Coursera, Inc.

Ladies and gentlemen, thank you for standing by and welcome to Coursera's third 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 star followed by the number one on your telephone keypad. And if you would like to withdraw that question, again, press star one. 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 us for Coursera's Q3 2024 earnings conference call. Today, I am joined by Jeff Maggiancalda, Coursera's chief executive officer, and Ken Hahn, our chief financial officer. Following their prepared remarks, we will open the call for questions. Our earnings press release, including financial tables, was issued after the market close and is available 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 have been posted. 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 earnings press release and supplemental presentation on the investor relations website. 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. 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 earnings press release, supplemental presentation, and SEC filings. And with that, I'd like to turn it over to Jeff.

Good afternoon, everyone. It's great to be with you all. We had a solid third quarter. Our operating and financial results emphasized the focus and execution we're driving across the organization, including content, product, and marketing, in order to deliver on our most important long-term growth initiatives. Last month, we showcased our progress at our annual Coursera Connect Conference, which brings together our globally connected ecosystem of learners, educators, and institutions to collaborate on the future of learning and work. We showcased a more personalized, relevant, and engaging learning experience with rapidly expanding Coursera coach features. We demoed new capabilities like course builder and academic integrity tools for the world's best educators and corporate authors to move quickly to create and scale high-quality content that is increasingly modular and interactive. And we helped forge stronger connections between university and industry to ensure education is able to keep pace with emerging technologies and a fast-changing global labor market. Before discussing the slate of announcements we made across our unified platform, I'd like to provide a brief update on how industry micro-credentials are increasingly addressing the needs of digital transformation and skills development and reshaping global higher education in the process. In September, we published a new Coursera survey of more than 1,000 higher education leaders, including deans, provosts, and chancellors, representing more than 850 institutions across nearly 90 countries. The survey's findings were consistent. Interest in microcredentials is growing. Among higher education leaders, our survey found that 94% believe microcredentials can strengthen students' long-term career outcomes. Half of the leaders surveyed said that their institutions currently offer microcredentials. And those that don't, over two-thirds plan to adopt them in the next five years. They were also clear about the factors driving their support. Seventy-five percent said that students are more likely to enroll in programs that offer micro-credentials for academic credit, and over 90 percent believe that micro-credentials can strengthen long-term career outcomes for students and enable their institutions to provide the job-related skills demanded by employers. Despite the conviction in these findings, the pace of progress has been inconsistent with obstacles to widespread adoption. Leaders cited challenges around awareness, integration with existing curriculum, and uncertainty about quality, all of which have been headwinds for our industry. But one of our key differentiators is our credit recognition initiative. Previously, I've mentioned our ongoing efforts to secure credit recommendations for industry micro-credentials from the American Council on Education, as well as the European Credit Transfer and Accumulation System, or ECTS, which now recognize up to 15 of our most popular entry-level professional certificates. Today, I'm pleased to share that we recently expanded our efforts to India, our second largest country of registered learners. Coursera has achieved India's National Skills Qualification Framework, or NSQF, alignment for 10 professional certificates from Google and IBM. When paired with our growing suite of academic integrity tools, these advancements significantly enhance the credibility and recognition of online learning, helping to facilitate their acceptance by universities and employers for academic credit and professional qualifications. It's one of the reasons we believe India will be a critical market for Coursera for campus, and we're seeing these trends occur at varying paces across countries and universities as they determine how to evolve their higher education offerings. One of the best examples continues to be our partnership with the University of Texas system. The Texas Credentials for the Future program, a partnership between University of Texas and Coursera, is one of the country's most extensive industry-recognized micro-credential programs, and it continues to deepen and scale. Students across UT's nine academic institutions have access to our professional certificates, equipping them with job-ready skills in a variety of fields. To date, more than 10,000 students have enrolled in one or more professional certificates, earning more than 25,000 certificates of completion. This fall, we announced the program will expand to include nearly 15,000 students enrolled at UT's five health institutions. Texas is home to one of the country's largest workforces of healthcare professionals. The healthcare industry, like many others, is becoming increasingly digital, and this trend is evolving the career paths and skill requirements of the healthcare workforce even for advanced professionals. As role requirements change, micro-credentials in data, technology, and business are vital to supplementing healthcare qualifications. Software and IT skills are increasingly relevant to activities like managing patient portals, telehealth platforms, and mobile apps, along with the early stages of integrating AI into various administrative, diagnostic, and treatment processes. We are inspired by the innovation the UT system is demonstrating in enriching their broad-based curriculum and preparing graduates for the future workforce. And I am proud of the important role that our platform is playing in the process. And now I'd like to discuss updates across our three platform advantages. First, educator partners and our content catalog. Coursera's first advantage is our 350 educator partners and the high-quality courses and credentials that they create. We recently welcomed 10 new partners to the Coursera ecosystem, including leading universities like Said Business School from the University of Oxford, Dubai College of Tourism, IMD Business School, and Real Madrid Graduate School, Universidad Europea. We are also rapidly broadening our partnerships with industry experts in fields like business, data science, technology, and health, including Adobe, Airbus Beyond, Amazon, Johns Hopkins Medicine, Liberty Mutual, and Xbox. Together with our trusted educators, we are establishing Coursera as the global destination for individuals and institutions seeking high-quality education and in-demand skills and credentials for the rapidly changing economy. For today's update, I'll focus on two key categories, entry-level professional certificates and generative AI content and credentials. Our entry-level professional certificates can create pathways to well-paying digital jobs, as well as earn credit towards a college degree. As our recent studies suggest, industry micro-credentials are poised to play an increasingly prominent role in the transformation of higher education, which is why we've been rapidly expanding this catalog with new partners, job roles, languages, and credit recommendations. At the start of this year, we had 45 entry-level professional certificates live on platform, and we've added more than 25 in 2024 so far. This includes nine recent launches from new and existing partners, including Adobe, ADP, Amazon, Epic Games, IBM, and Microsoft, many of which are expanding the selection of careers on Coursera with new roles in game design, graphic design, sales, and more. Now, turning to my second catalog update, let's discuss our growing selection of generative AI courses and credentials. We now have over 500 generative AI courses and projects with more than 3 million cumulative enrollments to date, And we're seeing the pace of these enrollments accelerate in 2024 with six every minute. Although a broad selection of content is essential, we believe that achieving the innovation unlock and productivity gains that employers are looking for requires generative AI training that is specific to a job role or function. IBM and Microsoft recently introduced over a dozen new generative AI specializations in functions such as cybersecurity, data science, HR, marketing, and more. with instruction that was designed to help learners integrate the latest AI tools like Copilot into their day-to-day work. However, our efforts extend beyond new content. We have continued to work with our partners to enhance our existing portfolio of certificates with generative AI content. Google has created several of the most popular courses and credentials on Coursera. Their AI Essentials course, launched earlier this year, has accumulated nearly 700,000 enrollments in a matter of months. Recently, they enhanced each of their six entry-level professional certificates with refreshed curriculum, including activities, readings, and videos that feature practical, field-specific AI training directly from Google's own industry experts. Our industry partners are at the forefront of emerging technologies. As they create the next generation of technology, tools, and services that will fundamentally reshape work and labor market more broadly, we are proud of how our partnership is making education and skilling equally accessible on a global scale. This brings me to our second major advantage, the global reach of our platform. This quarter, we added more than 7 million new registered learners, growing our global base to 162 million by the end of September. Additionally, we grew the number of paid enterprise customers by 19% to over 1,560 institutions, with recent additions spanning all verticals. And to create more value for our rapidly expanding ecosystem, we continue to invest in our platform's third advantage, which is product innovation. Our innovation efforts are focused in areas where we can uniquely leverage Jet of AI across our platform, including content, data, technology, and marketing, to redefine the experience of our learners, educators, and institutional customers on Coursera. And the advancements we are making with Coursera Coach give an early indication of how AI will transform both learning and teaching. Since Coach launched as a learning assistant, it has supported over 1 million learners, leading to higher quiz pass rates, faster grading with more personalized feedback, and more lessons completed per hour. And we're rapidly building on the initial coach use case with three new enhancements. First coach for career guidance will help learners explore career paths and identify transferable skills, recommending tailored learning paths based on their experience and goals. We expect it to launch later this year and be an important compliment to our career based discovery experience currently rolling out in the consumer segment. Second, CourseBuilder, our generative AI-powered authoring tool, will begin piloting the integration of Coach for instructional design support in the coming months. Coach will act as a thought partner for the course building authoring experience, giving educators and authors a personal instructional designer to help them design and refine course content, suggest course modifications, and uphold Coursera's pedagogical best practices. Since launching in March, Course Builder has been used to create more than 700 new custom courses, which have logged over 135,000 learner enrollments. With the coming coach capabilities, we're excited to see how our customers and partners will use Course Builder to further accelerate course customization and personalization at scale. The last enhancement is coach for interactive instruction. In the earliest days of online learning, learning was passive, simply sitting back and watching a video. Coursera and the launch of MOOCs in 2012 advanced us from passive learning to active learning, where learners would watch videos and then write reflections and take assessments. With AI, online learning is now entering its third stage, advancing us from active learning to interactive learning. And a new coach capability is now live in the hands of instructors to do this. We've just launched a new capability that makes coach an extension of the instructor. The feature allows an educator to give coach custom instructions and knowledge, which coach then uses to deliver personalized interactive instructions to students on a scale that was unimaginable before generative AI. We started with text-based coach dialogues. In the coming months, we'll also add other interaction types, including modalities like audio. Educator partners like deeplearning.ai, Google, the University of Michigan, Vanderbilt University, and others have already started integrating these new teaching methods into their courses and credentials. And I'm pleased to share that Google Gemini is the large language model that is powering interactive coach dialogues on Coursera. To wrap up my opening remarks, I want to provide an update on our efforts to reignite the next chapter of growth, innovation, and agility as we better position Coursera for long-term sustainable growth. One of the most significant technology shifts of our lifetime is underway. Navigating the near-term environment requires an organization that is focused and nimble. As we discussed earlier this spring, I have flattened my leadership team structure to spur faster decision-making and foster increased collaboration across our platform. including product content and marketing. And as you can see, in the nearly 700 basis points of adjusted EBITDA margin we intend to deliver this year, we have been disciplined about pacing our expense structure to ensure we build a viable long-term business. Going forward, we're committed to undertaking a broader expense reduction initiative. This includes a reduction in our global workforce of about 10%, which will allow us to better prioritize existing resources on core capabilities and create the capacity for future investments that are aligned to our three most important growth initiatives. First, expanding access to affordable, flexible, and job-relevant credentials that could help millions of learners discover, unlock, or advance their career through our consumer segment. Second, supporting our Coursera for business customers as they navigate a new era of skilling imperatives, helping them harness the potential of emerging technologies and ensure their talent is prepared to keep pace with our evolving economy. And third, growing our Coursera for campus vertical, which continues to demonstrate a more scalable approach to supporting academic institutions looking to transform higher education and modernize the college degree, particularly in international markets. We have a clear strategy with distinct assets, and we're operating from a position of financial strength, including a healthy balance sheet and a consistent track record of delivering growth with increased profitability every year as a public company. In 2024, we made important strides in strengthening our competitive advantages, accelerating the pace of our content engine and product innovation, and driving productivity improvements that position us for long-term profitable growth. Looking to 2025, we expect to build on this momentum, focusing our resources on the opportunities where we can further differentiate and enhance the value of Coursera's platform for the millions of learners, educators, and institutions that we serve. I'd like to now turn it over to Ken. Ken, please go ahead.