Q1 2025 Coursera Inc Earnings Call
Ladies and gentlemen, thank you for standing by and welcome to <unk> first quarter 2025 earnings call.
All participants are in a listen only mode and this call is being recorded.
Following their prepared remarks, we will hold a question and answer session to ask a question. Please click the raise hand button and be prepared to Amit your line when prompted.
Speaker Change: I would now like to turn the call over to Cam Carey head of Investor Relations. Mr. Carey you may begin.
Hi, everyone. Thank you for joining us for <unk> Q1, 2025 earnings conference call.
Speaker Change: Today, I'm joined by Greg Hart, our President and Chief Executive Officer.
Speaker Change: Dan Hahn, our Chief Financial Officer.
Speaker Change: Following their prepared remarks, we will open the call for questions.
Speaker Change: Our earnings press release was issued after market close it is available on our Investor Relations website at Investor Dot for Sarah Dot Com, where this call is being webcast live and more versions of today supplemental materials, including our new quarterly shareholder letter can be found.
Speaker Change: During this call we will present, both GAAP and non-GAAP financial measures. The reconciliation of non-GAAP measures to the most directly comparable GAAP measure can be found in today's earnings press release and supplemental materials.
Speaker Change: Please note all growth percentages discussion refer to year over year change unless otherwise specified.
Speaker Change: Additionally statements made during this call relating to future results and events are forward looking statements based on current expectations and beliefs.
Speaker Change: 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 earnings press release shareholder letter and FCC filings.
Speaker Change: With that I'll turn it over to questions.
Speaker Change: Okay.
Speaker Change: Thank you Cam and good afternoon, everyone I want to begin by saying how exciting the past few months have been as I've settled into my role.
Speaker Change: Since joining coursera in February I have immersed myself in the business as part of a listening and learning process I've prioritized getting to know our team engaging with our customers and partners and deeply understanding our operations in order to implement new execution rigor that can begin to accelerate our progress.
Speaker Change: Fortunately I'm, starting with a strong foundation.
Speaker Change: Today I'm pleased to share that Coursera is off to a solid start in 2025, we.
Speaker Change: We delivered first quarter revenue of $179 million up 6% from a year ago.
Speaker Change: We generated over $25 million of free cash flow up 40% year over year.
Speaker Change: And our growth expectations for the full year have improved we now expect to deliver $725 million of revenue at the midpoint of our range as we lay the groundwork for our next chapter of growth.
Speaker Change: In addition to our financial progress, we welcomed more than 7 million learners. This quarter, marking a Q1 record and underscoring the global demand for job relevant skills and trusted credentials.
Speaker Change: I'm, particularly excited about our innovation efforts, which are focused on building durable capabilities that can re imagine the learning experience and deliver more value for our customers.
Speaker Change: Over the past two months I've learned a great deal and I want to provide some initial observations.
Speaker Change: First it is clear that coursera attracts a dedicated and talented workforce.
Speaker Change: The company has a strong culture rooted in innovation and motivated by our mission.
Speaker Change: Our team cares deeply about the millions of learners. Our platform serves and is focused on expanding the impact we create and the outcomes. We can unlock by transforming access to education and career opportunities I am thrilled to be working alongside them.
Speaker Change: Second the pace of change is accelerating around the world expanding our market opportunities, while creating new avenues for growth.
In January the World Economic Forum estimated that 59% of the world's workforce will require some form of upscaling or re skilling training by 2030.
Speaker Change: As the need to develop new skills progresses at an unprecedented rate individuals' require access to education that can help them advance their careers and remain competitive in a global labor market.
Speaker Change: Businesses across every sector need to develop a more agile workforce that can drive innovation and transform their operations.
Speaker Change: In higher education must adapt to mounting pressures.
Speaker Change: Students desire, a more compelling value proposition and.
Speaker Change: And employers demand graduates with job olive and skills and.
Speaker Change: And demographic and enrollment trends will require universities to expand their revenue streams.
Speaker Change: Meeting this moment will require a leader with the scale technology and ecosystem to reinvent how education is delivered.
Speaker Change: Coursera is positioned to do just that we operate on solid footing with a strong continuously improving set of foundational assets and the capacity to drive durable long term growth.
Speaker Change: Our team has made strong progress delivering new products capabilities and experiences across our platform, but I believe we can move at a faster pace.
Speaker Change: Working with the leadership team I have started to implement thoughtful changes to our operating model focused on driving more innovation and engagement throughout our learner experience more rapid product development cycles, and a data driven approach to continuous improvement in all aspects of our business.
Speaker Change: At the highest level our mission is to serve learners by providing trusted education that unlocks career mobility.
Speaker Change: As part of this effort, we have simplified our business model and segment reporting integrating the consumer and degrees segments as both support consumer learners around the world.
Speaker Change: The degrees market opportunity will continue to be an important part of our long term strategy, but our new model is designed to accomplish three things.
Speaker Change: Simplify our structure.
Speaker Change: Reflect the learner journey at the center of our decision making and.
Speaker Change: And focus the investments, we're making in a unified end to end platform experience that spans all product categories.
Speaker Change: Whether its a standalone course, our professional certificate or a college degree our job is to deliver the right content at the right time to support each learners personal goals.
Speaker Change: By building, an integrated learner journey, we ensure that our investments and platform capabilities marketing and discovery and the next breakthrough learning experience provide a consistent experience for the broad audiences that we serve.
Speaker Change: From helping our consumer learners navigate their careers to supporting our enterprise customers looking for the best way to Upskill their workforces to adapt to a rapidly changing business environment.
Speaker Change: As we lay the groundwork for our next phase of innovation and growth. We continue to execute on our 2025 plan with strong progress in expanding our ecosystem.
Speaker Change: Content is the engine of our business and the foundation of that ecosystem. Our catalog now includes nearly 10000 courses growing by 37% over the past year.
Speaker Change: We are building a faster more agile content model that preserves the value of our credible high quality brands and meets the rapid pace of skills development for real time learner and business needs.
Speaker Change: A key offering as our generative AI content and credentials.
Speaker Change: Our content creators many of which are the world's leading AI companies have launched nearly 700 AI courses as they look to meet the growing demand for these skills.
Speaker Change: So far this year, we are seeing 12 enrollments per minute and AI content up from one per minute in 2023 and eight per minute in 2024.
Speaker Change: We also continue to expand our catalog of entry level professional certificates.
Speaker Change: This year, we have launched five new certificates from industry partners, including Adobe deep learning AI.
Speaker Change: B M, John Hopkins Medicine, and Microsoft expanding our total catalog to 90 certificates.
Speaker Change: These certificates provider learners with a pathway to entry level jobs in fields, such as software development Cyber security data science business in health care, while students can increasingly earn college credit for these certificates.
Speaker Change: More than 30 of our certificates in this catalog have received one or more credit recommendations from <unk> in the U S. S. Etfs in Europe, and <unk> in India, which are part of our efforts to create more distinct value for learners and customers by enabling pathways to college degrees.
Speaker Change: Later this month, we will publish our 2025 micro credentials impact report drawing insights from more than 2000 students and employers.
Speaker Change: Preview of several key findings showcases why we continue to enhance this catalog.
Speaker Change: 85% of employers are more likely to hire a candidate who has the microcode agile compared to one without.
Speaker Change: And 94% of students want micro credentials to count towards their degree which is up from 55% in 2023.
Speaker Change: As students are increasingly concerned about whether a traditional degree will equip them with the skills they need to land the job in a competitive labor market.
Speaker Change: Micro credentials have emerged as a solution that prepares graduates for the modern workplace.
Speaker Change: Augments the expertise of traditional University courses and gives employers assurance that entry level hires possess the job relevant skills needed by their workforce.
Speaker Change: The breadth and quality of our content engine enables us to serve both upskilling and reskilling value propositions as a result, our catalog attracts learners from around the world, making coursera one of the largest and most globally distributed learning platforms.
Speaker Change: We have attracted over 175 million learners with the U S, India, Mexico, and Brazil, among our largest markets.
Speaker Change: This global reach not only drive scale that creates powerful opportunities for localization, enabling us to tailor content language and experiences to meet the needs of learners and labor markets in different regions.
Speaker Change: Additionally, many working adults access learning in institutional settings. We now serve 1006 hundred 51 paid enterprise customers spanning businesses governments and campuses.
Speaker Change: Our customer partners.
Speaker Change: Our customers partner with Coursera, not only for content, but a robust set of platform capabilities that can meet the unique needs of each vertical with a shared foundation.
Speaker Change: Having skills transformation for employees, enabling government workforce development at scale and powering academic innovation.
Speaker Change: Our growing base of learners and enterprise customers continues to attract leading content creators from world class universities to industry leaders.
Speaker Change: These creators are trusted by learners for their academic rigor industry expertise and real world relevance as.
Speaker Change: As demand for career aligned education grows we believe top universities and industry partners will increasingly view coursera as a strategic platform to extend their reach and impact.
Speaker Change: Google one of our strongest partnerships has created several of the most popular certificates on coursera.
Speaker Change: Last year, they launched AI essentials of course designed to help learners across roles in industries gained valuable AI skills and hands on experience with AI tools to boost productivity.
Speaker Change: It was the most popular course on Coursera in 2024 with over 1 million enrollments to date.
Speaker Change: In February Google added of course, an agile essentials to our catalog teaching software development methodologies to professionals across industries and teams.
Speaker Change: Additionally, our relationship with Microsoft which began in April 2021 continues to deepen over the past three years, we have partnered to launch more than 35 professional certificates and specializations that encompass over 170 courses covering topics ranging from azure cloud to excel and more.
Speaker Change: Our recently AI.
Speaker Change: Earlier this month, we announced more than 1 million learners have enrolled in Microsoft content with learners coming from more than 195 countries.
Speaker Change: We are proud of how our shared commitment with these partners can broaden access to job relevant skills and technology education, and we look forward to expanding our efforts so that learners everywhere can succeed in an evolving labor market.
Speaker Change: I believe our next chapter of growth will be defined by innovation and I am committed to accelerating the role our platform will play in shaping the future of learning.
Speaker Change: Coursera is ecosystem is powered by our platform, which benefits from rapidly expanding global reach to scaled access to learning.
Speaker Change: Data driven insights to inform our content strategy and skill recommendations.
Speaker Change: And advanced AI and technology tools to enhance discovery deliver a more personalized and interactive learning experience and empower and structures to create an augment courses that are engaging and impactful for learners.
Speaker Change: The team has made strong recent progress building new products and capabilities across our platform.
Speaker Change: I would like to highlight three examples that demonstrate how we're focused on driving an improvement in engagement retention and conversion by delivering more valuable experiences for our learners.
Speaker Change: First technology continues to rapidly reduce language barriers opening access to education and career opportunities.
Speaker Change: As you know Coursera started rolling out AI powered text chat translations in 2023.
Speaker Change: Which have enabled nearly 3 million learners to access more than 5000 courses across 26 languages.
Speaker Change: Last week, we announced the next phase of our translation initiative with the launch of more than 100, AI dumped courses in Spanish French German and Brazilian Portuguese.
Speaker Change: Now this can not only read but here courses in their native language with natural voice tone, and lip sync, which offers a remarkably better experience than conventional dumping.
Speaker Change: And the initial text based phase learners completed translated courses at higher rates and nearly 25% faster compared to those offered only in the original language.
Speaker Change: With the advancements in audio were excited about the possibility of driving stronger engagement and better outcomes.
Speaker Change: Over the course of Q2 and the rest of this year, we will expand the breadth of courses and range of languages available with AI dumping as we continue our efforts to bring the world's best education to learners everywhere.
Speaker Change: Next is coursera coach, which started as a learning assistant, but it's rapidly expanding in breadth and depth.
Speaker Change: Coach has become an increasingly core presence across our platform with expanding features and career guidance and discovery instructional design and customer support.
Speaker Change: In Q4, we piloted coach dialogues, which allowance structures to incorporate personalized interactive learning experiences throughout their courses acting as an extension of their teaching to help learners think more deeply about course material and concepts.
Speaker Change: The early signals are promising showing a significant impact in learner engagement for courses with dialogues.
Speaker Change: I am pleased to share the dialogues are generally available as of the first week of April and we will be closely monitoring performance as we seek to drive broad adoption of this new capability across our catalog.
Speaker Change: Finally, coursera prominence as a global destination for career motivated learning attracts a broad range of learners from our survey data, we know that the majority of learners looking to start or switch their careers do not know what they need to learn or where to begin.
Historically, our search and discovery experience is emphasize the breadth of our offerings, we recognized opportunities to better understand our learner schools guide them on what roles can be learned fully online and how high quality education and credentials can provide a pathway to a more satisfying career.
Speaker Change: Starting in Q4, we began testing and improved career based discovery experience that maps, our broad selection of credentials to specific job roles and skills.
Speaker Change: The new experience, which continues to be rolled out globally includes improved onboarding, allowing us to better understand learner goals and provide more personalized recommendations.
Speaker Change: 60 roll description pages, which provide credential recommendations across different levels of career progression and expertise in.
Speaker Change: And localized salary and job data for approximately 40 countries.
Speaker Change: The preliminary results are showing positive impacts in our paid learner conversion.
Speaker Change: We expect to rapidly expand these early features with a wider selection of rolls a better understanding of learner goals to personalized guidance and recommendations and a clear learning and career progression from beginner courses to industry certificates and college degrees.
Speaker Change: This is an experience that coursera is uniquely capable of creating.
Speaker Change: As I reflect on my first month as CEO.
Speaker Change: I'm excited about the opportunities ahead and of course theres role in shaping the future of education there.
Speaker Change: The foundational elements are all in place.
Speaker Change: Solid financial performance with a strong balance sheet.
Speaker Change: And expanding ecosystem at the forefront of learning with distinct assets and global scale.
Speaker Change: In a growing market opportunity to serve both individuals and institutions with an integrated platform.
Speaker Change: Our efforts to unlock Coursera <unk> next chapter of innovation and growth are well underway in the coming quarters, our priorities will be centered around three key areas.
Speaker Change: First and foremost product innovation is key to our strategy. We are committed to expanding access to the world's best education and career opportunities through focused improvements and our learner experience. This means accelerating product development cycles, leveraging advanced AI and data driven insights and <unk>.
Speaker Change: Continuously enhancing our platform's capabilities.
Speaker Change: Second we will continue to accelerate our content engine by rapidly growing our high our catalog of high quality job relevant courses with more leading content creators. We can meet the fast changing skill requirements of learners looking to transform their careers and companies needing to transform their businesses.
Speaker Change: Through their most important asset their people.
Speaker Change: Third we will enhance our go to market capabilities. We aim to guide individual learners more effectively through improved discovery merchandising and a clear value proposition career based discovery is just the start.
Speaker Change: This combined with optimizing our enterprise channels enables us to reach and serve our customers efficiently and effectively.
Speaker Change: While it's still early days I am confident in the clear direction, we're taking grounded in strong fundamentals and important mission and a highly motivated team.
Speaker Change: Now I'll hand, it over to Ken to walk us through the financial performance and outlook in more detail.
Ken: Ken Please go ahead.
Ken: Thank you, Greg and good afternoon, everyone. We.
Ken: We delivered solid first quarter.
Ken: Greg mentioned, our expectations for full year growth have improved as we begin to implement new operating capabilities and a focused set of initiatives.
Speaker Change: Please note that for the remainder of this call as I review, our business performance and outlook I will discuss our non-GAAP financial measures unless otherwise noted.
Speaker Change: In Q1, we generated total revenue of $179 million up 6% from a year ago, driven by growth in our consumer and enterprise segments.
Speaker Change: Gross profit was $100 million up 9% year over year with a 56% gross margin up from 54% in the prior year period.
Speaker Change: Total operating expense was $87 million or 49% of revenue an improvement of four percentage points from the prior year period, reflecting our disciplined approach to managing our cost structure, while making investments intended to drive long term durable growth.
Speaker Change: Net income was $20 million or.
Speaker Change: Or 11% of revenue and adjusted EBITDA was $19 million or 10, 4% of revenue.
Speaker Change: Turning to cash performance and the balance sheet Q1 was our strongest quarter of cash performance to date, we generated more than $25 million of free cash flow, which included over $4 million in purchases of content assets treated similarly to other categories of capital expenditures.
Speaker Change: As Greg highlighted we will continue to invest in expanding our content engine capabilities. This includes new partnerships production arrangements and formats that can deliver more value for our learners customers and content creators as well as long term benefits to our business model and economics.
Speaker Change: Our strong cash performance bolstered our already healthy balance sheet as of March 31, 2025, we had approximately $748 million of unrestricted cash and cash equivalents with no debt.
Speaker Change: We are operating from a position of financial strength with the flexibility and stability needed to navigate changes in the technology landscape and remain focused on executing on our long term strategy.
Speaker Change: As we've discussed in the past our capital allocation framework emphasizes the strategic Optionality provided by our strong financial position, which we believe is particularly valuable given the industry's rapid recent transformation as well as our desire to grow and establish a leadership position.
Now turning to our operating segments I want to begin with the segment reporting simplification introduced today, which is aligned with the information Greg our chief operating decision maker or C. O D M and accounting part of land is now using to manage the business.
Speaker Change: Going forward our degrees of results will no longer be reported as an independent segment degrees is now a product within our consumer segment.
Speaker Change: As a result, we're no longer disclosing the number of degree students as it will not provide a meaningful indication of consumer segment performance.
Speaker Change: As a onetime practice to ensure clarity in todays report we have provided our operating results in both our historic segment reporting structure as well as our new simplified structure.
Speaker Change: While the change is straightforward and has no impact whatsoever on either our consolidated results or enterprise segment results a reclassification table for the past two years is included in the appendix of today's shareholder letter as well as posted to our IR website, and a downloadable spreadsheet for complete clarity and ease of modeling.
Speaker Change: Additionally, our performance and outlook commentary today includes comprehensive discussions of both our consumer segment and degrees product trends, ensuring full visibility into standalone first quarter results and our 2025 expectations as we transition to the updated reporting structure.
Speaker Change: We will discontinue this presentation after this transition quarter.
Speaker Change: Now, let's discuss the segment results in more detail starting with consumer.
Speaker Change: In Q1, combined consumer segment revenue was $118 million.
Speaker Change: Up 5% from a year ago. This.
Speaker Change: This is composed of our historical consumer product revenue of $102 million and degrees product revenue of $16 million, both of which grew 5% year over year.
Speaker Change: On a standalone basis historical consumer product revenue was driven primarily by solid top of funnel activity and receptivity to our coursera plus subscription offerings.
Speaker Change: The greatest product revenue was slightly ahead of expectations due to stronger student persistence and several north American programs as well as a year over year increase in the total number of degree students.
Speaker Change: Moving to gross profit combined consumer segment gross profit was $72 million up 9% from $67 million in the prior year period.
Speaker Change: In historical terms. This included Standalone consumer product gross profit of $57 million in degrees product gross profit of $16 million up 10% and 5% year over year, respectively.
Speaker Change: Combined consumer segment gross profit margin was 62% up 190 basis points from a year ago.
Speaker Change: In historical terms consumer gross profit margin was 56% up 220 basis points from a year ago. It was the primary driver of the combined segment margin expansion as there is no change to the degree gross profit margin of 100% and remains the same year over year.
Speaker Change: The consumer expansion was driven by an improvement in our gross profit margin rate as learners engage with more recently launched content and credentials created under new production arrangements with more favorable revenue share economics.
Speaker Change: To summarize our consumer trends remained stable in Q1 as Greg highlighted earlier, we added more than 7 million new registered learners, bringing our total base to $175 million.
Speaker Change: Additionally, we saw strong receptivity to our coursera, plus subscription offerings and marketing campaigns, including localized promotions that benefited our paid conversion rate.
Speaker Change: Overall I'm pleased with our continued progress in consumer.
Speaker Change: The renewed level of prioritization and focus and our execution and the initiatives underway across content product and marketing as we begin to implement our new operating model and seek to drive more significant growth.
Speaker Change: Moving to our enterprise segment, which I will remind you is not impacted by the segment reporting change.
Speaker Change: Enterprise revenue was $62 million up 7% from a year ago, driven by growth in our business and campus verticals. Our first quarter performance was solid and like most companies. We are closely monitoring budgetary trends amidst the backdrop of an uncertain macro environment.
Speaker Change: Segment gross profit was $43 million up 10% from $39 million in the prior year period.
Speaker Change: <unk> gross profit margin was 70% up 200 basis points from a year ago.
Speaker Change: Total number of paid enterprise customers increased to 1651 up 12% from a year ago and our net retention rate for paid enterprise customers was 91%.
Speaker Change: Finally, turning to our financial outlook.
Speaker Change: As you know our historical practice entering a new year has been to provide some incremental color on the composition and pace of our business, including onetime segment growth rates.
Speaker Change: Last quarter, Greg and the team assessed our business model and market opportunities and started to refine our operating capabilities and the prioritization of initiatives and investments intended to reignite our growth trajectory.
Speaker Change: As such we shared high level full year expectations with a commitment to providing a more detailed 2025 outlook soon.
Speaker Change: To that end for Q2, we expect revenue to be in the range of $179 million to $183 million representing growth of 5% to 7% year over year.
Speaker Change: For adjusted EBITDA, we're expecting a range of $11 million to $15 million.
Speaker Change: For the full year 2025, we now expect revenue to be in the range of $720 million to $730 million representing growth of approximately 4% to 5% year over year.
Speaker Change: From a segment perspective, this reflects single digit growth in our consumer and enterprise segments with more weighting towards consumer given one the stabilization trends, we've been driving in our consumer performance and to acknowledging the macroeconomic trends that have unfolded in recent weeks with less certainty.
Speaker Change: And the corporate spend environment.
Speaker Change: Lastly, consistent with last quarter's commentary, we continue to expect our degrees product to decline as we invest in more productive near term opportunities that can benefit the broadest number of learners and customers across our platform.
Speaker Change: Now moving to EBITDA.
Speaker Change: As you know our longtime operating practice as it relates to EBITDA is not focused on the optimization results for any single quarter.
Speaker Change: Rather we said an annual EBITDA margin target and work within that framework to invest in our most productive growth opportunities.
Speaker Change: This practice provides us with the flexibility to make the right long term decision to quarter to quarter, while demonstrating our commitment to operating with discipline and driving scale in our model every year.
Speaker Change: For 2025, we are targeting annual adjusted EBITDA margin improvement of 100 basis points to 7%.
Speaker Change: As we discussed last quarter. This is a more moderate pace of improvement following several years of aggressive expansion at.
Speaker Change: At the end of the day, our long term prospects and value will depend most heavily on us growing and succeeding in our large and attractive markets.
Speaker Change: We remain committed to extending our strong track record of operating with discipline, while providing the team with the optionality and capacity throughout this year to implement the new operating capabilities Greg outlined.
Speaker Change: Further differentiate <unk> leadership position.
Speaker Change: And bolster our return to higher growth.
Speaker Change: With that I'll open the call for questions.
As a reminder, if you'd like to ask a question. Please click on the right hand button at the bottom of your screen. Once prompted please on mute your line and ask your question.
Speaker Change: I will now pause a moment to assemble the queue.
Our first call question will come from Brian <unk> with Jpmorgan. Please Amit your line and ask your question.
Speaker Change: Great. Thanks for taking the questions I guess, Greg just.
Speaker Change: Can you just help us understand where you are spending the most time.
Speaker Change: In your new role and where you see the most opportunity to drive improved growth in the consumer segment Coursera for campus enterprise or the mobile app.
Speaker Change: Thank you.
Speaker Change: Thanks, Brian Great question. So my top priority is unlocking the next phase of innovation led growth for Coursera spend my first few weeks here deeply understanding all areas of the business and the organization and then turning to start to implement some thoughtful changes to our operating model and our ways of working.
Speaker Change: With a focus on new capabilities that can help us better serve our lenders are university and industry partners and then our enterprise customers as well so we can drive higher growth.
Speaker Change: Some of the near term focus areas number one product innovation I believe that we can accelerate our product development lifecycle, we can do that both by leveraging advanced AI and data driven insights, but also by focusing on the right spots within the product for innovation.
Speaker Change: Again tied back to durable capabilities that can better serve our members and then make sure that we're continuously enhancing the core foundational capabilities of the platform pads.
Speaker Change: Second area, our content engine. So content, obviously is the fuel that.
Speaker Change: Runs our business expanding our content catalog continues to be critical the need and the interest in learning has never been greater and you'll see that reflected in the strong growth to $7 1 million new registered learners in the quarter. We believe that need is going to continue to increase over time.
Speaker Change: And so we need to make sure that our catalog to meet that need and so we need to become more nimble and we need to make sure that we're filling in gaps in the catalog and we need to make sure that we're continuing to evolve not just the breadth and depth of the catalog that we offer but also the learning experience itself.
Speaker Change: Then finally, our go to market, so expanding our go to market capabilities and.
Speaker Change: And by that I mean, everything from sort of a registration in onboarding career based discovery et cetera to guiding individual learners more effectively through that experience how.
Speaker Change: How we merchandise.
Speaker Change: We communicate our value proposition and then how we do all of that across all segments of our business. So not just for consumer learners, but for our enterprise customers as well.
Speaker Change: We will also continue to make improvements to the enterprise areas business, specifically for enterprise admins and specific needs that our enterprise customers have.
Brian: I would say overall to the last part of your question Brian.
Brian: You would start to see just because the nature of the two businesses.
Brian: I expect that we would start to see more.
Brian: More signs that translate into sort of business output metrics on the consumer side of the business.
Brian: But I would expect that over time that would also translate into enterprise.
Brian: Great. Thank you and I just had a quick follow up to I mean, <unk> was such a strong quarter and a record quarter in terms of registered learner net adds could you just help us understand what drove that performance you mentioned stabilization across trends.
Brian: A cross retention top of funnel or both.
Brian: I would say, it's a mix of the two on top of funnel, obviously, a good quarter with $7 1 million registered learners.
Brian: We saw some real success on the marketing front with improvements in our return on AD spend and efficiency there.
Brian: But also saw some great improvements that we made on the platform itself.
Brian: Helping to drive a better learner experience and so we talked about some of those in the scripted remarks.
Brian: With things like dialogue.
Brian: Translation, driven translations et cetera, but.
Brian: But conversion and retention will be the two things that we are focused the most on driving improvements in ore.
Brian: Over the course of the coming year.
Brian: And from a product standpoint, we saw the biggest uplift in our plus subscription offerings.
Brian: So.
Brian: There was a big focus we do an annual promo every year.
Brian: Round the seat plus annual subscriptions and that was also particularly successful which drove a lot of nice free cash flow as well as future revenue. The course of this entire year.
Speaker Change: Great. Thank you both.
Stephen Sheldon: Our next question will come from Stephen Sheldon with William Blair Your line and ask your question.
Speaker Change: Yes. Thanks.
Speaker Change: Greg I wanted to follow up on the content front now that you've had a few months of course era, where do you see the bigger opportunities to expand the content on the platform as we think about subjects. For example building out more breath in health care or other subjects by the source of content as you think about corporate University partners along with.
Speaker Change: New sources and just by content type I'm curious, how you're thinking about how the how that content portfolio might look as we might sit here two to three years down the road.
Greg Hart: Great question Stephen.
Greg Hart: So content as I mentioned earlier is the engine of our business and it really powers the flywheel.
Greg Hart: Our ecosystem so stepping back you've got the branded content that comes from both our University partners and our industry partners that content is the reason that learners come to the platform as more and more learners come to our platform and engage with the platform that obviously makes coursera up more and more appealing to our partner.
Greg Hart: <unk>.
Greg Hart: Both higher education, and the industry as a way to bring their content to a large and increasingly growing audience.
Greg Hart: This past year, we've expanded our horses are of course catalog by 37% year over year. So we now offer nearly 10000 courses.
Greg Hart: And that includes things that are both incredibly topical <unk> so yes.
Speaker Change: Roughly 700, Jenny horses now.
Speaker Change: With an incredible amount of demand for those forces and so just to provide a little context as I've mentioned in the scripted remarks, we saw.
Speaker Change: Demand so far this year, we're seeing demand of 12 enrollments per minute and Jenny I content up from eight last year and one in 2023.
Speaker Change: We also want to keep adding new entry level certificates because that brings both very career aligned learning and things that employers are looking for in their prospective candidates and so we added five new interest of certificates in Q1.
Speaker Change: One of them was from John Hopkins said, you mentioned health care.
Speaker Change: And so we added one from Johns Hopkins I do believe there's opportunity for us to continue to expand in the healthcare space.
Speaker Change: The total number of certificates when that happens more than 90 and about a third of those have at least one credit recommendation. So theyre also useful to full time students and they help augment the <unk>.
Speaker Change: <unk> that our partners.
Speaker Change: At the University level provide to their student base.
Speaker Change: I think what we want to get too with our content offering.
Speaker Change: One that has both breadth across every different subject and domain area depth and all of those areas and has also really nimble and so one of the things that we're really trying to do is figure out how do we accelerate our content and Jim you've heard us talk on prior calls about Coursera produced content.
Those I think we will continue to increase our investment that we started that investment.
Speaker Change: Last year may be the tail end of 2023.
Speaker Change: We will increase that investment this year, a couple of really interesting things about what's there. Please contact one obviously, we have better control of that content, because we are creating at number two.
Speaker Change: Favorable for us economically.
Speaker Change: Accretive from a gross margin perspective, and obviously it's exclusive.
Speaker Change: The thing that we can do with that content is really use it as a testbed for what works to drive more learner engagement and so that's one of the things that the team has been doing and will continue to do.
Speaker Change: The goal of obviously all of our content is to make sure you're doing a fantastic job of improving that experience and so we really looked at it in terms of what's the supply that we need to have a content to attract learners to our catalog whats the learning experience that we provide that.
That converts them from registered a one or two are paid learner and keeps them on the platform for longer and so it drives higher retention.
Speaker Change: Okay got it. Thanks, that's really helpful. Maybe as a follow up.
Speaker Change: On the career discovery solution really interesting where you guys are doing there.
Speaker Change: I guess as you think about the opportunity how comprehensive solution of course airlift to build there, especially as we think about the opportunity to actually be a connection point potentially down the road between learners and prospective employers is there a bigger monetization opportunity that you may may start to pursue at some point.
Speaker Change: Yes, perhaps down the road.
Speaker Change: I'd say right now.
Speaker Change: It's still early days we have.
Speaker Change: 60 odd.
Different rules that are covered by our career based discovery. We believe there is a massive opportunity to expand that we continue to invest more and more third party data to help build out the underlying sort of career enroll in skilled grass and the goal is to enable a learner coming in who may not be sure about what.
Speaker Change: They're exactly what they are trying to learn but has an interest in a given area to be.
Speaker Change: Better understand what is that interest look like so stay on interested in data, okay, well what kind of rules are there.
Speaker Change: Out there in the job market that are in the data deal what are the skills that those rules require and then what are the courses that I can take 1% to help me build those skills and make my resume more appealing to employers in those spaces I would say, we're still early days on that but we're showing some good positive signs.
Speaker Change: From a conversion perspective, as we do that and so we will absolutely increase our investment in that over time I would like us to be viewed.
Speaker Change: <unk> as an authoritative source on that and as we do that that potentially create an opportunity down the road for looking at additional things that we might go after.
Speaker Change: Got it. Thank you very much appreciate you taking my questions.
Speaker Change: Our next question will come from Rishi Galeria with RBC. Please on mute your line and ask your question.
Rishi Galeria: Wonderful Hi, Greg Hi, Ken. Thanks, So much for taking my question, maybe I want to start with the re categorization.
Speaker Change: Consumer and degrees into one segment and look I understand what you're talking about streamlining the organization.
Rishi Galeria: Maybe two pieces there number one.
Rishi Galeria: They are fundamentally different business as I understand with micro credentials and pathways. There, there's maybe a little bit of a blurry line, but youre targeting different people. So maybe help me understand better the logic behind that and the second piece to that.
Speaker Change: Obvious pushback that I think youre going to get from investors is well degrees has been a little bit of a challenge business over the past couple of years is this just a move to hide future weakness in degrees. Maybe you can just help us understand both the notice and I've got a quick follow up.
Rishi Galeria: 100 <unk>.
Rishi Galeria: Ken.
Speaker Change: So thank you for that question and the clarity around it.
Rishi Galeria: As you mentioned.
Greg Hart: We think about it and as Greg looks about it new in his role ultimately degrees is another consumer products just another consumer, albeit it is.
Greg Hart: Longest in duration and the highest in price and a source differently, but it is one more consumer offerings. So as we look at how we operate the business and the changes we're making there.
Greg Hart: We stay focused on the biggest growth opportunities we've changed the data that we look at day to day that mist management, which ultimately drives the accounting around it. It is as you mentioned 9% of revenue.
Greg Hart: Trying to be as open as.
Greg Hart: As possible breaking you're breaking out including the forward look and to your point Richie we do expect degrees decline. So before we collapsed that reporting to be in sync with the reporting we do internally we wanted to make sure. We're not hiding anything we wanted to be very clear about it.
Greg Hart: And so for the small portion of the business, which while it's still important for consumer its an important product is a smaller portion and especially as we move forward and as degrees again, we expected to decline slightly this year, we wanted to make that statement.
Greg Hart: As consumer and enterprise and both expect to grow at.
Greg Hart: At significant rates it will become less relevant to investors.
Greg Hart: Less relevant date to date for us as we manage it and again important for our consumer.
Greg Hart: Think of it as a consumer offering.
Greg Hart: So as we look at the data that we've looked at to manage the business.
Greg Hart: Greg the tube, you'll see about accounting those are.
Greg Hart: <unk>, our chief operating decision maker.
Greg Hart: He looks at as we look at the health of the business and as we manage the business.
Greg Hart: It indicates we should collapse it so we think that.
Greg Hart: If you want that the noise around.
Greg Hart: Greed is not fitting with the with the focus externally, but we have provided historical combinations and we go out of our way to be transparent around these things.
Greg Hart: So you can look at the historic combination and again, we've tried to do our best by giving the forward guide and we're not trying to hide the ball that's for sure.
Greg Hart: But I hope that helps.
Speaker Change: Yes, no. Thanks, Ken that's Super helpful. And then maybe I will.
Speaker Change: When I think about now the outlook for the year nice to see a raise there.
Speaker Change: I just want to kind of understand your sets of assumptions behind that guidance right and especially just given I mean, no. One knows how this macro picture and everything is going to shake out, but I think it is clear we have seen consumer sentiment start to weaken that's obviously a very critical growth driver on your side as the consumer business.
Speaker Change: Maybe you can help us understand given the global nature of your business global nature of your learners in the consumer business, how youre thinking about what kind of a base case embedded in the guide, especially as it pertains to all of these pieces. Thanks.
Speaker Change: Sure so.
Speaker Change: As I break it down between consumer enterprise and as we said in the original <unk>.
Speaker Change: <unk>.
Speaker Change: We expect those to grow single digits, but consumer more than enterprise.
Speaker Change: What we built into our consumer outlook is some observed improvements that we see in our metrics.
Greg Hart: Greg talks about pop above conversion retention and ARPA internally.
Greg Hart: We look and think about the consumer business, we have seen improvements already.
Greg Hart: That are that we indicated essentially we've reflected in our forward guidance.
Greg Hart: We will also continue to invest in the business and we see lots of opportunities there operationally.
Greg Hart: So we increased our EBITDA outlook by 100 basis points, which is good and we continue to improve the economic model, but not at the rate we have historically and the reason for that is we wanted to be sure. We set aside not so that we can pursue growth initiatives and new capabilities that will also drive growth.
Greg Hart: And we've built that into the business, but we haven't assumed that we're going to see any incremental growth from them yet it's too early it needs to be proven. So we absolutely think we have a lot of opportunity just to operate differently and better.
Greg Hart: As you know as well we've seen historically during slower economic times, some counter cyclicality.
Greg Hart: Next is it's always hard to read that internally as you said everybody is trying to understand that.
Greg Hart: But we.
Greg Hart: I wouldn't be surprised if we see some of that as well every downturn a little bit differently to track that on the enterprise side, we had a nice Q1, we're still expecting enterprise to grow but we expect to grow at a slower rate and that is not necessarily because of what we're seeing directly right here right now.
Greg Hart: Associated with the revenue, but due to some caution around enterprise spend we think in this category as budgets softened during macro environment uncertainty and business is pulling back in particular.
Greg Hart: There could be some risk of <unk>.
Greg Hart: Slower growth going forward, we haven't seen it necessarily but we think.
Greg Hart: Some amount of caution, which I think everybody is looking for.
Greg Hart: City, where we have seen some particularly nice outcomes recently.
Greg Hart: In the near term, we expect to see is around where separate campus.
Greg Hart: As compared to <unk> for business or government. So.
Greg Hart: Of course separate campus, we think should be continue to be a bright spot, but overall and it gives us some confidence in the lower single digit growth, we see for enterprise.
Greg Hart: That's how we came to the outlook for Gucci.
Speaker Change: Very helpful. Thank you so much.
Speaker Change: Our next question comes from Josh Baer with Morgan Stanley Your line and ask your question.
Speaker Change: Great. Thanks for the question for Greg just wondering I mean.
Speaker Change: Bullish on the long term secular trends around skilling and Reskilling.
Speaker Change: But I'm more uncertain on the timing of when it is going to matter for companies in it.
Speaker Change: Exposed and so I'm wondering your perspective coming into this sector on the timing of that opportunity when the skilling, and reskilling and flat and translate to momentum.
Speaker Change: For you and.
Speaker Change: And really what will it take to get there.
Josh Baer: Great question, Josh So I'll give you my thoughts.
Speaker Change: Number one I don't have a crystal ball I wish I did.
Speaker Change: And I think some of the things that can actually just mentioned are really pertinent. So on the one hand, you've got satellite.
From the World Economic Forum that 59 out of every 100 jobs in our global workforce will need retraining by 2030 so.
Speaker Change: That is a longer term.
Speaker Change: Push that companies will need to figure out how to deal with how do they upskill and reskill their workforces balanced against that you have the uncertainty of the macroeconomic environment now.
Speaker Change: So you sort of got near term uncertainty that obviously is causing.
Speaker Change: Corporate leaders to be a little reticent about spending until they have a better sense of it.
Speaker Change: What the trends might look like and then you've got that balanced against this longer term shift that I think all of them absolutely agree on.
Speaker Change: We mentioned in the scripted remarks, the stats about enterprise leaders.
Speaker Change: The need for learners workforce.
Speaker Change: Members with AI skills.
Speaker Change: I think that.
Speaker Change: What youll see is that Youll see it play out a little bit differently in different sectors relatively obvious reasons, because AI will have different impacts in different sectors at different timelines.
Speaker Change: That the companies that are more forward leaning and continue to invest in Reskilling will have an advantage.
Speaker Change: And that will be a real competitive advantage because it will give them a combination of both better operating leverage as they become more efficient and better capabilities to attract and retain consumers regardless of the industry that they are and they can leverage AI to do a lot of things from a customer experience and marketing perspective more effectively than they are.
Speaker Change: Third with prior tools.
Speaker Change: So the companies that lead into that will be the ones that get the benefit of that and I expect that those will be the ones that will continue to invest and reskilling and upskilling their workforces and we want them, we want to make sure that Coursera does a great job of serving those companies and then of course the ones that are forced for whatever reason because of the macroeconomic uncertainties.
Speaker Change: Hold off on.
Speaker Change: Want to make sure that we stay in dialogue with those companies about the value that we can provide to them and the way that some of those reskilling and upskilling might provide benefit to their business that might help them in these uncertain times.
Speaker Change: Great. Thanks, Greg.
Speaker Change: Can you could just comment on why a 100 basis points is the right level of margin expansion.
Speaker Change: We can see that's below where it's been.
Speaker Change: If you could talk through some of the methodology of deciding how much to invest in and what projects in.
Speaker Change: That level of margin expansion is also coming with a lower level of growth this year than in the past too. Thanks.
Speaker Change: Yes, sure Josh and part of it is just budgeting I guess I would say as we're making a lot of change in kicking off a new year with incremental focus. So we wanted to be sure. We did not short change your opportunities for growth and that's something.
Speaker Change: Greg and I talk a lot about when he came on board and the board was very interested in even before Greg started in anticipation of Greg starting that we make sure there was enough dry powder. So that we could pursue changes in the company to reignite growth at levels that we would find more satisfying and so what we've done is we.
Speaker Change: <unk> started to identify those opportunities, we're well along the way and it's starting to identify the resources required to it too.
Speaker Change: To achieve those.
Speaker Change: We will go through a process, where we actually implement that and start to think more about exactly how much revenue.
Speaker Change: Balance those as we move forward, but essentially we baked in the cost to provide that opportunity and we haven't baked in a lot of top line I don't think that would be appropriate right now to do so given that these are new initiatives and given that we have a relatively uncertain environment right now more so than we've had in some time.
Speaker Change: So pragmatically speaking that drives you to a lower if you add more costs that don't don't take much benefit top line forecast.
Speaker Change: <unk> forecast, which I think is prudent and the right thing to do mechanically that's the answer it provides you.
Speaker Change: It was important for us that we did continue to improve it I hope that we get the confidence once we see the metrics that these actions today. So that we can confidently forecast new top line, but it would be premature to do that so I think the bit is a little bit of a transition methodologies do you want to call it that.
Speaker Change: <unk>.
Speaker Change: But important to us to continue to improve the economics of the business model and create the best opportunity for return to growth. We are still early we're still small there is a lot of growth opportunity and we think we'd be short changing the investors. If we did anything differently.
Speaker Change: Great. Thank you.
Speaker Change: Our next call comes from Ryan Macdonald with Needham.
Speaker Change: Your line and ask your question.
Ryan Macdonald: Alright, thanks for taking my questions Greg.
Speaker Change: As you think about the investments.
Speaker Change: Since you are making in the business today, there are a lot of them you talk about product innovation content generation. It seems like the sort of benefits to the core consumer business that perhaps is successful. We'll also benefit sort of the enterprise segment down. The line is that the way youre sort of looking at in terms of prioritization.
Speaker Change: <unk> in the business or are there separate sort of enterprise specific investments that you think also help to separately drive growth in that business or drive a reacceleration of growth in that business.
Speaker Change: Yes, the way that I'd think about it as sort of threefold number one the improvements that we make on the content side of the business benefit all learners, whether those are individual learners or enterprises, so as we make it.
Speaker Change: Improvements with things like CT cetera coach or dialogues to the actual learning experience those benefit individual learners. They also benefit enterprise.
Speaker Change: Enterprise customers.
Speaker Change: We are also making very specific investments in the enterprise business to improve that experience.
Speaker Change: Better creation of curated content that meet the specific needs.
Speaker Change: Up.
Speaker Change: Enterprises in different verticals in different sectors. So so for example.
Speaker Change: If you were in an enterprise and you.
Speaker Change: I want to make sure that you get the product management arm of your business all of the skills that they need to continue to improve and understand what's changing within AI and how to leverage that within.
Speaker Change: Your particular company, while we can provide a curated set of courses that can do that for you. So those types of things better integrations with Corp.
Speaker Change: Corporate systems, Lms's et cetera.
Speaker Change: Also.
Speaker Change: Admin tools for our enterprise customers better reporting and data.
Speaker Change: We are definitely making specific investments that are only going to benefit our enterprise business, but generally my viewpoint. There's a lot of the improvements that we've made to the content side will benefit both consumer and enterprise and then we're certainly also making specific improvements just sort of what the lifecycle journey of the consumer side of our business as well.
Speaker Change: From a customer lifecycle management discovery actually the career based discovery also benefits boats.
Speaker Change: Does that helps.
Speaker Change: Enterprises understand the skills.
Speaker Change: If they if they have a specific type of workforce what are the skills that workforce needs to develop which theyre, obviously going to have a point of view one so that that information is incredibly valuable and helpful. But also we're going to bring our point of view on in terms of how our catalog maps to that.
Speaker Change: Super helpful color there. Thank you Ken maybe for you I recognize that were on an annual basis, showing some nice EBITDA margin expansion, but the sort of implied guidance for second quarter and what's implied for the back half of the year sort of shows some adjusted EBITDA margins, obviously, there are sort of.
Speaker Change: Below the annual targets. So one can you talk about when you think adjusted EBITDA margin trough as we think about fiscal 'twenty five and two.
Speaker Change: Are you thinking about sort of payback period on these investments I understand youre, not including any revenue benefit in the implied guidance right now, but how should we think about how quickly some of these investments could actually.
Speaker Change: Translate to top line improvements.
Speaker Change: So.
Speaker Change: Great question Ryan.
Speaker Change: Again I described the methodology as they look to do those forecasts.
Speaker Change: Unless you build in topline growth associated with the investments.
Speaker Change: Creates the result is that there is like we're talking about I wanted to be very careful we didn't get in front of ourselves, but naturally mathematically.
Speaker Change: Again that initially that creates a slowing throughout the course of the year.
Speaker Change: I do think if we're successful with these investments we will see relatively near term results.
Speaker Change: It depends on exactly what we're talking about worse.
Speaker Change: The categories are priced innovation content engine itself and the go to market. We go to market investments I think we will see.
Speaker Change: Media more immediate payback.
Lessor in the enterprise, but much more so on consumer and there are a number of initiatives around their content will also be a mix of near term and longer term.
Speaker Change: We're investing in building increasingly we've had good success so far.
Speaker Change: Our core self produced content, which has lots of strategic benefits on top of the immediate financial benefit, but we do expect that to continue.
Speaker Change: To deliver.
And then the product innovation will be a mix some of that will be longer term some of it should have some immediate payback.
Speaker Change: Their piece and that that's how we're grouping our priority of priorities around growth, but the other part is operationally, what we're doing and the metrics, where we're investing in infrastructure to be more metrics driven and while it's soft I expect that we're going to see payback from that.
Speaker Change: We're already seeing payback from that it's frankly, one of the reasons this quarter ended.
Speaker Change: Well as it did for us.
Speaker Change: So I think youll start to see that.
Speaker Change: So we have a real opportunity to increase our growth outlook during the course of the year.
Speaker Change: But it's not a conservative forecast if you tell people you're going to beat it so.
Speaker Change: If we performed the way that we're going to perform.
Speaker Change: You'd start to see it sooner rather than later and I would love it if mechanically.
Speaker Change: We didn't have the result, we did with with implied slower growth at the end of the year, it's not what I expect to see to declare.
Speaker Change: I appreciate the color. Thanks again.
Speaker Change: Our final question will come from Jeff Silber with BMO. Please on mute your line and ask your question.
Jeff Silber: Hey can you hear me.
Speaker Change: Yes.
Speaker Change: Hey, this is Ryan on for Jeff I, just had a quick question.
Speaker Change: The thing is to measure the success of product intervention on go to market with business from the outside bookings. This.
Speaker Change: Just wondering what percentage of registered by Labor day, and then what percentage of your bread and butter you envision as paid once all of these initiatives.
Speaker Change: Thank you.
Speaker Change: I wasn't sure that I, followed exactly what all the question was but I would say that.
Speaker Change: We don't break out necessarily our conversion at that level.
Speaker Change: But we do expect to see improvements in.
Speaker Change: Registered learners to paid learners through a lot of the things that we're focused on those are some of the things that we believe.
Speaker Change: As Tim mentioned might translate in the nearer term two.
Speaker Change: The benefits in the business, but we don't break out the specifics around conversion on that obviously the size of our lunar base at.
Speaker Change: At $175 million is a tremendous asset and so we have opportunity to convert registered learners. Both immediately as they register and over time as well and we see both of those things happen.
Speaker Change: Alright. Thank you and then just quick follow up.
Speaker Change: Wondering if there is a knock on impact to the department of Ed So that closing whether its by different brands coming into the scrutiny on some of the higher end.
Speaker Change: The educational institutions that you partner with.
Greg Hart: The great question I would say that this is Greg I would say that what we are.
Speaker Change: We're seeing from our.
Speaker Change: Our partners in higher education is obviously, a lot of consternation about whats happening and how they respond to that I would say that in that environment. Coursera is a great partner for them because as their funding from the federal government tums potentially under threats we drew.
Speaker Change: <unk> revenue for them through the courses that they provide and our revenue sharing arrangement and so one of the active conversations that we're having.
Speaker Change: With institutions across.
Speaker Change: Higher education is how can we help you create more courses improve the performance of your courses.
Speaker Change: Make sure they're as relevant as possible for the massive global audience that we have.
Speaker Change: Yes, so that you can bring in revenue from a coursera to potentially help offset to a certain degree some of the funding challenges you might be seeing in the current environment.
Speaker Change: Thank you.
Speaker Change: That ratcheted, a Q&A session. A replay of this webcast will be available shortly on our Investor Relations website. We appreciate you joining us today take care.
Speaker Change: This concludes today's conference call you may now disconnect.