Q3 2021 Coursera Inc Earnings Call
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.
Thanks, Kim and good afternoon, everyone.
Today I am 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 is number one 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 billion 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 learns 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 and 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.
We recently announced Ace credit recommendation for all Google entry level professional certificates on Coursera as well as three 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 worthy 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.
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.
For example at Coursera in the first half of this year more than two thirds of our U S. Based new hires are fully remote providing us with access to a broader more diverse talent pool without the constraints are requiring proximity to our 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 impact everyone and the need for change has never been more urgent.
Businesses know that they must upskill and 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.
Campus has realized 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 of 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 labour market.
And the third major trend that's driving our business is enabling the digital transformation of higher education.
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 two trillion dollars.
Has seen relatively little innovation over the past three centuries traditional.
Traditional college degrees are not affordable to many people.
They are monolithic four year structure doesn't meet the needs of lifelong learners.
Degrees, often lack relevant to today's employers.
And degrees are often not design for working professionals, who don't want to quit their job or moved 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 three sided platform connects learners educators and institutions and a global learning ecosystem with three 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 educated partners Creek.
And the third major advantage is the technology and data that power of our platform let.
Let me share some recent highlights on each of these competitive advantages.
We continue to expand our list of educating our partners.
Our large growing learner base and global brand to 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 four 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 <unk> Bombay.
It grew a hobby Indians Statistical Institute and a showcase 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 five 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 launch the first of four anticipated new specializations on Coursera.
Lastly, we welcomed United service organizations, a nonprofit serving U S military members and families.
<unk>, India for Health Technology solutions, and Boxy and English language training company as new partners Coursera during the quarter.
Our industry partners value Coursera scale, and reach and building a global community of developers and users critical to their ecosystems. Additionally.
Additionally, it allows them to address the growing job displacement and skills gap that their technology and automation to create.
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 and 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 skill sets and skill dashboards originally developed for coarser 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.
<unk> 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, a branded high quality premium content enables us to attract learners at low cost and serve them at a range of price points learns.
<unk> come to Coursera for our premium content and bite sized 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 aimed to maximize lifetime value with our premium credentials from our partners, including specializations.
<unk> certificates and accredited Bachelors and Masters degree.
Our catalog continues to grow.
We recently announced five new certificates from University partners in India with topics ranging from five G technologies in Iot BLE.
<unk> 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 two new programs, including a post graduate diploma in applied statistics from the Indians Statistical Institute and a Bachelor of Science in business administration from the University of London.
With these recent additions the coarse ore catalog now includes over 2000 guided projects that offer hands on learning.
More than 5000 courses in 600 specializations over 70 certificates, including our 15 entry level professional certificates and.
<unk> 33 degree programs, including Bachelors Masters and post graduate diploma.
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 has delivered on our 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 localize homepage for better discovery Geo pricing on most individual courses five 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 are skills graph connect rolls his 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.
Liver 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.
Ketamine offer companies a skills first approach to enterprise learning.
Focusing first on the most critical job roles than specifying the skills and proficiency levels needed to do these roles and finally linking the skills to content the teachers at the appropriate proficiency level.
But the value of these insights extends beyond corporate training in August we announced the general availability of skill sets for all universities using coursera for campus.
While the shifting skills landscape is creating opportunities in the workforce.
These feel that theres, 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 is in demand jobs, leveraging our world class content from University and industry partners.
Additionally, these universities contract skills development at both the students and cohort level, while benchmarking students against real employees and industry.
And for educators at the end of June we announced our new content ingestion solution.
A feature that allows educators to more quickly and he mostly migrate content between our learning management system and Coursera.
We've been pleased with the official 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 one third of the traditional timeline.
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 is it growing selection of content and credentials attracts more individuals and institutions, which in turn motivates our educated 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 coarse ore 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 onto CRO.
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 two examples that are illustrative of the institutional collaboration that our platform is enabling at scale.
Same day, the Costa Rican investment promotion agency implemented a nationwide training program with Coursera for government in 2020.
For almost 40 years since they had 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.
<unk> teamed up with employers Costa Rican government agencies, and Coursera <unk> identified the most in demand skills and developed curated learning pathways on our platform.
Since the partnership began more than 23000, Costa Rican have enrolled and over 80000 courses completing more than 40000 courses and nearly 700000 lessons.
Given its initial success and they recently expanded the program.
Second we announced a new partnership with the Oklahoma State regions of higher education.
Enabling 15 universities in the state to adopt Coursera for campus.
The collaboration is focused on four key goals and.
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 eight 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 reached 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 course there.
This is driven by our freemium model, which brings in learners to coursera and enables our efficient low cost acquisition.
Key competitive advantage enabled by our three sided platform.
And finally, we will continue to scale, the <unk> platform and reinforce our flywheel effect.
Investing in growth of our registered learner base, increasing our network of educate our 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.
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 or 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 costs, which vary based on both the revenue mix amongst our three 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 continue 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 search and continued higher margin range.
With industry partners, we anticipate that for the near term our consumer segment margins will remain north of 60% that we will likely invest more operationally to take full advantage of the opportunity.
The second component of our cost of services as our non content cost margins for which were up slightly on a year over year basis at nine 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 our 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 seven 3% of revenue and our adjusted EBITDA loss was $3 1 million or two 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 is 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.
To deepening our competitive moats.
And three securing leadership and our large and rapidly evolving market for the benefit of all our constituents.
Now turning to cash performance in the balance sheet free.
Free cash flow was $7 $1 million.
Compared to a use of $4 $2 million a year ago, and we ended Q3 and a strong cash position.
As of September 30th 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.
<unk> revenue was $66 $5 million up 16% from the prior year over a tough growth comps of 81% in Q3 of 2020.
We are seeing sustained demand for our entry level professional certificates aimed at the global re skilling opportunity.
In addition adoption of our new courtyard, 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 program 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 the financial contribution our consumer business is an important strategic asset.
It attracts our educated 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 segment, allowing us to attract learners at low cost.
As Jeff said earlier, we had $5 5 million new registered learners during the quarter for total base of $92 million as of September 30th.
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 three 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 degree segment.
The group's revenue was $11 6 million up 59% from a year ago as prior cohorts continue to scale and students embrace our newly launched programs, including date 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 two 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 five 4% and 13, 6% respectively.
Despite these headwinds we grew our total number of degrees students, 40% from a year ago to 16068 and continue to be excited about our pipeline of programs from new and existing University partners.
<unk> segment gross margin was 100% of revenue as there is no content cost attributable to degree segment.
Now on to our financial outlook as a reminder, with fairly good visibility into revenue on a quarterly basis in both our enterprise and degree segment, so any significant variance to expectations as most likely to occur within our consumer segment.
For the fourth quarter, we're 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're expecting a loss in the range of $16 five 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% to $35 $5 million or an adjusted EBITDA margin of negative eight 3% at the midpoint.
<unk> 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.
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 absorbed significant additional overhead costs as a newly public company.
The forecast closing comments I wanted to leave you with three key reminders about our long term financial framework.
First we have a unique set of strategic assets that allow us to compete differently or.
Freemium model global scale and unified platform allow us to attract new registered learners at low acquisition cost.
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 a result 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 and global learning ecosystem. We believe coursera has the platform to <unk>.
To meet this challenge.
I'll now turn the call back to Jeff.
Thanks, Ken.
Our mission is to provide universal access to world class learning so that anyone anywhere has the power to transform their lives 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 derived from anywhere in the world.
Together with our partners. We're excited to continue our efforts to fulfill this promise and our quest to build a more just world.
And with that let's get to Q&A could you. Please introduce the first question. Thank you.
At this time I would like to remind everyone in order to ask a question. Please press Star then the number one on your telephone keypad.
And your first question comes from Tom single first with Citigroup. Please go ahead.
Yes.
Good evening, Thanks for taking the question some hits in the city.
<unk>.
Congratulations on the results just a couple of questions.
Yes.
First one on Santa flexibility you mentioned.
Quarter that you've had sort of encouraging.
Adoption and Lo and Behold <unk> consumer revenue.
<unk> be great to get some more detail on weather.
Suddenly gone so well.
And also whether that.
But structurally higher gross margins for the consumer division.
Any more detail that would be very much appreciated that was the first question on the second question.
Going to be on.
Yes.
Education company.
The impact of that looking forward the community College, Enrolments and the impact that's having them.
Some of the other.
Of the 19 States I'm just wondering what you think the strength in consumer.
On the other side of that coin I think.
Absolutely and then the comments button, just firming that up a bit do you think can encourage enrollment coming down because of it.
Sure.
<unk> got one more for me.
See the side of the business.
Thank you Tom Thanks for the question do you hear me Okay.
Yes, loud and clear.
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 and the early days, Steve jobs said.
You buy every song and has to be exactly 99.
Every single and momentum.
And that was great I was a breakthrough from having to go to the 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 a commitment to consume it similar I think for the the sort of standard pricing model for coarser, where you have to know what specialization you want before you actually buy it.
I think what Coursera plus does is it kind of Spotify. If you will not just the pricing model, but the consumption model and the ability to us the interested in one subscription are one specialization and then go to Adjacencies and supplemented with other courses or Amazon projects I think it really just increase.
This is the consumption. So I think that's what we're basically saying is for a fairly small price increase.
<unk> can get.
Unlimited and more friction free consumption and what that does is it boost retention rates because.
It's not like you finished a piece of content and then Youre done and then you have to buy another one is sort of just a subscription that you can continue to explore with respect to structural a higher gross margin I don't think so I don't expect that that would change it the only way that that might happen.
Because of this lower friction ability to explore learners ended up exploring content, which with lower content costs to the educated partner and I don't necessarily see a reason why that would happen.
Might turn out that way, but we're not we're not modeling anything like that.
In terms of community College enrollments.
Yeah.
Think to some degree that is what we're seeing I mean, my sense of it with respect to community colleges that and we've just launched.
Some major initiatives are 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 the bigger factor. It just seems to me right now is a strong labor market.
People, who otherwise might say the jobs aren't good enough, so I'm going to get a community College.
And AA degree maybe have that gone to be pulled.
Pulled fasteners are saying there is some good job opportunity, thus increasing pay all go into labor market now and maybe I'll get that other.
Other significant later, so I think the substitution effect of a strong labor market is higher with community college them with more advanced sort of elite four year degrees.
I think the other part of it too is just that community colleges are realizing.
That they 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 someplace like coursera.
Sarah as a substitute for community colleges and so we certainly intend to do both worked directly with Facebook and Google and others to put professional certificates on our platforms of individuals can come directly to coursera, but with Coursera for campus, We mentioned, Oklahoma I think thats, a really wonderful model for any state.
Higher education.
Board regions.
They actually did a deal and they said we want to make sure that every college and 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 four year or whether that's 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.
A stream of revenue.
That's very interesting thanks for that detail.
I'll jump back in the queue. Thank you.
Thanks, Tom.
Your next question comes from the line of Josh <unk> with Morgan Stanley. Your line is open.
Great. Thanks for the question.
One follow up our 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.
Yeah, Hey, Josh.
We think it has we think it has.
Our degree 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 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 of Assurant and page how often do they start an application when we 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 werent necessarily technical learners, they're more sort of interested in some of the science of well being of course learning how to learn of course et cetera that cohort is a little different than previous ones, but when we when we look at our data our track our traffic and our registrations are looking.
Not matured.
But when we look at what we see the interest levels. The 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 vis bachelors and also higher.
Here 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 enjoyed the benefit of having more technical degrees on Coursera from top named partners with 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.
Great context.
One or it might be a quick one funny you mentioned.
So I was just wondering if that changes to the app store fees at Google and Apple.
That's having any impact on the consumer business not sure if the consumer revenue runs through the app stores in that way.
Yes, some of it some of it some of it does Josh do you have any visibility on any relative effect of.
On floors on them it has a little bit of effect on the cost for obvious reasons that are less.
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 non issue not a negative or a positive for us.
Okay. Thank you.
Yes sure.
Your next question comes from Stephen Sheldon with William Blair. Your line is open.
Hey, Thanks, I appreciate you taking my questions.
First it seems like Youre continuing to see some nice wins on the government side with the.
To win in a customer to 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 these broad upscaling initiatives.
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 or maybe with April.
Workforce recovery initiatives.
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 that three version and like with many institutions with businesses doing remote work for the first time in campuses doing online learning for the first time government Scott to do workforce training virtually for the <unk>.
First time.
I think that they were pretty shocked I hear a number of them say wow. Like this is really advanced a lot since five 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 what's the fastest cheapest way to try to get somebody employed.
To a large 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 uptick on the government side and as you can imagine as with the U S. Theres just a lot of governments are putting a lot of money towards <unk>.
Lending reskilling and sort of reemployment. So so we're looking forward to a good year in 2022, and we're seeing good uptake following on 2020.
Got it.
And then great to hear that it seems like you're seeing some nice traction so far with.
Consumer subscriptions, but would be curious to get more detail on the type of individual learners that are signing up for subscriptions is it is it the consumers that we're already highly engaged in pain on a per course basis or a per certificate basis or are you pulling in people to buy subscriptions that maybe you werent more that engaged before which is awesome.
So on that.
Yes, I think it's sort of a combination of all of the above generally speaking.
Certainly appeal 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 theres a lot of cannibalization, but they are the happier they're like Wow. This is great you get to learn a lot more stuff and I don't have to pay for it every time.
I think more importantly for your <unk>.
That might have otherwise spot one technical specialization those techniques are changing and the tools that are being used are changing and so there are adjacent portion of specialization 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.
Other thing that we're seeing with Reskilling.
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 theyre going to need or how to get those skills and so for those who are switching jobs and thinking about a digital career.
Valuable to have the ability to say you don't have to pick the 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 marketers certificate from Facebook, we're seeing good traction with them too. It they have a bookkeeper statistic. If you want to go into financer bookkeeping, Here's a certificate from Intuit and you don't have to pay right away, which which really changes the purchase decision.
Kind of like if you're not sure and you maybe you want to try it before you decide what created 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 the path is right for me. So I think it works for many many types of learners, including those entry level professional certificates.
Seekers.
Makes sense. Thank you.
Sure.
Your next question comes from Ryan Macdonald with Needham <unk> Company. Your line is open.
Hi, Thanks for taking my question and congrats on a nice quarter, Jeff you alluded to it in your in your last answer about there are individuals in the workforce and you know that they wanted to switch their careers and are looking for ways to do that I am curious given what we've seen in terms of the voluntary turnover rates in the coin great resignation over the past few.
I'm curious how that impacting your conversations with corsair for business and how that maybe impacting LNG strategies with the enterprise organizations, who are talking to.
Yes, Ryan it's a great question and it is 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 that sort of education as a benefit in the tax fault in the U S that make them more attractive pretty much a U S kind of think we don't see that very big in other countries, but in U S. Coursera for business customers, we've seen that and thats kind of width with axes degrees for the most part unusually 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 four year program.
I think to a large degree of the conversation is being had about micro credentials chop relevant job specific.
Skill training.
The competition, we are hearing with individuals looking for something Thats shorter more affordable more flexible is also starting to trickle into LNG thinking as well.
I have definitely been aware of a few of our customers who are re looking at their tuition reimbursement benefit and thinking hey education of the benefit that that's something we want to do maybe even do more off but when we think about what should be the architecture of how we do that what kind of education what kinds of credentials.
We think at Coursera that if 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 pathway as these are the the American Council on education.
Recommendations.
Mentioned in the script, we now have seven of the professional certificates have ace credit recommendations, which is basically the American council of education, telling universities and colleges in the U S. We have deemed this content to be credit worthy. So the idea that you could start with a professional certificate and by virtue of the.
The blessings of the AC count that as credit towards a bachelors degree, we think that hybrid model of industry plus degrees, where there could be more bite size more affordable, which are relevant but have that option to have that degree pathway, we think thats, a winning combination and.
We think there is a big opportunity there.
Okay.
Alright, and then as a follow up I wanted to ask about degrees you mentioned eight new programs being launched in September just curious to 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, but would just love to hear more about how that sort of.
Sort of translates into the revenue stream as the fourth quarter and into next year. Thanks.
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 slides and start taking pre enrollment pre admissions submission. So I know that there are some people that go to our website and just see kind of <unk>.
Degrees or announced but not yet live but then you can actually see when they're going to be life. You'll notice. If you look at the number of announced degrees and the number of live degrees, where theyre actually students in session that number was pretty wide. During the last say six to nine months, it's a bit more.
Less wide now and we launched a lot of degrees that were in the pipeline I'm not saying that there is not a pipeline coming but I do think that those eight those eight that went live represents a few things one was.
They all signed up around the same point in time.
We also wanted to just kind of mentioned it's pretty neat.
We enable multiple universities to build and launch degree programs on Coursera gives us a lot of scalability and kind of parallel processing.
It is conceivable that four or eight in this case or more than eight could all go live at the same time, because we don't put our working capital towards building all the content that's that was a little bit different than some other types of program management models.
I wouldn't necessarily say that because we launched eight this quarter, we're going to launch a next quarter and sort of keep an eye on the announced degrees and then Youll expect in almost every case. We've launched every degree that what's been announced that will just and reasonable indicator of the degree that are in the pipeline at least at the point of announcement.
Hey, Ryan I guess I would also this is Ken I'd like to emphasize what that model looks like and the degree revenue creation cycle. So first it starts with the partnership when we land a degree and then announce it which is what youre, referring to it tends to take six to 12 months for the partner to launch the degree.
On our platform and then we start generating revenue like filling cohorts and that revenue builds over time until you get a full set of cohorts a two year program. It takes roughly three years to fill so you start to lap. It takes four to five years to get full productivity, which means we have amazing visibility on <unk>.
Revenue, but you don't see an immediate impact from these announcements so the so what we announced now the land and partners again, they'll implement now over six to 12 months and then we'll begin the revenue production cycle. So there's a long lead time, but a lot of visibility.
Helpful reminder, thanks again of.
Of course, yes.
Your next question comes from the line of Jason <unk> with Keybanc. Your line is open.
Hey, Thanks for fitting me in.
Staying on this topic.
With the pricing announcement in August.
Be interested in how your conversations are going with with partners about our new to the platform our existing.
It.
International or domestic undergrad.
Curious how those discussions are going.
Yeah. 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 one or two degrees mchugh, 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.
Masters degrees were up a bit but undergrad.
Institutions that deliver only online degrees.
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 more.
I'd say, maybe less selected the online universities or less selective I think they compete for a little bit more of the same kind of students as community colleges do and they are 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.
Degrees online and so I think that what we what I would say three years ago four years ago at least.
The selective for the selected programs they kind of saw online degrees a bit as a hobby like let's try this year of let's try this they're 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 for Sarah I'll also say that a lot of universities are thinking hey, how strategic is this for us sure.
We build it ourselves.
So as we think about if you look at our degrees that we announced are the ones that are going live many of them are international.
A lot of the top tier U S schools I think.
Our working through what they're going to do strategically about online degrees I wanted to add to the spectrum. They can outsource the whole thing to a more traditional OPM as the other end of the spectrum. They can try to do everything themselves and kind of in the middle is coursera, where you use the platform to get some of the distribution recruitment and some of the technology and data.
<unk>.
But I think that universities are still are very much thinking through this and we'll see how it plays out but.
I feel like the pricing model is definitely helps and we continue to see a lot of global interest you'll not just U S. But global interest in moving degrees online final thing I, just mentioned and we put it in here, but we just announced a bachelors of science and business Administration University of London.
That follows on the heels of Nobel other batches of computer science, which is a really popular program thousands of students online. So they're a great partner and we're really excited to have our third bachelor's degree following on the heels of that.
University of North, Texas, which also has a successful bachelors program. So our Bachelor degrees. They are looking pretty good.
Okay, and maybe ill sneak one more in.
Thanks for sharing those enrollment that quite strong job market learn it certainly have options and working learning or both.
<unk> from the drop in the expanding content on your platform what controllable execution factors give you confidence about your ability to attract learners to ramp okay.
Okay.
I think I'm, sorry on the degree program or on the alternative credentials.
Alright degree program.
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 cohorts at low cost because recruitment definitely a major value driver for pretty much every university that we talk to maybe not the super Duper dupe relates but kind of everybody.
Globally.
And then the final piece of it really is the how well can you scale instruction and and grading and the whole learner and faculty 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 until fill it with a global audience, because thats something that we do.
<unk> will be well and then I think they're doing a lot of hands on learning and taken a lot of what we're learning from Christopher for business and helping universities make sure that their programs are modern these modern tools. They are all in the cloud all the hands on learning is happening I think thats. Another good differentiator, so building up Coursera labs building on recruitment.
Of course, our labs, and then just improving ingestion and offering would be three of the things I would say that we're trying to focus on in order to have our execution impact the growth already re segment.
Excellent quite helpful. Thank you.
Sure no problem.
Your next question comes from <unk> <unk> with RBC. Your line is open.
Hey, guys. Thanks, so much for squeezing me in nice to see continued trajectory, especially against a really tough comps.
Just wanted to maybe dial back into.
The whole discussion around the tight labor market and labor shortages, and maybe get a little bit more explicit on how it impacts different segments.
I think enterprise it makes sense that companies want their existing employees to be more more scale.
That should serve as a tailwind there how should we think about it on the consumer side, specifically, both here and kind of at this loss on for a while it is a case.
Because it's a better job market for prospective employers, there's less demand for that or are there other offsetting tailwind tailwind that might work.
Against that impact and then I've got a follow up.
Yes.
I think you got it right on the enterprise side another three 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 and that businesses are spending more money training their people. So the likelihood that I have to go back to a formal education, where my employer is helping me get semi formal micro credentials might be a little bit.
Have a substitution effect, but employers are really leaning into it like you said campuses.
We are starting to see a much bigger sense.
<unk>, 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.
Those were seeing more conversion and so.
We kind of start with what jobs are in demand then don't require a college degree and then we say who as an industry partner partner out there that's really knows the stuff cold and has a good brand that consumers would like and then we say what skills needed to be taught in or we talked to hiring managers what skills do you need for something to get this job.
And then we work with the industry partner and we build off of that.
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're going to start a college degree now or you can start with one of his professional certificates and Youre 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.
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 the skills who come from non traditional backgrounds. Maybe you don't have a college degree.
And we're issuing them. So I think that there is there is a.
A lot of jobs open that you could get without a college degree with these professional search I think these pathways to a degree and pathways to specific employers who are looking for more diverse nontraditional talent. Those are all tailwind. So I don't want to have a consumer business is going to keep growing really great because it's a little hard to predict but so far in 2021.
Definitely exceeded my expectations.
Got it that's really helpful. And then just go into enterprise land 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 tune.
To go to market on your side or is it more of a broad secular tailwind industry wide.
Yes, I would say on the Corsair for business I would characterize that mostly as a broad secular tailwind businesses all around the world are investing in digital transformation I think that our skill sets and academies, they're really resonating. This idea that you don't start with content, we start with which jobs do you need to.
In view of certain skills like I need my software engineers to no machine learning well, great. Here's a skill set for that and then the skill set links to the content that skills first approach frankly, it seems like it's really resonating for us and I think we're we're kind of I think a pretty strong position there with all of our data and our skill set.
On the <unk>, but I'd say at the ticket sizes I think there is some.
I don't think we are driving a ton because of bigger ticket sizes and coarser for business. The government by the way pretty big that average selling price of those are generally.
A little bit more lumpy and when they come in they are bigger than the business and on the Coursera for campus. My view on this one is to me it's almost like.
If you have two 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 coming stopped 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 university would 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 for sure for Capex, but we're early in that market I would like to say that we're kind of making that market and so that one might take a little bit more time.
Okay.
Well thank you so much.
Sure sure.
Your next question comes from Michael English Goldman Sachs. Your line is open.
Hey, good afternoon, and thanks for the question I just have two first could you just talk a little bit more about the.
Strengthen content arrangements with industry partners that drove the strong consumer margins in the quarter.
<unk>.
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.
Opportunity for <unk> plus to continue to increase.
Mix of consumer revenue, 25% was really impressive how youre working to increase that over time and how does that improve revenue visibility for you guys. Thanks.
Yes, sure no problem, Michael with respect to industry partners and the content.
Lot of this really comes down to the interest sort of strategic interest of the educator partner and then to.
To some degree you like who does the work and who has 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 and 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.
Youre raising our segment gross margins 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&L and they need to earn revenues and so.
They really want the reach from Coursera.
Expert teams they build a lot of content is 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 than other University partners it'll be a mix. My guess is that my guess is it's not going to trend to 70%, but I do think that.
We are gap, we actually gave specific guidance and Michael more importantly.
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 wanted to let people know we didn't expect it to revert, but we're not expecting it.
<unk> and the margins north of 60% those what we committed to in the near term.
Ken I like that answer.
Awesome.
There are currently no further questions at this time I will turn the call back to Ken Kenny for any closing remarks.
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.
Thanks, Ken includes today's conference call. Thank you for participating you may now disconnect.
Okay.
Okay.
Okay.
Okay.
Yes.
Okay.