Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited consolidated financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K for the year ended December 31, 2022.
Forward-Looking Statements
Statements contained in this report regarding matters that are not historical or current facts are “forward-looking statements” within the meaning of The Private Securities Litigation Reform Act of 1995. In some cases, you can identify forward-looking statements by the following words: “may,” “will,” “could,” “would,” “should,” “expect,” “intend,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “project,” “potential,” “continue,” “ongoing” or the negative of these terms or other comparable terminology, although not all forward-looking statements contain these words. These statements involve known and unknown risks, uncertainties and other factors that may cause our results to be materially different than those expressed or implied in such statements. Certain of these risk factors and others are described in Item 1A. “Risk Factors” of this Form 10-Q, as well as our most recent Annual Report on Form 10-K as filed with the Securities and Exchange Commission (SEC). Other unknown or unpredictable factors also could have material adverse effects on our future results. We cannot guarantee future results, levels of activity, performance or achievements. Accordingly, you should not place undue reliance on these forward-looking statements. Finally, we expressly disclaim any intent or obligation to update any forward-looking statements to reflect subsequent events or circumstances.
Overview
We are one of the world’s largest and fastest digital manufacturers of custom prototypes and on-demand production parts. Our mission is to empower companies to bring new ideas to market by offering the fastest and most comprehensive digital manufacturing service in the world. Our automated quoting and manufacturing systems allow us to produce commercial-grade plastic, metal, and liquid silicone rubber parts in as fast as one day. We manufacture prototype and low volume production parts for companies worldwide, who are under increasing pressure to bring their finished products to market faster than their competition. We utilize injection molding, computer numerical control (CNC) machining, 3D printing and sheet metal fabrication to manufacture custom parts for our customers. For most of our offerings, our proprietary technology eliminates most of the time-consuming and expensive skilled labor conventionally required to quote and manufacture parts. Our customers conduct nearly all of their business with us over the Internet. We target our products to the millions of product developers and engineers who use three-dimensional computer-aided design (3D CAD) software to design products across a diverse range of end-markets. In addition, we serve procurement and supply chain professionals seeking to manufacture custom parts on-demand. Through the acquisition of Hubs (formerly 3D Hubs, Inc.) (Hubs) in 2021, we are able to provide our customers access to a global network of premium manufacturing partners who reside across North America, Europe and Asia, complementing our in-house manufacturing. We believe our use of advanced technology enables us to offer significant advantages at competitive prices to many customers and is the primary reason we have become a leading supplier of custom parts.
On May 27, 2022, our board of directors approved a plan for the closure of our manufacturing facility in Japan and announced an intention to cease operations in the region. Affected employees in Japan will receive severance and other transition assistance that meet or exceed local requirements. We expect to complete the closure plan within the year.
Our primary manufacturing product lines currently include Injection Molding, CNC Machining, 3D Printing and Sheet Metal. We continually seek to expand the range of sizes and geometric complexity of the parts we can make with these processes, to extend the variety of materials we are able to support, and to identify additional manufacturing processes to which we can apply our technology in order to better serve the evolving preferences and needs of product developers and engineers. In 2021, we augmented our internal manufacturing operations through our acquisition of Hubs to expand the envelope of custom parts we can provide to our customers through a network of premium manufacturing partners in each of our product lines.
Injection Molding
Our Injection Molding product line uses our 3D CAD-to-CNC machining technology for the automated design and manufacture of molds, which are then used to produce custom plastic and liquid silicone rubber injection-molded parts and over-molded and insert-molded injection-molded parts on commercially available equipment. Our Injection Molding product line works best for on-demand production, bridge tooling, pilot runs and functional prototyping. Our affordable molds and quick turnaround times help reduce design risk and limit overall production costs for product developers and engineers. Because we retain possession of the molds, customers who need short-run production often come back to Proto Labs’ Injection Molding product line for additional quantities. They do so to support pilot production for product testing, while their tooling for high-volume production is being prepared, because they need on-demand manufacturing due to disruptions in their manufacturing process, because their product requires limited annual quantity or because they need end-of-life production support. In 2017, we launched an on-demand manufacturing injection molding service. This service utilizes our existing processes, but is designed to fulfill the needs of customers with on-going production needs.
CNC Machining
Our CNC Machining product line uses commercially available CNC machines to offer milling and turning. CNC milling is a manufacturing process that cuts plastic and metal blocks into one or more custom parts based on the 3D CAD model uploaded by the customer. CNC turning is a subtractive manufacturing process that rotates a metal rod while a cutting tool is used to remove material and create final parts. Quick-turn CNC machining works best for prototyping, form and fit testing, jigs and fixtures and functional components for end-use applications.
Industrial 3D Printing
Our Industrial 3D Printing product line includes SL, SLS, DMLS, MJF, PolyJet, Carbon DLS and fused deposition modeling (FDM) processes, which offers customers a wide-variety of high-quality, precision rapid prototyping and low volume production. These processes create parts with a high level of accuracy, detail, strength and durability. Industrial 3D Printing is best suited for functional prototypes, complex designs and end-use applications.
Sheet Metal
Our Sheet Metal product line includes quick-turn and e-commerce-enabled custom sheet metal parts, providing customers with prototype and low-volume production parts. The rapid prototype sheet metal process is most often used when form, fit and function are all a priority. Our manufacturing process uses customer 3D CAD models uploaded by the customer to fabricate rapid prototyping sheet metal or end-use production parts and assemblies.
Key Financial Measures and Trends
Revenue
Our operations are comprised of three geographic operating segments in the United States, Europe and Japan. On May 27, 2022, our board of directors approved a plan for the closure of our manufacturing facility in Japan and announced an intention to cease operations in the region. Revenue is derived from our Injection Molding, CNC Machining, 3D Printing and Sheet Metal product lines. Injection Molding revenue consists of sales of custom injection molds and injection-molded parts. CNC Machining revenue consists of sales of CNC-machined custom parts. 3D Printing revenue consists of sales of 3D-printed parts. Sheet Metal revenue consists of sales of fabricated sheet metal custom parts. Our historical and current efforts to increase revenue have been directed at gaining new customers and selling to our existing customer base by increasing marketing and selling activities, including:
|
● |
expanding the breadth and scope of our products by adding more sizes and materials to our offerings; |
|
|
|
|
● |
the introduction of our 3D Printing product line through our acquisition of FineLine in 2014; |
|
|
|
|
● |
expanding 3D Printing to Europe through our acquisition of Alphaform in 2015; |
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|
|
|
● |
the introduction of our Sheet Metal product line through our acquisition of Rapid Manufacturing Group, LLC in 2017; |
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|
|
|
● |
continuously improving the usability of our product lines such as our web-centric applications; and |
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|
|
|
● |
providing customers with on-demand access to a global network of premium manufacturing partners through our acquisition of Hubs in 2021. |
During the three months ended March 31, 2023, we served 23,287 unique product developers and engineers who purchased our products through our web-based customer interface, which is consistent with the same period in 2022.
Cost of Revenue, Gross Profit and Gross Margin
Cost of revenue consists primarily of raw materials, equipment depreciation, employee compensation, benefits, stock-based compensation, facilities costs and overhead allocations associated with the manufacturing process for molds and customer parts. We expect our personnel-related costs to increase in order to retain and attract top talent and remain competitive in the market. Overall, we expect cost of revenue to increase in absolute dollars.
We define gross profit as our revenue less our cost of revenue, and we define gross margin as gross profit expressed as a percentage of revenue. Our gross profit and gross margin are affected by many factors, including our mix of revenue by product line, pricing, sales volume, manufacturing costs, the costs associated with increasing production capacity, the mix between domestic and foreign revenue sources, the mix between revenue produced in our internal manufacturing operations and outsourced to our external manufacturing partners, the mix between premium expedited manufacturing and longer lead times, and foreign currency exchange rates.
Operating Expenses
Operating expenses consist of marketing and sales, research and development and general and administrative expenses. Personnel-related costs are the most significant component in each of these categories.
Our business strategy is to continue to be a leading online and technology-enabled manufacturer of quick-turn, on-demand injection-molded, CNC-machined, 3D-printed and sheet metal custom parts for prototyping and low-volume production. In order to achieve our goals, we anticipate continued substantial investments in technology and personnel, resulting in increased operating expenses in the future.
Marketing and sales. Marketing and sales expense consists primarily of employee compensation, benefits, commissions, stock-based compensation, marketing programs such as electronic, print and pay-per-click advertising, trade shows and other related overhead, which includes an allocation of information technology expense including amortization of Protolabs 2.0 software assets. We expect sales and marketing expense to increase in the future as we increase the number of marketing and sales professionals and marketing programs targeted to increase our customer base and grow revenue.
Research and development. Research and development expense consists primarily of personnel and outside service costs related to the development of new processes and product lines, enhancement of existing product lines, development of software for internal use, maintenance of internally developed software, quality assurance and testing. Costs for internal use software are evaluated by project and capitalized where appropriate under ASC 350-40, Intangibles — Goodwill and Other, Internal-Use Software. We expect research and development expense to increase in the future as we seek to enhance our e-commerce interface technology, internal software and supporting business systems, and continue to expand our product lines.
General and administrative. General and administrative expense consists primarily of employee compensation, benefits, stock-based compensation, professional service fees related to accounting, tax and legal, and other related overhead, which includes an allocation of information technology expense including amortization of Protolabs 2.0 software assets. We expect general and administrative expense to increase in the future as we continue to grow and expand as a global organization.
Closure of Japan business. Closure of Japan business expense is driven by our decision to close the Japan manufacturing facility and exit the Japan market. The expenses consist primarily of operating expense, including employee severance, write-down of fixed assets, facility-related charges and goodwill impairment charges.
Other Income (Loss), net
Other income (loss), net primarily consists of foreign currency-related gains and losses and interest income on cash balances and investments. Our foreign currency-related gains and losses will vary depending upon movements in underlying foreign currency exchange rates. Our interest income will vary each reporting period depending on our average cash balances during the period, composition of our marketable security portfolio and the current level of interest rates.
Provision for Income Taxes
Provision for income taxes is comprised of federal, state, local and foreign taxes based on pre-tax income. Overall, our effective tax rate for 2023 and beyond may differ from historical effective tax rates due to increases in losses in foreign operations that are not eligible for tax benefits on account of valuation allowances, as well as any future tax law changes that may impact our effective tax rate.
Results of Operations
The following table summarizes our results of operations and the related changes for the periods indicated. The results below are not necessarily indicative of the results for future periods.
|
|
Three Months Ended March 31, |
|
|
Change |
|
(dollars in thousands) |
|
2023 |
|
|
2022 |
|
|
|
|
|
$% |
|
Revenue |
|
$ |
125,859 |
|
|
|
100.0 |
|
|
$ |
124,168 |
|
|
|
100.0 |
|
|
$ |
1,691 |
|
|
|
1.4 |
|
Cost of revenue |
|
|
72,083 |
|
|
|
57.3 |
|
|
|
68,364 |
|
|
|
55.1 |
|
|
|
3,719 |
|
|
|
5.4 |
|
Gross profit |
|
|
53,776 |
|
|
|
42.7 |
|
|
|
55,804 |
|
|
|
44.9 |
|
|
|
(2,028 |
) |
|
|
(3.6 |
) |
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Marketing and sales |
|
|
22,451 |
|
|
|
17.8 |
|
|
|
20,586 |
|
|
|
16.6 |
|
|
|
1,865 |
|
|
|
9.1 |
|
Research and development |
|
|
10,677 |
|
|
|
8.5 |
|
|
|
10,557 |
|
|
|
8.5 |
|
|
|
120 |
|
|
|
1.1 |
|
General and administrative |
|
|
16,833 |
|
|
|
13.4 |
|
|
|
16,771 |
|
|
|
13.5 |
|
|
|
62 |
|
|
|
0.4 |
|
Closure of Japan business |
|
|
66 |
|
|
|
0.1 |
|
|
|
- |
|
|
|
- |
|
|
|
66 |
|
|
|
100.0 |
|
Total operating expenses |
|
|
50,027 |
|
|
|
39.7 |
|
|
|
47,914 |
|
|
|
38.6 |
|
|
|
2,113 |
|
|
|
4.4 |
|
Income from operations |
|
|
3,749 |
|
|
|
3.0 |
|
|
|
7,890 |
|
|
|
6.3 |
|
|
|
(4,141 |
) |
|
|
(52.5 |
) |
Other income (loss), net |
|
|
1,290 |
|
|
|
1.0 |
|
|
|
(300 |
) |
|
|
(0.2 |
) |
|
|
1,590 |
|
|
|
(530.0 |
) |
Income before income taxes |
|
|
5,039 |
|
|
|
4.0 |
|
|
|
7,590 |
|
|
|
6.1 |
|
|
|
(2,551 |
) |
|
|
(33.6 |
) |
Provision for income taxes |
|
|
2,380 |
|
|
|
1.9 |
|
|
|
2,495 |
|
|
|
2.0 |
|
|
|
(115 |
) |
|
|
(4.6 |
) |
Net income |
|
$ |
2,659 |
|
|
|
2.1 |
% |
|
$ |
5,095 |
|
|
|
4.1 |
% |
|
$ |
(2,436 |
) |
|
|
(47.8 |
)% |
Stock-based compensation expense included in the statements of operations data above for the three months ended March 31, 2023 and 2022 were as follows:
|
|
Three Months Ended March 31, |
|
(dollars in thousands) |
|
2023 |
|
|
2022 |
|
Stock options, restricted stock and performance stock |
|
$ |
3,321 |
|
|
$ |
4,006 |
|
Employee stock purchase plan |
|
|
374 |
|
|
|
391 |
|
Total stock-based compensation expense |
|
$ |
3,695 |
|
|
$ |
4,397 |
|
|
|
|
|
|
|
|
|
|
Cost of revenue |
|
$ |
466 |
|
|
$ |
587 |
|
Operating expenses: |
|
|
|
|
|
|
|
|
Marketing and sales |
|
|
693 |
|
|
|
737 |
|
Research and development |
|
|
572 |
|
|
|
629 |
|
General and administrative |
|
|
1,964 |
|
|
|
2,444 |
|
Total stock-based compensation expense |
|
$ |
3,695 |
|
|
$ |
4,397 |
|
Comparison of Three Months Ended March 31, 2023 and 2022
Revenue
Revenue by reportable segment and the related changes for the three months ended March 31, 2023 and 2022 were as follows:
|
|
Three Months Ended March 31, |
|
|
|
|
|
|
|
|
|
|
|
2023 |
|
|
2022 |
|
|
Change |
|
(dollars in thousands) |
|
$ |
|
|
% of Total Revenue |
|
|
$ |
|
|
% of Total Revenue |
|
|
$ |
|
|
% |
|
Revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United States |
|
$ |
97,746 |
|
|
|
77.7 |
% |
|
$ |
95,496 |
|
|
|
76.9 |
% |
|
$ |
2,250 |
|
|
|
2.4 |
% |
Europe |
|
|
28,113 |
|
|
|
22.3 |
|
|
|
24,586 |
|
|
|
19.8 |
|
|
|
3,527 |
|
|
|
14.3 |
|
Japan |
|
|
- |
|
|
|
- |
|
|
|
4,086 |
|
|
|
3.3 |
|
|
|
(4,086 |
) |
|
|
(100.0 |
) |
Total revenue |
|
$ |
125,859 |
|
|
|
100.0 |
% |
|
$ |
124,168 |
|
|
|
100.0 |
% |
|
$ |
1,691 |
|
|
|
1.4 |
% |
Our revenue increased $1.7 million, or 1.4%, for the three months ended March 31, 2023 compared to the same period in 2022. By reportable segment, revenue in the United States increased $2.3 million, or 2.4%, for the three months ended March 31, 2023 compared to the same period in 2022. Revenue in Europe increased $3.5 million, or 14.3%, and revenue in Japan decreased $4.1 million, or 100.0%, in each case for the three months ended March 31, 2023 compared to the same period in 2022. The decrease in Japan revenue was driven by our decision in the second quarter of 2022 to close our Japan operations. Our acquisition of Hubs provided revenue of $9.4 million and $4.8 million in the United States, and $7.8 million and $5.5 million in Europe, for each of the three months ended March 31, 2023 and 2022. International revenue was negatively impacted by $2.5 million during the three months ended March 31, 2023 compared to the same period in 2022 as a result of foreign currency movements, primarily the weakening of the British Pound and Euro relative to the United States Dollar.
During the three months ended March 31, 2023, we served 23,287 unique product developers and engineers, which is consistent with the same period in 2022. Our growth in product developers and engineers served increased at a lesser rate than our revenue growth, resulting in an increase in the average spend per product developer and engineer.
Revenue by product line and the related changes for the three months ended March 31, 2023 and 2022 were as follows:
|
|
Three Months Ended March 31, |
|
|
|
|
|
|
|
|
|
|
|
2023 |
|
|
2022 |
|
|
Change |
|
(dollars in thousands) |
|
$ |
|
|
% of Total Revenue |
|
|
$ |
|
|
% of Total Revenue |
|
|
$ |
|
|
% |
|
Revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Injection Molding |
|
$ |
51,948 |
|
|
|
41.3 |
% |
|
$ |
53,398 |
|
|
|
43.0 |
% |
|
$ |
(1,450 |
) |
|
|
(2.7 |
)% |
CNC Machining |
|
|
48,104 |
|
|
|
38.2 |
|
|
|
46,098 |
|
|
|
37.1 |
|
|
|
2,006 |
|
|
|
4.4 |
|
3D Printing |
|
|
21,325 |
|
|
|
16.9 |
|
|
|
19,672 |
|
|
|
15.8 |
|
|
|
1,653 |
|
|
|
8.4 |
|
Sheet Metal |
|
|
4,248 |
|
|
|
3.4 |
|
|
|
4,687 |
|
|
|
3.8 |
|
|
|
(439 |
) |
|
|
(9.4 |
) |
Other Revenue |
|
|
234 |
|
|
|
0.2 |
|
|
|
313 |
|
|
|
0.3 |
|
|
|
(79 |
) |
|
|
(25.2 |
) |
Total revenue |
|
$ |
125,859 |
|
|
|
100.0 |
% |
|
$ |
124,168 |
|
|
|
100.0 |
% |
|
$ |
1,691 |
|
|
|
1.4 |
% |
By product line, our revenue increase was driven by a 4.4% increase in CNC Machining revenue and an 8.4% increase in 3D Printing revenue, which was partially offset by a 2.7% decrease in Injection Molding revenue, a 9.4% decrease in Sheet Metal revenue and a 25.2% decrease in Other Revenue, in each case for the three months ended March 31, 2023 compared to the same period in 2022.
Cost of Revenue, Gross Profit and Gross Margin
Cost of Revenue. Cost of revenue increased $3.7 million, or 5.4%, for the three months ended March 31, 2023 compared to the same period in 2022, which was higher than the rate of revenue increase of 1.4% for the three months ended March 31, 2023 compared to the same period in 2022. Cost of revenue decreased $1.9 million in our digital manufacturing business, which was driven by decreases in overtime and contract labor expense and led to lower personnel and related costs of $2.1 million, and an increase in raw material and product costs of $0.2 million. Hubs provided a $5.6 million increase in cost of revenue due to higher revenue volume for the three months ended March 31, 2023 compared to the same period in 2022.
Gross Profit and Gross Margin. Gross profit decreased from $55.8 million in the three months ended March 31, 2022 to $53.8 million in the three months ended March 31, 2023. Gross margin decreased from 44.9% in the three months ended March 31, 2022 to 42.7% in the three months ended March 31, 2023.
Operating Expenses, Other Income (Loss), net and Provision for Income Taxes
Marketing and Sales. Marketing and sales expenses increased $1.9 million, or 9.1%, during the three months ended March 31, 2023 compared to the same period in 2022. The increase was driven by marketing program cost increases in our digital manufacturing business of $0.2 million and increases in Hubs' marketing and sales expenses of $1.7 million during the three months ended March 31, 2023 when compared to the same period in 2022.
Research and Development. Our research and development expenses increased $0.1 million, or 1.1%, during the three months ended March 31, 2023 compared to the same period in 2022 primarily due to increases of $0.7 million in Hubs' research and development expenses, which were partially offset by personnel and related cost decreases of $0.2 million and decreases in professional services and other operating costs of $0.4 million in our digital manufacturing business.
General and Administrative. Our general and administrative expenses increased $0.1 million, or 0.4%, during the three months ended March 31, 2023 compared to the same period in 2022 primarily due to an increase of $0.3 million in personnel and related costs, an increase of professional services of $0.4 million, an increase in stock based compensation costs of $0.1 million, which were partially offset by a decrease of $0.5 million in administrative costs and decreases of $0.2 million in Hubs' general and administrative expenses.
Closure of Japan business. Our decision to close our Japan business resulted in $0.1 million in operating expenses during the three months ended March 31, 2023. We had no expenses related to the closure of our Japan business in the three months ended March 31, 2022.
Other income (loss), net. We recognized other income, net of $1.3 million for the three months ended March 31, 2023, an increase of $1.6 million compared to other loss, net of $0.3 million for the three months ended March 31, 2022. Other income, net for the three months ended March 31, 2023 primarily consisted of a $0.1 million gain on foreign currency and $1.2 million in interest income on investments and other income. Other income, net for the three months ended March 31, 2022 primarily consisted of a $0.3 million loss on foreign currency.
Provision for Income Taxes. Our effective tax rate of 47.2% for the three months ended March 31, 2023 increased 14.3% compared to 32.9% for the same period in 2022. The increase in the effective tax rate is primarily due to a decrease in tax benefits from the vesting of restricted stock, the cancellation of performance stock units and the exercise of stock options, as well as an increase in the rate impact of losses in jurisdictions that are not eligible for tax benefits due to valuation allowances. Our income tax provision of $2.4 million for the three months ended March 31, 2023 decreased $0.1 million compared to our income tax provision of $2.5 million for the three months ended March 31, 2022.
Liquidity and Capital Resources
Cash Flows
The following table summarizes our cash flows during the three months ended March 31, 2023 and 2022:
|
|
Three Months Ended March 31, |
|
(dollars in thousands) |
|
2023 |
|
|
2022 |
|
Net cash provided by operating activities |
|
$ |
22,578 |
|
|
$ |
17,783 |
|
Net cash provided by (used in) investing activities |
|
|
4,383 |
|
|
|
(25,835 |
) |
Net cash used in financing activities |
|
|
(21,602 |
) |
|
|
(601 |
) |
Effect of exchange rates on cash and cash equivalents |
|
|
134 |
|
|
|
(37 |
) |
Net increase (decrease) in cash and cash equivalents |
|
$ |
5,493 |
|
|
$ |
(8,690 |
) |
Sources of Liquidity
Historically, we have primarily financed our operations and capital expenditures through cash flow from operations. We had cash and cash equivalents of $62.1 million as of March 31, 2023, an increase of $5.5 million from December 31, 2022. The increase in our cash was primarily due to cash provided by operating activities of $22.6 million and proceeds from call redemptions and maturities of marketable securities of $7.7 million, which were partially offset by $3.4 million for purchases of property, equipment and other capital assets, and $21.1 million in repurchases of common stock.
We believe that our existing cash and cash equivalents together with cash generated from operations will be sufficient to meet our working capital and capital expenditure requirements for at least the next 12 months.
Cash Flows from Operating Activities
Cash flows from operating activities were $22.6 million during the three months ended March 31, 2023 and primarily consisted of net income of $2.7 million, adjusted for certain non-cash items, including depreciation and amortization of $9.4 million, stock-based compensation expense of $3.7 million, interest on finance lease obligations of $0.3 million and changes in operating assets and liabilities and other items totaling $9.6 million, which were partially offset by deferred taxes of $3.1 million. Cash flows from operating activities were $17.8 million during the three months ended March 31, 2022 and primarily consisted of net income of $5.1 million, adjusted for certain non-cash items, including depreciation and amortization of $10.2 million and stock-based compensation expense of $4.4 million, which were partially offset by changes in operating assets and liabilities and other items totaling $1.9 million.
Cash flows from operating activities increased $4.8 million during the three months ended March 31, 2023 compared to the same period in 2022, primarily due to increases in interest on finance lease obligations of $0.3 million and changes in operating assets and liabilities totaling $8.4 million, which were partially offset by decreases in net income of $2.4 million, stock-based compensation of $0.7 million, and depreciation and amortization of $0.8 million.
Cash Flows from Investing Activities
Cash provided by investing activities was $4.4 million during the three months ended March 31, 2023, consisting of $7.7 million in proceeds from call redemptions and maturities of marketable securities, which were partially offset by $3.3 million for net purchases of property, equipment and other capital assets.
Cash used in investing activities was $25.8 million during the three months ended March 31, 2022, consisting of $22.7 million for net purchases of marketable securities and $3.1 million for the purchases of property, equipment and other capital assets.
Cash Flows from Financing Activities
Cash used in financing activities was $21.6 million during the three months ended March 31, 2023, consisting of $21.1 million in repurchases of common stock, $0.4 million in purchases of shares withheld for tax obligations associated with equity transactions, and $0.1 million for repayments of finance lease obligations.
Cash used in financing activities was $0.6 million during the three months ended March 31, 2022, consisting of $0.5 million in purchases of shares withheld for tax obligations associated with equity transactions, and $0.1 million for repayments of finance lease obligations.
Critical Accounting Estimates
We have adopted various accounting policies to prepare the Consolidated Financial Statements in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP). The preparation of these financial statements requires us to make estimates, judgements and assumptions. Our significant accounting policies and estimates are disclosed in Note 2 to the Consolidated Financial Statements included Pat II, Item 8 in our Annual Report on Form 10-K for the year ended December 31, 2022. There were no material changes to our critical accounting policies and estimates during the three months ended March 31, 2023.
Recent Accounting Pronouncements
For information on recent accounting pronouncements, see Note 2 to the Consolidated Financial Statements appearing in Part I, Item 1 in this Quarterly Report on Form 10-Q.