Thank you for joining us for Coursera's Second Quarter 2022 Earnings Call. All participants are currently in listen-only mode and this call is being recorded. Following the prepared remarks from our speakers, we will have a question-and-answer session. Now, I would like to turn the call over to Cam Carey, Head of Investor Relations. Mr. Carey, please proceed.

Hi, everyone, and thank you for joining our Q2 earnings conference call. With me today is Jeff Maggioncalda, Coursera's Chief Executive Officer; and Ken Hahn, our Chief Financial Officer. Following their prepared remarks, we will open the call for questions. Our press release, including financial tables, was issued after market close and is posted on our Investor Relations website located at investor.coursera.com, where this call is being simultaneously webcast and where versions of our prepared remarks and supplemental slides are available. During this call, we will present both GAAP and non-GAAP financial measures. A reconciliation of non-GAAP measures to the most directly comparable GAAP measure can be found in today's press release and supplemental presentation, which are distributed and available to the public through our Investor Relations website. Please note that all growth percentages refer to year-over-year change, unless otherwise specified. Additionally, all statements made during this call relating to future results and events are forward-looking statements based on current expectations. These forward-looking statements include, but are not limited to, statements regarding trends and their potential impact on our industry and our business; our ecosystem, platform, content and partner relationships; our strategy and priorities; and our business model mission, opportunities, outlook and long-term financial framework. Actual results and events could differ materially from projections due to a number of risks and uncertainties discussed in our press release, SEC filings, and supplemental materials. These forward-looking statements are not guarantees of future performance and plans and investors should not place undue reliance on them. We assume no obligation to update our forward-looking statements. And with that, I'd like to turn it over to Jeff.

Thanks Cam and good afternoon everyone. Shortly after our first quarter call, we hosted our 10th annual Coursera Conference, which attracted over 3,000 attendees from nearly 150 countries, including leaders from higher education, business, and government. The conference focused on collaboration to tackle the pressing issues shaping the future of learning and work. We view cross-sector collaboration among businesses, governments, and academic institutions as essential to addressing the skills gap crisis and establishing a foundation for the future of higher education during this time of rapid change. We highlighted examples of innovation and collaboration within the Coursera community, showcasing significant progress toward providing more equitable access to education. I was particularly pleased to introduce new offerings such as the Career Academy for institutions. This academy utilizes our entry-level Professional Certificates and Guided Projects created by leading companies to deliver the necessary skills and credentials for in-demand digital jobs, even for individuals without a college degree or prior work experience. This approach aims to enhance access to high-quality education, enabling institutions to deliver it rapidly and at scale to unlock economic opportunities globally. Now, regarding our results, in Q2, we experienced a 2% increase in total revenue, reaching $125 million. Our Enterprise segment saw strong growth in revenue across business, campus, and notably, government customers. Additionally, our expanding catalog of entry-level Professional Certificates continues to attract substantial demand from individuals and institutions alike. However, our overall revenue growth fell short of expectations, particularly in our Consumer and Degrees segments. In the Consumer segment, we noted weaker conversion rates in several international markets, especially in EMEA, as well as negative impacts from pricing and payment-related tests. In Degrees, student enrollments have been lower than anticipated, particularly in established U.S. and European degree programs where we currently generate most of our revenue. Ken will delve into these topics during the financial results discussion and our outlook for the year ahead. In this evolving environment, we're fortunate to have a unique business model, thanks to our three-sided platform. Our diverse offerings and global reach provide us with various growth opportunities, enabling us to navigate the long-term trends influencing higher education and adult learning. I'd like to outline the three key trends we observe. The first trend is digital transformation, where technology, globalization, and remote work are reshaping industries. This transformation requires businesses, governments, and educational institutions to redefine their operational frameworks and adjust to changing job market demands. We believe this ongoing change represents a permanent aspect of our increasingly digital landscape and will significantly contribute to Coursera’s growth. The second trend is skill development. We consistently hear from our Coursera for Business, Government, and Campus customers that while they are investing in upskilling and reskilling their workforce, they seek ways to assess the effectiveness of these programs and gain insights into workforce skill levels. Furthermore, as automation decreases the need for routine jobs, there is a strong focus on reskilling employees into roles that align with future business objectives. Governments aim to tackle unemployment, especially among youth, and help higher education produce more employable graduates. Higher educational institutions are keen on bridging the gap between employer needs and students' skills, all while attracting and retaining new students. To meet these evolving requirements, there is a pressing need for a flexible, affordable, and responsive higher education system. The third trend involves a transformation in higher education and adult learning. As technology accelerates changes in skills demand, a new model for lifelong learning must be implemented swiftly and at scale. This requires collaboration among academic institutions, industry leaders, and governments to keep pace with the evolving needs of the digital economy. An illustration of this collaboration is the recent partnership with Louisiana Tech University and the University of Louisiana System, which has initiated a system-wide for-credit initiative in collaboration with Coursera and Google. This initiative aims to offer entry-level Professional Certificates to faculty and eventually to students seeking in-demand skills for high-growth jobs like Data Analyst and UX Designer. We believe these innovative programs signal the future of higher education, characterized by the partnership between universities and industries, rather than competition. While higher education institutions excel in critical thinking, coaching, and community building, many struggle to maintain a connection to industry demands and the fast-evolving skills landscape. Our three-sided platform and innovations like the Career Academy empower us to connect learners, educators, and institutions in a global learning ecosystem that keeps pace with the changing world. Our platform presents three main advantages. First, we have leading educator partners that contribute to a vast catalog of content and credentials. Second, our global reach allows us to attract educators looking to teach individuals and institutions worldwide. Lastly, our data, technology, and continuous product innovation enhance our unified platform. Regarding our educator partners, we now boast over 275 partners on Coursera, including top universities and recognized industry leaders. Recent additions include four prestigious Indian universities, and we announced 11 new industry partners at the Coursera Conference, including Accenture, ADP, Coinbase, Genentech, Goodwill, Hero Mindmine, PwC India, SAP, and Tally Education, broadening our catalog of high-quality content. Furthermore, we introduced 10 new university certificates and three upcoming Master’s degree programs, including an Executive MBA from the Indian Institute of Technology Roorkee and a collaborative master's degree from Northeastern University and Mayo Clinic. Our entry-level Professional Certificate catalog also expanded significantly, with new offerings from Google, Meta, and IBM aimed at preparing learners for high-demand digital jobs. Our global reach is evident as we added approximately 5 million new registered learners this quarter, increasing our total to 107 million by the end of June. The number of Paid Enterprise Customers grew by 64% to 958, predominantly from Coursera for Business. Our ongoing product innovations enhance user experiences, like the recently announced Career Academy, which enables institutions and businesses to offer co-branded solutions for workforce development efficiently. Additionally, we launched Clips for Coursera for Business customers, providing short, targeted skill development content. Finally, our team is continually focused on creating a personalized learning experience with new features aimed at motivating and supporting learners. As we look ahead, our key priorities include investing in our growing Enterprise segment, expanding our Degrees offerings, broadening our entry-level Professional Certificates, and scaling our platform to reach more learners globally. Now, I’d like to hand it over to Ken for a detailed discussion of our financial results.

Thanks Jeff and good afternoon, everyone. We continue to demonstrate strong progress across our platform, expanding our number of educator partners and their catalog of job-relevant content and credentials, growing our global reach with individuals and institutions, and delivering new innovations for learners, educators, and our Enterprise customers. In Q2, we generated total revenue of $124.8 million, which was up 22% from a year ago on strong demand for our entry-level Professional Certificates and sustained momentum across our Enterprise segment. As Jeff mentioned, our revenue performance was mixed this quarter, with strength in Enterprise offset by lower-than-expected growth in Consumer and Degrees, which I’ll cover in more detail shortly during the discussion of our segment results. Nonetheless, the long-term, structural trends driving our business have not changed. First, individuals and institutions are increasingly turning to online learning to supply the digital skills required in today’s economy. Second, we have a powerful combination of university and industry content that delivers the in-demand skills and branded, recognized credentials required by learners no matter the stage of their career. And third, our three-sided platform provides us with global reach and the ability to leverage our strategic assets across our segments to compete differently. Please note that for the remainder of the call, as I review our business performance and outlook, I will discuss our non-GAAP financial measures, unless otherwise noted. Our non-GAAP adjustments remove only stock-based compensation and related payroll tax, nothing else. Gross profit was $79.2 million, a 63.5% gross margin, up 28% from a year ago. This margin was approximately three percentage points higher than the prior-year period due to the ongoing drivers we’ve discussed the past several quarters, particularly the positive changes in our segment content margin for both Consumer and Enterprise. Our Consumer segment’s content margin rate increased from 66% in the prior year period to 73% this quarter and our Enterprise segment’s content margin rate increased from 67% in the prior year period to 71% this quarter. This expansion continues to be driven by learners consuming a larger proportion of industry partner content, which tends to have lower than average content cost. Total operating expense was $99.3 million, or 80% of revenue, compared to 67% in Q2 of last year. The increase was partially driven by one-time impairment expenses associated with the subleasing of a portion of our Mountain View office. As a reminder, during our outlook last quarter, we discussed our expectations around a likely partial sublease of our Mountain View headquarters, which was consummated in a lease during Q2. This resulted in $3.2 million of additional costs this quarter, which are included in the departmental expenses and account for a portion of the OpEx increases as we did not pull the cost out as pro forma. As discussed previously, we expect a net benefit to accrue over the coming quarters and years, with much of the savings expected to be redeployed to fuel our talent strategy. Now, moving to the expense details. Sales and marketing expense represented 38% of total revenue, up from 32% in the prior year period as we expanded the capacity of our Enterprise sales force and invested in marketing programs related to higher margin content and credentials. Research and development expense was 26% of revenue, up from 22% in the prior year period, driven by content development investments associated with our entry-level Professional Certificates. And general and administrative expense was 16% of revenue, up from 13% in the prior year period. Our net loss was $21.6 million or 17.3% of revenue and our adjusted EBITDA loss was $15.6 million, or 12.5% of revenue. Now, turning to cash performance and the balance sheet. As of June 30th, we had approximately $783 million of unrestricted cash, cash equivalents, and marketable securities with no debt. Our free cash flow was a use of $3.2 million compared to $8.5 million in the prior year. The strength of our balance sheet, in combination with the modest cash requirements for operating needs, provides us with a strong financial base, positions us well in any environment, and allows us to invest confidently in our long-term strategy. Now, let’s discuss our segments in more detail. Consumer revenue was $69.7 million, up 12% from the prior year. At the start of this year, we communicated that we expected Q2 to be a seasonally light quarter for learners, reflecting the traditional education cycle. With that being said, our Consumer growth was lower-than-anticipated. First, we saw softness in several markets outside of the U.S., particularly in EMEA, with new payer conversion rates that were below our seasonal expectations and may reflect ongoing macroeconomic challenges in the region. Second, we conducted several pricing and payment-related tests in markets around the globe that resulted in a negative impact on Consumer revenue. To be clear, we continue to see increased demand for our job-relevant portfolio of entry-level Professional Certificates, particularly in North America, and we expect to rapidly expand this category with new and existing industry partners as Jeff highlighted. Segment gross profit was $50.7 million or 73% of Consumer revenue, up from 66% in the prior year. The expansion in our Consumer segment margin demonstrates the ongoing benefit we see from a lower content cost rate associated with higher consumption of industry partner content. And we added another 5 million new registered learners for a total base of 107 million. Next is Enterprise. Enterprise revenue was $43.7 million, up 55% from a year ago on strong growth across business, government, and campus customers. The total number of Paid Enterprise Customers increased to 958, up 64% from a year ago and our net retention rate for Paid Enterprise Customers was 111%. Segment gross profit was $31.1 million, or 71% of Enterprise revenue, up from 67% in the prior year, driven by higher consumption of industry content that similarly benefited our Consumer segment, although less pronounced. And finally, our Degrees segment. Degrees revenue was $11.4 million, down 4% from a year ago on lower-than-anticipated student enrollments in our mature programs and lower overall student activity. The total number of Degrees students grew 19% from a year ago to 17,460. Our Degrees performance reflects what we believe to be broader macroeconomic trends at play, particularly with U.S. and European enrollments and Master’s degree programs, which is where our revenue is concentrated today. As we’ve discussed, our Degrees segment is still in its very early stages. We have a small base of fully mature, existing programs, which is where we experienced decreased new student enrollments. While we remain excited about the momentum in new program announcements that will diversify our Degrees revenue base, it will take time to see their contribution given the extended ramp cycle we’ve discussed and the lower range of international tuition price points. As a reminder, there is no content cost attributable to the Degrees segment, so Degrees segment gross margin was 100% of revenue. Now, onto our updated financial outlook. For Q3, we are expecting revenue to be in the range of $126 million to $130 million, or 16% growth at the midpoint of the range. For adjusted EBITDA, we are expecting a loss in the range of $10.5 million to $13.5 million. For full year 2022, we anticipate revenue to be in the range of $509 million to $515 million or 23% growth at the midpoint of the range. With a three-sided platform, our business has exposure to the needs of learners, educators, and institutions that affect our three operating segments in different ways. Given the revised full-year outlook, we thought it would be helpful to provide new growth expectations by segment for 2022 to reflect our latest view. For Consumer, we expect to grow in the high teens for full-year 2022, which is slightly lower than our prior expectations given the softer conversion rates seen in Q2. For Enterprise, we expect our broad momentum to continue, with full year percentage growth in the mid-40s, inclusive of some macroeconomic headwind related to EMEA Coursera for Business customers. And for Degrees, we anticipate a mid-single-digit decline on an annual basis given the enrollment challenges witnessed in the first half and forecasted for this fall in our most mature programs. For full year 2022 adjusted EBITDA, we expect a loss of $42.5 million to $48.5 million or a negative 8.9% adjusted EBITDA margin at the midpoint of revenue and EBITDA guidance ranges. Our messaging and annual operating framework with regards to EBITDA margin has been consistent over the past two years. At the beginning of the year, we set an annual EBITDA margin target and work within that plan to maximize our growth opportunities across the business. With our reset revenue expectations for the second half of 2022, we have adjusted the pacing of our investments to align with the annual EBITDA margin target. Continuing to maintain the same margin target results in a lower adjusted EBITDA loss in dollar terms, for a midpoint of $45.5 million, down from the previous $48.5 million loss. This, along with our strong cash position and minimal cash burn, allows us to prioritize near-term growth opportunities, while strategically positioning Coursera for the long-term. I’ll now turn the call back to Jeff for final comments.

Thanks Ken. We have entered a new and ever-evolving era of work that consistently requires new skills. Technology is creating new career opportunities, but students and workers need access to flexible, affordable, and fast-tracked learning and career pathways to transition into well-paying jobs of the future. This is particularly true for women and other underrepresented groups, who have been disproportionately impacted by the pandemic and automation. With many of our learners based in emerging markets, we partnered with the International Finance Corporation and the European Commission to publish a global study seeking to better understand how these learners, particularly women, have been learning online since the pandemic’s onset. During the fourth quarter of 2021, we surveyed nearly 10,000 learners on Coursera in four focus countries; Egypt, India, Mexico, and Nigeria, targeting learners that had completed at least one graded item between January 2019 to the end of June 2021. Nearly half of the respondents reported earning in their country’s bottom 50th percentile of income. Our research found women and other underserved populations view online learning as more accessible than in-person education. In fact, 45 percent of women and 60 percent of women caregivers said they would have had to postpone or stop studies if online learning weren’t an option, citing mobility, safety, and family obligations as their top deciding factors. Women also said that they faced more restrictions that limited how and where they learn, but that online learning had provided an opportunity for them to achieve their goals. The study also confirmed links between online learning and career outcomes in emerging markets. The IFC research found that online learning produces gains in the broader economy through direct and indirect effects, with one new job created for every 30 people trained on Coursera in our four focus countries. About one-third of the women learners surveyed said they found a new job, set up a business, or improved their job or business performance after taking online courses and 22% of women saw an increase in their income, with nearly 40% reporting an increase of 10% or more. Finally, 99% of respondents said they plan to continue learning either online or in a blended format after the pandemic. These results demonstrate why increasing access to online learning, in combination with broadband connectivity and remote work, has the power to advance equal opportunity in the post-pandemic economy. However, it will require significant collaboration from both the public and private sectors to address the scale of the crisis and build competitive, equitable, and sustainable workforces. People often say, talent is equally distributed, but opportunity is not. With our Coursera community, encompassing leaders in higher education, business, and government, we are working together to expand access to economic opportunities for learners around the world. Now, let’s open the call to questions.

We will now take our first question from Stephen Sheldon with William Blair. Your line is open.

Hey, thanks for taking my questions. The first one here, just on the revenue guidance for the rest of the year, it seems like it assumes a year-over-year deceleration in the third quarter, and then some reacceleration in the fourth quarter. So can you talk about that? And I know you gave some segment level expectations from four years. Are there underlying segment level dynamics that you're kind of factoring in the second half kind of in play there?

Yes. Hi, Stephen. No, it was simply based on mechanics, forecasting what we're seeing in the pipeline and the usual ratios that we use to determine our forecast. There's nothing unusual in that. We're ensuring or wanting to ensure that we're careful to hit our numbers this coming quarter. But there's nothing unusual in there from a seasonality standpoint.

Got it. You previously mentioned 50% growth for Enterprise, but now you're indicating mid-40%s. You also mentioned some challenges in EMEA. Can you provide more details on those challenges in EMEA and what is changing there? Is it related to slower new client acquisitions or perhaps churn? What is driving the slowdown in that region?

Yes, hey Steve. It's a combination of things. I mean, when we look at Enterprise, we've got Coursera for Business, we've got Coursera for Government, and we've got Coursera for Campus, and then we've got the different regions. What we're seeing in EMEA is more of a Coursera for Business challenge relative to what we were expecting. North America actually has been pretty solid on the Enterprise side across all three segments, and government globally, the quarter for government has been quite paused. So it really is kind of Europe Coursera for Business, and most of that is more in a pipeline development process, as opposed to the churn rates. But it is kind of Coursera for Business in Europe where we're seeing the biggest sensitivity, and we suspect that that is kind of due to macroeconomic factors of what's going on in Europe right now. But that seems to be where we're seeing the localized weakness.

And of course, Steve, your question was Enterprise, and we saw similar weakness in EMEA in consumer on conversion rates. So, suspect that's part of the same trend, the general pressures on the economy there.

Got it. All right. Thank you for the color.

Your next question comes from the line of Taylor McGinnis with UBS. Your line is open.

Thank you for taking my question. I wanted to follow up on the previous discussion regarding macroeconomic weakness and its impact on your pipeline and consumer behavior. Could you elaborate on whether the challenges on the enterprise side are primarily due to delays in deal closures? Additionally, how do you view the situation as you look into the second half of the year? On the consumer side, could you share your observations regarding activity levels on the platform and how the macroeconomic factors are affecting those?

Yes, thanks Taylor, this is Jeff. On the Enterprise side, there's not much to add beyond what we mentioned to Stephen. It seems there is some tightening with budgets regarding how much and how quickly people are spending. Initially, we anticipated the opposite after COVID, as it appeared that spending was increasing, possibly due to government funding. However, now it seems people are being more cautious with their expenditures. I believe this is likely related to timing as well as the size of purchases, though I am not entirely clear on the specifics. On the Consumer side, it's interesting because the professional surge is still performing well, especially in North America. In Europe, there are more challenges with conversion rates. As Ken mentioned, it might be due to similar factors. Regarding activity levels, I don’t think we’re seeing any significant changes; top-of-the-funnel activity seems consistent across Europe and other regions. Generally, search volume for online courses and degrees, not just on Coursera, has decreased. It appears to reflect a broader trend of people engaging in more activities outside their homes as the economy reopens, which is likely also occurring in Europe. This has resulted in lower conversion rates in the Consumer segment in EMEA, particularly in Europe.

Got it. And then my next question is just on the Enterprise piece, I think, it looks like your net retention ticked up a little bit, but it looks like at least like the net logo ads in the quarter, maybe were the area that was a little bit weak relative to what we've seen in the past. So, can you talk about that, like the new versus existing and expansion activity? And when you think about the guide, like, where you're seeing more of the impact and how that influence it?

Yes, on this one, it is really a mixture of different sized companies that we sell, we do midmarket, we do some small medium business, and then, of course, we have bigger accounts as well. Also when we look at deal sizes, they're different between a campus, a government, and a business. So, part of this is variability within the segment, part of it is variability in average deal size across sub-segments, if you will, of Enterprise. I would say that as we and we've seen governments growing faster than business in terms of revenue growth, and those are generally bigger ticket sizes. So, I wouldn't be surprised if what we ended up seeing is, I guess what I'd say is general continued sort of variability, depending on the mix of what's growing fastest on the campus side, and we're seeing pretty good uptake of Career Academy. These are more narrow, simple focus SKU that might sell faster than the typical ones. We might have higher numbers with lower average ticket sizes, but it's really sort of a combination of mix across segments, I think that we're seeing mostly. Ken, I don't know if you want to add anything to that?

Just a little bit on the data side, looking at the number of paid, the net increase, which essentially you're referring to 41 versus 100; let's generalize over the previous four quarters, was definitely slower on the enterprise side, which is reflected in a lower forecast for the rest of the year. So it's part of the same, but there's absolutely a mix of, as Jeff said, between smaller and larger customers. But it's fewer conversions once again.

Great. Thanks so much for answering my question.

Sure Taylor.

Your next question comes from the line of Brian Peterson with Raymond James. Your line is open.

Hi, gentlemen, thanks for taking the question. So, I wanted to hit on the Degrees business for a second. And I understand some of the programs can have different enrollment times. But I was curious, what drove the enrollment change, particularly in the second quarter for some of these programs, I guess in the traditional cycle, maybe that's not the case. And then maybe looking ahead, how do we think about that potentially getting better? Doesn't sound like maybe that's the case and the outlook, but is there a possibility for those enrollment trends to change as we're looking ahead to maybe the fall semester of 2022?

Yes. Hey, Brian. So when we look at the Degree segment, I mean, clearly minus 4% in Q2 is lower than expected. A lot of that is lower than anticipated student enrollments, part of it is also lower overall student activity. So, tuition paid depends on how many credit hours students are learning. Partly probably because of working, maybe because of vacation, whatever it is, students have pulled back in the activity level. So if you look at where the Degree segment revenue comes from, currently, with our current portfolio Degrees, our four largest most mature Degree programs saw limited to negative revenue growth year-over-year, and three of these four are in the U.S. We think that what's going on when we look at our funnel and also sort of outside information of what's happening with other degree providers in the U.S. market, we think that there are economic trends, particularly in the U.S., associated with a strong labor market, and the stronger labor market historically has led to lower enrollments. If you look country-wide, at sort of national data on graduate enrollment rates, it's down 1% in spring of 2022 compared to plus 4.6% in spring 2021. So, we do think that there's an impact in the U.S. because of that, and that's where the concentrated and more mature programs are. I would also say that some people are like we have, but there's a recession, this should be countercyclical, right? It's a funny recession right now; people are talking about a recession, but the unemployment rate is really low. And generally speaking, degrees are countercyclical with mostly unemployment. So, if unemployment goes up and a recession happens, that's where you get the most. We're kind of looking at a potential recession, but we have really low unemployment. So, I don't think that we're seeing yet any sort of counter cyclicality because it's more associated with unemployment rates. The other thing I'll add and I'll turn it over to Ken, but when we look at the revenue sort of year-on-year, part of it, as I mentioned, is student enrollments and then part of it is the average revenue for students. And so the more intensely that students are learning, the higher their tuition in a given period, the average revenue per student was lighter in Q2 because of the lighter kind of learning loads, if you will, that students have been taking it. So that was another difference from what we're expecting. Ken, I don't know if there's anything you want to add to that?

I want to reiterate that our revenue is largely focused on a few major Master's Degree programs in the U.S. and Europe, which is why you mentioned graduate programs. They make up the vast majority of our business currently. Consequently, changes in those markets have a significant impact on us. Additionally, it's important to note that our model for degrees requires time to generate revenue from new programs. We have had some promising announcements for new programs in recent quarters, but these are still in the process of building revenue and won't show immediate results. While we are optimistic about this trajectory over the long term, we do not anticipate any short-term effects. What we are currently observing is specifically related to the Master's Degree programs in the U.S. and Europe.

You asked, by the way, Brian, like, when's it going to get better? My best guess would be it'll be related to unemployment. That's my best guess based on historical patterns.

Understood, No, I appreciate all the context there and maybe a follow-up for you Ken. Just in terms of the growth environment, obviously, not certain macro we've referenced some cyclicality. How do you think about that balance maybe beyond 2022, in terms of the growth versus the margin? Appreciate you're not giving guidance for 2023 yet, but has anything changed in terms of the thought process on how you're looking at some of the investment posture? Thanks, guys.

Sure. No, that's an incredibly important question as to how we run the business. The environment has changed and the outlook has changed somewhat in the near term. But philosophically, we're not changing our approach. We want to continue to scale the business, we want to build leverage in the business. So, we expect to see improving EBITDA margin. So, this last quarter, we just reduced, of course, the forward look on revenue and so we're reducing our rate of growth for the year, our rate of investment. We still want to fund growth, so we're not changing anything, we're in a great financial position from a cash standpoint, we're stable, we're burning $3 million a quarter that should continue at roughly that rate going forward. So, we control our own destiny with $783 million in cash and cash equivalents. But we do want to have the model start to scale, we plan to continue to do that regardless of the revenue rate. And so you'll see us continue to adjust our investments on a go-forward basis. So, I think next year what we'll say depending on the growth environment, at the end of the day, we need to win in this market, we need to own these markets, and we need to have long-term growth. We're not going to be confused about that. This is a growth company. But at the same time, we need to see leverage and so going forward, we don't have guidance yet, but you'll expect our EBITDA margin to be better next year. We've committed to that early on, as we went public, and we continue to hold the same philosophy.

And Ken, to add on that point about our ongoing investments, we have slowed the pace of expense growth to align with the lower than anticipated revenue growth, aiming to maintain our adjusted EBITDA margin. We are still focusing on building a direct salesforce to expand in the Enterprise sector, increasing our top-of-funnel distribution, and offering more localized learning experiences globally. We are continuing to invest in product innovations such as the Career Academy, various Professional Certificates, and the Eclipse program, which offers shorter and more accessible learning options. There appears to be strong demand for these offerings, and they are quite distinct, so we intend to keep investing in them.

Understood. Thanks guys.

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

Thank you for the question. I wanted to follow up on the Enterprise segment and the decrease in net new account additions from 100 to 41 quarter-over-quarter. Is this decline primarily in the EMEA region, or did it also affect other areas such as North America?

Yes. Our North America enterprise was pretty consistent with what we were expecting and I'm not sure exactly the number of deals maybe, Ken, you can grab that. But when you look at overall bookings, like that was pretty solid. Assuming that ASPs weren't changing a whole lot, I know that our new and expansion, the new logos in Europe was where it was really the latest. I don't know if that accounts for the full amount of it, certainly on the revenue expectations, that's where we're seeing the weakness for the rest of the year. Ken, any additional color that you provide in terms of the net logo adds and kind of where those showed up?

Our focus is on annual contract value, which is how we evaluate Salesforce and track our success over time. As Jeff mentioned, the performance in North America was acceptable. We emphasize total contract value rather than simply counting new additions. However, we don't necessarily forecast that, as our business operates on contract value.

Okay. Got it. With Enterprise in mind and the guidance, I’m curious if you are experiencing any delays in deals. Are there any changes in the new account additions or win rates? Essentially, is this just a slight shift in the macro environment in EMEA and demand that is causing delays, or are there any other changes in the competitive landscape or additional points to consider?

Yes, Josh we didn't mention competition in the script. But I'm feeling pretty good about our competitive position, especially in Coursera for campus and Coursera for government. And with this career academy, the professor's these long form job training certificates, we are willing that portfolio quite quickly. And that is just really resonating with governments that are trying to get people trained for jobs, and are looking for an affordable way to do that with good quality and good brand. And then frankly, academic institutions who are seeing competition from others and saying, if I'm going to attract students, I've got to provide something that makes them more job-ready when they graduate. Industry micro-credentials is becoming quite a buzzword in the higher academic space. And not to say there's no competition, but we really feel good about our competitive position in both the campus environment and the government environment. See, for me, honestly, not really much change that we've seen. And, and so I nothing stands out as being more exceptional than these macro-economic factors that we're talking about.

So Josh said your stat on briefly two-third one piece D. So it would be more pushing out a lack of closure, particularly in Europe as what we've seen, not that we're losing the competition, I'm always a little hesitant to say it's pushed out and it's delayed because the deal that doesn't happen might not ever happen. You're being realistic, but we're not losing. It's just we're not closing immediately. And again, that affects primarily in Europe.

Got it. Thank you.

Yes.

Your next question comes from the line of Ryan McDonald with Needham. Your line is open.

Hi, Jeff and Ken. Thanks for taking my questions. I had a question on the consumer segment, you talked about some pricing experiments during the quarter that perhaps had a bit of a negative impact or not the impact you're expecting? Can you provide a bit more color on what you were doing there? And perhaps corrective actions you're taking that gives you more confidence in sort of a back half step up in the consumer revenues? Like you're implying in the guidance? Thanks.

Sure. Not a problem. Yes, there was the number of pricing and packaging experiments that we ran. Some of them which came from some work we did in India, with some shifts in how we handle subscriptions within certain credit card rules there, where we saw some promise, actually some improvements in some of our metrics that are related to revenue. And so we ran experiments in other parts of the world, primarily Europe. And instead, we saw a decline. And as a result, we change those back to what we were doing. So yes, we've kept this quarter on an ongoing basis, we've factored any ongoing effects from them, although we've corrected it. And we did take some steps. It's a young company, we're growing, we try to be as aggressive as we can, in figuring out where there's opportunity for growth. But, you know, we're ensuring a few new sign-offs as we look at future experiments. So cheers for the team for looking for more growth. And we've upped the operational game a little bit in that group, so that will not have the recurring effects beyond our forecast.

And as Ryan, this was something that we actually saw in Q1. We ran some tests in Q1, right. This looks pretty interesting. It might be a way to stimulate new paying learners, with, albeit potentially a risk on the retention side. And the themes that we should run these a little bit more broadly. So basically, we took some that worked in Q1, we ran a bit more broadly in Q2, basically, in May, we said, we don't like the back end of this on the retention side, we should pull this back. But to Ken's point, there'll be some persistent but diminishing effect over the rest of the year. And so we factored that in.

Excellent. Thanks. And maybe just a follow-up on enterprise. Obviously, you've talked at nauseam about Europe and sort of delay of deals. I'm just curious, when you talk with your customers, what you're seeing in terms of headcount and retention there, obviously, we've seen in sort of May in June, start to see some tech layoffs and mass in the US and some hiring freezes. Just curious what you're hearing in terms of potential expansion opportunities from a pure headcount perspective at your existing customers? Thanks.

Thanks. Yes, sure, Ryan, this is one I think that is a little bit more specific to Coursera. Generally speaking, when we sell into companies, it's a higher price tag than the competition is usually not an enterprise license agreement that covers all heads based on the number of heads; people usually buy seat licenses at a higher price for a target population. That's a generally a small portion of the overall company. Often, what they're doing is they're upskilling people in very high-demand roles like data science and tech and in like digital marketing and things. So I think with respect to your overall layoffs, I don't think that that's going to impact our revenue retention, if you will of enterprise accounts because we don't typically have those broader enterprise license agreements. I mean, it might certainly have caused a pullback. And maybe we might be seeing some of that in terms of new spend or sort of cross-selling into other organizations. But anecdotally, we are certainly seeing customers have their organizations restructured, downsize, and in some cases, the point of contact that we've had are being moved around. And so it looks like, and again, in Europe, there are changes that companies are making seemingly in response to the environment. That's really pretty anecdotal. I mean, I couldn't give you an exact count on that.

Thanks for the color.

Sure. Thanks, Ryan.

Your next question comes from the line of Jason Celino with KeyBanc Capital Markets. Your line is open.

Great. Thanks for filling me in. Can you just talk a little bit about the linearity of the headwinds that you saw by segment, how they kind of developed in the quarter? Did these materialize very early on or towards the end? Just trying to understand kind of how it played out.

Yes. I think that this is going to be different by segment. One of the things about enterprise is it's typically very back-end loaded that's kind of when the deal gets done. So you don't get a lot of visibility in the last usually a few weeks. On consumer, it's a little bit more continuous. And then degrees, frankly, is based on one of the close date for the application process. And so across each segment, the dates are a little bit different, but generally it's back-end loaded on enterprise towards the end of the quarter. So I think, as I mentioned, on the consumer side, it was sort of a gradual sort of recognition of the conversion rates in Europe and then these pricing cuts, which were kind of midway in the quarter. On enterprise, we didn't really see anything until more the later part of the quarter because we just don't get a lot of visibility. It's not equal and linear process. And on degrees, it was more sort of the cohorts and seeing are they filling up or not when the closed bases come. Ken, anything you add to that?

No, I think that captures that exactly.

Okay. And then just to clarify, the third quarter guidance, I imagine, it assumes for these trends to kind of remain consistent or get worse or any thoughts there?

Yes, we forecast based on all available information regarding where we believe the trends are headed. This varies by segment, as mentioned by Jeff, and is linked to our visibility. Our projections depend on how we perform in relation to existing factors, and we have made assumptions about all the key elements influencing conversion rates, without expecting any improvements. It's crucial for us to meet our targets, making this quarter somewhat challenging. However, we considered everything we know and did not make any overly optimistic assumptions.

Great. Thank you.

Thanks, Jason.

Your next question comes from the line of Terry Tillman with Truist Securities. Your line is open.

Yes. Thanks for fitting me in as well on the call. I had a couple quick questions. I'll try and make it brief. So we've got about a 10 percentage point downtick in enterprise revenue. And I'm not trying to harp on that, but you're talking about enterprise sales capacity expansion and quota carrying headcount expanding. So it's kind of interesting that those are happening at the same time. Is that enterprise sales capacity levered to the European market where that seems like a softness or is it in another market's work more resilient? And how quickly could that provide some offset in terms of assuming they become productive? And then I had a follow-up?

Yes, that's a great question, Terry. The performance of our sales representatives has varied across different regions, individuals, and products. As Jeff mentioned earlier, it's no secret that performance has been slower in Europe, which excites us about the possibilities for reallocating quotas. However, we haven’t reduced our overall number of sales representatives and are satisfied with their performance. It's normal to see lower productivity during a slower quarter. We're not cutting capacity due to any concerns about future productivity. We did notice differences in performance by region, which is typical. As expected, results in Europe were not as strong. Additionally, there has been some variability in performance related to specific products, with sales representatives assigned by product and partially by region.

Okay. And final question, and thanks for that, but follow-up question. And thinking about ton of positive opportunities, your Career Academy, maybe you could talk a little bit more about the actual pipeline, how many are signed up in terms of kind of referenceable customers and the ticket size for Career Academy? Thank you.

Yes. Sure, Terry. The Career Academy, we launched it on May 5 at the conference. So it was really pretty much the two-thirds of the quarter, maybe half the quarter that was out there. We were pretty happy with the progress kind of right out of the gate. It is a sort of narrowly specified product. The basic claim is add industry micro-credentials for your students, so they can get jobs when they graduate. On the average ticket size, I'd say, it's a relatively limited number of pieces of content, that long form, usually 50 to 75 hours for these Professional Certificates. But it's about 22 Professional Certificates out of a catalog of 5,000. So it's a much more focused part of the catalog. And it is a much more sort of simple and standardized offering. The average ticket price is lower than a standard one, because it's a more focused offering. And we're expecting, and so far, the evidence suggests that this is the case that the ability to move deals through the pipeline for Career Academy will be a little bit quicker, because it's just simpler, it's easier, it's a little bit less expensive. And there seems to be a resonance of this idea of add industry micro-credentials to help my students to compete for students, and then help my students get jobs when they graduate. So, I think we're looking at some favorable characteristics, although to your point. And what I was kind of trying to allude to in one of the earlier calls, if the average ticket price comes down, we could see an increase in the number of deals assigned clients. But that might grow faster than the overall revenue if the average size of the ticket is lower, it's likely going to be with Career Academy, at least in Coursera for campus.

Okay. Thank you.

Yes.

Your next question comes from the line of Brett Knoblauch with Cantor Fitzgerald. Your line is open.

Hi, guys. Thanks for taking my question. First one on the enterprise side, I don't think you guys have added less than $3 million in enterprise revenue in the quarter since 4Q 2020. If you add $3 million, both 3Q and 4Q, you had call it 49% growth for the year. So I guess what is with the mid 40% guidance? Is that a result of conservatism? Do you expect to increase churn? And to that point, we've seen a lot of companies flag deal cycles lengthening, have you seen that across Coursera for business, campus or government?

Yes, it hasn't been about renewals; it's been new bookings that have been slower. On the revenue side, particularly in Europe, but a bit across the board, we've noticed the impact, more in secrecy and cost efficiency, yet both are performing well. There has been a deceleration compared to historical trends. We remain confident in the enterprise business and feel positive about our position and the new products we’re launching. I wouldn't interpret this as a widespread weakness in our enterprise business; that's not our perception. We believe we’ve encountered some regional slowdowns. We are committed to investing in this area, especially as we adjust some of our investments moving forward. Does that address your question, or is there something more specific you would like to know?

Yes. There’s another question regarding the segment margins. I think the consumer segment margin has continued to outperform expectations, including mine. It appears that the mix on the industry side from a content perspective is quite strong. Do you expect this trend to continue, especially as you focus more on entry-level Professional Certificates? Also, if unemployment rises, do you think there will be an increase in interest for university content? How should we consider these dynamics?

Yes. I generally say that in the consumer segments, we are seeing individuals around the world looking for specific types of content. People are coming to us mainly because they want to secure new jobs. There is a significant interest in becoming data analysts, computer scientists, and similar roles that offer better pay and job flexibility. As a result, much of the content we provide is industry-focused. If we continue to experience growth in consumer engagement due to individuals looking to start new careers or switch their existing paths, which has been the trend and shows no signs of slowing down, we can expect that their demand will remain centered around career-switching and Professional Certificate content. I remember when we first noticed this trend in May during Q2 of 2021; it has not only persisted but has also grown slightly since then. Unless consumers shift towards different content, I believe this demand will continue. I also want to emphasize that we are reinvesting a significant amount of our resources into supporting and promoting these programs. Our goal is to establish the best and most efficient entry-level Professional Certificates possible, and we are actively marketing them. While some of these expenses may not appear on the content fee cost of sales line, they are reflected in our sales and marketing efforts, as well as in our R&D expenditures, where we are capitalizing some of the costs related to content development. This means that not everything is simply reflected at the bottom line; we are strategically reinvesting to develop more content and ensure effective promotion. We believe this is a crucial time when many people are seeking this type of content, which is quite distinctive to Coursera.

No, I agree. Maybe just quickly, one last question on Coursera Plus. Last quarter, you mentioned it constituted over 30% of consumer revenue. Was there any observed weakness related to Coursera Plus? Also, could you provide an update on that metric as a percentage of consumer revenue?

So there was no specific weakness in Coursera Plus; Coursera Plus is grown throughout this year. It's still north of 30%. We're not looking to get specific guidance on the Coursera Plus composition of the total on an ongoing basis, but general colors where we like to provide, I'll confirm or north of 30%. And it's grown throughout the years. So we feel great. It's continued to be adopted. Where does it cap out? We don't know. It's great revenue. It's nice to have recurring revenue and makes it easier for the consumer team to continue to grow their revenue. So that's been great. But yes, so all is well in Coursera Plus.

Great. Thanks, Brian. That wraps the Q&A. A replay of this webcast will be available on our Investor Relations website, along with the transcript in the next 24 hours. We appreciate you joining us today.

This concludes today's conference call. You may now disconnect.