarily due to an increase in support and installation revenue from increased
shipments during the period and additional revenue in connection with
acquisitions.

The following table shows revenue by geographic region, as well as the percentage of total revenue and the change from the prior period.

                                           For the Nine Months Ended 

September 30,

                                                2022                       2021               Change in Revenues
(Dollars in thousands)                  Revenue     % of Total    Revenue  
  % of Total         $             %
Americas                               $ 102,959            69 %  $ 36,522            66 %  $     66,437       182 %
EMEA                                      33,444            23 %    12,249            22 %        21,195       173 %
APAC                                      12,063             8 %     6,957            12 %         5,106        73 %
Total Revenue                          $ 148,466           100 %  $ 55,728           100 %  $     92,738       166 %


Total revenue increased during the nine months ended September 30, 2022,
compared to the nine months ended September 30, 2021, due to an increase in unit
shipments in all regions across a more varied product mix and additional revenue
in connection with acquisitions.

Cost of sales

Total cost of sales during the nine months ended September 30, 2022 and 2021 was
$141.7 million and $50.0 million, respectively, an increase of $91.7 million or
183%. The increase in total cost of sales was driven primarily by an increase in
product cost of sales, which resulted from greater product sales. Additionally,
cost of sales increased $8.4 million due to amortization from intangible assets
acquired through acquisitions that are included in cost of sales.

Gross profit and gross margin

The following table shows gross margin by revenue stream, as well as the change in gross margin (loss) in dollars from the prior period.

                                           For the Nine Months Ended September 30,           Change in Gross
                                               2022                       2021                    Profit
(Dollars in thousands)                               Gross Profit (Loss)                      $            %
Products                                $             4,631        $             5,393    $    (762)       (14) %
Services                                              2,129                        347         1,782      (514) %
Total                                   $             6,760        $             5,740    $    1,020         18 %

Total gross profit during the nine months ended September 30, 2022 and 2021 was
$6.8 million and $5.7 million, respectively. The increase in gross profit of
$1.1 million was driven by revenue growth and a more favorable product mix sold,
partially offset by one-time excess and obsolescence charges in connection with
the Initiative described above.

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The following table shows gross margin by revenue stream, as well as the change in gross margin from the prior period.

             For the Nine Months Ended September 30,        Change in Gross Margin
                  2022                      2021             Percentage

                           Gross Margin                        Points           %
Products                   3 %                      10 %            (0.07)     (70) %
Services                  16 %                       9 %              0.07     (78) %
Total                      5 %                      10 %            (0.05)     (50) %


Total gross margin for the nine months ended September 30, 2022 and 2021 was 5%
and 10%, respectively. The decrease in total gross margin was primarily due to
one-time excess and obsolescence charges in connection with the Initiative
described above, an increase in amortization expense within cost of sales from
acquisitions, and a less favorable product mix.

Research and development

Research and development expenses during the nine months ended
September 30, 2022 and 2021 were $78.4 million and $45.8 million, respectively,
an increase of $32.6 million, or 71%. The increase in research and development
expenses was due primarily to an increase in stock compensation expense of $14.3
million, attributable to the amendment to the 2022 bonus program, the
acceleration of RSUs for certain key employees, in connection with the
Initiative described above, and grants to new hires. The increase is also due in
part to 2021 acquisitions, which added $15.0 million of research and development
expenses. Additionally, we incurred $2.8 million of additional personnel costs
related to hiring to support research operations and $0.6 million of
restructuring charges included in research and development expenses in
connection with the Initiative described above.

Sales and Marketing

Sales and marketing expenses during the nine months ended September 30, 2022 and
2021 were $56.3 million and $29.6 million, respectively, an increase of $26.7
million, or 90%. The increase in sales and marketing expenses was primarily due
to increased expense related to acquired entities of $8.7 million. In addition,
compensation costs increased $5.2 million related to sales personnel hiring to
support the launch and commercialization of new products. Additionally, there
was growth of $2.6 million in marketing program spend driven primarily by the
commercialization of new products and related marketing efforts. We incurred
$0.5 million of restructuring charges included in sales and marketing expenses
in connection with the Initiative described above.

General and administrative

General and administrative expenses during the nine months ended
September 30, 2022 and 2021 were $62.5 million and $46.8 million, respectively,
an increase of $15.7 million, or 34%. The increase in general and administrative
expenses was primarily due to increased expense related to acquired entities of
$15.0 million. Additionally, stock-based compensation costs increased by $6.3
million, attributable to the amendment to the 2022 bonus program and grants to
new hires, and personnel costs increased $2.8 million due to new hires. We
incurred $0.4 million in restructuring charges included in general and
administrative expenses in connection with the Initiative described above. The
increase in general and administrative expenses was partially offset by a
decrease of $12.4 million in accounting, auditing and legal fees due to a
reduction in merger and acquisition activity.

Currently researching and development assets acquired

There were no in-process research and development assets acquired during the
nine months ended September 30, 2022. We recognized $25.4 million of in-process
research and development assets acquired during the nine months ended
September 30, 2021, attributable to the Beacon Bio acquisition, in which we paid
$10.2 million in cash and share consideration and the Meta Additive acquisition,
in which we paid $15.2 million in cash consideration. As the acquired in-process
research and development assets were deemed to have no current or alternative
future use, the entire amount was recognized as expense in the consolidated
statement of operations for the nine months ended September 30, 2021.

Goodwill Impairment

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Goodwill impairment charge of $229.5 million during the nine months ended
September 30, 2022, represents an impairment charge to write down the carrying
amount of the goodwill. There was no goodwill impairment charge recorded during
the nine months ended September 30, 2021.

Change in fair value of warrant liability

There was no change in fair value of warrant liability during the nine months
ended September 30, 2022, and a change in fair value of warrant liability of
($56.6) million during the nine months ended September 30, 2021. The change in
fair value is the result of the remeasurement of the Private Placement Warrant
liability prior to the cashless exercise of the Private Placement Warrants. The
warrant liability increased $56.6 million as a result of the remeasurement,
which resulted in the $56.6 million loss. As of March 2, 2021, all Private
Placement Warrants were exercised and there was no outstanding warrant
liability.

Interest charges

Interest expense during the nine months ended September 30, 2022 and 2021 was
$1.3 million and $0.1 million, respectively, an increase of $1.2 million.
Interest expense increased due to the increase in accrued interest on the 2027
Notes.

Interest and other income, net

Interest and other (expense) income, net during the nine months ended
September 30, 2022 and 2021 and was ($8.4) million and ($3.2) million,
respectively, a decrease of $5.2 million. The decrease is primarily due to a
loss on the investment in equity securities of a publicly-traded company as well
as an unrealized loss on other investments.

Income taxes

We recorded an income tax benefit of $1.6 million during the nine months ended
September 30, 2022, compared to an income tax benefit of $32.8 million during
the nine months ended September 30, 2021. The decrease was primarily due to the
partial release of the valuation allowance related to the deferred tax liability
acquired in the EnvisionTEC and Adaptive 3D acquisitions during the nine months
ended September 30, 2021.

We have provided a valuation allowance for all of our deferred tax assets as a
result of our historical net losses in the jurisdictions in which we operate,
except for Japan and Belgium. We continue to assess our future taxable income by
jurisdiction based on our recent historical operating results, the expected
timing of reversal of temporary differences, various tax planning strategies
that we may be able to enact in future periods, the impact of potential
operating changes on our business and our forecast results from operations in
future periods based on available information at the end of each reporting
period. To the extent that we are able to reach the conclusion that deferred tax
assets are realizable based on any combination of the above factors in a single,
or multiple, taxing jurisdictions, a reversal of the related portion of our
existing valuation allowances may occur.

Non-GAAP financial information

In addition to our results determined in accordance with GAAP, we believe the
below non-GAAP financial measures are useful in evaluating our operational
performance. We use this non-GAAP financial information to evaluate our ongoing
operations and for internal planning and forecasting purposes. We believe that
this non-GAAP financial information, when taken collectively, may be helpful to
investors in assessing our operating performance.

The non-GAAP financial information excludes, as applicable, stock-based
compensation expense, amortization of acquired intangible assets, restructuring
expenses, acquisition-related and other transactional charges, inventory
step-up, in-process research and development assets acquired, goodwill
impairment, change in fair value of investments and change in fair value of
warrant liability. These items are normally included in the comparable measures
calculated and presented in accordance with GAAP. Our management excludes these
items when evaluating our ongoing performance and/or evaluating earnings
potential, and therefore excludes them when presenting non-GAAP financial
measures. Management uses non-GAAP financial measures to supplement our GAAP
results.

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Stock-based compensation is a non-cash expense relating to stock-based awards
issued to executive officers, employees, and outside directors, consisting of
options and restricted stock units. We exclude this expense because it is a
non-cash expense and we assess our internal operations excluding this expense
and believe it facilitates comparisons to the performance of other companies in
our industry.

Amortization of acquired intangible assets is a non-cash charge that is affected by the timing and magnitude of our acquisitions. We believe that valuing our operations excluding these costs is relevant for understanding internal operations and for comparisons with the performance of other companies in our industry.

Restructuring expenses are costs related to strategic integration and cost
optimization initiatives which include global workforce reductions, facilities
consolidation, and other operational savings measures. We believe the assessment
of our operations excluding these costs is relevant to an understanding of
internal operations and to comparisons with the performance of other companies
in our industry.

Acquisition-related and other transactional charges are direct costs related to
potential and completed acquisitions, including transaction fees, due diligence
costs, severance, professional fees, and integration activities. Other
transactional charges include third-party costs related to structuring unusual
transactions. The occurrence and amount of these costs will vary depending on
the timing and size of acquisitions. We believe excluding acquisition-related
costs facilitates the comparison of our financial results to our historical
operating results and to other companies in our industry.

In-process research and development assets acquired are direct costs related to
assets acquisitions where the intangible assets acquired were determined to have
no alternative future use. This is a non-recurring expense and we believe
excluding acquired in-process research and development facilitates the
comparison of our financial results to our historical operating results and to
other companies in our industry.

Goodwill impairment is a non-cash charge to write down the carrying amount of
goodwill following a quantitative impairment assessment where it was determined
that the estimated fair value of the reporting unit was less than its carrying
amount. We believe the assessment of our operations excluding this charge is
relevant to an understanding of internal operations and to comparisons with the
performance of other companies in our industry.

Change in fair value of investments is a non-cash gain or loss impacted by the
change in fair value of convertible debt instruments and the equity investment.
We believe the assessment of our operations excluding this activity is relevant
to an understanding of internal operations and to comparisons with the
performance of other companies in our industry.

Change in fair value of warrant liability is a non-cash gain or loss impacted by
the fair value of the Private Placement Warrants. We believe the assessment of
our operations excluding this activity is relevant to an understanding of
internal operations and to comparisons with the performance of other companies
in our industry.

We use the below non-GAAP financial measures, and we believe that they assist
our investors, to make period-to-period comparisons of our operational
performance because they provide a view of our operating results without items
that are not, in our view, indicative of our core operating results. We believe
that these non-GAAP financial measures help illustrate underlying trends in our
business, and we use the measures to establish budgets and operational goals for
managing our business and evaluating our performance. We believe that providing
non-GAAP financial measures also affords investors a view of our operating
results that may be more easily compared to the results of other companies in
our industry that use similar financial measures to supplement their GAAP
results.

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The items excluded from the non-GAAP financial measures often have a material
impact on our financial results and such items often recur. Accordingly, the
non-GAAP financial measures included in this Quarterly Report on Form 10-Q
should be considered in addition to, and not as a substitute for, the comparable
measures prepared in accordance with GAAP. The following tables reconcile each
of these non-GAAP financial measures to its most closely comparable GAAP measure
in our financial statements for the three and nine months ended
September 30, 2022 and 2021:

                                                For the Three Months Ended  

For the nine months ended

                                                      September 30,                   September 30,
(Dollars in thousands)                             2022             2021            2022            2021
GAAP gross margin                             $        (309)     $     3,955   $        6,760    $     5,740
Stock-based compensation included in cost
of sales(1)                                              734             341            1,892            586
Amortization of acquired intangible assets
included in cost of sales                              5,877           2,515           17,817          5,841
Restructuring expense in cost of sales                 3,085               -            3,126              -
Acquisition-related and other transactional
charges included in cost of sales                          -               -            1,148              -
Inventory step-up adjustment in cost of
sales                                                      -               -            1,496              -
Non-GAAP gross margin                         $        9,387     $     6,811   $       32,239    $    12,167

GAAP operating loss                           $     (57,819)     $  (63,594)   $    (419,868)    $ (142,049)
Stock-based compensation(2),(3)                       12,040           9,951           41,170         16,167
Amortization of acquired intangible assets             9,069           4,604           28,522         11,172
Restructuring expense                                  3,085               -            5,086              -
Inventory step-up adjustment in cost of
sales                                                      -               -            1,496              -
Acquisition-related and other transactional
charges                                                1,476           5,675            6,633         13,786
In-process research and development assets
acquired                                                   -          15,181                -         25,581
Goodwill impairment                                        -               -          229,500              -
Non-GAAP operating loss                       $     (32,149)     $  (28,183)   $    (107,461)    $  (75,343)

GAAP net loss                                 $     (60,774)     $  (66,879)   $    (427,990)    $ (169,167)
Stock-based compensation(2),(3)                       12,040           9,951           41,170         16,167
Amortization of acquired intangible assets             9,069           4,604           28,522         11,172
Restructuring expense                                  3,085               -            5,469              -
Inventory step-up adjustment in cost of
sales                                                      -               -            1,496              -
Acquisition-related and other transactional
charges                                                1,476           5,675            6,633         13,786
In-process research and development assets
acquired                                                   -          15,181                -         25,581
Goodwill impairment                                        -               -          229,500              -
Change in fair value of investments                    2,052           4,204            8,493          4,186
Change in fair value of warrant liability                  -               -                -         56,576
Non-GAAP net loss                             $     (33,052)     $  

(27,264) ($106,707) ($41,699)

(1) Includes $0.1 million and $0.2 million stock-based compensation expense attributed to liabilities for the three and nine months ended September 30, 2022respectively.

(2) Includes $7.3 million stock-based compensation expense associated with the initiative for the nine months ended September 30, 2022.

(3) Includes $1.2 million and $3.4 million stock-based compensation expense attributed to liabilities for the three and nine months ended September 30, 2022respectively.

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                                                  For the Three Months

Completed for the completed nine months

                                                        September 30,                   September 30,
(Dollars in thousands)                               2022             2021            2022             2021
GAAP operating expenses                         $       57,510     $    67,549   $      426,628     $  147,789
Stock-based compensation included in
operating expenses(1),(2)                             (11,306)         (9,610)         (39,278)       (15,581)
Amortization of acquired intangible assets
included in operating expenses                         (3,192)         (2,089)         (10,705)        (5,330)
Restructuring expense included in operating
expenses                                                     -               -          (1,960)              -
Acquisition-related and other transactional
charges included in operating expenses                 (1,476)         (5,675)          (5,485)       (13,786)
In-process research and development assets
acquired                                                     -        (15,181)                -       (25,581)
Goodwill impairment                                          -               -        (229,500)              -
Non-GAAP operating expenses                     $       41,536     $    34,994   $      139,700     $   87,511

(1) Includes $7.3 million stock-based compensation expense associated with the initiative for the nine months ended September 30, 2022.

(2) Includes $1.1 million and $3.2 million stock-based compensation expense attributed to liabilities for the three and nine months ended September 30, 2022respectively.

We define “EBITDA” as net loss plus net interest income, provision for income taxes, depreciation and amortization expense.

We define “Adjusted EBITDA” as EBITDA adjusted for change in fair value of warrant liability, change in fair value of investments, adjustment for increase in inventory, stock-based compensation expense, restructuring expense, goodwill impairment and transaction costs associated with acquisitions.

We believe that the use of EBITDA and Adjusted EBITDA provides an additional
tool for investors to use in evaluating ongoing operating results and trends
because it eliminates the effect of financing, capital expenditures, and
non-cash expenses such as stock-based compensation and warrants, and provides
investors with a means to compare our financial measures with those of
comparable companies, which may present similar non-GAAP financial measures to
investors. However, you should be aware when evaluating EBITDA and Adjusted
EBITDA that we may incur future expenses similar to those excluded when
calculating these measures. In addition, our presentation of these measures
should not be construed as an inference that our future results will be
unaffected by unusual or non-recurring items. Our computation of these measures,
especially Adjusted EBITDA, may not be comparable to other similarly titled
measures computed by other companies because not all companies calculate these
measures in the same fashion.

Because of these limitations, EBITDA and Adjusted EBITDA should not be
considered in isolation or as a substitute for performance measures calculated
in accordance with GAAP. We compensate for these limitations by relying
primarily on our GAAP results and using EBITDA and Adjusted EBITDA on a
supplemental basis. You should review the reconciliation of net loss to EBITDA
and Adjusted EBITDA below and not rely on any single financial measure to
evaluate our business.

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The following table reconciles the net loss to EBITDA and Adjusted EBITDA during the three and nine months ended September 30, 2022 and 2021:

                                                For the Three Months Ended  

For the nine months ended

                                                      September 30,                    September 30,
(Dollars in thousands)                             2022             2021             2022            2021
Net loss attributable to common
stockholders                                  $     (60,774)     $  (66,879)    $    (427,990)    $ (169,167)
Interest (income) expense, net                           680           (104)             1,281          (286)
Income tax expense (benefit)                             598           (523)           (1,602)       (32,761)
Depreciation and amortization                         12,692           6,488            38,294         15,576
In-process research and development assets
acquired                                                   -          15,181                 -         25,581
EBITDA                                              (46,804)        (45,837)         (390,017)      (161,057)
Change in fair value of warrant liability                  -               -                 -         56,576
Change in fair value of investments                    2,052           4,204             8,493          4,186
Inventory step-up adjustment                               -               -             1,496              -
Stock-based compensation expense(1),(2)               12,040           9,951            41,170         16,167
Restructuring expense                                  3,085               -             5,469              -
Goodwill impairment                                        -               -           229,500              -
Acquisition-related and other transactional
charges                                                1,476           5,675             6,633         13,786
Adjusted EBITDA                               $     (28,151)     $  (26,007)    $     (97,256)    $  (70,342)

(1) Includes $7.3 million stock-based compensation expense associated with the initiative for the nine months ended September 30, 2022.

(2) Includes $1.2 million and $3.4 million stock-based compensation awarded to liabilities for the three and nine months ended September 30, 2022respectively.

Cash and capital resources

We have incurred a net loss in each of our annual periods since our inception,
and we have an accumulated deficit of $996.6 million as of September 30, 2022.
We incurred net losses of $428.0 million and $169.2 million during the nine
months ended September 30, 2022 and 2021, respectively. We expect to continue to
incur additional losses and negative cash flows from operations in the near
term. As of September 30, 2022, we had $217.3 million in cash, cash equivalents,
and short-term investments.

Since inception, we have received cumulative net proceeds from the Business
Combination, the exercise of warrants, and the sale of our preferred and common
stock of $973.4 million to fund our operations, and in May 2022 we received
aggregate net proceeds of $111.4 million from the sale of 6.0% Convertible
Senior Notes due 2027 as described below. As of September 30, 2022, our
principal sources of liquidity were our cash, cash equivalents, and short-term
investments of $217.3 million which are principally invested in money market
funds and fixed income instruments.

In connection with the acquisition of Dental Arts Labs, we acquired a
thirteen-month equipment financing agreement, or the Financing Agreement, in the
amount of $0.5 million. The Financing Agreement provides for an advance payment
of $0.5 million to secure equipment. Payments are made monthly under the
Financing Agreement. As of September 30, 2022, we have made payments of $0.3
million on the Financing Agreement.

In connection with the acquisition of A.I.D.R.O., we acquired three loans, the
Bank Loans, totaling $1.1 million in aggregate. The Bank Loans have term of 4.5
years and mature from September 2024 through September 2025, with interest rates
ranging from 1.70% to 2.10%. Payments of principal and interest are made
quarterly. As of September 30, 2022, we had paid $0.5 million and $0.6 million
remains outstanding.

In May 2022, we issued $115.0 million principal amount of our 6.0% Convertible
Senior Notes due 2027 ("2027 Notes"). The 2027 Notes were issued pursuant to,
and are governed by, an indenture, dated as of May 13, 2022, between us and U.S.
Bank Trust Company, National Association, as trustee. Pursuant to the purchase
agreement between us and the initial purchasers of the Notes, we granted the
initial purchasers an option to purchase up to an additional $15.0 million
principal amount of 2027 Notes, which was exercised on May 19, 2022. We received
aggregate net proceeds of $111.4 million from the sale of the 2027 Notes.

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Our material cash requirements have consisted of operating activities, research
and development costs, purchase price for acquisitions, transaction costs and
capital expenditures. We expect our cash expenditures to increase in connection
with our ongoing activities, particularly as we continue to develop and launch
new products. As of September 30, 2022, we had inventory purchase commitments of
$64.3 million, with the majority payable within 12 months. In addition, as of
September 30, 2022, we had lease payment obligations of $24.2 million, with $5.4
million payable within 12 months.

Capital expenditures for the nine months ended September 30, 2022, totaled $8.2
million and consisted primarily of lab equipment and leasehold improvements. As
of September 30, 2022, we had capital expenditure commitments of $0.3 million,
all payable within 12 months. As of September 30, 2022, we had $67.0 million in
cash and cash equivalents, and $150.3 million in short-term liquid investments.
This liquid asset balance significantly exceeds our current liabilities of
$98.3 million as of the same date. Our future cash requirements will depend on
many factors including our revenue, research and development efforts,
investments in, or acquisitions of, complementary or enhancing technologies or
businesses, the impacts of the COVID-19 pandemic, the timing and extent of
additional capital expenditures to invest in existing and new facilities, the
expansion of sales and marketing and the introduction of new products.

We expect to continue to incur net losses and negative cash flows from
operations, particularly as we continue to invest in commercialization and new
product development. Additionally, we may engage in future acquisitions which
may require additional capital, and we may also dispose of assets or certain of
our businesses. We believe that our existing capital resources will be
sufficient to support our operating plan and cash commitments for at least the
next 12 months. This belief is based on assumptions that may change as a result
of many factors currently unknown to us; however, we expect that we may need to
further increase our capital resources by issuing additional shares of our
capital stock or offering debt or other equity securities, including senior or
subordinated notes, debt securities convertible into equity, or shares of
preferred stock. There is no assurance that sources of financing will be
available on a timely basis, or on satisfactory terms, or at all. If we are
unable to raise additional funds or reduce costs when needed, we may be required
to delay, reduce, or terminate our product development and commercialization
efforts, or forego attractive acquisition opportunities.

We have, and intend to continue to, enact cost savings measures during 2022 to
preserve capital. In June 2022, we announced a strategic integration and cost
optimization initiative that includes a global workforce reduction of
approximately 12%, facilities consolidation, and other operational savings
measures. We have commenced workforce reductions in the United States and are
reviewing workforce changes in other countries, the timing of which will vary
according to local regulatory requirements. In October 2022, we further reduced
our United States workforce. We are also conducting a facility rationalization
assessment and assessing other operational savings measures. We are currently
evaluating other potential specific initiatives we may undertake to reduce our
operating expenses and manage our cash flows. We expect that these initiatives
could include: disposing of certain of our assets, rationalizing our product
portfolio, workforce adjustments based on changes to the business, manufacturing
consolidation, improving our supply chain and logistics, improving our inventory
management and consolidating certain of our facilities. We expect to incur costs
in the near term in connection with these initiatives, including severance
costs, lease termination costs and other costs to invest in operational
improvements. These initiatives may not be successful, and they may not generate
the cost savings we expect. Certain future events, such as a global recession, a
material supply chain disruption or other events outside our control, may occur
and could negatively impact our operating results and cash position and may
require us to use our existing capital resources more quickly than we currently
anticipate. These events may cause us to undertake additional cost savings
measures or seek additional sources of financing.

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Cash Flows

Since inception, we have primarily used proceeds from the Business Combination,
issuances of preferred stock and debt instruments to fund our operations and
complete acquisitions. The following table sets forth a summary of cash flows
for the nine months ended September 30, 2022, and 2021:

                                                              For the Nine Months Ended
                                                                   September 30,
(Dollars in thousands)                                           2022            2021
Net cash used in operating activities                       $    (150,789)    $ (110,059)
Net cash provided by (used in) investing activities                 42,427 

(407,122)

Net cash provided by financing activities                          113,766 

165,452

Effect of exchange rate changes on cash, cash
equivalents and restricted cash                                    (1,491) 

(56)

Net change in cash, cash equivalents, and restricted
cash                                                        $        3,913    $ (351,785)


Operating Activities

Net cash used in operating activities was $150.8 million for the nine months
ended September 30, 2022, primarily consisting of $427.2 million of net losses,
adjusted for non-cash items, which primarily included goodwill impairment of
$229.5 million, depreciation and amortization expense of $38.3 million and
stock-based compensation expense of $37.8 million, as well as a $33.7 million
increase in cash consumed by working capital. This increase in cash consumed by
working capital was primarily driven by an increase in inventory to support new
product launches and commercialization of existing products.

Net cash used in operating activities was $110.1 million for the nine months
ended September 30, 2021, primarily consisting of $169.2 million of net losses,
adjusted for non-cash items, which primarily included loss on change in fair
value of warrant liability of $56.6 million, acquisition of in-process research
and development of $25.6 million, depreciation and amortization expense of $15.6
million and stock-based compensation expense of $16.2 million, as well as a
$33.8 million increase in cash consumed by working capital. The increase in cash
consumed by working capital was primarily driven by an increase in certain
assets including accounts receivable, inventory and prepaid expenses and other
current assets, alongside a decrease in certain liabilities including accounts
payable, customer deposits, and deferred revenue. This increase in cash consumed
by working capital was partially offset by a decrease in certain assets
including prepaid expenses and other current assets and an increase in certain
liabilities including accrued expenses and other current liabilities.

Investing activities

Net cash provided by investing activities was $42.4 million for the nine months
ended September 30, 2022, primarily consisting of proceeds from sales and
maturities of marketable securities of $205.7 million, partially offset by
purchases of marketable securities of $158.4 million. We also purchased $8.2
million of property and equipment, and received proceeds from other investments
of $3.1 million.

Net cash used in investing activities was $407.1 million for the nine months
ended September 30, 2021, primarily consisting of purchases of marketable
securities of $330.9 million, offset by proceeds from sales and maturities of
marketable securities of $163.9 million. We also paid $191.9 million for
acquisitions, and $21.2 million to acquire in-process research and development,
net of cash acquired. We invested $20.0 million in an equity investment and $3.6
million in other investments, and purchased $4.1 million of property and
equipment.

Fundraising activities

Net cash provided by financing activities was $113.8 million for the nine months
ended September 30, 2022, consisting primarily of $115.0 million of proceeds
from the issuance of the 2027 Notes, partially offset by $3.6 million of
convertible note costs incurred in connection with the issuance of the 2027
Notes. We also received $3.0 million in proceeds from the exercise of stock
options.

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Net cash provided by financing activities was $165.5 million for the nine months
ended September 30, 2021, consisting primarily of $170.6 million in proceeds
from the exercise of public warrants and $5.2 million in proceeds from the
exercise of stock options, offset by the repayment of the term loan for $10.0
million.

Significant Accounting Policies and Estimates

There have been no material changes during the first nine months of 2022 in the information provided under the heading “Critical Accounting Policies and Estimates” included in our Annual Report on Form 10-K for the year ended
December 31, 2021.

Off-balance sheet arrangements

In the normal course of operations, ExOne's German subsidiary, ExOne GmbH,
issues short-term financial guarantees and letters of credit to third parties in
connection with certain commercial transactions requiring security through a
credit facility with a German bank. At September 30, 2022, total outstanding
financial guarantees and letters of credit issued were $4.0 million. For further
discussion related to financial guarantees and letters of credit, refer to Note
17 in our condensed consolidated financial statements in this Quarterly Report
on Form 10-Q.

We have no other off-balance sheet arrangements and do not use any “structured debt”, “ad hoc” or similar unconsolidated entities for liquidity or funding purposes.

Recent accounting pronouncements

Information regarding recent accounting pronouncements is included in Note 2. Summary of Significant Accounting Policies to our Condensed Consolidated Financial Statements in this Quarterly Report on Form 10-Q.

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