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. [Operator Instructions] 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'm joined by Jeff Maggioncalda, 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 more 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 emphasize 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, Provost and Chancellors, representing more than 850 institutions across nearly 90 countries. The survey’s findings were consistent. Interest in micro credentials is growing. Among higher education leaders, our survey found that 94% believe micro credentials can strengthen students' long-term career outcomes. Half of the leaders surveyed said that their institutions currently offer micro credentials 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. 75% said that…

Thank you, Jeff, and good afternoon, everyone. In Q3, we generated total revenue of $176.1 million which was up 6% from a year ago as we navigate slower top line growth in the near term. Our results continue to demonstrate our commitment to driving sustainable growth targeting growth opportunities while also expanding financial and operating leverage no matter the environment. This is highlighted by our strong bottom line performance year-to-date, which is leading us to raise our adjusted EBITDA margin target by 170 basis points for the full year to 5.4%. Additionally, the expense reduction initiative Jeff outlined is intended to focus on our core capabilities while extending our track record of delivering consistently increasing leverage over the past several years as a public company, and prior. We expect this initiative to generate at least $30 million in annualized structural cost savings, creating capacity for targeted investments as well as incremental profitability that will be reflected in our full year 2025 financial outlook provided next quarter. As we navigate more constrained growth in the near term, we will ensure that the business remains fundamentally strong, while we pursue efforts to return to a growth company revenue trajectory. 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. For the third quarter, gross profit was $98.1 million, a 56% gross margin, up from 51% in the prior year. Total operating expense was $89.6 million or 51% of revenue, an improvement of six percentage points from the prior year quarter on continued operating discipline across all functions. Net income was $16.6 million or 9.4% of revenue, and adjusted EBITDA was $13.3 million or 7.6% of revenue. Now let's discuss cash performance. We generated strong free…

Thanks, Ken. We are proud of Coursera's role and especially the partners who join us in ensuring learners everywhere have access to the highest quality education. For many, belief in our collective responsibility is why they choose to join in our shared mission, and I'm excited that our educator community now includes Adobe. Last week, they launched their first entry-level professional certificates which were unveiled alongside an expansion of the Adobe Digital Academy, a program aimed at equipping next-generation learners and teachers with AI literacy, content creation and digital marketing. Like many of our partners, Adobe recognizes that emerging technologies will fundamentally reshape the relevant training, skills and credentials in their industry as well as the labor market more broadly, and we are thrilled that they have chosen to collaborate with Coursera in order to empower the next generation of creative talent. Now let's open up the call for questions. Thank you.

[Operator Instructions] Your first question comes from the line of Stephen Sheldon with William Blair. Please go ahead.

Hey, thanks. First, is there a way to frame how much monetization in your consumer segment you're getting from AI-related courses? Is that becoming a notably bigger part of the mix? And then can you just give some more detail on where things have weakened in Consumer more recently?

Yes. Thanks, Stephen. This is Jeff. So on AI monetization, we don't break it out. One of the things that is true in the earlier stages is that many of the original pieces of content or the first piece of the content coming out with generative AI were in a course format. It takes a little bit longer to do the long-form professional certificates and specializations. The courses are not subscription-based, the longer forms are. So I'd say in the early stages, it was relatively little. As more of the recent content has been launched in longer formats, and we've upgraded a number of these, it's increasing. But we don't break it out, and I will say it's not a major part of the overall revenue base of Consumer at this point. We are seeing the greatest search demands and enrollment in generative AI content compared to any other particular kind. And we're seeing like six enrollments per minute in generative AI content. We continue to obviously put a lot of cents on the platform. So we think we're still at the pretty early stages of individuals and institutions embracing the need for AI content and credentials and the content engine is cranking and we and our partners are producing more content faster and less expensively because of this reason. In terms of the funnel on consumer, Obviously, what we need to do is attract a lot of learners, convert them and then retain them. And when you look at the top of the funnel, seven million new registered learners, not bad, a pretty strong quarter in terms of absolute numbers. we are seeing some softer signals in the global consumer trends, especially when it comes to retention. So conversion rates look pretty steady. Retention rates have been under some pressure. And it's very possible that there are macro factors that are affecting this hard to say for sure exactly what that is. But what we've really been pushing on and clearly in the script, I said a lot about it, but launching a lot more content and credentials and delivering a much better learning experience and authoring experience as well. So we think -- and if you look historically, what has really driven the consumer segment is basically job market disruptions, both opportunities and threats to come from changes in technology and changes in labor. And we think we're at the beginning of a major wave of dislocation where people are going to have to get new skills and prove that they have those skills by showing credentials to say that they could be productive in a given company. So we think we've got the assets in terms of content and products. We think we're at the early stages of this. Historically, these types of disruptions like COVID have really driven consumer segment and we're optimistic that we're at the early end of a similar kind of disruption.

Got it. That's helpful. And maybe just a follow-up, maybe just talk about the rationale for cutting more of the cost base now and at a very high level, kind of where you might be focusing those efforts?

Yes. So I'll start with sort of maybe thinking about it. Ken, I don't know if there's any numbers that you want to get into whatever, but when we really think about it, I mean, to a large degree, our strategy has been to leverages many of the key assets that we're investing in as possible. So one technology platform, one data capability, one platform of content and credentials and then sell to consumers sell the institutions sell different formats, including professional certificates and degrees. In the last many years, that very broad approach has given us huge top line growth, and we've been able to amortize nicely these assets that we could sell across many segments. Where that has changed a little bit, I think, in the current environment is some of the use cases have very high product market fit, there's a very clear buyer, it's very clear content credentials is delivering a lot of value. It retains well. The use cases are changing a bit, and there are certain use cases where for the time and money we spend winning that deal or creating that piece of content, it just isn't having the kind of financial impact. And so we did a pretty simple analysis to say across regions and segments where we're seeing the biggest growth and where are we seeing the best leverage in terms of sales and marketing against revenue, R&D against revenue and G&A is generally allocated and we said, let's just put more resources against those places where we're seeing more growth with more leverage, and let's pull back on those places where we're seeing less growth and less leverage, and it really just comes down to, in my opinion value delivery. Where are we delivering real differentiated value, that's where we're going to have the highest growth in NRRs. And so that's essentially what we did. We said, let's go after the higher growth, higher leverage opportunities and try to simplify and focus more of our efforts on those parts of the businesses that are working the best. Ken, I don't know if there's anything you'd want to add.

Yes. Stephen asked about the timing as well. And so the timing and of course, exactly the way we approached it was to preserve the growth areas. The timing is setting us up as part of our planning for next year. This is about EBITDA for next year. We've been very disciplined as we discussed in the script as to always improving since we've been a public company, our leverage and our EBITDA margin to what rate we have allowed to vary. But this is setting up for 2025 from both an EBITDA perspective and to drive as much growth as we can within that context. I guess I'd say, and Jeff described broadly how we're doing it, emphasize one concept around focusing on growth is on the dev side, we'll plan to end next year with more headcount than we have ending this year. And so we're seeing right now a lot of opportunity on the product side on AI. And I think it's early before we see the results. But I think that's one example specifically to illustrate how we've thought about it.

Your next question comes from the line of Ryan MacDonald with Needham. Please go ahead.

Thanks for taking my questions. Maybe to dig a little bit deeper on some of those comments on Consumer as we think about -- can you talk about maybe to the extent you've got visibility into it on what's the useful life from a monetization perspective, there is for some of the content in Consumer? And then how has that changed? And as you think about that softer retention internationally, are there specific subject areas or topics where you've seen retention fall off quicker than maybe other areas than you expected?

Yes. I'll start here and then Ken, feel free to chime in. So on Useful Life, it really depends on the title. And a lot of what we're doing now, we talked about a bit in the script, we're upgrading an awful lot of pieces of our more popular titles with our partners to include AI. So our ability to refresh content is getting better and better and to help our partners do that and that being said, if you look at sort of the difference in ARR per month by title. Generally speaking, it declines over time. Some types of content seem to decline a little bit faster than others. We've said in the past, and so I'll just remind folks on the call here, these entry-level professional certificates have been really the engine of our consumer segment growth. It's for people generally who are thinking about starting or switching career. They come from top branded companies, and they teach skills that are required to the portfolio skills required to do an entry-level job. It is really ideal when there's a lot of job openings that people want to go get, and they need to get the skills and the credentials to go do them. We have seen historically that the lifetime value of learners in these entry-level professional certificates has generally been higher than many other titles. So that the retention rate has been higher, is kind of what I'm saying. We have seen, especially in North America, some of the softness on month-to-month retention, happening among these entry-level professional certificates. I cannot tell you exactly why, but macro factors are likely at play just as in years ago, a lot of the macro factors were great tailwinds, we're thinking that there might be headwinds right now. But probably not at all times and not at all regions. But that's -- those are the titles that typically have the highest lifetime value, and we're seeing some of the fall and retention rates in those titles. Ken, anything you'd add to that?

No.

Great. And then maybe following up on the enterprise segment. So obviously, a nice quarter in terms of accelerating growth in terms of logo additions, but NRR kind of continues to come down here. Can you just within the pieces of Enterprise talk about maybe where you're seeing the most softness on the spend that continues to kind of drive NRR down? And I guess, what level of visibility do we have going into fourth quarter here on sort of the renewal business and sort of close rates there?

Yes. Well, I'll talk a little bit about NRR and closes as well, sort of what are people interested in. NRRs are clearly still under pressure. We mentioned last quarter and the quarter before and I think in the script, we talked about transitory budgets, a lot of these transitory budgets are sort of the pandemic dollars that a lot of governments had to spend to upskill and otherwise, try to help people remain productive during that period when they were locked at home. Some of those budgets are less durable, and that's where we have continued to see some of the weakness is in the government sector. But on the question of visibility, we are seeing in Coursera for Business among sort of the North American and EMEA regions, an awful lot of interest in generative AI. Certainly more in terms of pipeline development and bookings in North America and Europe, and we are seeing in other parts of the world, we are optimistic that we're seeing the beginnings of companies not just talking about AI, be getting strategies in place, realizing that you get a strategy, then you buy some of the technology and then you train people on how to use it. Like with cloud computing, like with many of the other technologies, there is a bit of a sequencing here. As we think about demand and retention, gen AI in North America or Coursera for Business has definitely been one of the highlights. And if this persists, we're feeling like we might be seeing some stabilization really supported by the interest in generative AI train. Ken, anything you would add to that?

You proceed probably, talked a little bit about it.

Yes, of course, are for campus, it's also interesting. I mean the number of universities who are recognizing that this technology is not just changing the demand from employers of what graduates they need to have in terms of skills. But students saying, do I want to get a college degree and what kind of programs you want to want to take and what do I need to learn in order to get a job. That is changing very rapidly, much faster than schools can keep up. And in addition to the needs in terms of skilling students so they can get jobs, there's the whole teaching and learning experience that happened at school that is fundamentally being transformed by this technology. And that's what we talk about Coach for the students and coaching course builder for the instructors. So we are definitely seeing a lot of interest in generative AI and Coursera for Campus and in particular, we put this in the script quite a bit as well. When you integrate this cutting-edge technology and other job relevant contents, especially generate in do college curricula where you get where the student gets credit for the college degree, we see very strong NRR and good expansion. So that's a use case that, again, kind of the early part of it, we think, a bigger wave of higher education, $2 trillion market saying the only way to keep up is to integrate something like Coursera so that we can improve our curriculum and help attract students and health campus in general. So we are seeing some bright spots in NRR in that segment for Services.

Your next question comes from the line of Rishi Jaluria with RBC. Please go ahead.

Thanks so much for taking my questions. Wonderful. Maybe I just want to continue thinking about kind of the growth rates right now and things that are causing softness. You you've helped us kind of understand a little bit of the pieces on consumer. You've talked about enterprise before and unpacked that. But if we just think -- take a step back, you do have all these secular tailwinds at your back, the changing nature of education Gen AI and the need for people to upskill and reskill maybe even some pockets of softness in the economy that we've been seeing over the past kind of two years or so I guess given all of these, why aren't we seeing higher growth rates? Or what would be the right way to kind of think about what needs to happen outside of a macro recovery to see those growth rates inflect upwards to at least back to double digits, maybe help us kind of understand all of those pieces there? And then I've got a quick follow-up.

All right. I'm going to -- thanks, Rishi. I'm going to give a really high-level view of this, but that's what you asked for. So at a really high level, we really do believe that specially as it relates to people learning things. is going to create a much higher demand for people learning skills and credentials which helps prove that they have them in order to be productive in the workforce. When we think about -- so I agree, I really believe that we are going to be AI winners. -- remains to be proven, clearly that the growth rates do not suggest that, that's what's happening. But I look at individual readiness and institutional readiness, like -- and a lot of it starts with institutions. But when I think about institutional readiness, let's look at businesses, governments and campuses. Campuses, they're not very agile organizations. They are the ones facing the greatest disruption. I think of greater disruption, higher education than anything we've seen in our lifetimes. -- is going to be hitting higher education institutions around the world. They are not the most agile organizations. But like with any organization, they need to attract customers or call those students and to deliver value, which is a curriculum that helps them get jobs. Because they're not fast, it's hard for them to keep up with the rate of change. I don't think they can do it without someone like us. But because they're not fast, we are not seeing growth rates happen as quickly as we would like. I believe still is a very large market it will be a little while to crack that, and we are very well positioned to do that. So I think the institutional importance, exclusivity is very high. The readiness not quite…

You just had the end, the only thing I was going to add, we might want to sell that a little bit more is on the product side. I resist fundamental question, of course, how we're getting back to double-digit growth. And I do think us going to be product-driven Coach in course builder, maybe just talk a little bit more about what that's going to look like. We're going to be creating better more value for our customers, and we will capture some of that over time. It is early, and we're seeing results.

Yes. It's not just theoretical anymore, at least in terms of learner experience. I mean we launched Coach in May of last year. So we've been in market with Gena for over a year on many products we've now had over one million people using coach. We see how they're using it. They really like it. They are learning faster. That's one of the things putting pressure on our retention rates as people are finishing forces and specialization faster but they really like it, the translations have been helping. And on the course builder side, we're seeing a lot of institutions saying, I can take these world-class courses and tailor them just to mind company's needs. So it's no longer for us theoretical that there's a lot of value there and customers see the value and benefit from it. It's still early, and we have not seen that show up in revenue. But our rate of progress is high. And as we think about where we're going to focus our resources and where we're focused on the cost reductions, we're going to continue to push hard on value delivery from the content engine and value delivered from product innovation.

Got it. Okay. That's super helpful. Maybe just a very quick follow-up because that was a very thorough answer. But just how should we be thinking about capital deployment? You've got nearly $0.75 billion of cash -- net cash on the balance sheet. Stock is trading at multiples that are sub-1x revenue approaching 0.5x revenue. If you are, in fact, so bullish on the business and all these different growth drivers and the path ahead, I guess, why not pull the trigger and opportunistically buy back shares at these kind of super low levels?

So Rishi, this is Ken, of course. So a fair question and certainly one we've considered. On an overall basis, given where we are in the market, given our cash -- the thing you didn't add is we're throwing off a lot of free cash flow. So there's even more reason to ask that question. We don't need a spot. I think given this period right now where growth has slowed a little bit, financial stability, we think, is pretty important as it relates to our customers. Additionally, the strategic optionality, we're not done with that yet. We see opportunity. It's been hard across the sector. So we don't look around and say, other people aren't growing, then we shouldn't grow as much. That's not okay. And you led into that perfectly with your first question. So we should be growing faster. We should be getting back to double-digit growth. We do think there is the opportunity strategically while things are moving around in the space for us to take advantage of it. We haven't done so yet. You might remember, we disclosed last quarter, we non-GAAP some significant deal expenses because we didn't close a deal. We're going to continue to remain active. If we thought for some reason, we weren't going to be active and there wasn't strategic opportunity Absolutely, we think about moving forward and purchasing stock at prices like that.

And if we did, it wouldn't be the first time. And we did complete some share repurchases and not with...

Just this year, right, we've maintained this cash balance we bought back $40 million worth of stock this year. So spot on. So the concept isn't formed to us, and it's a good question, and we'll continue to monitor. But also hopefully look for us to be more active strategically.

Your next question comes from the line of Joshua Baer with Morgan Stanley. Please go ahead.

Great. Thanks for the question. A lot of the prepared remarks were more around the consumer as far as weakness. On the Q&A, definitely, we got into enterprise. So I want to make sure I understand the different business far as the change from the prior guidance. So maybe like focusing on Q4, what was implied before to what it is now, it's like $11 million or $12 million lower. Like how does that get split up between the different businesses? I guess part of the question, this will be my follow-up is on the enterprise, like was there incremental churn? Or was this some of those government contracts that you had previously talked about churning. Just wondering around that drop in net retention rate, like what was incremental versus last quarter?

Yes, it's a good question, Josh. The reason we focused on the prepared remarks on the consumer business is because that is where the vast majority of the weakness occurred. On the enterprise side, just the business model from a revenue perspective, it's relatively predictable in the near term, certainly. A lot of that revenue is from historic contracts a year plus -- on a year plus previous. The only thing that does affect it on the margin is the renewals. The renewals were slightly weaker than last quarter, but not materially. So the miss is primarily consumer.

And on the NRR, it is mostly persistence of things that we had talked about last time in terms of what's drag on the NRR.

Okay. So that drop quarter-over-quarter you're saying it wasn't driven by losing large customers?

That's right. There were some non-renewals from some of the onetime yet preferred from some of the onetime only less, yes.

Your next question comes from the line of Taylor McGinnis with UBS. Please go ahead.

Yeah, hi. Thanks so much for taking my questions. So first one, just on the consumer side. So I think part of the implied acceleration in the previous guide was driven by the rollout of some of the recent content launches that you guys talked about in the prepared remarks. So just one, like -- I guess are you seeing like since those have gone live, are you seeing the traction with those that you anticipated? Is there any part of the softness maybe just not seeing like the conversion with those? And if so, curious why that might be in if there's been any delays or anything else we should keep in mind?

Yes, Taylor, this is Jeff. So we clearly have been cranking on the content engine. We launched 10 entry-level professional seats. Those are a lot of the big moneymakers in the consumer segment, and this is like Adobe, Amazon, Epic, IBM, Microsoft, nice big brands, 20 new and upgraded generative AI certificates. So we're definitely getting into the next phase of our generative AI, what we call the Gen AI Academy Strategy, where there are three pillars. We launched an AI Academy last November, and it was first Generative AI for Everyone. And these are kind of general purpose titles that are about what is AI? How does it work? And how should you think about it responsibly. And then there's Generative AI for Executives. And then the third big pillar has been Generative AI for Teams. And this is basically the job-specific generative AI titles. So we have recently started -- and our partners have started creating more of these job-specific generative AI titles. We have had a few of them launched a couple of handfuls. And we are anticipating that when it comes to productivity unlock, those are going to be the kinds of titles that will teach people the skills in their jobs to unlock productivity, do higher quality work. So we're excited about those. We're still at the early stages. Now you asked have they performed according to our expectations. It's still relatively early. We have pulled in -- I shouldn't say pulled in. We have accelerated the rate of production we have not seen on the traffic side, the number of people coming into the new titles are coming to the site for the new titles to be as high as it was on some of the big new professional certificate launches say, from Google…

Awesome. That's super helpful. And then last one would just be you talked about like some areas that given the $30 million on the cost savings that you're going to -- there's going to be areas that you're going to pull back on, those look like less growth and less leverage. So when we think about the puts and takes of that combined with focusing on other areas, like any potential headwinds to revenue that could occur from that shift in any of the segments that we should consider? Or anything as we're thinking about the different segments overall with this initiative?

Yes. At a high level, I'll sort of give you the guiding principles. We obviously don't have -- well, we're not going to show all the details. And then Ken, maybe you can provide a little bit more granularity. But we basically looked at is this analysis of basically growth and leverage. So where are we growing the fastest per dollar that we're spending on it. We started mostly with sales and marketing leverage, and then we looked a little bit to R&D because we do have some dedicated R&D towards certain types of markets and segments, certain regions and segments. And so we feel pretty good that these cost reductions are not going to have a huge impact on our growth rate. We are still continuing to invest in the content engine to source and in the product innovations like we said with Coach and Course Builder. So we really tried to find ways where we can pull back on spend in a way that has the least impact on growth. To some degree, I think when I look at the amount of value that we're shipping in terms of content and products, we're ahead of where a lot of our customers are right now. I think a lot of the titles, they're not yet ready for them. I think a lot of the product features are new to them, and they will find that these are really valuable. So we are not really planning to slow down our shipment of value. We are trying to pull back in certain market segments, mostly on our sales and marketing, where we're just not seeing the market traction. We don't want to put the sales and marketing dollars against those things. Ken, anything you'd add to that?

Yes. I'd say broadly, just to acknowledge anytime there's a change like this, it creates risk on the revenue line items and just described well how we thought about approach it. I guess the one thing I'd say is where we started, the process was we started by looking at the growth areas and what we are going to support. So again, with the emphasis where we're going to grow in 2025 and beyond, and from there, we paired around that in areas that weren't required to get us there.

Yes. One final thing I'll just mention. Any time some new technology comes out, are there some major change that happens in the world, organizations respond at different rates. Part of -- we use the word pacing a lot around here. We talk about pacing our investments with our growth rate. There's another kind of pacing, which is pacing our investments with the readiness of the market to adopt new innovations. I think we're at the leading edge of this, but we don't want to go faster than the market is ready. Either. I think that the level of value that we're shipping is far in excess of the amount of incremental revenue we're getting for it. So we just don't want to put too much out there before the market is ready to absorb it. And so we're also really thinking about where on the product side, are we seeing the most immediate adoption need of value and the ability to monetize those features that we're delivering. So we're pacing also to market adoption, not just internally to growth rates and leverage.

Your next question comes from the line of Jeffrey Silber with BMO Capital Markets.

Okay. So I know it's late, so I'll just ask one. You had a pretty sizable adjusted EBITDA beat in the third quarter. And I guess the implied guidance for the fourth quarter it looks like you might be coming in a little bit below that. Were there any timing of expenses potentially that benefited the third quarter that you might shift into the fourth quarter?

No, Jeff. It's Ken. There was nothing specifically. What we do is we offset to -- you're newer with us, so I'll repeat what we repeat ad nauseam. What we do is we pick a target EBITDA margin for the year, and then we try to grow as much as we can within that. And so we're trying to invest for growth wherever we can. In Q4, we'll see some higher expenses because we couldn't spend enough. We do not try to be on an EBITDA. We try to come in where we commit. And so we haven't been able to spend enough last couple of quarters, which is why we had to, which is a funny way to say it, had to increase our guidance for EBITDA. We've had a little bit more opportunity to perhaps some spending areas that should contribute to longer-term growth, which we can taken in Q4. So we'll do that. There will be some incremental spend, but no, no delays that go quarter-to-quarter.

And I'll just chime in. When we talk about pacing, we think about sustainable growth and recurring expenses. So we started pulling back on a lot of our recurring expenses, i.e., hiring back in Q2, right? And so we said, look, we want to make sure that we don't lock in a rate of spend that's going to be further than -- or in excess of what we're going to be growing on the top line. So when Ken talks about finding ways to manage the EBITDA margin for the year and thinking about Q4, we are looking for ways to deploy expense that are nonrecurring because we want to make sure we don't outpace our revenue growth in the rest of this year and next year, but can help really further growth for next year. And so we're not going to spend money unwisely. We are very careful about putting in recurring expenses by hiring people we would like to find ways that we can sort of use expenses in Q4 to buy growth or to further our growth in the next year. But when you look at this on balance, as we thoughtfully consider how to spend the money, it just turned out to be a bigger adjusted EBITDA margin because we don't want to lock in recurring expenses, and we feel like we're adequately deploying our expenses for next year's growth and Q4 growth as we go into it.

That wraps today's Q&A session. A replay of this webcast will be available on our Investor Relations website. Thank you for joining us. Take care.

Ladies and gentlemen, that does conclude today's conference call. Thank you for your participation, and you may now disconnect.