What changed in this filing

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Item 7. Management’s Discussion and Analysis

2026-03-09 compared with 2025-02-24 · 129 added, 134 removed, 230 unchanged (53% of the section changed)

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You should read the following discussion of our financial condition and results of operations in conjunction with our audited consolidated financial statements and the related notes included in Part II, Item 8, “Consolidated Financial Statements and Supplementary Data” of this Annual Report on Form 10-K.

We have omitted discussion of the earliest of the three years of financial condition and results of operations and this information can be found in Part I, Item 7, “Management's Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, filed with the SEC on February 20, 2024, which is available free of charge on the SEC's website at sec.gov and on our website at investor.chegg.com.

We have omitted discussion of the earliest of the three years of financial condition and results of operations and this information can be found in Part II, Item 7, “Management's Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2024, filed with the SEC on February 24, 2025, which is available free of charge on the SEC's website at sec.gov and on our website at investor.chegg.com.

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.

See the section titled “Note about Forward-Looking Statements” in this Annual Report on Form 10-K for additional information.

Factors that could cause or contribute to these differences include those discussed below and elsewhere in this Annual Report on Form 10-K, particularly in Part I, Item 1A, “Risk Factors.”

Chegg provides individualized learning support to students as they pursue their educational journeys.

Available on demand 24/7 and powered by over a decade of learning insights, the Chegg platform offers students artificial intelligence (“AI”)-powered academic support thoughtfully designed for education coupled with access to a vast network of subject matter experts who help ensure quality and accuracy.

No matter the goal, level, or style, Chegg helps millions of students around the world learn with confidence by helping them build essential academic, life, and job skills to achieve success.

Our long-term strategy is centered upon our ability to utilize our Subscription Services to increase student engagement with our learning platform.

We continue to invest in the expansion of our offerings and technology platform to provide a more compelling and personalized solution and deepen engagement with students.

We continue to integrate artificial intelligence into our platform, and it is now conversational, more instructional, and interactive.

We remain focused on providing a holistic and differentiated product offering that supports the whole student with 360 degrees of individualized academic and functional support, including the delivery of high-quality and accurate content.

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.”

Exploration of Strategic Alternatives

On February 24, 2025, we announced that we are undertaking a strategic review process and exploring a range of alternatives to maximize shareholder value, including being acquired, undertaking a go-private transaction, or remaining as a standalone public company.

This review will be ongoing with our continued investment, innovation, and execution.

We have not set a timetable for the completion of this process, and there can be no assurance that it will result in any transaction or outcome.

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 of people around the world.

Our long-term strategy is focused on helping learners achieve better outcomes by combining academic support with practical, career-relevant skills across the learning lifecycle.

We are evolving our platform to support learners both in the classroom and beyond, leveraging AI to deliver faster, more personalized, and more effective learning experiences.

We continue to invest in expanding our skilling offerings and integrating them with our core academic services to provide a differentiated, end-to-end solution that supports the whole learner.

Our use of AI in our platform is designed to enable us to scale personalized support, improve learning outcomes, and increase course completion while maintaining high standards of quality and accuracy.

We believe these investments position us to drive deeper engagement, expand our addressable market, and return the business to sustainable 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 I, Item 1A, “Risk Factors” of this Annual Report on Form 10-K.

Our service and product offerings fall into two categories:

Chegg Skilling and Academic Services, which are described below.

We have changed our revenue disaggregation from Subscription Services and Skills and Other to Chegg Skilling and Academic Services to better reflect the nature of revenue and cash flows.

Chegg Skilling

Our language learning platform provides subscribers access to a premium language learning platform that offers comprehensive support through self-paced lessons, live classes with expert tutors and a community of members to practice alongside.

A team of leading experts have developed our online learning instruction to bring students from novice to advanced speakers in a fast-paced, enjoyable environment and we currently offer comprehensive courses taught by highly qualified teachers in 14 languages.

We also provide workforce skilling programs that help employers develop and retain talent.

Our workforce skilling programs align workforce needs with learner outcomes by combining in-demand technical skills such as AI, coding, data analytics, and cybersecurity, with foundational business and human-centered durable skills.

We keep our portfolio current by working closely with employers, including Fortune 1000 companies, to understand emerging role requirements and workforce needs.

Programs feature engaging, modular online content, practice opportunities, and support.

Our platform tracks learner progress in real time, delivering predictive nudges and timely interventions that improve engagement, retention, and completion rates.

Our approach is informed by learning science to help skills stick, so learners can apply what they learn with confidence at work.

Academic Services

Our legacy academic learning services are headlined by Chegg Study Pack, a premium subscription bundle that includes all of the benefits of Chegg Study, Chegg Writing and Chegg Math.

Chegg Study subscribers have access to personalized, step-by-step learning support powered by AI, computational engines, and subject matter experts.

Subscribers engage with our conversational experience that delivers the right support at the right time.

Our Chegg Writing subscription service consists of a suite of essential tools including plagiarism detection scans, grammar and writing fluency checking, expert personalized writing feedback, and premium citation generation.

Subscribers can also have a writing professional proofread papers for personalized feedback.

Our Chegg Math subscription service provides students with a computational engine to help them understand and solve math problems.

We also work with leading brands and programmatic partners to deliver advertising across our platforms.

Conclusion of Process to Explore Strategic Alternatives

On February 24, 2025, we announced that we were undertaking a strategic review process and exploring a range of alternatives to maximize shareholder value, including being acquired, undertaking a go-private transaction, or remaining as a standalone public company.

On October 27, 2025, we announced that our Board unanimously approved the conclusion of its review of strategic alternatives in support of the evolution of our business, including into a skilling-focused business-to-business organization, building on existing relationships with businesses in professional language learning, workplace readiness and AI-related skills courses.

In connection with this transformation, we are restructuring the way we operate our academic learning products.

Business Updates and Developments

Recent technological shifts, notably Google's roll out of AI Overviews (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 mid-August, Google broadly rolled out its AIO search experience, or AIO, which displays AI-generated content at the top of its search results.

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.

While we continue to study the changes and adjust our SEO strategy, we expect Google to continue its shift from being a search origination point to the destination, which could materially adversely affect our business, operating results and financial condition.

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.

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 June 2024, we undertook a strategic restructuring plan based on the environment in which we were operating to realign our expenses with the revenue trends at the time.

The June 2024 restructuring plan included a reduction in workforce, the closure of two offices, and a change in our Chegg Skills offering such that we no longer offer Chegg Skills directly to customers.

Since then, the factors described above have negatively impacted our business and our outlook.

As a result, in November 2024, we announced an additional restructuring plan to further manage costs and align with the market.

The November 2024 restructuring plan included a reduction in workforce and the closure of one office.

This issue impacts education technology companies broadly, where students see generative AI products like ChatGPT 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 I, Item 1A, “Risk Factors” for additional details.

In May 2025 and October 2025, we announced workforce reductions that resulted in management approved restructuring plans, which also included the closure of our offices in the United States.

During the year ended December 31, 2025, we recorded $51.5 million of restructuring charges and for fiscal year 2026, we expect to realize cost savings as a result of the restructuring plans.

See Part I, Item 1A, “Risk Factors”, Note 6, “Property and Equipment, Net”, and Note 15, “Restructuring Charges” of our accompanying Notes to Consolidated Financial Statements included in Part II, Item 8, “Financial Statements” of this Annual Report on Form 10-K for additional information.

In September 2024 and June 2024, in consideration of the sustained decline in our stock price, industry developments, and our financial performance, we determined that impairment tests for our goodwill, intangible assets and property and equipment were necessary.

As a result, we recorded $677.2 million of impairment expense during the year ended December 31, 2024.

See Note 6, “Property and Equipment, Net” and Note 7, “Goodwill and Intangible Assets” of our accompanying Notes to Consolidated Financial Statements included in Part II, Item 1, “Financial Statements” of this Annual Report on Form 10-K for additional information.

During the years ended December 31, 2024, and 2023, we generated net revenues of $617.6 million and $716.3 million, respectively, and in the same periods had a net loss of $837.1 million and a net income of $18.2 million.

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, 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.

We also provide 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.

See Part I, Item 1A, “Risk Factors”, “Note 9.

Leases”, and “Note 15.

Restructuring Charges” of our accompanying Notes to Consolidated Financial Statements included in Part II, Item 8, “Consolidated Financial Statements and Supplementary Data” of this Annual Report on Form 10-K for additional information.

During the years ended December 31, 2025, and 2024, we generated net revenues of $376.9 million and $617.6 million, respectively, and in the same periods had net losses of $103.4 million and $837.1 million, respectively.

Components of Results of Operations

We recognize revenues net of allowances for refunds or charge backs from our payment processors who process payments from credit cards, debit cards, and PayPal.

Revenues from Chegg Study Pack, Chegg Study, Chegg Writing, Chegg Math, and Busuu are primarily recognized ratably over the monthly subscription period.

Revenues from Chegg Skills are recognized over the delivery period, adjusted for an estimate of non-redemption.

Revenues from advertising services are recognized upon fulfillment.

Revenues from print textbooks and eTextbooks are recognized immediately.

Revenues from our language learning platform and Academic Services are primarily recognized ratably over the monthly subscription period.

Revenues from our workforce skilling programs are

recognized over the delivery period, adjusted for an estimate of non-redemption, or upon fulfillment.

Revenues from advertising services and content licensing are recognized upon fulfillment.

Cost of Revenues

Our cost of revenues consists primarily of expenses associated with the delivery and distribution of our products and services.

Cost of revenues primarily consists of content amortization expense related to content that we develop, license from publishers, or acquire through acquisitions, web hosting fees, customer support fees, payment processing costs, amortization of acquired intangible assets, employee-related expenses, which includes salaries, benefits and share-based compensation expense, and other direct costs related to providing content or services.

Cost of revenues consists primarily of expenses associated with the delivery and distribution of our products and services including content amortization expense, web hosting fees, customer support fees, payment processing costs, amortization of acquired intangible assets, employee-related expenses, which includes salaries, benefits and share-based compensation expense, contractor costs, and other direct costs related to providing content or services.

In addition, cost of revenues includes allocated information technology and facilities costs.

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We allocate certain costs to each expense category, primarily based on the headcount in each group at the end of a period.

As our business grows, our operating expenses may increase over time to expand capacity and sustain our workforce.

Research and Development

Research and development expenses consist of employee-related expenses, which includes salaries, benefits, and share-based compensation expense for employees on our product, engineering, and technical teams who are responsible for maintaining our website, developing new products, and improving existing products.

Research and development expenses also include technology costs to support our research and development, and outside services.

Research and development expenses also include technology costs to support our research and development, web hosting fees, contractor costs, and outside services.

We expense substantially all of our research and development expenses as they are incurred.

Our research and development expenses continue to support new products and services as well as expand our infrastructure capabilities to support back-end processes associated with our revenue transactions and internal systems.

We intend to continue making significant investments in developing new products and services and enhancing the functionality of existing products and services.

Sales and Marketing

Sales and marketing expenses consist of user and advertiser-facing marketing and promotional expenditures through a number of targeted online marketing channels, sponsored search, display advertising, social media campaigns, and other initiatives.

We incur employee-related expenses, which includes salaries, benefits and share-based compensation expenses for our employees engaged in marketing, business development and sales, sales support functions, and amortization of acquired intangible assets.

Our marketing expenses are largely variable and to the extent there is increased or decreased competition for these traffic sources, or to the extent our mix of these channels shifts, we could see a corresponding change in our sales and marketing expenses.

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Interest Expense, Net and Other Income, Net

Interest expense, net consists primarily of interest expense on the amortization of debt issuance costs related to the convertible senior notes.

Other income, net consists primarily of interest income, gains on early extinguishment of the convertible senior notes, and realized gains/losses on the sale of our investments.

Interest expense, net consists primarily of the amortization of debt issuance costs related to the convertible senior notes.

Other income, net consists primarily of interest income, gains on early extinguishment of the convertible senior notes, and realized gains and losses on the sale of our investments.

Provision For Income Taxes

Provision for income taxes consists primarily of federal and state income taxes in the United States and income taxes in certain non-US jurisdictions.

Provision for income taxes consists primarily of state income taxes in the United States and income taxes in certain non-U.S.

jurisdictions.

Results of Operations

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Total interest expense, net and other income, net 16,714 4 48,742 9

(Loss) income before provision for income taxes (688,366) n/m 50,312 7

Loss before provision for income taxes (100,142) (27) (688,366) n/m

Provision for income taxes (3,279) (1) (148,702) n/m

Net (loss) income $ (837,068) n/m $ 18,180 3 %

Net loss $ (103,421) (28) % $ (837,068) n/m

(1) Includes share-based compensation expense and restructuring charges as follows:

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Years Ended December 31, 2025 and 2024

The following table presents our total net revenues for the periods shown for our Subscription Services and Skills and Other product lines (in thousands, except percentages):

The following table presents our total net revenues for the periods shown for our Chegg Skilling and Academic Services product lines (in thousands, except percentages):

Years Ended December 31, Change in 2025

2025 2024 $ %

Subscription Services $ 549,211 $ 640,520 $ (91,309) (14) %

Skills and Other 68,363 75,775 (7,412) (10)

Chegg Skilling $ 68,654 $ 73,959 $ (5,305) (7) %

Academic Services 308,254 543,615 (235,361) (43)

Total net revenues $ 376,908 $ 617,574 $ (240,666) (39)

Subscription Services revenues decreased by $91.3 million, or 14%, during the year ended December 31, 2024, compared to the same period in 2023.

The decrease was primarily due to a 14% decrease in subscribers who have paid to access our services.

Subscription Services revenues as a percentage of net revenues were 89% during each of the years ended December 31, 2024 and 2023.

Skills and Other revenues decreased by $7.4 million, or 10%, during the year ended December 31, 2024 compared to the same period in 2023.

The decrease was primarily due to lower revenues in Chegg Skills related to fewer enrollments.

Skills and Other revenues as a percentage of net revenues were 11% during each of the years ended December 31, 2024 and 2023.

Chegg Skilling revenues decreased by $5.3 million, or 7%, during the year ended December 31, 2025 compared to the same period in 2024.

The decrease was due to lower revenues of $8.9 million related to our workforce skilling platform primarily related to reduced direct-to-consumer transactions, partially offset by an increase of revenue of $3.6 million from our language learning platform primarily related to business-to-business growth.

Chegg Skilling revenues as a percentage of net revenues were 18% during the year ended December 31, 2025 compared to 12% during the same period in 2024.

Academic Services revenues decreased by $235.4 million, or 43%, during the year ended December 31, 2025, compared to the same period in 2024.

The decrease was primarily due to a decrease in subscription revenue of $223.8 million primarily related to reduced traffic which led to fewer subscribers, a decrease in advertising services revenue of $18.0 million due to lower fulfillment, and a decrease of print textbook and eTextbook revenue of $4.4 million because we no longer provide this platform, partially offset by content licensing revenue of $10.8 million.

Academic Services revenues as a percentage of net revenues were 82% during the year ended December 31, 2025 compared to 88% during the same period in 2024.

Cost of Revenues

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(1) Includes restructuring charges of:

$ 762 $ 12 $ 750 n/m

$ 2,099 $ 762 $ 1,337 175 %

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Cost of revenues decreased $28.8 million, or 16%, during the year ended December 31, 2025, compared to the same period in 2024.

The decrease was primarily due to the absence of the $38.2 million content and related assets charge, lower contractor spend of $4.4 million, lower depreciation and amortization expense of $4.0 million, and lower payment processing fees of $2.9 million, which is primarily due to the decrease in subscribers who have paid to access our services, which was partially offset by higher web hosting fees of $2.5 million and the absence of the gain on disposition of textbooks of $1.2 million.

Gross margins increased to 71% during the year ended December 31, 2024, from 68% during the same period in 2023.

See Note 6, “Property and Equipment, Net” of our accompanying Notes to Consolidated Financial Statements included in Part II, Item 8, “Financial Statements” of this Annual Report on Form 10-K for additional information on the content and related assets charge.

The decrease was primarily due to lower payment processing and other order fees of $16.3 million, which is primarily due to the decrease in subscribers who have paid to access our services, lower employee-related expenses of $4.6 million, lower web hosting fees of $4.0 million, lower write-offs of content and internally developed software of $3.1 million, lower contractor spend of $2.4 million, and lower advertising services revenue costs of $1.0 million, partially offset by higher depreciation and amortization expense of $3.2 million and higher restructuring charges of $1.3 million.

Gross margins decreased to 60% during the year ended December 31, 2025, from 71% during the same period in 2024.

Operating Expenses

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177,406 217,756 (40,350) (19)

Impairment expense 677,239 3,600 673,639 n/m

Total operating expenses $ 1,173,755 $ 558,079 $ 615,676 n/m

Impairment expense 2,000 677,239 (675,239) (100)

Total operating expenses $ 341,613 $ 1,173,755 $ (832,142) (71)

(1) Includes share-based compensation expense of:

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(1) Includes restructuring charges of:

Research and development $ 11,387 $ 1,692 $ 9,695 n/m

Sales and marketing 2,630 1,228 1,402 n/m

General and administrative 9,824 2,772 7,052 n/m

Total restructuring charges $ 23,841 $ 5,692 $ 18,149 n/m

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Research and development $ 15,376 $ 11,387 $ 3,989 35 %

Sales and marketing 4,793 2,630 2,163 82

General and administrative 29,271 9,824 19,447 198

Total restructuring charges $ 49,440 $ 23,841 $ 25,599 107

Operating expenses decreased $832.1 million, or 71% during the year ended December 31, 2025, compared to the same period in 2024, primarily due to the absence of impairment expense of $677.2 million recognized in 2024.

The remaining decreases were primarily related to lower employee-related expenses and contractor spend as a result of the restructuring plans.

Goodwill and Intangible Assets” and “Note 15 .

Restructuring Charges” included in our accompanying Notes to Consolidated Financial Statements included in Part II, Item 8, “Consolidated Financial Statements and Supplementary Data” of this Annual Report on Form 10-K for additional information regarding impairment expense and the restructuring plans, respectively.

Research and Development

Research and development expenses decreased $77.0 million, or 45%, during the year ended December 31, 2025 compared to the same period in 2024.

The decrease was primarily due to lower employee-related expenses of $28.8 million, which is primarily due to share-based compensation expense, partially offset by higher restructuring charges of $9.7 million.

The decrease was primarily due to lower employee-related expenses of $65.4 million, including share-based compensation expense, lower contractor spend of $6.2 million, lower web hosting fees of $4.1 million, lower technology expenses of $3.3 million, and lower depreciation and amortization expense of $1.2 million, partially offset by higher restructuring charges of $4.0 million.

Research and development expenses as a percentage of net revenues were 25% during the year ended December 31, 2025 compared to 28% during the same period in 2024.

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Sales and marketing expenses decreased by $39.6 million, or 37%, during the year ended December 31, 2025, compared to the same period in 2024.

The decrease was primarily attributable to lower depreciation and amortization expense of $12.0 million, which is primarily due to previously recognized impairment charges, lower employee-related expenses $4.3 million, which is primarily due to share-based compensation expense, and lower paid marketing expenses of $1.7 million.

The decrease was primarily due to lower paid marketing expenses of $22.1 million, lower employee-related expenses of $14.3 million including share-based compensation expense, lower indirect marketing expenses of $2.7 million, and lower depreciation and amortization expense of $1.3 million, partially offset by higher restructuring charges of $2.2 million.

Sales and marketing expenses as a percentage of net revenues were 18% during each of the years ended December 31, 2025 and 2024.

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General and administrative expenses decreased $40.4 million, or 19%, during the year ended December 31, 2025 compared to the same period in 2024.

The decrease was due to lower employee-related expenses of $38.6 million, which is primarily due to share-based compensation expense, partially offset by higher restructuring charges of $7.1 million, impairment of lease related assets of $5.6 million, and a higher loss contingency of $5.0 million.

The decrease was primarily due to lower employee-related expenses of $50.9 million including share-based compensation expense, lower professional fees of $6.0 million, lower loss contingency accruals of $4.5 million, lower contractor spend of $3.0 million, and lower facility expenses of $2.9 million, partially offset by higher restructuring charges of $19.4 million, an impairment loss on our equity investment of $6.0 million, and higher impairments of lease-related assets of $1.8 million.

General and administrative expenses as a percentage of net revenues were 47% during the year ended December 31, 2025 compared to 35% during the same period in 2024.

Impairment Expense

Impairment expense was $2.0 million during the year ended December 31, 2025, consisting of impairment of property and equipment.

Impairment expense was $677.2 million during the year ended December 31, 2024 consisting of impairments of goodwill, intangible assets, and other related property and equipment.

Impairment expense was $3.6 million during the year ended December 31, 2023 consisting of an impairment of intangible assets.

Property and Equipment, Net” and “Note 7.

Goodwill and Intangible Assets” of our accompanying Notes to Consolidated Financial Statements included in Part II, Item 8, “Consolidated Financial Statements and Supplementary Data” of this Annual Report on Form 10-K for additional information.

Interest Expense, Net and Other Income, Net

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Interest expense, net decreased by $2.0 million, or 77%, during the year ended December 31, 2025, compared to the same period in 2024.

The decrease was primarily due to the early extinguishment of a portion of the 2026 notes.

Other income, net decreased $70.5 million, or 58%, during the year ended December 31, 2024 compared to the same period in 2023, primarily due to a decrease in gain on early extinguishment of a portion of convertible senior notes of $66.4 million and a decrease in interest income of $9.4 million partially offset by the gain on the sale of equity investment of $3.8 million.

See Note 8, “Convertible Senior Notes,” of our accompanying Notes to Consolidated Financial Statements included in Part II, Item 8, “Consolidated Financial Statements and Supplementary Data” of this Annual Report on Form 10-K for additional information on the gain on early extinguishment of a portion of the 2026 notes and 2025 notes.

The decrease was primarily due lower interest expense recognized as a result of the maturity of the 2025 notes and the early extinguishment of a portion of the 2026 notes.

Other income, net decreased $34.0 million, or 66%, during the year ended December 31, 2025 compared to the same period in 2024, primarily due to a decrease in interest income of $19.2 million due to lower investment balances, a decrease in gain on early extinguishment of a portion of the 2026 notes of $11.7 million, and the absence of a gain on the sale of our equity investment of $3.8 million.

Convertible Senior Notes,” of our accompanying Notes to Consolidated Financial Statements included in Part II, Item 8, “Consolidated Financial Statements and Supplementary Data” of this Annual Report on Form 10-K for additional information on the gain on early extinguishment of a portion of the 2026 notes and the maturity of the 2025 notes.

Provision for income taxes

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The $116.6 million change in provision for income taxes during the year ended December 31, 2024 compared to the same period in 2023, was primarily due to the establishment of a valuation allowance against our U.S.

federal and state deferred tax assets.

Provision for income taxes decreased by $145.4 million during the year ended December 31, 2025 compared to the same period in 2024, primarily due to the establishment of a valuation allowance against our U.S.

federal and state deferred tax assets in 2024.

Liquidity and Capital Resources

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_____________________________________________________

(1) Consists of the current and long-term portion of convertible senior notes, net.

Cash, cash equivalents, and investments decreased $51.2 million, or 9%, during the year ended December 31, 2024 primarily due to the early extinguishment of a portion of the 2026 notes of $96.5 million and purchases of property and equipment of $75.0 million, partially offset by the net cash provided by operating activities of $125.2 million.

Convertible senior notes, net decreased $113.9 million, or 19%, during the year ended December 31, 2024 primarily due to the early extinguishment of a portion of the 2026 notes.

The 2026 notes and 2025 notes mature on September 1, 2026 and March 15, 2025, respectively, unless converted, redeemed, or repurchased in accordance with their terms prior to such dates.

Holders of the 2026 notes and 2025 notes may convert their notes at any time on or after June 1, 2026 and December 15, 2024, respectively, until the close of business on the second scheduled trading day immediately preceding the respective maturity dates.

See Note 8, “Convertible Senior Notes” of our accompanying Notes to Consolidated Financial Statements included in Part I, Item 8, “Consolidated Financial Statements and Supplementary Data” of this Annual Report on Form 10-K for additional information on our notes.

(1) Consists of the current and long-term portion.

Cash, cash equivalents, and investments decreased $443.2 million, or 84%, during the year ended December 31, 2025 primarily due to the maturity of the 2025 notes and early extinguishment of a portion of the 2026 notes of $424.8 million and purchases of property and equipment of $28.1 million, partially offset by the net cash provided by operating activities of $15.5 million.

Convertible senior notes, net decreased $432.2 million, or 89%, during the year ended December 31, 2025 primarily due to the maturity of the 2025 notes and the early extinguishment of a portion of the 2026 notes.

The 2026 notes mature on September 1, 2026 unless converted, redeemed, or repurchased in accordance with their terms prior to such date.

Holders of the 2026 notes may convert their notes at any time on or after June 1, 2026 until the close of business on the second scheduled trading day immediately preceding the respective maturity dates.

Convertible Senior Notes” of our accompanying Notes to Consolidated Financial Statements included in Part II, Item 8, “Consolidated Financial Statements and Supplementary Data” of this Annual Report on Form 10-K for additional information on our 2026 notes.

On February 13, 2026, we entered into an individual, privately negotiated repurchase agreement with a holder of our outstanding 2026 notes to repurchase $20.0 million in aggregate principal amount of the 2026 notes for an aggregate cash repurchase price of $19.4 million (the “Notes Repurchase Transaction”).

The Notes Repurchase Transaction was entered into in connection with our previously announced securities repurchase program and closed on February 20, 2026.

Following the closing, $33.9 million aggregate principal amount of the 2026 notes remain outstanding and $122.4 million remain available under our securities repurchase program.

As of December 31, 2025, our principal sources of liquidity were cash, cash equivalents, and investments totaling $85.2 million, which were held for working capital purposes.

The substantial majority of our net revenues are from e-commerce transactions with students, which are settled within a few days through payment processors, as opposed to our accounts payable, which are settled based on contractual payment terms with our suppliers.

We believe that our existing sources of liquidity will be sufficient to fund our operations and debt service obligations for at least the next 12 months.

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Most of our cash, cash equivalents, and investments are held in the United States.

As we planned to repatriate a portion of the earnings from our subsidiary in India, we accrued a total tax liability of $5.2 million.

In November 2024, our subsidiary in India distributed $23.0 million to the United States, resulting in a remittance of $3.5 million in withholding tax.

As of December 31, 2024, the net cumulative tax expense related to future distributions amounts to $1.7 million.

In December 2025, our subsidiary in India distributed an additional $10.8 million to the United States, resulting in a remittance of $1.6 million in withholding tax.

As of December 31, 2025, the net cumulative tax expense related to future distribution amounts is $1.1 million.

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.

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_____________________________________________________

(1) Consists of the remaining principal amount due upon maturity and cash interest payments.

Our convertible senior notes are recorded on our consolidated balance sheets at their carrying amounts.

As of December 31, 2024, the carrying amount of the 2026 notes and 2025 notes was $127.3 million and $358.6 million, respectively.

(1) Consists of the remaining principal amount due upon maturity.

As of December 31, 2025, our convertible senior notes are recorded on our consolidated balance sheets at the carrying amounts of $53.8 million.

(2) Represents contractual obligations primarily related to information technology services.

(3) Our corporate offices are leased under operating leases, which expire at various dates through 2033.

In addition, we are also subject to certain legal proceedings and claims in the ordinary course of business and record a liability when we believe that a loss is probable and reasonably estimable.

As of December 31, 2024, we've recognized an estimated loss contingency accrual of $7.0 million related to one of our legal proceedings.

The timing of such payment is uncertain and we are unable to reliably estimate the timing and therefore have not included in the above table.

See Note 10, “Commitments and Contingencies” of our accompanying Notes to Consolidated Financial Statements included in Part I, Item 8, “Consolidated Financial Statements and Supplementary Data” of this Annual Report on Form 10-K for additional information.

In addition, we are also subject to certain legal proceedings and claims, including in the ordinary course of business, and record a liability when we believe that a loss is probable and reasonably estimable.

See “Note 10.

Commitments and Contingencies" of our accompanying Notes to Consolidated Financial Statements included in Part II, Item 8, “Consolidated Financial Statements and Supplementary Data” of this Annual Report on Form 10-K for additional information.

The following table presents our consolidated statements of cash flows data for the periods shown (in thousands, except percentages):

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Net cash provided by investing activities

11,345 268,673 (257,328) (96)

282,297 11,345 270,952 n/m

Net cash used in financing activities

(109,142) (852,770) 743,628 (87)

Net cash provided by operating activities decreased $121.0 million, or 49%, during the year ended December 31, 2024, compared to the same period in 2023 and was primarily driven by lower bookings as well as timing of bill payments.

Net cash provided by investing activities decreased $257.3 million, or 96%, during the year ended December 31, 2024, compared to the same period in 2023 and was primarily driven by lower cash from investment maturities of $425.5 million and lower cash proceeds from the sale of investments of $324.5 million partially offset by an increase in cash used for the purchases of investments of $467.0 million.

Net cash used in financing activities decreased $743.6 million, or 87%, during the year ended December 31, 2024, compared to the same period in 2023 and was primarily related to lower repurchases of our convertible senior notes of $409.5 million and lower repurchases of our common stock of $332.2 million.

Critical Accounting Policies, Significant Judgments and Estimates

(428,479) (109,142) (319,337) n/m

The substantial majority of our cash inflows from operating activities are from e-commerce transactions with learners, 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 provided by operating activities decreased $109.7 million, or 88%, during the year ended December 31, 2025, compared to the same period in 2024 and was primarily related to the net effect of a decrease in net loss of $733.6 million, a decrease in impairment expense of $675.2 million, and a decrease in deferred tax assets of $142.3 million.

Net cash provided by investing activities increased $271.0 million during the year ended December 31, 2025, compared to the same period in 2024 and was primarily related to fewer purchases of investments of $170.2 million, higher proceeds from the sale of investments of $111.1 million, and fewer purchases of property and equipment of $46.8 million, partially offset by a lower cash from investment maturities of $41.6 million and the absence of proceeds from the sale of our equity investment of $15.5 million.

Net cash used in financing activities increased $319.3 million during the year ended December 31, 2025, compared to the same period in 2024 and was primarily related to higher repayments of our convertible senior notes of $328.3 million, partially offset by lower taxes paid related to the net share settlement of equity awards of $6.6 million and the absence of repurchases of our common stock of $2.6 million.

Critical Accounting Estimates

Our consolidated financial statements are prepared in accordance with generally accepted accounting principles in the United States (U.S.

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Accordingly, these are the policies we believe are the most critical to aid in fully understanding and evaluating our financial condition and results of operations.

For further information on all of our significant accounting policies, see Note 2, “Significant Accounting Policies”, of our accompanying Notes to Consolidated Financial Statements included in Part II, Item 8, “Consolidated Financial Statements and Supplementary Data” of this Annual Report on Form 10-K.

For further information on all of our significant accounting policies, see “Note 2.

Significant Accounting Policies”, of our accompanying Notes to Consolidated Financial Statements included in Part II, Item 8, “Consolidated Financial Statements and Supplementary Data” of this Annual Report on Form 10-K.

Revenue Recognition and Deferred Revenue

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Our determination is based on our evaluation of whether we control the specified goods or services prior to transferring them to the customer.

There are significant judgments involved in determining whether we control the specified goods or

services prior to transferring them to the customer including whether we have the ability to direct the use of the good or service and obtain substantially all of the remaining benefits from the good or service.

We have concluded that we control our Subscription Services and therefore we recognize revenues and cost of revenues on a gross basis.

For print textbooks and eTextbooks, we have concluded that we do not control the service and therefore we recognize revenues on a net basis based on our role in the transaction as an agent.

There are significant judgments involved in determining whether we control the specified goods or services prior to transferring them to the customer including whether we have the ability to direct the use of the good or service and obtain substantially all of the remaining benefits from the good or service.

For all of our offerings, aside from print textbooks and eTextbooks which are no longer provided, we control our services and recognize revenues and cost of revenues on a gross basis.

Some of our customer arrangements include multiple performance obligations.

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If the asset group is not recoverable, we proceed to estimating the fair value of the asset group, which includes assumptions regarding future growth rates and the amount and timing of expected future cash flow.

If our estimates or related assumptions are inaccurate, our conclusion on whether these assets are recoverable or impaired could be incorrect, which could whether we recognize an impairment in a given period.

Goodwill is tested for impairment at least annually or whenever events or changes in circumstances indicate that their carrying values may not be recoverable.

If our estimates or related assumptions are inaccurate, our conclusion on whether these assets are recoverable or impaired could be incorrect, which could impact whether we recognize an impairment in a given period.

Goodwill is tested for impairment at least annually or whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.

We first assess qualitative factors to determine whether it is necessary to perform a quantitative impairment test.

In our qualitative assessment, we consider factors including economic conditions, industry and market conditions and developments, overall financial performance and other relevant entity-specific events in determining whether it is more likely than not that the fair value of our reporting unit is less than the carrying amount.

In our qualitative assessment, we consider factors including economic conditions, industry and

market conditions and developments, overall financial performance and other relevant entity-specific events in determining whether it is more likely than not that the fair value of our reporting unit is less than the carrying amount.

Our qualitative assessment requires management to make judgments based on the factors listed above in our determination of whether events or changes in circumstances indicate that the carrying values may not be recoverable.

If our qualitative assessment concludes that it is more likely than not that the fair value is less than the carrying amount, a quantitative assessment of impairment is performed.

If our qualitative assessment concludes that it is more likely than not that the fair value is less than the carrying amount, a quantitative assessment is performed.

Performing a quantitative impairment test includes the determination of fair value and involves significant estimates and assumptions including, among others, forecasted revenue growth rates, operating margins and capital expenditures, and discount rates used to calculate projected future cash flows.

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In the event that we change our determination as to the amount of deferred tax assets that can be realized, we will adjust our valuation allowance with a corresponding impact to the provision for income taxes in the period in which such determination is made.

We record uncertain tax positions on the basis of a two-step process in which (1) we determine whether it is more likely than not that the tax positions will be sustained on the basis of technical merits of the position and (2) for those tax positions that meet the more likely than not recognition threshold, we recognize the tax benefit as the largest amount that is cumulative more than 50 percent likely to be realized upon ultimate settlement with the related tax authority.

that meet the more likely than not recognition threshold, we recognize the tax benefit as the largest amount that is cumulative more than 50 percent likely to be realized upon ultimate settlement with the related tax authority.

The calculation of tax expense and liabilities involves dealing with uncertainties in the application of complex global tax regulations.

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Recent Accounting Pronouncements

For relevant recent accounting pronouncements, see Note 2, “Significant Accounting Policies”, of our accompanying Notes to Consolidated Financial Statements included in Part II, Item 8, “Consolidated Financial Statements and Supplementary Data” of this Annual Report on Form 10-K.

For relevant recent accounting pronouncements, see “Note 2.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis