The following discussion of our financial condition and results of operations should be read in conjunction with our condensed
consolidated financial statements and the related notes included in Item 1 of Part I of this report, and together with our audited consolidated financial statements and the related notes included in the final prospectus for our initial public offering filed with the
This report contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All
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In addition, any statements contained herein that are not statements of historical facts are deemed to be forward-looking
You should not rely upon forward-looking statements as predictions of future events. Although we believe that the expectations
Overview
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common stock on a one-for-one basis.
Factors Affecting Our Performance
Ability to attract and engage new learners, Enterprise customers, and Degrees students
In order to grow our business, we must attract new learners, Enterprise customers and Degrees students efficiently and increase engagement on our platform over time. Our Consumer learners are the most important source of our overall learner base, as they contribute to our Enterprise and Degrees revenue.
Ability to source in-demand content from our educator partners
Impact of mix shift over time
Ability to convert free learners to paid learners
Ability to expand our international footprint
Ability to retain and expand our Enterprise customer relationships
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Our investment in growth
The COVID-19 pandemic has resulted, and is likely to continue to result, in significant global, social, and business disruption.
Components of Results of Operations
Revenue
We derive revenue from contracts with customers for access to the learning content hosted on our platform and related services. We derive our revenue from three sources: Consumer, Enterprise, and Degrees.
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Cost of Revenue
Operating Expenses
General and administrative. Our general and administrative expenses consist primarily of personnel and personnel-related costs, including stock-based compensation and costs related to our legal, finance, and human resources departments, as well as indirect taxes, professional fees, and other corporate expenses.
Other income (expense), net consists primarily of foreign exchange gains (losses).
Income Tax Expense
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Results of Operations
(1) Includes stock-based compensation expense as follows:
Total stock-based compensation expense $ 4,700
The following table summarizes our results of operations as a percentage of revenue for each of the periods indicated:
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Comparison of the Three and Nine Months Ended
Nine Months Ended September
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Cost of Revenue, Gross Profit and Gross Margin
Months Ended September
Months Ended September
Total operating expenses for the three and nine months ended
respectively, compared to
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Other Income (Expense)
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Liquidity and Capital Resources
Cash Flows
The following table summarizes our cash flows for the periods indicated:
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Investing Activities
Key Business Metrics and Non-GAAP Financial Measures
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Net Retention Rate for Paid Enterprise Customers
Segment Revenue
Our revenue is generated from three sources: Consumer, Enterprise, and Degrees, each of which is an individual segment of our business. “Segment Revenue” represents the revenue recognized from each of these three sources.
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Nine Months Ended
Nine Months Ended
Non-GAAP Financial Measures
Non-GAAP Gross Profit and Non-GAAP Net Loss
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64,825
Adjusted EBITDA and Adjusted EBITDA Margin
“Adjusted EBITDA” and “Adjusted EBITDA Margin”, which are non-GAAP financial measures, are key measures used by our management to help us analyze our financial results, establish budget and operational goals for managing our business, evaluate our performance, and make strategic decisions.
The following table provides a reconciliation of net loss, the most directly comparable GAAP financial measure, to Adjusted EBITDA.
(32,451 )
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The following table provides a reconciliation of net cash (used in) provided by operating activities, the most directly
comparable GAAP financial measure, to Free Cash Flow.
941
178,272
Net cash provided by financing activities
541,983
Contractual Obligations and Commitments
Off-Balance Sheet Arrangements
Critical Accounting Policies and Estimates
There have been no material changes to our critical accounting policies and estimates as compared to those described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” set forth in our Prospectus.
Recent Accounting Pronouncements
See Note 2 to our unaudited condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for information regarding recently issued accounting pronouncements.
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JOBS Act Transition Period
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