Q1 2024 Coursera Inc Earnings Call

Operator: Ladies and gentlemen, thank you for standing by, and welcome to Coursera's first quarter 2024 earnings call. At this time, all participants are in a listen-only mode, and please be advised that this call is being recorded. 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 the star followed by the number one on your telephone keypad. If you would like to withdraw your question, again, press star 1. I'd like to turn the call over to Cam Carey, Head of Investor Relations. Mr. Carey, you may begin.

Ladies and gentlemen, thank you for standing by and welcome to Coursera is first quarter 2024 earnings call at.

At this time all participants are in a listen only mode and please be advised that this call is being recorded.

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

So I'd like to ask a question. During this time. Please press star followed by the number one on your telephone keypad.

I'd like to withdraw your question.

Again press Star one.

I'd like to turn the call over to Cam Kerry.

Cam Kerry: Head of Investor Relations.

Cam Kerry: Mr. Kerry you may begin.

Cam Carey: Hi, everyone, and thank you for joining our Q1 2024 earnings conference call. With me today is Jeff Maggioncalda, Coursera's Chief Executive Officer, and Ken Hahn, our Chief Financial Officer.

Cam Kerry: Hi, everyone and thank you for joining our Q1 2024 earnings conference call with me today is Jack 19 call that of course, there are chief Executive Officer, and Ken <unk>, Our Chief Financial Officer.

Cam Carey: Following their prepared remarks, we will open the call for questions. Our press release, including financial tables, was issued after the market closed and is posted on our investor relations website, 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 financial measures. A reconciliation of non-GAAP measures to the most directly comparable GAAP measure can be found in today's press release and supplemental presentation, which are distributed and available to the public through our Investor Relations website. Please note that all growth percentages refer to year-over-year change unless otherwise specified.

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

Cam Kerry: A press release, including financial tables.

Cam Kerry: After market closed and posted on our Investor Relations website, located at Investor <unk>, Coursera Dot com, where this.

Cam Kerry: This call is being simultaneously webcast and more versions of our prepared remarks and supplemental slides are available.

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

Cam Kerry: Please note all growth percentages refer to year over year change unless otherwise specified. 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: Additionally, all statements made during this call relating to future results and events are forward-looking statements based on current expectations and beliefs. These forward looking statements include, but are not limited to, statements regarding the potential impacts of trends affecting our industry and business and factors affecting the same, the anticipated benefits and impact of our strategic assets and platform advantages, including our AI and machine learning initiatives and offerings, our ecosystem, platform, content, and partner relationships, our anticipated plans, and the anticipated advantages and benefits thereof, our strategy and priorities, our share repurchase program and cash and capital allocation, and our vision, business model, mission, and goals.

Cam Kerry: These forward looking statements include but are not limited to statements regarding the potential impacts of trends affecting our industry and business and factors affecting the same <unk>.

Dissipated benefits and impact of our strategic assets and platform advantages, including our AI and machine learning initiatives and offerings, our ecosystem platform content and partner relationships are anticipated plans any anticipated advantages and benefits thereof, our strategy and priorities, our share repurchase program and cash and capital allocation and our vision business.

Cam Carey: and our vision, business model, mission, opportunities, outlook, financial, business, and otherwise, and future intentions. However, 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. These forward-looking statements are not guarantees of future performance or plans, and investors should not place undue reliance on them. We assume no obligation to update our forward-looking statements except as required by law. And with that, I'd like to turn it over to Jeff.

Cam Kerry: Model mission opportunities outlook financial business, and otherwise and future intentions.

Cam Kerry: 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.

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

Cam Kerry: We assume no obligation to update our forward looking statements, except as required by law and with that I'd like to turn it over to Jeff.

Jeffrey Nacey Maggioncalda: Thanks, Cam, and welcome, everyone. It's great to be with you all.

Jeff: Thanks, Kim and welcome everyone, it's great to be with you all.

Jeffrey Nacey Maggioncalda: In Q1, we continue to make progress across our business as we navigate a dynamic environment and evolving education landscape. We welcomed nearly 7 million new learners. We expanded our catalog offerings with new professional certificates, pathway degrees, and generative AI content. We made significant progress on getting our latest AI-powered product innovations into the hands of our learners and enterprise customers. And we grew revenue 15% over the prior year period while generating more than $8 million in adjusted EBITDA and $18 million of free cash flow. However, our first quarter revenue was lighter than we anticipated.

Jeff: In Q1, we continued to make progress across our business as we navigate a dynamic environment and evolving education landscape.

Jeff: We welcomed nearly 7 million new learners, we expanded our catalog offerings with new professional certificates pathway degrees and generative AI content.

Jeff: We made significant progress on getting our latest AI powered product innovation into the hands of our learners and enterprise customers and we grew revenue 15% over the prior year period, while generating more than $8 million and adjusted EBITDA and $18 million of free cash flow.

Jeff: Our first quarter revenue was lighter than we anticipated.

Jeffrey Nacey Maggioncalda: We are seeing softness in our North American paid learners, which has an outsized impact on our in-quarter results and future performance given their higher monetization rate. Ken will discuss the dynamics in more detail, as well as the implications on our outlook for the year. That said, our focus on branded, job-relevant credentials continues to resonate with the individuals and institutions that we serve, and I continue to see signs that the ecosystem that we've assembled—these learners, universities, educators, businesses, and governments all around the world have put Coursera in the right position to help solve the fast-changing demands of the labor market and education system. So let me start with an update on how we see these global trends evolving.

Jeff: We are seeing softness in our north American paid learners, we should have an outsized impact on our in quarter results and future performance given their higher monetization rates tenable.

Jeff: Ken will discuss the dynamics in more detail as well as the implications on our outlook for the year.

Jeff: That said our focus on branded job relevant credentials continues to resonate with the individuals and institutions that we serve.

Ken: And I continue to see signs that the ecosystem that we've assembled.

Ken: Learners universities educators businesses and governments all around the world have quick coursera in the right position to help solve the fast changing demands of the labor market and education system.

Ken: So let me start with an update on how we see these global trends evolving.

Jeffrey Nacey Maggioncalda: The first trend is digital transformation. For many years, the combined forces of technology and globalization have accelerated the transformation of nearly every institution in our society. It's been more than a year since the remarkable capabilities of generative AI mesmerized the world. Early concerns about this technology reflected challenges the world experienced in 2020, including its potential to disrupt local economies and educational systems, displace millions of workers, and demand new types of skills that risk further widening the digital divide. We believe that the lasting impact of the pandemic was an accelerated pace of change across every facet of society.

Ken: The first trend is digital transformation.

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

Ken: More than a year since the remarkable capabilities of generative AI mesmerize the world.

Ken: Early concerns about the technology reflected challenges the world experienced in 2020, including its potential to disrupt local economies and educational systems displace millions of workers and demand new types of skills that risk further widening the digital divide.

Ken: We believe that the lasting impact of the pandemic with an accelerated pace of change across every facet of society.

Jeffrey Nacey Maggioncalda: But unlike the pandemic, which served as a catalyst to force digital adoption overnight, we remain in the early stages of understanding how the next generation of AI will reshape the way we live, learn, and work. Research by the University of Pennsylvania estimates that up to half of all tasks for half of all job roles could eventually be automated. But today, I believe that the vast majority of organizations are only experimenting with the technology and are generally overwhelmed and paralyzed by what they see coming and how to respond to it.

Ken: But unlike the pandemic, which served as a catalyst to fourth digital adoption overnight.

Ken: We remain in the early stages of understanding how Jonathan AI will reshape the way, we live learn and work.

Ken: Research by the University of Pennsylvania estimate without the half of all tasks for half of all job roles could eventually be automated.

Ken: But today I believe that the vast majority of organizations are only experimented with the technology and are generally overwhelmed and paralyzed by what they see coming and how to respond to it.

Jeffrey Nacey Maggioncalda: Companies, universities, and governments are looking for mission-critical use cases and best practices to emerge that correctly balance the risks with the opportunities of generative AI. We believe the key to navigating this conundrum lies in high-quality education and training, talent agility, and effective change management, enabling companies to adopt generative AI both quickly and safely. Coursera itself has been navigating this generative AI conundrum, and I'm excited to share that earlier this month, Harvard Business School released a case study titled Coursera's Foray into Gen AI, illustrating how Coursera responded to the opportunities and threats created by generative AI.

Ken: Companies universities and governments are looking for mission critical use cases, and best practices to emerge that correctly balance the risks with the opportunities of generative AI.

We believe the key to navigating this conundrum lies in high quality education and training.

Ken: Agility and effective change management, enabling companies to adopt generative AI, both quickly and safely.

Ken: <unk> itself has been navigating this generative AI conundrum and I am excited to share that earlier. This month Harvard business School released the case study titled Coursera is foray into Gen. AI illustrating how <unk> responded to the opportunities and breath created by generative AI.

Jeffrey Nacey Maggioncalda: To our knowledge, this is the first case study of its kind by a top global academic institution, and it sets Coursera as a thought leader and introduces higher education to the generative AI capabilities that Coursera is now offering. We believe that market pressures will eventually force institutions to take action or face the risk of being left behind, but leaders today are still grappling with how to make the leap from experimentation to implementation.

Ken: To our knowledge. This is the first case study of its kind by a top global academic institution and it sets a coarse ore as a thought leader and introduces higher education to the degenerative AI capabilities that Coursera is now offering.

Ken: We believe that market pressures will eventually force institutions to take action or face the risk of being left behind but leaders today are still grappling with how to make the leap from experimentation to implementation.

Jeffrey Nacey Maggioncalda: Access to affordable, relevant, and high-quality education and training will help ensure that global talent has equal access to the skills, credentials, and job opportunities that they need to stay relevant and compete in our fast-changing world. This brings me to the second major trend, which is skills development. Accenture, a longtime industry partner and customer, published a report in January on generative AI's impact on the workforce, surveying thousands of CXOs and more than 5,000 employees.

Ken: Access to affordable relevant and high quality education, and training will help ensure that global talent as equal access to the skills credentials and job opportunities that they need to stay relevant and compete in a fast changing world.

Ken: This brings me to the second major trend, which is skills development.

Ken: Accenture, a longtime industry partner and customer published a report in January on generative Ai's impact on the workforce, serving thousands of <unk> and more than 5000 employees.

Jeffrey Nacey Maggioncalda: The report identifies a gap between leaders and employees that can help us understand barriers to workforce transformation that are facing companies this year. 86% of CXOs are using Genevive AI to some degree in their own work, and nearly all believe that Genevive AI will be transformative for their company and industry. However, only one in three leaders believe that they have the technology expertise or feel that they can tell a compelling transformation narrative to lead the change that's required.

Ken: The report identifies a gap between leaders and employees that can help us understand barriers to workforce transformation that are facing companies. This year.

Ken: 86% of <unk> are using AI to some degree in their own work and nearly all believe that Jonathan AI will be transformative for their company and industry.

Ken: However, only one and three leaders believe that they have the technology expertise or feel that they can tell a compelling transformation narrative to lead the change that's required.

Jeffrey Nacey Maggioncalda: As for employees, 95% see value in working with Genevive AI, 94% said they were ready to learn new skills, and their top concern is that they don't trust organizations to ensure positive outcomes for everyone, which is reinforced by the report finding that only 5% of organizations are actively reskilling their workforce at scale at this moment.

Ken: As for the employees, 95% see value in working with generative AI, 94% said they are ready to learn new skills.

Ken: And our top concern is that they don't trust organizations to ensure positive outcomes for everyone.

Ken: Which is reinforced by the reports finding that only 5% of organizations are actively reskilling their workforce at scale at this moment.

Jeffrey Nacey Maggioncalda: If organizations are going to succeed at moving from experimentation to implementation and unlocking the potential of these emerging technologies, we believe it must start with unlocking the potential of their talent. And this leads me to the third trend driving our business, the transformation of higher education. Two weeks ago, I was honored to join ASU GSV in San Diego alongside some of Coursera's closest partners: Director and President of the American Council on Education, or ACE, Ted Mitchell, founder of Grow with Google, Lisa Gevelber, and Chancellor of the University of Texas System, J.B. Milliken.

If organizations are going to see that moving from experimentation to implementation and unlocking the potential of these emerging technologies, we believe that must start with unlocking the potential of their talent.

Ken: And this leads me to the third trend driving our business the transformation of higher education.

Ken: Two weeks ago I was honored to join ASU GSV in San Diego alongside some of course, there is closest partners coursera.

Ken: <unk> director and President of the American Council of Education, or AC Ted Mitchell founder of grow with Google with the developer and Chancellor of the University of Texas system J D. Milligan.

Jeffrey Nacey Maggioncalda: As you may recall, last year we announced a statewide partnership with the University of Texas System, and at this year's conference, I had the pleasure of joining UT System Chancellor Milliken on stage to discuss our progress. We talked about the strategy behind our system-wide microcredential program, the value of professional certificates for universities, students, and employers, and the need for more flexible pathways for the system to serve diverse and growing populations. The main questions that kept coming up in the conversations were how.

Ken: As you May recall last year, we announced a state wide partnership with the University of Texas system and at this year's conference I had the pleasure of joining the UC system Chancellor Milliken onstage to discuss our progress.

Ken: We talked about the strategy behind our system wide micro credential program the value of professional certificates for universities students and employers.

Ken: And the need for more flexible pathways for the system to serve diverse and growing populations.

Ken: The main questions that kept coming up in the conversations with how how does the collaboration between Ut Coursera and industry partners like Google War.

Jeffrey Nacey Maggioncalda: How does the collaboration between UT, Coursera, and industry partners like Google work? How do students use these industry microcredentials to earn college credit toward a degree? And how can other universities implement a similar model in their city, state, or country? I'm pleased to share that as of the spring term, every UT campus has launched Coursera's Career Academy, and the majority of campuses now have curriculum integration for credit, including El Paso, Permian Basin, Rio Grande Valley, San Antonio, and Tyler.

Ken: How do your students use these industry micro credentials to earn college credit towards the degree and.

Ken: And how can other universities implement a similar model in their city state or country.

Ken: I am pleased to share that as of the spring term every UT campus has launched <unk> career Academy and the majority of campuses now have curriculum integration for credits, including El Paso, Permian Basin, Rio Grande Valley, San Antonio and Tyler.

Jeffrey Nacey Maggioncalda: As of March, over 7,000 students have spent more than 100,000 hours learning online, and they've earned over 16,000 course certificates from Google, Microsoft, IBM, and others. It's testament to both student demand and the power of university and industry collaboration to deliver solutions that are aligned with the labor market needs of the region. We believe our partnership with the University of Texas system is a replicable blueprint for the transformation of higher education, and it's only possible due to several leading capabilities and strategic assets that are unique to the Coursera platform, including our leading educator partners who create trusted, high-quality content and credentials that organizations like ACE increasingly recommend for credit recognition.

Ken: As of March over 7000 students have spent more than 100 thousands of hours learning online and <unk> earned over 16000 core certificates from Google, Microsoft IBM and others.

Ken: It's a testament to both student demand and the power of University and industry collaboration to deliver solutions that are aligned with the labor market needs of the region.

Ken: We believe our partnership with the University of Texas system is a replicable blueprint for the transformation of higher education and is only possible due to several leading capabilities and strategic assets that are unique to the coursera platform, including our leading educator partners, who create trusted high quality content and credentials.

That organizations like AC increasingly recommend for credit recognition.

Jeffrey Nacey Maggioncalda: Our global reach to individuals and institutions, including our ability to facilitate collaboration by serving businesses, governments, and campuses, as well as the data, technology, and Gen AI-powered product innovation we are investing in across our platform. Now, let me share some of the recent progress that we've made on each of these advantages. First, let me discuss our educator partners. More than 325 of the world's leading universities and industry experts power our content engine.

Our global reach to individuals and institutions, including our ability to facilitate collaboration by serving businesses governments and campuses.

Ken: As well as the data technology and Jen AI powered product innovation, we're investing in across our platform.

Ken: Now, let me share some of the recent progress that we've made on each of these advantages.

Ken: First let's discuss our educator partners.

Ken: More than 325 of the worlds, leading universities and industry experts power our content engine.

Jeffrey Nacey Maggioncalda: Recently, we were proud to welcome several new partners, including the University of Huddersfield, as well as Olay, Workday, and the Recording Academy. Today, I'd like to provide updates on three critical areas of our catalog, certificates, degrees, and generative AI content, starting with our entry-level professionals. Unilever, one of the world's leading suppliers of beauty, home, and personal care products, has joined our partner community and launched two Data Analyst Entry-Level Professional Certificates.

Ken: Recently, we were proud to welcome several new partners, including the University of Huddersfield as well as Ole Workday and the recording Academy.

Ken: Today I'd like to provide updates on three critical areas of our catalog certificates degrees and generative AI content, starting with our entry level professional certificates.

Ken: Unilever one of the world's leading suppliers of beauty home and personal care products has joined our partner community and launched two data analysts entry level professional certificates.

Jeffrey Nacey Maggioncalda: These certificates are designed to qualify learners with no college degree or prior experience for an analyst role in areas like inventory, logistics, demand planning, as well as data marketing analyst roles in SEO, content marketing, and CRM. This is what we refer to as a career path. But increasingly, learners completing certificates on Coursera are not choosing between a job or a degree. A certificate can provide the opportunity to unlock both a job and a degree.

Ken: These certificates are designed to quantify learners with no college degree or prior experience for an analyst role in areas like inventory logistics demand planning as well as data marketing analyst rolled in SCO content marketing and CRM.

Ken: This is why we refer to as a career pathway, but increasingly learners completing certificates on coursera are not choosing between a job or a degree.

A certificate can provide the opportunity to unlock both a job and a degree.

Jeffrey Nacey Maggioncalda: A key enabler of our credit recognition initiative and our pathway degree strategy is our growing partnerships with organizations like the American Council on Education. We believe this is the start of a long-term trend in higher education, where industry micro-credentials play a more critical role in how learners acquire their first job or earn credit toward their college degree, in how campuses, like the UT system, modernize their curriculum to create employable graduates to fuel the local economy, in How Governments Deploy Job-Relevant Workforce Training at Scale, and also in How Businesses Reskill and Redeplo Now, onto my second catalog update, which is my college degree.

A key enabler of our credit recognition initiative at our pathway degrees strategy is our growing partnerships with organizations like the American Council on education.

Ken: We believe this is a start of a long term trend in higher education, where industry micro credentials play a more critical role and how learners acquire their first job or earn credits towards a college degree in.

Ken: And how campuses like the U T system modernized their curriculum to create employable graduates to fuel the local economy and.

Ken: And how governments deploy job relevant workforce training at scale and also in how businesses Reskill and redeploy talent.

Ken: Now onto my second catalog update which is the college degree.

Jeffrey Nacey Maggioncalda: We recently announced a pathway degree program from the University of Huddersfield, a master's in management with performance-based admissions pathways to promote flexibility and accessibility. All learners, regardless of prior attainment or educational background, are eligible to attempt the first module on Coursera in our open content catalog. Successful completion of this introductory module gains learners admission to the full degree program.

Ken: We recently announced the pathway degree program from the University of Huddersfield a master's in management with performance based admissions pathways to promote flexibility and accessibility.

Ken: All learners, regardless of prior attainment or educational background are eligible to attempt the first module on Coursera and our open content catalog success.

Ken: Successful completion of this introductory module gains them admissions to the full degree program.

Jeffrey Nacey Maggioncalda: And for my final catalog update, I'm excited to share the momentum we're seeing in rapidly expanding generative AI content and credentials on Coursera. In an era where machines are increasingly capable of producing content at scale without guardrails for quality, integrity, or accuracy, we believe that individuals will increasingly turn to quality content from trusted institutions when looking to learn skills and earn credentials. Last week, Google launched the AI Essentials course, which, in addition to teaching foundational concepts, shows learners how to use AI as a collaboration tool in their day-to-day work.

And for my final catalog update I am excited to share the momentum, we're seeing and rapidly expanding generative AI content and credentials on for Sarah.

Ken: In an era, where machines are increasingly capable of producing content at scale without guardrails for quality integrity or accuracy. We believe that individuals will increasingly turn to quality content from trusted institutions, when looking to learn skills and earned credentials.

Ken: Last week, Google launched the AI Essentials course, which in addition to teaching foundational concepts shows learns how to use AI as a collaboration tool in their day to day work.

Jeffrey Nacey Maggioncalda: The introductory course is taught by Google AI experts who are working to make this new technology accessible and helpful for everyone. Google's latest course is one of more than 75 new courses and projects in generative AI that our partners have launched since the start of the year. This includes a growing number of top research universities and companies at the forefront of AI, including DeepLearning.ai, Duke University, Google Cloud, IBM, Microsoft, Vanderbilt University, and more to come in the future.

Ken: Rectory courses taught by Google AI experts, who are working to make this new technology accessible and helpful for everyone.

Ken: Google's latest course is one of more than 75, new courses in projects and gender the AI that our partners have launched since the start of the year.

Ken: This includes a growing number of top research universities and companies at the forefront of AI, including deep learning Dot AI, Duke University, Google Cloud IBM, Microsoft Vanderbilt University and more to come in the future.

Jeffrey Nacey Maggioncalda: That completes my catalog update, so let's move to our second advantage, the global reach of our platform. For institutions, we have grown our paid enterprise customers to 1,480 with recent additions across each of our verticals. As I highlighted before, we added nearly 7 million new registered learners, growing our global learner base to 148 million by the end of March. Growth continues to be broad-based, with the fastest year-over-year increase coming from learners in our Asia-Pacific region.

Ken: That completes my catalog updates so let's move to our second advantage the global reach of our platform.

For institutions, we have grown our paid enterprise customers to 1480 with reasons editions across each of our verticals.

Ken: As I highlighted before we added nearly 7 million new registered learners growing our global learner base to $148 million by the end of March growth continues to be broad based with the fastest year over year increase coming from learners in our Asia Pacific region.

Jeffrey Nacey Maggioncalda: To better serve our expanding base of learners and institutions around the world, we've rapidly introduced new value through generative AI-powered innovation. And this leads me to our third advantage: the ongoing product innovation occurring across our platform. My first product update is Coursera Course Builder. In many organizations, human resources and leadership and development teams are tasked with keeping employees informed, prepared, and skilled.

Ken: To better serve our expanding base of learners and institutions around the world, we rapidly introduce new value through generative AI powered innovation and this leads me to our third advantage the ongoing product innovation occurring across our platform.

Ken: My first product update is Coursera course builder.

Ken: In many organizations human resources and leadership and development teams are tasked with keeping employees informed prepared and skill.

Jeffrey Nacey Maggioncalda: We believe this will include creating, updating, and deploying learning resources that empower their workforce to keep pace with an increasing rate of change. That's why we launched CourseBuilder, an AI-assisted authoring tool that enables any business, government, or campus customer to easily and quickly produce high-quality custom private courses at scale. Based on a few simple inputs from an author, the tool auto-generates course content including outlines, descriptions, and learning objectives, dramatically reducing the time and cost of content production without sacrificing quality.

Ken: We believe this will include creating updating and deploying learning resources that empower their workforce to keep pace with an increasing rate of change.

Ken: It's why we launched course builder and AI assisted offering tool that enables any business government or campus customer to easily and quickly produce high quality custom private courses at scale.

Ken: Based on a few simple inputs from an offer the tool auto generates course contents, including outlines descriptions and learning objectives dramatically, reducing the time and cost of content production without sacrificing quality.

Jeffrey Nacey Maggioncalda: Then, Coursera can seamlessly blend modules of courses on Coursera from participating world-class industry and academic partners with content from their own experts in their own organization. For example, private and public sector employers can quickly create and launch organization-specific courses tailored to their unique needs.

Then of course areas can seamlessly blend modules of courses oncor, Sara from participating world class industry and academic partners with content from their own experts in their own organization.

Ken: For example, private and public sector employers can quickly create and launch organization specific courses tailored to their unique needs leadership and development teams can combine content from our industry and academic experts with relevant business context and internal expertise.

Jeffrey Nacey Maggioncalda: Leadership and development teams can combine content from our industry and academic experts with relevant business context and internal experts, and higher education institutions can leverage time-saving authoring tools to empower faculty to create custom courses and keep learning resources relevant and up-to-date at the speed and scale that students and employers now experience, like adding guest lectures or current events to their own university courses. Next, I'd like to provide an update on our AI-powered translation initiative, which we recently expanded from 18 to 21 languages, adding support for learners speaking Hindi, Japanese, and Korean.

Ken: And higher education institutions can leverage time, saving offering tools to empower faculty to create custom courses and keep learning resources relevant and up to date at the speed and scale that students and employers now expect like adding guest lecturers, our current events with their own University courses.

Ken: Next I'd like to provide an update on our AI powered translation initiative, which we recently expanded from 18 to 21 languages, adding support for learners speaking Hindi Japanese and Korean as a reminder, in 2023, we started translating our catalog of thousands of courses certificates and specialization.

Jeffrey Nacey Maggioncalda: As a reminder, in 2023, we started translating our catalog of thousands of courses, certificates, and specializations into local languages for our learners around the world. To date, more than 1 million learners have already accessed AI-translated content in their enrolled courses, and 90 million registered learners on our platform are based in countries where the primary language is one of our 21 supported translated languages.

<unk> into local languages for our learners around the world.

Ken: To date more than 1 million learners have already access AI translated content in their enrollment courses.

Ken: And 90 million registered learners on our platform are based in countries, where the primary language is one of our 21 supported translated languages.

Jeffrey Nacey Maggioncalda: Learner feedback has been inspiring, but we've also heard from our enterprise customers, including businesses and governments, who have large, multinational populations who can now have equal access to the world's top experts, no matter what local language they speak. And finally, an update on Coursera Coach. In Q1, we broadened access to the Coursera Coach beta program for paying consumer learners, as well as for our Coursera for Business and Coursera for Government customers.

Ken: Your feedback has been inspiring but we've also heard from our enterprise customers, including businesses and governments, who have large multinational populations, who can now have equal access to the world's top experts no matter what local language they speak.

Ken: And finally, an update on Coursera coach in.

Ken: In Q1, we broadened access of the coarse ore coach beta program for paying consumer learners as well as for our coarser for business and Corsair for government customers.

Jeffrey Nacey Maggioncalda: Coach usage has increased 150% since our initial beta release, and I wanted to share some initial feedback from early learners. Our research revealed that many learners come to Coursera lacking the skills to learn effectively without a tutor. When we talked to them, these learners said that they talked to Coach like a tutor, asking for summaries, explanations, quiz practice, and even career advice. Rather than spending hours searching for answers to their questions on external sites or creating notes from scratch, Coach freed up their time for actual learning. Using Coach fundamentally improves the quality of their learning, becoming an essential part of their course experience, much like the videos and assessments already in the course.

Ken: <unk> usage has increased 150% since our initial beta release and I wanted to share some initial feedback from early learners.

Ken: Our research revealed that many learners come to coursera lacking the skills to learn effectively without a tutor.

When we talk to them. These learners said that they've talked to coach like a tutor asking for summaries explanations quittance practice and even career advice.

Ken: Rather than spending hours searching for answers to the questions on external flights are creating notes from scratch coach has freed up their time for actual learning.

Using coach fundamentally improve the quality of their learning, becoming an essential part of their course experience much like the videos and assessments already in the courses.

Jeffrey Nacey Maggioncalda: In every example of our gender-to-AI-powered product innovation, we had a clear strategy that focused on enhancing the value of the Coursera experience through the unique assets of our platform: the content that we have, the data we have, and the scale that we have. And we've designed these generative AI products with support for multiple large language models so that our learners, educators, and customers will get to experience the rapid advancement in future models.

Ken: And every example of our generative AI powered product innovation, we had a clear strategy that focus on enhancing the value of the corsair experience through the unique assets of our platform. The content that we have the data we have and the scale that we've had.

Ken: And we've designed these general AG products with the support for multiple large language models, so that our learners educators and customers will get to experience the rapid advancements in future models.

Jeffrey Nacey Maggioncalda: To wrap up my opening remarks, I'd like to share our leadership. In 2022, we implemented a new organizational structure, including roles for a chief revenue officer and chief operating officer that has not delivered the growth that we need in our large but early market. After careful consideration, I've decided to flatten our leadership team structure, empowering our three segment general managers and creating chief technology officer and chief product officer roles that will all report directly to me.

Speaker Change: To wrap up my opening remarks, I would like to share a leadership update in.

Speaker Change: In 2022, we implemented a new organizational structure, including roles for a chief revenue Officer, and Chief operating officer that is not delivered the growth that we need in our large but early markets.

Speaker Change: After careful consideration I've decided to flatten our leadership team structure elevating our three segment general managers, and creating Chief Technology Officer, and Chief product officer roles that will all report directly to me.

Jeffrey Nacey Maggioncalda: This change is designed to enable our next chapter of growth, innovation, and leverage, all in support of our long-term strategy. Before I turn it over to Ken, let me remind you of the key priorities we are focused on in the year ahead. First, we are broadening our catalog of entry-level professional certificates, 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 that are open content, and industry microcredentials can count as credit towards college degrees.

Speaker Change: This change is designed to enable our next chapter of growth innovation and leverage all in support of our long term strategy.

Speaker Change: Before I turn it over to Ken Let me remind you of the key priorities. We are focused on in the year ahead.

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: We're sourcing and launching new degree programs with a focus on flexibility affordability and scaled pathways that are open content and industry micro credentials can count as credit towards college degrees.

Jeffrey Nacey Maggioncalda: Third, we're focusing 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, personalized learning with Coach, and content creation and course building with Course Builder, all while driving more scale and leverage over time. I'd like to now turn it over to Ken. Ken, please go ahead.

Speaker Change: Third we're focusing on growing our enterprise segment across business government and campus customers supporting institutional collaborations to better serve learner needs in this fast changing environment.

Speaker Change: And fourth we are deepening our platform advantages, including the broad application of Genova AI for translations personalized learning with coach and content creation and course building with course builder, all while driving more scale and leverage over time.

Ken: I'd like to now turn it over to Ken Ken. Please go ahead. Thank you, Jeff and good afternoon, everyone.

Kenneth R. Hahn: Thank you, Jeff, and good afternoon, everyone. As Jeff mentioned earlier, we're pleased with our strategic progress on a number of key initiatives. But I want to begin my remarks today by making it clear that we are not satisfied with our revenue growth, in particular our revised outlook for 2024 revenue. In the first quarter, we generated total revenue of $169.1 million, which was up 15% from a year ago. Growth was driven by double-digit increases across all three of our segments, but we underperformed in consumer. More on that momentarily.

Kenneth R. Hahn: As Jeff mentioned earlier, we are pleased with our strategic progress on a number of key initiatives.

Kenneth R. Hahn: To begin my remarks today by making it clear that we are not satisfied with our revenue growth in particular, our revised outlook for 2020 for revenue.

Kenneth R. Hahn: In the first quarter, we generated total revenue of $169 $1 million, which is up 15% from a year ago.

Kenneth R. Hahn: Growth was driven by double digit increases across all three of our segments, but we underperformed in consumer.

Kenneth R. Hahn: More on that momentarily.

Kenneth R. Hahn: Please note that for the remainder of the call, as we review our business performance and outlook, I'll discuss our non-GAAP financial measures unless otherwise noted. For the first quarter, gross profit was $91.7 million, and the 54% gross margin was in line with the prior year period. Total operating expense was $88.2 million, or 52% of revenue, down 10 percentage points from the prior year period. For the individual line item components of OPEX, sales and marketing expense represented 29% of total revenue, down one point.

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

Kenneth R. Hahn: For the first quarter gross profit was $91 7 million and 54% gross margin in line with the prior year period.

Kenneth R. Hahn: Total operating expense was $88 2 million or 52% of revenue down 10 percentage points from the prior year period.

Kenneth R. Hahn: For the individual line item components of Opex sales and marketing expense represented 29% of total revenue down one point.

Kenneth R. Hahn: Research and development expense was 13% of revenue, down 7%, and General Administrative Expense was 10% of revenue, down two points. I remain pleased by our ability to balance our growth initiatives and long-term investments while demonstrating the leverage inherent in our model as our platforms scale. Q1 net income was $11.9 million, or 7% of revenue, and adjusted EBITDA was $8.3 million, or 4.9% of revenue. As a reminder, we do not optimize EBITDA performance in any single quarter.

Kenneth R. Hahn: Research and development expense was 13% of revenue down seven point and.

Kenneth R. Hahn: In general and administrative expense was 10% of revenue down two points.

Kenneth R. Hahn: I remain pleased by our ability to balance our growth initiatives and long term investments, while demonstrating the leverage inherent in our model as our platform scale.

Q1, net income was $11 9 million or 7% of revenue and adjusted EBITDA was $8 3 million or four 9% of revenue.

As a reminder, we do not optimize EBITDA performance in any single quarter, rather we set an annual EBITDA margin target and work within that plan based on the trajectory of the business.

Kenneth R. Hahn: Rather, we set an annual EBITDA margin target and work within that plan based on the trajectory of the business. Most importantly, Q1's bottom-line performance marked a strong start to the year as we continue to manage to our 2024 Adjusted EBITDA margin target of approximately 4%. Thus, while we needed to bring down top-line guidance, our targeted adjusted EBITDA margin remains unchanged.

Kenneth R. Hahn: Most importantly, Q1 bottom line performance marked a strong start to the year as we continue to manage towards 2024, adjusted EBITDA margin target of approximately 4%.

Kenneth R. Hahn: So while we needed to bring down topline guidance, our targeted adjusted EBITDA margin remains unchanged.

Kenneth R. Hahn: Now, let's discuss cash performance and the balance sheet. We generated strong free cash flow of approximately $18 million, which I'll remind you is inclusive of more than $2 million in purchases of content assets, which we now treat similarly to other categories of capital expenditures, effectively lowering our free cash flow computation. And a progress update on our share repurchase program. In Q1, we repurchased approximately 400,000 shares of our common stock for approximately $6 million.

Kenneth R. Hahn: Now lets discuss cash performance and the balance sheet.

Kenneth R. Hahn: We generated strong free cash flow of approximately $18 million, which I'll remind you is inclusive of more than $2 million in purchases of content assets, which we now treat similarly to other categories of capital expenditures effectively lowering our free cash flow computation.

Kenneth R. Hahn: And a progress update on our share repurchase program in Q1, we repurchased approximately 400000 shares of our common stock for approximately $6 million and in April we bought back an additional $1 1 million shares of common stock for approximately $16 million.

Kenneth R. Hahn: And in April, we bought back an additional 1.1 million shares of common stock for approximately $16 million. This leaves nearly $15 million remaining under a total repurchase authorization amount of $95 million, which we expect to complete in the current quarter, price dependent. We ended the quarter with approximately $725 million of unrestricted cash and cash equivalents with no debt.

Kenneth R. Hahn: This leaves nearly $15 million remaining under our total repurchase authorization amount of $95 million, which we.

Kenneth R. Hahn: Back to complete in the current quarter price dependent.

Kenneth R. Hahn: We ended the quarter with approximately $725 million of unrestricted cash and cash equivalents with no debt.

Kenneth R. Hahn: We believe that our strong financial position is an asset that provides resilience and strategic optionality, which we believe is particularly valuable during a period of rapid technological change in the evolving education landscape. Next, we will discuss the performance of our segments in more detail. Consumer revenue was $96.7 million, up 18% from the prior year; segment gross profit was $51.8 million, or 54% of consumer revenue, in line with the prior year. And our Top of Funnel activity remained robust, with approximately 7 million new registered learners this quarter.

Kenneth R. Hahn: We believe that our strong financial position is an asset that provides resilience and strategic Optionality, which we believe is particularly valuable during a period of rapid technological change and the evolving education landscape.

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

Kenneth R. Hahn: <unk> revenue was $96 $7 million up 18% from the prior year.

Segment gross profit was $51 8 million or <unk>, 54% of consumer revenue in line with the prior year period.

Kenneth R. Hahn: And our top of funnel activity remained robust with approximately 7 million new registered learners this quarter.

Kenneth R. Hahn: With that being said, our consumer revenue is softer than anticipated. In particular, we underperformed in our North American region, where we are experiencing a lower volume and conversion of paid learners, compounded by the delay of a key content launch from one of our education partners as compared to the timing in our financial plan.

Kenneth R. Hahn: With that being said our consumer revenue was softer than anticipated in particular wind performed in our North American region, where we are experiencing a lower volume and conversion of paid learners compounded by the delay of the key content launch from one of our educated partners as compared to the timing and our financial plan.

Kenneth R. Hahn: While that launch has now occurred, we'll continue to face a future headwind on our consumer growth as our first quarter cohort of learners includes a substantial shortfall in high-LTV North American paid learners. We are actively pursuing opportunities to mitigate the impact on our full-year results, including the acceleration of other content launches planned throughout the year, but, as I'll discuss shortly in our revised guidance, we do anticipate a negative impact on both the second quarter and full-year outlook. Now, let's move to Enterprise.

Kenneth R. Hahn: While that launch has now occurred we will continue to face a future headwind on our consumer growth as our first quarter cohort of learners includes a substantial shortfall in high LTV North American paid learners.

Kenneth R. Hahn: We are actively pursuing opportunities to mitigate the impact on our full year results, including the acceleration of other content launches planned throughout the year, but as I'll discuss shortly in our revised guidance, we do anticipate a negative impact on both the second quarter and full year outlook.

Kenneth R. Hahn: Now, let's move to enterprise <unk>.

Kenneth R. Hahn: Enterprise revenue was $57.5 million, up 10% from a year ago, driven by our government and campus verticals. Segment gross profit was $39.1 million, or 68% of enterprise revenue compared to 67% a year ago. The total number of paid enterprise customers increased to 1,480, up 18% from a year ago. And our net retention rate for paid enterprise customers was 94%.

Kenneth R. Hahn: Enterprise revenue was $57 5 million up 10% from a year ago, driven by our government and campus verticals.

<unk> gross profit was $39 1 million or 68% of enterprise revenue compared to 67% a year ago.

Kenneth R. Hahn: The total number of paid enterprise customers increased to 1400 80 million up 18% from a year ago and our net retention rate for paid enterprise customers was 94%.

Kenneth R. Hahn: As we've discussed in the past several quarters, we continue to see a divergence in performance across our verticals, specifically pressuring Coursera for Business, offset by Momentum and our other two verticals, Government and Campus. While corporate learning budgets remain under pressure, we are leaning into the momentum in our government and campus opportunities where our unique capabilities, including branded high-quality content, entry-level job role training, and credit recommendations, are particularly well suited to these customer use cases.

Kenneth R. Hahn: As we discussed the past several quarters, we continue to see a divergence in performance across our verticals, specifically pressuring coursera for business offset by momentum in our other two vertical government and campus.

Kenneth R. Hahn: While corporate learning budgets remain under pressure, we are leaning into the momentum in our government and campus opportunities, where our unique capabilities, including branded high quality content entry level job role training and credit recommendations are particularly well suited for these customer use cases.

Kenneth R. Hahn: And finally, our degrees segment. Degrees revenue of $14.8 million, up 10% from a year ago, on growth in new students and the scaling of recent program launches. The total number of degree students grew 23% from a year ago to 22,200.

Kenneth R. Hahn: And finally, our degree segment decreased revenue of $14 $8 million up 10% from a year ago on growth in new students and scaling of recent program launches.

Kenneth R. Hahn: The total number of degree students grew 23% from a year ago to 22200.

Kenneth R. Hahn: As a reminder, there's no content cost attributable to the degree segment, so the degree segment gross margin was 100% of revenue. And while this segment is a small portion of our overall revenue mix today, we remain focused on the long-term opportunity in degrees. 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. 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, and the growing selection of pathway degree programs.

Kenneth R. Hahn: As a reminder, there is no content costs attributable to the degree segments. A degree segment gross margin was 100% of revenue.

Kenneth R. Hahn: And while that segment is a small portion of our overall revenue mix today, we remain focused on the long term opportunity in degrees. We believe that our platform is uniquely positioned to fundamentally transform the college degree.

Kenneth R. Hahn: We need to start validating that potential with renewed and increasing growth.

Kenneth R. Hahn: 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 and are growing selection of pathway degree programs.

Kenneth R. Hahn: Now, on our financial outlook, taking into account the dynamics I outlined in the discussion of our consumer results, for Q2, we're expecting revenue to be in the range of $162 to $166 million. For just the EBITDA, we're expecting a range of negative two to positive two million dollars. For full year 2024, we now anticipate revenue to be in the range of $695 to $705 million. With a revised total revenue outlook, we thought it would be helpful to provide new growth expectations by segment for 2024 to reflect our latest view.

Kenneth R. Hahn: Now on our financial outlook, taking into account the dynamics I outlined in the discussion of our consumer results for.

For Q2, we're expecting revenue to be in the range of $162 million to $166 million for adjusted EBITDA, We're expecting a range of negative two to positive $2 million.

Kenneth R. Hahn: For full year 2024, we now anticipate revenue to be in the range of $695 million to $705 million.

Kenneth R. Hahn: With our revised total revenue outlook, we thought it'd be helpful to provide new growth expectations by segment for 2024 to reflect our latest view.

Kenneth R. Hahn: We now expect all segments to grow at approximately 10% for the full year. For Adjusted EBITDA, we're expecting a range of 24 to 28 million dollars, maintaining our Adjusted EBITDA margin annual target of approximately 4%. Consistent with our messaging over the past several years, we're committed to adjusting the pacing of our investments based on the trajectory of the business to ensure we manage to the annual adjusted EBITDA margin target we set at the beginning of the year. For the

We now expect all segments to grow at approximately 10% for the full year.

Kenneth R. Hahn: For adjusted EBITDA, we're expecting a range of $24 million to $28 million, maintaining our adjusted EBITDA margin annual target of approximately 4%.

Kenneth R. Hahn: Consistent with our messaging over the past several years, we are committed to adjusting the pacing our investments based on the trajectory of the business to ensure we manage to the annual adjusted EBITDA margin target, we set at the beginning of the year.

Kenneth R. Hahn: So to summarize we're not satisfied with our revenue trajectory for Q2 and the full year.

Kenneth R. Hahn: We're not satisfied with our revenue trajectory for Q2 and the full year. This year's revised guidance is not what we consider successful growth company metrics, and we've taken actions that we believe will better position ourselves for future growth opportunities. We're committed to producing growth with consistently increasing scale and leverage, with a strong track record of delivering on that promise. 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 his closing comments.

Kenneth R. Hahn: This year's revised guidance is not what we consider a successful growth company metrics and we've taken actions that we believe will better position ourselves for future growth opportunities.

Kenneth R. Hahn: We are committed to producing growth with consistently increasing scale and leverage with a strong track record of delivering on that promise and.

Kenneth R. Hahn: 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.

Jeffrey Nacey Maggioncalda: Again, I'd like to close today with a special use case. Earlier this month, I joined the World Bank in Washington, D.C., to speak to ministers of finance from emerging economies. 20 of the 30 countries represented in that room had partnered with Coursera during our COVID response initiatives, many through our work with the Commonwealth of Learning. One of the countries served by this program was Guyana, whose Ministry of Education used Coursera to train more than 36,000 Guyanan citizens with more than 190,000 course enrollments during COVID.

Jeff: Thanks, Ken.

Jeff: To close today with a special use case.

Jeff: Earlier this month I joined the World Bank in D C to speak to ministers of finance from emerging economies.

Jeff: <unk> of the 30 countries represented in that room had partnered with Coursera during our Covid response initiatives, mainly through our work with the Commonwealth of learning.

Jeff: One of the countries served by this program was Guyana, whose ministry of education used coursera to train more than 36000, Guyana citizens with more than 190000 course enrollments during COVID-19.

Jeffrey Nacey Maggioncalda: Last month, I joined the President of Guyana and many of his ministers to launch a national training initiative that offers every Guyanese citizen and public sector employee access to Coursera. The national program will be delivered through various ministries across the country with customized learning programs for each sector.

Jeff: Last month I joined the president of our Guyana and many of his ministers to launch a national training initiative that offers every guyanese citizens and public sector employee access to Coursera.

Jeff: The National program will be delivered through various ministries across the country with customized learning programs for each sector.

Jeffrey Nacey Maggioncalda: For example, the Office of the Prime Minister is using Coursera to train public servants in digital media, communication, and journalism. The Ministry of Human Services and Social Security is using Coursera to train over 4,000 women in entrepreneurship, digital, finance, and resilience skills. The Ministry of Health assembled at the event 900 nursing students and 800 nursing assistant students who are part of the nursing school program now moving online on Coursera.

Jeff: For example, the office of the Prime Minister is using <unk>, whose skill public servants in digital media communication and journalism diminish.

The Ministry of Human services, and social security is using coarse ore to train over 4000 women in entrepreneurship digital finance and resilient skills.

Jeff: The Ministry of health assembled at the event 900 nursing students and 800 nursing assistant students, who are part of the Nursing School program now moving online on Coursera.

Jeffrey Nacey Maggioncalda: And the Ministry of Tourism, Industry, and Commerce is working with Coursera to enhance their staff skills in digital marketing, communication, and data analytics for hospitality and travel. Similar to our partnership with the University of Texas System, this use case with Guyana provides a powerful example for other institutions who are looking to provide high-quality education and skills training opportunities to large populations that otherwise wouldn't have access, to help citizens and local businesses unlock their full economic potential, to address skilled labor shortages in high-demand industries, and to diversify and drive economic growth in a fast-changing global market.

Jeff: And the Ministry of Tourism industry, and Commerce is working with Coursera to enhance their SaaS skills in digital marketing communication and data analytics for hospitality and travel.

Similar to our partnership with the University of Texas system. This use case with Guyana provides a powerful example for other institutions, who are looking to provide high quality education and skills training opportunities to large populations that otherwise wouldn't have access to.

Jeff: To help citizens and local businesses unlock their full economic potential to address skilled labor shortages and high demand industries and to diversify and drive economic growth and a fast changing global market.

Jeffrey Nacey Maggioncalda: Generative AI acts as both a disruptor and an enabler. Whether it widens or narrows the opportunity gap hinges on our ability to make education and skilling equally accessible on a global scale. Businesses, governments, and academic institutions will have to work together to mitigate the human cost of AI disruption and create more equal opportunities for everyone in a world of accelerating change. We are proud of Coursera's role, and especially our partners we work with, who are turning this threat into an opportunity because of education. Now, let's open up the call for questions. Thank you.

Jeff: Generative AI acts as both a disruptor and an enabler.

Jeff: It widens or narrows, the opportunity gap hinges on our ability to make education and skilling equally accessible on a global scale.

Jeff: Businesses governments and academic institutions will have to work together to mitigate the human cost of AI disruption and create more equal opportunities for everyone. In a world of accelerating change we are proud of <unk> role and especially our partners. We work with who are turning the threat into an opportunity.

Jeff: Because of education.

Speaker Change: Now, let's open up the call for questions. Thank you.

Operator: As a reminder, if you would like to ask a question during this time, please press star followed by the number one on your telephone keypad. We'll now take our first question from the line of Rishi Jaluria.

Speaker Change: As a reminder, if you'd like to ask a question. During this time. Please press star followed by the number one on your telephone keypad.

Speaker Change: We'll now take our first question from the line of <unk>.

Speaker Change: <unk> <unk>.

With RBC.

Rishi Nitya Jaluria: Oh, wonderful. Thanks so much for taking my questions. Maybe I want to start with the softness in the consumer. And there are two pieces there, right?

RBC: Please go ahead.

Wonderful. Thanks, so much for taking my questions, maybe I want to start with the softness in consumer.

There's two pieces there right number one is.

Rishi Nitya Jaluria: Number one is, when did you realize this was going to become an issue? And, you know, you said that there are certain steps you can take in terms of accelerating certain content partners to help mitigate that. Maybe that has already started? What has been the traction from there? And the piece number two within consumer, I guess I'm still a little struggling to understand why the timing of one content release, which is now live, is causing such a dramatic impact on the overall revenue trajectory. Maybe help me understand, build this piece, and then I've got a quick follow-up.

Speaker Change: When did you realize this was going to become an issue and you said that there are certain steps you can take in terms of accelerating certain content partners to help mitigate that maybe has that already started what has been traction from there in the piece number two within consumer.

Speaker Change: I guess I'm still a little struggling to understand why timing of one.

Speaker Change: Our content release, which is now alive is causing such a dramatic impact on the overall revenue trajectory maybe help me understand Delta piece, and then I've got a quick follow up.

Jeffrey Nacey Maggioncalda: Hey, Rishi, this is Jeff. Yeah, thanks for the question. I mean, basically, we're off to a pretty slow start on consumers in 2024, obviously. To the question of when we sort of knew, I mean, a lot of it is predicated on the launch of a new piece of content. To your question, when has content been launched? And sort of relevant to the launch was also paid media that went along with it, particularly in North America.

Speaker Change: Hey, Rishi this is Jeff yes. Thanks for the question I mean, basically we're off to a pretty slow start on consumer in 2024, obviously.

Rishi: So the question of when we sort of knew I mean, a lot of it is is predicated on the launch of a new piece of content.

Rishi: Your question that content has launched and.

Rishi: Sort of relevant to the launch was also paid media that went along with it particularly in North America. So the delay of the content delay in some of the spend and we saw some of the traffic lower than we had anticipated because of that delay.

Jeffrey Nacey Maggioncalda: So the delay of the content delayed some of the spend. We saw some of the traffic lower than we had anticipated because of that delay. And even though we're seeing good results so far, those lost months will not be recovered in terms of revenue, so that's gonna be something that follows us at least through the rest of the year. Ken, maybe you could talk a little bit about the question on sort of the impact of the slower start in 2024 on our Q2 and 2024 consumers.

Rishi: And even though we're seeing good results. So far those last months will not be recovered in terms of in terms of revenue. So that's going to be something that follows us at least through the rest of the year, Ken maybe you could talk a little bit about the question on sort of the impact of the slower start in 2024 to our Q2 in 2000.

Kenneth R. Hahn: Foreign consumer Yeah, and I guess first and foremost what we highlighted was the underperformance in North America broadly with lower volume and conversion on paid learners.

Kenneth R. Hahn: Yeah, and I guess, first and foremost, what we highlighted was the underperformance in North America broadly, with lower volume and conversion of paid learners. The delay in the content launch compounded it and certainly resulted in some of the underperformance and conversion, but it wasn't the primary point. And Jeff, to your commentary, it was really about the lower marketing spend as it relates to that content launch. So lower marketing spend begets lower conversion rates because that is highly qualified traffic, and so we saw it weigh overall on the result, but it wasn't the primary reason but a contributing factor.

Kenneth R. Hahn: The delay in the content launch compounded it and certainly resulted in some of the underperformance the conversion, but it wasn't the primary point and Geoff to your commentary it was really about the lower marketing spend so when.

Kenneth R. Hahn: Yeah.

Kenneth R. Hahn: As it relates to that content launch so lower marketing spend.

Kenneth R. Hahn: To get lower conversion rate because that is highly qualified traffic and so we saw way overall on the results, but it wasn't it wasn't the primary reason, but a contributing factor and I wish you in terms of mitigation. I mean, one is obviously you can get the content launched and put good money behind it.

Jeffrey Nacey Maggioncalda: And Rishi, in terms of mitigation, I mean, one is obviously to get the content launched and put good money behind it. Another is to say, all right, what kind of content is getting a lot of traction right now? And probably not surprisingly, it's AI content. The idea that people want new AI content both for the builders who are building these models and, obviously, major compensation packages going out there from companies looking to find the builders, but also for the users, people who need to learn how to use these stuff.

Kenneth R. Hahn: Another is to say all right what kind of content is getting a lot of traction right now and probably not surprisingly it's AI content.

Kenneth R. Hahn: The idea that people want new content, both for the builders, who are building. These models and obviously major compensation packages going out there from companies looking to find the builders, but also the users people who need to learn how to use this stuff, we see broad appetite Forex, what we saw last year in terms of people taking.

Jeffrey Nacey Maggioncalda: We see broad appetite, 4X what we saw last year in terms of people taking AI-related content. And, of course, the population of users of AI is much bigger than the population of builders of AI. And so accelerating content launches that have to do with AI and also upgrading existing content so that it has sort of this generative AI module that says, here's how you do this job in a world of generative AI, are a few of the things that we think are going to be promising throughout the rest of the year. And so we do see some steps to translate the demand for generative AI into content launches to at least partially make up for the slow start that we had in 2024.

AI related content and of course, the population of users of AI is much bigger than the population of builders of AI and.

Kenneth R. Hahn: So accelerating content launches that had to do with AI and also upgrading existing content. So that it has sort of this generative AI module that says here's how you do this job in a world of generally AI or a few of the things that we are that we think are going to be promising throughout the.

Kenneth R. Hahn: The rest of the year and so we do see some step to translate the demand for gen of AI into content launches to at least partially make up for the slow start that we had in 2024.

Speaker Change: Alright got it that's really helpful. And then just a quick follow up to the NR for paid enterprise dropped to 94%.

Rishi Nitya Jaluria: I got it. That's really helpful. And then just a quick follow-up to the NRR for paid enterprise dropped to 94 percent. And that's in spite of the strength that you saw in government and Coursera for campus. So that would imply that the NRR specifically for Coursera for business was a lot softer than that. Maybe again, what is causing that? Is layoffs still happening in the customer base? Is it just deemphasizing learning and development within those customers? And more importantly, what steps can you take outside of seeing an approving macro to see that NRR get back above 100 percent? Thank you.

Speaker Change: And that's in spite of the strength that you saw in government and Coursera for campus. So that would imply that the MLR specifically of course share for business was.

Speaker Change: Softer than that.

Again, what is causing that is that.

Speaker Change: They are still happening in the customer base is it just deemphasizing learning and development within those customers and more importantly, what steps can you take outside of seeing an improving macro let's see that MLR get back above 100%. Thank you.

Richie: So hey, Richie.

Kenneth R. Hahn: So, we've seen better success in both C4C and C4G this year on an overall basis. And C4B, you're right, has been where we've consistently underperformed. We've talked a little bit about product market fit and what we're emphasizing versus the other two verticals, C4C and C4G.

Richie: So the we have seen better success in the <unk> this year.

Richie: Overall basis and see for B Youre right. It has been where we've consistently underperformed we've talked a little bit about product market fit in what we're emphasizing versus the other two verticals <unk> CNC for Jake.

Kenneth R. Hahn: However, for this quarter as it relates to NRR, the pain was spread a little bit. It wasn't just C4B, which is where we've seen some weakness over the last year or so. We've been talking about that pretty actively.

Richie: However for this quarter as it relates to NR, the pain was spread a little bit. It wasn't just see for me, which is where we've seen some weakness over the last year or so we've been talking about that pretty actively but it was also a tougher quarter on seat for G, which is what overall was the change that caused that to drop to lower then it.

Kenneth R. Hahn: But it was also a tougher quarter on C4G, which was the overall change that caused it to drop to lower than it was last quarter, to 94%. So again, weakness in C4G this particular quarter, which were two specific renewals, and without going into detail on them, it's not something we expect to see on an ongoing basis. The fit tends to be strong in C4G, and we get pretty good renewal rates.

Richie: Was last quarter, so the 94%.

Richie: So again weakness in CPG, this particular quarter, which were two specific renewals and without going into detail on them. It's not something we expect to see on an ongoing basis, the fit tends to be strong and Super gene, we get pretty good renewal rates and then ratio on the question of how do we how can we manage NR and try to get it up I mean.

Jeffrey Nacey Maggioncalda: And then, Rishi, on the question of how can we manage NRR and try to get it up, I mean, clearly, you know, great content that people want, and generative AI academy for companies who are starting that process of reskilling their employees, which is going to be kind of a top-down CEO imperative when they really get into action. But part of it, too, is use cases around what kinds of learners are taking these. I mean, we actually see pretty high NRRs in this use case of students taking Coursera as part of their degree programs.

Richie: Clearly.

Richie: Content that people want Jarrett AI Academy for companies, who are starting that process of reskilling their employees, which is going to be kind of a top down CEO imperative when they really get into action, but part of it too is is use cases around what kinds of learners are taking these I mean, we actually see pretty high IRR is.

Richie: This use case of students taking coursera as part of their degree programs. I mean, the students are engaged they are there to learn they're getting credit they're getting an industry micro credential.

Jeffrey Nacey Maggioncalda: I mean, the students are engaged. They're there to learn. They're getting credit. They're getting an industry micro-credential. That's looking pretty good. So part of it, too, is finding use cases where we know that there is a good ability to reach the learners, and the learners are interested in advancing their careers through learning certain job skills. And we think a lot of what we're seeing continues to be fairly early market traction, where in not every case do we have exactly the right product-market fit when it comes to the learners ultimately taking some of these courses, particularly in the government segment, where Ken mentioned we had a little bit of a couple of exceptional cases where there wasn't a great fit.

Richie: That's looking pretty good so part of it too is finding use cases, where we know that there is.

Good ability to get to the learners and the learners are interested in advancing their career through through learning certain job skills, and we think a lot of what we're seeing continues to be fairly early market traction. We're in not every case do we have exactly the right product market fit when it comes to the learners ultimately taking <unk>.

Richie: Some of these courses, particularly in the government and the government segment, where Ken mentioned, we had a little bit of a couple of exceptional cases, where there wasn't a great fit with the learners there.

Jeffrey Nacey Maggioncalda: Both of which date back to COVID days.

Speaker Change: Very helpful.

Speaker Change: Covid days right.

Speaker Change: Thank you.

Ryan Michael MacDonald: Your next question comes from the line of Ryan MacDonald with Needham.

Speaker Change: And next question comes from the line of Ryan Macdonald with Needham.

Ryan Michael MacDonald: Thanks for taking my question. If we separate out the sort of delayed course launch and the impact on the consumer, you talked obviously about broader softness and lower conversion rates. As you've looked into the problem, are there specific reasons that are things that you're seeing commonalities of maybe what's driving that lower conversion rate? And I'd love to hear more on that. But then, as we think about the rest of the year, is there [inaudible]?

Ryan Michael MacDonald: Please go ahead.

Ryan Michael MacDonald: Alright, Thanks for taking my question, if we separate out sort of delayed course launch and the impact on consumer you talked obviously about broader softness in lower conversion rates as you look into the problem or is there a specific reasons there were things that youre seeing commonalities of maybe what's driving that.

Ryan Michael MacDonald: Lower conversion rate than most of your color on that but then as we think about the rest of the year.

Ryan Michael MacDonald: We used to try to boost that conversion through discounting or.

Jeffrey Nacey Maggioncalda: Yeah, thanks, Ryan. So, with respect to conversion rates, and this is more sensitive in the North America region, a lot of what stimulates higher conversion rates is more recent launches. I mean, generally, the people who come for a more recent title are more interested buyers, and in North America, they have higher disposable income to actually pay for it. We have seen some of the highest conversion rates are in the AI content.

Ryan Michael MacDonald: Any any sort of other mitigating factors that you might be able to combat that lower conversion rate domestically. Thanks.

Speaker Change: Yes, Thanks, Brian.

Speaker Change: So I think with respect to conversion rates and it is more sensitive than the North America region.

Speaker Change: Lot of what stimulates higher conversion rates as more recent launches I mean generally the people who come for a more recent title.

Speaker Change: Are more interested buyers and in North America. They are higher disposable income to actually pay for it we have seen some of the highest conversion rates are in the AI content.

Jeffrey Nacey Maggioncalda: So, I think kind of an obvious mitigating strategy is to really continue to lean into generative AI and say, not only launch new stuff for the builders and the users of generative AI, but upgrade and relaunch existing content. Every indication I've seen, and others can be their own judge, is that this generative AI will have a huge impact on the way people do their jobs. They're going to need to learn new skills to be, you name it, a PR comms person, a financial analyst, a supply chain manager, or a UX designer.

Kind of an obvious mitigating strategy is to really continue to lean in to generate AI and say not only launched new stuff for the builders and the users of Gentiva, AI, but upgrade and relaunch existing content because.

Speaker Change: Every indication I have seen.

Speaker Change: This can be their own judge is that this this generally I will have a huge impact on the way people do their jobs, they're going to need to learn new skills to be you name. It a PR comms person or a financial analyst or supply chain manager or UX designer.

Jeffrey Nacey Maggioncalda: We think there's a very broad opportunity to really refresh the content, including the longer form, to appeal to this very apparently strong demand that we're seeing from learners around generative AI. So that's, I think, one vector of mitigation that we are certainly going to be pushing on.

We think there's a very broad opportunity to really refresh the content developed including the longer form to appeal to this very apparently strong demand that we're seeing from Lars around general. So that's I think one vector of mitigation that we are certainly going to be pushing on.

Ryan Michael MacDonald: Maybe just as a follow-up, switching to the degree segment: obviously, there's been sort of a lot of turmoil or change within the OPM market generally over the last six months in terms of M&A and struggles from other vendors. Are you seeing any opportunities to bring in new degree partners as a result of that period of transition that we're going through? Thanks.

Speaker Change: Helpful and maybe just as a follow up switching to the degree segment. Obviously, there's been a sort of a lot of turmoil or change within sort of the OPM market generally over the last six months in terms of M&A and struggles from other vendors.

Speaker Change: Are you seeing any opportunities to bring in new degree partners as a result of that period of transition that we're going through.

Jeffrey Nacey Maggioncalda: Yeah, Ryan, we're certainly seeing inbounds. But many of the programs that are out there were designed for a time that no longer exists. Yeah, they were designed in a time when an online degree cost the same amount as an on-campus degree, which could be, you know, $100,000 or close to that, where that economics could justify spending $25,000 to acquire a learner. And those types of programs just don't really fit our model.

Speaker Change: Yeah Ryan.

Speaker Change: Certainly seeing inbounds.

Speaker Change: Many of the programs that are out there. They were designed for a time that no longer exists. Yes. There were designed in a time, where an online degree costs. The same amount as an on campus degree which could be.

Speaker Change: $100000 or close to that without economics could justify spending $25000 to acquire a learner.

Speaker Change: And those types of programs, just don't really fit our model so.

Jeffrey Nacey Maggioncalda: So with the pathway degrees, where we're really pushing far more affordable credit pathways so that you can start an open content course and have that count towards a credit degree, we don't see a lot of those types of program designs in the portfolios of some of these traditional OPMs who've been struggling. And so I would not expect, or we're not anticipating, seeing a lot more supply of degree programs coming under Coursera. They're essentially transplants from traditional OPM players.

Speaker Change: With the pathway degrees, where we're really pushing far more affordable credit pathway. So that you can start and open content and have that count towards the credit degree.

Speaker Change: We don't see a lot of those types of program designs in the portfolios of some of these traditional Oems who have been struggling and so I would not expect we're not anticipating being a lot more supply a degree programs coming under coursera, they're essentially transplants from those traditional OPM players.

Speaker Change: Thanks for taking my questions.

Speaker Change: Sure.

Speaker Change: Yes.

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

Stephen Hardy Sheldon: Thanks for taking my questions. Sure. Your next question comes from the line of Stephen Sheldon with William Blair. Please go ahead.

Stephen Hardy Sheldon: Please go ahead.

Hey, Thanks first one on the guidance it assumes about 7% year over year revenue growth in the second quarter, and then a reacceleration back closer to 10% in the second half of the year. So just curious what gives you the confidence in that second half re acceleration.

Stephen Hardy Sheldon: Your next question comes from the line of Stephen Sheldon with William Blair.

Kenneth R. Hahn: Sure, Stephen. That's primarily in consumer electronics, where we expect the acceleration. If you look at the guide we gave across the different verticals, and quite a bit of that is product-driven. We have a number of products coming out in the second half, particularly international payments, which is something we've talked about internationally, and pricing. And so we've had, and we originally had in our initial plan at the beginning of the year, you know, weighted average improvements that we expected to see from operating better with those products. So that's the reason for the uptick in growth as we go into Q3 and Q4 versus Q2. Yeah, and some of the product innovations will basically take advantage of translations.

Speaker Change: Sure Steven.

Primarily.

Speaker Change: Consumer where we expect the acceleration if you look at the guide we gave across the different verticals.

Steven: And quite a bit of that is product driven we have a number of products coming out in the second half, particularly international payments is something we've talked about internationally in pricing.

Steven: And so we've had than we originally had in our initial plan at the beginning of the year.

Steven: Weighted average improvements that we expected to see from operating better with those products.

Steven: So that's the reason for the uptick in the growth as we go into Q3, and Q4 versus Q2 and some of the product innovations will basically.

Kenneth R. Hahn: Yeah, and some of the product innovations will basically take advantage of the translations, and we want to couple those translations, which have obviously created broader accessibility, with, as Ken said, geopricing, payments, currency, and also merchandising in international markets. So we're planning to see higher NPL, new paid learners, and better conversion rates in international markets. And we also do have a number of titles that we think will be launching in the second half of this year that we're pretty excited about and follow the same basic pattern of other, you know, branded professional certificate types of titles that have seen good success and good demand on Got it. That's helpful.

Steven: Take advantage of the translations and we want a couple of those translations, which have obviously created.

Steven: Accessibility with as Ken said pricing Geo pricing payments currency.

Steven: And also merchandising in international market. So we're planning to see higher NPL, new paid learners and better conversion rates in international markets and we also do have a number of titles that we think we'll be launching second half of the year that we're pretty excited about and follow the same basic pattern of other <unk>.

Steven: Branded professional certificate types of titles that have seen good success and good demand on our platform.

Speaker Change: Got it Thats helpful.

Stephen Hardy Sheldon: And then, What are you seeing in terms of interest levels from the perspective of Coursera? and similar to what you've already launched with the University of Texas. His interest there picked up, I guess, this year.

Speaker Change: What are you seeing in terms of interest levels from perspective, Coursera for campus customers to do something similar to what you've already launched with University of Texas.

Speaker Change: Interest there picked up I guess this year has progressed.

Jeffrey Nacey Maggioncalda: Yeah, I think that as we continue to show other use cases that could be happening within a single campus, well actually within a single school on a campus, the whole campus, a system of campuses, or even a national system like in Kazakhstan, we are definitely putting together more and more use cases. Obviously, universities are not institutions known for their agility, but I think just the inevitable unyielding force of change that is saying that not only are working adults looking for more flexibility and affordability with their degree programs, but the curriculum that they're looking for is different.

Speaker Change: Yeah, I think that as we continue to show other use cases that can be happening within a single campus, while actually within a single school on a campus. The total campus a system of campuses or even a national system like in Kazakhstan.

We are definitely putting together more and more use cases.

Speaker Change: Obviously universities are not institutions, who are known for their agility, but I think just the inevitable unyielding force a change that is saying I mean, not only are working adult looking for more flexibility and affordability with the degree programs. The curriculum that theyre looking for is different I mean, it's turning out to be.

Jeffrey Nacey Maggioncalda: I mean, it's turning out to be a lot more digital, and especially now with generative AI, you can imagine how difficult it is for universities to keep up with the curricular offering. And then you layer on top of that the need to actually transform the organization; just the productivity, the operating leverage, the way that you run a university college or other vocational school is also changing. So we are seeing a recognition that is fairly incontrovertible that just is like, yeah, this is going to be a very big change. We're going to need some help.

A lot more digital and especially not regenerative AI you can imagine how difficult. It is for the University has to keep up with the curricular offering and then you layer on top of that the need to actually transform the organization. So just the productivity the operating leverage the way that you run a University college.

Speaker Change: Or other vocational school is also changing so we are seeing a recognition that as fairly incontrovertible Thats. Just is like yeah. This is going to be a very big change, we're going to need some help and we think we think that for sure that coursera is an ideal partner and pretty unique out there theres just not that many other.

Joshua Phillip Baer: The next question comes from the line of Josh Baer with Morgan Stanley.

Speaker Change: Players, who can offer electric for the students that can account for credit and a general de Academy to help transform the organization.

Joshua Phillip Baer: Great, thanks for the question. I wanted to come back to the enterprise segment. First, I guess it was one of the strongest net enterprise paid account ads sequentially in a while. So, I was wondering what drove that, and then, with that in mind, is that a read-through to, like, stable churn overall? Or were the growth ads particularly strong, but account churn was part of what contributed to the lower net retention rate?

Speaker Change: Got it thank you.

Speaker Change: And next question comes from line of Josh Baer with Morgan Stanley. Please go ahead.

Joshua Phillip Baer: Great. Thanks for the question I wanted to come back to the Enterprise segment first I guess it was one of the strongest.

Joshua Phillip Baer: Net enterprise paid account adds sequentially.

Joshua Phillip Baer: Sequentially in a while.

Joshua Phillip Baer: So I was wondering what drove that and then with that in mind.

Joshua Phillip Baer: Is that is that a read through to.

Like stable churn overall or where the gross add particularly strong but you.

Joshua Phillip Baer: But the account churn was part of what contributed to the lower net retention rate.

Jeffrey Nacey Maggioncalda: Yeah. Hey Josh.

Speaker Change: Yeah, Hey, Josh So it's a few things one is average average deal size is coming down a bit and so companies are interested in sometimes changing out their current partners and saying alright look.

Jeffrey Nacey Maggioncalda: So there are a few things. One is that the average deal size is coming down a bit. And so companies are interested and sometimes changing out their current partners and saying, all right, look, we'll give you a certain number of licenses to work with our data scientists or to work with our marketing department or to work in our leadership program. And if that goes well, we'll expand it. And so part of it is kind of reshuffling a portion of an existing budget over to Coursera to say, we want to try your approach to this whole thing.

We'll give you a certain number of licenses to work with our data scientists or to work with our marketing department or to work in our leadership program and if that goes well, we'll expand it and so part of it is kind of reshuffling a portion of an existing budget over the course Erik to say, we want to try your approach to this whole thing and.

Jeffrey Nacey Maggioncalda: And then we also see a world where the budgets are stabilizing a bit. You know, I do, quarterly, these events where we have discussion forums with Coursera for Business Learning and Development people in the different regions of the world.

And then.

Speaker Change: We also see a world.

Speaker Change: Where the budgets are stabilizing a bit I do quarterly I do these events, where we have I have discussion forums with coursera for business learning and development people in the different regions of the world.

Jeffrey Nacey Maggioncalda: And I've been asking, "Is your learning development budget getting bigger, getting smaller, or holding the same?" And there's a, at least from somewhat anecdotal polling, they have been saying, hey, we're getting ready. There's going to be a big need for reskilling due to the gen of AI. We're starting to see a change in the budget, and so I think we're also picking up a little bit of stabilization. And ideally, I'm optimistic that they're going to realize.

Speaker Change: And I have been asking.

Is your learning development budget getting bigger getting smaller or holding the same and there is at.

Speaker Change: At least from somewhat anecdotal polling they have been saying, hey, we're getting ready there's going to be big need for re scaling due to Jennifer AI, we're starting to see a change in the budget and so I think we're also picking up a little bit of a stabilization and ideally I'm optimistic that they're going to realize.

Jeffrey Nacey Maggioncalda: And when you look at that survey that I mentioned in the script, survey after survey is showing that even though almost every CEO and executive says major organizational skilling and transformation is going to be required, they also say that so far, they've almost not even started yet. Well, once they get their team in order, their strategy in order, and their budgets in order, we do think that there are indications that there'll be good dollars being spent on generative AI-related upskilling and reskilling in business.

And when you look at that survey that I mentioned in the script survey after survey showing that even though almost every CEO and executive says major organizational scaling and transformation is going to be required. They also say that so far they are almost not even started yet.

Speaker Change: Well once they get their team in order their strategy is harder and they or their budgets in order. We do think that there's indications that there'll be good dollars being spent on general AI related upskilling and Reskilling and businesses.

Joshua Phillip Baer: Got it. And then just like one follow-up on the segment guide, 10% across the board, with consumer coming in in the high teens this quarter, like the 10% for the year seems to make sense in the context of everything you're saying, but enterprise is already at 10%, I think, and will move lower sequentially. So, could you talk a little bit more about that stabilization when the net retention rate is below 100%, and we just saw that revenue tick lower sequentially? Yeah. So,

Speaker Change: Got it and then just one follow up on the segment guide 10 across 10% across the board.

Speaker Change: With consumer coming in in the high teens this quarter like the 10% for the year seems to make sense in the context of everything you are saying, but.

Speaker Change: But enterprise is already at 10% I think.

Speaker Change: And move lower sequentially. So could you talk a little bit about more about that stabilization when the net retention rate is below 100% and we just saw that revenue ticked lower sequentially.

Kenneth R. Hahn: Yeah, so, uh, thanks, Josh, for the question. The, um...

Speaker Change: Yes so.

Speaker Change: Thanks, Josh good question.

Kenneth R. Hahn: The methodology was as simple as renewing our forecast and taking a look at the overall growth rates for each of the segments. In particular, the enterprise group, and enterprise remained at 10% as it was with the previous guidance last quarter, as well as degrees at 10%, which I'm sure you noted. Enterprise, again, the NRR, there was a larger shortfall than we would have expected for some one-time contracts to one-time contracts on the government side.

Speaker Change: The methodology was simple as renewing our forecast and then taking a look at the overall growth rates with each of the segments in particular, the enterprise group and enterprise remained at 10% as it was with the previous guidance last quarter as well as the greatest.

Speaker Change: 10%, which I'm sure you noted.

Speaker Change: Enterprise.

Speaker Change: Again the NR.

Larger shortfall than we would've expected for some one time contracts to one time contracts on the government side, we do not expect those to recur and so we think you will see the NR bounce back which is the biggest.

Kenneth R. Hahn: We do not expect those to recur, and so we think you will see the NRR bounce back, which is the biggest lever on revenue. So that would explain the deceleration and then moving forward and still achieving the 10%. Thank you. Your next question comes from the line...

Speaker Change: Lever on the revenue so that would explain the deceleration and then and then move important still achieving the 10%.

Speaker Change: Alright, thank you.

Speaker Change: Your next question comes from the line of Brian Peterson with Raymond James. Please go ahead.

Brian Christopher Peterson: Your next question comes from the line of Brian Peterson with Raymond James. Please go ahead. Hey, thanks for taking the questions. I'm not sure if this is for Jeff or Ken, but we'd love to understand your latest thoughts on payback, your sales and marketing investments, and whether there is any change.

Brian Christopher Peterson: Hey, Thanks for taking my questions. So I'm not sure. If this is for.

Brian Christopher Peterson: Jeff Arcane, but would love to understand your latest thoughts on payback in your sales and marketing investments and is there any change in how you guys are thinking about sales and marketing with some of the managed care changes he does abate, but love to get more color there.

Jeffrey Nacey Maggioncalda: Yeah, this is Jeff. Hey, Brian.

Jeffrey Marc Silber: Yes. This is Jeff Hey, Brian So I think there's obviously a difference between the consumer marketing dynamic and then the enterprise where we've got the direct salesforce on the consumer side, we still continue to see pretty good returns on average spend on consumer notably with these professional certificates and especially for the newer ones. So.

Jeffrey Nacey Maggioncalda: So I think there's obviously a difference between the consumer marketing dynamic and then the enterprise where we've got the direct sales force. On the consumer side, we still continue to see pretty good returns on average spend on consumers, notably with these professional certificates and especially for the newer ones. So we're feeling pretty good that there's demand out there, and if we market these things, we get a good return on it. We're also seeing in international markets an increased return on average spend, given the translations.

Jeffrey Marc Silber: We're feeling pretty good that there is there is demand out there and if we market. These things we get a good.

Our return on it and we're also seeing in international markets increased return on average spend given the translations, we think that the translations have kind of opened up some opportunities to deploy paid media outside of the U S. So we're feeling pretty good about that.

Jeffrey Nacey Maggioncalda: We think that the translations have kind of opened up some opportunities to deploy paid media outside of the US, so we're feeling pretty good about that. And then there are the enterprise sales team. You know, I think, frankly, a lot of it, and I've been out there in a lot of these deals, companies are trying. They know that this Generate AI training is a big deal. They're trying to get their act together. They're trying to figure out what their playbook is. How are they going to actually scale? What groups do they go with first?

Jeffrey Marc Silber: And then on the on the enterprise sales team.

Jeffrey Marc Silber: I think frankly, a lot of it and I've been out there and a lot of these deals.

Companies are they know that.

Jeffrey Marc Silber: Generally our training is a big deal. They are trying to get their act together theyre trying to figure out what is their playbook, how are they going to actually scale what groups do they go with first right now theres still focused a bit on the builder, saying do we have people who understand this stuff.

Jeffrey Nacey Maggioncalda: Right now, they're still focused a bit on the builder thing. Do we have people who understand this stuff? But I think creating some shape for those larger Generative AI Academy deals will help. Right now, the deal sizes have been on the smaller side.

But I think creating some shape for those larger.

Jeffrey Marc Silber: Generally I Academy deals will help and so.

Jeffrey Marc Silber: Right now the deal sizes have been on the smaller side I'm optimistic that if they start doing larger scale training of generative AI those mandates might expand and that will create a better return on our enterprise sales and marketing spend by the way I'd also say on Coursera for campus.

Jeffrey Nacey Maggioncalda: I'm optimistic that if they start doing larger-scale training of generative AI, those mandates might expand, and that will create a better return on our enterprise sales and marketing spend. By the way, I'd also say on Coursera for Campus. We are really focused more and more on the four students for credit use cases, where the students get the best value and the institution gets the best value. It does take faculty a little time to warm up to this idea, though.

Jeffrey Marc Silber: We are really focused more and more and more on the four students for credit use cases, where the students get the best value in the enterprise.

Jeffrey Marc Silber: Institution gets the best value. It does take faculty a lull time to warm up to this idea I mean, usually the university president is quite interested in it they've got to make the decisions and sort of enact the policies to say, yes, we're going to offer these industry micro credentials as career Electus for credit that takes a bit of time, so there's a little bit of market development.

Jeffrey Nacey Maggioncalda: I mean, usually, the university president is quite interested in it. But they've got to make the decisions and sort of enact the policies to say, yep, we're going to offer these industry micro-credentials as career electives for credit. That takes a bit of time.

Jeffrey Nacey Maggioncalda: So there's a little bit of market development that we're doing with our sales and marketing team for Coursera for Campus. Frankly, I like that investment. I cannot see a way that higher education is able to respond to the changes without something that looks a lot like what we're offering with these industry micro-credentials that can count as credit towards pathway degrees. I understand. Thanks for coming to this meeting, Jeff.

Jeffrey Marc Silber: <unk> that we're doing with our sales and marketing team in Coursera for campus, we frankly I like that investment.

Jeffrey Marc Silber: I cannot see a way that higher education.

Jeffrey Marc Silber: Is able to respond to the changes without something that looks a lot like what we're offering with these industry micro credentials that can count as credit towards pathway degrees.

Speaker Change: Understood. Thanks for the color there Jeff.

Brian Christopher Peterson: I know you mentioned a lot about AI content. You know, I'd love to understand how you think about AI in terms of the professional certificate for the consumer side, and where is the ecosystem of partners in terms of really enabling that AI content at those really higher price points? Thanks, guys.

Speaker Change: You mentioned a lot about AI content I'd love to understand how you think about AI in terms of professional certificate for the consumer side and where is the ecosystem of partners in terms of really enabling that AI conflict. There is really higher price point consumer courses. Thanks, guys yeah.

Jeffrey Nacey Maggioncalda: Yeah, you know, I think that the professional certificates with generative AI are going to look a lot like the certificate programs that all the cloud players have been doing for the last five to ten years. The basic idea is in order to promote their platform as a leading platform, whether that's AWS or whether that's Azure or whether that's Google Cloud or IBM, they're going to want to essentially not just merchandise their platform but train people on their platform.

Speaker Change: Yeah, I think that the I.

Speaker Change: I suspect that the professional certificates with generative AI are going to look like.

Speaker Change: Like the certificate programs that all the cloud players had been doing for the last five to 10 years. The basic idea is in order to promote their platform as the leading platform, whether that's AWS or whether that's azure, whether that's Google cloud or IBM.

Speaker Change: We're going to want to essentially not just merchandise their platform, but trained people and certified people on their platform.

Jeffrey Nacey Maggioncalda: We'll see, but in the past, the platforms have only certified the builders on those platforms. I can see a world, and we're getting indications that a lot of the platform providers want to also create certification programs for the users of those platforms, of which, of course, there are orders of magnitude more users of the platforms than builders of the platforms. So if things go the way that I think that they might, there could be a next wave of certification programs, but potentially a much larger scale, where you're certifying not just the builders, but the users. Our next question comes from the line of Devin Au. KeyBank Capital Markets.

Speaker Change: We'll see but in the past the platforms have only certified the builders on those platforms.

I can see a world and we're getting indications that a lot of the platform providers want to also create certification programs for the users of those platforms of which of course, there are orders of magnitude more users of the platforms then builders of the platform. So.

Speaker Change: If things go the way that I think that they might there could be a next wave of certification programs.

Speaker Change: Potentially a much larger scale, where you sort of find not just the builders, but the users.

Speaker Change: Interesting thanks, Jeff.

Speaker Change: Your next question comes from the line of Devin.

Devin: With Keybanc capital markets.

Devin Au: Your next question comes from the line of Devin Au with KeyBank Capital Markets. Please go ahead. Great. Hi, Ken. Hi, Jeff. Thanks for taking my question. I'm not sure if you already mentioned this, but could you share the specifics on what you're...

Devin: Please go ahead.

Devin: Great Hi, Ken Hi, Jeff. Thanks for taking my question Im not sure. If you already mentioned this but could you share the specifics on what drove the delay in that content launch from the education partner and are there any guardrails of initiatives in place now to prevent that from happening again down the road.

Jeffrey Nacey Maggioncalda: Yeah. Hey, this is Gab, this is Jeff.

Okay.

Devin: Yeah, Hey, this is Gavin has suggested so.

Jeffrey Nacey Maggioncalda: So, we only have a certain amount of visibility into the production processes for different partners. I would say that one of the things that Ken talked about last quarter, which we continue to lean into for a number of reasons, is us assisting our partners in actually building out this content. A, we've got a pretty good idea of what the success factors are for designing and creating a good piece of content, and B, more and more industry partners appear to want to work with Coursera to put their branded content on Coursera, but they're not instructional designers, so they're looking for us to help. The benefits to us are quite a few. Number one, we can basically have more exclusivity on the content.

We only have a certain amount of visibility into the production processes for different partners I would say that one of the things that Ken talked about last quarter, which we continue to lean into for a number of reasons is us assisting our partners in actually building out this content.

Devin: We've got a pretty good idea of what the success factors are to too.

Devin: Design and create a good piece of content and be more and more industry partners. One appear to want to work with <unk> to put their branded content on for Sarah, but theyre not instructional designers and so theyre looking for us to help the benefits to us are a few number one.

Devin: We can have a.

Devin: Basically more exclusivity on the content number two is if we help to build it and we're putting more resources towards building. It we get a better share of the economics and then number three to your question, we get better visibility into that pipeline and excellent actual management of the production process. So I would say that for a number of reasons include.

Jeffrey Nacey Maggioncalda: Number two is if we help to build it and we're putting more resources towards building it, we get a better share of the economics. And then, number three, to your question, we get better visibility into that pipeline and actual management of the production process. So I would say that for a number of reasons, including these generative AI tools making our productivity much, much better at creating high-quality content at lower prices, we are basically providing more and more assistance to our partners in creating these certificates, and that will give us both more control and more visibility. Great, that's helpful. And then just staying on consumer, with the lower volume, paid learners, he called out in North America. Does that stop?

Devin: These generate AI tools, making our productivity much much better and creating high quality content that lower prices, we are basically providing more and more assistance to our partners in creating the significance and that will give us both more control and more visibility.

Devin: Okay. That's helpful and then just staying on consumer.

Devin: The lower volume and conversion of paid learners you called out in North America does that softness or any any potential impact to I guess degree segment in terms of the funnel and filling those cohorts and degree pathways in the near term.

Devin Au: degree segment in terms of the funnel and filling those cohorts and degree pathways. It might, but I don't know that the numbers are significant enough to materially affect that. What we found is that when we can pair up the right college degree with the right pathway, you know, policy, so you can get credit for the right segment of learners on a professional certificate, you can unlock much higher conversion rates. And so I think it's a bit more about, you know, getting the right pairing of certificate and degree that does it.

Devin: It might.

Devin: Don't know that the that the numbers are significant enough to materially affect that what we find is that when we can pair up the right College degree with the right pathway policy. So you can get credit to the right segment of learners in our professional certificate you can unlock much higher conversion rates and so I think it's a bit more about.

Devin: Getting the right pairing of certificate with degree that does it our Nols are new registered learners are also looking pretty good. So we feel that the top of the funnel. We brought in another $7 million globally, Although youre right in North America, it's a little bit soft.

Devin Au: Our NRLs, our new registered learners, are also looking pretty good. So we feel that at the top of the funnel, we've brought in another 7 million globally, although you're right, in North America it's a little bit soft. We are feeling pretty good about the overall, you know, site visits and new registered learners. So I'm not too worried about that. I don't think that will have a material impact on our ability to fill degree student cohorts.

Devin: We're feeling pretty good about the overall site visits and new registered learner. So I'm not too worried about that I don't think that will become a material impact on our ability to to fill degree student cohorts I think it's much more about unlocking these pathways and really <unk>.

Devin Au: I think it's much more about unlocking these pathways and really improving the conversion rate because of that link between the professional certificate and the pathway degree. Ken, anything you would add to that? No, I would have said the exact same thing.

Devin: Proving the conversion rate because of that unlock between the professional certificate and the pathway to greif, Ken anything you would add to that no.

Kenneth R. Hahn: Said the exact same thing thank you.

Kenneth R. Hahn: Yes.

Jeffrey Nacey Maggioncalda: Let's take one final question. Your final question comes from the line of Brett Knoblauch with Cantor Fitzgerald.

Speaker Change: Let's take one final question.

Speaker Change: Your final question comes from the line of Brett Knoblauch with Cantor Fitzgerald.

Brett Anthony Knoblauch: Thanks for taking my question, guys. Maybe just on comparing the LTV of your North American learners to that of the international learners. How big of a delta is it between them? And then do you think the new payment and currency functionality will help narrow that gap?

Brett Anthony Knoblauch: Please go ahead.

Brett Anthony Knoblauch: Alright, Thanks for taking my question guys.

Brett Anthony Knoblauch: Just on comparing the LTV here in North American learners to that of the international lenders.

How big of a delta is it between them.

Then do you think the new payment and currency functionality, helping narrow that gap.

Brett Anthony Knoblauch: Yeah, great question, Brett. I will say there's certainly a difference. Part of it is the price when we do geopricing. Part of it is the retention, which is typically longer. So retention times price gives you the LTV.

Speaker Change: Yeah, Great question Brett.

Speaker Change: We'll say.

Certainly a different part of it is the price for when we do Geo pricing part of it is the retention, which is typically longer so retention times price gives you the LTV.

Kenneth R. Hahn: Ken, in turn, can you give any general way to think about it? Obviously, it's not something we typically disclose. No, we haven't.

Kevin can you give any general way to think about it obviously, it's not something we typically disclose.

Kenneth R. Hahn: No, we haven't. It's a multiple is the answer. It's a significant difference between North America and Western and all else. Not surprisingly, it's about per capita GDP, especially in APAC. So we haven't given broad guidance, but it's a multiple. It's a significant difference. As far as the new product enabling that more or creating a change in that, we do think we'll be able to realize more value. If you think about it fundamentally, what we're doing around translations is we're making it accessible.

Kevin: We haven't it's a multiple is the answer is a significant difference between North America and Western Nols.

Kevin: Not surprisingly it's about per capita GDP, especially in APAC. So we haven't given broad guidance, but it's a multiple.

Kevin: It's a significant difference.

Kevin: As far as new product, enabling that more or creating a change net we do think we'll be able to realize more value. If you think about it fundamentally what we're doing around the translation.

Kevin: Making it accessible so we think that should should drive both volume and over time the ability to for pricing.

Kenneth R. Hahn: So we think that should drive both volume and, over time, the ability for pricing and payment systems as well, enabling the consumer to transact where it's difficult for them to do today. We think it will give us both pricing flexibility in the future, but more importantly, we'll produce more volume. So partially on the LPV, you'll see increases, but a lot of it is a function, again, of per capita GDP. And there's more opportunity for us to close that gap from a value add standpoint internationally just because we haven't done these things historically. So you'll see a little bit of both, we expect.

Kevin: And payment systems, as well, making enabling the consumer to transact, where it's difficult for them to do today, we think will give us both pricing flexibility in future, but more important we will produce more volume so.

Kevin: Partially on the LTV youll see increases, but a lot of it is a function again per capita GDP and theres more opportunity for us to close that gap from.

Kevin: From a value added standpoint internationally, just because we haven't done these things historically, so youll see a little bit of both we expect.

Brett Anthony Knoblauch: Perfect. And then, if I could just have one more.

Kevin: Okay.

Speaker Change: Perfect and then if I could just have more and more.

Kenneth R. Hahn: On the consumer side, I guess, how much of the revised consumer guidance is attributed to the delayed content versus anything else? Like, could it be macroeconomics starting to impact consumers' budgets and, you know, with inflation continuing to be high, is that affecting the demand funnel?

Speaker Change: On the consumer side, I guess, how much of the revised consumer guidance is.

Speaker Change: You get into the delayed content versus.

Anything else like could it be macro starting to impact consumers, but identity.

Inflation continued to be high is that affecting maybe.

Speaker Change: The demand funnel.

Kenneth R. Hahn: Yeah, it is both, Brett, to your question. So there was a general slowdown in the conversion. We can see some of that as a result of the delayed content launch and particularly the effect of less marketing dollars going against that content launch. Against, a little bit to your previous question, our highest performing, highest value region from a consumer standpoint, and so it is both. And we haven't broken out the attribution. It's hard to understand exactly what the difference is between the two, but it's an element of both.

Speaker Change: Yes. It is both Brad to your question. So there is a general slowdown in the conversion we can see some of that as a result of the delayed content launch and particularly the effect of less marketing dollars going against that content launches.

Speaker Change: Against a little bit to your previous question, our highest performing highest value region from a consumer standpoint, and so it is both and.

Speaker Change: And we haven't broken out the attribution, it's hard to to understand exactly between the two but it's an element of both but it has the slowdown at the beginning of the year around the marketing affects conversion in run rate for the rest of the year of course, because it's a building.

Kenneth R. Hahn: But it has, the slowdown at the beginning of the year around marketing affects conversion and run rate for the rest of the year, of course, because it's a building process, both conversion, and programs build over the first couple of months, and so by delaying that, it's, we lose that for the year.

Speaker Change: Both conversion.

Speaker Change: The programs build over the first couple of months.

Speaker Change: And so by delaying that itself, we lose that for the year.

Brett Anthony Knoblauch: Thank you guys, I appreciate it.

Speaker Change: Alright. Thank you guys appreciate it.

Operator: That wraps up 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. We appreciate you joining us.

Sure.

Speaker Change: 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. We appreciate you joining us.

Speaker Change: Okay.

Speaker Change: This guidance.