0001104659-26-051465
SEC filingMixed year: revenue growth resumed and operating losses narrowed, but net loss widened sharply on non-cash derivative and impairment charges.
Revenue increased 2.7% to $340.2 million in 2025 from $331.2 million in 2024, driven by the company's strategic focus on large enterprise customers and the launch of AI-powered products. Management attributed the growth to higher demand from large enterprises for corporate learning solutions, while the company deliberately deselected some small and medium-sized customers to improve revenue quality.
Net loss widened 73.2% to -$158.9 million from -$91.8 million, primarily due to the absence of prior-year non-cash derivative gains. Diluted EPS worsened to -$0.87 from -$0.55. The net loss includes significant non-cash charges related to impairments and derivative liabilities, which are not indicative of core operating performance.
Net cash used in operating activities improved to -$145.9 million from -$211.7 million, reflecting better working capital management and reduced operating losses. Capital expenditures were $1.6 million, resulting in free cash flow of -$147.5 million. The company continues to invest in technology and content, but cash burn remains a concern.
The company's strategy to focus on large enterprises led to a decline in the number of subscription customers, as it shed less profitable SMB accounts. This shift is expected to improve revenue retention and margin profile over time, though it may pressure near-term growth.
Management expects cost of revenues to increase in absolute terms but decrease as a percentage of revenue over the long run through economies of scale. The company continues to invest in AI products and international expansion (Singapore headquarters). Key risks include the ongoing CEIBS PG litigation, which has already resulted in deconsolidation and a winding-up order; potential cybersecurity review requirements under PRC law; and the risk of being classified as a PFIC for U.S. tax purposes. The company's dual-class share structure concentrates voting power with founder Xiaoyan Lu, who holds 67.7% of voting rights. The ADSs have faced Nasdaq minimum bid price deficiencies, though compliance was regained in October 2025.