AGNT, Inc. 10-Q

Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion should be read together with our condensed consolidated financial statements and related notes included elsewhere in this report. Management’s Discussion and Analysis of Financial Conditions and Results of Operations contain forward-looking statements. Our actual results could differ materially from those anticipated in these forward-looking statements. See “Item 1 A. – Risk Factors” in our 2022 Annual Report for a discussion of certain risks, uncertainties and assumptions associated with these statements. This MD&A is divided into the following sections: ● Overview ● Market Conditions and Industry Trends ● Key Business Metrics ● Results of Operations ● Business Segment Disclosures ● Non-U.S. GAAP Financial Measures ● Liquidity and Capital Resources ● Critical Accounting Policies and Estimates ● Non-U.S. GAAP Financial Measures All dollar amounts are in USD thousands except share amounts and per share data and as otherwise noted. OVERVIEW eXp World Holdings empowers the new economy through its people, technology platforms and personal and professional development solutions. Through our brokerage, eXp Realty, we operate one of the world’s fastest-growing real estate brokerages. We are focused on being the most agent-centric company on the planet and offer our agents a generous commission model, and a thriving community built on our proprietary and unique cloud-based brokerage and collaboration suite. eXp manages its operations in four operating business segments: North American Realty; International Realty; Virbela; and Other Affiliated Services. While we do not consider acquisitions a critical element of our ongoing business, we seek opportunities to expand and enhance our portfolio of solutions. Strategy Our strategy is to grow organically in North America and certain international markets by increasing our independent agent and broker network. Through our cloud-based operations and technology platform, we strive to achieve customer-focused efficiencies that allow us to increase market share and attain strong returns as we scale our business within the markets in which we operate. By building partnerships and strategically deploying capital, we seek to grow the business and enter into attractive verticals and associated businesses. Throughout 2022, and during the first three months of 2023, we continued to make progress in achieving our strategic goals, including a 12% increase in our agent count, going from 78,196 agents as of March 31, 2022 to 87,327 agents 15 Table of Contents as of March 31, 2023. The expected outcome of these activities will be to better position us to deliver on our full potential, to provide a platform for future growth opportunities, and to achieve our long-term financial goals. MARKET CONDITIONS AND INDUSTRY TRENDS In March of 2023, the existing home sales market declined 22%, compared to March of 2022 according to the National Association of Realtors (“NAR”). Due to the increasing interest rates and increasing inflation, the market began a contraction trend in the second quarter of 2022. The Company believes it continues to be well positioned to grow in the current economic climate. We have a strong base of agent support, which should drive organic market share growth, retention and productivity. Additionally, we have an efficient operating model with lower fixed costs driven by our cloud-based model, with no brick-and-mortar locations. Regardless of whether the housing market continues to slow or begins to recover, we believe that we are positioned to leverage our low-cost, high-engagement model, affording agents and brokers increased income and ownership opportunities while offering a scalable solution to brokerage owners looking to survive and thrive during fluctuations in economic activity. National Housing Inventory According to NAR, inventory of existing homes for sale in the U.S. was 980,000 as of March 2023 (preliminary) compared to 930,000 at the end of March 2022. Mortgage Interest Rates The sharp increase in mortgage rates have continued to negatively impact the demand for homebuying. Based on Freddie Mac data, the average rate for a 30-year, conventional, fixed rate mortgage was 6.3% in March 2023 vs 4.7% in March 2022. Housing Affordability Index According to NAR, the composite housing affordability index decreased to 103.9 for February 2023 (preliminary) from 129.4 for February 2022. When the index is above 100, it indicates that a family earning the median income has sufficient income to purchase a median-priced home, assuming a 20% down payment and ability to qualify for a mortgage. The favorable housing affordability index has been declining year over year due to increasing mortgage rates. Existing Home Sales Transactions and Prices According to NAR, seasonally adjusted existing home sale transactions decreased to an annual rate of 4.4 million in March 2023 (preliminary) compared to 5.7 million in March 2022. According to NAR, the nationwide existing home sales median price for March of 2023 (preliminary) was $375,700 compared to $379,300 in March 2022, a decline of 0.9%. Housing inventory was also up to 2.6 months of inventory compared to 2.0 months last year. KEY BUSINESS METRICS Management uses our results of operations, financial condition, cash flows, and key business metrics related to our business and industry to evaluate our performance and make strategic decisions. 16 Table of Contents The following table outlines the key business metrics that we periodically review: ​ ​ ​ ​ ​ ​ ​ Three Months Ended March 31, ​ ​ 2023 ​ 2022 ​ ​ ​ ​ ​ Performance: ​ ​ ​ ​ Agent count ​ 87,327 ​ 78,196 Transactions ​ 102,305 ​ 114,305 Volume ​ $ 33,241,616 ​ $ 41,379,500 Revenue ​ $ 850,616 ​ $ 1,010,731 Gross profit ​ $ 73,057 ​ $ 83,464 Gross margin (%) ​ 8.6% ​ 8.3% Adjusted EBITDA (1) ​ $ 13,327 ​ $ 17,709 ​ (1) Adjusted EBITDA is not a measurement of our financial performance under generally accepted accounting principles in the U.S. and should not be considered as an alternative to net income, operating income, or any other measures derived in accordance with U.S. GAAP. For a definition of Adjusted EBITDA and a reconciliation of Adjusted EBITDA to net income, see “Non-U.S. GAAP Financial Measures”. We periodically evaluate trends in certain metrics to track the Company’s performance. Our strength is attracting real estate agent and broker professionals that contribute to our growth. Brokerage real estate transactions are recorded when our agents and brokers represent buyers and/or sellers in the purchase or sale, respectively, of a home. The number of real estate transactions is a key driver of our revenue and profitability. Real estate transaction volume represents the total sales value for all homes sold by our agents and brokers and is influenced by several market factors, including, but not limited to, the pricing and quality of our services and market conditions that affect home sales, such as macroeconomic factors, local inventory levels, mortgage interest rates, and seasonality. Real estate transaction revenue represents the commission revenue earned by the Company for closed brokerage real estate transactions. We continue to increase our agents and brokers significantly in the United States and Canada through the execution of our growth strategies. The rate of growth of our agent and broker base is difficult to predict and is subject to many factors outside of our control, including macroeconomic factors affecting the real estate industry in general. With our unique business model, we anticipate being able to continue to grow for the remainder of the year, despite the less favorable economic outlook. Settled home sales transactions and volume resulted from closed real estate transactions and typically change directionally with changes in the market’s existing home sales transactions as reported by NAR, as disproportionate variances are representative of company-specific improvements or shortfalls to the norm. Our home sale transaction performance was directly related to the performance of our agent base over the prior comparative period. We utilize gross profit and gross margin, financial statement measures based on generally accepted accounting principles in the U.S. (“U.S. GAAP”) to assess eXp’s financial performance from period to period. Gross profit is calculated from U.S. GAAP reported amounts and equals the difference between revenue and cost of sales. Gross margin is the calculation of gross profit as a percentage of total revenue. Commissions and other agent-related costs represent the cost of sales for the Company. The cost of sales does not include depreciation or amortization expenses as the Company’s assets are not directly used in the production of revenue. Gross profit is based on the information provided in our results of operations or our consolidated statements of comprehensive income and is an important measure of our potential profitability and brokerage performance. For the three months ended March 31, 2023 and 2022 gross profit was $73.1 million, and $83.5 million, respectively. For the three months ended March 31, 2023, and 2022, gross margin was 8.6% and 8.3%, respectively. Gross profit in the first quarter of 2023 reflects lower revenue related to the slowdown in the housing market in early 2023. However, for the three months ended March 31, 2023, gross margin increased year-over-year primarily due to a lower increase in commissions and agent-related costs due to a lower percentage of agents reaching their commission capping requirements, entitling them to a lower percentage of the home sale commission. ​ 17 Table of Contents Management also reviews Adjusted EBITDA, which is a non-U.S. GAAP financial measure, to understand and evaluate our core operating performance. Adjusted EBITDA has declined for the three months ended March 31, 2023 ended compared to the same period in 2022 due to lower revenue partially offset by lower operating costs. Agent and Employee Experience The Company has embarked on an initiative to better understand both its agents’ and employees’ experiences. In doing so, we have adopted many of the principles of the Net Promoter Score® (“NPS”) across many aspects of our organization. NPS is a measure of customer satisfaction and is measured on a scale between -100 and 100. An NPS above 50 is considered excellent. The Company’s agent NPS was 70 in the first quarter of 2023. The NPS measure is an important vehicle for delivering on our core value of transparency. While we strive for high satisfaction, it is equally important to investigate a low or unfavorable trending of NPS. As NPS scores are often leading indicators to agents and employees’ future actions, we are able to learn quickly what may be a ‘pain point’ or product that is not meeting its desired objective. We then take that information and translate it into action with an effort to remediate the specific root cause(s) driving the lower score. Our fast and iterative approach has already led to improvements in parts of our business such as agent onboarding, commission transaction processing, and employee benefits. 18 Table of Contents Results of Operations Three Months Ended March 31, 2023 compared to the Three Months Ended March 31, 2022 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended ​ % of ​ Three Months Ended ​ % of ​ Change 2023 vs. 2022 ​ March 31, 2023 ​ Revenue ​ March 31, 2022 ​ Revenue ​ $ % ​ ​ (In thousands, except share amounts and per share data) Statement of Operations Data: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Revenues $ 850,616 ​ 100% ​ $ 1,010,731 ​ 100% ​ ($ 160,115) ​ (16)% Operating expenses ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Commissions and other agent-related costs ​ 777,559 ​ 91% ​ 927,267 ​ 92% ​ (149,708) ​ (16)% General and administrative expenses ​ 71,767 ​ 8% ​ 75,322 ​ 7% ​ (3,555) ​ (5)% Sales and marketing expenses ​ 2,963 ​ -% ​ 3,700 ​ -% ​ (737) ​ (20)% Total operating expenses ​ 852,289 ​ 100% ​ 1,006,289 ​ 100% ​ (154,000) ​ (15)% Operating (loss) income ​ (1,673) ​ -% ​ 4,442 ​ -% ​ (6,115) ​ (138)% Other (income) expense ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Other (income) expense, net ​ (880) ​ -% ​ 410 ​ -% ​ (1,290) ​ (315)% Equity in losses of unconsolidated affiliates ​ 342 ​ -% ​ 317 ​ -% ​ 25 ​ 8% Other (income) expense, net ​ (538) ​ -% ​ 727 ​ -% ​ (1,265) ​ (174)% (Loss) income before income tax expense ​ (1,135) ​ -% ​ 3,715 ​ -% ​ (4,850) ​ (131)% Income tax benefit ​ (2,588) ​ -% ​ (5,149) ​ (1)% ​ 2,561 ​ (50)% Net (loss) income ​ 1,453 ​ -% ​ 8,864 ​ 1% ​ (7,411) ​ (84)% Add back: Net loss attributable to noncontrolling interest ​ - ​ -% ​ 18 ​ -% ​ (18) ​ (100)% Net (loss) income attributable to eXp World Holdings, Inc. ​ 1,453 ​ -% ​ 8,882 ​ 1% ​ (7,429) ​ (84)% Adjusted EBITDA (1) ​ $ 13,327 ​ 2% ​ $ 17,709 ​ 2% ​ ($ 4,382) ​ (25)% Earnings per share ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Basic ​ $ 0.01 ​ ​ ​ $ 0.06 ​ ​ ​ ($ 0.05) ​ (83)% Diluted ​ $ 0.01 ​ ​ ​ $ 0.06 ​ ​ ​ ($ 0.05) ​ (83)% Weighted average shares outstanding ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Basic ​ 152,546,766 ​ ​ ​ 149,226,166 ​ ​ ​ ​ ​ ​ Diluted ​ 155,668,712 ​ ​ ​ 156,842,721 ​ ​ ​ ​ ​ ​ (1) Adjusted EBITDA is not a measurement of our financial performance under U.S. GAAP and should not be considered as an alternative to net income, operating income or any other measures derived in accordance with U.S. GAAP. For a definition of Adjusted EBITDA and a reconciliation of Adjusted EBITDA to net income, see “Non-U.S. GAAP Financial Measures.” First Quarter 2023 consolidated financial highlights as compared to the same year-ago quarter: ● Revenue decreased 16% to $850.6 million. ● Gross profit decreased 12% to $73.1 million. ● Net income of $1.5 million. Earnings per diluted share of $0.01 compared to earnings per diluted share of $0.06 in the year ago quarter. ● Adjusted EBITDA (a non-GAAP financial measure) of $13.3 million. ● As of March 31, 2023, cash and cash equivalents totaled $122.8 million. The company repurchased approximately $29.9 million of common stock during the first quarter of 2023. 19 Table of Contents ● The Company paid a cash dividend for the first quarter of 2022 of $0.045 per share of common stock on March 31, 2023. On April 27, 2023, the Company’s Board of Directors declared a cash dividend of $0.045 per share of common stock for the second quarter of 2023, expected to be paid on May 31, 2023 to stockholders of record on May 12, 2023 Revenue Our total revenues were $850.6 million for the three months ended March 31, 2023 compared to $1,010.7 million for the same period in 2022, a decrease of ($160.1) million, or (16)%. Total revenues decreased in the first quarter of 2023 as a result of a decrease in real estate transactions and home prices compared to the same period in 2022 due to the decline of the US and Canada residential real estate market. Commission and Other Agent-Related Costs Commission and other agent-related costs were $777.6 million for the three months ended March 31, 2023 compared to $927.3 million for the same period in 2022, a decrease ($149.7) million, or (16)%. Commissions and other agent-related costs decreased as a result of a decrease in real estate transactions and home prices compared to the three months ended March 31, 2022 due to the decline of the U.S. and Canada residential real estate market. General and Administrative Expense General and administrative expenses were $71.8 million for the three months ended March 31, 2023 compared to $75.3 million for the same period in 2022, a decrease of ($3.6) million or (5)%. General and administrative expenses include costs related to wages, including stock compensation, and other general overhead expenses. General and administrative expenses decreased as a result of lower stock-based compensation, partially offset by increased personnel expenses due to the Company’s increase in employee count to continue to support our agent growth strategy. Sales and Marketing Sales and marketing expenses decreased to $3.0 million for the three months ended March 31, 2023 compared to $3.7 million the same period in 2022. The decrease of ($0.7) million is due to decreased advertising to offset the contraction in the real estate market. Other (Income) Expense Other (income) in the first quarter of 2023 relates primarily to increased interest income when compared to the first quarter of 2022. Income Tax Benefit The Company’s provision for (benefit from) income taxes amounted to ($2.59) million and ($5.15) million for the three months ended March 31, 2023 and 2022, respectively, which represented effective tax rates of positive 237.56% and negative 137.97%, respectively. The increase in income tax benefit was primarily attributable to lower deductible stock-based compensation windfalls. 20 Table of Contents BUSINESS SEGMENT DISCLOSURES See Note 11 – Segment Information to the consolidated financial statements for additional information regarding our business segments. The following table reflects the results of each of our reportable segments during the three months ended March 31, 2023 and 2022: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended ​ Three Months Ended ​ Change 2023 vs. 2022 ​ March 31, 2023 ​ March 31, 2022 ​ $ % ​ ​ (In thousands, except share amounts and per share data) Statement of Operations Data: ​ ​ ​ ​ ​ ​ ​ ​ Revenues ​ ​ ​ ​ ​ ​ ​ North American Realty ​ $ 837,114 ​ $ 1,001,880 ​ ($ 164,766) ​ (16)% International Realty ​ 10,758 ​ 7,094 ​ 3,664 ​ 52% Virbela ​ 2,163 ​ 1,813 ​ 350 ​ 19% Other Affiliated Services ​ 1,677 ​ 838 ​ 839 ​ 100% Segment eliminations ​ (1,096) ​ (894) ​ (202) ​ 23% Total Consolidated Revenues ​ $ 850,616 ​ $ 1,010,731 ​ ($ 160,115) ​ (16)% Adjusted Segment EBITDA (1) ​ ​ ​ ​ ​ ​ ​ ​ North American Realty ​ 21,203 ​ 28,770 ​ ($ 7,567) ​ (26)% International Realty ​ (3,676) ​ (1,956) ​ (1,720) ​ 88% Virbela ​ (1,296) ​ (2,771) ​ 1,475 ​ (53)% Other Affiliated Services ​ (681) ​ (829) ​ 148 ​ (18)% Corporate expenses and other ​ (2,223) ​ (5,505) ​ 3,282 ​ (60)% Total Reported Adjusted EBITDA ​ $ 13,327 ​ $ 17,709 ​ ($ 4,382) ​ (25)% North American Realty revenue decreased 16% in the first quarter of 2023 compared to the same period in 2022 primarily due to decreased real estate transactions and home prices driven by the slowdown in the real estate markets. Adjusted EBITDA decreased 26% due to lower revenue, as well as increased general and administrative costs primarily related to increased compensation and personnel related expenses. International Realty revenue increased 52% in the first quarter of 2023 compared to the same period in 2022 primarily due to increased real estate transactions driven by a higher agent count and increased productivity in previously launched markets. Adjusted EBITDA (loss) increased 88% in the first quarter of 2022 compared to the same period in 2022 due to growing selling, general and administrative expenses to support the incremental production in existing operations. Virbela revenue increased 19% due to additional enterprise customer base. Adjusted EBITDA (loss) decreased 53% primarily due to workforce reductions and decrease in marketing and advertising expenses. Other Affiliated Services revenue increased 100% due to expansion of SUCCESS® Coaching and SUCCESS® Media, primarily SUCCESS® magazine. The increases in revenue directly contributed to Adjusted EBITDA (loss) decrease of 18%. Corporate expenses and other contain the costs incurred to operate the corporate parent of eXp Realty. The decrease in these costs (decrease in Adjusted EBITDA (loss) of 60% in the first quarter of 2023 compared to the same period of 2022) reflect decreased costs primarily due to cost containment initiatives. NON-U.S. GAAP FINANCIAL MEASURES To supplement our condensed consolidated financial statements, which are prepared and presented in accordance with U.S. GAAP, we use Adjusted EBITDA, a non-U.S. GAAP financial measure, to understand and evaluate our core operating performance. This non-GAAP financial measure, which may be different than similarly titled measures used by other companies, is presented to enhance investors’ overall understanding of our financial performance and should not be considered a substitute for, or superior to, the financial information prepared and presented in accordance with U.S.GAAP. 21 Table of Contents We define the non-U.S. GAAP financial measure of Consolidated Adjusted EBITDA to mean net income, excluding other income (expense), income tax benefit (expense), depreciation, amortization, impairment charges, stock-based compensation expense and stock option expense. Adjusted Segment EBITDA is defined as operating profit plus depreciation and amortization and stock-based compensation expenses. We believe that Consolidated Adjusted EBITDA and Adjusted Segment EBITDA provides useful information about our financial performance, enhances the overall understanding of our past performance and future prospects and allows for greater transparency with respect to a key metric used by our management for financial and operational decision-making. We believe that Adjusted Segment EBITDA helps identify underlying trends in our business that otherwise could be masked by the effect of the expenses that we exclude in Adjusted Segment EBITDA. In particular, we believe the exclusion of stock and stock option expenses, provides a useful supplemental measure in evaluating the performance of our underlying operations and provides better transparency into our results of operations. We are presenting the non-U.S. GAAP measure of Adjusted EBITDA to assist investors in seeing our financial performance through the eyes of management, and because we believe this measure provides an additional tool for investors to use in comparing our core financial performance over multiple periods with other companies in our industry. Adjusted EBITDA should not be considered in isolation from, or as a substitute for, financial information prepared in accordance with U.S. GAAP. There are a number of limitations related to the use of Adjusted EBITDA compared to Net Income (Loss), the closest comparable U.S. GAAP measure. Some of these limitations are that: ● Adjusted EBITDA excludes stock-based compensation expense related to our agent growth incentive program and stock option expense, which have been, and will continue to be for the foreseeable future, significant recurring expenses in our business and an important part of our compensation strategy; and ● Adjusted EBITDA excludes certain recurring, non-cash charges such as depreciation of fixed assets, amortization of intangible assets, and impairment charges related to these long-lived assets, and, although these are non-cash charges, the assets being depreciated, amortized, or impaired may have to be replaced in the future. The following tables present a reconciliation of Adjusted EBITDA to net loss, the most comparable U.S. GAAP financial measure, for each of the periods presented: ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended March 31, ​ ​ 2023 ​ 2022 ​ Net income ​ $ 1,453 ​ $ 8,864 ​ Other (income) expense, net ​ (538) ​ 727 ​ Income tax benefit ​ (2,588) ​ (5,149) ​ Depreciation and amortization ​ 2,579 ​ 1,958 ​ Stock compensation expense (1) ​ 9,660 ​ 7,798 ​ Stock option expense ​ 2,761 ​ 3,511 ​ Adjusted EBITDA ​ $ 13,327 ​ $ 17,709 ​ (1) This includes agent growth incentive stock compensation expense and stock compensation expense related to business acquisitions. LIQUIDITY AND CAPITAL RESOURCES Our primary sources of liquidity are our cash and cash equivalents on hand and cash flows generated from our business operations. Our ability to generate sufficient cash flow from operations or to access certain capital markets, including banks, is necessary to fund our operations and capital expenditures, repurchase our common stock, and meet obligations as they become due. At present, our cash and cash equivalents balances and cash flows from operations have strengthened primarily due to transaction volume growth and improved cost leverage over the prior five years, attributable to the expansion of our independent agent and broker network and, to a lesser extent, increased average prices of home sales. Currently, our primary use of cash on hand is to sustain and grow our business operations, including, but not limited to, commission and revenue share payments to agents and brokers and cash outflows for operating expenses and dividend payments. In addition, the Company has no known material cash requirements as of March 31, 2023, relating to capital expenditures, commitments, or human capital (except as passthrough commissions to agents and brokers concurrent with settled real estate transactions). 22 Table of Contents For information regarding the Company’s expected cash requirement related to settlement costs, see Note 10 – Commitments and Contingencies . We believe that our existing balances of cash and cash equivalents and cash flows expected to be generated from our operations will be sufficient to satisfy our operating requirements for at least the next twelve months. Our future capital requirements will depend on many factors, including our level of investment in technology, our rate of growth into new markets, and cash used to repurchase shares of the Company’s common stock. Our capital requirements may be affected by factors which we cannot control such as the changes in the residential real estate market, interest rates, and other monetary and fiscal policy changes to the manner in which we currently operate. In order to support and achieve our future growth plans, we may need or seek advantageously to obtain additional funding through equity or debt financing. We believe that our current operating structure will facilitate sufficient cash flows from operations to satisfy our expected long-term liquidity requirements beyond the next twelve months. Net Working Capital Net working capital is calculated as the Company’s total current assets less its total current liabilities. The following table presents our net working capital as of March 31, 2023 and December 31, 2022: ​ ​ ​ ​ ​ ​ March 31, 2023 December 31, 2022 Current assets ​ $ 290,247 ​ $ 255,113 Current liabilities ​ (161,547) ​ (127,299) Net working capital ​ $ 128,700 ​ $ 127,814 ​ ​ ​ ​ ​ For the three months ended March 31, 2023, net working capital increased $0.9 million, or 1%, compared to December 31, 2022. Cash Flows The following table presents our cash flows for the three months ended March 31, 2023 and 2022: ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended March 31, ​ 2023 ​ 2022 Cash provided by operating activities ​ $ 56,144 ​ $ 111,507 ​ Cash used in investment activities ​ (1,782) ​ (4,684) ​ Cash used in financing activities ​ (36,205) ​ (35,743) ​ Effect of changes in exchange rates on cash, cash equivalents and restricted cash ​ 594 ​ 41 ​ Net change in cash, cash equivalents and restricted cash ​ $ 18,751 ​ $ 71,121 ​ ​ ​ ​ ​ ​ ​ For the three months ended March 31, 2023, cash provided by operating activities decreased ($55.4) million compared to the same period in 2022. The change resulted primarily from decreased real estate transactions. For the three months ended March 31, 2023, cash used in our investing activities decreased primarily due to fewer capital expenditures. For the three months ended March 31, 2023, the increase in cash flows used in financing activities primarily were related to an increase in the payment of cash dividends from 2022 to 2023. Acquisitions While we do not consider acquisitions a critical element of our ongoing business, we seek opportunities to expand and enhance our portfolio of solutions, access new revenue streams, or otherwise complement or accelerate the growth of our existing operations . We may fund acquisitions or investments in complementary businesses with various sources of capital including existing cash balances and cash flow from operations. CRITICAL ACCOUNTING POLICIES AND ESTIMATES The condensed consolidated financial statements should be read in conjunction with the consolidated financial statements included in the Annual Report on Form 10-K for the year ended December 31, 2022, which provides a 23 Table of Contents description of our critical accounting policies. There were no changes to critical accounting policies or estimates as reflected in our 2022 Annual Report. For additional information regarding our critical accounting policies and estimates, see the Critical Accounting Policies and Estimates section of MD&A included in our 2022 Annual Report. ​ Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK There have been no material changes in our exposures to market risk since December 31, 2022. For details on the Company's interest rate and foreign currency exchange, see “Item 7A. Quantitative and Qualitative Information About Market Risks” in our 2022 Annual Report.