Chegg Inc.
11/10/2025 | Press release | Distributed by Public on 11/10/2025 15:17
Quarterly Report for Quarter Ending September 30, 2025 (Form 10-Q)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You should read the following discussion of our financial condition and results of operations in conjunction with our condensed consolidated financial statements and the related notes included in Part I, Item 1, "Financial Statements (unaudited)" of this Quarterly Report on Form 10-Q. In addition to historical consolidated financial information, the following discussion contains forward-looking statements that reflect our plans, estimates, and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. See the section titled "Note about Forward-Looking Statements" for additional information. Factors that could cause or contribute to these differences include those discussed below and elsewhere in this Quarterly Report on Form 10-Q.
Overview
Chegg is a learning platform helping businesses bring new skills to their workforce and giving lifelong learners and students the skills and confidence to succeed. Focused on the large and growing skilling market, Chegg offers innovative tools for workplace readiness, professional upskilling, and language learning. Chegg also continues to offer students artificial intelligence (AI)-driven, personalized support. Chegg remains committed to its mission of improving learning outcomes and career opportunities for millions around the world.
Along those lines, Chegg is evolving into a skills focused organization, investing in two large growth areas: language learning, and workplace readiness and upskilling. These businesses are expected to serve as primary growth engines, while Chegg Study should remain a valuable service for millions of students and also generate cash to support investments in the growth businesses. We believe the investments we are making will allow us to return to revenue growth over time. Our ability to achieve these long-term objectives is subject to numerous risks and uncertainties, which are described in greater detail below and in Part II, Item 1A, "Risk Factors."
Conclusion of Process to Explore Strategic Alternatives
On October 27, 2025, we announced that our Board of Directors unanimously approved the conclusion of its review of strategic alternatives that was announced in February 2025.
Business Updates and Developments
Recent technological shifts, notably Google's AI Overviews search experience, or AIO, and continued increase in adoption of free and paid generative AI services by students, have created and are expected to continue to create headwinds for our industry and our business, most notably a reduction in traffic to our website and customers subscribing to our services. In August 2024, Google broadly rolled out AIO, which displays AI-generated content at the top of its search results. This experience, which includes questions and solutions for education, keeps users on Google search results versus leading them onto our site. AIO's prevalence has grown and will only continue to increase. We expect Google to continue its shift from being a search origination point to the destination, which we believe has materially adversely affected our business, operating results and financial condition.
In addition, across our industry, there has been a continued increase in the adoption of free and paid generative AI products for academic support, and students are increasingly turning to generative AI for academic support, such as homework and exams, as well as assistance in other areas of daily life. This issue impacts education technology companies broadly, where students see generative AI products like Chat GPT and others as strong alternatives to vertically specialized solutions for education such as Chegg. These developments have negatively impacted our industry and our business and are expected to continue to impact our overall traffic and accelerate the decline in the number of new subscribers that sign up for our services, resulting in continued negative impacts to our growth, business, operating results and financial condition. See Part II, Item 1A, "Risk Factors" for additional details.
In May 2025, we announced an additional restructuring plan to further manage costs and align with the market. The May 2025 restructuring plan included a reduction in workforce and the closure of one office. We estimate we will incur between $2 million and $3 million of additional restructuring charges over the next fiscal quarter and we expect the plan to be substantially completed by the first quarter of the fiscal year 2026. For fiscal years 2025 and 2026, we expect to realize cost savings as a result of the May 2025 restructuring plan. See Note 11, "Restructuring Charges" of our accompanying Notes to Condensed Consolidated Financial Statements included in Part I, Item 1, "Financial Statements (unaudited)" of this Quarterly Report on Form 10-Q for additional details.
In October 2025, we announced a further restructuring plan that includes a reduction of our global workforce, which is expected to impact approximately 388 employees, or about 45% of our current workforce, as well as other actions to streamline the Company's operations. We estimate we will incur between $12 million and $16 million of additional restructuring charges over the next fiscal quarter and we expect the plan to be substantially completed by the first quarter of the fiscal year 2026. For fiscal years 2025 and 2026, we expect to realize cost savings as a result of the October 2025 restructuring plan. See Note 13, "Subsequent Events" of our accompanying Notes to Condensed Consolidated Financial Statements included in Part I, Item 1, "Financial Statements (unaudited)" of this Quarterly Report on Form 10-Q for additional details.
We are evolving our learning platform into a skilling-focused business-to-business organization, building on its existing businesses in professional language learning, workplace readiness and AI-related skills courses. These businesses are expected to generate positive revenue in 2025 and achieve further growth in 2026. This new strategic focus positions Chegg for a return to sustainable revenue and profitability growth over time.
We have presented revenues for our two product lines, Subscription Services and Skills and Other, based on how students view us and the utilization of our products by them. More detail on our two product lines is discussed in the next two sections titled "Subscription Services" and "Skills and Other."
Subscription Services
Our Subscription Services can be accessed internationally through our websites and on mobile devices and include Chegg Study Pack, Chegg Study, Chegg Writing, Chegg Math, and Busuu. Students typically pay to access our Subscription Services on a monthly basis. Revenues from our Subscription Services are primarily recognized ratably over the monthly subscription period whereas the number of subscribers are determined as those who have paid to access our services at any time during the period. Changes in revenues are primarily related to changes in subscribers. Our Chegg Study subscription service provides access to personalized, step-by-step learning support powered by AI, computational engines, and subject matter experts. When students need writing help, including plagiarism detection scans and creating citations for their papers, they can use our Chegg Writing subscription service. Our Chegg Math subscription service helps students understand math by providing a step-by-step math solver and calculator. We also offer our Chegg Study Pack as a premium subscription bundle of our Chegg Study, Chegg Writing, and Chegg Math services. Subscribers to Busuu have access to a premium language learning platform that offers comprehensive support through self-paced lessons, live classes with expert tutors and a huge community of members to practice alongside.
Skills and Other
Our Skills and Other product line includes revenues from Chegg Skills, advertising services, content licensing, print textbooks and eTextbooks. Our Chegg Skills learning platform offers professional courses focused on the latest technology skills. We work with leading brands and programmatic partners to deliver advertising across our platforms. Beginning in the first quarter of 2025, we enter into non-exclusive content library licensing agreements with third parties. Until July 1, 2025, we also provided a platform for students to rent or buy print textbooks and eTextbooks, which helps students save money compared to the cost of buying new.
Seasonality of Our Business
Revenues from Subscription Services are primarily recognized ratably over the subscription term which has generally resulted in our highest revenues and profitability in the fourth quarter as it reflects more days of the academic year. Certain variable expenses, such as marketing expenses, remain highest in the first and third quarters such that our profitability may not provide meaningful insight on a sequential basis. As a result of these factors, the most concentrated periods for our revenues and expenses do not necessarily coincide, and comparisons of our historical quarterly results of operations on a sequential basis may not provide meaningful insight into our overall financial performance.
Results of Operations
The following table presents our historical condensed consolidated statements of operations (in thousands, except percentage of total net revenues):
|
Three Months Ended September 30, |
Nine Months Ended September 30, |
||||||||||||||||||||||||||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||||||||||||||||||||||||||
| Net revenues | $ | 77,742 | 100 | % | $ | 136,593 | 100 | % | $ | 304,249 | 100 | % | $ | 474,090 | 100 | % | |||||||||||||||||||||||||||||||
|
Cost of revenues(1)
|
31,701 | 41 | 43,420 | 32 | 121,152 | 40 | 135,328 | 29 | |||||||||||||||||||||||||||||||||||||||
| Gross profit | 46,041 | 59 | 93,173 | 68 | 183,097 | 60 | 338,762 | 71 | |||||||||||||||||||||||||||||||||||||||
| Operating expenses: | |||||||||||||||||||||||||||||||||||||||||||||||
|
Research and development(1)
|
18,350 | 24 | 41,337 | 30 | 76,495 | 25 | 129,423 | 27 | |||||||||||||||||||||||||||||||||||||||
|
Sales and marketing(1)
|
11,583 | 15 | 26,508 | 19 | 54,614 | 18 | 80,428 | 17 | |||||||||||||||||||||||||||||||||||||||
|
General and administrative(1)
|
33,232 | 43 | 51,910 | 38 | 132,572 | 44 | 161,460 | 34 | |||||||||||||||||||||||||||||||||||||||
| Impairment expense | - | n/m | 195,708 | n/m | 2,000 | 1 | 677,239 | n/m | |||||||||||||||||||||||||||||||||||||||
| Total operating expenses | 63,165 | 81 | 315,463 | n/m | 265,681 | 87 | 1,048,550 | n/m | |||||||||||||||||||||||||||||||||||||||
| Loss from operations | (17,124) | (22) | (222,290) | n/m | (82,584) | (27) | (709,788) | n/m | |||||||||||||||||||||||||||||||||||||||
| Total interest expense, net and other income, net | 1,336 | 2 | 6,928 | 5 | 15,884 | 5 | 23,526 | 5 | |||||||||||||||||||||||||||||||||||||||
| Loss before provision for income taxes | (15,788) | (20) | (215,362) | n/m | (66,700) | (22) | (686,262) | n/m | |||||||||||||||||||||||||||||||||||||||
| Provision for income taxes | (1,683) | (2) | 2,723 | 2 | (3,918) | (1) | (144,681) | n/m | |||||||||||||||||||||||||||||||||||||||
| Net loss | $ | (17,471) | (22) | % | $ | (212,639) | n/m | $ | (70,618) | (23) | % | $ | (830,943) | n/m | |||||||||||||||||||||||||||||||||
|
(1)Includes share-based compensation expense and restructuring charges as follows:
|
|||||||||||||||||||||||||||||||||||||||||||||||
| Share-based compensation expense: | |||||||||||||||||||||||||||||||||||||||||||||||
| Cost of revenues | $ | 102 | $ | 471 | $ | 471 | $ | 1,450 | |||||||||||||||||||||||||||||||||||||||
| Research and development | 1,141 | 7,492 | 5,937 | 23,824 | |||||||||||||||||||||||||||||||||||||||||||
| Sales and marketing | 352 | 2,100 | 1,826 | 5,966 | |||||||||||||||||||||||||||||||||||||||||||
| General and administrative | 4,330 | 11,868 | 16,860 | 38,027 | |||||||||||||||||||||||||||||||||||||||||||
| Total share-based compensation expense | $ | 5,925 | $ | 21,931 | $ | 25,094 | $ | 69,267 | |||||||||||||||||||||||||||||||||||||||
| Restructuring charges: | |||||||||||||||||||||||||||||||||||||||||||||||
| Cost of revenues | $ | 915 | $ | 12 | $ | 1,656 | $ | 203 | |||||||||||||||||||||||||||||||||||||||
| Research and development | 2,511 | 827 | 10,303 | 2,909 | |||||||||||||||||||||||||||||||||||||||||||
| Sales and marketing | 92 | - | 2,234 | 906 | |||||||||||||||||||||||||||||||||||||||||||
| General and administrative | 5,614 | 1,273 | 16,781 | 4,822 | |||||||||||||||||||||||||||||||||||||||||||
| Total restructuring charges | $ | 9,132 | $ | 2,112 | $ | 30,974 | $ | 8,840 | |||||||||||||||||||||||||||||||||||||||
*n/m - not meaningful
Three and Nine Months Ended September 30, 2025 and 2024
Net Revenues
The following tables present our total net revenues for the periods shown for our Subscription Services and Skills and Other product lines (in thousands, except percentages):
|
Three Months Ended September 30, |
Change | ||||||||||||||||||||||
| 2025 | 2024 | $ | % | ||||||||||||||||||||
| Subscription Services | $ | 69,100 | $ | 119,804 | $ | (50,704) | (42) | % | |||||||||||||||
| Skills and Other | 8,642 | 16,789 | (8,147) | (49) | |||||||||||||||||||
| Total net revenues | $ | 77,742 | $ | 136,593 | $ | (58,851) | (43) | ||||||||||||||||
|
Nine Months Ended September 30, |
Change | ||||||||||||||||||||||
| 2025 | 2024 | $ | % | ||||||||||||||||||||
| Subscription Services | $ | 266,393 | $ | 420,668 | $ | (154,275) | (37) | % | |||||||||||||||
| Skills and Other | 37,856 | 53,422 | (15,566) | (29) | |||||||||||||||||||
| Total net revenues | $ | 304,249 | $ | 474,090 | $ | (169,841) | (36) | ||||||||||||||||
Subscription Services revenues decreased $50.7 million, or 42%, and $154.3 million, or 37%, during the three and nine months ended September 30, 2025, respectively, compared to the same periods in 2024. The decrease was primarily due to a 43%, 38%, and 30% decrease in subscribers who have paid to access our services during the three months ended September 30, 2025, June 30, 2025 and March 31, 2025, respectively, compared to the same periods in 2024.
Skills and Other revenues decreased $8.1 million, or 49%, during the three months ended September 30, 2025, compared to the same period in 2024, primarily due to a decrease in advertising services revenue of $4.5 million due to lower fulfillment, a decrease in Chegg Skills of $1.9 million related to lower enrollments, and a decrease of $1.7 million as we no longer provide a platform for students to rent or buy print textbooks and eTextbooks. Skills and Other revenues decreased $15.6 million, or 29%, during the nine months ended September 30, 2025, compared to the same period in 2024, primarily due to a decrease in advertising services revenues of $12.2 million due to lower fulfillment, a decrease in Chegg Skills of $10.2 million related to lower enrollments, and a $3.8 million decrease as we no longer provide a platform for students to rent or buy print textbooks and eTextbooks, partially offset by content licensing revenue of $10.6 million.
Cost of Revenues
The following tables present our cost of revenues for the periods shown (in thousands, except percentages):
|
Three Months Ended September 30, |
Change | ||||||||||||||||||||||
| 2025 | 2024 | $ | % | ||||||||||||||||||||
|
Cost of revenues(1)
|
$ | 31,701 | $ | 43,420 | $ | (11,719) | (27) | % | |||||||||||||||
|
(1)Includes share-based compensation expense of:
|
$ | 102 | $ | 471 | $ | (369) | (78) | % | |||||||||||||||
|
(1)Includes restructuring charges of:
|
$ | 915 | $ | 12 | $ | 903 | n/m | ||||||||||||||||
|
Nine Months Ended September 30, |
Change | ||||||||||||||||||||||
| 2025 | 2024 | $ | % | ||||||||||||||||||||
|
Cost of revenues(1)
|
$ | 121,152 | $ | 135,328 | $ | (14,176) | (10) | % | |||||||||||||||
|
(1)Includes share-based compensation expense of:
|
$ | 471 | $ | 1,450 | $ | (979) | (68) | % | |||||||||||||||
|
(1)Includes restructuring charges of:
|
$ | 1,656 | $ | 203 | $ | 1,453 | n/m | ||||||||||||||||
____________________________________
*n/m - not meaningful
Cost of revenues decreased $11.7 million, or 27%, during the three months ended September 30, 2025, compared to the same period in 2024. The decrease was primarily due to lower payment processing and other order fees of $4.3 million, primarily due to the decrease in subscribers who have paid to access our services, lower depreciation and amortization expense of $4.0 million, lower web hosting fees of $1.7 million and lower employee-related expenses of $1.1 million. Gross margins decreased to 59% during the three months ended September 30, 2025, from 68% during the same period in 2024.
Cost of revenues decreased $14.2 million, or 10%, during the nine months ended September 30, 2025, compared to the same period in 2024. The decrease was primarily due to lower payment processing and other order fees of $12.8 million, which is primarily due to the decrease in subscribers who have paid to access our services, lower employee-related expenses of $3.3 million, lower web hosting fees of $2.4 million, lower contractor spend of $1.9 million, and lower advertising revenue costs of $1.0 million due to decreased spending, which was partially offset by higher depreciation and amortization expense of $6.5 million primarily due to the accelerated depreciation recorded as we streamlined our product experiences, and higher restructuring charges of $1.5 million. Gross margins decreased to 60% during the nine months ended September 30, 2025, from 71% during the same period in 2024.
Operating Expenses
The following tables present our total operating expenses for the periods shown (in thousands, except percentages):
|
Three Months Ended September 30, |
Change | ||||||||||||||||||||||
| 2025 | 2024 | $ | % | ||||||||||||||||||||
|
Research and development(1)
|
$ | 18,350 | $ | 41,337 | $ | (22,987) | (56) | % | |||||||||||||||
|
Sales and marketing(1)
|
11,583 | 26,508 | (14,925) | (56) | |||||||||||||||||||
|
General and administrative(1)
|
33,232 | 51,910 | (18,678) | (36) | |||||||||||||||||||
| Impairment expense | - | 195,708 | (195,708) | n/m | |||||||||||||||||||
| Total operating expenses | $ | 63,165 | $ | 315,463 | $ | (252,298) | (80) | ||||||||||||||||
|
(1) Includes share-based compensation expense and restructuring charges as follows:
|
|||||||||||||||||||||||
|
Share-based compensation expense:
|
|||||||||||||||||||||||
| Research and development | $ | 1,141 | $ | 7,492 | $ | (6,351) | (85) | % | |||||||||||||||
| Sales and marketing | 352 | 2,100 | (1,748) | (83) | |||||||||||||||||||
| General and administrative | 4,330 | 11,868 | (7,538) | (64) | |||||||||||||||||||
| Share-based compensation expense | $ | 5,823 | $ | 21,460 | $ | (15,637) | (73) | ||||||||||||||||
|
Restructuring charges:
|
|||||||||||||||||||||||
| Research and development | $ | 2,511 | $ | 827 | $ | 1,684 | 204 | % | |||||||||||||||
| Sales and marketing | 92 | - | 92 | n/m | |||||||||||||||||||
| General and administrative | 5,614 | 1,273 | 4,341 | 341 | |||||||||||||||||||
|
Restructuring charges
|
$ | 8,217 | $ | 2,100 | $ | 6,117 | 291 | ||||||||||||||||
______________________________
*n/m - not meaningful
|
Nine Months Ended September 30, |
Change | ||||||||||||||||||||||
| 2025 | 2024 | $ | % | ||||||||||||||||||||
|
Research and development(1)
|
$ | 76,495 | $ | 129,423 | $ | (52,928) | (41) | % | |||||||||||||||
|
Sales and marketing(1)
|
54,614 | 80,428 | (25,814) | (32) | |||||||||||||||||||
|
General and administrative(1)
|
132,572 | 161,460 | (28,888) | (18) | |||||||||||||||||||
| Impairment expense | 2,000 | 677,239 | (675,239) | n/m | |||||||||||||||||||
| Total operating expenses | $ | 265,681 | $ | 1,048,550 | $ | (782,869) | (75) | ||||||||||||||||
|
(1) Includes share-based compensation expense and restructuring charges as follows:
|
|||||||||||||||||||||||
| Share-based compensation expense: | |||||||||||||||||||||||
| Research and development | $ | 5,937 | $ | 23,824 | $ | (17,887) | (75) | % | |||||||||||||||
| Sales and marketing | 1,826 | 5,966 | (4,140) | (69) | |||||||||||||||||||
| General and administrative | 16,860 | 38,027 | (21,167) | (56) | |||||||||||||||||||
| Share-based compensation expense | $ | 24,623 | $ | 67,817 | $ | (43,194) | (64) | ||||||||||||||||
| Restructuring charges: | |||||||||||||||||||||||
| Research and development | $ | 10,303 | $ | 2,909 | $ | 7,394 | n/m | ||||||||||||||||
| Sales and marketing | 2,234 | 906 | 1,328 | n/m | |||||||||||||||||||
| General and administrative | 16,781 | 4,822 | 11,959 | n/m | |||||||||||||||||||
| Restructuring charges | $ | 29,318 | $ | 8,637 | $ | 20,681 | n/m | ||||||||||||||||
______________________________
*n/m - not meaningful
Operating expenses decreased $252.3 million, or 80%, and $782.9 million, or 75%, during the three and nine months ended September 30, 2025, respectively, compared to the same periods in 2024, primarily due to the absence of impairment expenses of $195.7 million and $677.2 million recognized in the three and nine months ended September 30, 2024, respectively. The remaining decrease was primarily related to lower employee-related expenses and contractor spend as a result of restructuring actions. See "Note 1, "Background and Basis of Presentation" and Note 11, "Restructuring Charges" of our accompanying Notes to Condensed Consolidated Financial Statements included in Part I, Item 1, "Financial Statements (unaudited)" of this Quarterly Report on Form 10-Q for additional information regarding impairment expense and the restructuring actions, respectively.
Research and Development
Research and development expenses decreased $23.0 million, or 56%, during the three months ended September 30, 2025, compared to the same period in 2024. The decrease was primarily due to lower employee-related expenses of $20.2 million including share-based compensation expense, lower web hosting fees of $1.9 million, lower contractor spend of $1.2 million, and lower technology expenses of $0.7 million, partially offset by higher restructuring charges of $1.7 million. Research and development expenses as a percentage of net revenues were 24% during the three months ended September 30, 2025 compared to 30% during the same period in 2024.
Research and development expenses decreased $52.9 million, or 41%, during the nine months ended September 30, 2025 compared to the same period in 2024. The decrease was primarily due to lower employee-related expenses of $50.4 million including share-based compensation expense, lower contractor spend of $4.8 million, lower technology expenses of $1.9 million, lower web hosting fees of $1.8 million, and lower depreciation and amortization expense of $0.8 million, partially offset by higher restructuring charges of $7.4 million. Research and development expenses as a percentage of net revenues were 25% during the nine months ended September 30, 2025 compared to 27% during the same period in 2024.
Sales and Marketing
Sales and marketing expenses decreased by $14.9 million, or 56%, during the three months ended September 30, 2025, compared to the same period in 2024. The decrease was primarily attributable to lower paid marketing expenses of $11.2 million and lower employee-related expenses of $4.4 million including share-based compensation expense, partially offset by higher indirect marketing expenses of $0.9 million. Sales and marketing expenses as a percentage of net revenues were 15% during the three months ended September 30, 2025 compared to 19% during the same period in 2024.
Sales and marketing expenses decreased by $25.8 million, or 32%, during the nine months ended September 30, 2025, compared to the same period in 2024. The decrease was primarily attributable to lower paid marketing expenses of $12.2 million, lower employee-related expenses of $10.1 million including share-based compensation expense, lower indirect marketing expenses of $2.0 million, lower depreciation and amortization expense of $1.3 million, and $0.5 million in lower technology expenses, partially offset by higher restructuring charges of $1.3 million. Sales and marketing expenses as a percentage of net revenues were 18% during the nine months ended September 30, 2025 compared to 17% during the same period in 2024.
General and Administrative
General and administrative expenses decreased $18.7 million, or 36%, during the three months ended September 30, 2025 compared to the same period in 2024. The decrease was due to lower employee-related expenses of $15.6 million including share-based compensation expense, $5.1 million in lower loss contingency accruals, lower contractor spend of $0.9 million, and lower professional fees of $0.7 million, partially offset by higher restructuring charges of $4.3 million. General and administrative expenses as a percentage of net revenues were 43% during the three months ended September 30, 2025 compared to 38% during the same period in 2024.
General and administrative expenses decreased $28.9 million, or 18%, during the nine months ended September 30, 2025 compared to the same period in 2024. The decrease was due to lower employee-related expenses of $38.4 million including share-based compensation expense, lower professional fees of $7.5 million, and lower contractor spend of $2.8 million, partially offset by higher restructuring charges of $12.0 million, a $6.0 million impairment loss on a strategic equity investment, and higher loss contingency accruals of $2.4 million. General and administrative expenses as a percentage of net revenues were 44% during the nine months ended September 30, 2025 compared to 34% during the same period in 2024.
Impairment Expense
Impairment expense was $2.0 million during the nine months ended September 30, 2025, consisting of impairment of property and equipment. See Note 5, Property and Equipment, Net" of our accompanying Notes to Condensed Consolidated Financial Statements included in Part I, Item 1, "Financial Statements (unaudited)" of this Quarterly Report on Form 10-Q for additional information. Impairment expense was $195.7 million and $677.2 million during the three and nine months ended September 30, 2024, consisting of impairments of goodwill, intangible assets, and other related long-lived assets. See "Note 1, Background and Basis of Presentation" and "Note 5, Property and Equipment" of our accompanying Notes to Condensed Consolidated Financial Statements included in Part I, Item 1, "Financial Statements (unaudited)" of this Quarterly Report on Form 10-Q for additional information.
Interest Expense, net and Other Income, Net
The following tables present our interest expense, net and other income, net, for the periods shown (in thousands, except percentages):
|
Three Months Ended September 30, |
Change | ||||||||||||||||||||||
| 2025 | 2024 | $ | % | ||||||||||||||||||||
| Interest expense, net | $ | (41) | $ | (658) | $ | 617 | (94) | % | |||||||||||||||
| Other income, net | 1,377 | 7,586 | (6,209) | (82) | |||||||||||||||||||
| Interest expense, net and other income, net: | $ | 1,336 | $ | 6,928 | $ | (5,592) | (81) | ||||||||||||||||
|
Nine Months Ended September 30, |
Change | ||||||||||||||||||||||
| 2025 | 2024 | $ | % | ||||||||||||||||||||
| Interest expense, net | $ | (549) | $ | (1,959) | $ | 1,410 | (72) | % | |||||||||||||||
| Other income, net | 16,433 | 25,485 | (9,052) | (36) | |||||||||||||||||||
| Interest expense, net and other income, net: | $ | 15,884 | $ | 23,526 | $ | (7,642) | (32) | ||||||||||||||||
Interest expense, net decreased $0.6 million, or 94%, and $1.4 million, or 72%, during the three and nine months ended September 30, 2025, respectively, compared to the same periods in 2024, primarily due to the maturity of the 2025 notes and the early extinguishment of a portion of the 2026 notes.
Other income, net decreased $6.2 million, or 82%, during the three months ended September 30, 2025 compared to the same period in 2024, primarily due to a decrease in interest income of $6.0 million due to lower investment balances.
Other income, net decreased $9.1 million, or 36%, during the nine months ended September 30, 2025 compared to the same period in 2024, primarily due to a decrease in interest income of $13.8 million due to lower investment balances and $3.0 million of lower realized gains on investments, partially offset by the $7.4 million gain on early extinguishment of a portion of the 2026 notes.
Provision for income taxes
The following tables present our provision for income taxes for the periods shown (in thousands, except percentages):
|
Three Months Ended September 30, |
Change | ||||||||||||||||||||||
| 2025 | 2024 | $ | % | ||||||||||||||||||||
| (Provision for) benefit from income taxes | (1,683) | 2,723 | $ | (4,406) | n/m | ||||||||||||||||||
|
Nine Months Ended September 30, |
Change | ||||||||||||||||||||||
| 2025 | 2024 | $ | % | ||||||||||||||||||||
| Provision for income taxes | (3,918) | (144,681) | $ | 140,763 | n/m | ||||||||||||||||||
______________________________
*n/m - not meaningful
Provision for income taxes increased $4.4 million during the three months ended September 30, 2025 compared to the same period in 2024 primarily due to the absence of discrete one-time tax benefits from fiscal year 2024 and restructuring losses in foreign jurisdictions. Provision for income taxes decreased $140.8 million during the nine months ended September 30, 2025 compared to the same period in 2024, primarily due to the valuation allowance established in fiscal year 2024 against our U.S. federal and state deferred tax assets.
Liquidity and Capital Resources
The following table presents our cash, cash equivalents and investments and convertible senior notes as of the periods shown (in thousands, except percentages):
| Change | |||||||||||||||||||||||
| September 30, 2025 | December 31, 2024 | $ | % | ||||||||||||||||||||
| Cash, cash equivalents and investments | $ | 111,666 | $ | 528,374 | $ | (416,708) | (79) | % | |||||||||||||||
|
Convertible senior notes, net(1)
|
62,558 | 485,949 | (423,391) | (87) | |||||||||||||||||||
______________________________________
(1)Consists of the current and long-term portion of convertible senior notes, net.
Cash, cash equivalents, and investments decreased $416.7 million, or 79%, and convertible senior notes, net decreased $423.4 million, or 87% during the nine months ended September 30, 2025. The decreases were primarily due to the net cash used for the maturity of the 2025 notes and the early extinguishment of a portion of the 2026 notes.
As of September 30, 2025, our principal sources of liquidity were cash, cash equivalents, and investments totaling $111.7 million, which were held for working capital purposes. We believe that our existing sources of liquidity as well as net cash flows from operations will be sufficient to fund our operations and debt service obligations for at least the next 12 months. Our future capital requirements will depend on many factors, including our rate of revenue growth, our investments in research and development activities, our acquisition of new products and services and our sales and marketing activities. To the extent that existing sources of liquidity are insufficient to fund our future operations, we may need to raise additional funds through public or private equity or debt financing. Additional funds may not be available on terms favorable to us or at all. If adequate funds are not available on acceptable terms, or at all, we may be unable to adequately fund our business plans and it could have a negative effect on our business, operating cash flows and financial condition. As of September 30, 2025, we have an accumulated deficit of $960.1 million from our operations and we may incur additional losses in the future.
Most of our cash, cash equivalents, and investments are held in the United States. As part of our ongoing cash management, we intend to repatriate a portion of earnings from our subsidiary in India by the end of fiscal year 2026.
Accordingly, we do not assert an indefinite reinvestment of earnings and accrued a withholding tax of $2.4 million as of September 30, 2025, related to a potential future distribution of such earnings. This reflects our continued assessment of cash needs and the absence of an indefinite reinvestment assertion for our subsidiary in India. As a result of the Tax Cuts and Jobs Act, we anticipate the U.S. federal impact for the remaining foreign jurisdictions to be minimal if these funds are repatriated. In addition, based on our current and future needs, we believe our current funding and capital resources for our international operations are adequate.
There were no material changes in our commitments under contractual obligations, as disclosed in Part II, Item 7 "Management's Discussion and Analysis of Financial Condition and Results of Operations" contained in our Annual Report on Form 10-K for the year ended December 31, 2024.
The following table presents our condensed consolidated statements of cash flows data (in thousands):
|
Nine Months Ended September 30, |
Change
|
||||||||||||||||||||||
| 2025 | 2024 |
$
|
%
|
||||||||||||||||||||
| Net cash flows provided by operating activities | $ | 24,499 | $ | 107,077 | $ | (82,578) | (77) | % | |||||||||||||||
| Net cash flows provided by (used in) investing activities | 269,838 | (83,465) | 353,303 | n/m | |||||||||||||||||||
| Net cash flows used in financing activities | (417,742) | (6,457) | (411,285) | n/m | |||||||||||||||||||
_______________________________________
*n/m - not meaningful
The substantial majority of our cash inflows from operating activities are from e-commerce transactions with students, which are settled immediately through payment processors, as opposed to cash outflows from bill payments, which are settled based on contractual payment terms with our suppliers.
Net cash flows from operating activities decreased $82.6 million, or 77%, during the nine months ended September 30, 2025 compared to the same period in 2024 and was primarily related to the net effect of a decrease in net loss of $760.3 million, a decrease in impairment expense of $675.2 million, and a decrease in deferred tax assets of $140.8 million.
Net cash flows from investing activities increased $353.3 million during the nine months ended September 30, 2025 compared to the same period in 2024 and was primarily related to higher proceeds from the sale of investments of $181.2 million, fewer purchases of investments of $133.4 million, higher proceeds from the maturities of our investments of $14.2 million, fewer purchases of property and equipment of $40.0 million partially offset by the absence of proceeds from the sale of our strategic investment of $15.5 million that occurred in the nine months ended September 30, 2024.
Net cash flows from financing activities decreased $411.3 million during the nine months ended September 30, 2025 compared to the same period in 2024 and was primarily related to the repayment of our convertible debt of $416.5 million.
Critical Accounting Policies, Significant Judgments and Estimates
Our condensed consolidated financial statements are prepared in accordance with generally accepted accounting principles in the United States (U.S. GAAP). The preparation of these condensed consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, costs and expenses and related disclosures. These estimates form the basis for judgments we make about the carrying values of our assets and liabilities, which are not readily apparent from other sources. We base our estimates and judgments on historical experience and on various other assumptions that we believe are reasonable under the circumstances. On an ongoing basis, we evaluate our estimates and assumptions. Our actual results may differ from these estimates under different assumptions or conditions.
There have been no material changes in our critical accounting policies and estimates during the nine months ended September 30, 2025 as compared to the critical accounting policies and estimates disclosed in Part II, Item 7 "Management's Discussion and Analysis of Financial Condition and Results of Operations" contained in our Annual Report on Form 10-K for the year ended December 31, 2024.
Recent Accounting Pronouncements
For relevant recent accounting pronouncements, see Note 1, "Background and Basis of Presentation," of our accompanying Notes to Condensed Consolidated Financial Statements included in Part I, Item 1, "Financial Statements (unaudited)" of this Quarterly Report on Form 10-Q.
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