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Coursera Achieves Milestone Amid Cautionary Outlook for 2024

In the third quarter of 2024, Coursera reached a noteworthy benchmark as its consumer segment surpassed $100 million in revenue for the first time. However, this achievement was clouded by the company’s increasingly pessimistic forecasts for the remainder of the fiscal year.

At the onset of 2024, Coursera set optimistic projections. Each earnings call since has revealed a more sobering reality, with the latest update leading to an approximate 20% drop in stock value and a 10% reduction in the workforce. As of now, Coursera’s market capitalization stands at about $1.08 billion.

Revenue Forecast Adjustments Throughout 2024

The revenue outlook for 2024 has progressively declined:

• 2023 Q4 (February): $730-740 million
• 2024 Q1 (April): $695-705 million
• 2024 Q2 (July): $695-705 million
• 2024 Q3 (October): $690-694 million

The earnings call held in May marked another set of challenges for the company. A $35 million reduction in revenue guidance resulted in a 15% stock decline, pushing it to an all-time low. This prompted a significant restructuring of the leadership team, which included the elimination of two senior roles, streamlining operations by having division leaders report directly to the CEO.

Factors Behind Coursera’s Struggles

Why has Coursera faced difficulties in meeting its targets? Analysis of the earnings call transcript highlights two primary factors.

First, while overall enrollment remains strong—boasting nearly 7 million new learners this quarter—the retention of these users is concerning. A decline in subscription renewals, particularly in regions outside of North America, has been noted. Newly launched courses, especially in the AI sector, are not drawing in as many users as previous offerings, and although the rate of conversion from visitor to subscriber remains constant, the length of subscription is dwindling.

Second, Coursera’s enterprise sector, which caters to businesses and government entities, continues to grapple with the repercussions of decreased spending following the pandemic. Many government-funded online learning programs initiated during lockdowns are now concluding, resulting in a net revenue retention rate that has fallen to 89%.

Industry-Wide Cost-Cutting Moves

Coursera’s layoffs follow similar moves by competitor Udemy, which recently reduced its workforce by 20%, impacting approximately 280 employees. Both companies employed comparable language in their statements, referencing a need to “reallocate resources” and streamline operations.

This cut is not Coursera’s first; the organization previously enacted layoffs roughly two years ago to control spending, a decision made prior to the surge in interest in AI-centric learning. Coursera now records an impressive six new enrollments per minute in its AI courses.

With a total of 1,295 full-time employees at the end of 2023, the current 10% job cut translates to roughly 150 individuals losing their positions. The company anticipates these reductions will result in annual savings of approximately $30 million.

Coursera’s Financial Performance in Q3 2024

Despite encountering hurdles, Coursera reported a revenue of $176.1 million for Q3, indicating a 6% rise compared to the previous year. The performance across different segments is as follows:

Of note is the consumer segment reaching over $100 million for the first time, while enterprise revenue steadily increased to $60.4 million. However, the degrees segment experienced a downturn, with revenue dropping to $13.4 million even as enrollment increased by 29% year-over-year, attributed to new cohorts from recently launched programs in India.

Coursera also reported generating $17 million in free cash flow and concluded the quarter with $719 million in cash reserves, providing a solid financial buffer despite the ongoing challenges.

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