Coursera,(COUR) - 2023 Q4 - Annual Report

PART I Item 1. Business Coursera operates a global online learning platform connecting 142 million learners with over 325 partners, offering diverse educational content to individuals and organizations as a Public Benefit Corporation - As of December 31, 2023, Coursera has approximately 142 million registered learners and partners with over 325 universities and industry experts[261][276] - The company's offerings are structured into three main segments: Consumer, Enterprise, and Degrees[256][262][284] Coursera Catalog Overview (as of Dec 31, 2023) | Offering Type | Quantity | Description/Price Range | | :--- | :--- | :--- | | Guided Projects | 3,500+ | Job-relevant skill in <2 hours for $9.99 | | Courses | 6,900+ | Learn in 4-6 weeks, free or up to $99 | | Specializations | 875+ | Job-relevant skill in 3-6 months for $39-$79/month | | Certificates | 125+ | Includes Professional, University, and MasterTrack Certificates | | Degrees | 50+ | Bachelor's or master's degree for ~$5,000-$45,000 | - Coursera operates as a Delaware Public Benefit Corporation (PBC) with a stated purpose to "provide global access to flexible and affordable high-quality education" and is also a certified B Corp[354][355][382] Item 1A. Risk Factors The company faces risks from its limited operating history, dependence on the evolving online learning market, concentration of revenue among a few educator partners, and regulatory challenges - The company's historical growth may not be indicative of future performance, and revenue growth rates may decline due to market saturation, competition, and other factors[391] - A significant business risk is the dependence on educator partners, with approximately 32% of total revenue for the year ended December 31, 2023, generated from the content of just five partners[436] - The business model for the Degrees segment relies heavily on the U.S. Department of Education's "bundled services exception" to the incentive compensation rule, which is based on agency guidance that could be altered or removed[48][223][349] - As a Public Benefit Corporation (PBC), directors have a fiduciary duty to balance stockholder interests with the company's public benefit purpose, which could lead to decisions that do not maximize short-term financial results[12][13][15] Item 1C. Cybersecurity Coursera manages cybersecurity risks through an ISO-certified information security program overseen by the audit committee of the Board of Directors - The Board of Directors oversees strategic risk, while the audit committee is responsible for overseeing cybersecurity policies and practices, receiving quarterly updates from the Senior Vice President of Engineering[18] - The company's information security management system is certified to the ISO/IEC 27001:2013 standard and undergoes annual independent third-party audits, such as SOC 2 Type 2 reports[648] - The information security team is led by the Senior Vice President of Engineering and the Head of Information Security, who together have over 35 years of technology industry experience[31] Item 2. Properties The company leases all its office properties, including its headquarters in Mountain View, California, and believes current facilities are adequate for operations - Coursera's headquarters is in Mountain View, California, and the company leases all its office spaces and does not own any real property[19] Item 3. Legal Proceedings Information regarding legal proceedings is incorporated by reference from Note 9 of the Notes to Consolidated Financial Statements - Details on legal proceedings are located in Note 9, "Commitments and Contingencies" of the financial statements[33] PART II Item 5. Market for Registrant's Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities Coursera's common stock trades on the NYSE under "COUR," with no dividends anticipated and a $95 million share repurchase program approved in April 2023 - The company's common stock trades on the NYSE under the symbol "COUR" since its IPO on March 31, 2021[21] - Coursera does not anticipate paying dividends on its common stock for the foreseeable future, retaining earnings for business development and expansion[5][698] - On April 26, 2023, a share repurchase program was approved, authorizing the purchase of up to $95 million of common stock with no expiration date; no repurchases were made in Q4 2023[23] Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations In FY2023, revenue grew 21% to $635.8 million, while net loss improved to $116.6 million, though gross margin declined due to higher content costs Results of Operations Total revenue increased 21% to $635.8 million in 2023, but gross margin fell to 52% from 63% due to higher content costs, while net loss improved to $116.6 million Consolidated Statement of Operations (in thousands) | Metric | 2023 | 2022 | | :--- | :--- | :--- | | Total Revenue | $635,764 | $523,756 | | Gross Profit | $329,771 | $331,479 | | Gross Margin | 52% | 63% | | Total Operating Expenses | $475,367 | $508,859 | | Loss from Operations | ($145,596) | ($177,380) | | Net Loss | ($116,554) | ($175,357) | Revenue by Segment (in thousands) | Segment | 2023 | 2022 | % Change | | :--- | :--- | :--- | :--- | | Consumer | $365,221 | $295,583 | 24% | | Enterprise | $219,542 | $181,284 | 21% | | Degrees | $51,001 | $46,889 | 9% | | Total Revenue | $635,764 | $523,756 | 21% | - Cost of revenue increased by 59% to $306.0 million in 2023, primarily due to higher content costs from a revised agreement with its largest educator partner, significantly impacting gross margin[64][65][728] - Total operating expenses decreased by 7% year-over-year, driven by a reversal of restructuring charges and decreases in R&D, Sales & Marketing, and G&A expenses[66][69] Liquidity and Capital Resources The company's liquidity is strong with $722.1 million in cash and securities, positive operating cash flow of $29.6 million, and $58.5 million used for share repurchases in 2023 - As of December 31, 2023, the company had $722.1 million in cash, cash equivalents, and marketable securities, consisting primarily of U.S. Treasury securities[97] Summary of Cash Flows (in thousands) | Activity | 2023 | 2022 | | :--- | :--- | :--- | | Net cash from Operating Activities | $29,639 | ($38,051) | | Net cash from Investing Activities | $384,798 | ($234,024) | | Net cash from Financing Activities | ($79,229) | $12,234 | - During 2023, the company repurchased 4,829,803 shares of common stock for $58.5 million under its Repurchase Program, with $36.6 million remaining available for repurchase[100] Key Business Metrics and Non-GAAP Financial Measures Key metrics showed growth in learners and customers, but a decline in enterprise retention, while non-GAAP measures like Adjusted EBITDA and Free Cash Flow improved significantly in 2023 Key Business Metrics (Year-End) | Metric | 2023 | 2022 | YoY Growth (2023) | | :--- | :--- | :--- | :--- | | Total Registered Learners (millions) | 141.9 | 118.1 | 20% | | Number of Degrees Students (Q4) | 22,025 | 18,103 | 22% | | Paid Enterprise Customers | 1,369 | 1,149 | 19% | | Net Retention Rate (Paid Enterprise) | 98% | 108% | (9)% | Non-GAAP Financial Measures (in thousands) | Metric | 2023 | 2022 | | :--- | :--- | :--- | | Adjusted EBITDA | ($10,000) | ($36,945) | | Adjusted EBITDA Margin | (2)% | (7)% | | Free Cash Flow | $7,894 | ($53,305) | Item 7A. Quantitative and Qualitative Disclosures About Market Risk Coursera is exposed to market risks from interest rate changes affecting its investment portfolio and foreign currency fluctuations impacting operating expenses - The company's primary market risk is interest rate risk on its investment portfolio; a hypothetical 100 basis point change would result in a $7.2 million change in annual interest income[152][174] - Coursera is exposed to foreign currency risk as operating expenses are often denominated in local currencies; a 10% change in exchange rates would have had a $3.4 million impact on 2023 financial statements[153][176] Item 8. Financial Statements and Supplementary Data This section contains the audited consolidated financial statements and an unqualified audit opinion from Deloitte & Touche LLP on both the financials and internal controls - The independent registered public accounting firm, Deloitte & Touche LLP, issued an unqualified opinion on the company's consolidated financial statements as of December 31, 2023[185] - The auditor also issued an unqualified opinion on the effectiveness of the company's internal control over financial reporting as of December 31, 2023, based on the COSO framework[157][179] - A critical audit matter identified was the revenue recognition for higher value Enterprise contracts, which required significant auditor judgment[187][188][189] Consolidated Financial Statements The financial statements show total assets of $920.5 million, a net loss of $116.6 million, and a significant turnaround in operating cash flow to $29.6 million for 2023 Consolidated Balance Sheet Highlights (in thousands) | Account | Dec 31, 2023 | Dec 31, 2022 | | :--- | :--- | :--- | | Cash and cash equivalents | $656,321 | $320,817 | | Total Current Assets | $832,486 | $875,988 | | Total Assets | $920,533 | $947,597 | | Total Current Liabilities | $298,260 | $242,441 | | Total Liabilities | $304,339 | $253,022 | | Total Stockholders' Equity | $616,194 | $694,575 | Consolidated Statement of Operations (in thousands) | Metric | 2023 | 2022 | 2021 | | :--- | :--- | :--- | :--- | | Revenue | $635,764 | $523,756 | $415,287 | | Gross Profit | $329,771 | $331,479 | $249,469 | | Loss from Operations | ($145,596) | ($177,380) | ($143,063) | | Net Loss | ($116,554) | ($175,357) | ($145,215) | | Net Loss Per Share | ($0.77) | ($1.21) | ($1.28) | Notes to Consolidated Financial Statements The notes detail key accounting policies, segment reporting, partner concentration risk, purchase commitments, and a pending privacy class action lawsuit - Revenue Recognition Policy: The company is the principal for Consumer and Enterprise revenue but acts as an agent for Degrees revenue, recognizing a service fee based on tuition[748][752][883] - Segment Reporting: The company operates and reports on three segments—Consumer, Enterprise, and Degrees—with performance evaluated based on segment revenue and gross profit[876][898] - Commitments and Contingencies: As of December 31, 2023, the company had $23.1 million in non-cancelable purchase obligations and is defending a putative class action lawsuit alleging privacy violations[810][860] - Restructuring: A 2022 workforce reduction resulted in a $10.1 million charge, while a January 2024 sales force restructuring is expected to incur $2-3 million in charges in Q1 2024[880][904]