Ladies and gentlemen, thank you for joining us, and welcome to Coursera's Third Quarter 2022 Earnings Call. All participants are currently in listen-only mode, and this call is being recorded. After the prepared remarks from our speakers, we will have a question-and-answer session. 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 Q3 earnings conference call. With me today are 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. 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. Please note, 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 and beliefs. These forward-looking statements include, but are not limited to, statements regarding the potential impacts of trends affecting our industry and uncertainties in the current economic and educational environment. Our ecosystem, platform, content and partner relationships, our anticipated plans and the anticipated benefits thereof, our strategy and priorities and our business model, mission, opportunities, outlook and future intentions. 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 or 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. We appreciate you joining us. I'm pleased to report solid third quarter performance with revenue growth of 24% to $136 million, reflecting our growing prominence among both individual learners and institutions. Learners are coming to Coursera from around the world, seeking job-relevant skills and branded credentials that can unlock the next stage of their career. We added more than 6 million registered learners in Q3. We also grew our Paid Enterprise Customers, including businesses, campuses and governments who are looking to drive powerful cross-sector collaboration to better meet the needs of an increasingly digital economy. One of the critical components of recent success has been the growing relevance of industry micro-credentials across our business. In 2018, we had initial success with the launch of our first two entry-level Professional Certificates. And in the time since, we've grown this category in both breadth and depth adding new partners and job roles while creating stronger connections with career and degree pathways. This year, our catalog's expanded scope became the foundation for Career Academy, an institutional offering that brings together our Professional Certificates and guided projects into a solution that businesses, governments and campuses can deliver at scale to help individuals with no college degree or prior work experience start a new career or switch careers into an entry-level digital job. As we navigate the trends shaping higher education, we believe that industry micro-credentials provide a turnkey way for higher education systems to upgrade their curriculum and produce graduates with the skills and abilities that employers are looking for. The first trend is digital transformation. The forces of technology and globalization have been accelerating the transformation of every institution in our society, requiring businesses to retool the systems, processes and talent required to stay competitive, pushing campuses to modernize their curriculum and make quality education more accessible, and driving governments to deliver job training programs at the speed and scale needed to keep pace with job dislocation and unemployment challenges. The pandemic served to fast-forward these trends, but we believe its lasting impact may be defined in how it has reshaped both the supply and demand for jobs globally. The expansion of online learning has enabled more equal access to higher quality education for millions of learners around the globe. And with remote and hybrid work, learners that acquire the knowledge, skills and credentials to unlock these job opportunities are met with the supply of digital careers no longer confined to a specific city, state or even country. Simply put, we believe that the rise of remote work, digital jobs and broadband connectivity have increased the ROI of education. And this benefit extends beyond individual learners. Forward-thinking institutions including businesses, governments and campuses are harnessing the opportunity to adapt to the fast changing skill landscape and to build workforces and economies of the future. This leads me to my second major trend, skills development. In times of rapid change, I find it critical to stay close to the needs of our learners, customers and partners, understanding how their needs are evolving and how we need to evolve to better serve them. That's why over the past several weeks, I spent time with Coursera for Business, Government and Campus customers across the U.S., Europe, the Middle East and Central and Southeast Asia, hearing how these institutions are adapting to a changing skills landscape. This is what I'm hearing: Businesses are investing in their human capital to address a diverse set of needs using online learning to deliver measurable role-based skill development programs to support strategic transformation initiatives. And they're increasingly positioning learning programs as a career development benefit in order to attract and retain talent in a competitive labor market. Governments said that reducing unemployment and underemployment and building a more resilient workforce were key priorities and that they are looking to help higher education systems create more employable graduates. And campuses are telling us that they need to bridge the gap between evolving employer needs and student skill sets upon graduation, recognizing the value of offering industry micro-credentials alongside their core academic curriculum. Each of these use cases will require a flexible, affordable and scalable system of higher education and workforce development, designed to keep pace with changing skill requirements as they evolve. And this leads me to the third trend that's driving our business, the transformation of higher education and adult learning more broadly. As technology and automation accelerates, we believe a new and inclusive lifelong learning model is required to meet this challenge with rapid speed and scale. In the past quarter, we conducted a third-party survey of over 2,400 students and recent graduates as well as 1,200 employers across eight countries, including Australia, India, France, Germany, Mexico, Turkey, the U.K. and the U.S. We learned that students like their parents are thinking more critically about the ROI of traditional three- and four-year degree programs. 89% of students and recent graduates agree or strongly agree that earning an entry-level professional certificate alongside their diploma will help them stand out to employers and secure jobs when they graduate. And 88% said that including industry micro-credentials in an academic program would make them more likely to enroll in that program. From employers, we heard that industry micro-credentials help hiring decision-makers solve their top two challenges, identifying and validating applicant skills. 92% of employers agree or strongly agreed that a professional certificate strengthens a candidate's application for an entry-level job role. And on average, three-quarters are more likely to hire a candidate who has earned a professional certificate. Platforms like Coursera are able to address both of these challenges side by side by linking skills-based learning to skills-based hiring. Our ecosystem was designed to foster institutional collaboration between academic institutions, industry leaders and governments that are required by students and employers in an increasingly digital world. We believe that the Coursera platform has three distinct advantages that we continue to reinforce. First, our leading educators who created a broad catalog of branded content and credentials. Second is our global reach and distribution. And third is the data and technology that powers our unified platform. Let's discuss recent highlights for each of these. First, our educator partners. Coursera's global learning ecosystem includes the powerful combination of both university and industry partners. Universities play an integral role in durable skills; critical thinking, collaboration and community are all hallmarks of the campus experience. But with the pace of digital transformation, industry partners can often complement traditional learning with practical hands-on learning aligned with specific job roles. Today, more than 175 world-class universities and more than 100 industry leaders continue to expand our catalog of content and credentials. In September, we announced our first bachelor's degree program from an Indian university. The Birla Institute of Technology & Science, or BITS Pilani, is a premier engineering institution that is reimagining their highly sought-after computer science program to expand access for Indian and international students. This includes broad learner eligibility with no entrance exam or background in science or mathematics, a job relevant curriculum designed with input from industry experts and a flexible, affordable structure that allows students to pursue the program while they're working. We continue to see demand among working adults for degrees that are affordable, have convenient admissions and flexible schedules and to develop knowledge and skills that are in high demand from employers. Next, I continue to be impressed by the progress and pace at which our partners are expanding our catalog of entry-level Professional Certificates. Since launching the category in 2018, we've announced 35 of these certificate training programs, including nearly 20 new titles so far this year from new and existing partners. Recently, we announced our first entry-level Professional Certificates from industry partners in India, who are excited to serve learners in our second largest market. The three job roles include PwC India Goods and Services Tax Executive, PwC India, Direct Tax Executive, and Tally Bookkeeper. Additionally, we continue to enhance some of our most popular certificates with new language translations, launching versions in Arabic and Spanish. Finally, in partnership with Google, we announced an exciting new offering that brings the benefits of university and industry collaboration to our entry-level Professional Certificates. Google has collaborated with five of our university partners to pair several of their most popular certificates with specializations from leading academic institutions in high-growth industries, including data analytics and finance from the University of Illinois, data analytics in the public sector from the University of Michigan, project management and construction from Columbia University, project management and sustainability from Arizona State University and Healthcare IT from Johns Hopkins University. Historically, collaboration between industry and academia has been slow and piecemeal. But by integrating industry expertise into university curriculum, we are beginning to witness what our ecosystem can make possible. The future is not universities or industry; it is the collaboration between universities and industry, which is increasingly taking place on the Coursera platform in multiple forms. This includes entry-level Professional Certificates that stack into degree programs, especially with ACE Credit Recommendations. It includes degree programs like BITS or Northeastern and Mayo Clinic that incorporate training and expertise from industry leaders into college degrees. And Career Academy delivered through the Coursera for Campus program, where industry micro-credentials are offered alongside and incorporated into core University curriculum. Our second major advantage is the global reach of our platform. We have a large growing learner base that attracts educator partners looking to teach both individuals and institutions around the world. We added more than 6 million new registered learners, growing our global learner base to 113 million by the end of September. Learner growth continues to be broad-based with double-digit increases in all regions and the fastest growth coming in the Asia Pacific region. Additionally, we've grown the number of Paid Enterprise Customers by 53% this quarter to 1,086, which includes new additions across Coursera for Business, Coursera for Campus and Coursera for Government customers. The final advantage is the ongoing technological innovation on our unified platform, and I'd like to provide updates on two recently announced offerings. The first is Clips. There are more than 5,400 courses on Coursera today, and these courses comprise more than 200,000 individual video clips, which are typically 5 to 10 minutes long. Our new Clips feature enables enterprise learners to directly access clips in the course without having to take the entire course. The videos and lessons are surfaced in the context of our longer courses so learners can quickly access clips and then continue to the full course for deeper skill development. Our initial data show that over one-third of learners who viewed clips for immediate needs went on to enroll in at least one course. We launched in May with over 10,000 clips, primarily focused in business technology and data. In September, we expanded the offering with a more comprehensive library of content, including nearly 200,000 short videos and lessons. Customers like Google, Bosch and the New York State Department of Labor were early adopters, and we look forward to bringing our expanded clips offering to more enterprise customers. I'd like to also provide an update on Career Academy. We announced Career Academy at our annual conference earlier this year and continue to see promising signals from our early customers. Career Academy leverages our entry-level Professional Certificates, benefiting when our industry partners create and launch new job roles. For example, in Q3, we launched five new certificates from Meta, allowing us to expand the scope of roles offered with new additions in software engineering. These roles include front-end developers, back-end developers, database application developers, iOS mobile developer and Android mobile developer Professional Certificates. Additionally, we are bringing new career discovery benefits to our learners to help them better understand the prospects and ROI of their education decisions. For example, individual learners in the U.S. using Career Academy see key economic data alongside their career choices, including the median entry-level salary, the number of job openings and the recommended Professional Certificates that are aligned with specific careers. Before I turn the call over to Ken, let me remind you of several key priorities we're focusing on in the coming years. We're focused on growing our enterprise segment across business, government and campus customers, including new customer acquisitions and expanding existing relationships. We're focused on expanding our portfolio of degree programs, especially those tailored to meet the particular needs of working adults. We are broadening our entry-level professional certificate catalog, expanding with new roles, new partners and additional languages. And finally, we are deepening our advantages, including expanding our educator partners and their content in credentials and improving and broadening our global scale and reach and the technology and data that underpins our platform. And now, I'd like to turn it over to Ken. Ken, please go ahead.

Thanks, Jeff, and good afternoon, everyone. We are pleased with our third quarter results, which continue to reflect a diversified business model that benefits from its exposure to multiple levers of growth. In Q3, we generated total revenue of $136.4 million, which was up 24% from a year ago with strong performance in our Enterprise and Consumer segments. For our enterprise consumers, including businesses, governments and campuses, we are helping their learners adapt to a fast-changing skills landscape and evolve with employer needs as well as producing job-ready graduates. And for consumers, we are increasingly becoming a global destination where learners can secure the digital skills that allow them to remain relevant in the workforce and acquire the branded credentials that can unlock their next career opportunities. 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. Gross profit was $88.3 million, a 64.7% gross margin, up 29% from a year ago. This margin was approximately three percentage points higher than the prior year period due to the positive changes in our segment content margin rates. Our Consumer segment's content margin rate increased from 68% in the prior year period to 73% this quarter and our Enterprise segments content margin rate increased from 67% from the prior year period to 71% this quarter. The margin expansion we experienced was driven by learners consuming a larger proportion of industry partnered content, which, on average, can have lower content costs depending on the partners' goals, sometimes with associated additional spend in promoting partner brands as part of our sales and marketing efforts. Total operating expense was $98.1 million or 72% of revenue compared to 69% in Q3 of last year. Sales and marketing expense represented 37% of total revenue, up from 35% in the prior year period due to investments in sales force cast and marketing programs associated with the higher margin content. Research and development expense was 20% of revenue, and general and administrative expense was 14% of revenue. Both were generally in line with the prior year period. Our net loss was $9.5 million or 7% of revenue, and our adjusted EBITDA loss was $4.9 million or 3.6% of revenue. Now turning to cash performance and the balance sheet. This quarter, we had a positive free cash flow of $1.3 million compared to $7.1 million in the prior year, and we ended Q3 in a strong cash position. As of September 30, we had approximately $786 million of unrestricted cash, cash equivalents and marketable securities with no debt. We believe the strength of our balance sheet, in combination with the modest cash requirements for operating needs is an asset that provides us stability and strategic flexibility to execute against our long-term strategy. Next, let's discuss our segments in more detail. Consumer revenue was $78 million, up 17% from the prior year. We continue to see strong demand for our portfolio of entry-level Professional Certificates, particularly in North America, which we continue to expand with new partners and job roles at a rapid pace. Segment gross profit was $57.1 million or 73% of consumer revenue, up from 68% in the prior year, given the higher consumption of industry partnered content. Finally, we added 6 million new registered learners for a total base of $113 million. Our learner growth continues to be broad-based with double-digit year-over-year growth across all regions. Now turning to Enterprise. Enterprise revenue was $48 million, up 51% from a year ago on growth across Business, Government and Campus customers. In particular, we continue to see strong momentum within Coursera for Government where our catalog of world-class brands and job relevant credentials are well suited for workforce development use cases. The total number of Paid Enterprise Customers increased to 1,086, up 53% from a year ago, with the majority of additions coming from Coursera for Business customers. And our net retention rate for Paid Enterprise Customers was 111%. Segment gross profit was $34 million or 71% of Enterprise revenue, up from 6% to 7% in the prior period due to the content consumption mix similar to our Consumer segment. And finally, our Degrees segment. Degrees revenue was $10.3 million, down 11% from a year ago on lower student enrollments, which we anticipated in our forward-looking commentary provided on the Q2 call. We believe these enrollment headwinds, primarily in our mature U.S. degree programs, where our revenue is concentrated today, are associated with broader macroeconomic trends at play. The total number of degree students grew 10% from a year ago to 17,723. As a reminder, there's no content cost attributable to the Degrees segment, so Degrees segment gross margin was 100% of revenue. Now on to our updated financial outlook. For Q4, we are expecting revenue to be in the range of $135.5 million to $139.5 million or 20% growth at the midpoint of the range. For adjusted EBITDA, we're expecting a loss in the range of $13.5 million to $16.5 million. For full year 2022, we anticipate revenue to be in the range of $517 million to $521 million or 25% growth at the midpoint of the range. For adjusted EBITDA, we're expecting a loss of $44.5 million to $47.5 million or negative 8.9% adjusted EBITDA margin at the midpoint of revenue and EBITDA guidance ranges. As a reminder, our messaging and annual operating framework with regard to EBITDA margin has been consistent. At the beginning of the year, we set an annual EBITDA margin target, and we manage within that plan based on the trajectory of our business, which we demonstrated last quarter with our revised outlook. Following our annual planning cycle, we intend to share our 2023 expectations on our Q4 call. We remain committed to building a viable long-term business and demonstrating leverage over time. We intend to continue to pace investments appropriately, increasing our focus and aligning our cost structure, including our consideration of current economic trends and uncertainties. Importantly, we operate from a position of financial strength and the long-term structural trends driving our business have not changed. Individuals and institutions are increasingly turning to online learning to supply digital skills. 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 our three-sided platform provides us with global reach and the ability to leverage our strategic assets across our segments to compete differently. Now I'll turn the call back to Jeff for closing remarks.

Thanks, Ken. Before we open the call for questions, I'd like to expand on an example I shared last quarter as it demonstrates the progress, speed and scale of what is possible on Coursera's platform with system-wide collaboration. In July, I highlighted the recent partnership with Louisiana Tech University and the University of Louisiana Systems. Our initial partnership with Louisiana Tech started as a social impact initiative with the office of student financial assistance via the Louisiana Board of Regions. It was designed to provide low-income high school students and graduates access to Coursera's entry-level Professional Certificates from Google in order to prepare them for college or to begin a digital career. This was followed by Louisiana Tech's summer programming series open to faculty and staff that is banded to include professional development opportunities for employees across all campuses within the University of Louisiana Systems. Now the Louisiana Workforce Commission, a state agency responsible for enhancing workforce growth and well-paying jobs for Louisiana residents, is partnered with Coursera to launch Tech Ready Louisiana, a statewide workforce development initiative providing training to thousands of Louisiana. The centerpiece of the program is Career Academy, as our entry-level professional certificates were specifically designed to prepare workers without a college degree or prior work experience. Using Career Academy, Louisianans can explore careers, develop key skills and competencies, build a portfolio of hands-on projects using actual workplace tools and earn industry-recognized credentials. And many of these credentials have ACE Credit Recommendations, which make it easier for learners to earn credit towards a local or online degree program when they're ready to continue their education. Finally, in recognition of the connectivity challenges that present a real barrier today, the Workforce Commission is making reliable Internet access available at nearly 60 sites across the state for learners to complete their Coursera courses. Traditional university degree programs and workforce development initiatives often lack a solid connection to today's in-demand jobs and are often not equipped to adapt to the fast-changing skill landscape and evolving employer expectations. By leveraging Coursera, an entire system of higher education in coordination with government institutions can foster stronger collaboration with industry by unlocking new development opportunities for students, faculty and staff, by diversifying and expanding talent pipelines for employers and by building a more competitive workforce. This is the vision of Coursera's three-sided platform at scale, connecting learners, educators and institutions in a global learning ecosystem designed to keep pace with our rapidly changing world. Now let's open up the call for questions.

Your first question today comes from Brian Peterson with Raymond James. Your line is now open.

So I wanted to start on the enterprise segment. And I'm just curious kind of how the linearity played out through the quarter. And it sounds like you called out some strength in multiple areas. I'm curious if there's any one or two that kind of outperform versus some other areas of that segment.

Brian, this is Jeff. Yes, generally speaking, I would say that we are seeing what some of the other companies who have announced early in the quarter have also been seeing, which is a bit of cyclicality on enterprise spend, especially in more developed markets like Europe and to some degree in North America. What we're seeing, thus, as I kind of mentioned in a couple of the examples, we’re seeing the government sector continue to go pretty strongly. I think that there's some counter-cyclicality there. And we're seeing a lot of interest as well from educational institutions. They're realizing there might be some counter-cyclicality there, and they're thinking about how they could upgrade their curriculum for better graduate placement rates. So, yes, it's nice to have some diversification there. We are definitely seeing a lot of the same macroeconomic trends that others are seeing, but I think our diversified model is helping us a bit.

Understood. I have a longer-term question regarding degrees. I recognize the macro sensitivity involved. Considering that many of our university partners are exploring different approaches, are we currently having discussions that may lead to a significant increase in programs over the next few years? I am curious about how we should perceive the potential long-term growth rate in that area, even though it might be challenging to predict.

Yes. I believe there is an overarching question regarding the value and demand for a college degree as a credential, which likely varies by region. My recent experience in Bangalore, India, highlighted the different dynamics at play. The government aims to boost the gross enrollment ratio to 50% by 2035, necessitating about 3.3 million additional professors for 35 million more students. The demographic trends observed in the U.S. do not necessarily align with those in other parts of the world. Globally, college degrees continue to hold the same importance they have historically. As we analyze this globally, demographic trends will significantly influence demand, particularly where emerging middle classes place a strong emphasis on education. Consequently, we maintain a positive outlook on the future value of a college degree. Colleges are actively evolving. There have been numerous examples of universities incorporating Career Academy into their curricula. Graduates will not only receive a degree but also an industry certificate. Many people may view college degrees as static, but the competition will increasingly involve individuals who possess micro-credentials alongside their degrees. Thus, obtaining a college degree is likely to remain valuable. On the affordability front, we expect improvements driven by technology and competition, leading to decreased degree costs. Degrees will become more relevant to job markets and widely accessible, particularly online, catering to a larger demographic that includes working adults, not just those aged 18 to 24. Therefore, we remain optimistic about the long-term prospects for degrees. Currently, we have a focus on North America, where the labor market remains tight, albeit only among a few programs. However, as we continue to announce more degree options, the range of offerings will expand. Lastly, regarding the model universities will adopt to deliver online degrees, there is clear movement towards universities creating these programs to accommodate working populations and growing needs. Whether they choose to go it alone, rely on a traditional model where a significant portion of revenue goes to a provider, or adopt a hybrid approach, varies by region. North America is currently leaning towards universities trying to manage this themselves. In contrast, globally, we observe less of that trend. By engaging in multiple regions, we gain valuable insights into how we can support universities in bringing their degrees online and providing scalable solutions.

Your next question comes from the line of Stephen Sheldon with William Blair. Your line is now open.

You had a good result here. For the fourth quarter, it seems that your revenue guidance is similar to the midpoint of your previous projections, but it anticipates a larger loss. Is this mainly due to a cautious approach and perhaps considering some increased uncertainty? Also, have your investment plans shifted at all, such that you're planning to increase investments more than you previously expected at the end of the year?

Thanks, Stephen. Firstly, we were happy with the results. As we look to Q4 versus the implied guidance last time, it's consistent, as you said, with our implied guidance. So we haven't forecast anything above that. As you know, we've generally done a good job of hitting our guidance. So we're thoughtful in that selection. From an EBITDA and profitability standpoint, we target an annual number as we always remind people, and we spend more at the end of a particular year. Now we're mindful of costs especially the operating structure and fixed costs as we enter the new year because we're setting up for the new year always. But where we have opportunities to do things and enhance revenue for the future, we tend to keep investing. So if you will, when we have a beat one quarter, you should expect us to guide lower to the same annual target. And that's been something we've done consistently. But as a public company, I know you understand, Stephen, but for everybody on the call, this has been something we've done consistently since we've been public as well as pre-public. We've been doing this for a long time. It's the way we happen to run the Company operationally to try to maximize growth and to grow and win our markets for the long term. So that's what you're seeing there, the mechanical action between the current quarter and then still keeping the same annual guidance for the year. We'll, of course, update that for '23 this coming quarter. One of the very important things to understand is the way we manage our fixed costs, so that we're set to spend appropriately and have flexibility for the following year. That's something that's near and dear to our processes internally.

Got it. Yes, that's helpful. And then it sounds like you're pretty optimistic about the opportunity with Career Academy. So just curious what engagement has looked like so far with them. Although clearly, it's early since you just launched it this year? And have you seen stronger traction with certain types of institutions relative to others?

Yes, we're really excited about it. We're seeing various levels of traction across different types of institutions. Since going public, the Professional Certificates have significantly driven growth in the Consumer segment. This highlights the strong learner demand for such learning products. We view institutions as channels that deliver these learning experiences and credentials to learners. Specifically, institutions like governments are playing an essential role in workforce investment programs, helping people bridge to the numerous job opportunities created by digital technology. Despite the automation of jobs, there's a continued need for skilled workers. Additionally, educational campuses have been under pressure for years from employers to better equip graduates with relevant job skills. Career Academy offers a mechanism to help educational institutions adapt their curriculums to meet this demand. While it's still early, we see substantial interest in this area. On the Coursera for Business front, it's also in the early stages, but we're observing that some employers in the U.S. want to focus more on developing their frontline workers by providing clear career development benefits. They're looking to signal their commitment to these employees and provide pathways beyond entry-level jobs. In Europe, there's a strong emphasis on the need to re-skill and redeploy employees due to regulatory challenges in exiting them. Companies are exploring ways to transition workers from one role to a more productive, higher-value position. Career Academy seems to resonate with this need as well.

Your next question comes from the line of Tom Singlehurst with Citi. Your line is now open.

It's Tom here from Citi. Congrats on the results. One question and then a follow-up. Actually, I'm going to start with consumer. Obviously, just keeps on getting better and better and micro-credentials and professional qualifications is the main driver of that. Just interested in what's happening sort of behind this with more plain vanilla university partner content. Is this still performing how you'd expect? Is there any sort of obvious cyclicality or any sort of changes in how the content is consumed and sort of some purchase rates and things like that? That's the first question, if that's okay.

Yes. Tom, this is Jeff. I'll take this one. Yes, I think it sort of depends on the segment. In the consumer channel, we clearly still have a lot of people who are coming and taking university courses. But often, those are not as career-relevant courses and are more often taken without paying for it. You just sort of get the videos, but you don’t actually get the credential. Most of the consumers, I think, are more career-focused and they're looking for that job training. So disproportionately what they're paying for in the consumer channel is the industry content. When you look at other channels, though, notably the Coursera for Business channel, there are a lot more advanced topics in business technology and data science from universities. They're a bit more cutting edge, and they're doing pretty well. So I would say that what universities are generally doing well at is some of the more advanced content in business and technology and data science in Coursera for Business. In Coursera for Campus, some of those advanced courses are being used as stand-alone electives where a university doesn’t have a large data science staff. Imagine a university, say, in Indonesia, and they haven't really hired a really big data science staff; maybe there’s nobody on faculty who understands the intricacies or doesn’t offer a course on deep learning. Well, the university courses on Coursera often touch on these advanced courses, and they could be pretty handy to offer stand-alone electives as part of a university curriculum because they come from a notable university and they're in a cutting-edge field that's not currently part of that university's course offerings.

Makes a lot of sense. And I guess that possibly explains why the gross margins for Consumer ticked above Enterprise. Maybe that's one of the factors there?

I think that's fair, Tom. Yes.

On the topic of degrees, it seems that the relative decline in degrees is counterbalanced by significant growth in industry micro-credentials, particularly in the U.S. However, my question is about whether there's a need to reconsider the expansion of degree programs in the U.S. Is it taking up too much capital, potentially slowing down your efforts in that area? Or can degree programs continue to be developed without requiring an excessive investment?

Yes. Tom, I think since the time that we have gone public, obviously, through COVID, there are a lot of atypical phenomena and signals and it’s often hard to parse out what’s going to be enduring and what’s going to be temporary. During that unprecedented time, we brought a lot of degrees on platform, and we are learning about, well, which ones resonate with learners and which ones don't resonate so much, and what features of degrees are resonating with learners and frankly, which features of degrees are not. I don’t think that it’s so much about slowing the pace of bringing degrees on platform, but I do think that there are certain types of degrees and certain types of features that we are understanding are very attractive, especially to working adults. In the script, we mentioned BITS Pilani, and the features that we described there are the kinds of features that universities are looking for—features working adults are looking for. A lot of that has to do with affordability, demand skills, and integration of industry content, and the convenient ability to start a degree. So you could start at any time online. The way that you have to go through the application process, can it be more performance-based? That’s what we’re finding; degrees that have those features are performing better than degrees that don’t. What we’re really doing is focusing more of our attention on degrees that have those features currently on the platform, on changing degrees that are on the platform to adopt more of those features and then sourcing new degrees that have those features. We’re hearing learners tell us— we’ve done quite a bit of research on this in the last six months. Working adults are looking for something a bit different than the traditional on-campus degree. I think we’re going to see is that Phase 1 of online degrees, let’s kind of just take what was on campus and put it online. Phase 2 is going to be to add some additional features that really work better for working adults. As those types of degrees come online, I think they're going to better meet the needs of a large population of working adults who want to get a degree but it has to work for them. Ken, I don’t know if you want to add anything to that?

Yes, I would just add a little bit. Yours is a more interesting part, but to get to the capital part of the equation, which is very important and a differentiator on our approach to the business, which is that, yes, while we’re investing in go-to-market on degrees, it's not that expensive in the long-term outlook, to say the least, as Jeff was talking about. Very importantly, in the near term, there's not a huge capital burden. There's a misconception out there due to the OPM, the traditional OPM industry historically that would have huge capital commitments before implementing these various degree programs. From a marketing cost standpoint, our costs are much lower because we generate our users, 75% of which are free, as we've talked about multiple times since the IPO. Very important to understand that differentiation. Secondly, the servicing costs for us are much lower because we act as a platform and do not engage in production. That has enabled us to compete the way we do. It also keeps the degrees program from sucking up a lot of working capital, and we don’t share the problems that some of the traditional OPMs did earlier in their existence.

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

On a greater Jeff, perhaps to start with you. On Coursera for Business, it was interesting the comment you made about North America, really the platform being focused as a career development benefit versus Europe being more of a sort of a re-skilling tool. I'm curious how that's evolved over the last six months. As you think about those use cases, when you speak to CHROs, what sort of level of prioritization are they putting on those types of initiatives, especially given they're in their budget planning process for next year? And given the macro, we tend to see some budget cuts on the L&D side of things. But would really like to know sort of from your viewpoint and from your conversations, where does the prioritization lie in terms of investing in expansion of those types of initiatives going into next year? And how do you feel positioned wise if we start to see some consolidations or some tighter budgets?

Brian, great question. And it's evolving. The Career Academy offering is fairly recent for us. So it's pretty new, and we're only getting some, I'd say, early indications of how this offering will fit into the greater agenda for learning and development departments. I think you're right, though. I mean, L&D budgets are tightening. Historically, it’s been a fairly discretionary spend generally speaking. I think it’s continued to be more discretionary and cyclical than other parts of our business, some of the other segments. At least that’s what we’re seeing. In terms of where their priorities are going to be, it feels to me, and I do talk to a lot of CHROs, and Europe is really holding on to their first strings, it seems. They— which is interesting because during COVID, I think there was a lot of emphasis on just generally putting a lot of online learning and development programs out there to support workforces who are going through the whole shutdown process, at least office closures in Europe. I think that what's happening in Europe now is causing a contraction of the L&D spend. When they take those dollars to spend, what are they doing with them? I do feel like they're focusing on consolidating to fewer players. It's going to make it harder for smaller and niche players to be as successful. There is computing demand. I think there are a lot of things that L&D folks have to figure out or try to put their spend against. One is to continue to build tech talent and data science talent. I mean, that’s really important. I think that's some of the least discretionary money that needs to be spent. I don’t see that really going away as much. I think the general broad-based learning programs that aren't really role-specific and don't really dial into critical job roles that need critical skills, I think those are more discretionary. So I think L&D is kind of putting the money against what job roles need which skills to drive the business agenda that the CEO and the C-suite execs are talking about. I think that's generally data science, technology and also some of these workforce re-skilling programs. And that re-skilling is—I think they're just starting to see how they might do that at greater scale.

That's really helpful. And maybe as a follow-up and just more focused on the collaborations you talked about between the industry and university partners. What is the strategy there in terms of—is this really a goal of trying to drive sort of more of the professional certification type learners into degree programs over time? And if so, how do you think you bridge that gap or sort of shift that learner into sort of that more longer duration program over time? And then if it works, what sort of efficiency could this create in terms of your sales and marketing line item?

Yes. I think this is— the answer that I'll provide is a bit of a continuation to an answer that I provided earlier to, I think it was Brian, when he asked. When Coursera started 10 years ago, it was all about MOOCs, massively open online courses. I think what people saw was, "Oh my gosh, these MOOCs are going to threaten degrees, maybe they'll replace degrees." Even today, bootcamps and all these other types of micro-credentials, people often think, "Oh, they might replace degrees." We've always maintained, perhaps because we were started by two university professors that there was going to be a much more nuanced portfolio of credentials out there. The way that people learn and the credentials that matter to employers is going to broaden; it’s not like one credential is going to be all the other ones. That’s what we’re seeing. Not only are there more credentials out there, but I would also say that the way that those credentials stack into each other, how one credential—say, from an industry can count towards another credential from the university. This idea that you could go from a MOOC to a degree has been something we've been working on quite a bit. I think what's happening in the last year or two is that we're just formalizing and building out that capability. So it’s not just a MOOC to a degree; it's a credential which is a professional certificate that can be integrated with degrees for credit. Right now, 12 of the Professional Certificates in the Career Academy have ACE Credit Recommendations, this is the American Council on Education where the ACE is recommending to every college and university in the United States that any learner who finishes this professional certificate could be, should be awarded credit and this many credit hours towards a degree. A lot of universities are starting to pick up on this and say, "Wow, this is not only a way to improve the employability of my graduates, but it's actually a funnel where I can get some leads into my degree program. If I can reach out to all those learners earning the industry micro-credentials and say, hey, you're already on your way towards earning your degree from my institution, I can improve my curriculum and get a source of new learners, namely working adults." When you look at the demographics in the U.S., the 18-year-old population is getting smaller post-millennials. Universities need to go after working adults. If you can get working adults to start with an industry micro-credential and then have that be the on-ramp to an online degree that people can take while they're working, that's a system that benefits departments of labor because they could help retrain their working adults and universities so that they can recruit and serve a population of learners who traditionally they just didn’t serve before.

Your next question comes from the line of Matt Saltzman with Morgan Stanley. Your line is now open.

So my question is around Coursera for Business and just kind of the go-to-market motion. I'm curious if there's anything that you all can share on how big the web-enabled sales component is today? And if you expect kind of the mix of leads to change over time? And also just anything you can share on how that performance is different from the direct sales effort.

Sure, Matt. You’ve been close to the model to test by WES. WES has not been a big area of emphasis. It's a different way to serve smaller purchases, departmental. So just to eliminate PO, the hassles of dealing with bigger companies. WES has been something that’s kind of a natural offshoot of what we do anyway. We have the platform because of consumer, and then we capture WES independently. WES has been steady for some quarters and years. It's not a huge part of the business. It's a part of the business that's still important to us, so we continue to serve it. There's still ongoing investment to allow that infrastructure—but we keep it to minimum. It serves as a gateway and an ability to upgrade. So it can be part of a land-and-expand strategy, but it's not something that we hit directly as an investment. We enable it, but it's a smaller part of the business and serves the broader needs.

Got it. So just to make sure I'm understanding it correctly, direct sales, you guys are typically going more at kind of the higher level, I don’t want to say C-suite, but a high level of the organization, and then at the more departmental level, call it HR, that might manage a separate learning and development budget, that’s kind of where web-enabled sales can come into play more often?

Yes, there could be a couple of different possibilities. It's really just smaller departmental when you're doing something for the whole entity that tends to be over an enterprise sale, right? The vast majority of the deals are multi-hundred thousand. They're six-figure deals, sometimes seven figures. WES tends to be at a much smaller price point. It could be a departmental engineer ordering for a group of 12 people, or someone in L&D. But the L&D deals tend to be bigger deals or corporate-wide so really more departmental and operational. Sometimes they’re trials, they’re samples, they’re looking at evaluating.

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

Just on the industry content that is higher from a content or segment margin perspective, but it also sounds like you guys then have to invest more on the marketing front to drive demand for the industry content. I guess, if you account for that incremental marketing investment, what is the margin differential between the industry and I guess, the university content?

Brett, it's an important question actually because it's something we're very focused on. The industry credentials have been great for us across all the different parts of the business. It's part of what Jeff talked about, even as it relates to the degree; it's a stackable portion. It’s something we're focused on. It's also been very successful, so the margin profile matters. As we've discussed regularly, they tend to have a higher gross margin profile because the objective of the industry partners is often for their publicity purposes, for pushing for their platforms, their business, how they make money. That said, the numbers are a little bit across the board, but it tends to even out not far from where they do for standard media; they want us to invest at a reasonably heavy level where we're using their brand and to market and promote what they do. That's why they're doing it. So, the overall economics when you drop it down to, say, an EBIT line, are relatively similar. That’s very broad base, to be clear. It varies quite a bit depending on the partner. But in generalities, you can expect, we're investing a fair amount below the line as well.

Perfect. Understood. And I guess what would be the pathway to generate leverage there if there's a constant need for additional marketing spend to drive demand for either the academia or the industry content? I guess the broader question is, can you just give some longer-term thoughts on how we should be thinking about you guys profitability?

Sure. Well, the path to profitability is something we think about, and it's pretty complicated. We look at how we're scaling, which is part of your question here. You do get more scale over time. It's hard to answer your question discretely just because of the way the expenses do flow. So, we invest in the different programs for the industry partners and sometimes for the university partners. We also invest even when there isn't a mandate, if we're just being paid as a rev share to maximize and grow those revenues. So, it's looking for continued areas where we get leverage over time. As we grow the Company, as our brand grows, it helps. We won't have to — we won't have to invest at the same rate going forward. I expect you're going to start to see some of that scaling relatively soon. As we've said, we focus on EBITDA and we focus on leverage. I think you're going to start to see some more leverage. We're not providing guidance for '23 yet. But it's consistent with how we've been thinking about it, we're getting closer to a point where we really start to show some leverage. Profitability matters to us. If you will, it's in vogue right now with Wall Street with interest rates so it's not how we run our company quarter-to-quarter. But we're also paying attention. We're also naturally at a point with the Company where I think you're going to see some more drop down towards the bottom line.

Yes. Thanks, Brett. And that wraps the Q&A for today. 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. Take care.

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