Duolingo Inc

Previous wording

Our flagship app has organically become the world’s most popular way to learn languages and the top-grossing Education app in the App Stores, offering courses in over 40 languages to over 95 million monthly active users for the three months ended March 31, 2024. We believe that we have become the preeminent online destination for language learning due to our beautifully designed products, exceptional user engagement, and demonstrated learning efficacy.

Current wording

Our flagship app has organically become the world’s most popular way to learn languages and the top-grossing Education app in the App Stores, offering courses in over 40 languages to over 100 million monthly active users for the three months ended June 30, 2024. We believe that we have become the preeminent online destination for language learning due to our beautifully designed products, exceptional user engagement, and demonstrated learning efficacy.

Previous wording

We had approximately 97.6 million and 72.6 million MAUs for the three months ended March 31, 2024 and 2023, respectively, representing an increase of 35% from the prior year period. We grew MAUs through product initiatives designed to make the app more social and engaging, through marketing, and through improving our courses, all of which we believe helped us attract new users, retain existing users, and reengage the millions of former users who return to our Duolingo App.

Current wording

We had approximately 103.6 million and 74.1 million MAUs for the three months ended June 30, 2024 and 2023, respectively, representing an increase of 40% from the prior year period. We grew MAUs through product initiatives designed to make the app more social and engaging, through marketing, and through improving our courses, all of which we believe helped us attract new users, retain existing users, and reengage the millions of former users who return to our Duolingo App.

Previous wording

We had approximately 31.4 million and 20.3 million DAUs for the three months ended March 31, 2024 and 2023, respectively, representing an increase of 54% from the prior year period. The DAU / MAU ratio, which we believe is an indicator of user engagement, increased to 32.1% from 28.0% a year ago. We grew DAUs through many of the same product initiatives as we grew MAUs, such as making the product more fun and engaging.

Current wording

We had approximately 34.1 million and 21.4 million DAUs for the three months ended June 30, 2024 and 2023, respectively, representing an increase of 59% from the prior year period. The DAU / MAU ratio, which we believe is an indicator of user engagement, increased to 32.9% from 28.9% a year ago. We grew DAUs through many of the same product initiatives as we grew MAUs, such as making the product more fun and engaging.

Previous wording

As of March 31, 2024 and 2023, we had approximately 7.4 million and 4.8 million paid subscribers, respectively, representing an increase of 54% from the prior year period. We grew paid subscribers through product initiatives designed to make Duolingo subscription offerings more appealing which we believe helped us attract new subscribers and retain existing subscribers.

Current wording

As of June 30, 2024 and 2023, we had approximately 8.0 million and 5.2 million paid subscribers, respectively, representing an increase of 52% from the prior year period. We grew paid subscribers through product initiatives designed to make Duolingo subscription offerings more appealing, which we believe helped us attract new subscribers and retain existing subscribers.

Previous wording

For the three months ended March 31, 2024 and 2023, we generated $161.5 million and $110.1 million of subscription bookings, respectively, representing an increase of 47% from the prior year period. We grew subscription bookings by selling more first-time and renewal subscriptions.

Current wording

For the three months ended June 30, 2024 and 2023, we generated $156.5 million and $106.3 million of subscription bookings, respectively, representing an increase of 47% from the prior year period. For the six months ended June 30, 2024 and 2023, we generated $318.0 million and $216.4 million of subscription bookings, respectively, representing an increase of 47% from the prior year period. We grew subscription bookings by selling more first-time and renewal subscriptions.

Previous wording

For the three months ended March 31, 2024 and 2023, we generated $197.5 million and $140.1 million total bookings, respectively, representing an increase of 41% from the prior year period. We grew total bookings through growth in subscription bookings noted above, in addition to growth in the Duolingo English Test, advertising and in-app purchases.

Current wording

For the three months ended June 30, 2024 and 2023, we generated $190.1 million and $137.5 million total bookings, respectively, representing an increase of 38% from the prior year period. For the six months ended June 30, 2024 and 2023, we generated $387.5 million and $277.6 million total bookings, respectively, representing an increase of 40% from the prior year period. We grew total bookings through growth in subscription bookings noted above, in addition to growth in the Duolingo English Test, advertising and in-app purchases.

Previous wording

We use certain non-GAAP financial measures to supplement our Unaudited Condensed Consolidated Financial Statements, which are presented in accordance with GAAP. These non-GAAP financial measures include Adjusted EBITDA and free cash flow. We use these non-GAAP financial measures for financial and operational decision-making and as a means to evaluate period-to-period comparisons. By excluding certain items that may not be indicative of our recurring core operating results, we believe that Adjusted EBITDA and free cash flow provide meaningful supplemental information regarding our performance. Accordingly, we believe these non-GAAP financial measures are useful to investors and others because they allow for additional information with respect to financial measures used by management in its financial and operational decision-making and they may be used by our institutional investors and the analyst community to help them analyze the health of our business. However, there are a number of limitations related to the use of non-GAAP financial measures, and these non-GAAP financial measures should be considered in addition to, not as a substitute for or in isolation from, our financial results prepared in accordance with GAAP. Other companies, including companies in our industry, may calculate these non-GAAP financial measures differently or not at all, which reduces their usefulness as comparative measures.

Current wording

We use certain non-GAAP financial measures to supplement our Unaudited Condensed Consolidated Financial Statements, which are presented in accordance with GAAP. These non-GAAP financial measures include Adjusted EBITDA, free cash flow and constant currency. We use these non-GAAP financial measures for financial and operational decision-making and as a means to evaluate period-to-period comparisons. By excluding certain items that may not be indicative of our recurring core operating results, we believe that Adjusted EBITDA, free cash flow and constant currency provide meaningful supplemental information regarding our performance. Accordingly, we believe these non-GAAP financial measures are useful to investors and others because they allow for additional information with respect to financial measures used by management in its financial and operational decision-making and they may be used by our institutional investors and the analyst community to help them analyze the health of our business. However, there are a number of limitations related to the use of non-GAAP financial measures, and these non-GAAP financial measures should be considered in addition to, not as a substitute for or in isolation from, our financial results prepared in accordance with GAAP. Other companies, including companies in our industry, may calculate these non-GAAP financial measures differently or not at all, which reduces their usefulness as comparative measures.

Previous wording

Adjusted EBITDA. Adjusted EBITDA is defined as net income (loss) excluding interest income, income taxes, depreciation and amortization, stock-based compensation expenses related to equity awards, acquisition earn-out costs, and gain on sale of capitalized software. Adjusted EBITDA is used by management to evaluate the financial performance of our business and we present Adjusted EBITDA because we believe it is helpful in highlighting trends in our operating results and that it is frequently used by analysts, investors and other interested parties to evaluate companies in our industry. The following table presents a reconciliation of our net income (loss), the most directly comparable financial measure presented in accordance with GAAP, to Adjusted EBITDA.

Current wording

Adjusted EBITDA. Adjusted EBITDA is defined as net income excluding interest income, income taxes, depreciation and amortization, stock-based compensation expenses related to equity awards, transaction costs related to acquisitions, acquisition earn-out costs, and gain on sale of capitalized software. Adjusted EBITDA is used by management to evaluate the financial performance of our business and we present Adjusted EBITDA because we believe it is helpful in highlighting trends in our operating results and that it is frequently used by analysts, investors and other interested parties to evaluate companies in our industry. The following table presents a reconciliation of our net income, the most directly comparable financial measure presented in accordance with GAAP, to Adjusted EBITDA.

Previous wording

(1)In addition to stock-based compensation expense of $25.0 million and $21.1 million for the three months ended March 31, 2024 and 2023, this includes costs incurred related to taxes paid on equity transactions as follows:

Current wording

(1)In addition to stock-based compensation expense of $26.7 million and $23.7 million for the three months ended June 30, 2024 and 2023, respectively, and $51.7 million and $44.8 million for the six months ended June 30, 2024 and 2023, respectively, this includes costs incurred related to taxes paid on equity transactions as follows:

Previous wording

(2)Represents costs incurred related to the earn-out payment on an acquisition, which is included within General and administrative within our Unaudited Condensed Consolidated Statements of Operations and Comprehensive Income (Loss).

Current wording

(3)Represents costs incurred related to the earn-out payment on an acquisition, which is included within General and administrative within our Unaudited Condensed Consolidated Statements of Operations and Comprehensive Income.

Previous wording

(3)Represents proceeds from a sale of capitalized software, which is included within Other (expense) income, net within our Unaudited Condensed Consolidated Statements of Operations and Comprehensive Income (Loss).

Current wording

(4)Represents proceeds from a sale of capitalized software, which is included within Other expense, net of other income within our Unaudited Condensed Consolidated Statements of Operations and Comprehensive Income.

Previous wording

For the three months ended March 31, 2024 and 2023, we generated net income of $27.0 million and net loss of $2.6 million, respectively. Our generation of net income as compared to a net loss in the comparative period was due to a combination of our growth in revenue, a reduction in operating expenses as a percentage of revenue as compared to the prior year period, and an increase in interest income of $4.4 million during the three months ended March 31, 2024.

Current wording

For the three months ended June 30, 2024 and 2023, we generated net income of $24.4 million and $3.7 million, respectively. For the six months ended June 30, 2024 and 2023, we generated net income of $51.3 million and $1.1 million, respectively. The increase in net income as compared to the comparative period was due to a combination of our growth in revenue and interest income in addition to a reduction in operating expenses as a percentage of revenue as compared to the prior year period.

Previous wording

For the three months ended March 31, 2024 and 2023, we generated Adjusted EBITDA of $44.0 million and $15.1 million, respectively. Adjusted EBITDA increased due to a combination of our growth in revenue and a reduction in operating expenses as a percentage of revenue as compared to the prior year periods.

Current wording

For the three months ended June 30, 2024 and 2023, we generated Adjusted EBITDA of $48.1 million and $20.9 million, respectively. For the six months ended June 30, 2024 and 2023, we generated Adjusted EBITDA of $92.1 million and $36.0 million, respectively. Adjusted EBITDA increased due to a combination of our growth in revenue and a reduction in operating expenses as a percentage of revenue as compared to the prior year periods.

Previous wording

Free Cash Flow. Free cash flow represents net cash provided by operating activities, reduced by capitalized software development costs and purchases of property and equipment and increased by taxes paid related to stock-based compensation equity awards as we believe they are not indicative of future liquidity. We believe that free cash flow is a measure of liquidity that provides useful information to our management, investors and others in understanding and evaluating the strength of our liquidity and future ability to generate cash that can be used for strategic opportunities or investing in our business. Free cash flow has certain limitations in that it does not represent our residual cash flow for discretionary expenditures and our non-discretionary commitments. The following table presents a reconciliation of net cash provided by operating activities, the most directly comparable financial measure calculated in accordance with GAAP, to free cash flow:

Current wording

Free Cash Flow. Free cash flow represents net cash provided by operating activities, reduced by capitalized software development costs and purchases of property and equipment and increased by taxes paid related to stock-based compensation equity awards and transaction costs related to acquisitions as we believe they are not indicative of future liquidity. We believe that free cash flow is a measure of liquidity that provides useful information to our management, investors and others in understanding and evaluating the strength of our liquidity and future ability to generate cash that can be used for strategic opportunities or investing in our business. Free cash flow has certain limitations in that it does not represent our residual cash flow for discretionary expenditures and our non-discretionary commitments. The following table presents a reconciliation of net cash provided by operating activities, the most directly comparable financial measure calculated in accordance with GAAP, to free cash flow:

Previous wording

For the three months ended March 31, 2024 and 2023, we generated $83.5 million and $29.6 million of net cash provided by operating activities, respectively. The increase in net cash provided by operating activities was mainly due to our generation of positive net income as discussed under the heading Adjusted EBITDA above and timing of amounts received from our payment service providers in the current period as compared to the same period in the prior year.

Current wording

For the three months ended June 30, 2024 and 2023, we generated $62.4 million and $37.2 million of net cash provided by operating activities, respectively, which was mainly due to our generation of positive net income as discussed under the heading Adjusted EBITDA above. For the six months ended June 30, 2024 and 2023, we generated $145.9 million and $66.8 million of net cash provided by operating activities, respectively. In addition to the generation of positive net income, timing of amounts received from our payment service providers in the current period as compared to the same period in the prior year caused the increase in net cash provided by operating activities for the six months ended June 30, 2024 and 2023.

Previous wording

For the three months ended March 31, 2024 and 2023, we generated $79.6 million and $28.8 million of free cash flow, respectively. The increase in free cash flow was mainly attributable to the increase in net cash provided by operating activities.

Current wording

For the three months ended June 30, 2024 and 2023, we generated $54.9 million and $34.3 million of free cash flow, respectively. For the six months ended June 30, 2024 and 2023, we generated $134.5 million and $63.1 million of free cash flow, respectively. The increase in free cash flow was mainly attributable to the increase in net cash provided by operating activities.

Previous wording

Total revenues were $167.6 million for the three months ended March 31, 2024, which represents an increase of 45% (on both a reported and constant currency basis) over the three months ended March 31, 2023. Subscription revenues totaled $131.7 million for the three months ended March 31, 2024, which represented an increase of 53% (on both a reported and constant currency basis) over the three months ended March 31, 2023.

Current wording

Total revenues were $178.3 million for the three months ended June 30, 2024, which represents an increase of 41% on a reported basis and 42% on a constant currency basis over the three months ended June 30, 2023. Subscription revenues totaled $143.9 million for the three months ended June 30, 2024, which represented an increase of 51% on a reported basis and 52% on a constant currency basis over the three months ended June 30, 2023.

Previous wording

Cost of revenues predominantly consists of third-party payment processing fees charged by various distribution channels, and also includes hosting fees. To a much lesser extent, cost of revenues includes costs for contractors, wages and stock-based compensation for certain employees in the capacity of customer support, amortization of revenue generating capitalized software, and depreciation of certain property and equipment.

Current wording

Cost of revenues predominantly consists of third-party payment processing fees charged by various distribution channels in addition to hosting fees. To a much lesser extent, cost of revenues includes customer support costs, such as contractor fees, wages and stock-based compensation for certain employees working in customer support, in addition to amortization of revenue generating capitalized software, and depreciation of certain property and equipment.

Previous wording

Research and Development. We invest heavily in research and development to create new products and product features that help us grow our user base, engage our users, monetize our users, and teach our users. This, in turn, drives additional growth in, and better lifetime value of, our paid subscribers, as well as increased advertising revenue from impressions from our free users. Expenses are primarily made up of costs incurred for the development of new and improved products and features in our applications. Such expenses include employee-related compensation, including stock-based compensation, of engineers, designers, and product managers, in addition to materials, travel and direct costs associated with the design and required testing of our platform. We expect engineers, designers, and product managers to represent a significant portion of our employees for the foreseeable future. We typically capitalize a small portion of research and development costs, mostly consisting of wages, each period into capitalized software when the work is specific to launching a new product, or making major upgrades to our existing products or platforms. We regularly test product improvements with our users. Many of these tests start by making small changes in the product that affect small numbers of users. As the tests evolve, they can require increasing investment and can impact more users. This process of constant testing is how we implement many of our new products and improvements to our platform and, in total, require large investments and involve substantial time and risks to develop and launch. Some of these products and product improvements may not be well received or may take a long time for users to adopt. As a result, the benefits of our research and development investments may be difficult to forecast. We expect research and development to continue to be our largest operating expense, but expect that it will decline as a percentage of revenues over the long-term.

Current wording

Research and Development. We invest heavily in research and development to create new products and product features that help us grow our user base, engage our users, monetize our users, and teach our users. This, in turn, drives additional growth in, and better lifetime value of, our paid subscribers, as well as increased advertising revenue from impressions from our free users. Expenses are primarily made up of costs incurred for the development of new and improved products and features in our applications during the preliminary product development stage. Such expenses include employee-related compensation, including stock-based compensation, of engineers, designers, and product managers, in addition to materials, travel and direct costs associated with the design and required testing of our platform. We expect engineers, designers, and product managers to represent a significant portion of our employees for the foreseeable future. We typically capitalize a small portion of research and development costs once the product has reached application development phase, mostly consisting of wages, each period into capitalized software when the work is specific to launching a new product, or making major upgrades to our existing products or platforms. We regularly test product improvements with our users. Many of these tests start by making small changes in the product that affect small numbers of users. As the tests evolve, they can require increasing investment and can impact more users. This process of constant testing is how we implement many of our new products and improvements to our platform and, in total, require large investments and involve substantial time and risks to develop and launch. Some of these products and product improvements may not be well received or may take a long time for users to adopt. As a result, the benefits of our research and development investments may be difficult to forecast. We expect research and development to continue to be our largest operating expense, but expect that it will decline as a percentage of revenues over the long-term.

Previous wording

General and Administrative. General and administrative expenses primarily consist of employee-related compensation, including stock-based compensation, for management and administrative functions, including our finance and accounting, legal, and people teams. General and administrative expenses also include certain professional services fees, general corporate and director and officer insurance, our facilities costs, public company costs to comply with the rules and regulations of the SEC and the Listing Rules of the Nasdaq Global Select Market, and other general overhead costs that support our operations. We expect that our general and administrative expenses will increase in absolute dollars as our business grows. However, we expect that our general and administrative expenses will decrease as a percentage of our revenues as our revenues grow faster than these expenses over the long-term.

Current wording

General and Administrative. General and administrative expenses primarily consist of employee-related compensation, including stock-based compensation, for management and administrative functions, including our finance and accounting, legal, and people teams. General and administrative expenses also include certain professional services fees, general corporate and director and officer insurance, our facilities costs, public company costs to comply with the rules and regulations of the Securities and Exchange Commission (“SEC”) and the Listing Rules of the Nasdaq Global Select Market, and other general overhead costs that support our operations. We expect that our general and administrative expenses will increase in absolute dollars as our business grows. However, we expect that our general and administrative expenses will decrease as a percentage of our revenues as our revenues grow faster than these expenses over the long-term.

Previous wording

Other (expense) income, net consists primarily of foreign currency exchange gains and losses.

Current wording

Other expense, net of other income consists primarily of foreign currency exchange gains and losses.

Previous wording

The benefit for income taxes represents the income tax provision associated with our operations based on the tax laws of the jurisdictions in which we operate. In addition to the U.S., we also operate in foreign jurisdictions that have different statutory rates. Our effective tax rates will vary depending on the relative proportion of foreign to domestic income, changes in the valuation of our deferred tax assets and liabilities, and changes in tax laws.

Current wording

The provision (benefit) for income taxes represents the income tax provision (benefit) associated with our operations based on the tax laws of the jurisdictions in which we operate. In addition to the U.S., we also operate in foreign jurisdictions that have different statutory rates. Our effective tax rates will vary depending on the relative proportion of foreign to domestic income, changes in the valuation of our deferred tax assets and liabilities, and changes in tax laws.

Previous wording

Comparison of the three months ended March 31, 2024 and 2023

Current wording

Comparison of the three and six months ended June 30, 2024 and 2023

Previous wording

The following table sets forth our Unaudited Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) data, including year-over-year change, for the periods indicated:

Current wording

The following table sets forth our Unaudited Condensed Consolidated Statements of Operations and Comprehensive Income data, including year-over-year change, for the periods indicated:

Previous wording

The following table sets forth the components of our Unaudited Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) for each of the periods presented as a percentage of revenue.

Current wording

The following table sets forth the components of our Unaudited Condensed Consolidated Statements of Operations and Comprehensive Income for each of the periods presented as a percentage of revenue.

Previous wording

Revenues increased $51.9 million, or 45%, to $167.6 million during the three months ended March 31, 2024, from revenues of $115.7 million during the three months ended March 31, 2023. The main drivers of the increase were:

Current wording

Revenues increased $51.5 million, or 41%, to $178.3 million during the three months ended June 30, 2024, from revenues of $126.8 million during the three months ended June 30, 2023. Revenues increased $103.4 million, or 43%, to $345.9 million during the six months ended June 30, 2024, from revenues of $242.5 million during the six months ended June 30, 2023. The main drivers of the increase were:

Previous wording

•Subscription revenue increased by $45.5 million during the three months ended March 31, 2024, primarily due to an increase in the average number of paid subscribers during the period;

Current wording

•Subscription revenue increased $48.8 million, or 51%, to $143.9 million during the three months ended June 30, 2024, and $94.3 million, or 52%, to $275.6 million during the six months ended June 30, 2024, primarily due to an increase in the average number of paid subscribers during the period;

Previous wording

•In-App Purchases revenue increased by $2.1 million during the three months ended March 31, 2024. This increase was primarily driven by the increase in DAUs; and

Current wording

•Other revenue increased by $2.7 million, or 9%, to $34.4 million during the three months ended June 30, 2024, primarily due to increased In-App Purchases of $1.5 million which was driven by the increase in DAU.

Previous wording

•Duolingo English Test revenue increased by $2.8 million during the three months ended March 31, 2024. The increase was primarily driven by increases in the average revenue per test;

Current wording

•Other revenue increased by $9.1 million, or 15%, to $70.3 million during the six months ended June 30, 2024, due to increased Duolingo English Test revenue of $3.7 million. The increase was mainly driven by increases in the average revenue per test. Additionally, In-App Purchases revenue increased by $3.6 million primarily driven by the increase in DAUs and Advertising revenue increased by $1.5 million driven by the increase in DAUs, which resulted in increased advertisements served, offset by decreases in average revenue per DAU.

Previous wording

Cost of Revenues and Gross Margin. Total gross margin increased slightly to 73.0% from 72.8% during the three months ended March 31, 2024 and 2023. This was primarily due to higher subscription gross margin contribution from an increase in subscriber revenue as a percentage of total revenue, partially offset by a decline in Advertising margins, which was due to decreases in average revenue per DAU and increased amortization of capitalized software.

Current wording

Cost of Revenues and Gross Margin. Total gross margin was 73.4% during both the three months ended June 30, 2024 and 2023. This was primarily due to higher subscription gross margin contribution from an increase in subscriber revenue as a percentage of total revenue, offset by a decline in Advertising margins, which was due to decreases in average revenue per DAU.

Previous wording

Research and Development. Research and development expense increased by $5.0 million, or 11%, to $50.9 million during the three months ended March 31, 2024 from $45.8 million during the three months ended March 31, 2023. The increase was mainly due to:

Current wording

Research and Development. Research and development expense increased by $7.2 million, or 15%, to $55.1 million during the three months ended June 30, 2024 from $47.9 million during the three months ended June 30, 2023. The increase was mainly due to:

Previous wording

•Increased net personnel costs of $5.7 million. Total gross personnel costs increased by $8.3 million, of which $4.0 million of the increase was related to stock-based compensation expense. This increase was reduced by an additional $2.6 million wages recorded as capitalized software as compared to the same period in the prior year;

Current wording

•Increased net personnel costs of $7.9 million, driven primarily by the growth in headcount. Total gross personnel costs increased by $8.2 million, of which $3.2 million of the increase was related to stock-based compensation expense. This increase was reduced by $0.3 million of wages recorded as capitalized software as compared to the same period in the prior year;

Previous wording

The above increases were partially offset by a decrease in net contractor costs of $1.3 million.

Current wording

The above increases were partially offset by a decrease in net contractor costs of $1.8 million.

Previous wording

•Increased web services and technology costs of $0.5 million; and

Current wording

•Increased travel and other costs of $0.5 million.

Previous wording

Sales and Marketing. Sales and marketing expense increased by $3.3 million, or 20%, to $19.9 million during the three months ended March 31, 2024 from $16.6 million during the three months ended March 31, 2023.

Current wording

Sales and Marketing. Sales and marketing expense increased by $2.4 million, or 14%, to $20.2 million during the three months ended June 30, 2024 from $17.7 million during the three months ended June 30, 2023.

Previous wording

•Increased direct marketing and other expenses of $2.8 million; and

Current wording

•Increased direct marketing and other expenses of $1.5 million; and

Previous wording

•Increased personnel costs of $1.8 million, including increased stock-based compensation expense of $0.2 million;

Current wording

•Increased personnel costs of $0.9 million driven primarily by the growth in headcount, including increased stock-based compensation expense of $0.2 million.

Previous wording

•Advertising revenue increased by $1.3 million during the three months ended March 31, 2024. This increase was driven by the increase in DAUs, which resulted in increased advertisements served, offset by decreases in average revenue per DAU.

Current wording

This increase was mainly due to:

Previous wording

•Increased personnel costs of $0.5 million driven primarily by the growth in headcount, including increased stock-based compensation expense of $0.3 million.

Current wording

•Increased personnel costs of $1.4 million driven primarily by the growth in headcount, including increased stock-based compensation expense of $0.5 million.

Previous wording

General and Administrative. General and administrative expense increased by $4.9 million, or 16%, to $35.1 million during the three months ended March 31, 2024 from $30.2 million during the three months ended March 31, 2023. This increase was mainly due to:

Current wording

General and Administrative. General and administrative expense increased by $4.7 million, or 15%, to $37.0 million during the three months ended June 30, 2024 from $32.2 million during the three months ended June 30, 2023. This increase was mainly due to: