Coursera, Inc. — Q2 2021 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2021. Unaudited results; amounts below are in USD millions unless stated otherwise. Coursera operates an online learning platform with Consumer, Enterprise, and Degrees revenue streams. It completed its IPO in April 2021.
Financial performance
| Metric | Q2 2021 | Q2 2020 | Change |
|---|---|---|---|
| Revenue | $102.1 | $73.7 | +38% |
| Gross profit / margin | $60.9 / 60% | $38.6 / 52% | Margin +8 percentage points |
| Operating expenses | $106.7 | $52.4 | +104% |
| Operating loss | $(45.8) | $(13.8) | Loss widened |
| Net loss | $(46.4) | $(13.9) | Loss widened |
| Adjusted EBITDA (non-GAAP) | $(2.9) | $(7.9) | Improved |
Q2 diluted loss per share was $0.35, compared with $0.38. The smaller per-share loss reflects a substantially higher weighted-average share count following the IPO; it does not indicate lower net loss.
- Revenue by segment: Consumer $62.0 million (+23%); Enterprise $28.2 million (+69%); Degrees $11.9 million (+78%). Enterprise and Degrees increased their share of revenue.
- Six-month results: Revenue was $190.5 million (+49% year over year); gross profit was $110.5 million and gross margin 58% (53% in 2020); net loss was $65.0 million (versus $28.2 million); Adjusted EBITDA was $(13.0) million (versus $(17.8) million).
- Cash flow, six months: Operating cash used was $9.8 million, versus $3.8 million provided in 2020. Free cash flow, a non-GAAP measure, was $(17.1) million versus $(1.6) million. Investing activities provided $146.1 million, principally from maturities of marketable securities; financing activities provided $533.5 million, primarily from the IPO.
- Liquidity and obligations: Cash and cash equivalents were $749.6 million and marketable securities $51.1 million at June 30, for total cash, cash equivalents, and marketable securities of $800.7 million. No borrowings are reported on the balance sheet. Current liabilities were $177.1 million; operating lease liabilities totaled $23.0 million. Non-cancelable purchase obligations were approximately $54.1 million.
Changes and notable items
- Revenue growth reflected more registered learners and paying Consumer customers, 305 additional Paid Enterprise Customers, and growth in Degrees students. Registered learners reached 86.7 million, up 36% year over year; Paid Enterprise Customers reached 584, up 109%; Degrees students reached 14,630, up 81%.
- Gross margin improved as revenue mix shifted toward Enterprise and Degrees and Consumer content costs declined as a percentage of Consumer revenue. Enterprise gross margin was 67% in Q2, down from 70%, while Consumer gross margin rose to 66% from 54%.
- Operating expenses rose sharply, including substantial stock-based compensation. Q2 stock-based compensation was $39.2 million, compared with $3.6 million a year earlier. The IPO triggered recognition of cumulative compensation expense on certain pre-IPO RSUs; the company reported $16.8 million of that cumulative expense.
- The IPO and full exercise of the underwriters’ option generated approximately $525.3 million in net proceeds before other offering costs. Preferred stock converted into common stock at the IPO.
- Deferred revenue was $101.3 million at June 30. Remaining performance obligations were $224.8 million; the company expected to recognize approximately 62% over the following 12 months.
Outlook, risks, and contingencies
- The filing provides no specific revenue or earnings guidance. Management expects operating expenses to increase in absolute dollars as it invests in sales and marketing, employees, and technology, and expects losses to continue for the foreseeable future. It cautions that recent growth may not continue and expects revenue growth rates to decline compared with prior years.
- Management said existing cash, cash equivalents, marketable securities, and expected operating cash flows should fund cash needs for at least 12 months. Results remain subject to uncertainty around post-pandemic demand; the filing notes that COVID-19 accelerated online learning and that the durability of this demand is uncertain.
- Key risks include learner and customer retention and conversion to paid offerings, partner relationships and content supply, competition, scaling costs, and online-learning market adoption. Regulatory risks include partners’ education authorizations and the DOE “dear colleague letter” guidance underlying the company’s tuition revenue-sharing model. Cybersecurity, privacy, platform availability, and international compliance are also cited risks.
- The company reported no present legal proceedings expected to have a material adverse effect and no material aggregate exposure for matters with a reasonable possibility of loss. It disclosed approximately $54.1 million of future purchase obligations and an India tax examination for fiscal 2020. Management concluded disclosure controls were effective at the reasonable assurance level.
Important facts for investors to verify
- Whether Enterprise and Degrees growth and the improved gross margin persist, and whether Enterprise customer retention and expansion continue.
- How much of the sharply higher reported loss reflects IPO-related and ongoing stock-based compensation, and the future dilution from outstanding options and RSUs.
- Whether operating cash use and free cash flow improve as revenue grows, given continued investment and working-capital movements.
- Whether online-learning demand remains strong as pandemic effects recede, and whether growth slows as management anticipates.
- Developments in education regulation and the DOE guidance supporting tuition revenue-sharing, as well as any material changes in litigation, tax, privacy, or cybersecurity exposures.