# GAIA, INC (GAIA) FY 2023 MD&A

Verbatim Item 7 Management's Discussion and Analysis from GAIA, INC's 10-K for fiscal year 2023.

SEC filing source: https://www.sec.gov/Archives/edgar/data/1089872/000095017024038768/gaia-20231231.htm
Accession: 0000950170-24-038768
Filing date: 2024-03-29
Report date: 2023-12-31
Extracted structurally from real Item 7 body heading to real Item 7A/8 boundary.
Confidence: high

Company profile: /company/GAIA/
All MD&A years: /company/GAIA/mda/
Previous year: /company/GAIA/mda/fy2022/ (FY 2022)
Next year: /company/GAIA/mda/fy2024/ (FY 2024)

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Statements

This report contains forward-looking statements within the meaning of the federal securities laws. All statements other than statements of historical fact are forward looking statements that involve risks and uncertainties. When used in this discussion, we intend the words “anticipate,” “believe,” “contemplate,” “continue,” “could,” “estimate,” “expect,” “future,” “hope,” “intend” “may,” “might,” “objective,” “ongoing,” “plan,” “potential,” “predict,” “project,” “should,” “strive,” “target,” “will,” “would” and similar expressions as they relate to us to identify such forward-looking statements. Our actual results could differ materially from the results anticipated in these forward-looking statements as a result of certain factors set forth under “Risk Factors” and elsewhere in this Form 10-K. Risks and uncertainties that could cause actual results to differ include, without limitation: our ability to attract new members and retain existing members; our ability to compete effectively, including for customer engagement with different modes of entertainment; maintenance and expansion of device platforms for streaming; fluctuation in customer usage of our service; fluctuations in quarterly operating results; service disruptions; production risks, general economic conditions; future losses; loss of key personnel; price changes; brand reputation; acquisitions; new initiatives we undertake; security and information systems; legal liability for website content; failure of third parties to provide adequate service; future internet-related taxes; our founder’s control of us; litigation; consumer trends; the effect of government regulation and programs; the impact of public health threats; our ability to remediate the material weaknesses in our internal control over financial reporting; and other risks and uncertainties included in our filings with the SEC. We caution you that no forward-looking statement is a guarantee of future performance, and you should not place undue reliance on these forward-looking statements which reflect our views only as of the date of this report. We undertake no obligation to update any forward-looking information.

You should read the following discussion and analysis of our financial condition and results of operations in conjunction with the consolidated financial statements and related notes included elsewhere in this report. This section is designed to provide information that will assist readers in understanding our consolidated financial statements, changes in certain items in those statements from year to year, the primary factors that caused those changes and how certain accounting principles, policies and estimates affect the consolidated financial statements.

Restatement of Previously Issued Consolidated Financial Statements:

We have restated our previously issued consolidated financial statements contained in this Annual Report on Form 10-K. Refer to the “Explanatory Note” preceding Item 1, Business, for background on the restatement, the fiscal periods impacted, control considerations, and other information.

In addition, we have restated certain previously reported consolidated financial information at December 31, 2022 and for the fiscal year ended December 31, 2022, and for each of the interim periods ended March 31, 2022 through September 30, 2023 in this Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, including but not limited to information within the Results of Operations, Quarterly and Seasonal Fluctuations, and Cash Flows sections.

See Note 3, Restatement of Previously Issued Consolidated Financial Statements, and Note 17 Quarterly Financial Data (Unaudited), in Item 8, Financial Statements and Supplementary Data, for additional information related to the restatement, including descriptions of the misstatements and the impacts on our consolidated financial statements.

Overview and Outlook

We operate a global digital video subscription service with a library of over 10,000 titles and live events, with a growing selection of titles available in Spanish, German and French that caters to a unique, underserved member base. Our digital content is available to our members on most internet-connected devices anytime, anywhere, commercial-free. Through our online Gaia subscription service our members have unlimited access to a library of inspiring films, cutting edge documentaries, interviews, yoga classes, transformation related content, live events, and more – 88% of which is exclusively available to our members for digital streaming on most internet-connected devices.

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Gaia’s position in the streaming video landscape is firmly supported by its wide variety of exclusive and unique content, which provides a complementary offering to other entertainment-based streaming video services. Our original content is developed and produced in-house in our lifestyle campus near Boulder, Colorado. By offering exclusive and unique content through our streaming service, we believe we will be able to significantly expand our target member base.

Our available content is currently focused on yoga, transformation, alternative healing, seeking truth and conscious films. This content is specifically targeted to a unique member base that is interested in alternatives and supplements to the content provided by mainstream media. We have grown these content options both organically through our own productions and through strategic acquisitions. In addition, through our investments in our streaming video technology and our user interface, we have expanded the many ways our subscription member base can access our unique library of media titles.

Our core strategy is to grow our subscription business domestically and internationally by expanding our unique and exclusive content library, enhancing our user interface, extending our streaming service to new internet-connected devices as they are developed and creating a conscious community built around our content.

We are a Colorado corporation. Our principal and executive office is located at 833 West South Boulder Road, Louisville, CO 80027-2452. Our telephone number at that address is (303) 222-3600.

Results of Operations

The table below summarizes certain of our results for the periods indicated:

[[GREPCENT_TABLE]]
[["","","Years ended December 31,"],["(in thousands, except per share data)","","2023","","","2022 (As restated)"],["Revenues, net","","$","80,423","","","$","82,035"],["Cost of revenues","","","11,629","","","","10,915"],["Gross profit margin","","","85.5","%","","","86.7","%"],["Selling and operating","","","67,156","","","","64,155"],["Corporate, general and administration","","","6,205","","","","7,181"],["Acquisition costs","","","\u2014","","","","49"],["Loss from operations","","","(4,567",")","","","(265",")"],["Equity method investment loss","","","(501",")","","","(511",")"],["Interest and other expense, net","","","(467",")","","","(257",")"],["SEC settlement","","","\u2014","","","","(2,000",")"],["Loss before income taxes","","","(5,535",")","","","(3,033",")"],["Provision for income taxes","","","60","","","","202"],["Loss from continuing operations","","","(5,595",")","","","(3,235",")"],["Loss from discontinued operations","","","\u2014","","","","(360",")"],["Net loss","","$","(5,595",")","","$","(3,595",")"],["Net income attributable to noncontrolling interests","","","207","","","","296"],["Net loss attributable to common shareholders","","","(5,802",")","","","(3,891",")"]]
[[/GREPCENT_TABLE]]

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The following table sets forth certain financial data as a percentage of revenues, net for the periods indicated:

[[GREPCENT_TABLE]]
[["","","Years ended December 31,"],["","","2023","","","2022 (As restated)"],["Revenues, net","","","100.0","%","","","100.0","%"],["Cost of revenues","","","14.5","%","","","13.3","%"],["Gross profit margin","","","85.5","%","","","86.7","%"],["Expenses:"],["Selling and operating","","","83.5","%","","","78.2","%"],["Corporate, general and administration","","","7.7","%","","","8.8","%"],["Acquisition costs","","","0.0","%","","","0.1","%"],["Total operating expenses","","","91.2","%","","","87.0","%"],["Loss from operations","","","(5.7",")%","","","(0.3",")%"],["Equity method investment loss","","","(0.6",")%","","","(0.6",")%"],["Interest and other expense, net","","","(0.6",")%","","","(0.3",")%"],["SEC settlement","","","0.0","%","","","(2.4",")%"],["Loss before income taxes","","","(6.9",")%","","","(3.7",")%"],["Provision for (benefit from) income taxes","","","0.1","%","","","0.2","%"],["Loss from continuing operations","","","(7.0",")%","","","(3.9",")%"],["Loss from discontinued operations","","","0.0","%","","","(0.4",")%"],["Net loss","","","(7.0",")%","","","(4.4",")%"],["Net income attributable to noncontrolling interests","","","0.3","%","","","0.4","%"],["Net loss attributable to common shareholders","","","(7.2",")%","","","(4.7",")%"]]
[[/GREPCENT_TABLE]]

Year Ended December 31, 2023 Compared to Year Ended December 31, 2022

Revenues, net. Revenues, net decreased $1.6 million, or 2.0%, to $80.4 million during 2023, compared to $82.0 million during 2022. The primary contributing factor to the decrease in revenue is a lower average-subscriber count for 2023 versus 2022. The reduced count is due to the industry-wide post-COVID subscriber contraction in the second half of 2022 and subsequent recovery.

Cost of revenues. Cost of revenues increased $0.7 million, or 6.4%, to $11.6 million during 2023 from $10.9 million during 2022, with gross profit margin of 85.5% in the current year compared to 86.7% in 2022. The increase in the cost of revenues is driven mainly by increased paid advertising costs. The gross profit margin decrease is due to the combination of increased costs with lower revenues.

Selling and operating expenses. Selling and operating expenses increased $3.0 million, or 4.7%, to $67.2 million during 2023 from $64.2 million during 2022 and, as a percentage of revenues, increased to 83.5% during 2023 from 78.2% during 2022. The increase was primarily driven by tax accruals for 2023.

Corporate, general and administration expenses. Corporate, general and administration expenses decreased $1.0 million, or 13.9%, to $6.2 million during 2023 from $7.2 million during 2022 and, as a percentage of net revenue, decreased to 7.7% during 2023 from 8.8% during 2022. The decrease was primarily driven by higher legal fees and stock compensation expense during 2022.

Interest and other income (expense), net. Interest and other income (expense), net decreased $(0.2) million to $(0.5) million during 2023 compared to $(0.3) million during 2022. The bulk of interest paid is attributed to the loan on our building and the line of credit discussed in Note 9 to the consolidated financial statements in Item 8 of this Form 10-K.

Provision for (benefit from) income taxes. Provision for income taxes reflects a current year provision of $0.1 million compared to the prior year provision of $0.2 million from income taxes due to the partial valuation allowance release related to the recognition of deferred tax liabilities associated with the acquisition of Yoga International, Food Matters, and My Yoga Online.

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Quarterly and Seasonal Fluctuations

The following tables set forth our unaudited results of operations for each of the quarters in 2023 and 2022. In our opinion, this unaudited financial information includes all adjustments, consisting solely of normal recurring accruals and adjustments, necessary for a fair presentation of the results of operations for the quarters presented. You should read this financial information in conjunction with our consolidated financial statements and related notes included elsewhere in this Form 10-K. The results of operations for any quarter are not necessarily indicative of future results of operations.

[[GREPCENT_TABLE]]
[["","","Year 2023 Quarters Ended (Unaudited) (As restated)"],["(in thousands, except per share data)","","March 31","","","June 30","","","September 30","","","December 31"],["Revenues, net","","$","19,647","","","$","19,839","","","$","20,223","","","$","20,714"],["Gross profit","","","16,874","","","","17,000","","","","17,240","","","","17,680"],["Gross profit margin","","","85.9","%","","","85.7","%","","","85.2","%","","","85.4","%"],["Equity method investment loss","","","(125",")","","","(125",")","","","(125",")","","","(126",")"],["Loss from continuing operations","","","(1,268",")","","","(1,843",")","","","(713",")","","","(1,771",")"],["Net loss","","","(1,268",")","","","(1,843",")","","","(713",")","","","(1,771",")"],["Net income attributable to noncontrolling interests","","","38","","","","45","","","","59","","","","65"],["Net loss attributable to common shareholders","","","(1,306",")","","","(1,888",")","","","(772",")","","","(1,836",")"],["Loss per share"],["Basic"],["Continuing operations (attributable to common shareholders)","","$","(0.06",")","","$","(0.09",")","","$","(0.04",")","","$","(0.08",")"],["Discontinued operations","","$","\u2014","","","$","\u2014","","","$","\u2014","","","$","\u2014"],["Basic loss per share","","$","(0.06",")","","$","(0.09",")","","$","(0.04",")","","$","(0.08",")"],["Diluted"],["Continuing operations (attributable to common shareholders)","","$","(0.06",")","","$","(0.09",")","","$","(0.04",")","","$","(0.08",")"],["Discontinued operations","","$","\u2014","","","$","\u2014","","","$","\u2014","","","$","\u2014"],["Diluted loss per share","","$","(0.06",")","","$","(0.09",")","","$","(0.04",")","","$","(0.08",")"],["Weighted average shares outstanding"],["Basic","","","20,826","","","","20,874","","","","21,154","","","","23,148"],["Diluted","","","20,826","","","","20,874","","","","21,154","","","","23,148"]]
[[/GREPCENT_TABLE]]

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[[GREPCENT_TABLE]]
[["","","Year 2022 Quarters Ended (Unaudited) (As restated)"],["(in thousands, except per share data)","","March 31","","","June 30","","","September 30","","","December 31"],["Revenues, net","","$","21,831","","","$","20,720","","","$","19,907","","","$","19,577"],["Gross profit","","","18,926","","","","17,961","","","","17,259","","","","16,974"],["Gross margin","","","86.7","%","","","86.7","%","","","86.7","%","","","86.7","%"],["Equity method investment loss","","","(129",")","","","(135",")","","","(125",")","","","(122",")"],["Income (loss) from continuing operations","","","122","","","","123","","","","(2,493",")","","","(987",")"],["Loss from discontinued operations","","","(161",")","","","(132",")","","","(7",")","","","(60",")"],["Net loss","","","(39",")","","","(9",")","","","(2,500",")","","","(1,047",")"],["Net income attributable to noncontrolling interests","","","65","","","","65","","","","34","","","","132"],["Net loss attributable to common shareholders","","","(104",")","","","(74",")","","","(2,534",")","","","(1,179",")"],["Loss per share"],["Basic"],["Continuing operations (attributable to common shareholders)","","$","\u2014","","","$","\u2014","","","$","(0.12",")","","$","(0.05",")"],["Discontinued operations","","$","(0.01",")","","$","(0.01",")","","$","\u2014","","","$","\u2014"],["Basic loss per share","","$","(0.01",")","","$","(0.01",")","","$","(0.12",")","","$","(0.05",")"],["Diluted"],["Continuing operations (attributable to common shareholders)","","$","\u2014","","","$","\u2014","","","$","(0.12",")","","$","(0.05",")"],["Discontinued operations","","$","(0.01",")","","$","(0.01",")","","$","\u2014","","","$","\u2014"],["Diluted loss per share","","$","(0.01",")","","$","(0.01",")","","$","(0.12",")","","$","(0.05",")"],["Weighted average shares outstanding"],["Basic","","","20,465","","","","20,788","","","","20,806","","","","20,806"],["Diluted","","","20,816","","","","20,795","","","","20,806","","","","20,806"]]
[[/GREPCENT_TABLE]]

Our member base growth reflects seasonal variations driven primarily by periods when consumers typically spend more time indoors and, as a result, tend to increase their viewing. We have generally experienced the greatest member growth in the fourth and first quarters (October through February), and slowest during May through August. This drives quarterly variations in our spending on member acquisition efforts and the number of net new subscribers we add each quarter but does not result in a corresponding seasonality in net revenue. As we continue to expand internationally, we also expect regional seasonality trends to demonstrate more predictable seasonal patterns as our service offering in each market becomes more established and we have a longer history to assess such patterns.

Critical Accounting Estimates

We prepare our consolidated financial statements in conformity with accounting principles generally accepted in the United States, which require us to make judgments, estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Note 2 to the consolidated financial statements in Item 8 of this Form 10-K summarizes the significant accounting policies and methods used in the preparation of our consolidated financial statements.

We believe the following to be critical accounting policies whose application has a material impact on our financial presentation, and involve a higher degree of complexity, as they require us to make judgments and estimates about matters that are inherently uncertain.

Media library

Media library represents the lower of unamortized cost or net realizable value of capitalized costs to produce our proprietary media content, rights obtained through license arrangements and digital media content acquired through asset purchases or business combinations.

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The value of our produced media library consists of capitalized costs incurred to produce original media content, including salary and overhead costs of our in-house production team and other third-party costs.

Our licensed media library is obtained through license arrangements. Generally, we pay an advance against a percentage royalty or an upfront license fee in exchange for the distribution rights for a specific license window, but we may also obtain a license for a fixed fee for perpetuity. These payments are capitalized at the time of payment. Certain agreements also include an ongoing royalty obligation, which entitles the licensor to a share of the revenues generated from the licensed works. These expenses are calculated and accrued on a monthly basis and included in costs of revenues. We pay these accrued royalties on a quarterly basis and therefore have included the related liability in accrued liabilities.

The value of our acquired media library consists of the acquisition date fair value of media assets obtained through asset acquisitions and business combinations recorded at the estimated fair value of the titles acquired, which is based on a number of factors, including the number of titles, the total hours of content, the production quality and age of the acquired media assets.

We amortize our media library in cost of revenues on a straight-line basis over the shorter of the license period or the estimated useful life of the titles, which typically ranges from 12 to 90 months. The amortization period begins with the first month of availability on our service.

Management reviews content viewership to determine whether viewing patterns correlate with initial estimates supporting the amortization period utilized. If current estimates indicate that viewing is significantly higher in earlier periods relative to the remaining amortization period, we will begin amortizing the respective titles on an accelerated basis over the amortization period. Due to our exclusive content and growing member base, our viewership trends have continued to support both the amortization period and the straight-line basis of amortization with no additional amortization recorded.

Our media library is reviewed for impairment at the film group level when an event or change in circumstances indicates that the carrying amount of the film group may not be recoverable. Recoverability of the film group is measured by a comparison of the carrying amount of the film group to estimated discounted future cash flows expected to be generated by the film group. If the carrying amount exceeds the estimated future cash flows, an impairment charge is recognized by the amount by which the carrying value exceeds the fair value. No impairment charges were recorded during 2023 or 2022.

Goodwill

Goodwill represents the excess of the purchase consideration over the estimated fair value of assets acquired less liabilities assumed in a business acquisition. We have only one reporting unit; therefore, goodwill is assessed at the enterprise level. We review goodwill for impairment annually as of October 1 or more frequently if indicators of impairment are identified. We have the option of first assessing qualitative factors to determine whether events and circumstances indicate that it is more likely than not that the estimated fair value of goodwill is less than its carrying amount. If the estimated fair value of goodwill exceeds its carrying amount, we consider the goodwill to not be impaired. If the carrying amount of goodwill exceeds its estimated fair value, we use both a comparable market approach and an income approach to test for potential impairment. The market approach follows the guideline public company method to establish valuation multiples for comparison. The income approach follows a traditional discounted cash flow model. Primary assumptions for each approach include revenue projections, operating expenses, discount rate, control premium, and terminal growth rate. Projections are dependent on management assumptions, which are partly based on the Company’s historical experience. The results of these approaches are evaluated against the Company’s market capitalization for reasonableness. The process of evaluating the potential impairment of goodwill is highly subjective and requires significant judgment at many points during the analysis. Application of alternative assumptions and definitions could yield significantly different results. During 2023 and 2022, no impairment of goodwill was indicated.

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Income Taxes and Deferred Tax Balances

Deferred income tax assets and liabilities are recorded with respect to temporary differences in the accounting treatment of items for financial reporting purposes and for income tax purposes. The tax expense or benefit related to ordinary income or loss must be computed at an annual effective tax rate and the tax expense or benefit related to all other items must be individually computed and recognized as a discrete item when it occurs. Where, based on the weight of available evidence, it is more likely than not that some amount of recorded deferred tax assets will not be realized, a valuation allowance is established for the amount that, in management’s judgment, is sufficient to reduce the deferred tax asset to an amount that is more likely than not to be realized. As we have historically had cumulative losses, we have not released the current valuation allowance. The timing of the release of the valuation allowance will be dependent on cumulative income for a period of 36 months and an expectation that we will not have cumulative losses in the future.

A tax position must meet a minimum probability threshold before a financial statement benefit is recognized. The minimum threshold is defined as a tax position that is more likely than not to be sustained upon examination by the applicable taxing authority, including resolution of any related appeals or litigation processes, based on the technical merits of the position. The tax benefit to be recognized is measured as the largest amount of benefit that is greater than fifty percent likely of being realized upon ultimate settlement.

Non-Income Taxes

The Company accrues for non-income tax assessments from foreign jurisdictions related to prior periods and recognizes the expense within selling and operating, when deemed probable and estimable. Once the requirement to remit non-income taxes to foreign jurisdictions has been established, we present revenues net of the non-income taxes collected from members and remit such amounts to foreign tax authorities.

Share-Based Compensation

We recognize compensation cost for share-based awards based on the estimated fair value of the award on the date of grant. We measure compensation cost at the grant date based on the estimated fair value of the award and recognize compensation cost upon the probable attainment of a specified performance condition over the estimated performance period or for time-based awards over the service period. Since 2019, we have only granted restricted stock units, for which we utilize the market price of our common stock on the date of grant to estimate fair value.

Liquidity and Capital Resources

Our capital needs arise from working capital required to fund operations, capital expenditures related to acquisition and development of media content, development and marketing of our digital platforms, acquisitions of new businesses and other investments, replacements, expansions and improvements to our infrastructure, and future growth. These capital requirements depend on numerous factors, including the rate of market acceptance of our offerings, our ability to expand our customer base, the cost of ongoing upgrades to our offerings, our expenditures for marketing, and other factors. Additionally, we will continue to pursue opportunities to expand our media libraries, evaluate possible investments in businesses and technologies, and increase our marketing programs as needed.

On December 28, 2020, Boulder Road and Westside Boulder, LLC entered into a loan agreement with First Interstate Bank, as lender, providing for a mortgage loan in the principal amount of $13.0 million. The loan bears interest at a fixed rate of 3.75% per annum and matures on December 28, 2025. Westside and Boulder Road each received 50% of the proceeds and are each responsible for 50% of the monthly installments. The loan is secured by a deed of trust, assignment of rents, security agreement and fixture filing on our corporate campus and is guaranteed by Gaia.

On August 25, 2022, Gaia entered into a Credit and Security Agreement with KeyBank National Association. The Credit Agreement provides for a revolving credit facility in an aggregate amount of up to $10.0 million with a sublimit of $1.0 million available for issuances of letters of credit. Borrowings under the Credit Agreement are

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available for working capital and general corporate purposes, but not to fund any permitted acquisitions or other investments.

We began to generate positive cash flows from operations since 2020 and have continued to generate cash flows from operations each subsequent quarter. We expect to continue generating positive cash flows from operations during 2024. We generated approximately $5.9 million in cash flows from operations during 2023, which helped fund the ongoing investment in our content library and the technology platform we use to deliver the content to our members.

We intend to invest approximately 10%-20% of our consolidated revenues each year to support continued investment in our content library and technology platform. This spending is entirely discretionary in nature with no contractual commitments and due to our in-house production capabilities, we can scale our content investment based on the cash flows generated from operations if necessary to ensure we have sufficient liquidity to operate our business into the future. As of December 31, 2023, our cash balance was $7.8 million.

In the normal course of our business, we investigate, evaluate and discuss acquisition, joint venture, minority investment, strategic relationship and other business combination opportunities in our market. For any future investment, acquisition or joint venture opportunities, we may consider using then-available liquidity, issuing equity securities or incurring indebtedness.

While there can be no assurances, we believe our cash on hand, cash expected to be generated from operations, and potential capital raising capabilities should be sufficient to fund our operations on both a short-term and long-term basis. However, our projected cash needs may change as a result of acquisitions, product development, unforeseen operational difficulties or other factors.

Class A Common Stock Offering

On October 2, 2023, we entered into an underwriting agreement with Lake Street Capital Markets, LLC (the Underwriter) relating to the offer and sale of 1,855,000 shares of our Class A common stock ($0.0001 par value) (the Shares). We sold the Shares to the Underwriter at the public offering price of $2.70 per share less underwriting discounts and commissions, resulting in net proceeds of $4.7 million. We provided a 30-day option to the Underwriter to purchase up to an additional 278,250 Shares to cover over-allotments. On November 3, 2023, the Underwriter purchased an additional 203,754 Shares generating additional net proceeds of $0.5 million pursuant to the partial exercise of the over-allotment option.

Cash Flows

The following table summarizes our primary sources (uses) of cash during the periods presented:

[[GREPCENT_TABLE]]
[["","","Years ended December 31,"],["(in thousands)","","2023","","","2022 (As restated)"],["Net cash provided by (used in):"],["Operating activities - continuing operations","","$","5,870","","","$","2,040"],["Operating activities - discontinued operations","","$","\u2014","","","$","(360",")"],["Operating activities","","$","5,870","","","$","1,680"],["Investing activities","","$","(5,282",")","","$","(9,264",")"],["Financing activities","","$","(4,384",")","","$","8,877"],["Net (decrease) increase in cash","","$","(3,796",")","","$","1,293"]]
[[/GREPCENT_TABLE]]

2023 Compared to 2022

Operating activities. Cash flows from operations increased $4.2 million during 2023 compared to 2022. This increase was primarily driven by improvements in working capital driven by several factors including timing of payments to vendors and an increase in direct membership subscriptions.

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Investing activities. Cash flow used in investing activities decreased $4.0 million during 2023 compared to 2022 due to impacts from investments and planned decrease in capital expenditures.

Financing activities. Cash flows from financing activities decreased $13.3 million during 2023 compared to 2022 primarily related to debt repayments in 2023. Debt repayments were partially offset by proceeds from the issuance of common stock. We had no outstanding borrowings at December 31, 2023.