Q1 2022 Coursera Inc Earnings Call
We believe reflects our differentiated business model and admittedly strong tailwind that propelled the growth of our business.
Our diversified offerings and global distribution to individuals businesses governments and campuses.
Bose us to multiple growth levers being driven by the need for new skills in a rapidly changing digital world.
Let's discuss the latest on the key trends that we see at play.
The first major trend is digital transformation.
The forces of technology, globalization, and increasingly remote and hybrid work are transforming industry after industry.
The impact of these forces has amplified the criticality of technology and digital tools.
Caused businesses governments and campuses to redefine the way they operate and reshaped both the supply and demand for jobs globally.
Simplest form this ongoing transformation has created an accelerated rate of change that we believe will be permanent feature of our increasingly digital world.
The requirement for all of us to keep pace with accelerating change leads to my second major trend skill development.
Businesses are rapidly automating jobs that are repeatable and predictable, while investing to upskill and reskill and benchmark their talent.
Developing a competitive workforce requires that employers better understand the skill proficiencies of their team members, while creating both internal and external talent pipelines to fill in demand rolls.
Governments are looking to scale up their public sector employees and prepare their citizen workforce for a growing knowledge economy.
While addressing unemployment was one initial use case, we are seeing larger more strategic national and state wide initiatives focused on developing equitable workforces and driving long term economic growth.
Campuses are realizing that they must enhance the quality of their offerings, ensuring that students graduate with job relevant skills and deliver stronger employability outcomes more cost effectively.
And just about every individual and every job we will need to keep learning throughout their life to stay relevant in the changing workforce. We believe this new hybrid model of adult learning and work will require a flexible affordable and responsive system of higher education that can keep pace with skill requirements as they evolve.
This leads me to the third trend driving our business the transformation of higher education and adult learning more broadly.
As technology and automation accelerate a changing skills landscape, a new an inclusive lifelong learning model must meet this challenge with rapid speed and scale.
Technology is a key driver of change.
There is also the means by which society is adapting with online education and remote work.
But technology is only part of the solution.
Adapting to change will also require institutional collaboration.
Between academic institutions industry leaders and governments to meet the needs of this new digital world.
That's why we frequently speak about the importance of course, there is three sided platform, which connects learners educators and institutions in a global learning ecosystem.
Our platform is three distinct advantages that we continue to deepen and scale.
First are the leading educate our partners, including World class universities and global industry leaders, who have created a vast catalog of branded content and credentials.
The second is the global reach of Coursera and the third is the data and technology that powers our unified platform.
Let's discuss recent highlights for each of these first educate our partners.
More than 250 educate our partners have come to Coursera to teach the world and we're proud to have recently welcomed more.
In the Middle East, we added three top tier universities, bringing our total number of partners in the region to eight these include our <unk> University in Saudi Arabia.
<unk> University, and the UAE and the Jordan University of Science and technology.
The upcoming courses created by these universities have been curated to align with the regions broader skills development agenda, and particular equipping learners with the essential digital skills, they need to contribute to a growing knowledge economy.
In addition to bringing on new partners, we also expanded our relationships with existing partners.
Once if the CEO when he said that cattolica, the Chile or UC, Chile has announced four master's degree programs on Coursera. These programs build on the success of their 35 open courses to now provide Spanish speaking students with world class degrees in business analytics data science investments in.
Applied finance and global public health.
Next the University of Illinois announced two stackable graduate certificates.
Certificates created by the geese college of business stack directly into their three existing master's degree programs, providing learners with job relevant skills today and the building blocks toward a degree in the future.
Finally hub spot a longtime coursera industry partner with several existing courses launched its first entry level professional certificate the.
The sales Representatives certificate prepared to learner for a new or growing career in sales.
This includes hands on projects using hub spot CRM software to apply skills as well as the creation of a portfolio to present to future employers.
This is our 19th entry level professional certificate and sixth industry partner to offer a credential in this rapidly expanding category.
We are excited to share more on our catalog and connection with next weeks coarse ore conference. Chris that was second major advantage is the global reach of our platform. We've consistently added approximately $5 million registered learners each of the past six quarters. Additionally, we've grown the number of paid enterprise customers to over 900 institutions.
This large growing learner base attract educator partners looking to teach both individuals and institutions around the world, but it also provides a unique set of advantages that allow us to compete differently.
First our high quality premium content enables us to attract learners at low cost and serve them at a range of price points.
As these learners looked at progressing their careers, we aim to maximize lifetime value with premium credentials from our partners, including specializations professional certificates and college degrees from accredited universities.
Second our learner base provide leads for our rapidly growing enterprise churn.
And third the rich data generated by our learners, including catalog performance learner insights and feedback from our institutional customers enable our business customers to benchmark their talent and our educator partners to prioritize the content and credentials that they create for their students.
Now our final advantage the ongoing product innovation on our unified platform.
Coursera learning platform includes several core capabilities that are leveraged globally across our offerings and segments.
They include our sales and marketing system.
Broad catalog of content and credentials.
Our technology and tools and the data generated by millions of worldwide learners, including our proprietary skills graph.
These capabilities allow us to build products features and services that better meet the needs of our learners.
Share a few recent examples.
Last week, we announced an exciting new chapter for Coursera immersive learning experiences powered by augmented mixed and virtual realities.
We are working with the University of Michigan, one of our first University partners to create 10 extended reality or X our courses exclusively on Coursera.
These new courses will embrace XR technology to provide a new level of learning immersion, including a social learning environment for roleplaying simulations and the ability to expand the access and affordability of practical skills training and higher risk field, such as mobility manufacturing and health care training.
The first three courses are scheduled to debut in early 2023.
Importantly, all courses will be accessible on mobile devices, requiring no VR headset to benefit learners worldwide.
Next we announced an expansion of level sets for our enterprise customers.
As the rate of innovation accelerates the development of new skills will be imperative level sets provides businesses with deeper visibility into the skills of their workforce and the ability to create tailored development paths for employees.
The initial level sets offering announced this past fall enabled skill assessments of more than 20 data and analytics folks of skills.
The recent expansion grows this assessment capability to more than 60 skills, allowing employees to test proficiency in other domains, such as technology finance and marketing.
Finally, we introduced our content ingestion solution for educators last year with significant reduces the time needed to author and launched a course on coursera.
More than 110 courses from over 25 partners have been adjusted to date and.
And we recently enhanced the functionality to include self service canvas ingestion, a more efficient way for educators to import their existing content and courses from one of the most popular learning management systems.
Our learning platform has expanded significantly over the past 10 years.
But we believe the transformation of higher education is just getting started with many opportunities to drive growth in Coursera is next decade.
Let me highlight some of the key strategies for growth that we're focused on.
First we will continue to invest in our fast growing enterprise segment, focusing on both new customer acquisitions and expanding existing relationships.
This quarter I'd like to share two recent coursera for government deals in.
In March we announced our largest workforce development partnership to date with the Milken centre for advancing the American Dream.
The three year initiative is designed to prepare 200000 Americans from underserved communities to enter well paying digital jobs, while earning credit eligible towards a college degree at no cost to the learner.
It includes eight of our entry level professional certificates from industry partners as well as degree pathways to partners like the University of North, Texas Wraparound students support services and job opportunities through the partners hiring networks.
Next we shared earlier in the quarter that Coursera is partnering with <unk> and the National Institute for lifelong education to launch a nationwide Upscaling program in South Korea.
Through this partnership learners across South Korea will have access to 70 job relevant Korean language courses from top University in industry leaders worldwide, including Yale, Google and deep learning Dot AI.
Program supported by the Ministry of Education aims to help thousands of adult learners in Korea on the <unk> platform to develop the high demand digital skill needed to advance their education or career in the new economy.
In each of these programs three key features of Coursera play a critical role, including our scale and reach particularly our ability to serve an entire state or nationwide workforce initiative the.
The collaboration between academic institutions industry and government fostered by our three sided platform and the world class content and credentials from leading University and industry brands.
These programs demonstrate coursera is distinctive ability to deliver on the promise of online learning at scale.
Second we are investing in the beginning stages of growing our degree segment with several focus areas in the years ahead.
They include expanding our program catalog, including the types of degrees offered in a greater variety of subject matters and languages.
Knowing the number of students in current programs and continuing to expand our pathways for learners with increasing stack ability and removing admissions barriers with innovations like performance pathways.
Our third area of growth, we will continue to broaden our entry level professional certificate catalog sourcing new partners and expanding with existing industry leaders working with our partners. We're adding features like degree and career pathways as well as securing a C E credit recommendations across the catalog.
And finally, we will continue to scale the coursera platform investing in growing our registered learner base, increasing our network of educate our partners and their content and credentials and expanding our reach into more countries and to more learners around the world.
And now I'd like to turn it over to Ken.
Thanks, Jeff and good afternoon, everyone.
I am pleased to report we had a strong first quarter with results that reflect the durable demand we continue to see for high quality online learning.
In Q1, we generated total revenue of $124 million, which was up 36% from a year ago on sustained strength in our consumer and enterprise segments.
As Jeff and I have discussed there is a global trend of both individuals and institutions increasingly turning to online learning to supply the digital skills required to compete in today's economy.
For individuals our broad catalog of job relevant content and credentials from recognized World class brands is helping to meet the needs of learners no matter the state of their career.
And for institutions products like our skill sets academies and level sets.
By the data from millions of Coursera learners worldwide.
<unk> businesses governments and campuses better understand the in demand skills are today, and where they need to invest for tomorrow.
Please note that for the remainder of the call as we review our business performance and outlook I will discuss our non-GAAP financial measures unless otherwise noted our non-GAAP adjustments remove only stock based compensation and related payroll tax nothing else.
Gross profit was $78 2 million or <unk> 64, 9% gross margin up 58% from a year ago.
This margin was nearly nine percentage points higher than the prior year period due to the drivers we've discussed in the past several quarters.
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 segments as well as the content margin rate within each segment.
Our enterprise some degree segments accounted for 43% of our overall revenue mix this quarter up a couple of percentage points from the prior year.
Additionally, we have continued to enjoy the positive changes in the consumer segment content margin.
Our consumer segment content margin rate increased from 57% in the prior year to 71% this quarter.
<unk> had continued to consume a larger proportion of industry partner content, which tends to have a lower than average content cost.
This positive variance also impacted the enterprise segment content margin, although less pronounced.
The second component of our cost of services is our non content costs, which were nine 4% of total revenue this quarter.
Total operating expense was $92 9 million or <unk>, 77% of revenue compared to 71% in Q1 of last year.
Sales and marketing expense represented 38% of total revenue up from 35% in the prior year period, as we invest more and expanding our enterprise sales force capacity and marketing programs.
Research and development expense was 23% of revenue in line with the prior year period on a percentage basis.
General and administrative expense was 16% of revenue up from 13% in the prior year period, given incremental costs associated with being a public company.
I remember we were a private company in Q1 of last year.
Net loss was $15 8 million or 13, 1% of revenue and our adjusted EBITDA loss was $11 million or nine 1% of revenue.
Now turning to cash performance and the balance sheet free cash flow was a use of $42 2 million compared to $8 6 million in the prior year with the decline driven primarily by the timing of receivables and incremental year end vendor spend paid in Q1, so primarily working capital.
Related much of which we expect to reverse in future quarters.
We continue to maintain a strong cash position and expect to end the year with approximately the same cash balance with which we began as of March 31, we had approximately $780 million of unrestricted cash cash equivalents and marketable securities with no debt.
Now, let's discuss our segments in more detail our consumer segment continues to grow rapidly at scale with attractive economics consumer revenue was $68 1 million up 31% from the prior year, we continue to see strong demand for our job relevant portfolio of entry level professional certificates and <unk>.
Adoption of our Coursera plus subscription offering segment gross profit was $48 3 million or 71% of consumer revenue as we continued to benefit from a lower content cost rate associated with higher consumption of industry partner contact and we added another 5 million new registered learners for a total base of 100.
<unk> and $2 million.
Next is enterprise <unk>.
Enterprise revenue was $39 million up 59% from a year ago on broad strength across the business government and campus customers. The total number of paid enterprise customers increased to 917 up 91% from a year ago.
And our net retention rate for paid enterprise customers once 109%.
Segment gross profit was $28 million or 72% of enterprise revenue up from 68% in the prior year.
And finally, our degree segment. The greenest revenue was $13 3 million up 11% from a year ago on an increase in student cohorts of new and existing programs.
Given the extended revenue model for degrees. This slower start to the year was consistent with our expectations outlined in our previous earnings call in February .
Our total number of degree students grew 22% from a year ago to 16481.
As a reminder, there is no content costs attributable to the degree segment. So degree segment gross margin was 100% of revenue.
Now onto our financial outlook.
For Q2, we're expecting revenue to be in the range of $128 million to $132 million. This represents a growth rate of 27% at the midpoint of the range for adjusted EBITDA, We're expecting a loss in the range of $15 million to $18 million.
Our Q2 outlook for adjusted EBITDA includes an approximately $2 $3 million impairment expense related to the likely parcel sublease of our mountain view office with a nonbinding LOI, which we expect to consummate and leased but it does not guarantee in the spring of 2020, we moved to a work from anywhere strategy for our <unk>.
Mobile team members, resulting in complete flexibility for our workforce and the ability to source and retain talent from anywhere in the world.
As a result, we are optimizing our facility footprint after two years of learning and observing allowing us to redeploy capital to accelerate our work from anywhere strategy and provide additional programs for in person connection.
For full year 2022, we will see a net benefit of the sublease in Q3 and Q4, so that the total impact is about a $5 million for the year in.
In 2023, and 2024, we will see a benefit of about $6 million with much of the savings expected to be redeployed to fuel our talent strategy and elevate the coursera workforce experience.
Now our outlook ranges for full year 2022, we.
We anticipate revenue to be in the range of $538 million to $546 million or 31% growth at the midpoint of the range.
This updated full year outlook reflects approximately two points of headwind, resulting from the suspension of business in Russia announced in early March.
We manage coursera for high growth across our business. However, we will not look to profit from operating in the region amid this humanitarian crisis.
So in summary, we are still increasing the midpoint of our revenue range. Despite absorbing these impacts given the strong start to 2022.
And for adjusted EBITDA, we're expecting a loss of 45, 5% to $51 5 million or.
Or negative eight 9% adjusted EBITDA margin at the midpoint of revenue and EBITDA guidance ranges.
Our messaging and operating framework with regards to EBITDA margin has been consistent we plan to demonstrate scale and leverage while targeting EBITA margin improvement overtime at.
At the start of the year, we set an annual EBITDA margin target and work within that plan to maximize our growth opportunities for instance, a significant investment in marketing our job relevant credentials, particularly our increasingly successful portfolio of entry level professional certificates.
We do not optimize the business for any single quarter, and we will strategically invest throughout the year to position coursera for the long term.
Before Jeff closing comments, let me recap the three key highlights of our financial framework first we have a unique set of strategic assets that allow us to compete differently.
We expect have increasingly better forward visibility on our top line in the years ahead as our mix of revenue evolves and third in addition to our rapid growth, we expect structural gross margin expansion over the long term.
We believe that our results continue to reflect a differentiated business model that benefits from our three sided platform.
It provides diversification and exposure to multiple levers of growth and it provides us with a unique vantage point that encompasses the needs of learners employers and educators in order to promote institutional collaboration and navigate the trends shaping higher education.
Now I'll turn the call back to Jeff.
Thanks, Ken.
Coursera, we believe that learning is the source of human progress and we are committed to ensuring that learners everywhere have access to the highest quality education.
Before we open up the call to questions I wanted to highlight two recent initiatives.
First we announced several actions that we're taking to support learners in Ukraine amid the growing humanitarian crisis. These.
These include partnering with the Ministry of Education, and Science of Ukraine to offer Coursera for campus for free to all Ukrainian higher education institutions and their students.
To date 7000 learners at 95, Ukrainian and academic institutions have logged over 40000 hours of learning on Coursera.
We're also making our coursera for refugee program available for free to nonprofits actively working to support Ukrainian refugees. We're also offering individual learners the ability to receive financial aid or scholarship waiver through the <unk> platform.
Second in March we announced that Coursera has joined forces with the UK Prime Minister Boris Johnson, and 10, other partners, including Accenture, Microsoft Pearson Pwc and others.
To deliver a 20 million pound initiative to improve gross access to education and employment and developing countries.
This is the Uk's first partnership of its kind.
The girls' education skills partnership will deliver high quality skills training to run 1 million girls initially in the countries of Nigeria in Bangladesh.
The initiative will focus on stem skills needed for in demand sectors like technology and manufacturing with Coursera, providing 10000 scholarships for our entry level professional certificates at no cost.
The UK government believes that private sector involvement will help to ensure that the training delivered corresponds to the requirements of employers and our entry level professional certificate catalog is precisely designed to help prepare these learners with no college degree or industry experience to enter digital careers.
This is how leading institutions on coursera are moving from ideas to action.
Technology is one part of the solution, but it also requires institutional collaboration bridging public and private sectors University and industry partners and national and regional borders to meet the needs of our evolving world.
Together, we are providing greater access to world class learning and more equal opportunity for all.
Together, we are moving humanity forward.
And with that let's open up the call to questions. Thank you.
Thank you Mr. Matthew I'll call, ladies and gentlemen at this time do you have any question simply press Star one and if you do find your question has already been answered you can remove yourself from the queue by pressing star one again with that we will take our first question. This afternoon, Brian <unk> with RBC.
Wonderful Thanks, Jeff <unk>.
I appreciate you taking my question I wanted to start by looking at the <unk> within the enterprise segment.
Obviously enterprise continues to show nice growth, but that at our fingertips ticked down a little bit from Q4 Q4 itself was down from from earlier in the year can you maybe help us understand some of the drivers of that number how much of that is comps versus maybe just mix shift and going more towards government that might have a slower expansion rate and then I've got a follow.
Yep.
Hey, Richard this is Jeff.
It's a few things.
A little bit of it is.
Institutional deals in Russia that we have suspended and so thats. The part contributor and then you kind of put your finger on it.
Different types of enterprise deals that we have with businesses with governments and with campuses are at different levels of maturity. So one of the things I will say is that the MLR is not the same among those three and I guess, what I would say generally is in segments, where we are earlier to market and customers are or experimented with different use.
<unk> of how to use the content on Coursera to.
Provide the loans that they want to provide some are more standard of mature and more predictable and we they have a problem, we deliberate and it's pretty predictable.
It's a little bit more sort of experimentation trying Mr. Trying that sometimes it works a little bit better sometimes but I think part of what is reflecting is the early stage of some of these markets in the enterprise space.
Great. That's really helpful. And then on the degree side I just wanted to turn to looking at that at the students.
Surprisingly it looks like that number actually was up about 280 sequentially. In spite of your setting off a number of universities in Russia.
As a big surprise to US can you maybe talk a little bit about what youre seeing.
Within that segment outside of Russia.
And specifically within U S universities, and then maybe any insight you'd be able to share on what you expect in the coming alphabetic year, which fall under this fiscal year.
Yeah no problem. So it definitely is the case that we are we are seeing what has historically been true which is that degrees generally are counter cyclical with a really strong labor market people will sometimes to further expensive.
More expensive long term education credential investments and go into the labor market and make more money in a job.
We are seeing some of that we think in the U S.
Like you said, Russia is clearly what it is we suspended our operations there.
In other non U S non Russian markets.
We're still in the earlier stages, but we've had we've had degrees in Latin America for a while we just announced a couple more.
We're not quite seeing the same kind of headwinds because I think the economies and unemployment rates are in different.
Sort of levels of intensity the U S. I will say is exhibiting those countercyclical qualities that they had before I mean, clearly there's a lot of job availability and that's showing up.
The board in the U S across many providers and higher education institutions in the U S.
Alright, Thats really helpful. Thank you so much.
Sure no problem.
Thank you we'll take our next question now from Josh Baer at Morgan Stanley .
Yes.
Great. Thanks for the question.
I wanted to ask a couple on margins.
We've sort of gotten used to seeing the consumer segment margins.
Coming in higher than expected driven by the professionals.
Okay.
Mix.
In the enterprise segment that jump quarter over quarter year over year at.
What's causing that big swing up and enterprise segment.
One and part two on margins is beyond the mix of professional certification is there anything else that you're doing more proactively to work on the.
The segment margins are you taking.
Taking on more parts of the content generation process that would.
Potentially have more favorable economics revenue share for you.
Yeah, Ken Hey, Josh it's Ken.
Yeah, Thanks, a lot great questions.
So firstly well firstly, we've enjoyed this margin expansion far earlier than expected. So the trending has been really nice and consumer has continued to.
I guess unexpectedly, though we should start to expect that done well.
The on the enterprise side.
It's really a lot of the same its consumption, which is how we measure and how we allocate the.
The cost to our partners or their revenue our cost base.
Based on consumption. So we continue to see these higher margin.
Specializations.
Continue to be more popular and hence drive up the margin.
They have a lower content costs, so really enterprise to a lesser degree. The same result, as the consumer but just based on content usage, whereas the consumer is purchasing.
Secondarily on the the mix and what we're doing even within consumer.
Are starting to do a few things differently certainly as these searches have taken off we've looked to do more search there's it's amazing how well it's done but we have also started to think based on that success about sponsoring more of the content, helping pay and so those are other things we do that can drive the margin up over time.
Jim and I expect we'll continue to do it makes it easier lower risk for some of the partners.
And for Us.
Proprietary.
Which is not usually where we go with proprietary content. So.
Anyway, that's a little bit more on what we're doing there.
Got it and then just wanted to clarify.
Our highlight maybe some of the comments on the.
The.
Cash balances ending.
22, I mean with some capex in there.
Sort of implicit guidance for positive operating cash flow for 2022.
To be honest, we're not trying to be exactly precise on it what we've been saying is we burn minimal cash last year, we expect that to continue to be the case on the operating side.
There is a mix, though still stock exercises in stock sales, we will do some incremental investment in some of our programs that may end up on the balance sheet. So roughly yes, I'd agree with your statement, but I just want to be clear our intent is not to be that precise with 800 $780 million in the <unk>.
<unk> and with minimal cash burn.
Solving for growth, but as a result in seeing with the growth, we're seeing and some of the leverage we're saying, yes, we expect the cash burn to be minimal on the opex side, it's not an immediate focus but thats. The result, we're seeing.
Great. Thank you.
<unk>.
Thank you we'll go next matching Terry Tillman at <unk> Securities.
Yeah, Hey, Jeff and Kevin Congrats on the consumer and enterprise strength.
With all the color on the call there's a lot of detail really much appreciated.
Two questions. The first one actually has two parts maybe it's for you Jeff anything you can call out in terms of certificates strength, that's like really kind of surprising you an outlier oriented and then the second part of that first question is just where are we with coursera plus any more kind of quantification on the kind of success, we're having and then I had a follow up for Ken.
Yes, really quick one on the certificate strength.
It is as we've talked about a major factor that's been driving good performance of consumer segment revenue growth part of that is good conversion characteristics. It looks like people, who are thinking about switching careers have a little bit more intense to not just what the 10 minute video, but to really learn skills to get into.
A new job and they'd like to have the credential that they can show to an employer that says hey, I don't have a college degree I don't have any experience in this.
Prior experience in this industry, but I completed this course of study I've learned the skills over the course of maybe four or five courses with the professional certificate I've got the certificate that says I have demonstrated my skills increasingly we have projects built into them with a portfolio of work that someone can show to land that job.
That those learners are more likely to buy and more likely to retain and so part of what we're seeing is a margin enhancement because as we've talked about we've invested a bit more on producer needs.
It seemed better conversion rates, we've been seeing better retention rates on the question of course, there are plus I think we continue continue to see.
Interest in that as people are maybe thinking about switching careers I'm not sure what career they want to get into but they just they want more flexibility in their job and they want higher pay they might explore three different jobs or careers and so that would be a consumption across multiple professional certificates for which were surplus really helps so yes.
We're seeing that are there any particular outliers.
Obviously, Google It support certificate was the first back in January of 2018, they have followed that up with three additional search in the first quarter of last year. They continue collectively to do really well, but we're really excited about the number of jobs for which we now have professionals.
Certificates and these professional certificates have been increased we mentioned hotspot, but the number of different brands and different domains that are helping prepare.
Someone who wants to switch jobs to a greater range of possible career options all of which are digital jobs that pay well. They don't require a college degree they don't require prior experience and increasingly the skills can be learned online and the jobs can increasingly be done online. So we're just really leaning into these.
<unk> sector tailwind that we don't think were going to abate anytime soon.
Alright, and then maybe one for Ken Yes, yes, yes, thank you Jeff for that Ken.
I'm going to ask you the real hard question.
In terms of the net revenue retention there was a question on it I think I think Geoff maybe you talked about look there's actually three tails to that story in terms of the three different parts of the enterprise business and they do have very kind of retention rates and just different kind of maturity dynamics, but as we look through the rest of the year should we expect maybe kind of stability is that what you're modeling for NR or could it drift a little lower.
Maybe just a little higher just any any color there would be helpful. Thank you.
Yes, sorry.
Firstly, it's something difficult to forecast, but we've looked at the numbers.
I would expect it around where it is now for the rest of the year. Most importantly that mix that Jeff was talking about in the area. That's newer hence most volatile almost by definition.
That's growing quite rapidly and so so my guess is we'll stay right around these levels.
The other businesses as we start to grow as the other businesses on a relative basis I think we'll start to see some expansion there.
Look for that a year out I would tag on however.
Conversation around Coursera pluses to give you a little bit more data.
We talked about it being 25% of consumer revenue.
A couple of quarters ago, I think is when we were talking about that and at the time. We said look we're not focused we're happy with the result, it's done a lot for visibility around the business and really utility for the consumer if you think about the economics around that pricing and as Jeff mentioned.
It's been driven a lot by people wanting to see multiple career related specializations and so that has continued to grow we're seeing north of 30%. They're now of consumer revenue. So again nice from a stability standpoint, and visibility standpoint on the consumer segment, we're not forecasting that.
Going up or down necessarily but we're really very very pleased with that result.
Hey.
I'll just add one other thing I'll, just add Gary that might not be obvious to folks there.
There's obviously a lot of content out there that's pretty obvious the vast majority is short form content created by lots of different people.
Turns out it takes a lot of money to build a full college degree that there is a two year program. It also is a considerable investment to build a five course professional certificate that's not short form that's not something that a bunch of individuals' will sort of piece together.
There is a really nice.
Sort of.
I think combined effect of of long form learning to get into a new career that creates.
Higher monetization longer persistence and also it's a more distinct type of content and the credential matters, because youre trying to get into a job that's where the brand matters. So another reason, we really like these professional certificates.
Bruni distinct but not the only thing in the world that kind of are.
Bigger than a 30 minute video and shorter than a college degree, but we're seeing a really nice big segment of long form credential branded learning for career advancement.
We are leaning into pretty hard.
Understood. Thank you.
Okay.
Thank you we'll go next to Stephen Sheldon with William Blair.
Hey, Thanks, guys and nice results.
So the consistency of registered learner growth I think it's been a pretty notable so it'd be great to get some more detail on maybe two things one.
What's kind of working on the marketing side to support this and how you're finding learners.
I guess may see it's more that they are finding new and then two anything notable about the location and.
Demographics are reset of R&R additions or is it.
Been pretty broad based.
Yes, I think that with respect to register learner growth.
It's been interesting to watch some of the other big announcements during this earning season, but those are those that are more subject to kind of stay at home activities.
Seeing some headwinds as I think the pandemic can you get on a more control and people go outside and Theyre doing relatively fewer things online than they were doing during the midst of the lockdown.
We are seeing some of the same things too I mean.
<unk>.
To some degree the consumer revenue growth.
It does not reflect a lot more people come to coursera than say during the pandemic I think it shows the kinds of things that are coming from the propensity to pay the propensity to persist.
Our higher that being said what seems to be working has been what's working in the past we do not spend very much money on paid marketing we never have.
Now you look at the content fees and the reason we pay the content piece because we have these great partners with great brands, who are.
<unk> money and building courses and putting it out there the videos can be seen by individuals' for free.
Thats free high quality content, just watching the video is not the credentials draws a lot of people to Coursera and then also the Urls.
<unk> of this content have very high domain authority on search engines and so when they back linked to their courses, we enjoy some of that benefit and so I wouldn't say that SCO and other organic means of attracting learners.
To stay quite strong because we don't really want to be spending too many dollars in the paid media business, because it's pretty tough out there.
Can be buying customer thinks this.
You asked about the location I don't think that there's any major tilt in any region can you say anything on that.
Exactly it's been fairly even across the board I think the one thing I'd highlight is India and Asia Pac has been growing a little bit faster than the other three but it's been relatively evenly distributed.
The overall got it yet.
That's really helpful.
And then just as a follow up.
Just would love an update on where you guys are at in terms of expanding the availability of local language content on the platform.
Yes, so theres a few different ways that we do that.
The least expensive highest volume way to do it with machine learning and there are certain language pairs that are easier to translate which machines and there are certain domains that are easier to translate as well.
The language is more commonly used by people that the that the.
Big cloud companies used to train all their algorithms.
What we what we are mostly doing is creating subtitled.
Language pairs using machine learning and that is good and getting better.
Like 5000.
Maybe 3000 in Arabic most of those have been done through machines on the subtitle side. There are often cases, where big institutional customers want the full course to be translated with a high degree of accuracy in those cases will use human translation translation services of the full course.
Included assessments and everything else those are a lot more expensive I don't I don't know that that's ever going to become a really high scale activity for us I think what youre going to find in what we're counting on is the machines get better and better and better and the humans become less and less important in this process I will say and this is a strategic matter.
The core part of our catalog with all these great global brands, most of whom teach in English.
We're not going to try to replicate every major title natively in every language that we just don't think that is very cost effective but also it really <unk>.
<unk> fits the ability on quality and brand to do that we'd much rather do translations of these big global brands, and then supplement that with shorter form native language content and so what we've been doing more and more of is working quite well is the big content that longer form branded content will translate subtitles and.
Then we'll pair it with native language say 30 to 60 minutes hands on projects by a subject matter expert in region, who can crank out the local context with local tools in the local language local businesses et cetera, and we can do that at dramatically lower cost and so it's a bit of a bifurcated languished.
That would be taken on the accounts a lot on machine to do better and better at that so we feel pretty good about where we're going we do think that these techniques will open up larger and larger markets with higher quality and low cost.
Yeah.
Got it thanks I appreciate all the commentary.
Sure.
Thank you we'll go next now to Brian Peterson with Raymond James.
Hi, gentlemen, thanks for taking the question suggests there are a lot of partnerships that you guys announced this quarter and the Michigan, one is near and Dear to my heart, but curious on.
I guess the breadth of the number of I can see University partnerships that you may look at for degrees.
That changed versus a year or two ago.
I know you expanded or enhanced the canvas partnership there what do you think the impact could be of that enhanced data ingestion.
Yes.
It's interesting, but at a really big level, Brian the basic idea. We made a we made a strategic bet well before I got here five years ago. It was really Daphne and Andrew at the very beginning when they launch coursera. They launch versa with five universities from its inception of course, there has been an institutional play and they believe that institution.
We have a number of things that they do well what is of course, having the resources and the brand to create high quality content, but we're also finding obviously that institutions are a great way to reach a lot of people. So the kinds of so we have lots of institutional partnerships on the content side, it's the brands that institutions that create the content on the distributions.
Side. It is working with governments and also working at multiple levels. So we mentioned the ministry of education.
Ukraine is connecting us with each academic institution in Ukraine.
Connects us with learners, who have been displaced in Ukraine, and then you can imagine, which we see a thing in the Philippines, where we're working with government agencies to coordinate with businesses, who coordinate with campuses to make sure that the educational policies until development is producing graduates that the business is really want so.
And what's happening now what we're seeing is.
More and more institutions are coming to us because they want to play in some part.
This institutional ecosystem on the operating side with these professional certificates you can imagine with the great resignation and the interest in especially the tech companies are training up developers and certifying them and also being known in multiple societies as job creators they want to be in the education business.
Of course businesses, who are helping them upskill their employees are seeing a great competitive advantage to upscaling and then campuses are like yes, we're in the education business too and we got to move online. So it's really a wide range of reasons why institutions are partnering with US you mentioned the degree of partnerships. We are seeing more interest in degrees.
More nationally I think the U S was it ahead of everybody else to some degree with online traditional online program managers I think other countries post pandemic are starting to see why we should be offering online degrees as well in India. There's a lot of regulatory support for creating online degree programs and so we're seeing some tailwind.
They're a canvas is a different kind of.
Sort of institutional relationship, where we're really looking at the ability to more easily allow institutions to get content that they created in one system to get it into our system and so that's really more about lower cost and faster.
Hosting of publishing of content on Coursera, because it was created on one platform, but we can just adjust it more quickly and get it available to learn is on the cost airplane.
Understood maybe just a follow up there on Coursera for government you mentioned some more large wins this quarter I'm curious how many of those like larger let's call. It six figure <unk> or in the platform.
I guess are we seeing more of these large deals come up in the pipeline and just curious to get your thoughts there.
Yes, I do think that part of what's happening I mean, we could talk about institutions kind of one institution at the time with certain universities. The University will do a deal with us and each school has a different theme and they'll sometimes start with one school and like a business school will say, hey, I need to teach my business school students.
Java in computer science.
The professors over those aren't really available to teach those students and so we're seeing a lot of multi disciplinary applications within the university on the government side. What's interesting is you take a set of institutions like academic institutions and those things are a system a higher education system and so what we're starting to see is not only institutional.
<unk> leverage and change, but system level leverage and change where a ministry of education can say, hey, I want to try to upgrade.
The institutions that once I'm going to change policy I'm going to help support this financially and I wanted to make sure that my entire higher Ed system is starting to avail themselves of the kinds of workforce development and other job related scaling that you guys can do online that maybe my system of higher education would take longer to accomplish in that system.
A level change is where we're seeing the moh the ministry of education come more into the picture and yes.
This is like this is a pretty interesting phenomenon and it really I think we are seeing an unrelenting.
Pace of acceleration in Digitization in the world and institutions, including institutions that are responsible for systems of institutions are saying, we need to move more quickly to be responsive to this global change and we are again, we are leaning we're leaning right into that.
Great color Thanks, Jeff.
Sure.
Thank you we'll go next now to Eric Sheridan with Goldman Sachs.
Thanks, So much for getting me on maybe I wanted to follow up on the conversation from last quarter, where you talked about wanting to lean in against the investments for the longer term because you continue to see the opportunity set.
You need to expand and you talked a lot about the learner being signaled it creates a flywheel effect, we get an update on how youre thinking about balancing adjustments versus harvesting for profitability against the growth opportunity for the long term. We noticed that continues to come up as a pretty consistent investor debate broadly across all of technology, but I wanted to bring it back to.
What we talked about last quarter somatic like thanks, so much.
Yes, sure, Eric and I'll start kind of with the way we're thinking about it and then Kevin you could maybe just go through what that might imply for some of the ratios, but we are continuing to invest in the longer term, Ken and I have a very like mind as does the board. We just met with the board yesterday I think we had a board meeting.
I'll want to make sure that we're pacing ourselves for growth I mean, we want to invest when we know that there's going to be a reasonable timeframe and a reasonable certainty of pay up on that growth, we're growing well so we're continuing to invest.
Really aggressively when you look at our R&D as a percentage of revenue compared with a lot of other folks. We're not just a content company. We don't think that content is going to be the way that you win its content. Its credentials it's content from big brands and it's also a lot of technology that supports sort of.
Institutional scale administration measurement of skilled benchmarking of skills and things like that.
Brian mentioned, Michigan, we are starting to lean into some new pedagogy is associated with VR and XR technologies of course, we're investing in sales force because we see a big opportunity.
And across many regions.
In business and government and campus, so that's a pretty big investment there.
I would say, maybe I'll turn it over to Ken that we're trying to invest in those areas that most growth some of them like this XR work were a little bit ahead, and it might not pay off for a while we think we can afford to do this.
Maybe you could just talk a little bit about what that might mean for some of the operating.
Margin as a percentage of revenue as we go through the year sure no and I will do because we never stop reminding on how we think about and how we manage the company for profitability. It's based on an EBITDA margin for the year and so we continue to evaluate our investment opportunities during the year, we spend more or less than that.
Given quarter.
And we tend to update that as you know and as we exhibited last year, but it was true even when we were a private company.
We tend to throughout the year make adjustments to get to the final goal.
As we look at some of the opportunity and to Jeff's point I think the most important thing is we don't want to constrain the growth, but we're certainly building the business to scale. It is incredibly important as Jeff said.
We're in complete alignment in how to think about that as is the board.
And we're getting to a point, where the scale is going to start to create margin expansion, whether we want it or not and so I.
I do think we're going to see more scaling as we go into next year and we consider this year. If we continue to overachieve as we did in the past, but it's we don't want to commit to any of that on the front end because if there is growth opportunity there, where we can have meaningful competitive advantage and start to when these markets will continue to invest again expect improve.
<unk> no matter, what but it's just the rate of improvement that we're going to monitor and.
And really maximize around the growth.
Great really appreciate the color.
Sure.
And ladies and gentlemen, we have time for one further question. This afternoon and that question will come from Ryan Macdonald with Needham.
Hi, Thanks for squeezing me in here and congrats on a great quarter.
Impressive to look at the reiteration of the outlook.
A two point headwind to growth given the macro environment here.
I'd be curious maybe for Ken as well to understand how you think about the three segments of growth I believe last quarter, we talked about sort of 20%, 50% and 20% across the three segments. Obviously, some strong outperformance on the consumer side, but maybe you can perhaps give us an update on if there is any updated thoughts on how.
You think of that segment to growth rate and perhaps maybe what segments are expected to feel the brunt of that headwind. Thanks.
Sure well relevant question.
As we rolled out some guidance to try to be helpful for everybody as they put model together for the year. So that you were in our shoes and knew how you thought about our view on the different segments.
One of the things I think we emphasized was we didn't expect to have ongoing three segment guidance.
But we can still give you a little color because it's been consistent with what we've expected. We've continued to do great on the consumer side as kind of the standout in the space frankly enterprise continues to be a robust market. We're really excited about about each of the three sub verticals and what they're doing there.
Degrees has not been as strong from a growth perspective, but we told you that was going to be the case last quarter. So nothing's changed what we said on the degree side specifically is that the first two quarters, we expect it to be slower than in approximately a 20% growth rate for the year plus or minus again, we won't reiterate.
Guidance, but I think in the near term it will be shorter but.
That's how I think we're feeling.
Similar to where we were three months ago.
It's early in the year.
Yeah.
Yeah.
Great.
Okay.
And Mr. Mcdonald's did you have anything further.
<unk> audio.
Yeah.
So we can rally to QM equity today.
Great. So a replay of the webcast will be available on our Investor Relations website, along with the transcript of the next 24 hours. We appreciate you joining us today.
Yes.
And again, ladies and gentlemen, thank you for joining us and that will conclude todays <unk> first quarter 2022 earnings conference call you may now disconnect.