Coursera (COUR) Conference Call Summary Company Overview - **Company**: Coursera (COUR) - **Date of Conference**: August 11, 2025 - **Key Speaker**: Ken Corso, CFO Industry and Business Segments - **Industry**: Online Education and Learning Platforms - **Business Segments**: - Consumer Segment - Enterprise Segment Key Points and Arguments Business Performance - The consumer segment faced operational and executional headwinds leading to slowed growth since the IPO in March 2021, but has recently rebounded with double-digit growth in the last quarter [6][8] - The enterprise segment also experienced a slowdown due to uncertainty in capital spending across the market [6][20] - The appointment of the new CEO, Greg Hart, has led to a renewed focus on operational improvements, particularly in the consumer segment [7] AI and Course Demand - There has been a significant increase in interest in AI-related courses, with enrollments rising from 8 to 12 per minute over the past year [11] - The company has expanded its offerings to include 5,000 courses in 26 languages, resulting in increased revenue from these courses [12] - A shift in demand is noted, with more mid-level professionals seeking reskilling in AI rather than just entry-level courses [14] Subscription Model - The Coursera Plus subscription model has seen strong adoption, particularly in annual subscriptions, which enhances cash flow and deferred revenue visibility [17] - The focus on improving key metrics such as conversion and retention has yielded positive results, contributing to overall growth [17][18] Enterprise Segment Insights - The enterprise segment is experiencing a slowdown, but there is optimism for recovery as companies seek to reskill their workforces in response to AI advancements [19][21] - The campus segment, while smaller, is performing well, offering accredited courses to universities, which is beneficial for both students and institutions [25][27] Financial Performance - The company reported strong second-quarter results, raising its full-year revenue guidance by $17 million and increasing EBITDA guidance [36][40] - The consumer business model reacts quickly to improvements, leading to immediate payback on strategic initiatives [35] - There is a focus on maintaining a balance between growth and operational efficiency, with improvements in gross margin due to content initiatives and partnerships [44] Future Outlook - The company is transitioning towards a more platform-oriented approach, enhancing the value of its offerings through AI and product improvements [49][51] - There is an expectation of creating more value with existing content, which will drive revenue growth [53] Additional Important Insights - The synergy between Coursera's consumer and enterprise segments is significant, with approximately 30% of enterprise leads coming from former students [32] - The company emphasizes the importance of brand recognition and the value of certificates in enhancing the learning experience [49] - The management is focused on long-term platform investments and capabilities to drive future growth [51] This summary encapsulates the key insights from the conference call, highlighting Coursera's current performance, strategic initiatives, and future outlook in the online education industry.

[PART I. FINANCIAL INFORMATION](index=3&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) [Item 1. Condensed Consolidated Financial Statements (Unaudited)](index=3&type=section&id=Item%201.%20Condensed%20Consolidated%20Financial%20Statements%20(Unaudited)) The company presents its unaudited financial statements, showing revenue growth and a significantly reduced net loss - Effective February 3, 2025, Gregory Hart was appointed as the new President and Chief Executive Officer (CEO)[24](index=24&type=chunk) - Following the CEO transition, the company simplified its business model and now operates under two reporting segments: **Consumer** and **Enterprise**[25](index=25&type=chunk)[83](index=83&type=chunk) Condensed Consolidated Balance Sheet Highlights (in millions) | Account | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $775.1 | $726.1 | | Total current assets | $881.9 | $830.7 | | Total assets | $979.9 | $930.3 | | **Liabilities & Equity** | | | | Total current liabilities | $346.2 | $327.5 | | Total liabilities | $352.9 | $332.9 | | Total stockholders' equity | $627.0 | $597.4 | Condensed Consolidated Statements of Operations Highlights (in millions) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Revenue | $187.1 | $170.3 | $366.4 | $339.4 | | Gross Profit | $102.7 | $90.2 | $200.6 | $179.7 | | Loss from operations | $(15.1) | $(31.2) | $(29.5) | $(61.0) | | Net loss | $(7.8) | $(22.9) | $(15.6) | $(44.2) | | Net loss per share | $(0.05) | $(0.15) | $(0.10) | $(0.28) | Condensed Consolidated Statements of Cash Flows Highlights (in millions) | Cash Flow Activity | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $69.0 | $48.3 | | Net cash provided by (used in) investing activities | $(15.1) | $52.8 | | Net cash used in financing activities | $(6.5) | $(48.7) | [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=22&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management analyzes Q2 2025 results, detailing revenue growth, segment performance, and key business metrics [Results of Operations](index=26&type=section&id=Results%20of%20Operations) Revenue grew 10% YoY in Q2 2025, driven by growth in both segments and improved gross margins Revenue by Segment (in millions) | Segment | Q2 2025 | Q2 2024 | % Change | H1 2025 | H1 2024 | % Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Consumer | $122.8 | $111.6 | 10% | $240.4 | $223.2 | 8% | | Enterprise | $64.3 | $58.7 | 10% | $126.0 | $116.2 | 8% | | **Total Revenue** | **$187.1** | **$170.3** | **10%** | **$366.4** | **$339.4** | **8%** | - Gross margin for Q2 2025 increased to **54.9%** from 53.0% in Q2 2024, driven by lower content cost rates in both Consumer and Enterprise segments[132](index=132&type=chunk)[133](index=133&type=chunk) - Total operating expenses for Q2 2025 **decreased by 3% YoY** to $117.8 million, primarily due to lower personnel-related expenses from 2024 expense reduction initiatives[138](index=138&type=chunk)[139](index=139&type=chunk)[143](index=143&type=chunk) [Liquidity and Capital Resources](index=31&type=section&id=Liquidity%20and%20Capital%20Resources) The company maintains strong liquidity with $775.1 million in cash and increased operating cash flow - The company's principal source of liquidity as of June 30, 2025, was cash and cash equivalents totaling **$775.1 million**[148](index=148&type=chunk) - Net cash provided by operating activities **increased by $20.7 million to $69.0 million** for the six months ended June 30, 2025, compared to the same period in 2024[156](index=156&type=chunk)[157](index=157&type=chunk) - The share repurchase program, authorizing up to $95.0 million, was completed in May 2024, with no repurchases made in 2025[152](index=152&type=chunk)[153](index=153&type=chunk) [Key Business Metrics and Non-GAAP Financial Measures](index=33&type=section&id=Key%20Business%20Metrics%20and%20Non-GAAP%20Financial%20Measures) Key metrics show growth in learners and enterprise customers, with improved non-GAAP profitability Key Business Metrics as of June 30 | Metric | 2025 | 2024 | YoY Growth | | :--- | :--- | :--- | :--- | | Total Registered Learners (millions) | 183 | 155 | 18% | | Paid Enterprise Customers | 1,686 | 1,511 | 12% | | Net Retention Rate for Paid Enterprise Customers | 93% | 93% | 0% | Non-GAAP Financial Measures Reconciliation (in millions) | Metric | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :--- | :--- | :--- | :--- | :--- | | **Non-GAAP Gross Profit** | $104.7 | $92.3 | $204.8 | $184.0 | | **Non-GAAP Net Income** | $19.3 | $13.8 | $39.0 | $25.7 | | **Adjusted EBITDA** | $18.0 | $10.4 | $36.7 | $18.7 | | **Free Cash Flow** | N/A | N/A | $53.9 | $35.1 | [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=38&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's primary market risks are interest rate and foreign currency fluctuations - The company's primary market risks are **interest rate changes** and **foreign currency fluctuations**[186](index=186&type=chunk) - A hypothetical **100 basis point** increase or decrease in interest rates would result in a **$7.8 million** change in annualized interest income as of June 30, 2025[189](index=189&type=chunk) - Foreign currency risk from operating expenses would have had a **negligible impact** on pre-tax loss for Q2 2025 based on a 10% change in exchange rates[190](index=190&type=chunk)[192](index=192&type=chunk) [Item 4. Controls and Procedures](index=39&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and internal controls over financial reporting were effective - The CEO and CFO concluded that as of the end of the period, the company's disclosure controls and procedures were **effective** at the reasonable assurance level[194](index=194&type=chunk) - **No changes** in internal control over financial reporting occurred during the quarter that have materially affected, or are reasonably likely to materially affect, these controls[195](index=195&type=chunk) [PART II. OTHER INFORMATION](index=40&type=section&id=PART%20II.%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=40&type=section&id=Item%201.%20Legal%20Proceedings) The company details legal proceedings, including a $4.5 million settlement for privacy arbitration matters - The company refers to Note 9 in Part I, Item 1 for information on legal proceedings[199](index=199&type=chunk) - In May 2025, the company entered into settlement agreements with the majority of remaining claimants in the Privacy Arbitration Matters for **$4.5 million**[59](index=59&type=chunk) [Item 1A. Risk Factors](index=40&type=section&id=Item%201A.%20Risk%20Factors) The company faces risks related to industry growth, competition, regulation, AI, and its PBC status - The company's growth may be adversely impacted by macroeconomic conditions, and its limited operating history makes future results difficult to predict[201](index=201&type=chunk)[207](index=207&type=chunk) - The business depends on partnerships with content creators, with the top five generating approximately **24% of total revenue** in the first six months of 2025[212](index=212&type=chunk) - The use of AI presents risks related to inaccurate content, academic integrity, and evolving regulations, which could damage the company's reputation[245](index=245&type=chunk)[246](index=246&type=chunk) - Degree programs rely on the DOE's non-codified "bundled services exception" guidance, which could be altered or removed, impacting revenue-sharing models[298](index=298&type=chunk)[300](index=300&type=chunk) - As a Public Benefit Corporation (PBC), the board must balance stockholder interests with its public benefit purpose, potentially impacting short-term financial results[372](index=372&type=chunk)[374](index=374&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=81&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company reports no unregistered sales of equity securities during the reporting period - None[381](index=381&type=chunk) [Item 5. Other Information](index=81&type=section&id=Item%205.%20Other%20Information) Two company officers adopted Rule 10b5-1 trading arrangements during the quarter - On May 15, 2025, Michele M. Meyers, VP, Accounting and Chief Accounting Officer, entered into a Rule 10b5-1 trading arrangement for the sale of up to **21,000 shares** of common stock[383](index=383&type=chunk) - On May 30, 2025, Marcelo C. Modica, SVP and Chief People Officer, entered into a Rule 10b5-1 trading arrangement for the sale of up to **51,720 shares** of common stock[384](index=384&type=chunk) [Item 6. Exhibits](index=82&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the Form 10-Q, including certifications and charter documents - Lists the exhibits filed with the report, including charter documents, officer certifications required by the Sarbanes-Oxley Act, and Inline XBRL documents[390](index=390&type=chunk)

Company Performance - Coursera's stock has increased by 41.4% over the past month and reached a new 52-week high of $12.49 [1] - Year-to-date, Coursera's stock has gained 45.5%, outperforming the Zacks Business Services sector's 2.6% gain and the Zacks Technology Services industry's 12.8% return [1] Earnings and Revenue - Coursera has consistently exceeded earnings expectations, reporting EPS of $0.12 against a consensus estimate of $0.09 in its last earnings report [2] - For the current fiscal year, Coursera is projected to achieve earnings of $0.35 per share on revenues of $726.86 million, reflecting a 2.94% increase in EPS and a 4.63% increase in revenues [3] - The next fiscal year forecasts earnings of $0.42 per share on revenues of $764.31 million, indicating a year-over-year change of 22.04% in EPS and 5.15% in revenues [3] Valuation Metrics - Coursera's current valuation metrics show a Price-to-Earnings (P/E) ratio of 35.6X for the current fiscal year, which is higher than the peer industry average of 21.3X [6] - The stock has a Value Score of D, a Growth Score of A, and a Momentum Score of F, resulting in a VGM Score of B [6] Zacks Rank - Coursera holds a Zacks Rank of 2 (Buy), supported by rising earnings estimates, making it a suitable choice for investors [7] Industry Comparison - The Technology Services industry is performing well, ranking in the top 34% of all industries, providing favorable conditions for Coursera and its peers [10] - JBT Marel Corporation, a competitor, also shows strong performance with a Zacks Rank of 2 (Buy) and has reported earnings that exceeded consensus estimates by 18.29% [8][9]

Core Insights - The S&P 500 is attempting to establish stability at new all-time highs, prompting a strategy shift towards overlooked small-cap stocks with better valuations [1] Group 1: Market Strategy - The current investment strategy involves rotating out of winning momentum trades and focusing on small-cap stocks that are undervalued [1] Group 2: Analyst Background - Gary Alexander has extensive experience in technology sectors, having worked on Wall Street and in Silicon Valley, and has advised seed-round startups [1] - He has been a contributor to Seeking Alpha since 2017 and has been featured in various web publications, with his articles reaching popular trading platforms like Robinhood [1]

Group 1 - Coursera reported better-than-expected second-quarter results with earnings of 12 cents per share, surpassing the analyst consensus estimate of 9 cents, and quarterly revenue of $187.1 million, exceeding the Street estimate of $180.48 million [1][2] - The company attracted over 7 million new learners this quarter, indicating a growing market opportunity driven by global demand for new technology and skills [2] - Coursera raised its full year 2025 revenue outlook by $17 million to a range of $738 to $746 million [2] Group 2 - Analysts have adjusted their price targets for Coursera following the earnings announcement, with several maintaining or upgrading their ratings [3][5] - Needham analyst Ryan MacDonald raised the price target from $11 to $14 while maintaining a Buy rating [5] - B of A Securities analyst Nafeesa Gupta upgraded Coursera from Underperform to Neutral and increased the price target from $7 to $12 [5] - Telsey Advisory Group analyst Sarang Vora maintained an Outperform rating and raised the price target from $12 to $14 [5] - Keybanc analyst Bradley Thomas maintained an Overweight rating and boosted the price target from $11 to $12 [5] - Morgan Stanley analyst Josh Baer maintained an Equal-Weight rating and raised the price target from $11 to $12 [5] - Cantor Fitzgerald analyst Yi Fu Lee maintained an Overweight rating and lifted the price target from $10 to $13 [5]

Core Insights - Coursera reported strong Q2 2025 results, exceeding analyst expectations with GAAP revenue of $187.1 million and non-GAAP EPS of $0.12, leading to an optimistic outlook for the full year 2025 [1][5][14] Financial Performance - Q2 2025 GAAP revenue increased by 10% year-over-year, surpassing estimates by $6.6 million [5] - Non-GAAP net income rose 40% to $19.3 million, while adjusted EBITDA grew 73% to $18.0 million [5] - Free cash flow reached $28.6 million, up 68% from the previous year [5] - Operating cash flow for the quarter was $35.5 million, indicating improved operational efficiency [5] Business Focus and Strategy - Coursera focuses on expanding its network of educator partners, technological innovation, and global market penetration [4] - The company has nearly 10,000 courses available, with a significant emphasis on AI-related content [7] - Partnerships with institutions like Adobe and DeepLearning.AI are crucial for maintaining relevance in high-demand fields [10] Market Position and Growth - Coursera has 183 million registered learners globally, with nearly half of its revenue generated outside the US [12] - The Consumer segment generated $122.8 million in revenue, while the Enterprise segment brought in $64.3 million, both reflecting a 10% increase [6] - The company added 7.5 million new registered learners in the quarter [6] Technological Advancements - AI-powered features such as content translation and Coursera Coach have been introduced to enhance user experience [7][11] - The company is committed to linking course content with career outcomes through ongoing innovations [7] Financial Outlook - Management raised the full-year revenue guidance for FY2025 to $738-$746 million, up from the previous range of $720-$730 million [14] - For Q3 2025, expected GAAP revenue is between $188 million and $192 million [14] - Adjusted EBITDA margin target for the full year is set at 8.0%, indicating a planned improvement of 200 basis points [14]

Core Insights - Coursera reported revenue of $187.1 million for the quarter ended June 2025, reflecting a year-over-year increase of 9.8% and surpassing the Zacks Consensus Estimate by 3.38% [1] - The company's EPS for the quarter was $0.12, which is a 33.33% surprise compared to the consensus estimate of $0.09 [1] Financial Performance Metrics - Paid Enterprise Customers reached 1,686, exceeding the average estimate of 1,665 [4] - Total Registered Learners increased to 183 million, slightly above the estimated 182.27 million [4] - Enterprise Revenue was reported at $64.3 million, compared to the average estimate of $61.76 million, marking a year-over-year growth of 9.5% [4] - Consumer Revenue was $122.8 million, surpassing the average estimate of $119.25 million, with a significant year-over-year increase of 26.2% [4] - Gross Profit from Enterprise was $44.8 million, exceeding the estimated $43.06 million [4] - Gross Profit from Consumer was reported at $75.3 million, above the average estimate of $72.46 million [4] Stock Performance - Coursera's shares have returned +5.3% over the past month, slightly underperforming the Zacks S&P 500 composite's +5.7% change [3] - The stock currently holds a Zacks Rank 2 (Buy), indicating potential for outperformance in the near term [3]

Company Performance - Coursera reported quarterly earnings of $0.12 per share, exceeding the Zacks Consensus Estimate of $0.09 per share, and showing an increase from $0.09 per share a year ago, representing an earnings surprise of +33.33% [1] - The company posted revenues of $187.1 million for the quarter ended June 2025, surpassing the Zacks Consensus Estimate by 3.38%, and up from $170.34 million year-over-year [2] - Over the last four quarters, Coursera has consistently surpassed consensus EPS and revenue estimates [2] Stock Outlook - The stock has gained approximately 5.4% since the beginning of the year, while the S&P 500 has increased by 8.1% [3] - The current consensus EPS estimate for the upcoming quarter is $0.08 on revenues of $182.09 million, and for the current fiscal year, it is $0.35 on revenues of $726.86 million [7] - The favorable trend in estimate revisions prior to the earnings release has resulted in a Zacks Rank 2 (Buy) for Coursera, indicating expected outperformance in the near future [6] Industry Context - The Technology Services industry, to which Coursera belongs, is currently ranked in the top 34% of over 250 Zacks industries, suggesting a positive outlook for stocks within this sector [8] - Another company in the same industry, Bitfarms Ltd., is expected to report a quarterly loss of $0.01 per share, with a significant year-over-year revenue increase of 97% to $81.84 million [9]

Financial Data and Key Metrics Changes - The company reported revenue of $187 million, representing a 10% year-over-year growth [6][25] - Free cash flow increased by 68% year-over-year to $29 million [6] - Gross profit was $105 million, up 13% year-over-year, with a gross margin of 56%, an increase of 180 basis points from the previous year [25] - Net income was $19 million, or 10.3% of revenue, while adjusted EBITDA was $18 million, or 9.6% of revenue [26] Business Line Data and Key Metrics Changes - Consumer segment revenue reached $123 million, also up 10% year-over-year, driven by increased learner engagement and Coursera Plus subscriptions [30] - Enterprise segment revenue was $64 million, reflecting a 10% year-over-year growth, with a net retention rate of 93% [32][34] - The number of paid enterprise customers increased by 12% year-over-year to 1,686 [34] Market Data and Key Metrics Changes - The total number of registered learners grew by 18% year-over-year to 183 million, with 7.5 million new learners added in the second quarter [7][8] - The generative AI course catalog expanded to over 925 courses, with more than 10 million enrollments [10][11] Company Strategy and Development Direction - The company is focused on product-led growth, enhancing platform capabilities, and accelerating content production to meet the rapid pace of skills development [21][22] - New appointments in leadership positions aim to drive innovation and operational rigor [9] - The company is expanding its catalog of industry micro-credentials and collaborating with universities to broaden access to job-relevant education [12][13] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to adapt to the changing labor market and the growing demand for new technologies and skills [7][11] - The company raised its full-year revenue guidance to a range of $738 million to $746 million, reflecting a midpoint increase of $17 million [7][35] - Management acknowledged macroeconomic uncertainties affecting the enterprise segment but remains optimistic about consumer growth [40][86] Other Important Information - The company has a strong balance sheet with approximately $775 million in unrestricted cash and no debt [28] - The catalog now includes over 10,500 courses, having expanded by more than 36% over the past year [10] Q&A Session Summary Question: What is driving the guidance for Q3 and Q4? - The guidance reflects strong performance in the consumer segment, with macro trends in enterprise remaining uncertain [39][40] Question: How is Coursera positioned in the context of big tech prioritizing AI skills education? - The company is well-positioned with trusted content and an AI-enabled learning platform, recognizing the need for reskilling and upskilling in the workforce [44][46] Question: Can you elaborate on consumer outperformance and future growth? - The consumer segment saw broad-based growth across regions, with ongoing improvements in product development and marketing strategies [55][56] Question: What trends are observed across government, business, and campus in the enterprise segment? - The enterprise segment showed strong performance in business and campus verticals, with ongoing monitoring of budgetary trends [60][64] Question: How sustainable are the improvements in consumer gross margins? - Improvements are driven by better revenue share agreements and investments in content, with expectations for continued positive trends [72][74] Question: What are the key metrics being monitored to assess business performance? - Key metrics include traffic conversion rates, learner engagement, and retention, all of which are essential for revenue growth [102][104]

Financial Performance - Coursera reported quarterly earnings of 12 cents per share, exceeding the analyst consensus estimate of 9 cents [1] - Quarterly revenue reached $187.1 million, surpassing the Street estimate of $180.48 million [1] Market Opportunity - The company continues to expand its market opportunity due to the global demand for new technology and skills, attracting over 7 million new learners this quarter [2] Growth and Outlook - Coursera achieved a revenue growth of 10% year-over-year and is making significant progress in enhancing customer experiences on its platform [3] - The company raised its full year 2025 revenue outlook by $17 million, now projected to be between $738 million and $746 million [3] Stock Performance - Following the earnings report, Coursera's stock price increased by 21.37%, reaching $11.02 in extended trading [3]