Coursera, Inc.

Ladies and gentlemen, thank you for standing by, and welcome to Coursera's third quarter fiscal year 2021 earnings call. At this time, all participants are in a listen-only mode, and please be advised, 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, simply press star, followed by the number one on your telephone keypad. If you would like to withdraw your question, please press star one again. I'd like to turn the call over to Cam Carey, head of investor relations, Mr. Carey, you may begin.

Hi, everyone, and thank you for joining our Q3 earnings conference call. With me today is Jeff Maggiancalda, Coursera's Chief Executive Officer, and Ken Hahn, our Chief Financial Officer. Following their prepared remarks, we will open the call for your questions. Our press release, including financial tables, was issued after market close and is posted on our investor relations website where this call is being simultaneously webcast. Additionally, downloadable versions of our prepared remarks and supplemental slides have also been made 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 located at investor.coursera.com. Please note that all growth percentages refer to year-over-year change unless otherwise specified. Additionally, I'd like to remind you that all statements made during this call that relate to future results and events are forward-looking statements based on current expectations. Actual results and events could differ materially from those projected due to a number of risks and uncertainties. which are discussed in our press release, SEC filings, and supplemental materials. These forward-looking statements are not guarantees of future performance or plans, and therefore, investors should not place undue reliance on them. We assume no obligation to update our forward-looking statements. And with that, I'd like to turn it over to Jeff.

Thanks, Kim, and good afternoon, everyone. Today, I'm pleased to report strong third-quarter results, which reflect the continued trend of institutions and individual learners embracing online learning to develop skills for the future. In Q3, we grew revenue 33% to $109.9 million. Performance was strong across the business, with double-digit revenue growth in each of our segments, consumer, enterprise, and degrees, and in every region. Since its founding, Coursera's number one goal has been and always will be to serve learners. And as of the end of Q3, we have more than 92 million registered learners on the platform, adding 5.5 million in Q3 and more than 15 million year-to-date. Learners come to Coursera seeking new skills to advance their careers and improve their lives. In particular, we continue to see strong demand for our growing catalog of entry-level professional certificates. Since launching this category in 2018, we have seen more than 2 million learner enrollments in programs from industry partners like Facebook, Google, IBM, Intuit, and Salesforce. With a professional certificate, learners with no college degree or background in the field can learn the skills needed for an entry-level digital job in less than a year. We're also excited about the impact these certificate training programs can have in reducing the gender gap in digital jobs. According to our latest Women in Skills report, women's enrollments in entry-level professional certificates have increased from 25% of all enrollments in 2019 to 37% in the first half of 2021. But a career pathway isn't the only option. Content on Coursera is modular and increasingly stackable. so that bite-sized learning can build toward a broader course of study, including a college degree. We recently announced ACE credit recommendation for all Google entry-level professional certificates on Coursera, as well as three from IBM. This means that learners who complete one of Google or IBM certificates are eligible to receive up to 12 college credits from participating colleges and universities. The University of London, the University of North Texas, and Northeastern University are among the institutions with programs already awarding college credit for these certificates. In a world reshaped by the pandemic, this is what the future of learning looks like for many adults, and it is being driven by several key trends at play. The first major trend is digital transformation. The forces of technology and globalization are transforming industry after industry, and the pandemic has served to only accelerate these trends. It has amplified the criticality of technology and digital tools. It has redefined the way that businesses and governments and individuals work. It has reshaped the global talent pool, opening new opportunities for companies to build more diverse, distributed workforces. For example, at Coursera, in the first half of this year, more than two-thirds of our US-based new hires are fully remote. providing us with access to a broader, more diverse talent pool without the constraints of requiring proximity to a corporate office. The second major trend is skills development. Employers are rapidly digitizing work processes and automating jobs that are repeatable and predictable. The rapid pace of this digital transformation impacts everyone, and the need for change has never been more urgent. Businesses know that they must upskill, reskill, and benchmark their talent to remain competitive in a changing economy. Governments understand that most at-risk jobs are typically held by lower-wage workers, which threatens to leave millions of workers unprepared for the digital future. Campuses realize that they must enhance their offerings as increasing competition from alternative credentials and substitution effect of a strong labor market drives them to teach students skills of the future and deliver stronger employability outcomes. And individuals need to keep learning through their life, requiring access to flexible and affordable education to stay relevant in a fast-changing labor market. And the third major trend that's driving our business is enabling the digital transformation of higher education. While technology is accelerating change and transformation around the world, it is also the means by which society is adapting. The digital transformation of higher education is upon us. Higher education, one of the largest industries in the world at $2 trillion, has seen relatively little innovation over the past three centuries. Traditional college degrees are not affordable to many people. Their monolithic four-year structure doesn't meet the needs of lifelong learners. Degrees often lack relevance to today's employers. And degrees are often not designed for working professionals who don't want to quit their job or move their families to obtain a college degree. Unlike other platforms, we are an enabler and not a disruptor. We work directly with universities and industry leaders and governments, driving powerful institutional collaboration to better meet the needs of this new digital world. Our platform is transforming the way that learners learn, it is transforming the way that educators teach, and it is transforming the way that employers upskill and reskill their talent. Our three-sided platform connects learners, educators, and institutions in a global learning ecosystem with three primary advantages. First, the leading educator partners, including world-class universities and some of the best-known global industry brands, are attracted to Coursera to teach at scale. Second, the quality and breadth of the content and credentials that these educator partners create. And the third major advantage is the technology and data that power our platform. Let me share some recent highlights on each of these competitive advantages. We continue to expand our list of educator partners. Our large growing learner base and global brand make us an attractive partner to educators who want to reach a worldwide audience and deliver high quality affordable education at a low cost. We now have more than 250 university and industry partners on Coursera. In September, we announced partnerships with four new top-tier institutions in India, our second largest market by registered learners, for a total of 10 university partners in the country. New partners include IIT Bombay, IIT Guwahati, Indian Statistical Institute, and Ashoka University. We're also excited to partner with a number of new industry leaders, Last week, we announced a new partnership with Oracle focused on helping learners develop cloud-related skills. The five new courses taught by Oracle experts cover a range of cloud infrastructure and database topics at varying levels of complexity with hands-on labs allowing learners to practice in a live environment. We also announced a partnership with Juniper Networks in October. They are committed to driving skills transformation within the networking industry and launched the first of four anticipated new specializations on Coursera. Lastly, we welcomed United Service Organizations, a nonprofit serving U.S. military members and families, Philips India for health technology solutions, and Boxy, an English language training company, as new partners of Coursera during the quarter. Our industry partners value Coursera's scale and reach in building a global community of developers and users critical to their ecosystems. Additionally, it allows them to address the growing job displacement and skills gap that their technology and automation can create. For example, in coordination with the ACE recommendation, we also announced that Google's professional certificates on Coursera are available to U.S. community colleges and career and technical education, or CTE, high schools for free. Students participating in the program will receive job-relevant skills training for today's most in-demand digital roles, as well as access to career services and job opportunities through a consortium of over 130 employers. And our skill sets and skill dashboards originally developed for Coursera for Business customers will now be offered through Coursera for Campus, allowing students to develop the specific skills required by employers for high-growth roles and administrators to track student progress against their career goals and to benchmark these students against employees in the industry. Our second major advantage is the broad catalog of world-class content and credentials created by these educator partners. Our stackable system of branded, high-quality, freemium content enables us to attract learners at low cost and serve them at a range of price points. Learners come to Coursera for our freemium content and bite-sized learning, including hands-on projects and short courses, enabling us to grow our top of funnel and attract registrants at low cost. As these learners look to progress in their careers by earning more valuable credentials, we aim to maximize lifetime value with our premium credentials from our partners, including specializations, professional certificates, and accredited bachelor's and master's degree. And our catalog continues to grow. We recently announced five new certificates from university partners in India with topics ranging from 5G technologies and IoT, VLSI design, digital transformation, data-driven decision-making, and electric vehicles. Additionally, IBM launched their sixth entry-level professional certificate focused on data engineering. For degrees, we recently added two new programs, including a postgraduate diploma in applied statistics from the Indian Statistical Institute and a Bachelor of Science in Business Administration from the University of London. With these recent additions, the Coursera catalog now includes over 2,000 guided projects that offer hands-on learning, more than 5,000 courses and 600 specializations, over 70 certificates, including our 15 entry-level professional certificates, and 33 degree programs, including bachelors, masters, and postgraduate diplomas. Now let's talk a little bit about product innovation. This is the thing that drives another key advantage, which is our unified platform. The world-class content created by our educator partners is delivered on a system of technology and data that underpins the Coursera learning platform. We continue to enhance the experience of our learners, institutions, and educator partners. We introduced a number of platform improvements to better serve Indian learners, including a localized homepage for better discovery, geo-pricing on most individual courses, five new payment options, and bulk pricing for avid users. What we learned from our India-focused initiatives will further inform our international strategy. For institutions, our skills graph connects roles to skills to content. And we continue to leverage our broad catalog and the data underpinning our platform to provide better insights to our customers. For businesses, we recently launched the Leadership Academy, designed to help companies to deliver and measure world-class management training at scale in critical soft skills such as change management, talent development, and collaboration. This was our sixth Academy launch. Academies offer companies a skills-first approach to enterprise learning, focusing first on the most critical job roles, then specifying the skills and proficiency levels needed to do these roles, and finally linking the skills to content that teaches at the appropriate proficiency level. But the value of these insights extends beyond corporate training. In August, we announced the general availability of skill sets for all universities using Coursera for campus. While the shifting skills landscape is creating opportunities in the workforce, companies feel that there is often a mismatch between the skills students are graduating with and the digital skills required in the modern workplace. Universities are using Coursera for Campus to drive targeted skills proficiencies needed for today's in-demand jobs, leveraging our world-class content from university and industry partners. Additionally, these universities can track skills development at both the student and cohort level while benchmarking students against real employees in industry. And for educators, at the end of June, we announced our new content ingestion solution. A feature that allows educators to more quickly and seamlessly migrate content between a learning management system and Coursera. We've been pleased with the official traction, with approximately 70 courses from 17 university and industry partners ingested into Coursera using this functionality. Our partners have been able to leverage the tool to significantly reduce the time needed to offer and launch a course on Coursera, typically in one-third of the traditional timeline. Individually, our ecosystem of partners, world-class content, and technology are important strategic advantages. But the real power is the way that these assets are reinforced by and leveraged across our unified platform. There's a flywheel effect, as a growing selection of content and credentials attracts more individuals and institutions, which in turn motivates our educator partners to create even more content on the platform. This growing content, technology, and data allow us to better meet the needs of learners, educators, and institutions. And this in turn fuels our business, increasing scale, reducing our acquisition costs, and ultimately maximizing the lifetime value of learners on Coursera. We believe that the transformation of higher education is just getting started, with many opportunities to drive growth for Coursera in the coming years. Before I turn it over to Ken, let me remind you of some of the key priorities that we're focused on to grow. First, we will continue to invest in our growing enterprise channels, focusing on both new customer acquisition and expanding relationships with existing customers. I'd like to highlight two examples that are illustrative of the institutional collaboration that our platform is enabling at scale. Cinde, the Costa Rican investment promotion agency, implemented a nationwide training program with Coursera for government in 2020. For almost 40 years, Cinde has helped attract businesses to Costa Rica, helping more than 350 companies to establish operations in the country. The organization was interested in leveraging Coursera to help reduce unemployment amidst the pandemic while building a competitive workforce to drive sustainable future growth. Cinde teamed up with employers, Costa Rican government agencies, and Coursera to help identify the most in-demand skills and develop curated learning pathways on our platform. Since the partnership began, more than 23,000 Costa Ricans have enrolled in over 80,000 courses, completing more than 40,000 courses and nearly 700,000 lessons. Given this initial success, Cinde recently expanded the program. Second, we announced a new partnership with the Oklahoma State Regents of Higher Education, enabling 15 universities in the state to adopt Coursera for Campus. The collaboration is focused on four key goals enhancing academic program innovation offering flexible blended learning options to faculty and students. Setting students up for success and completion of their degree programs and expanding alignment of academic programs with modern workforce needs. Oklahoma is the first U.S. state to launch a Coursera for Campus partnership with this wide-reaching scale, covering more than half of the state's public universities, with the potential to impact tens of thousands of students, faculty, and staff. Next, while we are only in the beginning stages of our degrees business, the pandemic has fundamentally changed how universities are thinking about online degrees. Students want the flexibility to learn online. and universities are responding by scaling online degree programs using partners like Coursera to meet that demand. For example, in the month of September, our team was able to launch eight degree programs from universities in the U.S., Russia, and India, demonstrating the power of online platforms to deliver worldwide degree programs at scale. And in August, we announced a new fee structure to support university partners looking to rapidly expand their online programs and reach more students around the world. With this new tiered structure, the service fee will progressively reduce from 40% to 25% for universities that grow their collective programs to more than $50 million of annual tuition on Coursera. This is driven by our freemium model. which brings in learners to Coursera and enables our efficient, low-cost acquisition, a key competitive advantage enabled by our three-sided platform. And finally, we will continue to scale the Coursera platform and reinforce our flywheel effect, investing in growth of our registered learner base, increasing our network of educator partners and their content and credentials, and expanding our reach into more countries, investing in localized experiences to better serve more learners for more countries around the world. And now, I'd like to turn it over to Ken.