Duolingo, Inc.

Previous wording

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our Unaudited Condensed Consolidated Financial Statements and related notes included elsewhere in this Quarterly Report on Form 10-Q, the audited consolidated financial statements and related notes included in our Annual Report on Form 10-K and 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. The following discussion contains forward-looking statements, such as those relating to our plans, objectives, expectations, intentions, and beliefs, that involve risks, uncertainties and assumptions. Our actual results could differ materially from these forward-looking statements as a result of many factors, including those discussed in Part II, Item 1A. “Risk Factors,” “Special Note Regarding Forward-Looking Statements,” and included elsewhere in this Quarterly Report on Form 10-Q, and in 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. Our historical results are not necessarily indicative of the results that may be expected for any periods in the future.

Current wording

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our Unaudited Condensed Consolidated Financial Statements and related notes included elsewhere in this Quarterly Report on Form 10-Q, the audited consolidated financial statements and related notes included in our Annual Report on Form 10-K and 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. The following discussion contains forward-looking statements, such as those relating to our plans, objectives, expectations, intentions, and beliefs, that involve risks, uncertainties and assumptions. Our actual results could differ materially from these forward-looking statements as a result of many factors, including those discussed in “Special Note Regarding Forward-Looking Statements,” and included elsewhere in this Quarterly Report on Form 10-Q, and in Part I, Item 1A. “Risk Factors,” and Part II, Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K. Our historical results are not necessarily indicative of the results that may be expected for any periods in the future.

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 100 million monthly active users for the three months ended September 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.

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 130 million monthly active users for the three months ended March 31, 2025. 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 113.1 million and 83.1 million MAUs for the three months ended September 30, 2024 and 2023, respectively, representing an increase of 36% 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 130.2 million and 97.6 million MAUs for the three months ended March 31, 2025 and 2024, respectively, representing an increase of 33% 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 37.2 million and 24.2 million DAUs for the three months ended September 30, 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 32.9% from 29.1% a year ago. We grew DAUs through many of the same marketing and product initiatives as we grew MAUs, such as making the product more fun and engaging.

Current wording

We had approximately 46.6 million and 31.4 million DAUs for the three months ended March 31, 2025 and 2024, respectively, representing an increase of 49% from the prior year period. The DAU / MAU ratio, which we believe is an indicator of user engagement, increased to 35.8% from 32.1% a year ago. We grew DAUs through many of the same marketing and product initiatives as we grew MAUs, such as making the product more fun and engaging.

Previous wording

As of September 30, 2024 and 2023, we had approximately 8.6 million and 5.8 million paid subscribers, respectively, representing an increase of 47% 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 March 31, 2025 and 2024, we had approximately 10.3 million and 7.4 million paid subscribers, respectively, representing an increase of 40% 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

Subscription Bookings and Total Bookings. Subscription bookings represent the amounts we receive from a purchase of any Duolingo subscription offering. Total bookings include subscription bookings, income from advertising networks for advertisements served to our users, purchases of the Duolingo English Test, and in-app purchases of virtual goods. We believe bookings provide an indication of trends in our operating results, including cash flows, that are not necessarily reflected in our revenues because we recognize subscription revenues ratably over the lifetime of a subscription, which is generally from one to twelve months.

Current wording

Subscription Bookings and Total Bookings. Subscription bookings represent the amounts we receive from a purchase of any Duolingo subscription offering. Total bookings include subscription bookings, income from advertising networks for advertisements served to our users, purchases of the Duolingo English Test, and in-app purchases of virtual goods. We believe bookings provide an indication of trends in our operating results, including cash flows, that are not necessarily reflected in our revenues because we recognize subscription revenues ratably over the lifetime of a subscription, the majority of which are twelve months in duration.

Previous wording

For the three months ended September 30, 2024 and 2023, we generated $176.3 million and $121.3 million of subscription bookings, respectively, representing an increase of 45% from the prior year period. For the nine months ended September 30, 2024 and 2023, we generated $494.3 million and $337.7 million of subscription bookings, respectively, representing an increase of 46% from the prior year period. We grew subscription bookings by selling more first-time and renewal subscriptions.

Current wording

For the three months ended March 31, 2025 and 2024, we generated $232.2 million and $161.5 million of subscription bookings, respectively, representing an increase of $70.7 million, or 44% from the prior year period. We grew subscription bookings by selling more first-time and renewal subscriptions.

Previous wording

For the three months ended September 30, 2024 and 2023, we generated $211.5 million and $153.6 million total bookings, respectively, representing an increase of 38% from the prior year period. For the nine months ended September 30, 2024 and 2023, we generated $599.0 million and $431.1 million total bookings, respectively, representing an increase of 39% from the prior year period. We grew total bookings primarily through growth in subscription bookings as noted above.

Current wording

For the three months ended March 31, 2025 and 2024, we generated $271.6 million and $197.5 million total bookings, respectively, representing an increase of $74.2 million, or 38% from the prior year period. We grew total bookings primarily through growth in subscription bookings as noted above.

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, 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.

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. The effect of currency exchange rates on our business is an important factor in understanding period to period comparisons. We use non-GAAP constant currency measures and non-GAAP percentage change in constant currency measures for financial and operational decision-making and as a means to evaluate period-to-period comparisons. 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 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, gain on sale of capitalized software and loss on disposal of leasehold improvements. 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.

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, and acquisition earn-out costs. 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 $29.0 million and $25.4 million for the three months ended September 30, 2024 and 2023, respectively, and $80.7 million and $70.2 million for the nine months ended September 30, 2024 and 2023, respectively, this includes costs incurred related to taxes paid on equity transactions as follows:

Current wording

(1)In addition to stock-based compensation expense of $31.0 million and $25.0 million for the three months ended March 31, 2025 and 2024, respectively, this includes costs incurred related to taxes paid on equity transactions as follows:

Previous wording

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

Current wording

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

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 and transaction costs related to acquisitions as we believe such items 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 is defined as net cash provided by operating activities, less capitalized software development costs and purchases of property and equipment. Beginning in the first quarter of 2025, we have aligned our calculation of free cash flow to this definition, and prior periods in this Quarterly Report on Form 10-Q have been recast to conform to this presentation. 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 September 30, 2024 and 2023, we generated $52.7 million and $33.5 million of free cash flow, respectively. For the nine months ended September 30, 2024 and 2023, we generated $187.2 million and $96.6 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 March 31, 2025 and 2024, we generated $103.0 million and $78.5 million of free cash flow, respectively, representing an increase of $24.5 million. The increase in free cash flow was mainly attributable to the increase in net cash provided by operating activities.

Previous wording

The effect of currency exchange rates on our business is an important factor in understanding period to period comparisons. We use non-GAAP percentage change in constant currency revenues, which exclude the impact of fluctuations in foreign currency exchange rates, for financial and operational decision-making and as a means to evaluate period-to-period comparisons. We believe this information is useful to investors to facilitate comparisons and better identify trends in our business. The impact of changes in foreign currency may vary significantly from period to period, and such changes generally are outside of the control of our management. We calculate constant currency revenues by using current period foreign currency revenues and translating them to constant currency using prior year comparable period exchange rates for the entire period of related bookings. Constant currency revenue percentage change is calculated by dividing the difference between constant currency revenue and the prior year comparable period revenue by the prior year comparable period revenue.

Current wording

Constant Currency. The effect of currency exchange rates on our business is an important factor in understanding period to period comparisons. We use non-GAAP percentage change in constant currency revenues and bookings, which exclude the impact of fluctuations in foreign currency exchange rates, for financial and operational decision-making and as a means to evaluate period-to-period comparisons. We believe this information is useful to investors to facilitate comparisons and better identify trends in our business. The impact of changes in foreign currency may vary significantly from period to period, and such changes generally are outside of the control of our management. We calculate constant currency revenues by translating current period foreign currency revenues using prior-year exchange rates applied consistently over the full revenue recognition period. We calculate constant currency bookings by using current period foreign currency bookings and translating them to constant currency using prior year comparable period exchange rates. The constant currency percentage change for revenues and bookings is calculated by dividing the difference between the constant currency amount and the prior year comparable period amount by the prior year comparable period amount.

Previous wording

Total revenues were $192.6 million for the three months ended September 30, 2024, which represents an increase of 40% on a reported basis and 41% on a constant currency basis over the three months ended September 30, 2023. Subscription revenues totaled $157.6 million for the three months ended September 30, 2024, which represented an increase of 49% on a reported basis and 50% on a constant currency basis over the three months ended September 30, 2023.

Current wording

Total revenues were $230.7 million for the three months ended March 31, 2025, which represents an increase of 38% on a reported basis and 40% on a constant currency basis, over the three months ended March 31, 2024. Subscription revenues totaled $191.0 million for the three months ended March 31, 2025, which represents an increase of 45% on a reported basis and 47% on a constant currency basis over the three months ended March 31, 2024.

Previous wording

Total revenues were $538.5 million for the nine months ended September 30, 2024, which represents an increase of 42%, on both a reported and constant currency basis, over the nine months ended September 30, 2023. Subscription revenues totaled $433.2 million for the nine months ended September 30, 2024, which represented an increase of 51% on a reported basis and 52% on a constant currency basis over the nine months ended September 30, 2023.

Current wording

Total bookings were $271.6 million for the three months ended March 31, 2025, which represents an increase of 38% on a reported basis and 42% on a constant currency basis, over the three months ended March 31, 2024. Subscription bookings totaled $232.2 million for the three months ended March 31, 2025, which represents an increase of 44% on a reported basis and 48% on a constant currency basis, over the three months ended March 31, 2024.

Previous wording

We generate revenues primarily from the sale of subscriptions. The term-length of our subscription agreements are primarily monthly or annual, with the family plan offered as an annual subscription. We also generate revenue from advertising, the in-app sale of virtual goods, and the Duolingo English Test.

Current wording

We generate revenues primarily from the sale of subscriptions. The term-length of our subscription agreements are primarily monthly or annual, with the family plan offered as an annual subscription. We also generate revenue from advertising, the in-app sale of virtual goods, and the Duolingo English Test, as well as from Duo’s Taquería.

Previous 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. It also includes the 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 and generative AI costs. 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. It also includes the amortization of revenue generating capitalized software, and depreciation of certain property and equipment.

Previous wording

We intend to continue to invest additional resources in our infrastructure and our customer support and success organization to expand the capabilities of our platform and ensure that our users are realizing the full benefit of our products. The level, timing, and relative investment in these areas could affect our cost of revenues in the future.

Current wording

We intend to continue to invest additional resources in our infrastructure to expand the capabilities of our platform and ensure that our users are realizing the full benefit of our products. The level, timing, and relative investment in these areas could affect our cost of revenues in the future.

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 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.

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, required testing of our platform and depreciation of certain property and equipment. 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.

Previous wording

Sales and Marketing. Sales and marketing expenses are expensed as incurred and consists primarily of brand advertising, marketing, digital and social media spend, field marketing, travel, trade show sponsorships and events, conferences, and employee-related compensation, including stock-based compensation for personnel engaged in sales and marketing functions, and amortization of non-revenue generating capitalized software used to promote Duolingo. We expect our sales and marketing expenses will decline as a percentage of revenues over the near-term.

Current wording

Sales and Marketing. Sales and marketing expenses are expensed as incurred and consists primarily of new user acquisition, brand marketing, digital and social media content, and employee-related compensation, including stock-based compensation, for personnel engaged in sales and marketing functions, amortization of non-revenue generating capitalized software used to promote Duolingo and depreciation of certain property and equipment.

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 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.

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.

Previous wording

Interest income consists of income earned on our money market funds included in cash and cash equivalents and income earned and net accretion on our marketable securities.

Current wording

Interest income consists of income earned on our cash and money market funds included in cash and cash equivalents and income earned and net accretion on our marketable securities.

Previous 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.

Current wording

The benefit for income taxes represents the tax impact associated with our operations under 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 and nine months ended September 30, 2024 and 2023

Current wording

Comparison of the three months ended March 31, 2025 and 2024

Previous wording

Revenues increased $55.0 million, or 40%, to $192.6 million during the three months ended September 30, 2024, from revenues of $137.6 million during the three months ended September 30, 2023. Revenues increased $158.4 million, or 42%, to $538.5 million during the nine months ended September 30, 2024, from revenues of $380.1 million during the nine months ended September 30, 2023. The main drivers of the increase were:

Current wording

Revenues increased by $63.2 million, or 38%, to $230.7 million during the three months ended March 31, 2025, from revenues of $167.6 million during the three months ended March 31, 2024. The main drivers of the increase were:

Previous wording

•Subscription revenue increased $51.7 million, or 49%, to $157.6 million during the three months ended September 30, 2024, and $146.0 million, or 51%, to $433.2 million during the nine months ended September 30, 2024, primarily due to an increase in the average number of paid subscribers during the period;

Current wording

•Subscription revenue increased by $59.3 million, or 45%, to $191.0 million during the three months ended March 31, 2025, primarily due to an increase in the average number of paid subscribers during the period;

Previous wording

•Other revenue increased by $3.2 million, or 10%, to $35.0 million during the three months ended September 30, 2024, primarily due to increased advertising revenue of $2.7 million which was driven by the increase in DAUs which resulted in increased advertisements served.

Current wording

•Other revenue increased by $3.9 million, or 11%, to $39.8 million during the three months ended March 31, 2025, primarily driven by increased advertising revenue resulting from the increase in DAUs, which resulted in increased advertisements served, offset by decreases in average revenue per DAU.

Previous wording

Research and Development. Research and development expense increased by $12.6 million, or 25%, to $62.9 million during the three months ended September 30, 2024 from $50.3 million during the three months ended September 30, 2023. The increase was mainly due to:

Current wording

Research and Development. Research and development expense increased by $19.5 million, or 38%, to $70.4 million during the three months ended March 31, 2025 from $50.9 million during the three months ended March 31, 2024. The increase was mainly due to:

Previous wording

•Increased net personnel costs of $25.4 million, driven primarily by the growth in headcount. Total gross personnel costs increased by $26.4 million, of which $11.3 million of the increase was related to stock-based compensation expense. This increase was reduced by $1.0 million of wages recorded as capitalized software as compared to the same period in the prior year;

Current wording

•Increased net personnel costs of $16.7 million, driven primarily by the growth in headcount. Total gross personnel costs increased by $14.6 million, including increased stock-based compensation expense of $5.4 million. Additionally, there was an increase of $2.1 million due to a reduction in wages recorded as capitalized software as compared to the prior year;

Previous wording

•Increased travel and other costs of $1.0 million.

Current wording

•Increased travel and other costs of $0.6 million.

Previous wording

Research and development continues to be our largest operating expense as we test and experiment with new products and product features and improve existing ones to drive engagement and efficacy of our products. Increased engagement and efficacy, we believe, help drive organic growth in MAUs and DAUs, growth in, and better retention of, paid subscribers, as well as increased advertising opportunities with free users.

Current wording

Research and development continues to be our largest operating expense as we test and experiment with new products and product features and improve existing ones to drive engagement and efficacy. Increased engagement and efficacy, we believe, help drive organic growth in MAUs and DAUs, growth in, and better retention of, paid subscribers, as well as increased advertising opportunities with free users.

Previous wording

Sales and Marketing. Sales and marketing expense increased by $3.2 million, or 15%, to $25.6 million during the three months ended September 30, 2024 from $22.3 million during the three months ended September 30, 2023.

Current wording

Sales and Marketing. Sales and marketing expense increased by $6.7 million, or 34%, to $26.7 million during the three months ended March 31, 2025 from $19.9 million during the three months ended March 31, 2024.

Previous wording

•Increased direct marketing and other expenses of $2.5 million; and

Current wording

•Increased direct marketing and other expenses of $4.8 million; and

Previous wording

•Increased personnel costs of $0.7 million driven primarily by the growth in headcount, including increased stock-based compensation expense of $0.2 million.

Current wording

•Increased personnel costs of $1.9 million driven primarily by the growth in headcount, including increased stock-based compensation expense of $0.4 million.

Previous wording

General and Administrative. General and administrative expense increased by $5.0 million, or 15%, to $38.4 million during the three months ended September 30, 2024 from $33.4 million during the three months ended September 30, 2023. This increase was mainly due to:

Current wording

General and Administrative. General and administrative expense increased by $8.3 million, or 24%, to $43.5 million during the three months ended March 31, 2025 from $35.1 million during the three months ended March 31, 2024. This increase was mainly due to:

Previous wording

•Increased gross personnel costs of $2.1 million, partially offset by a decline of $0.4 million in stock-based compensation expense;

Current wording

•Increased net personnel costs of $4.9 million, including an increase of $2.6 million in stock-based compensation related expense;

Previous wording

•Increased travel and meals expenses of $0.6 million;

Current wording

•Increased travel and meals expenses of $1.5 million;

Previous wording

•Increased web services of $0.8 million; and

Current wording

•Increased tax related expenses of $0.8 million; and