Q4 2022 Coursera Inc Earnings Call

Speaker 1: campuses have access to the Coursera catalog, including our entry-level professional certificates that have been created by some of the world's best-known industry brands.

Speaker 2: Many of these industry micro credentials come with ACE credit recommendations, and several universities have already begun integrating content on Coursera into their four credit curriculum, including UT Arlington, El Paso, San Antonio and Tyler. We believe students will benefit not only from learning skills, but also from earning industry micro credentials that complement the degree they earn from their local campus. And the University of Texas system will be preparing the next generation of talent to meet the state's workforce and industry demands.

Speaker 3: Historically, collaboration between industry and academia has been slow and is still taking that.

Speaker 4: By integrating industry expertise in the University curriculum, at the scale of entire systems of higher education in government, we are beginning to witness what our platform and our ecosystem can make possible.

Speaker 5: For CERRIT is increasingly becoming the platform through which institutions are able to drive powerful collaboration to better meet the needs of our digital world.

Speaker 6: We believe our platform has three distinct advantages that allow us to compete differently. First, our leading educator partners, who've created a broad catalog of branded, high-quality content and credentials.

Speaker 7: Second is our global reach and distribution.

Speaker 8: And third is the data and technology that powers our unified platform.

Speaker 9: Let's discuss our recent progress for each of these. First, our Educator Partners.

Speaker 10: Universities play a prominent role in society, fostering education, research, and knowledge while teaching durable skills like critical thinking, communication, and collaboration.

Speaker 11: And the curriculum could be complemented by practical hands-on learning from industry partners who are better equipped to keep pace with a fast-changing skills landscape and evolving job requirements.

Speaker 12: Coursera's learning ecosystem includes a powerful combination of 300 university and industry partners, and we welcome many new partners to our platform over the last year.

Speaker 13: This includes top-tier universities around the globe, like Georgetown University, Indian Institute of Science, and King Abdullah University of Science and Technology, as well as industry leaders in the fields of technology, business and health. This includes Accenture, Mayo Clinic, and Vidya, PWC India, and SAP.

Speaker 14: and these partners continue to expand the Coursera catalog. We announced 14 new degree programs in 2022, including two recent additions since our last call.

Speaker 15: We welcome the first liberal studies degree on Coursera from Georgetown University.

Speaker 16: This is the batch's completion program that offers an affordable, flexible way for adult learners to finish their degree. Additionally, we announced our first degree from West Virginia University. It's a master's of science and software engineering and it's offered at an affordable price for students around the world.

Speaker 17: Next, we are rapidly expanding our catalog of entry-level professional certificates, adding new partners, job roles, and language translations while creating stronger connections to career and degree pathways.

Speaker 18: A year ago, we had 18 of these certificate training programs.

Speaker 19: Today, we have 38 that have been announced, more than doubling the catalog with titles from new and existing partners.

Speaker 20: Recently, we announced the first entry-level professional certificates from two new industry partners, including SAP Technology Consultant and Goodwill Career Coach and Navigator.

Speaker 21: We believe that industry microcannotials will be a critical component of the transformation of higher education.

Speaker 22: They offer learners with no college degree or prior work experience an affordable, flexible way to start or switch into a digital career. They provide a turnkey solution for campuses or entire systems of higher education to upgrade their curriculum with career electives and produce graduates who have the skills and capabilities that employers are looking for.

Speaker 23: and they enable businesses and governments to deliver workforce and talent development at scale.

Speaker 24: Our second major advantage is the global reach of our platform. We have a large grown learner base that attracts educators looking to teach individuals and institutions around the world. Our freemium model paired with the world-class brands of these universities and industry partners allows us to grow our top of funnel, attract learners at low cost, and serve them at a range of principle.

Speaker 25: This year, we added nearly 22 million new-resure learners growing our global learner base to 118 million by the end of December . Learner growth continues to be broad-based, with double-digit percentage increases in all regions.

Speaker 26: We also grew the number of paid enterprise customers to more than a thousand, including new business, campus, and government customers.

Speaker 27: As the reach of our ecosystem continues to grow, the data generated by our learner base, including catalog performance, learner assessments, and feedback from institutional customers, allow us to identify and prioritize sourcing opportunities.

Speaker 28: As part of our Career Academy launch last year, we began surfacing credentials through the lens of career pathways, helping learners better understand the job roles, number of openings, median salary information, and in-demand skills associated with our entry-level professional certificates. This quarter, we focused on degree pathways and started rolling out enhancements to our catalog search and discovery with credit-eligible filtering and badging that allowed learners to more easily identify content and credentials that count as credit towards a college degree.

Speaker 29: This is tied directly to my second update on the American Council on Education, also known as ACE, which offers credit recommendations. From our campus survey in 2022, we learned that more than half of students want to earn a professional certificate that counts as credit towards their degree.

Speaker 30: These credit recommendations provide learners with the opportunity to earn academic credit towards a degree program, typically at a much lower cost. And universities can consider offering credit for these industry micro credentials, which can complement traditional curriculum with job-relevant skills, or what we like to refer to as career electives. This quarter we secured ACE credit recommendations for two additional entry-level professional certificates, with a total of 14 now recognized for academic credit. We believe more of our professional certificates have the potential to receive this distinction in the future, and we are pursuing similar credit recommendations.

Speaker 31: from accreditation agencies in additional regions around the globe. Now my final update is for institutions. Our Academy's product is a complete skills development solution. It offers personalized skills first approach to enterprise learning for the most critical job roles.

Speaker 32: Today we offer six academies spanning technical and non-technical domains.

Customers tell us that stronger leadership, change management and human skills are needed across their organizations, not just at the executive level, particularly with the unique challenges that remote work and hybrid work are presenting.

We recently created a new leadership academy.

with a more targeted, more selective portion of the catalog, including 11,000 clips, 500 courses, and 70 guided projects.

This has been designed for buyers looking to offer high-quality leadership training at scale for all levels of the organization.

As AI accelerates change and puts more jobs at risk, one job appears to be more important and less at risk than ever.

The job of the leader.

Leaders are responsible for managing people through change, which is more important now, but also more difficult now than ever.

Leadership requires human skills and an awareness of change and context that AI will likely never replace.

We are seeing strong demand for Leadership Academy and believe that tailwinds will increase demand for this kind of workplace training.

Before I turn the call to Ken for a closer look at our financial performance and outlook, let me remind you of several key priorities we are focusing on in the years ahead.

We're focused on growing our enterprise segment across business, government, and campus customers seeking to address their needs in this changing environment.

We are expanding our portfolio of degree programs, especially those tailors to meet the unique needs of working adults, including flexibility, affordability, and stronger pathways from open content and industry micro credentials into degrees.

We are broadening our entry-level professional certificate catalog, expanding with new roles, new partners, new languages, and credit recommendations.

We are focused on deepening our advantages while driving more scale and leverage across our platform. And we see exciting possibilities for the use of generative AI across our business model.

And now I'd like to turn it over to Ken. Ken, please.

Thanks Jeff and good afternoon everyone.

We are pleased with our fourth quarter results, which reflect the diversification inherent in our business model, including broad exposure to the needs of individuals, businesses, governments, and campuses.

a global footprint, and the ability to serve learners at every stage of their career.

In Q4, we generated total revenue of $142.2 million, which was up 24% from a year ago, driven by strong growth in our consumer and enterprise segments.

Over the course of 2022, we closely monitored the changing economic environment.

This included our partners' and customers' priorities, as well as the implications for our own business as we navigate lower growth rates in the near term.

We implemented a series of actions to pace our investments and resources with our revised growth forecast, most recently reducing the size of our global workforce and sharpening our focus on key investments.

Please note that for the remainder of the call, all non-GAT measures have been adjusted to reflect one-time charges related to our workforce restructuring actions of approximately $10 million, which is reconciled in our financial tables in supplemental slides.

Gross profit was $88.9 million, up 24% from a year ago, and a 63% gross margin, which was in line with the prior year period.

As a reminder, there are two components of cost of services, non-content costs that serve all three segments, and the content costs paid to our educator partners.

Our non-content costs have been largely consistent over time at approximately 10% of total revenue.

The second component, our content costs paid to educator partners will vary based on the revenue mix among start three segments as well as the content margin rate of each segment.

Given the strong growth in our entry-level professional certificates, we have seen a large positive variance in our consumer content margin rate associated with the increased consumption of the industry partner content which tends to have lower than average content costs depending on the partner's goals.

As we've discussed, some industry partners have prioritized additional spend that is included primarily as part of our operating spend.

to promote their brands, reach, or social impact initiatives, as opposed to a higher revenue share.

In conjunction with securing a multi-year contract extension of our strategic relationship as we damn this new year, our largest industry partner has chosen to receive a more standard revenue share in the future.

This will result in higher content costs and lower operating expense going forward, and I will provide more detail in the discussion of our financial outlook.

Total operating expense for Q4 was $99.7 million or 70% of revenue compared to 83% in the prior year period.

Shales and marketing expense represented 38% total revenue down from 44%.

Research and development expense was 20% of revenue, down from 24%.

In general, the administrative sense was 13% of revenue, down from 15%.

Net loss was $6.5 million or 4.6% of revenue. And the Justin EBITDA was a loss of $5.8 million or 4.1% of revenue.

For the full year, our adjusted EBITDA loss as a percentage of revenue was 7.1%, a 150 basis improvement over the prior year.

We aim to show ongoing leverage in our operating model while also pursuing growth opportunities in our large and early markets.

As a reminder, our annual operating framework with regards to EBIT-DOM-Argent has been consistent.

At the beginning of the year, we set an annual EBITDAV margin target and we work within that plan based on the trajectory of our business, which we again demonstrated with our reset growth expectations and disciplined expense management in the second half of 2022. Now turning the cast performance into the...

first quarter of this year.

We ended the year in a strong cash position.

As of December 31st, we had approximately $780 million of unrestricted cash, cash equivalent and marketable securities, with no debt.

We believe the strength of our balance sheet, in combination with the modest cash requirements for operating needs, is an asset that provides us the stability and the strategic flexibility to execute on our long-term strategy.

Next, let's discuss each of the business sections in more detail.

Consumer revenue was $79.8 million up 21% from the prior year. Segment gross profit was $58.2 million or 73% of consumer revenue compared to 69% a year ago. And we added another 5.2 million new registered learners.

despite Q4 being our historically lightest seasonal quarter for top of funnel activity. Our strong consumer performance continues to be driven by our expanding catalog of entry-level professional certificates along with the growing adoption of our Coursera Plus subscription offering.

As Jeff highlighted, we believe our focus on world-class brands and job-relevant credentials has made Coursera a natural destination for learners looking to start or switch careers.

Enterprise revenue was $50.5 million, a 41% from a year ago, on growth across all three of our customer verticals, businesses, campuses, and governments.

Segment gross profit was $33.5 million or 66% of enterprise revenue compared to 68% a year ago.

The total number of paid enterprise customers increased to 1,149 up 43% from a year ago.

And our net retention rate for paid enterprise customers was 108%.

While we benefit from multiple channels of distribution within our enterprise segment, we are seeing customers, particularly businesses, exercise caution in their spending priorities amidst increased macroeconomic uncertainty.

And finally, our degree segment. Degrees revenue was $11.9 million, down 11% from a year ago, on lower student enrollments consistent with our four-looking commenter on recent calls. As degrees growth in 2022 was challenged by enrollment headwinds,

associated with US Master's degree programs, where a revenue is concentrated today.

The total number of degrees students grew 12% from a year ago to 18,103.

As a reminder, there is no content cost attributable to the degree segment, so degree segment gross margin was 100% of revenue.

Before I turn to our financial outlook, I'd like to provide some additional detail with regards to a recent, multi-year contract extension we secured with our largest industry partner in this new year.

As we've discussed previously, in lieu of a high revenue share, some industry partners prioritize additional spend to promote their brand, global reach, and social impact initiative.

which is included as part of our operating expense.

primarily a sales and marketing efforts in content production.

The effect of these partners' success has driven large, positive variances in our gross margin, most pronounced in our consumer segment margin, while also increasing our operating expenses.

In consideration of the long-term strategic relationship, as well as the changing economic environment, our largest industry partner has chosen to receive a more standard revenue share arrangement.

as part of the recent contract negotiations.

We are excited about the opportunities this renewed commitment provides, and I want to be clear about how this change will affect our financial outlook in 2023.

First, the transition to a more standard revenue share will result in a geography shift within our P&L of an estimated 10 percentage points of total revenue from operating expense to cost of revenue.

We now expect both total gross margin and our consumer segment margin to be approximately 52% this year.

Second, we will incur expenses of $25 million in 2023, which will be similar in nature to our historic spend for the program, including sales and marketing efforts, content production, and product development. These payments will be spread evenly across the coming-for-corders.

and will not recur after 2023. As we work through these near-term impacts, we believe the multi-year contract extension is better aligned with our mutual priorities, reaffirms our strategic partnership, and allows us to best serve our learners and customers in years to come.

Now, enter a financial outlook.

For Q1, we're expecting revenue to be in the range of $136 to $140 million.

For Jeff at EBITDAQ, we're expecting a loss in the range of $12.5 to $15.5 million, inclusive of the $6.25 million related to the industry partner contract change.

For full year 2023, we anticipate revenue to be in the range of $595 to $605 million, representing approximately 15% growth at the midpoint of the range.

For adjusted EBITDA, we're expecting a loss of $26 to $34 million, or a negative 5% adjusted EBITDA margin at the midpoint of the revenue and EBITDA guidance ranges.

inclusive of the $25 million impact related to the industry partner contract change.

On a quarterly basis, we expect an adjusted EBITDA loss in the first half of the year and anticipate positive EBITDA by our fourth quarter.

Additionally, for the first time, we thought it would be helpful to provide our expectations around free cash flow for the year.

We expect a use of $12 to $18 million compared to a use of $52 million in 2022. Finally, as we answer a new year, we like to provide some color on the composition and pace of the business, particularly given the varying impacts of the changing environment across our platform.

This includes one time, segment level, annual growth expectations to help you better understand how we plan to deliver on our overall guidance.

For consumer, we believe that learner demand for our branded industry credentials will continue, with our initial outlook anticipating more than 10 percent growth.

Brander Prize is clear that businesses are being more cautious with their spending priorities and we expect growth of approximately 20 to 25% as we monitor the environment closely.

In four degrees, we anticipate a return to growth in 2023 of approximately 10 percent, with modest declines at the start of the year, then inflect as we enter the second half.

We are confident that structural trends driving our business have not changed and look forward to driving updated view of our long-term strategy, key initiatives, and financial targets at the March Investor Day.

We enter 2023 in a position of financial strength and are committed to driving sustainable growth with our outlook reflecting an increased focus on scale and leverage to position us for the future.

I'll now turn the call back to Jeff for closing comments.

Thanks Ken. Growth in online learning, in combination with remote work, digital jobs and broadband connectivity is reshaping the supply and demand for jobs globally.

For many companies, human capital is their most important asset, and they now find themselves competing on a global stage for in-demand skills.

This presents a challenge but possibly a larger opportunity.

Remote work provides direct access to sources of the best talent in the world, no matter where it resides in the world.

I want to wrap up today's remarks with a Coursera for Business customer example that is drafting the blueprint for how forward thinking companies are managing their holistic talent needs. Son of Fee, one of the world's largest pharmaceutical and healthcare companies, has been course a Coursera customer since 2017, and over the years, our partnership has deepened and scaled. Early on, Son of Fee focused on providing high quality training around the latest data, digital, and IT skills.

I've said many times that Coursera's mission is what inspires our team members and attracts our partners.

But it is also what enables our customers to fuel their human capital needs and improve lives through learning.

With our Coursera community, encompassing leaders in higher education, government and business, we are working together so that talent and opportunity can rise from anywhere in the

Now, let's open the call for questions. Thank you, Mr. Maggian. Ladies and gentlemen, at this time, any questions, please press star one. And just a reminder, if you would like to remove yourself from the queue, you can press star one again. We'll take our first question this afternoon from Steven Sheldon of William Blair.

Hey, thanks. First, just wanted to ask about Enterprise Trend. If you talked about seeing more caution from business customers there.

Can you give some more detail about what that looks like? Are you seeing customers reduce the scope of contracts much or just being cautious about expanding? And also curious if you've seen any changes in gross retention, especially for some of your smaller customers.

Yeah, I see. This is a this is Jeff. We obviously going into Q4, we're sure exactly how the year was going to finish up. It was it was pretty solid. We felt pretty good about it. To your point, there's definitely, especially in certain regions.

increased sensitivity on budgets. Certainly budgets have tightened. In some cases that has led to people saying, hey, I wanna pull back on the scope of my buy. So that is not a total churn, but we saw pressure among many accounts and that did put some pressure on the NRRs.

But, you know, we actually felt pretty good in terms of the NRR.

You know, we actually felt pretty good in terms of the NRR. We saw that.

generally in emerging markets where you sort of early markets like Corsair for Campus and Corsair for Government especially Corsair for Campus which is still kind of in the early stages of higher education learning how to incorporate these types of services. It was generally lower in more mature markets like Corsair for Business it was a little bit better so.

I would say that we feel pretty good coming into this here and that doesn't obviously mean that we didn't see some pressure though.

Got it. That's helpful. And then on this, the kind of the large partner, the extension and kind of the change in the contract there.

Just to make sure I understand, do they have any impact on total revenue or how much there is just more about

you know what what it sounds like it might be a shift in expenses from

you know, out of box and the core and into Cossarevna, but then also maybe a total increase. I guess just can walk through that one more time.

Just to make sure we understand. Yes, sure. We wanted to be very clear about it, even as Ken, of course. It was a shift in geography from primarily from operating expense to cost the sales, affecting the margin, of course. There is also for 2023 only.

roughly $25 million that will remain in operating expenses, incremental total expense if you want to think about it that way. So there's a transition period where there's op-X expense, but the majority of it is simply as you reference a shift in geography from op-X to cost the sales.

Okay, got it. And that will not continue in 2024. So if we kind of looked at the guidance and strip that out, then it'd be more or less. Okay.

Okay, and that will not continue in 2024. So if we kind of looked at the guidance and strip that out, then it'd be more or less.

Yeah, but more or less is the answer. All right.

Yep, yep, you understand it perfectly.

Great. Thank you.

Thank you. The next now to Josh Baer of Morgan Stanley . Great. Thanks for the question. Jeff, you outlined some of your key priorities for this year coming up. It's hoping we could fast forward to Q4 2023 earnings, where you'll be reviewing 2023. And we're going to be reviewing 2023.

expectations that we're setting with you all today.

Of course, most of that is the top line growth, but we want to make sure we continue to exhibit leverage. That's part of the obvious part.

But I think that a lot of why I feel pretty good is I like where we're sitting right here at the beginning of this year. There's a lot of things that are changing.

We believe that a lot of us play right into our advantages and our differentiation. There are some really important things that we're going to do this year that I think are going to capitalize on somebody advantage We have a lot of focus on quality and brands and institutions collaboration among institutions so at the end of the year

If we're bringing on more brands, more brand credentials, especially for Gateway, the, sorry, job starters and career switchers, that that will be big. These credit pathways that we're talking about, helping people get into either career pathways to a job, but also credit pathways to a degree, we think is a really powerful.

kind of system effect that we can create among institutions like governments, businesses, and campuses. So I definitely want to create more of those institutional collaborations. On the career academy side, we see across all segments, we see a lot of interest in it, even within the current industry.

co-mingling, combining these industries are difficult because what college degrees. And a lot of the people who are really looking for that are also looking to make the switch to a new career. So we think that there's a real opportunity to help learners not only develop skills but get a better and clear path to a job and with this globalization of talent that we talked about in the script.

And my travels, I've been traveling a ton around the world talking to business, governments and campuses. The CHROs that I talk to, especially in markets where there is emerging talent, kind of a affordable skill talent, they're saying, wow, it's really getting hard to hold onto my computer scientist and data scientist because they're getting really good offers.

from international employers. And when I go to the campuses and talk to students, they're all saying, hey Jeff, we're going to be studying data science and computer science because there's a lot of great jobs from international companies that will hire us with pretty good compensation. So I really think that there are good opportunities to help learners find new job opportunities.

in such a dynamic and globalizing labor market. So at the end of the year, I hope we have something really interesting to say about that. And then I did mention a bit on AI. I think my sense is, and as we look at it and work with it, we're getting a sense of this technology.

This generative language technology is really pretty interesting, especially if you start with high quality branded expert sources of material. And so we think this could really play to some of our existing strengths. And I hope at the end of the year we can do something pretty special there.

Thanks, Jeff. And a quick one for Ken on a segment margins. I think the strength and consumer segment margins is pretty clear and understood as far as the drivers wondering on enterprise statement margins why it was down year year and quarter of a quarter. Was that mixed driven?

as well or is there anything else going on there to consider around pricing or discounting or anything?

now you it was uh... nothing more it was down just a bit it's uh... bit of a mix issue relatively minor in the big scheme of things but you're correct on the trending

Hey, Josh, there's one thing I want to add. On the, you know, going down our, you know, on the degree side. At the end of the year, you can probably see by the mix here. We are finding that there are certain kinds of degrees that seem to appeal pretty, pretty well to.

sort of working adult who are thinking about switching careers not unlike the folks who are taking these career certificates these professional certificates in career academy

And I would like to be able to say that we have figured out a certain design of degree that really seems to resonate with and be more distinctive and different from the general online degrees that are out there and that that is driving a very clear.

growth rates based on clearly meeting and need for these working winners for certain kinds of degrees that aren't being met by the current standard and more traditional degree programs that are out there. Thank you. We will go next now to Terry Tillman of Terrific Ernie's.

Yeah, hey, good afternoon gentlemen, thanks for taking my questions. Hopefully you all can hear me okay. Yeah, I guess maybe Jeff, the first question for you is, maybe I'm just kind of slow writing things down or typing things, but I think you said 18 certificates, kind of beginning of the year to 36. Did I get that right or 38?

I think the 38 is the announced. Now we've got to get these things rolled out, but we've had a pretty good track record of getting these things rolled out. So yeah, among the ones that we've announced, we have more than doubled to 38. OK, well, it feels like a blingatory now for me on every call to ask about AI and you talk about it. So I'm curious out of these certificates.

You know, what's the exposure to data science and AI amid the mix of your certificates now? And then the second question is, and whether, you know, in an analyst that you could talk about this, would love to get a sense on, like, the cohort analysis of each of these certificates, and as they mature and how the revenue ramps from each of those, and what have you learned to help kind of improve the newer ones?

Yeah, so on the question of impact of AI on these certificates, I kind of immediately go to two different things. One is, what is the impact on the job that these certificates train for? That's a tougher one, in my opinion. Clearly, you look at GitHub copilot that...

that Microsoft put out and some of the amazing things that can be done. I mean, not perfectly, but it's pretty amazing things that could be done even with the GPT 3.5 in terms of writing code in different languages. It's got to change those jobs. So I think that not sure exactly what the impact will be, but the bar will likely be raised.

in terms of what humans are expected to do because the tools are going to be able to do a lot more. In terms of the impact that AI will have on the actual content and the demand for the content, I mean clearly like if the jobs all dried up people feel less likely to take those certificates, but of course they're going to need some of their job and so that's one of the reasons why we continue to broaden the

cover our bases and make sure that whatever those high demand entry level jobs are, we could be training for them.

I will say though that we believe that credentials are going to become more important and credentials from trusted brands will become more important. The ability to just learn a skills is going to be I think more straightforward in terms of sort of bite size upscaling.

But I think employers are going to be looking for more than just, you know, have you developed a bunch of small fields? I think they're going to be looking for have you really developed the deeper understanding with the deeper conceptual ability to Whatever the current tool is transfer those skills to the emerging tools. Whatever those might be so

I think that there's going to be a bigger premium put on credentials and those credentials are going to be highly associated, I believe, with the kinds of brands that we've been working with. So I think AI to a large degree will help more people get into our programs. They'll make those programs more interactive and more personalized.

But at the end of the day, the premium will be, I think, remaining on credentials, because I think credentials will be an important part of the employment equation.

Yeah, that's great. And I guess my thanks for that, Jeff, and then Ken, in terms of just so understand it, because I was curious because you all have talked about reduction of expense run rate. And then when I saw the guidance, I was confused. But I think it really is explainable now with the updated partnership with one of your key content providers.

But what I'm curious about is, because I don't know if I got this in the prepared marks, so the gross margin and consumer, it's going to take a large step down to that right, and did you say what that would be?

We did. The guidance is, yeah, we'll be up roughly 1,000 basis points. The guidance is 52 percent margin, both overall and for consumers. So we were pretty specific on both those counts. Okay. Well, the one thing, so I'll end it with this.

I'm getting some questions in terms of like, you know, the 25 million additional OpEx. I mean, you know, partners of two way streets, like, what do you all get out of the incremental 25 million of OpEx? I mean, what does it help you with in your business? And I don't want to sound short sighted, but like, what could you get out of that? Thank you.

So, firstly, we've extended our most important strategic relationship that we're pretty excited about from a job ready. You hear thematically what's important to us from a job ready standpoint. There will be incremental investment in the program overall that we do. We're excited about the growth that's going to be...

200 basis points and we're excited to extend this contract for several years and I think it's going to be an important part of what we're talking about to the previous question a year from now as we look backwards and some of the growth we think we're going to achieve but it is a two-way street exactly to your point.

And we're excited about it. It's actually a big positive over the next couple of years. Understood. Thank you. Thank you. We go next now to Jason Solino at Keybank. Hey, thanks for taking my questions. Just two for me. Staying on this, Epidod topic.

You know, Ken, you are showing, you know, break even within reach here, especially in the second half. I think you alluded to your prior philosophy around setting a margin target and then reinvesting upside if there is.

Do we think that this philosophy holds here?

Should we think that this philosophy holds here? Bill.

Oh yeah, 100% Jason. It's how we manage the business, how we manage the business before we were public. And it's both upside down, right? As things slow down in the second half of last year, we pull back our expenses to hit our target. We've in fact beat a bit in Q4, although that's not our objective. It's not to beat on it. It's to come in at what we promise.

EBITDA, break even, and profitability over time. And we aim to do that, regardless of the shape of the revenue growth. We won't be silly. This is for the long term. But so far, with some pretty dynamic time, both on the upside and not so, we've navigated to our targets over the course of the year. We have good control of business, and it's important to us from a business discipline standpoint.

So expect the same behavior, you know, that it's what we commit to, and I think we plan to fulfill those commitments to you.

Okay, perfect. Excellent. And then one question on the Georgetown Bachelor's Completion Degree, you know, interesting to see both from a quality of institution standpoint also because it's a Bachelor's Completion Degree. You know, how do we think of this as an opportunity with other schools? Because I imagine there's a lot of...

folks out there with credits and they may not have finished. Is this an area that we could expect more announcements?

Yeah, you know, this is Jeff. I think this is really important. I went to a Jesuit high school, so I have proffed with the Jesuit educational institutions who do have a serve mission of serving a broad range of people.

When you really look at why George Towns doing this, especially with their stature, they're really a thought leader. I think extending that kind of quality education to a much more diverse and broad population, the fact that it's affordable, the fact that it's online, the fact that it's...

with a completion degree, I think speaks to, and not just in the US, but around the world, a lot more societies are realizing we need more flexible ways for people to continue to learn through their life and to earn important credentials as they do that. Credentialized learning through our lives is gonna be important. And obviously we're delighted.

an institution with the kind of a steam of Georgetown is really stepping into a leadership role here and saying, look, we can do this. We can make a high quality and very elite education more available to more people.

Great. Thank you. Thank you. We'll go next now to Ryan McDonald of Media.

Thanks for taking my questions. Jeff, maybe the first one for you. Obviously, we continue to see layoffs picking up in the news and the unemployment number likely to start rising here soon. I'm just curious as we see that news flow, what you're seeing in terms of reflection into sort of pipeline or top of the funnel.

not only in the consumer segment, you know, for the professional certifications, but then also on the degrees segment and sort of the application pipeline for the growing number of programs you have. And then just, you know, how that's sort of reflecting into the guidance you're giving for 23 here. Thanks.

Yeah, thanks Ryan. You know the world is a pretty dynamic place coming off of COVID and looking at what's happening with expected recession and you're looking at inflation, the secondary effects of that and we have this really tight labor market. You know we felt that Q4 ended up pretty decently with respect to new degree learners.

And as I said, we're kind of getting a sense of the kinds of degrees that are in most demand and affordability, flexibility, and relevance to jobs are obviously three big parts of it with a big overlay that has got to be a quality institution.

Clearly, well, we believe that if history is any guide, if the labor market gets softer, we expect that that will improve things. Even if it doesn't, we think better designed degrees that really meet more of the key characteristics of what these lifelong learners are looking for, these adult working learners are looking for helps a lot too.

We launched a bolder degree that has really nice characteristics, sort of performance-based pathways, very reasonable price up, $15,000, and very high quality in a high demand domain like data science. So we think that these sort of degrees that have pathways from open content.

and even a performance-based admissions process is the kind of a degree that people like. So it's a combination. I think generally speaking is counter-cyclical. And also if we can put more of our focus on these types of degrees, they're well suited for working adults. You know, we feel pretty good about next year's new degree, or this year's new degree student numbers.

And Ryan, one of the things we did, we did include some hints on timing for our forecast. And as we did last year, we provided segment guidance to start the year to help everybody with their models. But as we talked about degrees, we did forecast roughly 10% growth.

with modest declines in the first half, so because of the degree's revenue model. So we see some real acceleration in that business as throughout this year, just to point that out, which I think directly addresses your question. No, yeah, super helpful color there. Can I really appreciate it? Maybe just my follow.

We've heard of a number of other vendors in this space also kind of going after the same opportunity. Are these opportunities becoming more competitive or any changes you're seeing in the competitive dynamics there? Thanks. Yeah, it definitely looks like there's a growing recognition that reskilling is important. It will continue to get more important over time. The government has a big role to play.

on the competitive side.

You know, I suppose that there's a little bit more, but I have to say that

We find that the attributes that are distinctive about Coursera resonate particularly well among governments.

the attributes include the quality, the credentials, you know, the brands, the how well-known Coursera is by their citizens and the number of citizens in the country already using Coursera. These institutional collaborations where Coursera can be used in higher education institutions so up leveling.

higher education system of public universities, also being able to do workforce development programs, like with the state of New York, being able to do a workforce development program where the graduates of these professional certificates can become eligible to be graduates of college degrees. And linking those two things together, workforce development with the Ministry of Labor and career electives with the Ministry of Education. So.

As not just the content and credentials, it's also the way that we can actually structure relationships and connections between institutions that government seem to think to be pretty compelling and generally speaking, it's pretty unique for Chris Erick.

Thank you. We'll take our last question today from Rishi Jalaria of RBC. Wonderful. Thanks for taking my questions, guys. Two that I'd like to if I may. First, going back up to the chat GPT OpenAI question, I understand.

potential benefits as it becomes another skill that people need to learn. One question I've gotten a lot from investors and I would love to hear your perspective is, how does CHATGPT itself kind of disrupt the way learning can happen and even at tech as itself? Is there a potential?

The rest that you see or is it really the kind of benefits and everything to your business model far outweighed the rest and I got a quick follow up. Yeah, thanks, Rishi. So in terms of the way the learning experience happens, the way I see it, in very simple, in a very simple view, I sort of say, there was kind of arrow one of online learning was YouTube.

for the most part, it's very passive. You sit back and watch a video. When Coursera came out, along with other MOOC providers, and it came out of universities where they introduced active learning, you'd watch a video, but then you'd answer questions. So it was more engagement in the content. I think there's a new and next level of learning, which I will call interactive.

where you are actually interacting. You are watching a video or you're doing an assessment, and not only do you do it, but you get personalized feedback on that and can even have kind of conversations to better understand the concept, to get more examples, to role-play a scenario. So I think that that interactive, personalized learning is really gonna be a big, online.

pretty much from scratch. And so it is possible to outsource a lot of thinking that would normally accompany writing and I think that's actually one of the potential downsides or vulnerabilities, risks that comes from this kind of technology. But overall we're gonna really push on how do we unlock more of that personalized interactive learning. We think that in terms of the...

the relative position is I really like the fact that we have high quality branded content because that is something that will be I think highly desired in a world where people don't always aren't always able to distinguish fact from fiction and it'll be harder and harder to credentialize things when they're all kind of piecemeal and totally personalized so I think grounding that kind of learning experience.

on branded credential learning, I think it's going to be key. You know, I think the other major thing in terms, in addition to the kind of learning being different and more interactive, is the content generation. I mean, you can generate content far more quickly and productively than you can before. And people will say, oh gosh, but you know, it can have a lot of mistakes in it.

You know, a human, at least if you're dealing with, you know, quality institutions, the humans always don't look at it before the course gets published. So I think it's just going to sort of superpower instructional designers. It's going to superpower the people that prepared this kind of content, but the quality stamp of an institution is going to be a big part of this. So, so.

I actually think the cost of production of content will go away down and people will be looking with more, I think, a seriousness at whether that quality, the quality is maintained as the cost co-downs. Overall, if you could say, hey Jeff, you wish that GPPT never existed. It only came out three years from now or now. I definitely think now.

I'm glad it's here. I think it's going to be exciting. I think it's be great for learners and I think it's going to be relatively advantageous to preserve.

Got it. That's really helpful. And then Ken, just a quick one for you. I really appreciate the kind of granularity in terms of how to think about the segment growth for this year. Drilling onto the degree side, you know, glad to see we're seeing it flush in the back half of the year. Can you expand a little bit on what is giving you confidence in that and maybe is there a certain set of.

macro expectations embedded in that or are you making the assumption that the kind of counter cyclical forces on degrees don't change relative to what we're seeing today. Thanks.

Sure, Rishi. Happy to do. Firstly, based on the revenue model, we have amazing visibility, whether it's good or bad, around degrees. And the vast majority of revenue will come from existing programs with wonderful visibility. It's about filling those student cohorts next.

We've seen real improvements in our ability to fulfill. We have a number of new degrees rolling out that we will be fulfilling. And so the, really if any of my segments, as far as the ability to look forward with certainty on a forecast, degrees is in fact the best. And so we're not relying on any particular trending.

That said, as we look forward to 24, then, some of the programs in the pipeline, we're pretty excited about what the changes that we're seeing. But 23, no matter what the revenue recognition, nothing's in the bag, but our visibility is quite high in degrees.

So that inflection after the first half, I have a very high level of confidence in.

Great, that's really helpful. Thank you guys. Absolutely. Thank you, Rishi.

That wraps the Q&A. A replay of this webcast will be available on our Investor Relations website along with the transcript in the next 24 hours. We appreciate you joining us.

Thank you, Mr. Kerry. Ladies and gentlemen, again, that does conclude Coursera's fourth quarter and full year 2022 earnings conference call. I'd like to thank you so much for joining us and wish you all a great remainder of your day. And as always, thanks for joining us.