Coursera,(COUR) - 2021 Q4 - Annual Report

PART I Item 1. Business Coursera provides universal access to world-class learning, serving 97 million learners and 800+ Enterprise customers through its platform - Coursera's mission is to provide universal access to world-class learning, enabling digital transformation of higher education globally[16][17] - Key Operational Metrics (as of December 31, 2021) | Metric | Value | | :-------------------------- | :-------------- | | Registered Learners | 97 million | | University & Industry Partners | 250+ | | Paying Enterprise Customers | 800+ | | Social Impact Learners | 120,000+ | - The company's business model is built on combining world-class educational content with a technology platform to serve a global audience, addressing the expanding skills gap in the digital economy[17][20][22] - Revenue and Net Loss (2020 vs. 2021) | Metric | 2020 (Millions) | 2021 (Millions) | | :-------- | :-------------- | :-------------- | | Revenue | $293.5 | $415.3 | | Net Loss | $(66.8) | $(145.2) | Overview Coursera aims to provide universal access to world-class learning, transforming lives through education and enabling the digital transformation of higher education globally - Coursera aims to provide universal access to world-class learning, transforming lives through education and enabling the digital transformation of higher education globally[16][17] - The platform serves a global ecosystem of educators, learners, organizations, and institutions, with approximately 97 million registered learners and over 250 university and industry partners as of December 31, 2021[18][22] - Coursera addresses the growing skills gap by offering job-relevant online learning, promoting blended classrooms, and lifelong learning to adapt to the accelerating digital economy[20] - Revenue and Net Loss (2020 vs. 2021) | Metric | 2020 (Millions) | 2021 (Millions) | | :-------- | :-------------- | :-------------- | | Revenue | $293.5 | $415.3 | | Net Loss | $(66.8) | $(145.2) | Our Offerings to Individuals, Organizations and Institutions Coursera offers a diverse portfolio of learning options for individuals and tailored solutions for organizations, supported by social impact programs and pandemic response initiatives - Coursera offers a diverse portfolio of learning options for individuals, ranging from 2-hour Guided Projects to full bachelor's and master's degrees, with flexible durations and price points[28][30][31] - The platform includes AI-driven learning features, hands-on labs with real-world tools, and a mobile app for offline learning, enhancing effectiveness and accessibility[32] - Coursera for Enterprise provides tailored solutions for businesses, academic institutions, and governments, enabling skill development, private content authoring, and performance tracking[34][35][37][38][39] - Social impact programs provide free access to learning resources for underserved learners, with over 120,000 participants and 225,000 course enrollments in 2021[40] - Coursera responded to the COVID-19 pandemic with initiatives like the Campus Response Initiative (2.3 million students from 4,000+ institutions) and Workforce Recovery Initiative (1 million learners across 100+ countries)[41][42] - Key Learner and Customer Statistics (as of December 31, 2021) | Metric | Value | | :----------------------------------- | :-------------- | | Total Registered Learners | 97 million | | Top 5 Countries (Registered Learners) | US (18.1M), India (14.9M), Mexico (5.0M), Brazil (3.9M), China (3.4M) | | Course Enrollments (2021) | 37 million | | Guided Project Enrollments (since 2020) | 3.9 million | | Professional Certificate Learners (since 2018) | 3.7 million | | Degrees Program Students | 16,000+ | | Paid Enterprise Customers | 800+ | | Coursera for Business Enrollments (2021) | 1.8 million | Our Competitive Strengths: The Power of Our Business Model Coursera's competitive strengths include a trusted global brand, a freemium model, a broad content catalog, a strong partner network, and a multi-channel Enterprise model with data analytics - Coursera's competitive advantages include a trusted global brand with 97 million registered learners, a freemium consumer model for efficient acquisition, and a broad catalog of modular and stackable content[55][58] - The company benefits from a network of over 250 leading academic and industry partners, offering job-relevant, hands-on projects and industry certificates[59][60] - A multi-channel Enterprise model serves over 800 paying customers (businesses, academic institutions, governments), supported by rich data analytics and a Skills Graph for personalized learning and marketing[61][62] Our Opportunity: The Global Education Market is Large and Growing The global higher education market, particularly online degrees, presents a significant and growing opportunity for Coursera due to its flexibility and acyclical growth characteristics - The global higher education market was valued at $2.2 trillion in 2019, with the online degree market at $36 billion and expected to grow, presenting a significant opportunity for Coursera[63] - Online learning's flexibility enables non-traditional learners and demonstrates acyclical growth characteristics[63] Our Growth Strategy Coursera's growth strategy focuses on expanding Enterprise and degree offerings, growing its learner base, enhancing content, improving conversion, and continuing global expansion - Coursera's growth strategy includes increasing adoption of Enterprise offerings, expanding online degree programs, growing its learner base and brand, and enhancing its content catalog and partner network[65][68][69][70] - Key elements also involve improving conversion, upsell, and retention of paid Consumer learners, and continuing global expansion, especially in emerging economies[71][72] - Approximately 49% of 2021 revenue came from outside the United States, highlighting the importance of global expansion[72] Competition The global adult online learning market is highly fragmented and competitive, with Coursera maintaining advantages through its brand, freemium model, content, and partner network - The global adult online learning market is highly fragmented and rapidly evolving, with competition from direct-to-consumer companies (2U, edX), technology solution providers (Eruditus, Noodle Partners), corporate training companies (LinkedIn Learning, Udemy), free educational resources (Khan Academy, YouTube), and internal university platforms[73][185][186] - Coursera maintains advantages through its trusted global brand, large learner base, freemium model, broad catalog of high-quality content, job-relevant projects, extensive partner network, multi-channel Enterprise model, and rich data analytics[74][75] Sales and Marketing Sales and marketing efforts leverage the Coursera brand and freemium content to connect individuals to lifelong learning, using cost-efficient acquisition channels and data-driven Enterprise targeting - Sales and marketing efforts focus on building a unified system that connects individuals to lifelong learning, leveraging the Coursera brand and partner brands with high-quality, freemium content[76] - Learner acquisition is primarily through free or low-cost channels like public relations, word-of-mouth, and SEO, supplemented by cost-efficient paid advertising[78] - Data from the consumer ecosystem drives Enterprise marketing efficiency, helping target skill development solutions for businesses[80] Research and Development Coursera's R&D team focuses on developing and maintaining its scalable, cloud-based technology platform to deliver high-quality learning experiences, supported by a globally distributed talent pool - Coursera's R&D team focuses on creating and maintaining its technology and data-driven platform, products, and insights to deliver high-quality learning experiences efficiently and at scale[82][84] - The platform runs on a cloud-based architecture, providing scalable storage and elastic computing, which allowed it to handle a 15x increase in registrations during the March 2020 pandemic surge[83] - R&D teams are globally distributed (Mountain View, Toronto, Bulgaria, remote) to access diverse talent and foster innovation[85] Public Benefit Corporation Status Coursera became a Delaware Public Benefit Corporation (PBC) on February 1, 2021, formalizing its commitment to providing global access to world-class learning while balancing stakeholder interests - On February 1, 2021, Coursera became a Delaware public benefit corporation (PBC), reinforcing its commitment to providing global access to affordable, flexible, world-class learning[87] - As a PBC, directors must balance stockholders' pecuniary interests, the best interests of those materially affected by the company's conduct, and the specific public benefit identified in its charter[88] Certified B Corporation Status Coursera is a Certified B Corporation, meeting rigorous standards of social and environmental performance, accountability, and transparency, which enhances trust with stakeholders - Coursera is also a Certified B Corporation (B Corp), meeting rigorous standards of social and environmental performance, accountability, and transparency, which further strengthens trust with stakeholders[89][91] - B Corp certification involves a comprehensive assessment of impact on customers, employees, communities, and the environment, with scores publicly available[90] Regulatory Matters Coursera must comply with various education laws and regulations, including state licensing, accreditation, federal financial assistance, and consumer protection rules, which are critical to its business model - Coursera, as a service provider to higher education, must comply with various education laws and regulations in the US and internationally, including state licensing, accreditation, and federal student financial assistance programs (Title IV HEA)[92][93] - The company's business model relies on the 'bundled services exception' under the DOE's incentive compensation rule, which permits tuition revenue-sharing arrangements with university partners[101][103] - Compliance with the misrepresentation rule, which prohibits substantial misrepresentations about programs, financial charges, or graduate employability, is also required for marketing activities[105][106] - Coursera is indirectly subject to FERPA, which governs the disclosure of personally identifiable information from learner education records, through its contracts with institutions[108] Human Capital Resources Coursera employs 1,138 full-time staff globally, fostering a culture of innovation, investing in DEI, embracing remote work, and offering competitive, equitable compensation and learning opportunities - As of December 31, 2021, Coursera had 1,138 full-time employees globally, focused on fostering a strong culture that values innovation and results[110][111] - The company invests in Diversity, Equity, and Inclusion (DEI) across workplace, workforce, and marketplace pillars to strengthen culture, attract diverse talent, and ensure representation in content and strategy[112][113][114][115] - Coursera embraces a 'work from anywhere' hiring strategy to attract global talent and offers internal learning programs (SkillUp) and scholarships for employees to build skills and advance careers[116] - Compensation practices are competitive, regularly benchmarked, and audited to ensure fair and equal pay regardless of protected characteristics[117][118] Properties Coursera's headquarters are in Mountain View, California, and all offices are leased, with expectations for future expansion space to be available - Coursera's headquarters are in Mountain View, California, and all offices are leased. The company anticipates suitable additional or alternative space will be available for future expansion[119] Available Information Coursera files its reports electronically with the SEC, making them accessible on its investor relations website and the SEC's website - Coursera files its annual, quarterly, and current reports electronically with the SEC, making them available on its investor relations website (investor.coursera.com) and the SEC's website (www.sec.gov)[121](index=121&type=chunk) Item 1A. Risk Factors Coursera faces risks from revenue volatility, growth sustainability, limited operating history, net losses, COVID-19, market adoption, partnerships, regulations, cybersecurity, and PBC status - Key business risks include fluctuating revenue and operating results, rapid growth not indicative of future performance, limited operating history, and anticipated continued net losses[124][125][129][132][133] - The COVID-19 pandemic has created unpredictable impacts, accelerating online learning demand but also posing risks related to remote work, economic downturns, and potential slowing demand post-pandemic[138][139][140][141][142] - Operational success depends on maintaining and expanding partnerships with universities and industry, attracting and retaining learners, and increasing sales of Enterprise offerings, all of which face competitive and market adoption challenges[146][149][173] - Regulatory risks are significant, particularly compliance with international, federal, and state education laws, reliance on the DOE's 'bundled services exception,' and potential liabilities from misrepresentation or FERPA violations[124][224][243][247][250] - Cybersecurity threats, data privacy regulations (CCPA, GDPR), and infrastructure disruptions pose risks to sensitive information, platform availability, and reputation[262][266][273][288][289][291][293][294] - As a Public Benefit Corporation (PBC), Coursera's focus on public benefit may conflict with short-term financial performance, potentially impacting stock value and increasing derivative litigation risk[124][318][319][321][324][326] Risk Factors Summary This section summarizes key risks including financial fluctuations, growth sustainability, operational history, net losses, COVID-19, market adoption, partnerships, data security, regulatory compliance, intellectual property, and public benefit corporation status - Key risks include revenue and operating result fluctuations, rapid growth not indicative of future performance, limited operating history, and ongoing net losses[124] - Other significant risks involve the impact of COVID-19, market adoption of online learning, ability to maintain partnerships and attract learners, competition, data security, regulatory compliance, intellectual property, and the implications of being a public benefit corporation[124] Risks Related to Our Business and Industry Coursera faces risks from fluctuating financial results, unproven growth sustainability, limited operating history, ongoing net losses, COVID-19 impacts, market adoption, partnership dependencies, and intense competition - Quarterly and annual revenue and operating results are subject to significant fluctuations due to factors like customer acquisition/retention, content offerings, international operations, and market conditions, potentially causing stock price volatility[125][126][128] - Despite rapid past growth (revenue $184.4 million in 2019 to $415.3 million in 2021), future revenue growth rates are expected to decline due to market maturity, competition, and the evolving impact of COVID-19[129][130] - The company has a limited operating history since its founding in 2011, making future financial and operating results difficult to predict and increasing uncertainty[132] - Coursera has incurred significant net losses since inception ($145.2 million in 2021) and expects continued losses due to substantial investments in platform expansion, sales and marketing, technology, and international markets[133][134] - Market adoption of online learning solutions is relatively new and may not grow as expected, especially as COVID-19 restrictions ease and in-person learning resumes, potentially harming business and operations[135][136] - The COVID-19 pandemic has created volatile and unpredictable impacts, accelerating online learning but also posing risks to remote work, employee productivity, and customer financial resources[138][139][140][141] - Changes to contract terms or pricing models for course content and credentialing programs, such as the introduction of Coursera Plus, could impact operating results[143][144] - Failure to maintain and expand partnerships with university and industry educators, or changes in contract terms with them, could materially affect business and revenue, especially given that 32% of 2021 revenue came from five partners[146][147][148] - Attracting and retaining learners is critical; negative perceptions of online learning, reduced partner support, learner dissatisfaction, or ineffective marketing could harm enrollment and retention[149][151][152] - The inability to convert freemium users to paid subscribers or retain existing Enterprise customers could adversely affect growth and results[153][154][155] - Pursuing unsuccessful partner opportunities or failing to generate sufficient revenue from new offerings to offset significant technology and content development expenses could harm operating results[157][159][160][161][162] - Failure to effectively expand sales and marketing capabilities, particularly for Enterprise offerings, could hinder customer base growth and market acceptance[163][166] - Inability to quickly and efficiently scale operations to support new and existing partners, or disruptions from third-party service providers, could damage reputation and revenue[167][168][169] - Failure to adapt to rapidly changing technology, evolving industry standards, and customer needs could make the platform less competitive[171][172] - Increasing sales of Enterprise offerings is crucial, but faces challenges like upfront sales costs, higher acquisition costs, complex customer requirements, and potential margin reductions[173][175][177] - Competition from established and emerging companies, including direct-to-consumer, technology solution providers, corporate training, free resources, and internal university platforms, could divert partners, create pricing pressure, and reduce market share[184][185][186][187][188][189][190] - Poor performance of for-profit postsecondary institutions could tarnish the reputation of online education generally, impairing Coursera's ability to grow[191][192][193] - Acquisitions of other companies or technologies could divert management attention, result in dilution, and disrupt operations[195][196] - Equity investments in private companies are risky and could adversely affect financial results if their value declines[197][198] - Conflicts of interest involving directors affiliated with other organizations could arise, potentially affecting business opportunities[200][201] - Failure to retain senior management and key employees could hinder growth and business objectives[202][203][204] - Future capital needs may not be met on favorable terms, compromising growth, and focusing on long-term growth may negatively impact near-term financial results[205][206][208][209] - International operations expose the company to regulatory, economic, and political risks, including currency fluctuations, compliance challenges, and geopolitical crises[210][211][212][214][215] - Natural disasters, public health crises, political crises, or climate change effects could materially and adversely affect business and operations[216][217] - Metrics and market estimates used to evaluate performance are subject to measurement challenges and inaccuracies, potentially harming reputation and business[218][219] - Increasing scrutiny and evolving expectations regarding ESG practices may impose additional costs, risks, or harm reputation[221][222] - Climate change risks, including extreme weather and critical infrastructure impacts, may adversely affect business in the longer term[223] Risks Related to Regulatory Matters and Litigation Coursera faces significant regulatory and litigation risks, including compliance with education laws, reliance on specific DOE guidance, and potential liabilities from misrepresentation, data privacy, and third-party content - Partners' failure to comply with international, federal, and state education laws and regulations, including state authorizations and Title IV HEA programs, could harm Coursera's business and reputation[224][225][226][228] - Delays or denials in regulatory approvals for new programs or expansion could impair future growth, especially for international offerings subject to new regulations like in India[229][230][231][232][233] - Loss or suspension of a partner's institutional accreditation could render programs ineligible for government funding and negatively impact revenue[235] - Compliance with education accessibility (ADA, Rehabilitation Act) and consumer protection laws (automatic renewal, false advertising) is critical; failure could lead to lawsuits, fines, or reputational damage[236][237] - Changes in U.S. Congress spending policies or budget priorities for education funding could adversely affect partners and Coursera's business[238][239][240] - Coursera's business model relies on the DOE's 'bundled services exception,' which is agency guidance and not codified, posing a risk of alteration, removal, or invalidation, potentially requiring business model changes and renegotiation of partner agreements[243][244][245][246] - Violations of the misrepresentation rule or similar marketing regulations could lead to fines, sanctions, and reputational harm[247][248] - Failure to comply with FERPA regarding learner personally identifiable information could harm reputation and lead to suspension of access to partner data[250][251] - Liability or reputational harm could arise from third-party content posted by customers and educators on the platform, including intellectual property infringement or defamation claims[252][253][254] - Compliance with governmental export/import controls and anti-corruption laws (FCPA, UK Bribery Act) is essential for international operations; violations could result in penalties, reputational harm, or market access loss[255][256][258][259] - Involvement in claims, lawsuits, or government investigations could be costly, divert management attention, and adversely affect financial condition[260][261] Risks Related to Privacy, Cybersecurity, and Infrastructure Coursera faces significant risks from data breaches, cyber-attacks, platform disruptions, and evolving privacy regulations, which could lead to liability, reputational damage, and operational challenges - Disclosure of sensitive information (partner, employee, learner data) or cyber-attacks could curtail platform use, expose Coursera to liability, and harm its reputation[262][263][266][267] - The platform is vulnerable to power outages, telecommunications failures, catastrophic events, and various cyber-attacks, which could lead to service interruptions, data loss, or unauthorized disclosure[264][265][268][269] - Unlawful acquisition or access of personally identifiable information could result in substantial fines, investigation costs, and reputational damage[271][272] - Disruptions or failures of the platform, including reliance on third-party infrastructure like AWS, could lead to partner and learner dissatisfaction and reputational harm[273][274][276][277] - Failure to maintain compatibility with third-party applications (LMS, APIs) used by customers could lead to revenue decline[278][279] - Reliance on third-party payment processors and compliance with evolving payment laws and regulations (e.g., India's recurring credit card payments, PCI DSS) pose risks of service disruption, liabilities, or increased costs[280][281][282] - Continued access to the Internet and mobile networks is critical; changes in net neutrality rules or mobile platform effectiveness could adversely affect platform use and growth[284][285][287][288] - Use and processing of personal information are subject to complex and evolving privacy and data protection laws (CCPA, CPRA, GDPR, PIPL), with non-compliance potentially leading to significant fines, litigation, and reputational damage[289][291][293][294][297][298] - Improper use of social media, emails, push notifications, and text messages could lead to intellectual property loss, unintended disclosures, or harm to reputation[299][300] Risks Related to Intellectual Property Coursera faces risks related to protecting its intellectual property, potential infringement claims, and issues arising from open-source software use or content ownership disputes - Failure to obtain, maintain, protect, or enforce intellectual property (copyright, trade secrets, trademarks, patents) could impair the ability to protect proprietary technology and brand, harming the business[302][303][304] - The company may be subject to costly intellectual property claims, including infringement allegations, which could require significant damages, licensing fees, or development of alternative technologies[305][306][307] - Confidentiality agreements with employees and contractors may not adequately prevent disclosure of trade secrets and proprietary information[309][310] - Use of 'open source' software could negatively affect solution offerings and subject the company to litigation if license conditions are not met[311] - Individuals appearing in content (faculty, learners) may claim violation of their rights (likeness, image, content ownership), leading to liability or reputational harm[312] Risks Relating to Our Existence as a Public Benefit Corporation As a Public Benefit Corporation (PBC), Coursera must balance stockholder and public benefit interests, which may negatively impact financial performance, stock value, and increase litigation risk - As a Delaware Public Benefit Corporation (PBC), Coursera is required to balance stockholder interests with its public benefit purpose; there's no assurance this purpose will be achieved, potentially harming reputation[313][314][315] - A decline in the publicly reported B Corp score could harm reputation and business, as B Corp certification requires meeting rigorous social and environmental standards[316][317] - Focusing on public benefit may negatively impact financial performance by prioritizing non-pecuniary benefits over maximizing short-term income for stockholders[318][319] - Being a PBC may make Coursera less attractive as a takeover target, limiting stockholders' ability to realize investment through acquisition[320] - Directors' fiduciary duty to balance stockholder and public benefit interests could lead to conflicts not resolved in favor of stockholders, harming financial condition[321][322] - Focusing on long-term interests as a PBC may conflict with short- or medium-term financial performance, potentially negatively impacting stock value[324][325] - Increased derivative litigation concerning the duty to balance interests could adversely impact financial condition and results of operations[326][327] - Inability to maintain company culture and public benefit commitment could harm business and reputation[328][329] Risks Related to Tax, Accounting, and Operations Coursera faces risks from evolving tax laws, limitations on NOL carryforwards, changes in GAAP, ineffective internal controls, and the complexities of operating as a public and emerging growth company - The business may be subject to sales and other indirect taxes, with evolving and complex regulations, potentially leading to additional costs or limiting business scope[331] - Amendments to existing tax laws or enactment of new unfavorable tax laws could adversely affect business and operating results, increasing tax payments or other obligations[332] - The ability to use net operating loss (NOL) carryforwards and other tax attributes may be limited due to ownership changes or new tax laws (e.g., 80% deduction limitation from Tax Cuts and Jobs Act)[333] - Changes in generally accepted accounting principles (GAAP) or their interpretations could significantly affect reported results of operations[334] - Ineffective internal control over financial reporting or disclosure controls could lead to inaccurate financial reporting, fraud, or untimely periodic reports, causing investor confidence loss and stock price decline[336][337][338] - As an emerging growth company (EGC), the decision to comply with reduced reporting and disclosure requirements could make common stock less attractive to investors[339][340][341][342] - Operations as a public company require substantial costs and management attention, and failure to manage this transition effectively could harm the business[345][346][347] Risks Related to Our Common Stock The price of Coursera's common stock could be volatile due to operating results, market speculation, future share sales, analyst expectations, and anti-takeover provisions, with no dividends planned - The price of Coursera's common stock could be volatile and decline due to variations in operating results, market speculation, analyst expectations, global events, competition, and changes in management or regulations[348][350][351] - Future sales of a substantial number of shares by directors, executive officers, or significant stockholders, or the perception of such sales, could cause the stock price to decline[352][353][354][355] - Future sales and issuances of common stock or rights to purchase common stock, including for equity incentive plans, could result in additional dilution to stockholders and cause the stock price to decline[356][357] - Failure to meet guidance or analyst/investor expectations for operating results would likely cause the stock price to decline[359][360] - Downgrades by securities analysts, negative research, or cessation of coverage could negatively impact stock price and trading volume[361][362] - Coursera does not intend to pay dividends on its common stock, meaning returns on investment will be limited to changes in stock value[363][364] - Anti-takeover provisions in charter documents and Delaware law could make company acquisition more difficult, limit attempts to replace management, and potentially limit the market price of common stock[365][366][369] - Charter documents designate Delaware courts as the exclusive forum for certain stockholder actions, which could limit stockholders' ability to choose a favorable judicial forum for disputes[370][371][374] Item 1B. Unresolved Staff Comments No unresolved staff comments from the SEC regarding the company's filings - The company has no unresolved staff comments[376] Item 2. Properties Coursera's headquarters are in Mountain View, California, with all offices leased; suitable additional space is expected for future expansion - Coursera's headquarters are in Mountain View, California, and all offices are leased[377] - Existing properties are in good operating condition, and suitable additional space is expected to be available for future expansion on commercially reasonable terms[377] Item 3. Legal Proceedings Coursera faces ordinary legal proceedings, but none are currently material, though future litigation could be costly and divert resources - Coursera is subject to legal proceedings and claims in the ordinary course of business, including intellectual property, commercial, and employment litigation[378] - As of the report date, there are no legal proceedings that would have a material adverse effect on the company's business, results of operations, financial condition, or cash flows[378] - Future litigation, even if without merit, could be time-consuming, expensive, and divert management's attention[378] Item 4. Mine Safety Disclosures This item is not applicable to Coursera, as the company does not engage in mining operations - There are no mine safety disclosures applicable to the company[379] PART II Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Coursera's common stock began trading on the NYSE on March 31, 2021, following its IPO which generated $525.3 million in net proceeds; no dividends are paid or planned - Coursera's common stock (COUR) began trading on the New York Stock Exchange on March 31, 2021[382] - As of February 24, 2022, there were 141 stockholders of record[383] - The company has never declared or paid cash dividends and plans to retain future earnings for business development and expansion[384] - IPO Proceeds (April 2021) | Item | Amount (Millions) | | :------------------------------------ | :---------------- | | Net proceeds from initial IPO shares | $452.5 | | Net proceeds from underwriters' option | $72.8 | | Total Net Proceeds to Company | $525.3 | - There has been no material change in the planned use of proceeds from the IPO[388] Item 6. [Reserved] This item is reserved and contains no information Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations This section analyzes Coursera's 2020-2021 financial condition and results, covering revenue, expenses, net loss, IPO impact, liquidity, key metrics, and critical accounting estimates - Coursera is a leading online learning platform connecting learners, educators, organizations, and institutions with high-quality content and credentials[392][393] - Net Loss and Net Loss Margin (2020 vs. 2021) | Metric | 2020 (Millions) | 2021 (Millions) | | :---------------- | :-------------- | :-------------- | | Net Loss | $(66.8) | $(145.2) | | Net Loss Margin | (23)% | (35)% | - The IPO in April 2021 generated $525.3 million in net proceeds, with all redeemable convertible preferred stock converting to common stock[397][398] - Key performance factors include attracting and engaging new learners, Enterprise customers, and Degrees students, sourcing in-demand content, managing business mix shifts, converting free to paid learners, expanding international footprint, and retaining Enterprise relationships[399][400][401][403][404][406][407] - The COVID-19 pandemic accelerated online education demand, leading to significant revenue increases but also higher operating costs due to freemium offerings and marketing[409] - Revenue is derived from Consumer (subscriptions), Enterprise (subscription licenses), and Degrees (service fees from university partners based on tuition)[410][411][414][415] - Cost of revenue includes partner fees (for Consumer and Enterprise), platform operations, hosting, and payment processing. Degrees offerings have no content costs, benefiting overall margins as their share of revenue grows[416][417] - Operating expenses (R&D, Sales & Marketing, G&A) are expected to increase in absolute dollars due to continued investment in growth, but decrease as a percentage of revenue over the long term[418][419][420][421][423] - As of December 31, 2021, principal liquidity sources were $821.8 million in cash, cash equivalents, and marketable securities, deemed sufficient for at least the next 12 months[445][446] - Key business metrics include Registered Learners, Number of Degrees Students, Paid Enterprise Customers, and Net Retention Rate for Paid Enterprise Customers[465][467][471][473] - Non-GAAP financial measures (non-GAAP gross profit, non-GAAP net loss, Adjusted EBITDA, Free Cash Flow) are used for internal analysis and investor comparison, excluding stock-based compensation and other non-cash items[480][486][493][496] - Critical accounting estimates involve revenue recognition (principal vs. agent, variable consideration), common stock valuations (pre-IPO), stock-based compensation, and income taxes (valuation allowances, uncertain tax positions)[501][503][520][528][537] Organization of Information This section outlines the narrative discussion of financial performance and condition, to be read with consolidated financial statements - This section provides a narrative discussion of financial performance and condition, to be read with consolidated financial statements[390] - It includes an overview, IPO details, factors affecting performance, COVID-19 impact, components of results, liquidity, key metrics, accounting estimates, and recent pronouncements[391] Overview Coursera is a global online learning destination connecting learners, educators, organizations, and institutions with high-quality content and credentials - Coursera is a global online learning destination connecting learners, educators, organizations, and institutions with high-quality content and credentials[392][393] - As of December 31, 2021, approximately 97 million learners were registered, engaging with offerings from Guided Projects to degrees[393] - The go-to-market strategy focuses on attracting learners efficiently and connecting them to tailored content, complemented by a direct sales team for Enterprise customers[394] - Net Loss and Net Loss Margin (2020 vs. 2021) | Metric | 2020 (Millions) | 2021 (Millions) | | :---------------- | :-------------- | :-------------- | | Net Loss | $(66.8) | $(145.2) | | Net Loss Margin | (23)% | (35)% | Initial Public Offering Coursera completed its IPO on April 5, 2021, raising $452.5 million in net proceeds from initial shares and an additional $72.8 million from underwriters' option, converting all preferred stock to common stock - Coursera completed its IPO on April 5, 2021, selling 14,664,776 shares at $33.00 per share, generating $452.5 million in net proceeds[397] - Underwriters exercised their option for an additional 2,359,500 shares, yielding $72.8 million in net proceeds[398] - All outstanding redeemable convertible preferred stock converted into 75,305,400 shares of common stock upon IPO closing[397] Factors Affecting Our Performance Coursera's performance is driven by attracting and engaging learners and Enterprise customers, sourcing in-demand content, managing business mix shifts, converting free learners, expanding internationally, and continuous investment - Growth depends on attracting and engaging new learners, Enterprise customers, and Degrees students, with Consumer learners being a key source for overall revenue[400] - Sourcing in-demand content and credentials from educator partners is crucial for attracting and retaining customers[401][402] - A shift in business mix towards Degrees and Enterprise segments is expected to benefit overall margins due to lower content costs[403] - Converting free learners to paid offerings through on-platform and off-platform marketing efforts is a key factor[404] - Expanding international footprint, especially in underserved adult learning populations, and retaining/expanding Enterprise customer relationships are significant growth drivers[406][407] - Continued investment in sales, marketing, employee base, and technology development is anticipated to support future growth[408] Impact of COVID-19 The COVID-19 pandemic accelerated online education demand, boosting Coursera's revenue but also increasing operating costs, with long-term impacts on growth rates remaining uncertain - The COVID-19 pandemic accelerated the need for online education, leading to a significant increase in Coursera's revenue[409] - Operating costs also increased due to freemium offerings and marketing efforts during the pandemic[409] - Uncertainty remains regarding the long-term impact of the pandemic's tapering on growth rates and operating results[409] Components of Results of Operations Coursera's revenue is segmented into Consumer, Enterprise, and Degrees, with cost of revenue including partner fees and platform expenses, while operating expenses are primarily personnel-related and expected to decrease as a percentage of revenue long-term - Revenue is categorized into Consumer (individual subscriptions), Enterprise (organizational subscription licenses), and Degrees (service fees from university partners)[410][411][414] - Revenue is generally recognized ratably over the contract term, with Coursera acting as the principal for Consumer and Enterprise, and as a service provider for Degrees[411][412][414][415] - Cost of revenue includes content fees paid to educator partners (for Consumer and Enterprise), platform operation/maintenance, hosting, and payment processing fees[416] - Content costs are lower as a percentage of revenue for Enterprise offerings and non-existent for Degrees, implying a benefit to overall margins from mix shifts[417] - Operating expenses (R&D, Sales & Marketing, G&A) primarily consist of personnel costs (salaries, benefits, stock-based compensation) and are expected to increase in absolute dollars but decrease as a percentage of revenue long-term[418][419][420][421][423] - Interest income is from cash, cash equivalents, and marketable securities. Other income (expense), net, primarily reflects foreign exchange gains/losses. Income tax expense is mainly from foreign jurisdictions, with a full valuation allowance against U.S. deferred tax assets[424][425][426] Results of Operations Coursera's 2021 results show a 41% YoY revenue increase to $415.3 million, driven by growth across all segments, improved gross margin to 60%, but also a 77% increase in operating expenses leading to a higher net loss - Consolidated Statements of Operations (2019-2021, in thousands) | Metric | 2019 | 2020 | 2021 | | :--------------------------- | :---------- | :---------- | :---------- | | Revenue | $184,411 | $293,511 | $415,287 | | Cost of revenue | $89,589 | $138,846 | $165,818 | | Gross profit | $94,822 | $154,665 | $249,469 | | Research and development | $56,364 | $76,784 | $135,410 | | Sales and marketing | $57,042 | $107,249 | $179,337 | | General and administrative | $29,810 | $37,215 | $77,785 | | Total operating expenses | $143,216 | $221,248 | $392,532 | | Loss from operations | $(48,394) | $(66,583) | $(143,063) | | Net loss | $(46,719) | $(66,815) | $(145,215) | | Stock-based compensation expense | $16,317 | $16,807 | $91,183 | - Results of Operations as a Percentage of Revenue (2019-2021) | Metric | 2019 | 2020 | 2021 | | :--------------------------- | :---- | :---- | :---- | | Revenue | 100% | 100% | 100% | | Cost of revenue | 49% | 47% | 40% | | Gross profit | 51% | 53% | 60% | | Research and development | 30% | 26% | 32% | | Sales and marketing | 31% | 37% | 43% | | General and administrative | 16% | 13% | 19% | | Total operating expenses | 77% | 76% | 94% | | Loss from operations | (26)% | (23)% | (34)% | | Net loss | (25)% | (23)% | (35)% | - Revenue by Segment (2020 vs. 2021, in thousands) | Segment | 2020 Revenue | 2021 Revenue | Change $ | Change % | | :-------------- | :----------- | :----------- | :--------- | :------- | | Consumer | $192,909 | $246,187 | $53,278 | 28% | | Enterprise | $70,784 | $120,429 | $49,645 | 70% | | Degrees | $29,818 | $48,671 | $18,853 | 63% | | Total Revenue | $293,511 | $415,287 | $121,776 | 41% | - Total revenue increased by 41% YoY in 2021, driven by a 26% increase in registered learners, 416 new Paid Enterprise Customers, and an increase in Degrees students[431] - Consumer revenue increased by 28% YoY, with new learners contributing $84.0 million in 2021. Enterprise revenue grew 70% YoY, with new customers contributing $25.9 million and existing customers $23.7 million. Degrees revenue increased 63% YoY, with student growth contributing $16.8 million and increased revenue per student $2.1 million[432][433][434] - Cost of Revenue, Gross Profit, and Gross Margin (2020 vs. 2021, in thousands) | Metric | 2020 | 2021 | Change $ | Change % | | :---------------- | :---------- | :---------- | :--------- | :------- | | Cost of revenue | $138,846 | $165,818 | $26,972 | 19% | | Gross profit | $154,665 | $249,469 | $94,804 | 61% | | Gross margin | 53% | 60% | | | - Gross margin increased from 53% to 60% YoY, primarily due to a shift in revenue mix towards Enterprise and Degrees segments and a lower content cost rate for the Consumer segment[437] - Operating Expenses (2020 vs. 2021, in thousands) | Expense Category | 2020 | 2021 | Change $ | Change % | | :--------------------- | :---------- | :---------- | :--------- | :------- | | Research and development | $76,784 | $135,410 | $58,626 | 76% | | Sales and marketing | $107,249 | $179,337 | $72,088 | 67% | | General and administrative | $37,215 | $77,785 | $40,570 | 109% | | Total operating expenses | $221,248 | $392,532 | $171,284 | 77% | - Increases in operating expenses were primarily driven by higher personnel-related costs and stock-based compensation due to additional headcount across all departments[439][440][441] - Other Income (Expense) (2020 vs. 2021, in thousands) | Item | 2020 | 2021 | Change $ | Change % | | :------------------------ | :-------- | :------- | :--------- | :-------- | | Interest income | $1,175 | $320 | $(855) | (73)% | | Interest expense | $(12) | $0 | $12 | (100)% | | Other income (expense), net | $120 | $(346) | $(466) | (388)% | | Total other income (expense) | $1,283 | $(26) | $(1,309) | (102)% | - Interest income decreased due to lower interest rates, and 2021 saw foreign exchange losses[443] - Income Tax Expense (2020 vs. 2021, in thousands) | Item | 2020 | 2021 | Change $ | Change % | | :---------------- | :------- | :------- | :------- | :------- | | Income tax expense | $1,515 | $2,126 | $611 | 40% | - Income tax expense primarily related to foreign taxes[444] Liquidity and Capital Resources As of December 31, 2021, Coursera had $821.8 million in cash and marketable securities, sufficient for future needs, with operating activities providing cash and financing significantly boosted by the IPO - As of December 31, 2021, Coursera's liquidity sources included $821.8 million in cash, cash equivalents, and marketable securities (U.S. government treasury bills), which are expected to meet cash needs for at least the next 12 months[445][446] - Future capital requirements depend on growth rate, R&D, sales & marketing, market acceptance, and potential acquisitions; additional financing may be needed[446] - Contractual Obligations and Commitments (as of December 31, 2021, in millions) | Obligation Type | Current (within 1 year) | Long-Term (beyond 1 year) | Total | | :-------------------- | :---------------------- | :------------------------ | :------- | | Operating Leases | $8.0 | $11.9 | $21.7 | | Purchase Obligations | $9.5 | $38.1 | $47.6 | - A five-year agreement with a cloud hosting provider commits $7.5 million annually[451] - Capital expenditures for 2022 are expected to be consistent with 2021, primarily for property, equipment, software, and capitalized internal-use software costs[452] - Cash Flows Summary (2019-2021, in thousands) | Cash Flow Activity | 2019 | 2020 | 2021 | | :---------------------------------- | :---------- | :---------- | :---------- | | Net cash provided by (used in) operating activities | $(21,334) | $(14,991) | $1,746 | | Net cash used in investing activities | $(64,886) | $(101,442) | $(51,609) | | Net cash provided by financing activities | $113,381 | $139,014 | $550,156 | | Net increase in cash, cash equivalents, and restricted cash | $27,161 | $22,581 | $500,293 | - Operating activities shifted from cash usage to cash provision in 2021 ($1.7 million), driven by business growth, deferred revenue, and changes in operating assets/liabilities[456][457][458] - Investing activities primarily involved marketable securities, capital expenditures, and content asset purchases[460][461] - Financing activities in 2021 were significantly boosted by $550.2 million from the IPO, stock option exercises, and employee stock purchase plan proceeds[462][463] Key Business Metrics and Non-GAAP Financial Measures Coursera monitors key business metrics like Registered Learners, Degrees Students, Paid Enterprise Customers, and Net Retention Rate, and uses non-GAAP measures to provide supplemental performance information - Key business metrics are monitored to evaluate growth, performance, and operational efficiencies, including Registered Learners, Number of Degrees Students, Paid Enterprise Customers, and Net Retention Rate for Paid Enterprise Customers[464][465][467][471][473] - Registered Learners (2019-2021, in millions) | Metric | 2019 | 2020 | 2021 | | :--------------------------- | :--- | :--- | :--- | | New Registered Learners | 9.2 | 30.6 | 20.8 | | Total Registered Learners | 46.4 | 76.6 | 96.9 | | Total Registered Learners YoY Growth | | 65% | 26% | - Number of Degrees Students (Q1 2020 - Q4 2021) | Quarter | Q1 2020 | Q2 2020 | Q3 2020 | Q4 2020 | Q1 2021 | Q2 2021 | Q3 2021 | Q4 2021 | | :------ | :------ | :------ | :------ | :------ | :------ | :------ | :------ | :------ | | Students | 7,184 | 8,079 | 11,504 | 11,900 | 13,493 | 14,630 | 16,068 | 16,204 | | YoY Growth | | | | | 88% | 81% | 40% | 36% | - Paid Enterprise Customers (as of December 31) | Year | 2020 | 2021 | | :-------------------- | :--- | :--- | | Paid Enterprise Customers | 387 | 803 | | YoY Growth | | 107% | - Net Retention Rate for Paid Enterprise Customers decreased from 114% in 2020 to 110% in 2021, reflecting expansion within existing customers net of contraction/attrition[474] - Segment Revenue (2019-2021, in thousands) | Segment | 2019 | 2020 | 2021 | | :-------------- | :---------- | :---------- | :---------- | | Consumer Revenue | $121,011 | $192,909 | $246,187 | | YoY Growth | | 59% | 28% | | Enterprise Revenue | $48,262 | $70,784 | $120,429 | | YoY Growth | | 47% | 70% | | Degrees Revenue | $15,138 | $29,818 | $48,671 | | YoY Growth | | 97% | 63% | | Total Revenue | $184,411 | $293,511 | $415,287 | | YoY Growth | | 59% | 41% | - Segment Gross Profit and Margin (2019-2021, in thousands) | Segment | 2019 | 2020 | 2021 | | :-------------------- | :---------- | :---------- | :---------- | | Consumer Gross Profit | $64,645 | $106,509 | $161,510 | | Segment Gross Margin % | | 55% | 66% | | Enterprise Gross Profit | $34,184 | $48,972 | $81,253 | | Segment Gross Margin % | | 69% | 67% | | Degrees Gross Profit | $15,138 | $29,818 | $48,671 | | Segment Gross Margin % | | 100% | 100% | - Consumer Segment Gross Margin increased from 55% to 66% due to more subscription sales with no associated content cost, while Enterprise Segment Gross Margin decreased from 69% to 67% due to a lower proportion of subscription licenses with no content cost[479] - Non-GAAP measures (gross profit, net loss, Adjusted EBITDA, Free Cash Flow) exclude stock-based compensation and other non-cash items to provide supplemental information for performance analysis[480][486][493][496] - Adjusted EBITDA and Margin (2019-2021, in thousands) | Metric | 2019 | 2020 | 2021 | | :---------------- | :---------- | :---------- | :---------- | | Adjusted EBITDA | $(26,929) | $(39,813) | $(35,826) | | Adjusted EBITDA Margin | (15)% | (14)% | (9)% | - Free Cash Flow (2019-2021, in thousands) | Metric | 2019 | 2020 | 2021 | | :-------------------------------------- | :---------- | :---------- | :---------- | | Net cash provided by (used in) operating activities | $(21,334) | $(14,991) | $1,746 | | Less: purchases of property, equipment and software | $(4,410) | $(3,099) | $(1,554) | | Less: capitalized internal-use software costs | $(5,522) | $(8,819) | $(12,090) | | Free Cash Flow | $(31,266) | $(26,909) | $(11,898) | Critical Accounting Estimates Critical accounting estimates involve significant judgment in revenue recognition, common stock valuations, stock-based compensation, and income taxes, impacting reported financial results - Critical accounting estimates include revenue recognition, common stock valuations (especially pre-IPO), stock-based compensation, and income taxes[502] - Revenue recognition involves significant judgment in determining principal vs. agent status and estimating variable consideration for Degrees services[506][508][518][519] - Pre-IPO common stock valuations were determined by the board using income approach and OPM/PWERM, considering various objective and subjective factors[521][524][525] - Stock-based compensation expense is recognized based on fair value at grant date usi