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, 2019.
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 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 the world’s largest and fastest digital manufacturer of custom prototypes and on-demand production parts. We manufacture prototypes 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. 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.
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.
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 aluminum molds and quick turnaround times help reduce design risk and limit overall production costs for product developers and engineers. Prototype quantities typically range from 25 to 100 parts. Because we retain possession of the molds, customers who need short-run production often come back to Protolabs’ 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 product offering. This product offering utilizes our existing processes, but is designed to fulfill the needs of customers with on-going production needs, typically in annual volumes of less than 10,000 parts.
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 product developer or engineer. CNC turning with live tooling combines both lathe and mill capabilities to machine parts with cylindrical features from metal rod stock. Our efficiencies derive from the automation of the programming of these machines and a proprietary fixturing process.
Quick-turn CNC machining works best for prototyping, form and fit testing, jigs and fixtures and functional components for end-use applications. The CNC Machining product line is well suited to produce small quantities, typically in the range of one to 1,000 parts.
3D Printing
Our 3D Printing product line includes stereolithography, selective laser sintering, direct metal laser sintering, Multi Jet Fusion, PolyJet and digital light synthesis processes, which offer 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 produced in small quantities, typically in the range of one to several hundred parts.
Sheet Metal
Our Sheet Metal product line includes quick-turn and e-commerce-enabled custom sheet metal parts, which provides 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 product developer or engineer to fabricate quick-turn prototype sheet metal or short-run production parts. The Sheet Metal product line is well suited to produce quantities in the range of one to 500 parts.
Key Financial Measures and Trends
Revenue
Our operations are comprised of three geographic operating segments in the United States, Europe and Japan. 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 expanding the breadth of our product offerings, gaining new customers and selling to our existing customer base by increasing marketing and selling activities, including:
|
●
|
expanding the breadth and scope of each of our product lines 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 October 2015;
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|
|
|
|
●
|
the introduction of our Sheet Metal product line through our acquisition of RAPID in 2017; and
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|
|
|
|
●
|
continuously improving the usability of our product lines such as our web-centric applications.
|
During the three months ended March 31, 2020, we served 20,876 unique product developers and engineers who purchased our products through our web-based customer interface, an increase of 1.5% over the same period in 2019.
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 custom 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, but remain relatively constant as a percentage of total revenue.
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 and foreign 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 recent growth in operating expenses is mainly due to higher headcounts to support our growth and expansion, and we expect that trend to continue. Our business strategy is to continue to be a leading online and technology-enabled manufacturer of quick-turn, on-demand injection-molded, CNC-machined, CNC-turned, 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.
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. 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. We expect general and administrative expense to increase in the future as we continue to grow and expand as a global organization.
Other Income, net
Other income, 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 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, we expect our effective tax rate for 2020 and beyond will remain consistent based on the current tax laws.
Market Conditions
On March 11, 2020, the World Health Organization declared the outbreak of the novel coronavirus (COVID-19) a pandemic. Its full financial impact is unknown at this time and will depend on the duration of government restrictions, including travel restrictions, quarantines, shelter in place orders and shutdowns and duration of the economic slowdown and nature and timing of a recovery. The Company has been deemed an essential business and all of our global manufacturing operations have remained open. The Company has activated a global, cross-functional response team, which is closely monitoring the situation and implementing additional safety measures to help ensure the well-being of our employees, customers and suppliers, to minimize disruptions and provide for the safe and reliable supply of products to our customers. In accordance with the guidance provided by both the World Health Organization and the U.S. Centers for Disease Control and Prevention, the Company has implemented safe work practices, including social distancing and work from home guidelines.
We are actively monitoring key product availability and continue to stay connected with our customers to understand impacts on their operations. All of these efforts will help us better plan and prepare, so we can continue to be a leading supplier of custom parts. In anticipation of exposure due to an economic slowdown driven by COVID-19, the Company increased its bad debt reserve by $0.9 million as of March 31, 2020.
The Coronavirus Aid, Relief, and Economic Security (CARES) Act was signed into law on March 27th, 2020. The CARES Act is meant to infuse companies with various income and payroll tax cash benefits to ease the impact of the pandemic. A technical correction to the Tax Cuts and Jobs Act of 2017 was included in the CARES Act allowing qualified improvement property to claim bonus depreciation for respective assets placed in service in 2018 and 2019. The impact of the CARES Act to the Company was a $2.6 million reduction in our income taxes payable and a corresponding increase to our deferred tax liability.
See "Risk Factors" in Item 1A of this Quarterly Report on Form 10-Q for further information of the possible impact of the COVID-19 pandemic on our business.
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)
|
|
2020
|
|
|
2019
|
|
|
$
|
|
|
%
|
|
Revenue
|
|
$
|
115,108
|
|
|
|
100.0
|
|
|
$
|
113,452
|
|
|
|
100.0
|
|
|
$
|
1,656
|
|
|
|
1.5
|
|
Cost of revenue
|
|
|
57,008
|
|
|
|
49.5
|
|
|
|
54,592
|
|
|
|
48.1
|
|
|
|
2,416
|
|
|
|
4.4
|
|
Gross profit
|
|
|
58,100
|
|
|
|
50.5
|
|
|
|
58,860
|
|
|
|
51.9
|
|
|
|
(760
|
)
|
|
|
(1.3
|
)
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Marketing and sales
|
|
|
18,180
|
|
|
|
15.8
|
|
|
|
18,577
|
|
|
|
16.4
|
|
|
|
(397
|
)
|
|
|
(2.1
|
)
|
Research and development
|
|
|
8,987
|
|
|
|
7.8
|
|
|
|
8,013
|
|
|
|
7.1
|
|
|
|
974
|
|
|
|
12.1
|
|
General and administrative
|
|
|
14,108
|
|
|
|
12.3
|
|
|
|
12,822
|
|
|
|
11.3
|
|
|
|
1,286
|
|
|
|
10.0
|
|
Total operating expenses
|
|
|
41,275
|
|
|
|
35.9
|
|
|
|
39,412
|
|
|
|
34.8
|
|
|
|
1,863
|
|
|
|
4.7
|
|
Income from operations
|
|
|
16,825
|
|
|
|
14.6
|
|
|
|
19,448
|
|
|
|
17.1
|
|
|
|
(2,623
|
)
|
|
|
(13.5
|
)
|
Other income, net
|
|
|
1,054
|
|
|
|
0.9
|
|
|
|
213
|
|
|
|
0.2
|
|
|
|
841
|
|
|
|
*
|
|
Income before income taxes
|
|
|
17,879
|
|
|
|
15.5
|
|
|
|
19,661
|
|
|
|
17.3
|
|
|
|
(1,782
|
)
|
|
|
(9.1
|
)
|
Provision for income taxes
|
|
|
3,895
|
|
|
|
3.4
|
|
|
|
4,150
|
|
|
|
3.6
|
|
|
|
(255
|
)
|
|
|
(6.1
|
)
|
Net income
|
|
$
|
13,984
|
|
|
|
12.1
|
%
|
|
$
|
15,511
|
|
|
|
13.7
|
%
|
|
$
|
(1,527
|
)
|
|
|
(9.8
|
)%
|
Stock-based compensation expense included in the statements of operations data above for the three months ended March 31, 2020 and 2019 was as follows:
|
|
Three Months Ended March 31,
|
|
(dollars in thousands)
|
|
2020
|
|
|
2019
|
|
Stock options and restricted stock
|
|
$
|
2,738
|
|
|
$
|
2,779
|
|
Employee stock purchase plan
|
|
|
295
|
|
|
|
261
|
|
Total stock-based compensation expense
|
|
$
|
3,033
|
|
|
$
|
3,040
|
|
|
|
|
|
|
|
|
|
|
Cost of revenue
|
|
$
|
521
|
|
|
$
|
421
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
Marketing and sales
|
|
|
618
|
|
|
|
549
|
|
Research and development
|
|
|
521
|
|
|
|
423
|
|
General and administrative
|
|
|
1,373
|
|
|
|
1,647
|
|
Total stock-based compensation expense
|
|
$
|
3,033
|
|
|
$
|
3,040
|
|
Comparison of Three Months Ended March 31, 2020 and 2019
Revenue
Revenue by reportable segment and the related changes for the three months ended March 31, 2020 and 2019 were as follows:
|
|
Three Months Ended March 31,
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
|
2019
|
|
|
Change
|
|
(dollars in thousands)
|
|
$
|
|
|
% of Total Revenue
|
|
|
$
|
|
|
% of Total Revenue
|
|
|
$
|
|
|
%
|
|
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United States
|
|
$
|
90,076
|
|
|
|
78.3
|
%
|
|
$
|
87,811
|
|
|
|
77.4
|
%
|
|
$
|
2,265
|
|
|
|
2.6
|
%
|
Europe
|
|
|
20,787
|
|
|
|
18.1
|
|
|
|
21,254
|
|
|
|
18.7
|
|
|
|
(467
|
)
|
|
|
(2.2
|
)
|
Japan
|
|
|
4,245
|
|
|
|
3.7
|
|
|
|
4,387
|
|
|
|
3.9
|
|
|
|
(142
|
)
|
|
|
(3.2
|
)
|
Total revenue
|
|
$
|
115,108
|
|
|
|
100.0
|
%
|
|
$
|
113,452
|
|
|
|
100.0
|
%
|
|
$
|
1,656
|
|
|
|
1.5
|
%
|
Our revenue increased $1.7 million, or 1.5%, for the three months ended March 31, 2020 compared to the same period in 2019. By reportable segment, revenue in the United States increased $2.3 million, or 2.6%, for the three months ended March 31, 2020 compared to the same period in 2019. Revenue in Europe decreased $0.5 million, or 2.2%, and revenue in Japan decreased $0.1 million, or 3.2%, in each case for the three months ended March 31, 2020 compared to the same period in 2019. Our revenue in Europe was impacted by foreign currency exchange rates. Excluding the impact of the changes in foreign currency exchange rates, Europe revenue growth would have been 0.9%. In addition, our revenue in each region was impacted by a decline in order activity driven by the COVID-19 pandemic.
Our revenue growth during the three months ended March 31, 2020 was the result of an increase in the volume of product developers and engineers we served. During the three months ended March 31, 2020, we served 20,876 unique product developers and engineers, an increase of 1.5% over the same period in 2019.
Our revenue increases were primarily driven by increases in sales personnel and marketing activities. Our sales personnel focus on gaining new customer accounts and expanding the depth and breadth of existing customer accounts. Our marketing personnel focus on marketing activities that result in the greatest number of customer leads to support sales activity. International revenue was negatively impacted by $0.6 million during the three months ended March 31, 2020 compared to the same period in 2019 as a result of foreign currency movements, primarily the weakening of the British Pound and Euro relative to the United States Dollar.
Revenue by product line and the related changes for the three months ended March 31, 2020 and 2019 were as follows:
|
|
Three Months Ended March 31,
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
|
2019
|
|
|
Change
|
|
(dollars in thousands)
|
|
$
|
|
|
% of Total Revenue
|
|
|
$
|
|
|
% of Total Revenue
|
|
|
$
|
|
|
%
|
|
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Injection Molding
|
|
$
|
54,776
|
|
|
|
47.6
|
%
|
|
$
|
55,311
|
|
|
|
48.8
|
%
|
|
$
|
(535
|
)
|
|
|
(1.0)
|
%
|
CNC Machining
|
|
|
37,885
|
|
|
|
32.9
|
|
|
|
37,872
|
|
|
|
33.4
|
|
|
|
13
|
|
|
|
0.0
|
|
3D Printing
|
|
|
15,948
|
|
|
|
13.9
|
|
|
|
14,480
|
|
|
|
12.8
|
|
|
|
1,468
|
|
|
|
10.1
|
|
Sheet Metal
|
|
|
5,649
|
|
|
|
4.9
|
|
|
|
5,025
|
|
|
|
4.4
|
|
|
|
624
|
|
|
|
12.4
|
|
Other Revenue
|
|
|
850
|
|
|
|
0.7
|
|
|
|
764
|
|
|
|
0.7
|
|
|
|
86
|
|
|
|
11.3
|
|
Total revenue
|
|
$
|
115,108
|
|
|
|
100.0
|
%
|
|
$
|
113,452
|
|
|
|
100.0
|
%
|
|
$
|
1,656
|
|
|
|
1.5
|
%
|
By product line, our revenue growth was driven by a 10.1% increase in 3D Printing revenue, a 12.4% increase in Sheet Metal revenue and an 11.3% increase in Other Revenue, which was partially offset by a 1.0% decrease in Injection Molding revenue, in each case for the three months ended March 31, 2020 compared to the same period in 2019.
Cost of Revenue, Gross Profit and Gross Margin
Cost of Revenue. Cost of revenue increased $2.4 million, or 4.4%, for the three months ended March 31, 2020 compared to the same period in 2019, which was greater than the rate of revenue increase of 1.5% for the three months ended March 31, 2020 compared to the same period in 2019. The increase in cost of revenue resulted from the growth of the business, investments to support future growth and the costs of inflation. Specifically, the increases were driven by an increase in direct labor headcount and wage inflation resulting in personnel and related cost increases of $1.5 million and equipment and facility-related cost increases of $1.0 million to support increased sales volumes and future growth of the business, which were partially offset by raw material and production cost decreases of $0.1 million.
Gross Profit and Gross Margin. Gross profit decreased from $58.9 million in the three months ended March 31, 2019 to $58.1 million in the three months ended March 31, 2020 primarily due to an increase in expenses associated with the cost of revenue. Gross margin decreased from 51.9% in the three months ended March 31, 2019 to 50.5% in the three months ended March 31, 2020 due to investments in facilities and personnel to support future growth and the timing and mix of revenue.
Operating Expenses, Other Income, net and Provision for Income Taxes
Marketing and Sales. Marketing and sales expenses decreased $0.4 million, or 2.1%, during the three months ended March 31, 2020 compared to the same period in 2019 due primarily to personnel and related cost decreases of $0.2 million as well as marketing program cost decreases of $0.2 million.
Research and Development. Our research and development expenses increased $1.0 million, or 12.1%, during the three months ended March 31, 2020 compared to the same period in 2019 due to an increase in headcount resulting in personnel and related cost increases of $1.0 million.
General and Administrative. Our general and administrative expenses increased $1.3 million, or 10.0%, during the three months ended March 31, 2020 compared to the same period in 2019 due to personnel and related cost increases of $1.2 million and administrative cost increases of $0.5 million primarily driven by an increase to our bad debt expense as a result of anticipated exposure related to the novel coronavirus (COVID-19) pandemic, which were partially offset by stock-based compensation decreases of $0.3 million, as well as a $0.1 million decrease in amortization cost.
Other Income, net. We recognized other income, net of $1.1 million for the three months ended March 31, 2020, an increase of $0.9 million compared to other income, net of $0.2 million for the three months ended March 31, 2019. Other income, net for the three months ended March 31, 2020 primarily consisted of $0.6 million in interest income on investments and a $0.7 million gain on foreign currency, which was partially offset by $0.2 million in other expense. Other income, net for the three months ended March 31, 2019 primarily consisted of $0.6 million in interest income on investments, which was partially offset by a $0.4 million loss on foreign currency.
Provision for Income Taxes. Our effective tax rate of 21.8% for the three months ended March 31, 2020 increased 0.7% compared to 21.1% for the same period in 2019. The increase in the effective tax rate is primarily due to a decrease in tax benefits from the vesting of restricted stock and the exercise of stock options and an increase in the state tax provision. Our income tax provision of $3.9 million for the three months ended March 31, 2020 decreased $0.3 million compared to our income tax provision of $4.2 million for the three months ended March 31, 2019.
Liquidity and Capital Resources
Cash Flows
The following table summarizes our cash flows during the three months ended March 31, 2020 and 2019:
|
|
Three Months Ended March 31,
|
|
(dollars in thousands)
|
|
2020
|
|
|
2019
|
|
Net cash provided by operating activities
|
|
$
|
22,410
|
|
|
$
|
18,002
|
|
Net cash (used in) provided by investing activities
|
|
|
(43,350
|
)
|
|
|
271
|
|
Net cash used in financing activities
|
|
|
(12,098
|
)
|
|
|
(17,729
|
)
|
Effect of exchange rates on cash and cash equivalents
|
|
|
(282
|
)
|
|
|
(240
|
)
|
Net (decrease) increase in cash and cash equivalents
|
|
$
|
(33,320
|
)
|
|
$
|
304
|
|
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 $91.9 million as of March 31, 2020, a decrease of $33.3 million from December 31, 2019. The decrease in our cash was primarily due to cash used in investing activity and repurchases of common stock, which were partially offset by cash generated through operations.
Cash Flows from Operating Activities
Cash flows from operating activities were $22.4 million during the three months ended March 31, 2020 and primarily consisted of net income of $14.0 million, adjusted for certain non-cash items, including depreciation and amortization of $8.0 million, stock-based compensation expense of $3.0 million and deferred taxes of $3.4 million, which were partially offset by changes in operating assets and liabilities and other items totaling $6.0 million. Cash flows from operating activities were $18.0 million during the three months ended March 31, 2019 and primarily consisted of net income of $15.5 million, adjusted for certain non-cash items, including depreciation and amortization of $7.4 million, stock-based compensation expense of $3.0 million and deferred taxes of $0.4 million, which were partially offset by changes in operating assets and liabilities and other items totaling $8.3 million.
Cash flows from operating activities increased $4.4 million during the three months ended March 31, 2020 compared to the same period in 2019, primarily due to increases in changes in operating assets and liabilities of $3.3 million driven by timing of cash receipts and payments, deferred taxes of $3.0 million and depreciation and amortization of $0.5 million, which were partially offset by decreases in net income of $1.5 million and decreases in other operating activities of $0.9 million.
Cash Flows from Investing Activities
Cash used in investing activities was $43.3 million during the three months ended March 31, 2020, consisting of $37.6 million for the purchases of marketable securities, $13.4 million for the purchases of property, equipment and other capital assets and $3.0 million for purchases of other assets and investments, which were partially offset by $10.7 million in proceeds from maturities of marketable securities.
Cash provided by investing activities was $0.3 million during the three months ended March 31, 2019, consisting of $17.0 million in proceeds from maturities of marketable securities, which were partially offset by $12.7 million for the purchases of property, equipment and other capital assets and $4.0 million for purchases of other assets and investments.
Cash Flows from Financing Activities
Cash used in financing activities was $12.1 million during the three months ended March 31, 2020, consisting of $11.2 million in repurchases of common stock and $1.0 million in purchases of shares withheld for tax obligations associated with equity transactions, which were partially offset by $0.1 million in proceeds from the exercise of stock options.
Cash used in financing activities was $17.7 million during the three months ended March 31, 2019, consisting of $17.3 million in repurchases of common stock and $0.6 million in purchases of shares withheld for tax obligations, which were partially offset by $0.2 million in proceeds from the exercise of stock options.
Off-Balance Sheet Arrangements
Since our inception, we have not engaged in any off-balance sheet arrangements, including the use of structured finance, special purpose entities or variable interest entities.
Critical Accounting Policies and Use of 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). Our significant accounting policies are disclosed in Note 2 to the Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2019.
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.