Coursera, Inc. — Q3 2022 Form 10-Q
Reporting period: Three and nine months ended September 30, 2022; comparative periods are the same periods in 2021. Amounts below are in USD millions unless noted. Coursera operates an online learning platform serving individual learners and institutional customers through Consumer, Enterprise, and Degrees offerings.
Financial performance and liquidity
| Metric | Q3 2022 | Q3 2021 | Nine months 2022 | Nine months 2021 |
|---|---|---|---|---|
| Revenue | $136.4 | $109.9 | $381.6 | $300.3 |
| Gross profit / margin | $87.6 / 64% | $67.7 / 62% | $243.6 / 64% | $178.2 / 59% |
| Operating expenses | $123.9 | $99.1 | $365.0 | $273.8 |
| Operating loss | $(36.3) | $(31.4) | $(121.4) | $(95.6) |
| Net loss | $(36.0) | $(32.5) | $(123.6) | $(97.5) |
| Adjusted EBITDA, non-GAAP | $(4.9) | $(2.9) | $(31.1) | $(15.9) |
- Revenue mix: Q3 Consumer revenue was $78.0 million, up 17%; Enterprise was $48.0 million, up 51%; and Degrees was $10.3 million, down 11%. For the nine months, Consumer grew 20% to $215.8 million, Enterprise grew 55% to $130.8 million, and Degrees declined 1% to $35.0 million.
- Cash flow: Nine-month operating cash flow was $(32.6) million, versus $0.9 million provided in 2021. Free cash flow, a non-GAAP measure, was $(44.1) million versus $(10.0) million. Investing cash flow was $(135.4) million and financing cash flow was $12.1 million; investing outflows primarily reflected purchases of marketable securities.
- Liquidity and obligations: Cash and cash equivalents were $424.8 million and marketable securities were $361.0 million at September 30, totaling $785.8 million. Current assets were $888.3 million and current liabilities were $235.7 million. The balance sheet lists no borrowings; the filing reports no debt balance. Management said available liquidity and expected operating cash flows should fund operations for at least 12 months.
- Other metrics: Stock-based compensation was $26.4 million in Q3 and $75.9 million year to date. Accumulated deficit was $612.4 million. Nine-month income tax expense was $3.2 million; Coursera maintained a full valuation allowance against U.S. federal and state deferred tax assets.
Material changes versus the prior comparable periods
- Revenue increased 24% in Q3 and 27% year to date. Management attributed growth mainly to learner growth and Enterprise customers; Enterprise revenue growth included contributions from both new and existing customers.
- Gross margin improved to 64% from 62% in Q3 and to 64% from 59% year to date, primarily due to lower content costs as a share of revenue in Consumer and Enterprise.
- Operating expenses rose 25% in Q3 and 33% year to date, outpacing gross-profit growth in Q3. Higher personnel costs, marketing, and investment in product and content contributed to expense growth. Net losses increased in dollars in both comparisons.
- Paid Enterprise Customers reached 1,086, up 53% year over year; their net retention rate was 111%, down from 113%. Registered learners totaled 113.0 million, up 23% year over year. Degrees students were 17,723, up 10%.
- Cash used in operations increased from the prior year, reflecting business investment and timing of invoicing and collections, including higher receivables and prepaid expenses. Cash and cash equivalents fell from $580.7 million at year-end 2021, while marketable securities rose from $241.1 million to $361.0 million.
Outlook, commentary, risks, and unusual items
- Management expects revenue growth to slow compared with recent results, citing macroeconomic headwinds, particularly in Europe. It also described slower new-student growth in Degrees, which it associated with tight U.S. labor markets and broader economic and geopolitical conditions. The filing provides no clear numeric revenue or earnings guidance.
- On November 9, 2022, after quarter-end, Coursera announced a global workforce reduction and expense-reduction initiative. It expects $10–$12 million of incremental expenses, mainly severance and benefits, largely paid in Q4 2022 and Q1 2023; a $7–$9 million reversal of stock compensation, mostly in Q1 2023; and a net operating-expense impact of $1–$5 million.
- Unusual charges included impairment of deferred partner fees related to Russian educator-partner content ($2.9 million year to date) and office-related impairments associated with a partial sublease. The company subleased part of its Mountain View office through October 2024.
- Remaining performance obligations were $269.2 million at September 30, 2022; approximately 67% was expected to be recognized as revenue over the next 12 months. Noncancelable purchase obligations were approximately $42.7 million, payable through 2026.
- Management disclosed that five partners’ content and programs accounted for approximately 29% of nine-month revenue. Other risks highlighted include slower online-learning adoption, competition, learner and partner retention, foreign-exchange exposure, privacy and cybersecurity, and education regulation, including uncertainty around the Department of Education’s bundled-services guidance.
- The filing says legal matters with a reasonable possibility of loss did not present material aggregate exposure at that time, though outcomes could involve material exposure. Disclosure controls were concluded effective at a reasonable-assurance level; no material change in internal control over financial reporting was reported.
Most important facts for investors to verify
- Whether the expected slowdown in revenue growth, especially in Europe and Degrees, is reflected in subsequent results and guidance.
- Whether Enterprise growth and retention remain durable, given the 111% net retention rate and the reported revenue concentration among five partners.
- Whether expense growth moderates after the workforce reduction, and how its severance costs and stock-compensation reversals affect reported and non-GAAP results.
- Whether operating cash use and negative free cash flow improve as receivables, deferred revenue, and other working-capital items change; confirm liquidity remains sufficient.
- How partner, regulatory, foreign-exchange, and litigation developments affect the business, including the Russian-content impairment and purchase commitments.