COUR - NYSE

Ladies and gentlemen, thank you for standing by, and welcome to Coursera’s Fourth Quarter and Full Year 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 Q4 and full year 2024 Earnings Conference Call. Today, I’m pleased to be joined by Andrew Ng, Coursera’s Chairman and Co-Founder; Jeff Maggioncalda, our current Chief Executive Officer; Greg Hart, our Incoming 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 prior to the market open 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 our 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 Andrew.

Hi everyone. We appreciate you joining us today. Before we discuss our results, I would like to take a moment to touch on yesterday’s leadership announcements. First, on behalf of the Board, I want to thank Jeff for his significant contributions to Coursera over the past seven years. Under his leadership, we achieved important milestones including completing our IPO, growing our revenue from less than $100 million in 2017 to nearly $700 million by the end of 2024 while achieving profitability, rapidly expanding our platform, product and offerings in collaboration with the world’s best educators, including partnering with more than 200 new universities and industry leaders, growing our number of registered learners by over 100 million and importantly, he has helped us accomplish all this while remaining a faithful steward of Coursera’s number one goal to serve learners and to transform lives through learning. His leadership and dedication helped to build our strong foundation and I believe that Coursera and the industry are at an important inflection point as we look to our next chapter of growth. Advancements in technology such as AI are transforming industry after industry, and education too will change. Learners need to discover, develop and validate new skills that can start or advance their career. Academic institutions need to modernize their curriculum and teach learners the skills they need not for the past, but for the future. And enterprises need a more agile and adaptive solution to power upskilling initiatives for the most important asset their people. After all, human capital is the most valuable form of capital and we all have to invest in building that. Coursera’s ecosystem, assets and global reach are unmatched and I’m optimistic and excited about the role our platform will play in shaping the future of learning. Together with Jeff, the Board has been thoughtful, comprehensive and deliberate in selecting the right person to lead Coursera’s next phase. Greg Hart is an exceptional and proven leader with over 25 years of experience leading technology-driven businesses. He has a long track record that is highlighted by that rare combination of innovation and operational excellence, including successfully navigating two decades of transformational technology shifts while at Amazon and scaling multiple businesses domestically and internationally with rigorous execution and leading customer-focused product development including an early AI-based consumer product, Alexa. His wealth of operational excellence, deep understanding of technology and of product and his passion for our mission makes us excited for the upcoming years. The Board is grateful to Greg for agreeing to take the helm as CEO and we’re confident in his ability to lead Coursera as we look to accelerate our journey of growth and innovation. I’m thrilled to now hand it over to Greg to share a few words.

Thank you Andrew and good afternoon everyone. I’m honored to take on the role of CEO and excited to build upon everything that Jeff and the collective team have accomplished. Coursera is a transformative company with a powerful mission. I’ve long admired the company’s ability to bridge the gap between education access and economic opportunity, serving millions of learners and thousands of institutions with a platform model powered by partnerships with over 350 world-class, universities and industry leaders. The industry is at a critical moment, accelerated by the rapid adoption of AI. As with other transformative technologies that I have navigated throughout my career, AI is poised to dramatically reshape industries and tasks across all sectors and regional economies and I believe this can create a future demand for learning that will be nearly limitless. Individuals and institutions will need to be more agile, learning at an accelerated pace to ensure they have the relevant skills and talent to remain competitive in a global labor market. Meeting this demand will require a market leader in education and technology with the capacity to transform access, deliver new experiences and enable the future of learning and work. I believe that Coursera has that capacity and is uniquely positioned to capture this opportunity. Thanks to Jeff and the management team’s work, Coursera is on solid footing, operating from a position of financial strength with a distinct set of assets. In the coming days and weeks, I’m looking forward to spending my time immersing myself in the business, getting to know the team, engaging with our partners and customers, and gaining a deeper understanding of the company and how to accelerate our progress against the opportunities ahead. I’m committed to driving a new phase of innovation and excited to work alongside such a talented team to shape the next chapter of Coursera’s growth and leadership. Thank you. I’ll now pass it to Jeff.

Thanks Greg. I cannot be more thrilled to see you take on this role. Serving as CEO for the past seven and a half years has been a privilege and a thrill. When Andrew and the Board gave me the opportunity to lead Coursera in 2017, my wife and I both felt that there was nothing more fundamental or more important that I could dedicate my time and talent to than providing education to the world. During that time, technology and globalization were changing industry after industry and the jobs most at risk of automation were typically held by lower skilled workers. Fast forward to today and generative AI threatens the jobs of not only lower skilled workers, but of knowledge workers as well. The talk at Davos was AI and the phrase of the day was FOBO, fear of becoming obsolete due to AI. Technology is dramatically shaping how we live, learn and work and requires every one of us, whether you’re a CEO, a data scientist, or an Uber driver, to learn and adapt in order to keep up in this changing world. Earlier this month, the World Economic Forum published its Future of Jobs Report 2025. I encourage you all to read it. The findings, based on responses from over 1000 companies, reinforce both the magnitude of change expected in our global labor markets and the opportunity ahead for Coursera and the industry. The report found that workers on average can expect that nearly 40% of their existing skill sets will be transformed or become outdated over the next five years, and these skill gaps are considered to be the biggest barriers to business transformation. In response, 85% of employers plan to prioritize upskilling their workforce. Unsurprisingly, AI and big data top the list of the fastest growing skills, but complementing these are human skills like creative thinking, resilience and agility, all things required to adapt to change that are expected to rise in importance by 2030. This moment calls for a new model of higher education and lifelong learning. Coursera’s ecosystem of learners, educators and institutions is positioned at the intersection of these trends, and over the course of 2024, our team made substantial progress in scaling and deepening the three advantages that distinguish our platform. I’d like to take a moment to highlight the progress that we’ve made to drive future growth. First, our leading educator partners, who created a broad catalog of trusted content and credentials. In 2024, we welcomed more than 25 new educator partners, ending the year with over 350. This included many of the world’s most respected industry leaders, including Adobe, Johns Hopkins Medicine, Samsung, Xbox and more, as well as prominent universities like Said Business school and the University of Oxford and IIT Hyderabad. We also deepened our relationship with existing partners. I’m pleased to share that we’ve extended a multiyear relationship with our largest industry partner, setting the foundation to jointly serve our learners and customers in years to come. In addition to growing our educator partnerships, we’ve also been able to accelerate our content engine, deploying new technology tools and production arrangements with our partners. We launched nearly 40 new entry-level professional certificates. Many of our certificates in this catalog have received credit recommendations from ACE, ECTS and NSQF so that industry micro-credentials can create pathways to both well-paying jobs as well as college degrees. We also rapidly expanded our catalog of generative AI courses and credentials. Our partners, many of which are the world’s leading AI companies, added over 450 GenAI courses this year as they look to meet the growing demand for these skills. In 2024, we saw six enrollments per minute in GenAI content, up from one per minute in 2023. For the first time, a generative AI course, Google’s AI Essentials, was the most popular course of the year with over 900,000 enrollments. Our second advantage is Coursera’s global reach to individuals and institutions. In 2024, we welcomed 26 million new learners from across the world, the most since 2020, growing our learner base to 168 million by the end of the year. We added nearly 250 new paid enterprise customers, ending the year with more than 1600 businesses, campuses and governments using our platform. To deliver more value for these learners and customers, we continue to invest in our platform’s third advantage, product innovation. Our innovation efforts have been focused in areas where we can uniquely leverage AI to redefine the experience for our learners, educators and customers. The first example is Coursera Coach, which started as a learning assistant, but is rapidly growing to become a core presence across our platform with expanding capabilities in career guidance and discovery, instructional design support and interactive learning. This year, more than 1.7 million learners exchanged over 21 million messages with Coach. In Q4, we launched Coach Dialogues, providing personalized interactive learning where Coach acts as an extension of the instructor. This is the future of learning and partners including Google, Stanford, Amazon, Johns Hopkins, Vanderbilt and Microsoft have already added Coach Dialogues to their courses. Second is our AI translation initiative, allowing us to better serve the growing volume of learners coming from outside the U.S. To date, our learners have driven more than 2.4 million enrollments in AI-translated content, and we recently added support for Dari, Hungarian and Pashto, ending the year with up to 24 languages available in nearly 5,000 courses. In Q4, we started experimenting with AI audio and video dubbing, so that learners can both see and hear the top instructors in the world speaking in their own language. Finally, we continue to make progress on Course Builder, our generative AI-powered authoring tool. In 2024, our enterprise customers, particularly campuses and businesses, started using Course Builder to create custom, private courses as they tailor our learning content to their specific organizational needs. In total, our advancements in 2024 provide only a glimpse of how Coursera will transform the teaching and learning experience, and I believe that Greg’s deep innovation and technology expertise will serve to further accelerate our team’s capabilities and these initiatives. In closing, I want to thank Andrew, the Board, and our exceptionally talented team. At Coursera, our mission is to provide universal access to world-class learning so that anyone, anywhere can has the power to transform their life through learning. For me, it’s been an inspiration at the end of every day to know that we’re not only building a great company, but we’re also serving the world through one of the most effective forces for empowering individuals and institutions to rise to their full potential. I’m deeply proud of what we’ve accomplished in the past seven years, grateful to be a part of this incredible journey, and looking forward to watching Coursera change, grow and redefine what is possible in the years to come with Greg at the helm. Now I’d like to hand it over to Ken to walk us through the financial results. Ken, please go ahead.

Thank you Jeff and good afternoon everyone. Over the course of 2024, while growth fell short of our goals, we nonetheless continued to demonstrate the strong financial and operating leverage in our model. In particular, we delivered more than 750 basis points of annual adjusted EBITDA margin expansion and generated over $59 million of free cash flow. Please note that for the remainder of the call, as I review our business performance and outlook, I’ll discuss our non-GAAP financial measures unless otherwise noted. In the fourth quarter we generated total revenue of $179 million, which is up 6% from a year ago on growth across all operating segments. Gross profit was $97.5 million, a 54% gross margin in line with our gross margin in the prior year period. Total operating expense was $93.1 million, or 52% of revenue, an improvement of 1 percentage point from the prior year period. Net income was $13.3 million, or 7.4% of revenue, and adjusted EBITDA was $9.5 million, or 5.3% of revenue. For the full year, we delivered total revenue of $695 million, up 9% from a year ago. Gross profit was $379.6 million, a 55% gross margin, up from 53% in the prior year. Total operating expense was $357.7 million, or 52% of revenue an improvement of 6 percentage points from the prior year on continued operating discipline across all functions. Net income was $55.6 million, or 8% of revenue, and adjusted EBITDA was $41.5 million, or 6% of revenue, which was up from negative 1.6% in 2023 as we extended our long track record of consistently delivering improving scale and leverage each year. Moving to cash performance and the balance sheet. In Q4 we generated free cash flow of $7.4 million and as I highlighted before, delivered more than $59 million for the full year. This included over $17 million in purchases of content assets which as of the beginning of 2024 we began treating like other categories of capital expenditures, effectively lowering our free cash flow computation. In the coming year we’ve earmarked approximately $20 million to continue driving this content engine initiative, which importantly provides us with multiple long-term benefits including pipeline visibility, platform exclusivity and more attractive revenue share economics over time. Our free cash flow performance bolstered our already healthy balance sheet. We ended the year with approximately $726 million of unrestricted cash, cash equivalents marketable securities with no debt. This was approximately the same balance as the beginning of 2024 as the completion of our share repurchase program designed to target dilution was offset by strong operating cash generation. As we’ve discussed in the past, our capital allocation framework emphasizes the strategic optionality provided by our strong financial position, which we believe is particularly valuable given the industry’s current pace of change as well as our desire to grow and enhance our leadership position. Now I’d like to discuss the fourth quarter performance of our segments starting with consumer. Consumer revenue was $101.7 million, up 5% from the prior year and solid demand for our Coursera Plus subscription offering. Following our October discussion of consumer retention trends, we made some progress stabilizing the month-to-month softness with our Coursera Plus subscriptions with initiatives planned across content, product and marketing in the coming year as we seek a return to more significant growth. Segment gross profit was $54.9 million or 54% of consumer revenue, up from 53% in the prior year period and we added more than 6 million new registered learners despite Q4 being our historically lightest quarter in terms of top of funnel seasonality. Consistent with the regional trends we discussed in the past several quarters, softer growth in North America translates into a higher proportion of learner traffic coming from international regions which on average have lower lifetime values given the price point. Moving to our Enterprise segment, Enterprise revenue was $62.3 million, up 7% from a year ago and driven by the momentum in our business and campus verticals. Segment gross margin was $42.6 million and remained at 68% of enterprise revenue. The total number of paid enterprise customers increased to 1,612, up 18% from a year ago and our net retention rate for paid enterprise customers was 87%, reflecting the transitory budget dynamics we discussed in prior quarters. And finally, our Degrees segment. Degrees revenue was $15.2 million, up 14% from a year ago on growth in new students and scaling of recent programs. The total number of Degrees students grew 22% from a year ago, 26,700, primarily due to some sizable new student cohorts for more recently added programs in India. As a reminder, there’s no content cost attributable to Degrees, so segment margin was 100% of revenue. As we discussed in October, we expect the Degrees market and broader opportunities to serve universities will continue to evolve and we want to be clear about our focus in in the near-term. In 2024 we were selective in our pursuit of partnerships and programs that align with our platform strengths. This approach, coupled with our recent expense initiatives, prioritized resources and investments leads us to anticipate a revenue decline in our Degrees segment for Q1 and full year 2025. We continue to believe this is an attractive long-term market that we can uniquely serve, but our pace of investment will shift to more productive near-term opportunities such as Coursera for Campus that can position us for a more immediate return to growth company revenue trajectory. Finally, turning to our financial outlook. As you know, our historical practice entering a new year has been to provide some incremental color on the composition and pace of our business, particularly given the diverse global markets and broad ecosystem our platform serves. Over the next several months, Greg will work closely with the rest of the management team to assess areas and opportunities for growth in support of Coursera’s long-term strategy and the creation of shareholder value. Once he’s had the opportunity to do so, our intention is to provide more detailed full year 2025 expectation in the coming months. For the full year 2025, we expect to continue to generate positive overall top line growth. We anticipate top line growth in both our Consumer and Enterprise segments and as previously mentioned, expect our Degrees segment revenue to decline in the year. And we’ll provide refined guidance on the magnitude of the overall growth and that of the segments in the coming months. For full year adjusted EBITDA, we remain committed to extending our strong track record of delivering annual EBITDA margin improvement. We have done so each year as a public company and even in the immediate years preceding our IPO. Our initial expectations are to once again expand annual EBITDA margin, though at a less aggressive pace in order to provide the company with the flexibility and capacity to invest in growth initiatives. At the end of the day, our long-term prospects and value will depend most heavily on us growing and succeeding in our large and attractive market. As we work to reignite the higher growth rates we enjoyed until just recently, we’ll continue to operate in a disciplined financial fashion. Over the past two years we delivered over 1300 basis points of EBITDA margin expansion, including more than 750 basis points in 2024. We’ve made strong progress on our business model and ability to generate cash, particularly as the team demonstrated its ability to operate with financial discipline and delivered consistent productivity improvements in scaling our core capabilities. This scaling and a moderation of the aggressive pace of improvement is designed to provide us the room this year to further differentiate and enhance Coursera’s leadership position. With regards to the quarterly guidance for Q1, we expect revenue to be in the range of $173 million to $177 million, representing growth of 2% to 5% year-over-year driven by our Enterprise and Consumer segments. For adjusted EBITDA, we’re expecting a range of $8 million to $12 million. We entered 2025 in a position of operational and financial strength with the flexibility and stability needed to effectively execute on our long-term strategy and bolster our return to higher growth. We are confident now is the right time to be joined by Greg, who has decades of experience successfully navigating technology trends, steering product development and scaling new and international markets. I’m excited to work alongside him and deliver Coursera’s next phase of innovation, growth and industry leadership and in the process create value for shareholders while transforming the global higher education market for the millions of learners, customers and educators we serve. With that, I’ll open the call for questions.

Thank you. For today’s Q&A session, Andrew, Jeff and Ken will be available to answer questions. [Operator Instructions] We will now take our first question from the line of Stephen Sheldon with William Blair. Your line is open.

Hi, team. You have Pat McIlwee on for Stephen today. Thank you all for being here and taking my questions. My first question, can you just talk more about the trends you’re seeing in Enterprise and more specifically where you’re seeing notable weakness or strength across campus B2B in government?

Yes. Hey, Pat, this is Jeff. So Enterprise, we obviously look across the three verticals, the business, government, and campus. I’d say where we’re seeing weakness has been in not only expansion bookings, but also new bookings in Coursera for government, workforce development types of programs. I mean, to a large degree, in the years following COVID, a lot of money went into programs to kind of upskill and generally support individual citizens. Many of those budgets have turned out to be transferred transitory. That’s where we’re seeing some weakness and that’s been weighing on the NRRs when you look at the NRRs in Q4 and the trend of NRRs that we’ve been seeing, and we’ve talked about that in previous quarters. The other part of weakness that we’re seeing, notably, is Coursera for Campus when it’s not used for credit. So clearly, universities, colleges, vocational programs, they are really struggling to come up with curriculum that make the training that they do for students relevant to the workforce and the faster things change, the harder it is to keep pace. When universities and colleges and other educational institutions use Coursera, but kind of avoid the process of integrating into the curriculum and avoid all the faculty approval process, what we find is that the students are less likely to take the courses because they’re not getting credit for it and they’re also more of a cost center than a profit center for the educational institution because they’re not receiving tuition for the courses being offered. When you offer Coursera for Campus for credit, the opposite is true. Suddenly, students take it at higher rates. The completion rates among students who are taking Coursera partner courses for credit are the highest across our entire platform. And because it’s for credit, the institution is receiving tuition, but the relative cost of delivering those credit hours is lower. So it’s early days. We’re seeing great progress in India and in certain regions where this embrace of online learning and integrating it into college degree programs has been faster. In Europe, we’ve seen it a little bit slower. But it clearly seems that this is the beginning. We are seeing the beginning of educational institutions around the world realizing they cannot keep up without partnering with someone like a Coursera to provide this kind of content.

Okay, thank you, Jeff. And I’ll just end briefly as we look forward to 2025 and discussing the overall Enterprise growth, which we expect for 2025 in rank ordering since you asked the question before, C4C, we expect to deliver the most growth next year, followed by C4B and then C4G, of course. Yes and one more thing. I mean, you asked about the weak spots. One other bright spot that we saw, it has been building, but we certainly saw it in Q4 is Coursera for Business in North America is looking pretty strong, driven mostly by AI upskilling efforts. I mean, it seems like businesses in North America are embracing, sort of seeing and embracing the need to upskill their employees the fastest. They’re also the ones who seem to be differentiating and caring, discriminating between the generative AI content on Coursera versus other places, and frankly, the generative AI teaching and learning experiences that are built in the platform. So we’re seeing signals that the demand is growing from businesses on general AI and that the Coursera content and platform are pretty well differentiated against the competition for those kinds of buyers looking for this kind of a generic skilling solution. And we think that North America is leading the world in the adoption of this in the business sector.

Okay, thank you both for clarifying that and the additional color. One more question if I may, at your 2023 Investor Day, you had expected Degrees to be a core growth engine for this business and we’re now looking at declining revenue in 2025, so understand there’s some shift in strategic priorities there. But can you just talk us through a bit what has changed in that business versus, your prior expectations?

Sure, sure. I’d say a lot of it is five years ago, seven years ago, online degrees were pretty novel. And during COVID when campuses closed, online degrees became largely a necessity in some sort or form. Clearly, the OPM market, the online program managers, the more traditional bundled, outsourced sort of online degree programs have struggled quite a bit. And what we saw and what we kind of outlined on Investor Day was a new type of an online degree that really couples together the open learning that you can do on the courses from our partners that can count as credit towards a college degree. So the model that we see as being attractive and can emphasize this a bit is, are those that are sort of based on open content being used for credit with what we call a degree pathway, where you can start learning in open content on Coursera and you can have that credit count as guaranteed credit on admission to a degree program. Now, the degree programs, what we had been thinking before is that there would be only the elite universities and the degrees would be fully on Coursera. What we’re seeing is a lot of Coursera for Campus customers, once they put Coursera and make it available and they integrate it into their curriculum, suddenly they’re like, look, students are already taking open content in my college courses and they’re getting credit towards degrees. We would love to bridge that gap between what’s happening on Coursera broadly and attracting students into our degree program. So we see a tighter synergy between Coursera for Campus and degree recruitment and that’s where we’re putting more of our focus.

Okay, thank you. I appreciate that, Jeff.

Sure.

The next question comes from Rishi Jaluria of RBC Capital Markets. Your line is open.

Oh, wonderful. Thanks so much for taking my questions, Jeff. It’s been a pleasure working with you since IPO. Wishing you all the best in the next chapter and Greg, looking forward to working with you. Maybe I want to start for you, Jeff, as we kind of reflect over your seven-year tenure as CEO, you’ve been through some major, major shifts, right, with kind of the initial onset of the company as you took over as CEO, COVID, and the rise of virtual learning and now AI. And from the outside perspective, it seems like virtual learning, while still transformational, has not been quite as widely adopted or transformational, or at the very least, we’ve snapped back to more traditional ways of learning than we would have expected if we rewound the tape back to late or early 2021, late 2020. And on the AI front, you’ve given some really encouraging stats in terms of course adoption and users and courses. But maybe the monetization or at least the disruption from AI that necessitates that hasn’t been quite as profound as maybe we would have expected when, ChatGPT first came out. Maybe can you walk us through your reflections over the past seven years and through the waves and just kind of how to think about the timeline of things going forward?

Yes. Hey Rishi, thank you. I’ll make the narrative arc as short, but I’ll jump a little bit into this question of Generative AI and how that might play out, at least from my perspective. When I first got here back in 2017, a lot of what was driving Coursera’s growth, and it really started literally with Andrew and Daphne and literally with the Stanford machine learning course that Andrew had done, it was heavily driven in the early days by data scientists wanting to know machine learning. It’s not being taught in any educational institution. There were no incumbent credentials. And if you want to learn the skills of machine learning and prove that you knew them then you kind of come to Coursera, like that was kind of what you did. That expanded rapidly when Google launched the first IT support certificate suddenly. Whereas when Andrew launched Deep Learning in November of 2017, 90% of the learners that came to take deep learning had already taken the machine learning class. It was like a sequel to Andrew and it’s attracted a lot of the same kinds of people, these sort of, I call them like the data scientists, heats seekers, the ones who wanted to build the AI models. But when Google launched IT support, 90% of the people that came for those certificates had never been a Coursera learner before. It attracted a totally different audience. So part of, in the early stages, what was driving our growth was a broadening of appeal, largely because the content from experts in AI to broader people looking for career advancement and those professional certificates during that time period where someone without a college degree could get trained in the skills and get a certificate credential from a recognized brand to do either a new career by switching or a new career as a student graduating, man the entry-level professional certificates really fueled that next level of growth and a broadening of the platform. Now as it relates to COVID and Generative AI, COVID clearly, I mean, it closed almost every campus and every office in the world within a course of 30 to 60 days. And things just went through the roof because the urgency of action and the clarity of action was super clear, like people had no other choice and it happened immediately. With Generative AI and so we saw the subsequent growth because of that. With Generative AI, it’s been a little bit different. I mean, the recognition that something big is happening was fairly immediate. Understanding for companies or campuses what to do about it less immediate, regulatory uncertainty certainly slowed some things down. And there’s also a question like, is this really valuable or is this sort of a gimmick or like, what do I do with this stuff? But I would say that the urgency to act was slower. The clarity of strategy and action was fuzzier. Now, what we’re starting to see now, and we’re seeing it largely because the models keep getting better and there’s more evidence that the value is there, we’re seeing a lot more interest not in understanding the general nature of Generative AI, but productivity gains. To me, what will deliver the urgency of action and the clarity of action will be when companies realize that for certain types of tasks, in certain types of jobs, in certain types of functions, that they could be done much faster and with much higher quality and much lower cost and to do that, you’re going to need to train certain people. I think productivity unlock will be something that improves urgency and clarity and will provide similar kinds of tailwinds to what we saw before. But it has been a little bit slower to get that kind of clarity and urgency and ability to see how much value there is that you can unlock through reskilling. And Andrew, I’d love to get some of your thoughts on this too. I mean, from your vantage point, what you’re seeing?

As one of our leading learner providers on our platform?

Right.

Yes, thanks. Thanks, Jeff, Ken and thank you, Rishi, for the question. So Rishi, I want to address your comment that disruption from AI is not yet as profound as I think the hype had made it out to be. I know a few years ago there was a lot of hype saying AI will be smarter than people and it will change everything. And maybe predictably, it takes some time for the amazing technology, which I think it is, to be mapped to concrete applications that then start to deliver value, not just in education, but that’s just a Davos, the economic forum last week and there’s also a sentiment that boy, there shows a lot of hype. And finally, across multiple businesses, the actually valuable applications are being built. So, in terms of Coursera, I think we have a very strong base on top of which to innovate, to capture or to invent or to partner or whatever, whatever comes next. I do think that there is going to be transformation of learning. A lot of learners are already asking Coursera Coach or sometimes asking ChatGPT or other large language models for information. I think there is a transformation that maybe is coming. And as Jeff mentioned earlier, Coursera Coach and Course Builder, which were announced I think over a year ago, are getting real traction. Course Dialogue, which was announced more recently, we’re seeing frankly much earlier signs of hopeful traction there. But it does take some time for these things to gain adoption. And tell you, I’ve been meeting our CTO Mustafa fairly regularly and our product team is working very hard to innovate. You’ve heard about some of the things already announced. The team is working very hard on a long list of additional things that I find exciting. And in terms of Coursera’s, based on what you’re building on, I think we’re starting from a very strong position because I think many learners know us as a quality shop, high quality content. We have a very large user base and our company culture from day one has always put learners first. Our team collectively up and down the organization, there is very deep learner empathy and people really wake up in the morning and figure out, all right, how do I serve learners today? And I think that combination of team assets and culture together with a healthy balance sheet, which also gives us more options, I think puts us in an excellent position to invent or spot what comes next and then quickly use our platform to scale it to all the learners. So our team knows that there’s work to be done and are busy not just rolling out some of the inventions you’ve already heard us talk about, but hopefully new things to come as well.

All right, thanks. Really detailed answer. In the interest of time, I’ll jump back in the queue. Thank you so much.

Thanks, Rishi.

Thank you.

The next question comes from Josh Baer with Morgan Stanley. Your line is open.

Great. Thanks for the question and congrats and thanks, Jeff. Congrats, Greg. I wanted to dig in on Degrees and on the strategy there and like part of this strategy is to focus investments on some other initiatives that’s going to drive kind of a faster return to more attractive growth trajectory ahead. The last three quarters Degrees has been the fastest growing business. So could you talk through that a little bit? It seems like we’re kind of taking away focus from what’s actually been growing fast. If you could talk about the growth rate of Coursera for Campus in 2024? And then I wanted to just understand like what that actually means for Degrees. Are you pulling away marketing dollars? Are you not launching any more degrees? How does that growth rate turn negative looking ahead?

Sure. Josh, this is Ken. So on Degrees, one of the important items to consider is the revenue model. So, it’s the degrees we sign up for years past really don’t get up to full productivity for the course of a couple years as we fulfill different cohorts and it builds over time. And so naturally when you have larger growth, it tails off when things are slowing and takes a little while. So that rev rec is part of the answer. As with regard to the investments, our current investments, we continue investing Degrees and as Jeff mentioned, we do believe there’s an excellent opportunity that we’re uniquely enabled to provide. But in the near-term, especially given the revenue model, in the near-term, we are not as focused on that. We’ll focus more on enterprise and consumer where there’s more near-term opportunity to return to growth. But there will be other ways, we believe to serve those degrees customers, essentially the universities and C4C is one of them. So I mentioned before, as we look to next year, to 2025 and enterprise, we expect the largest growth in C4C and that’s a reasonable part of it. We’re pretty excited. We may or may not have enrollment services we add on top of that. So there’s different ways to serve that same need. And it’s taken, as you know, some experimentation and the growth hasn’t come as much as we’d like. If you go back to the IPO and our thoughts on the degrees business, we expected that to be larger now than it is. That said, overall, we’ve had outsized growth in enterprise and consumer. So you can never predict too far ahead of time. But we still do believe in that model. Once again, it’s a matter of how that morphs and how we serve that customer and the near-term practicalities of driving growth again, we need to restore growth so that people understand us as they always have as a growth company stock.

And one of the things also that is true, Josh, is that you just cannot look at higher education as a $2 trillion market and say it’s not going to have to change in some pretty fundamental way. Certainly, one of the ways to do that is by putting Coursera for Campus, our partners content in as for credit electives, it’s a great way to quickly modernize the curriculum and it’s obviously a stone’s throw when you’re already offering credit for those courses in in a real degree program to say, do you want us to help you recruit some other students who aren’t currently at your university to do this? So it’s conceptually the same in terms of going after the big higher ed market, but we’re trying to find a more differentiated and I’d say standardized and scalable model. I think in the past it was sort of if you’re elite university and you want to put a degree online, just put it on Coursera. It’s much more now complementary with Coursera for Campus and recruiting people into these four credit electives that we’re going for. We think it’s going to have better scale over time.

Thank you. One, follow up. Like a lot of this conversation around degrees and different priorities and focus is around growth. I was hoping you could comment on the bottom line. Like I know the way you frame it is the segment margins and 100%, but is part of this now with a commitment to continue expanding EBITDA margins and the cost savings that you’ve recently talked about, like is part it basically is the degrees business profitable? Like is that part of the decision to pull back?

Yes, Josh, and we don’t. It’s not so much that we measure profitability by the different segments. It’s more investment versus growth outlook for the more distant futures, the way we think about it. But it’s always a matter of allocating resources in the near term. So. That’s exactly right. We’ve pulled back some of the investment there. We’re continuing to spend there. But when growth is slower, invest lasts, is traditional business. And so that’s what we’re doing in deploying those resources to where we see more opportunity in the near term.

And within the degree portfolio, there are some degrees that have the kind of model, like a standardized model that is integrated with the open content and the credit for open content, where like those are the kinds of programs that are more standardized, scalable and offer a unique value proposition to the end learner. It’s not just an elite degree online. It’s no, you can start in open content and get credit for an online degree. And we’re really focusing, within degrees even on certain programs that exhibit the right kind of characteristics that we think could be more uniformly scaled over a larger base.

So it’s finding that model and that rhythm that can scale, which we haven’t quite achieved, hence in underperformance on the growth versus where we wanted it to be.

Got it, thanks.

We will take our final question from the line of Ryan MacDonald with Needham. Your line is open.

Hi. Thanks for taking my questions. And Jeff, best of luck in the future endeavors and it was a pleasure working with you. Maybe just to talk about the consumer segment. One of the things obviously that we learned in 2024 is that sort of the cadence and timing of content launches and certification rollouts is obviously a driver of segment performance for the year. And so as we go into 2025, can you just talk about the level of visibility you have in terms of one, the number of new certification launches expected for 2025 and two, what the timing of those expected rollouts are. And as we think about with Generative AI being sort of a high priority in demand, of the new certifications you’re expecting to launch, what’s the general mix of Gen-AI related certifications there? Thanks.

Yes, maybe Ryan. I’ll start off and then I’ll hand it over to Ken. When we think about 2024 and consumer growth and you’re finishing relatively strong based on what we were expecting to begin in the quarter in Q4, clearly it was a year where a few of the larger titles did not perform as well in a region that really matters, which is North America. And as we talked about, I think in Q2, I think there are some macro factors going on and there’s a question about the relative demand for entry-level professional certificates in 2024 compared to 2021 or 2022. What we did see in 2024 and really especially in Q4 is that a much broader and more diverse set of titles exhibited much stronger growth. Even though, in 2023 there was more growth coming from a concentrated region and from a much more narrow set of our overall content base. So we did accelerate the content engine. Much of it was Coursera produced and partner branded. That content performed quite well. And as we go into 2025, we think that that broader, more diversified portfolio of content created by this more Gen-AI powered content engine will provide a more predictable, steady, reliable source of consumer segment growth that will also be more heavily indexed towards international markets. The translations, text translations and we think the video and audio dubbing is going to only accelerate this along with geography specific promotion geography specific pricing, geography specific currency and payments will really help us open up consumer growth in markets beyond North America where we’re seeing some of the headwinds. Ken, anything you’d want to add to that?

I guess a little bit of mix of some of the things we were talking about in the more near term, which was the C+ month to monitor that’s we started to see some stability there as well as a lot more progress on Coursera Plus subscriptions generally. I guess I’d chip that in in the near term we’re seeing opportunity there and I guess I wouldn’t hesitate ever to highlight because it is so important to the business highlighting the renewal of the agreement we had with our largest industry partner which has been a big driver of growth in innovation for us over time so.

Yes, and maybe just to wrap this, I mean the greatest growth that we’ve ever seen in consumer was due to COVID. When there are job dislocations, whether there’s a lot of jobs being created or a lot of jobs going away, helping people transition into new jobs is a huge driver of consumer segment growth. We do anticipate a wave of dislocation of various jobs for various reasons in different time horizons, requiring people to go retool if they want to stay relevant in the labor market and so we are clearly trying to position ourselves for Gen-AI titles. And to your question, Ryan, a lot of the titles that we’re going to be producing in 2025 on the heels of a pretty solid 2024 are job specific titles that teach you how to do a job using new Generative AI tools to be more productive and earn a credential that is relevant to employers. It says like you are a AI capable person who’s going to be a good return on investment for some employer who’s going to hire you. We see that world coming and we’re going to play to it in 2025.

Super helpful. Maybe just a quick follow up to that, given the obviously the impact in the markets that DeepSeek has had this week. Have you seen any impact in terms of demand or interest sort of coming to the website and the platform specifically for sort of DeepSeek related content? And could that be an unexpected tailwind for 25? Thanks.

Yes. So far, I wouldn’t say that we have any signals per se on DeepSeek, but like a lot of people have said, as models become more capable and cheaper, they become more ubiquitous. As they become more ubiquitous, like people have to learn how to use them and they’ll be expected to use them. They’ll be more productive when they do use them. And so all of the innovation and enhancements to the underlying models, to me says productivity gains will be higher, it’ll be more broad spread and more widely used and it’ll be more, more impactful when it is. And so people will need to skill themselves up on it. So I’d say that for me, like anything that advances, the return on investment of using an a Generative AI kind of model is probably going to necessitate a greater clarity and urgency to get people skilled on that. Andrew, anything you’d want to add to that?

Sure. So this is Andrew. You know, DC generated a lot of buzz as we all saw, and I feel like in the AI world there’s been a lot of excitement and hype about the AI model or the foundation model layer, which includes the models by the big model trainers, sometimes spending hundreds of millions or maybe billions of dollars training them. I think that, look, in the future a lot of the value will be created and captured by companies at the application layer that take advantage of these wonderful models that someone else has spent so much money to train and that we can now access, really inexpensively to build valuable products like Coursera Coach or course builder or coach dialog license and so on. So our engineering team is frankly, I think, very technically savvy and frequently looks at all the leading models out there. And the fact that models like DeepSeek are released in a relatively open ways in, I think under MIT License, this actually increases the ability of Coursera’s team and other teams working on applications to build valuable products. So I think long term, the fact that the foundation model layer is becoming hyper competitive I think is actually good for companies like us.

And Andrew, we hear from our customers, often our Coursera for business customers, that the fact that we have the ability at Coursera to use one model for coaches tutor a different model for coach dialogues, a different model for course builder, and even within course builder for different features of course builder, we use different fit for purpose models. We are using a wide array of models, cost effectively, each for the best purpose and every time they get better and cheaper, our business improves. So I really think that we’re pretty well set up and Andrew’s clearly been a very helpful guide in architecting the strategy. But I think we’re pretty well set up to exploit that kind of competition and innovation that’s happening at the foundation layer.

Well said. So really excited about the coming AI technologies that companies like DeepSeek and others may bring. And I think we’ll continue to benefit from those innovations to build on top of our own unique education focused innovations.

Excellent. I appreciate all the color.

Great. Thanks, Ryan. That wraps today’s Q&A session. A replay of this webcast will be available shortly on our investor relations website. We appreciate you joining us today. Take care.