Coursera, Inc. (COUR) on Q3 2021 Results - Earnings Call Transcript

Operator: Ladies and gentlemen, thank you for standing by, and welcome to Coursera's Third Quarter Fiscal Year 2021 Earnings Call. . I'd like to turn the call over to Cam Carey, Head of Investor Relations. Mr. Carey, you may begin. Cam Carey: Hi, everyone, and thank you for joining our Q3 earnings conference call. With me today is Jeff Maggioncalda, Coursera's Chief Executive Officer; and Ken Hahn, our Chief Financial Officer. Following their prepared remarks, we will open the call for your questions. Our press release, including financial tables, was issued after market close and is posted on our Investor Relations website where this call is being simultaneously webcast. Additionally, downloadable versions of our prepared remarks and supplemental slides have also been made available. During this call, we will present both GAAP and non-GAAP financial measures. A reconciliation of non-GAAP measures to the most directly comparable GAAP measure can be found in today's press release and supplemental presentation, which are distributed and available to the public through our Investor Relations website located at investor.coursera.com. Please note that all growth percentages refer to year-over-year change, unless otherwise specified. Additionally, I'd like to remind you that all statements made during this call that relate to future results and events are forward-looking statements based on current expectations. Actual results and events could differ materially from those projected due to a number of risks and uncertainties, which are discussed in our press release, SEC filings and supplemental materials. These forward-looking statements are not guarantees of future performance or plans, and therefore, investors should not place undue reliance on them. We assume no obligation to update our forward-looking statements. And with that, I'd like to turn it over to Jeff. Jeffrey Maggioncalda: Thanks, Cam, and good afternoon, everyone. Today, I'm pleased to report strong third quarter results, which reflect the continued trend of institutions and individual learners embracing online learning to develop skills for the future. In Q3, we grew revenue 33% to $109.9 million. Performance was strong across the business with double-digit revenue growth in each of our segments: Consumer, Enterprise and Degrees, and in every region. Since its founding, Coursera's #1 goal has been and always will be to serve learners. And as of the end of Q3, we have more than 92 million registered learners on the platform, adding 5.5 million in Q3 and more than 15 million year-to-date. Learners come to Coursera seeking new skills to advance their careers and improve their lives. In particular, we continue to see strong demand for our growing catalog of entry-level Professional Certificates. Since launching this category in 2018, we have seen more than 2 million learner enrollments in programs from industry partners like Facebook, Google, IBM, Intuit and Salesforce. With a professional certificate, learners with no college degree or background in the field can learn the skills needed for an entry-level digital job in less than a year. We're also excited about the impact these certificate training programs can have in reducing the gender gap in digital jobs. According to our latest Women and Skills Report, women's enrollments in entry-level professional certificates have increased from 25% of all enrollments in 2019 to 37% in the first half of 2021. But a career pathway isn't the only option. Content on Coursera is modular and increasingly stackable, so that bite-sized learning can build towards a broader course of study, including a college degree. We recently announced ACE Credit Recommendation for all Google entry-level professional certificates on Coursera as well as 3 from IBM. This means that learners who complete one of Google or IBM certificates are eligible to receive up to 12 college credits from participating colleges and universities. The University of London, the University of North Texas, and Northeastern University are among the institutions with programs already awarding college credit for these certificates. In a world reshaped by the pandemic, this is what the future of learning looks like for many adults, and it is being driven by several key trends at play. The first major trend is digital transformation. The forces of technology and globalization are transforming industry after industry, and the pandemic has served to only accelerate these trends. It has amplified the criticality of technology and digital tools. It has redefined the way that businesses and governments and individuals work. It has reshaped the global talent pool, opening new opportunities for companies to build more diverse distributed workforces. For example, at Coursera In the first half of this year, more than 2/3 of our U.S.-based new hires are fully remote, providing us with access to a broader, more diverse talent pool without the constraints of requiring proximity to a corporate office. The second major trend is skills development. Employers are rapidly digitizing work processes and automating jobs that are repeatable and predictable. The rapid pace of this digital transformation impacts everyone, and the need for change has never been more urgent. Businesses know that they must upskill, reskill and benchmark their talent to remain competitive in a changing economy. Governments understand that most at-risk jobs are typically held by lower-wage workers which threatens to leave millions of workers unprepared for the digital future. Campuses realize that they must enhance their offerings, as increasing competition from alternative credentials and substitution effect of a strong labor market drives them to teach students skills for the future and deliver stronger employability outcomes. And individuals need to keep learning through their life, requiring access to flexible and affordable education to stay relevant in a fast-changing labor market. And the third major trend that's driving our business is enabling the digital transformation of higher education. While technology is accelerating change and transformation around the world, it is also the means by which society is adapting. The digital transformation of higher education is upon us. Higher education, one of the largest industries in the world at $2 trillion, has seen relatively little innovation over the past 3 centuries. Traditional college degrees are not affordable to many people. Their monolithic 4-year structure doesn't meet the needs of lifelong learners. Degrees often lack relevance to today's employers. And degrees are often not designed for working professionals who don't want to quit their job or move their families to obtain a college degree. Unlike other platforms, we are an enabler and not a disruptor. We work directly with universities and industry leaders and governments, driving powerful institutional collaboration to better meet the needs of this new digital world. Our platform is transforming the way that learners learn. It is transforming the way that educators teach. And it is transforming the way that employers upskill and reskill their talent. Our 3-sided platform connects learners, educators and institutions in a global learning ecosystem with 3 primary advantages. First, the leading educator partners, including world-class universities and some of the best-known global industry brands, are attracted to Coursera to teach at scale. Second, the quality and breadth of the content and credentials that these educator partners create. And the third major advantage is the technology and data that power our platform. Let me share some recent highlights on each of these competitive advantages. We continue to expand our list of educator partners. Our large growing learner base and global brand make us an attractive partner to educators who want to reach a worldwide audience and deliver high-quality affordable education at a low cost. We now have more than 250 university and industry partners on Coursera. In September, we announced partnerships with 4 new top-tier institutions in India, our second-largest market by registered learners, for a total of 10 university partners in the country. New partners include IIT Bombay, IIT Guwahati, Indian Statistical Institute and Ashoka University. We're also excited to partner with a number of new industry leaders. Last week, we announced a new partnership with Oracle focused on helping learners develop cloud-related skills. The 5 new courses, taught by Oracle experts, cover a range of cloud infrastructure and database topics at varying levels of complexity, with hands-on labs allowing learners to practice in a live environment. We also announced a partnership with Juniper Networks in October. They are committed to driving skills transformation within the networking industry and launched the first of 4 anticipated new specializations on Coursera. Lastly, we welcomed United Service Organizations, a nonprofit serving U.S. military members and families; Philips India for Health Technology Solutions; and Voxy, an English language training company, as new partners of Coursera during the quarter. Our industry partners value Coursera's scale and reach in building a global community of developers and users critical to their ecosystems. Additionally, it allows them to address the growing job displacement and skills gap that their technology and automation creates. For example, in coordination with the ACE Recommendation, we also announced that Google's Professional Certificates on Coursera are available to U.S. community colleges and career in technical education, or CTE, high schools for free. Students participating in the program will receive job-relevant skills training for today's most in-demand digital roles as well as access to career services and job opportunities through a consortium of over 130 employers. And our SkillSets and Skill dashboards, originally developed for Coursera for Business customers, will now be offered through Coursera for Campus, allowing students to develop the specific skills required by employers for high-growth roles, and administrators to track student progress against their career goals and to benchmark these students against employees in the industry. Our second major advantage is the broad catalog of world-class content and credentials created by these educator partners. Our stackable system of branded, high-quality premium content enables us to attract learners at low cost and serve them at a range of price points. Learners come to Coursera for our freemium content and bite-size learning, including hands-on projects and short courses, enabling us to grow our top of funnel and attract registrants at low cost. As these learners look to progress in their careers by earning more valuable credentials, we aim to maximize lifetime value with our premium credentials from our partners, including specializations, Professional Certificates and accredited bachelor's and master's degree. And our catalog continues to grow. We recently announced 5 new certificates from university partners in India with topics ranging from 5G technologies in IoT, VLSI design, digital transformation, data-driven decision-making, and electric vehicles. Additionally, IBM launched their sixth entry-level professional certificate focused on data engineering. For degrees, we recently added 2 new programs, including a postgraduate diploma in applied statistics from the Indian Statistical Institute, and a Bachelor of Science in Business Administration from the University of London. With these recent additions, the Coursera catalog now includes over 2,000 guided projects that offer hands-on learning; more than 5,000 courses and 600 specializations; over 70 certificates, including our 15 entry-level Professional Certificates; and 33-degree programs, including bachelor's, master's and post-graduate diplomas. Now let's talk a little bit about product innovation. This is the thing that drives another key advantage, which is our unified platform. The world-class content created by our educator partners is delivered on a system of technology and data that underpins the Coursera learning platform. We continue to enhance the experience of our learners, institutions and educator partners. We introduced a number of platform improvements to better serve Indian learners, including a localized homepage for better discovery; geo-pricing on most individual courses; 5 new payment options, and bulk pricing for avid users. What we learned from our India-focused initiatives will further inform our international strategy. For institutions, our skills graph connects roles to skills to content. And we continue to leverage our broad catalog and the data underpinning our platform to provide better insights to our customers. For businesses, we recently launched the Leadership Academy, designed to help companies to deliver and measure world-class management training at scale and critical soft skills such as change management, talent development and collaboration. This was our sixth academy launch. Academies offer companies a skills-first approach to enterprise learning, focusing first on the most critical job roles; then specifying the skills and proficiency levels needed to do these roles; and finally, linking the skills to content that teaches at the appropriate proficiency level. But the value of these insights extends beyond corporate training. In August, we announced the general availability of SkillSets for all universities using Coursera for Campus. While the shift in the skills landscape is creating opportunities in the workforce, companies feel that there is often a mismatch between the skills students are graduating with and the digital skills required in the modern workplace. Universities are using Coursera for Campus to drive targeted skills proficiencies needed for today's in-demand jobs, leveraging our world-class content from university and industry partners. Additionally, these universities can track skills development at both the student and cohort level while benchmarking students against real employees in industry. And for educators, at the end of June, we announced our new content ingestion solution. The feature allows educators to more quickly and seamlessly migrate content between a learning management system and Coursera. We've been pleased with the initial traction, with approximately 70 courses from 17 university and industry partners ingested into Coursera using this functionality. Our partners have been able to leverage the tool to significantly reduce the time needed to author and launch a course on Coursera, typically in 1/3 of the traditional time line. Individually, our ecosystem of partners, world-class content and technology are important strategic advantages. But the real power is the way that these assets are reinforced by and leveraged across our unified platform. There's a flywheel effect as the growing selection of content and credentials attracts more individuals and institutions, which in turn motivates our educator partners to create even more content on the platform. This growing content, technology and data allow us to better meet the needs of learners, educators and institutions. And this in turn fuels our business, increasing scale, reducing our acquisition costs and ultimately maximizing the lifetime value of learners on Coursera. We believe that the transformation of higher education is just getting started, with many opportunities to drive growth for Coursera in the coming years. Before I turn it over to Ken, let me remind you of some of the key priorities that we're focused on to grow. First, we will continue to invest in our growing enterprise channels, focusing on both new customer acquisition and expanding relationships with existing customers. I'd like to highlight 2 examples that are illustrative of the institutional collaboration that our platform is enabling at scale. CINDE, the Costa Rican Investment Promotion Agency, implemented a nationwide training program with Coursera for Government in 2020. For almost 40 years, CINDE has helped attract businesses to Costa Rica, helping more than 350 companies to establish operations in the country. The organization was interested in leveraging Coursera to help reduce unemployment amidst the pandemic, while building a competitive workforce to drive sustainable future growth. CINDE teamed up with employers, Costa Rican government agencies and Coursera to help identify the most in-demand skills and develop curated learning pathways on our platform. Since the partnership began, more than 23,000 Costa Ricans have enrolled in over 80,000 courses, completing more than 40,000 courses and nearly 700,000 lessons. Given this initial success, CINDE recently expanded the program. Second, we announced a new partnership with the Oklahoma State Regents for Higher Education, enabling 15 universities in the state to adopt Coursera for Campus. The collaboration is focused on 4 key goals: enhancing academic program innovation, offering flexible blended learning options to faculty and students, setting students up for success and completion of their degree programs, and expanding alignment of academic programs with modern workforce needs. Oklahoma is the first U.S. state to launch a Coursera for Campus partnership with this wide-reaching scale, covering more than half of the state's public universities with the potential to impact tens of thousands of students, faculty and staff. Next, while we are only in the beginning stages of our Degrees business, The pandemic has fundamentally changed how universities are thinking about online degrees. Students want the flexibility to learn online, and universities are responding by scaling online degree programs using partners like Coursera to meet that demand. For example, in the month of September, our team was able to launch 8 degree programs from universities in the U.S., Russia and India, demonstrating the power of online platforms to deliver worldwide degree programs at scale. And in August, we announced the new fee structure to support university partners looking to rapidly expand their online programs and reach more students around the world. With this new tiered structure, the service fee will progressively reduce from 40% to 25% for universities that grow their collective programs to more than $50 million of annual tuition on Coursera. This is driven by our freemium model, which brings in learners to Coursera and enables our efficient low-cost acquisition, a key competitive advantage enabled by our 3-sided platform. And finally, we will continue to scale the Coursera platform and reinforce our flywheel effect, investing in growth of our registered learner base; increasing our network of educator partners and their content and credentials; and expanding our reach into more countries, investing in localized experiences to better serve more learners for more countries around the world. And now I'd like to turn it over to Ken. Kenneth Hahn: Thanks, Jeff, and good afternoon, everyone. We are pleased with our strong third quarter results, which reflect the sustained demand we continue to see for online learning. In Q3, we generated total revenue of $109.9 million, which was up 33% from a year ago. This strong growth was on top of the 70% year-over-year growth delivered last year, so we are quite pleased with the performance on top of a difficult comp. As Jeff discussed, we're seeing a global trend of not just individual learners but also institutions, including companies, campuses and governments, investing in digital and new skills required to compete in a post-pandemic economy. Please note that for the remainder of the call, I will discuss key operational metrics as well as non-GAAP financial metrics, excluding pro forma adjustments unless otherwise noted. Our non-GAAP adjustments remove only stock-based compensation and related payroll tax, nothing else. Gross profit was $68.3 million, up 56% from a year ago, for 62.1% gross margin as a percentage of revenue. This percentage was approximately 910 basis points higher than the prior year period, a continuation of similar dynamics that we saw in the second quarter. As a reminder, there are two components of our cost of services. First is our content cost, which vary based on both the revenue mix amongst our 3 businesses as well as the content margin rate within each segment. Our higher-margin Enterprise and Degree segments accounted for 39% of our overall revenue mix this quarter compared to 31% in the prior year period. This mix shift is key to our long-term financial framework, including structurally expanding margins over time. Additionally, we can see changes in the segment content margin rates depending on what learners consumed in any quarter. For Q3, this continued to be a positive variance primarily within our Consumer business. Our Consumer segment content margin rate increased from 54% in the prior year period to 68% this quarter as learners consumed a larger proportion of industry partner content, which tends to have lower-than-average content costs. Assuming similar levels of success with career certs and continued higher margin arrangements with industry partners, we anticipate that for the near term, our Consumer segment margins will remain north of 60% and that we will likely invest more operationally to take full advantage of the opportunity. The second component of our cost of services is our noncontent cost margins, which were up slightly on a year-over-year basis and 9.3% of total revenue. Total operating expense was $75.3 million, or 69% of revenue compared to 62% in Q3 of last year. Sales and marketing expense represented 35% of total revenue, up from a prior 30%. We expect our sales and marketing expense in 2021 to be slightly higher as a percentage of total revenue than in full year 2020, with a similar increase in the fourth quarter. Research and development expense was 20% of revenue, slightly lower than the year-ago period. We expect our overall R&D expense in 2021 to represent a similar percentage of revenue as the first half of this year. General and administrative expense was 13% of revenue versus 10% in the prior year, given incremental costs associated with being a public company. We expect this higher expense as a percentage of revenue to continue throughout 2021. Net loss was $8 million or 7.3% of revenue, and our adjusted EBITDA loss was $3.1 million or 2.9% of revenue. Similar to last quarter, our EBITDA margin continued to be quite strong. Importantly, I want to remind you of how we are managing the business. First, our messaging and operating framework with regards to EBITDA margin has been consistent since before the IPO. We plan to demonstrate scale and leverage over time while targeting EBITDA margin improvement over the long term. Second, we do not optimize the business for any single quarter and continue to see 2021 as an investment year, with our forward EBITDA guidance reflecting this focus. We intend to invest into our strong performance with the goals of: one, paving the way for future growth initiatives; two, deepening our competitive moats; and three, securing leadership in our large and rapidly evolving markets for the benefit of all our constituents. Now turning to cash performance and the balance sheet. Free cash flow was $7.1 million compared to a use of $4.2 million a year ago, and we ended Q3 in a strong cash position. As of September 30, we had over $800 million of unrestricted cash, cash equivalents and marketable securities, with no debt. Combined with the strong performance in the business, we are able to invest confidently in our future. Next, let's discuss more detail for each of the business segments. Consumer revenue was $66.5 million, up 16% from the prior year, over a tough growth comp of 81% in Q3 of 2020. We are seeing sustained demand for our entry-level Professional Certificates aimed at the global reskilling opportunity. In addition, adoption of our new Coursera Plus subscription continues to be strong. In the third quarter, we surpassed 25% of Consumer revenue generated from Coursera Plus subscriptions. Like other content subscription programs, Coursera Plus enables learners to consume a broader range of content without paying for each title. This has increased both consumption and retention amongst these learners. Segment gross profit was $45.5 million or 68% of Consumer revenue as we benefited from a lower content cost rate during the quarter. In addition to its financial contribution, our Consumer business is an important strategic asset. It attracts our educator partners, acting as a channel that allows them to reach a global audience of learners. It provides rich data visibility, enabling us to empower our institutional customers with the insights they value around skills and proficiency. And importantly, it serves as a top-of-funnel source for our Enterprise and Degree segments, allowing us to attract learners at low cost. As Jeff said earlier, we added 5.5 million new registered learners during the quarter for a total base of 92 million as of September 30. Next is Enterprise. Enterprise revenue was $31.8 million, up 75% from a year ago on the acquisition of new customers and expansion of our existing relationships. All 3 of our Enterprise customer categories, business, government and campuses, saw strong growth, demonstrating the progress we've made in creating a differentiated skills-based learning experience across our institutional customers. The total number of Paid Enterprise Customers increased to 711, up 124% from a year ago. And our net retention rate for Paid Enterprise Customers was 113%. Segment gross profit was $21.4 million or 67% of enterprise revenue, which was slightly lower on a percentage basis than the prior year primarily due to a larger share of revenue coming from our indirect customers utilizing our technology platform in Q3 of last year. And finally, our Degrees segment. Degrees revenue was $11.6 million, up 59% from a year ago as prior cohorts continued to scale and students embraced our newly launched programs, including the eighth launch in September that Jeff mentioned. According to the National Student Clearinghouse Research Center, postsecondary enrollment for combined undergraduate and graduate students for the fall semester declined by 2.3% this year, likely reflecting the strong labor market and increased demand for shorter-form credentials like our Professional Certificates. Furthermore at primarily online institutions, undergraduate and graduate enrollments dropped by 5.4% and 13.6%, respectively. Despite these headwinds, we grew our total number of degrees students 40% from a year ago to 16,068 and continue to be excited about our pipeline of programs from new and existing university partners. Degree segment gross margin was 100% of revenue as there's no content cost attributable to the Degrees segment. Now on to our financial outlook. As a reminder, we have fairly good visibility into revenue on a quarterly basis in both our Enterprise and Degree segments, so any significant variance to expectations is most likely to occur within our Consumer segment. For the fourth quarter, we are expecting revenue to be in the range of $109 million to $113 million. This represents a growth rate of 33% compared to last year at the midpoint of the range. For adjusted EBITDA, we are expecting a loss in the range of $16.5 million to $19.5 million, which translates to an adjusted EBITDA margin of negative 16.2% at the midpoint. For full year 2021, we anticipate revenue to be in the range of $409 million to $413 million, representing approximately 40% growth compared to last year at the midpoint of the range. And for adjusted EBITDA, we're expecting a loss of $32.5 million to $35.5 million or an adjusted EBITDA margin of negative 8.3% at the midpoint. Consistent with our prior discussion, we intend to strategically invest for the long-term sustainability of our business. As we did in 2020, we are investing heavily in growth in Q4 while performing better than our previous forecast for annual EBITDA. We manage our business on an annual cadence for expenses and adjusted EBITDA. And as I said earlier, we intend to demonstrate scale and leverage over time as our business grows. Our outlook for full year 2021 reflects ongoing investments in personnel-related costs, sales and marketing, product development, and general and administrative costs associated with being a public company. So to summarize, we are forecasting a substantial improvement in 2021 EBITDA margin over 2020 even as we absorb significant additional overhead costs as a newly public company. Before Jeff's closing comments, I want to leave you with 3 key reminders about our long-term financial framework. First, we have a unique set of strategic assets that allow us to compete differently. Our freemium model, global scale and unified platform allow us to attract new registered learners at low acquisition costs. It is what allowed us to introduce our new fee structure for degree partners looking to do online programs at scale. Second, we expect to have increasingly better forward visibility on our top line in the years ahead as our mix of revenue evolves. Third and finally, in addition to our rapid growth, we expect ongoing structural gross margin expansion over the long term, driven by revenue mix shift to our Enterprise and Degree segments. In summary, we see an exciting opportunity ahead of us. As our results in 2021 have demonstrated, the impact of the pandemic was not temporary. It has accelerated the pace of automation and technology while highlighting the growing need for digital skills across every institution and individual. And with our unique assets in global learning ecosystem, we believe Coursera is the platform designed to meet this challenge. I'll now turn the call back to Jeff. Jeffrey Maggioncalda: Thanks, Ken. Our mission is to provide universal access to world-class learning so that anyone anywhere has the power to transform their life through learning. Today, we launched our second Coursera Impact Report. Early in the pandemic, online learning shaped a global crisis response that changed the way we learn. More than a year later, the ability to learn without limits is unlocking new possibilities. New trends show that the combined force of online learning and remote work is creating a powerful opportunity to provide not just learning but more equitable job opportunities worldwide. As the 2021 impact report affirms, creating inclusive pathways to skilling, which prepare people for remote digital jobs, can pave the way for talent to rise from anywhere in the world. Together with our partners, we're excited to continue our efforts to fulfill this promise in our quest to build a more just world. And with that, let's get to Q&A. Could you please introduce the first question? Operator: . Your first question comes from Tom Singlehurst with Citigroup. Thomas Singlehurst: Tom here from Citi, and congratulations on the results. Just a couple of questions maybe to open up. First one on Coursera Plus, you mentioned last quarter that you had sort of encouraging early adoption. And sort of lo and behold, it's 25% of Consumer revenue. I mean I suppose it would be great to get some more detail on where that -- why that's suddenly gone so well, and also whether that drives structurally higher gross margins for the Consumer division. Any more detail or color on that would be very much appreciated. That was the first question. And the second question was going to be on just all of us looking at education companies suggesting the impact of rapidly falling community college enrollments and the impact that's having on some of the other names in the space. I'm just wondering whether you think the strength in Consumer is the other side of that coin? I think you referenced that I believe in the comments, but I mean just firming that up a bit. Do you think community college enrollments are coming down because there is just broader adoption of courses like the ones you offer on the Consumer side of the business and in the completely new programs? Jeffrey Maggioncalda: Yes, Tom. Thanks for the questions. Do you hear me, okay? Thomas Singlehurst: Yes, loud and clear. Jeffrey Maggioncalda: Great. So on the first question, Tom, Coursera Plus, I think a lot of what this is, is a consumption play. I mean the idea -- I often compare it to Apple iTunes in the early days. Steve Jobs said, "You buy every song and it has to be exactly $0.99. Every single one was $0.99." And that was great. It was a breakthrough from having to go to a record store, but you still have to pay every time you listen to a song. And so you kind of had to have a favorite song before you really made the commitment to consume it. Similar, I think, for the sort of standard pricing model for Coursera, where you have to know what specialization you want before you actually buy it. I think what Coursera Plus does is it kind of Spotifys, if you will, not just the pricing model but the consumption model. The ability to be interested in one subscription or one specialization and then go to adjacencies and supplement it with other courses or hands-on projects, I think it really just increases the consumption. So I think that's what we're basically seeing is for a fairly small price increase, learners can get unlimited and more friction-free consumption. And what that does is to boost retention rates because it's not like you finish a piece of content and then you're done and then you have to buy another one. This is sort of just a subscription that you can continue to explore. With respect to structural higher gross margins, I don't think so. I don't expect that, that would change it. The only way that, that might happen is if because of this lower-friction ability to explore, learners ended up exploring content with lower content costs to the educator partner. And I don't necessarily see a reason why that would happen. So it might turn out that way, but we're not modeling anything like that. In terms of community college enrollments, yes, I think to some degree, that is what we're seeing. I mean my sense of it with respect to community colleges -- and we just launched some major initiatives, a big one with Google recently, where any community college in the country can get access to Google's entry-level Professional Certificates on Coursera at no cost. And I think a lot of what that reflects is Google and our commitment to helping community colleges and also a need for community colleges to have a competitive offering when the alternative is going into the labor market. I think that the bigger factor, it just seems to me right now, is the strong labor market. People who otherwise might say, "The jobs aren't good enough so I'm going to get a community college, an AA degree, maybe have that going to be a full bachelor's," are saying, "There's some good job opportunities. There's increasing pay. I'll go into labor market now, and maybe I'll get that other certificate later". So I think the substitution effect of a strong labor market is higher with community college than with more advanced sort of elite 4-year degrees. I think the other part of it, too, is just that community colleges are realizing that they need to provide these kinds of micro credentials. And that's the effect that you were talking about. Sort of the other side of the coin is if learners can get faster, more affordable, more flexible, more job-relevant credentials on some place like Coursera, Coursera is a substitute for community colleges. And so we certainly intend to do both, work directly with Facebook and Google and others to put Professional Certificates on our platform so individuals can come directly to Coursera. But with Coursera for Campus -- and we mentioned Oklahoma. I think that's a really wonderful model for any state higher education board regents, where they did a deal and they said, "We want to make sure that every college in Oklahoma can get access to Coursera for Campus for the same price." Because they want to make sure that the curriculum on campus, whether that's a 4-year or whether that's a community college, is competitive with these new emerging micro credentials. And so they're essentially using Coursera to integrate micro credentials into their curriculum and make them more job relevant. So we're -- I think we're enjoying the benefits of this on multiple fronts, and it's one of the values of having a bit more of a diversified stream of revenue. Thomas Singlehurst: That's very interesting, and thanks for that detail. I'll jump back in the queue. Operator: Your next question comes from the line of Josh Baer with Morgan Stanley. Joshua Baer: One follow-up or continuation on that theme, just wondering if the kind of shift or impact of enrollments that we've been hearing about, if it played a role in the Degrees business at all for you? Jeffrey Maggioncalda: Josh, we think it has. We think it has. Our Degrees segment is still growing very nicely, as Ken talked about. But when we look at the -- some of the ratios of how often does someone see -- who sees a certain message for a degree actually click on it and take a closer look at what we call the degree description page, and then when they see the degree on the description page, how often do they start an application. When they start an application, how often do they submit. Generally speaking -- and I think it's partly because of a strong labor market, I also think it's partly because a lot of the people that came to Coursera during the pandemic, like the height of the pandemic, they weren't necessarily technical learners. They're more sort of interested in some of the science of well-being course, learning, how to learn course, et cetera. That cohort is a little different than previous ones. But when we look at our data, our traffic and our registrations are looking not perturbed. But when we look at when we see the interest levels of people on the site, it looks like it is skewing a bit more towards the entry-level Professional Certificates; and relatively speaking a little bit less towards college degrees. Although master's degrees are actually doing relatively well vis-a-vis bachelor's. And also higher-tier degree programs, more selective degree programs seem to be -- according to the Clearinghouse data, seem to be less affected than lower-tier degree programs. And so I think we also enjoy the benefit of having more technical degrees on Coursera from top name partners with selected programs. And so I think we're maybe not seeing as much of that, given our partners and the degrees that are on the platform. Joshua Baer: Great context. One more, might be a quick one. Funny you mentioned iTunes. So I was just wondering if changes to the apps store fees at Google and Apple, if that's having any impact on the Consumer business? I'm not sure if the Consumer revenue runs through the apps stores in that way? Jeffrey Maggioncalda: Yes, some of it some of it does, Josh. Ken, do you have any visibility on any relative effects of platform stores on us? Kenneth Hahn: No, it has a little bit of effect on the cost for obvious reasons that are much broader than -- for Coursera. Nothing hugely material for us, And we haven't seen any kind of effect on the demand on the Consumer side. So pretty much a nonissue not a negative or a positive for us. Operator: Your Next question comes from Stephen Sheldon with William Blair. Stephen Sheldon: First, it seems like you're continuing to see some nice wins on the government side with the win in Costa Rica being a good example. Can you talk some about the pipeline there and what you're seeing in terms of government focus and the ability to pay for kind of these broad upskilling initiatives? Jeffrey Maggioncalda: Yes, sure. We are seeing uptake on the government side. I think that when we look at what happened in 2020, we launched in May -- I think it was May, maybe it was April -- the workforce recovery initiative where Coursera for Government was available to any government agency through the end of 2020. And we saw a lot of utilization. Hundreds of agencies ended up signing up for that free version. And like with many institutions, with businesses doing remote work for the first time and campuses doing online learning for the first time, governments got to do workforce training virtually for the first time. And I think that they were pretty shocked. I hear a number of them say, "Wow, like this has really advanced a lot since 5 years ago, 10 years ago. We can get access to a broader range of curriculum. It is online. It's flexible. It's more affordable. It's more tailored to jobs, including entry-level jobs." And there is a growing awareness as well that many of these entry-level digital jobs can be done remotely. They're less place-based. And so governments are thinking, what's the fastest, cheapest way to try to get somebody employed, to a large degree, teaching them digital skills online where they might be able to get an entry-level digital job even if that job not in their community is creating exciting new possibilities. And so we're seeing good uptake on the government side. And as you can imagine, as with the U.S., there's just a lot of governments are putting a lot of money towards retraining, reskilling and sort of reemployment. So we're looking forward to a good year in 2022, and we're seeing good uptake following on 2020. Stephen Sheldon: Got it. And then great to hear it seems like you're seeing some nice traction so far with Consumer subscriptions, but I would be curious to give more detail on the type of individual learners that are signing up for subscriptions. Is it the consumers that were already highly engaged in paying on a per-course basis or a per-certificate basis? Or are you pulling in people to buy subscriptions that maybe weren't more that engaged before? Would just love some detail on that. Jeffrey Maggioncalda: Yes. I think it's sort of a combination of all of the above. Generally speaking, it certainly appeals most to those who are avid learners who were going to buy multiple courses anyway. Which by the way, is not a huge portion of our learner base. We don't think there's a lot of cannibalization. But they're the happiest. They're like, "Wow, this is great. I get to learn a lot more stuff and I don't have to pay for it every time." But I think more importantly for your learner that might have otherwise bought one technical specialization, those techniques are changing and the tools that are being used are changing. So there are adjacent courses specializations, projects that can be done And maybe they wouldn't have otherwise bought them, but they're like, "Hey, I can do this adjacent program." The other thing that we're seeing with reskillers, still early days, but a lot of folks know that they don't want to be in their current job, and they want some other job, but they don't necessarily know what job is available. They don't know where the high-demand jobs are or what kind of skills they're going to need or how to get those skills. And so for those who are switching jobs and thinking about a digital career, it's valuable to have the ability to say, you don't have to pick a career to get started. Just come to Coursera. We have 15 entry-level Professional Certificates now from some of the best names in the world. If you want to do project management, great, here's a project management certificate from Google. If you want to do marketing, here's the social media marketer certificate from Facebook. We're seeing good traction with Intuit. They have a bookkeeper certificate. If you want to go into finance or bookkeeping, here's a certificate from Intuit. And you don't have to pay right away, which really changes the purchase decision. Because it's kind of like if you're not sure and you may want to try it before you decide what career to go to, suddenly that subscription model is a pretty attractive way to sample lots of different programs and sort of career skills before deciding that, "Maybe this is a path that's right for me." So I think it works for many types of learners, including those entry-level professional certificate seeker. Stephen Sheldon: Makes sense. Operator: Next question comes from Ryan MacDonald with Needham & Company. Ryan MacDonald: Congrats on the nice quarter. Jeff, you alluded to it in your last answer about there are individuals in the workforce that you know, that they want to switch their careers and are looking for ways to do that. I'm curious given what we've seen in terms of the voluntary turnover rates in the coined Great Resignation over the past few months, I'm curious how that's impacting your conversations with Coursera for Business, and how that's maybe impacting L&D strategies with the enterprise organizations you're talking to? Jeffrey Maggioncalda: Yes. Ryan, it's a great question, and it's still shaping up a bit. I mean what we're seeing, and you're seeing it, too, is there has been a long tradition of U.S. businesses offering tuition reimbursement benefits. It's sort of education as a benefit, and there's a tax policy in the U.S. that makes it a little bit more attractive. Pretty much a U.S. kind of thing. We don't see that very big in other countries. But in U.S. Coursera for Business customers, we've seen that, and that's kind of with bachelor's degrees, for the most part. And usually for frontline workers who don't have a college degree, it's a way of providing them a benefit and also retaining them because it's typically a 4-year program. I think to a large degree, the conversation that's being had about micro credentials, job-relevant, job-specific skill training, the conversations we're hearing with individuals looking for something that's shorter, more affordable, more flexible, is also starting to trickle into L&D thinking as well. I've definitely been aware of a few of our customers who are relooking at their tuition reimbursement benefit and thinking, "Hey, education as a benefit, that's something we want to do, maybe even do more of." But when we think about what should be the architecture of how we do that, what kinds of education, what kinds of credentials, we think, at Coursera, that it's not degrees or micro credentials. With Coursera for Campus, we are helping universities build micro credentials right into their degree program for credit and with degree pathways vis-a-vis the American College Education Credit Recommendations that I mentioned in the script, We now have 7 of the Professional Certificates have ACE Credit Recommendations, which is basically the American College Education telling universities and colleges in the U.S., "We have deemed this content to be creditworthy." So the idea that you could start with a professional certificate, and by virtue of the blessings of the ACE, count that as credit towards a master's degree, we think that hybrid model of industry-plus degrees, where they can be more bite-size, more affordable, more job relevant, but have the option to have that degree pathway we think that's a winning combination. And we think there's a big opportunity there. Ryan MacDonald: Great. And then as a follow-up, I wanted to ask about degrees. You mentioned 8 new programs being launched in September. Just curious if we can get a sense of how we should expect that sort of cadence of program launches as we start thinking about 2022. Obviously, you continue to add new partners here, I think up to 33. I would just love to hear more about how that sort of translates into the revenue stream as we look at fourth quarter and into next year. Jeffrey Maggioncalda: Yes. So we won't be -- we don't plan to be reporting sort of -- any sort of guidance or forecast on this. I will say that if you go to the website, oftentimes we will start -- we will announce a degree before it's live and start taking pre-enrollment, preadmission submissions. So I know that there are some people that go to our website and just see kind of which degrees are announced but not yet live, but then you can actually see when they're going to be live. You'll notice, if you look at the number of announced degrees and the number of live degrees where there are actually students in session, that number was pretty wide during the last, say, 6 to 9 months. It's a bit more less wide now. We launched a lot of degrees that were in the pipeline. I'm not saying that there's not a pipeline coming, but I do think that those 8 that went live represent a few things. One was they all signed up around the same point in time. It also -- we also want to just kind of mention, it's pretty neat that the way that we enable multiple universities to build and launch degree programs on Coursera gives us a lot of scalability and kind of parallel processing. I mean it's conceivable that 4, or 8 in this case, or more than 8 could all go live at the same time because we don't put our working capital towards building all the content. That was a little bit different than some other types of program management models. But I wouldn't necessarily say that because we launched 8 this quarter, we're going to launch 8 next quarter. And sort of keep an eye on the announced degrees, and then you'll expect, in almost every case, we've launched every degree that has been announced. That will be a reasonable indicator of the degrees that are in the pipeline, at least at the point of announcement. Kenneth Hahn: Ryan, I guess I'd also -- this is Ken. I'd like to emphasize what that model looks like in the degree revenue creation cycle. So first, it starts with the partnership where we land a degree; and then announce it, which is what you're referring to. It tends to take 6 to 12 months for the partner to launch the degree on our platform. And then we start generating revenue by filling cohorts. And that revenue builds over time until you get a full set of cohorts. A 2-year program takes roughly 3 years to fill. So you start to lap. So it takes 4 to 5 years to get full productivity, which means we have amazing visibility on revenue but you don't see an immediate impact from these announcements. So what we announced now, the landed partners, again, they'll implement now over 6 to 12 months, and then we'll begin the revenue production cycle. So there's a long lead time, but a lot of visibility. Ryan MacDonald: Helpful reminder. Operator: Your next question comes from the line of Jason Celino with KeyBanc. Jason Celino: Staying on this topic of degrees, with the pricing announcement in August, I'd be interested in how your conversations are going with partners, whether new to the platform or existing? Is it international versus domestic, grad versus undergrad? I'm curious how those discussions are going. Jeffrey Maggioncalda: Yes. Thanks, Jason. I would say that the fee structure announcement that we made was more to remove an objection where a school would say, "Wait, I can see us doing 1 or 2 degrees with you, but if -- but now we're thinking post-pandemic, we're going to have a lot more online degrees." By the way, you might notice in the National Clearinghouse data, they showed that all enrollments were down a bit -- well, master degrees were up a bit, but undergrads. Institutions that deliver only online degrees, and there are a handful, they saw even larger declines in enrollment than traditional universities. And so I think one of the reasons is that those universities who are a little bit maybe -- say, maybe less selective. The online universities are less selective. I think they compete for a little bit more of the same kind of students as community colleges do. And they're also sort of seeing the labor market as an alternative to one of these online degrees. But the second thing I think that they might be seeing is a lot more conventional universities putting out more college degrees online. And so I think that what we -- what I would say is 3 years ago, 4 years ago at least at the selective -- for those selective programs, they kind of saw online degrees a bit as a hobby. Like let's try this here, let's try this there. Now they're thinking more substantially about doing more of them. I think the pricing model really helps them think more broadly about doing this on Coursera. I will also say that a lot of universities are thinking, "Hey, how strategic is this for us? Should we build it ourselves?" And so as we think about -- if you look at our degrees that we announced, they're the ones that are going live, many of them are international. A lot of the top-tier U.S. schools I think are working through what they're going to do strategically about online degrees. At one end of the spectrum, they can outsource the whole thing to a more traditional OPM. At the other end of the spectrum, they can try to do everything themselves. And kind of in the middle is Coursera, where you use a platform to get some of the distribution recruitment and some of the technology and data. But I think the universities are still are very much thinking through this, and we'll see how it plays out. But I feel like the pricing model has definitely helped. And we continue to see a lot of global interest, not just in the U.S. but global interest, in moving degrees online. Final thing I'd just mentioned, I -- and we put it in here. But we just announced a bachelor of science in business administration in University of London. That falls on the heels of UBL, their bachelor's of computer science, which is a really popular program, thousands of students in it online. So they're a great partner, and we're really excited to have our third bachelor's degree, following on the heels of the University of North Texas, which also has a successful bachelor's program. So our bachelor's degrees, they're looking pretty good. Jason Celino: Okay, and maybe I'll just sneak one more in. Thanks for sharing those enrollments. That's quite helpful. With the strong job market, learners certainly have options of working, learning or both. But aside from the drop of the expanding content of your platform, what controllable execution factors gives you confidence about your ability to attract learners to ramp these programs? Jeffrey Maggioncalda: I think -- sorry, on the degree program or on the alternative credentials? Jason Celino: Degree program. Jeffrey Maggioncalda: Yes, I think on the degree programs, I think what it really comes down to is can we help a university do a combination of get a degree program built using the tools and all the online pedagogy that's going to make it effective, get it launched and fill cohort at low cost? Because recruitment is definitely a major value driver for pretty much every university that we talk to. Maybe not the super duper uber elites, but kind of everybody else globally. And then the final piece of it really is the -- how well can you scale instruction and grading, and the whole learner -- in fact, the experience. So I think when it comes to execution, what we need to be able to do is, I think in order of importance, we have to make sure we can fill cohorts at low cost and fill it with a global audience, because that's something that we do distinctively well. And then I think that doing a lot of hands-on learning and taking a lot of what we're learning from Coursera for Business and helping universities make sure that their programs are modern, they use modern tools, they're on the cloud, all the hands-on learning is happening, I think that's another good differentiator. So building up Coursera labs, building up recruitment, building of labs and then just improving ingestion and offering would be 3 of the things, I'd say, that we're trying to focus on in order to have our execution impact the growth of our Degrees segment. Jason Celino: Excellent, quite helpful. Operator: Your next question comes from Rishi Jaluria with RBC. Rishi Jaluria: Nice to see continued trajectory, especially against the really tough comps. I just want to maybe dial back into what -- the whole discussion around the tight labor market and labor shortages. Maybe get a little bit more explicit on how it impacts different segments. So I think Enterprise, it makes sense that companies want their existing employees to be more skilled, and that should serve as a tailwind there. How should we think about it on the Consumer side, specifically both here and kind of -- as this lasts on for a while? Is it a case of because it's a better job market for prospective employers, there's less demand for this? Or are there other offsetting tailwinds that might work against that impact? And then I've got a follow-up. Jeffrey Maggioncalda: Yes, so I think you got it right on the Enterprise side. Now there are 3 different customer types. The businesses, they seem to be increasing their budgets. They seem to be doing more automation, digital transformation. By the way, there's a little bit of a substitution effect, I think, too, in that businesses are spending more money training their people. So the likelihood that I have to go back to a formal education, when my employer is helping me get semi-formal micro credentials might be a little bit of a substitution effect. But employers are really leaning into it, like you said. Campuses, we are starting to see a much bigger sense that, "Hey, we're facing competition and we need to make sure our graduates have some skills to get a job when they graduate." And I think a lot of it is differentiating themselves from micro credentials and boot camps and things. So we're seeing a nice tailwind on that part of the Enterprise business well. On the Consumer side, we continue to see good traffic coming, good registration rates. As our portfolio of entry-level Professional Certificates grows, we're seeing more conversion. And so we kind of start with what jobs are in demand that don't require a college degree. And then we say, who is an industry partner out there that really knows the stuff cold and has a good brand that consumers would like? And then we say, what skills are needed to be taught in -- we talk to hiring managers, like what skills do you need for someone to get this job? And then we work with the industry partner and we build out the certs. That recipe is just really going nicely. And when we link the degree pathways to that, so hey, this is also the beginning of a college degree. So you get to start a college degree now? Or you can start with one of these Professional Certificates and you're on your way if you want to get a college degree. That's a pretty nice option, if you will, for people. And then I also think that a lot of folks, when they're thinking about career switching, they are interested in the employment side. So to what degree could we link employability on the other side of these Professional Certificates? And Google has done a really nice job with us -- with this consortium of hiring partners that's over 100 companies saying, "We're looking for people who have these skills who come from nontraditional backgrounds. Maybe don't have a college degree. And we're interested in them." So I think that there's a lot of jobs open that you can get without a college agree with these professional certs. I think these pathways to a degree and pathways to specific employers who are looking for more diverse, nontraditional talent, those are all tailwinds. So I don't want to say the Consumer business is going to keep growing really great because it's a little hard to predict. But so far in 2021, it's definitely exceeded my expectations. Rishi Jaluria: Got it. That's really helpful. And then just going to Enterprise land, it continues to be really impressive. Can you maybe give us -- and I apologize if you did address this earlier. But can you maybe give us a little bit of color on the size of the lands? And would you be attributing the Enterprise success more to fine-tuning the go to market on your side? Or is it more of a broad secular tailwind industry-wide? Jeffrey Maggioncalda: Yes. I would say on Coursera for Business, I would characterize that mostly as a broad secular tailwind, and businesses all around the world are investing in digital transformation. I think that our SkillSets and academies, they're really resonating. This idea that you don't start with content. You start with which jobs do you need to imbue with certain skills. Like, "I need my software engineers to know machine learning." Well, great. Here's a SkillSet for that. And then the SkillSet links to the content. That skills-first approach, frankly, it seems like it's really resonating for us. And I think -- we're kind of, I think in a pretty strong position there with all of our data and our SkillSet. On the Coursera -- but I'd say the ticket sizes, I think there's -- that, I don't think we're driving a ton because of bigger ticket size in Coursera for Business. The government, by the way, pretty big average selling price. Those are generally a little bit more lumpy, and when they come in, they're a little bit bigger than business. And on the Coursera for Campus, my view on this one is to me, it's almost like it's you have 2 choices, either -- for not every university, but for a lot of universities. Either you adapt and integrate some of the more modern curriculum or students will start -- stop coming. And so like what are you going to do? The tricky thing about Coursera for Campus right now is there's often not a buyer and a budget. This is not something that universities are used to doing. And so universities have to get their head around, "Hey, we need to supplement our curriculum with this online capability. Our NPS scores are extremely high, and our upsells are quite healthy on Coursera for Campus." But we're early in that market. I'd like to say that we're kind of making that market. And so that one might take a little bit more time. Rishi Jaluria: Okay. That's really helpful. Operator: Your next question comes from Michael Ng with Goldman Sachs. Michael Ng: I just have two. First, could you just talk a little bit more about the strength in content arrangements with industry partners that drove the strong Consumer margins in the quarter? Is this something that can continue to be a tailwind to margins over time? Do you see the opportunity for a 70% gross margin in the segment at some point in the future? And then second, could you just talk a little bit more about whether you see the opportunity for Coursera Plus to continue to increase as a mix of Consumer revenue? 25% was really impressive. Are you working to increase that over time? And how does that improve revenue visibility for you guys? Jeffrey Maggioncalda: Yes, sure. No problem, Michael. With respect to industry partners and the content fees, a lot of this really comes down to the interest, sort of the strategic interest of the educator partner; and then to some degree, like who does the work and who adds the value. I will say that for industry partners who are taking more of a social impact point of view on it, and they asked us to do a lot of the heavy lifting in getting these things built at high quality with their names on them and also in partnership with them, that will tilt more of the economics towards us. So generally lower content fees. And that being said, I could see structurally for a longer period of time, those types of industry partners raising our segment gross margin in the Consumer segment. We also have industry partners, though, who are interested in actually making money off of selling content. And so many technology companies have training divisions and they have P&Ls, and they need to earn revenues. And so they really want the reach from Coursera, but they have expert teams, they build a lot of content, it's very high quality, and they need to post revenue on their P&L. And so for them, they want to do more of the work, they also want a bigger share of the economics. So it's not quite as simple as industry partners will always be higher segment margins than other university partners. It will be a mix. My guess is that it's -- my guess is it's not going to trend to 70%, but I do think that we are... Kenneth Hahn: Jeff, we actually gave specific guidance, and Michael, more importantly. But as part of the script, we talked about we expect to see 60%-plus. So we're not forecasting increases. It's been extraordinary improvement in our brief time as a public company. And we want to let people know we didn't expect it to revert, but we're not expecting explosion in the margins. North of 60%, though, is what we committed to in the near term. Jeffrey Maggioncalda: Ken, I like that answer. Operator: There are currently no further questions at this time. I'll turn the call back to Cam Carey for any closing remarks. Cam Carey: That wraps our Q&A. A replay of the webcast will be available on our Investor Relations website, along with the transcript in the next 24 hours. We appreciate you joining today. Take care. Jeffrey Maggioncalda: Thanks, Cam. Operator: That conclud
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Coursera Shares Drop 7% on Disappointing Q4 Revenue Guidance Despite Strong Q3 Earnings

Coursera (NYSE:COUR) saw its shares plummet 7% intra-day on Wednesday after the online education platform issued a fourth-quarter revenue forecast that fell short of expectations, overshadowing its stronger-than-anticipated third-quarter results.

For Q3, Coursera reported adjusted earnings per share of $0.10, beating the Street estimate of $0.02. Revenue for the quarter reached $176.1 million, a 6% year-over-year increase, surpassing the forecasted $173.98 million.

However, Coursera's fourth-quarter revenue projection of $174-178 million came in well below the Street estimate of $186.6 million, raising concerns over slowing growth. The company also revised its full-year 2024 revenue outlook to $690-$694 million, down from its prior range of $695-$705 million, and below the consensus of $700 million.

On a positive note, Coursera increased its full-year 2024 adjusted EBITDA margin forecast by 170 basis points to 5.4%.

Coursera, Inc. (NYSE:COUR) Financial Health in the Online Education Sector

  • Coursera's financial health is concerning with a Return on Invested Capital (ROIC) of -22.58% and Weighted Average Cost of Capital (WACC) of 10.27%, indicating it's not generating sufficient returns to cover its capital costs.
  • Udemy, Inc. (NASDAQ:UDMY) faces greater financial challenges than Coursera, with a ROIC to WACC ratio of -2.90, suggesting even more significant struggles in generating positive investment returns.
  • Duolingo, Inc. (NASDAQ:DUOL) showcases a positive ROIC to WACC ratio of 0.55, highlighting its operational efficiency and ability to create value for shareholders, contrasting sharply with Coursera and Udemy.

Coursera, Inc. (NYSE:COUR) is a key player in the online education sector, offering a platform that bridges the gap between learners and educational content providers. Despite its innovative approach to online learning, Coursera's financial health, as indicated by its Return on Invested Capital (ROIC) of -22.58% and Weighted Average Cost of Capital (WACC) of 10.27%, raises concerns. These figures suggest that Coursera is not generating enough returns from its investments to cover the cost of its capital, a situation that could deter potential investors.

In comparison, Udemy, Inc. (NASDAQ:UDMY) operates in the same industry but faces even greater financial challenges. With a ROIC to WACC ratio of -2.90, Udemy's situation indicates it is struggling more than Coursera to generate positive returns on its investments. This comparison puts Coursera's financial performance in perspective, showing that while Coursera faces challenges, it is not the worst performer in its sector.

On the other hand, Duolingo, Inc. (NASDAQ:DUOL) presents a stark contrast to both Coursera and Udemy. With a positive ROIC to WACC ratio of 0.55, Duolingo demonstrates its ability to generate returns that exceed its cost of capital. This performance not only sets Duolingo apart from its peers but also highlights its operational efficiency and potential for value creation for its shareholders.

Olo Inc. (NYSE:OLO) and Marqeta, Inc. (NASDAQ:MQ), though not direct competitors of Coursera in the online education space, offer insights into the broader tech industry's financial health. Olo's ROIC to WACC ratio of -0.82 and Marqeta's ratio of -1.45 indicate that they, too, face challenges in generating positive returns on invested capital. However, their situations are not as dire as Coursera's or Udemy's, suggesting that the issue of negative returns on invested capital is not isolated to the online education sector.

This analysis reveals a mixed picture of financial health and operational efficiency among companies in the tech and online education sectors. While Coursera struggles to generate positive returns on its investments, it is not alone in this challenge. However, Duolingo's positive ROIC to WACC ratio stands out, indicating that it is possible for companies in this space to achieve financial efficiency and create value for their shareholders.

Coursera Shares Surge 17% on Q2 Revenue Beat & Raised Guidance

Coursera (NYSE:COUR) shares jumped more than 17% on Friday after the company announced better-than-expected revenue figures for the second quarter, leading to an upward revision in its outlook.

While the company reported a second-quarter loss per share of $0.21, which was worse than the expected loss of $0.10, its revenue showed impressive growth, rising by 23% year-over-year to reach $153.7 million. This revenue figure surpassed the Street estimate of $145.86 million.

For the ongoing quarter, Coursera anticipates revenue to be around $158 million, surpassing the market's expectation of $153.5 million for Q3 revenue. Moreover, the company has raised its full-year revenue projection to $620 million, up from the previous forecast of $605 million, and also beating the Street estimate of $607.9 million.

Coursera Shares Surge 17% on Q2 Revenue Beat & Raised Guidance

Coursera (NYSE:COUR) shares jumped more than 17% on Friday after the company announced better-than-expected revenue figures for the second quarter, leading to an upward revision in its outlook.

While the company reported a second-quarter loss per share of $0.21, which was worse than the expected loss of $0.10, its revenue showed impressive growth, rising by 23% year-over-year to reach $153.7 million. This revenue figure surpassed the Street estimate of $145.86 million.

For the ongoing quarter, Coursera anticipates revenue to be around $158 million, surpassing the market's expectation of $153.5 million for Q3 revenue. Moreover, the company has raised its full-year revenue projection to $620 million, up from the previous forecast of $605 million, and also beating the Street estimate of $607.9 million.

Coursera Shares Surge 12% Since Q1 Results

Coursera (NYSE:COUR) shares rose more than 12% since the company reported its Q1 results on Thursday, with revenue coming in at $147.6 million, beating the consensus estimate of $138.51 million. EPS was ($0.22), compared to the Street estimate of ($0.11).

Consumer continues to demonstrate resiliency, with stable growth (accelerated on a two-year stack), which drove most of the upside in the quarter. Meanwhile, Degrees remains on track for a second-half rebound and Enterprise continues to decelerate against a tough macro backdrop.

For Q2/23, the company expects revenue in the range of $143-147 million, compared to the Street estimate of $143.5 million. For the full year, the company estimates revenue in the range of $600-610 million, compared to the Street estimate of $600.9 million.

Coursera Shares Surge 12% Since Q1 Results

Coursera (NYSE:COUR) shares rose more than 12% since the company reported its Q1 results on Thursday, with revenue coming in at $147.6 million, beating the consensus estimate of $138.51 million. EPS was ($0.22), compared to the Street estimate of ($0.11).

Consumer continues to demonstrate resiliency, with stable growth (accelerated on a two-year stack), which drove most of the upside in the quarter. Meanwhile, Degrees remains on track for a second-half rebound and Enterprise continues to decelerate against a tough macro backdrop.

For Q2/23, the company expects revenue in the range of $143-147 million, compared to the Street estimate of $143.5 million. For the full year, the company estimates revenue in the range of $600-610 million, compared to the Street estimate of $600.9 million.

Coursera’s Analyst Day Takeaways

RBC Capital provided its views on Coursera, Inc. (NYSE:COUR) following the company’s 2023 Analysts Day, noting they came away incrementally positive on the long-term growth and margin potential, as well as for a rebound in 2024.

Management introduced an encouraging long-term target operating model, calling for 25-30% revenue growth and a conservative 15-20% adjusted EBITDA margin, with a thorough breakdown of the underlying drivers.

In addition, the company set a couple of 2024 targets, including turning profitable and Degrees revenue growth accelerating to over 25%. Coursera noted subscriptions accounted for 95% of 2022 Consumer revenue, up from 82% in 2020, with an average paid learner retention of 3-5 months. The analysts believe supporting the durable growth is this sustained innovation around pricing and packaging, an accelerating pace of content generation (especially professional certificates), and international opportunity.