Financial Data and Key Metrics Changes - For Q3 2023, total revenue was $165.5 million, representing a 21% increase year-over-year, driven by double-digit growth across all segments, particularly in the consumer segment [56][90] - Gross profit was $84.9 million with a gross margin of 51%, down 14 percentage points from the prior year [35] - Free cash flow increased to $15.6 million from $1.3 million a year ago, with unrestricted cash and equivalents totaling approximately $721 million and no debt [36] Business Line Data and Key Metrics Changes - Consumer revenue reached $99 million, up 27% year-over-year, supported by strong demand for entry-level professional certificates [87] - Enterprise revenue was $54.9 million, a 14% increase from the previous year, with a net retention rate of 99% [88] - Degrees segment revenue grew to $11.7 million, up 13% year-over-year, with student enrollments increasing by 15% [89] Market Data and Key Metrics Changes - The global learner base expanded by 6.5 million new registered learners, totaling 136 million by the end of September, with double-digit growth across all regions [24] - The number of Paid Enterprise Customers increased to over 1,300, reflecting a 21% year-over-year growth [46] Company Strategy and Development Direction - The company is focused on digital transformation, skills development, and the transformation of higher education, emphasizing the need for collaboration between academic institutions, employers, and government [7][16][17] - The strategy includes sourcing and launching new degree programs tailored for working adults, enhancing localized learner experiences, and leveraging AI for content translation [30][47][49] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the demand for education driven by rapid changes in technology and the labor market, particularly due to generative AI [14][15] - The company anticipates mid-single-digit growth in the Degrees segment for Q4 and expects to be EBITDA positive for the full year 2024 [63][66] Other Important Information - The company has made significant progress in its share repurchase program, buying back approximately 300,000 shares at an average price of $12.67 per share [86] - The company is actively pursuing credit recommendations for its professional certificates, enhancing their value and recognition [50][51] Q&A Session Summary Question: Thoughts on Consumer revenue growth resiliency - Management noted strong performance in the Consumer segment, with no anticipated slowdown despite potential job market fluctuations [98][100] Question: Feedback on course translation quality - Management reported positive feedback on translation quality, with ongoing improvements and a human-in-the-loop process for quality assurance [101][128] Question: Infrastructure to support growth - Management highlighted a remote-first culture that allows for a diverse talent pool, ensuring the company can meet growth demands [116][140] Question: Net retention rate in Enterprise segment - Management acknowledged a slight improvement in net retention rates but emphasized the need for further growth [120] Question: Professional certificates partner engagement - Management indicated increasing interest from industry partners in creating branded professional certificates, facilitated by advancements in generative AI [124][125]

Title of each class Trading Symbol(s) Name of each exchange on which registered UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 _________________________________________________________ FORM 10-Q _________________________________________________________ (Mark One) x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Registrant's telephone number, including area code: (650) 963-9884 _________________________________________________________ Securities ...

Financial Data and Key Metrics Changes - The company reported total revenue of $153.7 million for Q2 2023, representing a 23% increase year-over-year [26] - Gross profit was $81.9 million, with a gross margin of 53%, down 11 percentage points from the prior year [27] - Operating expenses decreased to 58% of revenue, down 22 points from 80% in the prior year [53] - The net loss was approximately $300,000, or 0.2% of revenue, while adjusted EBITDA was a loss of $2.9 million, or 1.9% of revenue [28] Business Line Data and Key Metrics Changes - Consumer revenue reached $87 million, up 25% from the prior year, driven by strong demand for entry-level Professional Certificates [30] - Enterprise revenue was $54.2 million, up 24% year-over-year, with a gross profit margin of 71% [58] - Degrees revenue was $12.5 million, reflecting a 10% increase from the previous year, with a total of 19,068 degree students, marking a 9% growth [59] Market Data and Key Metrics Changes - The global learner base grew to 129 million by the end of June, with 5.7 million new registered learners added in Q2 [13] - The number of paid enterprise customers increased to 1,291, up 35% from a year ago, with a net retention rate of 97% [32] Company Strategy and Development Direction - The company is focusing on broadening its catalog of entry-level Professional Certificates and launching new degree programs tailored for working adults [49] - There is an emphasis on partnerships with universities and industry to enhance the relevance and accessibility of education [19][45] - The company aims to leverage AI technologies to improve learning experiences and operational efficiency [49] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in navigating the dynamic macro environment due to the diversified platform [8] - The company raised its full-year revenue outlook to a range of $617 million to $623 million, reflecting an 18% growth at the midpoint [60] - Management anticipates being EBITDA breakeven in Q4 2023 and EBITDA positive for the full year 2024 [62] Other Important Information - The company repurchased 4.5 million shares at an average price of $12.06 per share, totaling $54.5 million [55] - The company is actively exploring M&A opportunities, focusing on assets that enhance its product portfolio rather than simply adding revenue [70] Q&A Session Summary Question: Strength in Consumer Segment - Management noted that growth in the Consumer segment is driven by new Professional Certificates and increased demand for existing content, with effective paid marketing contributing positively [40][41] Question: M&A Philosophy - The company is looking for strategic assets that complement its platform, focusing on talent acquisition rather than just revenue growth [69][70] Question: Enterprise Segment Dynamics - Management highlighted that while there are cyclical pressures in the Enterprise segment, particularly in Coursera for Business, there is potential for growth in campus and government verticals [74][80] Question: Net Retention Rate Factors - The decline in net retention rate is attributed to various factors, including gross logo churn and pricing pressure, with expectations for improvement in the future [118]

Revenue and Growth - Total revenue for the three months ended March 31, 2023, was $147,642,000, representing a 23% increase from $120,433,000 in the same period of 2022[54] - Enterprise segment revenue increased by 34% to $52,173,000 compared to $39,046,000 in the prior year[54] - Total registered learners increased to 123.7 million in 2023, up from 101.7 million in 2022, representing a year-over-year growth of 22%[67] Financial Performance - The net loss for the three months ended March 31, 2023, was $32.4 million, compared to a net loss of $38.3 million in the same period of 2022, showing a reduction in losses[76] - Adjusted EBITDA for the three months ended March 31, 2023, was $(7.5) million, an improvement from $(10.5) million in the same period of 2022[76] - The company experienced a net loss margin of (22)% for the three months ended March 31, 2023, an improvement from (32)% in the same period of 2022[76] Operating Expenses - Total operating expenses for the three months ended March 31, 2023, were $116,545,000, a slight increase of 2% from $114,800,000 in the same period of 2022[56] - The company recognized restructuring charges of $5,659,000 during the three months ended March 31, 2023, primarily related to personnel expenses[56] - The company incurred stock-based compensation expense of $30.3 million for the three months ended March 31, 2023, compared to $22.0 million in the same period of 2022[76] Cash Flow and Investments - Free Cash Flow for the period is calculated as net cash provided by operating activities minus capital expenditures, indicating liquidity for strategic opportunities[45] - For the three months ended March 31, 2023, net cash used in investing activities was $50.5 million, a decrease from $185.1 million in the same period of 2022, indicating improved cash management[65] - The company reported a net decrease in cash, cash equivalents, and restricted cash of $53.5 million for the three months ended March 31, 2023, compared to a decrease of $219.3 million in the same period of 2022[65] Customer Metrics - Net Retention Rate for Paid Enterprise Customers decreased to 104% as of March 31, 2023, down from 109% as of March 31, 2022[40] - Approximately 90% of total Enterprise segment revenue was generated from Paid Enterprise Customers for the three months ended March 31, 2023[39] - The net retention rate for paid enterprise customers was not specified but is monitored as a key metric for financial performance[70] Segment Performance - Consumer segment gross profit was $44,617,000 with a gross margin of 54%, down from 71% in the previous year[42] - Segment gross profit is monitored to evaluate financial performance, with content costs being a significant factor affecting profitability[73] - The company is focused on segment performance, with shifts in mix between Consumer, Enterprise, and Degrees segments expected to drive overall financial performance[73] Shareholder Actions - On April 26, 2023, the Board of Directors approved a share repurchase program with authorization to purchase up to $95 million of common stock[62]

Financial Data and Key Metrics Changes - In Q1 2023, the company reported revenues of $148 million, representing a 23% increase year-over-year [6][62] - Gross profit was $79.6 million, with a gross margin of 54%, down 12 points from the prior year [42] - The net loss for the quarter was $5.2 million, or 3.5% of revenue, with adjusted EBITDA showing a loss of $7.5 million, or 5.1% of revenue [42][122] Business Line Data and Key Metrics Changes - Consumer revenue reached $82 million, up 20% year-over-year, driven by strong performance in entry-level professional certificates [99] - Enterprise revenue was $52.2 million, up 34% from the previous year, with a total of 1,253 paid enterprise customers, a 37% increase [120] - Degrees segment revenue was $13.4 million, reflecting a 1% increase, with total degree students growing 10% to 18,095 [101] Market Data and Key Metrics Changes - The global learner base grew to 124 million, adding 5.5 million new registered learners in Q1 [14] - The company is expanding partnerships with industry leaders in various fields, enhancing its catalog of branded credentials [11] Company Strategy and Development Direction - The company aims to leverage AI and digital transformation to enhance learning experiences and improve access to education [7][21] - There is a focus on expanding the catalog of entry-level professional certificates and degree programs tailored for working adults [59][60] - The company is pursuing partnerships with universities and industry leaders to create job-relevant credentials [25][47] Management's Comments on Operating Environment and Future Outlook - Management noted that the current economic environment is challenging, with companies being cautious in their spending [72][80] - There is optimism about the long-term potential of online learning and the necessity for companies to train their workforce [74][92] - The company expects to achieve adjusted EBITDA positivity in 2024, with a focus on strategic investments for growth [103] Other Important Information - The company announced a share repurchase program of up to $95 million, reflecting confidence in the business [67] - The upcoming learner outcome report will provide insights into the impact of online learning on career advancement [125] Q&A Session Summary Question: What is driving the strength in enterprise despite budget cuts? - Management acknowledged that while there is price sensitivity, companies recognize the need for training in a changing job landscape [72][74] Question: How does the enterprise pipeline compare to three months ago? - Management indicated that there has been no deterioration in the pipeline, but they are being conservative due to the uncertain environment [78][80] Question: Are there any impacts from the Department of Education's guidance on degree programs? - Management stated that they have not seen significant impacts on conversations with university partners regarding new degree programs [90][92] Question: What are the growth assumptions for each segment in the full-year guidance? - Management emphasized that the guidance reflects caution in an uncertain macro environment, not a lack of confidence in business performance [115][116]

User Base and Growth - As of December 31, 2022, Coursera had approximately 118 million registered learners on its platform, reflecting a significant user base for its online learning offerings [304]. - As of December 31, 2022, total registered learners reached 118.1 million, representing a year-over-year growth of 22% [441]. - The number of registered learners increased, with 18,103 degrees students in Q4 2022, reflecting a year-over-year growth of 12% [420]. - The number of paid enterprise customers increased to 1,149, reflecting a year-over-year growth of 43% [444]. Financial Performance - For the fiscal year ended December 31, 2022, Coursera reported a net loss of $175.4 million, with a net loss margin of 33% compared to 35% in 2021 [306]. - Revenue for the year ended December 31, 2022, was $523.8 million, an increase of 26.1% from $415.3 million in 2021 [356]. - Gross profit for 2022 was $331.5 million, representing a gross margin of approximately 63.3% [356]. - The net loss for 2022 was $33 million, or 6.3% of revenue, compared to a net loss of $35 million, or 8.4% of revenue in 2021 [358]. - Total revenue for the year ended December 31, 2022, was $523.8 million, a 26% increase compared to $415.3 million in 2021 [448]. - Consumer revenue rose by $49.4 million, or 20%, to $295.6 million, with new learners contributing $96.7 million to this segment [383]. - Total Degrees revenue decreased by $1.8 million, or 4%, to $46.9 million, primarily due to lower revenue per student [384]. Operating Expenses and Cost Management - Operating expenses totaled $508.9 million in 2022, up from $392.5 million in 2021, with significant increases in research and development, sales and marketing, and general and administrative expenses [356]. - Restructuring charges recognized within operating expenses amounted to $10.1 million, primarily related to personnel expenses, with cash payments of $4.8 million made in 2022 [327]. - The company capitalized $1.1 million in content assets during the year ended December 31, 2022, with total intangible assets amounting to $15.4 million [316]. - Coursera's operating lease costs for the year ended December 31, 2022, were $5.9 million, a decrease from $6.7 million in 2021 [320]. Tax and Income - The effective income tax rate for the year ended December 31, 2022, was -2.8%, reflecting various adjustments including changes in valuation allowance [325]. - The company recognized an income tax expense of $4.7 million for the year ended December 31, 2022, compared to $2.1 million in 2021, reflecting a 122% increase [394]. - The company recognized unrecognized tax benefits of $16.4 million as of December 31, 2022, with $1.6 million potentially impacting the effective tax rate if recognized [373]. Future Outlook and Strategy - The company expects future revenue growth to be lower than in prior years due to macroeconomic headwinds and tight labor markets [336]. - The company plans to continue investing in international expansion, targeting regions with large, underserved adult learning populations [332]. - The company aims to convert free learners to paid learners through targeted marketing efforts, which is crucial for revenue growth [315]. - The company plans to defend against a class action complaint filed in January 2023, which seeks injunctive relief and unspecified monetary damages [423]. Cash Flow and Investments - For the year ended December 31, 2022, net cash used in operating activities was $38.1 million, primarily due to a net loss of $175.4 million, adjusted for non-cash charges of $135.6 million [411]. - For the year ended December 31, 2022, net cash used in investing activities was $234.0 million, mainly from purchases of marketable securities and capital expenditures [414]. - For the year ended December 31, 2022, net cash provided by financing activities was $12.2 million, primarily from proceeds of common stock issuance from employee stock option exercises [416]. Stock and Compensation - Stock-based compensation expense totaled $110.8 million for the year ended December 31, 2022, up from $91.2 million in 2021 [437]. - The aggregate intrinsic value of stock options exercised in 2022 was $57,311, with a weighted-average grant date fair value of options granted at $7.26 [433]. - The total unrecognized compensation cost related to unvested RSUs was $286.6 million as of December 31, 2022 [438]. - The aggregate fair value of RSUs that vested in 2022 was $29.966 million, compared to $18.767 million in 2021 [435]. Revenue Segmentation - Total Enterprise revenue increased by $60.9 million, or 51%, with $29.7 million from new customers and $31.2 million from existing customers [360]. - Enterprise segment revenue grew to $181,284 thousand in 2022, up from $120,429 thousand in 2021, marking a 50% increase [474]. - Consumer segment revenue increased to $295,583 thousand in 2022 from $246,187 thousand in 2021, a growth of 20% [474]. - Consumer segment gross margin increased to 73% in 2022, up from 66% in 2021, due to a higher proportion of revenue from subscription sales [450].

| --- | --- | |------------------------------------------------|-------| | | | | | | | Investor Presentation Q4 2022 February 9, 2023 | | This presentation contains forward-looking statements that involve substantial risks and uncertainties. Any statements contained in this press release that are not statements of historical facts may be deemed to be forward-looking statements. In some cases, you can identify forward-looking statements by terms such as: "accelerate," "anticipate, "believe," "can," "continue ...

Financial Data and Key Metrics Changes - The adjusted EBITDA loss as a percentage of revenue improved to 7.1%, a 150 basis point improvement over the prior year [31] - Gross profit was $88.9 million, up 24% from a year ago, with a gross margin of 63%, consistent with the prior year [80] - The net loss for the quarter was $6.5 million, or 4.6% of revenue, while adjusted EBITDA was a loss of $5.8 million, or 4.1% of revenue [54] Business Line Data and Key Metrics Changes - Consumer revenue increased to $79.8 million, up 21% from the prior year, with a segment gross profit of $58.2 million, or 73% of consumer revenue, compared to 69% a year ago [84] - Degrees revenue decreased to $11.9 million, down 11% from a year ago due to lower student enrollments, particularly in U.S. master's degree programs [85] - The number of paid enterprise customers grew to over 1,000, indicating strong demand across business, campus, and government sectors [24] Market Data and Key Metrics Changes - Learner growth was broad-based, with double-digit percentage increases in all regions, contributing to a total of 118 million registered learners by the end of December [47] - The company anticipates a return to growth in the Degrees segment of approximately 10% in 2023, with modest declines at the start of the year [99] Company Strategy and Development Direction - The company is focused on expanding its portfolio of degree programs tailored to meet the needs of working adults, emphasizing flexibility, affordability, and stronger pathways from open content and industry microcredentials into degrees [78] - There is a strategic emphasis on leveraging generative AI to enhance the learning experience and improve customer offerings [17][51] - The company aims to grow its Enterprise segment across business, government, and campus customers, addressing their needs in a changing environment [78] Management's Comments on Operating Environment and Future Outlook - Management noted that organizations are exercising caution due to macroeconomic uncertainty, with students demanding a more affordable and relevant education system [15] - The company believes that the demand for reskilling will continue to grow, particularly as governments announce initiatives for upskilling [5][64] - Management expressed confidence in the structural trends driving the business, looking forward to providing an updated view of long-term strategy and financial targets [125] Other Important Information - The company ended the year with approximately $780 million in unrestricted cash, cash equivalents, and marketable securities, with no debt [32] - Total operating expenses for Q4 were $99.7 million, or 70% of revenue, down from 83% in the prior year [54] Q&A Session All Questions and Answers Question: What is the outlook for the consumer segment given the current economic conditions? - Management indicated that learner demand for branded industry credentials is expected to continue, with an initial outlook anticipating more than 10% growth [99] Question: How is the company addressing the competitive landscape in the government sector? - Management noted that while competition is increasing, Coursera's distinctive attributes, such as quality and brand recognition, resonate well with governments [65] Question: Can you elaborate on the impact of the new partnership with a key content provider? - Management explained that the partnership will involve an incremental investment that may slow the path to EBITDA breakeven but is expected to drive significant growth over the long term [87][88]

PART I. FINANCIAL INFORMATION [Item 1. Condensed Consolidated Financial Statements (Unaudited)](index=2&type=section&id=Item%201.%20Condensed%20Consolidated%20Financial%20Statements%20(Unaudited)) Presents Coursera's unaudited condensed consolidated financial statements and detailed notes for Q3 2022 and FY 2021 [Condensed Consolidated Balance Sheets (Unaudited)](index=2&type=section&id=Condensed%20Consolidated%20Balance%20Sheets%20(Unaudited)) | Metric (in thousands) | Sep 30, 2022 | Dec 31, 2021 | | :-------------------- | :----------- | :----------- | | **Assets** | | | | Total current assets | $888,289 | $892,331 | | Total assets | $956,256 | $958,910 | | **Liabilities** | | | | Total current liabilities | $235,732 | $201,123 | | Total liabilities | $247,275 | $217,397 | | **Equity** | | | | Total stockholders' equity | $708,981 | $741,513 | - Total assets slightly decreased from **$958.9 million** at December 31, 2021, to **$956.3 million** at September 30, 2022. Total liabilities increased from **$217.4 million** to **$247.3 million**, while total stockholders' equity decreased from **$741.5 million** to **$709.0 million**[10](index=10&type=chunk) [Condensed Consolidated Statements of Operations (Unaudited)](index=3&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20(Unaudited)) | Metric (in thousands) | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :-------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Revenue | $136,389 | $109,880 | $381,576 | $300,331 | | Cost of revenue | $48,821 | $42,162 | $137,972 | $122,149 | | Gross profit | $87,568 | $67,718 | $243,604 | $178,182 | | Total operating expenses | $123,917 | $99,145 | $364,958 | $273,755 | | Loss from operations | $(36,349) | $(31,427) | $(121,354) | $(95,573) | | Net loss | $(36,038) | $(32,451) | $(123,640) | $(97,477) | | Net loss per share | $(0.25) | $(0.23) | $(0.85) | $(0.93) | - Revenue increased by **24%** YoY for the three months ended September 30, 2022, and by **27%** YoY for the nine months ended September 30, 2022. Net loss increased for both periods, reaching **$(36.0) million** for the three months and **$(123.6) million** for the nine months ended September 30, 2022[13](index=13&type=chunk) [Condensed Consolidated Statements of Comprehensive Loss (Unaudited)](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Loss%20(Unaudited)) | Metric (in thousands) | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :-------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Net loss | $(36,038) | $(32,451) | $(123,640) | $(97,477) | | Change in unrealized gain (loss) on marketable securities, net of tax | $839 | $(4) | $(1,227) | $(19) | | Comprehensive loss | $(35,199) | $(32,455) | $(124,867) | $(97,496) | - Comprehensive loss for the three months ended September 30, 2022, was **$(35.2) million**, compared to **$(32.5) million** in the prior year. For the nine months, comprehensive loss was **$(124.9) million**, up from **$(97.5) million** in the prior year, primarily due to increased net loss and unrealized losses on marketable securities[16](index=16&type=chunk) [Condensed Consolidated Statements of Redeemable Convertible Preferred Stock and Stockholders' Equity (Deficit) (Unaudited)](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Redeemable%20Convertible%20Preferred%20Stock%20and%20Stockholders'%20Equity%20(Deficit)%20(Unaudited)) - As of September 30, 2022, total stockholders' equity was **$708.981 million**, a decrease from **$741.513 million** at December 31, 2021. This change reflects the accumulated deficit of **$(612.406) million** and accumulated other comprehensive loss of **$(1.479) million**, partially offset by additional paid-in capital of **$1,327.566 million**[10](index=10&type=chunk)[21](index=21&type=chunk) - Key activities impacting equity during the nine months ended September 30, 2022, included **$80.339 million** in stock-based compensation expense and a net loss of **$(123.640) million**[21](index=21&type=chunk) [Condensed Consolidated Statements of Cash Flows (Unaudited)](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows%20(Unaudited)) | Cash Flow Activity (in thousands) | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :-------------------------------- | :----------------------------- | :----------------------------- | | Net cash (used in) provided by operating activities | $(32,609) | $941 | | Net cash (used in) provided by investing activities | $(135,402) | $178,272 | | Net cash provided by financing activities | $12,149 | $541,983 | | Net (decrease) increase in cash, cash equivalents, and restricted cash | $(155,862) | $721,196 | | Cash, cash equivalents, and restricted cash —End of period | $426,857 | $803,622 | - Operating activities shifted from providing **$0.9 million** in cash in 2021 to using **$32.6 million** in 2022. Investing activities also shifted from providing **$178.3 million** to using **$135.4 million**, primarily due to increased purchases of marketable securities. Financing activities significantly decreased from providing **$542.0 million** in 2021 (due to IPO proceeds) to **$12.1 million** in 2022[24](index=24&type=chunk) [Notes to Condensed Consolidated Financial Statements (Unaudited)](index=7&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements%20(Unaudited)) [1. ORGANIZATION AND DESCRIPTION OF BUSINESS](index=8&type=section&id=1.%20ORGANIZATION%20AND%20DESCRIPTION%20OF%20BUSINESS) - Coursera, Inc. is an online learning platform connecting learners, educators, and institutions with world-class educational content. It partners with over **275** university and industry partners and serves approximately **113 million registered learners** as of September 30, 2022[26](index=26&type=chunk)[96](index=96&type=chunk) - The Company initiated an expense reduction plan on November 9, 2022, involving a global workforce reduction. This is expected to result in **$10 million to $12 million** in incremental operating expenses (severance, benefits) in Q4 2022 and Q1 2023, partially offset by a **$7 million to $9 million** reversal of stock-based compensation expense in Q1 2023, leading to a net effect on operating expenses of **$1 million to $5 million**[27](index=27&type=chunk)[102](index=102&type=chunk) [2. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES](index=8&type=section&id=2.%20BASIS%20OF%20PRESENTATION%20AND%20SUMMARY%20OF%20SIGNIFICANT%20ACCOUNTING%20POLICIES) - The unaudited condensed consolidated financial statements are prepared in accordance with GAAP for interim reporting, reflecting normal recurring adjustments. The Company operates under three segments: Consumer, Enterprise, and Degrees[28](index=28&type=chunk)[30](index=30&type=chunk) - Coursera will cease to be an emerging growth company and become a large accelerated filer on December 31, 2022, due to exceeding the **$700 million** public float threshold. This change will require the adoption of new accounting standards, such as ASU 2016-13 (CECL model), starting with the annual reporting period ended December 31, 2022, though no material impact is expected[39](index=39&type=chunk)[42](index=42&type=chunk) [3. REVENUE RECOGNITION](index=10&type=section&id=3.%20REVENUE%20RECOGNITION) - Deferred revenue balances at the beginning of the year recognized as revenue were **$85.754 million** for the nine months ended September 30, 2022, up from **$67.976 million** in the prior year[43](index=43&type=chunk) - Remaining performance obligations as of September 30, 2022, totaled **$269.160 million**, with approximately **67%** expected to be recognized as revenue over the next **12 months**[44](index=44&type=chunk) - The Company recognized an impairment loss of **$2.915 million** during the nine months ended September 30, 2022, for deferred partner fees associated with content from Russian educator partners, recorded in general and administrative expenses[46](index=46&type=chunk) [4. FAIR VALUE MEASUREMENTS](index=11&type=section&id=4.%20FAIR%20VALUE%20MEASUREMENTS) | Financial Assets (in thousands) | Sep 30, 2022 Fair Value | Dec 31, 2021 Fair Value | | :------------------------------ | :---------------------- | :---------------------- | | Cash equivalents—money market funds | $383,059 | $539,091 | | Marketable securities—U.S. Treasury securities | $361,025 | $241,117 | | Total financial assets | $744,084 | $780,208 | [5. MARKETABLE SECURITIES](index=11&type=section&id=5.%20MARKETABLE%20SECURITIES) | Marketable Securities (in thousands) | Sep 30, 2022 Fair Value | Sep 30, 2022 Gross Unrealized Losses | Dec 31, 2021 Fair Value | Dec 31, 2021 Gross Unrealized Losses | | :----------------------------------- | :---------------------- | :----------------------------------- | :---------------------- | :----------------------------------- | | U.S. Treasury securities | $361,025 | $(1,479) | $241,117 | $(252) | - All marketable securities are U.S. Treasury securities, due in **one year or less**. As of September 30, 2022, these securities had a fair value of **$361.025 million** with gross unrealized losses of **$(1.479) million**, an increase in unrealized losses from **$(0.3) million** at December 31, 2021[50](index=50&type=chunk)[51](index=51&type=chunk) [6. CONSOLIDATED BALANCE SHEET COMPONENTS](index=12&type=section&id=6.%20CONSOLIDATED%20BALANCE%20SHEET%20COMPONENTS) | Property, Equipment, and Software (in thousands) | Sep 30, 2022 | Dec 31, 2021 | | :----------------------------------------------- | :----------- | :----------- | | Internal-use software | $50,077 | $35,508 | | Total property, equipment, and software | $64,725 | $49,841 | | Less accumulated depreciation and amortization | $(36,607) | $(25,116) | | Net property, equipment, and software | $28,118 | $24,725 | | Intangible Assets (in thousands) | Sep 30, 2022 Net Carrying Value | Dec 31, 2021 Net Carrying Value | | :------------------------------- | :------------------------------ | :------------------------------ | | Content assets | $4,927 | $4,944 | | Developed technology | $4,058 | $5,109 | | Assembled workforce | $0 | $38 | | Total intangible assets | $8,985 | $10,091 | - Net property, equipment, and software increased to **$28.1 million** at September 30, 2022, from **$24.7 million** at December 31, 2021, driven by growth in internal-use software. Net intangible assets decreased to **$8.985 million** from **$10.091 million** over the same period, with future amortization expense projected to be **$8.985 million** through 2026 and thereafter[54](index=54&type=chunk)[56](index=56&type=chunk)[57](index=57&type=chunk) [7. INCOME TAXES](index=13&type=section&id=7.%20INCOME%20TAXES) | Metric | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :----- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Effective tax rate | (2.9)% | (2.5)% | (2.6)% | (2.0)% | - The effective tax rate for the three months ended September 30, 2022, was **(2.9)%**, and **(2.6)%** for the nine months, primarily due to a full valuation allowance against U.S. federal and state deferred tax assets, income taxes on foreign operations, U.S. state income taxes, and stock-based compensation expense[60](index=60&type=chunk)[61](index=61&type=chunk) [8. REDEEMABLE CONVERTIBLE PREFERRED STOCK](index=13&type=section&id=8.%20REDEEMABLE%20CONVERTIBLE%20PREFERRED%20STOCK) - All outstanding redeemable convertible preferred stock converted into **75,305,400 shares** of common stock upon the Company's initial public offering (IPO). As of September 30, 2022, there were no shares of redeemable convertible preferred stock issued and outstanding[62](index=62&type=chunk) [9. STOCKHOLDERS' EQUITY (Deficit)](index=13&type=section&id=9.%20STOCKHOLDERS'%20EQUITY%20(Deficit)) - As of September 30, 2022, **9,281,162 shares** were reserved for future issuance under the 2021 Stock Incentive Plan and **3,637,184 shares** under the 2021 Employee Stock Purchase Plan (ESPP)[63](index=63&type=chunk) - An ESPP Reset during the nine months ended September 30, 2022, resulted in a stock-based compensation modification charge of **$7.781 million**, recognized ratably over the new offering period ending May 10, 2024[63](index=63&type=chunk) | Stock-Based Compensation Expense (in thousands) | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :---------------------------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Cost of revenue | $683 | $527 | $2,072 | $1,537 | | Research and development | $11,675 | $11,259 | $34,037 | $31,650 | | Sales and marketing | $7,630 | $6,846 | $21,952 | $19,504 | | General and administrative | $6,382 | $4,776 | $17,792 | $15,176 | | Total | $26,370 | $23,408 | $75,853 | $67,867 | - Total unrecognized compensation cost as of September 30, 2022, was **$33.689 million** for stock options (**1.9 years** weighted-average period), **$283.426 million** for RSUs (**3.1 years**), and **$13.850 million** for ESPP (**0.9 years**)[72](index=72&type=chunk) [10. NET LOSS PER SHARE](index=15&type=section&id=10.%20NET%20LOSS%20PER%20SHARE) | Metric | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :----- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Net loss per share—basic and diluted | $(0.25) | $(0.23) | $(0.85) | $(0.93) | | Weighted average shares used in computing net loss per share—basic and diluted | 146,020,571 | 138,846,394 | 144,619,748 | 104,316,176 | - Potentially dilutive securities, totaling **38,629,929** for the nine months ended September 30, 2022, were excluded from diluted net loss per share calculations as their inclusion would have been anti-dilutive[74](index=74&type=chunk) [11. LEASES](index=16&type=section&id=11.%20LEASES) - The Company recognized an impairment loss of **$2.304 million** related to its operating lease right-of-use asset and **$0.9 million** related to property and equipment during the nine months ended September 30, 2022, due to a partial sublease of office space[76](index=76&type=chunk) [12. COMMITMENTS AND CONTINGENCIES](index=16&type=section&id=12.%20COMMITMENTS%20AND%20CONTINGENCIES) - As of September 30, 2022, the Company had approximately **$42.680 million** in future minimum payments under noncancelable purchase obligations, primarily for cloud infrastructure and subscription arrangements, expected to be paid through 2026[77](index=77&type=chunk) - The Company evaluates litigation uncertainties quarterly and has determined no material exposure on an aggregate basis for legal proceedings with a reasonable possibility of loss[78](index=78&type=chunk) [13. 401(K) PLAN](index=16&type=section&id=13.%20401(K)%20PLAN) - The Company made matching contributions of **$1.749 million** to its 401(k) Plan for the nine months ended September 30, 2022, compared to no contributions in the prior year period[80](index=80&type=chunk) [14. RELATED-PARTY TRANSACTION](index=17&type=section&id=14.%20RELATED-PARTY%20TRANSACTION) - Content fees earned by a related party from a content sourcing agreement were **$4.456 million** for the nine months ended September 30, 2022, a decrease from **$5.056 million** in the prior year[82](index=82&type=chunk) [15. SEGMENT AND GEOGRAPHIC INFORMATION](index=17&type=section&id=15.%20SEGMENT%20AND%20GEOGRAPHIC%20INFORMATION) | Revenue by Segment (in thousands) | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :-------------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Consumer | $78,002 | $66,482 | $215,786 | $180,432 | | Enterprise | $48,044 | $31,840 | $130,794 | $84,518 | | Degrees | $10,343 | $11,558 | $34,996 | $35,381 | | Total revenue | $136,389 | $109,880 | $381,576 | $300,331 | | Revenue by Geographic Region (in thousands) | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :------------------------------------------ | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | United States | $72,466 | $55,451 | $201,250 | $152,741 | | Europe, Middle East, and Africa | $33,004 | $28,863 | $94,593 | $81,504 | | Asia Pacific | $18,290 | $15,424 | $50,591 | $39,365 | | Other | $12,629 | $10,142 | $35,142 | $26,721 | | Total | $136,389 | $109,880 | $381,576 | $300,331 | - Enterprise revenue showed the strongest growth, increasing **51%** for the three months and **55%** for the nine months ended September 30, 2022. Degrees revenue decreased by **11%** and **1%** for the respective periods[84](index=84&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=18&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management's analysis of Coursera's financial performance, key metrics, liquidity, and strategic initiatives [Overview](index=20&type=section&id=Overview) - Coursera is a leading online learning platform with approximately **113 million registered learners** as of September 30, 2022, partnering with over **275** global university and industry partners[96](index=96&type=chunk) | Metric (in millions) | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Net loss | $(36.0) | $(32.5) | $(123.6) | $(97.5) | | Stock-based compensation expense | $26.4 | $23.4 | $75.9 | $67.9 | | Net loss margin (% of revenue) | 26% | 30% | 32% | 32% | - The Company is implementing an expense reduction initiative, including a global workforce reduction, expected to incur **$10-12 million** in incremental operating expenses in Q4 2022 and Q1 2023, with a net effect of **$1-5 million** after stock-based compensation reversals[100](index=100&type=chunk)[102](index=102&type=chunk) [Factors Affecting Our Performance](index=21&type=section&id=Factors%20Affecting%20Our%20Performance) - Key performance factors include attracting and engaging new learners, Enterprise customers, and Degrees students, sourcing in-demand content from educator partners, managing business mix shifts, converting free learners to paid, expanding international footprint, and retaining/expanding Enterprise customer relationships[104](index=104&type=chunk)[105](index=105&type=chunk)[107](index=107&type=chunk)[108](index=108&type=chunk)[109](index=109&type=chunk)[110](index=110&type=chunk) - The Company is adopting a measured investment approach, focusing on select markets, offerings, technologies, and solutions to drive long-term, sustainable growth amidst indications of a global economic slowdown[111](index=111&type=chunk) [Components of Results of Operations](index=22&type=section&id=Components%20of%20Results%20of%20Operations) - Revenue is derived from three segments: Consumer and Enterprise (primarily subscriptions, recognized ratably) and Degrees (service fees from university partners, recognized ratably per term)[113](index=113&type=chunk)[114](index=114&type=chunk)[116](index=116&type=chunk) - Cost of revenue includes content costs (fees to educator partners for Consumer and Enterprise, but not Degrees) and platform operation/maintenance expenses. Content costs are a lower percentage of revenue for Enterprise offerings compared to Consumer[118](index=118&type=chunk)[119](index=119&type=chunk) - Operating expenses (R&D, Sales & Marketing, G&A) are primarily personnel-related, including stock-based compensation. R&D and S&M are expected to increase in absolute dollars but generally decrease as a percentage of revenue over the long term. G&A is also expected to increase in absolute dollars due to public company costs[120](index=120&type=chunk)[121](index=121&type=chunk)[123](index=123&type=chunk)[125](index=125&type=chunk) [Results of Operations](index=23&type=section&id=Results%20of%20Operations) [Revenue Analysis](index=24&type=section&id=Revenue%20Analysis) | Revenue (in thousands) | Three Months Ended Sep 30, 2022 | YoY Change % | Nine Months Ended Sep 30, 2022 | YoY Change % | | :--------------------- | :------------------------------ | :----------- | :----------------------------- | :----------- | | Total Revenue | $136,389 | 24% | $381,576 | 27% | | Consumer Revenue | $78,002 | 17% | $215,786 | 20% | | Enterprise Revenue | $48,044 | 51% | $130,794 | 55% | | Degrees Revenue | $10,343 | (11)% | $34,996 | (1)% | - Total revenue growth was driven by a **23%** increase in registered learners and the addition of **375 Paid Enterprise Customers**. However, future revenue growth is expected to slow due to macroeconomic headwinds, particularly in Europe, and a slowdown in new student growth in the Degrees business[135](index=135&type=chunk)[136](index=136&type=chunk) - For the three months ended September 30, 2022, new learners contributed **$36.3 million** to Consumer revenue, while existing learners retained **63%** of prior-year revenue. Enterprise revenue growth was split between new customers (**$10.4 million**) and existing customers (**$5.8 million**). Degrees revenue decreased due to lower revenue per student, partially offset by an increase in student numbers[138](index=138&type=chunk)[139](index=139&type=chunk)[140](index=140&type=chunk) [Cost of Revenue, Gross Profit, and Gross Margin Analysis](index=25&type=section&id=Cost%20of%20Revenue,%20Gross%20Profit,%20and%20Gross%20Margin%20Analysis) | Metric | Three Months Ended Sep 30, 2022 | YoY Change % | Nine Months Ended Sep 30, 2022 | YoY Change % | | :----- | :------------------------------ | :----------- | :----------------------------- | :----------- | | Cost of revenue | $48,821 | 16% | $137,972 | 13% | | Gross profit | $87,568 | 29% | $243,604 | 37% | | Gross margin | 64% | +2 pp | 64% | +5 pp | - Gross margin increased to **64%** for both the three and nine months ended September 30, 2022, from **62%** and **59%** respectively, primarily driven by a lower revenue content cost rate in both Consumer and Enterprise segments[147](index=147&type=chunk)[151](index=151&type=chunk) - Content costs as a percentage of revenue for Consumer decreased from **32%** to **27%** (3-month) and **36%** to **28%** (9-month). For Enterprise, it decreased from **33%** to **29%** (3-month) and **33%** to **29%** (9-month)[146](index=146&type=chunk)[150](index=150&type=chunk) [Operating Expenses Analysis](index=26&type=section&id=Operating%20Expenses%20Analysis) | Operating Expenses (in thousands) | Three Months Ended Sep 30, 2022 | YoY Change % | Nine Months Ended Sep 30, 2022 | YoY Change % | | :-------------------------------- | :------------------------------ | :----------- | :----------------------------- | :----------- | | Research and development | $39,415 | 16% | $122,299 | 26% | | Sales and marketing | $58,504 | 29% | $165,757 | 36% | | General and administrative | $25,998 | 30% | $76,902 | 40% | | Total operating expenses | $123,917 | 25% | $364,958 | 33% | - Increases in operating expenses were primarily driven by higher personnel-related expenses due to headcount growth across all functions, increased marketing and advertising expenses, and higher content creation fees[153](index=153&type=chunk)[155](index=155&type=chunk)[157](index=157&type=chunk) - Non-recurring impairment charges of **$3.5 million** were recognized in general and administrative expenses for the nine months ended September 30, 2022, related to deferred partner fees from Russian educator partners and a partial sublease of office space[159](index=159&type=chunk) [Other Income (Expense) and Income Tax Expense Analysis](index=27&type=section&id=Other%20Income%20(Expense)%20and%20Income%20Tax%20Expense%20Analysis) | Metric (in thousands) | Three Months Ended Sep 30, 2022 | YoY Change % | Nine Months Ended Sep 30, 2022 | YoY Change % | | :-------------------- | :------------------------------ | :----------- | :----------------------------- | :----------- | | Interest income | $2,301 | 3611% | $3,473 | 1430% | | Other expense, net | $(976) | 241% | $(2,574) | 925% | | Income tax expense | $1,014 | 27% | $3,185 | 69% | - Interest income significantly increased due to a rise in interest rates and higher average returns on U.S. Treasury securities. Other expense, net, increased due to unfavorable foreign exchange rates from the strengthening U.S. dollar[160](index=160&type=chunk) [Liquidity and Capital Resources](index=27&type=section&id=Liquidity%20and%20Capital%20Resources) [Overview of Liquidity](index=27&type=section&id=Overview%20of%20Liquidity) - As of September 30, 2022, Coursera's principal sources of liquidity were cash, cash equivalents, and marketable securities totaling **$785.8 million**, primarily invested in U.S. Treasury securities[162](index=162&type=chunk) - The Company believes existing liquidity and expected cash flows will be sufficient for at least the next **12 months**. Future capital requirements depend on growth rate, R&D/S&M expenditures, market acceptance, and potential investments/acquisitions[164](index=164&type=chunk) [Contractual Obligations and Commitments](index=28&type=section&id=Contractual%20Obligations%20and%20Commitments) - No material changes to contractual obligations and commitments were reported for the three and nine months ended September 30, 2022, beyond those discussed in Notes 11 (Leases) and 12 (Commitments and Contingencies)[165](index=165&type=chunk) [Cash Flows Analysis](index=28&type=section&id=Cash%20Flows%20Analysis) | Cash Flow Activity (in thousands) | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :-------------------------------- | :----------------------------- | :----------------------------- | | Net cash (used in) provided by operating activities | $(32,609) | $941 | | Net cash (used in) provided by investing activities | $(135,402) | $178,272 | | Net cash provided by financing activities | $12,149 | $541,983 | - Operating cash flow shifted from a **$1.0 million** inflow in 2021 to a **$32.6 million** outflow in 2022, driven by increased net loss, higher accounts receivable, and increased prepaid expenses, partially offset by growth in deferred revenue and accounts payable[169](index=169&type=chunk)[170](index=170&type=chunk)[172](index=172&type=chunk) - Investing activities used **$135.4 million** in 2022, primarily due to purchases of marketable securities and capitalized internal-use software costs, a significant change from the **$178.3 million** provided in 2021. Financing activities provided **$12.1 million** in 2022, a substantial decrease from **$542.0 million** in 2021, which included IPO proceeds[173](index=173&type=chunk)[174](index=174&type=chunk)[175](index=175&type=chunk)[176](index=176&type=chunk) [Key Business Metrics and Non-GAAP Financial Measures](index=29&type=section&id=Key%20Business%20Metrics%20and%20Non-GAAP%20Financial%20Measures) [Key Business Metrics](index=29&type=section&id=Key%20Business%20Metrics) | Metric (in millions, except percentages) | Sep 30, 2022 | Sep 30, 2021 | | :--------------------------------------- | :----------- | :----------- | | New Registered Learners (9 months) | 16.4 | 15.9 | | Total Registered Learners | 113.0 | 92.1 | | Total Registered Learners YoY growth | 23% | | | Number of Degrees Students | 17,723 | 16,068 | | Degrees Students YoY growth | 10% | | | Paid Enterprise Customers | 1,086 | 711 | | Net Retention Rate for Paid Enterprise Customers | 111% | 113% | - Total Registered Learners grew **23%** YoY to **113.0 million**. Number of Degrees Students increased **10%** YoY to **17,723**. Paid Enterprise Customers grew to **1,086**. Net Retention Rate for Paid Enterprise Customers decreased to **111%** from **113%** YoY[179](index=179&type=chunk)[183](index=183&type=chunk)[185](index=185&type=chunk)[187](index=187&type=chunk) [Segment Revenue](index=31&type=section&id=Segment%20Revenue) | Segment Revenue (in thousands) | Three Months Ended Sep 30, 2022 | YoY Growth % | Nine Months Ended Sep 30, 2022 | YoY Growth % | | :----------------------------- | :------------------------------ | :----------- | :----------------------------- | :----------- | | Consumer revenue | $78,002 | 17% | $215,786 | 20% | | Enterprise revenue | $48,044 | 51% | $130,794 | 55% | | Degrees revenue | $10,343 | (11)% | $34,996 | (1)% | | Total revenue | $136,389 | 24% | $381,576 | 27% | [Segment Gross Profit](index=31&type=section&id=Segment%20Gross%20Profit) | Segment Gross Profit (in thousands) | Three Months Ended Sep 30, 2022 | Segment Gross Margin % | Nine Months Ended Sep 30, 2022 | Segment Gross Margin % | | :---------------------------------- | :------------------------------ | :--------------------- | :----------------------------- | :--------------------- | | Consumer gross profit | $57,078 | 73% | $156,090 | 72% | | Enterprise gross profit | $33,993 | 71% | $93,059 | 71% | | Degrees gross profit | $10,343 | 100% | $34,996 | 100% | - Consumer segment gross margin increased to **73%** (3-month) and **72%** (9-month) due to a greater proportion of subscription sales with no associated content cost. Enterprise segment gross margin increased to **71%** for both periods due to a higher proportion of revenue from subscription licenses with no associated content cost[191](index=191&type=chunk)[192](index=192&type=chunk) [Non-GAAP Financial Measures](index=31&type=section&id=Non-GAAP%20Financial%20Measures) | Non-GAAP Metric (in thousands) | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2022 | | :----------------------------- | :------------------------------ | :----------------------------- | | Non-GAAP gross profit | $88,254 | $245,692 | | Non-GAAP net loss | $(9,510) | $(46,896) | | Adjusted EBITDA | $(4,935) | $(31,103) | | Adjusted EBITDA Margin | (4)% | (8)% | | Free Cash Flow | N/A | $(44,077) | - Non-GAAP gross profit for the nine months ended September 30, 2022, was **$245.692 million**. Non-GAAP net loss was **$(46.896) million**. Adjusted EBITDA was **$(31.103) million**, with an Adjusted EBITDA Margin of **(8)%**. Free Cash Flow for the nine months was **$(44.077) million**[195](index=195&type=chunk)[198](index=198&type=chunk)[201](index=201&type=chunk) [Critical Accounting Policies and Estimates](index=33&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) - There have been no material changes to the Company's critical accounting policies and estimates compared to those described in the Annual Report on Form 10-K for the year ended December 31, 2021[203](index=203&type=chunk) [Recent Accounting Pronouncements](index=33&type=section&id=Recent%20Accounting%20Pronouncements) - Information regarding recently issued accounting pronouncements is provided in Note 2 to the unaudited condensed consolidated financial statements[204](index=204&type=chunk) [JOBS Act Transition Period](index=33&type=section&id=JOBS%20Act%20Transition%20Period) - Coursera, as an emerging growth company, has elected to use the extended transition period for complying with new or revised accounting standards. However, as of December 31, 2022, the Company will become a large accelerated filer and will no longer qualify as an emerging growth company, ceasing to be eligible for these provisions[205](index=205&type=chunk)[206](index=206&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=33&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) Details Coursera's market risk exposure, focusing on interest rate sensitivity and foreign currency fluctuations [Interest Rate Sensitivity](index=34&type=section&id=Interest%20Rate%20Sensitivity) - As of September 30, 2022, **$361.0 million** of marketable securities (U.S. Treasury securities) are subject to interest rate sensitivity. A hypothetical **100 basis point** increase or decrease in interest rates would result in a **$1.1 million** decrease or increase, respectively, in their market value[209](index=209&type=chunk) [Foreign Currency Risk](index=34&type=section&id=Foreign%20Currency%20Risk) - Coursera's operating expenses are denominated in local currencies (Pound Sterling, Canadian Dollar, Indian Rupee), exposing it to foreign currency fluctuations. A **10%** increase or decrease in current exchange rates would impact the quarterly unaudited condensed consolidated statement of operations by **$2.3 million** for the three months ended September 30, 2022[210](index=210&type=chunk) - The Company has not entered into hedging arrangements for foreign currency risk to date, but may consider them in the future[210](index=210&type=chunk) [Item 4. Controls and Procedures](index=33&type=section&id=Item%204.%20Controls%20and%20Procedures) Evaluates disclosure controls and procedures, confirming effectiveness and noting no material changes in internal control [Evaluation of Disclosure Controls and Procedures](index=34&type=section&id=Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) - As of September 30, 2022, management, including the CEO and CFO, concluded that Coursera's disclosure controls and procedures were effective at the reasonable assurance level[212](index=212&type=chunk) [Changes in Internal Control over Financial Reporting](index=34&type=section&id=Changes%20in%20Internal%20Control%20over%20Financial%20Reporting) - No changes in internal control over financial reporting materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting during the period covered by this report[213](index=213&type=chunk) [Inherent Limitations on Effectiveness of Controls](index=35&type=section&id=Inherent%20Limitations%20on%20Effectiveness%20of%20Controls) - Management acknowledges that control systems provide only reasonable, not absolute, assurance and may not prevent or detect all errors and fraud due to inherent limitations[215](index=215&type=chunk) PART II. OTHER INFORMATION [Item 1. Legal Proceedings](index=35&type=section&id=Item%201.%20Legal%20Proceedings) Refers to legal proceedings discussed in Note 12, 'Commitments and Contingencies,' in Part I, Item 1 - Legal proceedings information is incorporated by reference from Note 12 'Commitments and Contingencies' in Item 1 of Part I[218](index=218&type=chunk) [Item 1A. Risk Factors](index=35&type=section&id=Item%201A.%20Risk%20Factors) Outlines key risks across business, regulatory, privacy, IP, PBC status, and tax, impacting financial performance [Risk Factors Summary](index=36&type=section&id=Risk%20Factors%20Summary) - Key risks include fluctuations in revenue and operating results, declining revenue growth, limited operating history, anticipated net losses, impact of COVID-19, market adoption of online learning, ability to maintain partnerships, attract learners, increase Enterprise sales, and compete effectively[220](index=220&type=chunk) - Other significant risks involve data security, compliance with education laws, intellectual property protection, reliance on DOE guidance, platform disruptions, and the implications of operating as a public benefit corporation[220](index=220&type=chunk) [Risks Related to Our Business and Industry](index=37&type=section&id=Risks%20Related%20to%20Our%20Business%20and%20Industry) - Quarterly and annual revenue and operating results are subject to significant fluctuations due to factors like customer acquisition/retention, content offerings, international expansion, timing of costs, market demand for online learning, and macroeconomic conditions[223](index=223&type=chunk) - The Company expects its revenue growth rate to decline compared to prior years due to more challenging comparisons, slowing demand post-COVID-19, increased competition, and market saturation[227](index=227&type=chunk) - Coursera has incurred significant net losses since inception (**$612.4 million** accumulated deficit as of Sep 30, 2022) and anticipates continued losses, with no assurance of achieving or maintaining profitability[229](index=229&type=chunk)[230](index=230&type=chunk) - The success of the business depends on maintaining and expanding partnerships with university and industry partners, attracting and retaining learners, and increasing sales of Enterprise offerings. Failure in these areas, or changes in pricing models, could materially impact revenue and financial condition[242](index=242&type=chunk)[246](index=246&type=chunk)[274](index=274&type=chunk) - International expansion exposes the Company to various risks, including regulatory differences, currency fluctuations (e.g., Euro and Indian Rupee decline against USD), and geopolitical conditions, which could increase costs and constrain operations[311](index=311&type=chunk)[312](index=312&type=chunk)[315](index=315&type=chunk) [Risks Related to Regulatory Matters and Litigation](index=52&type=section&id=Risks%20Related%20to%20Regulatory%20Matters%20and%20Litigation) - Partners' failure to comply with international, federal, and state education laws and regulations, including state authorizations and accreditation, could harm Coursera's business and reputation, potentially leading to loss of operating ability or revenue[323](index=323&type=chunk)[324](index=324&type=chunk)[334](index=334&type=chunk) - The Company's business model relies on the DOE's 'bundled services exception' (DCL issued March 2011), which is not codified by statute and could be altered or removed, requiring changes to the business model and partner agreements[344](index=344&type=chunk)[346](index=346&type=chunk) - Compliance with FERPA, consumer protection laws, and export/import controls is critical. Violations could lead to fines, sanctions, reputational harm, and litigation, especially as international operations expand[350](index=350&type=chunk)[355](index=355&type=chunk)[356](index=356&type=chunk) [Risks Related to Privacy, Cybersecurity, and Infrastructure](index=57&type=section&id=Risks%20Related%20to%20Privacy,%20Cybersecurity,%20and%20Infrastructure) - Disclosure of sensitive information, cyberattacks, or security breaches could lead to platform interruptions, data loss, unauthorized PII disclosure, and significant liability, harming reputation and customer trust[362](index=362&type=chunk)[365](index=365&type=chunk)[366](index=366&type=chunk)[369](index=369&type=chunk) - The Company relies on third-party payment processors and cloud infrastructure (AWS), making it vulnerable to disruptions in their services. Failures could impact payment processing, platform availability, and overall business operations[377](index=377&type=chunk)[379](index=379&type=chunk) - Evolving global privacy laws (CCPA, CPRA, GDPR, PIPL, etc.) impose stringent requirements on personal information processing. Non-compliance could result in substantial fines, litigation, and necessitate significant changes to business practices[389](index=389&type=chunk)[390](index=390&type=chunk)[392](index=392&type=chunk)[393](index=393&type=chunk)[397](index=397&type=chunk) [Risks Related to Intellectual Property](index=63&type=section&id=Risks%20Related%20to%20Intellectual%20Property) - Failure to obtain, maintain, protect, or enforce intellectual property rights (copyright, trade secrets, patents, trademarks) could impair the ability to protect proprietary technology and brand, leading to competitive harm and significant legal expenses[402](index=402&type=chunk)[403](index=403&type=chunk)[404](index=404&type=chunk) - The Company faces risks of intellectual property claims from third parties, which are costly to defend and could require significant damages, licensing fees, or development of alternative technologies[405](index=405&type=chunk)[406](index=406&type=chunk)[407](index=407&type=chunk) - Use of open-source software could lead to litigation or requirements to disclose proprietary code. Claims from individuals appearing in content (e.g., faculty, learners) regarding rights violations also pose liability and reputational risks[411](index=411&type=chunk)[412](index=412&type=chunk) [Risks Relating to Our Existence as a Public Benefit Corporation](index=64&type=section&id=Risks%20Relating%20to%20Our%20Existence%20as%20a%20Public%20Benefit%20Corporation) - As a Delaware Public Benefit Corporation (PBC), Coursera is required to balance stockholder pecuniary interests with public benefit. There is no assurance this purpose will be achieved, and a decline in its B Corp score or perceived misalignment with values could harm its reputation[414](index=414&type=chunk)[415](index=415&type=chunk)[417](index=417&type=chunk) - The PBC structure may lead to decisions that do not maximize short-term financial results, potentially negatively impacting financial performance and stock value. It may also make the company less attractive as a takeover target[418](index=418&type=chunk)[419](index=419&type=chunk) - Directors' fiduciary duty to consider both stockholder and public benefit interests could lead to conflicts, with no guarantee of resolution in favor of stockholders, potentially increasing derivative litigation and associated costs[420](index=420&type=chunk)[421](index=421&type=chunk)[425](index=425&type=chunk)[426](index=426&type=chunk) [Risks Related to Tax, Accounting, and Operations](index=67&type=section&id=Risks%20Related%20to%20Tax,%20Accounting,%20and%20Operations) - The Company is subject to complex and evolving indirect tax laws (sales, VAT, digital service taxes), and changes or new enactments could increase tax payments, compliance costs, or reduce demand for services[429](index=429&type=chunk)[431](index=431&type=chunk) - The ability to use net operating loss (NOL) carryforwards may be limited by ownership changes (Sections 382 and 383 of the Internal Revenue Code) and limitations imposed by the Tax Cuts and Jobs Act[432](index=432&type=chunk) - As a public company, Coursera faces substantial costs and management attention requirements for compliance with SOX and SEC regulations. Failure to maintain effective internal controls could lead to inaccurate financial reporting, loss of investor confidence, and a decline in stock price[435](index=435&type=chunk)[436](index=436&type=chunk)[446](index=446&type=chunk)[447](index=447&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=72&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) Reports no unregistered sales of equity securities or use of proceeds for the period - This item is not applicable for the reporting period[476](index=476&type=chunk) [Item 5. Other Information](index=72&type=section&id=Item%205.%20Other%20Information) Details the company's expense reduction initiative, workforce reduction, and expected financial impact - The Company enacted a plan on November 9, 2022, to reduce its global workforce to align cost structure with business objectives. This is expected to result in **$10 million to $12 million** in incremental operating expenses in Q4 2022 and Q1 2023, mainly for severance and benefits[477](index=477&type=chunk) - A reversal of **$7 million to $9 million** in stock-based compensation expense is anticipated, mostly in Q1 2023, due to forfeiture of unvested RSUs and stock options. The net effect on operating expenses is estimated to be **$1 million to $5 million**[477](index=477&type=chunk) [Item 6. Exhibits](index=73&type=section&id=Item%206.%20Exhibits) Lists all exhibits filed with the Form 10-Q, including organizational documents, certifications, and XBRL data - Exhibits include Amended and Restated Certificate of Incorporation and Bylaws, an Offer Letter, Certifications of Principal Executive and Financial Officers (302 and 906), and Inline XBRL Instance Document and Taxonomy Extension Documents[481](index=481&type=chunk) [Signatures](index=75&type=section&id=Signatures) Contains official signatures of Coursera's executive officers, affirming the report's submission - The report is signed by Jeffrey N. Maggioncalda (President, CEO, and Director), Kenneth R. Hahn (SVP, CFO, and Treasurer), and Michele M. Meyers (VP, Accounting and Chief Accounting Officer) on November 9, 2022[483](index=483&type=chunk)[487](index=487&type=chunk)[488](index=488&type=chunk)

Financial Data and Key Metrics Changes - The company reported Q3 2022 revenue of $136 million, reflecting a 24% year-over-year growth [7][47] - Gross profit was $88.3 million, resulting in a gross margin of 64.7%, which is up 29% from the previous year [49] - The net loss for the quarter was $9.5 million, or 7% of revenue, with an adjusted EBITDA loss of $4.9 million, or 3.6% of revenue [53] Business Line Data and Key Metrics Changes - Consumer segment revenue was $78 million, up 17% year-over-year, with a gross profit margin of 73% [56] - Enterprise segment revenue reached $48 million, marking a 51% increase from the previous year, with a gross profit margin of 71% [58] - Degrees segment revenue was $10.3 million, down 11% year-over-year, attributed to lower student enrollments [61] Market Data and Key Metrics Changes - The total number of registered learners grew by over 6 million, bringing the total to 113 million [36] - The number of Paid Enterprise Customers increased by 53% to 1,086 [59] - The net retention rate for Paid Enterprise Customers was 111% [60] Company Strategy and Development Direction - The company is focused on expanding its enterprise segment across business, government, and campus customers [44] - There is an emphasis on broadening the entry-level professional certificate catalog and enhancing partnerships with educators [45] - The company aims to integrate industry micro-credentials into degree programs to enhance job readiness for graduates [85][86] Management's Comments on Operating Environment and Future Outlook - Management noted that the digital transformation and skills development trends are reshaping higher education and adult learning [12][20] - The company remains optimistic about the long-term value of college degrees, especially in emerging markets [84] - The anticipated revenue for Q4 2022 is projected to be between $135.5 million and $139.5 million, indicating a 20% growth at the midpoint [62] Other Important Information - The company ended Q3 with approximately $786 million in unrestricted cash and no debt, providing financial stability [54] - The gross margin for the Consumer segment increased from 68% to 73%, while the Enterprise segment's margin rose from 67% to 71% [50] Q&A Session Summary Question: Inquiry about enterprise segment performance - Management noted cyclicality in enterprise spending, particularly in developed markets, with strong performance in government and educational institutions [78][80] Question: Long-term growth prospects for degrees - Management expressed optimism about the global demand for college degrees, particularly in regions with rising middle classes [84][88] Question: Q4 guidance and investment plans - Management confirmed that Q4 guidance remains consistent with prior expectations, with a focus on maintaining annual targets while managing costs [93][96] Question: Engagement with Career Academy - Management reported varying levels of traction across different institutions, with strong interest from government and educational sectors [98][102] Question: Performance of university partner content - Management indicated that while university courses are still popular, the focus is shifting towards career-relevant industry content [109][111] Question: Need to pause degree program rollout - Management clarified that the focus is on enhancing degree features to better meet the needs of working adults rather than pausing the rollout [117][120]