Q4 2023 Coursera Inc Earnings Call

Operator: Ladies and gentlemen, thank you for standing by, and welcome to Coursera's fourth quarter 2023 earnings call. At this time, all participants are in a listen-only mode, and please be advised that this call is being recorded.

Ladies and gentlemen, thank you for standing by and welcome to you of course, there is fourth quarter 2023 earnings call. At this time all participants are in a listen only mode and please be advised that this call is being recorded.

Operator: After the speaker's prepared remarks, there will be a question and answer session. If you would like to ask a question during this time, please press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again.

After the Speakers' prepared remarks, there will be a question and answer session.

If you would like to ask a question. During this time. Please press star followed by the number one on your telephone keypad. If you would like to withdraw your question Press Star one again.

Pam Carey: I'd like to turn the call over to Pam Carey, Head of Investor Relief. Mr. Carey, you may begin. Hi everyone, and thank you for joining our Q4 and full year 2023 earnings conference. With me today are Jeff Maggi and Colton, COURSERA's Chief Executive Officer, and Ken Han, our Chief Financial Officer. Following their prepared remarks, we will open the call, or a press release, including financial information, was issued after market closing as posted on our investor relations located at investor.coursera.com, where this call is being simultaneously webcast and where versions of our prepared remarks and supplemental slides are available. During this call, we will present both GAAP and non-GAAP findings.

I'd like to turn the call over to you Cam Carey head of Investor Relations. Mr. Carey you may begin.

Cam Carey: Hi, everyone and thank you for joining our Q4 and full year 2023 earnings Conference call with me today is Jeff managing quarter of course, I was chief Executive Officer and Ken.

Cam Carey: Hahn, our chief Financial Officer.

Cam Carey: Following their prepared remarks, we will open the call for questions.

Cam Carey: A press release, including financial tables was issued after market close and is posted on our Investor Relations website located at Investor Dark horse Arrow Dot Com, where this call is being simultaneously webcast and where versions of our prepared remarks and supplemental slides are available.

Cam Carey: During this call we will present, both GAAP and non-GAAP financial measures a reconciliation of non-GAAP measures to their most directly comparable GAAP measure can be found in today's press release and supplemental presentation, which are distributed and available to the public through our Investor Relations website.

Pam Carey: The Reconciliation of Non-Gap Measures to their Most Directly Comparable Gap can be found in today's press release and supplementary distributed and available to the public through our inventory. Please note, all growth percentages refer to year-over-year change unless otherwise stated. Additionally, all statements made during this call relating to future results and events are forward-looking statements based on current expectations. Forward-looking statements include, but are not limited to, statements regarding the potential impacts of trends affecting our industry. The Anticipated Benefits and Impact of our Strategic Assets and Platform Advances, our ecosystem, platform, content, and partners, and the anticipated advantages and benefits thereof Strategy and Priority, our share repurchase program and cash and capital allocation, and our vision, business model, mission, opportunities, outlook, financial business, and otherwise. Actual results and events could differ materially from those expressed or implied in these forward-looking statements due to a number of risks, including those discussed in our press release, SEC filings, and supplementary documents.

Cam Carey: Please note all growth percentages refer to year over year change unless otherwise specified. Additionally.

Cam Carey: Additionally, all statements made during this call relating to future results and events are forward looking statements based on current expectations and beliefs.

Cam Carey: These forward looking statements include but are not limited to statements regarding the potential impacts and trends affecting our industry and business factors affecting the same day.

Cam Carey: The anticipated benefits and impact of our strategic assets and platform advantages our ecosystem platform content and partner relationships are anticipated plant and the anticipated advantages and benefits thereof, our strategy and priorities.

Cam Carey: Our share repurchase program and cash and capital allocation and our vision business model mission opportunities outlook financial business, and otherwise and future intentions.

Cam Carey: Actual results and events could differ materially from those expressed or implied in these forward looking statements due to a number of risks and uncertainties, including those discussed in our press release SEC filings and supplemental materials.

Matthew Sheldon: These forward-looking statements are not guarantees of future performance, and investors should not place undue reliance on, assume no obligation to update our. And with that, I'd like to turn it over to Matthew Sheldon. Thank you.

Cam Carey: These forward looking statements are not guarantees of future performance or plans and investors should not place undue reliance on them.

Cam Carey: We assume no obligation to update our forward looking statements, except as required by law.

Cam Carey: And with that I'd like to turn it over to Jeff.

Matthew Sheldon: Thanks, Cam, and welcome, everyone. We appreciate you joining us. I'm pleased to share that our fourth quarter marked a strong finish to a year of continued progress. We welcomed 24 million new learners, the most since 2020, growing our global learner base to more than 140 million. We expanded our educator partnerships to over 325 leading universities and companies; we grew revenue 21% over the prior year with total annual revenue of $636 million. And we achieved this growth with increased leverage, including our first positive adjusted EBITDA quarter, delivering on our commitment to build a platform and business model that I remain encouraged by our momentum and am increasingly confident in our vision for the future of higher education. So let's jump in, starting with the long-term trends that are driving our.

Jeff: Thanks, Kim and welcome everyone. We appreciate you joining us today I'm pleased to share that our fourth quarter marked a strong finish to a year of continued progress.

Jeff: We welcome 24 million new learners. The most since 2020 growing our global learner base to more than $140 million.

Jeff: We expanded our educator partnerships to over 325, leading universities and companies.

Jeff: We grew revenue 21% over the prior year with total annual revenue of $636 million.

Speaker Change: And we achieved this growth with increased leverage, including our first positive adjusted EBITDA quarter delivering on our commitment to build the platform and business model that scales.

Speaker Change: I remain encouraged by our momentum and I'm increasingly confident in our vision for the future of higher education.

Speaker Change: So let's jump in starting with the long term trends that are driving our business. The first trend is digital transformation.

Matthew Sheldon: The first trend is digital transformation. For many years, the combined forces of technology, globalization, and automation have accelerated the transformation of every institution in our society. Last year, the sweeping rise of generative AI provided a glimpse into how profoundly this new general purpose technology could reshape how we live, learn, and work. This year, organizations will begin to make the shift from experimentation to implementation, but leaders are still grappling with how to do it. A new report by Boston Consulting Group surveyed over 1,400 C-suite executives in 50 markets and found that nearly 90% of executives rank AI and generative AI as one of their top three tech priorities for. Despite the priority, two-thirds of these execs are either ambivalent or outright dissatisfied with their organization's progress on AI so far, citing three primary reasons. First,

Speaker Change: For many years, the combined forces of technology globalization and automation have accelerated the transformation of every institution in our society.

Speaker Change: Last year, the sweeping wise of Jonathan AI provided a glimpse into how profoundly this new general purpose technology could reshape how we live learn and work.

Speaker Change: This year organizations will begin to make the shift from experimentation to implementation, but leaders are still grappling with how to make this leap.

Speaker Change: A new report by Boston Consulting group surveyed over 1400 C suite executives in 50 markets.

Speaker Change: And found that nearly 90% of executives ranked AI and <unk> AI as one of their top three tech priorities for 2024 despite.

Speaker Change: Despite the priority two thirds of these execs are either ambivalent or outright dissatisfied with their organization's progress on AI. So far so having three primary reasons.

Matthew Sheldon: 22% of the execs cited a lack of talent and skill. Second, 47% cited an unclear AI and generative AI roadmap and investment priority. And third, 42% cited the absence of a strategy regarding responsible AI. Organizations are facing what I refer to as a generative AI conundrum. By moving too quickly, they risk ethical, data, and regulatory issues.

Speaker Change: 62% of the exact cited and lack of talent and skills.

Speaker Change: Second 47% cited an unclear AI and generative AI roadmap and investment priorities.

Speaker Change: And third 42% cited the absence of a strategy regarding responsible AI.

Speaker Change: Organizations are facing what I referred to as eight generative AI conundrum.

Speaker Change: By moving too quickly they risk ethical data and regulatory pitfalls, but if a company moves too slowly to adopt the risk of falling behind more agile competitors becomes a real threat.

Matthew Sheldon: But if a company moves too slowly to adopt, the risk of falling behind more agile competitors becomes real. The only way to resolve this generation of AI conundrum is enterprise. And this brings me to the second major trend, which is skills development. That BCG report found that only 6% of companies have managed to train more than 25% of their people on generative AI tools so far. 46% of their workforce, on average, will need to undergo upskilling in the next three years due to generative AI, and nearly half of the leaders say that they don't yet have guidance or restrictions on AI and generative AI usage. As every facet of our society grapples with the need to improve their productivity, agility, and human capital in this new world of generative AI, we believe that they will require education and training to do this quickly. But And I'll add that you also need skilled drivers.

Speaker Change: The only way to resolve this Jennifer I conundrum is enterprise scaling.

Speaker Change: And this brings me to the second major trend, which is skills development that BCG report found that only 6% of companies have managed to train more than 25% of their people on generative AI tool so far.

Speaker Change: 46% of their workforce on average we will need to undergo upskilling in the next three years due to generative AI and nearly half of the leaders say that they don't yet have guidance or restrictions on AI and Jennifer I usage at work.

Speaker Change: As every facet of our society grapples with the need to improve their productivity agility and human capital in this new world of generative AI, we believe that they will require education and training to do this quickly but safely.

Speaker Change: They say in F. One to go fast you need good brakes, and I'll add you also need skilled drivers.

Matthew Sheldon: This leads me to the third trend driving our business, the transformation of higher education. Our vision for the future of higher education is cross-sector collaboration between academic institutions, employers, and government. This quarter, I'm excited to share an evolving customer use that showcases many of the compelling capabilities of the platform that we've been building, including the speed and scale of collaboration between local higher education and government workforce programs, the increasingly important role of industry microcredentials, and the promise of our pathway degrees strategy. In 2020, the New York State Department of Labor partnered with COURSERA as part of our Free Workforce Recovery Initiative and later converted to one of our largest clients for government companies.

Speaker Change: This leaves me to the third trend driving our business the transformation of higher education.

Our vision for the future of higher education features cross sector collaboration between academic institutions employers and government.

Speaker Change: This quarter I'm excited to share an evolving customer use case that showcases many of the compelling capabilities of the platform that we've been building, including the speed and scale of collaboration between local higher education and government workforce programs.

Speaker Change: The increasingly important role of industry micro credentials.

And the promise of our pathway degrees strategy.

Speaker Change: In 2020, the New York State Department of Labor partnering with Coursera as part of our free workforce recovery initiative and later convert into one of our largest coursera for government customers.

Matthew Sheldon: Their program provides free access to skills training for unemployed and underemployed citizens across the state, and New York citizens in this program have spent more than one and a half million hours learning on Coursera. At the heart of the program is our portfolio of entry-level professionals, which are built by top companies and designed specifically for learners with no college degree or prior work experience. Branded certificates help create access to well-paying benefits. But increasingly, learners who complete these microcredentials can also earn credit toward a college degree.

Speaker Change: Their program provides free access to skills training for unemployed and underemployed citizens across the state and New York citizens. In this program has spent more than one and a half million hours learning on coursera completing over 2 million lessons.

Speaker Change: At the heart of the program is our portfolio of entry level professional certificates, which are built by top companies and designed specifically for learners with no college degree or prior work experience. These.

Speaker Change: These branded certificates helped create access to well paying digital jobs.

Speaker Change: But increasingly learners, who complete these micro credentials can also earn credit towards a college degree.

Matthew Sheldon: I'm excited to share that the recent fall term was the first semester of an expanded partnership between COURSERA, the New York State Department of Labor, as well as Empire State University, or SUNY Empire. The partnership allows New Yorkers in the government's state program to transfer eligible credits from courses on Coursera into any of SUNY Empire's 125 bachelor's and associate degrees. This includes our growing number of courses, specializations, and industry micro-credentials that have been approved by the American Council on Education, or ACE. Credit Recommendation, with learners eligible to receive a range of 1 to 18 college credits for learning on Coursera.

Speaker Change: I'm excited to share that the recent fall term was the first semester of an expanded partnership between Coursera. The New York State Department of Labor as well as the Empire State University or Sunni Empire.

Speaker Change: The partnership allows new Yorkers in the governments state program to transfer eligible credits from coarser courses on coursera into any of Sunni empires, 125, Bachelors and associates degree programs. This.

Speaker Change: This includes our growing number of courses specializations and industry micro credentials that I've received American Council on education or E credit recommendations with learners eligible to receive a range of 1% to 18 College credits for learning on Coursera.

Speaker Change: Every time, we launch a new certificate.

Matthew Sheldon: Every time we launch a new, Here's another credit recommendation or forge a new pathway between our open courses and degrees. We increase the value of our offering for the state of New York, SUNY Empire, and for learners seeking more affordable, flexible, and accessible ways to advance their lives. These kinds of partnerships and pathways require certain strategic assets that are unique to the Coursera platform, including our leading educator partners who have created a broad catalog of trusted branded content and credentials. Our Global Reach to Individuals and Institutions, as well as our data technology and AI advancements that we leverage across the platform. Now, we'll cover some of our recent progress in each of these categories. First, our educator partner.

Speaker Change: Secure another credit recommendation or forged a new pathway between our open courses and degrees, we increase the value of our offering for the state of New York SUNY Empire and for the learner is seeking more affordable and flexible and accessible solutions to advance their lives and careers.

Speaker Change: These kinds of partnerships and pathways require certain strategic assets that are unique to the coursera platform, including our leading educator partners, who created a broad catalog of trusted brand and content and credentials, our global reach to individuals and institutions as well as our data technology and AI advancements that we leverage across the platform.

Speaker Change:

Speaker Change: Now, let's cover some of our recent progress for each of these categories.

Speaker Change: First our educate our partners.

Matthew Sheldon: In an era where machines are increasingly capable of producing content at scale without guardrails for quality, integrity, and accuracy, we believe that trusted institutions will play an important role in education. Since the early days of Coursera's founding, there has been a proliferation of content across the internet, but volume and value are not. Coursera is the trusted steward of the world's top university and industry brands, and we believe this powerful combination of foundational knowledge and job-relevant learning is required to serve learners in this fast changing skills landscape. We added more than 25 new educator partners this year, including academic institutions like the London School of Business and University of California, Berkeley, as well as a broadening list of industry partners like CVS, Dell, Moderna, Novartis, Pe Enabling robust, organic top-of-funnel learner growth, it offers assurance of quality and rigor in an era of misinformation.

Speaker Change: In an era, where machines are increasingly capable of producing content at scale without guardrails for quality integrity and accuracy. We believe that trusted institutions will play an important role in education.

Speaker Change: Since the early days of course, there is founding theres been a proliferation of content across the internet.

Speaker Change: But volume and value are not the same thing.

Speaker Change: Coursera is the trusted stewards of the world's top University in industry brands and we believe this powerful combination of foundational knowledge and job relevant learning is required to serve learners in this fast changing skilled landscape.

Speaker Change: We added more than 25, new educator partners this year, including academic institutions like the London School of business and University of California, Berkeley, as well as a broadening list of industry partners like Cvs del Madonna Novartis, Pepsico and Unilever.

Speaker Change: Expert branded training is important for several reasons it.

Speaker Change: It enables robust organic top of funnel learner growth. It offers assurance on quality and rigor in an era of misinformation and most importantly, it provides learners with recognized certificate and degree credentials that helped them standout with employers.

Matthew Sheldon: And most importantly, it provides learners with recognized certificate and degree credentials that help them stand out. Today, I'd like to provide updates on three areas of our catalog, starting with our entry-level professional. At the start of the year, we had 28 of these certificate training programs; to date, we've announced nearly 100 with partners like Google, IBM, Microsoft, AWS, and others, and we're not slowing down. In the coming year, we have a pipeline focused on adding new job roles from new industries with new and existing partners. We believe we're in the early stages of a long-term trend in higher education, where industry micro-credentials play an increasingly prominent role in how learners acquire their first job or earn credit towards a college degree, and how campuses modernize their curriculum to create employable graduates, and how governments like New York deploy job-relevant workforce training at scale, and also in how businesses reskill and redeploy talent in an era where emerging technologies like Now on to my second catalog update, the College. We announced nearly 20 new degree programs in the past year, including two recent, our first degree from the University of Pittsburgh. This Master of Data Science includes many of the attributes we're focused on, including performance-based admissions and an affordable pay-as-you-go total of $15,000.

Speaker Change: I'd like to provide updates on three areas of our catalog starting with our entry level professional certificates.

Speaker Change: At the start of the year, we had 28 of these certificate training programs.

Speaker Change: To date, we've announced nearly 50 with partners like Google IBM, Microsoft AWS, and others, and we're not slowing down in the coming year, we have a pipeline focused on adding new job roles from new industries with new and existing partners.

Speaker Change: We believe we are in the early stages of a long term trend in higher education, where industry micro credentials play an increasingly prominent role in how learners acquire their first job or earn credit towards a college degree.

Speaker Change: And how campuses modernize their curriculum to create employable graduates.

Speaker Change: And how governments like New York deploy job relevant workforce training at scale.

Speaker Change: And also and how businesses Reskill and redeploy talent in an era, where emerging technologies like generative AI are expected to disrupt and automate a wide variety of job roles.

Speaker Change: Now onto my second catalog update the college degree.

Speaker Change: We announced nearly 20, new degree programs in the past year, including two recent additions are first degree from the University of Pittsburgh. This master of data Science includes many of the attributes we're focused on including performance based admissions and affordable pay as you go total tuition of $15000. We also announced a master of science in it.

Matthew Sheldon: We also announced a Master of Science in Information Technology from IIIT Hyderabad in India designed for learners with little to no computer science background looking to start a career in technology. We believe that college degrees need to be more accessible, affordable, and job relevant, and we continue to focus on how COURSERA and our partners can uniquely address the needs of working learners. This is what we refer to as pathways, where a learner can take open content like a professional certificate and have it count as credit towards a college degree. Our pathway degree strategy relies on three unique features of our business. 1, a consumer segment with global reach and low cost access to a broad and growing portfolio of professional certificates with credit recommendations.

Speaker Change: Information technology from Triple Hyderabad in India design for learners with little to no computer science background looking to start a career in technology.

Speaker Change: We believe that the college degree needs to be more accessible affordable and job relevant and we continue to focus on how coursera and our partners can uniquely address the needs of working adults.

Speaker Change: This is what we refer to as pathway degrees, where a learner can take open content like our professional certificate and have it count as credit towards a college degree.

Speaker Change: Our pathway degree strategy relies on three unique features of our business model, one our consumer segment with global reach and low cost acquisition too.

Speaker Change: To a broad and growing portfolio of professional certificates with credit recommendations and three a broad and growing portfolio of Bachelor and master degrees that enable open content to count as credit admissions and completion of coursework.

Matthew Sheldon: And three, a broad and growing portfolio of bachelor's and master's degrees that enable open content to count as credit, admissions, and completion of courses. In Q4, we launched 15 new pathways in the six degree programs on. As an example, Ball State's recently launched Master of Science in Data Science now allows for prior learning credit for eligible learners that complete the Google Data Analytics entry-level professional certificate, a certificate that has cumulative historical enrollments of nearly 2 million learners. A key enabler of this strategy is our credit recognition initiative.

Speaker Change: In Q4, we launched 15, new pathways in the six degree programs on Coursera as an example, both states recently launched Master of Science and data Science now allows for prior learning credit for eligible learners that complete the Google data analytics entry level professional certificate a certificate that is cumulative historical enrollments.

Speaker Change: Of nearly 2 million learners.

Speaker Change: A key enabler of this strategy is our credit recognition initiative.

Matthew Sheldon: Last quarter, I shared that we expanded our regional efforts with the European Credit Transfer and Accumulation System, or ECTS, credit record. To date, we have secured almost 40 credit recommendations from ACE and ECTS, with more to come in 2021. Today, I'm excited to announce that we've received an authorized instructional platform designation from the American Council on Education. It is the first instructional platform to receive this distinction of academic integrity, security, and rigor. This deeper partnership with ACE has several benefits, and further distinguishes our platform with an important signal of quality and trust. It enables our marketing engine to better merchandise and promote the value of our growing catalog of ACE recommended content and allows us to more quickly and seamlessly source existing ACE recommended content from other platforms, be migrated to COURSERA while maintaining the credit record.

Speaker Change: Last quarter I shared that we expanded our regional efforts with European credit transfer an accumulation system or E. Cts credit recommendations to date, we have secured almost 40 credit recommendations from AC and Etfs with more to come in 2024.

Speaker Change: Today I am excited to announce that we've received an authorized instructional platform designation from the American Council on education.

Speaker Change: Of course, there is the first instructional platform to receive this distinction of academic integrity security and rigor.

Speaker Change: This deeper partnership with AC has several benefits.

Speaker Change: It further distinguishes our platform with an important signal of quality and trust and enables our marketing engine to better merchandise and promote the value of our growing catalog of AC He recommended content and.

Speaker Change: It allows us to more quickly and seamlessly source existing AC recommended content from other platforms, which can be migrated to coursera, while maintaining the credit recommendation.

Speaker Change: For my final catalog update I'd like to discuss our growing selection of generative AI content.

Matthew Sheldon: For my final catalog update, I'd like to discuss our growing selection of generative AI courses. COURSERA offers over 800 AI-related courses that have attracted nearly 7 million total enrollments. This includes new generative AI courses, like the November launch by AI pioneer and COURSERA co-founder Andrew Ng. Andrew's course, called Generative AI for Everyone, enrolled 90,000 learners from over 190 countries in its first 30 days, making it the fastest-growing course of 2020. To date, the course has accumulated more than 130,000 enrollments.

Speaker Change: Coursera offers over 800 AI related courses that have attracted nearly $7 million total enrollments this year.

Speaker Change: This includes new generative AI courses like the November launch by AI Pioneer in Coursera co founder Andrew in Andrews course called generative AI for everyone enrolled 90000 learners from over 190 countries and its first 30 days, making it the fastest growing course of 2023 to.

Speaker Change: To date, the course has accumulated more than 130000 enrollments.

Matthew Sheldon: You're starting to see strong demand for these courses in our consumer segment, but as I touched on earlier with the data from BCG, institutions are only beginning to formulate their AI strategy. And that's why we were excited to launch our latest enterprise content offering, the Genitive AI Academy, just a few weeks ago. The Gen-AI Academy is a structured training program designed to help executives and their employees obtain the skills they need to thrive in an AI-driven world.

Speaker Change: We're starting to see strong demand for these courses in our consumer segment, but as I touched on earlier with the data from BCG institutions are only beginning to formulate their AI strategy.

Speaker Change: And that's why we were excited to launch our latest enterprise content offering the degenerative AI Academy, just a few weeks ago.

<unk> Academy is a structured training program designed to help executives and our employees obtain the skills they need to thrive in an AI driven workplace.

Matthew Sheldon: We believe that high-quality education and training will be an integral part of companies unleashing the next wave of innovation and productivity using generative AI. And we're proud that the Genitive AI Academy features institutions at the forefront of AI, including Microsoft, Stanford Online, Vanderbilt University, DeepLearning.ai, Fractal Analytics, Google Cloud, AWS, and many others. The Univac Academy has two pillars.

Speaker Change: We believe that high quality education, and training will be an integral part of companies unleashing. The next wave of innovation and productivity using generative AI.

Speaker Change: And we're proud that degenerative AI Academy features institutions at the forefront of AI, including Microsoft Stanford online Vanderbilt University deep learning AI fractal analytics, Google cloud AWS and many others.

Speaker Change: So Jonathan Academy has two pillars.

Matthew Sheldon: The first is Generative AI Academy for everyone. It's a foundational literacy program that gives every employee a general understanding of Gen AI's core principles, applications, and impact, including guided projects on how to actually use AI tools in their day-to-day jobs. And Generative AI Academy for Executives is the second pillar, which is designed to help leaders develop a deeper understanding of what generative AI is and how it is used so that they can set a Gen-AI strategy and navigate the risks and ethical issues associated with this new technology. As part of this pillar, I launched my new course, Navigating Genitive AI: A CEO Playbook, which aims to guide executives in making strategic and ethical decisions, Coursera also offers access to a hands-on lab playground running on Google Gemini Pro and hosted on the Google Cloud platform.

Speaker Change: The first is Jennifer AI Academy for everyone is the.

Speaker Change: A foundational literacy program that gives every employee a general understanding of <unk> core principles applications and impact, including guided projects on how to actually use AI tools in their day to day jobs.

Speaker Change: And Jennifer AI Academy for executives is the second pillar, which is designed to help leaders develop a deeper understanding of what <unk> is and how it is used so that they can set a gen AI strategy and navigate the risks and ethical issues associated with this new technology.

Speaker Change: As part of this pillar I launched my New course, navigating <unk> AI, a CEO playbook, which aims to guide executives and making strategic and ethical choices as well as lead and motivate their teams through rapid change.

Speaker Change: Of course also offers access to hands on lab playground running on Google Gemini Pro and hosted on the Google Cloud platform.

Matthew Sheldon: The Secure Private Sandbox Environment lets executives not only learn how to use generative AI but also how to apply this technology to formulate strategic plans and identify specific opportunities to create customer value and boost the productivity of their employees. In conversations with our customers and my recent discussions with business experts, government officials, and academic leaders at the World Economic Forum, we're consistently hearing that organizations need guidance and support to make sense of these new technologies, develop a strategic adoption framework, and implement a more We're in the very early stages of helping our customers navigate this change. With the launch of Generative AI Academy, we're able to better address one of their top strategic priorities and offer a more comprehensive, well-designed solution for their diverse training and talent.

Speaker Change: The secure private sandbox environments, let's executives not only learn how to use general AI, but also how to apply this technology to formulate strategic plans and identify specific opportunities to create customer value and boost the productivity of their teams.

Speaker Change: In conversations with our customers and my recent discussions with business experts government officials and academic leaders at the World Economic Forum, we're consistently hearing that organizations need guidance and support to make sense of these new technologies develop a strategic adoption framework and implement a more holistic approach to the human capital development. We're.

Speaker Change: We're in the very early stages of helping our customers navigate this change with the launch of generative AI Academy, we're able to better address one of their top strategic priorities and offer a more comprehensive well design solution for their diverse training and talent needs.

Matthew Sheldon: That recaps our progress with our educator partners. So let's move to our second major advantage, the global reach of our platform. In 2023, we added more than 200 paid enterprise customers to end the year with nearly 1,400 business, government, and campuses on Coursera. Growth came from all verticals in all regions.

Speaker Change: That recaps, our catalog progress with our educator partners. So let's move to our second major advantage the global reach of our platform in 2023, we added more than 200 paid enterprise customers to end the year with nearly 1400 business government and campuses on Coursera.

Speaker Change: <unk> came from all verticals and all regions as I highlighted before we consistently added around 6 million new registered learners each quarter growing our global learner base by 20% to $142 million.

Matthew Sheldon: As I highlighted before, we consistently added around 6 million new registered learners each quarter, growing our global learner base by 20% to 142 million. This marked our fourth consecutive year of welcoming more than 20 million learners to our platform, and growth continues to be broad-based, with double-digit percentage increases across all regions. And to serve these learners, we've been focused on enhancing the localized experience on Coursera, which is where I'd like to start my discussion of our third advantage, the ongoing product innovation that's happening across our platform. First, an update on our AI-powered language translation initiative. We believe that high-quality education from the world's leading experts should be accessible to learners anywhere in the world. Throughout 2023, we've used advancements in the quality of machine learning to translate our catalog at a fraction of the cost and speed of using conventional humans. Last quarter, I shared that we'd managed to accelerate, doubling our amount of full-course translations from 2,000 to 4,000 in seven commonly spoken languages. You saw nearly half a million learners access translated courses in the initial seven languages.

Speaker Change: This marked our fourth consecutive year of welcoming more than 20 million learners to our platform and growth continues to be broad based with double digit percentage increases across all regions.

Speaker Change: And to serve these learners, we've been focused on enhancing the localized experience on Coursera, which is where I'd like to start my discussion of our third advantage the ongoing product innovation, that's happening across our platform.

Speaker Change: First is an update on our AI powered language translation initiative.

Speaker Change: We believe that high quality education from the world, leading experts should be accessible to learners anywhere in the world throughout.

Speaker Change: Throughout 2023, we've used advancements in the quality of machine learning to translate our catalog at a fraction of the cost and speed of using conventional human methods.

Speaker Change: Last quarter I shared that we'd managed to accelerate this initiative doubling our amount of full course translations from 2000 to 4000 in seven commonly spoken languages, we saw nearly half a million learners access translated courses in the initial seven languages today.

Matthew Sheldon: Today, I'm pleased to share that we now have more than 4,000 Coursera courses, specializations, and 50 certificates available in up to 18 languages, recently adding support from Mandarin, Dutch, Greek, Italian, Polish, Turkish, and others. Over 58 million registered learners on our platform are based in countries where the primary language is one of these. It is a tangible example of how quickly AI innovations can enhance access and personalization at scale, and early feedback has been very positive. We're seeing higher engagement and course completion rates with learners. And our enterprise customers, particularly governments, are excited about the ability to better serve their constituents with high-quality training and education from the best experts in the world, no matter what language. Another major generative AI feature we have launched is Coursera. COURSERA COACH is our virtual learning assistant, powered by Genevive AI and grounded in our expert content.

Speaker Change: Today I am pleased to share that we now have more than 4000 courses 600, specializations and 50 certificates available in up to 18 languages recently, adding support for Mandarin Dutch Greek Italian Polish Turkish and others.

Speaker Change: Over $58 million registered learners on our platform are based in countries, where the primary language is one of these languages. It is a tangible example of how quickly AI innovations can enhance access and personalization at scale and early feedback has been very positive.

Speaker Change: Seeing higher engagement and course completion rates with learners and our enterprise customers, particularly governments are excited about the ability to better serve their constituents with high quality training and education from the best experts in the World No matter what language they speak.

Speaker Change: Another major agenda AI feature we have launched is of course Erik coach.

Of course, there are coaches are virtual learning assistant powered by gender AI and grounded in our expert content.

Ken Han: Early feedback from our beta program of participants is encouraged. We're seeing higher engagement for weekly active learners using COACH, with capabilities like pre-quiz practice, context-relevant examples, and quick video lecture summaries as some of the most popular. In the year ahead, we'll continue to embed codes throughout our platform, including a more personalized learning experience, Career Guidance, and more personalized learning pathways through content and credentials. To wrap up my opening remarks, let me remind you of several key priorities that we focused on this year. First, we are broadening our catalog of entry-level professionals, including new partners, roles, languages, and credit recommendations to support degree pathways and campus integration. Second, we're sourcing and launching new degree programs with a focus on flexibility, affordability, and scaled pathways so that our open content and industry microcredentials can count as credit toward college degrees.

Early feedback from our beta program participants is encouraging we're seeing higher engagement for weekly active learners using coach with capabilities like pre quiz practice context relevant examples and quick video lecture summaries at some of the most popular features.

Speaker Change: In the year ahead, we will continue to embed coast throughout our platform, including a more personalized learning experience career guidance and more personalized learning pathways through content and credentials.

Speaker Change: To wrap up my opening remarks, let me remind you of several key priorities that we're focused on this year.

Speaker Change: First we are broadening our catalog of entry level professional certificates, including new partners Rolls languages, and credit recommendations to support degree pathways and campus integrations.

Speaker Change: Second we're sourcing and launching new degree programs with a focus on flexibility affordability and scaled pathways. So theyre opening content and industry micro credentials can count as credit towards college degrees.

Ken Han: Third, we're focused on growing our enterprise segment across business, government, and campus, supporting institutional collaboration to better serve learner needs in this fast-changing environment. And fourth, we're deepening our platform, including the broad application of Genitive AI for translations, personalized learning with COACH, and domain scaling with Genitive AI Academy, all while driving more scale and leverage. I'd like to now turn it over to Ken. Ken, please go

Speaker Change: Third we're focused on growing our enterprise segment across business government and campus customers supporting institutional collaboration to better serve learner needs in this fast changing environment and fourth we're deepening our platform advantages, including the broad application of generative AI for translations.

Speaker Change: <unk> learning with coach and domain scaling regenerative AI Academy, all while driving more scale and leverage overtime.

Ken: I'd like to now turn it over to Ken Ken. Please go ahead.

Ken Han: Thank you, Jeff, and good afternoon, everyone. We are pleased to report another strong quarter, marked by the growing prominence of our platform for millions of learners around the world, as well as the differentiated value of our focus on high-quality branded credentials. Over the past year, we've continued to enjoy the benefits of our multi-sided platform, including exposure to multiple growth areas, including the needs of individuals, businesses, governments, and campuses; a common set of and the ability to leverage our content engine, data, marketing tools, and more across our segment; and a broad global lens to better understand and navigate the trends reshaping higher education. In Q4, we generated total revenue of $168.9 million, which is up 19% from a year ago.

Ken Ken: Thank you, Jeff and good afternoon, everyone. We.

Ken Ken: We are pleased to report another strong quarter marked by the growing prominence of our platform for millions of learners around the world as well as the differentiated value of our focus on high quality branded credentials over the past year, we continue to enjoy the benefits of our multi sided platform, including exposure to multiple growth levers, including the need.

Ken Ken: Of individuals' businesses governments and campuses.

Ken Ken: A common set of assets with the ability to leverage our content engine data marketing tools and more across our segments and abroad global lens to better understand and navigate the trends reshaping higher education.

Ken Ken: In Q4, we generated total revenue of $168 9 million, which was up 19% from a year ago.

Ken Han: Growth is driven by double-digit increases across our three segments, and in particular sustained strength in our consumer segment. Please note that for the remainder of the call, as I review our business performance network, I'll discuss our non-GAAP financial measures, unless otherwise noted, additional final. I would like to remind you that our 2023, and the year-over-year comparisons of gross profit and operating costs, reflect the shift of expenses in income statement line items associated with our contract extension with our largest industry partner that took effect at the beginning of 2023. We've discussed the shift extensively in our prior earnings calls this year and expect the year-over-year comparisons to largely normalize next quarter and for all of 2020. Removing the Noise from the Shift in P&L Geography

Ken Ken: Growth is driven by double digit increases across our three segments in particular sustained strength in our consumer segment results.

Ken Ken: Please note that for the remainder of the call as a review of our business performance and outlook I will discuss our non-GAAP financial measures unless otherwise noted.

Ken Ken: Additionally, and for the final time I would like to remind you that our 2023 results, particularly the year over year comparisons of gross profit and operating expenses reflect the shift of expenses in income statement line items associated with the contract extension with our largest industry partner it took effect at the beginning of 2023.

Ken Ken: We have discussed the shift extensively in our prior earnings calls this year and expect the year over year comparisons to largely normalize next quarter and for all of 2024.

Ken Ken: Removing the noise from the shift in P&L geography, we drove strong bottom line EBITDA performance on a year over year basis in 2023 cost of revenue increased by 11 points as a percentage of revenue while total opex decreased 17 points compared to the prior year.

Ken Han: We drove strong bottom-line EBITDA performance on a year-over-year basis. For 2020-2023, cost of revenue increased by 11 points as a percentage of revenue, while total opt-ex. 17 points compared to the prior year, and continue to be pleased with our ability to balance our growth initiatives and long-term investments, demonstrating the leverage inherent in our model as our platform. For the fourth quarter, gross profit was $91.2 million, and 54% of gross margin, which was down nine points from the prior year period. Total operating expense was $90 million, or 53% of revenue, down 17 points from the prior year period for the individual P&L line item components of OP-F. Sales and marketing expense represented 30% of total revenue.

Ken Ken: I continue to be pleased with our ability to balance our growth initiatives and long term investments, while demonstrating the leverage inherent in our model as our platform scales.

Ken Ken: For the fourth quarter gross profit was $91 2 million and a 54% gross margin, which was down nine points from the prior year period.

Ken Ken: Total operating expense was $90 million or 53% of revenue down 17 points from the prior year period.

Ken Ken: For the individual P&L line item components of Opex sales and marketing expense represented 30% of total revenue down eight points.

Ken Han: Research and Development Expense was $15,000 down. Bye. The general and administrative expense was 9% of revenue.

Ken Ken: And development expense was 15% of revenue down five points in general and administrative expense was 9% of revenue down four points.

Ken Han: Finally, a year ago at this time, we provided our expectation to be adjusted EBITDA break-even by the fourth quarter of this year, and I'm pleased to report that we exceeded that commitment. Fourth quarter net income was 9.5 million dollars, or 5.6, and suggested EBITDA was $5.7 million or $3.4 million. We are excited to have achieved this Profit-Building Method, and we expect increasing leverage in the coming year. More on that in a minute. This milestone capped off another year of demonstrating our ability to grow while creating leverage and deliver a strong bottom line. As a reminder of our practice, we set an annual EBITDA margin target at the beginning of the year and work within that plan based on the trajectory of the business. This year, we were able to deliver an incremental 340 basis points of annual EBITDA margin from our initial target of negative five, and this resulted in a total annual EBITDA margin of approximately 550 basis points year-over-year.

Ken Ken: Finally, a year ago at this time, we provided our expectation to be adjusted EBITDA breakeven by the fourth quarter of this year and I'm pleased to report that we exceeded that commitment.

Ken Ken: Fourth quarter net income was $9 5 million or five 6% of revenue and adjusted EBITDA was $5 7 million or three 4% revenue.

Ken Ken: We are excited to achieve this profitability metric and expect increasing leverage in the coming year more on that in a minute.

Ken Ken: This milestone capped off another year of demonstrating our ability to grow while creating leverage to deliver strong bottom line performance.

Ken Ken: As a reminder of our practice, we set an annual EBITDA margin target at the beginning of the year and work within that plan based on the trajectory of the business.

Ken Ken: This year, we're able to deliver an incremental 340 basis points of annual EBITDA margin from our initial target of negative 5% and this resulted in total annual EBITDA margin improvement of approximately 550 basis points year over year.

Ken Ken: The better than anticipated performance was the result of our overall revenue growth and strong operating expense discipline, which we were able to balance with our ongoing investments in many of the growth initiatives Jeff discussed.

Ken Han: The better-than-anticipated performance was the result of our overall revenue growth and strong operating performance, which we were able to balance with our ongoing investment in many of the growth initiatives. As you'll hear shortly, we expect to continue our consistent track record of delivering growth plus leverage in 2024. Now let's discuss cash performance and the balance sheet, and I'd like to begin with an update on our free cash flow definition. We have revised the definition of free cash flow to include cash outflows for purchases of content, a figure we already disclosed in our statement of cash flows. We believe this change will be helpful to investors for two reasons. First, we continue to invest in the success of strategic content assets, particularly our entry level, while we are rapidly expanding with new and, Park. Through certain arrangements, we will help fund the production.

Ken Ken: As you'll hear shortly we expect to continue our consistent track record of delivering growth plus leverage in 2024.

Speaker Change: Now lets discuss cash performance and the balance sheet and I'd like to begin with an update on our free cash flow definition.

Speaker Change: We have revised the definition to include cash outflows for purchases of content assets I figure, we already disclosed in our statement of cash flows.

Speaker Change: We believe this change will be helpful to investors for two reasons first we continue to invest in the success of strategic content assets, particularly our entry level professional certificates, while we are rapidly expanding with new and existing industry partners in.

Speaker Change: In certain arrangements, we will help fund the production of courses and credentials in exchange for more attractive economics, as well as exclusivity and of course Theres platform.

Ken Han: Historically, this amount was not large enough to have a meaningful impact, but we intend to increase it to go towards part of our broader content. Second, we want to ensure that our definition most closely resembles the manner in which we analyze our prudential and operational risks and that free cashflow remains aligned with adjusted EBITDA, aside from differences primarily. We believe this clarity is particularly important as we're out with strong, positive, free capital in the coming year. Under the revised definition in Reconciliation, purchases of content assets are treated similarly to other categories of capital expenditures, effectively lowering our free capital.

Speaker Change: Historically this amount was not large enough to have a meaningful impact, but we intend to increase these investments on a go forward basis as part of a broader content strategy.

Speaker Change: Second we want to ensure that our definition was closely resembles the manner in which we analyze our financial and operating goals and that free cash flow remains aligned with adjusted EBITDA aside from differences primarily associated with working capital changes.

Speaker Change: We believe this clarity is particularly important as our outlook anticipates strong positive free cash flow generation in the coming year.

Speaker Change: Under the revised definition reconciliation purchases of content assets are treated similarly to other categories of capital expenditures effectively lowering our free cash flow computation.

Ken Han: For clarity, all of today's materials, specifically the Supplemental Financial Tables that accompany our press release, to reflect free cash flow amounts for all periods using the revised data, with that background, precast, approximately $8 million, inclusive of more than $5 million in purchases of content assets in 2023 and in line with our Outlook range provided at the beginning of the year. Turning to the balance, we ended the quarter with approximately $722 million of unrestricted cash, cash equivalents, and marketable securities, with no doubt.

Speaker Change: Clarity all of today's materials, specifically, the supplemental financial tables that accompany our press release reflects free cash flow amounts for all periods using the revised definition.

Speaker Change: With that background free cash flow was approximately $8 million for the year.

<unk>, a more than $5 million in purchases of content assets in 2023 and in line with our outlook range provided at the beginning of the year.

Speaker Change: Turning to the balance sheet, we ended the quarter with approximately $722 million of unrestricted cash cash equivalents and marketable securities with no debt.

Speaker Change: As we enter a new year I want to remind you that our capital allocation priorities remain unchanged. We continue to focus on investments in our organic growth, while valuing the resilience and the strategic Optionality provided by our strong balance sheet as Jeff discussed the education landscape is undergoing a rapid pace of change and we believe that our strong financial position.

Ken Han: As we enter a new year, I want to remind you that our capital allocation priorities remain unchanged, continuing to focus on investments in our organic growth while valuing the resilience, D.

Ken Han: As Jeff discussed, the education landscape is undergoing a rapid pace of change, and we believe that our strong financial position is an asset that will help us win in our large and early markets. Next, we will discuss the performance of our segments in more detail. Consumer revenue was $97.2 million, up 22% from the prior year.

Speaker Change: Is an asset that will help us win in our large and early markets.

Speaker Change: Next let's discuss the performance of our segments in more detail.

Speaker Change: Consumer revenue was $97 2 million up 22% from the prior year on strong demand for entry level professional certificates and newly launched generative AI courses as.

Ken Han: Strong Demand for Entry-Level Professionals and newly launched generative AI. As Jeff mentioned, we had another 6 million registered learners this quarter. Segment gross profit was $51.5 million, or 53% of consumer revenue, compared to 73% a year ago, reflecting the impact associated with the industry partner contract, which is most pronounced in consumers. Summarize, our consumer segment is growing at. We believe our focus on high-quality credentials created in collaboration with the world's best distinguishes our platform.

Speaker Change: As Jeff mentioned, we had another 6 million registered lenders this quarter.

Speaker Change: Second gross profit was $51 5 million or 53% of consumer revenue compared to 73% a year ago, reflecting the impact associated with the industry partner contract extension, which is most pronounced in consumer.

Speaker Change: To summarize our consumer segment is growing at scale.

Speaker Change: We believe our focus on high quality credentials created in collaboration with the world's best brands distinguishes our platform.

Ken Han: Differentiates the value of our offerings, which are leveraged across our segments and allows us to shape what we expect to be a long-term trend in education, which is more affordable, accessible, and buildable units of learning that allows students and working adults to progress in their careers. As you'll hear shortly in our discussion of our financial outlook, we expect the ongoing strong execution demonstrated in our consumer segment to be sustainable in the coming year. Enterprise revenue is $58.3 million, up 15% from a year ago, driven by our government and campus burden. Segment gross profit was $39.6 million, or 68% of enterprise revenue, compared to 66% a year ago. The total number of paid enterprise customers increased to 1,300, up 19% from a year ago, and our net retention rate from paid enterprise.

Speaker Change: <unk> the value of our offerings, which are leveraged across our segments and allows us to shape, what we expect to be a long term trend in education puts more affordable accessible and buildable units of learning and less students and working adults to progress in their careers.

Speaker Change: As you'll hear shortly in discussion of our financial outlook, we expect the ongoing strong execution demonstrated in our consumer segment to be sustainable in the coming year.

Speaker Change: It's moved to enterprise.

Speaker Change: Enterprise revenue was $58 $3 million up 15% from year ago, driven by our government in campus verticals.

Speaker Change: Segment gross profit was $39 6 million or 68% of enterprise revenue compared to 66% a year ago.

Speaker Change: The total number of paid enterprise customers increased to 1369 up 19% from a year ago.

Speaker Change: And our net retention rate for paid enterprise customers was 98%.

Ken Han: As we've discussed in the past several quarters, we continue to see divergent, and Monkster, specifically pressuring Coursera for Offset by momentum and other, and COURSERA. com associated with harnessing the benefits of emerging AI technologies. Ultimately, we expect that AI will create significant changes in jobs and opportunities that will enhance employee productivity, which will, in turn, create additional demand for employee learning. At the highest level, change creates demand for learning, and AI should create increasing demand over the coming years. And while we navigate our slower COURSERA for Business protocol, focused on continuing the strong momentum in our government and campus verticals. Customer Use Cases are particularly well-suited for the branded, job-relevant credentials that are also driving our consumer segment performance, and finally, our degree, degrees revenue is $13.4 million, up 12% from a year ago on growth in new students and scaling the total number of new degree students for 22% from a year ago, $22,000. As a reminder, there's no content cost attributed to the degree, degrees, segment or gross margin.

Speaker Change: As we've discussed the past several quarters, we continue to see a divergence in performance amongst our verticals, specifically pressuring coursera for business offset by momentum in our other two verticals government and campus with.

Speaker Change: We see corporate learning budgets remaining under pressure to hear from customers and many are in the early stages of formulating a talent strategy associated with harnessing the benefits of emerging AI technologies. Ultimately, we expect that AI will create significant changes in job functions with opportunities that will enhance employee productivity, which will in turn create additional.

Speaker Change: Demand for employee learning.

Speaker Change: At the highest level change creates demand for learning and AI should create increasing change over the coming years.

Speaker Change: And while we navigate our slower corsair for business vertical growth, we're focused on continuing the strong momentum in our government and campus verticals, where the customer use cases are particularly well suited for the branded job relevant credentials. They are also driving our consumer segment performance.

Speaker Change: And finally, our degree segment.

Speaker Change: <unk> revenue was $13 $4 million up 12% from year ago and growth in new students and scaling of recent program launches. The total number of new degree students grew 22% from a year ago to 22025.

Speaker Change: As a reminder, there is no content costs attributed degree segment. So degrees segment gross margin was 100% of revenue.

Speaker Change: And while the segment is a small portion of our overall revenue mix today, we remain focused on the long term opportunity in degrees.

Ken Han: And while the segment is a small portion of our overall revenue mix today, we remain focused on the long term. We believe that our platform is uniquely positioned to fundamentally transform the college, but we need to start validating that potential with renewed and increasing growth. We believe that the path to better degrees growth lies in working with our university partners to create stronger paths in the Consumer Segment, where we benefit from scale, as well as our growing selection of pathway degree programs. Now on to our financial outlook. For Q1, we're expecting revenue to be in the range of $168 to $172 million. For just EBITDA, we're expecting a range of negative two to positive two million dollars for full year 2024. We anticipate revenue to be in the range of $730 to $740 million, representing approximately 16% growth. For Adjusted EBITDA, we're expecting a range of $26 to $32 million or an Adjusted EBITDA margin of approximately 4% at the midpoint of the revenue in Adjusted EBITDA guidance. This is a 550-basis point of, in line with the strong progress made. As a reminder, we do not optimize for any single quarter.

Speaker Change: We believe that our platform is uniquely positioned to fundamentally transform the college degree we need to start validating that potential with renewed and increasing growth.

Speaker Change: We believe that the path to better degrees growth lies in working with our University partners to create stronger pathways between our consumer segment, where we benefit from scale as well as our growing selection of pathway degree programs.

Speaker Change: Now on to our financial outlook for.

For Q1, we're expecting revenue to be in the range of 168% to $172 million for adjusted EBITDA, We're expecting a range of negative two to positive $2 million.

Speaker Change: For full year 2024, we anticipate revenue to be in the range of $730 million to $740 million, representing approximately 16% growth at the midpoint of the range.

Speaker Change: For adjusted EBITDA, we're expecting a range of 26% to $32 million when adjusted EBITDA margin of approximately 4% at the midpoint of the revenue and adjusted EBITDA guidance ranges.

Speaker Change: This is a 550 basis point improvement in line with the strong progress we made in 2023.

Speaker Change: As a reminder, we do not optimized for any single quarter. Instead, we manage our annual adjusted EBITDA margin target and work within that plan to maximize growth based on the trajectory of the business.

Ken Han: Instead, we manage our annual adjusted EBITDA margin target and work within that plan to maximize growth based on the trajectory of the business. Free cash flow, we expect to deliver at or above our adjusted EBIT. In addition to working capital benefits, this takes into account the increased purchases of content assets based on our revised, So overall, a very strong expectation around free cash, even as we invest. Finally, our practice is to provide some color on the composition and pace of the business as we enter the new year, particularly given the varying impacts of the evolving environment and ongoing trends in the education industry. This includes one-time, beginning-of-the-year, segment-level annual growth to help you better understand how we intend to deliver on our overall. For consumers, we believe that the strong, durable performance we've demonstrated over the past several years will continue, driven by learner demand for our growing selection of branded industry microproducts, along with a rapidly expanding catalog of generative AI. Our initial outlook anticipates Proxima, for Enterprise.

Speaker Change: For free cash flow, we expect to deliver at or above our adjusted EBITDA target.

Speaker Change: In addition to working capital benefits. This takes into account the increased purchases of content assets based on a revised definition. So overall, a very strong expectation around free cash flow generation, even as we invest.

Speaker Change: Finally, our practice is to provide some color on the composition and pace of the business as we enter the new year, particularly given the varying impacts of the evolving environment and ongoing trends in the education industry.

Speaker Change: This includes one time beginning of the year segment level annual growth expectations to help you better understand how we intend to deliver on our overall guidance.

Speaker Change: For consumer we believe that the strong durable performance we've demonstrated over the past several years will continue driven by Lerner demand for our growing collection of branded industry, Michael <unk>, along with the rapidly expanding catalog of generative AI courses, our initial outlook anticipates growth of approximately 20%.

Speaker Change: For enterprise, we remain optimistic about our government and campus verticals offsetting our slower business vertical growth, resulting in expected growth of more than 10%.

Ken Han: We remain optimistic about our government and campus. Offsetting our slower business, resulting in expected growth of more than. For degrees, we're focused on proving out our pathway degrees, including sourcing and ramping new programs in their very early stages, while we work to drive scaled pathways for fast, is that our degree segment grows by more than. Weighted, now.

Speaker Change: And for degrees, we're focused on proving out our pathway degree strategy, including sourcing and ramping new programs in their very early stages, while we work to drive scaled pathways for faster growth. Our 2024 expectation is that a degree segment growth by more than 10% weighted towards the second half.

Ken Han: To summarize, we're delivering high-quality learning through our multi-sided platform and our diversified channels. We're producing growth, and Coursera. Thank you all.

Speaker Change: To summarize we are delivering high quality learning through a multi sided platform and our diversified channels, we're producing growth with consistently increasing scale and leverage resulting from the complementary benefits of our three segments.

Ken Han: Thank you. Thank you. Thank you, and we're pursuing a long-term strategy from a position of financial strength that allows us the resilience and the strategic flexibility to navigate and drive the transformation of higher education currently underway. I'll now turn the call back to Jeff for closing.

And we are pursuing our long term strategy from a position of financial strength, allowing us the resilience and the strategic flexibility to navigate and drive the transformation of higher education currently underway.

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

Matthew Sheldon: Thanks, Ken. I want to close today's remarks by highlighting a recent recognition by the World Economic Forum. The World Economic Forum believes that skill and talent shortages are one of the most critical challenges facing society today. It impedes business growth, hinders economic prosperity, and inhibits individuals from realizing their potential.

Jeff: Thanks, Ken I want to close todays remarks by highlighting our recent recognition by the World Economic Forum.

Jeff: The World Economic Forum believes that skill and talent shortages are one of the most critical challenges facing society today at.

Jeff: It impedes business growth tenders economic prosperity and inhibits individuals' from realizing their full potential.

Matthew Sheldon: In January, their insight report on putting skills first recognized multiple organizations, including several of our educator partners and customers like IBM, PWC, and Sanofi for their innovative efforts to resolve labor shortages, solve the skills gap, and better equip workers for the jobs of tomorrow. I'm proud to share that COURSERA's Credit Recommendation Initiative for our Professional Certificates and Pathway Degrees was chosen as a Government and Education Sector Lighthouse. The report highlights how our efforts are bridging the divide between traditional and nontraditional learning pathways. Our collaboration with industry partners fosters education that is accessible, affordable, and aligned with the evolving labor market. And with the growing number of credit recommendations by ACE and ECTS, we have respected third-party support that furthers our ability to extend the reach and depth of the integration use cases we are seeing with traditional academic institutions and systems of higher education.

Jeff: In January their insight report on putting skills first recognize multiple organizations, including several of our educate our partners and customers like IBM PD Pwc and <unk> for their innovative efforts to resolve labor shortages solve the skills gap and better equip workers for the jobs of tomorrow.

Jeff: I am proud to share that Coursera is credit recommendation initiative for our professional certificates and pathway degrees was chosen as a government and education sector lighthouse this year.

Jeff: Port highlights how our efforts are bridging the divide between traditional and nontraditional learning pathways.

Jeff: Our collaboration with industry partners fosters education that is accessible affordable and align with the evolving labor market needs.

Jeff: And with a growing number of credit recommendations by <unk> and ECS, we have respected third party support that furthers our ability to extend the reach and depth of the integration use cases, we're seeing with traditional academic institutions and systems of higher education.

Matthew Sheldon: This is another validation of how our business strategy remains deeply intertwined with our founding, and I find it inspiring to see members of the COURSERA learning ecosystem recognized for the important role that they play in addressing skill shortages, transforming the global economy, and equipping the next generation with the education and opportunities they need. Now, we'll open the call for questions. Thank you.

Jeff: This is another validation of how our business strategy remains deeply intertwined with our founding mission.

Jeff: And I find it inspiring to see members of the Coursera learning ecosystem recognized for the important role that they play in enabling the future workforce addressing skill shortages transforming the global economy and equipping the next generation with the education and opportunities they need to succeed in a rapidly evolving digital world now lets open the call for <unk>.

Speaker Change: Questions. Thank you.

Speaker Change: Thank you just as a reminder, if you would like to ask a question. Please press star one on your telephone keypad.

Operator: Just as a reminder, if you would like to ask a question, please press star one on your telephone keypad. Our first question comes from the line of Josh Bayer with Morgan. Josh, your line is now open. Great, thanks for the question and congrats on a good finish to the year and a strong guide. I wanted to ask about marketing spend and marketing efficiency. The sales and marketing expense declined year-over-year versus really strong revenue growth, and that's been the theme this year.

Speaker Change: Our first question comes from the line of Josh Baer with Morgan Stanley Josh Your line is now open.

Josh Baer: Great. Thanks for the question and congrats on a good finish to the year and a strong guide I wanted to ask on marketing spend and marketing efficiency.

Josh Baer: Sales and marketing expense declined year over year versus really strong revenue growth and that's been the theme this year.

Ken Han: So I was hoping you could dig in a little on marketing spend. Just as your products, your certificates, and your catalog of offerings expand, are you spending more or less on a dollar basis? And then how efficient is that spend? Sure, Josh. This is Ken, of course.

Josh Baer: So I was hoping you could dig in a little on marketing spend just as your products. Your certificates catalog of offerings expand are you spending more or less on a dollar basis and then how has the efficiency of that spend changed.

Josh Baer: Sure Josh This is Ken of course.

Ken Han: So, two quick things. So, yes, one of the things that happened year over year, and we continue to talk about, and this gets to be the last time we do that, is we had a large partner that was spending marketing dollars on us, their marketing dollars, which helped, and then in their absence, we have been spending some of our own online. There was a shift in the line items between cost of sales and sales and marketing.

Speaker Change: So two quick things.

Ken Ken: So yes, one of the things that happened year over year, and we continue to talk about and this gets to be the last time. We do that is we had a large partner that was spending we were spending marketing dollars.

Ken Ken: Their marketing dollars, which helped and then in the absence of been spending some of our own online levers a shift in the line items to between cost of sales and sales and marketing. So that's a portion of the day the more fundamental answer to your question, which is important as we are seeing greater efficiency.

Ken Han: So, that's a portion of it, but the more fundamental answer to your question, which is important, is that we are seeing greater efficiency, and we've been able to deploy more marketing spend to drive some of that consumer growth in a highly profitable fashion. So, I think you'll see our absolute dollar spend continue to go up on marketing because I see that trajectory continuing. It's good business.

Ken Ken: And we've been able to deploy more marketing spend to drive some of that consumer growth and a highly profitable fashion. So I think you'll you'll see our absolute dollar spend continued up with marketing because I see that trajectory continuing its good business.

Speaker Change: Great and if I could just add one for Jeff.

Matthew Sheldon: Great, and if I could just add one for Jeff, you know, over the last year, there's been a lot of changes with degree competitors, a couple exiting their businesses, and others navigating some other challenges. I'm just wondering how all of that evolving competitive landscape has impacted Coursera's degree, business, and outlook. Yeah, I'd say thanks, Josh.

Jeff: Over the last year, there's been a lot of changes with degree competitors couple exiting their businesses and others navigating some other challenges I'm just wondering how all of that evolving competitive landscape has impacted corsairs degree business and outlook. Thanks, Yeah.

Jeff: Thanks, Josh I would say it clearly reflects a pretty difficult environment in North America to be in the business of providing college degrees I mean, the sentiment in America has been a pretty negative, especially among elite degrees labor markets remain tight and where there's often been historically counter cyclicality between degrees in the labor market.

Matthew Sheldon: I would say it clearly reflects a pretty difficult environment in North America to be in the business of providing college degrees. I mean, sentiment in America has gone pretty negative, especially among elite degrees. Labor markets remain tight, and where there's often been historically counter-cyclicality between degrees and the labor market, I think we're seeing the same thing. You're right.

Speaker Change: I think we're seeing the same thing you are.

Speaker Change: Right.

Matthew Sheldon: Our competitors have faced very difficult, I mean, to say headwinds is an understatement. I think that partly explains why it's taking us a bit of time to crack this pathway degrees opportunity, but we really do believe that there is a new need for working adults to get new skills and distinguish themselves with credentials like professional certificates and college degrees, and the traditional college degree could be improved, you know, dramatically by this new pathway degrees opportunity. So, I'd say that we are facing a lot of the same headwinds as others have, and we have something pretty distinctively different and more advantageous that we're still trying to figure out, frankly, how to nail down and appropriately market the right degree to the right students and educate people on what degree pathways are.

Speaker Change: Competitors have faced very I'm going to say headwinds is an understatement.

Speaker Change: I think that partly explains why it's taken us a bit of time to crack this pathway degrees opportunity, but we really do believe that there is a need for working adults to get new skills and distinguish themselves with credentials like professional certificates and college degrees.

Speaker Change: And the traditional I'll call. It a degree could be improved dramatically by this new pathway degrees opportunity. So I'd say that we are facing a lot of the same headwinds as others have and we have something pretty distinctively different and more advantageous that we're still trying to figure out frankly hadn't nailed down and market appropriately the rate degrees to the right.

Speaker Change: Students and educate people on what degree pathways are but what's kind of cool is when we find individuals who are in professional certificates, where they understand that there is a degree pathway, we see retention and satisfaction to actually be higher and to your question around marketing efficiency, we think that mark.

Matthew Sheldon: But what's kind of cool is when we find individuals who are in professional certificates where they understand that there's a degree pathway; we see retention and satisfaction actually be higher. And to your question around marketing efficiency, we think that marketing for these distinctive, valuable professional certificates could improve as people realize that the value of a professional certificate can extend beyond the certificate to a college degree, which you could earn, you know, not only more flexibly but more affordably, because those credits that you're buying on Coursera can count as credit toward a college degree.

Speaker Change: Getting into these distinctive valuable professional certificates could improve as people realize that the value of our professional certificate can extend beyond the certificate to a college degree.

Speaker Change: You could earn not only more flexibly, but more affordable because those credits that you are buying on coursera can count as credit towards the college degree. So we think it's a pretty tough environment in the U S and we've got some pretty different and we feel good about our long term prospects there.

Matthew Sheldon: So, we think it's a pretty tough environment in the U.S., and we've got something pretty different, and we feel good about our long-term prospects there. Good. Thank you.

Speaker Change: Great. Thank you.

Speaker Change: Thank you. Your next question comes from the line of Stephen Sheldon with William Blair.

Operator: Your next question comes from the line from Stephen Sheldon with William Blair. Stephen, your line is not... Hey, thanks, and a lot of encouraging updates here. Firstly, for me, just thinking about Coursera for business. It sounds like companies are going to need a lot of support and handholding as they try to develop AI skills across the organization. But it's also coming at a time when Learning and Development budgets are under pressure from a timing perspective. When do you think the fear about getting left behind on AI skills development at the organizational level starts to overpower the cost containment? It seems with the guidance that you put out there for enterprises, it seems like you may not be assuming much for guidance. So you think this is something that could start to move the demand needle later this year, 2025, 2026? I guess. What are you thinking about it? Stephen, this is Jeff.

Stephen Hardy Sheldon: Your line is now open.

Stephen Hardy Sheldon: Hey, Thanks, and a lot of encouraging updates here.

Stephen Hardy Sheldon: First one for me just thinking about more about coursera for business. It sounds like companies are going to need a lot of support and hand, holding as they try to develop AI skills across the organization, but it's also coming at a time when.

Stephen Hardy Sheldon: Learning and development budgets are under pressure.

Stephen Hardy Sheldon: From a timing perspective.

Stephen Hardy Sheldon: When you think of fear about getting left behind on AI skills development at the organizational level starting to overpower the cost containment efforts they've put in place it seems.

Stephen Hardy Sheldon: The guidance that you put out there for enterprise seems like you may not be assuming much in the 2024 guidance. So you think it's something that they can start to move the demand needle later this year 2025, 2026, I guess, how are you thinking about it.

Stephen Hardy Sheldon: Steven This is Jeff Thanks, I think youre spot on and it's an open question for sure what will this recognition turned into reality in 2024 as you mentioned, it's not built into the model.

Matthew Sheldon: Thanks. I think you're spot on. And it's an open question, for sure. Will this recognition turn into reality in 2024? As you mentioned, it's not built into the model.

Matthew Sheldon: You know, the way I see this, you know, from my perspective, is that the evolution of general AI in businesses is going to happen in certain phases. And the way I like to think about it is, phase one is kind of conversation. It was kind of 2023 was a lot about, oh, look at chat GPT. This is amazing.

Jeff: The way I see this from my perspective is that the evolution of <unk>.

Jeff: <unk> business is going to happen in certain phases, and the way I like to think about it as phase. One is kind of conversation that was kind of 2023 was a lot about oh look a chat JP Davis is amazing what's going to happen.

Matthew Sheldon: What's going to happen? Your AGI is going to take over the world, blah, blah, blah, blah. That is giving way to phase two, which is experimentation, and a lot of companies are moving into that. But as I said in the script, 66% of execs are dissatisfied with the progress that they're making, and BCG puts 90% of companies in that category of being observers, just kind of playing around, but not really doing anything.

It's going to take over the world level Blah blah.

Jeff: That is giving way to a phase two which is experimentation and a lot of companies a lot of companies moving into that but as I said in the script.

Jeff: 60% of 66% of exacts are dissatisfied with the progress that they're making and basically jeep with 90% of companies in that category, but being observer is just kind of playing around but not really doing anything.

Matthew Sheldon: I think that the next phase is going to be what I call separation. Certain companies are going to actually figure out how to unlock the productivity and the innovation that comes from this, and a bunch of other companies will not. That will then lead, I think, to a next phase, which is recognition. Recognition that the leaders are pulling away from the laggards, and then there's going to be a scramble that happens where companies say, "What's happening?" Why am I losing?

Jeff: I think that the next phase is going to be what I call separation.

Jeff: Certain companies are going to actually figure out how to unlock the productivity and the innovation that comes from this and a bunch of other companies will not.

Jeff: That will then lead I think to a next phase which is recognition recognition that the leaders are pulling away from the from the laggards and then there's going to be a scramble that happens where companies say, what's happening wildlife, losing why am I not getting the kind of leverage that these other companies are and then theyre going to try to pile in and catch up now I might be wrong, and I don't know the timing of it.

Matthew Sheldon: Why am I not getting the kind of leverage that these other companies are getting? And then they're going to try to pile in and catch up. Now, I might be wrong, and I don't know the timing of it, but one of the things we're dealing with here is institutions and individuals who are, frankly, overwhelmed by how fast things are changing and how much certainty exists in so many facets of the business. But as leaders pave the way, I think there will be sort of pathways and roadmaps to say, this is what you're supposed to do to figure this out. And I feel pretty confident that learning and training is going to be a major part of what separates the leaders from the laggards. It might be a matter of time, but I see it as almost inevitable. I mean, I just think scaling is going to be a really important part of taking advantage of this new technology. Very helpful, thank you.

Jeff: But one of the things we're dealing with here is institutions and individuals who are frankly overwhelmed by how fast things are changing and how much certainty exists in so many facets of the business, but as the leaders paved the way I think there will be road sort of pathway as a roadmap to say this is what you're supposed to do to figure this out and I.

Jeff: Feel pretty confident that learning and training is going to be a major part of what separates the leaders from the laggards might be a matter of time, but I see this as almost inevitable I mean, I just think scaling is going to be a really important part of taking advantage of this new technology.

Speaker Change: Very helpful. Thank you.

Ken Han: And then just as a follow-up on the consumer segment, I guess I wanted to ask a little bit about gross margins there. You've seen it. It looks like it's stepped up pretty nicely sequentially over the last two quarters. So it's kind of the second half of the year. I know that year over year, comps get a little tricky with the things that you talked about, Ken, and that we have been talking about for the last year.

Speaker Change: And then as a follow up on the consumer segment, I guess I wanted to ask a little bit about gross margins there you've seen it it looks like it stepped up pretty nicely sequentially over the last two quarters. So it's kind of a second half here I know year over year comps get a little tricky with the things that you talked about Ken talked about last year, but.

Ken Han: But just generally, how are you thinking on the consumer side as we think about 2024 and going forward? Thank you. Sure, Stephen.

Speaker Change: Generally how are you thinking about gross margins I guess on the consumer side as we think about 2024 and going forward.

Ken Ken: Sure Stephen the one of the things Thats happened there. The biggest reason for that more recent improvement, where we're not forecasting that into the mix necessarily going forward, but we have seen a shift towards some of the lower payout degrees, where we've worked with our partners and provided funding it coincides with our change in free.

Ken Han: One of the things that's happened there, the biggest reason for that more recent improvement, we're not forecasting that into the mix necessarily on the board, but we have seen a shift towards some of the lower payout degrees where we've worked with our partners and provided funding. It coincides with our change in free cash flow definition, by the way, because we're hopeful that we're going to do more of that going forward where we fund some of the content, and as a result, we get higher-margin business as well as proprietary great content, which we like. As you know, most of our content is not proprietary. People tend not to multisource.

Ken Ken: Cash flow definition by the way.

Ken Ken: Because we're hopeful that we're going to do more of that going toward where we fund some of the content and as a result, we get higher margin business as well as proprietary great content, which we like as you know most of our content is not proprietary people tend not to multi source, where the biggest platform the biggest channel, but when we can get it for the <unk>.

Ken Han: We're the biggest platform and the biggest channel, but when we can get it for the cost of funding, and we're also, by the way, figuring out quickly how to produce that content much more cheaply, so it's a great thing for us. The more we do of it, I'll do those deals all day long. But that's the primary reason.

Ken Ken: Cost of funding and we're also by the way figuring out quickly how to to produce that content.

Ken Ken: Content much more cheaply.

Ken Ken: It's a great thing for us the more we do have it I'll do those deals all day long, but thats. The primary reason so a couple of our big almost everybody's on a 50 50 Rev share, but there's a few where we get better terms because we funded on the front end and as a result get paid back. So you see a little bit of a ship that in Q3 Q4, we'd like to rinse and repeat and we'll continue to do.

Ken Han: So a couple of our big, almost everybody's on a 50-50 rev share, but there are a few where we get better terms because we funded on the front end and, as a result, get paid back. So you see a little bit of a shift to that in Q3, Q4. We'd like to rinse and repeat, and we'll continue to do that where we get the opportunity. It's a great payback for Coursera. Great, thank you. Thank you, and your next question comes from the line of Jeff Silber with BMO Capital Markets. Jeff, your line is open. Thanks so much.

Ken Ken: Where we get the opportunity, it's a great payback for Coursera.

Speaker Change: Great. Thank you.

Speaker Change: Thank you and your next question comes from the line of Jeff Silber with BMO capital markets. Jeff Your line is open.

Jeffrey Marc Silber: Thanks, So much I was intrigued when you talked about the partnership you are having within New York State Department of Labor.

Matthew Sheldon: I was intrigued when you talked about the partnership you're having with the New York State Department of Labor. Are there any other states thinking of doing what you're doing there? It sounds like a really interesting. Yeah, thanks, Jeff. We are certainly talking to many states about this, and if you just read, obviously, if you read the news and you hear what's happening in terms of perceptions of college, the ROI of buying a college degree, state funding of state schools, and also the need for services for big portions of the population that are being displaced and left behind, this kind of a program that says, look, we'll put something at scale and efficient to people who need upskilling, and we will also create pathways to make more relevant and affordable the degrees that are being offered, especially for state institutions.

Are there any other state thinking of doing what youre doing there it sounds like a really interesting initiatives.

Speaker Change: Yeah. Thanks, Jeff.

Jeffrey Marc Silber: We are certainly talking to many states about this and just obviously if you read the news and you hear what's happening in terms of perceptions of college, the ROI of buying a college degree state funding of state schools and also the need for services for big portions of the population that are being displaced in left behind this.

Jeffrey Marc Silber: Kind of a program that says look we'll put something at scale.

Jeffrey Marc Silber: Inefficient to people who need upskilling.

Jeffrey Marc Silber: And we will also create pathways to make more relevant and affordable.

Jeffrey Marc Silber: <unk> that are being offered especially for state institutions, we're seeing a lot of interest in it and by the way it's not just in the U S. In Kazakhstan, I think I might have mentioned a few quarters ago, we see we see national governments buying coursera for campus licenses.

Matthew Sheldon: We're seeing a lot of interest, and by the way, it's not just in the U.S. In Kazakhstan, I think I might have mentioned a few quarters ago, we see national governments buying Coursera for campus licenses and giving them to public and private universities throughout the country. We also mentioned the University of Texas system, which is not yet tied up with the Department of Labor there, but you can see state by state, sometimes with educational systems, sometimes with the government, often in collaboration, putting these systems together.

Jeffrey Marc Silber: And giving them to public and private universities throughout the country. We also mentioned the University of Texas system.

Jeffrey Marc Silber: Which is not yet tied up with the department of labor, there, but but you can see state by state, sometimes with educational system, sometimes with the government oftentimes in collaboration putting together. These systems, what I think is really I mean, there's.

Matthew Sheldon: And what I think is really, I mean, there's a lot of things exciting about it, but one of the things that's really great is that there's been a real challenge. You talk to almost anybody in government who recognizes that higher education systems are not fully meeting the needs of either students or employers, and then you say, well, how do you help an entire system adapt quickly to the new needs of employers and the new needs of students? Educational institutions are not highly adaptive; they're just not built that way.

Jeffrey Marc Silber: A lot of things, it's I think about it but one thing that's really greatest theres been a real challenge you talked to almost anybody in government, who recognizes that higher education systems are not fully meeting the needs of either students or employers.

Jeffrey Marc Silber: And then you say well how do you help an entire system adapt quickly to the new needs of employers and the new needs of students.

Jeffrey Marc Silber: Educational institutions are not highly adaptive, but let's just not built that way being able to bring an industry certificates via a credit recommendation system with an existing entity like in ACP AACE or in ECS or working in Saudi Arabia were working UAE, we're working in India country after country after country.

Matthew Sheldon: Being able to bring in industry certificates via a credit recommendation system with an existing entity like an ACE or an ECTS, or we're working in Saudi Arabia, we're working in the UAE, we're working in India, country after country after country is working on this pattern. And I think it's going to be, in India, for example, something called the National Skills Qualification Framework, which sits under the new education policy, the NEP. NASSCOM is the designated body that actually does the IT accreditation to see if it hits the standards of the National Skills Qualification Framework.

Jeffrey Marc Silber: Is working on this pattern.

Jeffrey Marc Silber: And I think it's going to be big in India. For example is something called the national skills qualification framework, which sits under the new education policy. The NDP Nasscom is the designated body that actually does the.

Jeffrey Marc Silber: Accreditation to see if it is the standard of the national skills qualification framework and then the Indian policy is something called <unk>, which is the academic bank of credit to make college credits mobile.

Matthew Sheldon: And then the Indian policy has something called ABC, which is the Academic Bank of Credit to make college credits mobile for a doubling, what they expect to be a doubling of the number of people in college in India, from 35 million to 70 million. So this is something that's happening well beyond New York, well beyond states in America. I believe this is going to be a global phenomenon. Okay, that's really helpful.

Jeffrey Marc Silber: A doubling what they expect to be a doubling of the number of people in college in India from 35 million to $70 million.

Jeffrey Marc Silber: So this is something thats happening well beyond New York well beyond States in America.

Jeffrey Marc Silber: I believe this is going to be a global phenomenon.

Speaker Change: Okay, that's really helpful.

Ken Han: And my second question, I guess it has to do with the change in definition of free cashflow. You talk about, and I'm just reading from your remarks, in certain arrangements, we will help fund the production of courses and credentials in exchange for more attractive economics, as well as exclusivity on your platform. How common is this?

Speaker Change: And my second question.

Speaker Change: I guess it has to do with the change in definition per week free cash flow you talk about and I was just reading from your remarks will certain arrangements. We will help fund the production of courses and credentials in exchange for more attractive economics as well as exclusivity on your platform.

Speaker Change: <unk> commented that what segments or this thing in.

Ken Han: You know, what segments are these in? And should we expect gross margins to potentially go up as you move towards more? Hi Jeff. This is Ken Hahn.

Speaker Change: Should we expect gross margins to potentially go up as you move towards more of these arrangements.

Hi, Jeff.

Ken Hahn: This is Ken Hahn.

Ken Han: So yes, we are starting to see more opportunity there with some of our partners. A lot of it has been on the tech side, and it's highly attractive content. It's content that's our bread and butter.

Ken Hahn: <unk>.

Ken Hahn: No.

Ken Hahn: So yes, we are starting saved more opportunity there with some of our partners.

Ken Hahn: Lot of it has been on the tech side, and it's highly attractive content its content, that's our bread and butter.

Ken Han: And so we do seek to do more of those as our partners, certain partners, appreciate the relationship. If those continue to increase as a percent of the total, obviously, they'll drive the margin higher. And, you know, in some instances, these are 70 or 80%, and some of them are pure margin. It depends on the individual relationship and how much we're funding and the proprietary. I wouldn't bake anything in from an increased standpoint, but we are seeing more interest.

And so we do seek to do more of those as our partners certain partners appreciate doing the relationship if those continue to increase as a percentage of total obviously they will drive the margin higher and in some instances. These are 70 or 80% and some of them. It's pure margin it depends on the individual relationship and how.

Ken Hahn: We're funding in.

Ken Hahn: And the proprietary I wouldn't bake anything in from an increased standpoint, but we are seeing more interest and again back to the free cash flow comment that's exactly what that is is that setting aside funds. So we're excited to do as many of those as our partners want to we don't need to if we do it'll have a salutary effect on the gross margins.

Ken Han: And again, back to the free cash flow comment, that's exactly what that is. It's us setting aside funds. So we're excited to do as many of those as our partners want to, but we don't need to.

Ken Han: If we do, it'll have a salutary effect on gross margins. And again, we'll do those deals all day long. And I would add, you know, I mentioned in the script the platform certification from ACE. We see this fundamental pattern around these pathway degrees happening state by state across countries. And we know that working with institutions is a big part of that. We are trying to institutionalize know-how The know-how of, you know, what does the professional certificate look like? Which ones do you want?

Ken Hahn: And again, we will do those deals all day long and I would add and I mentioned in the script the platform certification from AC a lot. We see this fundamental pattern around these pathway degrees happening state by state around countries and we know that working with institutions is a big part of that we are trying to institutionalize.

Ken Hahn: The Knowhow the know how of what does the professional certificate look like which ones do you want who do you want to get them from what's the basic structure of these things how do you build them.

Matthew Sheldon: Who do you want to get them from? What's the basic structure of these things? How do you build them?

Matthew Sheldon: I am seeing, and we are seeing now, the ability to use generative AI tools to produce these certificates at the same quality level much more quickly and less expensively. But there's a lot of know-how that's required to do that. There's know-how in the people, the processes, the tools, and also the underlying platform, which ACE has done a review of and said, look, this platform has the capabilities to protect academic integrity and ensure certain levels of rigor. So institutionalizing that know-how, I think, will give us certain advantages in terms of competitive advantages as well as scale advantages that Ken's talking about that will cause us to want to lean into this more and Okay, really helpful. Thanks so much.

Ken Hahn: I am seeing we are seeing now the ability to use generative AI tools to produce these certificates at the same quality level much more quickly.

Ken Hahn: And less expensively.

Ken Hahn: But theres a lot of know how those required to do that theres knowhow and the people the processes. The tools and also the underlying platform, which AACE has done a review and said look this platform has capabilities to predict academic integrity and ensure certain levels of rigor. So institutionalizing that knowhow I think will give us certain advantages in terms of competitive advantages as well as scale.

Ken Hahn: <unk> talking about that will cause us to want to lean into this more and more.

Speaker Change: Okay really helpful. Thanks, so much sure.

Speaker Change: Thank you.

Operator: Your next question comes from the line of Rishi Jaluria with RBC Capital Markets. Oh, wonderful. Thanks so much for taking my questions.

Speaker Change: Question comes from the line of Rishi Galeria with RBC capital markets. We see your line is now open.

Rishi Galeria: Wonderful. Thanks, so much for taking my questions nice to see.

Matthew Sheldon: It's nice to see continued strength in the business and the crossover to pre-castle positive. I want to maybe go back to thinking about the enterprise side, because we're now starting to see the first signs of job disruption or maybe even potential job losses as a result of AI. It still feels like enterprises are not taking reskilling and upskilling as seriously as they need to, maybe asking the same question in a different way.

Rishi Galeria: <unk> strengthened the base and the cross sells I got free cash flow positive.

Rishi Galeria: Maybe go back to thinking about the enterprise side.

Rishi Galeria: We're now starting to see the first signs of job disruption or maybe even potential job losses as a result of AI.

Rishi Galeria: So it feels like enterprises are not taking reskilling and upskilling as seriously as they need to maybe asking it kind of same question in a different way.

Matthew Sheldon: What do you have in your power to kind of make that message resonate deeper within actual enterprises that there is a sense of urgency around this, given, you know, it's going to start with jobs, but it's probably going to be entire industries that will get disrupted as a result of this? And then I've got a quick follow-up. Yeah, so Rishi, I think you're on to it. I think there is urgency. I mean, you look out there; everyone's talking about it.

Rishi Galeria: What are you having your power.

Make that message resonate.

<unk> actual <unk>.

Rishi Galeria: As an emergency around this given.

Rishi Galeria: With jobs, but it's probably going to be entire industries that will get disrupted as a result of this and I've got a quick follow up.

Speaker Change: Yes, so I think you're onto it I think I think there is urgency I think.

Speaker Change: You look out there everyone's talking about it everyone is doing something I think there's not clarity people just the executives don't really know what to do on this question of impact on labor market.

Matthew Sheldon: Everyone is doing something. I think that there's not enough clarity. People just, the executives don't really know what to do on this question of impact on the labor market. You know, over a long period of time, we have tried to position ourselves in terms of our business model structure. We want to make sure that we can serve institutions that need to reskill and upskill their employees, but we also want to upskill and reskill individuals. There's this question of separation that you're sort of identifying, which some companies are going to say, we don't need 1,000, 2,000, 5,000 employees that are currently with us today. So you know what? Reskilling is not really going to be our problem.

Speaker Change: We are.

Speaker Change: Over a long period of time, we have tried to position ourselves in terms of our business model structure.

Speaker Change: We wanted to make sure that we can serve institutions, who need to reskill and upskill their employees.

Speaker Change: But we also want to Upskill and Reskill individuals'. There's this question of separation.

Speaker Change: You're sort of identifying which is some companies are going to say, we don't need one.

Speaker Change: 2000, 5000 employees that are currently with US today. So you know what re scaling it is not really going to be our problem. We want to reschedule the people who stay at our company not the people who separate from our company.

Matthew Sheldon: We want to reskill the people who stay at our company, not the people who separate from our company. I think there's going to be two main types of tailwinds that are going to hit us, I think. But again, this is really hard for us, for any of us to really know. I think there is going to be a part which is serving institutions that will invest in their current and future employees and say, if I really want to improve the innovation and the quality of services I can deliver to my customers and improve the productivity of those employees who remain in my organization, I'm going to have to educate them to do that. But then I think there could be a consumer piece of this, too, for all the employees who want to separate. They're going to separate because their careers have been largely affected and substantially automated. You're not going to go to some other company and get the same job that you just lost.

Speaker Change: I think theres going to be kind of two main types of tailwind as theyre going to hit US I think but again. This is really hard for us to any of us to really know I think there is going to be.

Speaker Change: Part, which is serving institutions, who will invest in their current and future employees.

Speaker Change: You say, if I really want to improve the innovation and the quality of services delivered to my customers and improve the productivity of those employees, who remain in my organization I am going to have to educate them to do that.

Speaker Change: But then I think there could be a consumer piece of this too for all the employees who separate.

Speaker Change: Theyre going to separate because their careers had been largely impacted and substantially automated.

Speaker Change: Youre not going to go to some other company and get the same job that you just lost youre going to have to learn something new and get some new career, because those job prospects are not going to be very attractive on the open job labor market.

Matthew Sheldon: You're going to have to learn something new and get some new career because those job prospects are not going to be very attractive in the open job labor market. We are hopeful that a lot of those impacted employees will be able to, wherever you are in the world, whatever language you speak, you can come to Coursera, you can start with a professional certificate in the language of your choice, and you can explore multiple job opportunities that are still in high demand that don't require a college degree or any prior work experience, which is a defining characteristic of the way we've designed these with our partners. You can take these programs online to help you get into a new career, and continue on and get a college degree.

Speaker Change: Are hopeful that a lot of those impacted employees will be able to wherever you are in the world. Whatever language. You speak you can come to Coursera you could start with the professional certificate in the language of your choice you can explore multiple job opportunities that are still in high demand that don't require will require a college degree or any prior work experience, which is the <unk>.

Speaker Change: Finding characteristics of the way we've designed these with our partners you can take these programs online how do we get into a new career and continue on and get a college degree.

Matthew Sheldon: So I think there might be two major plays here. There's the re-skilling among existing and future employees, and maybe also re-skilling in the consumer segment for those people who are really disrupted. And I don't know the percentage, but I can tell you this.

There might be two major players here theres, the reskilling among future existing and future employees and maybe also re skilling in the consumer segment for those people who are really disrupted I don't know the percentage, but I can tell you. This well according to Mckinsey and a lot of people I'm talking to.

Matthew Sheldon: Well, according to McKinsey and a lot of people I'm talking to, there are certain kinds of jobs, like software engineering, where the job is going to be impacted by software, by generative AI. But at least, according to McKinsey and others I hear from, there's still going to be an increased demand for those skills and those jobs. On the other hand, you can look at customer operations. That's also a job type that's going to be impacted by generative AI. But unlike software engineering, it will result in a decrease in labor market demand for those types of jobs.

Speaker Change: There are certain kinds of jobs like software engineering, where the job is going to be impacted by software.

Speaker Change: By General AI, but at least according to Mckinsey and others I hear from Theres still going to be a demand for the increased demand for those skills and those jobs on the other hand, you can look at customer operations.

Speaker Change: That's also a job type thats going to be impacted by a generative AI, but unlike software engineering. It will result in a decrease in labor market demand for those types of jobs. So even among jobs that will be impacted by generative AI for some it will have an overall net negative impact on labor market demand on others and what Mackenzie says.

Matthew Sheldon: So even among jobs that will be impacted by generative AI, for some, it will have an overall net negative impact on labor market demand. On others, and what McKinsey says is there are data scientists and computer scientists, they expect there will still be increasing demand for those jobs. We'll see how it shapes out, but I think, as Ken said in his script, change creates opportunity. Whether it's an opportunity or a threat depends on whether you have access to education and the ability to actually skill yourself for the new opportunities that emerge. All right, wonderful. That's really helpful.

Data scientist and computer scientists, they expect still to be increasing demand for those jobs will see how it shapes out, but but I think because as Ken said in his script change creates opportunity, whether whether it's an opportunity or a threat depends on whether you have the access to education and the ability to actually scale yourself into the new opportunities that emerge.

Speaker Change: Wonderful that's really helpful. And then maybe just quickly sticking on the enterprise segment, moving a little bit.

Matthew Sheldon: And then maybe just quickly sticking with the enterprise segment, but moving a little bit to the government side. I guess, you know, if you've gone abroad and talked to, you know, different governments, what is the level of the willingness to not only adopt these solutions but to kind of bring about, you know, countrywide sponsorship of these, right? So it's not just solutions targeted at government employees but at the wider citizenry. I know you've had some success with that prior, but again, thinking about the kind of disruption to society coming from AI, how have those conversations with government agencies and that use case evolved? Thanks. Yes, sure. You know, if academic institutions are not built for adaptability, you know, government institutions are also generally on the slower side to adapt.

Speaker Change: Government side.

Speaker Change: I think on a broad and possibly.

Speaker Change: Different government, what's kind of the willingness to not only adopt these solutions to kind of bring about.

Speaker Change: Countrywide sponsorship.

Speaker Change: Right. So it's not just solutions targeted at government employees at the wider citizens I know you've.

Speaker Change: A lot of success with that prior but again to kind of the disruption of the society coming from AI, how have those conversations with government agencies.

Speaker Change: This case involves thanks, yes.

Speaker Change: Yes sure.

Speaker Change: If academic institutions are not built for adaptability.

Speaker Change: Government to government institutions also are generally on the slower side too to adapt.

Matthew Sheldon: That being said, there are a lot of countries, particularly with younger populations, who are realizing that there are almost two paths. If you do invest in education and upgrade your educational system, given the globalization of talent and the ability for people in your country to work for companies domiciled in other countries, there could be pretty good job prospects for young people if they get the skills and if you can up-level these educational systems. On the other hand, if you don't do that, and you have a lot of young people in your country, if those young people are not facing good economic prospects, it becomes a problem. So what I've been seeing is generally in smaller countries with younger populations, lower general disposable income, but an upwardly mobile middle class, and this is Southeast Asia, this is India, this is Africa, this is certain parts of Latin America. We see governments more receptive and interested in moving more quickly. In more established countries that are a little bit wealthier with older populations, think Europe, it's been the slowest.

Speaker Change: That being said there are a lot of there are a lot of countries, particularly with younger populations who are realizing.

Speaker Change: There's almost two paths if you if you do invest in education and upgrade your educational system, given the globalization of talent and the ability for people in your country to work for company is domiciled in other countries there could be pretty good job prospects for young people if they get the skills and if you can up level. These educational systems.

Speaker Change: On the other hand, if you don't do that.

Speaker Change: And you have a lot of young people in your country.

Speaker Change: Young people are not facing good economic prospects it becomes a problem. So what I've been seeing is generally in smaller countries with younger populations lower general disposable income, but an upwardly mobile middle class and this is southeast Asia. This is India. This is Africa, there's a certain parts of Latin America, we see.

Speaker Change: Governments more receptive and interested in moving more quickly and more established older more established countries that a little bit wealthier with older populations think Europe. It has been the slowest and frankly in North America has really come along in the second half of 2023. So.

Matthew Sheldon: And frankly, North America has really come along in the second half of 2023. So we're seeing some pretty nice innovation in North America, and I think there are a lot of people on both sides of the political spectrum saying, we need to create a better value proposition for Americans who are trying to get good access to jobs in a world that's changing and frankly should not have to pay so much and spend so much time trying to get a traditional degree. So there is a pretty wide spectrum out there.

Speaker Change: Seeing some pretty nice innovation in North America, and I think Theres, a theres a lot of people on both sides of the political spectrum, saying, we need to we need to create a better value proposition for Americans, who are trying to get good access to jobs and the world is changing and frankly should not have to pay so much and spent so much time trying to get.

Speaker Change: Traditional degree so it's a pretty wide spectrum out there.

Speaker Change: Wonderful thank you.

Matthew Sheldon: Your next question comes from the line of Terry Tillman with Truist Security. Yeah, thanks for taking my questions and, uh... Yeah, I'm sorry, can you hear me?

Speaker Change: Yes.

Speaker Change: Thank you. Your next question comes from the line of Terry Tillman with Truth Securities.

Terry Tillman: Yes, thanks for taking my questions.

Terry Tillman: Yes, I'm sorry can you hear me.

Operator: Yeah. Go ahead. Hi, Terry.

Terry Tillman: Yeah, Hi, Eric Thank you.

Ken Han: Okay, thanks. Solid job on the corner here in the Outlook. I guess the first question, Ken, for you is the multi-parter in terms of, appreciate all the color on the purchase of content assets, and it sounds like there's a strategic rationale for that. $5 million, I think you said in 23.

Terry Tillman: Okay. Thanks.

Terry Tillman: Solid job on the quarter here and the outlook I guess first question Ken for you is the multi partner in terms of.

Terry Tillman: Appreciate all the color on the purchase of content assets and it sounds like Theres, a strategic rationale for that $5 million. I think you said in 'twenty three any sense on what that could look like in 'twenty four and then on the Gen. AI kind of course is there anything you can share about the materiality now of revenue being generated from the G&A I content offer.

Ken Han: Any sense of what that could look like in 24? And then, you know, on the Gen AI kind of courses, anything you can share about, you know, the materiality now of revenue being generated from the Gen AI content, and then I have a follow-up for Jeff. So, perfect.

Yep.

Speaker Change: So perfect in fact, I'll, let Jeff answer your second question embedded there.

Ken Han: In fact, I'll let Jeff answer your second question embedded there. Regarding the content assets and the $5 million, we spent this last year as we announced this transition. Next year, this coming year, the year we're in, we expect to see roughly $20 million. That's what we're budgeting today. We'll see if we can produce it less expensively.

Jeffrey Marc Silber: In regards to the content assets and the 5 million. We spent this last year as we announced this transition.

Jeffrey Marc Silber: Next year, this coming year, and the year, where I'm, sorry, we expect to see.

Jeffrey Marc Silber: Roughly $20 million, that's why we're budgeting today.

Jeffrey Marc Silber: We'll see if we can produce it less expensive labor jeffs points before with the <unk>.

Ken Han: To Jeff's points before, with the scaling we're getting there, but I would hope we can invest that amount of money because, again, it's a great deal. So going from $5 million to $20 million, that number becoming material is the reason we changed the definition. It made us look at it. Again, it works against us. It makes the number lower, but it's actually, in our minds, more accurate.

Jeffrey Marc Silber: Scaling we're getting there but.

Jeffrey Marc Silber: I would hope we can invest that money because again thats great deal so going from 5 million to 20 in that number becoming material is the reason we changed the definition. It made us look at it again it works against US It makes the number lower but it's actually in our mind more accurate <unk>.

Matthew Sheldon: It will track EBITDA closer. And we're going to have a great year this coming year from a free cash flow standpoint, as we forecasted that, and EBITDA, we're quite pleased with. Yeah, in terms of the Genitive AI courses, you know, we're certainly seeing a lot of demand for those, Terry. We had one enrollment per minute in 2023 on average.

Jeffrey Marc Silber: Track EBITDA closer and we're going to have a great year. This coming year from a free cash flow standpoint, as we forecasted that in the EBITDA, we're quite pleased with so yeah.

Jeffrey Marc Silber: And then two in terms of the degenerative AI courses.

Jeffrey Marc Silber: We are certainly seeing a lot of demand for those Terry we had one enrollment per minute in 2023 on average and if you look at enrollments.

Matthew Sheldon: And if you look at enrollments in Genitive AI, if you look at enrollments in January of 2024 in Genitive AI, they're four and a half times higher than the number of Genitive AI enrollments in June of 2023. So we are seeing a lot of demand. And this is on the consumer side. I would say, you know, enterprises are trying to figure out what to do. I mean, and I think what's going to happen is once they start kind of getting their bearings, they're going to really ramp up. When we think about what kinds of Genitive AI content is producing the biggest results, I mean, Andrew Ng, we said in the script, he's got Genitive AI for everyone. It's kind of of almost public interest. What are these stuff?

Jeffrey Marc Silber: And generative AI. If you look at enrollments in January of 2024, and generative AI. Therefore, five times higher than the number of agenda of enrollments in June of 2023. So we are seeing a lot of demand and this isn't the consumers and the consumer side I would say enterprises.

Jeffrey Marc Silber: They are trying to figure out what to do I mean, I think what's going to happen is once they start kind of getting their bearings, they're going to they're going to really ramp up when we think about what kinds of generative AI content is producing the biggest results I mean, Andrew and we said in the script is that generally AI for everyone. It's kind of almost public interest what is this stuff let me let me play.

Matthew Sheldon: Let me play around with it. I launched the course for CEOs. Now we're starting to have AI in law, AI in this. We have a number of our university partners creating domain-specific courses, which I think will be really great. One of our most popular courses started as a course from Vanderbilt University. It was called Prompt Engineering with Chat GPT from Jules White at Vanderbilt.

Jeffrey Marc Silber: Around with it.

Jeffrey Marc Silber: Onto the course for Ceos now, we're starting to have AI in law AI and this we have a number of our University partners, creating domain specific courses, which I think will be really great. One of our most popular started as of course from Vanderbilt University. It's called it was called prompt engineering, which at GPT from duals White from Vanderbilt, It's one of our.

Matthew Sheldon: It's one of our most popular courses in 2023. He followed a page out of Andrew Ng's playbook and took a popular course and turned it into a four-course specialization. Now it is a prompt engineering specialization, which is more subscription-based. That course was written up in the Wall Street Journal basically saying, if you want to double or triple your income, become a prompt engineer. And so a lot of people are coming in and taking it. I mean, it's kind of the nature of what's happening.

Jeffrey Marc Silber: Most popular courses in 2023 key followed a page out of Andrew and his playbook and took US a popular course and turned it into a four course specialization. So now it is a prompt engineering specialization, which is more subscription based and.

Jeffrey Marc Silber: And Theres a lot of people. There was that course was written up in the Wall Street Journal basically, saying, if you want a double or triple your income become a prompt engineer.

Jeffrey Marc Silber: And so a lot of people are coming in and taking it I mean, it's kind of the nature of what's happening I think theres going to be a really interesting wave in 2024 that might be possible, which is not just about how might be generally I create new jobs, I think theres going to be a whole how will my job being transformed.

Matthew Sheldon: I think there's going to be a really interesting wave in 2024 that might be possible, which is not just about how might be, how might generative AI create new jobs. I think there's going to be a whole, how will my job be transformed? Like, Ken is a CFO. He's still going to be a CFO, I hope, in 2024.

Jeffrey Marc Silber: Canada is the CFO he is still going to be a CFO I hope in 2024, but you're going to do his job differently and Michel our chief accounting officer going through her job differently and Kansas to his we're all going to be doing our jobs differently I think where this really starts getting interesting is not just which new jobs get created.

Matthew Sheldon: But he's going to do his job differently. And Michelle, our chief accounting officer, is going to do her job differently. And Cam's going to do his.

Matthew Sheldon: And we're all going to be doing our jobs differently. I think where this really starts getting interesting is not just which new jobs get created, but how do I need to retool for the new way I'm going to do my existing job?

Jeffrey Marc Silber: How do I need to retool for the new way I'm going to do my existing job, that's where I think youre going to see where we're going to see some really interesting opportunities.

Matthew Sheldon: That's where I think you're going to see, where we're going to see some really interesting opportunities. And we're gearing up our content engine to perform in a certain way. And, by the way, we've got a lot of generative AI tools that we're working on to be able to enhance and upgrade existing content to be generative AI ready and relevant. Helpful color.

Jeffrey Marc Silber: Gearing up our content engine to do to perform in a certain way and by the way where you really got a lot of generative AI tools that we're working on to be able to enhance and upgrade existing content to be generative AI ready and relevant.

Speaker Change: Helpful color I'll leave it at that actually thanks.

Ken Han: I'll leave it at that, actually. Thanks. Sure. Thank you, and your final question comes from the line of Ryan McDonald with Needham. Ryan, your line is open.

Speaker Change: Sure.

Speaker Change: Thank you and your final question comes from the line of Ryan Macdonald with Needham.

Matthew Sheldon: Hi. Congratulations on a quarter, and thanks for taking my question. Jeff, in one of the earlier questions, I think it was Stephen's first one on Coursera for Business and the phases we're in terms of generative AI adoption, you talked about being in this phase, too, on the experimentation side. I think it's interesting the sort of the Gen AI Academy new product launch you have associated with that. I'm curious, you know, it seems like a really great product to be able to maybe capture some demand in this experimentation phase. Just curious what you're seeing sort of in terms of initial interest in adoption for that. And does this create a sort of an upsell cross-sell opportunity for Coursera in 2024, so maybe we can start to see some of the recovery in those NRR metrics? Yeah, and that's definitely what we're thinking about.

Ryan Macdonald: Brian Your line is open.

Ryan Macdonald: Congrats on a quarter in <unk>.

Ryan Macdonald: For taking my question, Jeff and one of the earlier questions. I think it was Stephens first one on sort of coursera for business and sort of the phases. We're in in terms of generative AI adoption, you talked about sort of being in this phase two on the experimentation side.

Ryan Macdonald: I think it's interesting sort of the Gen. III Academy, New product launch you have associated with that I am curious it seems like a really great product to be able to maybe capture some demand and this experimentation phase.

Ryan Macdonald: Curious what you are seeing sort of in terms of initial interest in adoption on that and does this create sort of an up sell cross sell opportunity for <unk> in 2024th where maybe we can start to see some of the recovery in those in our metrics.

Speaker Change: Yes, and that's definitely what we're thinking about we launched the <unk> Academy has multiple pillars, we have more to come but the first two are generally out for everyone in general for <unk>.

Matthew Sheldon: You know, we launched the General AI Academy, which has multiple pillars. We have more to come, but the first two are General AI for Everyone and General AI for Execs. It's intentional why we did it that way.

Speaker Change: It is intentional why we did it that way the generally out for everyone. As you can imagine it's not about the quantity of course, everybody doesn't need to know everything everybody.

Matthew Sheldon: The General AI for Everyone, as you can imagine, it's not about the quantity of courses. Everybody doesn't need to know everything. Everybody sort of universally needs to know a few things about what it is, how it works, what the risks are, what this might mean for change, and how your job might be done differently. We are seeing, and we are predicting that Generative AI, especially for everyone, can be a way of just adding a bit more value, getting out in front of a lot more employees, becoming a lot more relevant, even before the companies know exactly It's like start by laying the foundation and readiness that things are going to be changing around here. And we're not charging a ton of money for it. To go to your question, everybody's taking the calls. Everybody wants to talk about it.

Speaker Change: Sort of universally need to know a few things about what it is how it works with the risks are what this might mean for change in how your job might be done differently. We are seeing and we are intending degenerative AI, especially with for everyone can be a way of just adding a bit more value getting out in front of a lot more employees, becoming a lot more.

Speaker Change: Irrelevant, even before the companies know exactly who needs to what skills and how will my software engineers job changes like start by laying.

Speaker Change: Laying the foundation that and readiness that things are going to be changing around here.

Speaker Change: We're not charging a ton of money for it but to your question everybody is taking the calls everybody wants to talk about it they don't Theyre not all we get organized to act on it they don't have really big budgets, yet, but I've seen saying, yes, I got $5 million for generative AI training, but everybody knows that they're going to do generative AI everybody knows the training to the important.

Matthew Sheldon: They're not all yet organized to act on it. They don't have really big budgets yet that I've seen saying, yep, I got $5 million for Generative AI training, but everybody knows that they're going to do Generative AI. Everybody knows that training is going to be important, and they're trying to figure out how to structure it. What should the design look like? What kind of courses? What kinds of skills

Speaker Change: And Theyre trying to figure out how do you structure at what we consider the design look like what kind of courses what kinds of skills and so we'll be figuring that out. So I would say early I think it will help with retention I think there will be some upsell.

Matthew Sheldon: We'll be figuring that out. I would say early; I think it'll help with retention. I think there will be some upsell, but again, where it will be really interesting is when you can say, these specific job roles with these specific skills taught in these courses and these hands-on labs will unlock this kind of business productivity and leverage for your company. That's where I think it's going to get more interesting, and we're not there yet. Fall. Maybe as a follow-up quick for Ken, in the prepared remarks, I'm talking about the consumer segment here, it was noted that nearly 7 million enrollments came in for the AI courses in 2023. Can you talk about how many of those were sort of roughly net new enrollments to Coursera and then, in that context, how you're thinking about sort of that 20% growth algorithm between sort of new enrollments coming to the platform versus sort of maybe higher conversion rates in 2040? Yeah, Ryan. I don't have that data in front of me, that breakdown between new and existing. Generally, with new courses, it's bringing people in from the outside more, but I don't have that. I'd be happy to share it with you after, assuming we can find it. I don't think it's material, non-public information.

Speaker Change: Again, where it will be really interesting is when you can say these specific job roles with these specific skills taught by these courses and these hands on labs will unlock this kind of business productivity and leverage for your company. That's why I think it's going to get more interesting and we're not there yet.

Speaker Change: Super helpful and maybe as a follow up quick for Ken.

Speaker Change: In the prepared remarks Im talking about the consumer segment here. It was noted that nearly 7 million enrollments came in for the AI courses. In 2023 can you talk about how many of those were sort of roughly net new enrollments to Coursera and then in that context, how that how youre thinking about sort of that 20%.

Speaker Change: Both algorithm between sort of new enrollments coming to the platform versus sort of maybe higher conversion rates.

Speaker Change: 24.

Speaker Change: Yes, Brian I don't have that data in front of me that that breakdown between new and existing generally with new courses, it's bringing people in from the outside.

Speaker Change: More but I don't have that I'd be happy to share with you after assuming we can find it.

Speaker Change: Don't think its material nonpublic information.

Ken Han: It's a good question, and I don't know the answer, but I'll find that for you, and you can... Yeah, so I got the statistics. You had time to look it up. I did. There's a metric that we track internally, and I'm not going to get into that... Obviously, Cam is glaring at me right now, but there's a metric called first-time payers. So this is someone who came to the platform and paid for the first time. If you look at that quarter-on-quarter throughout 2023, the percentage year-on-year growth is quite a bit higher in Q4 than it was in Q3, which is quite a bit higher than it was in Q1. So hopefully that reflects. I can't tell you for sure that that was generative AI courses, but we are seeing a higher year-on-year rate of growth in first-time payers on platform, given its new topic.

It's a good question and I don't know the answer but I'll find that for you and you can yes.

Speaker Change: I've got the statistic.

Speaker Change: Ton look it up I did it.

Speaker Change: There is a metric that we track internally and I'm not going to obviously.

Speaker Change: Cam is glaring at me right now, but there is a metric called first time Payors. So this is someone who came to the to the platform and paid for the first time, if you look at that quarter on quarter throughout 2023.

Speaker Change: The percentage year on year growth is quite a bit higher in Q4 than it was in Q3, which is quite a bit higher than it was in Q1. So hopefully that reflects I can't tell you for sure that that was generally the AI courses, but we are seeing higher up year on year rate of growth in first time Paraison platform.

Speaker Change: Helpful. Given its new topic, it would make sense.

Ken Han: Yeah. Yeah. All right, great. Thanks, Ryan. That wraps today's Q&A. A replay of this webcast will be available on our Investor Relations website along with a transcript in the next 24 hours. Thank you. Ladies and gentlemen, that concludes today's call. Thank you for joining us. You may now disconnect.

Speaker Change: Alright, great. Thanks, Ryan that wraps today's Q&A a replay of this webcast will be available on our Investor Relations website, along with the transcript in the next 24 hours. Thank you.

Speaker Change: Ladies and gentlemen that concludes today's call. Thank you for joining you may now disconnect.

Speaker Change: Okay.

Speaker Change: Yeah.

Speaker Change: Yes.

Speaker Change: Yeah.