Ladies and gentlemen, thank you for standing by and welcome to Coursera's First Quarter 2025 Earnings Call. All participants are in a listen-only mode and this call is being recorded. Following the prepared remarks, we will hold a question and answer session. To ask a question, please click the raise hand button and be prepared to unmute your line when prompted. 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 Coursera's Q1 2025 earnings conference call. Today, I am joined by Greg Hart, our President and 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 was issued after market close. It is available on our Investor Relations website at investor.coursera.com where this call is being webcast live and where versions of today's supplemental materials, including our new quarterly shareholder letter, can be found. 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 materials. Please note all growth percentages discussed refer to year-over-year change unless otherwise specified. Additionally, 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, shareholder letter, and SEC filings. With that, I'll turn it over to Greg.

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. 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 executional rigor that can begin to accelerate our progress. Fortunately, I'm starting with a strong foundation. Today, I'm pleased to share that Coursera is off to a solid start in 2025. We delivered first-quarter revenue of $179 million, up 6% from a year ago. Generated over $25 million of free cash flow, up 40% year-over-year. And our growth expectations for the full year have improved. We now expect to deliver $725 million of revenue, the midpoint of our range, as we lay the groundwork for our next chapter of growth. 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. I'm particularly excited about our innovation efforts. We're focused on building durable capabilities that can reimagine the learning experience and deliver more value for our customers. Over the past two months, I've learned a great deal and want to provide some initial observations. First, it is clear that Coursera attracts a dedicated and talented force. The company has a strong culture, rooted in innovation and motivated by our mission. Our team cares deeply about the millions of learners our platform serves, is focused on expanding the impact we create and the outcomes we can unlock by transforming access to and career opportunities. I am thrilled to be working alongside them.…

Thank you, Greg. And good afternoon, everyone. We delivered a solid first quarter. As Greg mentioned, our expectations for full-year growth have improved as we begin to implement new operating capabilities and the focused set of initiatives. 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. In Q1, we generated total revenue of $179 million, up 6% from a year ago. Driven by growth in our consumer, and enterprise segments. Gross profit was $100 million, up 9% year-over-year with a 56% gross margin. Up from 54% in the prior year period. 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. Net income was $20 million or 11% of revenue. And adjusted EBITDA was $19 million or 10.4% of revenue. 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. As Greg highlighted, we will continue to invest in expanding our content engine's 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. Our strong cash performance both bolstered our already healthy balance sheet. As of 03/31/2025, we had approximately $748 million of unrestricted cash and cash equivalents with no debt. We are operating from a position of financial strength with the flexibility and stability…

As a reminder, if you would like to ask a question, please click on the raise hand button at the bottom of your screen. Once prompted, please unmute your line and ask your question. We will now pause a moment to assemble the queue. Our first call, question will come from Brian Spillak with JPMorgan. Please unmute your line and ask your question. Great. Thanks for taking the questions. I guess, Greg, to can you just help us understand where you're spending the most time you know, in your new role and where you see the most opportunity to drive improved growth? Is it in the consumer segment, Coursera for campus, enterprise, or the mobile app? Thank you.

Thanks, Brian. Good question. So my top priority is unlocking the next phase of innovation-led growth for Coursera. I spent 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 with a focus on new capabilities that can help us better serve our learners, our university, and industry partners, and then our enterprise customers as well so we can drive higher growth. Some of the near-term focus areas. Number one, product innovation. I believe that we can accelerate our product development life cycles. We can do that both by leveraging advanced AI and data-driven insights by all by also by focusing on the right spots within the product for innovation, again, tied back to durable capabilities that can better serve our learners. And then make sure that we're continuously enhancing the core foundational capabilities that the platform has. Second area, our content engine. So content obviously is the fuel that runs our business. So expanding our content catalog continues to be critical. The need, and the interest in learning has never been greater. You 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, and so we need to make that our catalog can meet that need. And so we need to become more more nimble, 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. And then finally, our go to market So expanding our go to market capabilities, And by that, I mean everything from sort of registration and onboarding, career-based discovery, etcetera, to guiding individual learners more effectively through that experience, how we merchandise, how 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. We'll also, you know, continue to make improvements to the enterprise area of the business, specifically for enterprise admins and and the specific needs that our enterprise customers have. I would say, you know, overall, the the last part of your question, Brian, I think you would start to see just because of the nature of the two businesses, I would expect that we would start to see more signs that translate into sort of business output metrics on the consumer side of the business. But I would expect that over time, that would also translate into enterprise.

Great. Thank you. And I just had a quick follow-up too. I mean, 1Q was such a strong quarter and record quarter in terms of registered learner net adds. Could you just help us understand what drove that performance? You mentioned stabilization across trends. Was that across retention, top of funnel, or both?

I would say it's a mix the two. On top of funnel, obviously, a good quarter with 7.1 million registered learners. We saw some real success on the marketing front. With improvements in our return on ad spend and efficiency there. But also saw some great improvements in that we made on the platform. Itself that are helping to drive a better learner experience. And so, you know, we talked about some of those in the scripted remarks. With things like dialogue, translation, AI-driven translations, etcetera. But conversion or will be the two things that we are focused the most on driving improvements in, over the course of the coming year. And from a product standpoint, we saw the the biggest uplift in our C plus subscription offerings. And so there was a big focus we do an annual promo every year around the C plus annual subscription and that was also particularly successful, which drove a lot of nice free cash flow as well as future revenue for the course of this entire year.

Great. Thank you both.

Our next question will come from Stephen Sheldon with William Blair. Please unmute your line and ask your question.

Yeah. Thanks. Greg, wanted to to follow-up on the content front. Now that you've had a few months at Coursera, where do you see the bigger opportunities to expand the content on the platform? As we think about subjects? You know, for example, building out more breadth in health care or other subjects by the source of content, we think about corporate, university partners, with potentially new sources and just by content type. I'm I'm curious. How you're thinking about how how that content kind of portfolio might look as as we might sit here two to three years down the road.

Great question, Steven. So, you know, content, as I mentioned earlier, is the engine of our business, and it really powers the flywheel. Of our ecosystem. So you know, 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 more and more appealing to our partners in both higher education and in industry as a way to bring their content to a large and increasingly growing audience. This past year, we've expanded our courses our course catalog by 37% year-over-year. So we now offer nearly 10,000 new courses. And that includes things that are both incredibly topical, like GenAI. So we have roughly 700 GenAI courses now with an incredible amount of demand for those courses. And so just to provide a little context as I mentioned in the scripted remarks, you know, we saw demand of so far this year, we're seeing demand of 12 enrollments per minute in GenAI content, up from eight last year and one in 2023. We also wanna keep adding new entry-level certificates. Because that brings both very career-aligned learning and things that employers looking for in their, prospective candidates. And so we added five new entry-level certificates in Q1. One of them was from Johns Hopkins, and you mentioned health care. And so we we added one from Johns Hopkins. I do believe there's opportunity for us to continue to expand in the health care space. The total number of certificates we now have is more than 90, and about a third of those have at least one credit recommendation. So they're also useful to full-time…

Got it. Thanks, Greg. That that's really helpful. Maybe as a follow-up, on the career discovery solution, you know, really interesting what you guys are doing there and I guess, as you as you think about the how comprehensive of a solution Coursera look to build there, especially as you 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?

You know, perhaps down the road, I I would say right now, it's still early days. You know, we have 60 odd, you know, different roles that are covered by our career-based discovery. We believe there's a massive opportunity to expand that. We continue to invest more and more third-party data to help build out that underlying sort of career and role in skill graph. And the, you know, the goal is enable a learner coming in who may not be sure about what their you know, exactly what they're trying to learn but has an interest in a given area. To better understand what does that interest look like. So say I'm interested in data. Okay. Well, what kind of roles are there, you know, out there in in the job market? That are in the data field. What are the skills that those roles require? And then what are the courses that I can take on Coursera to help you 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 from a conversion perspective as we do that. And so we'll absolutely increase our investment in that. Over time, I would like us to be you know, viewed as an authoritative source on that. And as we do that, potentially creates opportunity down the road for looking at, you know, additional things that we might go after. Got it. Thank you very much. Appreciate you taking the questions. Our next question will come from Rishi Jaluria with RBC. Please unmute your line and ask your question.

Oh, wonderful. Hi, Greg. Hi, Ken. Thanks so much for taking, my questions. Maybe I wanna start with the recategorization of, consumer and and degrees into one segment. Look. I understand what you're talking about streamlining the organization, but but maybe two pieces there. Number one, I mean, they they are fundamentally different businesses. I understand with with micro-credentials and pathways. There's there's maybe a little bit of a blurry line, but you're you're you're targeting different people. So maybe help me understand better the law should behind that. And and and the second piece to that, I mean, the the obvious pushback I think you're gonna get from investors is Degrees has been a little bit of a challenged business over the past couple years. Is this just a move to hide future weakness and degrees? Just help us understand both of those, and I've got a quick follow-up.

I appreciate It's Ken. So thank you for that question and the clarity around it. As you mentioned, as we think about it, and as Greg looks about it, new in his role, ultimately degrees is another consumer product. It's just another consumer, albeit it is the the longest in duration and the highest in price and it's sourced differently, but it is one more consumer offering. So as we look at how we operate the business and the changes we're making there, as we stay focused on the biggest growth opportunities We've changed the data that we look at day to day that we use to manage it, which ultimately drives the accounting around it. It is, as you mentioned, 9% of revenue We've tried to be as open as possible breaking everything out, including the forward look. Into your point, Rishi, we do expect the degrees to decline. So before we collapse 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. And so for this small portion of the business, which while it's still important for consumer, it's an important product It's a smaller portion, and especially as we move forward, and as degrees as, again, we expected decline slightly this year, we wanted to make that statement. And as consumer and enterprise, we both expect to grow. At significant rates, it will become less relevant to investors. It's less relevant day to day for us as we manage it. Again, important for consumer but we think of it as a consumer offering. And so as we look at the data that we look at to manage the business, and Greg, not to be too goofy about accounting, who's our CODM or chief operating decision maker, what he looks at as we look at the health of the business and as we manage the business, it indicates we should collapse it. So we think the if if you want the noise around degrees is not fitting with the focus externally. But we have provided historic combinations, and we go out of our way to be transparent around these things. 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 we're not trying to hide the ball. That's for sure. But hopefully that helps.

Yeah. No. Thanks, Ken. That's that's super helpful. And then maybe I just wanna think about, now the the outlook for the year. Nice to see a a raise there. I I just wanna kind of understand your sets of assumptions behind that guidance Right? And especially just given mean, no one knows how this macro picture and and and everything's gonna shake out, but I think it is clear. We've seen consumer sentiment start to weaken. That's obviously, you know, a very critical growth driver on your side is is is the consumer business. Maybe just help us understand, given the global nature of your business, global nature of your learners, and and the the consumer business, How you're thinking about, what's kind of the base case embedded in in the guide, especially as it pertains to all these pieces? Thanks. Sure, Rishi. So as you know, I'd break it down between consumer and enterprise. And as we said in the original remarks, the we expect both to grow single digits, but consumer more than enterprise. What we've built into our consumer outlook is some observed improvements that we've seen in our metrics. Greg talks about top of funnel conversion retention and ARPU internally. As we look and think about the consumer business We have seen improvements already that we've indicated essentially we've reflected in our forward guide. We will also continue to invest in the business, and we see lots of opportunity there operationally. It's so we've increased our EBITDA outlook by a hundred basis points, which is good. 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 enough so that we can pursue growth initiatives and new…

Very helpful. Thank you so much.

Our next question comes from Josh Baer with Morgan Stanley. Please unmute your line and ask your question.

Great. Thanks for the question. For Greg, just wondering I mean, I'm very bullish on the long-term secular trends around skilling and reskilling. But I'm more uncertain on the timing of of when it is gonna matter for companies and exposed. And so I'm I'm wondering your perspective coming into this sector on the timing of that opportunity. When does and reskilling inflect and and translate to momentum? You know, for you. And and, really, what will it take to to get there?

Great question, Josh. So I'll give you my thoughts. Number one, I don't have a crystal ball. I wish I did. And I think some of the things that Ken actually just mentioned are are really pertinent. So on the one hand, you've got stats like, you know, the report from the World Economic Forum that 59 out of every hundred jobs in the global workforce will need retraining by 2030. So that is a longer-term you know, push that companies will need to figure out how to deal with. How do they upscale and reskill their workforces? Balanced against that, you have the uncertainty in the macroeconomic environment now. So you've sort of gotten, you know, near-term uncertainty that obviously is causing corporate leaders to be a little reticent about spending until they have a better sense of what the trends might look like. And then you've got that balance against this, you know, longer-term shift that I think all of them, absolutely agree on. You know, we mentioned in the scripted remarks the the stats about enterprise leaders and the the need for a learner or sorry, workforce members with AI skills. I think that the that what you'll see is that you'll see it play out a little bit differently in different sectors. For relatively obvious reasons because AI will have different impacts in different sec sectors at different timelines, that the companies that are more forward-leaning and continue to invest in reskilling will have an advantage. And that will be a real competitive advantage because it'll give them you know, 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're in. They can leverage AI to do a lot of from a customer experience and marketing perspective more effectively than they could with you know, prior tools. So the companies that lean 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 in reskilling and upskilling their workforces. And we wanna we wanna make sure that Coursera does a great job of serving those companies. And then, of course, the, you know, the ones that are forced for for whatever reason because of the macroeconomic uncertainty to hold off on, you know, we wanna 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, you know, reskilling and upskilling might provide benefit to their business that might help them in these uncertain times.

Great. Thanks, Greg. I was hoping, Ken, you could just comment on why a hundred basis points is the right level of margin expansion You know, we can see that that's below where it's been. If you could talk through some of the the methodology of deciding how much to invest and in what projects and you know, that that level of margin expansion is also coming with a lower level of growth this year than in the past too. Thanks.

Yeah. Sure, Josh. And and part of it is just budgeting I guess I'd 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 shortchange our opportunity for growth. And it's something Greg and I talked 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 made 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've started to identify those opportunities. We're well along way. We've started to identify the resources required to it. To achieve those. We'll go through a process where we actually implement that and start to think more about exactly how much revenue and we'll balance those as we move forward. But essentially, we've baked in the cost to provide that opportunity. And we haven't baked in a lot of top line. I don't think that'd 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. So pragmatically speaking, that drives you to a lower, if if you add more cost but don't don't take much benefit top line, in your forward forecast, which I think is prudent and the right thing to do. Mechanically, that's the answer it provides you. It was important to us that we did continue to improve it. I hope that we get the confidence. Once we see the metrics that these actions take, so that we can confidently forecast new top line but it would be premature to do that. So I think of it as a little bit of a transition methodology, you wanna call it that, But, you know, important to us to continue to improve the economics of the business model and create the best opportunity for return to growth. We're still early, We're still small. There is a lot of growth opportunity. We think we'd be shortchanging the investors if we did anything differently.

Great. Thank you.

Our next call comes from Ryan MacDonald with Needham. Please unmute your line and ask your question.

Hi. Thanks for taking my questions. Greg, as I think as you think about the investments you're making in the business today, A lot of them, you talk about product innovation, content Seems like there are sort of benefits to the core consumer business that perhaps if successful will also benefit sort of the enterprise segment down the line? Is that the way you're sort of looking at in terms of prioritization 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?

Yeah. The way that I think about it is sort of threefold. Like, 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 improvements, you know, with things like Coursera Coach or dialogues, to the actual learning experience. Those benefit individual learners. They also benefit enterprise customers. We are also, though, making very specific investments in the enterprise business. To improve that experience. So better creation of curated sets of content that meet the specific needs of of enterprises in different verticals and different sectors. So so for example, you know, if you are an enterprise and you wanna make sure that you give the the product management arm, of your business all of the skills that they need to continue to and understand what's changing within AI and how to leverage that within your particular company. Well, we can provide a curated, set of courses that can do that for you. So those types of things, you know, better integrations with corporate systems, LMSs, etcetera. Also, better admin tools for our enterprise customers, better reporting and data. So we're definitely making specific investments that are only going to our enterprise business. But, generally, my viewpoint is a lot of the improvements that we make to the content side will benefit both consumer and enterprise. Then we're certainly also making specific improvements to sort of, like, the life cycle journey of the consumer side of our business as well. From a customer life cycle management discovery, actually, the career-based discovery also benefits both, because it helps the enterprises understand the skills that, you know, if they if they have a specific type of workforce what are the skills that workforce needs to develop, which they're obviously gonna have a point of view on. So that that information is incredibly valuable and helpful. But also, we are gonna bring a point of view on in terms of how our catalog maps to that.

Super helpful color there. Thank you. Maybe for you. I I recognize that we're on an annual basis showing some nice, EBITDA margin expansion, but the so 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, that are sort of below the the annual targets So one, can you talk about when you think adjusted EBITDA margin troughs as we think about fiscal twenty five? And two, how are you thinking about sort of payback period on these investments like I understand you're 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 translate to top line improvements? Thanks.

So great question, Ryan. Again, I described the methodology as we look to do those forecasts, and it's unless you build in top line growth associated with the investments, it creates the result, the exact result we're talking about. I wanted to be very careful we didn't get in front of ourselves, but naturally, again, definitionally, that creates a slowing throughout the course of the year. I I do think if we're successful with these investments, we will see relatively near-term results. It it depends on exactly what we're talking about, of course. But the categories are product innovation, the content engine itself, and the go to market. The go to market investments, I think we will see immediate more immediate payback less so on the enterprise, but much more so on consumer. And there are a number of initiatives around there. Content will also be a mix of near-term and longer-term. We're investing in building increasingly. We've had good success so far. Our Coursera produced content, which has lots of strategic benefit, on top of immediate financial benefit, But we do expect that to continue 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. The other piece, and that's how we're grouping our prior 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 gonna see payback from that. We're already seeing payback from that. It's frankly one of the reasons this quarter ended as well as it did for us. So I think you'll start to see that I hope we have a real opportunity to increase our growth outlook during the course of the year. But it's not a conservative forecast if you tell people you're gonna beat it. So if we perform the way I'd expect we're going to perform, we should start to see it sooner rather than later. And I would love it if mechanically, we 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 be clear.

Appreciate the color. Thanks again.

Our final question will come from Jeff Silber with BMO. Please unmute your line and ask your question.

Hey. Can you hear me?

Yep. Hey. This is Ryan on for Jeff. I just had a quick question. It is helping us to measure the success of product innovation and the go to market and mission initiatives. From the outside looking Just wondering what percentage of registered learners are paid today. And then what percentage of registered learners do you envision as paid once all these initiatives have bore through? Thank you. I wasn't sure that I followed exactly what all of the the question was, but I would say that you know, we don't break out necessarily our conversion at that level, but we do expect to see improvements in 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 you know, that, as Ken mentioned, might translate in the nearer term to to benefits in the business, but we don't break out the the specifics around conversion on that. Obviously, the size of our learner base 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. Understood. Thank you. And then just quick follow-up. Was wondering if there's any knock on impact of the Department of Education enter the closing. Whether it's budgets or grants coming into scrutiny of some of the higher end elite. Education institutions that you partner with?

It's a great question. I would say that this is Greg. I would say that what we're seeing from our partners in higher education is know, obviously a lot of consternation about what's 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 comes, you know, potentially under threat, you know, we drive revenue for them through the courses that they provide in our revenue sharing arrangements. And so one of the active conversations that we're having with institutions across higher education is how can we help you create more courses improve the performance of your courses, and make sure they're as relevant as possible for the massive global audience that we have. You know, so that you can bring in revenue from Coursera to potentially help offset, you know, to a certain degree, some of the funding challenges you might be seeing in the current environment. Thank you.

That wraps today's Q&A session. A replay of this web will be available shortly on our Investor Relations website. We appreciate you joining us today. Take care.

This concludes today's conference call. May now disconnect.