Coursera, Inc.

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This Quarterly Report on Form 10-Q (“Form 10-Q”) contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements in this report other than statements of historical fact, including statements identified by words such as “believe,” “may,” “will,” “estimate,” “continue,” “anticipate,” “intend,” “expect,” or the negative of these terms, or similar expressions, are forward-looking statements. Forward-looking statements include, but are not limited to, statements about:

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This Quarterly Report on Form 10-Q (“Form 10-Q”) contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements in this report other than statements of historical fact, including statements identified by words such as “accelerate,” “anticipate,” “believe,” “can,” “continue,” “could,” “demand,” “design,” “estimate,” “expand,” “expect,” “intend,” “may,” “might,” “mission,” “need,” “objective,” “ongoing,” “outlook,” “plan,” “potential,” “predict,” “project,” “should,” “target,” “will,” “would,” or the negative of these terms, or similar expressions, are forward-looking statements. Forward-looking statements include, but are not limited to, statements about:

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•our ability to successfully defend any current or future legal proceedings brought against us;

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•our ability to successfully defend, settle, or otherwise resolve any current or future legal proceedings brought against us;

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Coursera is one of the largest online learning destinations in the world, connecting an ecosystem of learners, educators, organizations, and institutions with a platform of high-quality content and credentials, data, and technology.

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Coursera is one of the world's largest online learning destinations, connecting an ecosystem of learners, content creators, organizations, and institutions through high-quality content, credentials, data, and technology.

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As we refine our business strategy and hone our focus, we have also been reducing our expenses and prioritizing investments in key initiatives that are expected to drive long-term, sustainable growth.

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During 2024 and the first quarter of 2025, in alignment with our efforts to refine our business strategy and hone our focus, we reduced our expenses and prioritized investments in key initiatives that are expected to drive long-term, sustainable growth.

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In January 2024, we implemented a plan to restructure our Enterprise segment sales force and recognized incremental operating expenses related to the restructuring of $2.1 million during the first quarter of 2024, substantially all of which was paid within the same quarter.

Current wording

In January 2024, we implemented a plan to restructure our Enterprise segment sales force and recognized restructuring related charges of $2.1 million during the three months ended March 31, 2024. Related cash payments of $1.8 million were made during the same period and reflected as cash used in operating activities within our Condensed Consolidated Statements of Cash Flows.

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We believe that the growth of our business and our future success are dependent upon many factors. While each of these factors present significant opportunities for us, these factors also pose challenges that we must successfully address in order to sustain the growth of our business and enhance our results of operations.

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We believe our business growth and future success depend on many factors. While each present significant opportunities for us, these factors also pose challenges that we must successfully address in order to sustain the growth of our business and enhance our results of operations.

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Ability to source in-demand content from our educator partners. We believe that learners and enterprises are attracted to Coursera largely because of the high quality and wide selection of content provided by our educator partners. Continuing to source in-demand content and credentials from our educator partners—from courses to degrees—is important to attract learners and increase our revenue over time.

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Ability to source in-demand content from our content creators. We believe that learners and enterprises are attracted to Coursera largely due to the quality, trust, and job-relevance of our wide selection of educational products provided by our content creators. We intend to accelerate our content engine, continuing to source and produce in-demand content and credentials in order to attract, convert, and retain learners and grow our revenue over time. By rapidly expanding our catalog of high-quality, job-relevant courses in collaboration with leading content creators, we aim to meet the evolving skill requirements of learners looking to transform their careers and support companies seeking to transform their businesses through their most crucial asset—their people.

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We believe that our reach, scale, and reputation provide an attractive value proposition for leading organizations and institutions to partner with Coursera to develop and distribute content and credentials. To be the platform of choice for educator partners, we continue to invest in increasing the size and engagement of our learner base, developing AI-powered product innovations (e.g., Course Builder and Coach), a suite of academic integrity features (e.g., identity verification and anti-plagiarism detection), improving recommendation and personalization features, developing marketing capabilities that drive higher conversion into paid offerings, and improving the analytics tools available for learners, educators, organizations, and institutions.

Current wording

We believe that our reach, scale, and reputation offer an attractive value proposition for leading organizations and institutions to partner with Coursera to develop and distribute content and credentials. To be the platform of choice for trusted content creators, we continue to invest in increasing the size and engagement of our learner base, enhancing the learning and authoring experience with AI-powered product innovations (e.g., Course Builder and Coach), and providing a suite of academic integrity features (e.g., identity verification and anti-plagiarism detection). Additionally, we are focused on improving our ability to provide personalized discovery, career guidance, and recommendations, driving higher conversion into paid offerings through efficient marketing efforts, and enhancing data-driven insights and tools available to learners, content creators, organizations, and institutions.

Previous wording

Impact of mix shift over time. The mix of our business amongst our Consumer, Enterprise, and Degrees segments shifts from time to time, and these shifts have and will continue to affect our financial performance. We typically incur content costs in the form of a fee paid to our educator partners, determined as a percentage of total revenue generated from their content. We do not incur any content costs for our Degrees offerings, since our university partners compensate us with a percentage of learner tuition.

Current wording

Impact of mix shift over time. The mix of our business amongst our Consumer and Enterprise segments shifts from time to time, and these shifts have and will continue to affect our financial performance. We typically incur content costs in the form of a fee paid to our educator partners, determined as a percentage of total revenue generated from their content. In 2025, we began compensating our educator partners based on the level of learner engagement their content generates, rather than learner enrollment rates. We believe this change will improve learner outcomes by incentivizing our educator partners to produce highly engaging content, drive adoption of learning innovation, and account for the varied types of content we offer beyond courses.

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Ability to convert free learners to paid learners. New learners typically begin to engage with our free courses on our platform, which serves as a funnel to grow our total learner base and drive referrals to our other offerings, including our paid offerings. Through both our on-platform and off-platform marketing efforts, we engage our free learners by highlighting key features that encourage conversion to our paid offerings, including paid subscriptions. These efforts include campaigns targeting existing learners, personalized recommendations, and performance marketing on the internet.

Current wording

Ability to convert free learners to paid learners. New learners typically start by engaging with free courses on our platform, which serve as a funnel to grow our total learner base and drive referrals to our other products, including our paid offerings. We engage our free learners through both our on-platform and off-platform marketing efforts, highlighting premium features that encourage conversion to our paid offerings, such as subscriptions. These efforts include campaigns targeting existing learners, personalized recommendations, and performance marketing on the internet.

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Ability to expand our international footprint. We see a significant opportunity to expand our offerings into other regions, particularly in regions with large, underserved adult learning populations. We have invested, and plan to continue to invest, in personnel and marketing efforts to support our international growth as part of our strategy to grow our customer and learner base. We also have been investing in improving the front-end experience for our Consumer learners and have been tailoring our pricing and check-out options, including selling our offerings in foreign currency, in select markets. Our business results and operations will depend on our ability to effectively price and package our Consumer products to meet demand and manage foreign currency risk.

Current wording

Ability to expand our international footprint. We see a significant opportunity to expand into regions with large, underserved adult learning populations. As part of our growth strategy, we have invested and plan to continue investing in marketing, localized discovery, and translation efforts to support our international expansion and grow our customer and learner base. We have also been improving the front-end experience for our Consumer learners and tailoring our pricing and check-out options, including selling our offerings in foreign currency, in select markets. Our business results and operations will depend on our ability to effectively price and package our Consumer products to meet demand and manage foreign currency risk.

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Ability to retain and expand our Enterprise customer relationships. Our efforts to grow our Enterprise segment are focused primarily on business, academic, government, and other institutional customers. We believe a significant opportunity exists to expand our customers’ use of our platform by identifying new use cases that increase the size of deployments. Our business and results of operations will depend in part on our ability to retain and expand usage of our platform within our existing customer base.

Current wording

Ability to retain and expand our Enterprise customer relationships. Our efforts to grow our Enterprise segment are focused primarily on businesses and universities. We also continue to foster relationships with our government customers and strategically engage in providing scaled workforce development. We believe a significant opportunity exists to expand our customers’ use of our platform by identifying new use cases that increase deployment sizes, as well as developing new innovation that can drive higher engagement and utilization. Our business and results of operations will depend, in part, on our ability to retain and expand platform usage within our existing customer base.

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Comparison of the Three and Nine Months Ended September 30, 2024 and 2023

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Comparison of the Three Months Ended March 31, 2025 and 2024

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Revenue for the three months ended September 30, 2024 was $176.1 million compared to $165.5 million for the three months ended September 30, 2023. Revenue increased by $10.5 million, or 6%, compared to the three months ended September 30, 2023. Revenue growth was primarily driven by a 19% increase in the average total number of registered learners resulting in more new paid learners, a 19% increase in the average total number of Paid Enterprise Customers, and a 29% increase in the number of Degrees students. The revenue growth contribution from these increases was partially offset by lower learner and customer retention in our Consumer and Enterprise segments globally as well as fewer new paid learners and Degrees students coming from our higher-priced regions.

Current wording

Revenue for the three months ended March 31, 2025 was $179.3 million, an increase of $10.2 million, or 6%, compared to $169.1 million for the prior year quarter. Revenue growth was primarily driven by an 18% increase in the average total number of Registered Learners, resulting in more paid learners, and a 12% increase in the average total number of Paid Enterprise Customers. This growth was partially offset by lower paid learner and customer retention in our Consumer and Enterprise segments globally.

Previous wording

For the three months ended September 30, 2024, Enterprise revenue increased by $5.5 million, or 10%, compared to the three months ended September 30, 2023 attributable to an increase in new customers. Acquisitions of new customers drove an increase of $10.9 million, offset by a $5.4 million decrease attributable to contraction of existing customer spend.

Current wording

Enterprise revenue for the three months ended March 31, 2025 increased by $4.2 million, or 7%, compared to the prior year quarter, attributable to an increase in new customers. Acquisitions of new customers drove an increase of $9.1 million, offset by a $4.9 million decrease due to contraction of existing customer spend.

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Content costs for the Consumer segment were $137.0 million and $126.5 million for the nine months ended September 30, 2024 and 2023, with content costs as a percentage of revenue of 46% and 47% for the same periods, due to a shift in mix to lower-cost content. Content costs for the Enterprise segment were $55.3 million and $50.5 million for the nine months ended September 30, 2024 and 2023, with content costs as a percentage of revenue of 31% for both periods.

Current wording

Content costs for the Consumer segment were $45.2 million and $45.0 million for the three months ended March 31, 2025 and 2024, with content costs as a percentage of revenue of 38.4% and 40.3% for the same periods. Content costs for the Enterprise segment were $18.5 million and $18.4 million for the three months ended March 31, 2025 and 2024, with content costs as a percentage of revenue of 30.0% and 31.9% for the same periods. Content costs as a percentage of revenue for both segments decreased due to higher learner engagement in content created under production arrangements with lower revenue share.

Previous wording

Gross margin was 55% for the three months ended September 30, 2024, compared to 50% for the three months ended September 30, 2023. The increase in gross margin was driven by a lower revenue content cost rate in both our Consumer and Enterprise segments and savings in language translation expenses and lower residual credit card processing fees.

Current wording

Gross margin was 54.6% for the three months ended March 31, 2025, an increase from 52.9% for the prior year quarter. The increase in gross margin was driven by lower content cost rates in both our Consumer and Enterprise segments.

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Research and development expenses for the three months ended September 30, 2024 were $31.6 million compared to $37.6 million for the three months ended September 30, 2023. The decrease was primarily due to lower personnel-related expenses of $3.7 million, including stock-based compensation expense of $1.5 million, from shifting resources to lower cost regions, and lower content creation costs of $1.7 million.

Current wording

Research and development expenses for the three months ended March 31, 2025 were $29.5 million compared to $34.6 million for the prior year quarter. This decrease was primarily due to lower personnel-related expenses of $5.0 million, including $2.7 million in stock-based compensation expense, resulting from our October 2024 expense reduction initiative and from shifting resources to lower-cost regions.

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Sales and marketing expenses for the three months ended September 30, 2024 were $59.0 million compared to $59.8 million for the three months ended September 30, 2023. The decrease was primarily due to a decrease in stock-based compensation expense of $1.8 million, partially offset by an increase in marketing and advertising expenses of $1.1 million.

Current wording

Sales and marketing expenses for the three months ended March 31, 2025 were $56.8 million compared to $57.6 million for the prior year quarter. This decrease was primarily due to lower personnel-related expenses of $5.1 million, including $3.3 million in stock-based compensation expense, resulting from our 2024 expense reduction initiatives, and was largely offset by an increase in marketing and advertising expenses in our Consumer segment of $4.3 million.

Previous wording

Restructuring related charges for the nine months ended September 30, 2024 were $2.1 million related to a plan implemented in January 2024 to restructure our Enterprise segment sales force compared to $(5.8) million for the nine months ended September 30, 2023 primarily relating to the reversal of stock-based compensation expense for the forfeitures of RSUs and stock options resulting from our global workforce reduction initiated in November 2022. Refer to Note 14, “Restructuring Related Charges,” in the Notes to Condensed Consolidated Financial Statements (Unaudited) included in Part I, Item 1 of this Form 10-Q for further information.

Current wording

Restructuring related charges for the three months ended March 31, 2025, were $(0.9) million, primarily consisting of the reversal of stock-based compensation expense for the forfeitures of RSUs and stock options, mostly offset by personnel expenses, such as employee severance and benefits costs, related to our expense reduction initiative initiated in October 2024, compared to $2.1 million for the prior year quarter, primarily consisting of personnel expenses, such as employee severance and benefits costs, related to our expense reduction initiative initiated in January 2024. Refer to Note 14, Restructuring Related Charges, included in Part I, Item 1 of this Form 10-Q for further information.

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Total other income, net for the three and nine months ended September 30, 2024 primarily reflected interest income earned on cash and cash equivalents. Interest income was higher during the three and nine months ended September 30, 2024 compared to the three and nine months ended September 30, 2023 due to higher interest rates and our average rate of return on investments in U.S. Treasury securities.

Current wording

Total other income, net for the three months ended March 31, 2025 was primarily comprised of interest income earned on cash and cash equivalents. Interest income, net decreased during the three months ended March 31, 2025 compared to the prior year quarter due to lower interest rates and our average rate of return on investments in U.S. Treasury securities. Other income (expense), net for the three months ended March 31, 2025 and 2024 were primarily comprised of unrealized foreign exchange gains and losses. Our foreign subsidiaries’ operating costs are typically denominated in the local currencies for each country and are subject to foreign currency fluctuations. We also maintain foreign-currency cash and cash equivalents in our foreign subsidiaries to support their ongoing operations.

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Income tax expense for the three and nine months ended September 30, 2024 and 2023 was primarily related to our foreign sourced income.

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Income tax expense for the three months ended March 31, 2025 and 2024 was primarily related to state and foreign taxes.

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As of September 30, 2024, our principal source of liquidity was cash and cash equivalents totaling $719.4 million.

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As of March 31, 2025, our principal source of liquidity was cash and cash equivalents totaling $748.0 million.

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Since our inception, we have financed our operations primarily through proceeds from issuance of redeemable convertible preferred stock, our initial public offering completed in April 2021 (the “IPO”), and cash generated from our business operations. Our principal uses of cash in recent periods include the funding of our business operations, investments in our internal-use software, purchases of content assets, and repurchases of our common stock, as discussed below.

Current wording

Since our inception, we have financed our operations primarily through proceeds from the issuance of redeemable convertible preferred stock, our initial public offering completed in April 2021 (the “IPO”), and cash generated from business operations. Our principal uses of cash in the three months ended March 31, 2025 and 2024 include the funding of our business operations, investments in our internal-use software, purchases of content assets, and repurchases of our common stock.

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We believe that our existing cash and cash equivalents and our expected cash flows from operations will be sufficient to meet our cash needs for at least the next 12 months. Over the longer term, our future capital requirements will depend on many factors, including our growth rate, the timing and extent of our expenditures to support sales and marketing as well as research and development efforts, the continuing market acceptance of our offerings, and any investments or acquisitions we may choose to pursue in the future. In the event that we need to borrow funds or issue additional equity, we cannot assure you that any such additional financing will be available on terms acceptable to us, if at all. In addition, any future borrowings may result in additional restrictions on our business, and any issuance of additional equity would result in dilution to investors. If we are unable to raise additional capital when desired and on terms acceptable to us, our business, results of operations, and financial condition could be materially and adversely affected.

Current wording

We believe that our existing cash and cash equivalents, along with our expected cash flows from operations, will be sufficient to meet our cash needs for at least the next 12 months. Over the longer term, our future capital requirements will depend on many factors, including our growth rate, the timing and extent of our sales and marketing and research and development expenditures, the continuing market acceptance of our offerings, and any investments or acquisitions we may choose to pursue in the future. If we need to borrow funds or issue additional equity, we cannot assure you that any such additional financing will be available on terms acceptable to us, if at all. Moreover, any future borrowings may result in additional restrictions on our business and any issuance of additional equity would result in dilution to investors. If we are unable to raise additional capital when desired and on terms acceptable to us, our business, results of operations, and financial condition could be materially and adversely affected.

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Except as discussed in Note 6, Leases, and Note 9, Commitments and Contingencies, in the Notes to Condensed Consolidated Financial Statements (Unaudited) included in Part I, Item 1 of this Form 10-Q, there were no material changes outside of the ordinary course of business in our commitments and contractual obligations for the three and nine months ended September 30, 2024 as compared to those in“Management’s Discussion and Analysis of Financial Condition and Results of Operations”, set forth in our Form 10-K.

Current wording

Except as discussed in Note 6, Leases, and Note 9, Commitments and Contingencies, included in Part I, Item 1 of this Form 10-Q, there were no material changes outside of the ordinary course of business in our commitments and contractual obligations for the three months ended March 31, 2025 as compared to those in“Management’s Discussion and Analysis of Financial Condition and Results of Operations,” set forth in our Form 10-K.

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On April 26, 2023, our board of directors approved a share repurchase program with autho rization to purchase up to $95 million of our common stock, excluding commissions and fees (the “Repurchase Program”). In May 2024, we completed the purchase authorization under the Repurchase Program, which was funded with our existing cash and cash equivalents.

Current wording

On April 26, 2023, the Board approved a share repurchase program with autho rization to purchase up to $95 million of our common stock, excluding commissions and fees (the “Repurchase Program”). In May 2024, we completed the purchase authorization under the Repurchase Program, which was funded with our existing cash and cash equivalents.

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For the nine months ended September 30, 2024, net cash provided by operating activities was $76.1 million, primarily resulting from improved operating leverage and working capital driven by (i) an increase in accounts receivable collections and (ii) deferred revenue growth.

Current wording

For the three months ended March 31, 2024, net cash provided by operating activities was $24.5 million, primarily driven by improved operating leverage and working capital, including (i) a decrease in accounts receivables due to higher cash collections and (ii) deferred revenue growth, partially offset by (iii) the payout of annual incentive compensation.

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For the nine months ended September 30, 2024, net cash provided by investing activities was $41.7 million, primarily as a result of (i) proceeds from maturities of marketable securities, partially offset by (ii) capitalized internal-use software costs, (iii) purchases of content assets, and (iv) capital expenditures for property, equipment, and software.

Current wording

For the three months ended March 31, 2024, net cash provided by investing activities was $59.6 million, primarily driven by (i) proceeds from maturities of marketable securities, partially offset by (ii) capitalized internal-use software costs, (iii) purchases of content assets, and (iv) purchases of property, equipment and software.

Previous wording

For the nine months ended September 30, 2024 and 2023, net cash used in financing activities was $54.3 million and $72.7 million, primarily as a result of (i) payments related to repurchases of common stock under the Repurchase Program and (ii) payments for tax withholdings on vesting of RSUs, partially offset by (iii) proceeds from the issuance of common stock from employee stock option exercises and (iv) proceeds from the employee stock purchase plan.

Current wording

For the three months ended March 31, 2024, net cash used in financing activities was $15.0 million, primarily driven by (i) payments for tax withholdings on vesting of RSU and (ii) payments for repurchases of common stock under the Repurchase Program, partially offset by (iii) proceeds from the exercise of stock options.

Previous wording

We count the total number of Paid Enterprise Customers that are active on our platform at the end of each period. For purposes of determining our customer count, we treat each customer account that has a corresponding contract as a unique customer, and a single organization with multiple divisions, segments, or subsidiaries may be counted as multiple customers. We define a “Paid Enterprise Customer” as a customer who purchases Coursera via our direct sales force. For purposes of determining our Paid Enterprise Customer count, we exclude our Enterprise customers who do not purchase Coursera via our direct sales force, including organizations engaging on our platform through our Coursera for Teams offering or through our channel partners. For the nine months ended September 30, 2024, approximately 94% of Enterprise revenue was generated from our Paid Enterprise Customers. We believe that the number of Paid Enterprise Customers and our ability to increase this number is an important indicator of the growth of our Enterprise business and future Enterprise segment revenue trends.

Current wording

We count the total number of Paid Enterprise Customers that are active on our platform at the end of each period. For purposes of determining our customer count, we treat each customer account that has a corresponding contract as a unique customer, and a single organization with multiple divisions, segments, or subsidiaries may be counted as multiple customers. We define a “Paid Enterprise Customer” as a customer who purchases Coursera via our direct sales force. For purposes of determining our Paid Enterprise Customer count, we exclude our Enterprise customers who do not purchase Coursera via our direct sales force, including organizations engaging on our platform through our Coursera for Teams offering or through our channel partners.

Previous wording

We calculate annual recurring revenue (“ARR”) by annualizing each customer’s monthly recurring revenue (“MRR”) for the most recent month at period end. We calculate “Net Retention Rate” for a period by starting with the ARR from all Paid Enterprise Customers as of the 12 months prior to such period end, or “Prior Period ARR”. We then calculate the ARR from these same Paid Enterprise Customers as of the current period end, or “Current Period ARR”. Current Period ARR includes expansion within Paid Enterprise Customers and is net of contraction or attrition over the trailing 12 months but excludes revenue from new Paid Enterprise Customers in the current period. We then divide the total Current Period ARR by the total Prior Period ARR to arrive at our Net Retention Rate for Paid Enterprise Customers. Our Net Retention Rate for Paid Enterprise Customers was 89% as of September 30, 2024 compared to 99% as of September 30, 2023, and was primarily the resultof non-renewal ofcertain large government contracts in North America and the Asia Pacific regions. Our Net Retention Rate for Paid Enterprise Customers is expected to fluctuate in future periods due to a number of factors, including the growth of our revenue base, the penetration within our Paid Enterprise Customer base, expansion of products and features, and our ability to retain and expand our Paid Enterprise Customers.

Current wording

We calculate annual recurring revenue (“ARR”) by annualizing each customer’s monthly recurring revenue (“MRR”) for the most recent month at period end. We calculate “Net Retention Rate” for a period by starting with the ARR from all Paid Enterprise Customers as of the 12 months prior to such period end, or “Prior Period ARR”. We then calculate the ARR from these same Paid Enterprise Customers as of the current period end, or “Current Period ARR”. Current Period ARR includes expansion within Paid Enterprise Customers and is net of contraction or attrition over the trailing 12 months but excludes revenue from new Paid Enterprise Customers in the current period. We then divide the total Current Period ARR by the total Prior Period ARR to arrive at our Net Retention Rate for Paid Enterprise Customers.

Previous wording

We generate revenue from three reportable segments: Consumer, Enterprise, and Degrees.

Current wording

We generate revenue from two reportable segments: Consumer and Enterprise.

Previous wording

We monitor segment gross profit as a key metric to help us evaluate the financial performance of our individual segments. Segment gross profit represents segment revenue less content costs paid to educator partners; segment gross margin is the quotient of segment gross profit and segment revenue. Content costs only apply to the Consumer and Enterprise segments as there is no content cost attributable to the Degrees segment. Instead, in the Degrees segment, we earn a Degrees service fee based on a percentage of the total online student tuition collected by the university partner. Given that content costs are the largest individual cost of our revenue, and that these costs contractually vary as a percentage of revenue between our Consumer and Enterprise offerings while there are no content costs attributable to our Degrees offering, mix shifts between our three segments is expected to be a significant driver of our overall gross margin, financial performance, and profitability.

Current wording

We monitor segment gross profit as a key metric to help us evaluate the financial performance of our individual segments. Segment gross profit represents segment revenue less segment content costs paid to educator partners; segment gross margin is the quotient of segment gross profit and segment revenue. Given that content costs are the largest individual cost of our revenue, and that these costs contractually vary as a percentage of revenue between our Consumer and Enterprise offerings, mix shifts between our two segments is a significant factor of our overall gross margin, financial performance, and profitability.

Previous wording

Consumer segment gross margin increased to 54% in both the three and nine months ended September 30, 2024 from 52% and 53% in the three and nine months ended September 30, 2023. Enterprise segment gross margin increased to 70% and remained at 69% from 68% and 69% when comparing those same periods. The increases in gross margin were driven by lower revenue content cost rates in both our Consumer and Enterprise segments, the latter due to a one-time benefit from a significant contract that was enrolled in lower-cost content, for the three months ended September 30, 2024, and in our Consumer segment for the nine months ended September 30, 2024.

Current wording

Consumer segment gross margin increased to 61.6% in the three months ended March 31, 2025 from 59.7% in the three months ended March 31, 2024. Enterprise segment gross margin increased to 70.0% from 68.0% when comparing those same periods. The improvements in gross margin were primarily the result of lower content cost rates in both our Consumer and Enterprise segments, for the three months ended March 31, 2025, due to higher learner engagement in content created under new production arrangements with lower revenue share.

Previous wording

Non-GAAP Gross Profit, Non-GAAP Net Income (Loss), and Non-GAAP Net Income (Loss) Per Share

Current wording

Non-GAAP Gross Profit, Non-GAAP Net Income, and Non-GAAP Net Income Per Share

Previous wording

We define non-GAAP gross profit and non-GAAP net income (loss) as GAAP gross profit and GAAP net loss excluding: (i) stock-based compensation expense; (ii) amortization of stock-based compensation expense capitalized as internal-use software costs; (iii) payroll tax expense related to stock-based compensation; (iv) M&A related transaction costs; (v) costs and settlement (gains) losses related to significant and non-recurring legal matters, net of insurance recoveries; and (vi) restructuring related charges. Non-GAAP net income (loss) per share is calculated by dividing non-GAAP net income (loss) by the diluted weighted average shares of common stock outstanding. We believe the presentation of these adjusted operating results provides useful supplemental information to investors and facilitates the analysis and comparison of our operating results across reporting periods.

Current wording

We define non-GAAP gross profit and non-GAAP net income as GAAP gross profit and GAAP net loss excluding: (i) stock-based compensation expense; (ii) amortization of stock-based compensation expense capitalized as internal-use software costs; (iii) payroll tax expense related to stock-based compensation; (iv) costs and settlement (gains) losses related to significant and non-recurring legal matters, net of insurance recoveries; and (v) restructuring related charges. Non-GAAP net income per share is calculated by dividing non-GAAP net income by the diluted weighted average shares of common stock outstanding. We believe the presentation of these adjusted operating results provides useful supplemental information to investors and facilitates the analysis and comparison of our operating results across reporting periods.

Previous wording

The following tables provide a reconciliation of GAAP gross profit and GAAP net loss, the most directly comparable GAAP financial measure, to non-GAAP gross profit and non-GAAP net income (loss):

Current wording

The following tables provide a reconciliation of GAAP gross profit and GAAP net loss, the most directly comparable GAAP financial measure, to non-GAAP gross profit and non-GAAP net income:

Previous wording

We define Adjusted EBITDA as our GAAP net loss excluding: (i) depreciation and amortization; (ii) interest income, net; (iii) income tax expense; (iv) other (income) expense, net; (v) stock-based compensation expense; (vi) payroll tax expense related to stock-based compensation; (vii) M&A related transaction costs; (viii) costs and settlement (gains) losses related to significant and non-recurring legal matters, net of insurance recoveries; and (ix) restructuring related charges. We define Adjusted EBITDA Margin as Adjusted EBITDA divided by revenue.

Current wording

We define Adjusted EBITDA as our GAAP net loss excluding: (i) depreciation and amortization; (ii) interest income, net; (iii) income tax expense; (iv) other (income) expense, net; (v) stock-based compensation expense; (vi) payroll tax expense related to stock-based compensation; (vii) costs and settlement (gains) losses related to significant and non-recurring legal matters, net of insurance recoveries; and (viii) restructuring related charges. We define Adjusted EBITDA Margin as Adjusted EBITDA divided by revenue.

Previous wording

We define Free Cash Flow as net cash provided by operating activities, less purchases of property, equipment, and software, capitalized internal-use software costs, and purchases of content assets as we consider these capital expenditures necessary to support our ongoing operations. Current and prior period Free Cash Flow amounts reported herein reflect the change to our definition of Free Cash Flow to include purchases of content assets.

Current wording

We define Free Cash Flow as net cash provided by operating activities, less purchases of property, equipment, and software, capitalized internal-use software costs, and purchases of content assets as we consider these capital expenditures necessary to support our ongoing operations.