Coursera, Inc S-1/A, filed Mar 22, 2021
Coursera, Inc. (COUR)
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As filed with the Securities and Exchange Commission on March 22, 2021.
Registration No. 333-253932
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Amendment No. 1
to
Form S-1
REGISTRATION STATEMENT
Under
The Securities Act of 1933
COURSERA, INC.
(Exact name of Registrant as specified in its charter)
| Delaware | 7372 | 45-3560292 | ||
| (State or other jurisdiction of incorporation or organization) |
(Primary Standard Industrial Classification Code Number) |
(I.R.S. Employer Identification Number) |
381 E. Evelyn Ave.
Mountain View, California 94041
(650) 963-9884
(Address, including zip code, and telephone number, including area code, of Registrant’s principal executive offices)
Jeffrey N. Maggioncalda
Chief Executive Officer
381 E. Evelyn Ave.
Mountain View, California 94041
(650) 963-9884
(Name, address, including zip code, and telephone number, including area code, of agent for service)
Copies to:
| Jorge del Calvo Davina K. Kaile Pillsbury Winthrop Shaw Pittman LLP 2550 Hanover St Palo Alto, California 94304 (650) 233-4500 |
Alan F. Denenberg Stephen Salmon Davis Polk & Wardwell LLP 1600 El Camino Real Menlo Park, California 94025 (650) 752-2000 |
Approximate date of commencement of proposed sale to the public: As soon as practicable after this registration statement becomes effective.
If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act, check the following box: ☐
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ | |||
| Non-accelerated filer | ☒ | Smaller reporting company | ☐ | |||
| Emerging growth company | ☒ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act. ☐
CALCULATION OF REGISTRATION FEE
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| Title of Securities To Be Registered |
Amount To Be |
Proposed |
Proposed Maximum Aggregate Offering Price |
Amount of Registration Fee(3) | ||||
| Common Stock, par value $0.00001 per share |
18,089,500 | $33.00 | $ 596,953,500 | $ 65,128 | ||||
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| (1) | Includes 2,359,500 shares that the underwriters have the option to purchase. |
| (2) | Estimated solely for the purpose of calculating the registration fee in accordance with Rule 457(a) of the Securities Act of 1933, as amended. |
| (3) | The Registrant previously paid a registration fee of $10,910 in connection with the initial filing of this Registration Statement. |
The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with the provisions of Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.
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The information in this preliminary prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities, and is not soliciting an offer to buy these securities, in any jurisdiction where offers or sales are not permitted.
PRELIMINARY PROSPECTUS
(Subject to Completion, dated March 22, 2021)
15,730,000 Shares
COMMON STOCK
This is the initial public offering of shares of common stock of Coursera, Inc. We are offering 14,664,776 shares of our common stock and the selling stockholders named in this prospectus are offering an additional 1,065,224 shares of our common stock. We will not receive any of the proceeds from the sale of our common stock by the selling stockholders. No public market currently exists for our shares. We anticipate that the initial public offering price will be between $30.00 and $33.00 per share.
We expect to apply to have our common stock listed on the New York Stock Exchange under the symbol “COUR”.
We are an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act, and will be subject to reduced public company reporting requirements.
Investing in our common stock involves risks. See “Risk Factors” beginning on page 22 of this prospectus.
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Price to |
Underwriting |
Proceeds to |
Proceeds
to |
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| (1) | See “Underwriters” for a description of the compensation payable to the underwriters. |
| (2) | Before expenses. |
Baillie Gifford Overseas Ltd., acting on behalf of a number of its clients, and one or more funds affiliated with Capital Research Global Investors have indicated an interest, severally but not jointly, in purchasing an aggregate of up to $125 million in shares of our common stock in this offering at the initial public offering price. However, because indications of interest are not binding agreements or commitments to purchase, the underwriters may determine to sell more, fewer, or no shares in this offering to such potential investors, or either or both of these potential investors may determine to purchase more, fewer, or no shares in this offering. The underwriters will receive the same underwriting discount on any shares purchased by such potential investors as they will on any other shares sold to the public in this offering.
We have granted the underwriters the right, for a period of 30 days from the date of this prospectus, to purchase up to 2,359,500 additional shares of common stock from us at the initial public offering price less the underwriting discount.
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
The underwriters expect to deliver the shares of common stock to purchasers on or about , 2021.
| MORGAN STANLEY | GOLDMAN SACHS & CO. LLC | |||||
| CITIGROUP | UBS INVESTMENT BANK | |
| KEYBANC CAPITAL MARKETS | RAYMOND JAMES | STIFEL | TRUIST SECURITIES | WILLIAM BLAIR | ||||
| D.A. DAVIDSON & CO. | NEEDHAM & COMPANY | |
| LOOP CAPITAL MARKETS | TELSEY ADVISORY GROUP | |
, 2021
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WE BELIEVE
Learning is the source of human
progress.
It has the power to transform our world from illness to health, from poverty to prosperity, from conflict to peace
It has the power to transform our lives for ourselves, for our families, for our communities.
No matter who we are or where we are, learning empowers us to change and grow and redefine what’s possible.
That’s why access to the best learning is a right, not a privilege.
And that’s why
Coursera is here. We partner with the best institutions to bring the best learning to every corner of the world.
So that anyone, anywhere has the power to
transform their life through learning.
coursera
Rami E., Lebanon, Courses
Lochan K., Coursera Tpgether Paulina M., Ghana, Coursera for Campus OUR MISSION Universal access to world-class learning
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In this prospectus, “Coursera,” “Coursera, Inc.,” the “Company,” “we,” “us,” and “our” refer to Coursera, Inc. and its consolidated subsidiaries.
Neither we, the selling stockholders, nor the underwriters have authorized anyone to provide any information other than that, or to make any representations other than those, contained in this prospectus or in any free writing prospectuses we have prepared. Neither we, the selling stockholders, nor the underwriters take any responsibility for, and cannot provide any assurance as to the reliability of, any other information that others may give you. Neither we, the selling stockholders, nor the underwriters are offering to sell, or seeking offers to buy, shares of our common stock in any jurisdiction where these offers and sales are not permitted. The information in this prospectus or in any applicable free writing prospectus is accurate only as of the date of this prospectus, or such free writing prospectus, as applicable, regardless of the time of delivery of this prospectus or any such free writing prospectus or any sale of shares of our common stock. Our business, financial condition, results of operations, and prospects may have and are likely to have changed since that date.
Through and including , 2021 (the 25th day after the date of this prospectus), all dealers effecting transactions in our common stock, whether or not participating in this offering, may be required to deliver a prospectus. This delivery requirement is in addition to the obligation of dealers to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.
For investors outside the United States: Neither we, the selling stockholders, nor the underwriters have done anything that would permit this offering or possession or distribution of this prospectus in any jurisdiction where action for that purpose is required, other than in the United States. Persons outside the United States who come into possession of this prospectus must inform themselves about, and observe any restrictions relating to, the offering of the shares of our common stock and the distribution of this prospectus outside of the United States.
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PURPOSE STATEMENT We believe Learning is the source of human progress. It has the power to transform our world from illness to health, from poverty to prosperity, from conflict to peace It has the power to transform our lives for ourselves, for our families, for our communities. No matter who we are or where we are, learning empowers us to change and grow and redefine what’s possible. That’s why access to the best learning is a right, nopt a privilege. And that’s why Coursera is here. We partner with the best institutions to bring the best learning to every corner opf the world. So that anyone, anywhere has the power to transform their life through learning. coursera
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This summary highlights information contained elsewhere in this prospectus and does not contain all of the information you should consider in making your investment decision. Before investing in our common stock, you should carefully read this entire prospectus, including our consolidated financial statements and related notes and the information set forth in “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
Overview
Our mission is to provide universal access to world-class learning so that anyone, anywhere has the power to transform their life through learning.
We believe that education is the source of human progress. In today’s economy in which the skills needed to succeed are rapidly evolving, education is becoming more important than ever. As automation and digital disruption are poised to replace unprecedented numbers of jobs worldwide, giving workers the opportunity to upskill and reskill will be crucial to raising global living standards and increasing social equity. Online education will play a critical role, enabling anyone, anywhere, to gain the valuable skills they need to earn a living in an increasingly digital economy.
We have built a global platform connecting learners, educators, and institutions, providing world-class educational content that is affordable, accessible, and relevant. We partner with over 200 leading educational institutions and industry partners to bring quality higher education to a broad range of individuals, academic institutions, organizations, and governments. We use the term organizations for Coursera for Business customers within our Enterprise segment. Our offerings range from Guided Projects to courses to fully online degrees, allowing learners to discover and access relevant and affordable content, consume it on a flexible schedule, and build upon their progress towards a broader program of study with a more advanced credential.
Our business has experienced rapid growth. As of December 31, 2020, more than 77 million learners had registered on our platform, and over 2,000 organizations, 4,000 academic institutions, and 300 government entities had used our platform to upskill and reskill their employees, students, and citizens. We generated revenue of $184.4 million and $293.5 million for the years ended December 31, 2019 and 2020, respectively, representing a growth rate of 59%. Our net loss was $46.7 million and $66.8 million for the years ended December 31, 2019 and 2020, respectively.
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Industry Background: The Need for a New Model of Lifelong Learning
The global economy is changing rapidly. According to our estimates based on data from the International Labour Organization (the “ILO”), the global workforce will grow by 230 million people by 2030. This is expected to happen at a time when up to half of today’s jobs, around 2 billion, are at high risk of disappearing by 2030 due to automation.
The current system of higher education faces inherent challenges. The predominantly classroom-based model may not be able to keep pace with the rapidly emerging skills required to succeed in today’s workforce. While serving certain learners well, the in-person experience may fail to meet the needs of learners in more remote areas and non-traditional learners who need access to education and upskilling the most, both domestically and internationally. Lastly, the cost of education has grown considerably. According to the Federal Reserve Bank of New York, student loan debt in the United States was the second largest component of household debt at $1.55 trillion as of September 30, 2020, creating further headwinds for individuals navigating their careers and personal lives.
While technology will continue to disrupt jobs and labor markets, it can also be the source of significant benefits. Technology, when applied to learning, can reduce distribution costs, increase affordability, extend access to less wealthy geographical regions, adapt a workforce more quickly to emerging skills, and expand the overall market opportunity for education companies. The need for technological change in education has been exacerbated by the recent global pandemic. According to the United Nations, 1.6 billion students in 190 countries, approximately 94% of all students in the world, saw their schools at least temporarily closed due to the COVID-19 pandemic by August 2020.
We believe the future of education will be characterized by blended classrooms, job-relevant education, and lifelong learning, and that online learning will be the primary means of meeting the urgent global demand for emerging skills. According to an estimate by the World Bank, there were more than 200 million college students around the world as of October 2017, many of whom did not have necessary job-relevant skills. Online learning holds the promise to enable anyone, anywhere to learn new skills in preparation for high demand, digital jobs. The combined forces of online learning and remote work have the potential to increase global social equity by enabling a future where anyone, anywhere has access to both high-quality learning and high-quality job opportunities in an increasingly digital world.
Our Solution: A Platform for Delivering World-Class Learning at Scale
Coursera is a platform that connects a global ecosystem of learners, educators, and institutions with a goal of bringing world-class education to adult learners everywhere. We combine content, data, and technology into a single, unified platform that is customizable and extensible to both individual learners and institutions. Coursera partners with more than 200 leading university and industry partners to provide a flexible, affordable, and job-relevant online learning experience to meet the needs of an increasingly digital world.
Coursera serves the needs of a broad range of customers, including individuals, businesses, universities, and governments, all with a single, unified, scalable platform of technology, data, content, and know-how. Our platform contains:
| • | A Catalog of High-Quality Content and Credentials. Coursera provides a broad range of learning offerings, including Guided Projects, courses, Specializations, certificates, and degrees. Coursera provides modular learning offerings to allow learners to gain the skills and credentials they need to reach their goals. Our model of learning is “stackable,” meaning incremental completion of standalone courses can count as progress towards a broader program of study for a more advanced credential. |
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| • | Content Developed by Leading University and Industry Partners. Coursera partners with over 200 leading university and industry partners to deliver a broad portfolio of content and credentials. As of December 31, 2020, more than 150 university partners offered more than 4,000 courses across a range of domains including Data Science, Technology, Business, Health, Social Sciences, and Arts and Humanities. In addition, as of December 31, 2020, more than 50 industry partners have offered more than 600 courses primarily in the domains of data science, technology, and business. |
| • | Data and Machine Learning Drive Personalized Learning, Effective Marketing, and Skills Benchmarking. Our proprietary machine learning systems are powered by rich learning data across more than 220 million enrollments and provide tailored support to learners and resources to scale instructors. Fully-automated features such as In-Course Coach provide personalized insights and tips to keep learners motivated and making progress. Additionally, Coursera’s Skills Graph is a system of machine learning models that links learning paths to job skills and helps benchmark learner skills against peers and competitors. |
| • | Technology Delivers a Personalized Learning Experience at Scale. Our unified technology platform enables learners to learn more quickly and effectively, educators to author and deliver high-quality content at low cost, and employers to help employees develop the right skills to be competitive in the marketplace. |
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77M REGISTERED LEARNERS AS OF 12/31/2020 Tristen A., U.S.A, Professional Certificate 6K+ BUSINESSES, UNIVERSITIES AND GOVERNMENTS SERVED IN 2020 150+ UNIVERSITY PARTNERS 50+ INDUSTRY PARTNERS AS OF 12/31/2020 Wafa’ B., Indonesia, Courses & Specialization Ehab B., Germany, Coursera for Regugees
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Kara A., U.S.A, MBA Degree Jessica R., Mexico, Courses & Specialization Bharathan M., India, Courses 1,000+ GUIDED PROJECTS 4,600+
COURSES 500+ SPECIALZATIONS 40+ CERTIFICATES 25+ DEGREES AS OF 12/31/2020
AND GOVERNMENTS
SERVED IN 2020
150+
UNIVERSITY PARTNERS
50+
INDUSTRY PARTNERS
AS OF 12/31/2020
77M
LEARNERS
AS OF 12/31/2020
Wafa’B., Indonesia, Courses & Specialization
Kara A., U.S.A, MBA Degree
1,000+
GUIDED PROJECTS
4,600+
COURSES
500+
SPECIALIZATIONS
45+
CERTIFICATES
25+
DEGREES
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Our Offerings to Individuals and Institutions
| • | Coursera for Individuals. Learners consume content from our diversified portfolio, which is designed to meet a wide variety of goals and preferences. The full Coursera catalog includes the following offerings*: |
| • | 1,000+ Guided Projects: Gain a job-relevant skill in less than two hours for $9.99; |
| • | 4,600+ Courses: Learn something new in 4-6 weeks for free, or for prices up to $99; |
| • | 500+ Specializations: Gain a job-relevant skill in 3-6 months for $39-$99/month; |
| • | 25+ Professional Certificates: Earn a certification of job readiness for an in-demand career in 3-9 months for $39-$99/month; |
| • | 15+ MasterTrack Certificates: In 3-12 months, earn a university-issued certificate from a module of a university degree and credit that can be applied to that degree in the future for approximately $2,000-$6,000; and |
| • | 25+ Degrees: Earn a bachelor’s or master’s degree fully online for approximately $9,000-$45,000. |
| * | As of December 31, 2020. Time periods noted are intended completion timeframes; actual time to completion varies by learner. Learners may also access certain courses, Specializations, and Professional Certificates through a Coursera Plus subscription. |
| • | Coursera for Enterprise. Coursera is available to institutions around the world, allowing businesses, academic institutions, and governments to enable their employees, students, and citizens to gain critical skills aligned to the job market of today and tomorrow. Institutions play a major role in tackling the global reskilling challenge by providing awareness, incentives, and financial support for lifelong learning. Coursera has designed a single, unified platform that allows us to configure a common set of content and features to meet the various needs of business, academic, and government customers. |
| • | Coursera for Business: helps employers upskill and reskill their teams to drive innovation, competitiveness, and growth. Our content in data science, technology, and business is especially relevant to employers; |
| • | Coursera for Campus: empowers academic institutions to offer job-relevant online education to students, faculty, and staff. Our content from leading universities and academic integrity features are especially relevant to colleges that allow students to earn credit towards their college degree by taking online courses; and |
| • | Coursera for Government: helps federal, state, and local governments deliver workforce reskilling programs to provide in-demand skills and paths to new jobs for an entire workforce. Our Professional Certificates and content from leading universities and industry partners are especially relevant to government officials seeking to prepare citizens for emerging jobs in their region and enhance the skills of public sector employees. |
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Coursera introduced me to the world of AI and now I can’t stay away! I’m a medicalk student exploring how AI can be used to solve healthcare delivery problems in West Africa. Paulina M. COURSES
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Coursera Social Impact Programs
Over the last four years, we have fostered an initiative to provide learning for tens of thousands of refugees in more than 140 countries. We also work with 69 nonprofit and community organizations to provide refugees, veterans, formerly incarcerated individuals, and students of underserved high schools with access to high-quality education and job-relevant credentials, at no cost to them. To date, our social impact programs have helped more than 72,000 learners across the globe, who have logged more than 390,000 course enrollments.
The COVID-19 pandemic sharply increased the need for online learning beginning in 2020. Both individuals and institutions relied on online learning to navigate change and disruption. We, along with our partners, launched several initiatives to mitigate the pandemic’s impact on communities worldwide including our Campus Response, Workforce Recovery, and Employee Resilience Initiatives, as well as a free Contact Tracing Course from John Hopkins University aimed towards public healthcare professionals.
“i Study and learn because my country needs help. We need to encourage Syrian youth to participate in the peace-building process and fight for social justice. Ehab B. GERMANY COURSERA FOR REFUGEES
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Our Customers: How We Serve the World Through Learning
We offer a wide range of content and credentials from some of the world’s most recognizable educator brands. We help individuals learn and advance in their jobs and careers, and we serve companies, academic institutions, and governments to help them upskill and reskill their employees, students, and citizens. Our customers include:
| • | Learners. Learners can come to Coursera to advance their careers, reach their educational goals, and enhance their lives. Learners are individuals who are or may be interested in learning, including those who have registered on our platform (“registered learners”). Registered learners include those who engage in a variety of activities, including opening an e-mail from us, browsing offerings on the platform, watching lectures, or enrolling in guided projects or courses. Not all registered learners are active at any given time or over any given period. As of December 31, 2020, more than 77 million learners had registered on Coursera to learn from more than 200 leading university and industry partners in thousands of offerings ranging from open courses to full diploma-bearing degrees. Coursera serves learners in their homes, through their employers, through their colleges and universities, and through government-sponsored programs. |
| • | Businesses. Employers can use Coursera for Business to help employees develop new skills in order to better acquire and serve customers, lower costs, reduce risk, and remain competitive in today’s economy. The launch of our Enterprise business in 2016 has enabled customers to choose Coursera to upskill their teams with critical skills in business, technology, data science, and other disciplines. As of December 31, 2020, over 2,000 organizations, including over 25% of Fortune 500 companies, were paying customers of Coursera for Business. |
| • | Colleges and Universities. Colleges and universities can use Coursera for Campus to deliver branded online learning at low cost in a new era of financial challenges for higher education and evolving student preferences for hybrid learning. Coursera for Campus enables universities to leverage our global online learning platform to provide job-relevant, credit-ready, high-quality learning at higher scale and lower cost than in-classroom learning alone. Accelerated by the pandemic, thousands of higher education institutions launched Coursera for Campus over the past year, making it one of our fastest growing offerings. As of December 31, 2020, over 130 colleges and universities were paying customers of Coursera for Campus. |
| • | Governments. Governments, facing unprecedented levels of unemployment, can use Coursera for Government to build a competitive workforce that drives sustainable economic growth by upskilling employees for public sector success and reskilling citizens for career advancement. As of December 31, 2020, over 100 government agencies and organizations were paying customers of Coursera for Government. |
Our Competitive Strengths: The Power of Our Business Model
We believe that our competitive advantage is based on the following key strengths:
| • | Our consumer flywheel creates a price-to-cost advantage: We believe our efficient learner acquisition model, powered by free, high-quality content, global partner brands, deep expertise in search engine optimization, strong word of mouth referrals, public relations, and a profitable affiliate paid marketing channel, enables us to attract learners to Coursera at scale. This acquisition model has allowed us to add over 12,000 new Degrees students over the two years ended December 31, 2020 at an average acquisition cost of under $2,000. We calculate our average acquisition cost for Degrees students by aggregating directly attributable marketing costs and dividing by the total number of new students. |
| • | Branded catalog of modular and stackable content and credentials: Our broad catalog and flexible technology platform provide many entry points for learners and allow us to give learners a path to achieving their goals, regardless of their starting place. This allows us to help learners find the right |
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| learning program based on their prior skills, credentials, and experience and provide pathways for them to accomplish their goals. We believe we are the only platform with the ability to blend industry credentials with traditional academic degree credentials at scale. |
| • | Network of leading academic and industry partners: Our large and global learner base attracts top-tier educator partners by allowing them to reach new audiences and create new revenue streams with relatively small up-front investments. As technology advances and new relevant skill sets emerge, our growing partner relationships enable us to be responsive in providing in-demand skills for aspiring and ascending professionals. |
| • | Job-relevant, hands-on projects, and industry certificates: In order to compete and keep pace with the rapidly changing skills landscape, learners need to be able to quickly identify and learn practical skills using job-relevant tools. For example, Coursera’s technology platform allows instructors to efficiently launch one to two hour Guided Projects that teach the latest in-demand skills to learners with a hands-on learning experience. |
| • | Multi-channel Enterprise model: With a single content catalog and a unified technology and data platform, we are able to distribute content and credentials to a global audience of more than 6,000 businesses, academic institutions, and governments. Our technology enables our educator partners to reach large, globally-distributed employee populations through the workplace and provide them with high-quality lifelong learning. |
| • | Rich data analytics and Skills Graph: Since all of our teaching and learning activities happen online, our platform is able to capture a significant amount of data across millions of enrollments related to teaching, learning, content, and outcomes. These data allow us to drive learner success through personalized learning, mapping skills to content and jobs through a system of machine learning models, and unlocking marketing efficiencies by automating and targeting communications with learners to generate engagement. |
Our Opportunity: The Global Education Market is Large and Growing
As the pace of new knowledge and the demands of the global workforce continue to accelerate, the global adult education market is poised to grow dramatically. According to the education market intelligence firm HolonIQ, the global higher education market was $2.2 trillion in 2019; the global online degree market was $36 billion in 2019 and is expected to grow to $74 billion by 2025. The flexibility of online learning enables non-traditional learners to continue their education, which has allowed the online education industry to demonstrate acyclical growth characteristics.
Our Growth Strategy
We believe that we have a large, underpenetrated addressable opportunity ahead of us to enable the digital transformation of higher education and provide lifelong adult learning at scale. To advance our growth strategy, we intend to:
| • | Continue to invest in growing our Enterprise channels. Coursera’s growth is driven in part by expansion into new logos as well as broader penetration of learners within our existing base of business, university, and government customers. We utilize a land-and-expand strategy with our Enterprise customers that focuses on acquiring new customers and efficiently growing our relationships with existing customers. |
| • | Drive adoption and conversion of freemium Enterprise offerings. During the pandemic, we opened up our platform across our Enterprise customer base through multiple initiatives, enabling over 4,000 institutions globally, including approximately 10% of all degree-granting institutions worldwide, to tap |
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| into ready-made, high-quality digital curricula from leading universities with minimal upfront costs through our Coursera for Campus offering. We plan to continue to focus on converting free institutions to paying Enterprise customers as we enable the digital transformation of higher education. |
| • | Expand the number of online degrees and the number of students in Degrees programs. We believe we have a substantial opportunity to increase the number of bachelor’s and master’s programs in new and existing academic disciplines within our current network of university partners. Over time, we also aim to naturally progress current open course university partners into Degrees partners. For existing Degrees program partners, we intend to continue to increase the size of student cohorts in existing Degrees programs and add new online Degrees programs from these partners. |
| • | Continue to grow our learner base and build our brand. We intend to continue to invest in increasing the number of registered learners on Coursera and increasing awareness of the Coursera brand. Our large learner base and brand creates a virtuous cycle, increasing our value to educator partners and providing incentive for them to author additional content and credentials. This broader catalog, in turn, enhances the appeal of Coursera to learners, thereby further growing our learner base. |
| • | Grow our content and credentials catalog and network of educator partners. We plan to continue to invest in growing our catalog of Guided Projects, courses, Specializations, certificates, and degrees across a broad range of topics and expanding our network of educator partners. |
| • | Improve conversion, upsell, and retention of paid Consumer learners. Our Consumer platform makes it easy for individuals to come to Coursera and learn, allowing for a natural progression of learners to go from free projects or courses to full online degrees. In 2020, over 50% of our cash receipts from Consumer offerings came from individual learners who were registered on our platform as of December 31, 2019 and approximately 50% of our new Degrees students were previously registered Coursera learners. |
| • | Continue global expansion. We see a particularly large opportunity to help emerging economies that lack the ability to absorb the large and growing influx of adult students by delivering education in a scalable and affordable way. We plan to continue to market our offerings and programs to individual learners, businesses, academic institutions, and governments globally. |
Risk Factor Summary
Our business is subject to numerous risks, as more fully described in “Risk Factors” and elsewhere in this prospectus. You should read these risks before you invest in our common stock. In particular, risks associated with our business include, among others, the following, any of which could have an adverse effect on our business, financial condition, results of operations, or prospects:
| • | Fluctuations in our quarterly and annual revenue and operating results, which could cause our stock price to fluctuate and the value of your investment to decline; |
| • | Our rapid growth, which may not be indicative of our future growth, and our expected decline in revenue growth rate compared to prior years; |
| • | Our limited operating history, which makes it difficult to predict our future financial and operating results; |
| • | We have incurred significant net losses since inception, and anticipate that we will continue to incur losses for the foreseeable future; |
| • | The impact of the COVID-19 pandemic, which has impacted, and may continue to impact, our business, key metrics, and results of operations in volatile and unpredictable ways; |
| • | The nascency of online learning solutions, the market adoption of which may not grow as we expect; |
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| • | Our ability to maintain and expand our partnerships with our university and industry partners; |
| • | Our ability to attract and retain learners; |
| • | Our ability to increase sales of our Enterprise offering; |
| • | Our ability to compete effectively; |
| • | Our partners’ ability to comply with international, federal, and state education laws and regulations, including applicable state authorizations for their programs; |
| • | Any failure to obtain, maintain, protect, and enforce our intellectual property and proprietary rights and successfully defend against claims of infringement, misappropriation, or other violations of third-party intellectual property; |
| • | Any changes to the validation or applicability of the DOE “dear colleague letter,” on which our business model relies; |
| • | Any disclosure of sensitive information about our partners, their employees, or our learners, whether due to cyber-attack or otherwise; |
| • | Any disruption or failure of our platform; and |
| • | Our status as a B Corp, which may negatively impact our financial performance. |
Emerging Growth Company Status
We are an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act (the “JOBS Act”) enacted in April 2012. We intend to take advantage of certain exemptions under the JOBS Act from various public company reporting requirements, including not being required to have our internal control over financial reporting audited by our independent registered public accounting firm pursuant to Section 404(b) of the Sarbanes-Oxley Act of 2002, as amended (the “Sarbanes-Oxley Act”), reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and any golden parachute payments not previously approved. In addition, we have in this prospectus taken and intend to continue to take advantage of certain reduced reporting obligations, including disclosing only two years of audited consolidated financial statements and only two years of related management’s discussion and analysis of financial condition and results of operations. We may take advantage of these exemptions until the earlier of the last day of the fiscal year following the fifth anniversary of the completion of this offering or the date we cease to be an “emerging growth company,” which will be the earliest of (i) the last day of the fiscal year in which we have more than $1.7 billion in annual revenue; (ii) the date we qualify as a “large accelerated filer;” and (iii) the date on which we have, during the previous three-year period, issued more than $1 billion in non-convertible debt securities.
In addition, the JOBS Act provides that an “emerging growth company” can take advantage of an extended transition period for complying with new or revised accounting standards. This provision allows an emerging growth company to delay the adoption of some accounting standards until those standards would otherwise apply to private companies. We have elected to use the extended transition period under the JOBS Act. Accordingly, our consolidated financial statements may not be comparable to the financial statements of public companies that comply with such new or revised accounting standards.
Public Benefit Corporation Status
To reinforce our long-term commitment to providing global access to affordable and flexible world-class learning, on February 1, 2021, we amended our certificate of incorporation to become a Delaware public benefit corporation. Public benefit corporations are a relatively new class of corporations that are intended to produce a public benefit and to operate in a responsible and sustainable manner. Under Delaware law, public benefit
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corporations are required to identify in their certificate of incorporation the public benefit or benefits they will promote, and their directors have a duty to manage the affairs of the corporation in a manner that balances the pecuniary interests of the stockholders, the best interests of those materially affected by the corporation’s conduct, and the specific public benefit identified in the public benefit corporation’s certificate of incorporation. See “Risk Factors—Risks Relating to Our Existence as a Public Benefit Corporation” and “Description of Capital Stock—Public Benefit Corporation Status.” The public benefit stated in our certificate of incorporation is to provide global access to flexible and affordable high-quality education that supports personal development, career advancement, and economic opportunity.
Certified B Corporation Status
While not required by Delaware law or the terms of our certificate of incorporation, we have been designated as a Certified B CorporationTM (“B Corp”). The term “B Corp” does not refer to a particular form of legal entity, but instead refers to companies that are certified by B Lab, Inc. (“B Lab”), an independent nonprofit organization, for meeting rigorous standards of social and environmental performance, accountability, and transparency. See “Business—Certified B Corporation Status.”
Corporate Information
We were incorporated in Delaware on October 7, 2011 and we launched our platform in April 2012. Our principal executive offices are located at 381 E. Evelyn Ave. Mountain View, California 94041 and our telephone number is (650) 963-9884. Our corporate website address is www.coursera.org. Information contained on or accessible through our website is not part of this prospectus, and is not incorporated by reference herein, and should not be relied on in determining whether to make an investment decision. The inclusion of our website address in this prospectus is an inactive textual reference only.
We have obtained registered trademarks for Coursera, which marks are our property. This prospectus also contains references to trademarks belonging to other entities, which marks remain the property of such other entities. Solely for convenience, trademarks and trade names referred to in this prospectus, including logos, artwork and other visual displays, may appear without the ® or TM symbols, but such references are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights or the rights of the applicable licensor to these trademarks and trade names. We do not intend our use or display of other entities’ trade names or trademarks to imply a relationship with, or endorsement or sponsorship of us by, any other entity.
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| Common stock offered by us |
14,664,776 shares |
| Common stock offered by the selling stockholders |
1,065,224 shares |
| Underwriters’ option to purchase additional shares |
2,359,500 shares |
| Common stock to be outstanding after this offering |
130,271,466 shares (132,630,966 shares if the underwriters exercise their option to purchase additional shares in full) |
| Use of proceeds |
We estimate that the net proceeds to us from this offering will be approximately $426.3 million (or $495.8 million if the underwriters exercise their option to purchase additional shares in full), based on an assumed initial public offering price of $31.50 per share (the midpoint of the price range set forth on the cover page of this prospectus), and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. We will not receive any proceeds from the sale of shares of common stock by the selling stockholders. |
| We intend to use the net proceeds from this offering primarily for general corporate purposes, including working capital, sales and marketing activities, research and development, general and administrative matters, and capital expenditures, although we do not currently have any specific plans with respect to use of proceeds for such purposes. We also may use a portion of the net proceeds to acquire complementary businesses, offerings, services, or technologies. However, we do not have agreements, commitments, or plans for any specific acquisitions. See “Use of Proceeds.” |
| Indications of interest |
Baillie Gifford Overseas Ltd., acting on behalf of a number of its clients, and one or more funds affiliated with Capital Research Global Investors have indicated an interest in purchasing, severally but not jointly, an aggregate of up to $125 million in shares of our common stock in this offering at the initial public offering price. However, because indications of interest are not binding agreements or commitments to purchase, the underwriters may determine to sell more, fewer, or no shares in this offering to such potential investors, or either or both of these potential investors may determine to purchase more, fewer, or no shares in this offering. The underwriters will receive the same underwriting discount on any shares purchased by such potential investors as they will on any other shares sold to the public in this offering. |
| Risk factors |
You should read “Risk Factors” and the other information included in this prospectus for a discussion of certain of the factors to consider carefully before deciding to purchase any shares of our common stock. |
| Proposed trading symbol on the NYSE |
“COUR” |
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The number of shares of our common stock to be outstanding after this offering is based on 115,606,690 shares of common stock outstanding as of December 31, 2020, and excludes:
| • | 32,458,408 shares of our common stock issuable upon the exercise of stock options outstanding as of December 31, 2020 granted under our Stock Incentive Plan (the “Non-Executive Plan”) and our 2014 Executive Stock Incentive Plan (the “Executive Stock Plan” and collectively with the Non-Executive Plan, the “Predecessor Stock Incentive Plans”), at a weighted-average exercise price of $4.60 per share; |
| • | 3,276,600 shares of our common stock subject to restricted stock units (“RSUs”) outstanding as of December 31, 2020 granted under the Predecessor Stock Incentive Plans; |
| • | 8,098,484 shares of our common stock reserved for future issuance under the Predecessor Stock Incentive Plans as of December 31, 2020, which shares (to the extent not subject to outstanding equity awards prior to the date the registration statement for this offering is declared effective) will no longer be available for future issuance upon completion of this offering; |
| • | 15,400,000 shares of our common stock reserved for future issuance under our 2021 Stock Incentive Plan (the “2021 Plan”), which will become effective on the date the registration statement for this offering is declared effective, as well as any automatic increases in the number of shares of our common stock reserved for future issuance under the 2021 Plan, and any shares subject to outstanding awards under the Predecessor Stock Incentive Plans after the effective date of the 2021 Plan that are subsequently (i) forfeited or terminated, (ii) not issued because such award is settled in cash, or (iii) withheld or reacquired to satisfy the applicable exercise, strike, or purchase price, or a tax withholding obligation, all of which shares shall become available for issuance under the 2021 Plan; and |
| • | 2,800,000 shares of our common stock reserved for future issuance under the 2021 Employee Stock Purchase Plan (the “ESPP”), which will become effective on the date the registration statement for this offering is declared effective, as well as any automatic increases in the number of shares of our common stock reserved for future issuance under the ESPP. |
Unless otherwise indicated, all information contained in this prospectus assumes or gives effect to:
| • | the automatic conversion of all of our redeemable convertible preferred stock outstanding as of December 31, 2020 into an aggregate of 75,305,400 shares of our common stock immediately prior to the closing of this offering; |
| • | the filing and effectiveness of our amended and restated certificate of incorporation and the adoption of our amended and restated bylaws immediately prior to the completion of this offering; and |
| • | no exercise by the underwriters of their option to purchase up to 2,359,500 additional shares of our common stock. |
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SUMMARY CONSOLIDATED FINANCIAL DATA
The summary consolidated statements of operations data presented below for the years ended December 31, 2019 and 2020 and the summary consolidated balance sheet data as of December 31, 2020 are derived from our audited consolidated financial statements included elsewhere in this prospectus. The following summary consolidated financial data should be read together with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our audited consolidated financial statements and related notes included elsewhere in this prospectus. The summary consolidated financial data in this section are not intended to replace our audited consolidated financial statements and related notes and are qualified in their entirety thereby. Our historical results are not necessarily indicative of the results that may be expected for any period in the future.
Consolidated Statements of Operations Data
| Year Ended December 31, | ||||||||
| 2019 | 2020 | |||||||
| (in thousands, except share and per share data) |
||||||||
| Revenue |
$ | 184,411 | $ | 293,511 | ||||
| Cost of revenue(1) |
89,589 | 138,846 | ||||||
|
|
|
|
|
|||||
| Gross profit |
94,822 | 154,665 | ||||||
|
|
|
|
|
|||||
| Operating expenses: |
||||||||
| Research and development(1) |
56,364 | 76,784 | ||||||
| Sales and marketing(1) |
57,042 | 107,249 | ||||||
| General and administrative(1) |
29,810 | 37,215 | ||||||
|
|
|
|
|
|||||
| Total operating expenses |
143,216 | 221,248 | ||||||
|
|
|
|
|
|||||
| Loss from operations |
(48,394 | ) | (66,583 | ) | ||||
| Other income (expense): |
||||||||
| Interest income |
3,282 | 1,175 | ||||||
| Interest expense |
(625 | ) | (12 | ) | ||||
| Other income (expense), net |
(264 | ) | 120 | |||||
|
|
|
|
|
|||||
| Loss before income taxes | (46,001 | ) | (65,300 | ) | ||||
|
|
|
|
|
|||||
| Income tax expense |
718 | 1,515 | ||||||
|
|
|
|
|
|||||
| Net loss |
$ | (46,719 | ) | $ | (66,815 | ) | ||
|
|
|
|
|
|||||
| Net loss per share attributable to common stockholders, basic and diluted(2) |
$ | (1.45 | ) | $ | (1.80 | ) | ||
|
|
|
|
|
|||||
| Weighted-average shares used to compute net loss per share attributable to common stockholders, basic and diluted(2) |
32,276,258 | 37,207,492 | ||||||
|
|
|
|
|
|||||
| Pro forma net loss per share attributable to common stockholders, basic and diluted (unaudited)(2) |
$ | (0.62 | ) | |||||
|
|
|
|||||||
| Weighted-average shares used to compute pro forma net loss per share attributable to common stockholders, basic and diluted (unaudited)(2) |
108,503,105 | |||||||
|
|
|
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| (1) | Stock-based compensation expense included in the consolidated statements of operations data above was as follows: |
| Year Ended December 31, | ||||||||
| 2019 | 2020 | |||||||
| (in thousands) | ||||||||
| Cost of revenue |
$ | 491 | $ | 516 | ||||
| Research and development |
7,038 | 6,960 | ||||||
| Sales and marketing |
3,189 | 4,097 | ||||||
| General and administrative |
5,599 | 5,234 | ||||||
|
|
|
|
|
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| Total |
$ | 16,317 | $ | 16,807 | ||||
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|
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| (2) | See Note 2 and Note 10 to our audited consolidated financial statements included elsewhere in this prospectus for an explanation of the calculations of our net loss per share attributable to common stockholders, basic and diluted, pro forma net loss per share attributable to common stockholders, basic and diluted, and the weighted-average shares used to compute these amounts. |
Consolidated Balance Sheet Data
| As of December 31, 2020 | ||||||||||||
| Actual | Pro Forma(1) |
Pro Forma as Adjusted(2)(3) |
||||||||||
| (in thousands) | ||||||||||||
| Cash, cash equivalents and marketable securities |
$ | 285,280 | $ | 285,280 | $ | 711,626 | ||||||
| Total assets |
$ | 417,624 | $ | 417,624 | $ | 842,641 | ||||||
| Working capital(4) |
$ | 201,427 | $ | 201,427 | $ | 627,741 | ||||||
| Redeemable convertible preferred stock |
$ | 462,293 | $ | — | $ | — | ||||||
| Additional paid-in capital |
$ | 126,408 | $ | 588,700 | $ | 1,015,014 | ||||||
| Accumulated deficit |
$ | (343,551 | ) | $ | (343,551 | ) | $ | (343,551 | ) | |||
| Total stockholders’ (deficit) equity |
$ | (221,824 | ) | $ | 240,469 | $ | 666,783 | |||||
| (1) | The pro forma column gives effect to (a) the automatic conversion of all of our outstanding redeemable convertible preferred stock into 75,305,400 shares of our common stock immediately prior to the closing of this offering and (b) the filing and effectiveness of our amended and restated certificate of incorporation upon the closing of this offering. |
| (2) | The pro forma as adjusted column gives effect to the pro forma adjustments described in footnote (1) above and gives further effect to the sale of 14,664,776 shares of common stock by us in this offering at an assumed initial public offering price of $31.50 per share (the midpoint of the price range set forth on the cover page of this prospectus), after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. The pro forma as adjusted information set forth in the table above is illustrative only and will be adjusted based on the actual initial public offering price and other terms of this offering determined at pricing. |
| (3) | Each $1.00 increase (decrease) in the assumed initial public offering price of $31.50 per share would increase (decrease) each of cash, cash equivalents, and marketable securities, working capital, total assets, and total stockholders’ deficit on a pro forma as adjusted basis by approximately $13.7 million, assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same, and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. Similarly, each 1.0 million increase (decrease) in the number of shares offered by us as set forth on the cover page of this prospectus would increase (decrease) each of our cash, cash equivalents, and marketable securities, working capital, total assets, and total stockholders’ deficit on a pro forma as adjusted basis by approximately $29.5 million, assuming no change in the assumed initial public offering price per share and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. |
| (4) | Working capital is defined as current assets less current liabilities. |
Non-GAAP Financial Measures
We have included Adjusted EBITDA, Adjusted EBITDA Margin, and Free Cash Flow, which are non-GAAP financial measures, in this prospectus because they are key measures used by our management to help us analyze our financial results, establish budgets and operational goals for managing our business, evaluate our performance, and make strategic decisions. Accordingly, we believe that these non-GAAP financial measures
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provide useful information to investors and others in understanding and evaluating our operating results in the same manner as our management and board of directors. In addition, we believe these measures are useful for period-to-period comparisons of our business. We also believe that the presentation of these non-GAAP financial measures in this prospectus provides an additional tool for investors to use in comparing our core business and results of operations over multiple periods with other companies in our industry, many of which present similar non-GAAP financial measures to investors, and to analyze our cash performance. However, the non-GAAP financial measures presented in this prospectus may not be comparable to similarly titled measures reported by other companies due to differences in the way that these measures are calculated.
Limitations of Non-GAAP Measures
These non-GAAP financial measures are not prepared in accordance with GAAP, are supplemental in nature, and are not intended, and should not be construed, as the sole measure of our performance, and should not be considered in isolation from or as a substitute for comparable financial measures prepared in accordance with GAAP. There are a number of limitations related to Adjusted EBITDA, Adjusted EBITDA Margin, and Free Cash Flow, including the following:
| • | Adjusted EBITDA and Adjusted EBITDA Margin exclude certain recurring, non-cash charges, such as depreciation of property and equipment and/or amortization of intangible assets. While these are non-cash charges, we may need to replace the assets being depreciated and amortized in the future and Adjusted EBITDA and Adjusted EBITDA Margin do not reflect cash requirements for these replacements or new capital expenditure requirements. |
| • | Adjusted EBITDA and Adjusted EBITDA Margin do not reflect interest income, net, which consists of interest income earned on our cash, cash equivalents, and marketable securities and amortization of premiums and accretion of discounts related to our marketable securities, offset by interest expense. |
| • | Adjusted EBITDA and Adjusted EBITDA Margin exclude stock-based compensation and payroll tax expense related to stock-based activities, which have been significant recurring expenses and will continue to constitute significant recurring expenses for the foreseeable future, as equity awards are expected to continue to be an important component of our compensation strategy. |
| • | Free Cash Flow does not reflect our future contractual commitments, and it does not represent the total increase or decrease in our cash balance for a given period. |
Because of these limitations, you should consider Adjusted EBITDA, Adjusted EBITDA Margin, and Free Cash Flow alongside other financial performance measures, including gross margin, net loss, and our other GAAP results.
Adjusted EBITDA and Adjusted EBITDA Margin
We define Adjusted EBITDA as our net loss excluding: (1) depreciation and amortization; (2) interest income, net; (3) stock-based compensation; (4) income tax expense; and (5) payroll tax expense related to stock-based activities. We define Adjusted EBITDA Margin as Adjusted EBITDA divided by revenue.
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The following table provides a reconciliation of net loss, the most directly comparable GAAP financial measure, to Adjusted EBITDA.
| Year Ended December 31, | ||||||||||||||||
| 2017 | 2018 | 2019 | 2020 | |||||||||||||
| (in thousands) | ||||||||||||||||
| Net loss |
$ | (53,270 | ) | $ | (43,601 | ) | $ | (46,719 | ) | $ | (66,815 | ) | ||||
| Depreciation and amortization |
4,923 | 5,543 | 5,282 | 9,585 | ||||||||||||
| Interest income, net |
(483 | ) | (1,299 | ) | (2,657 | ) | (1,163 | ) | ||||||||
| Stock-based compensation |
11,069 | 17,685 | 16,317 | 16,807 | ||||||||||||
| Income tax expense |
— | 537 | 718 | 1,515 | ||||||||||||
| Payroll tax expense related to stock-based activities |
202 | 147 | 130 | 258 | ||||||||||||
| Adjusted EBITDA |
$ | (37,559 | ) | $ | (20,988 | ) | $ | (26,929 | ) | $ | (39,813 | ) | ||||
The following table provides a reconciliation of net loss margin, the most directly comparable GAAP financial measure, to Adjusted EBITDA Margin.
| Year Ended December 31, | ||||||||||||||||
| 2017 | 2018 | 2019 | 2020 | |||||||||||||
| (in thousands, except percentage) | ||||||||||||||||
| Revenue |
$ | 95,630 | $ | 141,772 | $ | 184,411 | $ | 293,511 | ||||||||
| Net loss |
$ | (53,270 | ) | $ | (43,601 | ) | $ | (46,719 | ) | $ | (66,815 | ) | ||||
| GAAP net loss margin |
(56 | )% | (31 | )% | (25 | )% | (23 | )% | ||||||||
| Revenue |
$ | 95,630 | $ | 141,772 | $ | 184,411 | $ | 293,511 | ||||||||
| Adjusted EBITDA |
$ | (37,559 | ) | $ | (20,988 | ) | $ | (26,929 | ) | $ | (39,813 | ) | ||||
| Adjusted EBITDA Margin |
(39 | )% | (15 | )% | (15 | )% | (14 | )% | ||||||||
Free Cash Flow
Free Cash Flow is a non-GAAP financial measure that we calculate as net cash (used in) provided by operating activities, less cash used for purchases of property, equipment, and software, and capitalized internal-use software costs. We exclude purchases of property, equipment and software, and capitalized internal-use software costs as we consider these capital expenditures to be a necessary component of our ongoing operations. We consider Free Cash Flow to be a liquidity measure that provides useful information to management and investors in understanding and evaluating our liquidity and future ability to generate cash that can be used for strategic opportunities, including investing in our business and strengthening our balance sheet, but it is not intended to represent the residual cash flow available for discretionary expenditures.
The following table provides a reconciliation of cash flow (used in) provided by operating activities, the most directly comparable GAAP financial measure, to Free Cash Flow.
| Year Ended December 31, | ||||||||||||||||
| 2017 | 2018 | 2019 | 2020 | |||||||||||||
| (in thousands) | ||||||||||||||||
| Net cash (used in) provided by operating activities |
$ | (29,694 | ) | $ | 456 | $ | (21,334 | ) | $ | (14,991 | ) | |||||
| Less: Purchases of property, equipment, and software |
(785 | ) | (2,097 | ) | (4,410 | ) | (3,099 | ) | ||||||||
| Less: Capitalized internal-use software costs |
(3,151 | ) | (4,578 | ) | (5,522 | ) | (8,819 | ) | ||||||||
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| Free Cash Flow |
$ | (33,630 | ) | $ | (6,219 | ) | $ | (31,266 | ) | $ | (26,909 | ) | ||||
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| Net cash used in investing activities |
$ | (23,802 | ) | $ | (11,893 | ) | $ | (64,886 | ) | $ | (101,442 | ) | ||||
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| Net cash provided by financing activities |
$ | 71,084 | $ | 9,538 | $ | 113,381 | $ | 139,014 | ||||||||
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Key Business Metrics
We monitor the key business metrics set forth below to help us evaluate our business and growth trends, establish budgets, measure the effectiveness of our sales and marketing efforts, and assess operational efficiencies. The calculation of the key metrics discussed below may differ from other similarly titled metrics used by other companies, securities analysts, or investors.
| Year Ended December 31, | ||||||||||||||||
| 2017 | 2018 | 2019 | 2020 | |||||||||||||
| (in millions) | ||||||||||||||||
| Total Registered Learners |
30.1 | 37.3 | 46.4 | 76.6 | ||||||||||||
| 2019 | 2020 | |||||||||||||||||||||||||||||||
| Q1 | Q2 | Q3 | Q4 | Q1 | Q2 | Q3 | Q4 | |||||||||||||||||||||||||
| Number of Degrees Students |
2,762 | 4,255 | 5,986 | 6,217 | 7,184 | 8,079 | 11,504 | 11,900 | ||||||||||||||||||||||||
| As of December 31, | ||||||||
| 2019 | 2020 | |||||||
| Paid Enterprise Customers |
240 | 387 | ||||||
| As of December 31, | ||||||||
| 2019 | 2020 | |||||||
| Net Retention Rate |
106 | % | 114 | % | ||||
| Year Ended December 31, | ||||||||||||||||
| 2017 | 2018 | 2019 | 2020 | |||||||||||||
| (in thousands) | ||||||||||||||||
| Consumer Segment Revenue |
$ | 85,667 | $ | 107,554 | $ | 121,011 | $ | 192,909 | ||||||||
| Enterprise Segment Revenue |
$ | 7,422 | $ | 26,812 | $ | 48,262 | $ | 70,784 | ||||||||
| Degrees Segment Revenue |
$ | 2,541 | $ | 7,406 | $ | 15,138 | $ | 29,818 | ||||||||
| Consumer Segment Gross Profit |
$ | 43,076 | $ | 57,607 | $ | 64,645 | $ | 106,509 | ||||||||
| Enterprise Segment Gross Profit |
$ | 4,717 | $ | 19,011 | $ | 34,184 | $ | 48,972 | ||||||||
| Degrees Segment Gross Profit |
$ | 2,541 | $ | 7,406 | $ | 15,138 | $ | 29,818 | ||||||||
See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Key Business Metrics and Non-GAAP Financial Measures” for a description of registered learners, number of Degrees students, Paid Enterprise Customers, Net Retention Rate, Segment Revenue and Segment Gross Profit.
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Investing in our common stock involves a high degree of risk. You should carefully consider the risks and uncertainties described below, together with all of the other information in this prospectus, including our audited consolidated financial statements and related notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” before investing in our common stock. If any of the following risks are realized, in whole or in part, our business, financial condition, results of operations, and prospects could be materially and adversely affected. In that event, the price of our common stock could decline, and you could lose part or all of your investment. Additional risks and uncertainties not presently known to us or that we currently deem immaterial also may impair our business, financial condition, results of operations, and prospects.
Risks Related to Our Business and Industry
Our quarterly and annual revenue and operating results have fluctuated from period to period and may do so in the future, which could cause our stock price to fluctuate and the value of your investment to decline.
Our quarterly and annual revenue and operating results have historically fluctuated from period to period, and our future operating results may vary significantly from quarter to quarter due to a variety of factors, many of which are beyond our control. You should not rely on period-to-period comparisons of our operating results as an indication of our future performance. Factors that may cause fluctuations in our quarterly operating results include, but are not limited to, the following:
| • | our ability to maintain existing customers and attract new customers, including businesses, governments, and educational institutions who subscribe to our Enterprise platform, as well as learners who access the content and credentialing programs available on our platform; |
| • | our ability to continue to offer compelling content and degrees or other credentialing programs created by our industry and university partners; |
| • | changes in, or trends affecting, subscriptions to our Enterprise platform from businesses, governments, and educational institutions; |
| • | changes in, or trends affecting, learner enrollment and retention levels, including with respect to learners electing to access our paid offerings; |
| • | our ability to increase and manage the growth of our international operations, including our international customer base, and our ability to manage the risks associated therewith; |
| • | the timing of our costs incurred in connection with the launch of new course content and offerings and new certification, degree, or other credentialing programs, and the timing and amount of revenue we generate from new offerings and programs; |
| • | trends and factors impacting the demand for, and acceptance of, online learning and credentialing programs, including the COVID-19 pandemic, and the prices consumers and businesses are willing to pay for such programs; |
| • | changes in, or trends affecting, the mix of partners, including educational institutions, offering open online courses only and those offering certification, degree, or other credentialing programs; |
| • | changes in the rate, volume, and demand for new content and credentialing programs created and offered by our partners on our platform; |
| • | changes in the terms of our existing partnership agreements; |
| • | the timing and terms of any new partnership agreements; |
| • | the timing and amount of our sales and marketing expenses; |
| • | costs necessary to improve and maintain our platform; |
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| • | changes in our key metrics or the methods used to calculate our key metrics; |
| • | seasonality, including seasonal engagement patterns of learners and Enterprise customers, which may vary from quarter to quarter or year to year; |
| • | changes in laws, regulations or accounting principles that impact our business; and |
| • | general political, economic, or market conditions and events affecting any of the above, including the outcome of political elections and the impact of the COVID-19 pandemic. |
These and other factors may cause our revenue and operating results to fall below the expectations of market analysts and investors in future periods, which could cause the market price of our common stock to decline substantially. Any decline in the market price of our common would cause the value of your investment to decline.
Our recent, rapid growth may not be indicative of our future growth and we expect our revenue growth rate to decline compared to prior years.
We have experienced rapid revenue growth in recent periods, with revenue of $184.4 million and $293.5 million in 2019 and 2020, respectively. You should not rely on our revenue for any previous quarterly or annual period as any indication of our revenue or revenue growth in future periods. As we grow our business, we expect our revenue growth rates to decline compared to prior years for a number of reasons, which may include more challenging comparisons to prior periods as our revenue grows, slowing demand for our platform, increasing competition, a decrease in the growth of our overall market or market saturation, and our failure to capitalize on growth opportunities. In addition, our growth rates are likely to experience increased volatility, and may decline, as the COVID-19 pandemic evolves and societal and economic circumstances shift.
We have a limited operating history, which makes it difficult to predict our future financial and operating results.
We were founded in 2011; introduced our first open online course in 2012, our first certificates of completion in 2013, our first Specialization in 2014, our Enterprise platform for businesses in 2016, and our first MasterTrack certification in 2018; enrolled the first students in the Degrees programs offered through our platform in 2016; and introduced Guided Projects in 2019 and Coursera for Campus, our Enterprise platform offering for educational institutions, in late 2019. As a result of our limited operating history, our ability to estimate our future operating results is limited and subject to a number of uncertainties, including those discussed in this “Risk Factors” section and elsewhere in this prospectus. If we do not manage these risks successfully, our operating and financial results may differ materially from our expectations and our business and stock price may suffer.
We have incurred significant net losses since inception, and anticipate that we will continue to incur losses for the foreseeable future.
We incurred net losses of $46.7 million and $66.8 million in 2019 and 2020, respectively, and we had an accumulated deficit of $343.6 million as of December 31, 2020. We expect to incur significant losses in the future. We will need to generate and sustain increased revenue levels in future periods to achieve profitability, and even if we achieve profitability, we may not be able to maintain or increase our level of profitability. We anticipate that our operating expenses will increase substantially for the foreseeable future as we continue to, among other things:
| • | expand our course offerings and the robustness of our platform; |
| • | expand our learner base and our sales and marketing efforts; |
| • | improve and scale our technology; |
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| • | address increased competition; and |
| • | incur significant accounting, legal, and other expenses as a public company that we did not incur as a private company. |
These expenditures will make it more difficult for us to achieve and maintain profitability. Our efforts to grow our business may be more costly than we expect, and we may not be able to increase our revenue enough to offset our higher operating expenses. If we are forced to reduce our expenses, it could negatively impact our growth and growth strategy. As a result, we can provide no assurance as to whether or when we will achieve profitability. If we are not able to achieve and maintain profitability, the value of our company and our common stock could decline significantly, and you could lose some or all of your investment.
The COVID-19 pandemic has impacted, and may continue to impact, our business, key metrics, and results of operations in volatile and unpredictable ways.
The uncertainty around the COVID-19 pandemic in the United States and worldwide will likely continue to adversely impact the national and global economy. The full extent of the impact of the pandemic on our business, key metrics, and results of operations depends on future developments that are uncertain and unpredictable, including the duration, severity, and spread of the pandemic, its impact on capital and financial markets, and any new information that may emerge concerning the virus or vaccines or other efforts to control the virus.
As a result of the COVID-19 pandemic, we have transitioned to an almost fully remote work environment and we may continue to operate on a significantly remote and geographically (including internationally) dispersed basis for the foreseeable future. This remote and dispersed work environment could have a negative impact on the execution of our business plans and operations. For example, if a natural disaster, power outage, connectivity issue, or other event occurred that impacted our employees’ ability to work remotely, it may be difficult or, in certain cases, impossible, for us to continue our business for a substantial period of time. Further, as the COVID-19 pandemic continues, we may experience disruptions if our employees or our partners’ or third-party service providers’ employees become ill and are unable to perform their duties, and our operations, Internet, or mobile networks, or the operations of one or more of our third-party service providers, is impacted. The increase in remote working may also result in consumer privacy, IT security, and fraud vulnerabilities, which, if exploited, could result in significant recovery costs and harm to our reputation. Transitioning to a fully or predominantly remote work environment and providing and maintaining the operational and infrastructure necessary to support a remote work environment also present significant challenges to maintaining our corporate culture, including employee engagement and productivity, both during the immediate pandemic crisis and beyond.
We have also seen significant and rapid shifts in the traditional models of education and training as this pandemic has evolved. Although we believe our business has also been positively impacted to some extent by several trends related to the COVID-19 pandemic, including the increased need or willingness of businesses, governments, and educational institutions to adopt remote, online, and asynchronous learning and training, we cannot predict whether these trends will continue if and when the pandemic begins to subside, restrictions ease, and the risk and barriers associated with in-person learning and training decrease. In addition, the COVID-19 pandemic may negatively impact the financial resources available to learners or the operating budgets of our partners or customers, any of which could in turn negatively impact our business and operating results.
Market adoption of online learning solutions is relatively new and may not grow as we expect, which may harm our business and results of operation.
Our future success will depend in part on the growth, if any, in the demand for online learning solutions. While the COVID-19 pandemic has accelerated the market for online learning solutions, it is still less mature than the market for in-person learning and training, which many businesses currently utilize, and these businesses
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may be slow or unwilling to migrate from these legacy approaches. As such, it is difficult to predict learner or partner demand for our platform, learner or partner adoption and renewal, the rate at which existing learners and partners expand their engagement with our platform, the size and growth rate of the market for our platform, the entry of competitive offerings into the market, or the success of existing competitive offerings. Furthermore, even if educators and enterprises want to adopt an online learning solution, it may take them a substantial amount of time to fully transition to this type of learning solution or they could be delayed due to budget constraints, weakening economic conditions, or other factors. Even if market demand for online learning solutions generally increases, we cannot assure you that adoption of our platform will also increase. If the market for online learning solutions does not grow as we expect or our platform does not achieve widespread adoption, it could result in reduced customer spending, learner and partner attrition, and decreased revenue, any of which would adversely affect our business and results of operations.
We may need to change the contract terms, including our pricing model, for the course content and credentialing programs offered on our platform, which in turn would impact our operating results.
We have limited experience with respect to determining the optimal prices and contract length for the course content and certification, degree, and other credentialing programs offered on our platform, and as a result, we have in the past, and expect that we may in the future, need to change our pricing model or target contract length from time to time, which could impact our financial results. For example, in February 2020, we launched Coursera Plus, an annual subscription plan with unlimited access to a variety of our courses, Specializations, and professional certificates, at a fixed annual cost, and we may need to adjust our pricing model as we gain experience with this new offering. As the market for our learning platform grows (if ever), as new competitors introduce competitive applications or services, or as we enter into new international markets, we may be unable to attract new customers at the same price or based on the same pricing models we have historically used, or for contract lengths consistent with our historical averages. Pricing and contract length decisions may also impact the mix of adoption among our offerings and negatively impact our overall revenue. Moreover, competition may require us to make substantial price concessions or accept shorter contract durations. Our revenue and financial position may be adversely affected by any of the foregoing, and we may have increased difficulty achieving profitability.
If we fail to maintain and expand our partnerships with university and industry partners, our ability to grow our business and revenue will suffer.
The success of our business depends in large part on the continued and increased development and volume of compelling course content and credentialing programs by our university and industry partners, which we also refer to as our educator partners. We may face several challenges in establishing and expanding these relationships. For instance, our university and industry partners who use our platform are required to invest significant time and resources to adjust the manner in which they develop course content and degree programs for an online learning environment. The delivery of degree programs online at educational institutions has not yet achieved widespread acceptance, and many administrators and faculty members may have concerns regarding the perceived loss of control over the educational process that might result from offering courses and degrees online and the effectiveness of asynchronous learning, as well as concerns regarding the ability to provide high-quality education online that maintains the standards they set for their on-campus programs. There can be no assurance that online programs, such as those offered on our platform, will ever achieve significant market acceptance, and universities and organizations may therefore decline to engage with our platform. Further, if we were to lose a significant number of university and industry partners, our growth and revenue would be negatively impacted.
If we are required to change the contract terms with our educator partners, including with respect to pricing or contract length, it could materially and adversely affect our business, financial condition, and results of operations.
We work with our educator partners to deliver a broad portfolio of content and credentials on our platform. For our Consumer and Enterprise offerings, we incur content costs in the form of fees paid to educator partners.
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In addition, our Degrees services revenue is based on a percentage of the total tuition collected from Degrees students by the university partner. As a result, our revenue, gross profit, and operating results generally could be significantly and negatively impacted if we are required to renegotiate or change the terms of our agreements with these partners. For example, if a significant number of university partners, or university partners whose courses or credentialing programs account for a significant volume of learner enrollment on our platform, were to seek to renegotiate the content fees payable by us or the percentage of tuition payable to us, it could have a material impact on our business and operating results. Further, we may be required to change the terms of these agreements, including the pricing terms or contract length, due to competitive, regulatory, or other reasons. Any significant change in our pricing or other contract terms with these partners could materially and adversely affect our business, financial condition, and results of operations.
Our financial performance depends heavily on our ability to attract and retain learners, and if we fail to do so, our business and operating results will suffer.
Building awareness and acceptance of the online course content and certification, degree, and other credentialing programs offered on our platform among learners is critical to our ability to attract prospective learners and generate revenue. We must also continue to successfully work with our partners to develop new and compelling course content as well as additional certification, degree, and other credentialing programs to maintain the relevancy of content and keep learners interested and engaged. A significant portion of our expenses is attributable to marketing efforts dedicated to attracting potential learners to our platform. Because we generate revenue based on fees from, or as a result of, learners enrolled in the online courses and certification, degree, and other credentialing programs offered on our platform, we must attract learners in a cost-effective manner and increase the rate at which learners enroll in and complete the courses and credentialing programs offered by our partners. We also must retain learners and convert learners from our freemium model to paying customers, which depends in part on our ability to offer engaging and frequently updated content as well as quality customer support and service. The following factors, many of which are largely outside of our control, may prevent us from increasing and maintaining learner enrollment in the online courses and credentialing programs offered on our platform in a cost-effective manner or at all:
| • | Negative perceptions about online learning. Online education programs may not be successful or operate efficiently, which in turn could create the perception that online education in general is not effective. Learners may also be reluctant to enroll in online programs due to concerns that the learning experience may be substandard, that employers may be hesitant to hire learners who received their education or credentials online, or that organizations granting professional licenses or certifications may be reluctant to grant them based on credentials, including degrees, earned through online education or training. |
| • | Reduced support from partners. If partners cease to offer new and compelling course content or certification, degree, or other credentialing programs or limit our ability to promote their courses or programs, learners may reduce or terminate their use of our platform. |
| • | Harm to partner reputation. Many factors affecting our partners’ reputations are beyond our control and can change over time, including their academic performance and ranking among educational institutions, including with respect to a specific degree, certification, or other credentialing program. |
| • | Lack of interest in the certifications, degrees, or other credentials offered on our platform. We may encounter difficulties attracting learners to enroll in certification, degree, or other credentialing programs that are not in demand due to shifting employer or societal preferences and priorities or that are in emerging or unproven fields. |
| • | Learner dissatisfaction. Learner dissatisfaction with the quality of the course content and presentation or the course presenters, changing views of the value of our partners’ programs and certification, degree, or other credentialing programs offered, and perceptions of employment prospects following completion of a program on our platform may negatively impact learner retention. |
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| • | Ineffective marketing efforts. Our marketing efforts, which use search engine optimization, paid search, and custom website development and deployment, may prove unsuccessful or cost inefficient. |
| • | Lack of financial resources for learners. Any developments that reduce the availability of financial aid for higher education generally or that reduce the disposable income available to potential learners (including macro-economic developments such as continued or worsening recession or unemployment or the ongoing COVID-19 pandemic) could impair learners’ abilities to meet their financial obligations, which in turn could result in reduced enrollment and harm our ability to generate revenue. |
| • | General economic conditions. Enrollment in the courses and certification, degree, and other credentialing programs offered on our platform may be affected by changes in the U.S. economy and by global economic conditions. For example, an improvement in economic conditions may reduce demand for higher educational services as potential learners may find adequate employment without additional education. Conversely, a decline in employment opportunities or economic conditions may reduce employers’ willingness to sponsor higher educational opportunities for employees given a lack of employer need for enhanced skill sets or an inability to fund such programs, and could discourage learners from pursuing higher education due to an inability to afford our programs or a perception that the financial investment may not result in increased earning potential or improved employment opportunities. |
Any of these factors could reduce enrollment and retention and could cause our costs associated with attracting and retaining learners to increase, which could materially harm our ability to increase our revenue or achieve profitability. These developments could also harm our reputation and make it more difficult for us to engage our partners for new course content or other offerings, which in turn may negatively impact our ability to expand our business and improve our financial performance.
If our learners do not expand beyond our freemium offerings and free trials available on our platform, our ability to grow our business and improve our results of operations may be adversely affected.
Many of our learners initially use the freemium version of our platform or free trials available on our platform, and many of our Enterprise customers engage with our platform only for a specific use case. Specifically, in March 2020, as part of our COVID-19 initiative, we began offering free unlimited access to Coursera for Campus to students and faculty at campuses around the world. Our ability to grow our business depends in part on our ability to persuade learners and other customers to expand their use of our platform to address additional use cases and to convert free subscriptions to paid subscriptions over time.
Further, to continue to grow our business, it is important that our customers renew their subscriptions when existing contracts expire and that we expand our relationships with our existing customers. Our customers have no obligation to renew their subscriptions, and our customers may decide not to renew their subscriptions with a similar contract period, at the same prices and terms, with the same or a greater number of learners, or at all.
If we pursue unsuccessful partner opportunities, we may forego more profitable opportunities and our operating results and growth would be harmed.
The process of identifying course content and certification, degree, and other credentialing programs that we believe will be a good fit for our platform and negotiating agreements with potential partners is complex and time-consuming. Because of the initial reluctance on the part of some educational institutions, businesses, and other organizations to embrace online delivery of education, training, and credentialing programs and the complicated approval process within some of these entities, our process to attract and engage a new partner can be lengthy. In addition, we may face resistance from university administrators or faculty members.
Developing and launching a new course offering or new certification, degree, or other credentialing program can take up to 500 hours and up to a year or more. We may spend substantial effort and management resources on securing a new partnership or working with our existing and new partners to develop and launch new course content
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and new degree, certification, or other credentialing programs without any assurance that our efforts will result in the successful launch of a new offering or the generation of revenue. If we invest substantial resources pursuing opportunities which do not attract sufficient interest from learners, we may forego other more successful content and program development efforts, and our operating results, revenue and growth would be harmed.
We must incur significant expense in technology and content development to launch a new offering or program, and we may not generate sufficient revenue from a new offering to offset our costs.
Our platform enables our partners to offer learners the opportunity to enroll in live, or synchronous, courses and programs and pre-produced, or asynchronous, educational content that can be accessed at any time. To launch a new course offering or new certification, degree, or other credentialing program, whether synchronous or asynchronous, we must integrate our platform with the various learner information and other operating systems our partners use to manage functions within their institutions. In addition, our content development team must work closely with that partner’s faculty members or staff to produce engaging online course content, and we must commence learner acquisition activities. During the term of our agreement with the partner, we are responsible for the costs associated with maintaining our technology platform and providing non-academic and other support for learners enrolled in the program. We invest significant resources in these new programs from the beginning of our relationship with a partner, including marketing and other learner acquisition costs to attract and fulfill enrollment cohorts for a program, and there is no guarantee that we will ever recoup these costs. In addition, delays in the implementation of a new program, including Specialization or Degrees programs, could negatively impact our revenue and operating results.
Because we receive fees from learners enrolling in, and, in some cases, completing, courses and certification, degree, or other credentialing programs on our platform, we only begin to recover these costs once learners are enrolled and begin paying fees. In addition, in some cases, learners may audit a course or courses toward a certification free of charge and elect not to pay for the certification itself. Further, our Degrees services revenue is determined based on a percentage of the total tuition collected from Degrees students by the university partner. As a result, the revenue we earn from the Degrees offerings on our platform is dependent on the number of learners enrolled in the Degrees program and the tuition charged by the university partner. The time that it takes for us to recover our investment in a new course or program depends on a variety of factors, primarily our learner acquisition costs, learner retention rate, and the rate of growth in learner enrollment in and, in some cases, completion of, the course or program. Because of the lengthy period required to recoup our investment in a program, unexpected developments beyond our control could occur that result in the partner ceasing or significantly curtailing a course offering or certification, degree, or other credentialing program before we generate any revenue therefrom. In addition, partners generally do not grant us exclusive rights to their content, and any such arrangements are of limited duration. As such, partners may choose to offer the same content on one of our competitors’ platforms, which could limit the number of learners enrolled in such partner’s courses or programs on our platform. In addition, if a partner were to terminate an existing program, learners enrolled in that program may stop using our platform, which in turn would negatively impact our learner enrollment generally. As a result of any of the foregoing, we may ultimately be unable to recover the full investment that we make in a new offering or achieve any level of profitability from such offering.
Failure to effectively expand our sales and marketing capabilities could harm our ability to increase our customer base and achieve broader market acceptance of our platform.
Our ability to broaden our customer base, particularly our Enterprise customer base, and achieve broader market acceptance of our platform, will depend to a significant extent on the ability of our sales and marketing organizations to work together to drive our sales pipeline and cultivate customer and partner relationships to drive revenue growth. Our marketing efforts include the use of search engine optimization, paid search, and custom website development and deployment.
We have invested in and plan to continue expanding our sales and marketing organizations, both domestically and internationally. Identifying, recruiting, and training sales personnel will require significant
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time, expense, and attention. If we are unable to hire, develop, and retain talented sales or marketing personnel, if our new sales or marketing personnel are unable to achieve desired productivity levels in a reasonable period of time (including as a result of working remotely in connection with the COVID-19 pandemic), or if our sales and marketing programs are not effective, our ability to broaden our customer base and achieve broader market acceptance of our platform could be harmed. In addition, the investments we make in our sales and marketing organization will occur in advance of experiencing benefits from such investments, making it difficult to determine in a timely manner if we are efficiently allocating our resources in these areas.
If we fail to quickly and efficiently scale our operations to support the needs of new and existing partners, our reputation and our revenue will suffer.
Our continued growth and potential profitability depends on our ability to successfully scale our operations to support newly launched course offerings or new certification, degree, or other credentialing programs with our partners. We plan to continue to hire new employees, particularly in our sales and marketing team and our technology and content development teams. If we cannot adequately train these new employees, we may not be successful in attracting potential learners to our platform, which would negatively impact our ability to generate revenue, and our partners and learners could lose confidence in our platform. If we cannot quickly and efficiently scale up our technology and operations to handle increases in the volume and rate of learner enrollment and of new course offerings or new certification, degree, or other credentialing programs, our partners’ and learners’ experiences with our platform may suffer, which in turn could damage our reputation. Our ability to effectively manage any significant increase in the volume of new offerings or programs or in the rate or volume of learner enrollment and retention will depend on a number of factors, including our ability to:
| • | assist our partners in developing and producing an increased volume of engaging course content that is accessible to a wide variety of learners; |
| • | successfully introduce new features and enhancements on our platform; |
| • | maintain a high level of functionality and cross-functionality, and technological robustness of our platform; and |
| • | deliver high-quality professional services and support (including training, implementation, and consulting services) to our partners, their faculty and employees, and learners on our platform. |
Establishing new course offerings and new certification, degree, or other credentialing programs or expanding existing ones will require us to make investments in management and key staff, increase capital expenditures, incur additional marketing expenses, and potentially reallocate other resources. If we are unable to scale our platform, maintain and increase its interoperability, develop an increasingly robust mix of engaging content or otherwise manage new offerings effectively, our ability to grow our business and achieve profitability would be impaired, and the quality of our solutions and the satisfaction of our partners and learners could suffer.
If we fail to adapt and respond effectively to rapidly changing technology, evolving industry standards and changing customer needs or requirements, our platform may become less competitive.
Our future success depends on our ability to adapt and enhance our platform. To attract new learners and partners and increase revenue from existing learners and partners, we will need to continuously enhance and improve our offerings to meet learner and partner needs at prices that our customers are willing to pay. Such efforts will require adding new functionality and responding to technological advancements, which will increase our research and development costs. If we are unable to develop content that addresses learners’ and partners’ needs, or enhance and improve our platform in a timely manner, we may not be able to maintain or increase market acceptance of our platform. Further, many of our competitors expend a considerably greater amount of funds on their research and development programs, and those that do not may be acquired by larger companies that would allocate greater resources to our competitors’ research and development programs. If we fail to maintain adequate research and development resources or compete effectively with the research and development
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programs of our competitors, our business could be harmed. Our ability to grow is also subject to the risk of future disruptive technologies. Access to and use of our platform is provided via the Internet, which, itself, was disruptive to the previous enterprise software model. If new technologies emerge that are able to deliver online learning programs at lower prices, more efficiently, more conveniently or more securely, and if we fail to adopt such technologies or do so in a timely manner, our ability to compete would be adversely affected.
If we fail to increase sales of our Enterprise offering, or if we need to change the contract terms associated therewith, including with respect to pricing or contract length, it could negatively affect our business, financial condition, and results of operations.
In addition to our offerings for individuals, we sell our Enterprise offering to businesses, academic institutions, and governments. These customers utilize our platform to provide relevant training, skills, and credentialing programs to current and potential employees and citizens through our online platform. To maintain and expand our relationships with these entities, we must demonstrate the value, benefits, and return on investment of providing education, training, and credentialing through our online platform and achieve acceptance from both employees and these entities of the merits and legitimacy of our business model.
Our growth strategy is dependent upon increasing sales of our Enterprise offering to these entities, which we offer on a subscription basis. We have a limited history with our subscription and pricing models and changes in our models could adversely affect our revenue and financial position. In addition, as the market for our learning platform grows (if ever), as new competitors introduce competitive applications or services, or as we enter into new international markets, we may be unable to attract new customers at the same price or based on the same pricing models we have historically used, or for contract lengths consistent with our historical averages. For example, we often enter into subscription arrangements with businesses, academic institutions, and governments in which we offer more favorable pricing terms in exchange for larger total contract values or longer contract terms. Changes to our pricing models or contract lengths could negatively impact our revenue and financial position, and we may have increased difficulty achieving profitability. As we drive a greater portion of our revenue through subscriptions to our Enterprise platform, this may also result in reduced margins in the future.
We recognize revenue from Enterprise customer subscriptions ratably over the subscription term of the underlying contract, which generally ranges from one to three years. Consequently, a decline in new or renewed subscriptions in any quarter will not be fully reflected in revenue or other results of operations in that quarter but will negatively affect our revenue and other results of operations across future quarters. Further, any increases in the average term of subscriptions would result in revenue for those contracts being recognized over longer periods of time with less positive impact on our results of operations in the near term. Accordingly, such changes could adversely affect our financial performance, cause us to miss industry or analyst expectations and cause our stock price to decline.
As we seek to increase sales of our Enterprise offering, we face upfront sales costs, higher customer acquisition costs, more complex customer requirements, and discount requirements. In addition, entities that subscribe to our Enterprise platform may elect to begin to use our platform on a limited basis, but nevertheless require education and interactions with our sales team, which increases our upfront investment in the sales effort with no guarantee that our platform will be used widely enough across their organization to justify our upfront investment. If we are unable to maintain or increase the number of subscriptions to our Enterprise platform while mitigating the risks associated with serving subscribers, our business, financial condition, and results of operations will suffer.
If we fail to maintain sufficient high-quality content from partners, we will be unable to attract and retain customers.
Our success depends on our ability to provide learners and partners with the information they seek, which in turn depends on the quantity and quality of the content provided by our partners. We may be unable to provide
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learners with the information they seek if our partners do not contribute content that is helpful and reliable, or if they remove content they previously submitted.
We believe that many of our new learners find us by word of mouth and other non-paid referrals from existing learners. If existing learners and partners are dissatisfied with their experience on our platform, they may stop accessing our content and may stop referring others to us. Likewise, if existing learners do not find our content appealing, whether because of a negative experience or declining interest in or relevancy of the content, they may stop referring others to us. In turn, if partners perceive that our platform lacks an adequate learner audience, partners may be less willing to provide content to offer on our platform, and the experience of learners could be further negatively impacted. If we are unable to retain existing learners and partners and attract new learners and partners who contribute to an active community, our growth prospects would be harmed and our business could be adversely affected.
If we fail to manage the growth of our business both in terms of scale and complexity, our operating results and financial condition could be adversely affected.
Our revenue increased from $184.4 million in 2019 to $293.5 million in 2020, and the number of our full-time employees increased from 512 as of December 31, 2019 to 779 as of December 31, 2020. Our growth has placed, and will continue to place, a significant strain on our administrative and operational infrastructure, facilities, and other resources, and we face challenges of integrating, developing, training, and motivating a rapidly growing employee base in our various offices around the world and maintaining our company culture across multiple offices and internationally. Our ability to manage our operations and growth will require us to continue to expand our sales and marketing and content development personnel, and technology, finance and administration teams, as well as our facilities and infrastructure. We will also be required to refine our operational, financial, and management controls and reporting systems and procedures. If we fail to efficiently manage this expansion of our business, our costs and expenses may increase more than anticipated and we may not successfully expand our partnerships with businesses, governments, educational institutions, and other organizations, enhance our platform and technology-enabled services, increase the volume of new course content and credentialing programs developed by our partners, attract a sufficient number of learners in a cost-effective manner, satisfy the requirements of our existing partners, increase the volume of subscriptions to our Enterprise platform, respond to competitive challenges, or otherwise execute our business plan. Although our business has experienced significant growth in the past, we cannot provide any assurance that our revenue will continue to grow at the same rate or at all in the future.
Our ability to effectively manage any significant growth of our business will depend on a number of factors, including our ability to:
| • | effectively recruit, integrate, train, and motivate a large number of new employees while retaining existing employees and effectively executing our business plan; |
| • | continue to improve our operational, financial, and management controls; |
| • | protect and further develop our strategic assets, including our intellectual property rights; and |
| • | make sound business decisions in light of the scrutiny associated with operating as a public company. |
These activities will require significant capital expenditures and allocation of valuable management and employee resources, and our growth will continue to place significant demands on our management and our operational and financial infrastructure. We may be unable to effectively manage any future growth in an efficient, cost-effective or timely manner, or at all. Any failure to successfully implement systems enhancements and improvements will likely negatively impact our ability to manage our expected growth, ensure uninterrupted operation of key business systems, and comply with the rules and regulations that are applicable to public reporting companies. Moreover, if we do not effectively manage the growth of our business and operations, the quality of our platform could suffer, which could negatively affect our reputation, results of operations, and overall business.
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We face competition from established companies as well as other emerging companies, which could divert partners to our competitors, result in pricing pressure, impact our market share, and significantly reduce our revenue.
The market for global adult online learning is highly fragmented and rapidly evolving. We expect alternative modes of learning to continue to accelerate as players in this industry introduce new and more competitive products, enhancements, and bundles.
Participants in the global adult online learning ecosystem include:
| • | Direct-to-consumer, online education companies: edX Inc., FutureLearn Limited, and Udemy, Inc.; |
| • | Companies that provide technology solutions and services to universities offering online learning programs: 2U, Inc., Eruditus Learning Solutions Pte. Ltd., Noodle Partners, Inc., and upGrad Education Private Limited; |
| • | Corporate training companies: A Cloud Guru Ltd., Degreed, Inc., LinkedIn Corporation through its LinkedIn Learning services, Pluralsight, Inc., and Udacity, Inc.; |
| • | Providers of free educational resources: Khan Academy, Inc., The Wikipedia Foundation, Inc., and Google LLC (“Google”) through its YouTube services; and |
| • | Internal online degree platforms: Online degree programs developed in-house by universities. |
We expect these and other existing competitors and new entrants to the online learning market to continually revise and improve their business models. If these or other market participants introduce new or improved delivery of online education and technology-enabled services that are more compelling or widely accepted than ours, our ability to grow our revenue and achieve profitability could suffer. Several new and existing companies in the online education industry provide or may provide offerings similar to what we offer on our platform, and these companies may pursue relationships with our partners that may reduce the content our partners produce for our platform. In addition, educational institutions, as well as businesses, governments, and other organizations, may choose to continue using or develop their own online learning or training solutions in-house, rather than pay for our solutions.
Some of our competitors and potential competitors have significantly greater resources than we do. Increased competition may result in pricing pressure for us in terms of the percentage of tuition we are able to negotiate to receive from a partner. The competitive landscape may also result in a longer and more complex process of recruiting and maintaining current and prospective partners or a decrease in our market share, any of which could negatively affect our revenue and future operating results and our ability to grow our business.
A number of factors could impact our ability to compete, including:
| • | the availability or development of alternative online education services that are more compelling than ours; |
| • | changes in pricing policies and terms offered by our competitors or by us; |
| • | the ability to adapt to new technologies and changes in requirements of our partners and learners; |
| • | learner acquisition and retention costs; |
| • | the ability of our current and future competitors to establish relationships with businesses, governments, educational institutions, and other organizations to enhance their services and expand their markets; and |
| • | industry consolidation and the number and rate of new entrants. |
We may not be able to compete successfully against current and future competitors. In addition, competition may intensify as our competitors raise additional capital and as established companies in other market segments or geographic markets expand into our market segments or geographic markets. If we cannot compete successfully against our competitors, our ability to grow our business and achieve profitability could be impaired.
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If for-profit postsecondary institutions, which offer online education alternatives different from ours, perform poorly, it could nonetheless tarnish the reputation of online education as a whole, which could impair our ability to grow our business.
For-profit postsecondary institutions, many of which provide course offerings predominantly online, are under intense regulatory and other scrutiny, which has led to media attention that has sometimes portrayed that sector in an unflattering light. Some for-profit online school operators have been subject to governmental investigations alleging the misuse of public funds, financial irregularities, and failure to achieve positive outcomes for learners, including the inability to obtain employment in their fields. These allegations have attracted significant adverse media coverage and have prompted legislative hearings and regulatory responses. These investigations have focused on specific companies and individuals, as well as entire industries in the case of recruiting practices by for-profit higher education companies. Even though we do not market our solutions to these institutions, this negative media attention may nevertheless add to the skepticism about online higher education generally, including our solutions.
The impact of these negative public perceptions on our current and future business is difficult to predict. If these few situations, or any additional misconduct, cause all online learning programs to be viewed by the public or policymakers unfavorably, we may find it difficult to enter into or renew agreements with our partners or attract additional learners for our partners’ programs. In addition, this perception or any further governmental investigation could serve as the impetus for more restrictive legislation, which could limit our future business opportunities. Moreover, allegations of abuse of federal financial aid funds and other statutory violations against for-profit higher education companies could negatively impact our ability to succeed due to increased regulation and decreased demand. Any of these factors could negatively impact our ability to increase our partner base and grow our partners’ programs, which would make it difficult to continue to grow our business and could negatively affect our stock price.
We may acquire other companies or technologies which could divert our management’s attention, result in additional dilution to our stockholders, and otherwise disrupt our operations and harm our results of operations.
We may choose to expand by making acquisitions that could be material to our business. To date, we have only completed one acquisition, and our ability as an organization to successfully acquire and integrate technologies or businesses is unproven and limited. Acquisitions involve many risks, including the following:
| • | an acquisition may negatively affect our results of operations and financial condition because it may require us to incur charges or assume substantial debt or other liabilities, may cause adverse tax consequences or unfavorable accounting treatment, may expose us to claims and disputes by third parties, including intellectual property claims and disputes, or may not generate sufficient financial return to offset additional costs and expenses related to the acquisition; |
| • | we may encounter difficulties or unforeseen expenditures in integrating the business, technologies, products, personnel or operations of any company that we acquire, particularly if key personnel of the acquired company decide not to work for us; |
| • | an acquisition may disrupt our ongoing business and distract our management; |
| • | an acquisition may result in a delay or reduction of customer purchases for both us and the company we acquired due to customer uncertainty about continuity and effectiveness of service from either company; |
| • | an acquisition may involve the entry into geographic or business markets in which we have little or no prior experience or where competitors have stronger market positions; |
| • | we may face challenges inherent in effectively managing an increased number of employees in diverse locations; |
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| • | we may experience strain on our financial and managerial controls and reporting systems and procedures; |
| • | our use of cash to pay for acquisitions would limit other potential uses for our cash; |
| • | if we incur debt to fund such acquisitions, such debt may subject us to material restrictions on our ability to conduct our business; |
| • | we may incur impairment charges related to potential write-downs of acquired assets or goodwill; and |
| • | to the extent that we issue a significant amount of equity or equity-linked securities in connection with an acquisition, existing stockholders may be diluted. |
We may not succeed in addressing these or other risks, which could harm our business and operating results.
We may invest in private companies and if the value of any such equity investments were to decline, it could adversely affect our results of operations and financial condition.
We may from time to time evaluate or make equity investments in private companies where we do not have the ability to exercise significant influence over results. Investments in private companies are inherently risky. The companies in which we may invest include early-stage companies that may still be developing products and services with limited cash to support the development, marketing, and sales of their products, and whose financial statements are often unaudited. Further, our ability to liquidate such investments will typically be dependent on a liquidity event, such as a public offering or acquisition, as no public market currently exists for the securities held in the investees. Valuations of privately-held companies are inherently complex and uncertain due to the lack of a liquid market for the securities of such companies. If we determine that any of our investments in such companies have experienced a decline in value, we will recognize an expense to adjust the carrying value to its estimated fair value. Negative changes in the estimated fair value of private companies in which we invest could have a material adverse effect on our results of operations and financial condition.
Our directors may encounter conflicts of interest involving us and other entities with which they may be affiliated, including matters that involve corporate opportunities.
Most of our directors are, and any future directors may be, affiliated with other entities, including venture capital or private equity funds or businesses that may be complementary, competitive, or potentially competitive to our company. They may also in the future become affiliated with entities that are engaged in business or other activities similar to our business. Additionally, all of our officers and directors, in the course of their other business activities, may become aware of investments, business opportunities, or information which may be appropriate for presentation to us as well as to other entities to which they owe a fiduciary duty. As a result, directors and officers may encounter perceived or actual conflicts of interest involving us and other entities with which they are or become affiliated, including matters that involve corporate opportunities. For example, a portfolio company of a director-affiliated venture fund may become a competitor of ours or a potential strategic partner. In addition, as our growth strategy includes considering potential acquisitions, it is possible an entity affiliated with one of our directors could be an acquisition target or a competitive acquiror. Further, to the extent we engage in transactions with any director-affiliated entity, it could create actual, or the perception of, additional conflicts of interest, including with respect to our ability to negotiate terms equivalent to those that could be obtained in an arms’-length negotiation with an unaffiliated third party. For instance, Dr. Ng, one of our co-founders and Chairman of our board of directors, owns DeepLearning.AI Corp., a developer of educational content relating to artificial intelligence that offers courses through our platform. Although we view DeepLearning.AI Corp. as a valued business partner and believe our agreement is on commercially reasonable terms, there may nonetheless be a perception of a conflict of interest. As a result of the foregoing, our directors and officers may have conflicts of interest in determining to which entity particular opportunities or information should be presented. If, as a result of such potential conflicts, we are deprived of investment, business, or information, the execution of our business plan and our ability to effectively compete may be adversely affected. Our directors are also not obligated to commit their time and attention exclusively to our business and accordingly, they may encounter conflicts of interest in allocating their time and resources between us and other entities with which they are affiliated.
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If we do not retain our senior management team and key employees, we may not be able to sustain our growth or achieve our business objectives.
Our future success is substantially dependent on the continued service of our senior management team, and in particular of our Chief Executive Officer. The expertise of our senior management in negotiating with businesses, governments, educational institutions, and other organizations is critical in navigating the complex approval processes of these entities. We do not maintain key-person insurance on any of our employees, including our senior management team, and our management and other employees are generally employed on an at-will basis. The loss of the services of any individual on our senior management team would make it more difficult to successfully operate our business and pursue our business goals.
Our future success also depends heavily on the retention of our sales and marketing, data science, technology and content development, and support teams to continue to attract and retain qualified learners in our partners’ programs, thereby generating revenue for us. In particular, our technology and content development employees provide the technical expertise underlying our technology-enabled services that support our online course offerings and the certification, degree and other credentialing programs offered on our platform, as well as the learners enrolled in these programs. Competition for these employees is intense. We may be unable to attract or retain these key personnel that are critical to our success, resulting in harm to our relationships with partners, loss of expertise or know-how, and unanticipated recruitment and training costs.
We may need additional capital in the future to pursue our business objectives. Additional capital may not be available on favorable terms, or at all, which could compromise our ability to grow our business.
We believe that our existing cash balances, in addition to the proceeds we receive from this offering will be sufficient to meet our minimum anticipated cash requirements for at least the next twelve months. We may, however, need to raise additional funds to respond to business challenges or opportunities, accelerate our growth, develop new offerings, or enhance our platform. If we seek to raise additional capital, it may not be available on favorable terms or may not be available at all. In addition, if we seek debt financing, we may be subject to onerous terms and restrictive covenants. Lack of sufficient capital resources could significantly limit our ability to manage our business and to take advantage of business and strategic opportunities. Further, any additional capital raised through the sale of equity or issuance of debt securities with an equity component would dilute our stock ownership. If adequate additional funds are not available if and when needed, we may be required to delay, reduce the scope of, or eliminate material parts of our business strategy.
We believe our long-term value as a company will be greater if we focus on growth, which may negatively impact our results of operations in the near term.
We believe our long-term value as a company will be greater if we focus on longer-term growth over short-term results. As a result, our results of operations may be negatively impacted in the near term relative to a strategy focused on maximizing short-term profitability. Significant expenditures on sales and marketing efforts, developing and enhancing our platform, and expanding our research and development efforts may not ultimately grow our business or lead to expected long-term results. If our strategy does not lead to expected growth or if we are ultimately unable to achieve results of operations at the levels expected by securities analysts and investors, the market price of our common stock could decline.
Our current operations are international in scope and we plan to expand our international operations, which exposes us to risks inherent in international operations.
Operating in international markets requires significant resources and management attention and subjects us to regulatory, economic, and political risks that are different from those in the United States. We have employees in Bulgaria, Canada, India, and the United Kingdom in several functional areas, including product and software development, sales and marketing, talent recruitment, and general facilities management. Our international
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operations subject us to the compensation and benefits regulations of those jurisdictions, as well as other employer duties and obligations, that differ from the compensation and benefits regulations and duties and obligations in the United States. Further, enrollments of learners from other countries requires us to comply with international data privacy regulations of those countries. As of December 31, 2020, we had approximately 77 million registered learners, including approximately 62 million registered learners from over 190 foreign countries, and had partnerships with over 100 international entities. Failure to comply with international regulations or to adequately adapt to international markets could harm our ability to successfully operate our business and pursue our business goals.
We intend to expand our international operations and continue to establish a worldwide partner and learner base. Our expansion efforts into international markets may not be successful. In addition, we face risks in doing business internationally, including risks associated with sales to international governments and entities, that could constrain our operations, increase our cost structure, and compromise our growth prospects, including:
| • | the need to localize and adapt online certification, degree, and other credentialing programs for specific countries, including translation into foreign languages and ensuring that these programs enable our partners to comply with local education laws and regulations; |
| • | local laws restricting learners from pursuing certifications, degrees, or other credentials through online education platforms such as ours or limiting the availability of financial aid to finance online education; |
| • | data privacy laws that may require data to be handled in a specific manner, including storing and processing data solely on local servers, which is a capability we currently do not have; |
| • | difficulties in staffing and managing foreign operations, including in countries in which foreign employees may become part of labor unions, employee representative bodies, workers’ councils or collective bargaining agreements, and challenges relating to work stoppages or slowdowns; |
| • | different pricing environments, longer sales cycles, longer accounts receivable payment cycles, and collections issues; |
| • | new and different sources of competition and practices which may favor local competitors; |
| • | weaker protection for intellectual property and other legal rights than in the United States and practical difficulties in enforcing intellectual property and other rights outside of the United States; |
| • | compliance challenges related to the complexity of multiple, conflicting and changing governmental laws and regulations, including employment, tax, privacy and data protection, and anti-bribery laws and regulations such as the U.S. Foreign Corrupt Practices Act; |
| • | increased financial accounting and reporting burdens and complexities; |
| • | risks associated with foreign tax regimes, trade tariffs, or similar issues, which could negatively impact international adoption of our offerings; |
| • | adverse tax consequences, including the potential for required withholding taxes for our overseas employees; and |
| • | regional and economic political conditions. |
Further, as we continue to expand internationally, we will become more exposed to fluctuations in currency exchange rates. Future agreements with international partners may provide for payments to us to be denominated in local currencies, and in such cases, fluctuations in the value of the U.S. dollar and foreign currencies could impact our operating results when translated into U.S. dollars. Further, the strengthening of the U.S. dollar relative to foreign currencies could increase the real cost of our platform for our learners and partners outside of the United States, which could lead to the lengthening of our sales cycle or reduced demand for our platform. If we are not able to successfully hedge against the risks associated with currency fluctuations, our financial
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condition and results of operations would be adversely affected. To date, we have not entered into any hedging transactions in an effort to reduce our exposure to foreign currency exchange risk. While we may decide to enter into hedging transactions in the future, the availability and effectiveness of these hedging transactions may be limited and we may not be able to successfully hedge our exposure, which would adversely affect our financial condition and results of operations.
Our results of operations could be adversely affected by natural disasters, public health crises, political crises, or other catastrophic events.
Our business and operations could be materially and adversely affected in the event of earthquakes, floods, fires, telecommunications failures, blackouts or other power losses, break-ins, acts of terrorism, political crises, inclement weather, public health crises, pandemics or endemics, or other catastrophic events. In particular, our executive offices are located in the San Francisco Bay Area, an earthquake-sensitive area and one that has been increasingly vulnerable to wildfires, and, damage to or total destruction of our executive offices resulting from earthquakes may not be covered in whole or in part by any insurance we may have. If floods, fire, inclement weather including extreme rain, wind, heat, or cold, or accidents due to human error were to occur and cause damage to our properties, or if our operations were interrupted by telecommunications failures, blackouts, acts of terrorism, political or geopolitical crises or public health crises, our results of operations would suffer, especially if such events were to occur during peak periods. We may not be able to effectively shift our operations due to disruptions arising from the occurrence of such events, and our business could be affected adversely as a result.
Our metrics and market estimates used to evaluate our performance are subject to inherent challenges in measurement, and real or perceived inaccuracies in those estimates may harm our reputation and negatively affect our business.
The metrics we use to evaluate our growth, measure our performance and make strategic decisions are calculated using internal company data and have not been validated by a third party. Our metrics and market estimates may differ from estimates published by third parties or from similarly titled metrics of our competitors or peers due to differences in methodology or the assumptions on which we rely. Additionally, the metrics and forecasts in this prospectus relating to the size and expected growth of our addressable market may prove to be inaccurate. Even if the markets in which we compete meet the size estimates and growth forecasted in this prospectus, our business could fail to grow at similar rates, if at all. If securities analysts or investors do not consider our or market metrics to be accurate representations of our business, or if we discover material inaccuracies in such estimates, then the market price of our common stock could decline, our reputation and brand could be harmed, and our business, financial condition, and results of operations could be adversely affected.
Risks Related to Regulatory Matters and Litigation
If our partners fail to comply with international, federal and state education laws and regulations, including any applicable state authorizations for their programs, it could harm our business and reputation.
Higher education is heavily regulated in the United States and most international jurisdictions. For example, numerous states require education providers to be licensed or authorized in such state simply to enroll persons located in that state into an online education program or to conduct related activities such as marketing. If any of our partners were found to be in non-compliance with any of the laws, regulations, standards or policies related to state authorization, the partner could lose their ability to operate in certain states, and if such non-compliance extended to a material contingent of our partners and such partners lost the ability to operate in certain states, our revenue could decline.
Additionally, the vast majority of our U.S.-based college and university partners participate in the federal student financial assistance programs under Title IV of the Higher Education Act of 1965, as amended (“HEA”),
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and are subject to extensive regulation by the U.S. Department of Education (“DOE”), as well as various state agencies, licensing boards and accrediting agencies. To participate in the Title IV programs, an institution must receive and maintain authorization by the appropriate state education agencies, be accredited by an accrediting agency recognized by the DOE, and be certified by the DOE as an eligible institution.
The regulations, standards, and policies of our college and university partners’ regulators are complex, change frequently and are often subject to differing interpretation. Changes in, or new interpretations of, applicable laws, regulations or standards could compromise our college and university partners’ accreditation, authorization to offer online learning in various states or countries, permissible activities, or access to federal funds under the Title IV programs. We cannot predict with certainty how the requirements applicable to our college and university partners will be interpreted, including in the case of new laws or regulations for which no, or insufficient, interpretative guidance exists, or whether our college and university partners will be able to comply with these requirements in the future. Some regulations were designed to regulate in-person, correspondence or other types of learning experiences not offered online and may be difficult to interpret or apply to the types of programs offered by our partners on our platform. In addition, there is no assurance that degrees or certifications earned through an institution in one jurisdiction will be recognized as valid or sufficient in other jurisdictions, including internationally, for employment, to satisfy prerequisites for advanced degrees, or other opportunities. Our international college and university partners are subject to similarly extensive legislation, regulation, and oversight.
Our future growth could be impaired if we or our partners fail to obtain timely approval from applicable regulatory agencies to offer new programs, make substantive changes to existing programs or expand their programs into or within certain states.
Our U.S. partners are required to obtain the appropriate approvals from the DOE and applicable state and accrediting regulatory agencies for new programs, which may be conditioned, delayed, or denied in a manner that could impair our future growth. Similar approvals and reviews may be required for programs from our partners based outside the United States, and for our partners to offer programs in other countries. Education regulatory agencies may experience increases in the volume of requests for approvals as a result of new distance learning programs and adjustments to new regulations. Any such increases in volume could result in delays to various approvals our partner institutions request, and any such delays could in turn delay the timing of our ability to generate revenue from our partners’ programs.
Our partners, both U.S. and international, may be required to be authorized in certain states to offer online programs, engage in advertising or recruiting and operate externships, internships, technical training, or other forms of field experience, depending on state law. Although many of our programs are offered by U.S.-based higher education institutions that hold such authorizations or participate in an appropriate state reciprocity agreement such as the State Authorization Reciprocity Agreement (“SARA”), other partners are not traditional education institutions or operate outside the United States and do not hold such state authorizations. Further, even U.S.-based higher education institutions could lose a necessary authorization either because it lapses or is revoked by a state agency. Such partners could also lack, or lose, the ability to participate in a reciprocity agreement that provides the basis for their authorization in multiple states. For example, California higher education institutions currently do not participate in SARA. Unless we choose to seek authorization in our own name, which we have not done to date, the loss of or failure by a partner to obtain a necessary state authorization would, among other things, limit our ability to deliver content to learners in that state, either for degree or nondegree programs, render the partner and its learners in that state ineligible to participate in Title IV or other financial aid programs, diminish the attractiveness of the partner’s programs, and ultimately compromise our ability to generate revenue. For example, in Iowa, while the state’s regulations and their application to our business are subject to differing interpretations, we may need to limit or prevent enrollments in certain programs offered by partners based outside the United States because they do not meet the requirement that institutions be accredited by an accrediting agency recognized by the DOE. In addition, if we or any of our partners fail to comply with any state agency’s rules, regulations, or standards beyond authorizations, the state agency could
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limit the ability of the partner to offer programs in that state or limit our ability to perform our contractual obligations to our partner in that state.
We or our partners may also be required to obtain appropriate approvals under international education laws and regulations. For example, a recent Indian regulation relating to online higher education requires, among other things, that learning platforms utilized by Indian universities to offer online degrees be approved by a technical committee of the Indian regulator. Seeking such approval could be a complex and time-consuming process, since the requirement is new, and as such there is no certainty as to the timing and standard of review for international platforms, or even whether international platforms are permitted to apply for approval. In addition, we may lack the knowledge and resources to successfully pursue an application without the support of one or more of our Indian university partners.
If we or our partners fail to obtain or maintain necessary authorizations, or we or our partners violate applicable laws and regulations, learners in relevant programs could be adversely affected and we could lose our ability to operate in that state, and our ability to generate revenue would be adversely affected.
If our partners fail to maintain institutional accreditation for their programs, our revenue could be materially adversely affected.
The loss or suspension of a partner’s accreditation or other adverse action by the partner’s institutional accreditor would render the institution or its program ineligible to participate in Title IV programs or similar government funding programs that may be in place and available to students enrolled at our Degrees partners based outside of the United States, could prevent the partner from offering certain educational programs, and could make it impossible for the graduates of the partner’s program to practice the profession for which they trained. If any of these results occurs, it could hurt our ability to generate revenue from that program.
Our activities are subject to international, federal and state education accessibility, and consumer protection laws and regulations and other requirements.
As a service provider to higher education institutions both in the United States and internationally, either directly or indirectly through our arrangements with partners, we are required to comply with certain education laws and regulations. See “Business—Regulatory Matters.”
Our platform is also subject to various requirements relating to accessibility for learners with disabilities. Certain requirements of Title II and Title III of the Americans with Disabilities Act apply to us and to our public and private university partners, Section 504 of the Rehabilitation Act of 1974 (the “Rehabilitation Act”) applies to our partners that receive federal funding, and Section 508 of the Rehabilitation Act, which sets accessibility standards for websites of federal departments and agencies, applies to certain of our government customers. Further, in the absence of definitive federal rulemaking, the Web Content Accessibility Guidelines 2.1, a set of recommendations and technical standards for making websites accessible to individuals with disabilities published by the World Wide Web Consortium, have become the effective standard for learner-facing aspects of our platform. We may not be successful in ensuring that our offerings and services meet these changing statutory and regulatory requirements, which could make our solutions less attractive to our partners and customers, and we expect to incur ongoing costs of compliance. In addition, we have structured our learner subscription plans to charge learners on a recurring basis, and as a result we must comply with complex federal and state laws and regulations related to automatic renewal, unfair competition, and false advertising. These laws, among other things, require us to make specific disclosures in specific ways at the time a learner purchases a subscription, and obtain the learner’s express consent to the recurring charges. The penalties for failing to comply with these requirements can be severe, including rendering the subscription contract null and void, and allowing the consumer to treat any services provided under such a contract as a gift, and any failure to comply with these requirements may constitute violations of more general consumer protection laws.
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Failure to comply with any of these laws and regulations could result in breach of contract and indemnification claims and could cause damage to our reputation and impair our ability to grow our business and achieve profitability.
Activities of the U.S. Congress, such as changes in spending policies or budget priorities for government funding of colleges, universities, schools and other education providers, could result in adverse legislation or regulatory action.
Our partners include colleges, universities, and other education providers, many of which depend substantially on government funding. Accordingly, any general decrease, delay, or change in federal, state, or local funding for colleges, universities, and other education providers could cause our current and potential partners to reduce their use of our platform, or delay development of content for our platform, any of which could cause us to lose learners and revenue.
In addition, the increased scrutiny and results-based accountability initiatives in the education sector, as well as ongoing policy differences in Congress regarding spending levels, could lead to significant changes in connection with the upcoming reauthorization of the HEA or otherwise. These changes may place additional regulatory burdens on postsecondary schools participating in the Title IV programs generally, and specific changes may be targeted at companies like us that serve higher education within the United States. The adoption of any laws or regulations that limit our ability to provide our bundled services to our partners could compromise our ability to offer their programs or make our solutions less attractive to them. Congress could also enact laws or regulations that require us to modify our practices in ways that could increase our costs.
Regulatory activities and initiatives of the DOE may have similar consequences for our business even in the absence of Congressional action. No assurances can be given as to how any new rules may affect our business.
Our business model has been validated by a DOE “dear colleague letter”, but such validation is not codified by statute or regulation and may be subject to change.
Each institution that participates in Title IV programs agrees, as a condition of its eligibility to participate in those programs, that it will not “provide any commission, bonus, or other incentive payment based in any part, directly or indirectly, upon success in securing enrollments or the award of financial aid, to any person or entity who is engaged in any student recruitment or admission activity, or in making decisions regarding the award of Title IV HEA program funds.” The vast majority of our U.S.-based partners participate in the Title IV programs. Although this rule, referred to as the incentive compensation rule, generally prohibits entities or individuals from receiving incentive-based compensation payments for the successful recruitment, admission, or enrollment of learners, the DOE provided clarifying guidance in March 2011 interpreting the incentive compensation rule as permitting tuition revenue-sharing arrangements known as the “bundled services exception.” Our current business model relies heavily on the bundled services exception to enter into tuition revenue-sharing agreements with partner colleges and universities. See “Business—Regulatory Matters.”
The “dear colleague letter” (“DCL”) issued by the DOE on March 17, 2011 sets forth the official guidance of the DOE regarding various regulations that were implemented around that time. The DCL affirms that “[t]he Department generally views payment based on the amount of tuition generated as an indirect payment of incentive compensation based on success in recruitment and therefore a prohibited basis upon which to measure the value of the services provided.” The DCL, however, in Example 2-B, clarified an important exception to this prohibition for a business model that complies with the bundled services exception: “A third party that is not affiliated with the institution it serves and is not affiliated with any other institution that provides educational services, which third party provides bundled services to the institution including marketing, enrollment application assistance, recruitment services, course support for online delivery of courses, the provision of technology, placement services for internships, or student career counseling, may receive from an institution an amount based on tuition generated for the institution by the third-party’s activities for all bundled services that
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are offered and provided collectively, as long as the third party does not make prohibited compensation payments to its employees, and the institution does not pay the third party separately for student recruitment services provided by the entity.”
The DCL guidance indicates that an arrangement that complies with Example 2-B will be deemed to be in compliance with the incentive compensation provisions of the HEA and the DOE’s regulations. Our business model and contractual arrangements with our U.S.-based partners are designed to follow Example 2-B in the DCL. However, the inherent ambiguity in the DCL and the incentive compensation rule creates the risk that DOE or a court, including, notably, in the context of a “whistleblower” claim under the federal False Claims Act, could disagree with that interpretation. If the DOE or a court determined that our business model or even the practices of a subcontractor did not meet the bundled services exception, we could have contractual obligations to our U.S.-based partners such as indemnifying a partner from private claims or government investigations or demands for repayment of Title IV program funds. Even if such claims are without merit, they could cause reputational harm, cause us to incur significant defense costs, result in the termination of our U.S.-based partner agreements, and negatively impact our ability to enter into new agreements.
Further, because the bundled services rule was promulgated by agency guidance through the DCL and is not codified by statute or regulation, there is risk that the exception could be altered or removed without prior notice, public comment period, or other administrative procedural requirements that accompany formal agency rulemaking. Although the DCL represents the current interpretation of the DOE, the bundled services exception could be reviewed, altered, or vacated in the future. In addition, the legal weight the DCL would carry in litigation over the propriety of any specific compensation arrangements under the HEA or the incentive compensation rule is uncertain. We can offer no assurances as to whether the exception in the DCL would be upheld by a court or how it would be interpreted. The revision, removal, or invalidation of the bundled services exception by Congress, the DOE, or a court, whether in an action involving our company or our partners, or in action that does not involve us, could require us to change our business model and renegotiate the terms of our college and university partner agreements and could compromise our ability to generate revenue.
If we violate the misrepresentation rule, or similar federal and state regulatory requirements, we could face fines, sanctions and other liabilities.
Under our contracts with U.S.-based partners, we are required to comply with other regulations promulgated by the DOE and comparable state laws that affect our marketing activities, including the misrepresentation rule. The misrepresentation rule is broad in scope and applies to statements our employees or agents may make about the nature of a partner’s program, a partner’s financial charges or the employability of a partner’s program graduates. A violation of this rule or other federal or state regulations applicable to our marketing activities by an employee or agent performing services for partners could damage our reputation, result in the termination of partner agreements, require us to pay fines or other monetary penalties, and require us to pay the fees associated with indemnifying a partner from private claims or government investigations.
We are required to comply with The Family Educational Rights and Privacy Act (“FERPA”), and failure to do so could harm our reputation and negatively affect our business.
FERPA generally prohibits an institution of higher education from disclosing personally identifiable information from a learner’s education records without the learner’s consent. Our U.S.-based university degree and certificate partners and Coursera for Campus customers and their learners disclose to us certain information that originates from or composes a learner education record under FERPA. Through our contracts to provide services to institutions, we are indirectly subject to FERPA, and we may not transfer or otherwise disclose any personally identifiable information from a learner record to another party other than in a manner permitted under the statute and any applicable contract. If we violate FERPA, it could result in a material breach of agreement with one or more of our partners and could harm our reputation. Further, in the event that we disclose learner information in violation of FERPA, the DOE could require a partner to suspend our access to their learner information for at least five years.
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We could face liability, or our reputation might be harmed, as a result of the activities of our customers and educators for content on or accessible through our platform.
In some instances, various articles or other third-party content may be posted to our platform by customers and educators for use in class discussions or within asynchronous lessons. The laws governing the fair use of these third-party materials are imprecise and adjudicated on a case-by-case basis, which makes it challenging to adopt and implement appropriately balanced institutional policies governing these practices. As a result, we could incur liability to third parties for the unauthorized duplication, distribution or other use of this material. In addition, third parties may allege misappropriation, plagiarism, or similar claims related to content appearing on our platform. Any such claims, including claims of defamation, disparagement, negligence, warranty, misappropriation, or personal harm, could subject us to costly litigation and impose a significant strain on our financial resources and management personnel, regardless of whether the claims have merit. Our various liability insurance coverages may not cover potential claims of this type adequately or at all, and we may be required to alter or cease our uses of such material, which may include changing or removing content from courses or altering the functionality of our platform, or be required to pay monetary damages.
While we rely on a variety of statutory and common-law frameworks and defenses, including those provided by the Digital Millennium Copyright Act of 1998 (“DMCA”), the Communications Decency Act (“CDA”), the fair-use doctrine in the United States and the E-Commerce Directive in the European Union, differences between statutes, limitations on immunity, requirements to maintain immunity, and moderation efforts in the many jurisdictions in which we operate may affect our ability to rely on these frameworks and defenses, or create uncertainty regarding liability for information or content uploaded by partners or learners or otherwise contributed by third-parties to our platform. Moreover, regulators in the United States and in other countries in which we operate may introduce new regulatory regimes that increase potential liability for information or content available on our platform, or which impose additional obligations to monitor such information or content, which could increase our costs.
We are subject to governmental export and import controls and anti-corruption laws and regulations that could impair our ability to compete in international markets and subject us to liability if we are not in full compliance with applicable laws.
Our business activities are subject to various restrictions under U.S. export and similar laws and regulations, including the U.S. Department of Commerce’s Export Administration Regulations and various economic and trade sanctions regulations administered by the U.S. Treasury Department’s Office of Foreign Assets Controls. The U.S. export control laws and U.S. economic sanctions laws include restrictions or prohibitions on the sale of certain services to U.S. embargoed or sanctioned countries, governments, persons, and entities. In addition, various countries regulate the import of certain technology and have enacted or could enact laws that could limit our ability to provide learners access to our platform or could limit our learners’ ability to access or use our services in those countries.
Although we take precautions to prevent our platform from being provided in violation of such laws, our platform could be provided inadvertently in violation of such laws, despite the precautions we take. If we fail to comply with these laws and regulations, we and certain of our employees could be subject to civil or criminal penalties, including the possible loss of export privileges and fines. We may also be adversely affected through penalties, reputational harm, loss of access to certain markets, or otherwise. In addition, various countries regulate the import and export of certain encryption and other technology, including import and export permitting and licensing requirements, and have enacted laws that could limit our ability to distribute our platform or could limit our learners’ ability to access our platform in those countries. Changes in our platform, or future changes in export and import regulations, may prevent our international learners from utilizing our platform or, in some cases, prevent the export or import of our platform to certain countries, governments, or persons altogether. Any change in export or import regulations, economic sanctions, or related legislation or changes in the countries, governments, persons, or technologies targeted by such regulations, could result in decreased use of our platform
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by, or in our decreased ability to export or sell subscriptions to our platform to, existing or potential learners internationally. Any decreased use of our platform or limitation on our ability to export or sell our platform would adversely affect our business, results of operations, and financial results.
We are also subject to various domestic and international anti-corruption laws, such as the U.S. Foreign Corrupt Practices Act and the U.K. Bribery Act, as well as other similar anti-bribery and anti-kickback laws and regulations. These laws and regulations generally prohibit companies and their employees and intermediaries from authorizing, offering, providing, and accepting improper payments or benefits for improper purposes. These laws also require that we keep accurate books and records and maintain compliance procedures designed to prevent any such actions. Although we take precautions to prevent violations of these laws, our exposure for violating these laws increases as our international presence expands and as we increase sales and operations in foreign jurisdictions.
We may become involved in claims, lawsuits, government investigations, and other proceedings that could adversely affect our business, financial condition, and results of operations.
From time to time, we may become involved in litigation matters, such as matters incidental to the ordinary course of our business, including intellectual property, commercial, employment, class action, whistleblower, accessibility, and other litigation and claims, and governmental and other regulatory investigations and proceedings. Such matters can be time-consuming, divert management’s attention and resources, cause us to incur significant expenses or liability, or require us to change our business practices. In addition, the expense of litigation and the timing of these expenses from period to period are difficult to estimate, subject to change, and could adversely affect our financial condition and results of operations. Because of the potential risks, expenses, and uncertainties of litigation, we may, from time to time, settle disputes, even where we have meritorious claims or defenses, by agreeing to settlement agreements. Any of the foregoing could adversely affect our business, financial condition, and results of operations.
Risks Related to Privacy, Cybersecurity, and Infrastructure
If sensitive information about our partners, their employees, or our learners is disclosed, or if we or our third-party providers are subject to cyber-attacks, use of our platform could be curtailed, we may be exposed to liability and our reputation would suffer.
Although we do not directly collect, transmit, and store financial information such as credit cards and other payment information, we utilize third-party payment processors who provide these services on our behalf. We also collect and store certain personally identifiable information provided by our partners and learners, such as names and email addresses. The collection, transmission and storage of such information is subject to stringent legal and regulatory obligations. Some of our third-party service providers, such as identity verification and payment processing providers, also regularly have access to personal data. In an effort to protect sensitive information, we rely on a variety of security measures, including encryption and authentication technology licensed from third parties. However, advances in computer capabilities, increasingly sophisticated tools and methods used by hackers and cyber terrorists, new discoveries in the field of cryptography, or other developments may result in our failure or inability to adequately protect sensitive information.
Our platform is vulnerable to power outages, telecommunications failures, and catastrophic events, as well as computer viruses, worms, malicious code, break-ins, phishing attacks, denial-of-service attacks, and other cyber-attacks. Any of these incidents could lead to interruptions or shutdowns of our platform, loss of data, or unauthorized disclosure of personally identifiable or other sensitive information. Cyber-attacks could also result in the theft of our intellectual property. If we gain greater visibility, we may face a higher risk of being targeted by cyber-attacks. Advances in computer capabilities, new technological discoveries, or other developments may result in cyber-attacks becoming more sophisticated and more difficult to detect.
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Any failure or perceived failure by us to comply with our privacy policies, our privacy or data protection obligations to learners or other third parties, or our privacy or data protection legal obligations, or any compromise of security that results in the unauthorized release or transfer of sensitive information, which may include personally identifiable information or other data, may result in governmental enforcement actions, litigation or public statements against us by consumer advocacy groups or others and could cause learners to lose trust in us, which could have an adverse effect on our business.
Further, if we or our third-party service providers experience security breaches that result in platform performance or availability problems or the loss or unauthorized disclosure of sensitive information, our reputation and ability to maintain existing, or attract new, partners and learners could be materially adversely affected, and our existing partners could scale back their programs or elect to not renew their agreements, prospective learners could decline to enroll or stay enrolled in our partners’ programs, and we could be subject to third-party lawsuits, regulatory fines, or other action or liability. Further, any reputational damage resulting from breach of our security measures could create distrust of our company by prospective partners or learners.
We and our third-party service providers may not have the resources or technical sophistication to anticipate or prevent all such cyber-attacks. Moreover, techniques used to obtain unauthorized access to systems change frequently and may not be known until launched against us or our third-party service providers. Security breaches can also occur as a result of non-technical issues, including intentional or inadvertent breaches by our employees or employees of our third-party service providers.
We expect to incur ongoing costs associated with the detection and prevention of security breaches and other security-related incidents. We may incur additional costs in the event of a security breach or other security-related incident. Any actual or perceived compromise of our systems or data security measures or those of third parties with whom we do business, or any failure to prevent or mitigate the loss of personal or other confidential information and delays in detecting or providing notice of any such compromise or loss could disrupt our operations, harm the perception of our security measures, damage our reputation, cause some learners or partners to decrease or stop their use of our platform or relationships with us, and could subject us to litigation, government action, increased transaction fees, regulatory fines or penalties, or other additional costs and liabilities that could harm our business, financial condition, and operating results.
We cannot be certain that our insurance coverage will cover or be adequate for data handling or data security liabilities, that insurance will continue to be available to us on economically reasonable terms, or at all, or that any insurer will not deny coverage as to any future claim. The successful assertion of one or more large claims against us that exceed available insurance coverage or the occurrence of changes in our insurance policies, including premium increases or the imposition of large deductible or co-insurance requirements, could have a material and adverse effect on our business, including our financial condition, operating results, and reputation.
If the personally identifiable information we collect from our partners, customers, and learners is unlawfully acquired, accessed, or obtained, we could be required to pay substantial fines and bear the cost of investigating the data breach and providing notice to individuals whose personally identifiable information was unlawfully accessed.
In providing services to our partners and customers, we may directly or indirectly have access to personally identifiable information from learners and prospective learners, such as names and email addresses. In the event that the personally identifiable information is unlawfully accessed or acquired, the majority of states and many international jurisdictions have laws that require institutions to investigate and promptly disclose the data breach to learners, usually in writing. Under the terms of our agreements with partners and customers, we may be responsible for the costs of investigating and disclosing data breaches to learners and, in many cases, to partners and customers as well. In addition to costs associated with investigating and fully disclosing a data breach in such instances, we could be subject to substantial monetary fines or private claims by affected parties and our reputation would likely be harmed.
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Disruption to or failures of our platform could result in our partners and learners becoming unsatisfied with our platform and could harm our reputation.
The performance and reliability of our platform and the underlying technology are critical to our operations, reputation, and ability to attract and retain partners and learners. Our partners rely on our platform to offer their courses and programs online, and learners must access our platform on a frequent and reliable basis. Our platform is complex and relies on infrastructure provided by third parties, and may contain defects, errors, or vulnerabilities, or may not perform as contemplated. These errors, defects, disruptions, breaches, or other performance problems with our platform could damage our or our partners’ reputations, decrease partner and learner satisfaction and retention, negatively impact our ability to attract new learners and partners, and could result in large indemnity payments to learners and partners for losses suffered or incurred in connection with any such defects or errors on our platform, or other liabilities relating to or arising from our platform. In addition, sustained or recurring disruptions in our platform or its underlying technology could adversely affect our and our partners’ compliance with applicable regulations and accrediting body standards.
Further, if we fail to accurately predict the rate or timing of the growth of our platform, we may be required to incur significant additional costs to maintain reliability. We also depend on the development and maintenance of the Internet infrastructure, including maintenance of reliable Internet networks with the necessary speed, data capacity and security. If we experience failures in our technology infrastructure or do not expand our technology infrastructure successfully, then our ability to attract and retain partners and learners, our growth prospects, and our business would suffer.
We have experienced, and expect that in the future we will experience, interruptions, delays, and outages in service and availability from time to time due to a variety of factors, including infrastructure changes, human or software errors, website hosting disruptions, and capacity constraints, which could affect the availability of services on our platform and prevent or inhibit the ability of learners to access or complete courses and programs on our platform. In particular, our technology infrastructure is currently hosted by third-party data center facilities operated by Amazon Web Services (“AWS”). Any disruption in its services, or any failure of AWS or any future third-party provider to handle the demands of our platform, could significantly harm our business and damage our reputation. We do not have control over the operations of the facilities of the third-party providers that we use, and these facilities may be vulnerable to damage or interruption from natural disasters, cybersecurity attacks, terrorist attacks, power outages, and similar events or acts of misconduct.
If we do not maintain the compatibility of our learning management platform with third-party applications that our customers use, our revenue will decline.
A number of our customers integrate our learning management platform with certain learning management systems or learning experience platforms using application programming interfaces (“APIs”) for user management, usage reporting, and content listings and we expect this number of customers to grow. The functionality and popularity of our platform depends, in part, on our ability to integrate our platform with third-party applications and software. Third-party providers of applications may change the features of their applications and software, restrict our access to their applications and software or alter the terms governing use of their applications and access to those applications and software in an adverse manner. Such changes could functionally limit or terminate our ability to use these third-party applications and software in conjunction with our platform, which could negatively impact our offerings and harm our business. If we fail to integrate our platform with new third-party applications and software that our learners and partners can utilize, we may not be able to offer the functionality that our learners and partners need, which would negatively impact our ability to generate revenue and adversely impact our business.
Our payments system depends on third-party providers and is subject to evolving laws and regulations.
We rely on third-party payment processors to process payments made by learners on our platform. We have engaged third-party service providers to perform underlying card processing, currency exchange, identity
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verification, and fraud analysis services. If these service providers do not perform adequately or if they terminate their relationships with us or refuse to renew their agreements with us on commercially reasonable terms, we will need to find an alternate payment processor and may not be able to secure similar terms or replace such payment processors in an acceptable timeframe. Further, the software and services provided by our third-party payment processors may not meet our expectations, contain errors or vulnerabilities, be compromised or experience outages. Any of these risks could cause us to lose our ability to accept online payments, make payments to our partners, or conduct other payment transactions, any of which could make our platform less convenient and attractive and harm our ability to attract and retain partners and learners. In addition, if these providers increase the fees they charge us, our operating expenses could increase.
The laws and regulations related to payments are complex and vary across different jurisdictions in the United States and globally. As a result, we are required to spend significant time and effort to comply with those laws and regulations. Any failure or claim of our failure to comply, or any failure by our third-party service providers to comply, could cost us substantial resources, could result in liabilities, or could force us to stop offering certain third-party payment services. In addition, as we expand our international operations, we will need to accommodate international payment method alternatives. As we expand the availability of new payment methods in the future, including internationally, we may become subject to additional regulations and compliance requirements.
Further, through our agreement with our third-party credit card processors, we are indirectly subject to payment card association operating rules and certification requirements, including the Payment Card Industry Data Security Standard. We are also subject to rules governing electronic funds transfers. Any change in these rules and requirements could make it difficult or impossible for us to comply. If we fail to comply with these rules or requirements, we may be subject to additional fines and higher transaction fees and lose our ability to accept credit and debit card payments from our learners, process electronic funds transfers or facilitate other types of online payments, and our business and operating results could be adversely affected.
Our business depends to a significant degree on continued access to the Internet and mobile networks.
Our partners and learners rely on access to the Internet and mobile networks to access our platform. Internet service providers may choose to disrupt or degrade our access to our platform or increase the cost of such access. Internet service providers or mobile network operators could also attempt to charge us for providing access to our platform. Although the Federal Communications Commission (“FCC”) recently approved new rules that would prohibit Internet service providers from charging content providers higher rates in order to deliver their content over certain “fast traffic” lanes, these rules will not go into effect until later this year and could be subject to legal challenge or statutory preemption, which could delay or prevent implementation. If the FCC’s rules are not implemented, our business could be adversely impacted. Outside of the United States, government regulation of the Internet, including the idea of network neutrality, may be developing or non-existent. As a result, we could face discriminatory or anti-competitive practices that could impede our growth prospects, increase our costs, and harm our business.
If the mobile solutions available to our learners and partners are not effective, the use of our platform could decline.
Learners have been increasingly accessing our platform on mobile devices through our app in recent years. The smaller screen size and reduced functionality associated with some mobile devices may make the use of our platform more difficult or our partners may believe that online learning through such mobile devices is not effective. Learners accessing our network primarily on mobile devices may not enroll in the courses or the certification, degree, or other credentialing programs offered on our platform as often as those accessing our platform through personal computers, which could result in less revenue for us. If we are not able to provide our partners with the functionality to deliver a rewarding experience on mobile devices, their ability to attract learners to their programs may be harmed and, consequently, our business may suffer.
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As new mobile devices and mobile features are released, we may encounter problems in developing or supporting apps for them. In addition, supporting new devices and mobile device operating systems may require substantial time and resources.
The success of our mobile apps could also be harmed by factors outside our control, such as:
| • | actions taken by mobile app distributors; |
| • | unfavorable treatment received by our mobile apps, especially as compared to competing apps, such as the placement of our mobile apps in a mobile app download store; |
| • | increased costs in the distribution and use our mobile app; or |
| • | changes in mobile operating systems, such as iOS and Android, that degrade the functionality of our mobile website or mobile apps or that give preferential treatment to competitive offerings. |
If our partners or customers, including learners, encounter difficulty accessing or using, or if they choose not to use, our mobile platform, our growth prospects and our business may be adversely affected.
Our use and processing of personal information and other data is subject to laws and obligations relating to privacy and data protection, and our failure to comply with such laws and obligations could harm our business.
In the ordinary course of business, and in particular in connection with merchandising our service to our learners, we collect, process, store and use personal information and data supplied by learners. Numerous federal, state, and foreign laws, rules and regulations govern privacy, data protection, and the collection, use and protection of personal information and other types of data we collect, use, disclose, and otherwise process. These laws, rules, and regulations are constantly evolving, and we expect that there will continue to be new proposed laws, regulations, and industry standards concerning privacy, data protection and information security in the United States, the EU and other jurisdictions.
For example, California has adopted the California Consumer Privacy Act (the “CCPA”), which provides new data privacy rights for California consumers and new operational requirements for covered companies. The CCPA provides that covered companies must provide new disclosures to California consumers and afford such consumers new data privacy rights that include the right to request a copy from a covered company of the personal information collected about them, the right to request deletion of such personal information, and the right to request to opt-out of certain sales of such personal information. The CCPA became operative in January 2020, and its implementing regulations took effect in August 2020. The California Attorney General can enforce the CCPA, including seeking an injunction and civil penalties for violations. The CCPA provides a private right of action for certain data breaches that is expected to increase data breach litigation. The CCPA may require us to modify our data practices and policies and to incur substantial costs and expenses in an effort to comply. California voters also passed a new privacy law, the California Privacy Rights Act (the “CPRA”), in the November 2020 election. The CPRA significantly modifies the CCPA, including by imposing additional obligations on covered companies and expanding consumers’ rights with respect to certain sensitive personal information, potentially resulting in further uncertainty and requiring us to incur additional costs and expenses in an effort to comply. The CPRA also creates a new state agency that will be vested with authority to implement and enforce the CCPA and the CPRA. In addition, all 50 states have laws including obligations to provide notification of security breaches of computer databases that contain personal information to affected individuals, state officers and others. Aspects of the CCPA, the CPRA, and other laws and regulations relating to data protection, privacy, and information security, as well as their enforcement, remain unclear, and we may be required to modify our practices in an effort to comply with them.
Similarly, the European Commission adopted a General Data Protection Regulation (the “GDPR”) that became fully effective on May 25, 2018, imposing stringent EU data protection requirements. The GDPR is
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wide-ranging in scope and imposes numerous additional requirements on companies that process personal data, including imposing special requirements in respect of the processing of personal data, requiring that consent of individuals to whom the personal data relates is obtained in certain circumstances, requiring additional disclosures to individuals regarding data processing activities, requiring that safeguards are implemented to protect the security and confidentiality of personal data, creating mandatory data breach notification requirements in certain circumstances, and requiring that certain measures (including contractual requirements) are put in place when engaging third-party processors. The GDPR also provides individuals with various rights in respect of their personal data, including rights of access, erasure, portability, rectification, restriction, and objection.
Further, the United Kingdom’s vote in favor of exiting the European Union, often referred to as Brexit, and ongoing developments in the United Kingdom, have created uncertainty with regard to data protection regulation in the United Kingdom. As of January 1, 2021, and the expiry of transitional arrangements agreed to between the United Kingdom and the European Union, data processing in the United Kingdom is governed by a United Kingdom version of the GDPR (combining the GDPR and the Data Protection Act 2018), exposing us to two parallel regimes, each of which potentially authorizes similar fines and other potentially divergent enforcement actions for certain violations. Pursuant to the Trade and Cooperation Agreement, which went into effect on January 1, 2021, the United Kingdom and the European Union agreed to a specified period during which the United Kingdom will be treated like a European Union member state in relation to transfers of personal data to the United Kingdom for four months from January 1, 2021. This period may be extended by two further months. Unless the European Commission makes an adequacy finding in respect of the United Kingdom before the expiration of such specified period, the United Kingdom will become an inadequate third country under the GDPR and transfers of data from the European Economic Area to the United Kingdom will require a transfer mechanism, such as the standard contractual clauses. Furthermore, following the expiration of the specified period, there will be increasing scope for divergence in application, interpretation, and enforcement of the data protection law as between the United Kingdom and the European Union. Other jurisdictions outside the European Union are similarly introducing or enhancing privacy and data security laws, rules, and regulations, which could increase our compliance costs and the risks associated with noncompliance.
We cannot yet fully determine the impact these or future laws, rules, and regulations may have on our business or operations. These laws, rules and regulations may be inconsistent from one jurisdiction to another, subject to differing interpretations and may be interpreted to conflict with our practices. The CCPA and CPRA could mark the beginning of a trend toward more stringent privacy legislation in the United States. The CCPA has prompted a number of proposals for federal and state privacy legislation that, if passed, could increase our potential liability, add layers of complexity to compliance in the U.S. market, increase our compliance costs and adversely affect our business.
Additionally, we may be bound by contractual requirements applicable to our collection, use, processing and disclosure of various types of data, including personal information, and may be bound by, or voluntarily comply with, self-regulatory or other industry standards relating to these matters.
Any failure or perceived failure by us or any third parties with which we do business to comply with these laws, rules and regulations, or with other obligations to which we or such third parties are or may become subject, may result in actions against us by governmental entities or private claims and litigation. Any such action would be expensive to defend, may require the expenditure of substantial legal and other costs and substantial time and resources, may result in fines, penalties or other liabilities, and likely would damage our reputation and adversely affect our business and operating results. In many jurisdictions, enforcement actions and consequences for non-compliance with protection, privacy, and information security laws and regulations are rising. In the United States, possible consequences for non-compliance include enforcement actions in response to rules and regulations promulgated under the authority of federal agencies and state attorneys general and legislatures and consumer protection agencies. In the EU, data protection authorities may impose large penalties for violations of the data protection laws, including potential fines of up to €20 million or 4% of annual global revenue, whichever is greater. The authorities have shown a willingness to impose significant fines and issue
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orders preventing the processing of personal data on non-compliant businesses. Data participants also have a private right of action, as do consumer associations, to lodge complaints with supervisory authorities, seek judicial remedies, and obtain compensation for damages resulting from violations of applicable data protection laws. In addition, privacy advocates and industry groups have regularly proposed, and may propose in the future, self-regulatory standards that may legally or contractually apply to us. If we fail to follow these security standards, even if no customer information is compromised, we may incur significant fines or experience a significant increase in costs.
Further, in view of new or modified federal, state, or foreign laws and regulations, industry standards, contractual obligations, and other legal obligations, or any changes in their interpretation, we may find it necessary or desirable to fundamentally change our business activities and practices or to expend significant resources to modify our services, and otherwise adapt to these changes. We may be unable to make such changes and modifications in a commercially reasonable manner or at all, and our ability to develop new features could be limited. Privacy, data protection, and information security concerns, whether valid or invalid, may inhibit the use and growth of our platform, particularly in certain foreign countries.
Use of social media, emails, push notifications, and text messages in ways that do not comply with applicable laws and regulations, lead to the loss or infringement of intellectual property, or result in unintended disclosure may harm our reputation or subject us to fines or other penalties.
We use social media, emails, push notifications and text messages as part of our omni-channel approach to marketing. As laws and regulations evolve to govern the use of these channels, the failure by us, our employees, or third parties acting at our direction to comply with applicable laws and regulations in the use of these channels could adversely affect our reputation or subject us to fines or other penalties. In addition, our employees or third parties acting at our direction may knowingly or inadvertently make use of social media in ways that could lead to the loss or infringement of intellectual property, as well as the public disclosure of proprietary, confidential, or sensitive personal information of our business, employees, learners, partners or others. Information concerning us or our partners and learners, whether accurate or not, may be posted on social media platforms at any time and may have an adverse impact on our brand, reputation, or business. The harm may be immediate without affording us an opportunity for redress or correction and could have a material adverse effect on our reputation, business, operating results, financial condition, and prospects.
Risks Related to Intellectual Property
Any failure to obtain, maintain, protect or enforce our intellectual property and proprietary rights could impair our ability to protect our proprietary technology and our brand and could materially harm our business.
We rely on a combination of intellectual property rights, contractual protections, and other practices to protect our brand, proprietary information, technologies and processes. We primarily rely on copyright and trade secret laws to protect our proprietary technologies and processes, including the algorithms we use throughout our business. Others may independently develop the same or similar technologies and processes, or may improperly acquire and use information about our technologies and processes, which may allow them to provide a service similar to ours, which could harm our competitive position. Our principal trademark assets include the registered trademark “Coursera” and our logos and taglines. We also hold the rights to the “Coursera.org” Internet domain name and various related domain names, which are subject to Internet regulatory bodies and trademark and other related laws of each applicable jurisdiction. If we are unable to protect our trademarks or domain names, our brand recognition and reputation would suffer, we would incur significant expense establishing new brands and our operating results would be adversely impacted. As of December 31, 2020, we had 14 issued patents relating to technology features of our platform, including identity verification, content delivery and navigation, and automation, which patents expire between 2034 and 2038, and two U.S. pending patent applications also relating to certain technology features of our platform. We cannot predict whether any pending patent application will result in an issued patent that will
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effectively protect our intellectual property. Even if a patent issues, the patent may be circumvented or its validity may be challenged in proceedings before the U.S. Patent and Trademark Office. In addition, we cannot assure you that every significant feature of technology and services will be protected by any patent or patent application. Further, to the extent we pursue patent protection for our innovations, patents we may apply for may not issue, and patents that do issue or that we acquire may not provide us with any competitive advantages or may be challenged by third parties. There can be no assurance that any patents we obtain will adequately protect our inventions or survive a legal challenge, as the legal standards relating to the validity, enforceability, and scope of protection of patent and other intellectual property rights are uncertain.
Third parties may challenge any patents, copyrights, trademarks, and other intellectual property and proprietary rights owned or held by us or may knowingly or unknowingly infringe, misappropriate or otherwise violate our patents, copyrights, trademarks, and other proprietary rights. We may be required to spend significant resources to monitor and protect our intellectual property rights, and the efforts we take to protect our proprietary rights may not be sufficient. Even if we do detect violations, we may need to engage in litigation to enforce our intellectual property rights. Any enforcement efforts we undertake, including litigation, could be time-consuming and expensive and could divert our management’s attention. In addition, our efforts may be met with defenses and counterclaims challenging the validity and enforceability of our intellectual property rights or may result in a court determining that our intellectual property rights are unenforceable. If we are unable to cost-effectively protect our intellectual property rights, then our business could be harmed. An adverse decision in any of these legal actions could limit our ability to assert our intellectual property or proprietary rights, limit the value of our intellectual property or proprietary rights or otherwise negatively impact our business, financial condition and results of operations. If the protection of our intellectual property and proprietary rights is inadequate to prevent use or misappropriation by third parties, the value of our brand and other intangible assets may be diminished, competitors may be able to more effectively mimic our service and methods of operations, the perception of our business and service to customers and potential customers may become confused in the marketplace and our ability to attract customers may be adversely affected.
We may be subject to intellectual property claims, which are extremely costly to defend, could require us to pay significant damages and could limit our ability to use certain technologies in the future.
Companies in the technology industry are frequently subject to litigation based on allegations of infringement or other violations of intellectual property rights. We periodically receive notices that claim we have infringed, misappropriated, or misused other parties’ intellectual property rights. To the extent we gain greater public recognition, we may face a higher risk of being the subject of intellectual property claims. Any intellectual property claims against us, with or without merit, could be time consuming and expensive to settle or litigate and could divert the attention of our management. Litigation regarding intellectual property rights is inherently uncertain due to the complex issues involved, and we may not be successful in defending ourselves in such matters.
In addition, some of our competitors have extensive portfolios of issued patents. Many potential litigants, including some of our competitors and patent holding companies, have the ability to dedicate substantial resources to enforcing their intellectual property rights. Any claims successfully brought against us could subject us to significant liability for damages and we may be required to stop using technology or other intellectual property alleged to be in violation of a third party’s rights. We also might be required to seek a license for third-party intellectual property. Even if a license is available, we could be required to pay significant royalties or submit to unreasonable terms, which would increase our operating expenses. We may also be required to develop alternative non-infringing technology, which could require significant time and expense. If we cannot license or develop technology for any allegedly infringing aspect of our business, we would be forced to limit our service and may be unable to compete effectively. Any of these results could harm our business.
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Confidentiality agreements with employees and others may not adequately prevent disclosure of trade secrets and proprietary information.
We have devoted substantial resources to the development of our intellectual property and proprietary rights. In order to protect our intellectual property and proprietary rights, we rely in part on confidentiality agreements with our employees, licensees, independent contractors and other advisors. These agreements may not effectively prevent disclosure of confidential information and may not provide an adequate remedy in the event of unauthorized disclosure of confidential information. In addition, others may independently discover trade secrets and proprietary information, and in such cases we could not assert any trade secret rights against such parties. Costly and time-consuming litigation could be necessary to enforce and determine the scope of our proprietary rights, and failure to obtain or maintain trade secret protection could adversely affect our competitive business position.
Our use of “open source” software could negatively affect our ability to offer our solutions and subject us to possible litigation.
A substantial portion of our platform and our solutions incorporates so-called “open source” software, and we may incorporate additional open source software in the future. Open source software is generally freely accessible, usable and modifiable. Certain open source licenses may, in certain circumstances, require us: (i) to offer our solutions that incorporate the open source software for no cost; (ii) to make available source code for modifications or derivative works we create based upon, incorporating or using the open source software; and (iii) to license such modifications or derivative works under the terms of the particular open source license. If an author or other third party that distributes open source software we use were to allege that we had not complied with the conditions of one or more of these licenses, we could be required to incur significant legal expenses defending against such allegations, could be required to disclose our proprietary code and could be subject to significant damages, including being enjoined from the offering of our solutions that contained the open source software and being required to comply with the foregoing conditions, which could disrupt our ability to offer the affected solutions. We could also be subject to suits by parties claiming ownership of what we believe to be open source software. Litigation could be costly for us to defend, and have a negative effect on our operating results and financial condition.
Individuals that appear in content hosted on our platform may claim violation of their rights.
Faculty and learners that appear in video segments hosted on our platform may claim that proper assignments, licenses, consents, and releases were not obtained for use of their likenesses, images or other contributed content. Our partners are contractually required to ensure that proper assignments, licenses, consents, and releases are obtained for their course material, but we do not know with certainty that they have obtained all necessary rights. Moreover, the laws governing rights of publicity and privacy, and the laws governing faculty ownership of course content, are imprecise and adjudicated on a case-by-case basis, such that the enforcement of agreements to transfer the necessary rights is unclear. As a result, we could incur liability to third parties for the unauthorized duplication, display, distribution, or other use of this material. Any such claims could subject us to costly litigation and impose a significant strain on our financial resources and management personnel, regardless of whether the claims have merit. Our various liability insurance coverages may not cover potential claims of this type adequately or at all, and we may be required to alter or cease our use of such material, which may include changing or removing content from courses, or to pay monetary damages. Moreover, claims by faculty and learners could damage our reputation, regardless of whether such claims have merit.
Risks Relating to Our Existence as a Public Benefit Corporation
Although we operate as a Delaware public benefit corporation, we cannot provide any assurance that we will achieve our public benefit purpose.
As a Delaware public benefit corporation (“PBC”), we are required to produce a public benefit and to operate in a responsible and sustainable manner, balancing our stockholders’ pecuniary interests, the best
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interests of those materially affected by our conduct, and the public benefit identified by our certificate of incorporation. There is no assurance that we will achieve our public benefit purpose or that the expected positive impact from being a PBC will be realized, which could have a material adverse effect on our reputation, which in turn may have a material adverse effect on our business, results of operations and financial condition. See “Description of Capital Stock— Public Benefit Corporation Status.”
As a PBC, we are required to publicly disclose at least biennially on our overall public benefit performance and on our assessment of our success in achieving our specific public benefit purpose. If we are not timely or are unable to provide this report, or if the report is not viewed favorably by parties doing business with us or by regulators or others reviewing our credentials, our reputation and status as a PBC may be harmed.
If our publicly reported B Corp score declines, our reputation could be harmed and our business could suffer.
We have been certified as a B Corp through B Lab. Our business model and brand could be harmed if we are unable to maintain certification as a B Corp. B Corp status is a certification that requires us to consider the impact of our decisions on our employees, partners, learners, community, and the environment. We believe that our B Corp status enables us to strengthen our credibility and trust among our customers and partners. Whether due to our choice or our failure to meet B Lab’s certification requirements, any change in our status could create a perception that we are more focused on financial performance and no longer as committed to the values shared by B Corps. Likewise, our reputation could be harmed if our publicly reported B Corp score declines and there is a perception that we are no longer committed to the B Corp standards. Similarly, our reputation could be harmed if we take actions that are perceived to be misaligned with B Corp values. See “Description of Capital Stock—Certified B Corporation Status.”
As a PBC, our focus on a specific public benefit purpose and producing a positive effect for society may negatively impact our financial performance.
Unlike traditional corporations, which have a fiduciary duty to focus exclusively on maximizing stockholder value, our directors have a fiduciary duty to consider not only the stockholders’ interests, but also the company’s specific public benefit and the interests of other stakeholders affected by our actions. See “Description of Capital Stock—Public Benefit Corporation Status.” Therefore, we may take actions that we believe will be in the best interests of those stakeholders materially affected by our specific benefit purpose, even if those actions do not maximize our financial results. While we intend for this public benefit designation and obligation to provide an overall net benefit to us and our partners and learners, it could instead cause us to make decisions and take actions without seeking to maximize the income generated from our business, and hence available for distribution to our stockholders. Our pursuit of longer-term or non-pecuniary benefits may not materialize within the timeframe we expect or at all and may have an immediate negative effect on any amounts available for distribution to our stockholders. Accordingly, being a PBC and complying with our related obligations could harm our business, results of operations, and financial condition, which in turn could cause our stock price to decline.
Additionally, as a PBC, we may be less attractive as a takeover target than a traditional company and, therefore, your ability to realize your investment through an acquisition may be limited. PBCs may also not be attractive targets for activists or hedge fund investors because new directors would still have to consider and give appropriate weight to the public benefit along with stockholder value, and stockholders can enforce this through derivative suits. Further, by requiring the boards of directors of PBCs consider additional constituencies other than maximizing stockholder value, Delaware public benefit corporation law could potentially make it easier for a board to reject a hostile bid, even where the takeover would provide the greatest short-term financial yield to investors.
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Our directors have a fiduciary duty to consider not only our shareholders’ interests, but also our specific public benefit and the interests of other stakeholders affected by our actions. If a conflict between such interests arises, there is no guarantee such a conflict would be resolved in favor of our shareholders.
While directors of traditional corporations are required to make decisions they believe to be in the best interests of their shareholders, directors of a PBC have a fiduciary duty to consider not only the shareholders’ interests, but also the company’s specific public benefit and the interests of other stakeholders affected by the company’s actions. Under Delaware law, directors are shielded from liability for breach of these obligations if they make informed and disinterested decisions that serve a rational purpose. Thus, unlike traditional corporations which must focus exclusively on shareholder value, our directors are not merely permitted, but obligated, to consider our specific public benefit and the interests of other stakeholders. See “Description of Capital Stock—Public Benefit Corporation Status.” In the event of a conflict between the interests of our shareholders and the interests of our specific public benefit or our other stakeholders, our directors must only make informed and disinterested decisions that serve a rational purpose; thus, there is no guarantee such a conflict would be resolved in favor of our shareholders, which could harm our business, results of operations, and financial condition, which in turn could cause our stock price to decline.
Our focus on the long-term best interests of our company as a PBC and our consideration of all of our stakeholders, including our shareholders, learners, partners, employees, the communities in which we operate, and other stakeholders that we may identify from time to time, may conflict with short- or medium-term financial interests and business performance, which may negatively impact the value of our common stock.
We believe that focusing on the long-term best interests of our company as a public benefit corporation and our consideration of all of our stakeholders, including our shareholders, learners, partners, employees, the communities in which we operate, and other stakeholders we may identify from time to time, is essential to the long-term success of our company and to long-term shareholder value. Therefore, we have, and may in the future, make decisions that we believe are in the long-term best interests of our company and our shareholders, even if such decisions may negatively impact the short- or medium-term performance of our business, results of operations, and financial condition or the short- or medium-term performance of our common stock. Our commitment to pursuing long-term value for the company and its shareholders, potentially at the expense of short- or medium-term performance, may materially adversely affect the trading price of our common stock, including by making owning our common stock less appealing to investors who are focused on returns over a shorter time horizon. Our decisions and actions in pursuit of long-term success and long-term shareholder value, which may include changes to our platform to enhance the experience of our learners, partners, and the communities in which we operate, including by improving the trust and safety of our platform, changes in the manner in which we deliver community support, investing in our relationships with our learners, partners, and employees, investing in and introducing new offerings and services, investing in social impact initiatives consistent with our public benefit objectives, or changes in our approach to working with local or national jurisdictions on laws and regulations governing our business, may not result in the long-term benefits that we expect, in which case our business, results of operations, and financial condition, as well as the trading price of our common stock, could be materially adversely affected.
As a Delaware PBC, we may be subject to increased derivative litigation concerning our duty to balance stockholder and public benefit interest, the occurrence of which may have an adverse impact on our financial condition and results of operations.
Stockholders of a Delaware PBC (if they, individually or collectively, own the lesser of (i) two percent of the company’s outstanding shares, or (ii) shares with a market value of $2 million or more on the date the lawsuit is instituted) are entitled to file a derivative lawsuit claiming the directors failed to balance stockholder and public benefit interests. Such derivative suits would be subject to the exclusive forum provision in our amended and restated certificate of incorporation, requiring them to be heard in the Delaware Chancery Court (or, if that court lacks subject matter jurisdiction, another federal or state court situated in the State of Delaware). This
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potential liability does not exist for traditional corporations. Therefore, we may be subject to the possibility of increased derivative litigation, which would require the attention of our management, and, as a result, may adversely impact our management’s ability to effectively execute our strategy. Additionally, any such derivative litigation may be costly, which may harm our financial condition and results of operations.
If we cannot maintain our company culture and public benefit commitment, our business could be harmed.
We believe that our company culture has been critical to our success. In addition, we believe that our status as a Delaware PBC and our commitment to providing global access to flexible and affordable world-class learning that supports personal development, career advancement, and economic opportunity distinguish us from our competitors and promote a relationship among our partners, learners, and employees founded on trust. However, we face a number of challenges that may affect our ability to sustain our corporate culture, including:
| • | a need to identify, attract, reward and retain people in leadership positions in our organization who share and further our culture, values, mission, and public benefit objectives; |
| • | the increasing size and geographic diversity of our workforce, and our ability to promote a uniform and consistent culture across all our offices and employees, including in a remote work environment; |
| • | the market perception about our public benefit objectives; |
| • | competitive pressures that may divert us from our mission, vision, and values; |
| • | the continued challenges of a rapidly evolving industry; and |
| • | the increasing need to develop expertise in new areas of business that affect us. |
If we are unable to maintain our company culture and demonstrate our commitment to our mission as a PBC, it could harm our business and reputation.
Risks Related to Tax, Accounting, and Operations as a Public Company
Our business may be subject to sales and other taxes.
The application of indirect taxes, such as sales and use tax, value-added tax (“VAT”), provincial taxes, goods and services tax, business tax and gross receipt tax to businesses like ours is a complex and evolving issue. For example, as of January 1, 2015, the European Union imposed an obligation on platforms to collect and remit VAT on sales of automatically downloaded digital items, and we are in the process of implementing such collection and remittance procedures. Significant judgment is required to evaluate applicable tax obligations and as a result amounts recorded are estimates and could change. In many cases, the ultimate tax determination is uncertain because it is not clear how existing statutes apply to our business. One or more states, the federal government or other countries may seek to impose additional reporting, record-keeping, or indirect tax collection obligations on businesses like ours that facilitate online commerce. For example, the U.S. Congress is currently considering the “Marketplace Fairness Act,” which would grant states the authority to require online merchants to collect sales tax on online sales at the time a transaction is completed. New taxes could also require us to incur substantial costs to capture data and collect and remit taxes. If such obligations were imposed, the additional costs associated with tax collection, remittance, and audit requirements could make accessing offerings through our platform less attractive and more costly, which could harm our business.
Amendments to existing tax laws, rules or regulations or enactment of new unfavorable tax laws, rules or regulations could have an adverse effect on our business and operating results.
Many of the underlying laws, rules and regulations imposing taxes and other obligations were established before the growth of the Internet and ecommerce. U.S. federal, state and local taxing authorities are currently reviewing the appropriate treatment of companies engaged in Internet commerce and considering changes to
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existing tax or other laws that could levy sales, income, consumption, use, or other taxes relating to our activities, and/or impose obligations on us to collect such taxes. If such tax or other laws, rules or regulations are amended, or if new unfavorable laws, rules or regulations are enacted, the results could increase our tax payments or other obligations, prospectively or retrospectively, subject us to interest and penalties, decrease the demand for our services if we pass on such costs to our partners or learners, result in increased costs to update or expand our technical or administrative infrastructure, or effectively limit the scope of our business activities if we decided not to conduct business in particular jurisdictions. As a result, these changes may have a material adverse effect on our business, results of operations, financial condition, and prospects.
Our ability to use our net operating loss carryforwards and certain other tax attributes may be limited.
We have incurred substantial net operating losses (“NOLs”) during our history. Unused NOLs may carry forward to offset future taxable income if we achieve profitability in the future, unless such NOLs expire under applicable tax laws. However, under the rules of Sections 382 and 383 of the Internal Revenue Code of 1986, as amended, if a corporation undergoes an “ownership change,” generally defined as a greater than 50% change (by value) in its equity ownership over a three-year period, the corporation’s ability to use its NOLs and other pre-change tax attributes to offset its post-change taxable income or taxes may be limited. The applicable rules generally operate by focusing on changes in ownership among stockholders considered by the rules as owning, directly or indirectly, 5% or more of the stock of a company, as well as changes in ownership arising from new issuances of stock by the company. As a result of these rules, in the event that we experience one or more ownership changes as a result of this offering or future transactions in our stock, then we may be limited in our ability to use our NOL carryforwards to offset our future taxable income, if any. In addition, the Tax Cuts and Jobs Act imposes certain limitations on the deduction of NOLs generated in tax years that began on or after January 1, 2018, including a limitation on use of NOLs to offset only 80% of taxable income and the disallowance of NOL carrybacks. Although NOLs generated in tax years before 2018 may still be used to offset future income without limitation, the recent legislation may limit our ability to use our NOLs to offset any future taxable income.
Our reported results of operations may be adversely affected by changes in generally accepted accounting principles.
Generally accepted accounting principles are subject to interpretation by the Financial Accounting Standards Board, the SEC and various bodies formed to promulgate and interpret appropriate accounting principles. A change in these principles or interpretations could have a significant effect on our reported results of operations and could affect the reporting of transactions completed before the announcement of a change. It is difficult to predict the impact of future changes to accounting principles or our accounting policies, any of which could negatively affect our reported results of operations.
If our internal control over financial reporting or our disclosure controls and procedures are not effective, we may not be able to accurately report our financial results, prevent fraud or file our periodic reports in a timely manner, which may cause investors to lose confidence in our reported financial information and may lead to a decline in our stock price.
We have been a private company and, as such, we have not been subject to the internal control and financial reporting requirements applicable to a publicly traded company. We are required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act following the later of the date we are deemed to be an “accelerated filer” or a “large accelerated filer,” each as defined in the Securities Exchange Act of 1934 as amended (the “Exchange Act”), or the date we are no longer an “emerging growth company,” as defined in the JOBS Act. In addition, as a public company, we will be subject to Section 404(a), which requires us to include a report on our internal controls, including an assessment of the effectiveness of our internal controls and financial reporting procedures. Section 404 of the Sarbanes-Oxley Act (“Section 404”) requires that we maintain effective internal control over financial reporting and disclosure controls and procedures. In particular, we must perform system and process evaluations, document our controls and perform testing of our
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key controls over financial reporting to allow management and our independent public accounting firm to report on the effectiveness of our internal control over financial reporting. Our testing, or the subsequent testing by our independent public accounting firm, may reveal deficiencies in our internal control over financial reporting that are deemed to be material weaknesses. If we are not able to comply with the requirements of Section 404 in a timely manner, or if we or our accounting firm identify deficiencies in our internal control over financial reporting that are deemed to be material weaknesses, the market price of our stock would likely decline and we could be subject to lawsuits, sanctions or investigations by regulatory authorities, which would require additional financial and management resources.
We may encounter difficulties in the timely and accurate reporting of our financial results, which would impact our ability to provide our investors with information in a timely manner. As a result, our investors could lose confidence in our reported financial information, and our stock price could decline.
We are an emerging growth company, and any decision on our part to comply only with certain reduced reporting and disclosure requirements applicable to emerging growth companies could make our common stock less attractive to investors.
We are an “emerging growth company” as defined in the JOBS Act. We intend to take advantage of certain exemptions under the JOBS Act from various public company reporting requirements, including not being required to have our internal control over financial reporting audited by our independent registered public accounting firm pursuant to Section 404(b) of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and any golden parachute payments not previously approved. We may take advantage of these exemptions for up to five years or until we are no longer an “emerging growth company,” whichever is earlier.
In addition, Section 107 of the JOBS Act provides that an “emerging growth company” can take advantage of an extended transition period for complying with new or revised accounting standards. This provision allows an emerging growth company to delay the adoption of some accounting standards until those standards would otherwise apply to private companies. We have elected to use the extended transition period under the JOBS Act. Accordingly, our consolidated financial statements may not be comparable to the financial statements of public companies that comply with such new or revised accounting standards
We cannot predict if investors will find our common stock less attractive if we choose to rely on any of the exemptions afforded to emerging growth companies. If some investors find our common stock less attractive because we rely on any of these exemptions, there may be a less active trading market for our common stock and the market price of our common stock may be more volatile.
We will remain an emerging growth company until the earlier of (1) the last day of the fiscal year (a) in which the fifth anniversary of the completion of this offering occurs, (b) in which we have total annual gross revenue of at least $1.07 billion or (c) in which we become a large accelerated filer, which means that we have been public for at least 12 months, have filed at least one annual report and the market value of our common stock that is held by non-affiliates exceeds $700 million as of the last day of our then-most recently completed second fiscal quarter, and (2) the date on which we have issued more than $1.0 billion in non-convertible debt during the prior three-year period.
We have not operated as a public company, which will require us to incur substantial costs and will require substantial management attention, and we may not be able to manage our transition into a public company effectively or efficiently.
We have never operated as a public company and will incur significant legal, accounting, and other expenses that we did not incur as a private company. Our management team and other personnel will need to
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devote a substantial amount of time to, and we may not effectively or efficiently manage, our transition into a public company. For example, we will be subject to the reporting requirements of the Exchange Act, the applicable requirements of the Sarbanes-Oxley Act and the Dodd-Frank Wall Street Reform and Consumer Protection Act and the rules and regulations of the SEC. The rules and regulations of the New York Stock Exchange (“NYSE”) will also apply to us following this offering. To comply with the various requirements applicable to public companies, we will need to establish and maintain effective disclosure and financial controls and make changes to our corporate governance practices. If, notwithstanding our efforts to comply with these laws, regulations and standards, we fail to comply, regulatory authorities may initiate legal proceedings against us and our business may be harmed. Further, failure to comply with these rules might make it more difficult for us to obtain some types of insurance, including director and officer liability insurance, and we might be forced to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. The impact of these events could also make it more difficult for us to attract and retain qualified persons to serve on our board of directors, on committees of our board of directors or as members of senior management. As such, we intend to invest resources to comply with evolving laws, regulations and standards, and this investment may result in increased general and administrative expenses and a diversion of management’s time and attention from revenue-generating activities to compliance activities.
We also expect that our management and other personnel will need to divert attention from other business matters to devote substantial time to the reporting and other requirements applicable to a public company. In particular, we expect to incur significant expense and devote substantial management effort to complying with the requirements of Section 404. We intend to hire additional accounting and finance personnel with system implementation experience and expertise regarding compliance with the Sarbanes-Oxley Act. We may be unable to locate and hire qualified professionals with requisite technical and public company experience when and as needed. In addition, new employees will require time and training to learn our business and operating processes and procedures. If we are unable to recruit and retain additional finance personnel or if our finance and accounting team is unable for any reason to respond adequately to the increased demands that will result from being a public company, the quality and timeliness of our financial reporting may suffer, which could result in the identification of material weaknesses in our internal controls. Any consequences resulting from inaccuracies or delays in our reported consolidated financial statements could cause our stock price to decline and could harm our business, financial condition, and results of operations.
Risks Related to This Offering and Our Common Stock
An active trading market for our common stock may not develop or be sustained and you may not be able to sell your shares at or above the initial public offering price, or at all.
There has been no public market for our common stock prior to this offering. The initial public offering price for our common stock will be determined through negotiations between the underwriters and us and may vary from the market price of our common stock following this offering. If you purchase our common stock in this offering, you may not be able to resell those shares at or above the initial public offering price, or at all. An active market in our common stock may not develop upon completion of this offering or, if it does develop, it may not be sustainable or liquid enough for you to sell your shares.
The price of our common stock could be volatile and you may not be able to resell your shares at or above our initial public offering price. Declines in the price of common stock could subject us to litigation.
Our stock price may be volatile and may decline, resulting in a loss of some or all of your investment. The trading price and volume of our common stock could fluctuate significantly in response to numerous factors, many of which are beyond our control, including:
| • | variations in our operating results and other financial and operational metrics, including the key financial and operating metrics disclosed in this prospectus, as well as how those results and metrics compare to analyst and investor expectations; |
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| • | speculation in the market about our operating results; |
| • | the financial projections we may provide to the public, any changes in these projections or our failure to meet these projections; |
| • | failure of securities analysts to initiate or maintain coverage of us, changes in financial estimates or ratings by any securities analysts who follow us, or our failure to meet these estimates or the expectations of investors; |
| • | events or factors resulting from global health crises such as the COVID-19 pandemic, war, incidents of terrorism, or responses to these events; |
| • | announcements of new services or enhancements, strategic alliances or significant agreements, or other developments by us or our competitors; |
| • | announcements by us or our competitors of mergers or acquisitions or rumors of such transactions involving us or our competitors; |
| • | changes in management, other key personnel, or our board of directors; |
| • | disruptions in our platform due to hardware, software or network problems, security breaches, or other issues; |
| • | the strength of the global economy or the economy in the jurisdictions in which we operate, and market conditions in our industry and those affecting our partners and learners; |
| • | trading activity by our principal stockholders, including upon the expiration of contractual lock-up agreements, and other market participants, in whom ownership of our common stock may be concentrated following this offering; |
| • | price and volume fluctuations in the overall stock market; |
| • | the performance of the equity markets in general and in our industry; |
| • | the operating performance of other similar companies; |
| • | actual or anticipated developments in our business or our competitors’ businesses or the competitive landscape generally; |
| • | new laws or regulations or new interpretations of existing laws, or regulations applicable to our business; |
| • | litigation or other claims against us; |
| • | the number of shares of our common stock that are available for public trading; and |
| • | any other factors discussed in this prospectus. |
In addition, if the market for technology stocks or the stock market in general experiences a loss of investor confidence, the price of our common stock could decline for reasons unrelated to our business, results of operations, or financial condition. The price of our common stock might also decline in reaction to events that affect other companies, even if those events do not directly affect us. Some companies that have experienced volatility in the trading price of their stock have been the subject of securities class action litigation. If we are the subject of such litigation, it could result in substantial costs and could divert our management’s attention and resources, which could adversely affect our business.
If you purchase our common stock in this offering, you will incur immediate and substantial dilution.
The initial public offering price is substantially higher than the pro forma net tangible book value per share of our common stock immediately following this offering based on the total value of our tangible assets less our
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total liabilities. Therefore, if you purchased our common stock in this offering, at the initial public offering price of $31.50 per share, you would experience an immediate dilution of $26.61 per share, the difference between the price per share you pay for our common stock and our pro forma net tangible book value per share as of December 31, 2020, after giving effect to the issuance by us of 14,664,776 shares of our common stock in this offering. See “Dilution.”
Future sales of a substantial number of shares of our common stock in the public market following this offering, or the perception that such sales could occur, could cause the price of our common stock to decline.
The market price of our common stock could decline as a result of substantial sales of our common stock, particularly sales by our directors, executive officers, and significant stockholders, a large number of shares of our common stock becoming available for sale, or the perception in the market that such sales could occur. Upon the closing of this offering, we will have approximately 130,271,466 shares of common stock outstanding, assuming no exercise of the underwriters’ option to purchase additional shares. All of the shares of common stock sold in this offering will be freely transferable without restriction or additional registration under the Securities Act of 1933, as amended (the “Securities Act”).
Substantially all of the remaining shares of our common stock, including all shares held by our executive officers, directors and the holders of substantially all of our equity securities, will be subject to the lock-up agreements with the underwriters of this offering described in “Underwriters.”
As a result of the lock-up agreements described in “Underwriters,” subject to the provisions of Rule 144 and Rule 701, shares of our common stock will be available for sale in the public market following this offering as follows:
| Earliest Date Available for Sale in the Public Market |
Number of Shares of Common Stock | |
| The date of this prospectus. | The 15,730,000 shares of common stock sold in this offering. | |
| The opening of trading on the fifth trading day immediately following our public release of earnings for the first quarter following the most recent period for which financial statements are included in this prospectus. | Up to an additional 5,218,788 shares of our outstanding common stock, shares of our common stock issuable on the exercise of vested stock options, and shares of our common stock underlying vested RSUs. | |
| The opening of trading on the fifth trading day immediately following our public release of earnings for the first quarter following the most recent period for which financial statements are included in this prospectus, provided that the last reported closing price of our common stock on the NYSE was at least 33% greater than the initial public offering price per share set forth on the cover page of this prospectus for any 10 trading days out of the 15 consecutive full trading day period ending on the closing of the second full trading day immediately following such earnings release. | Up to an additional 28,748,613 shares of our outstanding common stock, shares of our common stock issuable on the exercise of vested stock options and shares of our common stock underlying vested RSUs. | |
| The earlier of the 181st day following the date of this prospectus and the opening of trading on the third trading day immediately following our public release of earnings for the second quarter following the most recent period for which financial statements are included in this prospectus. | All remaining shares held by our equityholders. | |
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In addition, at any time with or without public notice, Morgan Stanley & Co. LLC and Goldman Sachs & Co. LLC may in their sole discretion release shares subject to such lock-up agreements prior to the expiration of the lock-up period. See “Shares Eligible for Future Sale” for additional information. As these resale restrictions end, the market price of our common stock could decline if the holders of those shares sell them or are perceived by the market as intending to sell them.
In addition, as of December 31, 2020, 35,735,008 shares were issuable upon exercise of outstanding stock options or the vesting of outstanding RSUs (including the vested stock options and vested RSUs subject to early release pursuant to the lock-up agreements described above). We intend to register all of the shares underlying outstanding options and RSUs and any shares underlying other equity incentives we may grant in the future for public resale under the Securities Act. Accordingly, after the lock-up period, these shares will be able to be freely sold in the public market upon issuance to the extent permitted by any applicable vesting requirements. Sales of stock by these equityholders or the perception that such sales could occur could adversely affect the trading price of our common stock.
Following this offering, assuming the sale of 1,065,224 shares of common stock in this offering by the selling stockholders, the holders of 72,868,846 shares of our common stock will have registration rights. See “Description of Capital Stock—Registration Rights.” Registration of these shares under the Securities Act would result in the shares becoming freely tradable without restriction under the Securities Act, except for shares held by our affiliates as defined in Rule 144 under the Securities Act, which are subject to the limitations of Rule 144. Sales of securities by any of these stockholders or the perception that such sales could occur could adversely affect the trading price of our common stock.
Future sales and issuances of our common stock or rights to purchase common stock could result in additional dilution to our stockholders and could cause the price of our common stock to decline.
We may issue additional common stock, convertible securities or other equity following the completion of this offering. We also expect to issue common stock to our employees, directors and other service providers pursuant to our equity incentive plans. Such issuances will be dilutive to investors and could cause the price of our common stock to decline. New investors in such issuances could also receive rights senior to those of holders of our common stock.
Our actual operating results may not meet our guidance or analyst or investor expectations, which would likely cause our stock price to decline.
From time to time, we may release guidance in our earnings releases, earnings conference calls, or otherwise, regarding our future performance that represent our management’s estimates as of the date of release. If given, this guidance, which will include forward-looking statements, will be based on projections prepared by our management. Projections are based upon a number of assumptions and estimates that, while presented with numerical specificity, are inherently subject to significant business, economic, and competitive uncertainties and contingencies, many of which are beyond our control. The principal reason that we expect to release guidance is to provide a basis for our management to discuss our business outlook with analysts and investors. With or without our guidance, analysts and investors may publish or otherwise have expectations regarding our business, financial condition, and results of operations, for which we do not accept any responsibility. Guidance is necessarily speculative in nature, and it can be expected that some or all of the assumptions of the guidance furnished by us or analysts will not materialize or will vary significantly from actual results. If our actual performance does not meet or exceed our guidance or analyst or investor expectations, the trading price of our common stock is likely to decline.
If securities analysts or industry analysts downgrade our common stock, publish negative research or reports, or fail to publish reports about our business, our stock price and trading volume could decline.
The market price and trading market for our common stock will be influenced by the research and reports that industry or securities analysts publish about us, our business and our market. If one or more analysts
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adversely change their recommendation regarding our stock or change their recommendation about our competitors’ stock, our stock price could decline. If one or more analysts cease coverage of us or fail to regularly publish reports on us, we could lose visibility in the financial markets, which in turn could cause our stock price or trading volume to decline or become volatile.
We will have broad discretion in the use of the net proceeds to us from this offering and may not apply the proceeds in ways that increase our market value or improve our operating results.
Our management will have considerable discretion in the application of the net proceeds to us of this offering, and you will not have the opportunity, as part of your investment decision, to assess whether the proceeds are being used appropriately. The net proceeds to us may be used for corporate purposes that do not increase the value of our business, which could cause our stock price to decline.
We do not intend to pay dividends on our common stock, so any returns on your investment will be limited to changes in the value of our common stock.
We have never declared or paid any dividends on our common stock. We currently anticipate that we will retain future earnings for the development, operation, and expansion of our business and do not anticipate declaring or paying any dividends for the foreseeable future. In addition, if we were to enter into loan or similar agreements in the future, these agreements may contain restrictions on our ability to pay dividends or make distributions. Any return to stockholders will therefore be limited to the increase, if any, in our stock price, which may never occur.
Our directors, executive officers and principal stockholders beneficially own a substantial percentage of our stock and will be able to exert significant control over matters subject to stockholder approval.
Upon completion of this offering, our existing directors, executive officers, greater than 5% stockholders and their respective affiliates will beneficially own in the aggregate approximately 56.3% of our outstanding common stock, assuming no exercise of the underwriters’ option to purchase additional shares of our common stock. Therefore, these stockholders will continue to have the ability to influence us through their ownership position, even after this offering. If these stockholders act together, they may be able to determine all matters requiring majority stockholder approval. For example, these stockholders will be able to control elections of directors, amendments of our charter documents or approval of any merger, sale of assets or other major corporate transaction. This may prevent or discourage unsolicited acquisition proposals or offers for our capital stock that other stockholders may feel are in their best interests.
Anti-takeover provisions in our charter documents and under Delaware law could make an acquisition of our company more difficult, limit attempts by our stockholders to replace or remove our current management, and limit the market price of our common stock.
Provisions in our certificate of incorporation and bylaws, as amended and restated in connection with this offering, may have the effect of delaying or preventing a change of control or changes in our management. Our amended and restated certificate of incorporation and bylaws include provisions that:
| • | authorize our board of directors to issue, without further action by the stockholders, shares of undesignated preferred stock with terms, rights, and preferences determined by our board of directors that may be senior to our common stock; |
| • | require that any action to be taken by our stockholders be effected at a duly called annual or special meeting and not by written consent; |
| • | specify that special meetings of our stockholders can be called only by our board of directors, the Chairman of our board of directors, our President, or our Chief Executive Officer; |
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| • | establish an advance notice procedure for stockholder proposals to be brought before an annual meeting, including proposed nominations of persons for election to our board of directors; |
| • | establish that our board of directors is divided into three classes, with each class serving three-year staggered terms; |
| • | prohibit cumulative voting in the election of directors; |
| • | provide that our directors may be removed only for cause; |
| • | provide that vacancies on our board of directors may be filled by a majority of directors then in office, even if less than a quorum; and |
| • | require the approval of our board of directors or the holders of at least 66 2/3% of our outstanding shares of capital stock to amend our bylaws and certain provisions of our certificate of incorporation. |
These provisions may frustrate or prevent any attempts by our stockholders to replace or remove our current management by making it more difficult for stockholders to replace members of our board of directors, which is responsible for appointing the members of our management. In addition, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, which generally prohibits a Delaware corporation from engaging in a broad range of business combinations with any interested stockholder for a period of three years following the date on which such stockholder became an interested stockholder. See “Description of Capital Stock—Anti-Takeover Effects of Provisions of Our Certificate of Incorporation, Our Bylaws and Delaware Law” for additional information. Further, as a PBC, we may be less attractive as a takeover target than a traditional company and, therefore, your ability to realize your investment through an acquisition may be limited. Any delay or prevention of a change of control transaction or changes in our management could cause our stock price to decline or could prevent or deter a transaction that you might support.
Our amended and restated charter and bylaws that will be in effect upon the closing of this offering will designate the Court of Chancery of the State of Delaware as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by our stockholders, and provides that federal district courts will be the sole and exclusive forum for Securities Act claims, which could limit our stockholders’ ability to obtain what they believe to be a favorable judicial forum for disputes with us or our directors, officers, or other employees.
Our charter and bylaws that will be in effect upon the closing of this offering provide that, unless we consent in writing to the selection of an alternative forum, to the fullest extent permitted by law, the Court of Chancery of the State of Delaware (or, if that court lacks subject matter jurisdiction, another federal or state court situated in the State of Delaware) shall be the sole and exclusive forum for (a) any derivative action or proceeding brought on our behalf, (b) any action asserting a claim of breach of a fiduciary duty owed by any of our directors, officers, or other employees to us or our stockholders, (c) any action asserting a claim arising pursuant to any provision of the Delaware General Corporation Law, our certificate of incorporation or our bylaws, or (d) any action asserting a claim against us governed by the internal affairs doctrine. Our charter and bylaws that will be in effect upon the closing of this offering further provide that, unless we consent in writing to the selection of an alternative forum, the federal district courts are the sole and exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act.
Section 27 of the Exchange Act creates exclusive federal jurisdiction over all suits brought to enforce any duty or liability created by the Exchange Act or the rules and regulations thereunder. As a result, the exclusive forum provision will not apply to suits brought to enforce any duty or liability created by the Exchange Act or any other claim for which the federal courts have exclusive jurisdiction. Accordingly, the exclusive forum provision does not designate the Court of Chancery as the exclusive forum for any derivative action arising under the Exchange Act, as there is exclusive federal jurisdiction in that instance, and instead designates the federal district court for the District of Delaware for such an action.
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Section 22 of the Securities Act creates concurrent jurisdiction for federal and state courts over all suits brought to enforce any duty or liability created by the Securities Act or the rules and regulations thereunder. As a result, the enforceability of our exclusive forum provision is uncertain, and a court may determine that such provision will not apply to suits brought to enforce any duty or liability created by the Securities Act or any other claim for which the federal and state courts have concurrent jurisdiction. Further, compliance with the federal securities laws and the rules and regulations thereunder cannot be waived by investors in our common stock.
Any person or entity purchasing or otherwise acquiring any interest in our capital stock shall be deemed to have notice of and consented to the provisions of our certificate of incorporation described above. This choice of forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers, or other employees, which may discourage such lawsuits against us and our directors, officers, or other employees. Alternatively, if a court were to find these provisions of our bylaws inapplicable to, or unenforceable in respect of, one or more of the specified types of actions or proceedings, we may incur additional costs associated with resolving such matters in other jurisdictions, which could adversely affect our business, financial condition, and results of operations and result in a diversion of the time and resources of our management and board of directors.
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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements that involve substantial risks and uncertainties. Any statements contained in this prospectus that are not statements of historical facts may be deemed to be forward-looking statements. The forward-looking statements are contained principally in “Prospectus Summary,” “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Business,” but are also contained elsewhere in this prospectus. In some cases, you can identify forward-looking statements by the words “may,” “might,” “will,” “can,” “could,” “would,” “should,” “expect,” “intend,” “plan,” “objective,” “target,” “anticipate,” “believe,” “estimate,” “predict,” “project,” “potential,” “continue,” and “ongoing,” or the negative of these terms, or other comparable terminology intended to identify statements about the future. These statements involve known and unknown risks, uncertainties, and other factors that may cause our actual results, levels of activity, performance, or achievements to be materially different from the information expressed or implied by these forward-looking statements. Forward-looking statements include statements about:
| • | trends in the higher education market and the market for online education, and expectations for growth in those markets; |
| • | the acceptance, adoption, and growth of online learning and credentialing by businesses, governments, educational institutions, faculty, learners, employers, accreditors, and state and federal licensing bodies; |
| • | the demand for, and market acceptance of, our platform; |
| • | the potential benefits of our solutions to partners and learners; |
| • | anticipated launch dates of new partner programs; |
| • | our business model; |
| • | our future financial performance, including our expectations regarding our revenue and expenses, and our ability to achieve and maintain future profitability; |
| • | our ability to expand the content and credentialing programs available on our platform and our ability to develop new platform features; |
| • | our ability to manage or sustain our growth and to effectively expand our customer base and operations, including internationally; |
| • | our ability to acquire new partners and expand program offerings with existing partners; |
| • | our ability to acquire prospective learners and to affect or increase learner enrollment and retention; |
| • | our growth strategies, plans, objectives, and goals; |
| • | our ability to compete and the future competitive landscape; |
| • | our ability to attract and retain key employees; |
| • | the scalability of our platform and operations; |
| • | our ability to develop and protect our brand; |
| • | the increased expenses associated with being a public company; |
| • | our anticipated uses of net proceeds from this offering; |
| • | the size of our addressable markets, market share, and market trends; |
| • | the affordability and convenience of our platform; |
| • | the effect of COVID-19 on our business and operations, including the demand for online learning following the COVID-19 pandemic; |
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| • | our ability to obtain, maintain, protect, and enforce our intellectual property and proprietary rights and successfully defend against claims of infringement, misappropriation, or other violations of third-party intellectual property; |
| • | the availability of capital to grow our business; |
| • | our ability to successfully defend any future litigation brought against us; |
| • | our ability to implement, maintain, and improve effective internal controls; |
| • | potential changes in laws and regulations applicable to us or our partners and our partners’ ability to comply therewith; and |
| • | the amount of time for which we expect our cash balances and other available financial resources to be sufficient to fund our operations. |
These forward-looking statements reflect our management’s beliefs and views with respect to future events and are based on estimates and assumptions as of the date of this prospectus and are subject to risks and uncertainties. You should refer to the “Risk Factors” section of this prospectus for a discussion of important factors that may cause our actual results to differ materially from those expressed or implied by our forward-looking statements. As a result of these factors, we cannot assure you that the forward-looking statements in this prospectus will prove to be accurate. Furthermore, if our forward-looking statements prove to be inaccurate, the inaccuracy may be material. In light of the significant uncertainties in these forward-looking statements, you should not regard these statements as a representation or warranty by us or any other person that we will achieve our objectives and plans in any specified timeframe, or at all. Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. Given these uncertainties, you should not place undue reliance on these forward-looking statements.
In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based on information available to us as of the date of this prospectus. While we believe that such information provides a reasonable basis for these statements, such information may be limited or incomplete. Our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all relevant information. These statements are inherently uncertain, and investors are cautioned not to unduly rely on them.
You should not rely upon forward-looking statements as predictions of future events. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee that the future results, levels of activity, performance, or events and circumstances reflected in the forward-looking statements will be achieved or occur. Moreover, neither we nor any other person assumes responsibility for the accuracy and completeness of the forward-looking statements. Such forward-looking statements relate only to events as of the date of this prospectus. We undertake no obligation to update publicly any forward-looking statements for any reason after the date of this prospectus to conform these statements to actual results or to changes in our expectations, except as required by law.
You should read this prospectus and the documents that we reference in this prospectus and have filed as exhibits to the registration statement of which this prospectus is a part completely and with the understanding that our actual future results may be materially different from what we expect. We qualify all of the forward-looking statements in this prospectus by these cautionary statements.
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This prospectus includes statistical and other industry and market data that we obtained from industry publications and research, surveys, studies and other similar third-party sources, as well as our estimates based on such data. All of the market data and estimates used in this prospectus involve a number of assumptions and limitations, and you are cautioned not to give undue weight to such data and estimates. We believe that the information from these third-party sources is reliable; however, we have not independently verified them, and our business and the industry in which we operate is subject to a high degree of risk and uncertainty. See “Risk Factors” for additional information regarding risks that could cause results to differ materially from those expressed in the estimates made by the third-party sources and by us.
Certain information in this prospectus is based on independent or third-party sources, including:
| 1. | The Future of Jobs Report, World Economic Forum, October 2020.* |
| 2. | Policy Brief: Education during COVID-19 and beyond, United Nations, August 2020. |
| 3. | 2020 Deloitte Global Human Capital Trends, Deloitte Insights. |
| 4. | Federal Reserve, Bank of New York, Quarterly Report on Household Debt and Credit 2020:Q3, November 2020. |
| 5. | Higher Education, World Bank, 2017. |
| 6. | Wittgenstein Centre Human Capital Data Explorer, Lutz, Goujon, KC, Stonawski, and Stilianakis (Eds.) (2018). |
| 7. | International Labour Organization Database, ILO modelled estimates—Labour force by sex and age, July 2019. |
| 8. | HolonIQ, May 2020. |
| 9. | The Education Commission, 2016, The Learning Generation: Investing in education for a changing world. New York: The International Commission on Financing Global Education Opportunity. |
| 10. | World Population Prospects, United Nations Department of Economic and Social Affairs, 2019. |
The content of the foregoing sources, except to these extent specifically set forth in this prospectus, does not constitute a portion of this prospectus and is not incorporated herein.
| * | Coursera provided certain data utilized and cited in the report, including with respect to learner reskilling and upskilling efforts on personal development and self-management skills. |
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We estimate that we will receive net proceeds of approximately $426.3 million (or approximately $495.8 million if the underwriters exercise their option to purchase additional shares in full) from the sale of the shares of common stock offered by us in this offering, based on an assumed initial public offering price of $31.50 per share (the midpoint of the price range set forth on the cover page of this prospectus), and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. We will not receive any proceeds from the sale of shares of common stock by the selling stockholders.
A $1.00 increase (decrease) in the assumed initial public offering price of $31.50 per share would increase (decrease) the net proceeds to us from this offering by approximately $13.7 million, assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us.
Similarly, a 1.0 million share increase (decrease) in the number of shares offered by us, as set forth on the cover of this prospectus, would increase (decrease) the net proceeds to us by approximately $29.5 million, assuming no change in the assumed initial public offering price per share, and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us.
The principal purposes of this offering are to increase our capitalization and financial flexibility, establish a public market for our common stock, facilitate future access to the public equity markets by us, our employees, and our stockholders, obtain additional capital to support our operations, and increase our visibility in the marketplace. Our expected use of the net proceeds to us from this offering represents our current intentions based upon our present plans and business condition. As of the date of this prospectus, we cannot predict with certainty all of the particular uses for the net proceeds to be received by us upon completion of this offering, or the amounts that we will actually spend on the uses set forth below. However, we currently intend to use the net proceeds to us from this offering primarily for general corporate purposes, including working capital, sales and marketing activities, research and development, general and administrative matters, and capital expenditures, although we do not currently have any specific or preliminary plans with respect to the use of proceeds for such purposes. We also may use a portion of the net proceeds to acquire complementary businesses, products, services, or technologies. However, we do not have agreements, commitments, or plans for any specific acquisitions at this time.
Pending the uses described above, we intend to invest the net proceeds to us from this offering in interest-bearing securities such as money market accounts, certificates of deposit, commercial paper, and guaranteed obligations of the U.S. government.
The amounts and timing of our actual use of the net proceeds to us will vary depending on numerous factors, including our ability to gain access to additional financing, the pace of our operational expansion relative to revenue growth, and the relative success and cost of our research and development programs. As a result, our management will have broad discretion in the application of the net proceeds to us, and investors will be relying on our judgment regarding the application of our net proceeds from this offering. In addition, we might decide to slow, postpone, or not pursue certain operational expansion and development activities if the net proceeds to us from this offering and any other sources of cash are less than expected.
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We have never declared or paid cash dividends on our common stock. We do not anticipate declaring or paying, in the foreseeable future, any cash dividends on our common stock. We currently intend to retain all available funds and any future earnings to support our operations and finance the growth and development of our business. Any future determination related to our dividend policy will be made at the discretion of our board of directors and will depend upon, among other factors, our results of operations, financial condition, capital requirements, contractual restrictions, business prospects, and other factors our board of directors may deem relevant.
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The following table sets forth our cash and cash equivalents and our capitalization as of December 31, 2020:
| • | on an actual basis; |
| • | on a pro forma basis, giving effect to: (1) the automatic conversion of all of our outstanding redeemable convertible preferred stock into 75,305,400 shares of our common stock immediately prior to the closing of this offering and (2) the filing and effectiveness of our amended and restated certificate of incorporation upon completion of this offering; and |
| • | on a pro forma as adjusted basis, giving effect to the pro forma adjustments described above, and giving further effect to the sale of 14,664,776 shares of our common stock by us in this offering at an assumed initial public offering price of $31.50 per share (the midpoint of the range set forth on the cover of this prospectus), after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. |
The pro forma and pro forma as adjusted data below are illustrative only, and our capitalization following the completion of this offering will be adjusted based on the actual initial public offering price and other terms of this offering determined at pricing. You should read this table together with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and the related notes appearing elsewhere in this prospectus.
| As of December 31, 2020 | ||||||||||||
| Actual | Pro Forma | Pro Forma As Adjusted(1) |
||||||||||
| (in thousands, except share and per share data) | ||||||||||||
| Cash, cash equivalents and marketable securities |
$ | 285,280 | $ | 285,280 | $ | 711,626 | ||||||
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|
|
|
|
|
|
|||||||
| Redeemable convertible preferred stock, $0.00001 par value: 76,420,805 shares authorized and 75,305,400 shares issued and outstanding, actual; no shares authorized, issued or outstanding, pro forma and pro forma as adjusted |
462,293 | — | — | |||||||||
| Stockholders’ (deficit) equity: |
||||||||||||
| Preferred stock, $0.00001 par value: no shares authorized, issued or outstanding, actual; and 10,000,000 shares authorized and no shares issued or outstanding, pro forma and pro forma as adjusted |
— | — | — | |||||||||
| Common stock, $0.00001 par value: 162,000,000 shares authorized, actual; 300,000,000 shares authorized, pro forma and pro forma as adjusted; 40,301,290 shares issued and outstanding, actual; 115,606,690 shares issued and outstanding pro forma; and 130,271,466 shares issued and outstanding, pro forma as adjusted |
— | 1 | 1 | |||||||||
| Additional paid-in capital |
126,408 | 588,700 | 1,015,014 | |||||||||
| Treasury stock |
(4,701 | ) | (4,701 | ) | (4,701 | ) | ||||||
| Accumulated other comprehensive income |
20 | 20 | 20 | |||||||||
| Accumulated deficit |
(343,551 | ) | (343,551 | ) | (343,551 | ) | ||||||
| Total stockholders’ (deficit) equity |
(221,824 | ) | 240,469 | 666,783 | ||||||||
|
|
|
|
|
|
|
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| Total capitalization |
$ | 240,469 | $ | 240,469 | $ | 666,783 | ||||||
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|
|
|
|
|
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| (1) | Each $1.00 increase (decrease) in the assumed initial public offering price of $31.50 per share (the midpoint of the price range set forth on the cover page of this prospectus) would increase (decrease) each of the amount of cash, cash equivalents, and marketable securities, additional paid-in capital, total stockholders’ deficit, and total capitalization by approximately $13.7 million, assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting estimated underwriting discounts and commissions and estimated offering costs payable by us. Each 1.0 million increase (decrease) in the number |
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| of shares offered by us as set forth on the cover page of this prospectus, would increase (decrease) each of our cash, cash equivalents, and marketable securities, additional paid-in capital, total stockholders’ deficit, and total capitalization by approximately $29.5 million, assuming no change in the assumed initial public offering price per share, and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. The pro forma as adjusted information set forth in the table above is illustrative only and will be adjusted based on the actual initial public offering price and other terms of this offering determined at pricing. |
The number of shares of our common stock set forth in the table above is based on 115,606,690 shares of common stock outstanding as of December 31, 2020 and excludes:
| • | 32,458,408 shares of our common stock issuable upon the exercise of stock options outstanding as of December 31, 2020 granted under the Predecessor Stock Incentive Plans, at a weighted-average exercise price of $4.60 per share; |
| • | 3,276,600 shares of our common stock subject to RSUs outstanding as of December 31, 2020 granted under the Predecessor Stock Incentive Plans; |
| • | 8,098,484 shares of our common stock reserved for future issuance under the Predecessor Stock Incentive Plans as of December 31, 2020, which shares (to the extent not subject to outstanding equity awards prior to the date the registration statement for this offering is declared effective) will no longer be available for future issuance upon completion of this offering; |
| • | 15,400,000 shares of our common stock reserved for future issuance under the 2021 Plan, which will become effective on the date the registration statement for this offering is declared effective, as well as any automatic increases in the number of shares of our common stock reserved for future issuance under the 2021 Plan, and any shares subject to outstanding awards under the Predecessor Stock Incentive Plans after the effective date of the 2021 Plan that are subsequently (i) forfeited or terminated, (ii) not issued because such award is settled in cash, or (iii) withheld or reacquired to satisfy the applicable exercise, strike, or purchase price, or a tax withholding obligation, all of which shares shall become available for issuance under the 2021 Plan; and |
| • | 2,800,000 shares of our common stock reserved for future issuance under the ESPP, which will become effective on the date the registration statement for this offering is declared effective, as well as any automatic increases in the number of shares of our common stock reserved for future issuance under the ESPP. |
The foregoing discussion and table assumes or gives effect to:
| • | the automatic conversion of all of our redeemable convertible preferred stock outstanding as of December 31, 2020 into an aggregate of 75,305,400 shares of our common stock immediately prior to the closing of this offering; |
| • | the filing and effectiveness of our amended and restated certificate of incorporation and the adoption of our amended and restated bylaws immediately prior to the completion of this offering; and |
| • | no exercise by the underwriters of their option to purchase up to 2,359,500 additional shares of our common stock from us. |
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If you invest in our common stock in this offering, your ownership interest will be immediately diluted to the extent of the difference between the initial public offering price per share of our common stock and the pro forma as adjusted net tangible book value per share of our common stock after this offering.
Our historical net tangible book value (deficit) as of December 31, 2020 was approximately $(252.3) million, or $(6.26) per share of our common stock. Our historical net tangible book value (deficit) represents our total tangible assets less our total liabilities and redeemable convertible preferred stock (which is not included within stockholders’ deficit). Historical net tangible book value (deficit) per share is our historical net tangible book value (deficit) divided by the number of shares of common stock outstanding as of December 31, 2020.
Our pro forma net tangible book value as of December 31, 2020, which gives effect to: (1) the automatic conversion of all of our outstanding redeemable convertible preferred stock into 75,305,400 shares of our common stock immediately prior to the closing of this offering and (2) the filing and effectiveness of our amended and restated certificate of incorporation upon completion of this offering, was approximately $210.0 million, or $1.82 per share of common stock.
Pro forma as adjusted net tangible book value is our pro forma net tangible book value (deficit), plus the effect of the sale of 14,664,776 shares of our common stock by us in this offering at an assumed initial public offering price of $31.50 per share (the midpoint of the range set forth on the cover of this prospectus), after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. Our pro forma as adjusted net tangible book value as of December 31, 2020 would have been approximately $637.6 million, or $4.89 per share. This amount represents an immediate increase in pro forma as adjusted net tangible book value of $3.07 per share to our existing stockholders, and an immediate dilution of $26.61 per share to new investors participating in this offering. We determine this dilution by subtracting the pro forma as adjusted net tangible book value per share after this offering from the amount of cash that an investor participating in this offering paid for a share of common stock.
The following table illustrates this dilution on a per share basis:
| Assumed initial public offering price per share |
$ | 31.50 | ||||||
| Historical net tangible book value (deficit) per share as of December 31, 2020 |
$ | (6.26 | ) | |||||
| Pro forma increase in net tangible book value (deficit) per share as of December 31, 2020 before giving effect to this offering |
$ | 8.08 | ||||||
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| Pro forma net tangible book value per share as of December 31, 2020 |
$ | 1.82 | ||||||
| Increase in pro forma net tangible book value per share attributable to investors participating in this offering |
3.07 | |||||||
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|
|
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| Pro forma as adjusted net tangible book value per share after giving effect to this offering |
4.89 | |||||||
|
|
|
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| Pro forma as adjusted dilution per share to investors participating in this offering |
$ | 26.61 | ||||||
|
|
|
A $1.00 increase (decrease) in the assumed initial public offering price of $31.50 per share (the midpoint of the price range set forth on the cover page of this prospectus) would increase (decrease) the pro forma as adjusted net tangible book value per share after this offering by approximately $0.11 per share and the dilution to investors participating in this offering by approximately $0.89 per share, assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us.
Similarly, a 1.0 million share increase (decrease) in the number of shares offered by us, as set forth on the cover of this prospectus, would increase (decrease) the pro forma as adjusted net tangible book value per share
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after this offering by approximately $0.19 and decrease (increase) the dilution to investors participating in this offering by approximately $0.19, assuming that the assumed initial public offering price of $31.50 per share (the midpoint of the price range set forth on the cover of this prospectus) remains the same, and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us.
If the underwriters exercise their option to purchase additional shares in full, the pro forma as adjusted net tangible book value will increase to $5.33 per share, representing an immediate increase in pro forma as adjusted net tangible book value to our existing stockholders of $0.44 per share, and an immediate decrease in dilution of $0.44 per share to new investors participating in this offering, in each case assuming an initial public offering price of $31.50 per share (the midpoint of the price range set forth on the cover of this prospectus).
The following table summarizes, on a pro forma as adjusted basis as of December 31, 2020, the number of shares of common stock purchased or to be purchased from us, the total consideration paid or to be paid to us, and the average price per share paid to us by our existing stockholders and paid to us by investors participating in this offering at an assumed initial public offering price of $31.50 per share (the midpoint of the price range set forth on the cover of this prospectus), before deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. The table below shows the average price per share investors participating in this offering will pay compared to our existing stockholders.
| Shares Purchased | Total Consideration | Average Price Per Share |
||||||||||||||||||
| Number | Percent | Amount | Percent | |||||||||||||||||
| Existing stockholders |
115,606,690 | 88.7 | % | $ | 502,767,295 | 52.1 | % | $ | 4.35 | |||||||||||
| New investors participating in this offering |
14,664,776 | 11.3 | 461,940,444 | 47.9 | $ | 31.50 | ||||||||||||||
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| Total |
130,271,466 | 100 | % | 964,707,739 | 100 | % | $ | 7.41 | ||||||||||||
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The table above assumes no exercise of the underwriters’ option to purchase up to an additional 2,359,500 shares in this offering. If the underwriters’ option to purchase additional shares is exercised in full, the number of shares of our common stock held by the existing stockholders would be reduced to 87.2% of the total number of shares of our common stock outstanding after this offering, and the number of shares of common stock held by new investors participating in the offering would be increased to 12.8% of the total number of shares outstanding after this offering.
A $1.00 increase (decrease) in the assumed initial public offering price of $31.50 per share (the midpoint of the price range set forth on the cover page of this prospectus) would increase (decrease) the total consideration paid to us by investors participating in this offering, total consideration paid to us by all stockholders, and the average price per share paid to us by all stockholders by approximately $14.7 million, $14.7 million, and $0.11, respectively, assuming that the number of shares offered, as set forth on the cover page of this prospectus, remains the same and before deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us.
Similarly, a 1.0 million share increase (decrease) in the number of shares offered by us, as set forth on the cover of this prospectus, would increase (decrease) the total consideration paid to us by investors participating in this offering, total consideration paid to us by all stockholders, and the average price per share paid to us by all stockholders by approximately $31.5 million, $31.5 million, and $0.18, respectively, assuming the assumed initial public offering price of $31.50 per share (the midpoint of the price range set forth on the cover of this prospectus) remains the same, and before deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us.
The dilution information set forth above is illustrative only. The pro forma as adjusted net tangible book value following this offering is subject to adjustment based on the actual initial public offering price and other
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terms of this offering determined at pricing. We will not receive any proceeds from the sale of shares of our common stock by the selling stockholders in this offering. Accordingly, there will be no dilutive impact as a result of such sales.
The number of shares of our common stock to be outstanding after this offering is based on 115,606,690 shares of common stock outstanding as of December 31, 2020 and excludes:
| • | 32,458,408 shares of our common stock issuable upon the exercise of stock options outstanding as of December 31, 2020 granted under the Predecessor Stock Incentive Plans, at a weighted-average exercise price of $4.60 per share; |
| • | 3,276,600 shares of our common stock subject to RSUs outstanding as of December 31, 2020 granted under the Predecessor Stock Incentive Plans; |
| • | 8,098,484 shares of our common stock reserved for future issuance under the Predecessor Stock Incentive Plans as of December 31, 2020, which shares (to the extent not subject to outstanding equity awards prior to the date the registration statement for this offering is declared effective) will no longer be available for future issuance upon completion of this offering; |
| • | 15,400,000 shares of our common stock reserved for future issuance under the 2021 Plan, which will become effective on the date the registration statement for this offering is declared effective, as well as any automatic increases in the number of shares of our common stock reserved for future issuance under the 2021 Plan, and any shares subject to outstanding awards under the Predecessor Stock Incentive Plans after the effective date of the 2021 Plan that are subsequently (i) forfeited or terminated, (ii) not issued because such award is settled in cash, or (iii) withheld or reacquired to satisfy the applicable exercise, strike, or purchase price, or a tax withholding obligation, all of which shares shall become available for issuance under the 2021 Plan; and |
| • | 2,800,000 shares of our common stock reserved for future issuance under the ESPP, which will become effective on the date the registration statement for this offering is declared effective, as well as any automatic increases in the number of shares of our common stock reserved for future issuance under the ESPP. |
The foregoing discussion and table assumes or gives effect to:
| • | the automatic conversion of all of our redeemable convertible preferred stock outstanding as of December 31, 2020 into an aggregate of 75,305,400 shares of our common stock immediately prior to the closing of this offering; |
| • | the filing and effectiveness of our amended and restated certificate of incorporation and the adoption of our amended and restated bylaws immediately prior to the completion of this offering; and |
| • | no exercise by the underwriters of their option to purchase up to 2,359,500 additional shares of our common stock from us. |
To the extent that additional options or other securities are issued under our equity incentive plans, or we issue additional shares of common stock in the future, there will be further dilution to investors participating in this offering. In addition, we may choose to raise additional capital through the sale of equity or convertible debt securities due to market conditions or strategic considerations even if we believe we have sufficient funds for our current or future operating plans. To the extent we issue additional shares of common stock or other equity or convertible debt securities in the future, there will be further dilution to investors participating in this offering.
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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You should read the following discussion and analysis of our financial condition and results of operations together with the audited consolidated financial statements and related notes and other financial information included elsewhere in this prospectus. This discussion contains forward-looking statements based upon our current plans, expectations and beliefs, which involve risks and uncertainties. See “Special Note Regarding Forward-Looking Statements.” Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under “Risk Factors” and in other parts of this prospectus.
Overview
Coursera is one of the largest online learning destinations in the world, connecting an ecosystem of learners, educators, and institutions with a platform of high-quality content and credentials, data, and technology.
As shifts to the digital economy are increasing the need for new skills, Coursera’s online learning offerings can meet this global demand and provide access to world-class learning to learners and institutions worldwide. We partner with over 200 leading global university and industry partners to create and distribute content that is modular, stackable, flexible, and affordable. As of December 31, 2020, more than 77 million learners had registered on our platform to engage with a wide range of offerings from Guided Projects to bachelor’s and master’s degree programs. As of December 31, 2020, over 2,000 organizations were paying Coursera for Business customers, and in 2020 more than 4,000 colleges and universities launched free online learning programs through Coursera for Campus during the COVID-19 pandemic, and over 300 governments and governmental agencies around the world used Coursera for Government to upskill and reskill their civil servants and citizens.
Our goal is to bring world-class learning from leading educators to learners and institutions worldwide. We began with free online courses, and over time, expanded to provide a range of learning offerings including Guided Projects, courses, Specializations, certificates, and degrees. We source this content by partnering with leading universities and companies and utilizing our technology platform to deliver high-quality content and credentials that are affordable, accessible, and flexible. We announced the first Degrees program to be hosted on our platform in 2015, partnering with universities to fully deliver online bachelor’s and master’s degrees to a global learner audience. In 2016, we launched our Enterprise offering with Coursera for Business, helping businesses upskill and reskill their employees. We followed that with Coursera for Government, an offering to help governments upskill their public servants and reskill their citizens to be job-ready in a digital economy. In 2019, we launched Coursera for Campus, an offering to help academic institutions deliver ready-made, high-quality online courses to their students.
Our go-to-market strategy centers on leveraging the Coursera brand and our partners’ brands along with our large catalog of high-quality, free content to attract learners to Coursera efficiently. Our learners have the opportunity to engage with many of our offerings on both a freemium basis (using an audit option that allows unlimited time access but with fewer features) and a free trial basis (which allows for limited time access but with nearly full functionality). Once we attract learners to Coursera, our data-driven learner experience connects learners to courses, certificates, and degree programs tailored to them through a personalized discovery and nurture system and identifies whether they are a potential Enterprise prospect. In 2020, approximately 50% of our new Degrees students were previously registered Coursera learners and over 30% of our Coursera for Enterprise leads were sourced from our Consumer platform. Our enterprise sales and account management teams identify and engage with potential business, academic, and government customers around the world with the goal of landing and expanding these customers. We have experienced rapid growth in recent periods. Our revenue was $184.4 million and $293.5 million for the years ended December 31, 2019 and 2020, respectively, representing annual growth of approximately 59%.
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We generated a net loss for the years ended December 31, 2019 and 2020 of $46.7 million and $66.8 million, respectively, which included $16.3 million and $16.8 million, respectively, of stock-based compensation, and a net loss margin for the years ended December 31, 2019 and 2020 of (25)% and (23)%, respectively. Our adjusted EBITDA and adjusted EBITDA margin as a percentage of revenue were $(26.9) million and (15)%, and $(39.8) million and (14)%, for the years ended December 31, 2019 and 2020, respectively. See “Summary Consolidated Financial Data—Non-GAAP Financial Measures” for more information and for a reconciliation of net loss and net loss margin, the most directly comparable GAAP financial measures, to adjusted EBITDA and adjusted EBITDA margin.
Our History
Since our launch in 2012, we have built one of the largest platforms for adult online learning worldwide.
Our History Fall 2011 Aug 2016 Free open online May 2015 Coursera Jan 2017 Mar 2018 courses launched Jan 2013 First Master’s for Coursera for First Bachelor’s Oct 2019 Feb 2020 May 2020 out of Stanford First paid certificate Degree Business Governments Degree Coursera Coursera Coursera University (before offering (with announced (iMBA (Enterprise & Nonprofit announced for Plus launched Coursera was financial aid from the University offering) Organizations (ULondon, Campus unlimited Guided officially founded) available from day 1) of Illinois) launched launched BSCS) launched subscription Projects April 2012 Jan 2014 Dec 2016 Jan 2018 Aug 2019 Mar 2020 Apr 2020 Coursera First Industry Google IT Coursera Coursera for Helping launched Specializations Partners Support Labs Campus made governments launched started Professional launched, free as part of respond to the creating Certificate incl. Rhyme Coronavirus unemployment content launched acquisition response crisis caused by initiatives the Coronavirus 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Our Business Model
Coursera is a platform that enables a global ecosystem of educators, learners, and institutions. Coursera serves learners in their homes, through their employers, through their colleges and universities, and through government-sponsored programs. We provide a broad range of learning offerings: Guided Projects, courses, Specializations, certificates, and degrees. Our go-to-market strategy centers on efficiently attracting learners to our platform and connecting them to content and degree programs tailored to them, after which our data-driven learner experience identifies potential Enterprise prospects, complemented by our direct sales team which finds and engages with potential business, academic, and government customers.
Our freemium offerings, large registered learner base, and stackable model enable favorable customer acquisition economics. Our sales and marketing expenses as a percentage of annual revenue were 31% in 2019 and 37% in 2020, as we grew total revenue 59% from 2019 to 2020. Our participation in numerous channels (Consumer, Enterprise, and Degrees) allows us to leverage technology, data, content, and know-how at scale.
Consumer
Coursera’s Consumer offerings target individuals seeking to obtain hands-on learning, gain valuable job skills, receive professional-level certifications, and otherwise increase their knowledge and advance their careers. We built our broader business model from our original Consumer offering. Our large learner base attracts top educator partners, allows us to source Enterprise and Degrees leads, provides data and insights, increases operating scale, improves search engine optimization performance, and produces favorable economics.
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Our Consumer learners come to the Coursera platform through direct marketing channels such as email, affiliate marketing, and online advertising, and indirect marketing channels such as search engine optimization, public relations, television advertising, and word-of-mouth. They often begin to engage with the platform via our freemium offering by taking one of over 4,500 courses for free. Learners who become paying customers can gain access to graded assignments and assessments and can receive a certificate of completion after finishing a course. With our stackable model, completion of a stand-alone course can count as progress towards a broader program of study, such as a Specialization, Professional Certificate, or university degree. Our flexible model allows learners to complete certain courses in less than a week. We attempt to upsell and retain our learners by delivering timely, personalized suggestions—both on-platform and via off-platform channels, including email—of content that might be most relevant to them. We source our educational content by partnering with leading universities and companies. We pay these partners a percentage of revenue that we earn from our learners’ use of their educational content.
Learners on our Consumer platform pay either one time for a single Course or Project or on a subscription basis for multi-course offerings. A summary of our Consumer offerings and pricing as of December 31, 2020 is below:
| Learning Offering |
Payment Basis | Duration* | Price | |||
| Guided Projects |
One-time | Less than 2 hours | $10 | |||
| Courses |
One-time | 4-6 weeks | Free - $99 | |||
| Specializations |
Upfront, Subscription | 3-6 months | $39 - $99 / month | |||
| Professional Certificates |
Upfront, Subscription | 3-9 months | $39 - $99 / month | |||
| Coursera Plus |
Subscription | Monthly, Annually | $399 / year |
| * | Learning offerings are designed for completion within the periods listed; actual time to completion varies by learner. Learners may also access certain courses, Specializations, and Professional Certificates through a Coursera Plus subscription. |
Our Consumer learners also represent an important “top-of-the-funnel” source of potential customers for our Enterprise and Degrees offerings. The ability to source these customers from our total Consumer pool materially decreases our overall customer acquisition costs—in 2020, approximately 50% of our new Degrees students were previously registered Coursera learners and over 30% of our Coursera for Enterprise leads were sourced from the Consumer platform. Additionally, the data from our Consumer ecosystem helps drive Enterprise marketing efficiency. Related insights, especially on how a company’s skill proficiencies stack up relative to peers based on the aggregated learning behaviors of learners working at a given company, help us reach prospects with targeted skill development solutions.
In the year ended December 31, 2020, over 30.2 million new learners registered on Coursera, representing a 65% year-on-year increase from the approximately 46.4 million learners who were registered as of December 31, 2019.
For the year ended December 31, 2020, our revenue from Consumer learners totaled $192.9 million, representing a 59% year-on-year increase from December 31, 2019.
Enterprise
We derive substantially all of our Enterprise revenue from the sale of subscriptions to institutional customers. Subscription terms typically range from one to three years and include a fixed number of seat licenses, each of which provides one learner access to all or a portion of our catalog for one year. Nearly all of our subscriptions to Enterprise services are billed in quarterly or annual installments.
Our team identifies and engages with potential Enterprise customers. Once an Enterprise customer has adopted our platform, we focus on expanding our relationships with existing customers and on driving continued use of our offerings. We source our Enterprise leads through a combination of field marketing and leveraging our existing registered learner base. We expand our relationships with existing Enterprise customers through
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increasing the number of license seats. We sell subscriptions to our platform to Enterprise customers primarily through our direct sales team, though as discussed in the Consumer section, our Consumer learner base provides substantial customer acquisition efficiency and insights.
We generate Enterprise revenue through three main offerings: Coursera for Business, Coursera for Campus, and Coursera for Government.
Coursera for Business. We generate most of our Coursera for Business revenue on a seat license subscription basis through our Enterprise Plan. Smaller businesses or larger businesses seeking to retrain a subset of their workforce can also access our Coursera for Business Teams Plan directly through our website and pay via debit or credit card or bank transfer.
Coursera for Campus. We offer subscriptions to our college and university customers with either a fixed number of licenses or enrollments per campus or a fixed contract with unlimited learners. Coursera for Campus enables customers to begin with a freemium offering, such as Coursera for Campus Basic, which gives universities and students unlimited access to Guided Project enrollments and one course enrollment per student per year for up to 20,000 students to enable trial before purchase.
Coursera for Government. We offer Government customers a fixed subscription per licensed user per year. We have developed a large Government pipeline from the COVID-19-related free trial offered in 2020, and expect to continue to help governments educate and reskill their populations.
For the year ended December 31, 2020, revenue from our Enterprise channel totaled $70.8 million, representing a 47% year-on-year increase from December 31, 2019.
Degrees
Coursera partners with universities worldwide to develop and deliver fully online bachelor’s and master’s degrees to a global learner audience. After a Degrees program is live on our platform, universities admit students and pay us a percentage fee based on the online student tuition in a given period. Our Degrees partner contracts generally have initial terms between two to ten years in length. We continue to offer all of the degrees we have launched since inception. The primary driver of our Degrees revenue is the number of students enrolled in online Degrees programs on Coursera. Enrollments in online Degrees programs are driven by:
| • | Our ability to increase the number of degrees offered by our partners, either by adding new degree partners or by expanding the number of degree programs offered by existing partners; |
| • | Our ability to identify and acquire prospective students for degree programs; and |
| • | Our ability, and that of our partners, to retain the students who enroll in their degree programs through high-quality content and optimal learner experiences. |
As of December 31, 2020, we partnered with 13 universities to offer 26 bachelor’s and master’s programs with over 11,000 enrolled Degrees students across institutions, including Arizona State University, the University of Illinois, The University of London (the “University of London”), University of Michigan, and University of Pennsylvania (“UPenn”). Approximately 8,000 new Degrees students matriculated in 2020, as compared to approximately 4,800 new Degrees students in 2019. We calculate our average acquisition cost for Degrees students by aggregating directly attributable marketing costs and dividing by the total number of new students. Our average Degrees student acquisition cost was under $2,000 over the two years ended December 31, 2020.
For the year ended December 31, 2020, our revenue from Degrees totaled $29.8 million, representing a 97% year-on-year increase from December 31, 2019.
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Our Attractive Cohort Characteristics
Consumer
We define a Coursera registrant cohort as all Coursera learners who registered for the first time in a given calendar year. For example, the 2018 cohort includes all learners who registered on Coursera for the first time between January 1, 2018 and December 31, 2018. The chart below reflects the cash receipts generated from Consumer offerings for the years ended December 31, 2016 through 2020 by Coursera registrant cohort. We encourage learners to remain on our platform by continuing to suggest new and relevant courses as well as expanding our offerings.
Annual Consumer Cash Receipts by Coursera Registrant Cohort $M
$220 $200 $180 $160 $140 $120 $100 $80 $60 $40 $20 $0 2016 2017 2018 2019 2020 s 2012 2013 2014 2015 2016 2017 2018 2019 2020
Our cohorts usually experience a drop in cash receipts from Consumer offerings after the first year, typical of a new Coursera registrant cohort exploring a new offering. However, many of our learners across cohorts remain customers for a number of years and continue to make purchases in subsequent years. These cohorts also provide value to our other revenue lines. For the year ended December 31, 2020, more than 50% of our Consumer offering cash receipts came from individual learners who were registered on our platform as of December 31, 2019.
Enterprise
We have a history of attracting new Enterprise customers and expanding their use of the platform over time. We calculate annual recurring revenue (“ARR”) by annualizing each customer’s monthly recurring revenue (“MRR”) for the most recent month at period end. We define an Enterprise cohort as Enterprise customers that purchase Coursera via our direct sales force and who purchased their first subscription with us in a given year. For example, the year 2018 cohort represents all Enterprise customers that purchased their first subscription from us via our direct sales force between January 1, 2018 and December 31, 2018. These customers represented approximately 85% of our Enterprise ARR for the year ended December 31, 2020. We exclude from these cohorts our Enterprise customers who do not purchase Coursera via our direct sales force such as organizations engaging on our platform through our Coursera for Teams offering or through our channel partners. We track cohort behavior for customers served by our direct sales force because we are able to directly manage those customer relationships.
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The chart below illustrates the total ARR for our 2017, 2018, 2019, and 2020 Enterprise cohorts. Our 2017 Enterprise cohort combines all customer cohorts that purchased their first subscription from us on or prior to December 31, 2017.
Enterprise ARR by Enterprise Cohort $M
$80M $60M $40M $20M $0M 2016 2017 2018 2019 2020 2017 & Earlier 2018 2019 2020
Our Enterprise cohorts have expanded over time as the number of license seats increased. Our Enterprise revenue is also predictable, given its subscription business model. For the year ended December 31, 2020, 79% of our Enterprise revenue came from Enterprise customers who were on our platform as of December 31, 2019.
Degrees
We define a Degrees program cohort as the Degrees programs that generate revenue for the first time in a given calendar year. For example, the 2018 Degrees cohort includes all programs that generated Coursera revenue for the first time between January 1, 2018 and December 31, 2018. As a Degrees program continues, we focus on adding an increasing number of new students to each degree in successive years and as a result, each cohort of Degrees programs typically generates higher revenue over time. We began recognizing revenue for Degrees in 2017.
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The chart below illustrates the total revenue of each Degrees cohort for each calendar year through 2020.
Degrees Annual Revenue by Degrees Program Cohort $M
Degrees Annual Revenue by Degrees Program Cohort $M $30 $25 $20 $15 $10 $5 $0 2016 2017 2018 2019 2020 2017 & Prior 2018 2019 2020
A significant portion of Degrees students entering our university partners’ programs are existing registered Coursera learners. For the years ended December 31, 2019 and 2020, approximately 59% and 50% of new Degrees students were previously registered Coursera learners, respectively. New Degrees students coming from our registered learner base spanned cohorts originating over many years, as illustrated in the following chart.
New Degrees Students from Registered Learner Cohort
Total New Degrees Students 1.7K 4.8K 8.1K New Degrees Students from registered learners 1.0k Degree Students from registered learner base 2.8k Degree Students from registered learner base 4.1k Degree Students from registered learner base Year of Registered Learner Cohort 2020 2019 2018 2017 2016 2015 2014 2013 2012
Our Degrees cohorts expand over time as new students join each degree program in subsequent years. Full run-rate revenue for a degree is typically reached after the program has been active for a few years. Our Degrees revenue is highly predictable; for the year ended December 31, 2020, 98% of our Degrees revenue came from Degrees programs that were live on our platform as of December 31, 2019.
Factors Affecting Our Performance
We believe that the growth of our business and our future success are dependent upon many factors. While each of these factors presents significant opportunities for us, these factors also pose challenges that we must successfully address in order to sustain the growth of our business and enhance our results of operations.
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Ability to attract and engage new learners, Enterprise customers, and Degrees students
In order to grow our business, we must attract new learners, Enterprise customers and Degrees students efficiently and increase engagement on our platform over time. Our Consumer learners are the most important source of our overall learner base, as they contribute to our Enterprise and Degrees revenue. As of December 31, 2020, more than 77 million learners from more than 190 countries had registered on Coursera, and we had attracted over 2,000 Enterprise customers to our platform. We added approximately 30.2 million learners during the year ended December 31, 2020, representing annual growth of our total learner base of 65%.
We acquire a substantial portion of our learners via organic channels and also use paid marketing to further enhance the growth of our learner base. Of the 30.6 million learners who joined the platform during the year ended December 31, 2020, approximately 84% originated from organic channels. Once we bring new learners onto our platform, we work to create a best-in-class experience to encourage engagement and drive learning and career outcomes.
Ability to source in-demand content from our educator partners
We believe that learners and enterprises are attracted to Coursera largely because of the high quality and wide selection of content our educator partners offer, and that continuing to source in-demand content and credentials from our educator partners—from Courses to Degrees—will be an important factor in attracting free and paid customers and increasing our revenue over time.
We believe that our reach, scale, and reputation provide an attractive value proposition for leading institutions to partner with Coursera to develop and distribute content and credentials. To be the platform of choice for educator partners, we continue to invest in increasing the size and engagement of our learner base, improving recommendation and personalization features, developing marketing capabilities that drive higher conversion into paid offerings, and improving the analytics tools available for learners, educators, and institutions. We experienced minimal turnover among university and industry partners in 2019 and 2020.
Impact of mix shift over time
Our mix of business amongst our Consumer, Enterprise, and Degrees channels is shifting, and this shift will affect our financial performance.
We incur content costs in the form of a fee paid to our university and industry partners, determined as a percentage of total revenue generated from their content. These costs totaled $70.4 million in 2019 and $108.2 million in 2020, or 38.2% and 36.9% of total annual revenue, respectively. These costs, which are included in our cost of revenue, vary significantly for our different offerings. For the year ended December 31, 2020, content costs as a percentage of revenue averaged 44.8% for our Consumer offerings and 30.8% for our Enterprise offerings. We incur no content costs for our Degrees offerings since our university partners pay us a percentage of learner tuition.
If either our Degrees or Enterprise revenue grow faster than our Consumer revenue, which we presently expect, our overall margins will benefit from this shift in revenue mix.
Ability to convert free learners to paid learners
New learners to our platform typically begin to engage with our free courses, which serve as a funnel to grow our total learner base and drive referrals to our other offerings, including our paid offerings. Through both our on-platform and off-platform marketing efforts, we engage our free learners by highlighting key features that encourage conversion to our paid offerings. These efforts include campaigns targeting existing learners, personalized recommendations, and performance marketing across leading social media platforms. Of the approximately 46 million registered learners on our platform as of December 31, 2019, approximately 2.3 million had paid for a course or offering. As of December 31, 2020, of the approximately 77 million registered learners on our platform, approximately 3.6 million had paid for a course or offering.
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Ability to expand our international footprint
We generated 51% of our revenue outside the United States during both of the years ended December 31, 2019 and 2020. We see a significant opportunity to expand our offerings into other regions, particularly in regions with large underserved adult learning populations. We have invested, and plan to continue to invest, in personnel and marketing efforts to support our international growth and expand our international operations as part of our strategy to grow our customer and learner base, particularly among our Enterprise customers.
Ability to retain and expand our Enterprise customer relationships
Our efforts to grow our Enterprise business are focused primarily on business, academic and government customers. We believe a significant opportunity exists for us to expand our existing customers’ use of our platform by identifying new use cases in additional departments and divisions and increasing the size of deployments. Our business and results of operations will depend in part on our ability to retain and expand usage of our platform within our existing customer base.
Our investment in growth
We are actively investing in our business. In order to support our future growth and expanding set of offerings, we expect this investment to continue. We anticipate that our operating expenses will increase as we continue to build our sales and marketing efforts, expand our employee base, and invest in our technology development. The investments we make in our platform are designed to grow our revenue opportunity and to improve our operating results in the long term.
Impact of COVID-19
In December 2019, an outbreak of the COVID-19 virus was first identified and began to spread across the globe. In March 2020, the World Health Organization declared COVID-19 a pandemic, impacting many countries around the world. Governments have instituted lockdown or other similar measures to slow infection rates. Many organizations have resorted to mandating employees to work from home, and schools, colleges, and universities globally have also closed as a result of the COVID-19 pandemic. While the impact of the ongoing COVID-19 pandemic is severe, widespread, and continues to evolve, it has accelerated the need for online-delivered education. Both individuals and institutions have relied and are continuing to rely on online learning to navigate change and disruption. As a result, our revenue significantly increased due primarily to an increase in the number of enrollments during the COVID-19 pandemic. Likewise, we have experienced a significant increase in our operating costs associated with our services, primarily driven by our freemium offerings and marketing efforts. As the pandemic made remote work and online learning more widespread, it is uncertain what impact the tapering of the COVID-19 pandemic could have on our operating results. Once COVID-19 wanes, our growth rates may increase or decrease. The full extent of the impact of the pandemic and its aftermath on our operations, key metrics, and financial performance depends on future developments that are uncertain and unpredictable, including the duration and spread of the pandemic, its impact on capital and financial markets, and any new information that may emerge concerning the severity of the COVID-19 virus.
Components of Results of Operations
Revenue
We derive revenue from contracts with customers for access to the learning content hosted on our platform and related services. We derive our revenue from three sources: Consumer, Enterprise, and Degrees.
Consumer and Enterprise revenue both consist primarily of subscriptions with terms varying from 30 days for Consumer subscriptions to one to three years for Enterprise license subscription contracts. Consumer
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subscriptions are paid in advance, generally after a 7-day free trial period. Enterprise subscriptions are generally invoiced in quarterly or annual installments. Access to our platform represents a series of distinct services, as we continually provide access to, and fulfill our obligation to, the customer over the contract term. As a result, revenue is recognized ratably over the contract term.
We are the principal with respect to revenue generated from sales to Consumer and Enterprise customers as we control the performance obligation and are the primary obligor with respect to delivering access to content.
Degrees revenue is generated from contracts with university partners for the delivery of online bachelor’s and master’s degrees awarded by the university. We earn a Degrees service fee that is determined as a percentage of the total tuition collected from Degrees students, net of refunds, by the university partner. We have a stand ready obligation to perform degree services continually throughout the period that the degree content is hosted on our platform. Degrees revenue is received and paid by the university partner for each university term. As a result, revenue generated from each term is recognized ratably from the start of a term through the start of the following term.
There is no direct contractual arrangement between Coursera and Degrees students, who contract directly with the university partners. University partners typically have additional performance obligations to the Degrees students in the form of real-time teaching, financial aid, and academic or career counseling. For these reasons, we have determined that the university partners control the delivery of degrees hosted on our platform. As a result, we recognize Degrees revenue as the service fee we receive from the university partner.
We have not observed significant fluctuations from period to period in our pricing or service fee percentage for our Enterprise and Degrees offerings, respectively, or in our course, Specialization, and certificate offerings over the periods presented.
Cost of Revenue
Cost of revenue consists of content costs in the form of fees paid to educator partners and expenses associated with the operation of our platform. These expenses include the cost of servicing both paid learner and educator partner support requests, hosting and bandwidth costs, amortization of acquired technology and internal-use software, customer payment processing fees, and allocated depreciation and facilities costs.
Content costs only apply to Consumer and Enterprise offerings; there is no content cost attributable to our Degrees offering. Content costs as a percentage of revenue are lower for our Enterprise offerings, due to a lower effective percentage payable to educator partners compared with sales to Consumer customers. We expect Enterprise and Degrees to become a larger portion of the overall business and as our mix changes the content cost will decrease as a percentage of total revenue.
Operating Expenses
Operating expenses consist of research and development, sales and marketing, and general and administrative expenses. Personnel costs are the most significant component of our operating expenses and consist of salaries, benefits, bonuses, stock-based compensation, and commissions. Our operating expenses also include allocated costs of facilities, information technology, depreciation, and amortization. Although our operating expenses may fluctuate from period to period, we currently expect our operating expenses to increase in absolute dollars over time.
Research and development. Our research and development expenses consist primarily of personnel and personnel-related costs, including stock-based compensation and costs related to the ongoing management, maintenance, and expansion of content, features, and services offered on our platform. We believe that continued investment in our platform is important to our future growth and to maintain and attract partners and learners to our platform. As a result, we expect research and development expenses to increase in absolute dollars. In addition, we expect research and development expenses as a percentage of revenue to vary from period to period but generally decrease over the long term.
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Sales and marketing. Our sales and marketing expenses consist primarily of personnel and personnel-related costs, including stock-based compensation and costs related to learner and partner acquisition, support efforts, and brand marketing. Sales and marketing expenses also consist of hosting and bandwidth costs and learner support costs related to the provisioning of services to free learners. We expect sales and marketing expenses to increase in absolute dollars as our business grows. In addition, we expect sales and marketing expenses as a percentage of revenue to vary from period to period but generally decrease over the long term.
General and administrative. Our general and administrative expenses consist primarily of personnel and personnel-related costs, including stock-based compensation and costs related to our legal, finance, and human resources departments, as well as indirect taxes, professional fees, and other corporate expenses.
Following the closing of this offering, we expect to incur additional expenses as a result of operating as a public company, including costs to comply with the rules and regulations applicable to companies listed on a national securities exchange, costs related to compliance and reporting obligations, and increased expenses for insurance, investor relations, and professional services. We expect general and administrative expenses to increase in absolute dollars as our business grows. In addition, we expect general and administrative expenses as a percentage of revenue to vary from period to period but generally decrease over the long term. Further, we currently expect stock-based compensation expense to increase significantly in the near term in connection with the anticipated attainment of a performance-based vesting condition of RSUs during the second quarter of 2021, and to generally increase over the longer term, as we expect equity compensation to continue to be an integral part of our overall compensation program.
Interest Income
Interest income consists primarily of interest income earned on our cash, cash equivalents, and marketable securities. It also includes amortization of premiums and accretion of discounts related to our marketable securities. Interest income varies each reporting period based on our average balance of cash, cash equivalents, and marketable securities during the period and market interest rates.
Interest Expense
Interest expense consists primarily of interest expense recorded related to certain indirect tax liabilities and operating lease cease-use liabilities.
Other Income (Expense), Net
Other income (expense), net consists primarily of foreign exchange gains and losses.
Income Tax Expense
Our income tax provision consists primarily of income taxes in certain foreign jurisdictions in which we conduct business. We have a full valuation allowance against our U.S. federal and state deferred tax assets as the realization of the full amount of these deferred tax assets is uncertain, including net operating loss carryforwards and tax credits related primarily to research and development. We expect to maintain this full valuation allowance until it becomes more likely than not that the deferred tax assets will be realized.
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Results of Operations
The following table summarizes our results of operations for the periods presented. The results below are not necessarily indicative of results to be expected for future periods.
| Year Ended December 31, | ||||||||
| 2019 | 2020 | |||||||
| (in thousands) | ||||||||
| Revenue |
$ | 184,411 | $ | 293,511 | ||||
| Cost of revenue(1) |
89,589 | 138,846 | ||||||
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|
|
|||||
| Gross profit |
94,822 | 154,665 | ||||||
|
|
|
|
|
|||||
| Operating expenses: |
||||||||
| Research and development(1) |
56,364 | 76,784 | ||||||
| Sales and marketing(1) |
57,042 | 107,249 | ||||||
| General and administrative(1) |
29,810 | 37,215 | ||||||
|
|
|
|
|
|||||
| Total operating expenses |
143,216 | 221,248 | ||||||
|
|
|
|
|
|||||
| Loss from operations |
(48,394 | ) | (66,583 | ) | ||||
| Other income (expense): |
||||||||
| Interest income |
3,282 | 1,175 | ||||||
| Interest expense |
(625 | ) | (12 | ) | ||||
| Other income (expense), net |
(264 | ) | 120 | |||||
|
|
|
|
|
|||||
| Loss before income taxes |
(46,001 | ) | (65,300 | ) | ||||
|
|
|
|
|
|||||
| Income tax expense |
718 | 1,515 | ||||||
|
|
|
|
|
|||||
| Net loss |
$ | (46,719 | ) | $ | (66,815 | ) | ||
|
|
|
|
|
|||||
| (1) | Includes stock-based compensation expense as follows: |
| Years Ended December 31, | ||||||||
| 2019 | 2020 | |||||||
| (in thousands) | ||||||||
| Cost of revenue: |
$ | 491 | $ | 516 | ||||
| Research and development |
7,038 | 6,960 | ||||||
| Sales and marketing |
3,189 | 4,097 | ||||||
| General and administrative |
5,599 | 5,234 | ||||||
|
|
|
|
|
|||||
| Total stock-based compensation expense |
$ | 16,317 | $ | 16,807 | ||||
|
|
|
|
|
|||||
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The following table summarizes our results of operations as a percentage of revenue for each of the periods indicated:
| Year Ended December 31, | ||||||||
| 2019 | 2020 | |||||||
| Revenue |
100 | % | 100 | % | ||||
| Cost of revenue |
49 | 47 | ||||||
|
|
|
|
|
|||||
| Gross profit |
51 | 53 | ||||||
|
|
|
|
|
|||||
| Operating expenses: |
||||||||
| Research and development |
30 | 26 | ||||||
| Sales and marketing |
31 | 37 | ||||||
| General and administrative |
16 | 13 | ||||||
|
|
|
|
|
|||||
| Total operating expenses |
77 | 76 | ||||||
|
|
|
|
|
|||||
| Loss from operations |
(26 | ) | (23 | ) | ||||
| Other income (expense): |
||||||||
| Interest income |
2 | 1 | ||||||
| Interest expense |
(1 | ) | — | |||||
| Other income (expense), net |
— | — | ||||||
|
|
|
|
|
|||||
| Loss before income taxes |
(25 | ) | (22 | ) | ||||
|
|
|
|
|
|||||
| Income tax expense |
— | 1 | ||||||
|
|
|
|
|
|||||
| Net loss |
(25 | )% | (23 | )% | ||||
|
|
|
|
|
|||||
Comparison of the Years Ended December 31, 2019 and 2020
Revenue
| Year Ended December 31, | Change | |||||||||||||||
| 2019 | 2020 | $ | % | |||||||||||||
| (dollars in thousands) | ||||||||||||||||
| Revenue: |
||||||||||||||||
| Consumer |
$ | 121,011 | $ | 192,909 | $ | 71,898 | 59 | % | ||||||||
| Enterprise |
48,262 | 70,784 | 22,522 | 47 | % | |||||||||||
| Degrees |
15,138 | 29,818 | 14,680 | 97 | % | |||||||||||
|
|
|
|
|
|
|
|||||||||||
| Total revenue |
$ | 184,411 | $ | 293,511 | $ | 109,100 | 59 | % | ||||||||
|
|
|
|
|
|
|
|||||||||||
Revenue for the year ended December 31, 2019 was $184.4 million, compared to $293.5 million for the year ended December 31, 2020. Revenue increased by $109.1 million, or 59% compared to the year ended December 31, 2019. For the year ended December 31, 2019, Consumer, Enterprise, and Degrees revenue was $121.0 million, $48.3 million, and $15.1 million, or approximately 66%, 26%, and 8% of total revenue, respectively, compared to $192.9 million, $70.8 million, and $29.8 million, or approximately 66%, 24%, and 10% of total revenue, respectively, for the year ended December 31, 2020. The increase in revenue in 2020 was primarily driven by the 65% increase in registered learners, which resulted in a substantial number of additional paying customers, the addition of 147 Paid Enterprise Customers, and the increase in the number of Degrees students in 2020 compared to 2019. These trends accelerated in part due to the effects of the COVID-19 pandemic.
For the year ended December 31, 2020, total Consumer revenue increased by $71.9 million, or 59%, compared to the year ended December 31, 2019. The new learners that registered in 2020 added $80.9 million in revenue to the total revenue of $192.9 million. The remaining $112.0 million in 2020 Consumer revenue was
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attributable to retaining 93% of the 2019 revenue from 2019 and prior cohorts. We have not experienced significant price changes for our course, Specialization, or certificate offerings from period to period.
For the year ended December 31, 2020, total Enterprise revenue increased by $22.5 million, or 47%, compared to the year ended December 31, 2019. Approximately $14.6 million of the increase in revenue was attributable to new customers, and the remaining increase of $7.9 million was attributable to growth from existing customers. We have not made significant changes to pricing for our Enterprise offerings from period to period.
For the year ended December 31, 2020, total Degrees revenue increased by $14.7 million, or 97%, compared to the year ended December 31, 2019. The increase in average number of Degrees students per quarter added $15.0 million in revenue; this was partially offset by $0.3 million attributable to a decrease in average revenue per student per quarter. We have not experienced significant changes to our service fee percentage from period to period.
Cost of Revenue, Gross Profit and Gross Margin
| Year Ended December 31, | Change | |||||||||||||||
| 2019 | 2020 | $ | % | |||||||||||||
| (dollars in thousands) | ||||||||||||||||
| Cost of revenue |
$ | 89,589 | $ | 138,846 | $ | 49,257 | 55 | % | ||||||||
| Gross profit |
$ | 94,822 | $ | 154,665 | $ | 59,843 | 63 | % | ||||||||
| Gross margin |
51 | % | 53 | % | ||||||||||||
Cost of revenue for the year ended December 31, 2019 was $89.6 million, compared to $138.8 million for the year ended December 31, 2020. The increase in revenue resulted in an increase of $37.8 million in costs related to partner fees. Content costs for the Consumer and Enterprise segments were $56.4 million and $14.1 million for the year ended December 31, 2019, respectively, compared to $86.4 million and $21.8 million for the year ended December 31, 2020, respectively. Content costs as a percentage of revenue for Consumer and Enterprise segments were 47% and 29% for the year ended December 31, 2019, respectively, compared to 45% and 31% for the year ended December 31, 2020, respectively. We experienced a significant increase in usage by paid learners on our platform. This increase in usage resulted in an increase of $3.7 million in credit card processing fees, $3.1 million in professional services fees, and $1.0 million in third-party cloud hosting costs. Additionally, there was an increase of $3.5 million in amortization expense of internal-use software and developed technology.
Gross margin was 51% for the year ended December 31, 2019, compared to 53% for the year ended December 31, 2020. The increase in gross margin was due to a shift in mix of revenue toward Enterprise and Degrees and economies of scale within our operations.
Operating Expenses
| Year Ended December 31, | Change | |||||||||||||||
| 2019 | 2020 | $ | % | |||||||||||||
| (dollars in thousands) | ||||||||||||||||
| Operating expenses: |
||||||||||||||||
| Research and development |
$ | 56,364 | $ | 76,784 | $ | 20,420 | 36 | % | ||||||||
| Sales and marketing |
57,042 | 107,249 | 50,207 | 88 | % | |||||||||||
| General and administrative |
29,810 | 37,215 | 7,405 | 25 | % | |||||||||||
|
|
|
|
|
|
|
|||||||||||
| Total operating expenses |
$ | 143,216 | $ | 221,248 | $ | 78,032 | 54 | % | ||||||||
|
|
|
|
|
|
|
|||||||||||
Research and development expenses for the year ended December 31, 2019 were $56.4 million, compared to $76.8 million for the year ended December 31, 2020. The increase was primarily due to higher personnel-
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related expenses of $12.6 million, mainly driven by additional headcount. The remaining increase included $2.9 million in consulting fees, $1.2 million in software subscription costs, and $1.1 million in content creation costs.
Sales and marketing expenses for the year ended December 31, 2019 were $57.0 million, compared to $107.2 million for the year ended December 31, 2020. The increase in sales and marketing expense was primarily due to higher personnel-related expenses of $22.7 million, mainly driven by both additional headcount in our sales force to support increased demand for our platform and an increase in amortization of deferred contract acquisition costs driven by our increase in revenue. The remaining increase was primarily due to $11.1 million in marketing promotions and related expenses, a $9.2 million increase in freemium costs that include hosting and support, and $4.5 million in consulting and related expenses.
General and administrative expenses for the year ended December 31, 2019 were $29.8 million, compared to $37.2 million for the year ended December 31, 2020. The increase in general and administrative expense was primarily due to an increase of $5.1 million in personnel-related expenses, mainly driven by additional headcount, and an increase of $3.8 million related to indirect taxes, partially offset by savings in facilities and consulting related expenses.
Other Income (Expense)
| Year Ended December 31, | Change | |||||||||||||||
| 2019 | 2020 | $ | % | |||||||||||||
| (dollars in thousands) | ||||||||||||||||
| Interest income |
$ | 3,282 | $ | 1,175 | $ | (2,107 | ) | (64 | )% | |||||||
| Interest expense |
(625 | ) | (12 | ) | 613 | (98 | )% | |||||||||
| Other income (expense), net |
(264 | ) | 120 | 384 | (145 | )% | ||||||||||
|
|
|
|
|
|
|
|||||||||||
| Total other income |
$ | 2,393 | $ | 1,283 | $ | (1,110 | ) | (46 | )% | |||||||
|
|
|
|
|
|
|
|||||||||||
Total other income for the year ended December 2019 was $2.4 million, compared to $1.3 million for the year ended December 31, 2020. Total other income for the year ended December 31, 2019 reflected primarily interest income earned on invested cash balances, offset by interest expense incurred due to certain indirect tax liabilities and operating lease cease-use liabilities. Total other income for the year ended December 31, 2020 reflected primarily interest income earned on invested cash balances. Interest income was lower during the year ended December 31, 2020 compared to the year ended December 31, 2019 as the interest rates were lower during 2020. Interest expense for the year ended December 31, 2020 was lower compared to the year ended December 31, 2019 as interest expense incurred due to certain indirect tax liabilities was lower and as there was no interest expense related to operating lease cease-use liabilities.
Income Tax Expense
| Year Ended December 31, | Change | |||||||||||||||
| 2019 | 2020 | $ | % | |||||||||||||
| (dollars in thousands) | ||||||||||||||||
| Income tax expense |
$ | 718 | $ | 1,515 | $ | 797 | 111 | % | ||||||||
For the year ended December 31, 2019, we recognized income tax expense of $0.7 million, compared to $1.5 million for the year ended December 31, 2020. This tax expense for the years ended December 31, 2019 and December 31, 2020 was primarily due to foreign taxes.
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Quarterly Results of Operations
The following table sets forth selected unaudited quarterly consolidated statements of operations data for each of the eight quarters in the two year period ended December 31, 2020. The information for each of these quarters has been prepared on the same basis as our audited consolidated financial statements and reflects, in the opinion of management, all adjustments, consisting only of normal, recurring adjustments that are necessary for a fair presentation of this information in accordance with GAAP. These quarterly operating results are not necessarily indicative of the results for a full year or any other fiscal period. This information should be read in conjunction with our audited consolidated financial statements and related notes included elsewhere in the prospectus.
| Three Months Ended | ||||||||||||||||||||||||||||||||
| Mar. 31, 2019 |
June 30, 2019 |
Sept. 30, 2019 |
Dec. 31, 2019 |
Mar. 31, 2020 |
June 30, 2020 |
Sept. 30, 2020 |
Dec. 31, 2020 |
|||||||||||||||||||||||||
| (unaudited) (in thousands) |
||||||||||||||||||||||||||||||||
| Revenue |
$ | 40,139 | $ | 45,751 | $ | 48,614 | $ | 49,907 | $ | 53,847 | $ | 73,728 | $ | 82,674 | $ | 83,262 | ||||||||||||||||
| Cost of revenue(1) |
20,065 | 21,770 | 23,621 | 24,133 | 24,951 | 35,161 | 38,970 | 39,764 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Gross profit |
20,074 | 23,981 | 24,993 | 25,774 | 28,896 | 38,567 | 43,704 | 43,498 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Operating expenses: |
||||||||||||||||||||||||||||||||
|
Research and development(1) |
10,909 | 12,727 | 17,140 | 15,588 | 15,783 | 18,046 | 19,620 | 23,335 | ||||||||||||||||||||||||
| Sales and marketing(1) |
10,779 | 12,912 | 16,695 | 16,656 | 20,696 | 25,414 | 26,162 | 34,977 | ||||||||||||||||||||||||
| General and administrative(1) |
7,124 | 6,768 | 8,322 | 7,596 | 7,086 | 8,943 | 9,810 | 11,376 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Total operating expenses |
28,812 | 32,407 | 42,157 | 39,840 | 43,565 | 52,403 | 55,592 | 69,688 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Loss from operations |
(8,738) | (8,426) | (17,164) | (14,066) | (14,669) | (13,836) | (11,888) | (26,190) | ||||||||||||||||||||||||
| Other income (expense): |
||||||||||||||||||||||||||||||||
| Interest income |
483 | 861 | 1,025 | 913 | 696 | 265 | 119 | 95 | ||||||||||||||||||||||||
| Interest expense |
(25) | (89) | (28) | (483) | - | (12) | - | - | ||||||||||||||||||||||||
| Other income (expense), net |
(26) | (85) | (163) | 10 | (252) | 34 | 227 | 111 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Loss before income taxes |
(8,306) | (7,739) | (16,330) | (13,626) | (14,225) | (13,549) | (11,542) | (25,984) | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Income tax expense |
63 | 127 | 271 | 257 | 89 | 367 | 325 | 734 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Net loss |
$ | (8,369) | $ | (7,866) | $ | (16,601) | $ | (13,883) | $ | (14,314) | $ | (13,916) | $ | (11,867) | $ | (26,718) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| (1) Includes stock-based compensation expense as follows: | ||||||||||||||||||||||||||||||||
| Three Months Ended | ||||||||||||||||||||||||||||||||
| Mar. 31, 2019 |
June 30, 2019 |
Sept. 30, 2019 |
Dec. 31, 2019 |
Mar. 31, 2020 |
June 30, 2020 |
Sept. 30, 2020 |
Dec. 31, 2020 |
|||||||||||||||||||||||||
| (in thousands) | ||||||||||||||||||||||||||||||||
| Cost of revenue |
$47 | $84 | $253 | $107 | $110 | $115 | $135 | $156 | ||||||||||||||||||||||||
| Research and development |
628 | 1,145 | 3,865 | 1,400 | 1,277 | 1,492 | 1,917 | 2,274 | ||||||||||||||||||||||||
| Sales and marketing |
452 | 544 | 1,529 | 664 | 709 | 833 | 1,175 | 1,380 | ||||||||||||||||||||||||
| General and administrative |
694 | 800 | 3,127 | 978 | 918 | 1,123 | 1,473 | 1,720 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Total |
$1,821 | $2,573 | $8,774 | $3,149 | $3,014 | $3,563 | $4,700 | $5,530 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Stock-based compensation expense for the three months ended September 30, 2019 included $6.2 million of compensation expense related to a private tender offer. We recognized the difference between the purchase price and the fair value of our common stock as stock-based compensation expense. See Note 9 to our audited consolidated financial statements included elsewhere in this prospectus for further details.
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The following table summarizes our quarterly results of operations as a percentage of revenue for each of the periods indicated:
| Three Months Ended | ||||||||||||||||||||||||||||||||
| Mar. 31, 2019 |
June 30, 2019 |
Sept. 30, 2019 |
Dec. 31, 2019 |
Mar. 31, 2020 |
June 30, 2020 |
Sept. 30, 2020 |
Dec. 31, 2020 |
|||||||||||||||||||||||||
| (unaudited) | ||||||||||||||||||||||||||||||||
| Revenue |
100% | 100% | 100% | 100% | 100% | 100% | 100% | 100% | ||||||||||||||||||||||||
| Cost of revenue |
50 | 48 | 49 | 48 | 46 | 48 | 47 | 48 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Gross profit |
50 | 52 | 51 | 52 | 54 | 52 | 53 | 52 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Operating expenses: |
||||||||||||||||||||||||||||||||
| Research and development |
27 | 28 | 35 | 32 | 29 | 24 | 24 | 28 | ||||||||||||||||||||||||
| Sales and marketing |
27 | 28 | 34 | 33 | 38 | 34 | 32 | 42 | ||||||||||||||||||||||||
| General and administrative |
18 | 15 | 17 | 15 | 13 | 12 | 12 | 13 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Total operating expenses |
72 | 71 | 86 | 80 | 81 | 70 | 67 | 83 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Loss from operations |
(22) | (19) | (35) | (28) | (27) | (18) | (14) | (31) | ||||||||||||||||||||||||
| Other income (expense): |
||||||||||||||||||||||||||||||||
| Interest income |
1 | 2 | 2 | 2 | 1 | 0 | 0 | 0 | ||||||||||||||||||||||||
| Interest expense |
0 | 0 | 0 | (1) | 0 | 0 | 0 | 0 | ||||||||||||||||||||||||
| Other income (expense), net |
0 | 0 | 0 | 0 | (1) | 0 | 0 | 0 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Loss before income taxes |
(21) | (17) | (33) | (27) | (27) | (18) | (14) | (31) | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Income tax expense |
0 | 0 | 1 | 1 | 0 | 1 | 0 | 1 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Net loss |
(21)% | (17)% | (34)% | (28)% | (27)% | (19)% | (14)% | (32)% | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Quarterly Revenue Trends
Revenue increased sequentially in all of the quarters presented primarily due to the quarter over quarter growth of registered learners, Paid Enterprise Customers, and the number of Degrees students. These trends were accelerated in 2020 in part due to the effects of the COVID-19 pandemic. Our historical revenue results are not necessarily indicative of future performance especially as our growth rates are likely to experience increased volatility as the COVID-19 pandemic evolves.
Quarterly Cost of Revenue
Cost of revenue increased sequentially in each of the quarters presented primarily as a result of increased content costs, credit card processing fees, amortization of internal-use software, and professional services fees, along with third-party cloud hosting costs.
Quarterly Gross Margin Trends
Our improved gross margin during the quarterly periods in the year ended December 31, 2020 was largely due to a shift in mix of revenue toward Enterprise and Degrees.
Quarterly Operating Expense Trends
Our total quarterly operating expenses generally increased sequentially during the periods presented primarily due to increases in headcount and other related expenses to support our growth. In the third quarter of 2019, we saw an increase in operating expenses, primarily driven by additional stock-based compensation expense of approximately $6.2 million recognized for a private tender offer. In the fourth quarter of 2020, our operating expenses increased mainly due to our continued investment to drive our growth. We intend to continue
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investing in our research and development efforts to develop and enhance both our existing and new offerings to drive future revenue growth. We may experience variations from period to period with our total research and development expense as a percentage of revenue. We expect the majority of our research and development expenses will result from personnel-related expenses but will also be impacted by the timing of particular projects. We intend to continue to make significant investments in our sales and marketing organization to drive revenue growth. Sales and marketing expenses can vary from quarter to quarter based on the timing of our sales and marketing programs. General and administrative expenses in the quarters presented have primarily been driven by personnel-related expenses and professional services fees, such as outside legal costs. General and administrative expenses are expected to increase in future quarters due to additional costs required to operate as a public company.
Liquidity and Capital Resources
Since our inception, we have financed our operations primarily through proceeds from our redeemable convertible preferred stock issuances, as well as from cash generated from our business operations. As of December 31, 2020, our principal sources of liquidity were cash, cash equivalents, and marketable securities totaling $285.3 million. Our investments consist of corporate debt, commercial paper securities, and U.S. government treasury bills. Since our inception through December 31, 2020, we have sold an aggregate of 75,304,500 shares of our redeemable convertible preferred stock for aggregate net proceeds of $461.8 million. Our principal use of cash is to fund our operations to support our growth.
We believe that our existing cash and cash equivalents and marketable securities and our expected cash flows from operations will be sufficient to meet our cash needs for at least the next 12 months. Over the longer term, our future capital requirements will depend on many factors, including our growth rate, the timing and extent of our sales and marketing and research and development expenditures, the continuing market acceptance of our offerings, and any investments or acquisitions we may choose to pursue in the future. In the event that we need to borrow funds or issue additional equity, we cannot assure you that any such additional financing will be available on terms acceptable to us, if at all. In addition, any future borrowings may result in additional restrictions on our business and any issuance of additional equity would result in dilution to investors. If we are unable to raise additional capital when desired and on terms acceptable to us, our business, results of operations, and financial condition could be materially and adversely affected.
Cash Flows
The following table summarizes our cash flows for the periods indicated:
| Year Ended December 31, | ||||||||
| 2019 | 2020 | |||||||
| (in thousands) | ||||||||
| Net cash used in operating activities |
$ | (21,334 | ) | $ | (14,991 | ) | ||
| Net cash used in investing activities |
(64,886 | ) | (101,442 | ) | ||||
| Net cash provided by financing activities |
113,381 | 139,014 | ||||||
|
|
|
|
|
|||||
| Net increase in cash, cash equivalents, and restricted cash |
$ | 27,161 | $ | 22,581 | ||||
|
|
|
|
|
|||||
Operating Activities
Cash used in operating activities mainly consists of our net loss adjusted for certain non-cash items, including stock-based compensation, depreciation and amortization as well as the effect of changes in operating assets and liabilities during each period.
Our main source of operating cash is payments received from our customers. Our primary use of cash from operating activities are for personnel-related expenses, partner fees, marketing and advertising expenses, indirect taxes, and third-party cloud infrastructure expenses.
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For the year ended December 31, 2019, net cash used in operating activities was $21.3 million, primarily consisting of our net loss of $46.7 million, adjusted for non-cash charges of $20.5 million and net cash inflows of $4.9 million provided by changes in our operating assets and liabilities. The main drivers of the changes in operating assets and liabilities were an $11.8 million increase in deferred revenue, resulting primarily from our Enterprise business growth, a $6.6 million increase in educator partners and other accounts payable, partially offset by a $6.2 million increase in accounts receivable and a $6.6 million increase in prepaids and other assets.
For the year ended December 31, 2020, net cash used in operating activities was $15.0 million, primarily consisting of our net loss of $66.8 million, adjusted for non-cash charges of $26.5 million and net cash inflows of $25.3 million provided by changes in our operating assets and liabilities. The main drivers of the changes in operating assets and liabilities were a $39.0 million increase in deferred revenue, resulting primarily from our Enterprise business growth, a $25.7 million increase in educator partners and other accounts payable due to the growth of our business, partially offset by a $24.1 million increase in accounts receivable and a $18.3 million increase in prepaids and other assets.
Cash used in operating activities decreased $6.3 million during the year ended December 31, 2020, compared to the year ended December 31, 2019, primarily due to our business growth.
We have generated negative cash flows and have supplemented working capital through net proceeds from the sale of equity securities in the years ended December 31, 2019 and 2020.
Investing Activities
For the year ended December 31, 2019, net cash used in investing activities was $64.9 million, primarily as a result of net purchases of marketable securities, capital expenditures for property and equipment, an asset acquisition, and capitalized internal-use software costs.
For the year ended December 31, 2020, cash used in investing activities was $101.4 million, primarily as a result of net purchases of marketable securities, capital expenditures for property and equipment, capitalized internal-use software costs, and purchase of investment in a private company.
Financing Activities
For the year ended December 31, 2019, net cash provided by financing activities was $113.4 million, primarily as a result of proceeds from our issuance of redeemable convertible preferred stock, and issuance of common stock following employee stock option exercises, partially offset by repayment of debt associated with an asset acquisition.
For the year ended December 31, 2020, net cash provided by financing activities was $139.0 million, primarily as a result of proceeds from our issuance of redeemable convertible preferred stock and issuance of common stock following employee stock option exercises, partially offset by payment of holdback consideration related to an asset acquisition.
Key Business Metrics and Non-GAAP Financial Measures
We monitor the key business metrics and non-GAAP financial measures set forth below to help us evaluate our business and growth trends, establish budgets, measure the effectiveness of our sales and marketing efforts, and assess operational efficiencies. These key business metrics and non-GAAP financial measures are presented for supplemental informational purposes only, should not be considered a substitute for financial information presented in accordance with GAAP, and may differ from similarly titled metrics or measures presented by other companies. A reconciliation of each non-GAAP financial measure to the most directly comparable GAAP financial measure is provided in “Summary Consolidated Financial Data.”
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Key Business Metrics
Registered Learners
We count the total number of registered learners at the end of each period. For purposes of determining our registered learner count, we treat each customer account that registers with a unique email as a registered learner and adjust for any spam, test accounts, and cancellations. Our registered learner count is not intended as a measure of active engagement. New registered learners are individuals that register in a particular period. We believe that the number of registered learners is an important indicator of the growth of our business and future revenue trends.
| Year Ended December 31, | ||||||||||||||||
| 2017 | 2018 | 2019 | 2020 | |||||||||||||
| (in millions, except percentages) | ||||||||||||||||
| New Registered Learners |
6.9 | 7.3 | 9.2 | 30.6 | ||||||||||||
| Total Registered Learners |
30.1 | 37.3 | 46.4 | 76.6 | ||||||||||||
| Total Registered Learners YoY Growth |
24 | % | 24 | % | 65 | % | ||||||||||
Number of Degrees Students
We count the total number of Degrees students for each period. For purposes of determining our Degrees student count, we include all the students that are matriculated in a degree program and who are enrolled in one or more courses in such degree program during the period. If a degree term spans across multiple quarters, said student is counted as active in all quarters of the degree term. For purposes of determining our Degrees student count, we do not include students who are matriculated in the degree but are not enrolled in a course in that period. We believe that the number of Degrees students is an important indicator of the growth of our Degrees business and future Degrees Segment Revenue trends.
The Degrees student count is impacted by the seasonality of the school class cycles, combined with the underlying growth interacting with those trends. The number of Degrees students fluctuates in part because the academic terms for each degree program often begin and/or end within different calendar quarters, and the frequency with which each degree program is offered within a given year varies.
| 2019 | 2020 | |||||||||||||||||||||||||||||||
| Q1 | Q2 | Q3 | Q4 | Q1 | Q2 | Q3 | Q4 | |||||||||||||||||||||||||
| Number of Degrees Students |
2,762 | 4,255 | 5,986 | 6,217 | 7,184 | 8,079 | 11,504 | 11,900 | ||||||||||||||||||||||||
| YoY Growth |
160 | % | 90 | % | 92 | % | 91 | % | ||||||||||||||||||||||||
Paid Enterprise Customers
We count the total number of Paid Enterprise Customers at the end of each period. For purposes of determining our customer count, we treat each customer account that has a corresponding contract as a unique customer, and a single organization with multiple divisions, segments, or subsidiaries may be counted as multiple customers. We define a “Paid Enterprise Customer” as a customer who purchases Coursera via our direct sales force. For purposes of determining our Paid Enterprise Customer count, we exclude our Enterprise customers who do not purchase Coursera via our direct sales force, which include organizations engaging on our platform through our Coursera for Teams offering or through our channel partners. In 2019 and 2020, approximately 70%, and 79%, respectively, of our total Enterprise Segment Revenue was generated from our Paid Enterprise Customers. We believe that the number of Paid Enterprise Customers and our ability to increase this number is an important indicator of the growth of our Enterprise business and future Enterprise Segment Revenue trends. The group of Paid Enterprise Customers included here is the same group of Enterprise customers reflected in our Enterprise cohort analysis in “—Our Attractive Cohort Characteristics.”
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| Year Ended | ||||||||
| December 31, | ||||||||
| 2019 | 2020 | |||||||
| Paid Enterprise Customers |
240 | 387 | ||||||
| YoY Growth |
61 | % | ||||||
Net Retention Rate for Paid Enterprise Customers
We disclose Net Retention Rate as a supplemental measure of our Enterprise revenue growth. We believe Net Retention Rate is an important metric that provides insight into the long-term value of our subscription agreements and our ability to retain, and grow revenue from, our Paid Enterprise Customers.
We calculate annual recurring revenue (“ARR”) by annualizing each customer’s monthly recurring revenue (“MRR”) for the most recent month at period end. We calculate “Net Retention Rate” as of a period end by starting with the ARR from all Paid Enterprise Customers as of the twelve months prior to such period end, or Prior Period ARR. We then calculate the ARR from these same Paid Enterprise Customers as of the current period end, or Current Period ARR. Current Period ARR includes expansion within Paid Enterprise Customers and is net of contraction or attrition over the trailing twelve months, but excludes revenue from new Paid Customers in the current period. We then divide the total Current Period ARR by the total Prior Period ARR to arrive at our Net Retention Rate. Our Net Retention Rate increased from 106% as of December 31, 2019 to 114% as of December 31, 2020. Our Net Retention Rate is expected to fluctuate in future periods due to a number of factors, including the growth of our revenue base, the penetration within our Paid Enterprise Customer base, expansion of products and features, and our ability to retain our Paid Enterprise Customers.
Segment Revenue
Our revenue is generated from three sources: Consumer, Enterprise, and Degrees, each of which is an individual segment of our business. “Segment Revenue” represents the revenue recognized from each of these three sources and is a key measure of the performance of our platform, and in turn drives our financial performance.
| Year Ended December 31, | ||||||||||||||||
| 2017 | 2018 | 2019 | 2020 | |||||||||||||
| (in thousands, except percentages) | ||||||||||||||||
| Consumer Revenue |
$ | 85,667 | $ | 107,554 | $ | 121,011 | $ | 192,909 | ||||||||
| YoY Growth |
26 | % | 13 | % | 59 | % | ||||||||||
| Enterprise Revenue |
$ | 7,422 | $ | 26,812 | $ | 48,262 | $ | 70,784 | ||||||||
| YoY Growth |
261 | % | 80 | % | 47 | % | ||||||||||
| Degrees Revenue |
$ | 2,541 | $ | 7,406 | $ | 15,138 | $ | 29,818 | ||||||||
| YoY Growth |
191 | % | 104 | % | 97 | % | ||||||||||
| Total Revenue |
$ | 95,630 | $ | 141,772 | $ | 184,411 | $ | 293,511 | ||||||||
| YoY Growth |
48 | % | 30 | % | 59 | % | ||||||||||
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Segment Revenue $M
Segment Revenue $M $85.7 $7.4 $2.5 $107.6 $26.8 $7.4 $121.0 $48.3 $15.1 $192.9 $70.8 $29.8 2017 2018 2019 2020 Consumer Enterprise Degrees
Segment Gross Profit
We monitor Segment Gross Profit as a key metric to help us evaluate the financial performance of our individual segments but also our Company as a whole. “Segment Gross Profit” is defined as Segment Revenue less content costs paid to educator partners; “Segment Gross Margin” is the quotient of Segment Gross Profit and Segment Revenue. Content costs only apply to the Consumer and Enterprise segments as there is no content cost attributable to the Degrees segment. Instead, in the Degrees segment, we earn a Degrees service fee based on a percentage of the total online student tuition collected by the university partner. Given that content costs are the largest individual cost of our revenue, and contractually vary as a percentage of revenue between our Consumer and Enterprise offerings, and the fact that no content costs are payable in our Degrees offering, shifts in mix between our three segments is expected to be a significant driver of our overall financial performance and profitability.
| Year Ended December 31, | ||||||||||||||||
| 2017 | 2018 | 2019 | 2020 | |||||||||||||
| (in thousands, except percentages) | ||||||||||||||||
| Consumer Gross Profit |
$ | 43,076 | $ | 57,607 | $ | 64,645 | $ | 106,509 | ||||||||
| Segment Gross Margin % |
50 | % | 54 | % | 53 | % | 55 | % | ||||||||
| Enterprise Gross Profit |
$ | 4,717 | $ | 19,011 | $ | 34,184 | $ | 48,972 | ||||||||
| Segment Gross Margin % |
64 | % | 71 | % | 71 | % | 69 | % | ||||||||
| Degrees Gross Profit |
$ | 2,541 | $ | 7,406 | $ | 15,138 | $ | 29,818 | ||||||||
| Segment Gross Margin % |
100 | % | 100 | % | 100 | % | 100 | % | ||||||||
Consumer Segment Gross Margin increased from 53% in the year ended December 31, 2019 to 55% in the year ended December 31, 2020 due to a greater proportion of Consumer Revenue generated from sales of subscriptions with no associated content cost. Conversely, Enterprise Segment Gross Margin decreased from 71% to 69% when comparing the same periods due to a lower proportion of Enterprise Revenue generated from subscription licenses where learners enrolled in content with no associated content cost.
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Non GAAP Financial Measures
Adjusted EBITDA and Adjusted EBITDA Margin
Adjusted EBITDA and Adjusted EBITDA Margin, which are non-GAAP financial measures, are key measures used by our management to help us analyze our financial results, establish budget and operational goals for managing our business, evaluate our performance, and make strategic decisions.
We define “Adjusted EBITDA” as our net loss excluding: (1) depreciation and amortization; (2) interest income, net; (3) stock-based compensation; (4) income tax expense; and (5) payroll tax expense related to stock-based activities. We define “Adjusted EBITDA Margin” as Adjusted EBITDA divided by revenue.
The table below presents Adjusted EBITDA and Adjusted EBITDA Margin, along with net loss, the most directly comparable GAAP financial measure to Adjusted EBITDA, and net loss margin, the most directly comparable GAAP financial measure to Adjusted EBITDA Margin, for 2017, 2018, 2019, and 2020:
| Year Ended December 31, | ||||||||||||||||
| 2017 | 2018 | 2019 | 2020 | |||||||||||||
| (in thousands, except percentages) | ||||||||||||||||
| Net loss |
$ | (53,270 | ) | $ | (43,601 | ) | $ | (46,719 | ) | $ | (66,815 | ) | ||||
| Adjusted EBITDA |
$ | (37,559 | ) | $ | (20,988 | ) | $ | (26,929 | ) | $ | (39,813 | ) | ||||
| Net loss margin |
(56 | )% | (31 | )% | (25 | )% | (23 | )% | ||||||||
| Adjusted EBITDA Margin |
(39 | )% | (15 | )% | (15 | )% | (14 | )% | ||||||||
Free Cash Flow
“Free Cash Flow” is a non-GAAP financial measure that we calculate as net cash (used in) provided by operating activities, less cash used for purchases of property, equipment, and software, and capitalized internal-use software costs. We exclude purchases of property, equipment and software, and capitalized internal-use software costs as we consider these capital expenditures to be a necessary component of our ongoing operations. We consider Free Cash Flow to be a liquidity measure that provides useful information to management and investors in understanding and evaluating our liquidity and future ability to generate cash that can be used for strategic opportunities, including investing in our business and strengthening our balance sheet, but it is not intended to represent the residual cash flow available for discretionary expenditures.
The table below presents Free Cash Flow, along with cash flow (used in) provided by operating activities, the most directly comparable GAAP financial measure to Free Cash Flow, for 2017, 2018, 2019, and 2020:
| Year Ended December 31, | ||||||||||||||||
| 2017 | 2018 | 2019 | 2020 | |||||||||||||
| (in thousands) | ||||||||||||||||
| Net cash (used in) provided by operating activities |
$ | (29,694 | ) | $ | 456 | $ | (21,334 | ) | $ | (14,991 | ) | |||||
| Free Cash Flow |
$ | (33,630 | ) | $ | (6,219 | ) | $ | (31,266 | ) | $ | (26,909 | ) | ||||
See “Summary Consolidated Financial Data—Non-GAAP Financial Measures” for additional information and a reconciliation of net loss to Adjusted EBITDA, net loss margin to Adjusted EBITDA Margin and cash (used in) provided by operating activities to Free Cash Flow.
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Contractual Obligations and Commitments
Set forth below is information concerning our contractual commitments and obligations as of December 31, 2020:
| Payments due by period | ||||||||||||||||||||
| Total | Less than 1 year |
1-3 years | 3-5 years | More than 5 years |
||||||||||||||||
| (in thousands) | ||||||||||||||||||||
| Operating leases |
$ | 30,640 | $ | 8,303 | $ | 15,111 | $ | 7,226 | $ | — | ||||||||||
| Purchase obligations |
27,661 | 10,550 | 13,266 | 3,845 | — | |||||||||||||||
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| Total |
$ | 58,301 | $ | 18,853 | $ | 28,377 | $ | 11,071 | $ | — | ||||||||||
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Our operating leases obligations as of December 31, 2020 were approximately $30.6 million, which consist of payments related to lease facilities under operating lease agreements expiring through 2024. We have office facility operating leases in the United States, Canada, the United Kingdom, India, Bulgaria, and United Arab Emirates.
Our purchase obligations as of December 31, 2020 were approximately $27.7 million, which consisted of commitments related to our service providers.
In February 2020, we entered into a four-year agreement with a cloud hosting provider pursuant to which we committed to spend $4.5 million in year one and $5.0 million in each of years two through four.
In each of October and December 2020, we entered into a five-year agreement with a cloud-based customer relationship management service provider pursuant to which we committed to spend $1 million and $0.7 million respectively in each of the next five years.
In December 2020, we entered into an agreement with an advertising service provider pursuant to which we committed to spend $4 million in 2021.
Off-Balance Sheet Arrangements
During the period presented, we did not have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.
Critical Accounting Policies and Estimates
Our consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”). The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, expenses, and related disclosures. We base our estimates on historical experience and on various other assumptions that we believe are reasonable under the circumstances. We evaluate our estimates and assumptions on an ongoing basis. Actual results may differ from these estimates. To the extent that there are material differences between these estimates and our actual results, our future financial statements will be affected.
The critical accounting policies requiring estimates, assumptions, and judgments that we believe have the most significant impact on our consolidated financial statements are described below. See Note 2 to our consolidated financial statements appearing elsewhere in this prospectus for a description of our other significant accounting policies.
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Revenue Recognition
We derive revenue from contracts with customers for access to the learning content hosted on our platform and related services. We derive our revenue from three sources: Consumer, Enterprise, and Degrees.
Consumer Revenue—We generate revenue from the sale of access to course content to consumers. Consumer offerings include certifications for single courses, Specializations, and catalog-wide subscriptions. Access to single courses are generally purchased at a fixed price for a set period of time, typically six months. Specializations are a series of related courses offered by the same educator partner where learners are provided access to these courses on a month-to-month subscription basis. Coursera Plus is our catalog-wide consumer subscription offering and it is sold in the form of monthly or annual subscription. All contracts with Consumer customers are billed in advance, generally after a 7-day free trial period. We recognize revenue ratably over the contracted period, after access has been granted to the consumer, as learners have unlimited access to the course content during the contracted period. Consumer learners are entitled to a full refund up to two weeks after payment is received. We estimate and establish a refund reserve based on historical refund rates.
Enterprise Revenue—We sell subscription licenses to business, government, and university customers that provide users the ability to enroll in courses and Specializations and receive certifications upon completion. Enterprise contracts are typically between one and three years in length and can consist of either a fixed quantity of seat licenses, each of which allows for unlimited course enrollments by one learner for each year, or the purchase of a quantity of course enrollments. In either contract type, we recognize revenue ratably over the contracted period, after access has been granted to the Enterprise customer, as learners have unlimited access to the course content during the contracted period.
We are the principal with respect to revenue generated from sales to Consumer and Enterprise customers as we control the performance obligation and are the primary obligor with respect to delivering access to course content. Additionally, we have inventory risk through recoupable advances sometimes paid to educator partners.
Degrees Revenue—University partners contract with us for the delivery of bachelor’s and master’s degrees awarded by the university. Our Degrees revenue contracts involve the performance of a number of promises, including but not limited to hosting the degree content on our learning platform, program management, marketing and platform technical support services. As a result, the university partner is our customer with respect to Degrees revenue. We earn a Degrees service fee that is determined based as a percentage of total tuition collected from Degrees students, net of refunds, by the university partner. Degrees revenue is earned and paid by the university partner for each university term. As a result, revenue generated from each term is recognized ratably from the start of a term through the start of the following term.
The Degrees learning experience is delivered on the same proprietary learning platform used by Consumer and Enterprise learners. There is no direct contractual arrangement between us and Degrees students, who contract directly with the university partners. University partners typically have additional performance obligations to the Degrees students in the form of real-time teaching, financial aid, and academic or career counseling. For these reasons, we have determined that the university partners control the delivery of degrees hosted on our platform. As a result, we recognize Degrees revenue as the service fee we receive from the university partner.
Revenue from contracts with customers is recognized when control of promised services is transferred. The amount of revenue recognized reflects the consideration that we expect to be entitled to receive in exchange for these services. We determine revenue recognition in accordance with Accounting Standards Codification (“ASC”) 606 through the following five steps:
| 1) | Identify the contract with a customer |
We determine a contract with a customer to exist when the contract is approved, each party’s rights regarding the services to be transferred can be identified, the payment terms for the services can be
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identified, the customer has the ability and intent to pay, and the contract has commercial substance. At contract inception, we evaluate whether two or more contracts should be combined and accounted for as a single contract and whether the combined or single contract includes more than one performance obligation. We apply judgment in determining the customer’s ability and intent to pay, which is based on a variety of factors, including the customer’s historical payment experience or, in the case of a new customer, credit and financial information pertaining to the customer. Consumer customers are required to pay in advance either prior to our providing access to course content or prior to the expiration of a 7-day free trial.
| 2) | Identify the performance obligations in the contract |
Performance obligations committed in a contract are identified based on the services that will be transferred to the customer that are both capable of being distinct, whereby the customer can benefit from the service either on its own or together with other resources that are readily available from third parties or from us, and are distinct in the context of the contract, whereby the transfer of the services and the products is separately identifiable from other promises in the contract. Customers do not have the ability to take possession of the software supporting the platform and, as a result, contracts are accounted for as service arrangements.
For sales to Consumer and Enterprise customers, our performance obligation generally consists of providing access to our platform and related support services, which is considered one performance obligation. Access to our platform represents a series of distinct services, as we continually provide access to, and fulfill our obligation to, the customer over the contract term.
Degrees services involve the performance of a number of promises that include hosting the degree content on our platform, degree program management, marketing, and platform technical support services, each of which are a series of distinct services that are substantially the same, and satisfied over time using the same measure of progress and as a result are considered one performance obligation to stand ready to perform an online degree hosting service for the duration of the degree.
| 3) | Determine the transaction price |
The transaction price is determined based on the consideration to which we expect to be entitled in exchange for transferring services to the customer. Variable consideration is included in the transaction price if, in our judgment, it is probable that a significant future reversal of cumulative revenue recognized under the contract will not occur. None of our contracts contain a significant financing component. Revenue is recognized net of any taxes collected from customers, which are subsequently remitted to governmental entities (e.g., sales and other indirect taxes).
| 4) | Allocate the transaction price to performance obligations in the contract |
Contracts that contain multiple performance obligations require an allocation of the transaction price to each performance obligation based on each performance obligation’s relative standalone selling price.
As noted above, for Consumer and Enterprise customers, access to our platform and related support services are considered one performance obligation in the context of the contract and accordingly, the transaction price is allocated to this single performance obligation. Similarly, Degrees services are considered one performance obligation and the transaction price is allocated to this single performance obligation.
| 5) | Recognize revenue when or as performance obligations are satisfied |
Revenue is recognized at the time the related performance obligation is satisfied by transferring the control of the promised service to a customer. Revenue is recognized in an amount that reflects the consideration that we expect to receive in exchange for those services. Fees for access to our platform and related support services by Consumer and Enterprise customers are considered one performance obligation, and the related revenue is recognized on a straight-line basis over the contract term as we satisfy our performance obligation.
We have a stand ready obligation to perform Degrees services continually throughout the period that the degree content is hosted on our platform. Degrees revenue is received and paid by the university partner for
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each university term. As a result, revenue generated from each term is recognized ratably from the start of a term through the start of the following term.
Historically, and with the exceptions noted below, no significant judgment has generally been required in determining the amount and timing of revenue from our contracts with customers.
| • | Determining whether we are the principal or agent in our revenue transactions requires significant judgment. In reaching the conclusion, we considered a range of indicators, including, but not limited to, who is primarily responsible for fulfilling the service, who has economic risk as a result of investing resources in advance of a sale transaction (“inventory risk”), and who has pricing discretion. As we control the performance obligation and are the primary obligor with respect to delivering access to course content for Consumer and Enterprise contracts and have inventory risk through recoupable advances paid to educator partners, we are the principal in such transactions. Conversely, as the university partner controls the delivery of degrees hosted on our platform, we recognize Degrees revenue as the service fee we receive from the partner. |
| • | Our Degrees services revenue is determined based on a fee percentage applied to the total tuition collected from Degrees students, net of refunds, by the university partner. As a result, the revenue earned by us is dependent upon the number of learners enrolled and the tuition charged by the university partner. This is a form of variable consideration. We estimate the amount of revenue, using an expected value method, that we expect to be entitled to in return for performance of the Degrees services, subject to assessment of the significant future reversal constraint discussed above. These estimates are continually evaluated until such time as the uncertainties are resolved, generally at the time the final term enrollment report is provided by the university partner. |
Common Stock Valuations
The fair value of the common stock underlying our stock-based awards has historically been determined by our board of directors, with input from management and corroboration from contemporaneous third-party valuations. We believe that our board of directors has the relevant experience and expertise to determine the fair value of our common stock. Given the absence of a public trading market of our common stock, and in accordance with the American Institute of Certified Public Accountants Practice Aid, Valuation of Privately-Held Company Equity Securities Issued as Compensation, our board of directors exercised reasonable judgment and considered numerous objective and subjective factors to determine the best estimate of the fair value of our common stock at each grant date. These factors include:
| • | contemporaneous valuations of our common stock performed by independent third-party specialists; |
| • | the prices, rights, preferences, and privileges of our redeemable convertible preferred stock relative to those of our common stock; |
| • | the prices paid for redeemable convertible preferred stock sold to third-party investors by us and prices paid in secondary transactions of common stock, including any tender offers; |
| • | the lack of marketability inherent in our common stock; |
| • | our actual operating and financial performance; |
| • | our current business conditions and projections; |
| • | the hiring of key personnel and the experience of our management; |
| • | the history of the company and the introduction of new offerings; |
| • | our stage of development; |
| • | the likelihood of achieving a liquidity event, such as an initial public offering (“IPO”), a merger, or acquisition of our company given prevailing market conditions; |
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| • | the operational and financial performance of comparable publicly traded companies; and |
| • | the U.S. and global capital market conditions and overall economic conditions. |
In valuing our common stock, the fair value of our business was determined using the income approach. The income approach estimates value based on the expectation of future cash flows that a company will generate. These future cash flows are discounted to their present values using a discount rate that is derived from an analysis of the cost of capital of comparable publicly traded companies in our industry or similar business operations as of each valuation date and is adjusted to reflect the risks inherent in our cash flows.
For each valuation, the fair value of our business determined by the income approach was then allocated to the common stock using either the option-pricing method (“OPM”), or the probability-weighted expected return method (“PWERM”). Our valuations prior to June 30, 2020 were allocated based on the OPM. Beginning June 30, 2020, our valuations were allocated based on the PWERM.
In addition, we considered any secondary transactions involving our capital stock. In our evaluation of those transactions, we considered the facts and circumstances of each transaction to determine the extent to which they represented a fair value exchange and assigned the transactions an appropriate weighting in the valuation of our common stock. Factors considered include the number of different buyers and sellers, transaction volume, timing relative to the valuation date, whether the transactions occurred between willing and unrelated parties, and whether the transactions involved investors with access to our financial information.
Application of these approaches and methodologies involves the use of estimates, judgments, and assumptions that are highly complex and subjective, such as those regarding our expected future revenue, expenses, and future cash flows, discount rates, market multiples, the selection of comparable public companies, and the probability of and timing associated with possible future events. Changes in any or all of these estimates and assumptions or the relationships between those assumptions impact our valuations as of each valuation date and may have a material impact on the valuation of our common stock.
For valuations after the closing of this offering, our board of directors will determine the fair value of each share of underlying common stock based on the closing price of our common stock on the NYSE as reported on the date of grant. Future expense amounts for any particular period could be affected by changes in our assumptions or market conditions.
Stock-Based Compensation
We calculate the fair value of employee stock-based awards on the date of grant using the Black-Scholes option-pricing model for stock options; the expense is recognized over the service period for awards expected to vest. We recognize forfeitures as they occur.
We estimate the fair value of stock-based compensation utilizing the Black-Scholes option-pricing model, which is dependent upon several variables, such as the expected option term, expected volatility of our stock price over the expected term, expected risk-free interest rate over the expected option term, and expected dividend yield rate over the expected option term. These amounts are estimates and, thus, may not be reflective of actual future results, nor amounts ultimately realized by recipients of these grants. We recognize compensation expense on a straight-line basis over the requisite vesting period for each award.
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A summary of the weighted-average assumptions we utilized to record compensation expenses for stock options granted during the years ended December 31, 2019 and 2020 is as follows:
| Years Ended December 31, | ||||||||
| 2019 | 2020 | |||||||
| Fair value of common stock |
$ | 5.70 | $ | 10.30 | ||||
| Risk-free interest rate |
1.8 | % | 0.6 | % | ||||
| Expected term (in years) |
6.1 | 6.1 | ||||||
| Expected volatility |
46.8 | % | 50.3 | % | ||||
| Dividend yield |
— | % | — | % | ||||
The assumptions above are estimated as follows. Each of these assumptions is subjective and generally requires significant judgment to determine.
Fair Value of Common Stock—Because our common stock is not yet publicly traded, the fair value was determined by our board of directors or a committee thereof. The board of directors or committee considers numerous objective and subjective factors to determine the fair value of our common stock each time awards are approved.
Expected Term—The expected term represents the period that our stock-based awards are expected to be outstanding. For option grants considered to be “plain vanilla,” we determined the expected term using the simplified method. The simplified method deems the term to be the average of the time to vesting and the contractual life of the options.
Risk-Free Interest Rate—The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant for zero-coupon U.S. Treasury notes with maturities approximately equal to the option’s expected term.
Expected Volatility—Since we do not have a trading history of our common stock, the expected volatility is derived from the average historical stock volatilities of several unrelated public companies within our industry that we consider to be comparable to our business over a period equivalent to the expected term of the stock option grants.
Dividend Rate—The expected dividend was assumed to be zero as we have never paid dividends and have no current plans to do so.
We will continue to use judgment in evaluating the assumptions related to our stock-based compensation on a prospective basis. As we continue to accumulate additional data related to our common stock, we may refine our estimates, which could materially impact our future stock-based compensation expense.
Income Taxes
We are subject to income taxes in the United States and numerous foreign jurisdictions. Significant judgment is required in determining our income tax expense and deferred tax assets and liabilities, including evaluating uncertainties in the application of accounting principles and complex tax laws.
We utilize the asset and liability method under which deferred tax assets and liabilities arise from the temporary differences between the tax basis of an asset or liability and our reported amount in the consolidated financial statements, as well as from net operating loss and tax credit carryforwards. Deferred tax amounts are determined by using the tax rates expected to be in effect when the taxes will actually be paid or refunds received, as provided for under currently enacted tax law. A valuation allowance is established if, based upon the available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. We
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consider all available evidence, both positive and negative, including historical levels of income, expectations, and risks associated with estimates of future taxable income in assessing the need for a valuation allowance.
We regularly review our tax positions and benefits to be realized. We recognize tax liabilities based upon our estimate of whether and the extent to which additional taxes will be due when such estimates are more likely than not to be sustained upon examination by the taxing authority. An uncertain income tax position will be recognized only if it is more likely than not to be sustained. We recognize interest and penalties related to income tax matters as income tax expense.
Recent Accounting Pronouncements
See Note 2 to our consolidated financial statements included elsewhere in this prospectus for information regarding recently issued accounting pronouncements.
JOBS Act Transition Period
We are an emerging growth company as defined in the JOBS Act. The JOBS Act provides that an emerging growth company can take advantage of an extended transition period for complying with new or revised accounting standards. This provision allows an emerging growth company to delay the adoption of some accounting standards until those standards would otherwise apply to private companies. We have elected to use the extended transition period under the JOBS Act for the adoption of certain accounting standards until the earlier of the date we (i) are no longer an emerging growth company or (ii) affirmatively and irrevocably opt out of the extended transition period provided in the JOBS Act. As a result, our consolidated financial statements may not be comparable to companies that comply with new or revised accounting pronouncements as of public company effective dates.
Quantitative and Qualitative Disclosures about Market Risk
We have operations both within the United States and internationally, and we are exposed to market risks in the ordinary course of our business, including the effects of interest rate changes and foreign currency fluctuations. Information relating to quantitative and qualitative disclosures about these market risks is described below.
Interest Rate Sensitivity
As of December 31, 2020, we had $285.3 million of cash, cash equivalents, and marketable securities which consist of corporate debt, commercial paper securities, and U.S. government Treasury bills. In addition, we had approximately $2.5 million of restricted cash primarily due to outstanding letters of credit related to the operating lease agreement for our corporate headquarters. Our cash, cash equivalents, and marketable securities are held for working capital purposes. A hypothetical 100 basis point increase or decrease in interest rates would not have resulted in a material impact on our consolidated financial statements.
Foreign Currency Risk
Our reporting currency and the functional currency of our wholly owned foreign subsidiaries is the U.S. dollar. With limited exceptions, all of our sales are denominated in U.S. dollars; therefore, our revenue is not currently subject to significant foreign currency risk. Our operating expenses are denominated in the currencies of the countries in which our operations are located and may be subject to fluctuations due to changes in foreign currency exchange rates, particularly changes in the Pound Sterling, Canadian Dollar, and Indian Rupee. Fluctuations in foreign currency exchange rates may cause us to recognize transaction gains and losses in our consolidated statement of operations. To date, we have not entered into any hedging arrangements with respect to foreign currency risk or other derivative financial instruments, although we may choose to do so in the future. A 10% increase or decrease in current exchange rates could result in additional income or expense of $3.4 million.
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A LETTER FROM OUR CHAIRMAN, ANDREW NG
When Daphne Koller and I teamed up to found Coursera, our mission was to transform lives through learning. We committed to always put the education mission first.
When my machine learning MOOC launched out of Stanford in 2011, neither of us expected that over 100,000 learners would enroll within weeks. I was teaching 400 on-campus students a year at the time and realized that to reach a similar audience, I would have had to teach for 250 years. The learners came from around the world, spanning many age groups and walks of life, and included people that otherwise did not have access to a great education.
Building on this early momentum, we started Coursera to democratize access to high-quality education. We are very thankful to the over 200 universities and institutions of learning that have joined us, including our first partners—Michigan, Princeton, Stanford, and UPenn—who embraced our approach right away and opened their virtual and hallowed doors to millions.
The world faces many challenges ranging from the pandemic to poverty, unemployment, inequality, and prejudice. While education is no panacea, it is one of the most effective forces in empowering individuals worldwide to rise to these challenges.
For the individual, education opens up opportunities to learn skills and develop one’s career. The old model of education, where you go to college for four years and then coast for the next 40, does not work in today’s changing world. For organizations, education enables scalable workforce development so that they can adapt to rapidly changing environments. Every person—and every organization—has to be a lifelong learner, and Coursera is at the forefront of supporting your journey.
We’ve seen billions struggle during the pandemic. At school, many learners and instructors were ill-prepared to move learning online. At work, digital acceleration is threatening many jobs as skills rapidly become obsolete. The staggering scale of disruption has underscored the need to modernize the global education system. Leaders tasked with creating a level playing field now recognize that learning online will be a powerful means of providing individuals with the skills they need and promoting social equity.
Coursera’s #1 goal has, and always will be, to serve learners. I am grateful to the talented Courserians, whose passion, innovative spirit, and learner-first mindset have helped make the company what it is today. As we take this next step of becoming a public company, we ask you to join us in the movement to make great education accessible to everyone. If we can unlock the full potential in every person, we will move humanity forward.
Keep learning,
Andrew Ng
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Overview
Our mission is to provide universal access to world-class learning so that anyone, anywhere has the power to transform their life through learning.
Learning is the source of human progress. The spread of ideas across cultures and ages has helped transform our world from illness to health, from poverty to prosperity, and from conflict to peace. By combining some of the world’s best educational content with a technology platform that can serve learners on a global scale, we believe Coursera will enable the digital transformation of higher education and bring high-quality, affordable education to every corner of the world.
Coursera is a platform that enables a global ecosystem of educators, learners, and institutions. As of December 31, 2020, more than 77 million learners had registered on Coursera to learn from more than 200 leading university and industry partners through thousands of offerings ranging from open courses to full diploma-bearing degrees. Coursera serves learners in their homes, through their employers, through their colleges and universities, and through government-sponsored programs. As of December 31, 2020, over 2,000 organizations were paying Coursera for Business customers, and in 2020 more than 4,000 colleges and universities launched free online learning programs through Coursera for Campus during the COVID-19 pandemic and over 300 governments, governmental agencies and organizations around the world used Coursera for Government to upskill and reskill their civil servants and citizens. Of the more than 300 government agencies that used Coursera for Government in 2020, 228 were participants in the Coursera Workforce Recovery Initiative, which was a free, limited-time program that ended on December 31, 2020. We also provide social impact programs that have helped more than 72,000 learners around the world.
Learner learn and prosper 77 million Registered learners 6,000+ Institutions -Businesses - Campuses - Governments coursera Educator Teach the world Institution Transform talent 150+ University partners 50+ Industry partners
As of December 31, 2020
Technology is advancing faster than the world’s ability to adapt and acquire new skills, resulting in a sizable and expanding skills gap. To be productive members of the workforce in the digital economy, many aspiring professionals need advanced skills in technology and information-based analytics. We believe education’s “new normal” will be characterized by blended classrooms powered by online learning, job-relevant education for a world facing unprecedented unemployment, and lifelong learning at work to help employees keep up with the
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emerging skills needed to compete in an accelerating digital economy. We believe that online learning will become the primary means of meeting the global demand for emerging skills and that the adoption of online education, combined with the increased flexibility enabled by remote working, holds the promise to increase global social equity.
World-class teaching is the foundation of the Coursera experience. Coursera partners with over 200 leading university and industry partners to provide learners content and credentials that are modular, stackable, and consumable at a wide range of durations, difficulty levels, and price points. Our data-driven technology platform enables educators to efficiently produce, teach, and scale content and credentials, from individual courses to professional certificates to diploma-bearing degrees. Coursera enables educator partners to tap into global demand from both individual learners and institutions.
Reaching and serving a world of learners lies at the heart of our model. We make it easy for learners to discover and engage with high-quality, job-relevant learning in flexible, hands-on online learning environments at affordable prices—often for free. Free content from top-branded partners has enabled us to attract more than 77 million individual learners at very low cost and build a global consumer brand. Data-driven marketing enables us to efficiently upsell learners a wide range of paid offerings, including stand-alone courses, multi-course Specializations, certificate programs, and university degrees. Learners can also “stack” content and credentials, allowing completion of stand-alone courses to count as progress towards a broader program of study, creating more flexible and affordable paths to upskilling and reskilling. We believe this efficient learner acquisition model has allowed us to build one of the largest global audiences of adult learners in the world and to serve learners at very low price points, with strong margins for us and for our educator partners.
Coursera’s data and machine learning systems drive personalized learning, effective marketing, and skills benchmarking. We believe that our unified technology platform is not only making global higher education more accessible and more effective, but is also enabling educators to author and distribute high-quality content efficiently, employers to upskill and reskill their talent, and learners to advance their careers in a flexible learning environment.
In addition to offering content and credentials directly to individuals at Coursera.org, we also sell directly to institutions, including employers, colleges and universities, and governments. Employers can use Coursera for Business to help employees develop new skills in order to better acquire and serve customers, lower costs, reduce risk, and remain competitive in the new digital economy. Colleges and universities can use Coursera for Campus to deliver university-branded online learning at low cost in a new era of financial challenges for higher education and evolving student preferences for hybrid learning. Governments, facing high levels of unemployment driven by automation and accentuated by the COVID-19 pandemic, can use Coursera for Government to reskill employees and citizens into fast-growing digital roles that constitute a significant share of new job opportunities.
The global higher education market is large and growing, currently at a size of $2.2 trillion, according to HolonIQ Smart Estimates. As we press our advantages to continue penetrating this market opportunity, we have multiple strategies to drive our growth, including increasing adoption and penetration of our Enterprise offerings for companies, universities, and governments; expanding the number of online degrees and the number of students in Degrees programs; continuing to grow our learner base and build our brand; growing our content and credentials catalog and network of educator partners; improving conversion, upsell, and retention of paid consumer learners; and continuing our global expansion.
Our business has experienced rapid growth since our founding in 2011. For the years ended December 31, 2019 and December 31, 2020, our revenue was $184.4 million and $293.5 million, respectively. We continue to invest in our business and had a net loss of $46.7 million and $66.8 million for the years ended December 31, 2019 and December 31, 2020, respectively.
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Industry Background: The Need for a New Model of Lifelong Learning
Technology–Driven Automation and Globalization are Accelerating the Demand for Skills and Lifelong Learning
The global economy is changing rapidly. According to our estimates based on data from the International Labour Organization, the global workforce will grow by 230 million people by 2030. This is expected to happen at a time when up to half of today’s jobs, around 2 billion, are at high risk of disappearing due to automation and other factors driving obsolescence by 2030, according to The International Commission on Financing Global Education Opportunity.
The COVID-19 pandemic has further accelerated the need for lifelong learning to be delivered online. According to the World Economic Forum’s Future of Jobs Report, October 2020, to which we contributed data on learner reskilling and upskilling, the “double disruption” caused by automation and the pandemic is likely to displace 85 million jobs by 2025. According to this report, 84% of employers report that the pandemic has increased their intent to rapidly digitize work processes, including a significant expansion of remote work, with the potential to move 44% of their workforce to remote operations. Additionally, companies estimate that 40% of workers will require up to six months of reskilling and 94% of business leaders expect employees to pick up new skills on the job.
Shortcomings of Today’s System
The current system of higher education faces inherent challenges. The predominantly classroom-based model may not be able to keep pace with the rapidly emerging skills required to succeed in today’s workforce. While serving certain learners well, the in-person learning experience may fail to meet the needs of learners in more remote areas and non-traditional learners who need access to education and upskilling the most, both domestically and internationally. Lastly, the cost of education has grown considerably. According to the Federal Reserve Bank of New York, student loan debt in the United States was the second largest component of household debt, at $1.55 trillion as of September 30, 2020, creating further headwinds for individuals navigating their careers and personal lives.
The Future of Learning
While technology will continue to disrupt jobs and labor markets, it can also be the source of significant benefits. Technology, when applied to learning, can reduce distribution costs, increase affordability, extend access to less wealthy geographical regions, adapt a workforce more quickly to emerging skills, and expand the overall market opportunity for education companies. The benefits of technology have only begun to be applied to the overall education market, as most learning today is still traditional, on premise, and classroom-based.
The need for technological change in education has been exacerbated by the recent global COVID-19 pandemic. According to the United Nations, 1.6 billion students in 190 countries, approximately 94% of all students in the world, saw their schools at least temporarily closed due to the pandemic by August 2020. This forced many teachers to teach online and students to learn online. The lessons learned during this period of “forced experimentation” have the potential to enable an enduring digital transformation of higher education. We believe the future of education will be characterized by:
| • | Blended classrooms: We believe online learning will be the “new normal” for higher education, where all students learn online, including those who sit in classrooms as well as those who never set foot on campus. Online learning increases the access and affordability of earning a college degree, expanding the market to new learners who could not otherwise have pursued an on-campus degree. |
| • | Job-relevant education: The risk of rising unemployment as a result of automation and COVID-19 means job-relevant education will be a critical component of higher education. We predict that students will demand skill-based, hands-on learning from both university and industry educators. Companies |
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| such as Google and AWS are already collaborating with universities to offer skill-focused professional certificates that count towards college degrees. Online learning enables colleges and universities to offer students courses in high-demand, cutting-edge fields such as data science and computer science even if they lack the faculty to meet demand in these disciplines. |
| • | Lifelong learning at work: Workers will need to consistently learn new concepts, skills, and tools to stay relevant in a fast-changing workplace. Many workers cannot afford to give up their job in order to advance their education. As a result, they need the flexibility to learn online while working. According to the World Economic Forum, 95% of U.S. employers plan to retrain existing employees in response to shifting skill needs. The 2020 Deloitte Global Human Capital Trend report indicates that 73% of employee respondents consider employers responsible for workforce development. |
We believe that online learning will be the primary means of meeting the urgent global demand for emerging skills. According to the World Bank, there were approximately 200 million college students around the world as of October 2017, many of whom lacked necessary job-relevant skills. According to the United Nations Department of Economic and Social Affairs, 1.3 billion people are projected to reach working age (defined as those between the ages of 15 to 64) between 2019 and 2029. Of the global working-age population of more than 5 billion people, approximately 83% have had no post-secondary education, according to data from the Wittgenstein Center Human Capital Explorer; we believe most will need to learn new skills to remain competitive in a dynamic, global economy.
We believe that the value of online learning will also be amplified by the growing trend towards remote work. Online learning holds the promise to enable anyone, anywhere to learn new skills in preparation for high-demand digital jobs. At the same time, remote work holds the promise to make job opportunities available in communities where traditional, on-site jobs have been scarce. The combined forces of online learning and remote work have the potential to increase global social equity by enabling a future where anyone, anywhere has access to both high-quality learning and high-quality job opportunities in an increasingly digital world.
Our Solution: A Platform for Delivering World-Class Learning at Scale
Coursera is a platform that connects a global ecosystem of learners, educators, and institutions with the goal of bringing world-class education to adult learners everywhere. We combine content, data, and technology into a single, unified platform that is customizable and extensible to both individual learners and institutions. Coursera partners with more than 200 leading university and industry partners to provide a flexible, affordable, and job-relevant online learning experience to meet the needs of an increasingly digital world.
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Coursera serves the needs of a broad range of customers, including individuals, businesses, universities, and governments, all with a single, unified, scalable platform of technology, data, content, and know-how:
77 million registered learners 2,000+ businesses 4,000+ universities 100+ governments coursera Content & Credentials Technology Data
As of December 31, 2020.
A Catalog of High-Quality Content and Credentials
Coursera offers a broad range of learning offerings, from a 2-hour Guided Project for $9.99 on how to build a website to a Master of Public Health degree from the University of Michigan for approximately $45,000.
The Coursera catalog includes*:
1,000+ Guided Projects <2 hours $10 4,600+ Courses 4-6 weeks Free to $99 500+ Specializations 3-6 months $39-$99/mo 40+ Certificates Pro / MasterTrack 3-12 mo. $39-$99/mo $2K-$6K 25+ Degrees 2 years+ $9K-$45K
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| • | 1,000+ Guided Projects: Gain a job-relevant skill in less than two hours for $9.99. |
| • | 4,600+ Courses: Learn something new in 4-6 weeks for free, or for prices up to $99. |
| • | 500+ Specializations: Gain a job-relevant skill in 3-6 months for $39-$99 per month. |
| • | 40+ Certificates |
| ¡ | 25+ Professional Certificates: Earn a certification of job readiness for an in-demand career in 3-9 months for $39-$99 per month. |
| ¡ | 15+ MasterTrack Certificates: In 3-12 months, earn a university-issued certificate from a module of a university degree and credit that can be applied to that degree in the future for approximately $2,000-$6,000. |
| • | 25+ Degrees: Earn a bachelor’s or master’s degree fully online for approximately $9,000-$45,000. |
* As of December 31, 2020. The time periods noted are intended completion timeframes; actual time to completion varies by learner. Learners may also access certain courses, Specializations, and Professional Certificates through a Coursera Plus subscription.
Coursera offers modular learning offerings to allow learners to gain the skills and credentials they need to reach their goals. Our model of learning is “stackable,” meaning completion of stand-alone courses can count as progress towards a broader program of study for a more advanced credential. For example, a University of Illinois digital marketing course can count as credit towards a Digital Marketing Specialization, which could count towards a two-year MBA, all earned on Coursera.
Course Lecture Quiz Lecture Lecture Project Certificate Course Degree Certificate
Coursera partners with universities to develop and deliver fully online degrees for a global learner audience. As of December 31, 2020, Coursera partners offered 26 bachelor’s and master’s degrees to more than 11,000 enrolled Degrees students. These degree programs offer accessibility, affordability, and flexibility to some of the most selective universities in the world. Courses, Specializations, or MasterTrack Certificates that are part of a degree allow prospective students to start learning prior to admission and make progress on coursework in order to determine if the degree is right for them. Students can engage in live lectures, discussions, office hours, and group projects and collaborate with other students via Zoom and Slack integrations. The Coursera platform enables rigorous assessment, staff-graded assignments, and proctored exams to facilitate high levels of academic integrity and achievement. Students receive instruction, grading, and support from university faculty and teaching assistants. Upon graduation, students receive transcripts and diplomas from the university that are no different from those received by students who study on campus.
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Coursera has designed its platform to deliver a learning experience consistent with the needs of today’s learners:
| • | World-class: We provide learning from experts at more than 200 leading universities and companies. Individuals can earn recognized credentials including professional certificates and university degrees to help advance their careers. |
| • | Job-relevant: Learners can master essential career skills that are benchmarked against skill levels observed in Coursera’s employer customers and build personal and professional skills with applied, hands-on learning. |
| • | Affordable: Learners can get started with a freemium offering or a free trial, and later earn fully accredited university degrees entirely online at affordable pricing. |
| • | Flexible: Learners can access on-demand lectures on desktop and mobile devices on a schedule that fits their lives. They can choose from free courses, hands-on projects, certificate programs, and stackable credentials. |
Content Developed by Leading University and Industry Partners
Coursera partners with over 200 leading university and industry partners to deliver a broad portfolio of content and credentials. As of December 31, 2020, more than 150 university partners offered more than 4,000 courses across a range of domains including Data Science, Technology, Business, Health, Social Sciences, and Arts and Humanities. Our university partners who offer courses on our platform represent 28 countries, including:
| • | United States — The Johns Hopkins University (“Johns Hopkins”), the Leland Stanford Junior University (“Stanford”), University of Michigan, UPenn, and Yale University, among others; |
| • | Europe — the National Research University Higher School of Economics, Imperial College of Science, Technology and Medicine, Universitat Autònoma de Barcelona, Università Commerciale “Luigi Bocconi” of Milan, and the University of London, among others; |
| • | Latin America — Pontificia Universidad Católica de Chile, Instituto Tecnológico y de Estudios Superiores de Monterrey, Universidad Nacional Autónoma de México, Universidad de Los Andes, and Universidade de São Paolo, among others; |
| • | India — Indian Institute for Human Settlements, Indian Institute of Management, Calcutta, Indian Institute of Technology Roorkee, Indian School of Business, and OP Jindal Global University; and |
| • | China — The Hong Kong University of Science and Technology, Peking University, Shanghai Jiao Tong University, and The University of Hong Kong, among others. |
As of December 31, 2020, more than 50 industry partners, especially platform technology companies seeking to expand their developer communities, offered more than 600 courses primarily in the domains of data science, technology, and business. Industry partners include AWS, Autodesk, Inc., DeepLearning.AI Corp., The Goldman Sachs Foundation, Google, International Business Machines Corporation (“IBM”), LearnQuest, Inc., SAS Institute Inc., and Unity Technologies ApS, among others.
We believe university and industry educator partners choose Coursera in order to:
| • | Reach Coursera’s global learner base of approximately 77 million registered learners and more than 6,000 institutions to grow their global reach, revenue, and impact; |
| • | Use Coursera’s data and technology platform to develop and deliver high-quality learning at high volume and low cost; and |
| • | Collaborate with a global educator community driving innovation in the digital transformation of higher education. |
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Data and Machine Learning Drive Personalized Learning, Effective Marketing, and Skills Benchmarking
Our proprietary machine learning systems are powered by rich learning data across more than 220 million course enrollments, which allow us to learn key attributes of both educator and learner preferences, and use those learnings to provide tailored support to learners and resources to instructors to enable them to scale their course offerings. Fully automated features such as In-Course Coach serve personalized insights and tips to keep learners motivated and making progress. “Human-in-the-loop” features such as Student Support Dashboards magnify staff impact by highlighting at-risk students and providing insights into the types of assistance each learner needs.
Our data-powered consumer marketing system helps learners discover the content and credentials that match their career needs, which in turn supports low cost of acquisition of paid learners and Degrees students to the Coursera platform. Learners can search and browse the catalog by skill, job role, language, learning product, educator, and other metadata, and receive personalized recommendations based on their current and target careers, inferred interests, and demonstrated skill levels. Degrees recruitment models predict a learner’s interest in each degree and expose Degrees programs to learners on and off platform based on the learner’s predicted interest in the degree and the forecasted program cohort size relative to target.
The data from our consumer ecosystem drives enterprise marketing efficiency. First, our algorithms identify learners likely to be interested in Enterprise offerings and reach them with targeted messaging. Second, thought leadership built on insights from the Consumer platform drives awareness and pipeline. Third, the aggregated learning behaviors of individual consumers working at potential Enterprise customers improve our lead scoring and show Enterprise prospects how their company’s skill proficiencies stack up relative to their competition.
Coursera’s Skills Graph is a system of machine learning models that links learning paths to job skills and helps benchmark learner skills against peers and competitors. The Skills Graph maps the content catalog to skills taught based on natural language processing techniques and tags sourced from instructors and learners, and then measures learners’ proficiencies in a variety of skills with a proprietary algorithm trained on performance on assignments, assessments, and projects across the platform. Content discovery applications include skills-based search and personalized recommendations, Essential Skills Maps that reflect top trending skills, and SkillSets that pinpoint the skills needed to do a job and the learning paths to develop these skill proficiencies. Skill Development Dashboards enable companies to understand their employees’ skill proficiencies, including on aggregate, relative to their peers, over time, and at the employee level to better train and deploy internal talent. Coursera’s Skills Graph also provides insights and demand signals to educator partners to invest in the right subject areas for new content.
Technology Delivers a Personalized Learning Experience at Scale
Our unified technology platform enables learners to learn more quickly and effectively, educators to author and deliver high-quality content at low cost, and employers to help employees develop the right skills to be competitive in the marketplace.
Learners on Coursera receive personalized search and discovery, AI-driven learning features such as In-Course Coach, Smart Review Material, and Goal Setting to help them succeed, and a mobile app that enables course downloads and off-line learning for students with limited connectivity. Coursera Labs enables hands-on learning of tools such as Python, Jupyter Notebooks, VS Code, and R-Studio. Coursera Labs runs in the cloud and does not require downloading software or datasets, so learners and educators have inexpensive access to the real-world tools, high-memory GPU compute, and massive datasets required to learn cutting edge disciplines like data science at scale. Learners in our Degrees programs are able to engage in live synchronous lectures with professors as well as collaborate with other students via Zoom and Slack integrations.
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Educators on Coursera can reach multiple, global audiences through our shared authoring platform and integrated recruitment engine, which sources Degrees candidates at low cost. They can efficiently author and distribute content, identify the students most likely to be interested in their offerings, and streamline their classrooms with machine-assisted student support and autograders.
For employers, our skills development platform empowers Learning and Development teams to design and deploy learning programs, utilize Course Collections to help employees discover job-relevant courses, and track and measure progress in skill development among key teams and personnel. Dashboards enable administrators to deliver enterprise-scale learning programs across specific employee groups, track and measure employee progress in developing any of the approximately 100 scorable skills in our Skills Graph, and benchmark employee skill proficiency against industry peers.
Our Offerings to Individuals and Institutions
Coursera.org for Individuals
Although our university partners offer thousands of courses across a wide range of domains, most learners come to Coursera to advance their careers. Learners consume content from our diversified portfolio, which is designed to meet a wide variety of goals and preferences. Learners coming to Coursera are offered a broad range of learning offerings, from a 2-hour Guided Project for $9.99 on how to build a website to a Master of Public Health degree from the University of Michigan for about $45,000.
As technology automates more repetitive, predictable, lower-skilled job tasks, individuals around the world are looking to reskill with professional certificates and college degrees in order to move into emerging digital careers. Coursera offers a portfolio of eight entry-level Professional Certificates from Facebook, Google, IBM, Salesforce, and Arizona State University that help develop the skills needed to land entry-level digital jobs in IT, cybersecurity, data science, marketing, sales, design, and finance without requiring a college degree or any experience in the field. Coursera also has fully online degrees in data science, computer science, engineering, business, and public health.
The full Coursera catalog includes*:
| • | 1,000+ Guided Projects: Gain a job-relevant skill in less than two hours for $9.99. |
| • | 4,600+ Courses: Learn something new in 4-6 weeks for free, or for prices up to $99. |
| • | 500+ Specializations: Gain a job-relevant skill in 3-6 months for $39-$99/month. |
| • | 40+ Certificates |
| ¡ | 25+ Professional Certificates: Earn a certification of job readiness for an in-demand career in 3-9 months for $39-$99 per month. |
| ¡ | 15+ MasterTrack Certificates: In 3-12 months, earn a university-issued certificate from a module of a university degree and credit that can be applied to that degree in the future for approximately $2,000-$6,000. |
| • | 25+ Degrees: Earn a bachelor’s or master’s degree fully online for approximately $9,000-$45,000. |
| * | As of December 31, 2020. The time periods noted are intended completion timeframes; actual time to completion varies by learner. Learners may also access certain courses, Specializations, and Professional Certificates through a Coursera Plus subscription. |
Our platform enables learners to discover the right content and credentials by domain (e.g. Business, Technology, Health), by skills (e.g. Python, Statistics, Data Visualization), and by job role (e.g. Data Analyst, Marketer, Engineer). Once learners enroll in a course, our unified technology platform enables them to learn more effectively to advance in their careers and earn credentials to signal their learning to prospective employers.
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The learning experience includes:
| • | Courses with video-based lectures, in-video quizzes, notes and highlights, readings, assessments, peer reviews, and group projects; |
| • | AI-driven learning features such as In-course Coach, Smart Review Material, and Goal Setting to help learners stay motivated and making progress; |
| • | Coursera Labs with hands-on projects that teach practical skills using real-world tools such as Python, Jupyter Notebooks, VS Code, R-Studio, and many other desktop and cloud-based applications fully in-browser with no software or data downloads; and |
| • | A mobile app that enables course downloads for off-line learning, which is especially important for students with limited or intermittent internet connectivity or power. |
Coursera Plus is a subscription pricing model that gives learners access to over 3,000 courses, Specializations, and Professional Certificates on Coursera for a monthly or annual fee. We announced Coursera Plus in February 2020, and over 50,000 learners had subscribed as of December 31, 2020.
Coursera for Enterprise
Coursera is available to institutions around the world, allowing businesses, academic institutions, and governments to enable their employees, students, and citizens to gain critical skills aligned to the job market of today and tomorrow. Institutions play a major role in tackling the global reskilling challenge by providing awareness, incentives, and financial support for lifelong learning.
Coursera has designed a single, unified platform that allows us to configure a common set of content and features to meet the various needs of business, academic, and government customers. The common content and features on Coursera’s Enterprise learning platform include:
| • | A broad catalog of more than 5,000 courses, hands-on projects and professional certificates, especially in the domains of Data Science, Technology, and Business; |
| • | Private Authoring, the ability for all Enterprise customers to author courses and projects that are specific to and accessible only by the learners in their institution or their citizens, as applicable; |
| • | The ability to tailor custom Course Collections that surface specific, curated collections of courses to specific learner populations; |
| • | Academies and SkillSets that identify target skill proficiencies required for specific job roles and provide personalized learning paths to develop these skill proficiencies; |
| • | Coursera Labs, with hands-on projects that teach practical skills using real-world tools such as Python, Jupyter Notebooks, VS Code, R-Studio, and many other desktop or cloud-based applications fully in-browser with no software or data downloads; and |
| • | Dashboards that enable administrators to deliver tailored learning programs to specific learner groups, measure and track progress in skill development, and benchmark learner skill proficiency. |
Coursera for Business helps employers upskill and reskill their teams to drive innovation, competitiveness, and growth. Our content in data science, technology, and business is especially relevant to employers; Private Authoring allows businesses to create courses and projects using their own datasets and tools; SkillSets can be tailored to company-specific job-roles and skill requirements; Coursera Labs helps employers provide hands-on training using the tools that are actually deployed in their corporate environments; and Dashboards allow businesses to benchmark skill proficiency against specific industry and competitive peer groups.
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Coursera for Campus empowers academic institutions to offer job-relevant online education to students, faculty, and staff. Our content from leading universities and academic integrity features are especially relevant to colleges that allow students to earn credit towards their university degree by taking online courses; Private Authoring allows faculty to create courses and projects that meet their particular curricular needs; SkillSets help faculty and students understand what skills will improve the chance of getting hired into particular job roles after graduation; Coursera Labs enables schools to supplement conceptual study with hands-on learning in a scalable cloud environment; and Dashboards help faculty and career placement personnel enhance student employability by benchmarking student skill proficiency against specific industry job roles.
Coursera for Government helps federal, state, and local governments and organizations deliver workforce reskilling programs to provide in-demand skills and paths to new jobs for an entire workforce. Our Professional Certificates and content from leading universities and industry partners are especially relevant to government officials who seek to prepare citizens for emerging jobs in their region and enhance the skills of public sector employees; Private Authoring allows agencies to create localized hands-on projects using regional instructors to develop skills to meet regional employment opportunities; SkillSets help workforce agencies tailor learning programs to develop skills that meet requirements of local employers; Coursera Labs enables governments to provide hands-on skilling to help citizens reskill into entry-level digital jobs; and Dashboards help workforce development personnel measure skill development and benchmark skill proficiency against workforces in other countries.
Our Social Impact Programs and Pandemic Response
Coursera Social Impact Programs
Universal access to world-class learning is critical for social change. Over the last four years, we have fostered an initiative to provide learning for tens of thousands of refugees in more than 140 countries. We also work with 69 nonprofit and community organizations to provide refugees, veterans, formerly incarcerated individuals, and students of underserved high schools with access to high-quality education and job-relevant credentials, at no cost to them. To date, our social impact programs have helped more than 72,000 learners across the globe, who have collectively logged more than 390,000 course enrollments.
Our Response to the COVID-19 Pandemic
The COVID-19 pandemic sharply increased the need for online learning beginning in 2020. Both individuals and institutions relied on online learning to navigate change and disruption. We, along with our partners, launched several initiatives to help mitigate the pandemic’s impact on communities worldwide:
| 1) | Campus Response Initiative: To help minimize the economic and educational impact of the pandemic, we and our partners launched the Campus Response Initiative on March 12, 2020, offering every college and university in the world free access to our course catalog through Coursera for Campus. Within seven months, the initiative reached 2.3 million students from over 4,000 institutions who collectively logged more than 19 million course enrollments. We and our partners concluded our Campus Response Initiative in September of 2020 but continue to provide a freemium offering, Coursera for Campus Basic, which allows universities and students unlimited access to Guided Project enrollments and one course enrollment per student per year to enable trial before purchase. In addition, university and industry partners who offer multiple courses on our platform may elect to join our Partner Consortium, which affords these partners free access to other members’ courses. |
| 2) | Workforce Recovery Initiative: We and our partners launched the Coursera Workforce Recovery Initiative on April 24, 2020 to help governments provide unemployed workers with free access to the Coursera catalog to help them develop skills needed to become re-employed more quickly. Since launch, we have activated more than 340 programs across more than 70 countries and 25 U.S. states, with more than 1 million learners and 8 million course enrollments. We surveyed Workforce Recovery learners three months after completing their first course, and over 80% of respondents reported that Coursera learning helped them to gain a new skill. |
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| 3) | Employee Resilience Initiative: Launched April 30, 2020, the Employee Resilience Initiative enables Enterprise customers to expand online learning opportunities for employees with free access to high-demand courses focused on mental well-being, remote working, and digital readiness. |
| 4) | Contact Tracing Course: On May 11, 2020, The Johns Hopkins Bloomberg School of Public Health launched a free COVID-19 Contact Tracing course on Coursera to help expand contact tracing capacity. This course is a requirement to become a contact tracer in New York State. In July, together with Johns Hopkins, we released Spanish and Portuguese versions of the course to make this critical content more accessible to the more than 600 million Spanish and Portuguese speakers worldwide. To date, over 1.1 million learners have enrolled in the course and more than 590,000 have completed it. |
Our Customers: How We Serve the World Through Learning
To achieve our mission of providing universal access to world-class learning, we offer a wide range of content and credentials from some of the world’s most recognizable educator brands. We help individuals learn and advance in their jobs and careers, and we serve companies, academic institutions, and governments to help them upskill and reskill their employees, students, and citizens.
Learners
Learners can come to Coursera to advance their careers, reach their educational goals, and enhance their lives. As of December 31, 2020, more than 77 million learners had registered with Coursera to learn from more than 200 leading university and industry partners in thousands of offerings ranging from open courses to full diploma-bearing degrees. Coursera serves learners in their homes, through their employers, through their colleges and universities, and through government-sponsored programs. We offer learners a broad range of learning offerings, from a 2-hour Guided Project for $9.99 on how to build a website to a Master of Public Health degree from the University of Michigan for approximately $45,000.
| • | The top five countries represented by registered learners on Coursera as of December 31, 2020 were (1) the United States, with 15.0 million registered learners, (2) India, with 10.6 million registered learners, (3) Mexico, with 4.1 million registered learners, (4) Brazil, with 3.2 million registered learners, and (5) China, with 3.1 million registered learners. As of December 31, 2020, over 80% of our registered learners were outside of the United States, with approximately 17 million registered learners in North America, 15 million registered learners in Latin America, 14 million registered learners in Europe, 12 million registered learners in Asia (excluding India), 7 million registered learners in the Middle East and Africa, and 1 million registered learners in Oceania, with the highest growth over the last year coming from Asia (+77%), Latin America (+74%), and the Middle East and Africa (+68%). |
| • | In 2020, learners logged 75 million course enrollments, watched 576 million lectures, and completed 123 million assessments. |
| • | Learners have logged more than 2.5 million Guided Projects enrollments since we launched Guided Projects in April 2020. |
| • | Our growing Professional Certificate catalog has enrolled 2.5 million learners and represents three of our top 10 revenue-producing courses and certificates. |
| • | Over 11,000 students were enrolled in Degrees programs as of December 31, 2020. |
Overall, learners are satisfied with their experiences on Coursera and with the outcomes Coursera learning helps them achieve. Of learners who have rated a course since 2015, 79% gave their course a full 5-star rating.
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Coursera is a game-changer just for levelling the playing field. It allows you to get a high-quality degree at a rate that you can afford. Getting my degree from the University of illinois is something I'm very proud of. I've landed in a position that is exactly where I want to be. Earning my MBA gives me confidence. I wanted my kids to know that you don't ever stop. Kara S. UNITED STATES MBA DEGREE
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Coursera has really changed my life. I'm achieving my dreams and continuously growing in my career. I want to raise awareness for Coursera as a learning destination for all people, especially in my country, because we don't have data science and Al degrees in Lebanon. Mo R. LEBANON COURSES, SPECIALIZATION, GUIDED PROJECTS INSTRUCTOR
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Getting into IT always felt insurmountable, because it was either i had the time but not the money, or i had the money but not the time. When i discovered the Google IT Support Professional Certificate i knew: this is my gateway. This is my path. This is how i can get into IT. My family gets to see me finally achieve my dream of being in IT. Tristen A. UNITED STATES PROFESSIONAL CERTIFICATE
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Businesses
Employers can use Coursera for Business to help employees develop new skills in order to better acquire and serve customers, lower costs, reduce risk, and remain competitive in today’s economy. The launch of our Enterprise business in 2016 has enabled customers to choose Coursera to upskill their teams with critical skills in business, technology, data science, and other disciplines. As of December 31, 2020, over 2,000 organizations, including over 25% of Fortune 500 companies, were paying customers of Coursera for Business.
| • | These 2,000 organizations include Enterprise customers that purchase Coursera through our direct sales force, on our platform through our Coursera for Teams offering, or through our channel partners. |
| • | Over 70% of Coursera’s direct sales business customers are outside of the United States. |
| • | In 2020, Coursera for Business learners logged over 1.2 million course enrollments, watched over 23 million lectures, and took over 5 million assessments. |
According to a 2019-2020 report conducted by market research firm IDC and commissioned by Coursera, the eight Coursera for Business customers that were interviewed for the report expected to achieve an estimated 3-year return on investment of approximately 700% (on average) due to a considerable reduction in employee attrition (-38% on average), lower spending on training costs (-24% on average), and increased worker productivity (+25% on average) as employees effectively utilize skills learned.
Colleges and Universities
Colleges and universities can use Coursera for Campus to deliver university-branded online learning at low cost in a new era of financial challenges for higher education and evolving student preferences for hybrid learning. We launched Coursera for Campus in October 2019, just months before the COVID-19 global pandemic broke out. Coursera for Campus enables colleges and universities to leverage our global online learning platform to provide job-relevant, credit-ready, high-quality learning at higher scale and lower cost than in-classroom learning alone. Accelerated by the pandemic, thousands of higher education institutions launched Coursera for Campus over the past year, making it one of our fastest growing offerings.
Through the Coursera Campus Response Initiative, more than 4,000 unique colleges and universities used content from our platform to launch online learning programs that ran for free through September 2020. During that time, these institutions launched more than 13,000 programs for 2.3 million students who accounted for more than 19 million course enrollments. Universities utilizing the Campus Response Initiative included Duke Kunshan University, Tec de Monterrey, and GITAM University among others. We and our partners concluded our Campus Response Initiative in September of 2020, but continue to provide a freemium offering, Coursera for Campus Basic, which allows universities, colleges, and students unlimited access to Guided Project enrollments and one course enrollment per student per year to enable trial before purchase.
As of December 31, 2020, over 130 colleges and universities were paying customers of Coursera for Campus. These customers represented public and private colleges and universities from more than 30 countries including Cameroon, India, Nigeria, Peru, and the United States.
Over 93% of students who responded to our outcomes survey from October to December 2020 reported that Coursera for Campus allows them to acquire a new skill, and 60% reported that Coursera learning improves their applications, prepares them for internships, and / or prepares them to be successful in getting a job.
Governments
Governments, facing unprecedented levels of unemployment, can use Coursera for Government to build a competitive workforce that drives sustainable economic growth by upskilling employees for public sector success and reskilling citizens for career advancement.
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Through the Coursera Workforce Recovery Initiative, government agencies launched more than 340 online learning programs that ran for free through December 2020. During that time, more than 1 million learners joined and logged more than 8 million course enrollments. Governments participating in the Workforce Recovery Initiative included the federal governments of Colombia and Kazakhstan, as well as the State of Illinois and the State of New York.
As of December 31, 2020, over 100 government agencies and organizations were paying customers of Coursera for Government. These customers represent national, state, and local government agencies and organizations from 33 countries and states including the United Arab Emirates, Saudi Arabia, Uruguay, and the State of New York.
Enterprise Case Studies
Coursera for Campus
Manipal
Manipal University (“Manipal”) is a leading, private university with over 42,000 students and campuses in India, Dubai, Malaysia, Nepal, and Antigua that provides degrees in a range of disciplines including Engineering, Management, and Healthcare.
Manipal partnered with Coursera in 2017 to inculcate a culture of multidisciplinary and lifelong learning among its learners. In 2019, Manipal’s engineering and management schools mapped Coursera courses to their curriculum and offered credit for completion. This led to an increase in course enrollments from 71,000 in 2018 to nearly 265,000 in 2020. 12,000 of these enrollments were in courses that were integrated into academic programs and had an average completion rate of 80%.
Szeged
The University of Szeged (“SZTE”) is a member of the European University Alliance for Global Health (EUGLOH) and one of the largest research universities in Hungary with approximately 21,000 students pursuing undergraduate and graduate degrees across 12 disciplines.
SZTE partnered with Coursera to deliver flexible, online learning options with high quality content to increase admissions and improve employment outcomes. Today, SZTE leverages Coursera across all facets of the University including providing incoming students with foundational courses, offering for-credit and extra-credit courses, and helping professors augment their skills and teaching materials.
In 2020, SZTE signed a 2,500 license multi-year agreement with Coursera. As of February 3, 2021, SZTE students and faculty had logged approximately 4,500 enrollments in various courses. SZTE has highlighted the Coursera partnership in press releases, social media, and open houses to attract students as well as in its strategic development plan to gain access to European Union education development funding.
Coursera for Business
Novartis
Novartis Pharma AG (“Novartis”) is a global healthcare company headquartered in Switzerland with 110,000 employees across 140 countries.
Novartis wanted to nurture employee curiosity to retain talent in a highly competitive pharma talent industry and continue to develop creative solutions to the world’s biggest healthcare challenges. They chose Coursera as a partner to help establish a culture of learning that delivers critical data science, digital, business, and soft skills.
In 2018, Novartis launched a 490 enrollments pilot with Coursera. In 2019, Novartis expanded its partnership with Coursera to 9,000 licenses, and added free tuition reimbursement for online Degrees as well as
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MasterTracks in data science. In 2020, due to positive learner feedback and increasing demand for online learning, Novartis’ agreement with Coursera was expanded to provide Enterprise-wide access as well as a new “Friends and Family” program.
Today, over 23,000 Novartis employees have logged 80,000+ enrollments in 3,600+ distinct courses and guided projects, developing skills across data, technology, business, human skills, and health domains. As of February 5, 2021, over 70 employees were pursuing online Degrees or MasterTrack Certificates in data science.
Coursera for Government
UNDP
The United Nations Development Programme (“UNDP”) has 20,000 employees across 170 countries focused on global international development, as of January 2021. The UNDP’s mission is organized around a set of 17 Sustainable Development Goals to help achieve the UN’s 2030 Agenda for Sustainable Development.
To enable employees to deliver on these goals, the UNDP needed programs to build employee skills in leadership, management, career development, and digital transformation, for example. In 2017, the UNDP engaged with Coursera to support the flagship People Manager Development Programs, which offer training for new and experienced managers in areas like leadership and people management development. Coursera also provided courses in AI, cybersecurity, big data, technical areas (e.g., international development), and design thinking to better leverage technology to enhance the UNDP’s development impact. The UNDP also uses Coursera for its newly launched SPARK Programme to enable women, based in over 100 country offices, to plan, manage, and excel in their careers with courses related to career development and management.
Since the UNDP started using Coursera in 2017, it has continued to expand the number of Coursera enrollments because the effective, self-paced learning in critical topics is helping it achieve its learning goals. Many national officers never had the opportunity to attend a university outside their home country and these learners appreciate the opportunity to receive certificates from Coursera and global universities. In 2017, the UNDP started with 1,500 enrollments and by 2020 it had expanded its engagement with Coursera to over 4,000 enrollments. To date, more than 3,000 UNDP employees have enrolled in Coursera courses.
Degrees Case Studies
The University of London
The University of London has long been an education pioneer, with its first distance learning programs dating back to 1858. Recognizing the potential in online education, the university became one of Coursera’s earliest partners and started hosting dozens of short-form MOOCs on the platform.
In 2017, the university identified a need to extend online education beyond short-form content. Meeting the needs for an online Bachelor’s degree and fulfilling regulatory reporting requirements for UK universities required a robust platform with advanced analytics, integrations, and support functionalities. Coursera supported a variety of learning activities – including simulations, games, and graphical interfaces – so students could practice what they’ve learned in real-time projects.
In 2019, the Bachelor of Science in Computer Science (BSc in CS) degree became the first undergraduate degree to be hosted on the Coursera platform. In the four cohorts since its launch, the program has seen three times the applications and student enrollments than they had initially expected, with over 4,800 applications alone in its most recent cohort. Furthermore, the university created an admissions pathway for learners from Coursera’s Google IT Support Professional Certificate, where students can transition from a career-oriented professional certificate to a degree program and receive academic credit for the professional certificate. As of December 31, 2020, 32% of the university’s Computer Science online degree students were also enrolled in the Google IT Support Professional Certificate, while 9% of students started with the Google IT program prior to enrolling in the degree.
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The University of Illinois
In 2013, the eLearning Office at the University of Illinois Urbana-Champaign Gies College of Business was exploring new channels to extend their programs beyond campus. The team was inspired by the potential of online degrees and saw an opportunity to redesign its MBA experience to address the challenge of declining MBA enrollments across the industry.
In 2016, the University of Illinois launched the first online iMBA degree program on Coursera with more than 200 students. The program has since experienced significant reach and scale, receiving more than 3,200 applications for its fall 2020 cohort and attracting students from over 90 countries and 46 U.S. states. Over 1,500 students have successfully graduated from the program since 2017. The iMBA program is now one of the fastest-growing MBA programs in the world. Following on the success of the iMBA program, the Gies College of Business has expanded its digital offerings to a total of three Masters’ degree programs with the launch of the Online Master’s of Accounting (iMSA) and the Master of Science in Management on Coursera.
Our Competitive Strengths: The Power of Our Business Model
We believe that our competitive advantage is based on the following key strengths:
| • | Trusted brand with a large learner base: With approximately 77 million registered learners, we have one of the largest global audiences of adult learners in the world. This large learner base attracts top educator partners, creates Enterprise and Degrees leads, provides data and insights, increases operating scale, improves search engine optimization performance, and produces favorable economics. |
| • | Our consumer flywheel creates a price-to-cost advantage: We make it easy for learners to come to Coursera and explore learning options through free open courses and projects. We believe this efficient acquisition model, powered by free, high-quality content, global partner brands, deep expertise in search engine optimization, strong word-of-mouth referrals, public relations, and a profitable affiliate paid marketing channel, enables us to attract learners to Coursera at scale and connect them with the right learning experiences over the course of their academic and professional lives. This acquisition model has allowed us to add over 12,000 Degrees students over the two years ended December 31, 2020 at an average student acquisition cost of under $2,000. |
Free university &industry branded content Attracts Motivated Global Learner Base at Low CAC Generates word-of-mouth Some of which pay Some registrants play for courses and degrees Drives value for content partners Revenue to partners incentivizes content creation Creates
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| • | Branded catalog of modular and stackable content and credentials: Our broad catalog and flexible technology platform provide many entry points for learners and allow us to give learners a path to achieving their goals, regardless of their starting place. This allows us to help learners find the right learning program based on their prior skills, credentials, experience, and career desires and provide pathways for them to accomplish their goals. For example, a learner with no college degree or experience might start her learning journey with the Google IT Professional Certificate over 3 to 6 months, land a new IT job, and get academic credit towards the University of London Bachelor’s of Computer Science, which she can complete while working, lowering the opportunity cost of earning that degree. Nine percent of students enrolled in the University of London Bachelor’s degree in Computer Science on Coursera have also enrolled in the Google IT Professional Certificate. We believe we are the only platform with the ability to blend industry credentials with traditional academic degree credentials at scale. |
| • | Network of leading academic and industry partners: Our large and global learner base attracts top-tier educator partners by allowing them to reach new audiences and create new revenue streams with relatively small up-front investments. We carefully select our university and industry partners, prioritizing quality, subject expertise, and geographic appeal. As technology advances and new relevant skill sets emerge, our growing partner relationships enable us to be responsive in providing in-demand skills for aspiring and ascending professionals. |
| • | Job-relevant, hands-on projects, and industry certificates: In order to compete and keep pace with the rapidly changing skills landscape, learners need to be able to quickly identify and learn practical skills using job-relevant tools. Our Project Network is composed of instructors who have demonstrated expertise in a tool or skill through industry experience or academic background in the topic of their project. Our technology platform allows instructors to efficiently launch one to two hour Guided Projects that teach the latest in-demand skills to learners with a hands-on learning experience. Similarly, Professional Certificates, some of which are authored by well-known employer brands such as Facebook, Google, IBM, and Salesforce, allow learners to efficiently reskill and upskill for new jobs. |
| • | Multi-channel Enterprise model: With a single content catalog and a unified technology and data platform, we are able to distribute content and credentials to a global audience of more than 6,000 businesses, academic institutions, and governments. Our technology enables our educator partners to reach large, globally-distributed employee populations through the workplace and provide them with high-quality lifelong learning. Our technology also allows collaboration among institutional networks, so that businesses, universities, and government agencies can collaborate on Coursera by sharing content, program settings, licenses, and data insights. |
| • | Rich data analytics and Skills Graph: Since all of our teaching and learning activities happen online, our platform is able to capture a significant amount of data across millions of enrollments related to teaching, learning, content, and outcomes. These data allow us to drive learner success through personalized learning, mapping skills to content and jobs through a system of machine learning models, and unlocking marketing efficiencies by automating and targeting communications with learners to generate engagement. |
Our Opportunity: The Global Education Market is Large and Growing
As the pace of new knowledge and the demands of the global workforce continue to accelerate, we believe the global adult education market is poised to grow dramatically. According to the education market intelligence firm HolonIQ, the global higher education market was $2.2 trillion in 2019; the global online degree market was $36 billion in 2019 and is expected to grow to $74 billion by 2025. The flexibility of online learning enables non-traditional learners to continue their education, which has allowed the online education industry to demonstrate acyclical growth characteristics.
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Our Growth Strategy
We have seen strong growth since our founding in 2011. The combination of greater global access to technology and our open learning platform is unlocking the opportunity for more global citizens to enhance their education and earn credentials that help advance their careers. We believe that we have a large, underpenetrated addressable opportunity ahead of us to enable the digital transformation of higher education and provide lifelong adult learning at scale.
Key elements of our strategy of growing our business include:
| • | Continue to invest in growing our Enterprise channels. Coursera’s growth is driven in part by expansion into new logos as well as broader penetration of learners within our existing base of business, university, and government customers. Our team identifies and engages with potential Enterprise customers. Once our platform has been adopted, we focus on expanding and growing our relationships with existing customers. Our relationships often begin with departmental deployments, evolving to multi-department and ultimately organization-wide utilization as our value is evangelized and proven within our customers’ learner base. |
| • | Drive adoption and conversion of freemium Enterprise offerings. During the pandemic, we opened up our platform across our Enterprise customer base through multiple initiatives including our Campus Response Initiative, Workforce Recovery Initiative, and Employee Resilience Initiative. As an example, our Campus Response Initiative enabled over 4,000 institutions globally, including approximately 10% of all degree-granting institutions, to tap into ready-made, high-quality digital curricula from leading universities with minimal upfront costs through our Coursera for Campus offering. We plan to continue to focus on converting free institutions to paying Enterprise customers as we enable the digital transformation of higher education. |
| • | Expand the number of online degrees and the number of students in Degrees programs. We believe we have a substantial opportunity to increase the number of bachelor’s and master’s programs in new and existing academic disciplines within our current network of university partners. Over time, we also aim to naturally progress current open course university partners into Degrees partners. For existing Degrees program partners, we also intend to continue to increase the size of student cohorts in existing Degrees programs and add new online Degrees programs from these partners. We believe that our ability to leverage our large, global learner base gives us a competitive advantage in delivering qualified international learners to Degrees partners in a cost-effective manner. |
| • | Continue to grow our learner base and build our brand. We intend to continue to invest in increasing the number of registered learners on Coursera and increasing awareness of the Coursera brand. Our large learner base and brand creates a virtuous cycle, increasing our value to educator partners and providing incentive for them to author additional content and credentials. This broader catalog, in turn, enhances the appeal of Coursera to learners, which grows our consumer learner base. We believe the content and credentials from our university and industry partners generate meaningful organic and unpaid traffic to Coursera, which reduces our cost of learner acquisition. A growing learner base also generates positive externalities for other parts of our business, as some learners will go on to enroll in Degrees programs or provide us with Enterprise leads. In 2020, approximately 50% of new Degrees students were previously registered Coursera learners and over 30% of our Enterprise leads were sourced from our Consumer platform. |
| • | Grow our content and credentials catalog and network of educator partners. We plan to continue to invest in growing our catalog of projects, courses, Specializations, certificates, and degrees across a broad range of topics and expanding our network of educator partners. Since January 1, 2020, we have added an average of over 450 new courses and projects every quarter. |
| • | Improve conversion, upsell, and retention of paid Consumer learners. Our Consumer platform makes it easy for individuals to come to Coursera and learn, allowing for a natural progression of |
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| learners to go from free projects or courses to full online degrees. In 2020, over 50% of our cash receipts from Consumer offerings came from individual learners who were registered on our platform as of December 31, 2019. |
| • | Continue global expansion. Approximately 51% of our revenue for the year ended December 31, 2020 came from learners outside of the United States. We see a particularly large opportunity to help emerging economies that lack the ability to absorb the large and growing influx of adult students by delivering education in a scalable and affordable way. We plan to continue to market our offerings and programs to individual learners, businesses, academic institutions, and governments globally, providing us broad access to the addressable market while also building on our global brand as a leading learning destination. |
Competition
The market for global adult online learning is highly fragmented and rapidly evolving. We expect alternative modes of learning to continue to accelerate as players in this industry introduce new and more competitive products, enhancements, and bundles.
Participants in the global adult online learning ecosystem include:
| • | Direct-to-consumer, online education companies: 2U, Inc., edX Inc., Eruditus Learning Solutions Pte. Ltd., FutureLearn Limited, Udemy, Inc., and upGrad Education Private Limited; |
| • | Corporate training companies: A Cloud Guru Ltd., Degreed, Inc., LinkedIn Corporation through its LinkedIn Learning services, Pluralsight, Inc., and Udacity, Inc.; |
| • | Providers of free educational resources: Khan Academy, Inc., The Wikipedia Foundation, Inc., and Google through its YouTube services; and |
| • | Internal online degree platforms: Online degree programs developed in-house by universities. |
We believe we have a number of advantages over these competitors due to our unique combination of:
| • | a trusted global brand; |
| • | a base of approximately 77 million registered learners; |
| • | a freemium consumer model that creates a price-to-cost advantage; |
| • | a broad catalog of branded, high-quality content and credentials; |
| • | job-relevant, hands-on projects and industry certificates; |
| • | a network of over 200 leading university and industry educator partners; |
| • | a multi-channel Enterprise model serving more than 6,000 institutions; and |
| • | rich data analytics and Skills Graph. |
Sales and Marketing
Our sales and marketing efforts are focused on building a unified marketing system that connects individuals to lifelong learning opportunities throughout their academic and professional lives. Our strategy centers on leveraging the Coursera brand and our partners’ brands along with our large catalog of high-quality, freemium content to attract learners to Coursera efficiently.
Once we attract learners to Coursera, our data-driven learner experience connects learners to the courses, certificates, and degree programs best-suited for them through a personalized discovery and nurture system and identifies whether they are a potential Enterprise prospect.
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Learners come to Coursera primarily through free or low-cost acquisition channels such as public relations, word of mouth, and search engine optimization. We also derive a smaller percentage of learners through cost-efficient paid advertising channels including an affiliate publisher network and paid search.
With our consumer brand, we can market categories of degree and certificate programs to learners earlier in their consideration process. This allows us to connect learners with targeted learning opportunities based on their background and goals. By connecting Coursera’s learners with relevant degree programs, we efficiently tap into latent degree demand from the consumer base and combine automated nurture strategies earlier in the funnel with higher-touch efforts to assist potential students who are further along in their purchase decision. This kept our Degrees student acquisition costs under $2,000 per student for the two years ended December 31, 2020, allowing our partners to offer more degrees at affordable prices. We calculate our average acquisition cost for Degrees students by aggregating directly attributable marketing costs and dividing by the total number of new students. We promote courses, Specializations, and MasterTrack Certificates that can count as progress towards a degree both to allow prospective students to discover Degrees and to increase conversion rates by enabling applicants to sample content and build interest and confidence before enrolling in a Degrees program.
The data from Coursera’s consumer ecosystem helps drive Enterprise marketing efficiency. Related insights, especially on how a company’s skill proficiencies stack up relative to the competition based on the aggregated learning behaviors of consumer learners working at a given company help us reach prospects with targeted skill development solutions.
Our Enterprise sales team identifies and engages with potential institutional customers around the world. With our international expansion, we have deployed a more regionally distributed approach to sales and account management and see significant upside in growing and upselling Enterprise accounts.
Research and Development
We have a technology and data-driven research and development team which creates and maintains our platform, products, and insights to deliver a high-quality learning experience to our customers and educator partners cost-effectively and at scale. We leverage our large partner and customer base, our engaged learner community, and our focus on user-driven innovation to aggregate feedback on features and functionality and consistently improve our offerings and platform.
Our production environment runs on a cloud, providing scalable storage and elastic computing. This architecture allowed our platform to effectively serve a 15x increase in registrations at peak hours during a pandemic-related surge in activity in late March 2020.
We invest substantial resources in research and development to drive our technology innovation and bring new offerings and features to the market. Our research and development team is responsible for the design, development, and testing of features and offerings on our platform. They are also responsible for building and integrating tools and systems to help our services function deliver high-quality service at lower cost as we scale.
Our research and development teams are located in Mountain View, California, Toronto, Bulgaria, and an increasingly distributed remote workforce that allows us to access diverse, talent-rich markets as we grow. We believe our research and development teams are diverse, bringing unique and essential perspectives to our platform.
Public Benefit Corporation Status
On February 1, 2021, we amended our certificate of incorporation to become a Delaware public benefit corporation. We believe becoming a public benefit corporation reinforces our long-term commitment to providing global access to affordable and flexible world-class learning and aligns with our mission, culture, and values.
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Public benefit corporations are a relatively new class of corporations that are intended to produce a public benefit and to operate in a responsible and sustainable manner. Under Delaware law, public benefit corporations are required to identify in their certificate of incorporation the public benefit they will promote, and their directors have a duty to manage the affairs of the corporation in a manner that balances the pecuniary interests of the stockholders, the best interests of those materially affected by the corporation’s conduct, and the specific public benefit identified in the certificate of incorporation. They are also required to publicly disclose a report that assesses their public benefit performance at least every two years.
Our public benefit purpose, as provided in our certificate of incorporation, is “to provide global access to flexible and affordable high-quality education that supports personal development, career advancement, and economic opportunity.”
Certified B Corporation Status
In addition to being a public benefit corporation under Delaware law, we are a Certified B Corporation™ (“B Corp”). The term “B Corp” does not refer to a particular form of legal entity, but instead refers to companies that are certified by B Lab, an independent nonprofit organization, for meeting rigorous standards of social and environmental performance, accountability, and transparency.
The process for becoming a B Corp involves taking and passing a comprehensive and objective assessment of a business’s positive impact on society and the environment, which includes over 200 questions measuring the business’s impact on its customers, employees, communities, and the environment, as well as a validation process which includes review of supporting documentation and verification interviews. Once certified, every B Corp must make its assessment score publicly available on B Lab’s website. Acceptance as a B Corp and continued certification is at B Lab’s sole discretion.
We believe that our status as a B Corp further demonstrates our commitment to our mission and public benefit purpose. Additionally, we believe that maintaining our status as a B Corp will further strengthen the relationship of trust between us, our partners, our customers, and our employees as we together seek to empower anyone, anywhere to transform their life through learning.
Regulatory Matters
As a service provider to higher education institutions both in the United States and internationally, either directly or indirectly through our arrangements with partners, we are required to comply with certain education laws and regulations.
General
Higher education is heavily regulated in the United States and most international jurisdictions. For example, numerous states require education providers to be licensed or authorized in such state simply to enroll persons located in that state into an online education program or to conduct related activities such as marketing. Additionally, the vast majority of our U.S.-based college and university partners participate in the federal student financial assistance programs under Title IV of the Higher Education Act of 1965, as amended (“HEA”), and are subject to extensive regulation by the DOE, as well as various state agencies, licensing boards and accrediting agencies. To participate in the Title IV programs, an institution must receive and maintain authorization by the appropriate state education agencies, be accredited by an accrediting agency recognized by the DOE, and be certified by the DOE as an eligible institution. The increased scrutiny and results-based accountability initiatives in the education sector, as well as ongoing policy differences in Congress regarding spending levels, could lead to significant changes in connection with the upcoming reauthorization of the HEA or otherwise. These changes may place additional regulatory burdens on postsecondary schools participating in the Title IV programs generally, and specific changes may be targeted at companies such as ours that serve higher education within the United States. Regulatory activities and initiatives of the DOE may have similar consequences for our business even in the absence of Congressional action.
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The regulations, standards, and policies of our college and university partners’ regulators are complex, change frequently and are often subject to differing interpretation. Changes in, or new interpretations of, applicable laws, regulations, or standards could compromise our college and university partners’ accreditation, authorization to offer online learning in various states or countries, permissible activities, or access to federal funds under the Title IV programs. We cannot predict with certainty how the requirements applicable to our college and university partners will be interpreted, including in the case of new laws or regulations for which no, or insufficient, interpretative guidance exists, or whether our college and university partners will be able to comply with these requirements in the future. Some regulations were designed to regulate in-person, correspondence or other types of learning experiences not offered online and may be difficult to interpret or apply to the types of programs offered by our partners on our platform. In addition, there is no assurance that degrees or certifications earned through an institution in one jurisdiction will be recognized as valid or sufficient in other jurisdictions, including internationally, for employment, to satisfy prerequisites for advanced degrees, or other opportunities. Our international college and university partners are subject to similarly extensive legislation, regulation and oversight.
Authorization and Approval
Our U.S.-based college and university partners are required to obtain the appropriate approvals from the DOE and applicable state and accrediting regulatory agencies for new programs. Similar approvals and reviews may be required for programs from our partners based outside the United States, and for our partners to offer programs in other countries.
Our partners, both U.S. and international, may also be required to be authorized in certain states to offer online programs, engage in advertising or recruiting, and operate externships, internships, technical training, or other forms of field experience, depending on state law. Although many of our programs are offered by U.S.-based higher education institutions that hold such authorizations or participate in an appropriate state reciprocity agreement such as SARA, other partners are not traditional education institutions or operate outside the United States and do not hold such state authorizations. Some institutions, including California higher education institutions, currently do not participate in SARA.
We or our partners may also be required to obtain appropriate approvals under international education laws and regulations. For example, a recent Indian regulation relating to online higher education requires, among other things, that learning platforms utilized by Indian universities to offer online degrees be approved by a technical committee of the Indian regulator.
Accreditation
Accrediting agencies primarily examine the academic quality of the instructional programs of an educational institution, and a grant of accreditation is typically viewed as confirmation that an institution or an institution’s programs meet generally accepted academic standards. Accrediting agencies also review the administrative and financial operations of the institutions they accredit to ensure that each institution has the resources to perform its educational mission. The DOE also relies on accrediting agencies to determine whether institutions qualify to participate in Title IV programs.
Although we are not an accredited institution and are not required to maintain accreditation, accrediting agencies are responsible for reviewing an accredited institution’s third-party contracts with service providers like us and may require that an institution obtain approval from, or notify the accreditor in connection with, such arrangements. We work closely with our university partners, which are accredited institutions, to assure that the applicable standards of their respective accreditors are met.
DOE “Dear Colleague Letter”
Each institution that participates in Title IV programs agrees, as a condition of its eligibility to participate in those programs, that it will not “provide any commission, bonus, or other incentive payment based in any part,
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directly or indirectly, upon success in securing enrollments or the award of financial aid, to any person or entity who is engaged in any student recruitment or admission activity, or in making decisions regarding the award of Title IV HEA program funds.” The vast majority of our U.S.-based partners participate in the Title IV programs. Although this rule, referred to as the incentive compensation rule, generally prohibits entities or individuals from receiving incentive-based compensation payments for the successful recruitment, admission, or enrollment of learners, the DOE provided clarifying guidance in March 2011 interpreting the incentive compensation rule as permitting tuition revenue-sharing arrangements known as the “bundled services exception.” Our current business model relies heavily on the bundled services exception to enter into tuition revenue-sharing agreements with partner colleges and universities.
The DCL issued by the DOE on March 17, 2011 sets forth the official guidance of the DOE regarding various regulations that were implemented around that time. The DCL affirms that “[t]he Department generally views payment based on the amount of tuition generated as an indirect payment of incentive compensation based on success in recruitment and therefore a prohibited basis upon which to measure the value of the services provided.” The DCL, however, in Example 2-B, clarified an important exception to this prohibition for a business model that complies with the bundled services exception: “A third party that is not affiliated with the institution it serves and is not affiliated with any other institution that provides educational services, which third party provides bundled services to the institution including marketing, enrollment application assistance, recruitment services, course support for online delivery of courses, the provision of technology, placement services for internships, or student career counseling, may receive from an institution an amount based on tuition generated for the institution by the third-party’s activities for all bundled services that are offered and provided collectively, as long as the third party does not make prohibited compensation payments to its employees, and the institution does not pay the third party separately for student recruitment services provided by the entity.”
The DCL guidance indicates that an arrangement that complies with Example 2-B will be deemed to be in compliance with the incentive compensation provisions of the HEA and the DOE’s regulations. Our business model and contractual arrangements with our U.S.-based partners are designed to follow Example 2-B in the DCL. However, the inherent ambiguity in the DCL and the incentive compensation rule creates the risk that DOE or a court, including, notably, in the context of a “whistleblower” claim under the federal False Claims Act, could disagree with that interpretation. If the DOE or a court determined that our business model or even the practices of a subcontractor did not meet the bundled services exception, we could have contractual obligations to our U.S.-based partners such as indemnifying a partner from private claims or government investigations or demands for repayment of Title IV program funds.
Further, because the bundled services rule was promulgated by agency guidance through the DCL and is not codified by statute or regulation, there is risk that the exception could be altered or removed without prior notice, public comment period, or other administrative procedural requirements that accompany formal agency rulemaking. Although the DCL represents the current interpretation of the DOE, the bundled services exception could be reviewed, altered, or vacated in the future. In addition, the legal weight the DCL would carry in litigation over the propriety of any specific compensation arrangements under the HEA or the incentive compensation rule is uncertain. We can offer no assurances as to whether the exception in the DCL would be upheld by a court or how it would be interpreted.
Misrepresentation Rule
Under our contracts with U.S.-based college and university partners, we are required to comply with regulations promulgated by the DOE and comparable state laws that affect our marketing activities, including the misrepresentation rule. The misrepresentation rule is broad in scope and applies to statements our employees or agents may make about the nature of a partner’s program, a partner’s financial charges, or the employability of a partner’s program graduates.
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Specifically, the HEA prohibits an institution that participates in the Title IV programs from engaging in any “substantial misrepresentation” regarding three broad subject areas: (1) the nature of the school’s education programs, (2) the school’s financial charges, and (3) the employability of the school’s graduates. In 2010, as part of the program integrity rules, the DOE revised its regulations in order to significantly expand the scope of the misrepresentation rule. Although some of the DOE’s most expansive amendments to the misrepresentation rule were overturned by the courts in 2012, most of the 2010 amendments survived and remain in effect.
Violations of the misrepresentation rule are subject to various sanctions by the DOE and violations may be used as a basis for legal action by third parties. Similar rules apply under state laws or are incorporated in institutional accreditation standards and the Federal Trade Commission (“FTC”) applies similar rules prohibiting any unfair or deceptive marketing practices to the education sector.
FERPA
We are required to comply with FERPA. FERPA generally prohibits an institution of higher education from disclosing personally identifiable information from a learner’s education records without the learner’s consent. Our U.S.-based university degree and certificate partners and Coursera for Campus customers and their learners disclose to us certain information that originates from or composes a learner education record under FERPA. As an entity that provides services to institutions, we are indirectly subject to FERPA, and we may not transfer or otherwise disclose any personally identifiable information from a learner record to another party other than in a manner permitted under the statute and our contract with the partner. In the event that we disclose learner information in violation of FERPA, the DOE could require a partner to suspend our access to their learner information for at least five years.
For additional discussion of regulatory risks, see “Risk Factors—Risks Related to Regulatory Matters and Litigation.”
Human Capital Resources
We intend to continue developing, attracting, and retaining personnel and enhancing diversity and inclusion in our workforce to support our ability to grow our business and fulfill our public benefit objectives. To facilitate this objective, we seek to foster a diverse, inclusive, and safe workplace, with opportunities for employees to develop their talents and advance their careers.
As of December 31, 2020, we had 779 full-time employees, and we also engaged contractors and consultants. None of our employees are represented by unions. We consider our relationship with our employees to be good and have not experienced interruptions of operations due to labor disagreements.
Properties
Our headquarters are in Mountain View, California. We believe that our properties are in good operating condition and adequately serve our current business operations. We also anticipate that suitable additional or alternative space, including those under lease options, will be available at commercially reasonable terms for future expansion.
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Executive Officers and Directors
The following table sets forth information regarding our executive officers and directors as of January 1, 2021:
| Name |
Age |
Position | ||||
| Executive Officers |
||||||
| Jeffrey N. Maggioncalda |
52 | President, Chief Executive Officer and Director | ||||
| Kenneth R. Hahn |
54 | Senior Vice President, Chief Financial Officer, and Treasurer | ||||
| Anne T. Cappel |
59 | Senior Vice President, General Counsel, and Secretary | ||||
| Leah F. Belsky |
40 | Senior Vice President and Chief Enterprise Officer | ||||
| Kimberly A. Caldbeck |
37 | Senior Vice President and Chief Marketing Officer | ||||
| Shravan K. Goli |
50 | Senior Vice President, Chief Product Officer and Head of Consumer Revenue | ||||
| Richard J. Jacquet, Jr. |
52 | Senior Vice President and Chief People Officer | ||||
| Betty M. Vandenbosch |
64 | Senior Vice President and Chief Content Officer | ||||
| Xueyan Wang |
39 | Senior Vice President, Services | ||||
| Chun Yu (“Richard”) Wong |
43 | Senior Vice President, Engineering | ||||
| Jeffrey C. Grace |
58 | Vice President, Corporate Controller | ||||
| Non-Employee Directors |
||||||
| Andrew Y. Ng |
44 | Chairman | ||||
| Amanda M. Clark(1)(2) |
41 | Director | ||||
| L. John Doerr(3) |
69 | Director | ||||
| Theodore R. Mitchell(1)(3) |
64 | Director | ||||
| Scott D. Sandell(2) |
56 | Director | ||||
| Sabrina L. Simmons(1) |
57 | Director | ||||
| (1) | Member of the Audit Committee. |
| (2) | Member of the Leadership, Diversity, Equity, Inclusion and Compensation Committee. |
| (3) | Member of the Nominating and Corporate Governance Committee. |
Executive Officers
Jeffrey N. Maggioncalda has served as our President and Chief Executive Officer and as a member of our board of directors since June 2017. Mr. Maggioncalda previously served as Chief Executive Officer and a director of Financial Engines, Inc. (Nasdaq: FNGN), a provider of financial advisory services, from August 1996 until December 2014, and served as a consultant until June 2015. Mr. Maggioncalda holds an M.B.A. from the Stanford Graduate School of Business and a B.A. in Economics and English from Stanford University. Mr. Maggioncalda has also served as a director of Silicon Valley Bank, Inc. since April 2012. We believe Mr. Maggioncalda’s position as our Chief Executive Officer and prior positions as the Chief Executive Officer and a director of a public company will bring industry expertise and extensive leadership experience to our board of directors.
Kenneth R. Hahn has served as our Senior Vice President, Chief Financial Officer and Treasurer since May 2020. Prior to joining Coursera, Mr. Hahn was the Chief Financial Officer of CollectiveHealth, Inc., a private healthcare SaaS company, from March 2017 until May 2020. From October 2014 until March 2017, Mr. Hahn was the Chief Financial Officer of Icontrol Networks, Inc. (acquired by Comcast Corporation), a private security SaaS company. Mr. Hahn also previously served as Chief Financial Officer at QuinStreet, Inc. (Nasdaq: QNST), Borland Software Corporation (Nasdaq: BORL), and Extensity, Inc. (Nasdaq: EXTN) Mr. Hahn holds a B.A. in Business Administration summa cum laude from California State University, Fullerton and an M.B.A. from Stanford Graduate School of Business, where he was named an Arjay Miller Scholar.
Anne T. Cappel has served as our General Counsel since October 2017. Prior to joining Coursera, Ms. Cappel served in multiple roles for Financial Engines, Inc. from November 2003 to April 2016, including as
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Executive Vice President, General Counsel and Secretary. She also served as Vice President and Assistant General Counsel at Loomis Sayles & Company, L.P., a federally registered investment advisor, from April 2000 to October 2003. Ms. Cappel holds a J.D. from Boston University School of Law and a B.A. in Economics from Yale University.
Leah F. Belsky has served as our Chief Enterprise Officer since December 2019. Prior to becoming our Chief Enterprise Officer, Ms. Belsky served in various other roles at Coursera, including as Senior Vice President of Enterprise from March 2018 until December 2019, Vice President of Global Sales & Business Development from November 2016 until March 2018, and as Vice President of Partnerships from October 2015 until November 2016. Prior to joining Coursera, from October 2011 until October 2015, Ms. Belsky was Senior Vice President at Kaltura, Inc., a video technology company, where she oversaw enterprise growth, operations, services, and international expansion during her tenure. Ms. Belsky holds a B.A. in Political Science and Human Biology from Brown University and a J.D. from Yale Law School.
Kimberly A. Caldbeck has served as our Chief Marketing Officer since June 2018 and previously served as Director of Brand and Product Marketing from April 2015 until May 2018. Prior to joining Coursera, Ms. Caldbeck spent five years at Facebook, Inc., a social networking company, from 2010 to April 2015, launching many of Facebook’s first consumer marketing campaigns. Ms. Caldbeck holds a B.A. in Sociology and Psychology from Harvard University and an M.B.A. from the Stanford Graduate School of Business.
Shravan K. Goli has served as our Chief Product Officer and Head of Consumer Revenue since April 2018. Prior to joining Coursera, Mr. Goli worked at DHI Group, Inc. where he served as President of Dice.com (predecessor of DHI Group, Inc.), an online job searching platform, from February 2013 until May 2017. Before that, Mr. Goli served as President and Chief Executive Officer of Dictionary.com, LLC, an online dictionary, from 2009 until 2013. Previously, Mr. Goli was the General Manager for Social Media Business at Slide, Inc., a software company, and also served as the General Manager for Yahoo! Video and the Head of Products for Yahoo! Finance at Yahoo! Inc., a web services company. Mr. Goli holds a Bachelor of Engineering in Computer Science from Osmania University, an M.S. in Computer Science from the University of Maryland and an M.B.A. from the University of Washington.
Richard J. Jacquet, Jr. has served as our Chief People Officer since January 2019. Prior to joining Coursera, Mr. Jacquet was the Chief People Officer of Gigamon Inc., a networking and security SaaS company, from May 2013 until January 2019. From March 2007 to May 2013, Mr. Jacquet held various other positions at Yahoo! Inc. Mr. Jacquet holds a B.S. in Business from California State University, Chico and an M.B.A. from Notre Dame de Namur University.
Betty M. Vandenbosch has served as our Chief Content Officer since April 2020. Prior to joining Coursera, Dr. Vandenbosch was the Chancellor of Purdue University Global from March 2018 to April 2020. From October 2015 until March 2018, Dr. Vandenbosch was President of Kaplan University. Dr. Vandenbosch holds a Ph.D. in Management Information Systems, and an M.B.A. and a B.S. in Computer Science from Western University in Ontario, Canada.
Xueyan Wang has served as our Senior Vice President, Services since April 2018 and previously served as Director of Content and Product Services from August 2014 until April 2018. Prior to joining Coursera, Ms. Wang spent nine years at Alphabet Inc., the parent company of Google LLC, a technology company, leading various services and operations functions in the United States and China across advertising, commerce, and consumer products. Ms. Wang holds a B.A. in English from Beijing Foreign Studies University and an M.A. in Journalism and Mass Communication from the University of Georgia.
Chun Yu (“Richard”) Wong has served as our Senior Vice President, Engineering since June 2019 and prior to this, was our Vice President of Engineering from March 2017 to June 2019, our Director of Engineering from September 2015 to March 2017, and an Engineering Manager from January 2015 to September 2015. Prior to joining Coursera, Mr. Wong served in various engineering leadership roles at LinkedIn Corporation, a social
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network company, from March 2011 to January 2015, and Microsoft Corporation, a computer software company, from September 2000 to March 2011. Mr. Wong holds a B. Eng. in Information Engineering from the Chinese University of Hong Kong and an M.S. in Electrical Engineering from Stanford University.
Jeffrey C. Grace has served as our Vice President, Corporate Controller since March 2019. Prior to joining Coursera, Mr. Grace served as the Vice President of Finance for BitGo, Inc., a SaaS company focused on digital assets, from October 2018 to March 2019, and as the Vice President of Finance, Controller of Financial Engines, Inc. from February 2010 until February 2018. Mr. Grace holds a B.S. in Finance and Accounting from California State University, Los Angeles.
Non-Employee Directors
Andrew Y. Ng is one of our co-founders and served as our co-Chief Executive Officer from January 2012 until April 2014 and has served as the Chair of our board of directors since April 2014. Dr. Ng is a global leader in both education and in AI. Prior to founding Coursera, Dr. Ng was Chief Scientist at Baidu, Inc., a Chinese language search engine, where he led approximately 1,300 people in the company’s AI Group and was responsible for driving the company’s global AI strategy and infrastructure. Dr. Ng was also the founding lead of the Google Brain team. As an adjunct professor and tenured member of Stanford University’s faculty, Dr. Ng also served as Director of the Stanford AI Lab. Dr. Ng currently serves as CEO of Landing.AI, which helps companies jumpstart AI adoption, and Managing General Partner of AI Fund, which supports entrepreneurs to build AI companies, positions he has held since January 2018. Dr. Ng has also led DeepLearning.AI Corp., which provides AI training, including through our platform, since its founding in June 2017. Dr. Ng holds a B.S. in Math and Computer Science from Carnegie Mellon University, an M.S. in Electrical Engineering and Computer Science from MIT, and a Ph.D. in Computer Science from the University of California, Berkeley. We believe Dr. Ng’s knowledge of our company as co-founder and his breadth and depth of experience as a pioneer in online education bring invaluable industry and leadership expertise to our board of directors.
Amanda M. Clark has served as a member of our board of directors since November 2020. Ms. Clark has been the Chief Development Officer of Papa John’s International, Inc. (Nasdaq: PZZA), a restaurant franchise, since February 2020 and was previously with Taco Bell Corp., a restaurant company, where she was responsible for design, consumer facing technology, merchandising, customer marketing, new concepts, and company development, and served as Executive Vice President Restaurant Experience from February 2019 to February 2020, Senior Vice President North America Development from May 2017 to February 2019, and the General Manager for Taco Bell Canada from November 2015 to August 2018. Previously, Ms. Clark served in roles of increasing responsibility in Brand Marketing at Taco Bell since 2013. Prior to joining Taco Bell, Ms. Clark worked at Procter and Gamble (NYSE: PG), a multinational consumer goods corporation, in various marketing roles for nearly 12 years on P&G brands including Olay, Pampers, and Oral-B. Ms. Clark holds a B.A. in Psychology and Theater Studies from Yale University. We believe Ms. Clark brings significant business, marketing, and leadership experience to our board of directors.
L. John Doerr has served as a member of our board of directors since December 2011. Mr. Doerr has been a General Partner of Kleiner Perkins Caufield & Byers (“KPCB”), a venture capital firm, since August 1980. He currently serves on the board of directors of Alphabet Inc. (Nasdaq: GOOG), the parent holding company of Google LLC, Doordash Inc. (NYSE: DASH), a provider of restaurant food delivery services, Amyris, Inc. (Nasdaq: AMRS), a renewable products company, and Bloom Energy Corporation (NYSE: BE), a clean energy company. Mr. Doerr was previously a director of Amazon.com, Inc., an e-commerce company, from 1996 to 2010, and Zynga Inc. (Nasdaq: ZNGA), a game developing company, from 2013 to 2017. Mr. Doerr holds a B.S. in Electrical Engineering and an M.S. in Electrical Engineering from Rice University, and an M.B.A. from Harvard Business School. We believe Mr. Doerr brings significant public company director experience and global business, leadership, venture capital, and financial expertise to our board of directors.
Theodore R. Mitchell has served as a member of our board of directors since May 2020. Dr. Mitchell assumed the Presidency of the American Council on Education in September 2017. Prior to that time, he was
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the Under Secretary of the United States Department of Education from May 2014 until January 2017, responsible for all post-secondary and adult education policy programs. From January 2017 to September 2017, Mr. Mitchell served as a private consultant, including to the American Council on Education. Prior to his federal service, Dr. Mitchell served as the Chief Executive Officer of the NewSchools Venture Fund, a national investor in education technology, from June 2005 to May 2014. Dr. Mitchell also previously served as President of the California State Board of Education, President of Occidental College, and in a variety of leadership roles at UCLA, including Vice Chancellor. Dr. Mitchell was Deputy to the President and to the Provost at Stanford University and began his career as a professor at Dartmouth College where he also served as Chair of the Department of Education. Dr. Mitchell has also served as a member of the board of directors of The McClatchy Company (PNK: MNIQQ) since 2017. Dr. Mitchell holds a B.A. and Ph.D. in Education from Stanford University. We believe Dr. Mitchell brings extensive experience as a leader in education, business, and public policy to our board of directors.
Scott D. Sandell has served as a member of our board of directors since December 2011. Mr. Sandell has served as Managing General Partner of New Enterprise Associates, Inc. (“NEA”), a venture capital firm, since April 2017, Co-Managing General Partner from April 2015 to April 2017, and as a General Partner since September 2000. Mr. Sandell joined NEA in January 1996 and served as head of the firm’s technology investing practice for 10 years. He currently serves as lead independent director of Cloudflare, Inc. (NYSE: NET), an internet security company, and as a director of Bloom Energy Corporation (NYSE: BE), a clean energy company, as well as several privately-held companies. Mr. Sandell previously served on the board of directors of Fusion-io, Inc., a computer hardware and software systems company acquired by SanDisk Corporation, Tableau Software (NYSE: DATA), Inc., a software company, Workday, Inc. (Nasdaq: WDAY), a provider of on-demand financial management and human capital management software, and Spreadtrum Communications, Inc., a semiconductor company acquired by Tsinghua Unigroup. Mr. Sandell holds an A.B. in Engineering from Dartmouth College and an M.B.A. from the Stanford Graduate School of Business. We believe Mr. Sandell brings significant public company director experience and global business, leadership, finance, and venture capital industry expertise to our board of directors.
Sabrina L. Simmons has served as a member of our board of directors since February 2020 and has been designated to serve as chair of our audit committee. Ms. Simmons has served as Executive Vice President and Chief Financial Officer of The Gap, Inc. (“The GAP”) (NYSE: GPS), a clothing company, from January 2008 until February 2017. Ms. Simmons held several positions at The Gap, including as Executive Vice President, Corporate Finance from September 2007 to January 2008, Senior Vice President, Corporate Finance and Treasurer from March 2003 to September 2007, and Vice President and Treasurer from September 2001 to March 2003. Prior to joining The Gap, Ms. Simmons served as the Chief Financial Officer and an executive member of the board of directors of Sygen International PLC, a British genetics company, and was Assistant Treasurer at Levi Strauss & Co. (NYSE: LEVI), a clothing company. Ms. Simmons currently serves as a member of the board of directors of Williams-Sonoma, Inc. (NYSE: WSM), a consumer retail company, where she is the chair of the audit and finance committee, Columbia Sportswear Company (Nasdaq: COLM), an outdoor apparel company, where she is a member of the compensation committee and the nominating and corporate governance committee, and of e.l.f. Beauty, Inc. (NYSE: ELF), an international cosmetics company, where she also chairs the audit committee. Ms. Simmons holds a B.S. degree in Business Administration from the University of California, Berkeley and an M.B.A. from the University of California, Los Angeles. We believe Ms. Simmons brings extensive public company leadership and board experience and significant financial expertise to our board of directors.
Board Composition
Our business and affairs are organized under the direction of our board of directors, which currently consists of seven members and has one vacancy. Andrew Y. Ng serves as Chair of our board of directors. The primary responsibilities of our board of directors are to provide oversight, strategic guidance, counseling, and direction to our management. Our board of directors meets on a regular basis and additionally as required.
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Our board of directors has determined that five of the seven directors on our board of directors qualify as independent directors, as defined under the listing rules of the NYSE: Amanda M. Clark, L. John Doerr, Theodore R. Mitchell, Scott D. Sandell, and Sabrina L. Simmons. The are no family relationships among any of our executive officers and directors.
Our amended and restated certificate of incorporation provides holders of our preferred stock and holders of our common stock with certain rights to elect directors to our board of directors. L. John Doerr and Scott D. Sandell were elected by the holders of a majority of our preferred stock, Jeffrey N. Maggioncalda was elected by the holders of a majority of our common stock, and the remaining directors were elected by a majority of the holders of our preferred stock and our common stock voting together as a single class on an as-converted basis. Separate class voting rights will terminate upon completion of this offering.
In accordance with the terms of our amended and restated bylaws, which will be effective immediately prior to the completion of this offering, our board of directors will be divided into three classes, Class I, Class II, and Class III, with members of each class serving staggered three-year terms.
Effective upon completion of this offering, our board of directors will be divided into the following classes:
| • | Class I, which will consist of Theodore R. Mitchell and Scott D. Sandell, whose terms will expire at our first annual meeting of stockholders to be held after the completion of this offering; |
| • | Class II, which will consist of Amanda M. Clark and Andrew Y. Ng, whose terms will expire at our second annual meeting of stockholders to be held after the completion of this offering; and |
| • | Class III, which will consist of L. John Doerr, Jeffrey N. Maggioncalda, and Sabrina L. Simmons, whose terms will expire at our third annual meeting of stockholders to be held after the completion of this offering. |
At each annual meeting of stockholders to be held after the initial classification, the successors to directors whose terms then expire will be elected to serve from the time of election and qualification until the third annual meeting following their election and until their successors are duly elected and qualified. This classification of our board of directors may have the effect of delaying or preventing changes in our control or management. Our directors may be removed for cause by the affirmative vote of the holders of at least two-thirds (2/3) of our voting stock.
Role of our Board of Directors in Risk Oversight
One of the key functions of our board of directors is informed oversight of our risk management process. Our board of directors does not have a standing risk management committee, but rather administers this oversight function directly through our board of directors as a whole, as well as through various standing committees of our board of directors that address risks inherent in their respective areas of oversight. In particular, our board of directors is responsible for monitoring and assessing strategic risk exposure and our audit committee has the responsibility to consider and discuss our major financial risk exposures and the steps our management has taken to monitor and control these exposures, including guidelines and policies to govern the process by which risk assessment and management is undertaken. The audit committee also monitors compliance with legal and regulatory requirements. Our Leadership, Diversity, Equity, Inclusion and Compensation Committee (“LDEIC”) assesses and monitors whether our compensation plans, policies, and programs comply with applicable legal and regulatory requirements.
Board Committees
Our board of directors has established an audit committee, a compensation committee (the LDEIC), and a nominating and corporate governance committee. Our board of directors has adopted a charter for each of these committees, which complies with the applicable requirements of current NYSE rules. We intend to comply with future requirements to the extent they are applicable to us. Following the completion of this offering, copies of the charters for each committee will be available on the investor relations portion of our website.
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Audit Committee
Our audit committee consists of Sabrina L. Simmons, Amanda M. Clark, and Theodore R. Mitchell. Sabrina L. Simmons serves as the chair of our audit committee. Our board of directors has determined that each of the members of our audit committee satisfies the independence requirements of the NYSE and Rule 10A-3 under the Exchange Act. Each member of our audit committee can read and understand fundamental financial statements in accordance with NYSE audit committee requirements. In arriving at this determination, our board of directors has examined each audit committee member’s scope of experience and the nature of their prior and current employment.
Our board of directors has determined that Ms. Simmons qualifies as an audit committee financial expert within the meaning of SEC regulations and meets the financial sophistication requirements of the NYSE listing rules. In making this determination, our board of directors has considered Ms. Simmons’ formal education and previous experience in financial roles. Both our independent registered public accounting firm and management periodically meet privately with our audit committee.
The functions of this committee include, among other things:
| • | evaluating the performance, independence, and qualifications of our independent auditors and determining whether to retain our existing independent auditors or engage new independent auditors; |
| • | reviewing our financial reporting processes and disclosure controls; |
| • | reviewing and approving the engagement of our independent auditors to perform audit services and any permissible non-audit services; |
| • | reviewing the adequacy and effectiveness of our internal control policies and procedures, including the responsibilities, budget, staffing, and effectiveness of our internal audit function; |
| • | reviewing with the independent auditors the annual audit plan, including the scope of audit activities and all critical accounting policies and practices to be used by us; |
| • | obtaining and reviewing at least annually a report by our independent auditors describing the independent auditors’ internal quality control procedures and any material issues raised by the most recent internal quality-control review; |
| • | monitoring the rotation of partners of our independent auditors on our engagement team as required by law; |
| • | prior to engagement of any independent auditors, and at least annually thereafter, reviewing relationships that may reasonably be thought to bear on their independence, and assessing and otherwise taking the appropriate action to oversee the independence of our independent auditors; |
| • | reviewing our annual and quarterly financial statements and reports, including the disclosures contained in “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and discussing the statements and reports with our independent auditors and management; |
| • | reviewing with our independent auditors and management significant issues that arise regarding accounting principles and financial statement presentation and matters concerning the scope, adequacy, and effectiveness of our financial controls and critical accounting policies; |
| • | reviewing with management and our auditors any earnings announcements and other public announcements regarding material developments; |
| • | establishing procedures for the receipt, retention, and treatment of complaints received by us regarding financial controls, accounting, auditing, or other matters; |
| • | preparing the report that the SEC requires in our annual proxy statement; |
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| • | reviewing and providing oversight of any related person transactions in accordance with our related person transaction policy and reviewing and monitoring compliance with legal and regulatory responsibilities, including our code of ethics; |
| • | reviewing our major financial risk exposures, including the guidelines and policies to govern the process by which risk assessment and risk management is implemented; and |
| • | reviewing and evaluating on an annual basis the performance of the audit committee and the audit committee charter. |
We believe that the composition and functioning of our audit committee complies with all applicable requirements of the Sarbanes-Oxley Act and all applicable SEC and NYSE rules and regulations. We intend to comply with future requirements to the extent they become applicable to us.
Leadership, Diversity, Equity, Inclusion and Compensation Committee
Our LDEIC consists of Scott D. Sandell and Amanda M. Clark. Scott D. Sandell serves as the chair of our LDEIC. Our board of directors has determined that each of the members of the LDEIC is a non-employee director, as defined in Rule 16b-3 promulgated under the Exchange Act, and satisfies the independence requirements of the NYSE.
The functions of this committee include, among other things:
| • | reviewing and approving the corporate objectives that pertain to the determination of executive compensation; |
| • | reviewing and approving the compensation and other terms of employment of our executive officers; |
| • | reviewing and approving performance goals and objectives relevant to the compensation of our executive officers and assessing their performance against these goals and objectives; |
| • | making recommendations to our board of directors regarding the adoption or amendment of equity and cash incentive plans and approving amendments to such plans to the extent authorized by our board of directors; |
| • | granting equity awards not subject to stockholder approval under applicable listing standards; |
| • | reviewing and assessing the independence of compensation consultants, legal counsel, and other advisors as required by Section 10C of the Exchange Act; |
| • | administering our equity incentive plans; |
| • | reviewing and approving the terms of any employment agreements, severance arrangements, change in control protections, indemnification agreements, and any other material arrangements for our executive officers; |
| • | reviewing and making recommendations to our board of directors regarding the type and amount of compensation to be paid or awarded to our non-employee board members and officers; |
| • | reviewing with management our disclosures under the caption “Compensation Discussion and Analysis” in our periodic reports or proxy statements to be filed with the SEC, to the extent such caption is included in any such report or proxy statement; |
| • | preparing the annual report on executive compensation that the SEC requires in our annual proxy statement; and |
| • | reviewing and evaluating on an annual basis the performance of the LDEIC and its charter and recommending such changes as deemed necessary with our board of directors. |
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We believe that the composition and functioning of our LDEIC complies with all applicable requirements of the Sarbanes-Oxley Act and all applicable SEC and NYSE rules and regulations. We intend to comply with future requirements to the extent they become applicable to us.
Nominating and Corporate Governance Committee
Our nominating and corporate governance committee consists of L. John Doerr and Theodore R. Mitchell. L. John Doerr serves as the chair of our nominating and corporate governance committee. Our board of directors has determined that each of the members of our nominating and corporate governance committee satisfies the independence requirements of the NYSE.
The functions of this committee include, among other things:
| • | identifying, reviewing, and making recommendations of candidates to serve on our board of directors; |
| • | evaluating the performance of our board of directors, committees of our board of directors, and individual directors and determining whether continued service on our board is appropriate; |
| • | evaluating nominations by stockholders of candidates for election to our board of directors; |
| • | evaluating the current size, composition, and organization of our board of directors and its committees and making recommendations to our board of directors for approvals; |
| • | developing a set of corporate governance policies and principles and recommending to our board of directors any changes to such policies and principles; |
| • | reviewing and making recommendations to our board of directors regarding the stock ownership guidelines applicable to our non-employee board members and officers; |
| • | reviewing issues and developments related to corporate governance and identifying and bringing to the attention of our board of directors current and emerging corporate governance trends; |
| • | developing and reviewing periodically with the Chairman of the board of directors and the Chief Executive Officer the succession plan relating to the Chief Executive Officer and make recommendations to the board of directors with respect to such plan; and |
| • | reviewing periodically the nominating and corporate governance committee charter, structure, and membership requirements and recommending any proposed changes to our board of directors, including undertaking an annual review of its own performance. |
We believe that the composition and functioning of our nominating and corporate governance committee complies with all applicable requirements of the Sarbanes-Oxley Act and all applicable SEC and NYSE rules and regulations. We intend to comply with future requirements to the extent they become applicable to us.
Compensation Committee Interlocks and Insider Participation
None of the members of our LDEIC have ever been an executive officer or employee of ours. None of our executive officers currently serve, or have served during the last completed fiscal year, on the compensation committee or board of directors of any other entity that has one or more executive officers serving as a member of our board of directors or LDEIC.
Limitation on Liability and Indemnification of Directors and Officers
Our amended and restated bylaws, which will be effective immediately prior to the completion of this offering, limits our directors’ liability to the fullest extent permitted under the Delaware General Corporation
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Law (the “DGCL”). The DGCL provides that directors of a corporation will not be personally liable for monetary damages for breach of their fiduciary duties as directors, except for liability:
| • | for any transaction from which the director derives an improper personal benefit; |
| • | for any act or omission not in good faith or that involves intentional misconduct or a knowing violation of law; |
| • | for any unlawful payment of dividends or redemption or repurchases of shares; or |
| • | for any breach of a director’s duty of loyalty to the corporation or its stockholders. |
If the DGCL is amended to authorize corporate action further eliminating or limiting the personal liability of directors, then the liability of our directors shall be eliminated or limited to the fullest extent permitted by the DGCL, as so amended.
Delaware law and our amended and restated bylaws provide that we will, in certain situations, indemnify our directors and officers and may indemnify other employees and other agents, to the fullest extent permitted by law. Any indemnified person is also entitled, subject to certain limitations, to advancement, direct payment, or reimbursement of reasonable expenses (including attorneys’ fees and disbursements) in advance of the final disposition of the proceeding.
In addition, we have entered, and intend to continue to enter, into separate indemnification agreements with our directors and officers. These agreements, among other things, require us to indemnify our directors and officers for certain expenses, including attorneys’ fees, judgments, fines, and settlement amounts incurred by a director or officer in any action or proceeding arising out of their services as one of our directors or officers or any other company or enterprise to which the person provides services at our request.
We maintain a directors’ and officers’ insurance policy pursuant to which our directors and officers are insured against liability for actions taken in their capacities as directors and officers. We believe that these provisions in our amended and restated certificate of incorporation and amended and restated bylaws and these indemnification agreements are necessary to attract and retain qualified persons as directors and officers.
Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers, or control persons, in the opinion of the SEC, such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable.
Code of Business Conduct and Ethics for Employees, Executive Officers, and Directors
Our board of directors has adopted a Code of Business Conduct and Ethics applicable to all of our employees, executive officers, and directors, as well as a Code of Ethics applicable to our senior financial officers (collectively, the “Codes of Conduct”). The Codes of Conduct will be available on our website at www.coursera.org. Information contained on or accessible through our website is not a part of and is not incorporated by reference into this prospectus, and the inclusion of our website address in this prospectus is an inactive textual reference only. The nominating and corporate governance committee of our board of directors is responsible for overseeing the Codes of Conduct and must approve any waivers of the Codes of Conduct for employees, executive officers, and directors. We expect that any amendments to the Codes of Conduct, or any waivers of its requirements, will be disclosed on our website.
Non-Employee Director Compensation
We have not historically paid cash retainers or other compensation in respect of service on our board of directors. We have reimbursed and will continue to reimburse all of our non-employee directors for their reasonable expenses incurred in attending meetings of our board of directors and committees of our board of directors. We have also, from time to time, granted stock options or RSUs to our non-employee directors as compensation under our equity incentive plans. See “Executive Compensation—Director Compensation.”
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We have adopted a non-employee director compensation policy that will become effective upon the closing of this offering. This policy will include the following cash compensation for non-employee directors, which is based on a review of director compensation at comparable companies in our industry, consisting of a $30,000 annual retainer, an additional $20,000 annual retainer for the non-executive chair, if any, and the following additional annual retainers for committee service, contingent upon the closing of this offering:
| Committee |
Chair | Member | ||||||
| Leadership, Diversity, Equity, Inclusion and Compensation Committee |
$ | 12,000 | $ | 6,000 | ||||
| Nominating and Corporate Governance Committee |
8,000 | 4,000 | ||||||
| Audit Committee |
20,000 | 10,000 | ||||||
The non-employee director compensation policy also provides for the annual grant of RSUs under the 2021 Plan following the conclusion of each regular annual meeting of our stockholders, commencing with the 2022 annual meeting, to each non-employee director who will continue serving as a member of the Board. The annual RSU award will be with respect to a number of shares of common stock having an aggregate fair market value equal to $175,000 calculated on the date of grant. Each annual RSU award will become fully vested, subject to continued service as a director, on the earliest of the twelve (12) month anniversary of the date of grant, the next annual meeting of stockholders following the date of grant, or the consummation of a change in control as defined in the 2021 Plan.
In addition, because the first annual RSU award will not be made until the 2022 annual stockholder meeting, we approved the grant of 6,695 liquidity-contingent RSUs on February 17, 2021, to each of our non-employee directors. These RSU awards will vest on the first date upon which both the service-based requirement and the liquidity event requirement are satisfied with respect to the award. The liquidity event requirement will be satisfied as to any then-outstanding RSUs on the first to occur of: (1) a change in control event (as defined in the award agreement) or (2) the first sale of common stock pursuant to an initial public offering, in either case, within seven (7) years of the grant date. The service-based requirement will be satisfied on the earlier of May 15, 2022 or our 2022 annual meeting of stockholders subject to continuous service through the vesting date. If a change in control event occurs during the director’s service, all of the shares subject to the award will immediately vest upon such change in control event.
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Our named executive officers, who consist of our principal executive officer and our next two most highly compensated executive officers, for the year ended December 31, 2020 were:
| • | Jeffrey N. Maggioncalda, our President and Chief Executive Officer; |
| • | Kenneth R. Hahn, our Senior Vice President, Chief Financial Officer and Treasurer; and |
| • | Betty M. Vandenbosch, our Senior Vice President and Chief Content Officer. |
2020 Summary Compensation Table
| Name and Principal Position |
Year | Salary ($)(1) |
Stock Awards ($)(2) |
Option Awards ($)(2) |
Non-equity Incentive Plan Compensation ($)(3) |
All Other Compensation ($) |
Total ($) |
|||||||||||||||||||||
| Jeffrey N. Maggioncalda |
2020 | 400,000 | 6,592,857 | 7,598,911 | 322,500 | 475 | 14,914,743 | |||||||||||||||||||||
| President, Chief Executive Officer |
||||||||||||||||||||||||||||
| Kenneth R. Hahn |
2020 | 218,750 | 1,727,443 | 5,780,574 | 141,094 | 375 | 7,868,236 | |||||||||||||||||||||
| Senior Vice President, Chief Financial Officer, Treasurer |
||||||||||||||||||||||||||||
| Betty M. Vandenbosch |
2020 | 251,894 | 2,796,874 | 2,608,939 | 97,483 | 425 | 5,755,615 | |||||||||||||||||||||
| Senior Vice President, Chief Content Officer |
||||||||||||||||||||||||||||
| (1) | Mr. Hahn joined us in May 2020 and his annual salary for 2020 was $350,000. Dr. Vandenbosch joined us in February 2020 and her annual salary for 2020 was $350,000. |
| (2) | The amounts in this column represent the aggregate grant-date fair value of awards granted to each named executive officer under our equity incentive plans, computed in accordance with the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) Topic 718. See Note 2 to our audited consolidated financial statements included elsewhere in this prospectus for a discussion of the assumptions we made in determining the grant-date fair value of our equity awards. |
| (3) | The amounts in this column represent the applicable named executive officer’s total annual performance-based cash bonus for the year ended December 31, 2020, as described below under “Annual Cash Bonuses.” |
Narrative to Summary Compensation Table
We review compensation annually for all employees, including our named executive officers. In setting our named executive officers’ base salaries and bonuses and granting equity incentive awards, we consider compensation for comparable positions in the market, the historical compensation levels of our named executive officers, individual performance as compared to our expectations and objectives, our desire to motivate our named executive officers to achieve short- and long-term results that are in the best interests of our stockholders, and a long-term commitment to our company.
Base Salaries
In 2020, base salary was set at a level that was commensurate with each named executive officer’s respective duties and authorities, contributions, prior experience and sustained performance.
Annual Cash Bonuses
We maintain an annual Executive Incentive Compensation Plan in which our named executive officers participate. Participants are eligible to earn a cash incentive payment based upon an individual at-target incentive opportunity, which is assigned individually and expressed as either a target dollar amount or as a percentage of the named executive officer’s annual base salary earned during that portion of the year in which he or she is
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designated a participant in the plan. The performance criteria applicable to our named executive officers in 2020 included the enrollment of 7,000 global degree learners, the achievement of $242,000,000 in annual revenue, and the achievement of $10,000,000 of cash from new content, each of which is equally weighted for purposes of determining achievement under the plan. In 2020, Mr. Maggioncalda’s, Mr. Hahn’s, and Dr. Vandenbosch’s target bonuses were 62.50%, 50% and 30% of their respective base salaries. In 2020, we enrolled 7,918 global degree learners, and achieved $293.5 million in annual revenue and $11 million in cash from new content, resulting in achievement of targets at 129% and the bonus payouts set forth above. Executives must be employed on the date of payment to receive a bonus under the Executive Incentive Compensation Plan, except as provided in the executive’s employment agreement or the Executive Severance Plan (as described below).
Equity Incentive Awards
Our equity incentive awards are designed to align our interests with those of our employees, including our named executive officers.
Stock options are granted to our employees, including our named executive officers, under the Executive Stock Plan and the Non-Executive Plan. RSUs are granted to our employees, including our named executive officers, under the Non-Executive Plan.
Options are granted with an exercise price not less than the fair market value of shares of our common stock on the date of grant and generally become exercisable within four years after the date of grant, subject to accelerated vesting in certain circumstances. Options generally expire ten years from the date of grant. The Predecessor Stock Incentive Plans provide for the grant of incentive stock options (“ISOs”), which qualify for favorable tax treatment to recipients under Section 422 of the Code, and nonstatutory stock options (“NSOs”). Such awards may be granted to our employees, including officers, and to non-employee directors and consultants.
Following the closing of this offering, equity awards will be granted to our employees, including our named executive officers, under the Coursera, Inc. 2021 Stock Incentive Plan (as described below).
Health and Welfare Benefits and Perquisites
All of our current named executive officers are eligible to participate in our employee benefit plans, including our medical, dental, vision, life and disability insurance plans, in each case on the same basis as all of our other employees. We do not maintain any executive-specific benefit or perquisite programs.
Retirement Benefits
We sponsor a tax-qualified Section 401(k) plan for our eligible United States employees, including the named executive officers. Participants may make pre-tax and certain after-tax (Roth) salary deferral contributions to the plan from their eligible earnings up to the statutorily prescribed annual limit under the Code. An employee’s interest in his or her salary deferral contributions is 100% vested when contributed. We do not provide matching or profit-sharing contributions under this plan.
We do not provide employees, including our named executive officers, any other retirement benefits, including but not limited to tax-qualified defined benefit plans, supplemental executive retirement plans or nonqualified defined contribution plans.
Existing Employment Agreements with Our Named Executive Officers
Below are descriptions of the material terms of the offer letter agreements with our named executive officers. These agreements generally provide for at-will employment and set forth the named executive officer’s initial base salary and eligibility for employee benefits.
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Employment Agreement with Jeffrey N. Maggioncalda
We entered into an employment agreement with Mr. Maggioncalda dated June 1, 2017 (the “Maggioncalda Employment Agreement”) to serve in the position of Chief Executive Officer. The Maggioncalda Employment Agreement provides for an annual base salary of $400,000 and eligibility to receive an annual bonus with a target amount equal to $250,000, based upon the achievement of company performance objectives established by the Board and subject to the terms of the applicable bonus plan and Mr. Maggioncalda’s continued employment through the date of payment.
The Maggioncalda Employment Agreement also provides that we would recommend to the Board that Mr. Maggioncalda be granted a stock option to purchase 5,552,808 shares of our common stock at an exercise price equal to the fair market value of a share of our common stock as determined by the Board on July 13, 2017, the date of grant (the “Maggioncalda Option”). The Maggioncalda Option is intended to be an ISO to the maximum extent permitted under the Code and will otherwise be an NSO. The Maggioncalda Option vests over four years commencing on Mr. Maggioncalda’s start date, with 25% of the shares underlying the Maggioncalda Option vesting on the first anniversary of Mr. Maggioncalda’s start date, and the balance vesting in equal monthly installments over the next thirty-six months, in each case subject to Mr. Maggioncalda’s continued service with us. If the Maggioncalda Option is not assumed, continued or substituted for in a “change of control” (as defined in the Maggioncalda Employment Agreement), the vesting of the Maggioncalda Option will accelerate in full immediately prior to such change of control.
The Maggioncalda Employment Agreement provides that if he is terminated by us without “cause” or experiences a “constructive termination” (as such terms are defined in the Maggioncalda Employment Agreement) not in connection with a change of control, and provided that he delivers a signed release of claims in our favor that becomes effective and irrevocable within sixty (60) days of his termination of employment, Mr. Maggioncalda will be entitled to (i) acceleration as to twenty-five percent (25%) of the then unvested portion of the Maggioncalda Option and (ii) a lump sum payment equal to the sum of (x) twelve (12) months of his then current annual base salary plus (y) his full target bonus for the calendar year of his termination.
The Maggioncalda Employment Agreement provides that if he is terminated by us without cause or experiences a constructive termination within three (3) months prior to or twelve (12) months following a change of control, and provided that he delivers a signed release of claims in our favor that becomes effective and irrevocable within sixty (60) days of his termination of employment, Mr. Maggioncalda will be entitled to (i) accelerated vesting of one hundred percent (100%) of the then unvested portion of the Maggioncalda Option and (ii) a lump sum severance payment equal to the sum of (x) twelve (12) months of his then current annual base salary plus (y) his full target bonus for the calendar year of his termination.
Employment Agreement with Kenneth R. Hahn
We entered into an employment agreement with Mr. Hahn dated as of April 27, 2020 to serve in the position of Senior Vice President and Chief Financial Officer (the “Hahn Employment Agreement”). The Hahn Employment Agreement provides for an annual base salary of $350,000 and eligibility to receive an annual bonus with a target amount equal to 50% of Mr. Hahn’s annual base salary, based upon the achievement of company performance objectives established by the Chief Executive Officer and subject to the terms of the applicable bonus plans and Mr. Hahn’s continued employment through the date of payment.
The Hahn Employment Agreement also provides that we would recommend to the Board that Mr. Hahn be granted an option to purchase 1,250,000 shares of our common stock at an exercise price equal to the fair market value of a share of our common stock as determined by the Board on May 19, 2020, the date of grant (the “Hahn Option”). The Hahn Option is intended to be an ISO to the maximum extent permitted under the Code, and will otherwise be an NSO. The Hahn Option vests over four years commencing on Mr. Hahn’s start date, with 25% of the shares underlying the Hahn Option vesting on the first anniversary of Mr. Hahn’s start date, and the balance vesting in equal monthly installments over the next thirty-six (36) months, in each case subject to Mr. Hahn’s continued service with us.
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The Hahn Employment Agreement includes severance and vesting acceleration provisions. However, because the Executive Severance Plan, described under “—Potential Payments upon Termination or Change in Control,” includes severance and vesting acceleration provisions that are more favorable to Mr. Hahn, the severance and vesting acceleration provisions in the Executive Severance Plan, rather than in the Hahn Employment Agreement, will apply to Mr. Hahn.
Employment Agreement with Betty M. Vandenbosch
We entered into an employment agreement with Dr. Vandenbosch dated as of February 26, 2020 (the “Vandenbosch Employment Agreement”). The Vandenbosch Employment Agreement provides for Dr. Vandenbosch’s at-will employment as our Chief Content Officer, an annual base salary of $350,000 and eligibility to receive an annual bonus with a target amount equal to 30% of Dr. Vandenbosch’s annual base salary, based upon the achievement of company performance objectives established by the Chief Executive Officer and subject to the terms of the applicable bonus plans and Dr. Vandenbosch’s continued employment through the date of payment. The Vandenbosch Employment Agreement also includes a $50,000 lump sum signing bonus that must be repaid in its entirety if Dr. Vandenbosch’s employment terminates within twelve (12) months of her start date.
The Vandenbosch Employment Agreement provides that we would recommend to the Board that Dr. Vandenbosch be granted an option to purchase 400,000 shares of our common stock at an exercise price equal to the fair market value of a share of our common stock as determined by the Board on May 19, 2020, the date of grant (the “Vandenbosch Option”). The Vandenbosch Option is intended to be an ISO to the maximum extent permitted under the Code, and will otherwise be an NSO. The Vandenbosch Option vests over four years commencing on Dr. Vandenbosch’s start date, with 25% of the shares underlying the Vandenbosch Option vesting on the first anniversary of Dr. Vandenbosch’s start date, and the balance vesting in equal monthly installments over the next thirty-six (36) months, in each case subject to Dr. Vandenbosch’s continued service with us.
The Vandenbosch Employment Agreement includes severance and vesting acceleration provisions. However, because the Executive Severance Plan, described under “—Potential Payments upon Termination or Change in Control,” includes severance and vesting acceleration provisions that are more favorable to Dr. Vandenbosch, the severance and vesting acceleration provisions in the Executive Severance Plan, rather than in the Vandenbosch Employment Agreement, will apply to Dr. Vandenbosch.
Employee Assignment of Intellectual Property and Confidentiality Agreements
Each of our named executive officers has executed a form of our standard Proprietary Information and Inventions Assignment Agreement which contains customary restrictions on disclosure of our confidential information, as well as provisions regarding the assignment of intellectual property.
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Outstanding Equity Awards at 2020 Year End
The following table presents information regarding outstanding equity awards held by our named executive officers as of December 31, 2020. All of the equity awards in the table were granted under the Predecessor Stock Incentive Plans. The terms of the Predecessor Stock Incentive Plans are described below under “Equity Incentive Plans.” All of the option awards were granted with a per share exercise price equal to the fair market value of one share of our common stock on the date of grant.
| Option Awards | Stock Awards | |||||||||||||||||||||||||||
| Name |
Grant Date |
Number of Securities Underlying Unexercised Options (#) Exercisable |
Number of Securities Underlying Unexercised Options (#) Unexercisable |
Option Exercise Price ($) |
Option Expiration Date |
Number of Shares or Units of Stock That Have Not Vested (#) |
Market Value of Shares or Units of Stock That Have Not Vested ($) |
|||||||||||||||||||||
| Jeffrey N. Maggioncalda |
11/18/2020 | (1) | — | 700,000 | 15.17 | 11/18/2030 | — | — | ||||||||||||||||||||
| 11/18/2020 | (2) | — | — | — | — | 333,000 | 7,945,380 | |||||||||||||||||||||
| 7/13/2017 | (1) | 4,155,875 | — | 2.56 | 7/13/2027 | — | — | |||||||||||||||||||||
| Kenneth R. Hahn |
12/7/2020 | (3) | — | — | — | — | 80,000 | 1,908,800 | ||||||||||||||||||||
| 5/19/2020 | (1) | — | 1,250,000 | 6.06 | 5/19/2030 | — | ||||||||||||||||||||||
| Betty M. Vandenbosch |
12/7/2020 | (3) | — | — | — | — | 110,000 | 2,624,600 | ||||||||||||||||||||
| 8/18/2020 | (1) | — | 99,000 | 7.91 | 8/18/2030 | |||||||||||||||||||||||
| 8/18/2020 | (4) | — | — | — | — | 33,000 | 787,380 | |||||||||||||||||||||
| 5/19/2020 | (1) | — | 400,000 | 6.06 | 5/19/2030 | — | — | |||||||||||||||||||||
| (1) | 25% of the total number of shares of stock subject to this option will vest on the first anniversary of the vesting commencement date (as defined in the stock option agreement) and 1/48th of the total number of shares of stock subject to the option will vest in monthly installments for 36 months thereafter, subject to the named executive officer’s continuous service through each such date. If applicable, vesting accelerates as provided in, and subject to the terms and conditions of, as applicable, the named executive officer’s stock option agreement, employment agreement, or the Executive Severance Plan. |
| (2) | Award vests on the first date upon which both the service-based requirement and the liquidity event requirement are satisfied with respect to the award. The liquidity event requirement will be satisfied as to any then-outstanding RSUs on the first to occur of: (1) a change in control event (as defined in the applicable award agreement) or (2) the first sale of our common stock pursuant to an initial public offering, in each case, within seven (7) years of the grant date (the “Liquidity Event Requirement”). For the avoidance of doubt, failure to satisfy the Liquidity Event Requirement within seven (7) years of the grant date results in the cancellation of the RSUs. The service-based requirement will be satisfied in installments as follows: 25% of the RSUs will have the service-based requirement satisfied on May 15, 2022, with the remaining 75% of the RSUs vesting with respect to the service-based requirement in equal quarterly installments during the next twelve (12) quarters thereafter, subject to Mr. Maggioncalda’s continuous service through each such date. If applicable, vesting accelerates as provided in, and subject to the terms and conditions of, Mr. Maggioncalda’s award agreement. |
| (3) | Award vests on the first date upon which both the service-based requirement and the Liquidity Event Requirement with respect to the award are satisfied. The service-based requirement will be satisfied in installments as follows: 25% of the RSUs will have the service-based requirement satisfied on May 15, 2023, with the remaining 75% of the RSUs vesting with respect to the service-based requirement in equal quarterly installments during the next eight (8) quarters thereafter, subject to the named executive officer’s continuous service through each such date. If applicable, vesting accelerates as provided in, and subject to the terms and conditions of, the named executive officer’s applicable award agreement or the Executive Severance Plan. |
| (4) | Award vests on the first date upon which both the service-based requirement and the Liquidity Event Requirement with respect to the award are satisfied. The service-based requirement will be satisfied in installments as follows: 25% of the RSUs will have the service-based requirement satisfied on August 15, 2021, with the remaining 75% of the RSUs vesting with respect to the service-based requirement in equal quarterly installments during the next twelve (12) quarters thereafter, subject to Dr. Vandenbosch’s continuous service through each such date. If applicable, vesting accelerates as provided in, and subject to the terms and conditions of, Dr. Vandenbosch’s award agreement or the Executive Severance Plan. |
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Potential Payments upon Termination or Change in Control
Executive Severance Plan
On January 5, 2021, we adopted an Executive Severance Plan (the “Executive Severance Plan”) applicable to our Chief Executive Officer and certain members of our executive management team who report directly to our Chief Executive Officer (including each of our named executive officers) that is effective as of January 5, 2021. Under the Executive Severance Plan, if a named executive officer’s employment is terminated by us without “cause” (as defined in the Executive Severance Plan), and provided that he or she delivers a signed release of claims in our favor that becomes effective and irrevocable within sixty (60) days of his or her termination of employment and complies with all applicable restrictive covenants and contractual obligations, the named executive officer will be entitled to (i) a lump sum payment equal to the sum of (A) six (6) months of his or her then current annual base salary plus (B) an additional week of his or her then current annual base salary for every full year of employment with us prior to termination, payable on the first business day after the sixtieth (60th) day following the named executive officer’s termination of employment, and (ii) if the named executive officer elects to continue health insurance coverage under COBRA for the named executive officer and the named executive officer’s eligible dependents, payment by us of the COBRA premium for a period of six (6) months following the named executive officer’s termination of employment for such coverage as of the date of the named executive officer’s termination, payable commencing on the first business day after the sixtieth (60th) day following the named executive officer’s termination of employment.
If any named executive officer’s employment is terminated (i)(A) by the named executive officer with “good reason” (as defined in the Executive Severance Plan), or (B) by us without “cause” and (ii) such termination occurs within three (3) months prior to or twelve (12) months following a “change of control” (as such terms are defined in the Executive Severance Plan), and provided that he or she delivers a signed release of claims in our favor that becomes effective and irrevocable within sixty (60) days of his or her termination of employment and complies with all applicable restrictive covenants and contractual obligations, the named executive officer will be entitled to receive:
| • | a lump sum payment equal to the sum of (i) six (6) months of his or her then current annual base salary, plus (ii) an additional week of his or her then current annual base salary for every full year of employment with us prior to termination, plus (iii) the amount of any earned but unpaid bonus attributable to the fiscal year preceding the year in which the termination of employment occurs, plus (iv) a pro-rated portion of the named executive officer’s then current target annual bonus; |
| • | if the named executive officer elects to continue health insurance coverage under COBRA for the named executive officer and the named executive officer’s eligible dependents, payment by us of the COBRA premium for a period of six (6) months following the named executive officer’s termination of employment for such coverage as of the date of the named executive officer’s termination, payable commencing on the first business day after the sixtieth (60th) day following the named executive officer’s termination of employment; and |
| • | full acceleration with respect to the service-based vesting component of all equity compensation awards outstanding as of the effective date of the Executive Severance Plan. |
In addition, in the event any of the payments or benefits provided for under the Executive Severance Plan or that are otherwise paid or will become payable to a named executive officer would constitute a “parachute payment” within the meaning of Section 280G of the Code and could be subject to the related excise tax, the named executive officer would be entitled to receive either full payment of such payments and benefits or such lesser amount which would result in no portion of the payments and benefits being subject to the excise tax, whichever results in the greater amount of after-tax benefits to the named executive officer.
To the extent that an eligible named executive officer participates in any other plan or has entered into another agreement with us that also provides for one or more of the severance benefits provided under the
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Executive Severance Plan, then with respect to each such payment or benefit, the named executive officer will be entitled to receive either (i) such payment or benefit under such other agreement or (ii) the payment or benefit provided under the Executive Severance Plan, whichever of the foregoing results in the receipt by the named executive officer on an after-tax basis of the greater payment or benefit, and provided that the named executive officer does not receive any duplication of payments or benefits.
Equity Award Acceleration Terms
Mr. Maggioncalda’s July 13, 2017 and November 18, 2020 stock option grants are subject to double-trigger acceleration of 100% of the remaining unvested shares underlying such options, as set forth in the respective stock option agreements and the Maggioncalda Employment Agreement. If Mr. Maggioncalda is terminated by us without cause or experiences a constructive termination, in each case, within three (3) months prior to or twelve (12) months following a change of control, and provided that he delivers a signed release of claims in our favor that becomes effective and irrevocable within sixty (60) days of his termination of employment, Mr. Maggioncalda will be entitled to accelerated vesting of one hundred percent (100%) of the then unvested portion of such options. If not assumed, continued, or substituted for in a “change of control” (as defined in the Maggioncalda Employment Agreement), the vesting of the options subject to these grants will fully accelerate immediately prior to such change of control. Such acceleration will occur whether or not Mr. Maggioncalda is terminated by us without cause or experiences a constructive termination in connection with the change of control.
Mr. Maggioncalda’s November 18, 2020 RSU grant is subject to 100% double-trigger acceleration with respect to the service-based requirement of unvested RSUs, as set forth in the applicable award agreement. If Mr. Maggioncalda is terminated by us without cause or experiences a constructive termination, in each case, within three (3) months prior to or twelve (12) months following a change of control, and provided that he delivers a signed release of claims in our favor that becomes effective and irrevocable within sixty (60) days of his termination of employment, Mr. Maggioncalda will be entitled to accelerated vesting with respect to the service-based vesting requirement of one hundred percent (100%) of the then unvested RSUs. If not assumed, continued, or substituted for in a “change of control” (as defined in the Maggioncalda Employment Agreement), vesting will fully accelerate with respect to the service-based requirement of unvested RSUs immediately prior to such change of control. Such acceleration will occur whether or not Mr. Maggioncalda is terminated by us without cause or experiences a constructive termination in connection with the change of control.
Mr. Hahn’s and Dr. Vandenbosch’s RSU grants are each subject to 100% double-trigger acceleration with respect to the service-based requirement of unvested RSUs, as set forth in the applicable award agreements or the Executive Severance Plan. Mr. Hahn’s and Dr. Vandenbosch’s stock options grants are subject to double-trigger acceleration of 100% of the remaining unvested shares underlying such options, as set forth in the applicable stock option agreements, the applicable employment agreements, or the Executive Severance Plan. Upon a termination by us without cause or a constructive termination, in each case, within three (3) months prior to or twelve (12) months following a change of control, and provided that such named executive officer delivers a signed release of claims in our favor that becomes effective and irrevocable within sixty (60) days of termination of employment and compliance with all applicable restrictive covenants and contractual obligations, the named executive officer will be entitled to accelerated vesting of (i) one hundred percent (100%) of the then unvested portion of any stock options and (ii) the service-based vesting requirement of one hundred percent (100%) of the then unvested RSUs.
Equity Incentive Plans
Predecessor Stock Incentive Plans
The following is a description of the material terms of the Predecessor Stock Incentive Plans (as defined above), which are materially the same except as indicated below. The summary below does not contain a complete description of all provisions of the Predecessor Stock Incentive Plans and is qualified in its entirety by reference to the Predecessor Stock Incentive Plans, copies of which will be included as exhibits to the registration statement of which this prospectus forms a part.
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General. The Executive Stock Plan was adopted by our board of directors and subsequently approved by our stockholders on February 12, 2014, and was most recently amended effective February 17, 2021. The Non-Executive Plan was originally adopted in 2013 and was most recently amended effective February 17, 2021.
As of December 31, 2020, 64,424 shares of common stock remained available for future issuance under the Executive Stock Plan and options to purchase a total of 7,329,224 shares of our common stock were outstanding under the Executive Stock Plan. The weighted average exercise price of the options outstanding under the Executive Stock Plan was $2.27 per share.
As of December 31, 2020, 8,034,060 shares of common stock remained available for future issuance under the Non-Executive Plan and awards to acquire a total of 28,405,784 shares, including options to purchase a total of 25,129,184 shares of our common stock, were outstanding under the Non-Executive Plan. The weighted average exercise price of the options outstanding under the Non-Executive Plan was $5.28 per share.
Following the completion of this offering, no additional awards and no shares of our common stock will remain available for future issuance under the Predecessor Stock Incentive Plans. However, the Predecessor Stock Incentive Plans will continue to govern the terms and conditions of the outstanding awards previously granted thereunder. Shares subject to outstanding awards under the Predecessor Stock Incentive Plans on the effective date of the 2021 Plan that are subsequently forfeited or terminated for any reason before being exercised or becoming vested, not issued because an award is settled in cash, or withheld or reacquired to satisfy the applicable exercise, strike, or purchase price, or a tax withholding obligation will again become available for awards under our 2021 Plan.
The Predecessor Stock Incentive Plans provide for the grant of ISOs to employees and the grant of NSOs to employees, non-employee directors, advisors, and consultants. The Predecessor Stock Incentive Plans also provide for the grants of restricted stock awards, unrestricted stock awards, share appreciation rights (“SARs”), and, only under the Non-Executive Plan, RSUs to employees, non-employee directors, advisors and consultants.
Administration. The Predecessor Stock Incentive Plans have been administered by our LDEIC, and may be amended, suspended, or terminated by our board of directors. To the extent required by applicable law, stock exchange listing standards, or deemed necessary or advisable by our board of directors, any amendment to a Predecessor Stock Incentive Plan is subject to stockholder approval.
Authorized Shares. We previously reserved 17,980,000 shares of our common stock for issuance under the Executive Stock Plan and 47,567,319 shares of our common stock for issuance under the Non-Executive Plan. In the event of a stock split, reverse stock split, stock dividend, combination, or reclassification of the shares or similar transaction affecting the shares (including a merger, consolidation, or sale of all or substantially all of our assets), the administrator of the Predecessor Stock Incentive Plans will equitably and proportionately adjust (i) the number and type of shares (or other securities) that thereafter may be made the subject of awards, (ii) the number, amount, and type of shares (or other securities or property) subject to any outstanding awards, (iii) the grant, purchase, or exercise or base price of any outstanding awards, (iv) the performance standards applicable to any then-outstanding performance-based awards, and/or (v) the securities, cash, or other property deliverable upon exercise or vesting of any outstanding awards, in each case to the extent necessary to preserve (but not increase) the level of incentives intended by the applicable Predecessor Stock Incentive Plan and the then-outstanding awards.
Stock Options. The administrator of the Predecessor Stock Incentive Plans determines the exercise price for each stock option, provided that the exercise price of an option must equal at least one hundred percent (100%) of the common stock fair market value on the date of grant and the term of an option may not exceed ten (10) years, provided further, that no ISO may be granted to any stockholder holding more than ten percent (10%) of our voting shares unless the option exercise price is at least one hundred and ten percent (110%) of the common stock fair market value subject to the option on the date of grant, and the term of the ISO does not exceed five (5) years from the date of grant. No option may be transferred by the optionholder other than to us,
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by gift or domestic relations order, by will, or by the laws of descent or distribution. Each option may be exercised during the optionholder’s lifetime solely by the optionholder. Options granted under the Predecessor Stock Incentive Plans generally vest at the rate of 25% after one year from the vesting commencement date and in equal monthly installments thereafter for an additional three years. As described under “—Potential Payments upon Termination or Change of Control,” certain stock options granted to executives include double-trigger vesting acceleration provisions, pursuant to which certain participants will be entitled to vesting in full of the total number of shares subject to the applicable award to the extent then outstanding and unvested in the event of a termination without “cause” or a “constructive termination” of employment in connection with or within twelve (12) months following a “change of control” (each as defined in the applicable award agreement). Unless otherwise provided in an applicable award agreement, upon the termination of an optionholder’s service as an employee, non-employee director, or consultant for any reason other than death or disability, such optionholder may exercise his or her vested options for three (3) months after the date service terminates. In the case of the optionholder’s termination of service as a result of the optionholder’s death or disability, the option will generally remain exercisable for twelve (12) months following such termination. Notwithstanding the foregoing, no option may be exercised after the expiration of its term.
Restricted Stock. Restricted stock is a share award that may be conditioned upon continued service, the achievement of performance objectives or the satisfaction of any other criteria that the Predecessor Stock Incentive Plans administrator may specify in a restricted stock agreement. Upon the grant of a restricted stock award and payment of any applicable purchase price, a grantee of restricted stock is considered the record owner of and is entitled to vote the restricted stock if, and to the extent, such shares of stock are entitled to voting rights, subject to such conditions contained in the restricted stock agreement. Restricted stock may not be sold, transferred, or otherwise disposed of except as specifically provided in the restricted stock agreement. If a grantee’s service with us terminates, we have the right, as may be specified in the relevant restricted stock agreement, to repurchase some or all of the shares of our common stock subject to the award at such purchase price as is set forth in the restricted stock agreement.
Stock Unit Awards. Under the Non-Executive Plan, RSUs give recipients the right to acquire a specified number of shares of stock (or cash amount) at a future date upon the satisfaction of certain conditions, including any performance conditions or other vesting arrangements, established by the LDEIC and as set forth in a RSU award agreement. An RSU award may be settled by cash, delivery of stock, or a combination of cash and stock as deemed appropriate by the LDEIC. Recipients of RSUs generally will have no voting or dividend rights prior to the time the vesting conditions are satisfied and the award is settled. At the LDEIC’s discretion and as set forth in the RSU award agreement, RSUs may provide for the right to dividend equivalents.
Beginning in 2020, we granted RSUs to certain employees that will vest on the first date upon which both the “service-based requirement” and the “liquidity event requirement” (as such terms are defined in the applicable award agreement) are satisfied with respect to that particular RSU; provided, that such vesting conditions are satisfied within seven (7) years of the grant date. The liquidity event requirement will be satisfied as to any then-outstanding RSUs on the first to occur of: (1) a “change in control event” (as defined in the award agreement) or (2) the first sale of common stock pursuant to an initial public offering, including the consummation of this offering. The service-based requirement will generally be satisfied in installments as follows: 25% of the RSUs will have the service-based requirement satisfied on the anniversary of the mid-point of the quarter in which the award was granted and 1/16th of the RSUs will have the service-based requirement satisfied in equal quarterly installments during the next 12 quarters thereafter, subject to the participant’s continuous service through each such vesting date. As described under “—Potential Payments upon Termination or Change of Control,” certain RSUs granted to executives include double-trigger vesting acceleration provisions, pursuant to which certain participants will be entitled to immediate vesting with respect to the service-based requirement applicable to the total number of shares subject to the applicable award to the extent then outstanding and unvested in the event of a termination without “cause” or a “constructive termination” of employment in connection with or within twelve (12) months following a “change of control” (each as defined in the applicable award agreement).
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Unrestricted Stock Awards and SARs. We have not granted any unrestricted stock awards or SARs under the Predecessor Stock Incentive Plans.
Corporate Transactions. The Predecessor Stock Incentive Plans provide that, in the event of a merger, consolidation, sale of all or substantially all of our assets, or sale of 50% or more of our voting stock to a third party (each, a “Change in Control Event”), the Predecessor Stock Incentive Plans administrator may make provision for a cash payment in settlement of, or for the assumption, substitution, or exchange of, any or all outstanding awards (or the cash, securities, or other property deliverable to the holder(s) of any or all outstanding awards) based upon, to the extent relevant in the circumstances, the distribution or consideration payable to holders of shares of stock in respect of such event (and reduced by the aggregate exercise price, in the case of stock options). The Predecessor Stock Incentive Plans further provide that, to the extent the agreement for the Change in Control Event does not provide for a cash or stock payment in settlement of, or for the survival, assumption, substitution, acceleration, or exchange of, any outstanding award, such award will be subject to full vesting immediately prior to the effectiveness of such Change in Control Event; provided, however, that the portion of such award subject to performance-based vesting shall be subject to the terms and conditions of the applicable award agreement and, in the absence of applicable terms and conditions, the Predecessor Stock Incentive Plan administrator’s discretion. Upon the occurrence of a Change in Control Event, each then-outstanding award (whether or not vested and/or exercisable) shall terminate, subject to any provision that has been expressly made by the Predecessor Stock Incentive Plans administrator, through a plan of reorganization or otherwise, for the survival, substitution, assumption, exchange, or other continuation or settlement of such award. The Predecessor Stock Incentive Plans administrator may, in its sole discretion, provide in the applicable award agreement or by an amendment thereto for the accelerated vesting of one or more awards to the extent such awards are outstanding upon a Change in Control Event or such other events or circumstances as such plan administrator may provide.
2021 Stock Incentive Plan
Our 2021 Stock Incentive Plan (the “2021 Plan”) was adopted by our board of directors on February 17, 2021, and our stockholders approved the 2021 Plan on March 2, 2021. The 2021 Plan will become effective upon, and no awards may be granted under the 2021 Plan until, the date the registration statement for this offering is declared effective. Once the 2021 Plan is effective, no further grants will be made under our Predecessor Stock Incentive Plans.
Stock Awards. The 2021 Plan provides for the grant of ISOs, NSOs, restricted share awards, stock unit awards, stock appreciation rights, cash-based awards, and performance-based stock awards (collectively, “stock awards”). ISOs may be granted only to our employees, including officers, and the employees of our parent or subsidiaries. All other stock awards may be granted to our employees, officers, our non-employee directors, and consultants and the employees and consultants of our parent, subsidiaries, and affiliates.
Share Reserve. The aggregate number of shares of our common stock that may be issued pursuant to stock awards under the 2021 Plan will not exceed the sum of (x) 15,400,000 shares, plus (y) the number of shares subject to outstanding stock awards granted under either of the Predecessor Stock Incentive Plans and that following the effective date of the 2021 Plan are subsequently (i) forfeited or terminated for any reason before being exercised or settled; (ii) not issued because such stock award is settled in cash; (iii) subject to vesting restrictions and are subsequently forfeited; (iv) withheld or reacquired to satisfy the applicable exercise, strike or purchase price; or (v) withheld or reacquired to satisfy a tax withholding obligation, as such shares become available from time to time, plus (z) an annual increase on the first day of each fiscal year, for a period of not more than ten (10) years, beginning on January 1, 2022 and ending on (and including) January 1, 2031, in an amount equal to (a) five percent (5%) of the outstanding shares on the last day of the immediately preceding fiscal year or (b) such lesser amount (including zero) that the LDEIC (as defined above) determines for purposes of the annual increase for that fiscal year.
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If restricted shares or shares issued upon the exercise of options are forfeited, then such shares shall again become available for awards under the 2021 Plan. If stock units, options, or stock appreciation rights are forfeited or terminate for any reason before being exercised or settled, or an award is settled in cash without the delivery of shares to the holder, then the corresponding shares will again become available for awards under the 2021 Plan. Any shares withheld to satisfy the exercise price or tax withholding obligation pursuant to any award of options or stock appreciation rights shall again become available for awards under the 2021 Plan. If stock units or stock appreciation rights are settled, then only the number of shares (if any) actually issued in settlement of such stock units or stock appreciation rights shall reduce the number of shares available under the 2021 Plan, and the balance (including any shares withheld to cover taxes) shall again become available for awards under the 2021 Plan.
Shares issued under the 2021 Plan shall be authorized but unissued shares or treasury shares. As of the date hereof, no awards have been granted and no shares of our common stock have been issued under the 2021 Plan.
Incentive Stock Option Limit. The maximum number of shares of our common stock that may be issued upon the exercise of ISOs under the 2021 Plan shall not exceed five (5) times the number of shares provided under (x) above plus, to the extent allowable under Section 422 of the Code, any shares that again become available for issuance under the 2021 Plan.
Grants to Outside Directors. The fair market value of any awards granted under the 2021 Plan to an outside director as compensation for services as an outside director during any calendar year (other than the calendar year in which an outside director commences service on our board of directors) may not exceed $750,000 on the date of grant, provided that any award granted to an outside director in lieu of annual retainer payments and/or meeting fees will be excluded from such limit. Additionally, an outside director may elect to receive his or her annual retainer payments in the form of cash, options, stock appreciation rights, restricted shares, stock units, or a combination thereof, if authorized by our board of directors.
Administration. The 2021 Plan will be administered by the LDEIC. Subject to the limitations set forth in the 2021 Plan, the LDEIC will have the authority to determine, among other things, to whom awards will be granted, the number of shares subject to awards, the term during which an option or stock appreciation right may be exercised and the rate at which the awards may vest or be earned, including any performance criteria to which they may be subject. The LDEIC also will have the authority to determine the consideration and methodology of payment for awards.
Repricing; Cancellation and Re-Grant of Stock Awards. The LDEIC will have the authority to modify outstanding awards under the 2021 Plan. Subject to the terms of the 2021 Plan, the LDEIC will have the authority to cancel any outstanding stock award in exchange for new stock awards, cash, or other consideration, without stockholder approval but with the consent of any adversely affected participant.
Stock Options. A stock option is the right to purchase a certain number of shares of stock, at a certain exercise price, in the future. Under the 2021 Plan, ISOs and NSOs are granted pursuant to stock option agreements adopted by the LDEIC. The LDEIC determines the exercise price for a stock option, within the terms and conditions of the 2021 Plan, provided that the exercise price of a stock option generally cannot be less than one hundred percent (100%) of the fair market value of our common stock on the date of grant. Options granted under the 2021 Plan vest at the rate specified by the LDEIC.
Stock options granted under the 2021 Plan generally must be exercised by the optionee before the earlier of the expiration of such option or the expiration of a specified period following the optionee’s termination of employment. Each stock option agreement will set forth the extent to which the option recipient will have the right to exercise the option following the termination of the recipient’s service with us, and the right to exercise the option of any executors or administrators of the award recipient’s estate or any person who has acquired such options directly from the award recipient by bequest or inheritance.
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Payment of the exercise price may be made in cash or, if provided for in the stock option agreement evidencing the award, (1) by surrendering, or attesting to the ownership of, shares which have already been owned by the optionee, (2) future services or services rendered to us or our affiliates prior to the award, (3) by delivery of an irrevocable direction to a securities broker to sell shares and to deliver all or part of the sale proceeds to us in payment of the aggregate exercise price, (4) by delivery of an irrevocable direction to a securities broker or lender to pledge shares and to deliver all or part of the loan proceeds to us in payment of the aggregate exercise price, (5) by a “net exercise” arrangement, (6) by delivering a full-recourse promissory note, or (7) by any other form that is consistent with applicable laws, regulations, and rules.
Tax Limitations on Incentive Stock Options. The aggregate fair market value, determined at the time of grant, of our common stock with respect to ISOs that are exercisable for the first time by an optionholder during any calendar year under all of our stock plans may not exceed $100,000. Options or portions thereof that exceed such limit will generally be treated as NSOs. No ISO may be granted to any person who, at the time of the grant, owns or is deemed to own stock possessing more than ten percent (10%) of our total combined voting power or that of any of our affiliates unless (1) the option exercise price is at least one hundred ten percent (110%) of the fair market value of the stock subject to the option on the date of grant, and (2) the term of the ISO does not exceed five years from the date of grant.
Restricted Share Awards. The terms of any awards of restricted shares under the 2021 Plan will be set forth in a restricted share agreement to be entered into between us and the recipient. The LDEIC will determine the terms and conditions of the restricted share agreements, which need not be identical. A restricted share award may be subject to vesting requirements or transfer restrictions or both. Restricted shares may be issued for such consideration as the LDEIC may determine, including cash, cash equivalents, full recourse promissory notes, past services and future services. Award recipients who are granted restricted shares generally have all of the rights of a stockholder with respect to those shares, provided that dividends and other distributions will not be paid in respect of unvested shares unless and until the underlying shares vest.
Stock Unit Awards. Stock unit awards give recipients the right to acquire a specified number of shares of stock (or cash amount) at a future date upon the satisfaction of certain conditions, including any vesting arrangement, established by the LDEIC and as set forth in a stock unit award agreement. A stock unit award may be settled by cash, delivery of stock, or a combination of cash and stock as deemed appropriate by the LDEIC. Recipients of stock unit awards generally will have no voting or dividend rights prior to the time the vesting conditions thereon are satisfied and the award is settled. At the LDEIC’s discretion and as set forth in the stock unit award agreement, stock units may provide for the right to dividend equivalents. Dividend equivalents may not be distributed prior to settlement of the stock unit to which the dividend equivalents pertain and the value of any dividend equivalents payable or distributable with respect to any unvested stock units that do not vest will be forfeited.
Stock Appreciation Rights. Stock appreciation rights generally provide for payments to the recipient based upon increases in the price of our common stock over the exercise price of the stock appreciation right. The LDEIC determines the exercise price for a stock appreciation right, which generally cannot be less than one hundred percent (100%) of the fair market value of our common stock on the date of grant. A stock appreciation right granted under the 2021 Plan vests at the rate specified in the stock appreciation right agreement as determined by the LDEIC. The LDEIC determines the term of stock appreciation rights granted under the 2021 Plan, up to a maximum of ten years. Upon the exercise of a stock appreciation right, we will pay the participant an amount in stock, cash, or a combination of stock and cash as determined by the LDEIC, equal to the product of (1) the excess of the per share fair market value of our common stock on the date of exercise over the exercise price, multiplied by (2) the number of shares of common stock with respect to which the stock appreciation right is exercised.
Other Stock Awards. The LDEIC may grant other awards based in whole or in part by reference to our common stock. The LDEIC will set the number of shares under the stock award and all other terms and conditions of such awards.
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Cash-Based Awards. A cash-based award is denominated in cash. The LDEIC may grant cash-based awards in such number and upon such terms as it shall determine. Payment, if any, will be made in accordance with the terms of the award, and may be made in cash or in shares of common stock, as determined by the LDEIC.
Performance-Based Awards. The number of shares or other benefits granted, issued, retainable and/or vested under a stock or stock unit award may be made subject to the attainment of performance goals. The LDEIC may utilize any performance criteria selected by it in its sole discretion to establish performance goals.
Changes to Capital Structure. In the event of a recapitalization, stock split, or similar capital transaction, the LDEIC will make appropriate and equitable adjustments to the number of shares reserved for issuance under the 2021 Plan, the number of shares that can be issued as incentive stock options, the number of shares subject to outstanding awards and the exercise price under each outstanding option or stock appreciation right.
Transactions. If we are involved in a merger or other reorganization, outstanding awards will be subject to the agreement of merger or reorganization. Subject to compliance with applicable tax laws, such agreement will provide for (1) the continuation of the outstanding awards by us, if we are a surviving corporation, (2) the assumption or substitution of the outstanding awards by the surviving corporation or its parent or subsidiary, (3) immediate vesting, exercisability, and settlement of the outstanding awards followed by their cancellation, or (4) settlement of the intrinsic value of the outstanding awards (whether or not vested or exercisable) in cash, cash equivalents, or equity (including cash or equity subject to deferred vesting and delivery consistent with the vesting restrictions applicable to such award or the underlying shares) followed by cancellation of such awards. To the extent the applicable agreement of merger or reorganization does not provide for one of the treatments set forth in the preceding sentence, all outstanding awards will be subject to full vesting immediately prior to the effectiveness of such transaction; provided, however, that the portion of any such award subject to performance-based vesting shall be subject to the terms and conditions of the applicable award agreement and, in the absence of applicable terms and conditions, the LEDIC’s discretion.
Change of Control. The LDEIC may provide, in an individual award agreement or in any other written agreement between a participant and us, that the stock award will be subject to acceleration of vesting and exercisability in the event of a change of control (as defined under the 2021 Plan).
Transferability. Unless the LDEIC provides otherwise, no award granted under the 2021 Plan may be transferred in any manner (prior to the vesting and lapse of any and all restrictions applicable to shares issued under such award), except by will, the laws of descent and distribution, or pursuant to a domestic relations order.
Amendment and Termination. Our board of directors will have the authority to amend, suspend, or terminate the 2021 Plan, provided that such action does not materially impair the existing rights of any participant without such participant’s written consent. No ISOs may be granted after the tenth anniversary of the date our board of directors adopted the 2021 Plan.
2021 Employee Stock Purchase Plan
Our 2021 Employee Stock Purchase Plan (the “ESPP”), was adopted by our board of directors on February 17, 2021, and our stockholders approved the ESPP on March 2, 2021. The ESPP will become effective on the date the registration statement for this offering is declared effective.
General. The ESPP is intended to qualify as an “employee stock purchase plan” under Code Section 423, except as explained below under “International Participation.” During regularly scheduled “offerings” under the ESPP, participants will be able to request payroll deductions and then expend the accumulated deduction to purchase a number of shares of our common stock at a discount and in an amount determined in accordance with the ESPP’s terms.
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Shares Available for Issuance. The ESPP will have 2,800,000 authorized but unissued or reacquired shares of our common stock reserved for issuance under the ESPP, plus an additional number of shares to be reserved annually on the first day of each fiscal year for a period of not more than ten years, beginning on January 1, 2022, in an amount equal to the least of (i) one percent (1%) of the outstanding shares of our common stock on such date, (ii) 11,000,000 shares, or (iii) a lesser amount determined by the LDEIC or our board of directors.
Administration. Except as noted below, the ESPP will be administered by our board of directors or a committee appointed by our board of directors, or the LDEIC. The LDEIC has the authority to construe, interpret, and apply the terms of the ESPP, to determine eligibility, to establish such limitations and procedures as it determines are consistent with the ESPP, and to adjudicate any disputed claims under the ESPP.
Eligibility. Each full-time and part-time employee, including our officers and employee directors and employees of participating subsidiaries, who is employed by us on the day preceding the start of any offering period will be eligible to participate in the ESPP. The ESPP requires that an employee customarily work more than 20 hours per week and more than five months per calendar year in order to be eligible to participate in the ESPP. The ESPP will permit an eligible employee to purchase our common stock through payroll deductions, which may not be more than fifteen percent (15%) of the employee’s eligible compensation, or such lower limit as may be determined by the LDEIC from time to time. However, no employee is eligible to participate in the ESPP if, immediately after electing to participate, the employee would own stock (including stock such employee may purchase under this plan or other outstanding options) representing five percent (5%) or more of the total combined voting power or value of all classes of our stock. No employee will be able to purchase more than 20,000 shares (further limited to 5,000 shares per purchase period), or such number of shares as may be determined by the LDEIC with respect to a single offering period, or purchase period, if applicable. In addition, no employee is permitted to accrue, under the ESPP and all similar purchase plans of us or our subsidiaries, a right to purchase our stock having a value in excess of $25,000 of the fair market value of such stock (determined at the time the right is granted) for each calendar year. Employees may increase or decrease their payroll deductions once per purchase period unless otherwise provided by the terms of the offering. In addition, employees may withdraw their accumulated payroll deductions prior to the end of the offering period in accordance with the terms of the offering. Participation in the ESPP will end automatically on termination of employment.
Offering Periods and Purchase Price. The ESPP will be implemented through a series of offerings of purchase rights to eligible employees. Under the ESPP, the LDEIC may specify offerings with a duration of not more than twenty-seven (27) months and may specify shorter purchase periods within each offering. During each purchase period, payroll deductions will accumulate, without interest. On the last day of the purchase period, accumulated payroll deductions will be used to purchase our common stock for employees participating in the offering.
The purchase price will be specified pursuant to the offering, but cannot, under the terms of the ESPP, be less than eighty-five percent (85%) of the fair market value per share of our common stock on either the offering date or on the purchase date, whichever is less. The fair market value of our common stock for this purpose will generally be the closing price on the NYSE (or such other exchange as our common stock may be traded at the relevant time) for the date in question, or if such date is not a trading day, for the last trading day before the date in question. For the first offering period beginning on the effective date of the ESPP, the fair market value on such offering date will be the price at which our common stock is offered to the public pursuant to the registration statement of which this prospectus forms a part.
Reset Feature. The LDEIC may specify that, if the fair market value of a share of our common stock on any purchase date within a particular offering period is less than or equal to the fair market value on the start date of that offering period, then the offering period will automatically terminate and the employee in that offering period will automatically be transferred and enrolled in a new offering period which will begin on the next day following such purchase date.
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Changes to Capital Structure. In the event that there is a specified type of change in our capital structure, such as a stock split, appropriate adjustments will be made to (1) the number of shares reserved under the ESPP, (2) the individual and aggregate participant share limitations described in the plan, and (3) the price of shares that any participant has elected to purchase.
International Participation. To provide us with greater flexibility in structuring our equity compensation programs for our non-U.S. employees, the ESPP also permits us to grant employees of our non-U.S. subsidiary entities rights to purchase shares of our common stock pursuant to other offering rules or sub-plans adopted by the LDEIC in order to achieve tax, securities law, or other compliance objectives. While the ESPP is intended to be a qualified “employee stock purchase plan” within the meaning of Code Section 423, any such international sub-plans or offerings are not required to satisfy those U.S. tax code requirements and therefore may have terms that differ from the ESPP terms applicable in the United States. However, the international sub-plans or offerings are subject to the ESPP terms limiting the overall shares available for issuance, the maximum payroll deduction rate, the maximum purchase price discount, and the maximum offering period length.
Corporate Reorganization. Immediately before a corporate reorganization, the offering period and purchase period then in progress shall terminate and either our common stock will be purchased with the accumulated payroll deductions or the accumulated payroll deductions will be refunded without any purchase of our common stock, unless the surviving corporation (or its parent corporation) assumes the ESPP under the plan of merger or consolidation.
Amendment and Termination. Our board of directors and the LDEIC will each have the right to amend, suspend, or terminate the ESPP at any time. Any increase in the aggregate number of shares of stock to be issued under the ESPP is subject to stockholder approval. Any other amendment is subject to stockholder approval only to the extent required under applicable law or regulation.
Rule 10b5-1 Sales Plans
Our directors and executive officers may adopt written plans, known as Rule 10b5-1 plans, in which they will contract with a broker to buy or sell our common shares on a periodic basis. Under a Rule 10b5-1 plan, a broker executes trades pursuant to parameters established by the director or officer when entering into the plan, without further direction from them. The director or officer may amend a Rule 10b5-1 plan in some circumstances and may terminate a plan at any time. Our directors and executive officers also may buy or sell additional shares outside of a Rule 10b5-1 plan when they are not in possession of material nonpublic information subject to compliance with the terms of our insider trading policy. Prior to the expiration of the restricted period (as defined in the section titled “Shares Eligible for Future Sales”), subject to early termination, the sale of any shares under such plan is prohibited by the lock-up agreement that the director or officer has entered into with the underwriters. See “Underwriters” for more information.
Director Compensation
Our non-employee directors do not currently receive, and did not receive in 2020, any cash compensation for their service on our board of directors or committees of our board of directors.
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The following table provides information regarding the total compensation that was granted to each of our directors who was not an employee in 2020.
| Name |
Option Awards(1) | Stock Awards(1) | Total | |||||||||
| Amanda M. Clark(2) |
— | $ | 914,353 | $ | 914,353 | |||||||
| L. John Doerr |
— | — | — | |||||||||
| Theodore R. Mitchell(3) |
$ | 398,536 | — | $ | 398,536 | |||||||
| Andrew Y. Ng |
— | — | — | |||||||||
| Scott D. Sandell |
— | — | — | |||||||||
| Sabrina L. Simmons(4) |
$ | 412,867 | — | $ | 412,867 | |||||||
| (1) | The amounts in this column represent the aggregate grant-date fair value of awards granted to each non-employee director, computed in accordance with FASB ASC Topic 718. See Note 2 to our audited consolidated financial statements included elsewhere in this prospectus for a discussion of the assumptions we made in determining the grant-date fair value of our equity awards. |
| (2) | As of December 31, 2020, 50,000 RSUs remained outstanding under this award. |
| (3) | As of December 31, 2020, 150,000 stock options remained outstanding under this award. |
| (4) | As of December 31, 2020, 150,000 stock options remained outstanding under this award. |
In connection with her joining our board of directors, we granted Amanda Clark 50,000 liquidity-contingent RSUs on November 2, 2020. Ms. Clark’s RSU award will vest on the first date upon which both the service-based requirement and the liquidity event requirement are satisfied with respect to the award. The liquidity event requirement will be satisfied as to any then-outstanding RSUs on the first to occur of: (1) a change in control event (as defined in the award agreement) or (2) the first sale of common stock pursuant to an initial public offering, in either case, within seven (7) years of the grant date. The service-based requirement will be satisfied in installments over four years as follows: 25% of the RSUs will vest on the one-year anniversary of the vesting commencement date (as set forth in the applicable award agreement), with the remaining 75% of the RSUs vesting, in equal quarterly installments during the next twelve (12) quarters thereafter, in each case subject to Ms. Clark’s continuous service through each such date. If a change in control event occurs during Ms. Clark’s service, all of the shares subject to the award will immediately vest upon such change in control event.
On February 19, 2020, we granted 150,000 NSOs to Ms. Simmons with an exercise price per share of $7.06. On March 2, 2020, we granted 150,000 NSOs to Mr. Mitchell, also with an exercise price per share of $7.06. Each of these grants vests as to 25% of the total number of shares of stock subject to the option on the first anniversary of the “vesting commencement date” (as defined in the applicable stock option agreement) and 1/48th of the total number of shares of stock subject to the option in monthly installments for 36 months thereafter, subject to the applicable director’s continuous service through each such date. If a change of control (as defined in the applicable award agreement) occurs during Ms. Simmons’ or Mr. Mitchell’s service, all of the shares subject to the respective awards will immediately vest upon such change of control.
All directors are entitled to the reimbursement of reasonable travel and out-of-pocket expenses related to board and committee meetings in accordance with our reimbursement procedures. For information regarding equity and cash compensation for non-employee directors, see “Management—Non-Employee Director Compensation.”
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CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
The following includes a summary of transactions since January 1, 2018 to which we have been a party, in which the amount involved in the transaction exceeded or will exceed $120,000, and in which any of our directors, executive officers or beneficial owners of more than 5% of our capital stock or any member of the immediate family of any of the foregoing persons had or will have a direct or indirect material interest, other than equity and other compensation, termination, change of control, and other arrangements, which are described under “Executive Compensation” or would be described under “Executive Compensation” if the applicable executive officer had been a named executive officer.
Series F Redeemable Convertible Preferred Stock Financing
In July 2020, we issued and sold an aggregate of 7,647,058 shares of our Series F redeemable convertible preferred stock (“Series F Preferred Stock”) at a purchase price of $17.00 per share, for aggregate consideration of approximately $130.0 million (the “Series F Financing”).
The participants in the Series F Financing included the following holders of more than 5% of our capital stock or entities affiliated with them. The following table sets forth the aggregate number of shares of Series F Preferred Stock issued to these related parties in the Series F Financing:
| Participants |
Shares of Series F Stock |
Aggregate Purchase Price |
||||||
| Entities affiliated with New Enterprise Associates, Inc.(1) |
4,411,765 | $ | 75,000,005 | |||||
| Entities affiliated with G Squared(2) |
450,782 | $ | 7,663,294 | |||||
| KPCB Holdings, Inc.(3) |
578,081 | $ | 9,827,377 | |||||
| (1) | Includes (i) 1,470,588 shares purchased by New Enterprise Associates 13, Limited Partnership and (ii) 2,941,177 shares purchased by New Enterprise Associates 17, L.P. Scott Sandell, one of our directors, is the Managing General Partner of New Enterprise Associates, Inc., an affiliated entity of New Enterprise Associates 13, Limited Partnership and New Enterprise Associates 17, L.P. |
| (2) | Includes (i) 202,128 shares purchased by G Squared IV, LP, (ii) 225,775 shares purchased by G Squared IV, SCSP, and (iii) 22,879 shares purchased by G Squared Equity Management LP. |
| (3) | John Doerr, one of our directors, is a General Partner of KPCB, an affiliated entity of KPCB Holdings, Inc. |
Series E Redeemable Convertible Preferred Stock Financing
Between April 23, 2019 and August 1, 2019, we issued and sold an aggregate of 8,794,164 shares of our Series E redeemable convertible preferred stock (the “Series E Preferred Stock”) at a purchase price of $12.00 per share, for aggregate consideration of approximately $105.5 million (the “Series E Financing”).
The participants in the Series E Financing included the following holders of more than 5% of our capital stock or entities affiliated with them. The following table sets forth the aggregate number of shares of Series E Preferred Stock issued to these related parties in the Series E Financing:
| Participants |
Shares of Series E Stock |
Aggregate Purchase Price |
||||||
| New Enterprise Associates 13, Limited Partnership(1) |
833,333 | $ | 9,999,996 | |||||
| Future Fund Investment Company No. 4 Pty Ltd(2) |
2,500,000 | $ | 30,000,000 | |||||
| (1) | Scott Sandell, one of our directors, is the Managing General Partner of New Enterprise Associates, Inc., an affiliated entity of New Enterprise Associates 13, Limited Partnership. |
| (2) | These shares were purchased by the Northern Trust Company, in its capacity as custodian for Future Fund Investment Company No. 4 Pty Ltd. |
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Investors’ Rights Agreement, Registration Rights Agreement, and Stockholders Agreement
In connection with the Series F Financing, on July 7, 2020 we entered into an (i) Amended and Restated Investors’ Rights Agreement (the “Rights Agreement”), (ii) Amended and Restated Right of First Refusal and Co-Sale Agreement (the “RoFR Agreement”), and (iii) Amended and Restated Voting Agreement (the “Voting Agreement”) with certain holders of our capital stock, including those that beneficially own more than 5% of our capital stock.
The Rights Agreement, among other things, obligates us to deliver financial information to specified stockholders and provides certain investors a right of first offer with regard to certain issuances of our capital stock. Such provisions will terminate upon the closing of this offering. Further, the Rights Agreement grants our preferred stockholders specified registration rights with respect to shares of our common stock, including shares of our common stock issued or issuable upon conversion of the shares of our redeemable convertible preferred stock held by them. For more information regarding the registration rights provided in the Rights Agreement, which will remain effective following this offering, please refer to “Description of Capital Stock—Registration Rights.”
The RoFR Agreement, among other things grants our investors rights of first refusal and co-sale with respect to proposed transfers of our securities by specified stockholders and grants us rights of first refusal (which is primary to the investors’ right of first refusal) with respect to proposed transfers of our securities by specified stockholders. The RoFR Agreement will terminate immediately prior to the closing of this offering.
The Voting Agreement provides for the voting of shares with respect to the election of directors and the voting of shares in favor of specified transactions approved by our board of directors and a majority of the shares of common stock then issued or issuable upon conversion of our redeemable convertible preferred stock. The Voting Agreement will terminate immediately prior to the closing of this offering.
Online Course Hosting & Services Agreement with Deeplearning.AI
On August 7, 2017, we entered into an Online Course Hosting and Services Agreement (as amended, the “Original Hosting Agreement”) with deeplearning.ai LLC (“Deeplearning LLC”) which is wholly owned by Dr. Ng, Chairman of our board of directors. On October 1, 2020, the Original Hosting Agreement was terminated and we entered into a new Online Course Hosting and Services Agreement (together with the Original Hosting Agreement, the “Hosting Agreements”) with DeepLearning.AI Corp., which is wholly owned by Deeplearning LLC (“Deeplearning Corp.”, and together with Deeplearning LLC, the “Deeplearning Entities”). Deeplearning Corp. develops artificial intelligence education courses which are currently distributed through our platform. Pursuant to the Hosting Agreements, Deeplearning Corp. receives 50% of revenue attributable to courses provided by the Deeplearning Entities (subject to customary conditions and deductions) on our platform, except for a certain machine learning specialization courses co-developed and co-branded by the Deeplearning Entities and Stanford, for which we make payments to Stanford equal to 60% of revenue attributable to such courses, which amount is subsequently shared between the Deeplearning Entities and Stanford. We are not party to, or otherwise involved with, this subsequent revenue sharing arrangement. Under the Hosting Agreements, we have made payments to the Deeplearning Entities in an aggregate amount of approximately $14.7 million, including approximately $6.3 million, $4.1 million, and $4.3 million in 2018, 2019, and 2020, respectively. As Deeplearning Corp. distributes courses through our platform, we do not believe there are any material conflicts with our business model and that of Deeplearning Corp. See “Risk Factors—Our directors may encounter conflicts of interest involving us and other entities with which they may be affiliated, including matters that involve corporate opportunities.”
Consulting Agreement with Andrew Y. Ng
On June 1, 2014, we entered into a Consultant and Proprietary Information Nondisclosure Agreement with Dr. Ng for advisory services (the “Consulting Agreement”). Under the terms of the Consulting Agreement,
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Dr. Ng receives continued vesting under the previously executed Stock Restriction Agreement, reimbursement for reasonable expenses required to complete his duties and responsibilities (subject to approval from our Chief Executive Officer) and payment of $1.00 per annum. Pursuant to the Stock Restriction Agreement dated December 7, 2011, the 8,000,000 shares of our common stock purchased by Dr. Ng on October 7, 2011 were subject to a repurchase right by us, which repurchase right lapsed in its entirety on December 7, 2015, the fourth anniversary of the date of the Stock Restriction Agreement, such that, with the exception of the repurchase by us of 254,952 shares in October 2013, all shares were vested shares on such date and no additional shares vested thereafter.
Employment Agreements
We have entered into employment agreements and offer letter agreements with certain of our executive officers. See “Executive Compensation—Existing Employment Agreements with Our Named Executive Officers” and “—Potential Payments Upon Termination or Change in Control.”
Indemnification Agreements
We have entered, and intend to continue to enter, into separate indemnification agreements with our directors and executive officers, in addition to the indemnification provided for in our amended and restated certificate of incorporation and amended and restated bylaws. These agreements, among other things, require us to indemnify our directors and executive officers for certain expenses, including attorneys’ fees, judgments, fines, and settlement amounts incurred by a director or executive officer in any action or proceeding arising out of their services as one of our directors or executive officers or as a director or executive officer of any other company or enterprise to which the person provides services at our request. For more information regarding these indemnification arrangements, see “Management—Limitation on Liability and Indemnification of Directors and Officers.” We believe that these charter and bylaw provisions and indemnification agreements are necessary to attract and retain qualified persons as directors and officers.
The limitation of liability and indemnification provisions in our amended and restated certificate of incorporation and amended and restated bylaws may discourage stockholders from bringing a lawsuit against directors for breach of their fiduciary duties. They may also reduce the likelihood of derivative litigation against directors and officers, even though an action, if successful, might benefit us and our stockholders. A stockholder’s investment may decline in value to the extent we pay the costs of settlement and damage awards against directors and officers pursuant to these indemnification provisions.
Policies and Procedures for Transactions with Related Persons
We have adopted a written Related Person Transactions Policy that sets forth our policies and procedures regarding the identification, review, consideration, and oversight of “related person transactions.” For purposes of our policy only, a “related person transaction” is a transaction, arrangement, or relationship (or any series of similar transactions, arrangements or relationships, including any indebtedness or guarantee of indebtedness) in which we or any of our subsidiaries are participants involving an amount that exceeds $120,000, in which any “related person” has a material interest.
Transactions involving compensation for services provided to us as an employee, consultant, or director are not considered related person transactions under this policy. A related person is any executive officer, director, nominee to become a director, or a holder of more than 5% of any class of our voting securities (including our common stock), including any of their immediate family members and affiliates, including entities owned or controlled by such persons.
Under the policy, the related person in question or, in the case of transactions with a holder of more than 5% of any class of our voting securities, an executive officer with knowledge of the proposed transaction, must
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present information regarding the proposed related person transaction to our audit committee (or, where review by our audit committee would be inappropriate, to another independent body of our board of directors) for review. To identify related person transactions in advance, we rely on information supplied by our executive officers, directors, and certain significant stockholders. In considering related person transactions, our audit committee takes into account the relevant available facts and circumstances, which may include, but are not limited to:
| • | the risks, costs, and benefits to us; |
| • | the impact on a director’s independence in the event the related person is a director, immediate family member of a director or an entity with which a director is affiliated; |
| • | the terms of the transaction; |
| • | the availability of other sources for comparable services or products; and |
| • | the terms available to or from, as the case may be, unrelated third parties. |
Our audit committee will approve only those transactions that it determines are fair to us and in our best interests. All of the transactions described above were entered into prior to the adoption of such policy.
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PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth information regarding beneficial ownership of our common stock by:
| • | each person, or group of affiliated persons, known by us to beneficially own more than 5% of our common stock; |
| • | each of our directors; |
| • | each of our named executive officers; |
| • | all of our current executive officers and directors as a group; and |
| • | each of the other selling stockholders. |
The percentage ownership information under the column “Beneficial Ownership Before Offering” is based on 115,606,690 shares of common stock outstanding as of December 31, 2020, after giving effect to the automatic conversion of all of our redeemable convertible preferred stock outstanding as of December 31, 2020 into an aggregate of 75,305,400 shares of our common stock upon the completion of this offering. The percentage ownership information under the column “Beneficial Ownership After Offering” is based on 130,271,466 shares of common stock outstanding after the completion of this offering, the sale of 14,664,776 shares of common stock in this offering by us, and assumes no exercise of the underwriters’ option to purchase additional shares from us. Beneficial ownership has been determined in accordance with the rules of the SEC. These rules generally attribute beneficial ownership of securities to persons who possess sole or shared voting power or investment power with respect to those securities. In addition, the rules include shares of our common stock issuable pursuant to the exercise of stock options or other convertible securities that are either immediately exercisable or exercisable, or in the case of RSUs, which may vest, within 60 days of December 31, 2020. These shares are deemed to be outstanding and beneficially owned by the person holding those options, securities, or RSUs for the purpose of computing the percentage ownership of that person, but they are not treated as outstanding for the purpose of computing the percentage ownership of any other person. Unless otherwise indicated, the persons or entities identified in this table have sole voting and investment power with respect to all shares shown as beneficially owned by them, subject to applicable community property laws. Except as otherwise noted below, the address for each person or entity listed in the table is c/o Coursera, Inc., 381 E. Evelyn Ave. Mountain View, California 94041.
| Beneficial Ownership Before Offering |
Number of Shares to be Sold in the Offering |
Beneficial Ownership After Offering |
||||||||||||||||||
| Number | Percentage | Number | Percentage | |||||||||||||||||
| Name of Beneficial Owner |
||||||||||||||||||||
| Greater than 5% Stockholders: |
||||||||||||||||||||
| Entities affiliated with New Enterprise Associates 13, Limited Partnership(1) |
21,156,891 | 18.3 | % | — | 21,156,891 | 16.2 | % | |||||||||||||
| Entities affiliated with G Squared(2) |
18,335,314 | 15.9 | — | 18,335,314 | 14.1 | |||||||||||||||
| Entities affiliated with KPCB Holdings, Inc.(3) |
10,635,143 | 9.2 | — | 10,635,143 | 8.2 | |||||||||||||||
| Future Fund Investment Company No. 4 Pty Ltd.(4) |
|
9,093,240 |
|
|
7.9 |
|
— | 9,093,240 | 7.0 | |||||||||||
| Named Executive Officers and Directors: |
||||||||||||||||||||
| Jeffrey N. Maggioncalda(5) |
4,235,875 | 3.5 | — | 4,235,875 | 3.2 | |||||||||||||||
| Kenneth R. Hahn |
— | * | — | — | * | |||||||||||||||
| Betty M. Vandenbosch |
— | * | — | — | * | |||||||||||||||
| Andrew Y. Ng(6) |
9,165,048 | 7.8 | — | 9,165,048 | 7.0 | |||||||||||||||
| Amanda M. Clark |
— | * | — | — | * | |||||||||||||||
| L. John Doerr(7) |
11,498,139 | 9.9 | — | 11,498,139 | 8.8 | |||||||||||||||
| Theodore R. Mitchell |
— | * | — | — | * | |||||||||||||||
| Scott D. Sandell(8) |
21,156,891 | 18.3 | — | 21,156,891 | 16.2 | |||||||||||||||
| Sabrina L. Simmons(9) |
40,625 | * | — | 40,625 | * | |||||||||||||||
| All current executive officers and directors as a group (17 persons)(10) |
50,354,057 | 40.8 | % | — | 50,354,057 | 36.5 | % | |||||||||||||
| * | Represents beneficial ownership of less than 1%. |
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| Beneficial Ownership Before Offering |
Number of Shares to be Sold in the Offering |
Beneficial Ownership After Offering |
||||||||||||||||||
| Number | Percentage | Number | Percentage | |||||||||||||||||
| Other Selling Stockholders: |
||||||||||||||||||||
| International Finance Corporation(11) |
1,338,668 | 1.2 | 446,222 | 892,446 | * | |||||||||||||||
| Matthew MacQueen |
229,687 | * | 18,000 | 211,687 | * | |||||||||||||||
| New Technology Fund SPC Limited Class Q Participating Shares designated as “Alfa pre-IPO-4 Fund Segregated Portfolio” |
383,500 | * | 383,500 | — | * | |||||||||||||||
| Nicholas Dellamaggiore |
124,257 | * | 35,502 | 88,755 | * | |||||||||||||||
| Shu-Yun Lai(12) |
106,202 | * | 8,000 | 98,202 | * | |||||||||||||||
| Times Internet Inc. |
436,229 | * | 174,000 | 262,229 | * | |||||||||||||||
| (1) | Represents (i) 18,215,714 shares of common stock held of record by New Enterprise Associates 13, L.P. (“NEA 13”) and (ii) 2,941,177 shares of common stock held of record by New Enterprise Associates 17, L.P. (“NEA 17”). The shares held by NEA 13 are held indirectly by NEA Partners 13, L.P. (“NEA Partners 13”), which is the sole general partner of NEA 13, NEA 13 GP, LTD (“NEA 13 LTD”), the sole general partner of NEA Partners 13, and each of the individual directors of NEA 13 LTD. The shares held by NEA 17 are held indirectly by NEA Partners 17, L.P. (“NEA Partners 17”), which is the sole general partner of NEA 17, NEA 17 GP, LLC (“NEA 17 LLC”), the sole general partner of NEA Partners 17, and each of the individual managers of NEA 17 LLC. The individual directors of NEA 13 LTD (the “Directors”) are Forest Baskett, Patrick Kerins, and Scott Sandell, and the individual managers (the “Managers”) of NEA 17 LLC are Forest Baskett, Ali Behbahani, Carmen Chang, Anthony Florence, Liza Landsman, Mohamad Makhzoumi, Joshua Makower, Edward Mathers, Peter Sonsini, Paul Walker, Rick Yang, and Scott D. Sandell. The Directors and the Managers share voting and dispositive power over the shares held directly by NEA 13 and NEA 17, respectively. The address of the principal business office of each of the above entities is 1954 Greenspring Drive, Suite, 600, Timonium, MD 21093. |
| (2) | Represents (i) 3,628,987 shares of common stock held of record by G Squared Opportunities ICAV, (ii) 3,571,274 shares of common stock held of record by G Squared Opportunities Fund IV LLC, (iii) 3,333,333 shares of common stock held of record by G Squared Coursera LLC, (iv) 2,130,506 shares of common stock held of record by Ventura-Gsquared Investments LP Fund, (v) 829,899 shares of common stock held of record by G Squared IV, LP, (vi) 926,990 shares of common stock held of record by G Squared IV, SCSp, (vii) 895,668 shares of common stock held of record by G Squared Opportunities Fund I, Series C-6, (viii) 672,224 shares of common stock held of record by G Squared Opportunities Fund I LLC, (ix) 666,667 shares of common stock held of record by G Squared Opportunities Fund I, Series C-7, (x) 666,663 shares of common stock held of record by G Squared Coursera II LLC, (xi) 230,702 shares of common stock held of record by G Squared Coursera IV LLC, (xii) 213,342 shares of common stock held of record by G Squared V LP, (xiii) 136,658 shares of common stock held of record by G Squared Opportunities Fund V LLC, (xiv) 133,333 shares of common stock held of record by G Squared Coursera III LLC, (xv) 4,744 shares of common stock held of record by G Squared Opportunities Fund II LLC and (xvi) 294,324 shares of common stock held of record by G Squared Special Situations Fund LLC. Larry Aschebrook is the Managing Partner of G Squared Equity Management LP, the investment adviser to each of the aforementioned G Squared funds, and has sole voting and dispositive control over the shares held of record by such funds. The principal business address of G Squared is 205 N. Michigan Avenue, Suite 3770, Chicago, Illinois 60601. |
| (3) | Represents (i) 9,805,602 shares of common stock held of record by Kleiner Perkins Caufield & Byers XIV, LLC (“KPCB XIV”) and (ii) 829,541 shares of common stock held of record by KPCB XIV Founders Fund, LLC (“KPCB XIV FF”). All shares are held for convenience in the name of “KPCB Holdings, Inc., as nominee” for the accounts of such entities. The managing member of KPCB XIV and KPCB XIV FF is KPCB XIV Associates, LLC (“KPCB XIV Associates”). L. John Doerr, Brook Byers, Theodore E. Schlein and William “Bing” Gordon, the managing members of KPCB XIV Associates, exercise shared voting and dispositive control over the shares held by KPCB XIV and KPCB XIV FF. The address of the principal business office of Kleiner Perkins Caufield & Byers, LLC is 2750 Sand Hill Road, Menlo Park, CA 94025. |
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| (4) | Represents shares of common stock held of record by The Northern Trust Company in its capacity as custodian for Future Fund Investment Company No. 4 Pty Ltd. Future Fund Investment Company No. 4 Pty Ltd. is a wholly beneficially owned subsidiary of the Future Fund Board of Guardians, an Australian statutory body corporate. The principal business address of Future Fund Investment Company No. 4 Pty Ltd. is Level 47, 80 Collins Street, Melbourne VIC 3000 Australia. |
| (5) | Represents (i) 4,155,875 shares of common stock subject to options held by Mr. Maggioncalda that are immediately exercisable, of which 3,776,396 will be vested within 60 days of December 31, 2020 (ii) 10,000 shares of common stock owned indirectly through Mr. Maggioncalda’s daughter, Alison Maggioncalda, (iii) 10,000 shares of common stock owned indirectly through Mr. Maggioncalda’s sister-in-law, Anastacia Maggioncalda, (iv) 10,000 shares of common stock owned indirectly through Mr. Maggioncalda’s brother, Gregory Maggioncalda, (v) 10,000 shares of common stock owned indirectly through Mr. Maggioncalda’s daughter, Julia Maggioncalda, (vi) 10,000 shares of common stock owned indirectly through Mr. Maggioncalda’s sister-in-law, Aileen Schmoller, (vii) 10,000 shares of common stock owned indirectly through Mr. Maggioncalda’s brother-in-law, Christopher Schmoller, (viii) 10,000 shares of common stock owned indirectly through Mr. Maggioncalda’s daughter, Lindsay Maggioncalda, and (ix) 10,000 shares of common stock owned indirectly through Mr. Maggioncalda’s brother, Steven Maggioncalda. |
| (6) | Represents (i) 7,945,048 shares of common stock and (ii) 1,220,000 shares of common stock subject to options held by Dr. Ng that are immediately exercisable, of which 1,027,708 will be vested within 60 days of December 31, 2020. |
| (7) | Represents (i) 10,635,143 shares of common stock held by KPCB (see footnote (3) above) and (ii) 862,996 shares of common stock held of record by WindyHill, LLC (“WindyHill”). The shares held by WindyHill are held indirectly by John Doerr, who holds voting and dispositive power over these shares. |
| (8) | Represents shares of common stock held by NEA 13 and NEA 17. See footnote (1) above. |
| (9) | Represents 40,625 shares of common stock subject to options held by Ms. Simmons that are exercisable within 60 days of December 31, 2020. |
| (10) | Represents (i) 42,535,660 shares of common stock and (ii) 7,818,415 shares of common stock subject to options beneficially owned by our current directors and executive officers that are exercisable within 60 days of December 31, 2020, of which 6,733,529 will be vested within 60 days of December 31, 2020. |
| (11) | International Finance Corporation has certain board observer rights pursuant to that certain Observer Rights Letter by and between Coursera, Inc. and International Finance Corporation, dated July 9, 2013. |
| (12) | Shu-Yun Lai served as an employee of Coursera, Inc. within the last three years. |
Baillie Gifford Overseas Ltd., acting on behalf of a number of its clients, and one or more funds affiliated with Capital Research Global Investors have indicated an interest, severally but not jointly, in purchasing an aggregate of up to $125 million in shares of our common stock in this offering at the initial public offering price. However, because indications of interest are not binding agreements or commitments to purchase, the underwriters may determine to sell more, fewer, or no shares in this offering to such potential investors, or either or both of these potential investors may determine to purchase more, fewer, or no shares in this offering. The underwriters will receive the same underwriting discount on any shares purchased by such potential investors as they will on any other shares sold to the public in this offering. Capital Research Global Investors currently beneficially owns approximately 3.7% of our outstanding capital stock. Baillie Gifford Overseas Ltd. does not currently own any shares of our common stock. Neither Baillie Gifford Overseas Ltd. nor Capital Research Global Investors is an affiliate of ours.
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The following is a summary of the rights of our common and preferred stock and some of the provisions of our amended and restated certificate of incorporation and amended and restated bylaws, which will become effective immediately prior to the completion of this offering, and of the DGCL. This summary is not complete. For more detailed information, please see our amended and restated certificate of incorporation and amended and restated bylaws, which are filed as exhibits to the registration statement of which this prospectus is a part, as well as the relevant provisions of the DGCL.
General
Upon completion of this offering and upon the filing and effectiveness of our amended and restated certificate of incorporation, our authorized capital stock will consist of 300,000,000 shares of common stock, $0.00001 par value per share, and 10,000,000 shares of preferred stock, $0.00001 par value per share. All of our authorized preferred stock upon completion of this offering will be undesignated.
Common Stock
Outstanding Shares
As of December 31, 2020, there were 40,301,290 shares of common stock outstanding. Upon completion of this offering and assuming no exercise by the underwriters of their option to purchase additional shares, 115,606,690 shares of common stock will be outstanding.
Voting
Our common stock is entitled to one vote for each share held of record on all matters submitted to a vote of the stockholders, including the election of directors, and does not have cumulative voting rights. Accordingly, the holders of a majority of the shares of our common stock entitled to vote in any election of directors can elect all of the directors standing for election.
Dividends
Subject to preferences that may be applicable to any then outstanding preferred stock, the holders of common stock are entitled to receive dividends, if any, as may be declared from time to time by our board of directors out of legally available funds.
Liquidation
In the event of our liquidation, dissolution, or winding up, holders of our common stock will be entitled to share ratably in the net assets legally available for distribution to stockholders after the payment of all of our debts and other liabilities, subject to the satisfaction of any liquidation preference granted to the holders of any outstanding shares of preferred stock.
Other Rights and Preferences
Holders of our common stock have no preemptive, conversion, or subscription rights, and there are no redemption or sinking fund provisions applicable to our common stock. The rights, preferences, and privileges of the holders of our common stock are subject to, and may be adversely affected by, the rights of the holders of shares of any series of our preferred stock that we may designate and issue in the future.
Fully Paid and Nonassessable
All of our outstanding shares of common stock are, and the shares of common stock to be issued in this offering will be, fully paid and nonassessable.
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Preferred Stock
Immediately prior to the closing of this offering, all outstanding shares of redeemable convertible preferred stock will be converted into shares of our common stock on a one-to-one basis and we will not have any shares of preferred stock outstanding. Under our amended and restated certificate of incorporation, our board of directors will have the authority, without further action by the stockholders, to issue up to 10,000,000 shares of preferred stock in one or more series, to establish from time to time the number of shares to be included in each such series, to fix the rights, preferences, and privileges of the shares of each wholly unissued series and any qualifications, limitations, or restrictions thereon, and to increase or decrease the number of shares of any such series, but not below the number of shares of such series then outstanding.
Our board of directors may authorize the issuance of preferred stock with voting or conversion rights that could adversely affect the voting power or other rights of the holders of the common stock. The issuance of preferred stock, while providing flexibility in connection with possible acquisitions and other corporate purposes, could, among other things, have the effect of delaying, deferring, or preventing a change in our control that may otherwise benefit holders of our common stock and may adversely affect the market price of our common stock and the voting and other rights of the holders of common stock. We have no current plans to issue any shares of preferred stock.
Stock Options and RSUs
As of December 31, 2020, we had 32,458,408 shares of common stock issuable upon the exercise of outstanding stock options under our Predecessor Stock Incentive Plans, at a weighted-average exercise price of $4.60 per share, and 3,276,600 shares of common stock subject to outstanding RSUs under the Predecessor Stock Incentive Plans. As of February 17, 2021, there were 15,400,000 shares of common stock reserved for future issuance under the 2021 Plan, which shall be subject to an annual increase. For additional information regarding terms of the 2021 Plan, see “Executive Compensation—Equity Incentive Plans.”
Registration Rights
Following the completion of the offering, certain holders of our common stock, common stock issuable upon conversion of outstanding preferred stock, or their transferees, will continue to be entitled to the registration rights set forth below with respect to such shares under the Securities Act pursuant to the Rights Agreement. Pursuant to the Rights Agreement, we will pay the registration expenses, other than estimated underwriting discounts and commissions, of the shares registered pursuant to the demand, piggyback, and Form S-3 registrations described below, including the legal fees payable to one selling holders’ counsel.
Generally, in an underwritten offering, the managing underwriter, if any, has the right, subject to specified conditions, to limit the number of shares such holders may include. The demand, piggyback, and Form S-3 registration rights described below will expire upon the earlier of (1) the date that is five years after the completion of this offering and (2) the date that a holder may sell all of their shares in a three-month period under Rule 144 of the Exchange Act, this offering has closed and such holder holds less than 1% of our outstanding common stock.
Demand Registration Rights
The holders of 73,489,068 shares of our common stock that will be issued upon conversion of all outstanding redeemable convertible preferred stock as of December 31, 2020 will be entitled to certain demand registration rights upon completion of this offering. At any time beginning on the earlier of the third anniversary of the date of the Rights Agreement or 180 days following the effectiveness of this registration statement, the holders of a majority of these shares may, on not more than two occasions, request that we register all or a portion of their shares, subject to certain specified exceptions. Such request for registration must cover securities with an aggregate offering price which equals or exceeds $10.0 million. We will not be required to effect more than one registration on Form S-1 within any 12-month period.
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Piggyback Registration Rights
The holders of 73,489,068 shares of our common stock that will be issued upon conversion of all outstanding redeemable convertible preferred stock as of December 31, 2020 were entitled to notice of this offering and to include their shares of registrable securities in this offering, which rights may be waived upon the consent of the requisite percentage of holders of registrable securities under the Rights Agreement. In the event that we propose to register any of our securities under the Securities Act in another offering, either for our own account or for the account of other security holders, the holders of these shares will be entitled to certain “piggyback” registration rights, allowing them to include their shares in such registration, subject to certain marketing and other limitations. As a result, whenever we propose to file a registration statement under the Securities Act, including a registration statement on Form S-3 as discussed below, other than with respect to a demand registration, a registration statement relating to a business combination or exchange offer, or a registration statement relating solely to employee benefit plans, the holders of these shares are entitled to notice of the registration and have the right, subject to limitations that the underwriters may impose on the number of shares included in the registration, to include their shares in the registration.
S-3 Registration Rights
The holders of 73,489,068 shares of our common stock issuable upon conversion of all outstanding preferred stock as of December 31, 2020 will be entitled to certain Form S-3 registration rights upon completion of this offering. These holders can make a request that we register their shares on Form S-3 if we are qualified to file a registration statement on Form S-3, subject to specified exceptions. Such request for registration on Form S-3 must cover securities with an aggregate offering price which equals or exceeds $3.0 million. We will not be required to effect more than two registrations on Form S-3 within any 12-month period.
Anti-Takeover Effects of Provisions of Our Certificate of Incorporation, Our Bylaws, and Delaware Law
Delaware Anti-Takeover Law
We are subject to Section 203 of the DGCL (“Section 203”). Section 203 generally prohibits a public Delaware corporation from engaging in a “business combination” with an “interested stockholder” for a period of three years after the date of the transaction in which the person became an interested stockholder, unless:
| • | prior to the date of the transaction, the board of directors of the corporation approved either the business combination or the transaction which resulted in the stockholder becoming an interested stockholder; |
| • | the interested stockholder owned at least 85% of the voting stock of the corporation outstanding at the time the transaction commenced, excluding for purposes of determining the number of shares outstanding (but not the outstanding voting stock owned by the interested stockholder) shares owned (a) by persons who are directors and also officers, and (b) by employee stock plans in which employee participants do not have the right to determine confidentially whether shares held subject to the plan will be tendered in a tender or exchange offer; or |
| • | upon or subsequent to the consummation of the transaction, the business combination is approved by the board and authorized at an annual or special meeting of stockholders, and not by written consent, by the affirmative vote of at least 66 2/3% of the outstanding voting stock which is not owned by the interested stockholder. |
Section 203 defines a business combination to include:
| • | any merger or consolidation involving the corporation and the interested stockholder; |
| • | any sale, transfer, pledge, or other disposition of 10% or more of the assets of the corporation to or with the interested stockholder; |
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| • | subject to exceptions, any transaction involving the corporation that has the effect of increasing the proportionate share of the stock of any class or series of the corporation owned by the interested stockholder; |
| • | subject to exceptions, any transaction that results in the issuance or transfer by the corporation of any stock of the corporation to the interested stockholder; and |
| • | the receipt by the interested stockholder of the benefit of any loans, advances, guarantees, pledges, or other financial benefits provided by or through the corporation. |
In general, Section 203 defines an interested stockholder as any entity or person beneficially owning 15% or more of the outstanding voting stock of the corporation and any entity or person affiliated with or controlling or controlled by the entity or person.
Amended and Restated Certificate of Incorporation and Amended and Restated Bylaws
Because our stockholders do not have cumulative voting rights, our stockholders holding a majority of the voting power of our shares of common stock outstanding will be able to elect all of our directors. Our amended and restated certificate of incorporation and amended and restated bylaws to be effective immediately prior to the completion of this offering will provide that all stockholder actions must be effected at a duly called meeting of stockholders and not by written consent. A special meeting of stockholders may be called by the majority of our board of directors, Chairman of our board of directors, our President, or our Chief Executive Officer.
As described above in “Management—Board Composition,” in accordance with our amended and restated certificate of incorporation to be effective upon completion of this offering, our board of directors will be divided into three classes with staggered three-year terms.
In addition, our amended and restated certificate of incorporation and amended and restated bylaws will provide that the number of directors constituting our board of directors will be permitted to be set only by a resolution adopted by a majority vote of the members of our board of directors then in office, and that our directors may be removed only for cause. Our amended and restated certificate of incorporation and amended and restated bylaws will also provide that vacancies occurring on our board of directors and newly created directorships resulting from an increase in the authorized number of directors may be filled only by vote of a majority of the remaining members of our board of directors, even though less than a quorum. Our amended and restated certificate of incorporation and amended and restated bylaws will provide that our board of directors is expressly authorized to adopt, amend, or repeal our bylaws, and require a 66 2/3% stockholder vote to amend our bylaws and certain provisions of our certificate of incorporation.
Our amended and restated bylaws will provide advance notice procedures for stockholder proposals and the nomination of candidates for election as directors at our annual meeting of stockholders. Our amended and restated bylaws will also specify certain requirements regarding the form and content of a stockholder notice. These provisions preclude our stockholders from bringing matters before our annual meeting of stockholders or from making nominations for directors at our annual meeting of stockholders if the proper procedures are not followed. We expect that these provisions may also discourage or deter a potential acquirer from conducting a solicitation of proxies to elect the acquirer’s own slate of directors or otherwise attempting to obtain control of us.
The foregoing provisions will make it more difficult for our existing stockholders to replace our board of directors as well as for another party to obtain control of us by replacing our board of directors. Since our board of directors has the power to retain and discharge our officers, these provisions could also make it more difficult for existing stockholders or another party to effect a change in management. In addition, the authorization of undesignated preferred stock makes it possible for our board of directors to issue preferred stock with voting or other rights or preferences that could impede the success of any attempt to change our control.
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These provisions are intended to enhance the likelihood of continued stability in the composition of our board of directors and its policies and to discourage certain types of transactions that may involve an actual or threatened acquisition of us. These provisions are also designed to reduce our vulnerability to an unsolicited acquisition proposal and to discourage certain tactics that may be used in proxy fights. However, such provisions could have the effect of discouraging others from making tender offers for our shares and may have the effect of deterring hostile takeovers or delaying changes in our control or management. As a consequence, these provisions also may inhibit fluctuations in the market price of our stock that could result from actual or rumored takeover attempts.
Choice of Forum
Our amended and restated certificate of incorporation and our amended and restated bylaws will provide that the Court of Chancery of the State of Delaware (or, if that court lacks subject matter jurisdiction, another federal or state court situated in the State of Delaware) will be the exclusive forum for any derivative action or proceeding brought on our behalf; any action asserting a breach of fiduciary duty; any action asserting a claim against us arising pursuant to the DGCL, our amended and restated certificate of incorporation, or our bylaws; or any action asserting a claim against us that is governed by the internal affairs doctrine. In addition, our amended and restated certificate of incorporation and our amended and restated bylaws will provide that, unless we consent in writing to the selection of an alternative forum, the federal district courts of the United States of America shall be the exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act. Nothing in our amended and restated bylaws precludes stockholders that assert claims under the Exchange Act from bringing such claims in state or federal court, subject to applicable law. Any person or entity purchasing or otherwise acquiring any interest in our capital stock shall be deemed to have notice of and consented to the provisions of our certificate of incorporation and bylaws described above. Although we believe these provisions benefit us by providing increased consistency in the application of Delaware law for the specified types of actions and proceedings, the provisions may have the effect of discouraging lawsuits against us or our directors and officers. The enforceability of similar choice of forum provisions in other companies’ certificates of incorporation has been challenged in legal proceedings, and it is possible that a court could find these types of provisions to be inapplicable or unenforceable. See “Risk Factors—Our amended and restated charter and bylaws that will be in effect upon the closing of this offering will designate the Court of Chancery of the State of Delaware as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by our stockholders, and provides that federal district courts will be the sole and exclusive forum for Securities Act claims, which could limit our stockholders’ ability to obtain what they believe to be a favorable judicial forum for disputes with us or our directors, officers, or other employees.”
Listing
We have applied to list our common stock on the NYSE under the symbol “COUR”.
Transfer Agent and Registrar
The transfer agent and registrar for our common stock is American Stock Transfer & Trust Company, LLC. The transfer agent and registrar’s address is 6201 15th Avenue, Brooklyn, New York 11219 and the telephone number is (800) 937-5449.
Public Benefit Corporation Status
On February 1, 2021, we amended our certificate of incorporation to become a Delaware public benefit corporation. We believe becoming a public benefit corporation demonstrates our long-term commitment to providing global access to flexible and affordable high-quality education. Public benefit corporations are a relatively new class of corporations that are intended to produce a public benefit and to operate in a responsible and sustainable manner. Under Delaware law, public benefit corporations are required to identify in their
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certificate of incorporation the public benefit they will promote and their directors have a duty to manage the affairs of the corporation in a manner that balances the pecuniary interests of the stockholders, the best interests of those materially affected by the corporation’s conduct, and the specific public benefit identified in the public benefit corporation’s certificate of incorporation. They are also required to publicly disclose a report that assesses their public benefit performance at least every two years. Such report must include the objectives our board of directors established to promote such public benefit, the standards our board of directors adopted for measuring our progress in promoting such public benefit, objective factual information based on those standards measuring our success in meeting such objectives, and an assessment of our success in meeting the objectives and promoting our public benefit. Our amended and restated certificate of incorporation and amended and restated bylaws do not require us to obtain periodic third-party certification addressing our promotion of the public benefits identified in our corporate governance documents.
We believe that an investment in the stock of a public benefit corporation does not differ materially from an investment in a corporation that is not designated as a public benefit corporation. Further, we believe that our commitment to achieving our public benefit goals will not materially affect the financial interests of our stockholders. Holders of our common stock will have voting, dividend, and other economic rights that are the same as the rights of stockholders of a corporation that is not designated as a public benefit corporation.
Our public benefit purpose, as provided in our certificate of incorporation, is “to provide global access to flexible and affordable high-quality education that supports personal development, career advancement, and economic opportunity.” Stockholders of the company owning individually or collectively, as of the date of instituting a derivative suit, the lesser of (i) 2% of our outstanding shares, or (ii) shares with a market value of $2 million or more will be able to file a derivative lawsuit to enforce the requirements that the board of directors will manage the business and affairs of the company in a manner that balances the pecuniary interests of the stockholders, the best interests of those materially affected by the company’s conduct, and the specific public benefits identified in our certificate of incorporation. Such derivative actions would be subject to the exclusive forum provision in our amended and restated certificate of incorporation, which requires derivative actions to be heard in the Delaware Chancery Court (or, if that court lacks subject matter jurisdiction, another federal or state court situated in the State of Delaware).
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SHARES ELIGIBLE FOR FUTURE SALE
Immediately prior to this offering, there has been no public market for our common stock. Future sales of substantial amounts of common stock in the public market, or the perception that such sales may occur, could adversely affect prevailing market prices. Furthermore, since only a limited number of shares will be available for sale shortly after this offering because of contractual and legal restrictions on resale described below, sales of substantial amounts of common stock in the public market before (to the extent permitted) or after the restrictions lapse could adversely affect the prevailing market price for our common stock as well as our ability to raise equity capital in the future.
Based on the number of shares of common stock outstanding as of December 31, 2020, upon completion of this offering, 130,271,466 shares of common stock will be outstanding, assuming no exercise of the underwriters’ option to purchase additional shares and the automatic conversion of all outstanding shares of our redeemable convertible preferred stock upon completion of this offering. Of these shares, the shares sold in this offering (including any shares sold pursuant to the underwriters’ option to purchase additional shares) will be freely tradable unless purchased by our “affiliates” as that term is defined in Rule 144 under the Securities Act. The remaining 115,606,690 shares of common stock outstanding after this offering will be restricted as a result of securities laws or lock-up agreements. These remaining shares will generally become available for sale in the public market as follows:
| • | no shares will be eligible for immediate sale upon completion of this offering; and |
| • | the remaining 115,606,690 shares will be eligible for sale under Rule 144, subject to the volume limitations, manner-of-sale, and notice provisions described below under “Rule 144,” upon expiration of lock-up agreements. See “Risk Factors—Future sales of a substantial number of shares of our common stock in the public market following this offering, or the perception that such sales could occur, could cause the price of our common stock to decline” and “Underwriters.” |
Rule 144
In general, under Rule 144 as currently in effect, beginning 90 days after the effective date of the registration statement of which this prospectus is a part, any person who is not an affiliate of ours and has held their shares for at least six months, including the holding period of any prior owner other than one of our affiliates, may sell shares without restriction, provided current public information about us is available. In addition, under Rule 144, any person who is not an affiliate of ours and has held their shares for at least one year, including the holding period of any prior owner other than one of our affiliates, would be entitled to sell an unlimited number of shares immediately upon completion of this offering without regard to whether current public information about us is available.
Beginning 90 days after the effective date of the registration statement of which this prospectus is a part, a person who is an affiliate of ours and who has beneficially owned restricted securities for at least six months, including the holding period of any prior owner other than one of our affiliates, is entitled to sell a number of restricted shares within any three-month period that does not exceed the greater of:
| • | 1% of the number of shares of our common stock then outstanding, which will equal approximately 1,302,715 shares immediately after this offering; or |
| • | the average weekly trading volume of our common stock on the NYSE during the four calendar weeks preceding the filing of a notice on Form 144 with respect to the sale. |
Sales of restricted shares under Rule 144 held by our affiliates are also subject to requirements regarding the manner-of-sale, notice, and the availability of current public information about us. Rule 144 also provides that affiliates relying on Rule 144 to sell shares of our common stock that are not restricted shares must nonetheless comply with the same restrictions applicable to restricted shares, other than the holding period requirement.
Notwithstanding the availability of Rule 144, substantially all of our stockholders, as well as our directors and executive officers, have entered into lock-up agreements as described below and any restricted shares held by them will become eligible for sale at the expiration of the restrictions set forth in those agreements. After these
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contractual resale restrictions lapse, these holders will be able to sell some or all of their shares of our common stock, subject only to applicable restrictions under federal and state securities laws.
Rule 701
Under Rule 701, shares of common stock acquired upon the exercise of outstanding options or pursuant to other rights granted under compensatory stock plans may be resold by:
| • | persons other than affiliates, beginning 90 days after the effective date of the registration statement of which this prospectus is a part, subject only to the manner-of-sale provisions of Rule 144; and |
| • | our affiliates, beginning 90 days after the effective date of the registration statement of which this prospectus is a part, subject to the manner-of-sale and volume limitations, current public information, and filing requirements of Rule 144, in each case, without compliance with the six-month holding period requirement of Rule 144. |
Lock-Up Agreements
We, along with our directors, executive officers and substantially all of our other equityholders, including all of the selling stockholders, have agreed with the underwriters that during the period ending on the earlier of 180 days after the date of this prospectus and the opening of trading on the third trading day immediately following our public release of earnings for the second quarter following the most recent period for which financial statements are included in this prospectus (the “restricted period”), subject to specified exceptions, we or they will not, and will not publicly disclose an intention to, in each case without the prior written consent of Morgan Stanley & Co. LLC and Goldman Sachs & Co. LLC, offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right, or warrant to purchase, lend or otherwise transfer or dispose of, directly or indirectly, any shares of common stock or any securities convertible into or exercisable or exchangeable for shares of common stock, or enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of our common stock. Notwithstanding the foregoing:
| • | up to 25% of the shares of our outstanding common stock, shares of our common stock underlying vested RSUs and vested stock options exercisable for shares of our common stock held as of the date of the applicable lockup agreement by our current and former employees, consultants, and contractors (but excluding our current executive officers and directors and any other person who is a party to the Rights Agreement) (the “Employee Stockholders”) may be sold beginning on the opening of trading on the fifth trading day immediately following our public release of earnings for the first quarter following the most recent period for which financial statements are included in this prospectus; and |
| • | up to an additional 25% of the shares of our outstanding common stock, shares of our common stock underlying vested RSUs and vested stock options exercisable for shares of our common stock held as of the date of the applicable lockup agreement by non-Employee Stockholders (including our current executive officers and directors and any other person who is a party to the Rights Agreement) may be sold beginning on the opening of trading on the fifth trading immediately following our public release of earnings for the first quarter following the most recent period for which financial statements are included in this prospectus; provided that the last reported closing price of our common stock on the NYSE is at least 33% greater than the initial public offering price per share set forth on the cover page of this prospectus for any 10 trading days out of the 15-consecutive full trading day period ending on the closing of the second full trading day immediately following such earnings release. |
The lock-up agreements described above are subject to a number of exceptions, described in “Underwriters.” Upon the expiration of the restricted period, substantially all of the securities subject to such restrictions will become eligible for sale, subject to the limitations discussed above.
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Form S-8 Registration Statements
As soon as practicable after the completion of this offering, we intend to file with the SEC one or more registration statements on Form S-8 under the Securities Act to register the offer and sale of shares of our common stock that are issuable pursuant to the Predecessor Stock Incentive Plans, the 2021 Plan, and the ESPP. These registrations statements will become effective immediately upon filing. Shares covered by these registration statements will then be eligible for sale in the public markets, subject to vesting restrictions, any applicable lock-up agreements, including as described above, and Rule 144 limitations applicable to affiliates.
Registration Rights
Immediately prior to the closing of this offering, the holders of 73,489,068 shares of our common stock that will be issued upon conversion of all shares of redeemable convertible preferred stock outstanding as of December 31, 2020 will be entitled to rights with respect to the registration of their shares under the Securities Act, subject to the lock-up agreements described under “—Lock-Up Agreements” above. Registration of these shares under the Securities Act would result in the shares becoming freely tradable without restriction under the Securities Act, except for shares purchased by affiliates, immediately upon the effectiveness of the registration statement of which this prospectus is a part. Any sales of securities by these stockholders could have a material adverse effect on the trading price of our common stock. See “Description of Capital Stock—Registration Rights.”
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MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES
TO NON-U.S. HOLDERS OF OUR COMMON STOCK
The following is a summary of the material U.S. federal income tax considerations relating to the acquisition, ownership, and disposition of common stock acquired pursuant to this offering by non-U.S. holders (as defined below). This summary deals only with common stock held as a capital asset (within the meaning of Section 1221 of the Internal Revenue Code of 1986, as amended (the “Code”)) and does not discuss all of the U.S. federal income tax considerations applicable to a non-U.S. holder that is subject to special treatment under U.S. federal income tax laws, including, but not limited to: a dealer in securities or currencies; a broker-dealer; a financial institution; a qualified retirement plan, individual retirement plan, or other tax-deferred account; a regulated investment company; a real estate investment trust; a tax-exempt organization; an insurance company; a person holding common stock as part of a hedging, integrated, conversion, or straddle transaction or a person deemed to sell common stock under the constructive sale provisions of the Code; a trader in securities that has elected the mark-to-market method of tax accounting; an accrual method taxpayer subject to special tax accounting rules under Section 451(b) of the Code; an entity that is treated as a partnership for U.S. federal income tax purposes; a person that received such common stock in connection with services provided; a corporation that accumulates earnings to avoid U.S. federal income tax; a corporation organized outside the United States, any state thereof or the District of Columbia that is nonetheless treated as a U.S. corporation for U.S. federal income tax purposes; a person that is not a non-U.S. holder; a “controlled foreign corporation;” a “passive foreign investment company;” or a U.S. expatriate.
This summary is based upon provisions of the Code, its legislative history, applicable U.S. Treasury regulations promulgated thereunder, published rulings, and judicial decisions, all as in effect as of the date hereof. We have not sought, and will not seek, any ruling from the Internal Revenue Service, or IRS, with respect to the tax consequences discussed herein, and there can be no assurance that the IRS will not take a position contrary to the tax consequences discussed below or that any position taken by the IRS would not be sustained. Those authorities may be repealed, revoked, or modified, perhaps retroactively, or may be subject to differing interpretations, which could result in U.S. federal income tax consequences different from those discussed below. This summary does not address all aspects of U.S. federal income tax, does not deal with all tax considerations that may be relevant to stockholders in light of their personal circumstances, and does not address the Medicare tax imposed on certain investment income or any state, local, foreign, gift, estate (except to the limited extent set forth herein), or alternative minimum tax considerations.
For purposes of this discussion, a “U.S. holder” is a beneficial holder of common stock that is for U.S. federal income tax purposes: an individual citizen or resident of the United States; a corporation (or any other entity treated as a corporation for U.S. federal income tax purposes) created or organized in or under the laws of the United States, any state thereof or the District of Columbia; an estate the income of which is subject to U.S. federal income taxation regardless of its source; or a trust if it (1) is subject to the primary supervision of a court within the United States and one or more U.S. persons have the authority to control all substantial decisions of the trust, or (2) was in existence on August 20, 1996 and has a valid election in effect under applicable U.S. Treasury regulations to be treated as a U.S. person.
For purposes of this discussion, a “non-U.S. holder” is a beneficial owner of common stock that is neither a U.S. holder nor a partnership (or any other entity or arrangement that is treated as a partnership) for U.S. federal income tax purposes regardless of its place of organization or formation. If a partnership (or an entity or arrangement that is treated as a partnership for U.S. federal income tax purposes) holds common stock, the tax treatment of a partner will generally depend upon the status of the partner and the activities of the partnership. A partner of a partnership holding common stock is urged to consult its own tax advisors.
PROSPECTIVE INVESTORS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS CONCERNING THE U.S. FEDERAL INCOME, ESTATE, AND OTHER TAX CONSEQUENCES OF ACQUIRING, OWNING, AND DISPOSING OF OUR COMMON STOCK IN LIGHT OF THEIR
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SPECIFIC SITUATIONS, AS WELL AS THE TAX CONSEQUENCES ARISING UNDER ANY STATE, LOCAL, OR NON-U.S. TAX LAWS AND ANY OTHER U.S. FEDERAL TAX LAWS (INCLUDING THE U.S. FEDERAL ESTATE AND GIFT TAX LAWS).
Distributions on Our Common Stock
Distributions with respect to common stock, if any, generally will constitute dividends for U.S. federal income tax purposes to the extent paid out of current or accumulated earnings and profits, as determined for U.S. federal income tax purposes. Any portion of a distribution in excess of current or accumulated earnings and profits will be treated as a return of capital and will first be applied to reduce the holder’s tax basis in its common stock, but not below zero. Any remaining amount will then be treated as gain from the sale or exchange of the common stock and will be treated as described under “—Disposition of Our Common Stock” below.
Distributions treated as dividends that are paid to a non-U.S. holder, if any, with respect to shares of our common stock will be subject to U.S. federal withholding tax at a rate of 30% (or such lower rate as may be specified in an applicable income tax treaty) of the gross amount of the dividends unless the dividends are effectively connected with the non-U.S. holder’s conduct of a trade or business in the United States subject to the discussion below regarding foreign accounts. If a non-U.S. holder is engaged in a trade or business in the United States and dividends with respect to the common stock are effectively connected with the conduct of that trade or business and, if required by an applicable income tax treaty, are attributable to a U.S. permanent establishment, then although the non-U.S. holder will generally be exempt from the 30% U.S. federal withholding tax, provided certain certification requirements are satisfied, the non-U.S. holder will be subject to U.S. federal income tax on those dividends on a net income basis at regular graduated U.S. federal income tax rates in the same manner as if such holder were a resident of the United States. Any such effectively connected income received by a foreign corporation may, under certain circumstances, be subject to an additional branch profits tax equal to 30% (or lower applicable income tax treaty rate) of its effectively connected earnings and profits for the taxable year, as adjusted under the Code. To claim the exemption from withholding with respect to any such effectively connected income, the non-U.S. holder must generally furnish to us or our paying agent a properly executed IRS Form W-8ECI (or applicable successor form). In the case of a non-U.S. holder that is an entity, Treasury Regulations and the relevant tax treaty provide rules to determine whether, for purposes of determining the applicability of a tax treaty, dividends will be treated as paid to the entity or to those holding an interest in that entity. If a non-U.S. holder holds stock through a financial institution or other agent acting on the holder’s behalf, the holder will be required to provide appropriate documentation to such agent. Such holder’s agent will then be required to provide certification to us or our paying agent.
A non-U.S. holder of shares of common stock who wishes to claim the benefit of a reduced rate of withholding tax under an applicable treaty must furnish to us or our paying agent a valid IRS Form W-8BEN or IRS Form W-8BEN-E (or applicable successor form) certifying such holder’s qualification for the exemption or reduced rate. If a non-U.S. holder is eligible for a reduced rate of U.S. withholding tax pursuant to an income tax treaty and does not timely file the required certification, it may obtain a refund of any excess amounts withheld by timely filing an appropriate claim for refund with the IRS. Non-U.S. holders are urged to consult their tax advisors regarding their entitlement to benefits under a relevant income tax treaty.
Disposition of Our Common Stock
Subject to the discussion below regarding backup withholding, a non-U.S. holder generally will not be subject to U.S. federal income tax on any gain from a sale, exchange or other disposition of our stock unless: (a) that gain is effectively connected with the non-U.S. holder’s conduct of a trade or business in the United States (and, if required by an applicable income tax treaty, is attributable to a U.S. permanent establishment maintained by the non-U.S. holder); (b) the non-U.S. holder is a nonresident alien individual who is present in the United States for 183 days or more in the taxable year of that disposition, and certain other conditions are met; or (c) we are or have been a “United States real property holding corporation” within the meaning of Code
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Section 897(c)(2) for U.S. federal income tax purposes at any time during the shorter of the five-year period preceding the date of disposition or the holder’s holding period for our common stock, and certain other requirements are met. Although there can be no assurance, we believe that we are not, and we do not anticipate becoming, a United States real property holding corporation for U.S. federal income tax purposes. Even if we are treated as a United States real property holding corporation, gain realized by a non-U.S. holder on a disposition of our common stock will not be subject to U.S. federal income tax so long as (1) the non-U.S. holder owned, directly, indirectly and constructively, no more than five percent of our common stock at all times within the shorter of (x) the five-year period preceding the disposition, or (y) the holder’s holding period, and (2) our common stock is regularly traded on an established securities market. Although the NYSE qualifies as an established securities market, there can be no assurance that our common stock will continue to qualify as regularly traded on an established securities market. If any gain on your disposition is taxable because we are a United States real property holding corporation and your ownership of our common stock exceeds five percent, you will be taxed on such disposition generally in the manner applicable to U.S. persons and in addition, a purchaser of your common stock may be required to withhold tax with respect to that obligation.
If a non-U.S. holder is described in clause (a) of the preceding paragraph, the non-U.S. holder will generally be subject to tax on the net gain derived from the disposition at the regular graduated U.S. federal income tax rates in the same manner as if such non-U.S. holder were a U.S. person, unless an applicable income tax treaty provides otherwise. In addition, a non-U.S. holder that is a corporation may be subject to the branch profits tax at a rate equal to 30% (or lower applicable income tax treaty rate) of its effectively connected earnings and profits. If the non-U.S. holder is an individual described in clause (b) of the preceding paragraph, the non-U.S. holder will generally be subject to a flat 30% tax on the gain derived from the disposition, which may be offset by U.S. source capital losses even though the non-U.S. holder is not considered a resident of the United States, provided that the non-U.S. holder has timely filed U.S. federal income tax returns with respect to such losses.
U.S. Federal Estate Tax
The estate of a nonresident alien individual is generally subject to U.S. federal estate tax on property he or she is treated as the owner of, or has made certain life transfers of, having a U.S. situs. Because we are a U.S. corporation, our common stock will be U.S. situs property and therefore will be included in the taxable estate of a nonresident alien decedent for U.S. federal estate tax purposes, unless an applicable estate tax treaty between the United States and the decedent’s country of residence provides otherwise.
Information Reporting and Backup Withholding Tax
We report to our non-U.S. holders and the IRS certain information with respect to any dividends we pay on our common stock, including the amount of dividends paid during each fiscal year, the name and address of the recipient, and the amount, if any, of tax withheld. All distributions to holders of common stock are subject to any applicable withholding. Information reporting requirements apply even if no withholding was required because the distributions were effectively connected with the non-U.S. holder’s conduct of a U.S. trade or business or withholding was reduced by an applicable income tax treaty. This information also may be made available under a specific treaty or agreement with the tax authorities in the country in which the non-U.S. holder resides or is established. Under U.S. federal income tax law, interest, dividends, and other reportable payments may, under certain circumstances, be subject to “backup withholding” at the then applicable rate (currently, 24%). Backup withholding, however, generally will not apply to distributions on our common stock to a non-U.S. holder, provided the non-U.S. holder furnishes to us or our paying agent the required certification as to its non-U.S. status, such as by providing a valid IRS Form W-8BEN, IRS Form W-8BEN-E or IRS Form W-8ECI, or certain other requirements are met. Notwithstanding the foregoing, backup withholding may apply if either we or our paying agent has actual knowledge, or reason to know, that the holder is a U.S. person that is not an exempt recipient. Backup withholding is not an additional tax but merely an advance payment, which may be credited against the tax liability of persons subject to backup withholding or refunded to the extent it results in an overpayment of tax and the appropriate information is timely supplied to the IRS.
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Foreign Accounts
Certain withholding taxes may apply to certain types of payments made to “foreign financial institutions” (as specially defined under these rules) and certain other non-U.S. entities if certification, information reporting and other specified requirements are not met. A 30% withholding tax may apply to “withholdable payments” if they are paid to a foreign financial institution or to a non-financial foreign entity, unless (a) the foreign financial institution undertakes certain diligence and reporting obligations and other specified requirements are satisfied, or (b) the non-financial foreign entity either certifies it does not have any substantial U.S. owners or furnishes identifying information regarding each substantial U.S. owner and other specified requirements are satisfied. “Withholdable payment” generally means any payment of interest, dividends, rents, and certain other types of generally passive income if such payment is from sources within the United States. Treasury regulations proposed in December 2018 (and upon which taxpayers and withholding agents are entitled to rely) eliminate possible withholding under these rules on the gross proceeds from any sale or other disposition of our common stock, previously scheduled to apply beginning January 1, 2019. If the payee is a foreign financial institution, it must enter into an agreement with the U.S. Treasury requiring, among other things, that it undertake to identify accounts held by certain U.S. persons or U.S.-owned foreign entities, annually report certain information about such accounts and withhold 30% on payments to account holders whose actions prevent it from complying with these reporting and other requirements, or comply with comparable requirements under an applicable inter-governmental agreement between the United States and the foreign financial institution’s home jurisdiction. If an investor does not provide the information necessary to comply with these rules, it is possible that distributions to such investor that are attributable to withholdable payments, such as dividends, will be subject to the 30% withholding tax. Holders should consult their own tax advisers regarding the implications of these rules for their investment in our common stock.
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Under the terms and subject to the conditions in an underwriting agreement dated the date of this prospectus, the underwriters named below, for whom Morgan Stanley & Co. LLC and Goldman Sachs & Co. LLC are acting as representatives, have severally agreed to purchase, and we and the selling stockholders have agreed to sell to them, severally, the number of shares indicated below:
| Name |
Number of |
|||
| Morgan Stanley & Co. LLC |
||||
| Goldman Sachs & Co. LLC |
||||
| Citigroup Global Markets Inc. |
||||
| UBS Securities LLC |
||||
| KeyBanc Capital Markets Inc. |
||||
| Raymond James and Associates, Inc. |
||||
| Stifel, Nicolaus & Company, Incorporated |
||||
| Truist Securities, Inc. |
||||
| William Blair & Company, L.L.C. |
||||
| D.A. Davidson & Co. |
||||
| Needham & Company, LLC |
||||
| Loop Capital Markets LLC |
||||
| Telsey Advisory Group LLC |
||||
|
|
|
|||
| Total: |
15,730,000 | |||
|
|
|
|||
The underwriters and the representatives are collectively referred to as the “underwriters” and the “representatives,” respectively. The underwriters are offering the shares of common stock subject to their acceptance of the shares from us and subject to prior sale. The underwriting agreement provides that the obligations of the several underwriters to pay for and accept delivery of the shares of common stock offered by this prospectus are subject to the approval of certain legal matters by their counsel and to certain other conditions. The underwriters are obligated to take and pay for all of the shares of common stock offered by this prospectus if any such shares are taken. However, the underwriters are not required to take or pay for the shares covered by the underwriters’ option to purchase additional shares described below.
The underwriters initially propose to offer part of the shares of common stock directly to the public at the offering price listed on the cover page of this prospectus and part to certain dealers at the public offering price less a concession not to exceed $ per share. After the initial offering of the shares of common stock, the offering price and other selling terms may from time to time be varied by the representatives. The offering of the shares by the underwriters is subject to the receipt and acceptance and subject to the underwriters’ right to reject any order in whole or in part.
We have granted to the underwriters an option, exercisable for 30 days from the date of this prospectus, to purchase up to 2,359,500 additional shares of common stock at the public offering price listed on the cover page of this prospectus, less underwriting discounts and commissions. The underwriters may exercise this option solely for the purpose of covering over-allotments, if any, made in connection with the offering of the shares of common stock offered by this prospectus. To the extent the option is exercised, each underwriter will become obligated, subject to certain conditions, to purchase about the same percentage of the additional shares of common stock as the number listed next to the underwriter’s name in the preceding table bears to the total number of shares of common stock listed next to the names of all underwriters in the preceding table.
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The following table shows the per share and total public offering price, underwriting discounts and commissions, and proceeds before expenses to us and the selling stockholders. These amounts are shown assuming both no exercise and full exercise of the underwriters’ option to purchase up to an additional shares of common stock.
| Total | ||||||||||||
| Per Share |
No Exercise | Full Exercise |
||||||||||
| Public offering price |
$ | $ | $ | |||||||||
| Underwriting discounts and commissions to be paid by: |
||||||||||||
| Us |
$ | $ | $ | |||||||||
| The selling stockholders |
$ | $ | $ | |||||||||
| Proceeds, before expenses, to us |
$ | $ | $ | |||||||||
| Proceeds, before expenses, to selling stockholders |
$ | $ | $ | |||||||||
The estimated offering expenses payable by us, exclusive of the underwriting discounts and commissions, are approximately $5,600,000. We have agreed to reimburse the underwriters for expenses relating to clearance of this offering with the Financial Industry Regulatory Authority, Inc. (“FINRA”) up to $50,000.
The underwriters have informed us that they do not intend sales to discretionary accounts to exceed 5% of the total number of shares of common stock offered by them.
We intend to apply to list our common stock on the NYSE under the trading symbol “COUR”.
In connection with this offering, we and all directors and officers and the holders of substantially all of our outstanding equity securities have agreed that, without the prior written consent of each of Morgan Stanley & Co. LLC and Goldman Sachs & Co. LLC on behalf of the underwriters, we and they will not, and will not publicly disclose an intention to, during the restricted period as defined in “Shares Eligible for Future Sale”:
| • | offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, lend or otherwise transfer or dispose of, directly or indirectly, any shares of common stock or any securities convertible into or exercisable or exchangeable for shares of common stock; |
| • | file any registration statement with the SEC relating to the offering of any shares of common stock or any securities convertible into or exercisable or exchangeable for common stock; or |
| • | enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of the common stock; |
whether any such transaction described above is to be settled by delivery of common stock or such other securities, in cash or otherwise. In addition, we and each such person agrees that, (i) the foregoing precludes hedging or other transactions designed or intended to lead to or result in, or which could reasonably be expected to lead to or result in, a sale or disposition of such securities, and (ii) without the prior written consent of each of Morgan Stanley & Co. LLC and Goldman Sachs & Co. LLC on behalf of the underwriters, we or such other person will not, during the restricted period, make any demand for, or exercise any right with respect to, the registration of any shares of common stock or any security convertible into or exercisable or exchangeable for common stock. Notwithstanding the foregoing:
| • | up to 25% of the shares of our outstanding common stock, shares of our common stock underlying vested RSUs and vested stock options exercisable for shares of our common stock held as of the date of the applicable lockup agreement by our current and former employees, consultants, and contractors (but excluding our current executive officers and directors and any other person who is a party to the Rights Agreement) (the “Employee Stockholders”) may be sold beginning on the opening of trading on the fifth trading day immediately following our public release of earnings for the first quarter following the most recent period for which financial statements are included in this prospectus; and |
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| • | up to an additional 25% of the shares of our outstanding common stock, shares of our common stock underlying vested RSUs and vested stock options exercisable for shares of our common stock held as of the date of the applicable lockup agreement by non-Employee Stockholders (including our current executive officers and directors and any other person who is a party to the Rights Agreement) may be sold beginning on the opening of trading on the fifth trading immediately following our public release of earnings for the first quarter following the most recent period for which financial statements are included in this prospectus; provided that the last reported closing price of our common stock on the NYSE is at least 33% greater than the initial public offering price per share set forth on the cover page of this prospectus for any 10 trading days out of the 15-consecutive full trading day period ending on the closing of the second full trading day immediately following such earnings release. |
The restrictions on our directors, officers, and the holders of substantially all of our outstanding equity securities described in the immediately preceding paragraph are subject to certain exceptions, including:
| • | the sale of shares to the underwriters in connection with this offering; |
| • | transfers of common stock or securities convertible into or exercisable or exchangeable for shares of common stock as a bond fide gift or, upon the death of the signatory, by will or intestacy; provided that no public announcement or filing under Section 16(a) of the Exchange Act, or any other public filing or disclosure, shall be made during the restricted period unless such filing is required and clearly indicates in the footnotes thereto that the transfer is by bona fide gift, will, or intestacy, as applicable; |
| • | distributions of shares of common stock or any security convertible into common stock to limited partners, memebers, or stockholders, or any entity that controls, is controlled by, or is under common control with the signatory; provided no public announcement or filing under Section 16(a) of the Exchange Act or any other public filing or disclosure reporting a reduction in beneficial ownership of shares of common stock shall be required or shall be voluntarily made during the restricted period; |
| • | transactions relating to shares of common stock or securities convertible into or exercisable or exchangeable for shares of common stock acquired in open market transactions after the completion of the offering of the shares; provided that no filing under Section 16(a) of the Exchange Act is required or voluntarily made in connection with subsequent sales of the common stock or such other securities acquired in such open market transactions; |
| • | the establishment of a trading plan pursuant to Rule 10b5-1 under the Exchange Act for the transfer of shares of common stock, provided that (i) such plan does not provide for the transfer of common stock during the restricted period (except as may be otherwise permitted by the lock-up agreement), and (ii) to the extent a public announcement or filing under the Exchange Act, if any, is required of or voluntarily made regarding the establishment of such plan, such announcement or filing shall include a statement to the effect that no transfer of common stock may be made under such plan during the restricted period; |
| • | transfers of common stock or securities convertible into or exercisable or exchangeable for shares of common stock that occur by operation of law pursuant to a qualified domestic order in connection with a divorce settlement or other court order; provided that no public announcement or filing under Section 16(a) of the Exchange Act, or any other public filing or disclosure, shall be made during the restricted period, unless such filing is required and clearly indicates in the footnotes thereto that the transfer is by operation of law, court order, or in connection with a divorce settlement, as the case may be; |
| • | dispositions to any trust the beneficiaries of which are the signatory or immediate family members of the signatory, or, if the signatory is a trust, to any beneficiaries of such trust; provided that no public announcement or other filing under Section 16(a) of the Exchange Act, or any other public filing or disclosure reporting a reduction in beneficial ownership of shares of common stock, shall be required or shall be voluntarily made during the restricted period; |
| • | transfers to an immediate family member or a trust formed for the benefit of an immediate family member; provided that no public announcement or other filing under Section 16(a) of the Exchange |
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| Act, or any other public filing or disclosure reporting a reduction in beneficial ownership of shares of common stock, shall be required or shall be voluntarily made during the restricted period; |
| • | transfers to us upon a vesting event of RSUs or upon the exercise of stock options on a “cashless” or “net exercise” basis, subject to certain conditions; provided that the shares received upon such vesting event or exercise shall continue to be subject to the restrictions described above and that no public announcement or filing under Section 16(a) of the Exchange Act or any other public filing or disclosure shall be made during the restricted period, unless such filing is required and clearly indicates in the footnotes thereto that the filing relates to such cashless or net exercise and no shares were sold by the reporting person; and |
| • | transfers of common stock or securities convertible into or exercisable or exchangeable for shares of common stock in connection with a change of control. |
The restrictions on us described above are subject to certain exceptions, including:
| • | the sale of the shares to the underwriters in connection with this offering; |
| • | the issuance by us of shares of common stock upon the exercise of an option or warrant, the vesting and settlement of an RSU, or the conversion of any other security outstanding on the date of this prospectus, in each case that are described in this prospectus; |
| • | grants of stock options, stock appreciation rights, restricted stock, restricted stock units, deferred stock units or other stock-based awards pursuant to the 2021 Plan; |
| • | issuances of common stock pursuant to an employee stock purchase plan described in this prospectus and the filing of one or more registration statements on Form S-8 in connection therewith; and |
| • | the establishment of a trading plan pursuant to Rule 10b5-1 under the Exchange Act for the transfer of shares of common stock, provided that (i) such plan does not provide for the transfer of common stock during the restricted period and (ii) to the extent a public announcement or filing under the Exchange Act, if any, is required or voluntarily made regarding the establishment of such plan, such announcement or filing shall include a statement to the effect that no transfer of common stock may be made under such plan during the restricted period. |
Certain of the exceptions described above are subject to a requirement that the transferee enter into a lock-up agreement with the underwriters containing similar restrictions. Morgan Stanley & Co. LLC and Goldman Sachs & Co. LLC, in their sole discretion, may release the common stock and other securities subject to the lock-up agreements described above in whole or in part at any time.
In order to facilitate the offering of the common stock, the underwriters may engage in transactions that stabilize, maintain or otherwise affect the price of the common stock. Specifically, the underwriters may sell more shares than they are obligated to purchase under the underwriting agreement, creating a short position. A short sale is covered if the short position is no greater than the number of shares available for purchase by the underwriters under the option to purchase additional shares. The underwriters can close out a covered short sale by exercising the option to purchase additional shares or purchasing shares in the open market. In determining the source of shares to close out a covered short sale, the underwriters will consider, among other things, the open market price of shares compared to the price available under the option to purchase additional shares. The underwriters may also sell shares in excess of the option to purchase additional shares, creating a naked short position. The underwriters must close out any naked short position by purchasing shares in the open market. A naked short position is more likely to be created if the underwriters are concerned that there may be downward pressure on the price of the common stock in the open market after pricing that could adversely affect investors who purchase in this offering. As an additional means of facilitating this offering, the underwriters may bid for, and purchase, shares of common stock in the open market to stabilize the price of the common stock. These activities may raise or maintain the market price of the common stock above independent market levels or prevent or retard a decline in the market price of the common stock. The underwriters are not required to engage in these activities and may end any of these activities at any time.
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We, the selling stockholders and the underwriters have agreed to indemnify each other against certain liabilities, including liabilities under the Securities Act.
A prospectus in electronic format may be made available on websites maintained by one or more underwriters, or selling group members, if any, participating in this offering. The representatives may agree to allocate a number of shares of common stock to underwriters for sale to their online brokerage account holders. Internet distributions will be allocated by the representatives to underwriters that may make Internet distributions on the same basis as other allocations.
The underwriters and their respective affiliates are full service financial institutions engaged in various activities, which may include securities trading, commercial and investment banking, financial advisory, investment management, investment research, principal investment, hedging, financing and brokerage activities. Certain of the underwriters and their respective affiliates have, from time to time, performed, and may in the future perform, various financial advisory and investment banking services for us, for which they received or will receive customary fees and expenses.
In addition, in the ordinary course of their various business activities, the underwriters and their respective affiliates may make or hold a broad array of investments and actively trade debt and equity securities (or related derivative securities) and financial instruments (including bank loans) for their own account and for the accounts of their customers and may at any time hold long and short positions in such securities and instruments. Such investment and securities activities may involve our securities and instruments. The underwriters and their respective affiliates may also make investment recommendations or publish or express independent research views in respect of such securities or instruments and may at any time hold, or recommend to clients that they acquire, long or short positions in such securities and instruments.
Pricing of the Offering
Prior to this offering, there has been no public market for our common stock. The initial public offering price will be determined by negotiations between us and the representatives. Among the factors considered in determining the initial public offering price will be our future prospects and those of our industry in general, our sales, earnings and certain other financial and operating information in recent periods, and the price-earnings ratios, price-sales ratios, market prices of securities, and certain financial and operating information of companies engaged in activities similar to ours.
Selling Restrictions
European Economic Area and United Kingdom
In relation to each Member State of the European Economic Area and the United Kingdom (each a “Relevant State”), no common shares (the “Shares”) have been offered or will be offered pursuant to the offering to the public in that Relevant State prior to the publication of a prospectus in relation to the Shares which has been approved by the competent authority in that Relevant State or, where appropriate, approved in another Relevant State and notified to the competent authority in that Relevant State, all in accordance with the Prospectus Regulation, except that offers of Shares may be made to the public in that Relevant State at any time under the following exemptions under the Prospectus Regulation:
(a) to any legal entity which is a qualified investor as defined under the Prospectus Regulation;
(b) to fewer than 150 natural or legal persons (other than qualified investors as defined under the Prospectus Regulation), subject to obtaining the prior consent of the representatives for any such offer; or
(c) in any other circumstances falling within Article 1(4) of the Prospectus Regulation,
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provided that no such offer of Shares shall require us or any representative to publish a prospectus pursuant to Article 3 of the Prospectus Regulation or supplement a prospectus pursuant to Article 23 of the Prospectus Regulation.
For the purposes of this provision, the expression an “offer to the public” in relation to any Shares in any Relevant State means the communication in any form and by any means of sufficient information on the terms of the offer and any Shares to be offered so as to enable an investor to decide to purchase or subscribe for any Shares, and the expression “Prospectus Regulation” means Regulation (EU) 2017/1129 (as amended).
United Kingdom
Each underwriter has represented and agreed that:
(a) it has only communicated or caused to be communicated and will only communicate or cause to be communicated an invitation or inducement to engage in investment activity (within the meaning of Section 21 of the Financial Services and Markets Act 2000 (as amended, the “FSMA”)) received by it in connection with the issue or sale of the shares of our common stock in circumstances in which Section 21(1) of the FSMA does not apply to us or the selling stockholders; and
(b) it has complied and will comply with all applicable provisions of the FSMA with respect to anything done by it in relation to the shares of our common stock in, from or otherwise involving the United Kingdom.
Switzerland
This prospectus is not intended to constitute an offer or solicitation to purchase or invest in the shares of common stock. The shares may not be publicly offered, directly or indirectly, in Switzerland within the meaning of the Swiss Financial Services Act (“FinSA”) and no application has or will be made to admit the shares to trading on any trading venue (exchange or multilateral trading facility) in Switzerland. Neither this prospectus nor any other offering or marketing material relating to the shares constitutes a prospectus pursuant to the FinSA, and neither this prospectus nor any other offering or marketing material relating to the shares may be publicly distributed or otherwise made publicly available in Switzerland.
France
Neither this prospectus nor any other offering material relating to the shares described in this prospectus has been submitted to the clearance procedures of the Autorité des Marchés Financiers or of the competent authority of another member state of the European Economic Area and notified to the Autorité des Marchés Financiers. The shares have not been offered or sold and will not be offered or sold, directly or indirectly, to the public in France. Neither this prospectus nor any other offering material relating to the shares has been or will be (1) released, issued, distributed or caused to be released, issued or distributed to the public in France; or (2) used in connection with any offer for subscription or sale of the shares to the public in France.
Such offers, sales and distributions will be made in France only:
(a) to qualified investors (investisseurs estraint) and/or to a restricted circle of investors (cercle estraint d’investisseurs), in each case investing for their own account, all as defined in, and in accordance with, articles L.411-2, D.411-1, D.411-2, D.734-1, D.744-1, D.754-1 and D.764-1 of the French Code monétaire et financier;
(b) to investment services providers authorized to engage in portfolio management on behalf of third parties; or
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(c) in a transaction that, in accordance with article L.411-2-II-1° -or-2° -or 3° of the French Code monétaire et financier and article 211-2 of the General Regulations (Réglement Général) of the Autorité des Marchés Financiers, does not constitute a public offer (appel public á l’épargne).
The shares may be resold directly or indirectly, only in compliance with articles L.411-1, L.411-2, L412-1 and L.621-8 through L.621-8-3 of the French Code monétaire et financier.
Canada
The shares of common stock may be sold in Canada only to purchasers purchasing, or deemed to be purchasing, as principal that are accredited investors, as defined in National Instrument 45-106 Prospectus Exemptions or subsection 73.3(1) of the Securities Act (Ontario), and are permitted clients, as defined in National Instrument 31-103 Registration Requirements, Exemptions, and Ongoing Registrant Obligations. Any resale of the shares of common stock must be made in accordance with an exemption from, or in a transaction not subject to, the prospectus requirements of applicable securities laws.
Securities legislation in certain provinces or territories of Canada may provide a purchaser with remedies for rescission or damages if this prospectus (including any amendment thereto) contains a misrepresentation, provided that the remedies for rescission or damages are exercised by the purchaser within the time limit prescribed by the securities legislation of the purchaser’s province or territory. The purchaser should refer to any applicable provisions of the securities legislation of the purchaser’s province or territory for particulars of these rights or consult with a legal advisor.
Pursuant to section 3A.3 of National Instrument 33-105 Underwriting Conflicts (NI 33-105), the underwriters are not required to comply with the disclosure requirements of NI 33-105 regarding underwriter conflicts of interest in connection with this offering.
Chile
The shares of our common stock offered by this prospectus are not registered in the Securities Registry (Registro de Valores) or subject to the control of the Chilean Securities and Exchange Commission (Superintendencia de Valores y Seguros de Chile). This prospectus supplement and other offering materials relating to the offer of the shares do not constitute a public offer of, or an invitation to subscribe for or purchase, the shares in the Republic of Chile, other than to individually identified purchasers pursuant to a private offering within the meaning of Article 4 of the Chilean Securities Market Act (Ley de Mercado de Valores) (an offer that is not “addressed to the public at large or to a certain sector or specific group of the public”).
Brazil
No securities may be offered or sold in Brazil, except in circumstances that do not constitute a public offering or unauthorized distribution under Brazilian laws and regulations. The securities have not been, and will not be, registered with the Comissão de Valores Mobiliários.
Australia
No placement document, prospectus, product disclosure statement, or other disclosure document has been lodged with the Australian Securities and Investments Commission (the “ASIC”) in relation to this offering. This prospectus does not constitute a prospectus, product disclosure statement, or other disclosure document under the Corporations Act 2001 (the “Corporations Act”) and does not purport to include the information required for a prospectus, product disclosure statement, or other disclosure document under the Corporations Act.
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Any offer in Australia of our common stock may only be made to persons, or Exempt Investors, who are “sophisticated investors” (within the meaning of section 708(8) of the Corporations Act), “professional investors” (within the meaning of section 708(11) of the Corporations Act), or otherwise pursuant to one or more exemptions contained in section 708 of the Corporations Act so that it is lawful to offer our common stock without disclosure to investors under Chapter 6D of the Corporations Act.
The common stock applied for by Exempt Investors in Australia must not be offered for sale in Australia in the period of twelve months after the date of allotment under the offering, except in circumstances where disclosure to investors under Chapter 6D of the Corporations Act would not be required pursuant to an exemption under section 708 of the Corporations Act or otherwise or where the offer is pursuant to a disclosure document which complies with Chapter 6D of the Corporations Act. Any person acquiring securities must observe such Australian on-sale restrictions.
This prospectus contains general information only and does not take account of the investment objectives, financial situation, or particular needs of any particular person. It does not contain any securities recommendations or financial product advice. Before making an investment decision, investors need to consider whether the information in this prospectus is appropriate to their needs, objectives and circumstances, and, if necessary, seek expert advice on those matters.
China
This prospectus does not constitute a public offer of shares, whether by sale or subscription, in the People’s Republic of China (the “PRC”). The shares are not being offered or sold directly or indirectly in the PRC to or for the benefit of, legal or natural persons of the PRC.
Further, no legal or natural persons of the PRC may directly or indirectly purchase any of the shares of common stock offered by this prospectus or any beneficial interest therein without obtaining all prior PRC’s governmental approvals that are required, whether statutorily or otherwise. Persons who come into possession of this document are required by the issuer and its representatives to observe these restrictions.
Hong Kong
Shares of our common stock may not be offered or sold in Hong Kong by means of any document other than (i) in circumstances which do not constitute an offer to the public within the meaning of the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Cap. 32 of the Laws of Hong Kong) (“Companies (Winding Up and Miscellaneous Provisions) Ordinance”) or which do not constitute an invitation to the public within the meaning of the Securities and Futures Ordinance (Cap. 571 of the Laws of Hong Kong) (“Securities and Futures Ordinance”), or (ii) to “professional investors” as defined in the Securities and Futures Ordinance and any rules made thereunder, or (iii) in other circumstances which do not result in the document being a “prospectus” as defined in the Companies (Winding Up and Miscellaneous Provisions) Ordinance, and no advertisement, invitation or document relating to shares of our common stock may be issued or may be in the possession of any person for the purpose of issue (in each case whether in Hong Kong or elsewhere), which is directed at, or the contents of which are likely to be accessed or read by, the public in Hong Kong (except if permitted to do so under the securities laws of Hong Kong) other than with respect to shares of our common stock which are or are intended to be disposed of only to persons outside Hong Kong or only to “professional investors” in Hong Kong as defined in the Securities and Futures Ordinance and any rules made thereunder.
Singapore
This prospectus has not been registered as a prospectus with the Monetary Authority of Singapore. Accordingly, this prospectus and any other document or material in connection with the offer or sale, or invitation for subscription or purchase, of shares of our common stock may not be circulated or distributed, nor may the shares of our common stock be offered or sold, or be made the subject of an invitation for subscription
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or purchase, whether directly or indirectly, to persons in Singapore other than (i) to an institutional investor (as defined under Section 4A of the Securities and Futures Act, Chapter 289 of Singapore (the “SFA”)) under Section 274 of the SFA, (ii) to a relevant person (as defined in Section 275(2) of the SFA) pursuant to Section 275(1) of the SFA, or any person pursuant to Section 275(1A) of the SFA, and in accordance with the conditions specified in Section 275 of the SFA or (iii) otherwise pursuant to, and in accordance with the conditions of, any other applicable provision of the SFA, in each case subject to conditions set forth in the SFA.
Where shares of our common stock are subscribed or purchased under Section 275 of the SFA by a relevant person which is a corporation (which is not an accredited investor (as defined in Section 4A of the SFA)) the sole business of which is to hold investments and the entire share capital of which is owned by one or more individuals, each of whom is an accredited investor, the securities (as defined in Section 239(1) of the SFA) of that corporation shall not be transferable for 6 months after that corporation has acquired shares of our common stock under Section 275 of the SFA except: (1) to an institutional investor under Section 274 of the SFA or to a relevant person (as defined in Section 275(2) of the SFA), (2) where such transfer arises from an offer in that corporation’s securities pursuant to Section 275(1A) of the SFA, (3) where no consideration is or will be given for the transfer, (4) where the transfer is by operation of law, (5) as specified in Section 276(7) of the SFA, or (6) as specified in Regulation 32 of the Securities and Futures (Offers of Investments) (Shares and Debentures) Regulations 2005 of Singapore (“Regulation 32”).
Where shares of our common stock are subscribed or purchased under Section 275 of the SFA by a relevant person which is a trust (where the trustee is not an accredited investor (as defined in Section 4A of the SFA)) whose sole purpose is to hold investments and each beneficiary of the trust is an accredited investor, the beneficiaries’ rights and interest (howsoever described) in that trust shall not be transferable for 6 months after that trust has acquired shares of our common stock under Section 275 of the SFA except: (1) to an institutional investor under Section 274 of the SFA or to a relevant person (as defined in Section 275(2) of the SFA), (2) where such transfer arises from an offer that is made on terms that such rights or interest are acquired at a consideration of not less than S$200,000 (or its equivalent in a foreign currency) for each transaction (whether such amount is to be paid for in cash or by exchange of securities or other assets), (3) where no consideration is or will be given for the transfer, (4) where the transfer is by operation of law, (5) as specified in Section 276(7) of the SFA, or (6) as specified in Regulation 32.
Japan
The securities have not been and will not be registered under the Financial Instruments and Exchange Act of Japan (Act No. 25 of 1948, as amended), or the FIEA. The securities may not be offered or sold, directly or indirectly, in Japan or to or for the benefit of any resident of Japan (including any person resident in Japan or any corporation or other entity organized under the laws of Japan) or to others for reoffering or resale, directly or indirectly, in Japan or to or for the benefit of any resident of Japan, except pursuant to an exemption from the registration requirements of the FIEA and otherwise in compliance with any relevant laws and regulations of Japan.
South Korea
The shares of common stock offered by this prospectus have not been and will not be registered under the Financial Investments Services and Capital Markets Act of South Korea and the decrees and regulations thereunder (the “FSCMA”), and the shares have been and will be offered in South Korea as a private placement under the FSCMA. None of the shares may be offered, sold or delivered directly or indirectly, or offered or sold to any person for re-offering or resale, directly or indirectly, in South Korea or to any resident of South Korea except pursuant to the applicable laws and regulations of South Korea, including the FSCMA and the Foreign Exchange Transaction Law of Korea and the decrees and regulations thereunder (the “FETL”). Furthermore, the purchaser of the shares will comply with all applicable regulatory requirements (including but not limited to requirements under the FETL) in connection with the purchase of the shares. By the purchase of the shares, the relevant holder thereof will be deemed to represent and warrant that if it is in South Korea or is a resident of South Korea, it purchased the shares pursuant to the applicable laws and regulations of South Korea.
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Taiwan
The shares of common stock offered by this prospectus have not been and will not be registered with the Financial Supervisory Commission of Taiwan pursuant to relevant securities laws and regulations and may not be sold, issued or offered within Taiwan through a public offering or in circumstances which constitutes an offer within the meaning of the Securities and Exchange Act of Taiwan that requires a registration or approval of the Financial Supervisory Commission of Taiwan. No person or entity in Taiwan has been authorized to offer, sell, give advice regarding or otherwise intermediate the offering and sale of the shares in Taiwan.
Malaysia
No prospectus or other offering material or document in connection with the offer and sale of the shares of common stock offered by this prospectus has been or will be registered with the Securities Commission of Malaysia (“Commission”) for the Commission’s approval pursuant to the Capital Markets and Services Act 2007. Accordingly, this prospectus and any other document or material in connection with the offer or sale, or invitation for subscription or purchase, of the shares may not be circulated or distributed, nor may the shares be offered or sold, or be made the subject of an invitation for subscription or purchase, whether directly or indirectly, to persons in Malaysia other than (i) a closed end fund approved by the Commission; (ii) a holder of a Capital Markets Services License; (iii) a person who acquires the shares, as principal, if the offer is on terms that the shares may only be acquired at a consideration of not less than RM250,000 (or its equivalent in foreign currencies) for each transaction; (iv) an individual whose total net personal assets or total net joint assets with his or her spouse exceeds RM3 million (or its equivalent in foreign currencies), excluding the value of the primary residence of the individual; (v) an individual who has a gross annual income exceeding RM300,000 (or its equivalent in foreign currencies) per annum in the preceding twelve months; (vi) an individual who, jointly with his or her spouse, has a gross annual income of RM400,000 (or its equivalent in foreign currencies), per annum in the preceding twelve months; (vii) a corporation with total net assets exceeding RM10 million (or its equivalent in a foreign currencies) based on the last audited accounts; (viii) a partnership with total net assets exceeding RM10 million (or its equivalent in foreign currencies); (ix) a bank licensee or insurance licensee as defined in the Labuan Financial Services and Securities Act 2010; (x) an Islamic bank licensee or takaful licensee as defined in the Labuan Financial Services and Securities Act 2010; and (xi) any other person as may be specified by the Commission; provided that, in the each of the preceding categories (i) to (xi), the distribution of the shares is made by a holder of a Capital Markets Services License who carries on the business of dealing in securities. The distribution in Malaysia of this prospectus is subject to Malaysian laws. This prospectus does not constitute and may not be used for the purpose of public offering or an issue, offer for subscription or purchase, invitation to subscribe for or purchase any securities requiring the registration of a prospectus with the Commission under the Capital Markets and Services Act 2007.
Dubai International Financial Centre
This prospectus relates to an Exempt Offer in accordance with the Offered Securities Rules of the Dubai Financial Services Authority, or DFSA. This prospectus is intended for distribution only to persons of a type specified in the Offered Securities Rules of the DFSA. It must not be delivered to, or relied on by, any other person. The DFSA has no responsibility for reviewing or verifying any documents in connection with Exempt Offers. The DFSA has not approved this prospectus nor taken steps to verify the information set forth herein and has no responsibility for the prospectus. The shares to which this prospectus relates may be illiquid and/or subject to restrictions on their resale. Prospective purchasers of the shares offered should conduct their own due diligence on the shares. If you do not understand the contents of this prospectus you should consult an authorized financial advisor.
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United Arab Emirates
The shares of common stock offered by this prospectus have not been, and are not being, publicly offered, sold, promoted or advertised in the United Arab Emirates (including the Dubai International Financial Centre) other than in compliance with the laws of the United Arab Emirates (and the Dubai International Financial Centre) governing the issue, offering and sale of securities. Further, this prospectus does not constitute a public offer of securities in the United Arab Emirates (including the Dubai International Financial Centre) and is not intended to be a public offer. This prospectus has not been approved by or filed with the Central Bank of the United Arab Emirates, the Securities and Commodities Authority or the Dubai Financial Services Authority.
South Africa
Due to restrictions under the securities laws of South Africa, the shares are not offered, and the offer will not be transferred, sold, renounced or delivered, in South Africa or to a person with an address in South Africa, unless one or other of the following exemptions applies:
(a) the offer, transfer, sale, renunciation or delivery is to:
(i) persons whose ordinary business is to deal in securities, as principal or agent;
(ii) the South African Public Investment Corporation;
(iii) persons or entities regulated by the Reverse Bank of South Africa;
(iv) authorized financial service providers under South African law;
(v) financial institutions recognized as such under South African law;
(vi) a wholly-owned subsidiary of any person or entity contemplated in (iii), (iv) or (v), acting as agent in the capacity of an authorized portfolio manager for a pension fund or collective investment scheme (in each case duly registered as such under South African law); or
(vii) any combination of the person in (i) to (vi); or
(b) the total contemplated acquisition cost of the securities, for any single addressee acting as principal is equal to or greater than ZAR1,000,000.
No “offer to the public” (as such term is defined in the South African Companies Act, No. 71 of 2008 (as amended or re-enacted) (the “South African Companies Act”)) in South Africa is being made in connection with the issue of the shares. Accordingly, this document does not, nor is it intended to, constitute a “registered prospectus” (as that term is defined in the South African Companies Act) prepared and registered under the South African Companies Act and has not been approved by, and/or filed with, the South African Companies and Intellectual Property Commission or any other regulatory authority in South Africa. Any issue or offering of the shares in South Africa constitutes an offer of the shares in South Africa for subscription or sale in South Africa only to persons who fall within the exemption from “offers to the public” set out in Section 96(1)(a) of the South African Companies Act. Accordingly, this document must not be acted on or relied on by persons in South Africa who do not fall within Section 96(1)(a) of the South African Companies Act (such persons being referred to as “SA Relevant Persons”). Any investment or investment activity to which this document relates is available in South Africa only to SA Relevant Persons and will be engaged in South Africa only with SA Relevant Persons.
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The validity of the shares of common stock being offered by this prospectus will be passed upon for us by Pillsbury Winthrop Shaw Pittman LLP, Palo Alto, California, and for the selling stockholders by Whalen LLP, Newport Beach, California. Davis Polk & Wardwell LLP, Menlo Park, California, is acting as counsel to the underwriters in connection with the offering.
The consolidated financial statements as of December 31, 2019 and 2020 and for each of the two years in the period ended December 31, 2020, included in this prospectus, have been audited by Deloitte & Touche LLP, an independent registered public accounting firm, as stated in their report appearing herein. Such consolidated financial statements are included in reliance upon the report of such firm given upon their authority as experts in accounting and auditing.
WHERE YOU CAN FIND ADDITIONAL INFORMATION
We have filed with the SEC a registration statement on Form S-1, including exhibits and schedules, under the Securities Act, with respect to the shares of common stock being offered by this prospectus. This prospectus, which constitutes part of the registration statement, does not contain all of the information in the registration statement and its exhibits. For further information with respect to us and the common stock offered by this prospectus, we refer you to the registration statement and its exhibits. Statements contained in this prospectus as to the contents of any contract or any other document referred to are not necessarily complete, and in each instance, we refer you to the copy of the contract or other document filed as an exhibit to the registration statement. Each of these statements is qualified in all respects by this reference.
You can read our SEC filings, including the registration statement, over the Internet at the SEC’s website at www.sec.gov. You may also request a copy of these filings, at no cost, by writing us at 381 E. Evelyn Ave. Mountain View, California 94041.
Upon completion of this offering, we will be subject to the information reporting requirements of the Exchange Act and we will file reports, proxy statements and other information with the SEC. These reports, proxy statements and other information will be available at the web site of the SEC referred to above. We also maintain a website at www.coursera.org, at which, following the completion of this offering, you may access these materials free of charge as soon as reasonably practicable after they are electronically filed with, or furnished to, the SEC. Information contained on or accessible through our website is not a part of or incorporated by reference into this prospectus or the registration statement of which it was a part, and the inclusion of our website address in this prospectus is an inactive textual reference only.
Following the completion of this offering, we intend to announce material information to the public through filings with the SEC, the investor relations page on our website (www.coursera.org), press releases, public conference calls, and public webcasts. Any updates to the list of disclosure channels through which we will announce information will be posted on the investor relations page on our website.
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and the Board of Directors of Coursera, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Coursera, Inc. and subsidiaries (the “Company”) as of December 31, 2019 and 2020, the related consolidated statements of operations, comprehensive loss, redeemable convertible preferred stock and stockholders’ deficit, and cash flows, for each of the two years in the period ended December 31, 2020, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2019 and 2020, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2020, in conformity with accounting principles generally accepted in the United States of America.
Change in Accounting Principle
As discussed in Note 2 to the financial statements, the Company has changed its method of accounting for leases in fiscal year 2020 due to the adoption of Accounting Standards Update 2016-02, Leases, and related amendments (collectively, “ASC 842”).
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ DELOITTE & TOUCHE LLP
San Jose, California
February 24, 2021
We have served as the Company’s auditor since 2013.
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COURSERA, INC. AND SUBSIDIARIES
As of December 31, 2019 and 2020
(In thousands, except share and per share amounts)
| 2019 | 2020 | Pro Forma December 31, 2020 |
||||||||||
| (unaudited) | ||||||||||||
| Assets |
||||||||||||
| Current assets: |
||||||||||||
| Cash and cash equivalents |
$ | 55,986 | $ | 79,878 | ||||||||
| Marketable securities |
116,829 | 205,402 | ||||||||||
| Accounts receivable, net of allowance for doubtful accounts of $28 and $48 as of December 31, 2019 and 2020, respectively |
16,656 | 40,721 | ||||||||||
| Deferred costs |
7,664 | 14,077 | ||||||||||
| Prepaid expenses and other current assets |
9,376 | 14,993 | ||||||||||
|
|
|
|
|
|||||||||
| Total current assets |
206,511 | 355,071 | ||||||||||
| Property, equipment and software, net |
14,043 | 18,644 | ||||||||||
| Operating lease right-of-use assets |
— | 21,622 | ||||||||||
| Intangible assets, net |
8,085 | 10,570 | ||||||||||
| Restricted cash |
3,090 | 2,548 | ||||||||||
| Other assets |
4,534 | 9,169 | ||||||||||
|
|
|
|
|
|||||||||
| Total assets |
$ | 236,263 | $ | 417,624 | ||||||||
|
|
|
|
|
|||||||||
| Liabilities, Redeemable Convertible Preferred Stock, and Stockholders’ (Deficit) Equity |
||||||||||||
| Current liabilities: |
||||||||||||
| Educator partners payable |
$ | 21,032 | $ | 39,005 | ||||||||
| Other accounts payable |
5,374 | 12,897 | ||||||||||
| Accrued compensation and benefits |
8,079 | 12,997 | ||||||||||
| Operating lease liabilities, current |
— | 7,926 | ||||||||||
| Deferred revenue, current |
39,204 | 76,080 | ||||||||||
| Other current liabilities |
9,304 | 4,739 | ||||||||||
|
|
|
|
|
|||||||||
| Total current liabilities |
82,993 | 153,644 | ||||||||||
| Operating lease liabilities, non-current |
— | 18,305 | ||||||||||
| Other liabilities |
5,185 | 644 | ||||||||||
| Deferred revenue, non-current |
2,403 | 4,562 | ||||||||||
|
|
|
|
|
|||||||||
| Total liabilities |
90,581 | 177,155 | ||||||||||
|
|
|
|
|
|||||||||
| Commitments and contingencies (Note 12) |
||||||||||||
| Redeemable convertible preferred stock: |
||||||||||||
| $0.00001 par value—authorized, 68,030,844 and 76,420,805 shares as of December 31, 2019 and 2020, respectively; issued and outstanding, 67,658,342 and 75,305,400 shares as of December 31, 2019 and 2020, respectively; and aggregate liquidation preference, $334,036 and $464,036 as of December 31, 2019 and 2020, respectively; 10,000,000 shares authorized, no shares issued and outstanding as of December 31, 2020, pro forma (unaudited) |
332,681 | 462,293 | — | |||||||||
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| 2019 | 2020 | Pro Forma December 31, 2020 |
||||||||||
| (unaudited) | ||||||||||||
| Stockholders’ (deficit) equity: |
||||||||||||
| Common stock, $0.00001 par value—authorized, 117,000,000 and 162,000,000 shares as of December 31, 2019 and 2020, respectively; issued and outstanding, 35,682,740 and 40,301,290 shares as of December 31, 2019 and 2020, respectively; 300,000,000 shares authorized, 115,606,690 shares issued and outstanding as of December 31, 2020, pro forma (unaudited) |
— | — | 1 | |||||||||
| Additional paid-in capital |
94,364 | 126,408 | 588,700 | |||||||||
| Treasury stock—at cost 2,747,938 shares as of December 31, 2019 and 2020 |
(4,701 | ) | (4,701 | ) | (4,701 | ) | ||||||
| Accumulated other comprehensive income |
74 | 20 | 20 | |||||||||
| Accumulated deficit |
(276,736 | ) | (343,551 | ) | (343,551 | ) | ||||||
|
|
|
|
|
|
|
|||||||
| Total stockholders’ (deficit) equity |
(186,999 | ) | (221,824 | ) | $ | 240,469 | ||||||
|
|
|
|
|
|
|
|||||||
| Total liabilities, redeemable convertible preferred stock, stockholders’ deficit |
$ | 236,263 | $ | 417,624 | ||||||||
|
|
|
|
|
|||||||||
See notes to consolidated financial statements.
F-4
Table of Contents
COURSERA, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
for the years ended December 31, 2019 and 2020
(In thousands, except share and per share data)
| 2019 | 2020 | |||||||
| Revenue |
$ | 184,411 | $ | 293,511 | ||||
| Cost of revenue |
89,589 | 138,846 | ||||||
|
|
|
|
|
|||||
| Gross profit |
94,822 | 154,665 | ||||||
|
|
|
|
|
|||||
| Operating expenses: |
||||||||
| Research and development |
56,364 | 76,784 | ||||||
| Sales and marketing |
57,042 | 107,249 | ||||||
| General and administrative |
29,810 | 37,215 | ||||||
|
|
|
|
|
|||||
| Total operating expenses |
143,216 | 221,248 | ||||||
|
|
|
|
|
|||||
| Loss from operations |
(48,394 | ) | (66,583 | ) | ||||
| Interest income |
3,282 | 1,175 | ||||||
| Interest expense |
(625 | ) | (12 | ) | ||||
| Other income (expense), net |
(264 | ) | 120 | |||||
|
|
|
|
|
|||||
| Loss before income taxes |
(46,001 | ) | (65,300 | ) | ||||
| Income tax expense |
718 | 1,515 | ||||||
|
|
|
|
|
|||||
| Net loss |
$ | (46,719 | ) | $ | (66,815 | ) | ||
|
|
|
|
|
|||||
| Net loss per share attributable to common stockholders—basic and diluted |
$ | (1.45 | ) | $ | (1.80 | ) | ||
|
|
|
|
|
|||||
| Weighted average shares used in computing net loss per share attributable to common stockholders—basic and diluted |
32,276,258 | 37,207,492 | ||||||
|
|
|
|
|
|||||
| Pro forma net loss per share attributable to common stockholders—basic and diluted (unaudited) |
$ | (0.62 | ) | |||||
|
|
|
|||||||
| Weighted-average shares used in computing pro forma net loss per share attributable to common stockholders—basic and diluted (unaudited) |
108,503,105 | |||||||
|
|
|
|||||||
See notes to consolidated financial statements.
F-5
Table of Contents
COURSERA, INC. AND SUBSIDIARIES
Consolidated Statements of Comprehensive Loss
for the years ended December 31, 2019 and 2020
(In thousands)
| 2019 | 2020 | |||||||
| Net loss |
$ | (46,719 | ) | $ | (66,815 | ) | ||
| Change in unrealized gain (loss) on marketable securities, net of tax |
88 | (54 | ) | |||||
|
|
|
|
|
|||||
| Comprehensive loss |
$ | (46,631 | ) | $ | (66,869 | ) | ||
|
|
|
|
|
|||||
See notes to consolidated financial statements.
F-6
Table of Contents
COURSERA, INC. AND SUBSIDIARIES
Consolidated Statements of Redeemable Convertible Preferred Stock and Stockholders’ Deficit
for the years ended December 31, 2019 and 2020
(In thousands, except share and per share amounts)
| Redeemable | Accumulated | |||||||||||||||||||||||||||||||||||||
| Convertible | Additional | Other | Total | |||||||||||||||||||||||||||||||||||
| Preferred Stock | Common Stock | Paid-In | Treasury | Comprehensive | Accumulated | Stockholders’ | ||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Stock | Income (Loss) | Deficit | Deficit | ||||||||||||||||||||||||||||||
| Balances—January 1, 2019 |
58,864,178 | $ | 227,861 | 29,464,090 | $ | — | $ | 56,997 | $ | (4,701 | ) | $ | (14 | ) | $ | (230,017 | ) | $ | (177,735 | ) | ||||||||||||||||||
| Issuance of common stock upon exercise of options |
— | — | 4,211,484 | — | 8,293 | — | — | — | 8,293 | |||||||||||||||||||||||||||||
| Issuance of common stock in connection with settlement liability |
— | — | 1,346,610 | — | 7,622 | — | — | — | 7,622 | |||||||||||||||||||||||||||||
| Issuance of common stock in connection with asset acquisition |
— | — | 610,556 | — | 3,846 | — | — | — | 3,846 | |||||||||||||||||||||||||||||
| Issuance of restricted stock awards |
— | — | 50,000 | — | — | — | — | — | — | |||||||||||||||||||||||||||||
| Issuance of Series E redeemable convertible preferred stock |
8,794,164 | 105,530 | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||
| Issuance costs of Series E redeemable convertible preferred stock |
— | (710 | ) | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||
| Vesting of early exercise stock options |
— | — | — | — | 927 | — | — | — | 927 | |||||||||||||||||||||||||||||
| Stock compensation expense |
— | — | — | — | 16,679 | — | — | — | 16,679 | |||||||||||||||||||||||||||||
| Change in unrealized gain on marketable securities |
— | — | — | — | — | — | 88 | — | 88 | |||||||||||||||||||||||||||||
| Net loss |
— | — | — | — | — | — | — | (46,719 | ) | (46,719 | ) | |||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
| Balances—December 31, 2019 |
67,658,342 | 332,681 | 35,682,740 | — | 94,364 | (4,701 | ) | 74 | (276,736 | ) | (186,999 | ) | ||||||||||||||||||||||||||
| Issuance of common stock upon exercise of options |
— | — | 4,204,065 | — | 10,081 | — | — | — | 10,081 | |||||||||||||||||||||||||||||
| Issuance of restricted stock awards |
— | — | 36,250 | — | — | — | — | — | — | |||||||||||||||||||||||||||||
| Issuance of common stock upon exercise of warrants |
— | — | 190,930 | — | 38 | — | — | — | 38 | |||||||||||||||||||||||||||||
| Issuance of Series F redeemable convertible preferred stock |
7,647,058 | 130,000 | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||
| Issuance costs of Series F redeemable convertible preferred stock |
— | (388 | ) | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||
| Vesting of early exercise stock options |
— | — | — | — | 196 | — | — | — | 196 | |||||||||||||||||||||||||||||
| Issuance of common stock in connection with content asset (Note 9) |
— | — | 187,305 | — | 3,956 | — | — | — | 3,956 | |||||||||||||||||||||||||||||
| Stock compensation expense |
— | — | — | — | 17,773 | — | — | — | 17,773 | |||||||||||||||||||||||||||||
| Change in unrealized loss on marketable securities |
— | — | — | — | — | — | (54 | ) | — | (54 | ) | |||||||||||||||||||||||||||
| Net loss |
— | — | — | — | — | — | — | (66,815 | ) | (66,815 | ) | |||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
| Balances—December 31, 2020 |
75,305,400 | $ | 462,293 | 40,301,290 | $ | — | $ | 126,408 | $ | (4,701 | ) | $ | 20 | $ | (343,551 | ) | $ | (221,824 | ) | |||||||||||||||||||
See notes to consolidated financial statements.
F-7
Table of Contents
COURSERA, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
for the years ended December 31, 2019 and 2020
(In thousands)
| 2019 | 2020 | |||||||
| Cash flows from operating activities: |
||||||||
| Net loss |
$ | (46,719 | ) | $ | (66,815 | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: |
||||||||
| Depreciation and amortization |
5,282 | 9,585 | ||||||
| Stock-based compensation |
16,317 | 16,807 | ||||||
| Amortization or accretion of marketable securities |
(1,121 | ) | (1 | ) | ||||
| Other |
38 | 86 | ||||||
| Changes in operating assets and liabilities: |
||||||||
| Accounts receivable, net |
(6,155 | ) | (24,138 | ) | ||||
| Prepaid expenses and other assets |
(6,622 | ) | (18,254 | ) | ||||
| Operating lease right-of-use assets |
— | 5,165 | ||||||
| Educator partners and other accounts payable |
6,620 | 25,652 | ||||||
| Accrued and other liabilities |
(815 | ) | 3,718 | |||||
| Operating lease liabilities |
— | (5,831 | ) | |||||
| Deferred revenue |
11,841 | 39,035 | ||||||
|
|
|
|
|
|||||
| Net cash used in operating activities |
(21,334 | ) | (14,991 | ) | ||||
|
|
|
|
|
|||||
| Cash flows from investing activities: |
||||||||
| Purchases of marketable securities |
(166,926 | ) | (218,458 | ) | ||||
| Proceeds from maturities of marketable securities |
115,317 | 129,934 | ||||||
| Asset acquisition |
(3,345 | ) | — | |||||
| Purchases of property, equipment, and software |
(4,410 | ) | (3,099 | ) | ||||
| Capitalized internal-use software costs |
(5,522 | ) | (8,819 | ) | ||||
| Purchase of investment in private company |
— | (1,000 | ) | |||||
|
|
|
|
|
|||||
| Net cash used in investing activities |
(64,886 | ) | (101,442 | ) | ||||
|
|
|
|
|
|||||
| Cash flows from financing activities: |
||||||||
| Proceeds from issuance of redeemable convertible preferred stock, net of issuance costs |
104,820 | 129,613 | ||||||
| Proceeds from exercise of stock options and warrants |
8,293 | 10,118 | ||||||
| Proceeds from exercise of unvested options, net of repurchases |
499 | 84 | ||||||
| Repayment of debt associated with asset acquisition |
(231 | ) | — | |||||
| Payment of holdback consideration related to asset acquisition |
— | (769 | ) | |||||
| Payment of deferred offering costs |
— | (32 | ) | |||||
|
|
|
|
|
|||||
| Net cash provided by financing activities |
113,381 | 139,014 | ||||||
|
|
|
|
|
|||||
| Net increase in cash, cash equivalents, and restricted cash |
27,161 | 22,581 | ||||||
| Cash, cash equivalents, and restricted cash—Beginning of year |
32,684 | 59,845 | ||||||
|
|
|
|
|
|||||
| Cash, cash equivalents, and restricted cash—End of year |
$ | 59,845 | $ | 82,426 | ||||
|
|
|
|
|
|||||
| Cash, cash equivalents, and restricted cash—End of year |
||||||||
| Cash and cash equivalents |
$ | 55,986 | $ | 79,878 | ||||
| Restricted cash |
3,090 | 2,548 | ||||||
| Restricted cash in prepaid expenses and other current assets |
769 | — | ||||||
|
|
|
|
|
|||||
| Cash, cash equivalents, and restricted cash—End of year |
$ | 59,845 | $ | 82,426 | ||||
|
|
|
|
|
|||||
F-8
Table of Contents
| 2019 | 2020 | |||||||
| Supplemental disclosures of cash flow information: |
||||||||
| Cash paid for interest |
$ | 197 | $ | 550 | ||||
| Cash paid for income taxes |
$ | 523 | $ | 1,155 | ||||
| Supplemental disclosures of noncash investing and financing activities: |
||||||||
| Vesting of early exercised stock options |
$ | 927 | $ | 196 | ||||
| Stock-based compensation capitalized as internal-use software costs |
$ | 362 | $ | 966 | ||||
| Issuance of common stock in connection with settlement liability |
$ | 7,622 | $ | — | ||||
| Issuance of common stock in connection with asset acquisition |
$ | 3,846 | $ | — | ||||
| Issuance of common stock in connection with content asset |
$ | — | $ | 3,956 | ||||
| Unpaid deferred offering costs |
$ | — | $ | 1,297 | ||||
See notes to consolidated financial statements.
F-9
Table of Contents
COURSERA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)
| 1. | DESCRIPTION OF BUSINESS |
Coursera, Inc., a Delaware corporation (the “Company”), is an online learning platform that connects learners, educators, and institutions with the goal of providing world-class educational content that is affordable, accessible, and relevant. The Company combines content, data, and technology into a platform that is customizable and extensible to both individual learners and institutions. The Company partners with leading university and industry partners (“educator partners”) to bring quality higher education to a broad range of individuals, businesses, organizations, and governments. The Company also sells directly to institutions, including employers, colleges and universities, and governments, to enable their employees, students, and citizens to gain critical skills aligned to the job markets of today and tomorrow. The Company’s corporate headquarters are located in Mountain View, California.
| 2. | BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
Basis of Presentation—The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”).
Principles of Consolidation—The consolidated financial statements include the Company and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.
Segment Information—The Company defines its segments as those operations the chief operating decision maker (“CODM”), determined to be the Chief Executive Officer of the Company, regularly reviews to allocate resources and assess performance. For the years ended December 31, 2019 and 2020, the Company operated under three segments: Consumer, Enterprise, and Degrees. The Company continually monitors and reviews its segment reporting structure in accordance with Accounting Standards Codification (“ASC”) Topic 280, Segment Reporting, to determine whether any changes have occurred that would impact its reportable segments. For further information on the Company’s segment reporting, see Note 15 “Segment and Geographic Information.”
Use of Estimates—The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates, judgments, and assumptions that affect the reported amounts of assets and liabilities and related disclosures at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. On an ongoing basis, the Company evaluates its estimates, including those related to fair value of common stock and stock-based awards; period of benefit for capitalized commissions; internal-use software development costs; useful lives of long-lived assets; the carrying value of operating lease right-of-use assets; valuation of intangible assets and income tax expense, including the valuation of deferred tax assets and liabilities, among others.
The World Health Organization declared in March 2020 that the recent outbreak of the coronavirus disease (“COVID-19”) constitutes a pandemic. The COVID-19 pandemic has caused general business disruption worldwide beginning in January 2020. The global impact of COVID-19 continues to rapidly evolve, and the Company will continue to monitor the situation and the effects on its business and operations closely. The Company does not yet know the full extent of potential impacts on its business or operations or on the global economy as a whole, particularly if the COVID-19 pandemic continues and persists for an extended period of time. Given the uncertainty, the Company cannot reasonably estimate the impact on its future results of operations, cash flows, or financial condition. As of the date of issuance of the consolidated financial statements, the Company is not aware of any specific event or circumstance that would require it to update its estimates,
F-10
Table of Contents
judgments, or the carrying value of its assets or liabilities. These estimates may change as new events occur and additional information is obtained and are recognized in the consolidated financial statements as soon as they become known. Actual results could differ from those estimates, and any such differences may be material to the Company’s consolidated financial statements.
Unaudited Pro Forma Consolidated Balance Sheet Information—Unaudited pro forma consolidated balance sheet information as of December 31, 2020 has been presented to show the assumed effect to the consolidated balance sheet for the automatic conversion of the outstanding redeemable convertible preferred stock upon the closing of a qualified initial public offering (“IPO”), as described in Note 8 as if such conversion had occurred on December 31, 2020. Immediately prior to the closing of a qualified IPO, all outstanding shares of redeemable convertible preferred stock will automatically convert into 75,305,400 shares of common stock. The unaudited pro forma consolidated balance sheet information does not give effect to the shares of common stock issuable and the proceeds expected to be received upon the closing of a qualified IPO.
Unaudited Pro Forma Net Loss Per Share—Unaudited pro forma basic and diluted net loss per share attributable to common stockholders for the year ended December 31, 2020 has been presented to give effect to the automatic conversion of the Company’s redeemable convertible preferred stock into common stock immediately prior to the closing of a qualified IPO as of the beginning of the period or the original date of issuance, if later. The unaudited pro forma basic and diluted net loss per share attributable to common stockholders does not give effect to the shares of common stock issuable upon the completion of a qualified IPO.
Significant Accounting Policies
Cash and Cash Equivalents—The Company considers all highly liquid investments with an original maturity at the date of purchase of three months or less to be cash equivalents.
Marketable Securities—Marketable securities consist of corporate debt, commercial paper securities, and U.S. government Treasury bills, with an original maturity greater than three months at the date of purchase and are classified as available-for-sale securities. As the Company views these securities as available to support current operations, it has classified all available-for-sale securities as current assets. Available-for-sale securities are initially recorded at cost and periodically adjusted to fair value with unrealized gains and losses reported as a component of accumulated other comprehensive income (loss) in stockholders’ deficit, while realized gains and losses are reported within other income (expense), net as a component of net loss. An impairment charge is recorded in the consolidated statements of operations for declines in fair value below the cost of an individual investment that are deemed to be other-than-temporary. The Company did not identify any marketable securities as other-than-temporarily impaired during the years ended December 31, 2019 and 2020.
Restricted Cash—As of December 31, 2019 and 2020, the Company had letters of credit of $3,035 and $2,548, respectively, related to its corporate headquarters’ operating lease agreement and $55 and zero, respectively, in a collateral account related to the Company’s corporate card program. As of December 31, 2019, restricted cash of $769 was recorded within prepaids and other current assets in connection with holdback consideration for an acquisition, which was fully paid in November 2020.
Accounts Receivable—Trade accounts receivable are recorded net of allowances for doubtful accounts. An allowance for doubtful accounts is established based on the Company’s assessment of the collectibility of accounts. Management regularly reviews the adequacy of the allowance for doubtful accounts by considering the age of each outstanding invoice; each customer’s expected ability to pay; and the collection history with each customer, when applicable, to determine whether a specific allowance is appropriate. Accounts receivable deemed uncollectible are charged against the allowance for doubtful accounts when identified. The allowance for doubtful accounts and related activities were not material for the years ended December 31, 2019 and 2020.
F-11
Table of Contents
Property, Equipment, and Software—Property, equipment, and software are stated at cost, less accumulated depreciation. Depreciation is recorded using the straight-line method over the estimated useful lives of the assets, generally two to five years. Leasehold improvements are amortized over the shorter of the estimated useful lives of the improvements or the remaining lease term.
Deferred Offering Costs—Deferred offering costs, which consist primarily of direct and incremental legal, accounting, and other fees related to the Company’s proposed IPO, are capitalized in prepaids and other current assets on the consolidated balance sheets. The deferred offering costs will be offset against IPO proceeds upon the consummation of an IPO. In the event the planned IPO is terminated, the deferred offering costs will be expensed. Deferred offering costs were zero and $1,329 as of December 31, 2019 and 2020, respectively.
Leases—On January 1, 2020, the Company adopted Accounting Standards Update No. 2016-02, Leases, (“ASC 842”), using the modified retrospective transition approach by applying the new standard to all leases existing at the date of initial application. The Company elected the optional transition method that allows entities to apply the standard prospectively and not recast prior year comparative periods. As a result, the amounts and disclosure requirements for reporting periods beginning after January 1, 2020 are presented under ASC 842, while prior period amounts have not been adjusted and continue to be reported in accordance with the historical accounting under Accounting Standards, Leases, Topic 840.
The Company elected the package of practical expedients permitted under the transition guidance, which allowed the Company to carryforward its historical lease classification, its assessment on whether a contract was or contains a lease, and its initial direct costs for any leases that existed prior to January 1, 2020. The Company also elected to not separate lease and non-lease components and to not recognize operating lease right-of-use assets and operating lease liabilities that arise from short-term leases (i.e., leases with a term of 12 months or less).
Under ASC 842, the Company determines if an arrangement is a lease and classification of that lease, if applicable, at inception based on: (1) whether the contract involves the use of a distinct identified asset, (2) whether the Company obtains the right to substantially all the economic benefits from the use of the asset throughout the period, and (3) whether the Company has a right to direct the use of the asset.
The Company applies ASC 842 to individual leases of assets. Right-of-use (“ROU”) assets and lease liabilities are recognized at the commencement date based on the present value of minimum remaining lease payments over the lease term. For this purpose, the Company considers only payments that are fixed and determinable at the time of commencement. As the Company’s leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments. The Company’s lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise such options. When determining the probability of exercising such options, the Company considers contract-based, asset-based, entity-based, and market-based factors. The Company’s lease agreements may contain variable costs such as common area maintenance, insurance, real estate taxes or other costs. Variable lease costs are expensed as incurred in the consolidated statements of operations.
ROU assets are initially measured at amounts that represents the present value of the lease payments over the lease, plus any initial direct costs incurred and less any lease incentives received. Annually, all ROU assets are reviewed for impairment. The Company’s lease agreements generally do not contain any residual value guarantees or restrictive covenants.
Operating leases are included in operating lease ROU assets, and current and non-current operating lease liabilities on the Company’s consolidated balance sheets. Operating lease costs for operating lease payments are recognized on a straight-line basis over the lease term. The Company does not have any finance leases.
F-12
Table of Contents
Internal-Use Software Development Costs—The Company capitalizes certain costs associated with developing its internal-use software during the application development stage when management with the relevant authority authorizes and commits to the funding of the project, it is probable that the project will be completed, and the software will be used as intended. These costs include personnel and related employee benefits expenses for employees who are directly associated with and who devote time to software projects. Such costs are amortized on a straight-line basis over the estimated useful life of the related asset, which is approximately two years. Costs incurred prior to meeting these criteria, together with costs incurred for training and maintenance, are expensed as incurred and recorded in research and development expenses in the consolidated statements of operations.
The Company capitalized internal-use software costs of $5,884 and $9,785 for the years ended December 31, 2019 and 2020, respectively.
Intangible Assets—Intangible assets with finite lives are stated at cost, net of accumulated amortization. The Company amortizes its intangible assets on a straight-line basis over an estimated useful life of three to six years.
Impairment of Long-Lived Assets—The Company continually monitors events and changes in circumstances that could indicate that carrying amounts of its long-lived assets, including property, equipment, software, and finite-lived intangible assets, may not be recoverable. When such events or changes in circumstances occur, the Company assesses the recoverability of long-lived assets by determining whether the carrying value of such assets will be recovered through their undiscounted expected future cash flows. If the future undiscounted cash flows are less than the carrying amount of these assets, the Company recognizes an impairment loss based on the excess of the carrying amount over the fair value of the assets.
Revenue Recognition—The Company derives revenue from contracts with customers for access to the learning content hosted on its platform and related services. The Company derives its revenue from three sources: Consumer, Enterprise, and Degrees.
Consumer Revenue—The Company generates revenue from the sale of access to course content to consumers. Consumer products include certifications for single courses, Specializations, and catalog-wide subscriptions. Access to single courses are generally purchased at a fixed price for a set period of time, typically six months. Specializations are a series of courses offered by the same educator partner where learners are provided access to these courses on a month-to-month subscription basis. Coursera Plus is the Company’s catalog-wide consumer subscription product, and it is sold in the form of a monthly or annual subscription. All contracts with Consumer customers are billed in advance, generally after a 7-day free trial period. The Company recognizes revenue ratably over the contracted period, after access has been granted to the consumer, as learners have unlimited access to the course content during the contracted period.
Consumer learners are entitled to a full refund up to two weeks after payment is received. The Company estimates and establishes a refund reserve based on historical refund rates. The refund reserve was immaterial as of December 31, 2019 and 2020.
Enterprise Revenue—The Company sells subscription licenses to business, government, and university customers that provide users the ability to enroll in courses and Specializations and receive certifications upon completion. Enterprise contracts are typically between one and three years in length and can consist of either the purchase of a fixed quantity of seat licenses, each of which allows for unlimited course enrollments by one learner for each year or the purchase of a quantity of course enrollments. In either contract type, the Company recognizes revenue ratably over the contracted period, after access has been granted to the Enterprise customer, as learners have unlimited access to the course content during the contracted period.
The Company is the principal with respect to revenue generated from sales to Consumer and Enterprise customers as the Company controls the performance obligation and is the primary obligor with respect to
F-13
Table of Contents
delivering access to course content. Additionally, the Company has inventory risk through recoupable advances sometimes paid to educator partners.
Degrees Revenue—University partners contract with the Company for the delivery of bachelor’s and master’s degrees awarded by the university. The Company’s Degrees revenue contracts involve the performance of a number of promises, including but not limited to hosting the degree content on its learning platform, degree program management, marketing, and platform technical support services. As a result, the university partner is the Company’s customer with respect to Degrees revenue. The Company earns a Degrees service fee that is determined based as a percentage of total tuition collected from Degrees students by the university partner. Degrees revenue is earned and paid by the university partner for each university term. As a result, revenue generated from each term is recognized ratably from the start of a term through the start of the following term.
The Degrees learning experience is delivered on the same proprietary learning platform used by Consumer and Enterprise customers. There is no direct contractual arrangement between the Company and Degrees students, who contract directly with university partners. Further, the university partners typically have additional performance obligations to the Degrees students in the form of real-time teaching, financial aid, and academic or career counseling. For these reasons, the Company has determined that the university partners control the delivery of degrees hosted on its platform. As a result, the Company recognizes Degrees revenue as the service fee it receives from the university partner.
For all customers, revenue from contracts is recognized when control of promised services is transferred. The amount of revenue recognized reflects the consideration that the Company expects to be entitled to receive in exchange for these services. To achieve this, the Company applies the following five steps:
1) Identify the contract with a customer
The Company determines a contract with a customer to exist when the contract is approved, each party’s rights regarding the services to be transferred can be identified, the payment terms for the services can be identified, the customer has the ability and intent to pay, and the contract has commercial substance. At contract inception, the Company evaluates whether two or more contracts should be combined and accounted for as a single contract and whether the combined or single contract includes more than one performance obligation. The Company applies judgment in determining the customer’s ability and intent to pay, which is based on a variety of factors, including the customer’s historical payment experience or, in the case of a new Enterprise or Degrees customer, credit and financial information pertaining to the customer. Consumer revenue customers are required to pay in advance either prior to the Company providing access to course content or prior to the expiration of a 7-day free trial.
2) Identify the performance obligations in the contract
Performance obligations committed in a contract are identified based on the services that will be transferred to the customer that are both capable of being distinct, whereby the customer can benefit from the service either on its own or together with other resources that are readily available from third parties or from the Company, and are distinct in the context of the contract, whereby the transfer of the services and the products is separately identifiable from other promises in the contract. Customers do not have the ability to take possession of the software supporting the platform and, as a result, contracts are accounted for as service arrangements.
For sales to Consumer and Enterprise customers, the Company’s performance obligation generally consists of providing access to its platform and related support services, which is considered one performance obligation. Access to the Company’s platform represents a series of distinct services, as the Company continually provides access to, and fulfills its obligation to, the customer over the contract term.
Degrees services involve the performance of a number of promises that include hosting the degree content on the Company’s platform, degree program management, marketing and platform technical support services,
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each of which are a series of distinct goods or services that are substantially the same, are satisfied over time using the same measure of progress and as a result are considered one performance obligation to stand ready to perform an online degree hosting service for the duration of the degree.
3) Determine the transaction price
The transaction price is determined based on the consideration to which the Company expects to be entitled in exchange for transferring services to the customer. Variable consideration is included in the transaction price if, in the Company’s judgment, it is probable that a significant future reversal of cumulative revenue recognized under the contract will not occur. None of the Company’s contracts contain a significant financing component. Revenue is recognized net of any taxes collected from customers, which are subsequently remitted to governmental entities (e.g., sales and other indirect taxes).
The Company’s Degrees services revenue is determined based on a fee percentage applied to the total tuition collected from Degrees students, net of refunds, by the university partner. As a result, the revenue earned by the Company is dependent upon the number of learners enrolled and the tuition charged by the university partner. This is a form of variable consideration. The Company estimates the amount of revenue, using an expected value method, that it expects to be entitled to in return for performance of the Degrees services, subject to assessment of the significant future reversal constraint discussed above. These estimates are continually evaluated until such time as the uncertainties are resolved, generally at the time the final term enrollment report is provided by the university partner.
4) Allocate the transaction price to performance obligations in the contract
Contracts that contain multiple performance obligations require an allocation of the transaction price to each performance obligation based on each performance obligation’s relative standalone selling price. As noted above, for Consumer and Enterprise customers, access to the Company’s platform and related support services are considered one performance obligation in the context of the contract and, accordingly, the transaction price is allocated to this single performance obligation. Similarly, Degrees services are considered one performance obligation and the transaction price is allocated to this single performance obligation.
5) Recognize revenue when or as performance obligations are satisfied
Revenue is recognized at the time the related performance obligation is satisfied by transferring the control of the promised service to a customer. Revenue is recognized in an amount that reflects the consideration that the Company expects to receive in exchange for those services. Fees for access to the Company’s platform and related support services by Consumer and Enterprise customers are considered one performance obligation, and the related revenue is recognized on a straight-line basis over the contract term as the Company satisfies its performance obligation.
The Company has a stand ready obligation to perform Degrees services continually throughout the period that the degree content is hosted on its platform. Degrees revenue is earned and paid by the university partner for each university term. As a result, revenue generated from each term is recognized ratably from the start of a term through the start of the following term.
Contract Assets and Liabilities—Accounts receivable are recorded at the invoiced amount, net of an allowance for doubtful accounts in the period that the Company’s right to consideration is unconditional. Payment terms on invoiced amounts are typically 30-60 days. The timing of revenue recognition may differ from the timing of invoicing to customers. If revenue is recognized prior to the Company’s unconditional right to consideration, a contract asset is recorded. Deferred revenue consists of cash payments received in advance of performance obligations being delivered and is recorded as current or noncurrent based on the related period in which services will be provided.
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Contract Acquisition and Fulfillment Costs—Contract acquisition costs consist of sales commissions and related payroll taxes associated with obtaining contracts with Enterprise customers.
Deferred Commissions—Customer acquisition costs are primarily related to sales commissions and related payroll taxes earned by the Company’s Enterprise sales force, which are incremental costs to obtaining a contract. Sales commissions and related payroll taxes for new and upsell Enterprise contracts are deferred and then amortized on a straight-line basis over the expected period of benefit, which is estimated to be three years. The Company determined the expected period of benefit by taking into consideration the length of terms in its Enterprise customer contracts, the life of the technology, and other factors. The Company amortizes these costs over three years since the commissions paid upon a contract renewal are not commensurate with the commissions paid on the initial contract and as such, the sales contract period is not commensurate with the expected period of benefit. Commissions and related payroll taxes paid for Enterprise contract renewals are amortized over the renewal term, which is generally one to two years.
Deferred commissions and related payroll taxes that will amortize within the succeeding 12-month period are classified as current and included in deferred costs in the consolidated balance sheets. The remaining balance is classified as noncurrent and included in other assets.
Deferred Partner Fees—These fulfillment costs are paid to educator partners in advance of the Company’s performance obligations being completed; are recorded within current assets or other assets, depending on the timing of the related revenue recognition; and are amortized into cost of revenue ratably over the term of the access being provided.
Cost of Revenue—Cost of revenue consists of content costs in the form of a fee paid to educator partners and expenses associated with the operation of the Company’s platform. These expenses include the cost of servicing both paid learner and educator partner support requests, hosting and bandwidth costs, amortization of acquired technology and internal-use software, customer payment processing fees, and allocated depreciation and facilities costs.
Fair Value Measurements—Fair value is defined as the price that would be received for an asset or the “exit price” that would be paid to transfer a liability in the principal or most advantageous market in an orderly transaction between independent market participants on the measurement date. The fair value hierarchy requires an entity to maximize the use of observable inputs, where available. This hierarchy prioritizes the inputs into three broad levels as follows: Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2 inputs are quoted prices for similar assets and liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the financial instrument. Level 3 inputs are unobservable inputs based on the Company’s own assumptions used to measure assets and liabilities at fair value. A financial asset or liability’s classification within the hierarchy is determined based on the lowest-level input that is significant to the fair value measurement. The Company’s assets and liabilities that were measured at fair value by level within the fair value hierarchy as of December 31, 2019 and 2020, are as follows:
| As of December 31, 2019 | ||||||||||||
| Fair Value | Level 1 | Level 2 | ||||||||||
| Financial assets: |
||||||||||||
| Cash equivalents—money market funds |
$ | 52,606 | $ | 52,606 | $ | — | ||||||
| Marketable securities: |
||||||||||||
| Corporate debt securities |
46,518 | — | 46,518 | |||||||||
| Commercial paper |
35,318 | — | 35,318 | |||||||||
| U.S. government Treasury bills |
34,993 | 34,993 | — | |||||||||
|
|
|
|
|
|
|
|||||||
| Total financial assets |
$ | 169,435 | $ | 87,599 | $ | 81,836 | ||||||
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|
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| As of December 31, 2020 | ||||||||||||
| Fair Value | Level 1 | Level 2 | ||||||||||
| Financial assets: |
||||||||||||
| Cash equivalents—money market funds |
$ | 58,997 | $ | 58,997 | $ | — | ||||||
| Marketable securities: |
||||||||||||
| Corporate debt securities |
8,551 | — | 8,551 | |||||||||
| Commercial paper |
26,469 | — | 26,469 | |||||||||
| U.S. government Treasury bills |
170,382 | 170,382 | — | |||||||||
|
|
|
|
|
|
|
|||||||
| Total financial assets |
$ | 264,399 | $ | 229,379 | $ | 35,020 | ||||||
|
|
|
|
|
|
|
|||||||
The Company remeasures certain assets, including intangible assets and its equity-method investment in a private company, at fair value on a nonrecurring basis when there are identifiable events or changes in circumstances that may have a significant adverse impact on the fair value of these assets. No such events or changes occurred during the years ended December 31, 2019 and 2020.
Concentration of Credit Risk—Financial instruments that potentially subject the Company to concentration of credit risk consist of cash, cash equivalents, and marketable securities. The Company invests only in high-credit-quality instruments and maintains its cash equivalents and marketable securities in fixed-income securities. The Company places its cash primarily with domestic financial institutions that are federally insured within statutory limits.
For purposes of assessing concentration of credit risk and significant customers, a group of customers under common control or customers that are affiliates of each other are regarded as a single customer. For the years ended December 31, 2019 and 2020, the Company did not have any customers that accounted for more than 10% of the Company’s revenue. As of December 31, 2019 and 2020, the Company had one customer that accounted for 32% and 21%, respectively, of the Company’s net accounts receivable balance.
Income Taxes—The Company is subject to income taxes in the United States and numerous foreign jurisdictions. Significant judgment is required in determining its income tax expense and deferred tax assets and liabilities, including evaluating uncertainties in the application of accounting principles and complex tax laws.
The Company utilizes the asset and liability method under which deferred tax assets and liabilities arise from the temporary differences between the tax basis of an asset or liability and its reported amount in the consolidated financial statements, as well as from net operating loss and tax credit carryforwards. Deferred tax amounts are determined by using the tax rates expected to be in effect when the taxes will actually be paid or refunds received, as provided for under currently enacted tax law. A valuation allowance is established if, based upon the available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. The Company considers all available evidence, both positive and negative, including historical levels of income, expectations, and risks associated with estimates of future taxable income in assessing the need for a valuation allowance.
The Company regularly reviews its tax positions and benefits to be realized. The Company recognizes tax liabilities based upon its estimate of whether and the extent to which additional taxes will be due when such estimates are more likely than not to be sustained upon examination by the taxing authority. An uncertain income tax position will be recognized only if it is more likely than not to be sustained. The Company recognizes interest and penalties related to income tax matters as income tax expense.
Stock-Based Compensation—The Company measures and recognizes compensation expense for stock options and restricted stock units granted to employees, directors, and service providers based on the estimated fair value on the date of the grant. The Company calculates the fair value of stock-based awards on the date of
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grant using the Black-Scholes option-pricing model for stock options; the expense is recognized over the service period for awards expected to vest. At that time, the total compensation recognized to date shall equal the fair value of the stock-based award as calculated on the measurement date, which is the date at which the award recipient’s performance is complete. The Company recognizes forfeitures as they occur.
Net Loss Per Share Attributable to Common Stockholders—Basic and diluted net loss per share attributable to common stockholders is computed in conformity with the two-class method required for participating securities. The Company considers all series of its redeemable convertible preferred stock to be participating securities as the holders of such stock have the right to receive nonforfeitable dividends on a pari passu basis in the event that a dividend is paid on common stock. Under the two-class method, the net loss attributable to common stockholders is not allocated to the redeemable convertible preferred stock as the preferred stockholders do not have a contractual obligation to share in the Company’s losses.
Basic net loss per share is computed by dividing net loss attributable to common stockholders by the weighted-average number of shares of common stock outstanding during the period. Diluted net loss per share is computed by giving effect to all potentially dilutive common stock equivalents to the extent they are dilutive. For purposes of this calculation, redeemable convertible preferred stock, common stock options, restricted stock units, early exercised common stock options, and common stock warrants are considered to be common stock equivalents but have been excluded from the calculation of diluted net loss per share attributable to common stockholders as their effect is anti-dilutive for the period presented.
Comprehensive Loss—Comprehensive loss is composed of two components: net loss and other comprehensive income (loss). Other comprehensive income (loss) refers to revenue, expenses, gains, and losses that under GAAP are recorded as an element of stockholders’ deficit but are excluded from net loss.
Research and Development—Expenditures for research and development of the Company’s technology and non-refundable contributions to the development of partner content are expensed when incurred unless they qualify as internal-use software development costs. Research and development costs consist principally of personnel costs, consulting services, content development contributions, and allocated facilities costs.
Advertising Costs—Advertising costs are expensed as incurred and are included in sales and marketing expense. For the years ended December 31, 2019 and 2020, these costs were $11,566 and $21,005, respectively.
Foreign Currency—The majority of the Company’s sales contracts are denominated in U.S. dollars. In addition, the functional currency of the Company’s international subsidiaries is U.S. dollars. Foreign currency transaction gains and losses have not been material for any periods presented.
New Accounting Pronouncements Recently Adopted
The Company is an emerging growth company, as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act until those standards apply to private companies. The Company has elected to use this extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date that it (i) is no longer an emerging growth company or (ii) affirmatively and irrevocably opts out of the extended transition period provided in the JOBS Act. As a result, the consolidated financial statements may not be comparable to companies that comply with the new or revised accounting pronouncements as of public company effective dates.
The JOBS Act does not preclude an emerging growth company from early adopting new or revised accounting standards. The Company early adopted ASU 2014-09, Revenue from Contracts with Customers (Topic 606), effective January 1, 2017 and ASU No. 2016-02, Leases (ASC 842) effective January 1, 2020. The Company expects to use the extended transition period for any other new or revised accounting standards during the period for which the Company remains an emerging growth company.
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In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement (“ASU 2018-13”), which amended its conceptual framework to improve the effectiveness of disclosures around the amount of, and reasons for, transfers between Level 1 and Level 2 of the fair value hierarchy. This guidance also adds new disclosure requirements for Level 3 measurements. The Company adopted this guidance on January 1, 2020, and the adoption did not have a material impact on its consolidated financial statements.
In June 2018, the FASB issued ASU No. 2018-07, Compensation—Stock Compensation (Topic 718): Improvements to Non-employee Share-Based Payment Accounting, which is intended to reduce cost and complexity and to improve financial reporting for nonemployee stock-based payments. This update expands the scope of ASC Topic 718 to include stock-based payments issued to nonemployees for goods or services, aligning the accounting for stock-based payments to nonemployees and employees. The Company early adopted this update on January 1, 2019 using the modified retrospective approach, and the impact on its consolidated financial statements was not material.
In January 2017, the FASB issued ASU No. 2017-01, Business Combinations—Clarifying the Definition of a Business. The purpose of the ASU is to add guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The ASU provides a screen to determine when an integrated set of assets and activities is not a business. The ASU also provides a framework to assist entities in evaluating whether both an input and a substantive process are present. ASU 2017-01 was effective for the Company beginning in 2019. The Company adopted this standard in conjunction with its acquisition of Rhyme Softworks, LLC (“Rhyme”). The adoption had an impact on the consolidated financial statements with respect to the accounting for the acquisition of Rhyme, and it will continue to have an impact if the Company engages in future business combinations or asset acquisitions.
In February 2016, the FASB issued ASC 842, which establishes a comprehensive new lease accounting model. The guidance requires lessees, at the commencement date, to recognize a right-of-use asset and a lease liability for virtually all leases except those that meet the definition of a short-term lease. The guidance also introduces new disclosure requirements for leasing arrangements. The Company elected to early adopt ASC 842 on January 1, 2020, applying the modified retrospective approach under the optional transition method of not adjusting its comparative period financial statements prescribed by ASU 2018-11 at the adoption date. Upon adoption, the Company recognized total ROU assets of $26,787 with corresponding lease liabilities of $32,063 on the consolidated balance sheet as of January 1, 2020, which included reclassifying lease incentives and deferred rent as a component of the ROU assets. The adoption did not impact the Company’s beginning accumulated deficit. For information regarding the impact of ASC 842 adoption, see “Significant Accounting Policies—Leases” (above) and Note 11—“Leases”.
New Accounting Pronouncements Not Yet Adopted
In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. This standard simplifies the accounting for income taxes by eliminating certain exceptions to the guidance in Topic 740 related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period, and the recognition of deferred tax liabilities for outside basis differences. The guidance also simplifies aspects of the accounting for franchise taxes and enacted changes in tax laws or rates, and clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill and the allocation of consolidated income taxes to separate financial statements of entities not subject to income tax. ASU 2019-12 will be effective for the Company in 2022. Upon adoption, the Company must apply certain aspects of this standard retrospectively for all periods presented while other aspects are applied on a modified retrospective basis through a cumulative-effect adjustment to accumulated deficit as of the beginning of the fiscal year of adoption. The Company is currently evaluating the impact of this update on its consolidated financial statements and related disclosures.
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In August 2018, the FASB issued ASU 2018-15, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract. This update requires capitalization of the implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. Further, the standard also requires the Company to expense the capitalized implementation costs of a hosting arrangement over the term of the hosting arrangement. ASU 2018-15 will be effective for the Company in 2021 and early adoption is permitted. The Company is currently evaluating the impact of this update on its consolidated financial statements and related disclosures.
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments-Credit Losses, which provides new authoritative guidance with respect to the measurement of credit losses on financial instruments. This update changes the impairment model for most financial assets and certain other instruments by introducing a current expected credit loss (“CECL”) model. The CECL model is a more forward-looking approach based on expected losses rather than incurred losses, requiring entities to estimate and record losses expected over the remaining contractual life of an asset. The guidance will be effective for the Company in 2023 and early adoption beginning in 2019 is permitted. The Company is currently evaluating the impact from the adoption of this guidance on the consolidated financial statements and related disclosures.
| 3. | REVENUE RECOGNITION |
Contract Balances—The Company’s contract assets and liabilities as of January 1, 2019 and December 31, 2019 and 2020 were as follows:
| January 1, 2019 | December 31, 2019 | December 31, 2020 | ||||||||||
| Contract assets: |
||||||||||||
| Accounts receivable |
$ | 10,527 | $ | 16,592 | $ | 39,976 | ||||||
| Unbilled revenue |
2 | 64 | 745 | |||||||||
|
|
|
|
|
|
|
|||||||
| Total contract assets |
$ | 10,529 | $ | 16,656 | $ | 40,721 | ||||||
|
|
|
|
|
|
|
|||||||
| Contract liabilities: |
||||||||||||
| Deferred revenue |
$ | 29,766 | $ | 41,607 | $ | 80,642 | ||||||
|
|
|
|
|
|
|
|||||||
| Total contract liabilities |
$ | 29,766 | $ | 41,607 | $ | 80,642 | ||||||
|
|
|
|
|
|
|
|||||||
Revenue recognized during the years ended December 31, 2019 and 2020 that was included in the deferred revenue balances at the beginning of the year was $27,501 and $37,906, respectively.
There were no impairment losses recorded on contract assets during the years ended December 31, 2019 and 2020.
Remaining Performance Obligations—Remaining performance obligations are future revenue that are under noncancelable contracts but have not yet been recognized. As of December 31, 2020, the Company had remaining performance obligations of $187,087 and expects to recognize approximately 61% as revenue over the next twelve months and the remainder thereafter.
Costs to Obtain and Fulfill a Contract—During 2019 and 2020, the Company capitalized $4,906 and $11,099, respectively, of commissions and related payroll tax expenditures and amortized $1,695 and $4,156, respectively, to sales and marketing expense. As of December 31, 2019 and 2020, the amount of deferred commissions and related payroll taxes included in deferred costs and in other assets was $2,664 and $2,951, and $5,990 and $6,568, respectively.
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| 4. | MARKETABLE SECURITIES |
The following table presents the Company’s available-for-sale marketable securities as of December 31, 2019 and 2020:
| As of December 31, 2019 | ||||||||||||||||
| Amortized Cost |
Gross Unrealized Gains |
Gross Unrealized Losses |
Estimated Fair Market Value |
|||||||||||||
| Corporate debt |
$ | 46,485 | $ | 34 | $ | (1 | ) | $ | 46,518 | |||||||
| Commercial paper |
35,318 | — | — | 35,318 | ||||||||||||
| U.S. government Treasury bills |
34,952 | 41 | — | 34,993 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total marketable securities |
$ | 116,755 | $ | 75 | $ | (1 | ) | $ | 116,829 | |||||||
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|
|
|
|
|
|
|
|
|||||||||
| As of December 31, 2020 | ||||||||||||||||
| Amortized Cost |
Gross Unrealized Gains |
Gross Unrealized Losses |
Estimated Fair Market Value |
|||||||||||||
| Corporate debt |
$ | 8,547 | $ | 4 | $ | — | $ | 8,551 | ||||||||
| Commercial paper |
26,469 | — | — | 26,469 | ||||||||||||
| U.S. government Treasury bills |
170,366 | 17 | (1 | ) | 170,382 | |||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total marketable securities |
$ | 205,382 | $ | 21 | $ | (1 | ) | $ | 205,402 | |||||||
|
|
|
|
|
|
|
|
|
|||||||||
The gross realized gains and gross realized losses related to the Company’s marketable securities were not material for the years ended December 31, 2019 and 2020.
The following table presents the cost basis and fair value of available-for-sale marketable securities by contractual maturity date as of December 31, 2019 and 2020:
| 2019 | 2020 | |||||||||||||||
| Amortized Cost |
Estimated Fair Market Value |
Amortized Cost |
Estimated Fair Market Value |
|||||||||||||
| Due in one year or less |
$ | 116,755 | $ | 116,829 | $ | 205,382 | $ | 205,402 | ||||||||
Investments in an unrealized loss position consisted of the following as of December 31, 2019 and 2020:
| 2019 | 2020 | |||||||||||||||
| Fair Value |
Gross Unrealized Losses |
Fair Value |
Gross Unrealized Losses |
|||||||||||||
| Corporate debt |
$ | 5,460 | $ | (1 | ) | $ | — | $ | — | |||||||
| U.S. government Treasury bills |
— | — | 20,201 | (1 | ) | |||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total investments in an unrealized loss position |
$ | 5,460 | $ | (1 | ) | $ | 20,201 | $ | (1 | ) | ||||||
|
|
|
|
|
|
|
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|
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As of December 31, 2019 and 2020, no investments were in a continuous unrealized loss position for more than 12 months. The Company does not intend to sell any of these investments and it is not more likely than not that the Company would be required to sell these investments before recovery of their amortized cost basis, which may be at maturity.
As of December 31, 2020, the Company held a 13% ownership interest in a privately held company which is accounted for under the equity method based on the Company’s ability to exercise significant influence over the private company’s operating and financial policies. The investment in this private company is classified within other assets on the consolidated balance sheets. The carrying value of the investment was zero and $1,000 as of December 31, 2019 and 2020, respectively.
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| 5. | ASSET ACQUISITION |
In August 2019, the Company purchased 100% of the outstanding units of membership interest of Rhyme Softworks LLC (“Rhyme”). Rhyme is an interactive web-based platform for learners to access hands-on short-form software training and demonstrations. The purchase consideration consisted of $3,846 of cash and 610,556 fully vested shares of the Company’s common stock with a fair value of $3,846. The Company also incurred $281 of acquisition-related costs.
In connection with the acquisition, the Company assumed $231 of Rhyme’s outstanding debt and $436 of seller acquisition costs, and held back $769 in cash to satisfy potential indemnification claims. The holdback consideration less working capital adjustments of $28 was recorded within other current liabilities on the consolidated balance sheet as of December 31, 2019. Final payment of $741 was made in November 2020.
The purchase of Rhyme was accounted for as an asset acquisition given that substantially all of the fair value of the gross assets acquired was concentrated in a single identified asset, thus satisfying the requirements of the screen test in ASU 2017-01. As a result, no goodwill was recorded, and the Company’s acquisition-related costs were capitalized. Of the total purchase price, $8,446 was allocated to developed technology, $181 to assembled workforce and $13 to other net tangible assets acquired.
The fair value of developed technology was estimated using the excess earnings method, an income approach (Level 3), which converts projected revenue and costs into cash flows. To reflect the fact that certain other assets contribute to the cash flows generated, the returns for these contributory assets were removed to arrive at estimated cash flows solely attributable to the acquired developed technology, which were then discounted at a rate of 27.5% to determine the fair value. The value of assembled workforce was estimated using a replacement cost approach (Level 3), which is calculated as the amount that would be required to replace the service capacity of an asset.
As the transaction was also treated as an asset acquisition for tax purposes, there was no difference between book and tax basis; therefore, no deferred taxes were recorded.
Options to purchase the Company’s common stock with a grant date fair value of $1,250 and a sign-on bonus of $500 were provided to the founder of Rhyme, subject to his continuous employment with the Company during the applicable service periods. The related expense is being recognized over the service period of four and two years, respectively.
| 6. | CONSOLIDATED BALANCE SHEET COMPONENTS |
Property, Equipment and Software—Property, equipment and software as of December 31, 2019 and 2020, consisted of the following:
| Estimated Useful Lives |
2019 | 2020 | ||||||||||
| Internal-use software |
2 years | $ | 13,453 | $ | 21,582 | |||||||
| Computer equipment and software |
2 years | 1,338 | 2,928 | |||||||||
| Leasehold improvements |
|
Shorter of useful life and remaining lease term |
|
6,421 | 7,057 | |||||||
| Furniture and fixtures |
5 years | 2,259 | 2,973 | |||||||||
|
|
|
|
|
|||||||||
| Total property, equipment, and software |
23,471 | 34,540 | ||||||||||
| Less accumulated depreciation and amortization |
(9,428 | ) | (15,896 | ) | ||||||||
|
|
|
|
|
|||||||||
| Property, equipment, and software—net |
$ | 14,043 | $ | 18,644 | ||||||||
|
|
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|
|
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F-22
Table of Contents
Depreciation and amortization expense related to property, equipment and software for the years ended December 31, 2019 and 2020, was $4,740 and $8,114, respectively, which included amortization expense of internal-use software of $3,273 and $5,875, respectively, that is recorded within cost of revenue in the consolidated statement of operations.
Intangible Assets—Intangible assets, net as of December 31, 2019 and 2020 consisted of the following:
| 2019 | 2020 | |||||||||||||||||||||||||||
| Estimated Useful Lives |
Gross Carrying Value |
Accumulated Amortization |
Net Carrying Value |
Gross Carrying Value |
Accumulated Amortization |
Net Carrying Value |
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| Assembled workforce |
3 years | $ | 181 | (22 | ) | $ | 159 | 181 | $ | (83 | ) | $ | 98 | |||||||||||||||
| Developed technology |
6 years | 8,446 | (520 | ) | 7,926 | 8,446 | (1,930 | ) | 6,516 | |||||||||||||||||||
| Content asset |
5 years | — | — | — | 3,956 | — | 3,956 | |||||||||||||||||||||
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| Intangible assets, net |
$ | 8,627 | $ | (542 | ) | $ | 8,085 | $ | 12,583 | $ | (2,013 | ) | $ | 10,570 | ||||||||||||||
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During the year ended December 31, 2019, the Company acquired assembled workforce and developed technology assets for $181 and $8,446, respectively. Intangible assets amortization expense was $542 and $1,471 for the years ended December 31, 2019 and 2020, respectively. As of December 31, 2020, the remaining amortization period was 1.6 years for assembled workforce and 4.6 years for developed technology. Amortization of assembled workforce and developed technology is included in research and development expenses and cost of revenue, respectively, in the consolidated statements of operations.
During the year ended December 31, 2020, the Company recorded an intangible content asset of $3,956, which was the fair value of fully vested shares of common stock issued to an educator partner to expand the extent of its content hosted on the Company’s platform. No amortization expense was recorded for the year ended December 31, 2020. As of December 31, 2020, the remaining amortization period was 5 years. Amortization of the intangible content asset will be included in cost of revenue in the consolidated statements of operations.
As of December 31, 2020, future expected amortization expense for intangible assets was as follows:
| Years Ending December 31 |
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| 2021 |
$ | 2,258 | ||
| 2022 |
2,235 | |||
| 2023 |
2,198 | |||
| 2024 |
2,201 | |||
| 2025 |
1,678 | |||
| Thereafter |
— | |||
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| Total |
$ | 10,570 | ||
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Other Current Liabilities—Other current liabilities as of December 31, 2019 and 2020 consisted of the following:
| 2019 | 2020 | |||||||
| Value-added tax and sales tax liabilities |
$ | 7,452 | $ | 3,888 | ||||
| Holdback consideration payable |
741 | — | ||||||
| Other |
1,111 | 851 | ||||||
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| Total other current liabilities |
$ | 9,304 | $ | 4,739 | ||||
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F-23
Table of Contents
Other Liabilities—Other liabilities as of December 31, 2019 and 2020 consisted of the following:
| 2019 | 2020 | |||||||
| Deferred rent, non-current |
$ | 4,995 | $ | — | ||||
| Uncertain tax positions liability |
— | 564 | ||||||
| Other |
190 | 80 | ||||||
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| Total other liabilities |
$ | 5,185 | $ | 644 | ||||
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| 7. | INCOME TAXES |
The components of loss before income tax for the years ended December 31, 2019 and 2020 were as follows:
| 2019 | 2020 | |||||||
| Domestic |
$ | (46,974) | $ | (68,128) | ||||
| Foreign |
973 | 2,828 | ||||||
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| Total |
$ | (46,001) | $ | (65,300) | ||||
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The income tax expense for the years ended December 31, 2019 and 2020 consisted of the following:
| 2019 | 2020 | |||||||
| Current: |
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| Federal |
$ | — | $ | — | ||||
| State |
— | — | ||||||
| Foreign |
718 | 1,515 | ||||||
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| Total |
718 | 1,515 | ||||||
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| Total income tax expense |
$ | 718 | $ | 1,515 | ||||
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The Company had an effective tax rate of (1.56)% and (2.32)% for the years ended December 31, 2019 and 2020, respectively.
The reconciliation between the statutory federal income tax and the Company’s effective tax rate as a percentage of loss before income taxes was as follows:
| 2019 | 2020 | |||||||
| U.S Federal income taxes at statutory rate |
21.00 | % | 21.00 | % | ||||
| State income taxes, net of federal benefit |
1.27 | % | 1.79 | % | ||||
| Foreign income taxes at rates other than the US rate |
(1.22 | )% | (1.02 | )% | ||||
| Change in valuation allowance |
(22.30 | )% | (27.74 | )% | ||||
| Research and development credits |
2.87 | % | 5.29 | % | ||||
| Stock-based compensation |
(2.58 | )% | (0.38 | )% | ||||
| Other |
(0.60 | )% | (1.26 | )% | ||||
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| Effective income tax rate |
(1.56 | )% | (2.32 | )% | ||||
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F-24
Table of Contents
As of December 31, 2019 and 2020, the components of deferred tax assets for federal and state income taxes consisted of the following:
| 2019 | 2020 | |||||||
| Deferred tax assets: |
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| Net operating loss carryforwards |
$ | 55,105 | $ | 71,075 | ||||
| Accruals and reserves |
2,248 | 791 | ||||||
| Stock-based compensation |
2,041 | 3,025 | ||||||
| Research and development credits |
6,221 | 14,427 | ||||||
| Lease liabilities |
— | 5,976 | ||||||
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| Gross deferred tax assets |
65,615 | 95,294 | ||||||
| Valuation allowance |
(61,512 | ) | (84,065 | ) | ||||
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| Total deferred tax assets |
4,103 | 11,229 | ||||||
| Deferred tax liabilities: |
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| Depreciation and amortization |
(2,852 | ) | (3,539 | ) | ||||
| Deferred commissions |
(1,251 | ) | (2,862 | ) | ||||
| Right of use assets |
— | (4,828 | ) | |||||
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| Total deferred tax liabilities |
(4,103 | ) | (11,229 | ) | ||||
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| Net deferred tax assets |
$ | — | $ | — | ||||
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A valuation allowance is provided for deferred tax assets where the recoverability of the assets is uncertain. The determination to provide a valuation allowance is dependent upon the assessment of whether it is more likely than not that sufficient future taxable income will be generated to utilize the deferred tax assets.
Based on the weight of the available evidence, which includes the Company’s historical operating losses, lack of taxable income, and the accumulated deficit, the Company has provided for a full valuation allowance against its U.S. federal and state deferred tax assets as of December 31, 2019 and 2020. The Company increased the valuation allowance for the years ended December 31, 2019 and 2020 by $7,704 and $22,553, respectively.
As of December 31, 2020, the Company had U.S. federal and state net operating loss carryforwards of $314,472 and $73,777, respectively, and U.S. federal and state research and development tax credit carryforwards of $11,456 and $11,587, respectively. If not utilized, certain of the federal and state net operating losses will expire at various dates beginning in 2031, while the federal research and development tax credit carryforwards will expire in various amounts beginning in 2033. State research and development tax credit carryforwards can be carried forward indefinitely.
The Company’s net operating loss and tax credit carryovers may be subject to annual limitations of usage, as promulgated by the Internal Revenue Service and similar state provisions, due to ownership changes that may have occurred in the past. The annual limitation may result in the expiration of net operating losses and credits before utilization.
The federal net operating loss carryforwards generated after December 31, 2017 have an indefinite carryforward period and are subject to an 80% deduction limitation based upon taxable income prior to net operating loss deduction. Of the total federal net operating loss carryforwards as of December 31, 2020, $163,907 are carried forward indefinitely, but are limited to 80% of taxable income. On March 27, 2020, the Coronavirus Aid, Relief and Economic Security (“CARES”) Act was enacted and signed into U.S. law to provide economic relief to individuals and businesses facing economic hardship as a result of the COVID-19 pandemic. Changes in tax laws or rates are accounted for in the period of enactment. The CARES Act temporarily removes the 80% taxable income limitation for tax years beginning before 2021. Furthermore, it allows for a five-year carryback of federal net operating loss arising in 2018, 2019, and 2020.
F-25
Table of Contents
The Company files income tax returns in the U.S. federal jurisdiction as well as certain U.S. state and foreign jurisdictions with varying statutes of limitation. Due to loss carryovers, the statutes of limitations remain open for tax years from 2016 in the major jurisdictions that the Company is subject to tax. There are currently no income tax audits underway by U.S. federal or state or foreign tax authorities.
The Company does not expect that future undistributed foreign earnings will be subject to U.S. federal or state or foreign withholding tax since the Company intends to continue reinvesting such earnings outside the U.S. indefinitely.
Uncertain Tax Positions—As of December 31, 2020, the Company’s total amount of unrecognized tax benefits was $7,477, of which $564 would impact the Company’s effective tax rate, if recognized. For the years ended December 31, 2019 and 2020, the activity related to the unrecognized tax benefits was as follows:
| 2019 | 2020 | |||||||
| Gross unrecognized tax benefits—beginning balance |
$ | 9,688 | $ | 14,099 | ||||
| Increases related to tax positions taken during current year |
4,411 | 2,210 | ||||||
| Decreases related to tax positions taken during prior years |
— | (8,832 | ) | |||||
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| Gross unrecognized tax benefits—ending balance |
$ | 14,099 | $ | 7,477 | ||||
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The Company is currently unaware of uncertain tax positions that could result in significant additional payments, accruals, or other material deviation in the next 12 months. The Company records interest and penalties, if any, related to unrecognized tax benefits in income tax expense.
| 8. | REDEEMABLE CONVERTIBLE PREFERRED STOCK |
Redeemable Convertible Preferred Stock—From April to July 2019, the Company authorized 9,166,666 shares and issued an aggregate of 8,794,164 shares of its Series E redeemable convertible preferred stock, $0.00001 par value per share, for a price of $12.00 per share. In July 2020, the Company authorized an aggregate of 8,389,961 shares and issued an aggregate of 7,647,058 shares of its Series F redeemable convertible preferred stock, $0.00001 par value per share (“Series F”) for a price of $17.00 per share.
As of December 31, 2019 and 2020, redeemable convertible preferred stock consisted of the following:
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| Shares |
Issue Date |
Authorized | Outstanding | Issue Price | Carrying Value |
Liquidation Amount |
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| A | December 2011 and June 2012 | 23,023,168 | 23,023,168 | $ | 0.9628 | $ | 22,127 | $ | 22,167 | |||||||||||||
| B | June 2013, July 2013, and October 2013 | 12,849,539 | 12,849,539 | 4.9029 | 62,901 | 63,000 | ||||||||||||||||
| C | August 2015 and September 2015 | 12,091,062 | 12,091,062 | 5.0935 | 61,351 | 61,586 | ||||||||||||||||
| D | April 2017, June 2017, September 2017, and October 2017 | 10,900,409 | 10,900,409 | 7.50 | 81,482 | 81,753 | ||||||||||||||||
| E | April 2019 and July 2019 | 9,166,666 | 8,794,164 | 12.00 | 104,820 | 105,530 | ||||||||||||||||
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| 68,030,844 | 67,658,342 | $ | 332,681 | $ | 334,036 | |||||||||||||||||
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F-26
Table of Contents
| 2020 | ||||||||||||||||||||||
| Shares |
Issue Date |
Authorized | Outstanding | Issue Price | Carrying Value |
Liquidation Amount |
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| A | December 2011 and June 2012 | 23,023,168 | 23,023,168 | $ | 0.9628 | $ | 22,127 | $ | 22,167 | |||||||||||||
| B | June 2013, July 2013, and October 2013 | 12,849,539 | 12,849,539 | 4.9029 | 62,901 | 63,000 | ||||||||||||||||
| C | August 2015 and September 2015 | 12,091,062 | 12,091,062 | 5.0935 | 61,351 | 61,586 | ||||||||||||||||
| D | April 2017, June 2017, September 2017, and October 2017 | 10,900,409 | 10,900,409 | 7.50 | 81,482 | 81,753 | ||||||||||||||||
| E | April 2019 and July 2019 | 9,166,666 | 8,794,164 | 12.00 | 104,820 | 105,530 | ||||||||||||||||
| F | July 2020 | 8,389,961 | 7,647,058 | 17.00 | 129,612 | 130,000 | ||||||||||||||||
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| 76,420,805 | 75,305,400 | $ | 462,293 | $ | 464,036 | |||||||||||||||||
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The Company recorded the redeemable convertible preferred stock at fair value on the dates of issuance, net of issuance costs. The Company classified the redeemable convertible preferred stock outside of stockholders’ deficit because in the event of certain “liquidation events” that are not solely within its control (including merger, acquisition, or sale of all or substantially all of its assets), the shares would become redeemable at the option of the holders. The Company did not adjust the carrying values of the redeemable convertible preferred stock to the deemed liquidation values of such shares since a liquidation event was not probable at the consolidated balance sheet date. Subsequent adjustments to increase or decrease the carrying values to the ultimate liquidation values will be made only if and when it becomes probable that such a liquidation event will occur.
The significant rights and preferences of the outstanding redeemable convertible preferred stock are as follows:
Dividends—Dividend holders of Series A, Series B, Series C, Series D, Series E and Series F redeemable convertible preferred stocks (“Series A,” “Series B,” “Series C,” “Series D,” “Series E,” and “Series F” and collectively, the “Preferred Stock”) are entitled to receive noncumulative dividends at an annual rate of $0.077, $0.3922, $0.4075, $0.60, $0.96 and $1.36 per share, respectively. Such dividends shall be payable when declared by the Company’s Board of Directors (the “Board of Directors”). No dividends shall be payable on any common stock until dividends on Series A, Series B, Series C, Series D, Series E and Series F have been paid or declared by the Board of Directors. Through December 31, 2020, no dividends have been declared or paid.
Redemption—While the Preferred Stock is not mandatorily redeemable, it is contingently redeemable in the event of certain “liquidation events” that are not solely within its control (including merger, acquisition, or sale of all or substantially all of its assets).
Liquidation Preference—In the event of any liquidation, dissolution, or winding-up of the Company, holders of Series A are entitled to a liquidation preference of $0.9628 per share, plus any declared but unpaid dividends prior to, and in preference to, any distributions to the holders of common stock. Holders of Series B are entitled to a liquidation preference of $4.9029 per share, plus any declared but unpaid dividends prior to, and in preference to, any distributions to the holders of Series A and common stock. Holders of Series C are entitled to a liquidation preference of $5.0935 per share, plus any declared but unpaid dividends prior to, and in preference to, any distributions to the holders of Series A, Series B, and common stock. Holders of Series D are entitled to a liquidation preference of $7.50 per share, plus any declared but unpaid dividends prior to, and in preference to, any distributions to the holders of Series A, Series B, Series C, and common stock. Holders of Series E are entitled to a liquidation preference of $12.00 per share, plus any declared but unpaid dividends prior to, and in preference to, any distributions to the holders of Series A, Series B, Series C, Series D, and common stock. Holders of Series F are entitled to a liquidation preference of $17.00 per share, plus any declared but unpaid dividends prior to, and in preference to, any distributions to the holders of Series A, Series B, Series C, Series D, Series E, and common stock. Any assets remaining following the distribution to the holders of Series A, Series B, Series C, Series D, Series E, and Series F will be distributed ratably among the holders of common stock.
F-27
Table of Contents
Voting Rights—The holders of Series A, Series B, Series C, Series D, Series E and Series F are entitled to the number of votes equal to the number of shares of common stock into which such redeemable convertible preferred stock is convertible. The holders of Preferred Stock, voting as a single class, shall be entitled to elect two members of the Board of Directors at any election of directors. The holders of common stock, voting as a single class, shall be entitled to elect one member of the Board of Directors at any election of directors. The holders of the Preferred Stock and common stock, voting together as a single class on an as-converted basis, shall be entitled to elect any remaining members of the Board of Directors at any election of directors.
Conversion—Each share of Series A, Series B, Series C, Series D, Series E, and Series F is convertible, at the option of the holder, into such number of fully paid nonassessable shares of common stock as is determined by dividing by the original issue price by the conversion price. The conversion price and resulting ratio has been the same as the original issue price and ratio for each share of Series A, Series B, Series C, Series D, Series E and Series F through December 31, 2020. The conversion formula is adjusted for such events as dilutive issuances, stock splits, or business combinations. Each share of Preferred Stock shall automatically be converted into shares of common stock at the then-effective conversion price applicable to such share upon the earlier of (i) the date specified by written consent or agreement of holders of a majority of the shares of each series of Preferred Stock then outstanding (each voting separately as a series), or (ii) immediately upon the closing of the sale of the Company’s common stock in a firm commitment, underwritten public offering registered under the Securities Act of 1933, as amended (the “Securities Act”), other than a registration relating solely to a transaction under Rule 145 under the Securities Act (or any successor thereto) or to an employee benefit plan of the Company, the public offering price of which results in aggregate proceeds to the Company (before payment of any underwriters’ discounts and expenses relating to the issuance) of at least $50,000. Notwithstanding the foregoing, each share of any series of Preferred Stock shall automatically be converted into shares of common stock at the then-effective conversion price applicable to such share upon the date specified by written consent or agreement of holders of a majority of the shares of such series of Preferred Stock.
| 9. | STOCKHOLDERS’ DEFICIT |
Common Stock Warrants—In June 2012, the Company issued a warrant in connection with an educator partner agreement to purchase up to 571,250 shares of the Company’s common stock at an exercise price of $0.20 per share. These warrants expire on the earlier of (i) June 2020, (ii) the sale of substantially all of the Company’s securities, or (iii) 60 days after the termination of the educator partner agreement. The vesting schedule of the warrants was based on attainment of certain customer course completion metrics for the partner’s content through June 2017.
As of December 31, 2019, the Company believes that 190,930 of these warrants were vested and exercisable per the terms of the educator partner agreement. In June 2020, the educator partner cash exercised the 190,930 warrants and attempted to net exercise 379,070 of the warrants. The Company and the educator partner entered dispute resolution procedures to resolve the dispute regarding the vesting of the 379,070 net exercised warrants. In December 2020, the dispute was resolved by both parties. The Company issued 187,305 fully vested shares of common stock to the educator partner and the educator partner entered into a contract amendment that expanded the extent of its content hosted on the Company’s platform. The Company did not record a charge to the consolidated income statement as a result of the resolution of the dispute as the value assigned to the settlement element was zero. The Company concluded that there would be significant expected future benefit to be obtained from the expansion of the educator partner’s content on its platform, and recorded the fair value of common stock issued (which was less than the expected fair value of the educator partner’s content to be made available on the Company’s platform) in the amount of $3,956 as an intangible content asset as of December 31, 2020 to be amortized over the estimated useful life of 5 years, commencing once the content is available on the Company’s platform.
F-28
Table of Contents
Stock Incentive Plans—In 2013, the Company adopted the Coursera, Inc. Stock Incentive Plan (“Stock Incentive Plan”) and in 2014, adopted the Coursera, Inc. 2014 Executive Stock Incentive Plan (together, the “Plans”), which provide for the granting of both incentive and nonstatutory stock options. Restricted stock units (“RSU”s) are granted under the Stock Incentive Plan. Under the Plans, 48,547,319 and 65,547,319 shares were available for grant as stock-based awards to employees, directors, and service providers as of December 31, 2019 and 2020, respectively. Under the Plans, 2,108,167 shares and 8,098,484 shares of the Company’s common stock were reserved for future grants as of December 31, 2019 and 2020, respectively. During the years ended December 31, 2019 and 2020, the shares reserved for issuance under the Plans were increased by 7,112,536 shares and 17,000,000 shares, respectively.
Stock Options—The Company may grant options at prices not less than the fair market value at the date of grant. These options generally expire 10 years from the date of grant. Incentive stock options and nonstatutory options generally vest ratably over service periods between two to four years.
Stock option activity under the Plans for the years ended December 31, 2019 and 2020 was as follows:
| Number of Shares |
Weighted- Average Exercise Price |
Weighted- Average Remaining Contractual Term |
Aggregate Intrinsic Value |
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| Balance—January 1, 2019 . . . . . . . . . . . . . . . . . |
27,748,135 | $ | 2.16 | 8.13 | $ | 4,574 | ||||||||||
| Granted (weighted-average fair value of $2.69) |
8,229,541 | 5.73 | ||||||||||||||
| Exercised |
(4,261,484 | ) | 2.09 | |||||||||||||
| Canceled(1) |
(2,750,552 | ) | 2.08 | |||||||||||||
| Balance—December 31, 2019 |
28,965,640 | $ | 3.18 | 8.00 | $ | 106,730 | ||||||||||
| Granted (weighted-average fair value of $5.66) |
10,054,450 | 7.90 | ||||||||||||||
| Exercised |
(4,240,315 | ) | 2.42 | |||||||||||||
| Canceled |
(2,321,367 | ) | 5.04 | |||||||||||||
| Balance—December 31, 2020 |
32,458,408 | $ | 4.60 | 7.75 | $ | 625,058 | ||||||||||
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| Options vested |
14,832,161 | $ | 2.80 | 6.63 | $ | 312,412 | ||||||||||
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| (1) | 1,420,000 of the options canceled during 2019 were not added back to the pool of shares available for grant. |
Aggregate intrinsic value represents the difference between the exercise price of the options and the estimated fair value of the Company’s common stock as determined by the Board of Directors. The aggregate intrinsic value of options exercised was $15,788 and $50,286 in 2019 and 2020, respectively.
In certain instances, holders of options granted under the Plans may exercise their options prior to vesting, subject to the Company’s right of repurchase of unvested shares at the exercise price. The Company’s repurchase right becomes exercisable only if a termination event occurs that would have caused the stock option to be forfeited and lapses in accordance with the original vesting period for the associated stock option.
There were 92,858 and 45,834 shares of common stock outstanding pursuant to the exercise of unvested stock options for cash and subject to repurchase as of December 31, 2019 and 2020, respectively. Upon termination of a holder’s employment, the unvested shares are subject to repurchase at the option of the Company at a price that is the lesser of the original purchase price ranging from $1.68 to $2.56 or the fair market value of a share determined as of the date of the repurchase. The shares issued vest according to the employees’ normal stock option vesting schedule. There were zero unvested shares repurchased during the years ended December 31, 2019 and 2020. The cash received in exchange for the unvested shares is recorded within other liabilities in the Company’s consolidated balance sheet. On exercise, the shares are included as common stock outstanding in the consolidated statement of redeemable convertible preferred stock and stockholders’ deficit; however, as the shares vest, the repurchase liability is transferred to additional paid-in capital in the Company’s consolidated balance sheet.
F-29
Table of Contents
The total fair value of stock options granted to employees during the years ended December 31, 2019 and 2020 was $21,963 and $56,652, respectively, which is being recognized over the respective vesting periods.
RSUs—During the year ended December 31, 2020, the Company began granting RSUs to its employees and directors with service-based and performance-based vesting conditions, both of which must be satisfied in order for RSUs to vest. The service-based vesting condition for these awards is typically satisfied over four years with a cliff vesting period of one year and continued vesting quarterly thereafter. The performance-based vesting condition is satisfied on the earlier of (i) a change in control event or (ii) the first sale of the Company’s common stock pursuant to an initial public offering. Both events are not deemed probable until consummated, and therefore, all stock-based compensation expense related to RSUs remained unrecognized as of December 31, 2020. The total fair value of RSUs granted to employees and directors during the year ended December 31, 2020 was $58,851.
RSU activity during the year ended December 31, 2020 was as follows:
| 2020 | ||||||||||||
| Number of Shares |
Weighted- Average Grant Fair Value |
Aggregate Intrinsic Value |
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| Unvested balance—January 1, 2020 |
— | $ | — | $ | — | |||||||
| Granted |
3,286,400 | 17.91 | ||||||||||
| Forfeited |
9,800 | 12.78 | ||||||||||
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| Unvested balance—December 31, 2020 |
3,276,600 | $ | 17.92 | $ | 19,454 | |||||||
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Stock-Based Compensation Expense—The Company estimates the fair value of stock-based compensation utilizing the Black-Scholes option-pricing model, which is dependent upon several variables, such as the expected option term, expected volatility of the Company’s stock price over the expected term, expected risk-free interest rate over the expected option term, and expected dividend yield rate over the expected option term. These amounts are estimates and, thus, may not be reflective of actual future results, nor amounts ultimately realized by recipients of these grants. The Company recognizes compensation on a straight-line basis over the requisite vesting period for each award.
A summary of the weighted-average assumptions the Company utilized to record compensation expenses for stock options granted during the years ended December 31, 2019 and 2020 is as follows:
| 2019 | 2020 | |||||||
| Fair value of common stock |
$ | 5.70 | $ | 10.30 | ||||
| Risk-free interest rate |
1.8 | % | 0.6 | % | ||||
| Expected term (in years) |
6.1 | 6.1 | ||||||
| Expected volatility |
46.8 | % | 50.3 | % | ||||
| Dividend yield |
— | % | — | % | ||||
The fair value of each stock option grant was determined using the Black-Scholes option-pricing model and the assumptions are discussed below. Each of these inputs is subjective and generally requires significant judgment to determine.
Fair Value of Common Stock—Because the Company’s common stock is not yet publicly traded, the fair value was determined by the Company’s Board of Directors. The Board of Directors considers numerous objective and subjective factors to determine the fair value of the Company’s common stock at each meeting in which awards are approved. The factors considered include, but are not limited to: (i) the results of
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contemporaneous independent third-party valuations of the Company’s common stock; (ii) the prices, rights, preferences, and privileges of the Company’s redeemable convertible preferred stock relative to those of its common stock; (iii) the lack of marketability of the Company’s common stock; (iv) actual operating and financial results; (v) current business conditions and projections; (vi) the likelihood of achieving a liquidity event, such as an initial public offering or sale of the Company, given prevailing market conditions; and (vii) precedent transactions involving the Company’s shares.
Expected Term—The expected term represents the period that the Company’s stock-based awards are expected to be outstanding. For option grants considered to be “plain vanilla,” the Company determined the expected term using the simplified method. The simplified method deems the term to be the average of the time to vesting and the contractual life of the options.
Risk-Free Interest Rate—The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant for zero-coupon U.S. Treasury notes with maturities approximately equal to the option’s expected term.
Expected Volatility—Since the Company does not have a trading history of its common stock, the expected volatility was derived from the average historical stock volatilities of several unrelated public companies, within the Company’s industry, that it considers to be comparable to its business over a period equivalent to the expected term of the stock option grants.
Dividend Rate—The expected dividend was assumed to be zero as the Company has never paid dividends and has no current plans to do so.
Stock-based compensation expense for the years ended December 31, 2019 and 2020, is classified in the consolidated statements of operations as follows:
| 2019 | 2020 | |||||||
| Cost of revenue |
$ | 491 | $ | 516 | ||||
| Research and development |
7,038 | 6,960 | ||||||
| Sales and marketing |
3,189 | 4,097 | ||||||
| General and administrative |
5,599 | 5,234 | ||||||
|
|
|
|
|
|||||
| Total |
$ | 16,317 | $ | 16,807 | ||||
|
|
|
|
|
|||||
The Company capitalized $362 and $966 of stock-based compensation related to its internal-use software during the years ended December 31, 2019 and 2020, respectively.
During June 2019, the Company facilitated a private tender offer (the “Tender Offer”) by an existing external investor (the “Purchaser”). The Purchaser offered to purchase up to 5,208,333 shares of common stock of the Company from current employees, former employees, and current or former consultants of the Company. During the Tender Offer, 1,877,528 shares were purchased at a purchase price of $9.60 per share. The Company accounted for the offering as compensatory and recognized $6,196 of stock-based compensation expense for the difference between the purchase price and the fair value of the Company’s common stock, which was $6.30 per share.
As of December 31, 2020, there was a total of $65,304 unrecognized employee compensation cost related to unvested stock options, which is expected to be recognized over a weighted-average period of approximately 3.09 years. In addition, as of December 31, 2020, total unrecognized compensation cost related to unvested RSUs was $58,725, which is expected to be recognized over a weighted-average period of approximately 4.02 years if the first sale of the Company’s common stock pursuant to an initial public offering had occurred on December 31, 2020.
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Common Stock Reserved for Issuance—The Company’s common stock reserved for future issuance as of December 31, 2019 and 2020 was as follows:
| 2019 | 2020 | |||||||
| Conversion of convertible preferred stock |
67,658,342 | 75,305,400 | ||||||
| Exercise and conversion of common stock warrants |
571,250 | — | ||||||
| Stock options outstanding |
28,965,640 | 32,458,408 | ||||||
| RSUs outstanding |
— | 3,276,600 | ||||||
| Shares available for future grants |
2,108,167 | 8,098,484 | ||||||
|
|
|
|
|
|||||
| Total shares of common stock reserved |
99,303,399 | 119,138,892 | ||||||
|
|
|
|
|
|||||
| 10. | NET LOSS PER SHARE |
The following table presents the calculation of basic and diluted net loss per share attributable to common stockholders for the years ended December 31, 2019 and 2020:
| 2019 | 2020 | |||||||
| Numerator: |
||||||||
| Net loss attributable to common stockholders |
$ | (46,719) | $ | (66,815) | ||||
|
|
|
|
|
|||||
| Denominator: |
||||||||
| Weighted-average shares used in computing net loss per share attributable to common stockholders—basic and diluted |
32,276,258 | 37,207,492 | ||||||
|
|
|
|
|
|||||
| Net loss per share attributable to common stockholders—basic and diluted |
$ | (1.45) | $ | (1.80) | ||||
|
|
|
|
|
|||||
The following potentially dilutive securities were excluded from the computation of diluted net loss per share calculations for the years ended December 31, 2019 and 2020 because the impact of including them would have been anti-dilutive:
| 2019 | 2020 | |||||||
| Redeemable convertible preferred stock |
67,658,342 | 75,305,400 | ||||||
| Common stock options |
28,965,640 | 32,458,408 | ||||||
| Restricted stock units |
— | 3,276,600 | ||||||
| Common stock warrants |
571,250 | — | ||||||
| Shares subject to repurchase |
92,858 | 52,084 | ||||||
|
|
|
|
|
|||||
| Total |
97,288,090 | 111,092,492 | ||||||
|
|
|
|
|
|||||
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Unaudited Pro Forma Net Loss Per Share
The following table presents the calculation of unaudited pro forma basic and diluted net loss per share for the year ended December 31, 2020:
| 2020 | ||||
| Numerator: |
||||
| Net loss and pro forma net loss |
$ | (66,815) | ||
|
|
|
|||
| Denominator: |
||||
| Weighted-average shares used in computing basic net loss per share |
37,207,492 | |||
| Pro forma adjustment to reflect conversion of redeemable convertible preferred stock |
71,295,613 | |||
|
|
|
|||
| Weighted-average shares used in computing pro forma net loss per share—basic and diluted |
108,503,105 | |||
|
|
|
|||
| Pro forma net loss per share attributable to common stockholders—basic and diluted |
$ | (0.62) | ||
|
|
|
|||
| 11. | LEASES |
The Company has entered into various non-cancelable office space operating leases with lease periods expiring through November 2024. These leases do not contain residual value guarantees, covenants, or other restrictions.
The components of lease costs for the year ended December 31, 2020 were as follows:
| 2020 | ||||
| Lease costs |
||||
| Operating lease cost |
$ | 6,856 | ||
| Short term lease cost |
779 | |||
| Variable lease cost(1) |
1,302 | |||
|
|
|
|||
| Total lease costs |
$ | 8,937 | ||
|
|
|
|||
| (1) | Variable lease cost is primarily related to payments made to the Company’s landlords for common area maintenance, property taxes, insurance, and other operating expenses. |
Rent expense incurred under operating leases prior to adoption of ASC 842 was $4,786 for the year ended December 31, 2019.
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Future lease payments under the Company’s non-cancelable operating leases, which do not include short-term leases, as of December 31, 2020, were as follows:
| Operating leases | ||||
| 2021 |
$ | 7,083 | ||
| 2022 |
7,443 | |||
| 2023 |
7,668 | |||
| 2024 |
7,226 | |||
| 2025 and thereafter |
— | |||
|
|
|
|||
| Total lease payments |
29,420 | |||
| Less imputed interest |
(3,189 | ) | ||
|
|
|
|||
| Present value of operating lease liabilities |
$ | 26,231 | ||
|
|
|
|||
| Operating lease liabilities, current |
7,926 | |||
| Operating lease liabilities, non-current |
18,305 | |||
|
|
|
|||
| Total operating lease liabilities |
$ | 26,231 | ||
|
|
|
|||
Future minimum payments related to the Company’s operating leases as of December 31, 2019, were approximately as follows:
| Years Ending December 31 |
|
|||
| 2020 |
$ | 7,936 | ||
| 2021 |
7,680 | |||
| 2022 |
7,443 | |||
| 2023 |
7,668 | |||
| 2024 |
7,226 | |||
| 2025 and thereafter |
— | |||
|
|
|
|||
| Total |
$ | 37,953 | ||
|
|
|
|||
Supplemental cash flow information related to the Company’s operating leases for the year ended December 31, 2020 as well as the weighted-average remaining lease term and weighted-average discount rate as of December 31, 2020 were as follows:
| 2020 | ||||
| Supplemental Cash Flow Information |
||||
| Cash paid for amounts included in the measurement of operating lease liabilities |
$ | 7,548 | ||
| Operating lease ROU assets obtained in exchange for lease liabilities |
— | |||
| Lease Term and Discount Rate |
||||
| Weighted-average remaining operating lease term (years) |
3.87 | |||
| Weighted-average operating lease discount rate |
5.68 | % | ||
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| 12. | COMMITMENTS AND CONTINGENCIES |
Purchase Obligations—Purchase obligations relate mainly to a third-party cloud infrastructure agreement and subscription arrangements used to facilitate the Company’s operations as well as an advertising services agreement. Future minimum payments under the Company’s non-cancelable purchase obligations as of December 31, 2020 are presented in the table below.
| Purchase Obligations |
||||
| 2021 |
$ | 10,550 | ||
| 2022 |
6,633 | |||
| 2023 |
6,633 | |||
| 2024 |
2,466 | |||
| 2025 |
1,379 | |||
| Thereafter |
— | |||
|
|
|
|||
| Total |
$ | 27,661 | ||
|
|
|
|||
Litigation—From time to time, the Company is party to various litigation and administrative proceedings relating to claims arising from its operations in the normal course of business. Based on the information presently available, including discussion with legal counsel, management believes that resolution of these matters will not have a material adverse effect on the Company’s business, results of operations, consolidated financial condition, or cash flows.
Indemnifications—In the normal course of business, the Company enters into contracts and agreements that contain a variety of representations and warranties and provide for general indemnification. The Company’s exposure under these agreements is unknown because it involves future claims that may be made against the Company but have not yet been made. To date, the Company has not paid any material claims or has been required to defend any actions related to its indemnification obligations; however, the Company may record charges in the future as a result of these indemnification obligations. In addition, the Company has indemnification agreements with certain of its directors, executive officers, and other employees that require it, among other things, to indemnify them against certain liabilities that may arise by reason of their status or service with the Company. The terms of such obligations may vary.
13. 401(k) PLAN
The Company has a 401(k) savings plan (the “401(k) Plan”) that qualifies as a deferred salary arrangement under Section 401(k) of the Internal Revenue Code. Under the 401(k) Plan, participating employees may elect to contribute up to 100% of their eligible compensation, subject to certain limitations. The 401(k) Plan provides for a discretionary employer-matching contribution. The Company made no matching contributions to the 401(k) Plan in 2019 and 2020.
| 14. | RELATED-PARTY TRANSACTION |
During the year ended December 31, 2017, the Company entered into a content sourcing agreement with a related party in the normal course of business. Content fees earned by the related party during the years ended December 31, 2019 and 2020 were $5,876 and $6,171, respectively. As of December 31, 2019 and 2020, outstanding educator partner payables related to this content sourcing agreement were $2,994 and $4,821, respectively.
15. SEGMENT AND GEOGRAPHIC INFORMATION
The Company’s Chief Executive Officer is its CODM. For the purposes of allocating resources and assessing performance, the CODM examines three segments which are the Company’s three revenue sources: Consumer, Enterprise, and Degrees. This is also consistent with how the Company disaggregates revenue.
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The Consumer segment targets individual learners seeking to obtain hands-on learning, gain valuable job skills, receive professional-level certifications, and otherwise increase their knowledge and advance their careers. The Enterprise segment is focused on helping businesses and government customers upskill and reskill their employees and citizens, respectively, and helping university customers deliver online courses to their students. The Degrees segment is engaged in partnering with universities to deliver fully online bachelor’s and master’s degrees. The CODM measures the performance of each segment primarily based on segment revenue and segment gross profit.
Segment gross profit, as presented below, is defined as segment revenue less certain costs of revenue which represent content costs paid to educator partners. Content costs only apply to the Consumer and Enterprise segments as there is no content cost attributable to the Degrees segment. Instead, in the Degrees segment, the Company earns a Degrees service fee based on a percentage of the total online student tuition collected by the university partner. Expenses other than content costs included in cost of revenue are not allocated to segments because they are managed at the consolidated corporate level. These unallocated costs include platform and support costs, stock-based compensation expense, amortization of acquired intangible assets and internal-use software. In addition, the Company does not allocate sales and marketing expenses, research and development expenses, and general and administrative expenses because the CODM does not include the information in his measurement of the performance of the operating segments. While the Company has expanded its customer segments from Consumer to Enterprise and to Degrees, the Company’s technical and operating platforms continue to support the entire Company.
The CODM does not use asset information by segments to assess performance and make decisions regarding allocation of resources, and the Company does not track its long-lived assets by segment. The geographic identification of these assets is set forth below.
Financial information for each reportable segment was as follows:
| Revenue | 2019 | 2020 | ||||||
| Consumer |
$ | 121,011 | $ | 192,909 | ||||
| Enterprise |
48,262 | 70,784 | ||||||
| Degrees |
15,138 | 29,818 | ||||||
|
|
|
|
|
|||||
| Total revenue |
$ | 184,411 | $ | 293,511 | ||||
|
|
|
|
|
|||||
| Segment gross profit |
||||||||
| Consumer |
$ | 64,645 | $ | 106,509 | ||||
| Enterprise |
34,184 | 48,972 | ||||||
| Degrees |
15,138 | 29,818 | ||||||
|
|
|
|
|
|||||
| Total segment gross profit |
$ | 113,967 | $ | 185,299 | ||||
|
|
|
|
|
|||||
| Reconciliation of segment gross profit to gross profit |
||||||||
| Platform and support costs |
14,861 | 22,833 | ||||||
| Stock-based compensation |
491 | 516 | ||||||
| Amortization of internal use software |
3,273 | 5,875 | ||||||
| Amortization of acquired intangibles |
520 | 1,410 | ||||||
|
|
|
|
|
|||||
| Total reconciling items |
19,145 | 30,634 | ||||||
|
|
|
|
|
|||||
| Gross profit |
$ | 94,822 | $ | 154,665 | ||||
|
|
|
|
|
|||||
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Geographic Information:
Revenue: The following table summarizes the revenue by region based on the billing address of the Company’s customers:
| 2019 | 2020 | |||||||
| United States |
$ | 89,951 | $ | 143,478 | ||||
| Europe, Middle East, and Africa |
52,086 | 83,227 | ||||||
| Asia Pacific |
27,672 | 40,732 | ||||||
| Other |
14,702 | 26,074 | ||||||
|
|
|
|
|
|||||
| Total |
$ | 184,411 | $ | 293,511 | ||||
|
|
|
|
|
|||||
No single country other than the United States represented 10% or more of the Company’s total revenue during the years ended December 31, 2019 and 2020.
Long-lived assets: The following table presents the Company’s long-lived assets, consisting of property, equipment and software, net of depreciation and amortization, and operating lease right-of-use assets, by geographic region:
| 2019 | 2020 | |||||||
| United States |
$ | 13,758 | $ | 39,202 | ||||
| Rest of World |
285 | 1,064 | ||||||
|
|
|
|
|
|||||
| Total |
$ | 14,043 | $ | 40,266 | ||||
|
|
|
|
|
|||||
16. SUBSEQUENT EVENTS
The Company evaluated subsequent events through February 24, 2021, the date these consolidated financial statements were issued, and determined that no subsequent events have occurred that would require recognition in the consolidated financial statements or disclosure in the Notes to Consolidated Financial Statements.
* * * * * *
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coursera
Table of Contents
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution.
The following table sets forth all costs and expenses, other than estimated underwriting discounts and commissions, payable by Coursera, Inc. (the “Registrant”), in connection with the sale of the common stock being registered. All amounts shown are estimates except for the Securities and Exchange Commission (the “SEC”) registration fee, the FINRA filing fee and the NYSE listing fee.
| Amount | ||||
| SEC registration fee |
$ | 65,128 | ||
| FINRA filing fee |
90,044 | |||
| NYSE listing fee |
500,000 | |||
| Printing and engraving expenses |
525,000 | |||
| Legal fees and expenses |
1,800,000 | |||
| Accounting fees and expenses |
1,862,616 | |||
| Transfer agent and registrar fees and expenses |
8,500 | |||
| Miscellaneous fees and expenses |
748,712 | |||
|
|
|
|||
| Total |
$ | 5,600,000 | ||
|
|
|
|||
| * | To be completed by amendment. |
Item 14. Indemnification of Directors and Officers.
The Registrant is incorporated under the laws of the State of Delaware. Section 145 of the Delaware General Corporation Law (the “DGCL”), provides that a Delaware corporation may indemnify any persons who were, are, or are threatened to be made, parties to any threatened, pending, or completed action, suit, or proceeding, whether civil, criminal, administrative, or investigative (other than an action by or in the right of such corporation), by reason of the fact that such person is or was an officer, director, employee, or agent of such corporation, or is or was serving at the request of such corporation as an officer, director, employee, or agent of another corporation or enterprise. The indemnity may include expenses (including attorneys’ fees), judgments, fines, and amounts paid in settlement actually and reasonably incurred by such person in connection with such action, suit, or proceeding, provided that such person acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the corporation’s best interests and, with respect to any criminal action or proceeding, had no reasonable cause to believe that his or her conduct was illegal. The indemnity may include expenses (including attorneys’ fees) actually and reasonably incurred by such person in connection with the defense or settlement of such action or suit provided such person acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the corporation’s best interests, except that no indemnification is permitted without judicial approval if the officer or director is adjudged to be liable to the corporation. Where an officer or director is successful on the merits or otherwise in the defense of any action referred to above, the corporation must indemnify him or her against the expenses (including attorneys’ fees) actually and reasonably incurred.
The Registrant’s amended and restated certificate of incorporation will provide for the indemnification of its directors to the fullest extent permitted under the DGCL. The Registrant’s amended and restated bylaws will provide for the indemnification of its directors and officers to the fullest extent permitted under the DGCL. Each of the Registrant’s amended and restated certificate of incorporation and amended and restated bylaws will become effective upon completion of this offering.
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Section 102(b)(7) of the DGCL permits a corporation to provide in its certificate of incorporation that a director of the corporation shall not be personally liable to the corporation or its stockholders for monetary damages for breach of fiduciary duties as a director, except for liability for any:
| • | transaction from which the director derives an improper personal benefit; |
| • | act or omission not in good faith or that involves intentional misconduct or a knowing violation of law; |
| • | unlawful payment of dividends or redemption or repurchase of shares; or |
| • | breach of a director’s duty of loyalty to the corporation or its stockholders. |
The Registrant’s amended and restated certificate of incorporation will include such a provision. Under the Registrant’s amended and restated bylaws, expenses incurred by any director or officers in defending any such action, suit, or proceeding in advance of its final disposition shall be paid by the Registrant upon delivery to it of an undertaking, by or on behalf of such director or officer, to repay all amounts so advanced if it shall ultimately be determined that such director or officer is not entitled to be indemnified by the Registrant, as long as such undertaking remains required by the DGCL.
Section 174 of the DGCL provides, among other things, that a director who willfully or negligently approves of an unlawful payment of dividends or an unlawful stock repurchase or redemption may be held liable for such actions. A director who was either absent when the unlawful actions were approved or dissented at the time may avoid liability by causing his or her dissent to such actions to be entered in the books containing minutes of the meetings of the board of directors at the time such action occurred or immediately after such absent director receives notice of the unlawful acts.
As permitted by the DGCL, the Registrant has entered into indemnification agreements with each of its directors and officers that require the Registrant, among other things, to indemnify its directors and officers against certain liabilities which may arise by reason of their status or service as directors or officers to the fullest extent not prohibited by law. These indemnification agreements may be sufficiently broad to permit indemnification of the Registrant’s officers and directors for liabilities, including reimbursement of expenses incurred, arising under the Securities Act. Under these agreements, the Registrant is not required to provide indemnification for certain matters. The indemnification agreements also set forth certain procedures that will apply in the event of a claim for indemnification thereunder.
There is at present no pending litigation or proceeding involving any of the Registrant’s directors or executive officers as to which indemnification is required or permitted, and the Registrant is not aware of any threatened litigation or proceeding that may result in a claim for indemnification.
The Registrant intends to enter into an insurance policy that covers its officers and directors with respect to certain liabilities, including liabilities arising under the Securities Act or otherwise.
The Registrant plans to enter into an underwriting agreement which provides that the underwriters are obligated, under some circumstances, to indemnify the Registrant’s directors, officers, and controlling persons against specified liabilities, including liabilities under the Securities Act.
Item 15. Recent Sales of Unregistered Securities.
The following sets forth information regarding all unregistered securities sold by the Registrant since January 1, 2018:
| (1) | From January 1, 2018 through December 31, 2020, the Registrant granted stock options to purchase an aggregate of 26,160,246 shares of common stock at exercise prices ranging from $2.23 to $15.17 per share to employees, consultants, and directors under the Non-Executive Plan. Of these options, options to purchase 1,704,620 shares have been exercised for cash consideration in the aggregate amount of |
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| $4,946,903, options to purchase 3,704,581 shares have been cancelled without being exercised, and options to purchase 20,751,045 shares remain outstanding; |
| (2) | From January 1, 2018 through December 31, 2020, the Registrant granted an aggregate of 3,286,400 restricted stock units under the Non-Executive Plan, 9,800 of which have been canceled and 3,276,600 of which remain outstanding; |
| (3) | From January 1, 2018 through December 31, 2020, the Registrant granted stock options to purchase an aggregate of 1,650,000 shares of common stock, each with an exercise price of $2.23 per share to a total of four (4) employees, consultants, and directors under the Executive Stock Plan. Of these options, options to purchase 546,618 shares have been exercised for cash consideration in the aggregate amount of $1,218,958, no options have been cancelled without being exercised, and options to purchase 1,103,382 shares remain outstanding; |
| (4) | From January 1, 2018 through December 31, 2020, the Registrant granted an aggregate of 111,250 restricted stock awards to a consultant under the Executive Stock Plan; |
| (5) | On March 29, 2019, the Registrant granted an aggregate of 1,346,610 shares of common stock with an aggregate value of $7,621,813 to four individuals in connection with the assignment of certain intellectual property rights relating to the Registrant’s massive open online course business, to the extent such rights were not previously assigned to the Registrant, including pursuant to such individual’s proprietary information and inventions agreement; |
| (6) | From April 23, 2019 through August 1, 2019, the Registrant issued an aggregate of 8,794,164 shares of Series E preferred stock to 7 accredited investors at a price per share equal to $12.00 for an aggregate purchase price of approximately $105.5 million; |
| (7) | On August 19, 2019, the Registrant issued 610,556 shares in connection with its acquisition of Rhyme Softworks, LLC pursuant to a purchase agreement entered into on May 30, 2019. |
| (8) | In July 2020, the Registrant issued an aggregate of 7,647,058 shares of Series F preferred stock to 10 accredited investors at a price per share equal to $17.00 for an aggregate purchase price of approximately $130.0 million. |
The offers, sales and issuances of the securities described in paragraphs (1) through (4) above were deemed to be exempt from registration under the Securities Act in reliance on Rule 701 in that the transactions were under compensatory benefit plans and contracts relating to compensation as provided under Rule 701. The recipients of such securities were employees, directors, or bona fide consultants of the Registrant and received the securities under the Registrant’s equity incentive plans. Appropriate legends were affixed to the securities issued in these transactions. Each of the recipients of securities in these transactions had adequate access, through employment, business, or other relationships, to information about the Registrant.
The offers, sales and issuances of the securities described in paragraph (5) above was deemed to be exempt from registration under the Securities Act in reliance on Section 4(a)(2) of the Securities Act and Rule 147A related to intrastate offerings. No underwriters were involved in these transactions.
The offers, sales, and issuances of the securities described in paragraphs (6) through (8) above were deemed to be exempt from registration under the Securities Act in reliance on Section 4(a)(2) of the Securities Act and Rule 506 under Regulation D promulgated thereunder as transactions by an issuer not involving a public offering. The recipients of securities in each of these transactions acquired the securities for investment only and not with a view to or for sale in connection with any distribution thereof and appropriate legends were affixed to the securities issued in these transactions. Each of the recipients of securities in these transactions was an institutional accredited investor within the meaning of Rule 501(a) of Regulation D under the Securities Act and had adequate access, through employment, business, or other relationships, to information about the Registrant. No underwriters were involved in these transactions.
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Item 16. Exhibits and Financial Statement Schedules.
(a) Exhibits.
The list of exhibits is set forth under “Exhibit Index” prior to the signature page at the end of this registration statement and is incorporated herein by reference.
(b) Financial Statement Schedules.
No financial statement schedules are provided because the information called for is not required or is shown either in the financial statements or the notes thereto.
Item 17. Undertakings.
Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers, and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer, or controlling person of the Registrant in the successful defense of any action, suit, or proceeding) is asserted by such director, officer, or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question of whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.
The undersigned Registrant hereby undertakes that:
| (a) | For purposes of determining any liability under the Securities Act, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective. |
| (b) | For the purpose of determining any liability under the Securities Act, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. |
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EXHIBIT INDEX
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| # | To be filed by amendment. |
| + | Indicates management contract or compensatory plan. |
| * | Previously filed |
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Table of Contents
Pursuant to the requirements of the Securities Act of 1933, as amended, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the city of Mountain View, California, on March 22, 2021.
| COURSERA, INC. |
| /s/ Jeffrey N. Maggioncalda |
| Jeffrey N. Maggioncalda President and Chief Executive Officer |
Pursuant to the requirements of the Securities Act of 1933, as amended, this registration statement has been signed by the following persons in the capacities and on the dates indicated.
| Signature |
Title |
Date | ||
| /s/ Jeffrey N. Maggioncalda Jeffrey N. Maggioncalda |
Chief Executive Officer and Director (Principal Executive Officer) |
March 22, 2021 | ||
| /s/ Kenneth R. Hahn Kenneth R. Hahn |
Chief Financial Officer (Principal Financial Officer) |
March 22, 2021 | ||
| /s/ Jeffrey C. Grace Jeffrey C. Grace |
Vice President, Corporate Controller (Principal Accounting Officer) |
March 22, 2021 | ||
| * |
Chairman |
March 22, 2021 | ||
| Andrew Y. Ng | ||||
| * |
Director | March 22, 2021 | ||
| Amanda M. Clark | ||||
| * |
Director | March 22, 2021 | ||
| L. John Doerr | ||||
| * |
Director | March 22, 2021 | ||
| Theodore R. Mitchell | ||||
| * |
Director | March 22, 2021 | ||
| Scott D. Sandell | ||||
| * |
Director | March 22, 2021 | ||
| Sabrina L. Simmons | ||||
| * By: |
/s/ Kenneth R. Hahn | |
| Kenneth R. Hahn | ||
| Attorney-In-Fact |
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Exhibit 1.1
[•] Shares
COURSERA, INC.
COMMON STOCK ($0.00001 PAR VALUE PER SHARE)
UNDERWRITING AGREEMENT
[•], 2021
[•], 2021
Morgan Stanley & Co. LLC
Goldman Sachs & Co. LLC
As Representatives of the several Underwriters named in Schedule II hereto
| c/o | Morgan Stanley & Co. LLC | |
| 1585 Broadway New York, New York 10036 |
| c/o | Goldman Sachs & Co. LLC | |
| 200 West Street New York, New York 10282-2198 |
Ladies and Gentlemen:
Coursera, Inc., a Delaware corporation (the “Company”), proposes to issue and sell to the several Underwriters named in Schedule II hereto (the “Underwriters”), and certain stockholders of the Company (the “Selling Stockholders”) named in Schedule I hereto severally propose to sell to the several Underwriters, an aggregate of [•] shares of the common stock, $0.00001 par value per share, of the Company (the “Firm Shares”), of which [•] shares are to be issued and sold by the Company and [•] shares are to be sold by the Selling Stockholders, each Selling Stockholder selling the amount set forth opposite such Selling Stockholder’s name in Schedule I hereto.
The Company also proposes to issue and sell to the several Underwriters not more than an additional [•] shares of its common stock, $0.00001 par value per share (the “Additional Shares”) if and to the extent that Morgan Stanley & Co. LLC (“Morgan Stanley”) and Goldman Sachs & Co. LLC, as representatives of the several Underwriters (the “Representatives”), shall have determined to exercise, on behalf of the Underwriters, the right to purchase such shares of common stock granted to the Underwriters in Section 3 hereof. The Firm Shares and the Additional Shares are hereinafter collectively referred to as the “Shares.” The shares of common stock, $0.00001 par value per share, of the Company to be outstanding after giving effect to the sales contemplated hereby are hereinafter referred to as the “Common Stock.” The Company and the Selling Stockholders are hereinafter sometimes collectively referred to as the “Sellers.”
The Company has filed with the Securities and Exchange Commission (the “Commission”) a registration statement on Form S-1 (File No. 333-253932), including a preliminary prospectus, relating to the Shares. The registration statement as amended at the time it becomes effective, including the information (if any) deemed to be part of the registration statement at the time of effectiveness pursuant to Rule 430A under the
Securities Act of 1933, as amended (the “Securities Act”), is hereinafter referred to as the “Registration Statement”; the prospectus in the form first used to confirm sales of Shares (or in the form first made available to the Underwriters by the Company to meet requests of purchasers pursuant to Rule 173 under the Securities Act) is hereinafter referred to as the “Prospectus.” If the Company has filed an abbreviated registration statement to register additional shares of Common Stock pursuant to Rule 462(b) under the Securities Act (a “Rule 462 Registration Statement”), then any reference herein to the term “Registration Statement” shall be deemed to include such Rule 462 Registration Statement.
For purposes of this Underwriting Agreement (this “Agreement”), “free writing prospectus” has the meaning set forth in Rule 405 under the Securities Act, “preliminary prospectus” shall mean each prospectus used prior to the effectiveness of the Registration Statement, and each prospectus that omitted information pursuant to Rule 430A under the Securities Act that was used after such effectiveness and prior to the execution and delivery of this Agreement, “Time of Sale Prospectus” means the preliminary prospectus contained in the Registration Statement at the time of its effectiveness together with the documents, pricing information and free writing prospectuses, if any, set forth in Schedule III hereto, and “broadly available road show” means a “bona fide electronic road show” as defined in Rule 433(h)(5) under the Securities Act that has been made available without restriction to any person. As used herein, the terms “Registration Statement,” “preliminary prospectus,” “Time of Sale Prospectus” and “Prospectus” shall include the documents, if any, incorporated by reference therein as of the date hereof.
1. Representations and Warranties of the Company. The Company represents and warrants to and agrees with each of the Underwriters that:
(a) The Registration Statement has become effective; no stop order suspending the effectiveness of the Registration Statement is in effect, and no proceedings for such purpose or pursuant to Section 8A under the Securities Act are pending before or, to the knowledge of the Company, threatened by the Commission.
(b) (i) The Registration Statement, when it became effective, did not contain and, as amended or supplemented, if applicable, will not contain, any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading, (ii) the Registration Statement and the Prospectus comply and, as amended or supplemented, if applicable, will comply, in all material respects with the Securities Act and the applicable rules and regulations of the Commission thereunder, (iii) the Time of Sale Prospectus does not, and at the time of each sale of the Shares in connection with the offering when the Prospectus is not yet available to prospective purchasers and at the Closing Date (as defined in Section 5), the Time of Sale Prospectus, as then amended or supplemented by the Company, if applicable, will not, contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in the
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light of the circumstances under which they were made, not misleading, (iv) each broadly available road show, if any, when considered together with the Time of Sale Prospectus, does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading and (v) the Prospectus does not contain and, as amended or supplemented, if applicable, will not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, except that the representations and warranties set forth in this paragraph do not apply to statements or omissions in the Registration Statement, the Time of Sale Prospectus or the Prospectus made in reliance on and in conformity with any Underwriter Information.
(c) The Company is not an “ineligible issuer” in connection with the offering pursuant to Rules 164, 405 and 433 under the Securities Act. Any free writing prospectus that the Company is required to file pursuant to Rule 433(d) under the Securities Act has been, or will be, filed with the Commission in accordance with the requirements of the Securities Act and the applicable rules and regulations of the Commission thereunder. Each free writing prospectus that the Company has filed, or is required to file, pursuant to Rule 433(d) under the Securities Act or that was prepared by or on behalf of or used or referred to by the Company complies or will comply in all material respects with the requirements of the Securities Act and the applicable rules and regulations of the Commission thereunder. Except for the free writing prospectuses, if any, identified in Schedule III hereto, and electronic road shows, if any, each furnished to the Representatives before first use, the Company has not prepared, used or referred to, and will not, without each of the Representatives’ prior written consent, prepare, use or refer to, any free writing prospectus.
(d) The Company has been duly incorporated, is validly existing as a corporation in good standing under the laws of the State of Delaware, has the corporate power and authority to own or lease its property and to conduct its business as described in each of the Registration Statement, the Time of Sale Prospectus and the Prospectus and is duly qualified to transact business and is in good standing in each jurisdiction in which the conduct of its business or its ownership or leasing of property requires such qualification, except to the extent that the failure to be so qualified or be in good standing would not, singly or in the aggregate, have a material adverse effect on the Company and its subsidiaries, taken as a whole.
(e) Each subsidiary of the Company has been duly incorporated, organized or formed, is validly existing as a corporation or other business entity in good standing under the laws of the jurisdiction of its incorporation, organization or formation, has the corporate or other business entity power and authority to own or lease its property and to conduct its business as described in each of the Registration Statement, the Time of Sale Prospectus and the Prospectus and is duly qualified to transact business and is in good standing in each jurisdiction in
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which the conduct of its business or its ownership or leasing of property requires such qualification, except to the extent that the failure to be so qualified or be in good standing would not, singly or in the aggregate, have a material adverse effect on the Company and its subsidiaries, taken as a whole; all of the issued shares of capital stock or other equity interests of each subsidiary of the Company have been duly and validly authorized and issued, are fully paid and non-assessable and are owned directly or indirectly by the Company, free and clear of all liens, encumbrances, equities or claims.
(f) This Agreement has been duly authorized, executed and delivered by the Company.
(g) The authorized capital stock of the Company conforms as to legal matters to the description thereof contained in each of the Registration Statement, the Time of Sale Prospectus and the Prospectus.
(h) The shares of Common Stock (including the Shares to be sold by the Selling Stockholders) outstanding prior to the issuance of the Shares to be sold by the Company have been duly authorized and are validly issued, fully paid and non-assessable.
(i) The Shares to be sold by the Company have been duly authorized and, when issued, delivered and paid for in accordance with the terms of this Agreement, will be validly issued, fully paid and non-assessable, and the issuance of such Shares will not be subject to any preemptive or similar rights.
(j) The execution and delivery by the Company of, and the performance by the Company of its obligations under, this Agreement will not contravene (i) any provision of applicable law, (ii) the certificate of incorporation or by-laws of the Company, (iii) any agreement or other instrument binding upon the Company or any of its subsidiaries that is material to the Company and its subsidiaries, taken as a whole, or (iv) any judgment, order or decree of any governmental body, agency or court having jurisdiction over the Company or any subsidiary, except, in the case of clauses (i), (iii) and (iv), for such contraventions as would not, individually or in the aggregate, reasonably be expected to have a material adverse effect on the Company and its subsidiaries, taken as a whole, and no consent, approval, authorization or order of, or qualification with, any governmental body, agency or court is required for the performance by the Company of its obligations under this Agreement, except such as may be required by the securities or Blue Sky laws of the various states or the rules and regulations of the Financial Industry Regulatory Authority (“FINRA”) in connection with the offer and sale of the Shares.
(k) There has not occurred any material adverse change, or any development involving a prospective material adverse change, in the condition, financial or otherwise, or in the earnings, business or operations of the Company and its subsidiaries, taken as a whole, from that set forth in the Time of Sale Prospectus.
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(l) There are no legal or governmental proceedings pending or threatened to which the Company or any of its subsidiaries is a party or to which any of the properties of the Company or any of its subsidiaries is subject (i) other than proceedings accurately described in all material respects in each of the Registration Statement, the Time of Sale Prospectus and the Prospectus and proceedings that would not, singly or in the aggregate, reasonably be expected to have a material adverse effect on the Company and its subsidiaries, taken as a whole, or on the power or ability of the Company to perform its obligations under this Agreement or to consummate the transactions contemplated by each of the Registration Statement, the Time of Sale Prospectus and the Prospectus or (ii) that are required to be described in the Registration Statement, the Time of Sale Prospectus or the Prospectus and are not so described; and there are no statutes, regulations, contracts or other documents that are required to be described in the Registration Statement, the Time of Sale Prospectus or the Prospectus or to be filed as exhibits to the Registration Statement that are not described or filed as required.
(m) Each preliminary prospectus filed as part of the Registration Statement as originally filed or as part of any amendment thereto, or filed pursuant to Rule 424 under the Securities Act, complied when so filed in all material respects with the Securities Act and the applicable rules and regulations of the Commission thereunder.
(n) The Company is not, and after giving effect to the offering and sale of the Shares and the application of the proceeds thereof as described in each of the Registration Statement, the Time of Sale Prospectus and the Prospectus will not be, required to register as an “investment company” as such term is defined in the Investment Company Act of 1940, as amended.
(o) The Company and each of its subsidiaries (i) are in compliance with any and all applicable foreign, federal, state and local laws and regulations relating to the protection of human health and safety, the environment or hazardous or toxic substances or wastes, pollutants or contaminants (“Environmental Laws”), (ii) have received all permits, licenses or other approvals required of them under applicable Environmental Laws to conduct their respective businesses and (iii) are in compliance with all terms and conditions of any such permit, license or approval, except where such noncompliance with Environmental Laws, failure to receive required permits, licenses or other approvals or failure to comply with the terms and conditions of such permits, licenses or approvals would not, singly or in the aggregate, have a material adverse effect on the Company and its subsidiaries, taken as a whole.
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(p) There are no costs or liabilities associated with Environmental Laws (including, without limitation, any capital or operating expenditures required for clean-up, closure of properties or compliance with Environmental Laws or any permit, license or approval, any related constraints on operating activities and any potential liabilities to third parties) which would, singly or in the aggregate, have a material adverse effect on the Company and its subsidiaries, taken as a whole.
(q) Except as described in each of the Registration Statement, the Time of Sale Prospectus and the Prospectus, there are no contracts, agreements or understandings between the Company and any person granting such person the right to require the Company to file a registration statement under the Securities Act with respect to any securities of the Company or to require the Company to include such securities with the Shares registered pursuant to the Registration Statement.
(r) (i) None of the Company or any of its subsidiaries, or any director, officer, or employee thereof, or, to the knowledge of the Company, any affiliate of the Company or any agent or representative of the Company or of any of its subsidiaries or affiliates, has (A) used, directly or indirectly, any corporate funds for any unlawful contribution, gift, entertainment or other unlawful expense relating to political activity, (B) taken or will take any action, directly or indirectly, in furtherance of an offer, payment, benefit, promise to pay, or authorization or approval of the payment, giving or receipt of money, property, gifts or anything else of value, directly or indirectly, to any government official (including any officer or employee of a government or government-owned or controlled entity or of a public international organization, or any person acting in an official capacity for or on behalf of any of the foregoing, or any political party or party official or candidate for political office) (“Government Official”) in order to influence official action, (C) violated or is violating any applicable anti-corruption laws, including, without limitation, the U.S. Foreign Corrupt Practices Act of 1977, as amended, any applicable law or regulation implementing the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions, the Bribery Act 2010 of the United Kingdom (collectively, the “Anti-Corruption Laws”), or (D) directly or indirectly made, offered, agreed, authorized, requested or taken an act in furtherance of any unlawful bribe or other unlawful benefit, including, without limitation, any rebate, payoff, influence, payment, kickback or other unlawful or improper payment or benefit; (ii) the Company and each of its subsidiaries and affiliates have conducted their businesses in compliance with the Anti-Corruption Laws and have instituted and maintained and will continue to maintain policies and procedures reasonably designed to promote and achieve compliance with such laws and with the representations and warranties contained herein; and (iii) neither the Company nor any of its subsidiaries will use, directly or indirectly, the proceeds of the offering in furtherance of an offer, payment, promise to pay, or authorization of the payment or giving of money, or anything else of value, to any person in violation of any Anti-Corruption Laws.
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(s) The operations of the Company and each of its subsidiaries are and have been conducted at all times in material compliance with all applicable financial recordkeeping and reporting requirements, including those of the Bank Secrecy Act, as amended by Title III of the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (USA PATRIOT Act), and the applicable anti-money laundering statutes of jurisdictions where the Company or any of its subsidiaries conduct business, the rules and regulations thereunder and any related or similar rules, regulations or guidelines, issued, administered or enforced by any governmental agency (collectively, the “Anti-Money Laundering Laws”), and no action, suit or proceeding by or before any court or governmental agency, authority or body or any arbitrator involving the Company or any of its subsidiaries with respect to the Anti-Money Laundering Laws is pending or, to the knowledge of the Company, threatened.
(t) (i) None of the Company, any of its subsidiaries, or any director, officer, or employee thereof, or, to the knowledge of the Company, any agent, affiliate or representative of the Company or any of its subsidiaries, is an individual or entity (“Person”) that is, or is owned or controlled by one or more Persons that are:
(A) the subject of any sanctions administered or enforced by the U.S. Department of the Treasury’s Office of Foreign Assets Control, the United Nations Security Council, the European Union, Her Majesty’s Treasury, or other relevant sanctions authority (collectively, “Sanctions”), or
(B) located, organized or resident in a country or territory that is the subject of Sanctions (including, without limitation, Crimea, Cuba, Iran, North Korea and Syria).
(ii) The Company will not, directly or indirectly, use the proceeds of the offering, or lend, contribute or otherwise make available such proceeds to any subsidiary, joint venture partner or other Person:
(A) to fund or facilitate any activities or business of or with any Person or in any country or territory that, at the time of such funding or facilitation, is the subject of Sanctions; or
(B) in any other manner that will result in a violation of Sanctions by any Person (including any Person participating in the offering, whether as underwriter, advisor, investor or otherwise).
(iii) Neither the Company nor any of its subsidiaries have knowingly engaged in, are now knowingly engaged in, or will engage in, any dealings or transactions with any Person, or in any country or territory, that at the time of the dealing or transaction is or was the subject of Sanctions.
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(u) Subsequent to the respective dates as of which information is given in each of the Registration Statement, the Time of Sale Prospectus and the Prospectus, except in each case as described in Registration Statement, the Time of Sale Prospectus and the Prospectus, (i) the Company and its subsidiaries, taken as a whole, have not incurred any material liability or obligation, direct or contingent, nor entered into any material transaction; (ii) the Company has not purchased any of its outstanding capital stock, nor declared, paid or otherwise made any dividend or distribution of any kind on its capital stock other than ordinary and customary dividends; and (iii) there has not been any material change in the capital stock, short-term debt or long-term debt of the Company and its subsidiaries, taken as a whole.
(v) The Company and each of its subsidiaries have good and marketable title to all real property and good and marketable title to all personal property owned by them that is material to the business of the Company and its subsidiaries, in each case free and clear of all liens, encumbrances and defects except such as do not materially affect the value of such property and do not interfere with the use made and proposed to be made of such property by the Company and its subsidiaries; and any real property and buildings held under lease by the Company and its subsidiaries are held by them under valid, subsisting and enforceable leases with such exceptions as are not material and do not materially interfere with the use made and proposed to be made of such property and buildings by the Company and its subsidiaries.
(w) (i) The Company and its subsidiaries own or possess, or have a valid and enforceable license to, all patents, patent rights, licenses, inventions, invention registrations, invention disclosures, copyrights, technology, software, databases, know-how (including any trade secrets and any other unpatented and/or unpatentable proprietary or confidential information, systems or procedures), trademarks, service marks, trade names, trade dress, domain names, social media identifiers and accounts and other source identifiers and any other intellectual property or similar proprietary rights in any jurisdiction throughout the world (including any and all issuances and registrations and applications for issuance or registration of, and all goodwill associated with, any of the foregoing, as applicable) (collectively, “Intellectual Property”) used or held for use in, or otherwise reasonably necessary to the conduct of their respective businesses as now conducted by them, and as contemplated or proposed to be conducted in the Registration Statement, the Prospectus and the Time of Sale Prospectus, except where any failure to own or possess such rights would not, individually or in the aggregate, reasonably be expected to have a material adverse effect on the Company and its subsidiaries, taken as a whole; (ii) the Intellectual Property owned by the Company and its subsidiaries and, to the knowledge of the Company, the Intellectual Property licensed to the Company and its subsidiaries, is valid, subsisting and enforceable; (iii) neither the Company’s nor any of its
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subsidiaries’ conduct of business infringes, misappropriates or otherwise violates, or has infringed, misappropriated or otherwise violated, any third party’s rights with respect to Intellectual Property where such infringement, misappropriations or violations would, individually or in the aggregate, reasonably be expected to have a material adverse effect on the Company and its subsidiaries, taken as a whole; (iv) neither the Company nor any of its subsidiaries has received any notice alleging or is otherwise aware of (A) any pending or threatened action, suit, proceeding or claim by any third party against the Company or any of its subsidiaries (x) alleging that the Company or any of its subsidiaries (or its or their indemnities) has infringed, misappropriated or otherwise violated any Intellectual Property of any third party, or (y) challenging the ownership, validity, enforceability or scope of, or the Company’s or any of its subsidiaries’ rights in or to, any Intellectual Property owned by or licensed to the Company or any of its subsidiaries, or (B) any facts that would form a reasonable basis for any such action, suit, proceeding or claim; (v) all Intellectual Property owned by the Company or any of its subsidiaries is owned solely and exclusively by the Company or such subsidiaries and the Company and its subsidiaries own such Intellectual Property and hold all of their rights under all Intellectual Property licensed to them, in each case, free and clear of all liens, encumbrances, defects or other restrictions; (vi) to the knowledge of the Company, no third party is infringing, misappropriating or otherwise violating, or has infringed, misappropriated or otherwise violated, any Intellectual Property owned by or exclusively licensed to the Company or any of its subsidiaries; (vii) all employees or contractors engaged in the development of Intellectual Property on behalf of the Company or any subsidiary of the Company have executed an invention assignment agreement whereby such employees or contractors presently assign all of their right, title and interest in and to such Intellectual Property to the Company or the applicable subsidiary (or, in certain cases involving non-U.S. contractors, to a third-party staffing agency on the Company’s behalf), and to the knowledge of the Company no such agreement has been breached or violated; and (viii) the Company and its subsidiaries use and have used reasonable efforts in accordance with normal industry standards and practices to maintain the confidentiality of all Intellectual Property of the Company and its subsidiaries the value of which to the Company or any of its subsidiaries in contingent upon maintaining the confidentiality thereof, and no such Intellectual Property has been disclosed other than to employees, representatives and agents of the Company or its subsidiaries, all of whom are bound by written confidentiality agreements.
(x) (i) The Company and its subsidiaries use and have used any and all software and other materials distributed under a “free,” “open source,” or similar licensing model (including but not limited to the MIT License, Apache License, GNU General Public License, GNU Lesser General Public License and GNU Affero General Public License) (“Open Source Software”) in compliance with all license terms applicable to such Open Source Software; and (ii) neither the Company nor any of its subsidiaries uses or distributes or has used or distributed any Open Source Software in any manner that requires or has required (A) the Company or any of its subsidiaries to permit reverse engineering of any products
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or services of the Company or any of its subsidiaries, or any software code or other technology owned by the Company or any of its subsidiaries or (B) any products or services of the Company or any of its subsidiaries, or any software code or other technology owned by the Company or any of its subsidiaries to be (1) disclosed or distributed in source code form, (2) licensed for the purpose of making derivative works or (3) redistributed at no charge or minimum charge.
(y) (i) The Company and each of its subsidiaries have complied and are presently in compliance with all internal and external privacy policies, contractual obligations, industry standards, applicable laws, statutes, judgments, orders, rules and regulations of any court or arbitrator or other governmental or regulatory authority and any other legal obligations, in each case, relating to the collection, use, transfer, import, export, storage, protection, disposal and disclosure by the Company or any of its subsidiaries of personal, personally identifiable, household, sensitive, confidential or regulated data or information (“Data Security Obligations”, and such data and information, “Personal Data”) except where failure to comply would not, individually or in the aggregate, reasonably be expect to have a material adverse effect on the Company and its subsidiaries, taken as a whole; (ii) the Company and its subsidiaries have not received any notification of or complaint regarding and are unaware of any other facts that, individually or in the aggregate, would reasonably indicate non-compliance with any Data Security Obligation by the Company or any of its subsidiaries; and (iii) there is no action, suit or proceeding by or before any court or governmental agency, authority or body pending or, to the knowledge of the Company, threatened alleging non-compliance with any Data Security Obligation by the Company or any of its subsidiaries.
(z) (i) The Company’s and its subsidiaries’ respective information technology assets and equipment, computers, systems, networks, hardware, software, websites, applications, technology, data and databases (including Personal Data and the data and information of their respective customers, employees, suppliers and vendors and any third-party data maintained, processed or stored by or on behalf of the Company and its subsidiaries used in connection with the operation of the Company’s and its subsidiaries’ respective businesses (“IT Systems and Data”) are adequate for, and operate and perform in all material respects as required in connection with the operation of, the business of the Company and its subsidiaries as currently conducted, free and clear of all material bugs, errors, defects, Trojan horses, time bombs, malware and other corruptants; (ii) the Company and each of its subsidiaries have taken all technical and organizational measures necessary to protect the IT Systems and Data, and without limiting the foregoing, the Company and its subsidiaries have used reasonable efforts to establish and maintain, and have established, maintained, implemented and complied with, reasonable information technology, information security, cyber security and data protection controls, policies and procedures, including oversight, access controls, encryption, technological and physical safeguards and business continuity/disaster recovery and security plans, consistent with industry standards and practices, that are designed to protect against and
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prevent breach, destruction, loss, unauthorized distribution, use, access, disablement, misappropriation or modification, or other compromise or misuse of or relating to any IT Systems and Data (“Breach”); and (iii) there has been no such Breach, and the Company and its subsidiaries have not been notified of and have no knowledge of any event or condition that would reasonably be expected to result in, any such Breach.
(aa) No material labor dispute with the employees of the Company or any of its subsidiaries exists, or, to the knowledge of the Company, is imminent; and the Company is not aware of any existing, threatened or imminent labor disturbance by the employees of any of its principal suppliers, partners or contractors that could, singly or in the aggregate, have a material adverse effect on the Company and its subsidiaries, taken as a whole.
(bb) The Company and each of its subsidiaries are insured by insurers of recognized financial responsibility against such losses and risks and in such amounts as are prudent and customary in the businesses in which they are engaged; neither the Company nor any of its subsidiaries has been refused any insurance coverage sought or applied for; and neither the Company nor any of its subsidiaries has any reason to believe that it will not be able to renew its existing insurance coverage as and when such coverage expires or to obtain similar coverage from similar insurers as may be necessary to continue its business at a cost that would not, singly or in the aggregate, have a material adverse effect on the Company and its subsidiaries, taken as a whole.
(cc) The Company and each of its subsidiaries possess all certificates, authorizations and permits issued by the appropriate federal, state or foreign regulatory authorities necessary to conduct their respective businesses, and neither the Company nor any of its subsidiaries has received any notice of proceedings relating to the revocation or modification of any such certificate, authorization or permit which, singly or in the aggregate, if the subject of an unfavorable decision, ruling or finding, would have a material adverse effect on the Company and its subsidiaries, taken as a whole.
(dd) The financial statements included in each of the Registration Statement, the Time of Sale Prospectus and the Prospectus, together with the related schedules and notes thereto, comply as to form in all material respects with the applicable accounting requirements of the Securities Act and present fairly the consolidated financial position of the Company and its subsidiaries as of the dates shown and the results of operations, comprehensive loss, stockholders’ deficit and cash flows of the Company and its subsidiaries for the periods shown, and such financial statements have been prepared in conformity with generally accepted accounting principles in the United States (“U.S. GAAP”) applied on a consistent basis throughout the periods covered thereby except for any normal year-end adjustments in the Company’s quarterly financial statements. The other financial information included in each of the Registration Statement, the Time of Sale Prospectus and the Prospectus has been derived from the accounting records
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of the Company and its consolidated subsidiaries and presents fairly in all material respects the information shown thereby, and have been compiled on a basis consistent with that of the audited financial statements included therein. All disclosures contained in the Registration Statement, the Time of Sale Prospectus and the Prospectus regarding “non-GAAP financial measures” (as such term is defined by the rules and regulations of the Commission) comply with Regulation G of the Exchange Act and Item 10 of Regulation S-K of the Securities Act, to the extent applicable. The statistical, industry-related and market-related data included in each of the Registration Statement, the Time of Sale Prospectus and the Prospectus are based on or derived from sources which the Company reasonably and in good faith believes are reliable and accurate and such data and the presentation thereof in the Registration Statement, the Time of Sale Prospectus and the Prospectus is consistent with the sources from which they are derived, in each case in all material respects.
(ee) Deloitte & Touche LLP (“Deloitte”), who has certified certain financial statements of the Company and its subsidiaries and delivered its report with respect to the audited consolidated financial statements and schedules filed with the Commission as part of the Registration Statement and included in each of the Registration Statement, the Time of Sale Prospectus and the Prospectus, is an independent registered public accounting firm with respect to the Company and its subsidiaries within the meaning of the Securities Act and the applicable rules and regulations thereunder adopted by the Commission and the Public Company Accounting Oversight Board (United States).
(ff) The Company and each of its subsidiaries maintains a system of internal accounting controls sufficient to provide reasonable assurance that (i) transactions are executed in accordance with management’s general or specific authorizations; (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with U.S. GAAP and to maintain asset accountability; (iii) access to assets is permitted only in accordance with management’s general or specific authorization; and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences. Since the end of the Company’s most recent audited fiscal year, there has been (i) no material weakness in the Company’s internal control over financial reporting (whether or not remediated) and (ii) no change in the Company’s internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.
(gg) The Company has not sold, issued or distributed any shares of Common Stock during the six-month period preceding the date hereof, including any sales pursuant to Rule 144A under, or Regulation D or S of, the Securities Act, other than shares issued pursuant to employee benefit plans, qualified stock option plans or other employee compensation plans in each case described in the Registration Statement, Time of Sale Prospectus and Prospectus or pursuant to outstanding options, rights or warrants.
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(hh) The Company and each of its subsidiaries have filed all federal, state, local and foreign tax returns required to be filed through the date of this Agreement or have requested extensions thereof (except where the failure to file would not, singly or in the aggregate, have a material adverse effect on the Company and its subsidiaries, taken as a whole) and have paid all taxes required to be paid thereon (except for cases in which the failure to file or pay would not, singly or in the aggregate, have a material adverse effect on the Company and its subsidiaries, taken as a whole, or, except as currently being contested in good faith and for which adequate reserves required by U.S. GAAP have been created in the financial statements of the Company), and no tax deficiency has been determined adversely to the Company or any of its subsidiaries which, singly or in the aggregate, has had (nor does the Company nor any of its subsidiaries have any notice or knowledge of any tax deficiency which could reasonably be expected to be determined adversely to the Company or its subsidiaries and which could reasonably be expected to have) a material adverse effect on the Company and its subsidiaries, taken as a whole.
(ii) From the time of initial confidential submission of the Registration Statement to the Commission through the date hereof, the Company has been and is an “emerging growth company,” as defined in Section 2(a) of the Securities Act (an “Emerging Growth Company”).
(jj) The Company (i) has not alone engaged in any Testing-the-Waters Communication with any person (other than Testing-the-Waters Communications with the consent of each of the Representatives) with entities that are reasonably believed to be qualified institutional buyers within the meaning of Rule 144A under the Securities Act or institutions that are reasonably believed to be accredited investors within the meaning of Rule 501 under the Securities Act and (ii) has not authorized anyone other than the Representatives to engage in Testing-the-Waters Communications. The Company reconfirms that the Representatives have been authorized to act on its behalf in undertaking Testing-the-Waters Communications. The Company has not distributed any Testing-the-Waters Communication that is a written communication within the meaning of Rule 405 under the Securities Act other than those listed on Schedule IV hereto. “Testing-the-Waters Communication” means any communication with potential investors undertaken in reliance on Section 5(d) or Rule 163B of the Securities Act.
(kk) As of the time of each sale of the Shares in connection with the offering when the Prospectus is not yet available to prospective purchasers, none of (A) the Time of Sale Prospectus, (B) any free writing prospectus, when considered together with the Time of Sale Prospectus, and (C) any individual Testing-the-Waters Communication, when considered together with the Time of Sale Prospectus, included, includes or will include an untrue statement of a material fact or omitted, omits or will omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading.
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(ll) The Company and each of its subsidiaries have a system of “disclosure controls and procedures” (as defined in Rule 13a-15(e) under the Exchange Act) that has been designed to comply with the requirements of the Exchange Act within the time period required and has been designed to ensure that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Commission’s rules and forms, including controls and procedures designed to ensure that such information is accumulated and communicated to the Company’s management as appropriate to allow timely decisions regarding required disclosure.
(mm) Neither the Company nor any of its subsidiaries has any securities rated by any “nationally recognized statistical rating organization,” as such term is defined in Section 3(a)(62) of the Exchange Act.
2. Representations and Warranties of the Selling Stockholders. Each Selling Stockholder, severally and not jointly, represents and warrants to and agrees with each of the Underwriters that:
(a) This Agreement has been duly authorized, executed and delivered by or on behalf of such Selling Stockholder.
(b) The execution and delivery by such Selling Stockholder of, and the performance by such Selling Stockholder of its obligations under, this Agreement, the Custody Agreement signed by or on behalf of such Selling Stockholder and American Stock Transfer & Trust Company, LLC, as Custodian, relating to the deposit of the Shares to be sold by such Selling Stockholder (the “Custody Agreement”) and the Power of Attorney appointing certain individuals as such Selling Stockholder’s attorneys-in-fact to the extent set forth therein, relating to the transactions contemplated hereby and by the Registration Statement (the “Power of Attorney”) will not (A) contravene (i) any provision of applicable law, or (ii) the certificate of incorporation, by-laws or other organizational documents of such Selling Stockholder (if such Selling Stockholder is an entity), or (iii) any agreement or other instrument binding upon such Selling Stockholder or (iv) any judgment, order or decree of any governmental body, agency or court having jurisdiction over such Selling Stockholder, or (B) result in the creation or imposition of any tax upon the Shares except in the case of clauses (A)(i), (A)(iii), (A)(iv) or (B) as would not, individually or in the aggregate, have a material adverse effect on the ability of the Selling Shareholder to consummate the transactions contemplated by this Agreement, the Custody Agreement and the Power of Attorney, and no consent, approval, authorization or order of, or qualification with, any governmental body, agency or court is required for the performance by such Selling Stockholder of its obligations under this Agreement or the Custody Agreement or Power of Attorney of such Selling Stockholder, except such as have been obtained under the Securities Act, the Exchange Act or the rules and regulations thereunder or by the securities or Blue Sky laws of the various states or foreign jurisdictions in connection with the offer and sale of the Shares.
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(c) Such Selling Stockholder has, and on the Closing Date will have, valid title to, or a valid “security entitlement” within the meaning of Section 8-501 of the New York Uniform Commercial Code in respect of, the Shares to be sold by such Selling Stockholder free and clear of all security interests, claims, liens, equities or other encumbrances and the legal right and power, and all authorization and approval required by law, to enter into this Agreement, the Custody Agreement and the Power of Attorney and to sell, transfer and deliver the Shares to be sold by such Selling Stockholder or a security entitlement in respect of such Shares.
(d) The Custody Agreement and the Power of Attorney have been duly authorized, executed and delivered by or on behalf of such Selling Stockholder and are valid and binding agreements of such Selling Stockholder, enforceable against such Selling Stockholder in accordance with their terms, subject to the effects of bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors’ rights and to general equity principles.
(e) Upon payment for the Shares to be sold by such Selling Stockholder pursuant to this Agreement, delivery of such Shares, as directed by the Underwriters, to Cede & Co. (“Cede”) or such other nominee as may be designated by the Depository Trust Company (“DTC”), registration of such Shares in the name of Cede or such other nominee and the crediting of such Shares on the books of DTC to securities accounts of the Underwriters (assuming that neither DTC nor any such Underwriter has notice of any adverse claim (within the meaning of Section 8-105 of the New York Uniform Commercial Code (the “UCC”)) to such Shares), (A) DTC shall be a “protected purchaser” of such Shares within the meaning of Section 8-303 of the UCC, (B) under Section 8-501 of the UCC, the Underwriters will acquire a valid security entitlement in respect of such Shares and (C) no action based on any “adverse claim”, within the meaning of Section 8-102 of the UCC, to such Shares may be successfully asserted against the Underwriters with respect to such security entitlement; for purposes of this representation, such Selling Stockholder may assume that when such payment, delivery and crediting occur, (x) such Shares will have been registered in the name of Cede or another nominee designated by DTC, in each case on the Company’s share registry in accordance with its certificate of incorporation, by-laws and applicable law, (y) DTC will be registered as a “clearing corporation” within the meaning of Section 8-102 of the UCC and (z) appropriate entries to the accounts of the several Underwriters on the records of DTC will have been made pursuant to the UCC.
(f) Such Selling Stockholder has delivered to the Representatives an executed lock-up agreement in substantially the form attached hereto as Exhibit A (the “Lock-up Agreement”).
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(g) Such Selling Stockholder is not prompted by any information concerning the Company or its subsidiaries which is not set forth in the Registration Statement, the Time of Sale Prospectus or the Prospectus to sell its Shares pursuant to this Agreement.
(h) (i) The Registration Statement, when it became effective, did not contain and, as amended or supplemented, if applicable, will not contain, as of the date of such amendment or supplement, any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading, (ii) the Time of Sale Prospectus does not, and at the time of each sale of the Shares in connection with the offering when the Prospectus is not yet available to prospective purchasers and at the Closing Date (as defined in Section 5), the Time of Sale Prospectus, as then amended or supplemented by the Company, if applicable, will not, contain, as of the date of such amendment or supplement, any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, (iii) each broadly available road show, if any, when considered together with the Time of Sale Prospectus, does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading and (iv) the Prospectus, as of its date, does not contain and, as amended or supplemented, as of the date of such amendment or supplement, if applicable, will not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided, that the representations and warranties set forth in this paragraph are limited solely to statements or omissions made in reliance upon information relating to such Selling Stockholder furnished in writing to the Company or the Representatives by or on behalf of such Selling Stockholder expressly for use in the Registration Statement, the Time of Sale Prospectus, the Prospectus, any broadly available road show or any amendments or supplements to any of the foregoing, it being understood and agreed that the only information furnished in writing by such Selling Stockholder consists of the name of such Selling Stockholder, the number of offered shares and the address and other information with respect to such Selling Stockholder (excluding percentages) which appear in the Registration Statement or any Prospectus in the table (and corresponding footnotes) under the caption “Principal and Selling Stockholders” (with respect to each Selling Stockholder, the “Selling Stockholder Information”).
(i) (i) Neither such Selling Stockholder nor any of its subsidiaries, nor, to the knowledge of such Selling Stockholder, any director, officer, employee, agent, representative, or affiliate thereof, is a Person that is, or is owned or controlled by one or more Persons that are:
(A) the subject of any Sanctions, or
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(B) located, organized or resident in a country or territory that is the subject of Sanctions (including, without limitation, Crimea, Cuba, Iran, North Korea and Syria).
(ii) Such Selling Stockholder will not, directly or indirectly, use the proceeds of the offering, or lend, contribute or otherwise make available such proceeds to any subsidiary, joint venture partner or other Person:
(A) to fund or facilitate any activities or business of or with any Person or in any country or territory that, at the time of such funding or facilitation, is the subject of Sanctions; or
(B) in any other manner that will result in a violation of Sanctions by any Person (including any Person participating in the offering, whether as underwriter, advisor, investor or otherwise).
(iii) Such Selling Stockholder (and, if such Selling Stockholder is an entity, each of its subsidiaries) has not knowingly engaged in, is not now knowingly engaged in, and will not engage in, any dealings or transactions with any Person, or in any country or territory, that at the time of the dealing or transaction is or was the subject of Sanctions.
(iv) (a) Neither such Selling Stockholder nor any of its subsidiaries, nor, to the knowledge of such Selling Stockholder, any director, officer, employee, agent, representative, or affiliate thereof has (A) used, directly or indirectly, any funds for any unlawful contribution, gift, entertainment or other unlawful expense relating to political activity, (B) taken or will take any action, directly or indirectly, in furtherance of an offer, payment, benefit, promise to pay, or authorization or approval of the payment, giving or receipt of money, property, gifts or anything else of value, directly or indirectly, to any Government Official in order to influence official action, (C) violated or is violating any applicable Anti-Corruption Laws or (D) directly or indirectly made, offered, agreed, authorized, requested or taken an act in furtherance of any unlawful bribe or other unlawful benefit, including, without limitation, any rebate, payoff, influence, payment, kickback or other unlawful or improper payment or benefit; (b) if such Selling Stockholder is an entity, such Selling Stockholder and each of its subsidiaries and affiliates have conducted their businesses in compliance with Anti-Corruption Laws and have instituted and maintained and will continue to maintain policies and procedures reasonably designed to promote and achieve compliance with such laws and with the representations and warranties contained herein; and (c) if such Selling Stockholder is an entity, neither the Selling Stockholder nor any of its subsidiaries will use, directly or indirectly, the proceeds of the offering in furtherance of an offer, payment, promise to pay, or authorization of the payment or giving of money, or anything else of value, to any person in violation of any Anti-Corruption Laws.
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(v) If such Selling Stockholder is an entity, the operations of such Selling Stockholder and each of its subsidiaries are and have been conducted at all times in material compliance with all applicable financial recordkeeping and reporting requirements and all applicable Anti-Money Laundering Laws, and no action, suit or proceeding by or before any court or governmental agency, authority or body or any arbitrator involving such Selling Stockholder or any of its subsidiaries with respect to such requirements and Anti-Money Laundering Laws is pending or, to the knowledge of the Selling Stockholder, threatened.
(j) Such Selling Stockholder represents and warrants that it is not (i) an employee benefit plan subject to Title I of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), (ii) a plan or account subject to Section 4975 of the Internal Revenue Code of 1986, as amended or (iii) an entity deemed to hold “plan assets” of any such plan or account under Section 3(42) of ERISA, 29 C.F.R. 2510.3-101, or otherwise.
(k) No stamp, documentary, issuance, registration, transfer, withholding, capital gains, income or other taxes or duties are payable in any non-U.S. jurisdiction in which such Selling Stockholder is a citizen, resident or doing business, or to any taxing authority thereof or therein, by or on behalf of the Underwriters, the Company or any of its subsidiaries in connection with (i) the execution, delivery or consummation of this Agreement, (ii) the sale and delivery of the Shares to the Underwriters or purchasers procured by the Underwriters, or (iii) the resale and delivery of the Shares by the Underwriters in the manner contemplated herein.
(l) Such Selling Stockholder has the power to submit, and pursuant to Section 20(a) has, to the extent permitted by law, legally, validly, effectively and irrevocably submitted, to the jurisdiction of the Specified Courts (as defined in Section 20(a)), and has the power to designate, appoint and empower, and pursuant to Section 20(b), has legally, validly and effectively designated, appointed and empowered an agent for service of process in any suit or proceeding based on or arising under this Agreement in any of the Specified Courts.
3. Agreements to Sell and Purchase. Each Seller, severally and not jointly, hereby agrees to sell to the several Underwriters, and each Underwriter, upon the basis of the representations and warranties herein contained, but subject to the terms and conditions hereinafter stated, agrees, severally and not jointly, to purchase from such Seller at $[•] a share (the “Purchase Price”) the number of Firm Shares (subject to such adjustments to eliminate fractional shares as the Representatives may determine) that bears the same proportion to the number of Firm Shares to be sold by such Seller as the number of Firm Shares set forth in Schedule II hereto opposite the name of such Underwriter bears to the total number of Firm Shares.
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On the basis of the representations and warranties contained in this Agreement, and subject to its terms and conditions, the Company agrees to sell to the Underwriters the Additional Shares, and the Underwriters shall have the right to purchase, severally and not jointly, up to [•] Additional Shares at the Purchase Price, provided, however, that the amount paid by the Underwriters for any Additional Shares shall be reduced by an amount per share equal to any dividends declared by the Company and payable on the Firm Shares but not payable on such Additional Shares. The Representatives may exercise this right on behalf of the Underwriters in whole or from time to time in part by giving written notice not later than 30 days after the date of this Agreement. Any exercise notice shall specify the number of Additional Shares to be purchased by the Underwriters and the date on which such shares are to be purchased. Each purchase date must be at least one business day after the written notice is given and may not be earlier than the closing date for the Firm Shares or later than ten business days after the date of such notice. Additional Shares may be purchased as provided in Section 5 hereof solely for the purpose of covering over-allotments made in connection with the offering of the Firm Shares. On each day, if any, that Additional Shares are to be purchased (an “Option Closing Date”), each Underwriter agrees, severally and not jointly, to purchase the number of Additional Shares (subject to such adjustments to eliminate fractional shares as the Representatives may determine) that bears the same proportion to the total number of Additional Shares to be purchased on such Option Closing Date as the number of Firm Shares set forth in Schedule II hereto opposite the name of such Underwriter bears to the total number of Firm Shares.
4. Terms of Public Offering. The Sellers are advised by the Representatives that the Underwriters propose to make a public offering of their respective portions of the Shares as soon after the Registration Statement and this Agreement have become effective as in the Representatives’ judgment is advisable. The Sellers are further advised by the Representatives that the Shares are to be offered to the public initially at $[•] a share (the “Public Offering Price”) and to certain dealers selected by the Representatives at a price that represents a concession not in excess of $[•] a share under the Public Offering Price, and that any Underwriter may allow, and such dealers may reallow, a concession, not in excess of $[•] a share, to any Underwriter or to certain other dealers.
5. Payment and Delivery. Payment for the Firm Shares to be sold by each Seller shall be made to such Seller in Federal or other funds immediately available in New York City against delivery of such Firm Shares for the respective accounts of the several Underwriters at 10:00 a.m., New York City time, on [•], 2021, or at such other time on the same or such other date, not later than [•], 2021, as shall be designated in writing by Morgan Stanley. The time and date of such payment are hereinafter referred to as the “Closing Date.”
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Payment for any Additional Shares shall be made to the Company in Federal or other funds immediately available in New York City against delivery of such Additional Shares for the respective accounts of the several Underwriters at 10:00 a.m., New York City time, on the date specified in the corresponding notice described in Section 3 or at such other time on the same or on such other date, in any event not later than [•], 2021, as shall be designated in writing by Morgan Stanley.
The Firm Shares and Additional Shares shall be registered in such names and in such denominations as Morgan Stanley shall request in writing not later than one full business day prior to the Closing Date or the applicable Option Closing Date, as the case may be. The Firm Shares and Additional Shares shall be delivered to Morgan Stanley on the Closing Date or an Option Closing Date, as the case may be, for the respective accounts of the several Underwriters. The Purchase Price payable by the Underwriters shall be reduced by (i) any transfer taxes paid by, or on behalf of, the Underwriters in connection with the transfer of the Shares to the Underwriters duly paid and (ii) any withholding required by law.
6. Conditions to the Underwriters’ Obligations. The obligations of the Sellers to sell the Shares to the Underwriters and the several obligations of the Underwriters to purchase and pay for the Shares on the Closing Date are subject to the condition that the Registration Statement shall have become effective not later than [•] p.m. (New York City time) on the date hereof.
The several obligations of the Underwriters are subject to the following further conditions:
(a) Subsequent to the execution and delivery of this Agreement and prior to the Closing Date:
(i) no order suspending the effectiveness of the Registration Statement shall be in effect, and no proceeding for such purpose or pursuant to Section 8A under the Securities Act shall be pending before or threatened by the Commission; and
(ii) there shall not have occurred any change, or any development involving a prospective change, in the condition, financial or otherwise, or in the earnings, business or operations of the Company and its subsidiaries, taken as a whole, from that set forth in the Time of Sale Prospectus that, in the Representatives’ judgment, is material and adverse and that makes it, in the Representatives’ judgment, impracticable to market the Shares on the terms and in the manner contemplated in the Time of Sale Prospectus.
(b) The representations and warranties of the Company and the Selling Stockholders contained herein shall be true and correct on the date hereof and on and as of the Closing Date and the Company and the Selling Stockholders shall have complied with all of the agreements and satisfied all of the conditions on their part to be performed or satisfied hereunder on or before the Closing Date.
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(c) The Underwriters shall have received on the Closing Date a certificate, dated the Closing Date and signed by an executive officer of the Company, to the effect set forth in Sections 6(a)(i) and (solely with respect to the Company) 6(b) above. The officer signing and delivering such certificate may rely upon the best of his or her knowledge as to proceedings threatened.
(d) The Underwriters shall have received on the Closing Date a certificate, dated the Closing Date and signed by, or on behalf of, each Selling Stockholder, to the effect set forth in 6(b) above (solely with respect to such Selling Stockholder).
(e) The Underwriters shall have received on the Closing Date an opinion and negative assurance letter of Pillsbury Winthrop Shaw Pittman LLP (“Pillsbury”), outside counsel for the Company, dated the Closing Date, in form and substance satisfactory to the Representatives.
(f) The Underwriters shall have received on the Closing Date an opinion of (i) Whalen LLP (“Whalen”), counsel for the Selling Stockholders, (ii) Walkers, counsel for New Technology Fund SPC Limited Class Q Participating Shares designated as “Alfa pre-IPO-4 Fund Segregated Portfolio,” and (iii) the Deputy General Counsel of International Finance Corporation, in each case dated the Closing Date and in each case in form and substance satisfactory to the Representatives.
(g) The Underwriters shall have received on the Closing Date an opinion and negative assurance letter of Davis Polk & Wardwell LLP (“Davis Polk”), counsel for the Underwriters, dated the Closing Date, in form and substance satisfactory to the Representatives.
(h) Each Selling Stockholder shall have delivered to the Underwriters a properly completed and executed U. S. Internal Revenue Service Form W-8 or W-9, as applicable.
With respect to the negative assurance letters to be delivered pursuant to Sections 6(e) and 6(g) above, Pillsbury and Davis Polk, respectively, may state that their opinions and beliefs are based upon their participation in the preparation of the Registration Statement, the Time of Sale Prospectus and the Prospectus and any amendments or supplements thereto and review and discussion of the contents thereof, but are without independent check or verification, except as specified.
The opinions described in Sections 6(e) and 6(f) above shall be rendered to the Underwriters at the request of the Company or one or more of the Selling Stockholders, as the case may be, and shall so state therein.
(i) The Underwriters shall have received, on each of the date hereof and the Closing Date, a letter dated the date hereof or the Closing Date, as the case may be, in form and substance satisfactory to the Underwriters, from Deloitte, an independent registered public accounting firm, containing statements
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and information of the type ordinarily included in accountants’ “comfort letters” to underwriters with respect to the financial statements and certain financial information contained in the Registration Statement, the Time of Sale Prospectus and the Prospectus; provided that the letter delivered on the date hereof shall use a “cut-off date” not earlier than two business days prior to the date hereof, and the Closing Date shall use a “cut-off date” not earlier than two business days prior to the Closing Date.
(j) The Underwriters shall have received, on each of the date hereof and the Closing Date, a certificate dated the date hereof or the Closing Date, as the case may be, and signed by the chief financial officer of the Company, in his capacity as such, with respect to certain information in the Registration Statement, the Time of Sale Prospectus and the Prospectus, in form and substance satisfactory to the Representatives.
(k) The “lock-up” agreements, each substantially in the form of Exhibit A hereto, between the Representatives and the substantially all equityholders (including each Selling Stockholder), officers and directors of the Company relating to restrictions on sales and certain other dispositions of shares of Common Stock or certain other securities, delivered to the Representatives prior to the date hereof, shall be in full force and effect on the Closing Date.
(l) The Firm Shares and the Additional Shares, if any, shall have been approved for listing on the New York Stock Exchange, subject to official notice of the issuance.
(m) The Underwriters shall have received such other documents and certificates as the Representatives may reasonably request, including with respect to the good standing of the Company and its subsidiaries.
(n) The several obligations of the Underwriters to purchase Additional Shares hereunder are subject to the following:
(i) the representations and warranties of the Company and the Selling Stockholders contained herein shall be true and correct on the date hereof and on and as of the applicable Option Closing Date, and the Company and the Selling Stockholders shall have complied with all of the agreements and satisfied all of the conditions on their part to be performed or satisfied hereunder on or before the Option Closing Date;
(ii) the delivery to the Representatives on the applicable Option Closing Date of the following:
(A) a certificate, dated the Option Closing Date and signed by an executive officer of the Company, confirming that the certificate delivered on the Closing Date pursuant to Section 6(c) hereof remains true and correct as of such Option Closing Date;
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(B) an opinion and negative assurance letter of Pillsbury, outside counsel for the Company, dated the Option Closing Date, relating to the Additional Shares to be purchased from the Company on such Option Closing Date and otherwise to the same effect as the opinion required by Section 6(e) hereof;
(C) an opinion and negative assurance letter of Davis Polk, counsel for the Underwriters, dated the Option Closing Date, to the same effect as the opinion and negative assurance letter required by Section 6(g) hereof;
(D) a letter dated the Option Closing Date, in form and substance satisfactory to the Underwriters, from Deloitte, an independent registered public accounting firm, substantially in the same form and substance as the letter furnished to the Underwriters pursuant to Section 6(h) hereof; provided that the letter delivered on the Option Closing Date shall use a “cut-off date” not earlier than two business days prior to such Option Closing Date;
(E) a certificate, dated the Option Closing Date and signed by the chief financial officer of the Company, substantially in the same form and substance as the certificate delivered to the Underwriters pursuant to Section 6(i) hereof; and
(F) such other documents and certificates as the Representatives may reasonably request, including with respect to the good standing of the Company and its subsidiaries, the due authorization and issuance of the Additional Shares to be issued and sold on such Option Closing Date and other matters related to the issuance of such Additional Shares.
7. Covenants of the Company. The Company covenants with each Underwriter as follows:
(a) To furnish, if requested, to the Representatives, without charge, three signed copies of the Registration Statement (including exhibits thereto) and for delivery to each other Underwriter a conformed copy of the Registration Statement (without exhibits thereto) and to furnish to the Representatives in New York City, without charge, prior to 10:00 a.m. New York City time on the business day next succeeding the date of this Agreement and during the period mentioned in Section 7(e) or 7(f) below, as many copies of the Time of Sale Prospectus, the Prospectus and any supplements and amendments thereto or to the Registration Statement as the Representatives may reasonably request.
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(b) Before amending or supplementing the Registration Statement, the Time of Sale Prospectus or the Prospectus, to furnish to the Representatives a copy of each such proposed amendment or supplement and not to file any such proposed amendment or supplement to which the Representatives reasonably object, and to file with the Commission within the applicable period specified in Rule 424(b) under the Securities Act any prospectus required to be filed pursuant to such Rule.
(c) To furnish to the Representatives a copy of each proposed free writing prospectus to be prepared by or on behalf of, used by, or referred to by the Company and not to use or refer to any proposed free writing prospectus to which the Representatives reasonably object.
(d) Not to take any action that would result in an Underwriter or the Company being required to file with the Commission pursuant to Rule 433(d) under the Securities Act a free writing prospectus prepared by or on behalf of the Underwriter that the Underwriter otherwise would not have been required to file thereunder.
(e) If the Time of Sale Prospectus is being used to solicit offers to buy the Shares at a time when the Prospectus is not yet available to prospective purchasers and any event shall occur or condition exist as a result of which it is necessary to amend or supplement the Time of Sale Prospectus in order to make the statements therein, in the light of the circumstances, not misleading, or if any event shall occur or condition exist as a result of which the Time of Sale Prospectus conflicts with the information contained in the Registration Statement then on file, or if, in the opinion of counsel for the Underwriters, it is necessary to amend or supplement the Time of Sale Prospectus to comply with applicable law, to forthwith prepare, file with the Commission and furnish, at its own expense, to the Underwriters and to any dealer upon request, either amendments or supplements to the Time of Sale Prospectus so that the statements in the Time of Sale Prospectus as so amended or supplemented will not, in the light of the circumstances when the Time of Sale Prospectus is delivered to a prospective purchaser, be misleading or so that the Time of Sale Prospectus, as amended or supplemented, will no longer conflict with the Registration Statement, or so that the Time of Sale Prospectus, as amended or supplemented, will comply with applicable law.
(f) If, during such period after the first date of the public offering of the Shares as in the opinion of counsel for the Underwriters the Prospectus (or in lieu thereof the notice referred to in Rule 173(a) of the Securities Act) is required by law to be delivered in connection with sales by an Underwriter or dealer, any event shall occur or condition exist as a result of which it is necessary to amend or supplement the Prospectus in order to make the statements therein, in the light of the circumstances when the Prospectus (or in lieu thereof the notice referred to in Rule 173(a) of the Securities Act) is delivered to a purchaser, not misleading, or if, in the opinion of counsel for the Underwriters, it is necessary to amend or supplement the Prospectus to comply with applicable law, to forthwith prepare, file with the Commission and furnish, at its own expense, to the Underwriters and
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to the dealers (whose names and addresses the Representatives will furnish to the Company) to which Shares may have been sold by the Representatives on behalf of the Underwriters and to any other dealers upon request, either amendments or supplements to the Prospectus so that the statements in the Prospectus as so amended or supplemented will not, in the light of the circumstances when the Prospectus (or in lieu thereof the notice referred to in Rule 173(a) of the Securities Act) is delivered to a purchaser, be misleading or so that the Prospectus, as amended or supplemented, will comply with applicable law.
(g) To endeavor to qualify the Shares for offer and sale under the securities or Blue Sky laws of such jurisdictions as the Representatives shall reasonably request.
(h) To make generally available to the Company’s security holders and to the Representatives as soon as practicable an earnings statement covering a period of at least twelve months beginning with the first fiscal quarter of the Company occurring after the date of this Agreement which shall satisfy the provisions of Section 11(a) of the Securities Act and the rules and regulations of the Commission thereunder, which requirements may be satisfied by filing on the Commission’s Electronic Data Gather, Analysis and Retrieval System (“EDGAR”).
(i) If any Seller is not a U.S. person for U.S. federal income tax purposes, the Company will deliver to each Underwriter (or its agent), on or before the Closing Date, (i) a certificate with respect to the Company’s status as a “United States real property holding corporation,” dated not more than thirty (30) days prior to the Closing Date, as described in Treasury Regulations Sections 1.897-2(h) and 1.1445-2(c)(3), and (ii) proof of delivery to the IRS of the required notice, as described in Treasury Regulations 1.897-2(h)(2).
(j) The Company will promptly notify the Representatives if the Company ceases to be an Emerging Growth Company at any time prior to the later of (i) completion of the distribution of the Shares within the meaning of the Securities Act and (ii) completion of the Restricted Period referred to below.
(k) If at any time following the distribution of any Testing-the-Waters Communication that is a written communication within the meaning of Rule 405 under the Securities Act there occurred or occurs an event or development as a result of which such Testing-the-Waters Communication included or would include an untrue statement of a material fact or omitted or would omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances existing at that subsequent time, not misleading, the Company will promptly notify the Representatives and will promptly amend or supplement, at its own expense, such Testing-the-Waters Communication to eliminate or correct such untrue statement or omission.
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(l) The Company hereby agrees with each Underwriter that, without the prior written consent of the Representatives on behalf of the Underwriters, it will not and will not cause any of its affiliates to, and will not publicly disclose an intention to, during the period ending 180 days after the date of the Prospectus (the “Restricted Period”), (1) offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, lend, or otherwise transfer or dispose of, directly or indirectly, any shares of Common Stock or any securities convertible into or exercisable or exchangeable for Common Stock or (2) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of the Common Stock, whether any such transaction described in clause (1) or (2) above is to be settled by delivery of Common Stock or such other securities, in cash or otherwise or (3) file any registration statement with the Commission relating to the offering of any shares of Common Stock or any securities convertible into or exercisable or exchangeable for Common Stock.
The restrictions contained in the preceding paragraph shall not apply to (A) the Shares to be sold hereunder, (B) the issuance by the Company of shares of Common Stock upon the exercise of an option or warrant, the vesting and settlement of a restricted stock unit or the conversion of a Company security outstanding on the date hereof, in each case to the extent such securities are described in each of the Time of Sale Prospectus and Prospectus, (C) grants of stock options, stock appreciation rights, restricted stock, restricted stock units, deferred stock units or other stock-based awards pursuant to the Company’s 2021 Equity Incentive Plan, which is described in each of the Time of Sale Prospectus and the Prospectus, (D) issuances of Common Stock pursuant to an employee stock purchase plan of the Company described in each of the Time of Sale Prospectus and the Prospectus and the filing of one or more registration statements on Form S-8 in connection therewith, or (E) facilitating the establishment of a trading plan on behalf of a stockholder, officer or director of the Company pursuant to Rule 10b5-1 under the Exchange Act for the transfer of shares of Common Stock, provided that (i) such plan does not provide for the transfer of Common Stock during the Restricted Period and (ii) to the extent a public announcement or filing under the Exchange Act, if any, is required of or voluntarily made regarding the establishment of such plan, such announcement or filing shall include a statement to the effect that no transfer of Common Stock may be made under such plan during the Restricted Period; provided, that, in the case of each of clause (B), (C) and (D) above, the recipient of any such shares of Common Stock or other securities shall enter into a lock-up agreement in substantially the form attached hereto as Exhibit A for the remainder of the Restricted Period (as defined therein).
If the Representatives, in their sole discretion, agrees to release or waive the restrictions set forth in a Lock-up Agreement for an officer or director of the Company and provides the Company with notice of the impending release or waiver at least three business days before the effective date of the release or waiver, the Company agrees to announce the impending release or waiver by a press release substantially in the form of Exhibit B hereto through a major news service at least two business days before the effective date of the release or waiver.
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8. Covenants of the Sellers. Each Seller, severally and not jointly, covenants with each Underwriter as follows:
(a) Each Seller will deliver to each Underwriter (or its agent), prior to or at the Closing Date, a properly completed and executed Internal Revenue Service (“IRS”) Form W-9 or an IRS Form W-8, as appropriate, together with all required attachments to such form.
(b) Each Seller will deliver to each Underwriter (or its agent), on the date of execution of this Agreement, a properly completed and executed Certification Regarding Beneficial Owners of Legal Entity Customers, together with copies of identifying documentation, and each Seller undertakes to provide such additional supporting documentation as each Underwriter may reasonably request in connection with the verification of the foregoing Certification.
(c) All sums payable by the Company or any Selling Stockholder under this Agreement shall be paid free and clear of and without deductions or withholdings of any present or future taxes or duties, unless the deduction or withholding is required by law, in which case the Company or the Selling Stockholder, as the case may be, shall pay such additional amount as will result in the receipt by each Underwriter of the full amount that would have been received had no deduction or withholding been made.
(d) All sums payable to an Underwriter shall be considered exclusive of any value added or similar taxes. Where the Company or, as the case may be, a Selling Stockholder is obliged to pay value added or similar tax on any amount payable hereunder to an Underwriter, the Company or the Selling Stockholder, as the case may be, shall in addition to the sum payable hereunder pay an amount equal to any applicable value added or similar tax.
9. Expenses. Whether or not the transactions contemplated in this Agreement are consummated or this Agreement is terminated, the Company agrees to pay or cause to be paid all of the expenses incident to the performance of its obligations and, except as set forth in clause (B) below, the obligations of the Sellers under this Agreement, including: (i) the fees, disbursements and expenses of the Company’s counsel and the Company’s accountants in connection with the registration and delivery of the Shares under the Securities Act and all other fees or expenses in connection with the preparation and filing of the Registration Statement, any preliminary prospectus, the Time of Sale Prospectus, the Prospectus, any free writing prospectus prepared by or on behalf of, used by, or referred to by the Company and amendments and supplements to any of the foregoing, including all printing costs associated therewith, and the mailing and delivering of copies thereof to the Underwriters and dealers, in the quantities hereinabove specified, (ii) all costs and expenses related to the transfer and delivery of the Shares to the Underwriters, including any stock or other transfer taxes and any stamp or other
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similar taxes or duties payable thereon, (iii) the cost of printing or producing any Blue Sky or Legal Investment memorandum in connection with the offer and sale of the Shares under state securities laws and all expenses in connection with the qualification of the Shares for offer and sale under state securities laws as provided in Section 7(g) hereof, including filing fees and the reasonable and documented fees and disbursements of counsel for the Underwriters in connection with such qualification and in connection with the Blue Sky or Legal Investment memorandum, (iv) all filing fees and the reasonable and documented fees and disbursements of counsel to the Underwriters incurred in connection with the review and qualification of the offering of the Shares by FINRA, provided, however, that the amount payable by the Company with respect to legal fees and disbursements of counsel for the Underwriters pursuant to subclauses (iii) and (iv) shall not exceed $50,000, (v) all fees and expenses in connection with the preparation and filing of the registration statement on Form 8-A relating to the Common Stock and all costs and expenses incident to listing the Shares on the New York Stock Exchange and other national securities exchanges and foreign exchanges, (vi) the cost of printing certificates representing the Shares, (vii) the costs and charges of any transfer agent, registrar or depositary, (viii) the costs and expenses of the Company relating to investor presentations on any “road show” undertaken in connection with the marketing of the offering of the Shares, including, without limitation, expenses associated with the preparation or dissemination of any electronic road show, expenses associated with the production of road show slides and graphics, fees and expenses of any consultants engaged in connection with the road show presentations with the prior approval of the Company, travel and lodging expenses (if any) of such consultants, provided, however that the Company and the Underwriters will each bear 50% of the cost of any aircraft chartered in connection with the road show and the Company and the Underwriters will each pay their own lodging and other travel costs associated with the roadshow, (ix) the document production charges and expenses associated with printing this Agreement, and (x) all other costs and expenses incident to the performance of the obligations of the Company hereunder for which provision is not otherwise made in this Section. It is understood, however, that (A) except as provided in this Section, Section 11 entitled “Indemnity and Contribution” and the last paragraph of Section 14 below, the Underwriters will pay all of their costs and expenses, including fees and disbursements of their counsel, stock transfer taxes payable on resale of any of the Shares by them and any advertising expenses connected with any offers they may make, and (B) each Selling Stockholder shall pay all taxes incurred, and all fees, disbursements and expenses of its tax and other advisors and counsel in connection with the performance of its obligations under this Agreement, except (solely in the case of clause (B)) as otherwise agreed by such Selling Stockholder and the Company. The provisions of this Section shall not supersede or otherwise affect any agreement that the Sellers may otherwise have for the allocation of such expenses among themselves.
10. Covenants of the Underwriters. Each Underwriter, severally and not jointly, covenants with the Company not to take any action that would result in the Company being required to file with the Commission under Rule 433(d) a free writing prospectus prepared by or on behalf of such Underwriter that otherwise would not be required to be filed by the Company thereunder, but for the action of the Underwriter.
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11. Indemnity and Contribution.
(a) The Company agrees to indemnify and hold harmless each Underwriter, the directors, officers and employees of each Underwriter, each person, if any, who controls any Underwriter within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act, and each affiliate of any Underwriter within the meaning of Rule 405 under the Securities Act from and against any and all losses, claims, damages and liabilities (including, without limitation, any legal or other expenses reasonably incurred in connection with defending or investigating any action or claim) that arise out of, or are based upon, any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement or any amendment thereof, any preliminary prospectus, the Time of Sale Prospectus or any amendment or supplement thereto, any issuer free writing prospectus as defined in Rule 433(h) under the Securities Act, any Company information that the Company has filed, or is required to file, pursuant to Rule 433(d) under the Securities Act, any “road show” as defined in Rule 433(h) under the Securities Act (a “road show”), the Prospectus or any amendment or supplement thereto, or any Testing-the-Waters Communication or arise out of, or are based upon, any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, except insofar as such losses, claims, damages or liabilities arise out of, or are based upon, any such untrue statement or omission or alleged untrue statement or omission made in reliance upon and in conformity with any Underwriter Information.
(b) Each Selling Stockholder agrees, severally and not jointly, to indemnify and hold harmless each Underwriter, the directors, officers and employees of each Underwriter, each person, if any, who controls any Underwriter within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act, and each affiliate of any Underwriter within the meaning of Rule 405 under the Securities Act from and against any and all losses, claims, damages and liabilities (including, without limitation, any legal or other expenses reasonably incurred in connection with defending or investigating any action or claim) that arise out of, or are based upon, any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement or any amendment thereof, any preliminary prospectus, the Time of Sale Prospectus or any amendment or supplement thereto, any issuer free writing prospectus as defined in Rule 433(h) under the Securities Act, any Company information that the Company has filed, or is required to file, pursuant to Rule 433(d) under the Securities Act, any road show, the Prospectus or any amendment or supplement thereto, or any Testing-the-Waters Communication, or that arise out of, or are based upon, any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, but in each case only with respect to statements or omissions made in reliance upon, and in conformity with, the Selling Stockholder Information. The aggregate liability of any Selling Stockholder pursuant to this subsection (b) shall be limited to an amount equal to the net proceeds (net of underwriting discounts and commissions but without deducting expenses) received by such Selling Stockholder for the Shares sold by such Selling Stockholder under this Agreement (with respect to each Selling Stockholder, the “Selling Stockholder Proceeds”).
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(c) Each Underwriter agrees, severally and not jointly, to indemnify and hold harmless the Company, the Selling Stockholders, the directors of the Company, the officers of the Company who sign the Registration Statement and each person, if any, who controls the Company or any Selling Stockholder within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act from and against any and all losses, claims, damages and liabilities (including, without limitation, any legal or other expenses reasonably incurred in connection with defending or investigating any action or claim) that arise out of, or are based upon, any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement or any amendment thereof, any preliminary prospectus, the Time of Sale Prospectus or any amendment or supplement thereto, any issuer free writing prospectus as defined in Rule 433(h) under the Securities Act, any Company information that the Company has filed, or is required to file, pursuant to Rule 433(d) under the Securities Act, any road show or the Prospectus or any amendment or supplement thereto, or arise out of, or are based upon, any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, but in each case only with respect to statements or omissions made in reliance on and in conformity with information relating to such Underwriter furnished to the Company in writing by such Underwriter through the Representatives expressly for use in the Registration Statement, any preliminary prospectus, the Time of Sale Prospectus, any issuer free writing prospectus, road show or the Prospectus or any amendment or supplement thereto, it being understood and agreed that the only such information furnished by any Underwriter consists of the following information in the Prospectus furnished on behalf of each Underwriter: the selling concession amount appearing in the third paragraph under the caption “Underwriters,” the information concerning sales to discretionary accounts appearing in the seventh paragraph under the caption “Underwriters,” and the information concerning stabilization, short positions and the option to purchase additional shares in the thirteenth paragraph under the caption “Underwriters” (the “Underwriter Information”).
(d) In case any proceeding (including any governmental investigation) shall be instituted involving any person in respect of which indemnity may be sought pursuant to Section 11(a), 11(b) or 11(c) such person (the “indemnified party”) shall promptly notify the person against whom such indemnity may be sought (the “indemnifying party”) in writing and the indemnifying party, upon request of the indemnified party, shall retain counsel reasonably satisfactory to the indemnified party to represent the indemnified party and any others the indemnifying party may designate in such proceeding and shall pay the fees and disbursements of such counsel related to such proceeding. In any such proceeding, any indemnified party shall have the right to retain its own counsel,
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but the fees and expenses of such counsel shall be at the expense of such indemnified party unless (i) the indemnifying party and the indemnified party shall have mutually agreed to the retention of such counsel or (ii) the named parties to any such proceeding (including any impleaded parties) include both the indemnifying party and the indemnified party and representation of both parties by the same counsel would be inappropriate due to actual or potential differing interests between them. It is understood that the indemnifying party shall not, in respect of the legal expenses of any indemnified party in connection with any proceeding or related proceedings in the same jurisdiction, be liable for (A) the fees and expenses of more than one separate firm (in addition to any local counsel) for all Underwriters, all directors, officers and employees of any Underwriter and all persons, if any, who control any Underwriter within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act or who are affiliates of any Underwriter within the meaning of Rule 405 under the Securities Act, (B) the fees and expenses of more than one separate firm (in addition to any local counsel) for the Company, its directors, its officers who sign the Registration Statement and each person, if any, who controls the Company within the meaning of either such Section and (C) the fees and expenses of more than one separate firm (in addition to any local counsel) for all Selling Stockholders and all persons, if any, who control any Selling Stockholder within the meaning of either such Section, and that all such fees and expenses shall be reimbursed as they are incurred. In the case of any such separate firm for the Underwriters, such directors, officers and employees of any Underwriter and such control persons and affiliates of any Underwriters, such firm shall be designated in writing by the Representatives. In the case of any such separate firm for the Company and such directors, officers and control persons of the Company, such firm shall be designated in writing by the Company. In the case of any such separate firm for the Selling Stockholders and such control persons of any Selling Stockholders, such firm shall be designated in writing by the persons named as attorney-in-fact for the Selling Stockholders under the Powers of Attorney. The indemnifying party shall not be liable for any settlement of any proceeding effected without its written consent, but if settled with such consent or if there be a final judgment for the plaintiff, the indemnifying party agrees to indemnify the indemnified party from and against any loss or liability by reason of such settlement or judgment. Notwithstanding the foregoing sentence, if at any time an indemnified party shall have requested an indemnifying party to reimburse the indemnified party for fees and expenses of counsel as contemplated by the second and third sentences of this paragraph, the indemnifying party agrees that it shall be liable for any settlement of any proceeding effected without its written consent if (i) such settlement is entered into more than 30 days after receipt by such indemnifying party of the aforesaid request and (ii) such indemnifying party shall not have reimbursed the indemnified party in accordance with such request prior to the date of such settlement. No indemnifying party shall, without the prior written consent of the indemnified party, effect any settlement of any pending or threatened proceeding in respect of which any indemnified party is or could have been a party and indemnity could have been sought hereunder by such
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indemnified party, unless such settlement (x) includes an unconditional release of such indemnified party from all liability on claims that are the subject matter of such proceeding and (y) does not include a statement as to or an admission of fault, culpability or a failure to act by or on behalf of any indemnified party.
(e) To the extent the indemnification provided for in Section 11(a), 11(b) or 11(c) is unavailable to an indemnified party or insufficient in respect of any losses, claims, damages or liabilities referred to therein, then each indemnifying party under such paragraph, in lieu of indemnifying such indemnified party thereunder, shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages or liabilities (i) in such proportion as is appropriate to reflect the relative benefits received by the indemnifying party or parties on the one hand and the indemnified party or parties on the other hand from the offering of the Shares or (ii) if the allocation provided by clause 11(e)(i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause 11(e)(i) above but also the relative fault of the indemnifying party or parties on the one hand and of the indemnified party or parties on the other hand in connection with the statements or omissions that resulted in such losses, claims, damages or liabilities, as well as any other relevant equitable considerations. The relative benefits received by the Sellers on the one hand and the Underwriters on the other hand in connection with the offering of the Shares shall be deemed to be in the same respective proportions as the net proceeds from the offering of the Shares (before deducting expenses) received by each Seller and the total underwriting discounts and commissions received by the Underwriters, in each case as set forth in the table on the cover of the Prospectus, bear to the aggregate Public Offering Price of the Shares. The relative fault of the Sellers on the one hand and the Underwriters on the other hand shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Sellers or by the Underwriters and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The Underwriters’ respective obligations to contribute pursuant to this Section 11 are several in proportion to the respective number of Shares they have purchased hereunder, and not joint. Each Selling Stockholder’s obligation to contribute pursuant to this Section 11(e) is several in proportion to the respective number of Shares such Selling Stockholder has sold hereunder, and not joint. The liability of each Selling Stockholder under this paragraph shall be limited to an amount equal to the Selling Stockholder Proceeds.
(f) The Sellers and the Underwriters agree that it would not be just or equitable if contribution pursuant to this Section 11 were determined by pro rata allocation (even if the Underwriters were treated as one entity for such purpose) or by any other method of allocation that does not take account of the equitable considerations referred to in Section 11(e). The amount paid or payable by an indemnified party as a result of the losses, claims, damages and liabilities referred to in Section 11(e) shall be deemed to include, subject to the limitations set forth
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above, any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this Section 11, no Underwriter shall be required to contribute any amount in excess of the amount by which the total price at which the Shares underwritten by it and distributed to the public were offered to the public exceeds the amount of any damages that such Underwriter has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The remedies provided for in this Section 11 are not exclusive and shall not limit any rights or remedies which may otherwise be available to any indemnified party at law or in equity.
(g) The indemnity and contribution provisions contained in this Section 11 and the representations, warranties and other statements of the Company and the Selling Stockholders contained in this Agreement shall remain operative and in full force and effect regardless of (i) any termination of this Agreement, (ii) any investigation made by or on behalf of any Underwriter, any director, officer or employee of any Underwriter, any person controlling any Underwriter or any affiliate of any Underwriter, by or on behalf of any Selling Stockholder or any person controlling any Selling Stockholder, or by or on behalf of the Company, its officers or directors or any person controlling the Company and (iii) acceptance of and payment for any of the Shares.
(h) The aggregate liability of each Selling Stockholder under the indemnity and contribution agreements contained in this Section 11 shall not exceed the Selling Stockholder Proceeds.
12. Termination. The Underwriters may terminate this Agreement by notice given by the Representatives to the Company, if, after the execution and delivery of this Agreement and prior to or on the Closing Date or any Option Closing Date, as the case may be, (i) trading generally shall have been suspended or materially limited on, or by, as the case may be, any of the New York Stock Exchange, the NYSE American, the NASDAQ Global Market, the Chicago Board of Options Exchange, the Chicago Mercantile Exchange or the Chicago Board of Trade, (ii) trading of any securities of the Company shall have been suspended on any exchange or in any over-the-counter market, (iii) a material disruption in securities settlement, payment or clearance services in the United States shall have occurred, (iv) any moratorium on commercial banking activities shall have been declared by Federal or New York State authorities or (v) there shall have occurred any outbreak or escalation of hostilities, or any change in financial markets or any calamity or crisis that, in the Representatives’ judgment, is material and adverse and which, singly or together with any other event specified in this clause (v), makes it, in the Representatives’ judgment, impracticable or inadvisable to proceed with the offer, sale or delivery of the Shares on the terms and in the manner contemplated in the Time of Sale Prospectus or the Prospectus.
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13. Effectiveness; Defaulting Underwriters. This Agreement shall become effective upon the execution and delivery hereof by the parties hereto.
If, on the Closing Date or an Option Closing Date, as the case may be, any one or more of the Underwriters shall fail or refuse to purchase Shares that it has or they have agreed to purchase hereunder on such date, and the aggregate number of Shares which such defaulting Underwriter or Underwriters agreed but failed or refused to purchase is not more than one-tenth of the aggregate number of the Shares to be purchased on such date, the other Underwriters shall be obligated severally in the proportions that the number of Firm Shares set forth opposite their respective names in Schedule II bears to the aggregate number of Firm Shares set forth opposite the names of all such non-defaulting Underwriters, or in such other proportions as the Representatives may specify, to purchase the Shares which such defaulting Underwriter or Underwriters agreed but failed or refused to purchase on such date; provided that in no event shall the number of Shares that any Underwriter has agreed to purchase pursuant to this Agreement be increased pursuant to this Section 13 by an amount in excess of one-ninth of such number of Shares without the written consent of such Underwriter. If, on the Closing Date, any Underwriter or Underwriters shall fail or refuse to purchase Firm Shares and the aggregate number of Firm Shares with respect to which such default occurs is more than one-tenth of the aggregate number of Firm Shares to be purchased on such date, and arrangements satisfactory to the Representatives, the Company and the Selling Stockholders for the purchase of such Firm Shares are not made within 36 hours after such default, this Agreement shall terminate without liability on the part of any non-defaulting Underwriter, the Company or the Selling Stockholders. In any such case either the Representatives or the relevant Sellers shall have the right to postpone the Closing Date, but in no event for longer than seven days, in order that the required changes, if any, in the Registration Statement, in the Time of Sale Prospectus, in the Prospectus or in any other documents or arrangements may be effected. If, on an Option Closing Date, any Underwriter or Underwriters shall fail or refuse to purchase Additional Shares and the aggregate number of Additional Shares with respect to which such default occurs is more than one-tenth of the aggregate number of Additional Shares to be purchased on such Option Closing Date, the non-defaulting Underwriters shall have the option to (i) terminate their obligation hereunder to purchase the Additional Shares to be sold on such Option Closing Date or (ii) purchase not less than the number of Additional Shares that such non-defaulting Underwriters would have been obligated to purchase in the absence of such default. Any action taken under this paragraph shall not relieve any defaulting Underwriter from liability in respect of any default of such Underwriter under this Agreement.
If this Agreement shall be terminated by the Underwriters, or any of them, because of any failure or refusal on the part of any Seller to comply with the terms or to fulfill any of the conditions of this Agreement, or if for any reason any Seller shall be unable to perform its obligations under this Agreement, the Company will reimburse the Underwriters or such Underwriters as have so terminated this Agreement with respect to themselves, severally, for all out-of-pocket expenses (including the fees and disbursements of their counsel) reasonably incurred by such Underwriters in connection with this Agreement or the offering contemplated hereunder.
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14. Entire Agreement. (a) This Agreement, together with any contemporaneous written agreements and any prior written agreements (to the extent not superseded by this Agreement) that relate to the offering of the Shares, represents the entire agreement between the Company and the Selling Stockholders, on the one hand, and the Underwriters, on the other, with respect to the preparation of any preliminary prospectus, the Time of Sale Prospectus, the Prospectus, the conduct of the offering, and the purchase and sale of the Shares.
(b) The Company and each Selling Stockholder acknowledge that in connection with the offering of the Shares: (i) the Underwriters have acted at arm’s length, are not agents of, and owe no fiduciary duties to, the Company, any of the Selling Stockholders or any other person, (ii) the Underwriters owe the Company and each Selling Stockholder only those duties and obligations set forth in this Agreement, any contemporaneous written agreements and prior written agreements (to the extent not superseded by this Agreement), if any, (iii) the Underwriters may have interests that differ from those of the Company and each Selling Stockholder, and (iv) none of the activities of the Underwriters in connection with the transactions contemplated herein constitutes a recommendation, investment advice, or solicitation of any action by the Underwriters with respect to any entity or natural person. The Company and each Selling Stockholder waive to the full extent permitted by applicable law any claims it may have against the Underwriters arising from an alleged breach of fiduciary duty in connection with the offering of the Shares.
(c) Each Selling Stockholder further acknowledges and agrees that, although the Underwriters may provide certain Selling Stockholders with certain Regulation Best Interest and Form CRS disclosures or other related documentation in connection with the offering, the Underwriters are not making a recommendation to any Selling Stockholder to participate in the offering or sell any Shares at the Purchase Price, and nothing set forth in such disclosures or documentation is intended to suggest that any Underwriter is making such a recommendation.
15. Recognition of the U.S. Special Resolution Regimes. (a) In the event that any Underwriter that is a Covered Entity becomes subject to a proceeding under a U.S. Special Resolution Regime, the transfer from such Underwriter of this Agreement, and any interest and obligation in or under this Agreement, will be effective to the same extent as the transfer would be effective under the U.S. Special Resolution Regime if this Agreement, and any such interest and obligation, were governed by the laws of the United States or a state of the United States.
(b) In the event that any Underwriter that is a Covered Entity or a BHC Act Affiliate of such Underwriter becomes subject to a proceeding under a U.S. Special Resolution Regime, Default Rights under this Agreement that may be exercised against such Underwriter are permitted to be exercised to no greater extent than such Default Rights could be exercised under the U.S. Special Resolution Regime if this Agreement were governed by the laws of the United States or a state of the United States.
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For purposes of this Section a “BHC Act Affiliate” has the meaning assigned to the term “affiliate” in, and shall be interpreted in accordance with, 12 U.S.C. § 1841(k). “Covered Entity” means any of the following: (i) a “covered entity” as that term is defined in, and interpreted in accordance with, 12 C.F.R. § 252.82(b); (ii) a “covered bank” as that term is defined in, and interpreted in accordance with, 12 C.F.R. § 47.3(b); or (iii) a “covered FSI” as that term is defined in, and interpreted in accordance with, 12 C.F.R. § 382.2(b). “Default Right” has the meaning assigned to that term in, and shall be interpreted in accordance with, 12 C.F.R. §§ 252.81, 47.2 or 382.1, as applicable. “U.S. Special Resolution Regime” means each of (i) the Federal Deposit Insurance Act and the regulations promulgated thereunder and (ii) Title II of the Dodd-Frank Wall Street Reform and Consumer Protection Act and the regulations promulgated thereunder.
16. Counterparts. This Agreement may be signed in two or more counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. Counterparts may be delivered via facsimile, electronic mail (including any electronic signature complying with the U.S. federal ESIGN Act of 2000, Uniform Electronic Transactions Act or other applicable law, e.g., www.docusign.com) or other transmission method, and any counterpart so delivered shall be deemed to have been duly and validly delivered and be valid and effective for all purposes.
17. Applicable Law. This Agreement shall be governed by and construed in accordance with the internal laws of the State of New York.
18. Headings. The headings of the sections of this Agreement have been inserted for convenience of reference only and shall not be deemed a part of this Agreement.
19. Notices. All communications hereunder shall be in writing and effective only upon receipt and if to the Underwriters shall be delivered, mailed or sent to the Representatives in care of Morgan Stanley & Co. LLC, 1585 Broadway, New York, New York 10036, Attention: Equity Syndicate Desk, with a copy to the Legal Department, and in care of Goldman Sachs & Co. LLC, 200 West Street, New York, New York 10282-2198, Attention: Equity Syndicate Desk, with a copy to the Legal Department; if to the Company shall be delivered, mailed or sent to Coursera, Inc., 381 East Evelyn Avenue Mountain View, CA 94041, Attention: General Counsel; and if to the Selling Stockholders shall be delivered, mailed or sent to each of the Attorneys-in-Fact named in the Power of Attorney, c/o the Company at the address set forth on the cover of the Registration Statement, Attention: General Counsel with a copy, which shall not constitute notice, to Whalen LLP, 1601 Dove Street, Suite 270, Newport Beach, California 92660.
36
20. Submission to Jurisdiction; Appointment of Agents for Service. (a) The Company and each Selling Stockholder irrevocably submits to the non-exclusive jurisdiction of any New York State or United States Federal court sitting in The City of New York (the “Specified Courts”) over any suit, action or proceeding arising out of or relating to this Agreement, the Time of Sale Prospectus, the Prospectus, the Registration Statement or the offering of the Shares (each, a “Related Proceeding”). The Company and each Selling Stockholder irrevocably waives, to the fullest extent permitted by law, any objection which it may now or hereafter have to the laying of venue of any Related Proceeding brought in such a court and any claim that any such Related Proceeding brought in such a court has been brought in an inconvenient forum. To the extent that the Company or any Selling Stockholder has or hereafter may acquire any immunity (on the grounds of sovereignty or otherwise) from the jurisdiction of any court or from any legal process with respect to itself or its property, the Company or such Selling Stockholder, as the case may be, irrevocably waives, to the fullest extent permitted by law, such immunity in respect of any such suit, action or proceeding.
(b) Each of New Technology Fund SPC Limited Class Q Participating Shares designated as “Alfa pre-IPO-4 Fund Segregated Portfolio” and International Finance Corporation hereby irrevocably appoints each of Jeffrey Maggioncalda, Kenneth Hahn, Anne Cappel and Lara Anthony, with offices at 381 East Evelyn Avenue Mountain View, CA 94041, and any of them, as its agent for service of process in any Related Proceeding and agrees that service of process in any such Related Proceeding may be made upon any of such agents at the office of such agent. Each of such Selling Stockholders waives, to the fullest extent permitted by law, any other requirements of or objections to personal jurisdiction with respect thereto. Each of such Selling Stockholders represents and warrants that each such agent has agreed to act as such Selling Stockholder’s agent for service of process, and each of such Selling Stockholders agrees to take any and all action, including the filing of any and all documents and instruments, that may be necessary to continue such appointment in full force and effect.
21. Judgment Currency. If for the purposes of obtaining judgment in any court it is necessary to convert a sum due hereunder into any currency other than United States dollars, the parties hereto agree, to the fullest extent permitted by law, that the rate of exchange used shall be the rate at which in accordance with normal banking procedures the Underwriters could purchase United States dollars with such other currency in The City of New York on the business day preceding that on which final judgment is given. The obligation of any Selling Stockholder with respect to any sum due from it to any Underwriter or any person controlling any Underwriter shall, notwithstanding any judgment in a currency other than United States dollars, not be discharged until the first business day following receipt by such Underwriter or controlling person of any sum in such other currency, and only to the extent that such Underwriter or controlling person may in accordance with normal banking procedures purchase United States dollars with such other currency. If the United States dollars so purchased are less than the sum originally due to such Underwriter or controlling person hereunder, each Selling Stockholder agrees as a separate obligation and notwithstanding any such judgment, to indemnify such Underwriter or controlling person against such loss. If the United States dollars so purchased are greater than the sum originally due to such Underwriter or controlling person hereunder, such Underwriter or controlling person agrees to pay to the relevant Selling Stockholder(s) an amount equal to the excess of the dollars so purchased over the sum originally due to such Underwriter or controlling person hereunder.
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22. Taxes. If any sum payable by a Selling Stockholder under this Agreement is subject to tax in the hands of an Underwriter or taken into account as a receipt in computing the taxable income of that Underwriter (excluding net income taxes on underwriting commissions payable hereunder), the sum payable to the Underwriter under this Agreement shall be increased to such sum as will ensure that the Underwriter shall be left with the sum it would have had in the absence of such tax.
[Signature pages follow]
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| Very truly yours, | ||
| COURSERA, INC. | ||
| By: | ||
| Name: | ||
| Title: | ||
[Signature Page to Underwriting Agreement]
| The Selling Stockholders named in Schedule I hereto, acting severally | ||
| By: | ||
| Name: Attorney-in Fact | ||
[Signature Page to Underwriting Agreement]
Accepted as of the date hereof
Morgan Stanley & Co. LLC
Goldman Sachs & Co. LLC
Acting severally on behalf of themselves and the
several Underwriters named in Schedule II hereto
| By: | Morgan Stanley & Co. LLC |
| By: | ||
| Name: | ||
| Title: | ||
| By: | Goldman Sachs & Co. LLC | |
| By: | ||
| Name: | ||
| Title: | ||
[Signature Page to Underwriting Agreement]
SCHEDULE I
| Selling Stockholder |
Number of Firm Shares To Be Sold |
|||
| International Finance Corporation |
[•] | |||
| Matthew MacQueen |
[•] | |||
| New Technology Fund SPC Limited Class Q Participating Shares designated as “Alfa pre-IPO-4 Fund Segregated Portfolio” |
[•] | |||
| Nicholas Dellamaggiore |
[•] | |||
| Shun-Yun Lai |
[•] | |||
| Times Internet Inc. |
[•] | |||
|
|
|
|||
| Total: |
||||
|
|
|
|||
I-1
SCHEDULE II
| Underwriter |
Number of Firm Shares To Be Purchased |
|||
| Morgan Stanley & Co. LLC |
[•] | |||
| Goldman Sachs & Co. LLC |
[•] | |||
| Citigroup Global Markets Inc. |
[•] | |||
| UBS Securities LLC |
[•] | |||
| KeyBanc Capital Markets Inc. |
[•] | |||
| Raymond James and Associates, Inc. |
[•] | |||
| Stifel, Nicolaus & Company, Incorporated |
[•] | |||
| Truist Securities, Inc. |
[•] | |||
| William Blair & Company, L.L.C. |
[•] | |||
| D.A. Davidson & Co. |
[•] | |||
| Needham & Company, LLC |
[•] | |||
| Loop Capital Markets LLC |
[•] | |||
| Telsey Advisory Group LLC |
[•] | |||
|
|
|
|||
| Total: |
||||
|
|
|
|||
II-1
SCHEDULE III
Time of Sale Prospectus
| 1. | Preliminary Prospectus issued [•], 2021 |
| 2. | [to list all free writing prospectuses filed by the Company under Rule 433(d) of the Securities Act] |
| 3. | [free writing prospectus containing a description of terms that does not reflect final terms, if the Time of Sale Prospectus does not include a final term sheet] |
| 4. | [orally communicated pricing information such as price per share and size of offering if a Rule 134 pricing term sheet is used at the time of sale instead of a pricing term sheet filed by the Company under Rule 433(d) as a free writing prospectus] |
III-1
SCHEDULE IV
Written Testing-the-Waters Communications
| 1. | Testing-the-Waters presentation dated January 31, 2021 |
IV-1
EXHIBIT A
FORM OF LOCK-UP AGREEMENT
, 2021
Morgan Stanley & Co. LLC
Goldman Sachs & Co. LLC
As Representatives of the several Underwriters
listed on Schedule II to the
Underwriting Agreement referred to below
c/o Morgan Stanley & Co.
LLC 1585 Broadway
New York, New York 10036
c/o Goldman Sachs & Co. LLC
200 West Street
New York, New York 10282
Ladies and Gentlemen:
The undersigned understands that Morgan Stanley & Co. LLC (“Morgan Stanley”) and Goldman Sachs & Co. LLC (“Goldman Sachs,” and together with Morgan Stanley, the “Representatives”) propose to enter into an Underwriting Agreement (the “Underwriting Agreement”) with Coursera, Inc., a Delaware corporation (the “Company”), and the selling stockholders listed on Schedule I of the Underwriting Agreement (the “Selling Stockholders”), providing for the public offering (the “Public Offering”) by the several Underwriters listed on Schedule II to the Underwriting Agreement, including the Representatives (the “Underwriters”) of shares (the “Shares”) of the common stock, par value $0.00001 per share, of the Company (the “Common Stock”).
To induce the Underwriters that may participate in the Public Offering to continue their efforts in connection with the Public Offering, the undersigned hereby agrees that, without the prior written consent of each of Morgan Stanley and Goldman Sachs on behalf of the Underwriters, he, she or it will not, and will not publicly disclose an intention to, during the period commencing on the date hereof and ending on and including the second Trading Day (as defined below) after the Company publicly announces its earnings (which for this purpose shall include reporting of financial results on a press release or a Form 10-Q but shall not include reporting of “flash” numbers or preliminary or partial earnings) for the second completed quarterly period following the most recent period for which financial statements (which, for the avoidance of doubt, shall not include “flash” numbers) are included in the final prospectus (the “Prospectus”) relating to the Public Offering (the “Restricted Period”), (1) offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, lend or otherwise transfer or dispose of, directly or indirectly, any shares of Common Stock beneficially owned (as such term is
A-1
used in Rule 13d-3 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) by the undersigned or any other securities so owned convertible into or exercisable or exchangeable for Common Stock (collectively, the “Other Securities”) or (2) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of the Common Stock or such Other Securities, whether any such transaction described in clause (1) or (2) above is to be settled by delivery of Common Stock or such Other Securities, in cash or otherwise. The undersigned acknowledges and agrees that the foregoing precludes the undersigned from engaging in any hedging or other transactions designed or intended, or which could reasonably be expected to lead to or result in, a sale or disposition of any shares of Common Stock or securities convertible into or exercisable or exchangeable for Common Stock, even if any such sale or disposition transaction or transactions would be made or executed by or on behalf of someone other than the undersigned. Notwithstanding the foregoing, and for the avoidance of doubt, in no event shall the Restricted Period exceed 180 calendar days after the effective date of the registration statement of which the Prospectus is a part.
Notwithstanding the foregoing,
(1) if the undersigned is an employee of the Company or its subsidiaries (including (A) a current contractor or consultant of the Company or its subsidiaries, (B) a former employee of the Company or its subsidiaries, or (C) a former contractor or consultant of the Company or its subsidiaries, but excluding in all such cases (x) any person who is a party to that certain Amended and Restated Investors’ Rights Agreement, dated as of July 7, 2020, by and among the Company and the investors named therein, as amended from time to time (the “Investors’ Rights Agreement”), and (y) any director or “officer” of the Company (as defined in Rule 16a-1(f) under the Exchange Act)) (each such person, excluding those described in clauses (x) and (y) above, an “Employee Stockholder”), subject to compliance with applicable securities laws including without limitation Rule 144 promulgated under the Securities Act of 1933, as amended (the “Securities Act”), the undersigned may sell in the public market beginning at the commencement of the fifth Trading Day after the Company publicly announces its earnings (which for this purpose shall include reporting of financial results on a press release or a Form 10-Q but shall not include reporting of “flash” numbers or preliminary or partial earnings) for the first completed quarterly period following the most recent period for which financial statements (which, for the avoidance of doubt, shall not include “flash” numbers) are included in the Prospectus (the “First Earnings Release”), a number of shares of Common Stock not in excess of 25% of the Common Stock and Other Securities owned by the undersigned on the date of this agreement (where “Other Securities” shall include only (A) vested restricted stock units and (B) exercisable stock options (collectively, “Included Securities”)), calculated before giving effect to any sales of Common Stock by the undersigned to the Underwriters pursuant to the Underwriting Agreement; where “Trading Day” means a day on which the New York Stock Exchange and the Nasdaq Stock Market are open for the buying and selling of securities;
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(2) subject to compliance with applicable securities laws including without limitation Rule 144 promulgated under the Securities Act, if the undersigned is not an Employee Stockholder, the undersigned may sell in the public market beginning at the commencement of the fifth Trading Day after the First Earnings Release a number of shares of Common Stock not in excess of 25% of the Common Stock and Included Securities owned by the undersigned on the date of this agreement, calculated before giving effect to any sales of Common Stock by the undersigned to the Underwriters pursuant to the Underwriting Agreement; provided that the last reported closing price of the Common Stock on the exchange on which the Common Stock is listed is at least 33% greater than the initial public offering price per share set forth on the cover page of the Prospectus for any 10 Trading Days out of the 15-consecutive full Trading Day period ending on the closing of the second full Trading Day immediately following the First Earnings Release;
provided, that, on or before the third Trading Day following the First Earnings Release, the Company shall have issued a press release announcing the release (if any) pursuant to clause (2) by the Representatives of each director or “officer” of the Company (as defined in Rule 16a-1(f) under the Exchange Act) from the restrictions hereunder, which press release shall be in compliance with Rule 5131(d) of the Financial Industry Regulatory Authority.
Notwithstanding the foregoing, in addition to, and not by way of limitation of, any transfers by the undersigned that are permitted pursuant to paragraphs (1)-(2) above, the undersigned may transfer the undersigned’s shares of Common Stock or Other Securities in the following transactions:
(a) sales of shares of Common Stock by the undersigned to the Underwriters pursuant to the Underwriting Agreement;
(b) transactions relating to shares of Common Stock or Other Securities acquired in open market transactions after the completion of the Public Offering, provided that no filing under Section 16(a) of the Exchange Act shall be required or shall be voluntarily made during the Restricted Period in connection with subsequent sales of Common Stock or Other Securities acquired in such open market transactions;
(c) transfers of shares of Common Stock or any security convertible into Common Stock as a bona fide gift, or, upon the death of the undersigned, by will or intestacy;
(d) distributions of shares of Common Stock or any security convertible into Common Stock to limited partners, members or stockholders of the undersigned or to any corporation, partnership or other entity that controls, is controlled by or is under common control with the undersigned;
(e) facilitating the establishment of a trading plan on behalf of a stockholder, officer or director of the Company pursuant to Rule 10b5-1 under the Exchange Act for the transfer of shares of Common Stock, provided that (i) such plan does not provide for the transfer of Common Stock during the Restricted Period (other than as may be
A-3
permitted pursuant to paragraphs (1)-(2) above) and (ii) to the extent a public announcement or filing under the Exchange Act, if any, is required of or voluntarily made by or on behalf of the undersigned or the Company regarding the establishment of such plan, such announcement or filing shall include a statement to the effect that no transfer of shares of Common Stock may be made under such plan during the Restricted Period;
(f) the transfer of Common Stock or Other Securities that occurs by operation of law pursuant to a qualified domestic order in connection with a divorce settlement or other court order;
(g) a disposition to any trust the beneficiaries of which are the undersigned and/or immediate family members of the undersigned (for purposes of this agreement, except as explicitly provided otherwise herein, “immediate family” shall mean any spouse or domestic partner and relationship by blood, current or former marriage or adoption, not more remote than first cousin), or, if the undersigned is a trust, to any beneficiaries of the undersigned;
(h) transfers to an immediate family member of the undersigned or a trust formed for the benefit of an immediate family member of the undersigned;
(i) a transfer to the Company upon a vesting event of the Company’s restricted stock units or upon the exercise of options to purchase the Company’s securities on a “cashless” or “net exercise” basis (in each case to the extent permitted by the instruments representing such options or other securities), so long as such “cashless” exercise or “net exercise” is effected solely by the surrender to the Company of shares subject to outstanding options or other securities and the Company’s cancellation of all or a portion thereof solely in an amount sufficient to pay the exercise price (or the payment of taxes due as a result of such vesting event or exercise); provided that (A) the shares of Common Stock received upon such vesting event or exercise shall continue to be subject to the terms of this agreement and (B) no public announcement or filing under Section 16(a) of the Exchange Act or any other public filing or disclosure shall be made during the Restricted Period, unless such filing is required and clearly indicates in the footnotes thereto that the filing relates to the circumstances described in this clause (i) and no shares were sold by the reporting person; or
(j) the transfer of shares of Common Stock or Other Securities in connection with a bona fide third-party tender offer, merger, consolidation or other similar transaction that is approved by the Board of Directors of the Company, made to all holders of Common Stock, involving a Change of Control (as defined below), provided that in the event that the tender offer, merger, consolidation or other such transaction is not completed, the Common Stock or Other Securities owned by the undersigned shall remain subject to the restrictions contained in this agreement. For the purposes of this clause (j), “Change of Control” means the transfer (whether by tender offer, merger, consolidation or other similar transaction), in one transaction or a series of related transactions, to a person or group of affiliated persons (other than the Underwriters pursuant to the Public Offering) of shares of Common Stock or Other Securities if, after such transfer, such person or group of affiliated persons would hold more than fifty percent (50%) of the outstanding voting securities of the Company (or the surviving entity);
A-4
provided that (A) in the case of any transfer or distribution pursuant to clause (c), (d), (g) or (h), each donee, transferee or distributee shall sign and deliver a lock-up agreement substantially in the form of this agreement; (B) in the case of any transfer or distribution pursuant to clause (d), (g) or (h), no public announcement or other filing under Section 16(a) of the Exchange Act, or any other public filing or disclosure reporting a reduction in beneficial ownership of shares of Common Stock, shall be required or shall be voluntarily made during the Restricted Period; and (C) in the case of any transfer pursuant to clause (c) or (f), no public announcement or filing under Section 16(a) of the Exchange Act, or any other public filing or disclosure, shall be made during the Restricted Period, unless such filing is required and clearly indicates in the footnotes thereto that the transfer is by (1) bona fide gift, will, or intestacy, as applicable, in the case of a transfer pursuant to clause (c), or (2) operation of law, court order, or in connection with a divorce settlement, as the case may be, in the case of a transfer pursuant to clause (f).
In addition, the undersigned agrees that, without the prior written consent of each of Morgan Stanley and Goldman Sachs on behalf of the Underwriters, it will not, during the Restricted Period, make any demand for or exercise any right with respect to the registration of any shares of Common Stock or Other Securities. The undersigned also agrees and consents to the entry of stop transfer instructions with the Company’s transfer agent and registrar against the transfer of the undersigned’s shares of Common Stock except in compliance with the foregoing restrictions.
If the undersigned is an officer or director of the Company, the undersigned further agrees that the foregoing restrictions shall be equally applicable to any issuer-directed Shares the undersigned may purchase in the Public Offering.
If the undersigned is an officer or director of the Company, (i) the Representatives agree that, at least three business days before the effective date of any release or waiver of the foregoing restrictions in connection with a transfer of shares of Common Stock, the Representatives will notify the Company of the impending release or waiver, and (ii) the Company has agreed in the Underwriting Agreement to announce the impending release or waiver by press release through a major news service at least two business days before the effective date of the release or waiver. Any release or waiver granted by Morgan Stanley and Goldman Sachs hereunder to any such officer or director shall only be effective two business days after the publication date of such press release. The provisions of this paragraph will not apply if (a) the release or waiver is effected solely to permit a transfer not for consideration or to an immediately family member as defined in FINRA Rule 5130(i)(5) and (b) the transferee has agreed in writing to be bound by the same terms described in this agreement to the extent and for the duration that such terms remain in effect at the time of the transfer.
The undersigned understands that the Company and the Underwriters are relying upon this agreement in proceeding toward consummation of the Public Offering. The undersigned further understands that this agreement is irrevocable and shall be binding upon the undersigned’s heirs, legal representatives, successors and assigns.
A-5
The undersigned acknowledges and agrees that the Underwriters have not provided any recommendation or investment advice nor have the Underwriters solicited any action from the undersigned with respect to the Public Offering of the Shares and the undersigned has consulted their own legal, accounting, financial, regulatory and tax advisors to the extent deemed appropriate. The undersigned further acknowledges and agrees that, although the Underwriters may provide certain Regulation Best Interest and Form CRS disclosures or other related documentation to you in connection with the Public Offering, the Underwriters are not making a recommendation to you to participate in the Public Offering or sell any Shares at the price determined in the Public Offering, and nothing set forth in such disclosures or documentation is intended to suggest that any Underwriter is making such a recommendation.
Whether or not the Public Offering actually occurs depends on a number of factors, including market conditions. Any Public Offering will only be made pursuant to an Underwriting Agreement, the terms of which are subject to negotiation between the Company and the Underwriters.
Notwithstanding anything herein to the contrary, if (i) the closing of the Public Offering has not occurred prior to September 30, 2021, (ii) the registration statement related to the Public Offering is withdrawn prior to the execution of the Underwriting Agreement, or (iii) the Company notifies the Representatives or the Representatives notify the Company, in either case in writing prior to the execution of the Underwriting Agreement, that the notifying party does not intend to proceed with the Public Offering, this agreement shall automatically terminate and be of no further force or effect.
This agreement shall be governed by and construed in accordance with the laws of the State of New York.
[signature page follows]
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Very truly yours,
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[Signature Page to Lock-Up Agreement]
EXHIBIT B
FORM OF WAIVER OF LOCK-UP
_____________, 2021
[Name and Address of
Officer or Director
Requesting Waiver]
Dear Mr./Ms. [Name]:
This letter is being delivered to you in connection with the offering by Coursera, Inc. (the “Company”) of [•] shares of common stock, $0.00001 par value per share (the “Common Stock”) of the Company and the lock-up agreement dated [•], 2021 (the “Lock-up Agreement”), executed by you in connection with such offering, and your request for a [waiver][release] dated [•], 2021, with respect to [•] shares of Common Stock (the “Shares”).
Morgan Stanley & Co. LLC and Goldman Sachs & Co. LLC hereby agree to [waive][release] the transfer restrictions set forth in the Lock-up Agreement, but only with respect to the Shares, effective [•], 2021; provided, however, that such [waiver][release] is conditioned on the Company announcing the impending [waiver][release] by press release through a major news service at least two business days before effectiveness of such [waiver][release]. This letter will serve as notice to the Company of the impending [waiver][release].
Except as expressly [waived][released] hereby, the Lock-up Agreement shall remain in full force and effect.
| Very truly yours, |
| Morgan Stanley & Co. LLC |
| Goldman Sachs & Co. LLC |
| By: | ||
| Name: | ||
| Title: |
B-1
| By: | ||
| Name: | ||
| Title: | ||
cc: Company
IV-2
FORM OF PRESS RELEASE
Coursera, Inc.
[Date]
Coursera, Inc. (the “Company”) announced today that Morgan Stanley & Co. LLC and Goldman Sachs & Co. LLC, the joint book-running managers in the Company’s recent public sale of [•] shares of its common stock, are [waiving][releasing] a lock-up restriction with respect to [•] shares of the Company’s common stock held by [certain officers or directors][an officer or director] of the Company. The [waiver][release] will take effect on ____, 2021, and the shares may be sold on or after such date.
This press release is not an offer for sale of the securities in the United States or in any other jurisdiction where such offer is prohibited, and such securities may not be offered or sold in the United States absent registration or an exemption from registration under the United States Securities Act of 1933, as amended.
1
Exhibit 3.3
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION OF
COURSERA, INC.
A PUBLIC BENEFIT CORPORATION
Coursera, Inc., a corporation organized and existing under the laws of the State of Delaware under the original name of Dkandu, Inc., hereby certifies as follows:
FIRST: The name of the corporation is Coursera, Inc.
SECOND: The original certificate of incorporation of the corporation was filed with the Secretary of State of the State of Delaware on October 7, 2011 and most recently amended and restated pursuant to an Amended and Restated Certificate of Incorporation filed with the Secretary of State of the State of Delaware on July 6, 2020 (the “Existing Certificate”).
THIRD: Pursuant to Sections 242 and 245 of the General Corporation Law of the State of Delaware, this Amended and Restated Certificate of Incorporation restates, integrates, and further amends the provisions of the Existing Certificate.
FOURTH: The Existing Certificate shall be amended and restated to read in full as follows:
ARTICLE I
The name of the corporation is Coursera, Inc. (the “Corporation”).
ARTICLE II
The registered agent and the address of the registered offices in the State of Delaware is Corporation Service Company, 251 Little Falls Drive, Wilmington, Delaware 19808, New Castle County.
ARTICLE III
The Corporation shall be a public benefit corporation as contemplated by subchapter XV of the General Corporation Law of the State of Delaware (the “DGCL”), as the same may be amended from time to time. Accordingly, it is intended that the business and operations of the Corporation create a material positive impact on society and the environment, taken as a whole. The general purpose of the Corporation is to engage in any lawful act or activity for which corporations, including public benefit corporations, may be organized under the DGCL. The specific public benefit purpose of the Corporation is to provide global access to flexible and affordable high-quality education that supports personal development, career advancement, and economic opportunity.
ARTICLE IV
A. Classes of Stock. The total number of shares of all classes of capital stock that the Corporation shall have authority to issue is Three Hundred Ten Million (310,000,000), of which Three Hundred Million (300,000,000) shares shall be Common Stock, $0.00001 par value per share (the “Common Stock”), and of which Ten Million (10,000,000) shares shall be Preferred Stock, $0.00001 par value per share (the “Preferred Stock”). The number of authorized shares of Common Stock or Preferred Stock may be increased or decreased (but not below the number of shares thereof then outstanding) by the affirmative vote of the holders of a majority of the then outstanding shares of Common Stock, without a vote of the holders of the Preferred Stock, or of any series thereof, unless a vote of any such Preferred Stock holders is required pursuant to the provisions established by the board of directors of the Corporation (the “Board”) in the resolution or resolutions providing for the issue of such Preferred Stock, and if such holders of such Preferred Stock are so entitled to vote thereon, then, except as may otherwise be set forth in the certificate of incorporation of the Corporation, as amended from time to time (this “Certificate” or “Certificate of Incorporation”), the only stockholder approval required shall be the affirmative vote of a majority of the voting power of the Common Stock and the Preferred Stock so entitled to vote, voting together as a single class.
B. Preferred Stock. The Preferred Stock may be issued from time to time in one or more series, as determined by the Board. The Board is expressly authorized to provide for the issue, in one or more series, of all or any of the remaining shares of Preferred Stock and, in the resolution or resolutions providing for such issue, to establish for each such series the number of its shares, the voting powers, full or limited, of the shares of such series, or that such shares shall have no voting powers, and the designations, preferences, and relative participating, optional, or other special rights of the shares of such series, and the qualifications, limitations, or restrictions thereof. The Board is also expressly authorized (unless forbidden in the resolution or resolutions providing for such issue) to increase or decrease (but not below the number of shares of such series then outstanding) the number of shares of any series subsequent to the issuance of shares of that series. In case the number of shares of any such series shall be so decreased, the shares constituting such decrease shall resume the status that they had prior to the adoption of the resolution originally fixing the number of shares of such series. Unless the Board provides to the contrary in the resolution which fixes the designations, preferences, and rights of a series of Preferred Stock, neither the consent by series, or otherwise, of the holders of any outstanding Preferred Stock nor the consent of the holders of any outstanding Common Stock shall be required for the issuance of any new series of Preferred Stock regardless of whether the rights and preferences of the new series of Preferred Stock are senior or superior, in any way, to the outstanding series of Preferred Stock or the Common Stock.
C. Common Stock.
1. Relative Rights of Preferred Stock and Common Stock. All preferences, voting powers, relative participating, optional, or other special rights and privileges, and qualifications, limitations, or restrictions of the Common Stock are expressly made subject and subordinate to those that may be fixed with respect to any shares of the Preferred Stock.
2
2. Voting Rights. Except as otherwise required by law or this Certificate, each holder of Common Stock shall have one vote in respect of each share of stock held by such holder of record on the books of the Corporation. No holder of shares of Common Stock shall have the right to cumulative votes.
3. Dividends. Subject to the preferential rights of the Preferred Stock and except as otherwise required by law or this Certificate, the holders of shares of Common Stock shall be entitled to receive dividends, when, as, and if declared by the Board, out of the assets of the Corporation which are by law available therefor.
4. Dissolution, Liquidation, or Winding Up. In the event of any dissolution, liquidation, or winding up of the affairs of the Corporation, after distribution in full of the preferential amounts, if any, to be distributed to the holders of shares of the Preferred Stock, holders of Common Stock shall be entitled, except as otherwise required by law or this Certificate, to receive all of the remaining assets of the Corporation of whatever kind available for distribution to stockholders ratably in proportion to the number of shares of Common Stock held by them respectively.
5. Consideration for Shares. The Common Stock authorized by this Certificate shall be issued for such consideration as shall be fixed, from time to time, by the Board.
ARTICLE V
The following provisions are inserted for the management of the business and the conduct of the affairs of the Corporation, and for further definition, limitation, and regulation of the powers of the Corporation and of its directors and stockholders:
A. Board of Directors. The business and affairs of the Corporation shall be managed by or under the direction of the board of directors. In addition to the powers and authority expressly conferred upon them by statute or by this Certificate of Incorporation or the bylaws of the Corporation (the “Bylaws”), the directors are hereby empowered to exercise all such powers and do all such acts and things as may be exercised or done by the Corporation.
B. Election of Directors. The directors of the Corporation need not be elected by written ballot unless the Bylaws so provide.
C. Action by Stockholders. Subject to the rights of the holders of any series of Preferred Stock, any action required or permitted to be taken by the stockholders of the Corporation must be effected at a duly called annual or special meeting of stockholders of the Corporation and may not be effected by any consent in writing by such stockholders.
D. Special Meetings of Stockholders. Special meetings of stockholders of the Corporation may be called only by the Board acting pursuant to a resolution adopted by a majority of the Whole Board or by the Chairman of the Board, the Chief Executive Officer, or the President of the Corporation. For purposes of this Certificate of Incorporation, the term “Whole Board” shall mean the total number of authorized directors whether or not there exist any vacancies in previously authorized directorships.
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E. Annual Meeting of Stockholders. An annual meeting of stockholders, for the election of directors to succeed those whose terms expire and for the transaction of such other business as may properly come before the meeting, shall be held at such date and time as the Board shall fix.
ARTICLE VI
A. Number and Terms of Directors. Subject to the rights of the holders of any series of Preferred Stock to elect additional directors under specified circumstances, the number of directors shall be fixed from time to time exclusively by the Board pursuant to a resolution adopted by a majority of the Whole Board. The directors, other than those who may be elected by the holders of any series of Preferred Stock under specified circumstances, shall be divided into three classes, with the term of office of the first class to expire at the Corporation’s first annual meeting of stockholders following the adoption of this Article VI (the “Effective Time”), the term of office of the second class to expire at the Corporation’s second annual meeting of stockholders following the Effective Time, and the term of office of the third class to expire at the Corporation’s third annual meeting of stockholders following the Effective Time, with each director to hold office until his or her successor shall have been duly elected and qualified. The Board is authorized to assign members of the Board already in office at the Effective Time to such classes as it determines. At each annual meeting of stockholders, (i) directors elected to succeed those directors whose terms expire shall be elected for a term of office to expire at the third succeeding annual meeting of stockholders after their election, with each director to hold office until his or her successor shall have been duly elected and qualified; and (ii) if authorized by a resolution of the Board, directors may be elected to fill any vacancy on the Board, regardless of how such vacancy shall have been created.
B. Quorum. A majority of the Whole Board shall constitute a quorum for all purposes at any meeting of the Board, and, except as otherwise expressly required by law or by this Certificate of Incorporation, all matters shall be determined by the affirmative vote of a majority of the directors present at any meeting at which a quorum is present.
C. Board Vacancies. Subject to the rights of the holders of any series of Preferred Stock then outstanding, newly created directorships resulting from any increase in the authorized number of directors or any vacancies in the Board resulting from death, resignation, disqualification, removal from office, or other cause shall, unless otherwise required by law or by resolution of the Board, be filled only by a majority vote of the directors then in office, though less than a quorum (and not by stockholders), and directors so chosen shall serve for a term expiring at the annual meeting of stockholders at which the term of office of the class to which they have been chosen expires, with each director to hold office until his or her successor shall have been duly elected and qualified. No decrease in the authorized number of directors shall shorten the term of any incumbent director.
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D. Notice. Advance notice of stockholder nominations for the election of directors and of business to be brought by stockholders before any meeting of the stockholders of the Corporation shall be given in the manner provided in the Bylaws.
E. Removal. Subject to the rights of the holders of any series of Preferred Stock then outstanding, any director, or the entire Board, may be removed from office at any time, but only for cause and only by the affirmative vote of the holders of at least sixty-six and two-thirds percent (66-2/3%) of the voting power of all of the then-outstanding shares of capital stock of the Corporation then entitled to vote at an election of directors, voting together as a single class.
ARTICLE VII
The Board is expressly empowered to adopt, amend, or repeal bylaws of the Corporation. Any adoption, amendment, or repeal of the Bylaws by the Board shall require the approval of a majority of the Whole Board. The stockholders shall also have power to adopt, amend, or repeal the Bylaws; provided, however, that, in addition to any vote of the holders of any class or series of stock of the Corporation required by law or by this Certificate of Incorporation, the affirmative vote of the holders of at least sixty-six and two-thirds percent (66-2/3%) of the voting power of all of the then outstanding shares of the capital stock of the Corporation entitled to vote thereon, voting together as a single class, shall be required to adopt, amend, or repeal any provision of the Bylaws.
ARTICLE VIII
A. Limitation on Liability. To the fullest extent permitted by the DGCL, as the same exists or as may hereafter be amended (including, but not limited to Section 102(b)(7) of the DGCL), a director of the Corporation shall not be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director. If the DGCL hereafter is amended to further eliminate or limit the liability of directors, then the liability of a director of the Corporation, in addition to the limitation on personal liability provided herein, shall be limited to the fullest extent permitted by the amended DGCL. Any repeal or modification of this paragraph by the stockholders of the Corporation shall be prospective only and shall not adversely affect any limitation on the personal liability of a director of the Corporation existing at the time of such repeal or modification.
B. Indemnification. To the fullest extent permitted by applicable law, the Corporation is authorized to provide indemnification of (and advancement of expenses to) directors, officers, employees, and agents of the Corporation (and any other persons to which DGCL permits the Corporation to provide indemnification) through Bylaw provisions, agreements with such persons, vote of stockholders or disinterested directors, or otherwise.
C. Repeal and Modification. Any repeal or modification of the foregoing provisions of this Article VIII shall not adversely affect any right or protection existing hereunder immediately prior to such repeal or modification.
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ARTICLE IX
A. Exclusive Forum; Delaware Chancery Court. To the fullest extent permitted by law, and unless the Corporation consents in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware (or, if that court lacks subject matter jurisdiction, another federal or state court situated in the State of Delaware), shall be the sole and exclusive forum for (a) any derivative action or proceeding brought in the name or right of the Corporation or on its behalf, (b) any action or proceeding asserting a claim for breach of any fiduciary duty owed by any director, officer, employee, agent, or stockholder of the Corporation to the Corporation or the Corporation’s stockholders, (c) any action or proceeding arising or asserting a claim arising pursuant to any provision of the DGCL or any provision of this Certificate or the Bylaws, (d) any action or proceeding asserting a claim against a stockholder of the Corporation, or (e) any action or proceeding asserting a claim governed by the internal affairs doctrine, including, without limitation, any action to interpret, apply, enforce, or determine the validity of this Certificate or the Bylaws. Any person or entity purchasing or otherwise acquiring any interest in shares of capital stock of the Corporation shall be deemed to have notice of and consented to the provisions of this section.
B. Exclusive Forum; Federal District Courts. Unless the Corporation consents in writing to the selection of an alternative forum, the federal district courts of the United States shall, to the fullest extent permitted by law, be the sole and exclusive forum for the resolution of any complaint asserting a cause of action under the Securities Act of 1933. Any person or entity purchasing or otherwise acquiring any interest in shares of capital stock of the Corporation shall be deemed to have notice of and consented to the provisions of this section. Failure to enforce the provisions contained in this Article IX would cause the Corporation irreparable harm, and the Corporation shall be entitled to equitable relief, including injunctive relief and specific performance, to enforce the foregoing provisions.
ARTICLE X
The affirmative vote of the holders of at least sixty-six and two-thirds percent (66-2/3%) of the voting power of the shares of the capital stock of the Corporation entitled to vote generally in the election of directors, voting together as a single class, shall be required to amend in any respect or repeal this Article X or any of Articles V, VI, VII, VIII, or IX.
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IN WITNESS WHEREOF, the Corporation has caused this Certificate to be signed by its Chief Executive Officer this ___ day of __________, 2021.
| COURSERA, INC. | ||
| By: |
| |
| Jeff Maggioncalda, Chief Executive Officer | ||
Exhibit 5.1
PILLSBURY WINTHROP SHAW PITTMAN LLP
2550 Hanover Street, Palo Alto, CA 94304
March 22, 2021
Coursera, Inc.
381 East Evelyn Avenue
Mountain View, California 94041
| Re: | Registration Statement on Form S-1 |
Ladies and Gentlemen:
We are acting as counsel for Coursera, Inc., a Delaware corporation (the “Company”), in connection with the Registration Statement on Form S-1 (Registration No. 333-253932) relating to the registration under the Securities Act of 1933 (the “Act”) of 18,089,500 shares of common stock, $0.00001 par value per share (the “Common Stock”), of the Company, of which 17,024,276 authorized but heretofore unissued shares (including 2,359,500 shares subject to the underwriters’ over-allotment option) are to be offered and sold by the Company and 1,065,224 shares are to be offered and sold by certain stockholders of the Company (the “Selling Stockholders”). (Such Registration Statement, as amended, and including any registration statement related thereto and filed pursuant to Rule 462(b) under the Act (a “Rule 462(b) registration statement”) is herein referred to as the “Registration Statement.”)
We have reviewed and are familiar with such corporate proceedings and other matters as we have considered relevant or necessary for the opinions expressed in this letter. Based upon the foregoing, we are of the opinion that (i) the shares of Common Stock to be offered and sold by the Company (including any shares of Common Stock registered pursuant to a Rule 462(b) registration statement) have been duly authorized and, when issued and sold by the Company in the manner described in the Registration Statement and in accordance with the resolutions adopted by the Board of Directors of the Company, will be validly issued, fully paid and nonassessable, and (ii) the shares of Common Stock to be offered and sold by the Selling Stockholders have been duly authorized and validly issued and are fully paid and nonassessable. The opinions set forth in this letter are limited to the General Corporation Law of the State of Delaware, as in effect on the date hereof.
We hereby consent to the filing of this opinion letter as Exhibit 5.1 to the Registration Statement and to the use of our name under the caption “Legal Matters” in the Registration Statement and in the Prospectus included therein. In giving this consent, we do not thereby admit that we are within the category of persons whose consent is required under Section 7 of the Act or the rules and regulations of the Securities and Exchange Commission promulgated thereunder.
Very truly yours,
/s/ Pillsbury Winthrop Shaw Pittman LLP
Exhibit 10.5
COURSERA, INC.
2021 STOCK INCENTIVE PLAN
(Adopted by the Board of Directors on February 17, 2021)
(Approved by the Stockholders on March 2, 2021)
(Effective on , 2021)
TABLE OF CONTENTS
| Page | ||||||
| SECTION 1. |
ESTABLISHMENT AND PURPOSE | 1 | ||||
| SECTION 2. |
DEFINITIONS | 1 | ||||
| (a) |
“Affiliate” | 1 | ||||
| (b) |
“Award” | 1 | ||||
| (c) |
“Award Agreement” | 1 | ||||
| (d) |
“Board of Directors” or “Board” | 1 | ||||
| (e) |
“Cash-Based Award” | 1 | ||||
| (f) |
“Change in Control” | 1 | ||||
| (g) |
“Code” | 3 | ||||
| (h) |
“Committee” | 3 | ||||
| (i) |
“Company” | 3 | ||||
| (j) |
“Consultant” | 3 | ||||
| (k) |
“Disability” | 3 | ||||
| (l) |
“Employee” | 3 | ||||
| (m) |
“Exchange Act” | 3 | ||||
| (n) |
“Exercise Price” | 3 | ||||
| (o) |
“Fair Market Value” | 3 | ||||
| (p) |
“ISO” | 4 | ||||
| (q) |
“Nonstatutory Option” or “NSO” | 4 | ||||
| (r) |
“Option” | 4 | ||||
| (s) |
“Outside Director” | 4 | ||||
| (t) |
“Parent” | 4 | ||||
| (u) |
“Participant” | 4 | ||||
| (v) |
“Plan” | 4 | ||||
| (w) |
“Predecessor Plans” | 4 | ||||
| (x) |
“Purchase Price” | 4 | ||||
| (y) |
“Restricted Share” | 4 | ||||
| (z) |
“Returning Shares” | 4 | ||||
| (aa) |
“SAR” | 5 | ||||
| (bb) |
“Section 409A” | 5 | ||||
COURSERA, INC.
2021 STOCK INCENTIVE PLAN
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| (cc) |
“Securities Act” | 5 | ||||
| (dd) |
“Service” | 5 | ||||
| (ee) |
“Share” | 5 | ||||
| (ff) |
“Stock” | 5 | ||||
| (gg) |
“Stock Unit” | 5 | ||||
| (hh) |
“Subsidiary” | 5 | ||||
| SECTION 3. |
ADMINISTRATION | 5 | ||||
| (a) |
Committee Composition | 5 | ||||
| (b) |
Committee Appointment | 6 | ||||
| (c) |
Committee Procedures | 6 | ||||
| (d) |
Committee Responsibilities | 6 | ||||
| SECTION 4. |
ELIGIBILITY | 7 | ||||
| (a) |
General Rule | 7 | ||||
| (b) |
Ten-Percent Stockholders | 7 | ||||
| (c) |
Attribution Rules | 8 | ||||
| (d) |
Outstanding Stock | 8 | ||||
| SECTION 5. |
STOCK SUBJECT TO PLAN | 8 | ||||
| (a) |
Basic Limitation | 8 | ||||
| (b) |
Additional Shares | 8 | ||||
| (c) |
Substitution and Assumption of Awards | 9 | ||||
| (d) |
Grants to Outside Directors | 9 | ||||
| SECTION 6. |
RESTRICTED SHARES | 9 | ||||
| (a) |
Restricted Share Award Agreement | 9 | ||||
| (b) |
Payment for Awards | 9 | ||||
| (c) |
Vesting | 9 | ||||
| (d) |
Voting and Dividend Rights | 9 | ||||
| (e) |
Restrictions on Transfer of Shares | 10 | ||||
| SECTION 7. |
TERMS AND CONDITIONS OF OPTIONS | 10 | ||||
| (a) |
Stock Option Award Agreement | 10 | ||||
| (b) |
Number of Shares | 10 | ||||
COURSERA, INC.
2021 STOCK INCENTIVE PLAN
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| (c) |
Exercise Price | 10 | ||||
| (d) |
Withholding Taxes | 10 | ||||
| (e) |
Exercisability and Term | 11 | ||||
| (f) |
Exercise of Options | 11 | ||||
| (g) |
Effect of Change in Control | 11 | ||||
| (h) |
No Rights as a Stockholder | 11 | ||||
| (i) |
Modification, Extension and Renewal of Options | 11 | ||||
| (j) |
Restrictions on Transfer of Shares | 12 | ||||
| (k) |
Buyout Provisions | 12 | ||||
| SECTION 8. |
PAYMENT FOR SHARES | 12 | ||||
| (a) |
General Rule | 12 | ||||
| (b) |
Surrender of Stock | 12 | ||||
| (c) |
Services Rendered | 12 | ||||
| (d) |
Cashless Exercise | 12 | ||||
| (e) |
Exercise/Pledge | 12 | ||||
| (f) |
Net Exercise | 12 | ||||
| (g) |
Promissory Note | 13 | ||||
| (h) |
Other Forms of Payment | 13 | ||||
| (i) |
Limitations under Applicable Law | 13 | ||||
| SECTION 9. |
STOCK APPRECIATION RIGHTS | 13 | ||||
| (a) |
SAR Award Agreement | 13 | ||||
| (b) |
Number of Shares | 13 | ||||
| (c) |
Exercise Price | 13 | ||||
| (d) |
Exercisability and Term | 13 | ||||
| (e) |
Effect of Change in Control | 14 | ||||
| (f) |
Exercise of SARs | 14 | ||||
| (g) |
Modification, Extension or Assumption of SARs | 14 | ||||
| (h) |
Buyout Provisions | 14 | ||||
| SECTION 10. |
STOCK UNITS | 14 | ||||
| (a) |
Stock Unit Award Agreement | 14 | ||||
| (b) |
Payment for Awards | 14 | ||||
COURSERA, INC.
2021 STOCK INCENTIVE PLAN
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| (c) |
Vesting Conditions | 14 | ||||
| (d) |
Voting and Dividend Rights | 14 | ||||
| (e) |
Form and Time of Settlement of Stock Units | 15 | ||||
| (f) |
Death of Participant | 15 | ||||
| (g) |
Creditors’ Rights | 15 | ||||
| SECTION 11. |
CASH-BASED AWARDS | 15 | ||||
| SECTION 12. |
ADJUSTMENT OF SHARES | 16 | ||||
| (a) |
Adjustments | 16 | ||||
| (b) |
Dissolution or Liquidation | 16 | ||||
| (c) |
Mergers or Reorganizations | 16 | ||||
| (d) |
Reservation of Rights | 17 | ||||
| SECTION 13. |
DEFERRAL OF AWARDS | 17 | ||||
| (a) |
Committee Powers | 17 | ||||
| (b) |
General Rules | 18 | ||||
| SECTION 14. |
AWARDS UNDER OTHER PLANS | 18 | ||||
| SECTION 15. |
PAYMENT OF DIRECTOR’S FEES IN SECURITIES | 18 | ||||
| (a) |
Effective Date | 18 | ||||
| (b) |
Elections to Receive NSOs, SARs, Restricted Shares, or Stock Units | 18 | ||||
| (c) |
Number and Terms of NSOs, SARs, Restricted Shares or Stock Units | 18 | ||||
| SECTION 16. |
LEGAL AND REGULATORY REQUIREMENTS | 19 | ||||
| SECTION 17. |
TAXES | 19 | ||||
| (a) |
Withholding Taxes | 19 | ||||
| (b) |
Share Withholding | 19 | ||||
| (c) |
Section 409A | 19 | ||||
| SECTION 18. |
TRANSFERABILITY | 19 | ||||
| SECTION 19. |
PERFORMANCE BASED AWARDS | 20 | ||||
| SECTION 20. |
NO EMPLOYMENT RIGHTS | 20 | ||||
| SECTION 21. |
DURATION AND AMENDMENTS | 20 | ||||
| (a) |
Term of the Plan | 20 | ||||
COURSERA, INC.
2021 STOCK INCENTIVE PLAN
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| (b) |
Right to Amend the Plan | 20 | ||||
| (c) |
Effect of Termination | 20 | ||||
| SECTION 22. |
AWARDS TO NON-U.S. PARTICIPANTS | 20 | ||||
| SECTION 23. |
GOVERNING LAW | 21 | ||||
| SECTION 24. |
SUCCESSORS AND ASSIGNS | 21 | ||||
| SECTION 25. |
EXECUTION | 21 | ||||
COURSERA, INC.
2021 STOCK INCENTIVE PLAN
v
COURSERA, INC.
2021 STOCK INCENTIVE PLAN
SECTION 1.ESTABLISHMENT AND PURPOSE.
This Coursera, Inc. Stock Incentive Plan (the “Plan”) was adopted by the Board of Directors on February 17, 2021 and shall be effective on , 2021 (the “Effective Date”). The Plan’s purpose is to attract, retain, incent, and reward top talent through stock ownership to improve operating and financial performance and strengthen the mutuality of interest between eligible service providers and stockholders.
SECTION 2.DEFINITIONS.
(a) “Affiliate” means any entity other than a Subsidiary, if the Company and/or one or more Subsidiaries own not less than fifty percent (50%) of such entity.
(b) “Award” means any award of an Option, a SAR, a Restricted Share, a Stock Unit or a Cash-Based Award under the Plan.
(c) “Award Agreement” means the agreement between the Company and the recipient of an Award which contains the terms, conditions and restrictions pertaining to such Award.
(d) “Board of Directors” or “Board” means the Board of Directors of the Company, as constituted from time to time.
(e) “Cash-Based Award” means an Award that entitles the Participant to receive a cash-denominated payment.
(f) “Change in Control” means the occurrence of any of the following events:
| (i) | A change in the composition of the Board occurs, as a result of which fewer than one-half of the incumbent directors are directors who either: |
| (A) | Had been directors of the Company on the “look-back date” (as defined below) (the “original directors”); or |
| (B) | Were elected, or nominated for election, to the Board with the affirmative votes of at least a majority of the aggregate of the original directors who were still in office at the time of the election or nomination and the directors whose election or nomination was previously so approved (the “continuing directors”); |
provided, however, that for this purpose, the “original directors” and “continuing directors” shall not include any individual whose initial assumption of office occurred as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents, by or on behalf of a person other than the Board;
COURSERA, INC.
2021 STOCK INCENTIVE PLAN
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| (ii) | Any “person” (as defined below) who by the acquisition or aggregation of securities, is or becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing fifty percent (50%) or more of the combined voting power of the Company’s then outstanding securities ordinarily (and apart from rights accruing under special circumstances) having the right to vote at elections of directors (the “Base Capital Stock”); except that any change in the relative beneficial ownership of the Company’s securities by any person resulting solely from a reduction in the aggregate number of outstanding Shares of Base Capital Stock, and any decrease thereafter in such person’s ownership of securities, shall be disregarded until such person increases in any manner, directly or indirectly, such person’s beneficial ownership of any securities of the Company; |
| (iii) | The consummation of a merger or consolidation of the Company or a Subsidiary of the Company with or into another entity or any other corporate reorganization, if persons who were not stockholders of the Company immediately prior to such merger, consolidation or other reorganization own immediately after such merger, consolidation or other reorganization fifty percent (50%) or more of the voting power of the outstanding securities of each of (A) the Company (or its successor) and (B) any direct or indirect parent corporation of the Company (or its successor); or |
| (iv) | The sale, transfer, or other disposition of all or substantially all of the Company’s assets. |
For purposes of subsection (f)(i) above, the term “look-back” date means the later of (1) the Effective Date and (2) the date that is twenty-four (24) months prior to the date of the event that may constitute a Change in Control.
For purposes of subsection (f)(ii) above, the term “person” shall have the same meaning as when used in Sections 13(d) and 14(d) of the Exchange Act, but shall exclude (1) a trustee or other fiduciary holding securities under an employee benefit plan maintained by the Company or a Parent or Subsidiary and (2) a corporation owned directly or indirectly by the stockholders of the Company in substantially the same proportions as their ownership of the Stock.
Any other provision of this Section 2(f) notwithstanding, a transaction shall not constitute a Change in Control if its sole purpose is to change the state of the Company’s incorporation or to create a holding company that will be owned in substantially the same proportions by the persons who held the Company’s securities immediately before such transaction, and a Change in Control shall not be deemed to occur if the Company files a registration statement with the United States Securities and Exchange Commission in connection with an initial or secondary public offering of securities or debt of the Company to the public.
COURSERA, INC.
2021 STOCK INCENTIVE PLAN
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(g) “Code” means the United States Internal Revenue Code of 1986, as amended, and the rules and regulations promulgated thereunder.
(h) “Committee” means the Leadership, Diversity, Equity, Inclusion and Compensation Committee as designated by the Board, which is authorized to administer the Plan, as described in Section 3 hereof.
(i) “Company” means Coursera, Inc., a Delaware corporation, including any successor thereto.
(j) “Consultant” means an individual who is a consultant or advisor and who provides bona fide services to the Company, a Parent, a Subsidiary, or an Affiliate as an independent contractor (not including service as a member of the Board) or a member of the Board of a Parent or a Subsidiary, in each case who is not an Employee.
(k) “Disability” means any permanent and total disability as defined by Section 22(e)(3) of the Code.
(l) “Employee” means any individual who is a common-law employee of the Company, a Parent, a Subsidiary, or an Affiliate.
(m) “Exchange Act” means the United States Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.
(n) “Exercise Price” means, in the case of an Option, the amount for which one Share may be purchased upon exercise of such Option, as specified in the applicable Stock Option Agreement. “Exercise Price” means, in the case of a SAR, an amount, as specified in the applicable SAR Award Agreement, which is subtracted from the Fair Market Value of one Share in determining the amount payable upon exercise of such SAR.
(o) “Fair Market Value” with respect to a Share, means the market price of one Share, determined by the Committee as follows:
| (i) | If the Stock was traded over-the-counter on the date in question, then the Fair Market Value shall be equal to the last transaction price quoted for such date by the OTC Bulletin Board or, if not so quoted, shall be equal to the mean between the last reported representative bid and asked prices quoted for such date by the principal automated inter-dealer quotation system on which the Stock is quoted or, if the Stock is not quoted on any such system, by the Pink Quote system; |
| (ii) | If the Stock was traded on any established stock exchange (such as the New York Stock Exchange, The Nasdaq Global Market or The Nasdaq Global Select Market) or national market system on the date in question, then the Fair Market Value shall be equal to the closing price reported for such date by the applicable exchange or system; or |
COURSERA, INC.
2021 STOCK INCENTIVE PLAN
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| (iii) | If none of the foregoing provisions is applicable, then the Fair Market Value shall be determined by the Committee in good faith on such basis as it deems appropriate. |
In all cases, the determination of Fair Market Value by the Committee shall be conclusive and binding on all persons.
(p) “ISO” means an employee incentive stock option described in Section 422 of the Code.
(q) “Nonstatutory Option” or “NSO” means an employee stock option that is not an ISO.
(r) “Option” means an ISO or NSO granted under the Plan and entitling the holder to purchase Shares.
(s) “Outside Director” means a member of the Board who is not a common-law employee of the Company, a Parent or a Subsidiary.
(t) “Parent” means any corporation (other than the Company) in an unbroken chain of corporations ending with the Company, if each of the corporations other than the Company owns stock possessing fifty percent (50%) or more of the total combined voting power of all classes of stock in one of the other corporations in such chain. A corporation that attains the status of a Parent on a date after the adoption of the Plan shall be a Parent commencing as of such date.
(u) “Participant” means a person who holds an Award.
(v) “Plan” means this 2021 Stock Incentive Plan of Coursera, Inc., as amended from time to time.
(w) “Predecessor Plans” means the Coursera, Inc. 2014 Executive Stock Incentive Plan, as amended and restated, and the Coursera, Inc. Stock Incentive Plan, as amended and restated.
(x) “Purchase Price” means the consideration for which one Share may be acquired under the Plan (other than upon exercise of an Option or SAR), as specified by the Committee.
(y) “Restricted Share” means a Share awarded under the Plan.
(z) “Returning Shares” means Shares subject to outstanding stock awards granted under either of the Predecessor Plans and that following the Effective Date: (A) are subsequently forfeited or terminated for any reason before being exercised or settled; (B) are not issued because such stock award or any portion thereof is settled in cash; (C) are subject to vesting
COURSERA, INC.
2021 STOCK INCENTIVE PLAN
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restrictions and are subsequently forfeited; (D) are withheld or reacquired to satisfy the exercise, strike or purchase price; or (E) are withheld or reacquired to satisfy a tax withholding obligation.
(aa) “SAR” means a stock appreciation right granted under the Plan.
(bb) “Section 409A” means Section 409A of the Code.
(cc) “Securities Act” means the United States Securities Act of 1933, as amended, the rules and regulations promulgated thereunder.
(dd) “Service” means service as an Employee, Consultant or Outside Director, subject to such further limitations as may be set forth in the Plan or the applicable Award Agreement. Service does not terminate when an Employee goes on a bona fide leave of absence, that was approved by the Company in writing, if the terms of the leave provide for continued Service crediting, or when continued Service crediting is required by applicable law. However, for purposes of determining whether an Option is entitled to ISO status, an Employee’s employment will be treated as terminating three (3) months after such Employee went on leave, unless such Employee’s right to return to active work is guaranteed by law or by a contract. Service terminates in any event when the approved leave ends, unless such Employee immediately returns to active work. The Company determines which leaves of absence count toward Service, and when Service terminates for all purposes under the Plan.
(ee) “Share” means one Share of Stock, as adjusted in accordance with Section 12 (if applicable).
(ff) “Stock” means the Common Stock, par value $0.0001 per Share, of the Company.
(gg) “Stock Unit” means a bookkeeping entry representing the Company’s obligation to deliver one Share (or distribute cash) on a future date in accordance with the provisions of a Stock Unit Award Agreement.
(hh) “Subsidiary” means any corporation, if the Company and/or one or more other Subsidiaries own not less than fifty percent (50%) of the total combined voting power of all classes of outstanding stock of such corporation. A corporation that attains the status of a Subsidiary on a date after the adoption of the Plan shall be considered a Subsidiary commencing as of such date. The determination of whether an entity is a “Subsidiary” shall be made in accordance with Section 424(f) of the code.
SECTION 3. ADMINISTRATION.
(a) Committee Composition. The Plan shall be administered by the Board or a Committee appointed by the Board. The Committee shall consist of two or more directors of the Company. In addition, to the extent required by the Board, the composition of the Committee shall satisfy such requirements of the Nasdaq Stock Market or the New York Stock Exchange, as applicable to the Company, and as the Securities and Exchange Commission may establish for administrators acting under plans intended to qualify for exemption under Rule 16b-3 (or its successor) under the Exchange Act.
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(b) Committee Appointment. The Board may also appoint one or more separate committees of the Board, each composed of one or more directors of the Company who need not satisfy the requirements of Section 3(a), who may administer the Plan, may grant Awards under the Plan and may determine all terms of such grants, in each case with respect to all Employees, Consultants and Outside Directors (except such as may be on such committee), provided that such committee or committees may perform these functions only with respect to Employees who are not considered officers or directors of the Company under Section 16 of the Exchange Act. Within the limitations of the preceding sentence, any reference in the Plan to the Committee shall include such committee or committees appointed pursuant to the preceding sentence. To the extent permitted by applicable laws, the Board of Directors may also authorize one or more officers of the Company to designate Employees, other than officers under Section 16 of the Exchange Act, to receive Awards and/or to determine the number of such Awards to be received by such persons; provided, however, that the Board of Directors shall specify the total number of Awards that such officers may so award.
(c) Committee Procedures. The Committee may hold meetings at such times and places as it shall determine. The acts of a majority of the Committee members present at meetings at which a quorum exists, or acts reduced to or approved in writing (including via email) by all Committee members, shall be valid acts of the Committee.
(d) Committee Responsibilities. Subject to the provisions of the Plan, the Committee shall have full authority and discretion to take the following actions:
| (i) | To interpret the Plan and to apply its provisions; |
| (ii) | To adopt, amend, or rescind rules, procedures, and forms relating to the Plan; |
| (iii) | To adopt, amend, or terminate sub-plans established for the purpose of satisfying applicable foreign laws including qualifying for preferred tax treatment under applicable foreign tax laws; |
| (iv) | To authorize any person to execute, on behalf of the Company, any instrument required to carry out the purposes of the Plan; |
| (v) | To determine when Awards are to be granted under the Plan; |
| (vi) | To select the Participants to whom Awards are to be granted; |
| (vii) | To determine the type of Award and number of Shares or amount of cash to be made subject to each Award; |
| (viii) | To prescribe the terms and conditions of each Award, including (without limitation) the Exercise Price and Purchase Price, and the vesting or duration of the Award (including accelerating the vesting of Awards, either at the time of the Award or thereafter, without the consent of the Participant), to determine whether an Option is to be classified as an ISO or as an NSO, and to specify the provisions of the agreement relating to such Award; |
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| (ix) | To amend any outstanding Award Agreement, subject to applicable legal restrictions and to the consent of the Participant if the Participant’s rights or obligations would be materially impaired; |
| (x) | To prescribe the consideration for the grant of each Award or other right under the Plan and to determine the sufficiency of such consideration; |
| (xi) | To determine the disposition of each Award or other right under the Plan in the event of a Participant’s divorce or dissolution of marriage; |
| (xii) | To determine whether Awards under the Plan will be granted in replacement of other grants under an incentive or other compensation plan of an acquired business; |
| (xiii) | To correct any defect, supply any omission, or reconcile any inconsistency in the Plan or any Award Agreement; |
| (xiv) | To establish or verify the extent of satisfaction of any performance goals or other conditions applicable to the grant, issuance, exercisability, vesting, and/or ability to retain any Award; and |
| (xv) | To take any other actions deemed necessary or advisable for the administration of the Plan. |
Subject to the requirements of applicable law, the Committee may designate persons other than members of the Committee to carry out its responsibilities and may prescribe such conditions and limitations as it may deem appropriate, except that the Committee may not delegate its authority with regard to the selection for participation of or the granting of Awards under the Plan to persons subject to Section 16 of the Exchange Act. All decisions, interpretations and other actions of the Committee shall be final and binding on all Participants and all persons deriving their rights from a Participant. No member of the Committee shall be liable for any action that he has taken or has failed to take in good faith with respect to the Plan or any Award under the Plan.
SECTION 4. ELIGIBILITY.
(a) General Rule. Only Employees, Consultants and Outside Directors shall be eligible for the grant of Awards. Only common-law employees of the Company, a Parent, or a Subsidiary shall be eligible for the grant of ISOs.
(b) Ten-Percent Stockholders. An Employee who owns more than ten percent (10%) of the total combined voting power of all classes of outstanding stock of the Company, a Parent or Subsidiary shall not be eligible for the grant of an ISO unless such grant satisfies the requirements of Section 422(c)(5) of the Code.
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(c) Attribution Rules. For purposes of Section 4(b) above, in determining stock ownership, an Employee shall be deemed to own the stock owned, directly or indirectly, by or for such Employee’s brothers, sisters, spouse, ancestors, and lineal descendants. Stock owned, directly or indirectly, by or for a corporation, partnership, estate, or trust shall be deemed to be owned proportionately by or for its stockholders, partners, or beneficiaries.
(d) Outstanding Stock. For purposes of Section 4(b) above, “outstanding stock” shall include all stock actually issued and outstanding immediately after the grant. “Outstanding stock” shall not include Shares authorized for issuance under outstanding options held by the Employee or by any other person.
SECTION 5. STOCK SUBJECT TO PLAN.
(a) Basic Limitation. Shares offered under the Plan shall be authorized but unissued Shares or treasury Shares. The maximum aggregate number of Shares authorized for issuance as Awards under the Plan shall not exceed the sum of (x) 15,400,000 Shares, plus (y) the sum of any Returning Shares which become available from time to time, plus (z) an annual increase on the first day of each fiscal year, for a period of not more than ten (10) years, beginning on January 1, 2022, and ending on (and including) January 1, 2031, in an amount equal to (i) five percent (5%) of the outstanding Shares on the last day of the immediately preceding fiscal year or (ii) such lesser amount (including zero) that the Board determines for purposes of the annual increase for that fiscal year. Notwithstanding the foregoing, the number of Shares that may be delivered in the aggregate pursuant to the exercise of ISOs granted under the Plan shall not exceed five (5) times the number of Shares provided under (x) above plus, to the extent allowable under Section 422 of the Code, any Shares that become available for issuance under the Plan pursuant to Section 5(b). The limitations of this Section 5(a) shall be subject to adjustment pursuant to Section 12. The number of Shares that are subject to Awards outstanding at any time under the Plan shall not exceed the number of Shares which then remain available for issuance under the Plan. The Company shall at all times reserve and keep available sufficient Shares to satisfy the requirements of the Plan.
(b) Additional Shares. If Restricted Shares or Shares issued upon the exercise of options are forfeited, then such Shares shall again become available for Awards under the Plan. If Stock Units, Options, or SARs are forfeited or terminate for any reason before being exercised or settled, or an Award is settled in cash without the delivery of Shares to the holder, then the corresponding Shares shall again become available for Awards under the Plan. If Stock Units or SARs are settled, then only the number of Shares (if any) actually issued in settlement of such Stock Units or SARs shall reduce the number available in Section 5(a) and the balance (including any Shares withheld to satisfy tax withholding obligations) shall again become available for Awards under the Plan. Any Shares withheld to satisfy the Exercise Price or tax withholding obligation pursuant to any Award of Options or SARs shall be added back to the Shares available for Awards under the Plan. Notwithstanding the foregoing provisions of this Section 5(b), Shares that have actually been issued shall not again become available for Awards under the Plan, except for Shares that are forfeited and do not become vested.
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(c) Substitution and Assumption of Awards. The Committee may make Awards under the Plan by assumption, substitution, or replacement of stock options, stock appreciation rights, stock units, or similar awards granted by another entity (including a Parent or Subsidiary), if such assumption, substitution, or replacement is in connection with an asset acquisition, stock acquisition, merger, consolidation, or similar transaction involving the Company (and/or its Parent or Subsidiary) and such other entity (and/or its affiliate). The terms of such assumed, substituted, or replaced Awards shall be as the Committee, in its discretion, determines is appropriate, notwithstanding limitations on Awards in the Plan. Any such substitute or assumed Awards shall not count against the Share limitation set forth in Section 5(a) (nor shall Shares subject to such Awards be added to the Shares available for Awards under the Plan as provided in Section 5(b) above), except that Shares acquired by exercise of substitute ISOs will count against the maximum number of Shares that may be issued pursuant to the exercise of ISOs under the Plan.
(d) Grants to Outside Directors. The grant date fair value of all Awards (as determined in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718, or any successor thereto) granted under the Plan to any Outside Director as compensation for services as an Outside Director during any calendar year (other than the calendar year in which an Outside Director commences service on the Board) may not exceed $750,000, provided that any Award granted to an Outside Director in lieu of a cash retainer and/or meeting fees pursuant to Section 15(b) will be excluded from such limit.
SECTION 6. RESTRICTED SHARES.
(a) Restricted Share Award Agreement. Each grant of Restricted Shares under the Plan shall be evidenced by a Restricted Share Award Agreement between the Participant and the Company. Such Restricted Shares shall be subject to all applicable terms of the Plan and may be subject to any other terms that are not inconsistent with the Plan. The provisions of the various Restricted Share Award Agreements entered into under the Plan need not be identical.
(b) Payment for Awards. Restricted Shares may be sold or awarded under the Plan for such consideration as the Committee may determine, including (without limitation) cash, cash equivalents, full-recourse promissory notes, past services, and future services.
(c) Vesting. Each Award of Restricted Shares may or may not be subject to vesting. Vesting shall occur, in full or in installments, upon satisfaction of the conditions specified in the Restricted Share Award Agreement. A Restricted Share Award Agreement may provide for accelerated vesting in the event of the Participant’s death, Disability or retirement or other events. The Committee may determine, at the time of granting Restricted Shares or thereafter, that all or part of such Restricted Shares shall become vested in the event that a Change in Control occurs with respect to the Company.
(d) Voting and Dividend Rights. A holder of Restricted Shares awarded under the Plan shall have the same voting, dividend, and other rights as the Company’s other stockholders, except that in the case of any unvested Restricted Shares, the holder shall not be entitled to any dividends or other distributions paid or distributed by the Company in respect of outstanding Shares. Notwithstanding the foregoing, at the Committee’s discretion, the holder of unvested
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Restricted Shares may be credited with such dividends and other distributions, provided that such dividends and other distributions shall be paid or distributed to the holder only if, when and to the extent such unvested Restricted Shares vest. The value of dividends and other distributions payable or distributable with respect to any unvested Restricted Shares that do not vest shall be forfeited. At the Committee’s discretion, the Restricted Share Award Agreement may require that the holder of Restricted Shares invest any cash dividends received in additional Restricted Shares. Such additional Restricted Shares shall be subject to the same conditions as the Award with respect to which the dividend was paid. For the avoidance of doubt, other than with respect to the right to receive dividends and other distributions, the holders of unvested Restricted Shares shall have the same voting rights and other rights as the Company’s other stockholders in respect of such unvested Restricted Shares.
(e) Restrictions on Transfer of Shares. Restricted Shares shall be subject to such rights of repurchase, rights of first refusal, or other restrictions as the Committee may determine. Such restrictions shall be set forth in the applicable Restricted Share Award Agreement and shall apply in addition to any general restrictions that may apply to all holders of Shares.
SECTION 7. TERMS AND CONDITIONS OF OPTIONS.
(a) Stock Option Award Agreement. Each grant of an Option under the Plan shall be evidenced by a Stock Option Award Agreement between the Participant and the Company. Such Option shall be subject to all applicable terms and conditions of the Plan and may be subject to any other terms and conditions which are not inconsistent with the Plan and which the Committee deems appropriate for inclusion in a Stock Option Award Agreement. The Stock Option Award Agreement shall specify whether the Option is an ISO or an NSO. The provisions of the various Stock Option Award Agreements entered into under the Plan need not be identical.
(b) Number of Shares. Each Stock Option Award Agreement shall specify the number of Shares that are subject to the Option and shall provide for the adjustment of such number in accordance with Section 12.
(c) Exercise Price. Each Stock Option Award Agreement shall specify the Exercise Price. The Exercise Price of an ISO shall not be less than one hundred percent (100%) of the Fair Market Value of a Share on the date of grant and the Exercise Price of an NSO shall not be less than 100% of the Fair Market Value of a Share on the date of grant. Notwithstanding the foregoing, Options may be granted with an Exercise Price of less than one hundred percent (100%) of the Fair Market Value per Share on the date of grant pursuant to a transaction described in, and in a manner consistent with, Section 424(a) of the Code. Subject to the foregoing in this Section 7(c), the Exercise Price under any Option shall be determined by the Committee in its sole discretion. The Exercise Price shall be payable in one of the forms described in Section 8.
(d) Withholding Taxes. As a condition to the exercise of an Option, the Participant shall make such arrangements as the Committee may require for the satisfaction of any federal, state, local or foreign withholding tax obligations that may arise in connection with such exercise. The Participant shall also make such arrangements as the Committee may require for the satisfaction of any federal, state, local or foreign withholding tax obligations that may arise in connection with the disposition of Shares acquired by exercising an Option.
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(e) Exercisability and Term. Each Stock Option Award Agreement shall specify the date when all or any installment of the Option is to become exercisable. The Stock Option Award Agreement shall also specify the term of the Option; provided that the term of an ISO shall in no event exceed ten (10) years from the date of grant (five (5) years for ISOs granted to Employees described in Section 4(b)). A Stock Option Award Agreement may provide for accelerated exercisability in the event of the Participant’s death, Disability, or retirement or other events and may provide for expiration prior to the end of its term in the event of the termination of the Participant’s Service. Options may be awarded in combination with SARs, and such an Award may provide that the Options will not be exercisable unless the related SARs are forfeited. Subject to the foregoing in this Section 7(e), the Committee in its sole discretion shall determine when all or any installment of an Option is to become exercisable and when an Option is to expire.
(f) Exercise of Options. Each Stock Option Award Agreement shall set forth the extent to which the Participant shall have the right to exercise the Option following termination of the Participant’s Service with the Company and its Subsidiaries, and the right to exercise the Option of any executors or administrators of the Participant’s estate or any person who has acquired such Option(s) directly from the Participant by bequest or inheritance. Such provisions shall be determined in the sole discretion of the Committee, need not be uniform among all Options issued pursuant to the Plan, and may reflect distinctions based on the reasons for termination of Service.
(g) Effect of Change in Control. The Committee may determine, at the time of granting an Option or thereafter, that such Option shall become exercisable as to all or part of the Shares subject to such Option in the event that a Change in Control occurs with respect to the Company.
(h) No Rights as a Stockholder. A Participant shall have no rights as a stockholder with respect to any Shares covered by his Option until such Shares are issued to the Participant. No adjustments shall be made, except as provided in Section 12.
(i) Modification, Extension and Renewal of Options. Within the limitations of the Plan, the Committee may modify, extend, or renew outstanding options or may accept the cancellation of outstanding options (to the extent not previously exercised), whether or not granted hereunder, in return for the grant of new Options for the same or a different number of Shares and at the same or a different Exercise Price, or in return for the grant of a different Award for the same or a different number of Shares or for cash. The foregoing notwithstanding, no modification of an Option shall, without the consent of the Participant, materially impair his or her rights or obligations under such Option.
(j) Restrictions on Transfer of Shares. Any Shares issued upon exercise of an Option shall be subject to such special forfeiture conditions, rights of repurchase, rights of first refusal, and other transfer restrictions as the Committee may determine. Such restrictions shall be set forth in the applicable Stock Option Award Agreement and shall apply in addition to any general restrictions that may apply to all holders of Shares.
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(k) Buyout Provisions. The Committee may at any time (i) offer to buy out for a payment in cash or cash equivalents an Option previously granted or (ii) authorize a Participant to elect to cash out an Option previously granted, in either case at such time and based upon such terms and conditions as the Committee shall establish.
SECTION 8. PAYMENT FOR SHARES.
(a) General Rule. The entire Exercise Price or Purchase Price of Shares issued under the Plan shall be payable in lawful money of the United States of America at the time when such Shares are purchased, except as provided in Section 8(b) through Section 8(h) below.
(b) Surrender of Stock. To the extent that a Stock Option Award Agreement so provides, payment may be made all or in part by surrendering, or attesting to the ownership of, Shares which have already been owned by the Participant or his or her representative. Such Shares shall be valued at their Fair Market Value on the date when the new Shares are purchased under the Plan. The Participant shall not surrender, or attest to the ownership of, Shares in payment of the Exercise Price if such action would cause the Company to recognize compensation expense (or additional compensation expense) with respect to the Option for financial reporting purposes.
(c) Services Rendered. At the discretion of the Committee, Shares may be awarded under the Plan in consideration of services rendered to the Company or a Subsidiary. If Shares are awarded without the payment of a Purchase Price in cash, the Committee shall make a determination (at the time of the Award) of the value of the services rendered by the Participant and the sufficiency of the consideration to meet the requirements of Section 6(b).
(d) Cashless Exercise. To the extent that a Stock Option Award Agreement so provides, payment may be made all or in part by delivery (on a form prescribed by the Committee) of an irrevocable direction to a securities broker to sell Shares and to deliver all or part of the sale proceeds to the Company in payment of the aggregate Exercise Price.
(e) Exercise/Pledge. To the extent that a Stock Option Award Agreement so provides, payment may be made all or in part by delivery (on a form prescribed by the Committee) of an irrevocable direction to a securities broker or lender to pledge Shares, as security for a loan, and to deliver all or part of the loan proceeds to the Company in payment of the aggregate Exercise Price.
(f) Net Exercise. To the extent that a Stock Option Award Agreement so provides, by a “net exercise” arrangement pursuant to which the number of Shares issuable upon exercise of the Option shall be reduced by the largest whole number of Shares having an aggregate Fair Market Value that does not exceed the aggregate Exercise Price (plus tax withholdings, if applicable) and any remaining balance of the aggregate Exercise Price (and/or applicable tax withholdings) not satisfied by such reduction in the number of whole Shares to be issued shall be paid by the Participant in cash or any other form of payment permitted under the Stock Option Agreement.
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(g) Promissory Note. To the extent that a Stock Option Award Agreement or Restricted Share Award Agreement so provides, payment may be made all or in part by delivering (on a form prescribed by the Company) a full-recourse promissory note.
(h) Other Forms of Payment. To the extent that a Stock Option Award Agreement or Restricted Share Award Agreement so provides, payment may be made in any other form that is consistent with applicable laws, regulations, and rules.
(i) Limitations under Applicable Law. Notwithstanding anything herein or in a Stock Option Award Agreement or Restricted Share Award Agreement to the contrary, payment may not be made in any form that is unlawful, as determined by the Committee in its sole discretion.
SECTION 9. STOCK APPRECIATION RIGHTS.
(a) SAR Award Agreement. Each grant of a SAR under the Plan shall be evidenced by a SAR Award Agreement between the Participant and the Company. Such SAR shall be subject to all applicable terms of the Plan and may be subject to any other terms that are not inconsistent with the Plan. The provisions of the various SAR Award Agreements entered into under the Plan need not be identical.
(b) Number of Shares. Each SAR Award Agreement shall specify the number of Shares to which the SAR pertains and shall provide for the adjustment of such number in accordance with Section 12.
(c) Exercise Price. Each SAR Award Agreement shall specify the Exercise Price. The Exercise Price of a SAR shall not be less than one hundred percent (100%) of the Fair Market Value of a Share on the date of grant. Notwithstanding the foregoing, SARs may be granted with an Exercise Price of less than one hundred percent (100%) of the Fair Market Value per Share on the date of grant pursuant to a transaction described in, and in a manner consistent with, Section 424(a) of the Code. Subject to the foregoing in this Section 9(c), the Exercise Price under any SAR shall be determined by the Committee in its sole discretion.
(d) Exercisability and Term. Each SAR Award Agreement shall specify the date when all or any installment of the SAR is to become exercisable. The SAR Award Agreement shall also specify the term of the SAR. A SAR Award Agreement may provide for accelerated exercisability in the event of the Participant’s death, Disability, retirement, or other events and may provide for expiration prior to the end of its term in the event of the termination of the Participant’s Service. SARs may be awarded in combination with Options, and such an Award may provide that the SARs will not be exercisable unless the related Options are forfeited. A SAR may be included in an ISO only at the time of grant but may be included in an NSO at the time of grant or thereafter. A SAR granted under the Plan may provide that it will be exercisable only in the event of a Change in Control.
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(e) Effect of Change in Control. The Committee may determine, at the time of granting a SAR or thereafter, that such SAR shall become fully exercisable as to all Common Shares subject to such SAR in the event that a Change in Control occurs with respect to the Company.
(f) Exercise of SARs. Upon exercise of a SAR, the Participant (or any person having the right to exercise the SAR after his or her death) shall receive from the Company (i) Shares, (ii) cash or (iii) a combination of Shares and cash, as the Committee shall determine. The amount of cash and/or the Fair Market Value of Shares received upon exercise of SARs shall, in the aggregate, be equal to the amount by which the Fair Market Value (on the date of surrender) of the Shares subject to the SARs exceeds the Exercise Price.
(g) Modification, Extension or Assumption of SARs. Within the limitations of the Plan, the Committee may modify, extend, or assume outstanding SARs or may accept the cancellation of outstanding SARs (whether granted by the Company or by another issuer) in return for the grant of new SARs for the same or a different number of Shares and at the same or a different Exercise Price, or in return for the grant of a different Award for the same or a different number of Shares or cash. The foregoing notwithstanding, no modification of a SAR shall, without the consent of the holder, materially impair his or her rights or obligations under such SAR.
(h) Buyout Provisions. The Committee may at any time (i) offer to buy out for a payment in cash or cash equivalents a SAR previously granted, or (ii) authorize a Participant to elect to cash out a SAR previously granted, in either case at such time and based upon such terms and conditions as the Committee shall establish.
SECTION 10. STOCK UNITS.
(a) Stock Unit Award Agreement. Each grant of Stock Units under the Plan shall be evidenced by a Stock Unit Award Agreement between the Participant and the Company. Such Stock Units shall be subject to all applicable terms of the Plan and may be subject to any other terms that are not inconsistent with the Plan. The provisions of the various Stock Unit Award Agreements entered into under the Plan need not be identical.
(b) Payment for Awards. To the extent that an Award is granted in the form of Stock Units, no cash consideration shall be required of the Award recipients.
(c) Vesting Conditions. Each Award of Stock Units may or may not be subject to vesting. Vesting shall occur, in full or in installments, upon satisfaction of the conditions specified in the Stock Unit Award Agreement. A Stock Unit Award Agreement may provide for accelerated vesting in the event of the Participant’s death, Disability, retirement, or other events. The Committee may determine, at the time of granting Stock Units or thereafter, that all or part of such Stock Units shall become vested in the event that a Change in Control occurs with respect to the Company.
(d) Voting and Dividend Rights. The holders of Stock Units shall have no voting rights. Prior to settlement or forfeiture, any Stock Unit awarded under the Plan may, at the
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Committee’s discretion, carry with it a right to dividend equivalents. Such right entitles the holder to be credited with an amount equal to all cash dividends paid on one Share while the Stock Unit is outstanding. Dividend equivalents may be converted into additional Stock Units. Settlement of dividend equivalents may be made in the form of cash, in the form of Shares, or in a combination of both. Dividend equivalents shall not be distributed prior to settlement of the Stock Unit to which the dividend equivalents pertain. Prior to distribution, any dividend equivalents shall be subject to the same conditions and restrictions (including without limitation, any forfeiture conditions) as the Stock Units to which they attach. The value of dividend equivalents payable or distributable with respect to any unvested Stock Units that do not vest shall be forfeited.
(e) Form and Time of Settlement of Stock Units. Settlement of vested Stock Units may be made in the form of (i) cash, (ii) Shares or (iii) any combination of both, as determined by the Committee. The actual number of Stock Units eligible for settlement may be larger or smaller than the number included in the original Award, based on predetermined performance factors. Methods of converting Stock Units into cash may include (without limitation) a method based on the average Fair Market Value of Shares over a series of trading days. A Stock Unit Award Agreement may provide that vested Stock Units may be settled in a lump sum or in installments. A Stock Unit Award Agreement may provide that the distribution may occur or commence when all vesting conditions applicable to the Stock Units have been satisfied or have lapsed, or it may be deferred to any later date, subject to compliance with Section 409A. The amount of a deferred distribution may be increased by an interest factor or by dividend equivalents. Until an Award of Stock Units is settled, the number of such Stock Units shall be subject to adjustment pursuant to Section 12.
(f) Death of Participant. Any Stock Unit Award that becomes payable after the Participant’s death shall be distributed to the Participant’s beneficiary or beneficiaries. Each recipient of a Stock Unit Award under the Plan shall designate one or more beneficiaries for this purpose by filing the prescribed form with the Company. A beneficiary designation may be changed by filing the prescribed form with the Company at any time before the Participant’s death. If no beneficiary was designated or if no designated beneficiary survives the Participant, then any Stock Units Award that becomes payable after the Participant’s death shall be distributed to the Participant’s estate.
(g) Creditors’ Rights. A holder of Stock Units shall have no rights other than those of a general creditor of the Company. Stock Units represent an unfunded and unsecured obligation of the Company, subject to the terms and conditions of the applicable Stock Unit Award Agreement.
SECTION 11. CASH-BASED AWARDS.
The Committee may, in its sole discretion, grant Cash-Based Awards to any Participant in such number or amount and upon such terms, and subject to such conditions, as the Committee shall determine at the time of grant and specify in an applicable Award Agreement. The Committee shall determine the maximum duration of the Cash-Based Award, the amount of cash which may be payable pursuant to the Cash-Based Award, the conditions upon which the
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Cash-Based Award shall become vested or payable, and such other provisions as the Committee shall determine. Each Cash-Based Award shall specify a cash-denominated payment amount, formula, or payment ranges as determined by the Committee. Payment, if any, with respect to a Cash-Based Award shall be made in accordance with the terms of the Award and may be made in cash or in Shares, as the Committee determines.
SECTION 12. ADJUSTMENT OF SHARES.
(a) Adjustments. In the event of a subdivision of the outstanding Stock, a declaration of a dividend payable in Shares, a declaration of a dividend payable in a form other than Shares in an amount that has a material effect on the price of Shares, a combination or consolidation of the outstanding Stock (by reclassification or otherwise) into a lesser number of Shares, a recapitalization, a spin-off or a similar occurrence, the Committee shall make appropriate and equitable adjustments in:
| (i) | The number of Shares available for future Awards and the limitations set forth under Section 5; |
| (ii) | The number of Shares covered by each outstanding Award; and |
| (iii) | The Exercise Price under each outstanding Option and SAR. |
(b) Dissolution or Liquidation. To the extent not previously exercised or settled, Options, SARs, and Stock Units shall terminate immediately prior to the dissolution or liquidation of the Company.
(c) Mergers or Reorganizations. In the event that the Company is a party to a merger or other reorganization, outstanding Awards shall be subject to the agreement of merger or reorganization. Subject to compliance with Section 409A, such agreement shall provide for:
| (i) | The continuation of the outstanding Awards by the Company, if the Company is a surviving corporation; |
| (ii) | The assumption of the outstanding Awards by the surviving corporation or its parent or subsidiary; |
| (iii) | The substitution by the surviving corporation or its parent or subsidiary of its own awards for the outstanding Awards; |
| (iv) | Immediate vesting, exercisability, or settlement of outstanding Awards followed by the cancellation of such Awards upon or immediately prior to the effectiveness of such transaction; or |
| (v) | Settlement of the intrinsic value of the outstanding Awards (whether or not then vested or exercisable) in cash or cash equivalents or equity (including cash or equity subject to deferred vesting and delivery consistent with the vesting restrictions applicable to such Awards or the |
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| underlying Shares) followed by the cancellation of such Awards (and, for the avoidance of doubt, if as of the date of the occurrence of the transaction the Committee determines in good faith that no amount would have been attained upon the exercise of such Award or realization of the Participant’s rights, then such Award may be terminated by the Company without payment); |
in each case without the Participant’s consent. Any acceleration of payment of an amount that is subject to Section 409A will be delayed, if necessary, until the earliest time that such payment would be permissible under Section 409A without triggering any additional taxes applicable under Section 409A.
The Company will have no obligation to treat all Awards, all Awards held by a Participant, or all Awards of the same type, similarly. To the extent that the applicable agreement of merger or reorganization does not provide for one of the treatments set forth in (i) – (v) above, all outstanding Awards will be subject to full vesting immediately prior to the effectiveness of such transaction; provided, however, that the portion of such Award subject to performance-based vesting shall be subject to the terms and conditions of the applicable Award Agreement and, in the absence of applicable terms and conditions, the Committee’s discretion.
(d) Reservation of Rights. Except as provided in this Section 12, a Participant shall have no rights by reason of any subdivision or consolidation of Shares of stock of any class, the payment of any dividend or any other increase or decrease in the number of Shares of stock of any class. Any issue by the Company of Shares of stock of any class, or securities convertible into Shares of stock of any class, shall not affect, and no adjustment by reason thereof shall be made with respect to, the number or Exercise Price of Shares subject to an Award. The grant of an Award pursuant to the Plan shall not affect in any way the right or power of the Company to make adjustments, reclassifications, reorganizations, or changes of its capital or business structure, to merge or consolidate or to dissolve, liquidate, sell, or transfer all or any part of its business or assets. In the event of any change affecting the Shares or the Exercise Price of Shares subject to an Award, including a merger or other reorganization, for reasons of administrative convenience, the Company in its sole discretion may refuse to permit the exercise of any Award during a period of up to thirty (30) days prior to the occurrence of such event.
SECTION 13. DEFERRAL OF AWARDS.
(a) Committee Powers. Subject to compliance with Section 409A, the Committee (in its sole discretion) may permit or require a Participant to:
| (i) | Have cash that otherwise would be paid to such Participant as a result of the exercise of a SAR or the settlement of Stock Units credited to a deferred compensation account established for such Participant by the Committee as an entry on the Company’s books; |
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| (ii) | Have Shares that otherwise would be delivered to such Participant as a result of the exercise of an Option or SAR converted into an equal number of Stock Units; or |
| (iii) | Have Shares that otherwise would be delivered to such Participant as a result of the exercise of an Option or SAR or the settlement of Stock Units converted into amounts credited to a deferred compensation account established for such Participant by the Committee as an entry on the Company’s books. Such amounts shall be determined by reference to the Fair Market Value of such Shares as of the date when they otherwise would have been delivered to such Participant. |
(b) General Rules. A deferred compensation account established under this Section 13 may be credited with interest or other forms of investment return, as determined by the Committee. A Participant for whom such an account is established shall have no rights other than those of a general creditor of the Company. Such an account shall represent an unfunded and unsecured obligation of the Company and shall be subject to the terms and conditions of the applicable agreement between such Participant and the Company. If the deferral or conversion of Awards is permitted or required, the Committee (in its sole discretion) may establish rules, procedures, and forms pertaining to such Awards, including (without limitation) the settlement of deferred compensation accounts established under this Section 13.
SECTION 14. AWARDS UNDER OTHER PLANS.
The Company may grant awards under other plans or programs. Such awards may be settled in the form of Shares issued under the Plan. Such Shares shall be treated for all purposes under the Plan like Shares issued in settlement of Stock Units and shall, when issued, reduce the number of Shares available under Section 5.
SECTION 15. PAYMENT OF DIRECTOR’S FEES IN SECURITIES.
(a) Effective Date. No provision of this Section 15 shall be effective unless and until the Board has determined to implement such provision.
(b) Elections to Receive NSOs, SARs, Restricted Shares, or Stock Units. An Outside Director may elect to receive his or her annual retainer payments and/or meeting fees from the Company in the form of cash, NSOs, SARs, Restricted Shares, Stock Units, or a combination thereof, as determined by the Board. Alternatively, the Board may mandate payment in any of such alternative forms. Such NSOs, SARs, Restricted Shares, and Stock Units shall be issued under the Plan. An election under this Section 15 shall be filed with the Company on the prescribed form.
(c) Number and Terms of NSOs, SARs, Restricted Shares or Stock Units. The number of NSOs, SARs, Restricted Shares, or Stock Units to be granted to Outside Directors in lieu of annual retainers and meeting fees that would otherwise be paid in cash shall be calculated in a manner determined by the Board. The terms of such NSOs, SARs, Restricted Shares, or Stock Units shall also be determined by the Board.
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SECTION 16. LEGAL AND REGULATORY REQUIREMENTS.
Shares shall not be issued under the Plan unless the issuance and delivery of such Shares complies with (or is exempt from) all applicable requirements of law, including (without limitation) the Securities Act, state securities laws and regulations and the regulations of any stock exchange on which the Company’s securities may then be listed, and the Company has obtained the approval or favorable ruling from any governmental agency which the Company determines is necessary or advisable. The Company shall not be liable to a Participant or other persons as to: (a) the non-issuance or sale of Shares as to which the Company has not obtained from any regulatory body having jurisdiction the authority deemed by the Company’s counsel to be necessary to the lawful issuance and sale of any Shares under the Plan; and (b) any tax consequences expected, but not realized, by any Participant or other person due to the receipt, exercise or settlement of any Award granted under the Plan.
SECTION 17. TAXES.
(a) Withholding Taxes. To the extent required by applicable federal, state, local, or foreign law, a Participant or his or her successor shall make arrangements satisfactory to the Company for the satisfaction of any withholding tax obligations that arise in connection with the Plan. The Company shall not be required to issue any Shares or make any cash payment under the Plan until such obligations are satisfied.
(b) Share Withholding. The Committee may permit a Participant to satisfy all or part of his or her withholding or income tax obligations by having the Company withhold all or a portion of any Shares that otherwise would be issued to him or her or by surrendering all or a portion of any Shares that he or she previously acquired. Such Shares shall be valued at their Fair Market Value on the date when taxes otherwise would be withheld in cash. In no event may a Participant have Shares withheld that would otherwise be issued to him or her in excess of the number necessary to satisfy the maximum legally required tax withholding.
(c) Section 409A. Each Award that provides for “nonqualified deferred compensation” within the meaning of Section 409A shall be subject to such additional rules and requirements as specified by the Committee from time to time in order to comply with Section 409A. If any amount under such an Award is payable upon a “separation from service” (within the meaning of Section 409A) to a Participant who is then considered a “specified employee” (within the meaning of Section 409A), then no such payment shall be made prior to the date that is the earlier of (i) six (6) months and one day after the Participant’s separation from service, or (ii) the Participant’s death, but only to the extent such delay is necessary to prevent such payment from being subject to interest, penalties, and/or additional tax imposed pursuant to Section 409A. In addition, the settlement of any such Award may not be accelerated except to the extent permitted by Section 409A.
SECTION 18. TRANSFERABILITY.
Unless the agreement evidencing an Award (or an amendment thereto authorized by the Committee) expressly provides otherwise, no Award granted under the Plan, nor any interest in
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such Award, may be sold, assigned, conveyed, gifted, pledged, hypothecated, or otherwise transferred in any manner (prior to the vesting and lapse of any and all restrictions applicable to Shares issued under such Award), other than by will or the laws of descent and distribution; provided, however, that an ISO may be transferred or assigned only to the extent consistent with Section 422 of the Code. Any purported assignment, transfer, or encumbrance in violation of this Section 18 shall be void and unenforceable against the Company.
SECTION 19. PERFORMANCE BASED AWARDS.
The number of Shares or other benefits granted, issued, retained, and/or vested under an Award may be made subject to the attainment of performance goals. The Committee may utilize any performance criteria selected by it in its sole discretion to establish performance goals.
SECTION 20. NO EMPLOYMENT RIGHTS.
No provision of the Plan, nor any Award granted under the Plan, shall be construed to give any person any right to become, to be treated as, or to remain an Employee or Consultant. The Company and its Subsidiaries reserve the right to terminate any person’s Service at any time and for any reason, with or without notice.
SECTION 21. DURATION AND AMENDMENTS.
(a) Term of the Plan. The Plan, as set forth herein, shall come into existence on the date of its adoption by the Board; provided, however, that no Award may be granted hereunder prior to the Effective Date. The Board may suspend or terminate the Plan at any time. No ISOs may be granted after the tenth anniversary of the earlier of (i) the date the Plan is adopted by the Board, or (ii) the date the Plan is approved the stockholders of the Company.
(b) Right to Amend the Plan. The Board may amend the Plan at any time and from time to time. Rights and obligations under any Award granted before amendment of the Plan shall not be materially impaired by such amendment, except with consent of the Participant. An amendment of the Plan shall be subject to the approval of the Company’s stockholders only to the extent required by applicable laws, regulations or rules.
(c) Effect of Termination. No Awards shall be granted under the Plan after the termination thereof. The termination of the Plan shall not affect Awards previously granted under the Plan.
SECTION 22. AWARDS TO NON-U.S. PARTICIPANTS.
Awards may be granted to Participants who are non-United States nationals or employed or providing services outside the United States, or both, on such terms and conditions different from those applicable to Awards to Participants who are employed or providing services in the United States as may, in the judgment of the Committee, be necessary or desirable to recognize differences in local law, tax policy, or custom. The Committee also may impose conditions on the exercise, vesting, or settlement of Awards in order to minimize the Company’s obligation with respect to tax equalization for Participants on assignments outside their home country.
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SECTION 23. GOVERNING LAW.
The Plan and each Award Agreement shall be governed by the laws of the State of Delaware, without application of the conflicts of law principles thereof.
SECTION 24. SUCCESSORS AND ASSIGNS.
The terms of the Plan shall be binding upon and inure to the benefit of the Company and any successor entity, including any successor entity contemplated by Section 12(c).
SECTION 25. EXECUTION.
To record the adoption of the Plan by the Board, the Company has caused its authorized officer to execute the same.
| COURSERA, INC. | ||
| By: | ||
| Name: | ||
| Title: | ||
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2021 STOCK INCENTIVE PLAN
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COURSERA, INC.
2021 STOCK INCENTIVE PLAN
NOTICE OF STOCK OPTION GRANT
You have been granted the following Option (this “Option” or the/this “Award”) to purchase shares of Common Stock (“Stock”) of Coursera, Inc. (the “Company”) under the Coursera, Inc. 2021 Stock Incentive Plan (as may be amended from time to time, the “Plan”):
| Name of Optionee: | [Name of Optionee] | |
| Grant Date: | [Date of Grant] | |
| Total Number of Shares Subject to Option: | [Total Shares] | |
| Type of Option: | ☐ Incentive Stock Option ☐ Nonstatutory Stock Option | |
| Exercise Price Per Share: | $[Exercise Price] | |
| Vesting Commencement Date: | [Vesting Commencement Date] | |
| Vesting Schedule: | [Actual vesting schedule to be inserted] | |
| Expiration Date: | [Expiration Date] This Option expires earlier if your Service terminates earlier, as described in the Stock Option Agreement. | |
By your written signature below (or your electronic acceptance), and the signature of the Company’s representative below, you and the Company agree that this Option is granted under and governed by the term and conditions of the Plan, this Notice of Option Grant and the Stock Option Agreement (collectively, this “Agreement”), each of which are attached to and made a part of this document.
By your written signature below (or your electronic acceptance), you further agree that the Company may deliver by e-mail all documents relating to the Plan or this Award (including without limitation, prospectuses required by the Securities and Exchange Commission) and all other documents that the Company is required to deliver to its security holders (including without limitation, annual reports and proxy statements). You also agree that the Company may deliver these documents by posting them on a website maintained by the Company or by a third party under contract with the Company. If the Company posts these documents on a website, it will notify you by e-mail. Should you electronically accept this Agreement, you agree to the following: “This electronic contract contains my electronic signature, which I have executed with the intent to sign this Agreement.” Notwithstanding the above, if you have not affirmatively rejected or accepted this Award within 90 days of the Date of Grant set forth in this Notice of Stock Option Grant, you are deemed to have accepted this Award, subject to all of the terms and conditions of this Agreement.
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COURSERA, INC.
2021 STOCK INCENTIVE PLAN
STOCK OPTION AGREEMENT
| The Plan and Other Agreements | The Option that you are receiving is granted pursuant and subject in all respects to the applicable provisions of the Plan, which is incorporated herein by reference. Capitalized terms not defined in this Agreement will have the meanings ascribed to them in the Plan.
The attached Notice of Stock Option Grant, this Agreement and the Plan constitute the entire understanding between you and the Company regarding this Award. Any prior agreements, commitments or negotiations concerning this Option are superseded. This Agreement may be amended by the Committee without your consent; however, if any such amendment would materially impair your rights or obligations under this Agreement, this Agreement may be amended only by another written agreement, signed by you and the Company. | |
| Tax Treatment | This Option is intended to be an incentive stock option under Section 422 of the Code or a nonstatutory option, as provided in the Notice of Stock Option Grant. Even if this Option is designated as an incentive stock option, it will be deemed to be a nonstatutory option to the extent required by the $100,000 annual limitation under Section 422(d) of the Code. | |
| Vesting | This Option becomes exercisable in installments, as shown on the Notice of Stock Option Grant. This Option will in no event become exercisable for additional Shares after your Service as an Employee or Consultant has terminated for any reason. | |
| Term | This Option expires in any event at the close of business at Company headquarters on the day before the tenth (10th) anniversary of the Grant Date, as shown on the Notice of Stock Option Grant (fifth (5th) anniversary for a more than ten percent (10%) shareholders as provided under the Plan if this is an incentive stock option). This Option may expire earlier if your Service terminates, as described below. | |
| Regular Termination | If your Service is terminated for any reason except due to your death or Disability, then this Option will expire at the close of business at Company headquarters on the date three (3) months after the date your Service terminates (or, if earlier, the Expiration Date). Your Service will not be extended by any notice period (e.g., your Service will not include any contractual notice period or period of “garden leave” or similar period mandated under employment laws in the jurisdiction where you are employed or the terms of your employment or service agreement, if any). The Company determines when your Service terminates for this purpose and all purposes under the Plan, and its determinations are conclusive and binding on all persons. | |
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| Death | If your Service terminates because of your death, then this Option will expire at the close of business at Company headquarters on the date twelve (12) months after the date your Service terminates (or, if earlier, the Expiration Date). During that period of up to twelve (12) months, your estate or heirs may exercise this Option. | |
| Disability | If your Service terminates because of your Disability, then this Option will expire at the close of business at Company headquarters on the date twelve (12) months after the date your Service terminates (or, if earlier, the Expiration Date). | |
| Leaves of Absence | For purposes of this Option, your Service does not terminate when you go on a military leave, a sick leave or another bona fide leave of absence if the leave of absence was approved by the Company in writing, and if continued crediting of Service is required by the terms of the leave or by applicable law. But your Service terminates when the approved leave ends, unless you immediately return to active work.
If you go on a leave of absence, then the vesting schedule specified in the Notice of Stock Option Grant may be adjusted in accordance with the Company’s leave of absence policy or the terms of your leave. If your work schedule changes (i.e., your work hours are increased or reduced), then the vesting schedule specified in the Notice of Stock Option Grant may be adjusted in accordance with the Company’s part-time work policy, or the terms of an agreement between you and the Company pertaining to your part-time schedule. | |
| Restrictions on Exercise | The Company will not permit you to exercise this Option if the issuance of Shares at that time would violate any law or regulation. The inability of the Company to obtain approval from any regulatory body having authority deemed by the Company to be necessary to the lawful issuance and sale of the Stock pursuant to this Option will relieve the Company of any liability with respect to the non-issuance or sale of the Stock as to which such approval will not have been obtained. | |
| Notice of Exercise | When you wish to exercise this Option, you must provide a written or electronic notice of exercise form (substantially in the form attached to this Agreement as Exhibit A) in accordance with such procedures as are established by the Company and communicated to you from time to time. Any notice of exercise must specify how many Shares you wish to purchase and how your Shares should be registered. The notice of exercise will be effective when it is received by the Company. If someone else wants to exercise this Option after your death, that person must prove to the Company’s satisfaction that he or she is entitled to do so. | |
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| Form of Payment | When you submit your notice of exercise, you must include payment of the Option exercise price for the Shares you are purchasing. Payment may be made in the following form(s):
• Your personal check, a cashier’s check, a money order or a wire transfer.
• Certificates for Shares that you own, along with any forms needed to effect a transfer of those Shares to the Company. The value of the Shares, determined as of the effective date of the Option exercise, will be applied to the Option exercise price. Instead of surrendering Shares, you may attest to the ownership of those Shares on a form provided by the Company and have the same number of Shares subtracted from the Shares issued to you upon exercise of this Option. However, you may not surrender or attest to the ownership of Shares in payment of the exercise price if your action would cause the Company to recognize a compensation expense (or additional compensation expense) with respect to this Option for financial reporting purposes.
• By delivery on a form approved by the Company of an irrevocable direction to a securities broker approved by the Company to sell all or part of the Shares that are issued to you when you exercise this Option, and to deliver to the Company from the sale proceeds an amount sufficient to pay the Option exercise price and any withholding taxes. The balance of the sale proceeds, if any, will be delivered to you. The directions must be given by providing a notice of exercise form approved by the Company.
• By delivery on a form approved by the Company of an irrevocable direction to a securities broker or lender approved by the Company to pledge Shares that are issued to you when you exercise this Option as security for a loan and to deliver to the Company from the loan proceeds an amount sufficient to pay the Option exercise price and any withholding taxes. The directions must be given by providing a notice of exercise form approved by the Company.
• If permitted by the Committee, by a “net exercise” arrangement pursuant to which the number of Shares issuable upon exercise of the Option will be reduced by the largest |
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| wholenumber of Shares having an aggregate Fair Market Value that does not exceed the aggregate exercise price (plus tax withholdings, if applicable) and any remaining balance of the aggregate exercise price (and/or applicable tax withholdings) not satisfied by such reduction in the number of whole Shares to be issued will be paid by you in cash or other form of payment permitted under this Option. The directions must be given by providing a notice of exercise form approved by the Company.
• Any other form permitted by the Committee in its sole discretion.
Notwithstanding the foregoing, payment may not be made in any form that is unlawful, as determined by the Committee in its sole discretion. | ||
| Withholding Taxes and Stock Withholding | Regardless of any action the Company and/or the Subsidiary or Affiliate employing you (“Employer”) takes with respect to any or all income tax, social insurance, payroll tax, payment on account or other tax-related withholding (“Tax-Related Items”), you acknowledge that the ultimate liability for all Tax-Related Items legally due by you is and remains your responsibility and that the Company and your Employer (1) make no representations or undertakings regarding the treatment of any Tax-Related Items in connection with any aspect of this Option, including the grant, vesting or exercise of this Option, the subsequent sale of Shares acquired pursuant to such exercise and the receipt of any dividends; and (2) do not commit to structure the terms of the grant or any aspect of this Option to reduce or eliminate your liability for Tax-Related Items. Further, if you are subject to Tax-Related Items in more than one jurisdiction, you acknowledge that the Company and your Employer (or former Employer, as applicable) may be required to withhold or account for Tax-Related Items in more than one jurisdiction.
Prior to exercise of this Option, you will pay or make adequate arrangements satisfactory to the Company and/or your Employer to satisfy all withholding and payment on account obligations of the Company and/or your Employer. In this regard, you authorize the Company and/or your Employer to withhold all applicable Tax-Related Items legally payable by you from your wages or other cash compensation paid to you by the Company and/or your Employer. With the Company’s consent, these arrangements may also include, if permissible under local law, (a) withholding Shares that otherwise would be issued to you when you exercise this Option, provided that the Company only withholds the amount of Shares necessary to satisfy the maximum legally required tax withholding, (b) having the Company withhold taxes from the proceeds of the sale of the Shares, | |
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| either through a voluntary sale or through a mandatory sale arranged by the Company (on your behalf pursuant to this authorization), or (c) any other arrangement approved by the Committee. The Fair Market Value of the Shares, determined as of the effective date of the Option exercise, will be applied as a credit against the withholding taxes. The Company or your Employer may withhold or account for Tax-Related Items by considering statutory withholding amounts or other withholding rates applicable in your jurisdiction(s), including maximum applicable rates, in which case you may receive a refund of any over-withheld amount in cash and will have no entitlement to Share equivalent. Finally, you will pay to the Company or your Employer any amount of Tax-Related Items that the Company or your Employer may be required to withhold as a result of your participation in the Plan or your purchase of Shares that cannot be satisfied by the means previously described. The Company may refuse to honor the exercise and refuse to deliver the Shares if you fail to comply with your obligations in connection with the Tax-Related Items as described in this section. | ||
| Restrictions on Resale | You agree not to sell any Shares at a time when applicable laws, Company policies or an agreement between the Company and its underwriters prohibit a sale. This restriction will apply as long as your Service continues and for such period of time after the termination of your Service as the Company may specify. | |
| Transfer of Option | In general, only you can exercise this Option prior to your death. You may not sell, transfer, assign, pledge or otherwise dispose of this Option, other than as designated by you, by will or by the laws of descent and distribution, except as provided below. For instance, you may not use this Option as security for a loan. If you attempt to do any of these things, this Option will immediately become invalid. You may in any event dispose of this Option in your will. Regardless of any marital property settlement agreement, the Company is not obligated to honor a notice of exercise from your former spouse, nor is the Company obligated to recognize your former spouse’s interest in this Option in any other way.
However, if this Option is designated as a nonstatutory stock option in the Notice of Stock Option Grant, then the Committee may, in its sole discretion, allow you to transfer this Option as a gift to one or more family members. For purposes of this Agreement, “family member” means a child, stepchild, grandchild, parent, stepparent, grandparent, spouse, former spouse, sibling, niece, nephew, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law (including adoptive relationships), any individual sharing your household (other than a tenant or employee), a trust in which one or more of these individuals have more than fifty percent (50%) of the | |
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| beneficial interest, a foundation in which you or one or more of these persons control the management of assets, and any entity in which you or one or more of these persons own more than fifty percent (50%) of the voting interest.
In addition, if this Option is designated as a nonstatutory stock option in the Notice of Stock Option Grant, then the Committee may, in its sole discretion, allow you to transfer this Option to your spouse or former spouse pursuant to a domestic relations order in settlement of marital property rights.
The Committee will allow you to transfer this Option only if both you and the transferee(s) execute the forms prescribed by the Committee, which include the consent of the transferee(s) to be bound by this Agreement. | ||
| Retention Rights | Neither this Option nor this Agreement gives you the right to be employed or retained by the Company or any Subsidiary or Affiliate of the Company in any capacity. The Company and its Subsidiaries and Affiliates reserve the right to terminate your Service at any time, with or without cause. | |
| Shareholder Rights | This Option carries neither voting rights nor rights to dividends. You, or your estate or heirs, have no rights as a shareholder of the Company unless and until you have exercised this Option by giving the required notice to the Company and paying the exercise price. No adjustments will be made for dividends or other rights if the applicable record date occurs before you exercise this Option, except as described in the Plan. | |
| Adjustments | The number of Shares covered by this Option and the exercise price per Share will be subject to adjustment in the event of a stock split, a stock dividend or a similar change in Company Shares, and in other circumstances, as set forth in the Plan. The forfeiture provisions and restrictions described above will apply to all new, substitute or additional stock options or securities to which you are entitled by reason of this Award. | |
| Successors and Assigns | Except as otherwise provided in the Plan or this Agreement, every term of this Agreement will be binding upon and inure to the benefit of the parties hereto and their respective heirs, legatees, legal representatives, successors, transferees and assigns. | |
| Notice | Any notice required or permitted under this Agreement will be given in writing, including electronically, and will be deemed effectively given upon the earliest of personal delivery, receipt or the third (3rd) full day following mailing with postage and fees prepaid, addressed to | |
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| the other party hereto at the address last known in the Company’s records or at such other address as such party may designate by ten (10) days’ advance written notice to the other party hereto. The Company may, in its sole discretion, deliver any documents related to your current or future participation in the Plan by electronic means. By accepting this Award, you hereby (1) consent to receive such documents by electronic means; (2) consent to the use of electronic signatures; and (3) agree to participate in the Plan and/or receive any such documents through an on-line or electronic system established and maintained by the Company or a third party designated by the Company, including but not limited to the use of electronic signatures or click-through electronic acceptance of terms and conditions | ||
| Section 409A of the Code | To the extent this Agreement is subject to, and not exempt from, Section 409A of the Code, this Agreement is intended to comply with Section 409A, and its provisions will be interpreted in a manner consistent with such intent. You acknowledge and agree that changes may be made to this Agreement to avoid adverse tax consequences to you under Section 409A. | |
| Applicable Law and Choice of Venue | This Agreement will be interpreted and enforced under the laws of the State of Delaware without application of the conflicts of law principles thereof.
Any controversy arising out of or relating to this Agreement or the Plan, their enforcement or interpretation, or because of an alleged breach, default, or misrepresentation in connection with any of their provisions, or any other controversy arising out of or related to the Award, including, but not limited to, any state or federal statutory claims, shall be submitted to arbitration in Santa Clara County, California, before a sole arbitrator selected from Judicial Arbitration and Mediation Services, Inc., San Jose, California, or its successor (“JAMS”), or if JAMS is no longer able to supply the arbitrator, such arbitrator shall be selected from the American Arbitration Association, and shall be conducted in accordance with the provisions of California Code of Civil Procedure §§ 1280 et seq. as the exclusive forum for the resolution of such dispute; provided, however, that provisional injunctive relief may, but need not, be sought by either party to this Agreement in a court of law while arbitration proceedings are pending, and any provisional injunctive relief granted by such court shall remain effective until the matter is finally determined by the arbitrator. Final resolution of any dispute through arbitration may include any remedy or relief which the arbitrator deems just and equitable, including any and all remedies provided by applicable state or federal statutes. At the conclusion of the arbitration, the arbitrator shall issue a written decision that sets forth the essential findings and conclusions upon which the arbitrator’s award or decision is based. Any award or | |
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| relief granted by the arbitrator hereunder shall be final and binding on the parties hereto, and may be enforced by any court of competent jurisdiction. The parties acknowledge and agree that they are hereby waiving any rights to trial by jury in any action, proceeding or counterclaim brought by either of the parties against the other in connection with any matter whatsoever arising out of or in any way connected with any of the matters referenced in the first sentence above. The parties agree that the Company shall be responsible for payment of the forum costs of any arbitration hereunder, including the arbitrator’s fee. The parties further agree that in any proceeding with respect to such matters, each party shall bear its own attorney’s fees and costs (other than forum costs associated with the arbitration) incurred by it or you or them in connection with the resolution of the dispute. | ||
| Governing Plan Document | This Award is subject to all the provisions of the Plan, the provisions of which are hereby made a part of the Award, and is further subject to all interpretations, amendments, rules and regulations, which may from time to time be promulgated and adopted pursuant to the Plan. Except as expressly provided in this Agreement, in the event of any conflict between the provisions of this Agreement, the Notice of Stock Option Grant, and those of the Plan, the provisions of the Plan will control. | |
| Severability | In the event that all or any part of this Agreement or the Plan is declared by any court or governmental authority to be unlawful or invalid, such unlawfulness or invalidity will not invalidate any portion of this Agreement or the Plan not declared to be unlawful or invalid. Any section of this Agreement (or part of such a section) so declared to be unlawful or invalid will, if possible, be construed in a manner which will give effect to the terms of such section or part of a section to the fullest extent possible while remaining lawful and valid. | |
| Recoupment | This Award is subject to the terms of the Company’s recoupment, clawback or similar policy, as it may be in effect from time to time, as well as any similar provisions of applicable law, any of which could in certain circumstances require forfeiture of the Award and repayment or forfeiture of any Shares or other cash or property received with respect to the Award (including any value received from a disposition of the Shares acquired upon settlement of the Award). | |
| No Tax, Legal or Investment Advice | The Company is not providing any tax, legal or financial advice, nor is the Company making any recommendations regarding your participation in the Plan or your acquisition or sale of the underlying Shares. You understand and agree that you should consult with your own personal tax, financial and/or legal advisors regarding the Award and Tax-Related Items arising in connection with the Award and by accepting the Award, you have agreed that you have done so or knowingly and voluntarily declined to do so. | |
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| Miscellaneous | You understand and acknowledge that (1) the Plan is entirely discretionary, (2) the Company and your Employer have reserved the right to amend, suspend or terminate the Plan at any time, (3) the grant of this Option does not in any way create any contractual or other right to receive additional grants of options (or benefits in lieu of options) at any time or in any amount, and (4) all determinations with respect to any additional grants, including (without limitation) the times when options will be granted, the number of Shares subject to awards, the exercise price and the vesting schedule, will be at the sole discretion of the Company.
The value of this Option will be an extraordinary item of compensation outside the scope of your employment contract, if any, and will not be considered a part of your normal or expected compensation for purposes of calculating severance, resignation, redundancy or end-of-service payments, bonuses, long-service awards, pension or retirement benefits or similar payments.
You understand and acknowledge that participation in the Plan ceases upon termination of your Service for any reason, except as may explicitly be provided otherwise in the Plan or this Agreement.
You hereby authorize and direct your Employer to disclose to the Company or any Subsidiary or Affiliate any information regarding your employment, the nature and amount of your compensation and the fact and conditions of your participation in the Plan, as your Employer deems necessary or appropriate to facilitate the administration of the Plan.
You consent to the collection, use and transfer of personal data as described in this subsection. You understand and acknowledge that the Company, your Employer and the Company’s other Subsidiaries and Affiliates hold certain personal information regarding you for the purpose of managing and administering the Plan, including (without limitation) your name, home address, telephone number, date of birth, social insurance or other government identification number, salary, nationality, job title, any Shares or directorships held in the Company and details of all options or any other entitlements to Shares awarded, canceled, exercised, vested, unvested or outstanding in your favor (the “Data”). You further understand and acknowledge that the Company, its Subsidiaries and/or its Affiliates will transfer Data among themselves as necessary for the purpose of implementation, administration and management of your participation in the Plan, and that the Company and/or any Subsidiary may each further transfer Data to any third party assisting the Company in the implementation, |
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| administration and management of the Plan. You understand and acknowledge that the recipients of Data may be located in the United States or elsewhere, and that the laws of a recipient’s country of operation (e.g., the United States) may not have equivalent privacy protections as local laws where you reside or work. You authorize such recipients to receive, possess, use, retain and transfer Data, in electronic or other form, for the purpose of administering your participation in the Plan, including a transfer to any broker or other third party with whom you elect to deposit Shares acquired under the Plan, of such Data as may be required for the administration of the Plan and/or the subsequent holding of Shares on your behalf. You may, at any time, view the Data, require any necessary modifications of Data, make inquiries about the treatment of Data or withdraw the consents set forth in this subsection by contacting the Human Resources Department of the Company in writing.
You acknowledge and agree that you have reviewed the documents provided to you in relation to the Award in their entirety, have had an opportunity to obtain the advice of counsel prior to executing and accepting the Award, and fully understand all provisions of such documents. You agree upon request to execute any further documents or instruments necessary or desirable in the sole determination of the Company to carry out the purposes or intent of the Award. |
BY SIGNING THE NOTICE OF STOCK OPTION GRANT, YOU AGREE TO ALL OF THE TERMS AND CONDITIONS DESCRIBED ABOVE AND IN THE PLAN.
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EXHIBIT A
COURSERA, INC.
2021 STOCK INCENTIVE PLAN
NOTICE OF EXERCISE OF STOCK OPTION
OPTIONEE INFORMATION:
| Name: |
| |
| Social Security Number: |
| |
| Employee Number: |
| |
| Address: |
| |
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| ||
OPTION INFORMATION:
| Grant Date: |
| |
| Exercise Price per Share: | $ | |
| Total Number of Shares of Coursera, Inc. (the “Company”) Covered by Option: |
| |
| Type of Stock Option: | ☐ Nonstatutory (NSO) | |
| ☐ Incentive (ISO) | ||
| Number of Shares of the Company for which Option is Being Exercised Now: | (“Purchased Shares”) | |
| Total Exercise Price for the Purchased Shares: | $ | |
| Form of Payment: | ☐ Cash or Check for $ payable to “Coursera, Inc.”
☐ Cashless exercise
☐ Net exercise | |
| Name(s) in which the Purchased Shares should be Registered: |
| |
| The Certificate for the Purchased Shares (if any) should be sent to the Following Address: |
| |
ACKNOWLEDGMENTS:
| 1. | I understand that all sales of Purchased Shares are subject to compliance with the Company’s policy on securities trades. |
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| 2. | I hereby acknowledge that I received and read a copy of the prospectus describing the Coursera, Inc. 2021 Stock Incentive Plan and the tax consequences of an exercise. |
| 3. | In the case of a nonstatutory option, I understand that I must recognize ordinary income equal to the spread between the fair market value of the Purchased Shares on the date of exercise and the exercise price. I further understand that I am required to pay withholding taxes at the time of exercising a nonstatutory option. |
| 4. | In the case of an incentive stock option, I agree to notify the Company if I dispose of the Purchased Shares before I have met both of the tax holding periods applicable to incentive stock options (that is, if I dispose of the Purchased Shares prior to the date that is two (2) years after the Grant Date and one (1) year after the date the option was exercised). |
| SIGNATURE AND DATE: | ||
|
|
, 20 | |
A-2
COURSERA, INC.
2021 STOCK INCENTIVE PLAN
NOTICE OF RESTRICTED STOCK UNIT AWARD
You have been granted the following Restricted Stock Units (the “Restricted Stock Units”, “RSUs” or the/this “Award”) representing shares of Common Stock of Coursera, Inc. (the “Company”) under the Coursera, Inc. 2021 Stock Incentive Plan (as may be amended from time to time, the “Plan”):
| Name of Recipient: | [Name of Recipient] | |
| Grant Date: | [Date of Grant] | |
| Total Number of Shares Subject to Restricted Stock Units: | [Total Shares] | |
| First Vesting Date: | [First Vesting Date] | |
| Vesting Schedule: | [Actual vesting schedule to be inserted] | |
By your written signature below (or your electronic acceptance) and the signature of the Company’s representative below, you and the Company agree that the RSUs are granted under and governed by the term and conditions of the Plan, this Notice of Restricted Stock Unit Award and the Restricted Stock Unit Agreement, including any special terms for Participants outside the United States (“U.S.”) set forth in the Addendum (collectively, this “Agreement“), both of which are attached to and made a part of this document.
By your written signature below (or your electronic acceptance), you further agree that the Company may deliver by e-mail all documents relating to the Plan or this Award (including without limitation, prospectuses required by the Securities and Exchange Commission) and all other documents that the Company is required to deliver to its security holders (including without limitation, annual reports and proxy statements). You also agree that the Company may deliver these documents by posting them on a website maintained by the Company or by a third party under contract with the Company. If the Company posts these documents on a website, it will notify you by e-mail. Should you electronically accept this Agreement, you agree to the following: “This electronic contract contains my electronic signature, which I have executed with the intent to sign this Agreement.” Notwithstanding the above, if you have not affirmatively rejected or accepted this Award within 90 days of the Date of Grant set forth in this Notice of Restricted Stock Unit Award, you are deemed to have accepted this Award, subject to all of the terms and conditions of this Agreement.
| RECIPIENT | COURSERA, INC. | |||||
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|
By: |
| ||||
| Recipient’s Signature | Name: |
| ||||
|
|
Title: |
| ||||
| Recipient’s Printed Name | ||||||
COURSERA, INC.
2021 STOCK INCENTIVE PLAN
RESTRICTED STOCK UNIT AGREEMENT
| The Plan and Other Agreements | The RSUs that you are receiving are granted pursuant and subject in all respects to the applicable provisions of the Plan, which is incorporated herein by reference. Capitalized terms not defined in this Agreement will have the meanings ascribed to them in the Plan.
The attached Notice of Restricted Stock Unit Award, this Agreement and the Plan constitute the entire understanding between you and the Company regarding this Award. Any prior agreements, commitments or negotiations concerning this Award are superseded. This Agreement may be amended by the Committee without your consent; however, if any such amendment would materially impair your rights or obligations under this Agreement, this Agreement may be amended only by another written agreement, signed by you and the Company. | |
| Payment for RSUs | No cash payment is required for the RSUs you receive. You are receiving the RSUs in consideration for Services rendered by you. | |
| Vesting | The RSUs that you are receiving will vest in installments, as shown in the Notice of Restricted Stock Unit Award. No additional RSUs vest after your Service as an Employee or a Consultant has terminated for any reason. | |
| Forfeiture | If your Service terminates for any reason, then this Award expires immediately as to the number of RSUs that have not vested before the termination date and do not vest as a result of termination. Your Service will not be extended by any notice period (e.g., your Service will not include any contractual notice period or period of “garden leave” or similar period mandated under employment laws in the jurisdiction where you are employed or the terms of your employment or service agreement, if any). This means that the unvested RSUs will immediately be cancelled when your Service terminates. You receive no payment for RSUs that are forfeited. The Company determines when your Service terminates for this purpose and all purposes under the Plan and its determinations are conclusive and binding on all persons. | |
| Leaves of Absence | For purposes of this Award, your Service does not terminate when you go on a military leave, a sick leave or another bona fide leave of absence, if the leave of absence was approved by the Company in writing and if continued crediting of Service is required by the terms of the leave or by applicable law. But your Service terminates when the approved leave ends, unless you immediately return to active work. | |
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| If you go on a leave of absence, then the vesting schedule specified in the Notice of Restricted Stock Unit Award may be adjusted in accordance with the Company’s leave of absence policy or the terms of your leave. If your work schedule changes (i.e., your work hours are increased or reduced), then the vesting schedule specified in the Notice of Restricted Stock Unit Award may be adjusted in accordance with the Company’s part-time work policy or the terms of an agreement between you and the Company pertaining to your part-time schedule. | ||
| Nature of RSUs | Your RSUs are mere bookkeeping entries. They represent only the Company’s unfunded and unsecured promise to issue Shares on a future date. As a holder of RSUs, you have no rights other than the rights of a general creditor of the Company. | |
| No Voting Rights or Dividends | Your RSUs carry neither voting rights nor rights to dividends. You, or your estate or heirs, have no rights as a stockholder of the Company unless and until your RSUs are settled by issuing Shares. No adjustments will be made for dividends or other rights if the applicable record date occurs before your Shares are issued, except as described in the Plan. | |
| RSUs Nontransferable | You may not sell, transfer, assign, pledge or otherwise dispose of any RSUs. For instance, you may not use your RSUs as security for a loan. If you attempt to do any of these things, your RSUs will immediately become invalid. | |
| Settlement of RSUs | Each of your vested RSUs will be settled when it vests; provided, however, that if the Committee requires you to pay withholding taxes through a sale of Shares, settlement of each RSU may be deferred to the first permissible trading day (as defined below) for the Shares, if later than the applicable vesting date.
Under no circumstances may your RSUs be settled later than two and one-half (2-1/2) months following the calendar year in which the applicable vesting date occurs.
For purposes of this Agreement, “permissible trading day” means a day that satisfies all of the following requirements: (1) the exchange on which the Shares are traded is open for trading on that day; (2) you are permitted to sell Shares on that day without incurring liability under Section 16(b) of the Exchange Act; (3) either (a) you are not in possession of material non-public information that would make it illegal for you to sell Shares on that day under Rule 10b-5 under the Exchange Act or (b) Rule 10b5-1 under the Exchange Act would apply to the sale; (4) you are permitted to sell Shares on that day under such written insider trading policy as may have been adopted by the Company; and (5) you are not prohibited from selling Shares on that day by a written agreement between you and the Company or a third party. | |
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| At the time of settlement, you will receive one Share for each vested RSU; provided, however, that no fractional Shares will be issued or delivered pursuant to the Plan or this Agreement, and the Committee will determine whether cash will be paid in lieu of any fractional Share or whether such fractional Share and any rights thereto will be canceled, terminated or otherwise eliminated. In addition, the Shares are issued to you subject to the condition that the issuance of the Shares not violate any law or regulation and the Shares are subject to such approvals by any governmental agencies or national securities exchanges as may be required. | ||
| Withholding Taxes and Stock Withholding | Regardless of any action the Company and/or the Subsidiary or Affiliate employing you (“Employer”) takes with respect to any or all income tax, social insurance, payroll tax, payment on account or other tax-related withholding (“Tax-Related Items”), you acknowledge that the ultimate liability for all Tax-Related Items legally due by you is and remains your responsibility and that the Company and your Employer (1) make no representations or undertakings regarding the treatment of any Tax-Related Items in connection with any aspect of this Award, including the award, vesting or settlement of the RSUs, the subsequent sale of Shares acquired pursuant to settlement and the receipt of any dividends; and (2) do not commit to structure the terms of the award or any aspect of the RSUs to reduce or eliminate your liability for Tax-Related Items. Further, if you are subject to Tax-Related Items in more than one jurisdiction, you acknowledge that the Company and your Employer (or former Employer, as applicable) may be required to withhold or account for Tax-Related Items in more than one jurisdiction.
Prior to the settlement of the RSUs, you shall pay or make adequate arrangements satisfactory to the Company and your Employer to satisfy all withholding and payment on account obligations of the Company and your Employer. In this regard, you authorize the Company and your Employer to withhold all applicable Tax-Related Items legally payable by you from your wages or other cash compensation paid to you by the Company and your Employer.
Unless an alternative arrangement satisfactory to the Committee has been provided prior to the vesting date, the default method for paying withholding taxes is withholding fully vested Shares that otherwise would be issued to you when the RSUs are settled, provided that the Company only withholds a number of whole Shares having a Fair Market Value equal to the amount necessary to satisfy the maximum legally required tax withholding. Notwithstanding the foregoing, if you are classified as a Section 16 officer of the Company under the Exchange Act when the RSUs are settled, you shall be restricted to satisfying your obligation for Tax-Related Items by withholding in fully vested Shares that otherwise would be issued to you when the RSUs are settled, unless | |
4
| this withholding method is not permissible under applicable laws, or the Company has authorized an alternative method for the relative taxable event. If the obligation for Tax-Related Items is satisfied by withholding in Shares, for tax purposes, you are deemed to have been issued the full number of Shares subject to the vested RSU, notwithstanding that a number of the Shares is held back solely for the purpose of paying the Tax-Related Items. The Committee may also require the withholding of taxes from the proceeds of the sale of the Shares, either through a voluntary sale or through a mandatory sale arranged by the Company (on your behalf pursuant to this authorization), or any other arrangement approved by the Committee.
The Fair Market Value of the Shares, determined as of the effective date when taxes otherwise would have been withheld in cash, will be applied as a credit against the withholding taxes. The Company or your Employer may withhold or account for Tax-Related Items by considering statutory withholding amounts or other withholding rates applicable in your jurisdiction(s), including maximum applicable rates, in which case you may receive a refund of any over-withheld amount in cash and will have no entitlement to Share equivalent. Finally, you will pay to the Company or your Employer any amount of Tax-Related Items that the Company or your Employer may be required to withhold as a result of your participation in the Plan or your acquisition of Shares that cannot be satisfied by the means previously described. The Company may refuse to deliver the Shares if you fail to comply with your obligations in connection with the Tax-Related Items as described in this section, and your rights to the Shares will be forfeited if you do not comply with such obligations on or before the date that is two and one-half (2-1/2) months following the calendar year in which the applicable vesting date for the RSUs occurs. | ||
| Restrictions on Resale | You agree not to sell any Shares at a time when applicable laws, Company policies or an agreement between the Company and its underwriters prohibit a sale. This restriction will apply as long as your Service continues and for such period of time after the termination of your Service as the Company may specify. | |
| No Retention Rights | Neither this Award nor this Agreement gives you the right to be employed or retained by the Company or any Subsidiary or Affiliate of the Company in any capacity. The Company and its Subsidiaries and Affiliates reserve the right to terminate your Service at any time, with or without cause. | |
| Adjustments | The number of RSUs covered by this Award will be subject to adjustment in the event of a stock split, a stock dividend or a similar change in Shares, and in other circumstances, as set forth in the Plan. The forfeiture provisions and restrictions described above will apply to all new, substitute or additional restricted stock units or securities to which you are entitled by reason of this Award. | |
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| Successors and Assigns | Except as otherwise provided in the Plan or this Agreement, every term of this Agreement will be binding upon and inure to the benefit of the parties hereto and their respective heirs, legatees, legal representatives, successors, transferees and assigns. | |
| Notice | Any notice required or permitted under this Agreement will be given in writing, including electronically, and will be deemed effectively given upon the earliest of personal delivery, receipt or the third (3rd) full day following mailing with postage and fees prepaid, addressed to the other party hereto at the address last known in the Company’s records or at such other address as such party may designate by ten (10) days’ advance written notice to the other party hereto. The Company may, in its sole discretion, deliver any documents related to your current or future participation in the Plan by electronic means. By accepting this Award, you hereby (1) consent to receive such documents by electronic means; (2) consent to the use of electronic signatures; and (3) agree to participate in the Plan and/or receive any such documents through an on-line or electronic system established and maintained by the Company or a third party designated by the Company, including but not limited to the use of electronic signatures or click-through electronic acceptance of terms and conditions. | |
| Section 409A of the Code | To the extent this Agreement is subject to, and not exempt from, Section 409A of the Code, this Agreement is intended to comply with Section 409A, and its provisions will be interpreted in a manner consistent with such intent. You acknowledge and agree that changes may be made to this Agreement to avoid adverse tax consequences to you under Section 409A. | |
| Applicable Law and Choice of Venue | This Agreement will be interpreted and enforced under the laws of the State of Delaware without application of the conflicts of law principles thereof.
Any controversy arising out of or relating to this Agreement or the Plan, their enforcement or interpretation, or because of an alleged breach, default, or misrepresentation in connection with any of their provisions, or any other controversy arising out of or related to the Award, including, but not limited to, any state or federal statutory claims, shall be submitted to arbitration in Santa Clara County, California, before a sole arbitrator selected from Judicial Arbitration and Mediation Services, Inc., San Jose, California, or its successor (“JAMS”), or if JAMS is no longer able to supply the arbitrator, such arbitrator shall be selected from the American Arbitration Association, and shall be conducted in accordance with the provisions of California Code of Civil Procedure §§ 1280 et seq. as the | |
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| exclusive forum for the resolution of such dispute; provided, however, that provisional injunctive relief may, but need not, be sought by either party to this Agreement in a court of law while arbitration proceedings are pending, and any provisional injunctive relief granted by such court shall remain effective until the matter is finally determined by the arbitrator. Final resolution of any dispute through arbitration may include any remedy or relief which the arbitrator deems just and equitable, including any and all remedies provided by applicable state or federal statutes. At the conclusion of the arbitration, the arbitrator shall issue a written decision that sets forth the essential findings and conclusions upon which the arbitrator’s award or decision is based. Any award or relief granted by the arbitrator hereunder shall be final and binding on the parties hereto and may be enforced by any court of competent jurisdiction. The parties acknowledge and agree that they are hereby waiving any rights to trial by jury in any action, proceeding or counterclaim brought by either of the parties against the other in connection with any matter whatsoever arising out of or in any way connected with any of the matters referenced in the first sentence above. The parties agree that the Company shall be responsible for payment of the forum costs of any arbitration hereunder, including the arbitrator’s fee. The parties further agree that in any proceeding with respect to such matters, each party shall bear its own attorney’s fees and costs (other than forum costs associated with the arbitration) incurred by it or you or her in connection with the resolution of the dispute. | ||
| Governing Plan Document | This Award is subject to all the provisions of the Plan, the provisions of which are hereby made a part of the Award, and is further subject to all interpretations, amendments, rules and regulations which may from time to time be promulgated and adopted pursuant to the Plan. Except as expressly provided in this Agreement, in the event of any conflict between the provisions of this Agreement, the Notice of Restricted Stock Unit Award, and those of the Plan, the provisions of the Plan will control. | |
| Severability | In the event that all or any part of this Agreement or the Plan is declared by any court or governmental authority to be unlawful or invalid, such unlawfulness or invalidity will not invalidate any portion of this Agreement or the Plan not declared to be unlawful or invalid. Any section of this Agreement (or part of such a section) so declared to be unlawful or invalid will, if possible, be construed in a manner which will give effect to the terms of such section or part of a section to the fullest extent possible while remaining lawful and valid. | |
| Recoupment | This Award is subject to the terms of the Company’s recoupment, clawback or similar policy as it may be in effect from time to time, as well as any similar provisions of applicable law, any of which could in certain circumstances require forfeiture of the Award and repayment or forfeiture of any Shares or other cash or property received with respect to the Award (including any value received from a disposition of the Shares acquired upon settlement of the Award). | |
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| No Tax, Legal or Investment Advice | The Company is not providing any tax, legal or financial advice, nor is the Company making any recommendations regarding your participation in the Plan, or your acquisition or sale of the underlying Shares. You understand and agree that you should consult with your own personal tax, financial and/or legal advisors regarding the Award and Tax-Related Items arising in connection with the Award and by accepting the Award, you have agreed that you have done so or knowingly and voluntarily declined to do so. | |
| Miscellaneous | You understand and acknowledge that (1) the Plan is entirely discretionary, (2) the Company and your Employer have reserved the right to amend, suspend or terminate the Plan at any time, (3) the grant of this Award does not in any way create any contractual or other right to receive additional grants of awards (or benefits in lieu of awards) at any time or in any amount and (4) all determinations with respect to any additional grants, including (without limitation) the times when awards will be granted, the number of RSUs subject to awards and the vesting schedule, will be at the sole discretion of the Company.
The value of this Award will be an extraordinary item of compensation outside the scope of your employment contract, if any, and will not be considered a part of your normal or expected compensation for purposes of calculating severance, resignation, redundancy or end-of-service payments, bonuses, long-service awards, pension or retirement benefits or similar payments.
You understand and acknowledge that participation in the Plan ceases upon termination of your Service for any reason, except as may explicitly be provided otherwise in the Plan or this Agreement.
You hereby authorize and direct your Employer to disclose to the Company or any Subsidiary or Affiliate any information regarding your employment, the nature and amount of your compensation and the fact and conditions of your participation in the Plan, as your Employer deems necessary or appropriate to facilitate the administration of the Plan.
You consent to the collection, use and transfer of personal data as described in this subsection. You understand and acknowledge that the Company, your Employer and the Company’s other Subsidiaries and Affiliates hold certain personal information regarding you for the purpose of managing and administering the Plan, including (without limitation) your name, home address, telephone number, date of birth, social insurance or other government identification number, salary, nationality, job title, any Shares or directorships held in the Company and details of | |
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| all awards or any other entitlements to RSUs or Shares awarded, canceled, exercised, vested, unvested or outstanding in your favor (the “Data”). You further understand and acknowledge that the Company, its Subsidiaries and/or its Affiliates will transfer Data among themselves as necessary for the purpose of implementation, administration and management of your participation in the Plan and that the Company and/or any Subsidiary may each further transfer Data to any third party assisting the Company in the implementation, administration and management of the Plan. You understand and acknowledge that the recipients of Data may be located in the United States or elsewhere, and that the laws of a recipient’s country of operation (e.g., the United States) may not have equivalent privacy protections as local laws where you reside or work. You authorize such recipients to receive, possess, use, retain and transfer Data, in electronic or other form, for the purpose of administering your participation in the Plan, including a transfer to any broker or other third party with whom you elect to deposit Shares acquired under the Plan of such Data as may be required for the administration of the Plan and/or the subsequent holding of Shares on your behalf. You may, at any time, view the Data, require any necessary modifications of Data, make inquiries about the treatment of Data or withdraw the consents set forth in this subsection by contacting the Human Resources Department of the Company in writing.
You acknowledge and agree that you have reviewed the documents provided to you in relation to the Award in their entirety, have had an opportunity to obtain the advice of counsel prior to executing and accepting the Award, and fully understand all provisions of such documents. You agree upon request to execute any further documents or instruments necessary or desirable in the sole determination of the Company to carry out the purposes or intent of the Award. |
BY SIGNING THE NOTICE OF RESTRICTED STOCK UNIT AWARD, YOU AGREE TO ALL OF THE TERMS AND CONDITIONS DESCRIBED ABOVE AND IN THE PLAN.
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ADDENDUM
SPECIAL TERMS AND CONDITIONS FOR PARTICIPANTS OUTSIDE THE U.S.
This Addendum includes additional country-specific terms and conditions that apply to Participants working and/or residing in the countries listed below. This Addendum is part of the Agreement and contains terms and conditions material to participation in the Plan. Unless otherwise provided below, capitalized terms used but not defined herein shall have the same meanings assigned to them in the Plan and the Restricted Stock Unit Award Agreement.
The information is based on the securities and other laws in effect in the respective countries as of [January 2021]. Such laws are often complex and change frequently. As a result, the Company strongly recommends that you not rely on the information in this Addendum as the only source of information relating to the consequences of your participation in the Plan because the information may be out of date when your Award vests or settles, or you sell Shares acquired under the Plan.
In addition, the information contained herein is general in nature and may not apply to your particular situation, and the Company is not in a position to assure you of a particular result. Accordingly, you should seek appropriate professional advice as to how the relevant laws in your country may apply to your situation.
Finally, if you are a citizen or resident of a country other than the one in which you are currently working and/or residing or you transfer employment or residency after the Date of Grant, or if you are considered a resident of another country for local law purposes, then the provisions contained herein may not be apply to you. The Company shall, in its sole discretion, determine to what extent the terms and conditions included herein will apply under these circumstances.
ADDENDUM - 1
TERMS APPLICABLE TO ALL PARTICIPANTS OUTSIDE THE U.S.
1. NATURE OF GRANT. In accepting the Award, you understand, acknowledge and agree that:
(a) The Plan is established voluntarily by the Company, is discretionary in nature, and may be modified, amended, suspended or terminated by the Company at any time, to the extent permitted by the Plan;
(b) The grant of the Award is exceptional, voluntary and occasional and does not create any contractual or other right to receive future grants of Awards or benefits in lieu of Awards, even if Awards have been granted repeatedly in the past;
(c) All decisions with respect to future grants of Awards, if any, will be at the sole discretion of the Company;
(d) Your participation in the Plan is voluntary;
(e) The Award and the Shares subject to the Award, and the income from and value of same, are not intended to replace any pension rights or compensation;
(f) The Award and the Shares subject to the Award, and the income from and value of same, are not part of normal or expected salary or compensation for any purpose, including calculating any severance, resignation, termination, payment in lieu of notice, redundancy, dismissal, end-of-service payments, bonuses, holiday pay, long-service awards, pension or retirement or welfare benefits or similar payments;
(g) The future value of the underlying Shares is unknown, indeterminable and cannot be predicted with certainty;
(h) If you acquire Shares upon settlement of the Award, the value of such Shares may increase or decrease;
(i) No claim or entitlement to compensation or damages shall arise from forfeiture of the Award or any portion thereof resulting from the termination of your continuous Service (for any reason whatsoever, whether or not later found to be invalid or in breach of employment laws in the jurisdiction where you are employed or the terms of your employment or service agreement, if any);
(j) Unless otherwise agreed with the Company, the Award and the Shares subject to the Award, and the income from and value of same, are not granted as consideration for, or in connection with, the service you may provide as a director of a Subsidiary or Affiliate; and
(k) Neither the Company nor your Employer shall be liable for any foreign exchange rate fluctuation between your local currency and the U.S. Dollar that may affect the value of the Award or of any amounts due to you pursuant to the Award or the subsequent sale of any Shares acquired upon settlement.
ADDENDUM - 2
2. DATA PRIVACY INFORMATION AND CONSENT.
(a) Data Collection and Usage. The Company and your Employer may collect, process and use certain personal information about you, including, but not limited to, your name, home address, email address and telephone number, email address, date of birth, social insurance number, passport or other identification number, salary, nationality, job title, any shares of Common Stock or directorships held in the Company, details of all Awards or any other entitlement to Shares awarded, canceled, vested, unvested, settled or outstanding in your favor (“Data”), for the purposes of implementing, administering and managing the Plan. The legal basis, where required, for the processing of Data is your consent.
(b) Stock Plan Administration Service Providers. The Company may transfer Data to third parties which assist the Company with the implementation, administration and management of the Plan. The Company may select different service providers or additional service providers and share Data with such other provider serving in a similar manner. You may be asked to agree on separate terms and data processing practices with the service provider, with such agreement being a condition to the ability to participate in the Plan.
(c) International Data Transfers. The Company and its service providers are based in the United States. Your country or jurisdiction may have different data privacy laws and protections than the United States. The Company’s legal basis, where required, for the transfer of Data is your consent.
(d) Data Retention. The Company will hold and use the Data only as long as is necessary to implement, administer and manage your participation in the Plan, or as required to comply with legal or regulatory obligations, including under tax, exchange control, labor and securities laws. This period may extend beyond your period of continuous Service. When the Company or your Employer no longer need Data for any of the above purposes, they will cease processing it in this context and remove it from all of their systems used for such purposes to the fullest extent practicable.
(e) Voluntariness and Consequences of Consent Denial or Withdrawal. Participation in the Plan is voluntary and you are providing the consents herein on a purely voluntary basis. If you do not consent, or if you later seek to revoke your consent, your salary from or service with your Employer will not be affected; the only consequence of refusing or withdrawing your consent is that the Company would not be able to grant these Awards or other equity awards to you or administer or maintain such awards.
(f) Data Subject Rights. You may have a number of rights under data privacy laws in your jurisdiction. Depending on where you are based, such rights may include the right to (i) request access or copies of Data the Company processes, (ii) rectification of incorrect Data, (iii) deletion of Data, (iv) restrictions on processing of Data, (v) portability of Data, (vi) lodge complaints with competent authorities in your jurisdiction, and/or (vii) receive a list with the names and addresses of any potential recipients of Data. To receive clarification regarding these rights or to exercise these rights, you can contact your local human resources representative.
ADDENDUM - 3
By accepting the Award and indicating consent via the Company’s acceptance procedure, you are declaring that you agree with the data processing practices described herein and consent to the collection, processing and use of Data by the Company and the transfer of Data to the recipients mentioned above, including recipients located in countries which do not adduce an adequate level of protection from a European (or other non-U.S.) data protection law perspective, for the purposes described above.
3. SECURITIES LAW NOTICE. Unless otherwise noted, neither the Company nor the Shares are registered with any local stock exchange or under the control of any local securities regulator outside the U.S. The Agreement, the Notice of Restricted Stock Unit Award, the Plan, and any other communications or materials that you may receive regarding participation in the Plan do not constitute advertising or an offering of securities outside the U.S., and the issuance of securities described in any Plan-related documents is not intended for public offering or circulation in your jurisdiction.
4. LANGUAGE. You acknowledge you are sufficiently proficient in English, or have consulted with an advisor who is sufficiently proficient in English, so as to allow you to understand the terms of this Agreement. If you have received this Agreement or any other documents related to the Plan translated into a language other than English and if the meaning of the translated version is different than the English version, the English version will control.
5. FOREIGN ASSET/ACCOUNT REPORTING. You acknowledge that there may be certain foreign asset and/or account reporting requirements which may affect your ability to acquire or hold Shares acquired under the Plan or cash received from participating in the Plan in an escrow, trust, brokerage or bank account outside your country. You may be required to report such accounts, assets or transactions to the tax or other authorities in your country. You also may be required to repatriate sale proceeds or other funds received as a result of participation in the Plan to your country through a designated bank or broker within a certain time after receipt. You acknowledge that it is your responsibility to be compliant with such regulations, and you should consult your personal legal advisor for any details.
BULGARIA
Purpose and Eligibility
The purpose of this sub-addendum to the Plan (the “BG Addendum”) is to enable the Company to grant RSUs to certain employees of the Company who are based in the Republic of Bulgaria (“Bulgarian employees”). RSUs may only be granted under the BG Addendum to Bulgarian employees of the Company. Any person to whom an RSU has been granted under the BG Addendum is a “Participant” for the purposes of the Plan. RSUs granted pursuant to the BG Addendum shall be governed by the terms of the Plan and this Agreement, subject to any such amendments set out below and as are necessary to give effect to the BG Addendum.
ADDENDUM - 4
Definitions
Capitalized terms are defined in the Plan and this Agreement, with the following additions:
| (a) | “NRA” means the National Revenue Agency of the Republic of Bulgaria. |
| (b) | “NSSI” means the National Social Security Institute of the Republic of Bulgaria. |
| (c) | “PITA” means the Personal Incomes Tax Act of the Republic of Bulgaria. |
| (d) | “SIC” means the Social Insurance Code of the Republic of Bulgaria. |
| (e) | “HIA” means the Health Insurance Act of the Republic of Bulgaria. |
| (f) | “Tax Liabilities” shall have the meaning set out under “Withholding Obligations” below. |
Withholding obligations
For residents of Bulgaria, you shall be accountable for any personal income tax and any health and/or social security contributions liabilities, which are not in principle due at the expense of your Employer, which are chargeable on any assessable income deriving from the grant or settlement of an RSU. In respect of such assessable income, you shall indemnify the Company and (at the direction of the Company) a Subsidiary which is or may be treated as your Employer in respect of the following:
| (a) | Any personal income tax liability, which is to be paid to the NRA by the Company on your behalf and at your expense pursuant to the provisions of the PITA; |
| (b) | Any social security contribution liability, which is to be paid to the NSSI by the Company on your behalf and at your expense pursuant to the provisions of the SIC; and |
| (c) | Any health security contribution liability, which is to be paid to the NSSI by the Company on your behalf and at your expense pursuant to the provisions of the HIA, (together “Tax Liabilities”). |
You shall make such arrangements as the Company requires to meet the cost of the Tax Liabilities, including at the direction of the Company, any of the following:
| (a) | Making a cash payment of an appropriate amount equal to the Tax Liabilities to the Company before the 14th day following the end of the month in which the event giving rise to the Tax Liabilities occurred, or |
| (b) | Deduction of an appropriate amount equal to the Tax Liabilities from your salary payable for the month in which the event giving rise to the Tax Liabilities occurred or one or more of the following months. |
| (c) | Selling back to the Company a sufficient amount of the Shares acquired pursuant to the settlement of the RSUs to cover the amount of the Tax Liabilities and authorizing the payment to the relevant company of the appropriate amount (including all reasonable fees, commissions and expenses incurred by the relevant company in relation to such sale) out of the net proceeds of sale of the Shares; |
ADDENDUM - 5
| (d) | Appointing the Company as an agent and/or attorney for the sale of sufficient amount of the Shares acquired pursuant to settlement of the RSUs to cover the Tax Liabilities and authorizing the payment to the relevant company of the appropriate amount (including all reasonable fees, commissions and expenses incurred by the relevant company in relation to such sale) out of the net proceeds of sale of the Shares. |
| (e) | Any other appropriate means of indemnity agreed on between you and the Company. |
Data Privacy
| (a) | You understand and agree that the Company and any relevant Subsidiary or Affiliate may collect, use and transfer in electronic or other form any personal information (the “Data”) necessary for the purposes of implementing, administering and managing the Participant’s participation in the Plan and the implementation, administration and management of the Plan. Data includes your home address, telephone number, date of birth, national insurance number, salary, nationality, job title and number of shares of Common Stock held and the details of all stock units or any other entitlements to shares of Common Stock awarded, cancelled, exercised, vested, unvested or outstanding. |
| (b) | You understand and agree that Data may be transferred to the Company and any of its Subsidiaries and to any third parties dealing with the implementation, administration and management of the Plan, including any requisite transfer to broker or other third party assisting with the settlement of the RSUs or with whom the Shares may be deposited. |
| (c) | You understand and agree that the recipient of Data may be located overseas both within and outside the European Union and those countries may have data privacy laws which are different to those applicable on the territory of the Republic of Bulgaria. Furthermore, you understand and agree that the transfer of Data to such third parties is necessary to facilitate your participation in the Plan and the implementation, administration and management of the Plan. |
CANADA
Settlement of Award
Notwithstanding any provision of the Plan to the contrary, an Award granted to a Participant who is a resident of Canada shall be settled in Shares, unless the Participant agrees to the settlement being made in the form of cash, a combination of cash and Shares, or in any other form.
Tax Withholding Obligations
For residents of Canada, you understand, acknowledge and agree that, with respect to the payment of Tax-Related Items in connection with this Award, in addition to the means specifically contemplated in the “Withholding Taxes and Stock Withholding” section of this
ADDENDUM - 6
Agreement, you may be required to make a payment to the Company to enable it to satisfy any applicable withholding obligations with regard to Tax-Related Items before the issuance of Shares to you pursuant to this Award.
COLOMBIA
Nature of Grant
This provision supplements Section 1 of this Addendum:
You acknowledge that pursuant to Article 128 of the Colombian Labor Code, the Plan and related benefits do not constitute a component of “salary” for any legal purpose.
Exchange Control Information
You understand that you are responsible for complying with any and all Colombian foreign exchange requirements in connection with the RSUs, any Shares acquired and funds remitted into Colombia in connection with the Plan. This may include, among others, reporting obligations to the Central Bank (Banco de la República) and, in certain circumstances, repatriation requirements. You are responsible for ensuring your compliance with any applicable requirements and should speak to your personal legal advisor on this matter.
Foreign Asset / Account Reporting Information
You understand that you must file an annual informative return with the Colombian Tax Office detailing any assets held abroad (including Shares held outside of Colombia). If the individual value of any of these assets exceeds a certain threshold, you must describe each asset and indicate the jurisdiction in which it is located, its nature and its value.
INDIA
Data Privacy Information and Consent
By accepting the Award and indicating consent via the Company’s acceptance procedure, you are declaring that you agree to allow, use and transfer your personal information (including any sensitive personal data and information) for the purpose of achieving the objectives contemplated herein, and you further agree and acknowledge that the data collection, security and transfer practices adopted by the Company are the reasonable security practices and procedures for the purpose of (Indian) Information Technology Act, 2000, and the rules framed thereunder.
Exchange Control Information
You understand that you must repatriate any proceeds from the sale of Shares acquired under the Plan and convert the proceeds into local currency, immediately, but in any event no later than 90 days of sale of Shares. You also understand that you must repatriate any cash dividend equivalents to India and convert the proceeds into local currency within 60 days of receipt. You will receive a foreign inward remittance certificate (“FIRC”) from the bank where you deposit the foreign currency. You should maintain the FIRC as evidence of the repatriation of funds in the event the Reserve Bank of India or the Company requests proof of repatriation.
ADDENDUM - 7
Foreign Asset/Account Reporting Information
Indian residents are required to declare any foreign bank accounts and any foreign financial assets (including Shares held outside India) in their annual tax return. You should consult with your personal tax advisor to determine your personal reporting obligations.
UNITED KINGDOM
Purpose and Eligibility
The purpose of this sub-addendum to the Plan (the “UK Addendum”) is to enable the Company to grant restricted stock units (“RSUs”) to certain employees and directors of the Company and its Subsidiaries who are based in the United Kingdom. RSUs may only be granted under the UK Addendum to employees and directors of the Company and its Subsidiaries. Any person to whom an RSU has been granted under the UK Addendum is a “Participant” for the purposes of the Plan. RSUs granted pursuant to the UK Addendum shall be governed by the terms of the Plan and this Agreement, subject to any such amendments set out below and as are necessary to give effect to the UK Addendum. RSUs granted pursuant to the UK Addendum are granted pursuant to an “employees’ share scheme” for the purposes of the Financial Services and Markets Act 2000.
Definitions
Capitalized terms are defined in the Plan and this Agreement, with the following additions or amendments:
| (a) | “Control” (for the purposes of the definition of “Subsidiary” below) has the meaning contained in section 719 ITEPA. |
| (b) | “Data Protection Law” means: |
| a. | EU Regulation 2016/679 as it forms part of the law of England and Wales by virtue of section 3 of the European Union (Withdrawal) Act 2018 (the “UK GDPR”); and |
| b. | the Data Protection Act 2018; |
in each case, to the extent in force, and as such are updated, amended or replaced from time to time.
| (c) | “HMRC” means the UK HM Revenue and Customs. |
| (d) | “ITEPA” means the Income Tax (Earnings and Pensions) Act 2003. |
| (e) | “Personal Data” means as defined in Data Protection Law. |
| (f) | “Subsidiary” means a company (wherever incorporated) which for the time being is under the Control of the Company. |
| (g) | “Tax Liabilities” shall have the meaning set out under “Withholding Obligations” below. |
ADDENDUM - 8
Settlement of RSUs
For residents of the UK, settlement of RSUs upon vesting will be made in whole Shares, or, subject to your prior written consent, in the form of cash (or a combination of cash and whole Shares).
Withholding obligations
For residents of the UK, you shall be accountable for any income tax and, subject to the following provisions, national insurance liability which is chargeable on any assessable income deriving from the vesting of, or other dealing in, an RSU, or any additional share of cash consideration acquired as a result of a distribution of a dividend. In respect of such assessable income, you shall indemnify the Company and (at the direction of the Company), any Subsidiary which is or may be treated as your Employer in respect of the following:
| (a) | any income tax liability which falls to be paid to HMRC by the Company (or the relevant employing Subsidiary) under the PAYE system as it applies to income tax under ITEPA and the PAYE regulations referred to in it; and |
| (b) | any national insurance liability which falls to be paid to HMRC by the Company (or the relevant employing Subsidiary) under the PAYE system as it applies for national insurance purposes under the Social Security Contributions and Benefits Act 1992 and regulations referred to in it, such national insurance liability being the aggregate of: |
| i. | all the employee’s primary Class 1 national insurance contributions; and |
| ii. | all the employer’s secondary Class 1 national insurance contributions, |
((a) and (b) together, the “Tax Liabilities”).
You shall make such arrangements as the Company requires to meet the cost of the Tax Liabilities, including at the direction of the Company, any of the following:
| (a) | making a cash payment of an appropriate amount to your Employer whether by cheque, banker’s draft, bank transfer or deduction from salary in time to enable your Employer to remit the appropriate amount to HMRC before the 14th day following the end of the month in which the event giving rise to the Tax Liabilities occurred; or |
| (b) | appointing the Company as agent and/or attorney for the sale of sufficient shares of Common Stock acquired pursuant to the vesting of an RSU to cover the Tax Liabilities and authorizing the payment to the relevant company of the appropriate amount (including all reasonable fees, commissions and expenses incurred by the relevant company in relation to such sale) out of the net proceeds of sale of the Shares; or |
| (c) | entering into an election whereby your Employer’s liability for secondary Class 1 national insurance contributions is transferred to you on terms set out in the election and approved by HMRC. |
ADDENDUM - 9
Section 431 election
Where the Shares to be acquired on settlement of an RSU are considered to be “restricted securities” for the purposes of Part 7, Chapter 2 ITEPA (such determination to be at the sole discretion of the Company), it is a condition of grant, exercise or vesting (as determined by the Company) that you (if so directed by the Company) enters into a joint election with the Company, or, if different, the relevant Subsidiary employing you, pursuant to section 431, ITEPA electing that the market value of the shares of Common Stock to be acquired be calculated as if the shares of Common Stock were not “restricted securities”.
Employment Rights
| (a) | You acknowledge and agree that the terms of your employment shall not be affected in any way by your participation in the Plan which shall not form part of such terms (either expressly or impliedly) nor in any way entitle you to take into account such participation in calculating any compensation or damages on the termination of his employment for whatever reason (whether lawful or unlawful) which might otherwise be payable to you, and your terms of employment shall be deemed to be varied accordingly. |
| (b) | The Plan is entirely discretionary and may be suspended or terminated by the Company at any time for any reason. Participation in the Plan is entirely discretionary and does not create any contractual or other right to receive future Awards or benefits. All determinations with respect to future Awards will be at the sole discretion of the Company. Rights under the Plan are not pensionable. |
Data Privacy
| (a) | The Company will collect, use, store, share and transfer Personal Data about you (“Data”) as necessary to facilitate the implementation, administration and management of the Plan. The Company may collect and receive Data about you directly and/or from the relevant employing subsidiary. Full details about what Data the Company collects, how the Company collects, uses, stores, shares, transfers and protects that Data and the lawful basis that the Company relies on to do so under Data Protection Law, are set out in the Company’s privacy policy (“Privacy Policy”). The Privacy Policy is available upon request from the Company. |
| (b) | You confirm that you have read and understood the Privacy Policy and acknowledges that the Company may collect, use, store, share and transfer your Data in accordance with the Privacy Policy. |
ADDENDUM - 10
COURSERA, INC.
2021 STOCK INCENTIVE PLAN
NOTICE OF RESTRICTED STOCK AWARD
You have been granted the following restricted shares of Common Stock (the “Restricted Shares” or the/this “Award”) of Coursera, Inc. (the “Company”) under the Coursera, Inc. 2021 Stock Incentive Plan (as may be amended from time to time, the “Plan”):
| Name of Recipient: | [Name of Recipient] | |
| Grant Date: | [Date of Grant] | |
| Total Number of Shares Granted: | [Total Shares] | |
| Vesting Commencement Date: | [Vesting Commencement Date] | |
| Vesting Schedule: | [Actual vesting schedule to be inserted] | |
By your written signature below (or your electronic acceptance) and the signature of the Company’s representative below, you and the Company agree that the Restricted Shares are granted under and governed by the term and conditions of the Plan, this Notice of Restricted Stock Award and the Restricted Stock Agreement (collectively, this “Agreement”), both of which are attached to and made a part of this document.
By your written signature below (or your electronic acceptance), you further agree that the Company may deliver by e-mail all documents relating to the Plan or this Award (including without limitation, prospectuses required by the Securities and Exchange Commission) and all other documents that the Company is required to deliver to its security holders (including without limitation, annual reports and proxy statements). You also agree that the Company may deliver these documents by posting them on a website maintained by the Company or by a third party under contract with the Company. If the Company posts these documents on a website, it will notify you by e-mail. Should you electronically accept this Agreement, you agree to the following: “This electronic contract contains my electronic signature, which I have executed with the intent to sign this Agreement.” Notwithstanding the above, if you have not affirmatively rejected or accepted this Award within 90 days of the Grant Date set forth in this Notice of Restricted Stock Award, you are deemed to have accepted this Award, subject to all of the terms and conditions of this Agreement.
| RECIPIENT | COURSERA, INC. | |||||
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COURSERA, INC.
2021 STOCK INCENTIVE PLAN
RESTRICTED STOCK AGREEMENT
| The Plan and Other Agreements | The Restricted Shares that you are receiving are granted pursuant and subject in all respects to the applicable provisions of the Plan, which is incorporated herein by reference. Capitalized terms not defined in this Agreement will have the meanings ascribed to them in the Plan.
The attached Notice of Restricted Stock Award, this Agreement and the Plan constitute the entire understanding between you and the Company regarding this Award. Any prior agreements, commitments or negotiations concerning this Award are superseded. This Agreement may be amended by the Committee without your consent; however, if any such amendment would materially impair your rights or obligations under this Agreement, this Agreement may be amended only by another written agreement, signed by you and the Company. | |
| Payment For Shares | No cash payment is required for the Shares you receive. You are receiving the Shares in consideration for Services rendered by you. | |
| Vesting | The Shares that you are receiving will vest in installments, as shown in the Notice of Restricted Stock Award. No additional Shares vest after your Service as an Employee or a Consultant has terminated for any reason. | |
| Shares Restricted | Unvested Shares will be considered “Restricted Shares.” Except to the extent permitted by the Committee, you may not sell, transfer, assign, pledge or otherwise dispose of Restricted Shares. | |
| Forfeiture | If your Service terminates for any reason, then your Shares will be forfeited to the extent that they have not vested before the termination date and do not vest as a result of termination. Your Service will not be extended by any notice period (e.g., your Service will not include any contractual notice period or period of “garden leave” or similar period mandated under employment laws in the jurisdiction where you are employed or the terms of your employment or service agreement, if any). This means that the Restricted Shares will immediately revert to the Company. You receive no payment for Restricted Shares that are forfeited. The Company determines when your Service terminates for this purpose and all purposes under the Plan and its determinations are conclusive and binding on all persons. | |
| Leaves of Absence | For purposes of this Award, your Service does not terminate when you go on a military leave, a sick leave or another bona fide leave of absence, if the leave of absence was approved by the Company in | |
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| writing and if continued crediting of Service is required by the terms of the leave or by applicable law. But your Service terminates when the approved leave ends, unless you immediately return to active work. If you go on a leave of absence, then the vesting schedule specified in the Notice of Restricted Stock Award may be adjusted in accordance with the Company’s leave of absence policy or the terms of your leave. If you commence working on a part-time basis, then the vesting schedule specified in the Notice of Restricted Stock Award may be adjusted in accordance with the Company’s part-time work policy or the terms of an agreement between you and the Company pertaining to your part-time schedule. | ||
| Stock Certificates or Book Entry Form | The Restricted Shares will be evidenced by either stock certificates or book entries on the Company’s stock transfer records pending expiration of the restrictions thereon. If you are issued certificates for the Restricted Shares, the certificates will have stamped on them a special legend referring to the forfeiture restrictions. In addition to or in lieu of imposing the legend, the Company may hold the certificates in escrow. As your vested percentage increases, you may request (at reasonable intervals) that the Company release to you a non-legended certificate for your vested Shares. | |
| Shareholder Rights | During the period of time between the Grant Date and the date the Restricted Shares become vested, you will have all the rights of a shareholder with respect to the Restricted Shares except for the right to transfer the Restricted Shares, as set forth above, and except in the case of any unvested Restricted Shares, you will not be entitled to any dividends or other distributions paid or distributed by the Company in respect of outstanding Shares. Accordingly, you will have the right to vote the Restricted Shares and to receive any cash dividends paid with respect to the vested Restricted Shares. | |
| Withholding Taxes and Stock Withholding | Regardless of any action the Company and/or the Subsidiary or Affiliate employing you (“Employer”) takes with respect to any or all income tax, social insurance, payroll tax, payment on account or other tax-related withholding (“Tax-Related Items”), you acknowledge that the ultimate liability for all Tax-Related Items legally due by you is and remains your responsibility and that the Company and your Employer (1) make no representations or undertakings regarding the treatment of any Tax-Related Items in connection with any aspect of the Shares received under this Award, including the award or vesting of such Shares, the subsequent sale of Shares under this Award and the receipt of any dividends; and (2) do not commit to structure the terms of the award to reduce or eliminate your liability for Tax-Related Items. Further, if you are subject to | |
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| Tax-Related Items in more than one jurisdiction, you acknowledge that the Company and your Employer (or former Employer, as applicable) may be required to withhold or account for Tax-Related Items in more than one jurisdiction.
No stock certificates will be released to you or no notations on any Restricted Shares issued in book-entry form will be removed, as applicable, unless you have paid or made adequate arrangements satisfactory to the Company and/or your Employer to satisfy all withholding and payment on account obligations of the Company and/or your Employer. In this regard, you authorize the Company and/or your Employer to withhold all applicable Tax-Related Items legally payable by you from your wages or other cash compensation paid to you by the Company and/or your Employer. With the Company’s consent, these arrangements may also include, if permissible under local law, (a) withholding Shares that otherwise would be delivered to you when they vest having a Fair Market Value equal to the amount necessary to satisfy the maximum legally required tax withholding, (b) having the Company withhold taxes from the proceeds of the sale of the Shares, either through a voluntary sale or through a mandatory sale arranged by the Company (on your behalf pursuant to this authorization), or (c) any other arrangement approved by the Committee. The Fair Market Value of the Shares, determined as of the date when taxes otherwise would have been withheld in cash, will be applied as a credit against the withholding taxes. The Company or your Employer may withhold or account for Tax-Related Items by considering statutory withholding amounts or other withholding rates applicable in your jurisdiction(s), including maximum applicable rates, in which case you may receive a refund of any over-withheld amount in cash and will have no entitlement to Share equivalent.
Finally, you will pay to the Company or your Employer any amount of Tax-Related Items that the Company or your Employer may be required to withhold as a result of your participation in the Plan or your acquisition of Shares that cannot be satisfied by the means previously described. The Company may refuse to deliver the Shares if you fail to comply with your obligations in connection with the Tax-Related Items as described in this section. | ||
| Restrictions on Resale | You agree not to sell any Shares at a time when applicable laws, Company policies or an agreement between the Company and its underwriters prohibit a sale. This restriction will apply as long as your Service continues and for such period of time after the termination of your Service as the Company may specify. | |
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| No Retention Rights | Neither this Award nor this Agreement gives you the right to be employed or retained by the Company or any Subsidiary or Affiliate of the Company in any capacity. The Company and its Subsidiaries and Affiliates reserve the right to terminate your Service at any time, with or without cause. | |
| Adjustments | The number of Restricted Shares covered by this Award will be subject to adjustment in the event of a stock split, a stock dividend or a similar change in Shares, and in other circumstances, as set forth in the Plan. The forfeiture provisions and restrictions described above will apply to all new, substitute or additional restricted shares or securities to which you are entitled by reason of this Award. | |
| Successors and Assigns | Except as otherwise provided in the Plan or this Agreement, every term of this Agreement will be binding upon and inure to the benefit of the parties hereto and their respective heirs, legatees, legal representatives, successors, transferees and assigns. | |
| Governing Plan Document | This Award is subject to all the provisions of the Plan, the provisions of which are hereby made a part of the Award, and is further subject to all interpretations, amendments, rules and regulations which may from time to time be promulgated and adopted pursuant to the Plan. Except as expressly provided in this Agreement, in the event of any conflict between the provisions of this Agreement, the Notice of Restricted Stock Unit Award, and those of the Plan, the provisions of the Plan will control. | |
| Severability | In the event that all or any part of this Agreement or the Plan is declared by any court or governmental authority to be unlawful or invalid, such unlawfulness or invalidity will not invalidate any portion of this Agreement or the Plan not declared to be unlawful or invalid. Any section of this Agreement (or part of such a section) so declared to be unlawful or invalid will, if possible, be construed in a manner which will give effect to the terms of such section or part of a section to the fullest extent possible while remaining lawful and valid. | |
| Recoupment | This Award is subject to the terms of the Company’s recoupment, clawback or similar policy as it may be in effect from time to time, as well as any similar provisions of applicable law, any of which could in certain circumstances require forfeiture of the Award and repayment or forfeiture of any Shares or other cash or property received with respect to the Award (including any value received from a disposition of the Shares acquired upon settlement of the Award). | |
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| No Tax, Legal or Investment Advice | The Company is not providing any tax, legal or financial advice, nor is the Company making any recommendations regarding your participation in the Plan, or your acquisition or sale of the underlying Shares. You understand and agree that you should consult with your own personal tax, financial and/or legal advisors regarding the Award and Tax-Related Items arising in connection with the Award and by accepting the Award, you have agreed that you have done so or knowingly and voluntarily declined to do so. | |
| Notice | Any notice required or permitted under this Agreement will be given in writing, including electronically, and will be deemed effectively given upon the earliest of personal delivery, receipt or the third (3rd) full day following mailing with postage and fees prepaid, addressed to the other party hereto at the address last known in the Company’s records or at such other address as such party may designate by ten (10) days’ advance written notice to the other party hereto. The Company may, in its sole discretion, deliver any documents related to your current or future participation in the Plan by electronic means. By accepting this Award, you hereby (1) consent to receive such documents by electronic means; (2) consent to the use of electronic signatures; and (3) agree to participate in the Plan and/or receive any such documents through an on-line or electronic system established and maintained by the Company or a third party designated by the Company, including but not limited to the use of electronic signatures or click-through electronic acceptance of terms and conditions | |
| Applicable Law and Choice of Venue | This Agreement will be interpreted and enforced under the laws of the State of Delaware without application of the conflicts of law principles thereof.
Any controversy arising out of or relating to this Agreement or the Plan, their enforcement or interpretation, or because of an alleged breach, default, or misrepresentation in connection with any of their provisions, or any other controversy arising out of or related to the Award, including, but not limited to, any state or federal statutory claims, shall be submitted to arbitration in Santa Clara County, California, before a sole arbitrator selected from Judicial Arbitration and Mediation Services, Inc., San Jose, California, or its successor (“JAMS”), or if JAMS is no longer able to supply the arbitrator, such arbitrator shall be selected from the American Arbitration Association, and shall be conducted in accordance with the provisions of California Code of Civil Procedure §§ 1280 et seq. as the exclusive forum for the resolution of such dispute; provided, however, that provisional injunctive relief may, but need not, be sought by either party to this Agreement in a court of law while arbitration proceedings are pending, and any provisional injunctive relief granted by such court shall remain effective until the matter is finally determined by the arbitrator. Final resolution of any dispute through | |
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| arbitration may include any remedy or relief which the arbitrator deems just and equitable, including any and all remedies provided by applicable state or federal statutes. At the conclusion of the arbitration, the arbitrator shall issue a written decision that sets forth the essential findings and conclusions upon which the arbitrator’s award or decision is based. Any award or relief granted by the arbitrator hereunder shall be final and binding on the parties hereto and may be enforced by any court of competent jurisdiction. The parties acknowledge and agree that they are hereby waiving any rights to trial by jury in any action, proceeding or counterclaim brought by either of the parties against the other in connection with any matter whatsoever arising out of or in any way connected with any of the matters referenced in the first sentence above. The parties agree that the Company shall be responsible for payment of the forum costs of any arbitration hereunder, including the arbitrator’s fee. The parties further agree that in any proceeding with respect to such matters, each party shall bear its own attorney’s fees and costs (other than forum costs associated with the arbitration) incurred by it or you or her in connection with the resolution of the dispute. | ||
| Miscellaneous | You understand and acknowledge that (1) the Plan is entirely discretionary, (2) the Company and your Employer have reserved the right to amend, suspend or terminate the Plan at any time, (3) the grant of this Award does not in any way create any contractual or other right to receive additional grants of awards (or benefits in lieu of awards) at any time or in any amount and (4) all determinations with respect to any additional grants, including (without limitation) the times when awards will be granted, the number of Shares subject to awards, the purchase price and the vesting schedule, will be at the sole discretion of the Company.
The value of this Award will be an extraordinary item of compensation outside the scope of your employment contract, if any, and will not be considered a part of your normal or expected compensation for purposes of calculating severance, resignation, redundancy or end-of-service payments, bonuses, long-service awards, pension or retirement benefits or similar payments.
You understand and acknowledge that participation in the Plan ceases upon termination of your Service for any reason, except as may explicitly be provided otherwise in the Plan or this Agreement.
You hereby authorize and direct your Employer to disclose to the Company or any Subsidiary or Affiliate any information regarding your employment, the nature and amount of your compensation and the fact and conditions of your participation in the Plan, as your Employer deems necessary or appropriate to facilitate the administration of the Plan. | |
7
| You consent to the collection, use and transfer of personal data as described in this subsection. You understand and acknowledge that the Company, your Employer and the Company’s other Subsidiaries and Affiliates hold certain personal information regarding you for the purpose of managing and administering the Plan, including (without limitation) your name, home address, telephone number, date of birth, social insurance or other government identification number, salary, nationality, job title, any Shares or directorships held in the Company and details of all awards or any other entitlements to Shares awarded, canceled, exercised, vested, unvested or outstanding in your favor (the “Data”). You further understand and acknowledge that the Company, its Subsidiaries and/or its Affiliates will transfer Data among themselves as necessary for the purpose of implementation, administration and management of your participation in the Plan and that the Company and/or any Subsidiary may each further transfer Data to any third party assisting the Company in the implementation, administration and management of the Plan. You understand and acknowledge that the recipients of Data may be located in the United States or elsewhere, and that the laws of a recipient’s country of operation (e.g., the United States) may not have equivalent privacy protections as local laws where you reside or work. You authorize such recipients to receive, possess, use, retain and transfer Data, in electronic or other form, for the purpose of administering your participation in the Plan, including a transfer to any broker or other third party with whom you elect to deposit Shares acquired under the Plan of such Data as may be required for the administration of the Plan and/or the subsequent holding of Shares on your behalf. You may, at any time, view the Data, require any necessary modifications of Data, make inquiries about the treatment of Data or withdraw the consents set forth in this subsection by contacting the Human Resources Department of the Company in writing.
You acknowledge and agree that you have reviewed the documents provided to you in relation to the Award in their entirety, have had an opportunity to obtain the advice of counsel prior to executing and accepting the Award, and fully understand all provisions of such documents. You agree upon request to execute any further documents or instruments necessary or desirable in the sole determination of the Company to carry out the purposes or intent of the Award. |
BY SIGNING THE NOTICE OF RESTRICTED STOCK AWARD, YOU AGREE TO ALL OF THE TERMS AND CONDITIONS DESCRIBED ABOVE AND IN THE PLAN.
8
Exhibit 10.6
COURSERA, INC.
2021 EMPLOYEE STOCK PURCHASE PLAN
(Adopted by the Board of Directors on February 17, 2021)
(Approved by the Stockholders on March 2, 2021)
(Effective on _______, 2021)
Table of Contents
| Page | ||||||
| SECTION 1 |
Purpose of the Plan |
1 | ||||
| SECTION 2 |
Definitions |
1 | ||||
| (a) |
“Board” |
1 | ||||
| (b) |
“Code” |
1 | ||||
| (c) |
“Committee” |
1 | ||||
| (d) |
“Company” |
1 | ||||
| (e) |
“Compensation” |
1 | ||||
| (f) |
“Corporate Reorganization” |
1 | ||||
| (g) |
“Eligible Employee” |
2 | ||||
| (h) |
“Exchange Act” |
2 | ||||
| (i) |
“Fair Market Value” |
2 | ||||
| (j) |
“Offering” |
2 | ||||
| (k) |
“Offering Date” |
2 | ||||
| (l) |
“Offering Period” |
2 | ||||
| (m) |
“Participant” |
2 | ||||
| (n) |
“Participating Company” |
2 | ||||
| (o) |
“Plan” |
3 | ||||
| (p) |
“Plan Account” |
3 | ||||
| (q) |
“Purchase Date” |
3 | ||||
| (r) |
“Purchase Period” |
3 | ||||
| (s) |
“Purchase Price” |
3 | ||||
| (t) |
“Stock” |
3 | ||||
| (u) |
“Subsidiary” |
3 | ||||
| SECTION 3 |
Administration of the Plan |
3 | ||||
| (a) |
Administrative Powers and Responsibilities |
3 | ||||
| (b) |
International Administration |
4 | ||||
| SECTION 4 |
Enrollment and Participation |
4 | ||||
| (a) |
Offering Periods |
4 | ||||
| (b) |
Enrollment |
5 | ||||
| (c) |
Duration of Participation |
5 | ||||
| SECTION 5 |
Employee Contributions |
5 | ||||
| (a) |
Frequency of Payroll Deductions |
5 | ||||
| (b) |
Amount of Payroll Deductions |
5 | ||||
| (c) |
Changing Withholding Rate |
5 | ||||
| (d) |
Discontinuing Payroll Deductions |
5 | ||||
| SECTION 6 |
Withdrawal from the Plan |
6 | ||||
| (a) |
Withdrawal |
6 | ||||
| (b) |
Re-enrollment After Withdrawal |
6 | ||||
| SECTION 7 |
Change in Employment Status |
6 | ||||
| (a) |
Termination of Employment |
6 | ||||
| (b) |
Leave of Absence |
6 | ||||
| (c) |
Death |
6 | ||||
| SECTION 8 |
Plan Accounts and Purchase of Shares |
6 | ||||
| (a) |
Plan Accounts |
6 | ||||
| (b) |
Purchase Price |
6 | ||||
| (c) |
Number of Shares Purchased |
7 | ||||
| (d) |
Available Shares Insufficient |
7 | ||||
| (e) |
Issuance of Stock |
7 | ||||
| (f) |
Unused Cash Balances |
7 | ||||
| (g) |
Stockholder Approval |
8 | ||||
| SECTION 9 |
Limitations on Stock Ownership |
8 | ||||
| (a) |
Five Percent Limit |
8 | ||||
| (b) |
Dollar Limit |
8 | ||||
| SECTION 10 |
Rights Not Transferable |
8 | ||||
| SECTION 11 |
No Rights as An Employee |
9 | ||||
| SECTION 12 |
No Rights as A Stockholder |
9 | ||||
| SECTION 13 |
Securities Law Requirements |
9 | ||||
| SECTION 14 |
Stock Offered Under the Plan |
9 | ||||
| (a) |
Authorized Shares |
9 | ||||
| (b) |
Antidilution Adjustments |
9 | ||||
| (c) |
Reorganizations |
10 | ||||
| SECTION 15 |
Amendment or Discontinuance |
10 | ||||
| SECTION 16 |
Execution |
10 | ||||
COURSERA, INC.
2021 EMPLOYEE STOCK PURCHASE PLAN
SECTION 1 Purpose of the Plan.
The Plan was adopted by the Board of Directors on February 17, 2021 and is effective on _________, 2021 (the “Effective Date”). The purpose of the Plan is to provide a broad-based employee benefit to attract the services of new employees, to retain the services of existing employees, and to provide incentives for such individuals to exert maximum efforts toward our success by purchasing Stock from the Company on favorable terms and to pay for such purchases through payroll deductions. The Plan is intended to qualify under Section 423 of the Code.
SECTION 2 Definitions.
(a) “Board” means the Board of Directors of the Company, as constituted from time to time.
(b) “Code” means the United States Internal Revenue Code of 1986, as amended, and the rules and regulations promulgated thereunder.
(c) “Committee” means the Leadership, Diversity, Equity, Inclusion and Compensation Committee of the Board or such other committee, comprised exclusively of one or more directors of the Company, as may be appointed by the Board from time to time to administer the Plan.
(d) “Company” means Coursera, Inc., a Delaware corporation.
(e) “Compensation” means, unless provided otherwise by the Committee in the terms and conditions of an Offering, base salary, regular hourly wages (including overtime and holiday pay), shift premiums, sales commissions, and bonuses paid in cash to a Participant by a Participating Company, without reduction for any pre-tax contributions made by the Participant under Sections 401(k) or 125 of the Code. “Compensation” shall, unless provided otherwise by the Committee in the terms and conditions of an Offering, exclude all non-cash items, moving or relocation allowances, cost-of-living equalization payments, car allowances, tuition reimbursements, imputed income attributable to cars or life insurance, severance pay, fringe benefits, contributions or benefits received under employee benefit plans, income attributable to the exercise of stock options, and similar items. The Committee shall determine whether a particular item is included in Compensation.
(f) “Corporate Reorganization” means:
(i) the consummation of a merger or consolidation of the Company with or into another entity, or any other corporate reorganization; or
(ii) the sale, transfer or other disposition of all or substantially all of the Company’s assets or the complete liquidation or dissolution of the Company.
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2021 EMPLOYEE STOCK PURCHASE PLAN
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(g) “Eligible Employee” means any employee of a Participating Company whose customary employment is for more than five (5) months per calendar year and for more than twenty (20) hours per week.
The foregoing notwithstanding, an individual shall not be considered an Eligible Employee if his or her participation in the Plan is prohibited by the law of any country which has jurisdiction over him or her.
(h) “Exchange Act” means the United States Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.
(i) “Fair Market Value” means the fair market value of a share of Stock, determined as follows:
(i) if Stock was traded on any established national securities exchange including the New York Stock Exchange or The Nasdaq Stock Market on the date in question, then the Fair Market Value shall be equal to the closing price as quoted on such exchange (or the exchange with the greatest volume of trading in the Stock) on such date as reported in the Wall Street Journal or such other source as the Committee deems reliable;
(ii) if the foregoing provision is not applicable, then the Fair Market Value shall be determined by the Committee in good faith on such basis as it deems appropriate; or
(iii) with respect to the Offering Period beginning on the Effective Date, the Fair Market Value on the Offering Date shall be the price at which the Stock is offered to the public pursuant to the registration statement covering the initial public offering of the Stock.
For any date that is not a Trading Day, the Fair Market Value of a share of Stock for such date shall be determined by using the closing sale price for the immediately preceding Trading Day. Determination of the Fair Market Value pursuant to the foregoing provisions shall be conclusive and binding on all persons.
(j) “Offering” means the grant of options to purchase shares of Stock under the Plan to Eligible Employees.
(k) “Offering Date” means the first day of an Offering.
(l) “Offering Period” means a period with respect to which the right to purchase Stock may be granted under the Plan, as determined pursuant to Section 4(a).
(m) “Participant” means an Eligible Employee who elects to participate in the Plan, as provided in Section 4(b).
(n) “Participating Company” means (i) the Company and (ii) each present or future Subsidiary designated by the Committee as a Participating Company.
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2021 EMPLOYEE STOCK PURCHASE PLAN
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(o) “Plan” means this Coursera, Inc. 2021 Employee Stock Purchase Plan, as it may be amended from time to time.
(p) “Plan Account” means the account established for each Participant pursuant to Section 8(a).
(q) “Purchase Date” means one or more dates during an Offering on which shares of Stock may be purchased pursuant to the terms of the Offering.
(r) “Purchase Period” means one or more successive periods during an Offering, beginning on the Offering Date or on the day after a Purchase Date, and ending on the next succeeding Purchase Date.
(s) “Purchase Price” means the price at which Participants may purchase shares of Stock under the Plan, as determined pursuant to Section 8(b).
(t) “Stock” means the Common Stock of the Company.
(u) “Subsidiary” means any corporation (other than the Company) in an unbroken chain of corporations beginning with the Company, if each of the corporations other than the last corporation in the unbroken chain owns stock possessing fifty percent (50%) or more of the total combined voting power of all classes of stock in one of the other corporations in such chain.
(r) “Trading Day” means a day on which the national stock exchange on which the Stock is traded is open for trading.
SECTION 3 Administration of the Plan.
(a) Administrative Powers and Responsibilities. The Plan shall be administered by the Committee. The Committee shall have full power and authority, subject to the provisions of the Plan, to promulgate such rules and regulations as it deems necessary for the proper administration of the Plan, to interpret the provisions and supervise the administration of the Plan, and to take all action in connection therewith or in relation thereto as it deems necessary or advisable. Any decision reduced to writing and signed by all of the members of the Committee shall be fully effective as if it had been made at a meeting duly held. The Committee’s determinations under the Plan, unless otherwise determined by the Board, shall be final and binding on all persons. The Company shall pay all expenses incurred in the administration of the Plan. No member of the Committee shall be personally liable for any action, determination, or interpretation made in good faith with respect to the Plan, and all members of the Committee shall be fully indemnified by the Company with respect to any such action, determination or interpretation. The Committee may adopt such rules, guidelines and forms as it deems appropriate to implement the Plan. Subject to the requirements of applicable law, the Committee may designate persons other than members of the Committee to carry out its responsibilities and may prescribe such conditions and limitations as it may deem appropriate. All decisions, interpretations and other actions of the Committee shall be final and binding on all Participants and all persons deriving their rights from a Participant. No member of the Committee shall be liable for any action that he has taken or has failed to take in good faith with respect to the Plan. Notwithstanding anything to the contrary in the Plan, the Board may, in its sole discretion, at any time and from time to time, resolve to administer the Plan. In such event, the Board shall have all of the authority and responsibility granted to the Committee herein.
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2021 EMPLOYEE STOCK PURCHASE PLAN
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(b) International Administration. The Committee may establish sub-plans (which need not qualify under Section 423 of the Code) and initiate separate Offerings through such sub-plans for the purpose of (i) facilitating participation in the Plan by non-U.S. employees in compliance with foreign laws and regulations without affecting the qualification of the remainder of the Plan under Section 423 of the Code or (ii) qualifying the Plan for preferred tax treatment under foreign tax laws (which sub-plans, at the Committee’s discretion, may provide for allocations of the authorized shares of Stock reserved for issue under the Plan as set forth in Section 14(a)). The rules, guidelines and forms of such sub-plans (or the Offerings thereunder) may take precedence over other provisions of the Plan, with the exception of Section 4(a)(i), Section 5(b), Section 8(b) and Section 14(a), but unless otherwise superseded by the terms of such sub-plan, the provisions of the Plan shall govern the operation of such sub-plan. Alternatively and in order to comply with the laws of a foreign jurisdiction, the Committee shall have the power, in its discretion, to grant options in an Offering to citizens or residents of a non-U.S. jurisdiction (without regard to whether they are also citizens of the United States or resident aliens) that provide terms which are less favorable than the terms of options granted under the same Offering to employees resident in the United States, subject to compliance with Section 423 of the Code.
SECTION 4 Enrollment and Participation.
(a) Offering Periods. While the Plan is in effect, the Committee may from time to time grant options to purchase shares of Stock pursuant to the Plan to Eligible Employees during a specified Offering Period. Each such Offering shall be in such form and shall contain such terms and conditions as the Committee shall determine, subject to compliance with the terms and conditions of the Plan (which may be incorporated by reference) and the requirements of Section 423 of the Code, including the requirement that all Eligible Employees have the same rights and privileges. The Committee shall specify prior to the commencement of each Offering (i) the period during which the Offering shall be effective, which may not exceed twenty-seven (27) months from the Offering Date and may include one or more successive Purchase Periods within the Offering, (ii) the Purchase Dates and Purchase Price for shares of Stock which may be purchased pursuant to the Offering, and (iii) if applicable, any limits on the number of shares of Stock purchasable by a Participant, or by all Participants in the aggregate, during any Offering Period or, if applicable, Purchase Period, in each case consistent with the limitations of the Plan. The Committee shall have the discretion to provide for the automatic termination of an Offering following any Purchase Date on which the Fair Market Value of a share of Stock is equal to or less than the Fair Market Value of a share of Stock on the Offering Date, and for the Participants in the terminated Offering to be automatically re-enrolled in a new Offering that commences immediately after such Purchase Date. The terms and conditions of each Offering need not be identical, and shall be deemed incorporated by reference and made a part of the Plan.
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2021 EMPLOYEE STOCK PURCHASE PLAN
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(b) Enrollment. Any individual who, on the day preceding the first day of an Offering Period, qualifies as an Eligible Employee may elect to become a Participant in the Plan for such Offering Period by completing the enrollment process prescribed and communicated for this purpose from time to time by the Company to Eligible Employees.
(c) Duration of Participation. Once enrolled in the Plan, a Participant shall continue to participate in the Plan until he or she ceases to be an Eligible Employee or withdraws from the Plan under Section 6(a). A Participant who withdrew from the Plan under Section 6(a) may again become a Participant, if he or she then is an Eligible Employee, by following the procedure described in Subsection (b) above. A Participant whose employee contributions were discontinued automatically under Section 9(b) shall automatically resume participation at the beginning of the earliest Offering Period ending in the next calendar year, if he or she then is an Eligible Employee. When a Participant reaches the end of an Offering Period but his or her participation is to continue, then such Participant shall automatically be re-enrolled for the Offering Period that commences immediately after the end of the prior Offering Period.
SECTION 5 Employee Contributions.
(a) Frequency of Payroll Deductions. A Participant may purchase shares of Stock under the Plan solely by means of payroll deductions; provided, however, that to the extent provided in the terms and conditions of an Offering, a Participant may also make contributions through payment by cash or check prior to one or more Purchase Dates during the Offering. Payroll deductions, subject to the provisions of Subsection (b) below or as otherwise provided under the terms and conditions of an Offering, shall occur on each payday during participation in the Plan.
(b) Amount of Payroll Deductions. An Eligible Employee shall designate during the enrollment process the portion of his or her Compensation that he or she elects to have withheld for the purchase of Stock. Such portion shall be a whole percentage of the Eligible Employee’s Compensation, but not less than one percent (1%) nor more than fifteen percent (15%) (or such lower rate of Compensation specified as the limit in the terms and conditions of the applicable Offering).
(c) Changing Withholding Rate. Unless otherwise provided under the terms and conditions of an Offering, a Participant may discontinue, decrease or increase the rate of payroll withholding during the Offering Period to a whole percentage of his or her Compensation (including a reduction to zero percent (0%)) in accordance with such procedures and subject to such limitations as the Company may establish for all Participants. A Participant may also increase or decrease the rate of payroll withholding effective for a new Offering Period by submitting an authorization to change the payroll deduction rate pursuant to the process prescribed by the Company from time to time. The new withholding rate shall be a whole percentage of the Eligible Employee’s Compensation consistent with Subsection (b) above.
(d) Discontinuing Payroll Deductions. If a Participant wishes to discontinue employee contributions entirely, he or she may do so by withdrawing from the Plan pursuant to Section 5(b). In addition, employee contributions may be discontinued automatically pursuant to Section 9(b).
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2021 EMPLOYEE STOCK PURCHASE PLAN
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SECTION 6 Withdrawal from the Plan.
(a) Withdrawal. A Participant may elect to withdraw from the Plan by giving notice pursuant to the process prescribed and communicated by the Company from time to time. Such withdrawal may be elected at any time before the last day of an Offering Period, except as otherwise provided in the Offering. In addition, if payment by cash or check is permitted under the terms and conditions of an Offering, Participants may be deemed to withdraw from the Plan by declining or failing to remit timely payment to the Company for the shares of Stock. As soon as reasonably practicable thereafter, payroll deductions shall cease and the entire amount credited to the Participant’s Plan Account shall be refunded to him or her in cash, without interest. No partial withdrawals shall be permitted.
(b) Re-enrollment After Withdrawal. A former Participant who has withdrawn from the Plan shall not be a Participant until he or she re-enrolls in the Plan under Section 4(b). Re-enrollment may be effective only at the commencement of an Offering Period.
SECTION 7 Change in Employment Status.
(a) Termination of Employment. Termination of employment as an Eligible Employee for any reason, including death, shall be treated as an automatic withdrawal from the Plan under Section 6(a). A transfer from one Participating Company to another shall not be treated as a termination of employment.
(b) Leave of Absence. For purposes of the Plan, employment shall not be deemed to terminate when the Participant goes on a military leave, a sick leave or another bona fide leave of absence, if the leave was approved by the Company in writing. Employment, however, shall be deemed to terminate three (3) months after the Participant goes on a leave, unless a contract or statute guarantees his or her right to return to work. Employment shall be deemed to terminate in any event when the approved leave ends, unless the Participant immediately returns to work.
(c) Death. In the event of the Participant’s death, the amount credited to his or her Plan Account shall be paid to the Participant’s estate.
SECTION 8 Plan Accounts and Purchase of Shares.
(a) Plan Accounts. The Company shall maintain a Plan Account on its books in the name of each Participant. Whenever an amount is deducted from the Participant’s Compensation under the Plan, such amount shall be credited to the Participant’s Plan Account. Amounts credited to Plan Accounts shall not be trust funds and may be commingled with the Company’s general assets and applied to general corporate purposes. No interest shall be credited to Plan Accounts.
(b) Purchase Price. The Purchase Price for each share of Stock purchased during an Offering Period shall be the lesser of:
(i) eighty-five percent (85%) of the Fair Market Value of such share on the Purchase Date; or
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2021 EMPLOYEE STOCK PURCHASE PLAN
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(ii) eighty-five percent (85%) of the Fair Market Value of such share on the Offering Date.
The Committee may specify an alternate Purchase Price amount or formula in the terms and conditions of an Offering, but in no event may such amount or formula result in a Purchase Price less than that calculated pursuant to the immediately preceding formula.
(c) Number of Shares Purchased. As of each Purchase Date, each Participant shall be deemed to have elected to purchase the number of shares of Stock calculated in accordance with this Subsection (c), unless the Participant has previously elected to withdraw from the Plan in accordance with Section 6(a). The amount then in the Participant’s Plan Account shall be divided by the Purchase Price, and the number of shares of Stock that results shall be purchased from the Company with the funds in the Participant’s Plan Account. Unless provided otherwise by the Committee prior to commencement of an Offering, the maximum number of shares of Stock which may be purchased by an individual Participant during such Offering is 20,000 shares (further limited to 5,000 shares per Purchase Period). The foregoing notwithstanding, no Participant shall purchase more than such number of shares of Stock as may be determined by the Committee with respect to the Offering Period, or Purchase Period, if applicable, nor more than the amounts of Stock set forth in Section 9(b) and Section 14(a). For each Offering Period and, if applicable, Purchase Period, the Committee shall have the authority to establish additional limits on the number of shares of Stock purchasable by all Participants in the aggregate.
(d) Available Shares Insufficient. In the event that the aggregate number of shares of Stock that all Participants elect to purchase during an Offering Period exceeds the maximum number of shares of Stock remaining available for issuance under Section 14(a), or which may be purchased pursuant to any additional aggregate limits imposed by the Committee, then the number of shares of Stock to which each Participant is entitled shall be determined by multiplying the number of shares of Stock available for issuance by a fraction, the numerator of which is the number of shares of Stock that such Participant has elected to purchase and the denominator of which is the number of shares of Stock that all Participants have elected to purchase.
(e) Issuance of Stock. Certificates representing the shares of Stock purchased by a Participant under the Plan shall be issued to him or her as soon as reasonably practicable after the applicable Purchase Date, except that the Company may determine that such shares shall be held for each Participant’s benefit by a broker designated by the Company. Shares of Stock may be registered in the name of the Participant or jointly in the name of the Participant and his or her spouse as joint tenants with right of survivorship or as community property.
(f) Unused Cash Balances. An amount remaining in the Participant’s Plan Account that represents the Purchase Price for any fractional share of Stock shall be refunded to the Participant in cash at the end of the Purchase Period, without interest, unless otherwise provided in the terms and conditions of an Offering. Any amount remaining in the Participant’s Plan Account that represents the Purchase Price for whole shares of Stock that could not be purchased by reason of Subsection (c) or (d) above, Section 9(b) or Section 14(a) shall be refunded to the Participant in cash, without interest.
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2021 EMPLOYEE STOCK PURCHASE PLAN
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(g) Stockholder Approval. The Plan shall be submitted to the stockholders of the Company for their approval within twelve (12) months after the date the Plan is adopted by the Board. Any other provision of the Plan notwithstanding, no shares of Stock shall be purchased under the Plan unless and until the Company’s stockholders have approved the adoption of the Plan.
SECTION 9 Limitations on Stock Ownership.
(a) Five Percent Limit. Any other provision of the Plan notwithstanding, no Participant shall be granted a right to purchase Stock under the Plan if such Participant, immediately after his or her election to purchase such Stock, would own stock possessing five percent (5%) or more of the total combined voting power or value of all classes of stock of the Company or any parent or Subsidiary of the Company. For purposes of this Subsection (a), the following rules shall apply:
(i) Ownership of stock shall be determined after applying the attribution rules of section 424(d) of the Code;
(ii) Each Participant shall be deemed to own any stock that he or she has a right or option to purchase under this or any other plan; and
(iii) Each Participant shall be deemed to have the right to purchase up to the maximum number of shares of Stock that may be purchased by a Participant under the Plan under the individual limit specified pursuant to Section 8(c) with respect to each Offering Period.
(b) Dollar Limit. Any other provision of the Plan notwithstanding, no Participant shall accrue the right to purchase Stock at a rate which exceeds twenty-five thousand dollars ($25,000) of Fair Market Value of such Stock per calendar year (under the Plan and all other employee stock purchase plans of the Company or any parent or Subsidiary of the Company), determined in accordance with the provisions of Section 423(b)(8) of the Code and applicable Treasury Regulations promulgated thereunder. For purposes of this Subsection (b), the Fair Market Value of Stock shall be determined as of the beginning of the Offering Period in which such Stock is purchased. Employee stock purchase plans not described in Section 423 of the Code shall be disregarded. If a Participant is precluded by this Subsection (b) from purchasing additional Stock under the Plan, then the Company may discontinue his or her employee contributions.
SECTION 10 Rights Not Transferable.
The rights of any Participant under the Plan, or any Participant’s interest in any Stock or moneys to which he or she may be entitled under the Plan, shall not be transferable by voluntary or involuntary assignment or by operation of law, or in any other manner other than by the laws of descent and distribution. If a Participant in any manner attempts to transfer, assign or otherwise encumber his or her rights or interest under the Plan, other than by the laws of descent and distribution, then such act shall be treated as an election by the Participant to withdraw from the Plan under Section 6(a).
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SECTION 11 No Rights as An Employee.
Nothing in the Plan or in any right granted under the Plan shall confer upon the Participant any right to continue in the employ of a Participating Company for any period of specific duration or interfere with or otherwise restrict in any way the rights of the Participating Companies or of the Participant, which rights are hereby expressly reserved by each, to terminate his or her employment at any time and for any reason, with or without cause. Participation in the Plan is voluntary.
SECTION 12 No Rights as A Stockholder.
A Participant shall have no rights as a stockholder with respect to any shares of Stock that he or she may have a right to purchase under the Plan until such shares have been purchased on the applicable Purchase Date.
SECTION 13 Securities Law Requirements.
Shares of Stock shall not be issued under the Plan unless the issuance and delivery of such shares comply with (or are exempt from) all applicable requirements of law, including (without limitation) the Securities Act of 1933, as amended, the rules and regulations promulgated thereunder, state securities laws and regulations, the regulations of any stock exchange or other securities market on which the Company’s securities may then be traded, and the applicable laws of any country which has jurisdiction over the applicable Participant.
SECTION 14 Stock Offered Under the Plan.
(a) Authorized Shares. The maximum aggregate number of shares of Stock available for purchase under the Plan is 2,800,000 shares plus an annual increase to be added on the first day of each of the Company’s fiscal years for a period of up to ten years, beginning with the fiscal year that begins January 1, 2022, equal to the least of (i) one percent (1%) of the outstanding shares of Stock on such date, (ii) 11,000,000 shares, or (iii) a lesser amount determined by the Committee or Board. The aggregate number of shares available for purchase under the Plan (and the limit in clause ii to the annual increase thereto) shall at all times be subject to adjustment pursuant to Section 14(b).
(b) Antidilution Adjustments. The aggregate number of shares of Stock offered under the Plan, the individual and aggregate Participant share limitations described in Section 8(c) and the price of shares that any Participant has elected to purchase shall be adjusted proportionately by the Committee in the event of any change in the number of issued shares of Stock (or issuance of shares other than Common Stock) by reason of any forward or reverse share split, subdivision or consolidation, or share dividend or bonus issue, recapitalization, reclassification, merger, amalgamation, consolidation, split-up, spin-off, reorganization, combination, exchange of shares of Stock, the issuance of warrants or other rights to purchase shares of Stock or other securities, or any other change in corporate structure or in the event of any extraordinary distribution (whether in the form of cash, shares of Stock, other securities or other property).
COURSERA, INC.
2021 EMPLOYEE STOCK PURCHASE PLAN
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(c) Reorganizations. Any other provision of the Plan notwithstanding, in the event of a Corporate Reorganization in which the Plan is not assumed by the surviving corporation or its parent corporation pursuant to the applicable plan of merger or consolidation, the Offering Period then in progress shall terminate immediately prior to the effective time of such Corporate Reorganization and either shares shall be purchased pursuant to Section 8 or, if so determined by the Board or Committee, all amounts in all Participant Accounts shall be refunded pursuant to Section 15 without any purchase of shares. The Plan shall in no event be construed to restrict in any way the Company’s right to undertake a dissolution, liquidation, merger, consolidation or other reorganization.
SECTION 15 Amendment or Discontinuance.
The Board or Committee shall have the right to amend, suspend or terminate the Plan at any time and without notice. Upon any such amendment, suspension or termination of the Plan during an Offering Period, the Board or Committee may in its discretion determine that the applicable Offering shall immediately terminate and that all amounts in the Participant Accounts shall be carried forward into a payroll deduction account for each Participant under a successor plan, if any, or promptly refunded to each Participant. Except as provided in Section 14, any increase in the aggregate number of shares of Stock to be issued under the Plan shall be subject to approval by a vote of the stockholders of the Company. In addition, any other amendment of the Plan shall be subject to approval by a vote of the stockholders of the Company to the extent required by an applicable law or regulation. The Plan shall continue until the earlier to occur of (a) termination of the Plan pursuant to this Section 15 or (b) issuance of all of the shares of Stock reserved for issuance under the Plan.
SECTION 16 Execution.
To record the adoption of the Plan by the Board, the Company has caused its authorized officer to execute the same.
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COURSERA, INC.
2021 EMPLOYEE STOCK PURCHASE PLAN
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Exhibit 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the use in this Registration Statement No. 333-253932 on Form S-1 of our report dated February 24, 2021, relating to the financial statements of Coursera, Inc.
We also consent to the reference to us under the heading “Experts” in such Registration Statement.
/s/ DELOITTE & TOUCHE LLP
San Jose, California
March 22, 2021