Breaking Down Coursera, Inc. (COUR) Financial Health: Key Insights for Investors

Understanding Coursera, Inc. (COUR) Revenue Streams

Understanding Coursera, Inc.’s Revenue Streams

As of Q3 2024, Coursera, Inc. reported total revenue of $176.1 million, which represents a 6% increase from $165.5 million in Q3 2023. Year-to-date revenue for the nine months ended September 30, 2024, reached $515.5 million, compared to $466.9 million in the same period of 2023, marking a 10.4% increase.

Breakdown of Primary Revenue Sources

• Consumer Revenue: $102.3 million in Q3 2024, a 3% increase year-over-year, with a gross margin of 54%.
• Enterprise Revenue: $60.4 million in Q3 2024, a 10% increase year-over-year, with a gross margin of 70%.
• Degrees Revenue: $13.4 million in Q3 2024, a 15% increase year-over-year, with a gross margin of 100%.

Year-over-Year Revenue Growth Rate

The year-over-year revenue growth rate for Q3 2024 compared to Q3 2023 is summarized in the table below:

Contribution of Different Business Segments to Overall Revenue

As of Q3 2024, the contributions of each business segment to total revenue are as follows:

Analysis of Significant Changes in Revenue Streams

Notable changes in revenue streams for Q3 2024 compared to Q3 2023 include:

• Consumer revenue growth driven by new certificate launches and increased user engagement.
• Enterprise revenue increase attributed to a 19% growth in the number of Paid Enterprise Customers, totaling 1,564.
• Degrees revenue growth linked to scaling of recent program launches, with a 29% increase in the number of Degrees Students, reaching 26,400.

The overall financial performance indicates a stable growth trajectory across all segments, with a focus on expanding consumer offerings and enterprise partnerships.

A Deep Dive into Coursera, Inc. (COUR) Profitability

A Deep Dive into Coursera, Inc. (COUR) Profitability

Gross Profit: For the third quarter of 2024, the company reported a gross profit of $96.2 million, representing a gross margin of 55% of total revenue. This is an increase from $83.3 million or 50% of revenue in the same quarter of 2023.

Operating Profit: The operating loss for Q3 2024 was $(21.8) million, compared to a loss of $(39.6) million in Q3 2023. The total operating expenses for Q3 2024 were $118 million, slightly down from $122.9 million a year ago.

Net Profit: The net loss for the third quarter of 2024 was $(13.7) million, equating to a net loss margin of (7.8)% of revenue, an improvement from $(32.1) million or (19.4)% of revenue in Q3 2023.

Trends in Profitability Over Time

Over the past year, the trends indicate a gradual improvement in profitability metrics:

• Gross Margin: Increased from 50% in Q3 2023 to 55% in Q3 2024.
• Operating Loss: Reduced from $(39.6) million in Q3 2023 to $(21.8) million in Q3 2024.
• Net Loss: Improved from $(32.1) million in Q3 2023 to $(13.7) million in Q3 2024.

Comparison of Profitability Ratios with Industry Averages

Comparing these metrics with industry averages:

Analysis of Operational Efficiency

Operational efficiency can be assessed through cost management and gross margin trends:

• Cost Management: Operating expenses were $118 million in Q3 2024, a decrease from $122.9 million in Q3 2023.
• Gross Margin Trend: The gross margin has shown an upward trend from 50% to 55%.
• Adjusted EBITDA: Adjusted EBITDA for Q3 2024 was $13.3 million, or 7.6% of revenue, compared to $(5.3) million or (3.2)% of revenue a year ago.

Free Cash Flow: Free cash flow for Q3 2024 was $16.7 million, up from $13.5 million in Q3 2023.

Debt vs. Equity: How Coursera, Inc. (COUR) Finances Its Growth

Debt vs. Equity: How Coursera, Inc. Finances Its Growth

Debt Levels

As of September 30, 2024, Coursera, Inc. reported total liabilities of $320.9 million. This includes current liabilities of $314.8 million. The breakdown of liabilities is as follows:

Coursera's long-term debt is not explicitly detailed in the available financial statements, indicating a potential focus on equity financing for growth initiatives.

Debt-to-Equity Ratio

The debt-to-equity ratio for Coursera, based on total liabilities of $320.9 million and total stockholders' equity of $593.3 million, is calculated as follows:

Debt-to-Equity Ratio = Total Liabilities / Total Stockholders' Equity = 0.54

This ratio is below the industry average of approximately 0.75, indicating a conservative approach to leveraging debt compared to peers.

Recent Debt Issuances and Credit Ratings

As of the latest reports, Coursera has not issued new debt or reported any changes in credit ratings that would affect its financial strategy. The company maintains a focus on equity financing, reflected in its capital structure.

Balancing Debt Financing and Equity Funding

Coursera has strategically utilized equity funding to support its growth, as evidenced by a total stockholders' equity of $593.3 million. The company has opted for stock-based compensation as a means to align employee interests with company performance, incurring stock-based compensation expenses of $83.1 million for the nine months ended September 30, 2024.

In the third quarter of 2024, Coursera reported a net cash provided by operating activities of $76.1 million, showcasing its ability to generate cash flow without relying heavily on debt.

This strategic management of debt and equity is aimed at ensuring long-term sustainability while minimizing financial risk in a competitive market environment.

Assessing Coursera, Inc. (COUR) Liquidity

Assessing Liquidity and Solvency

Current and Quick Ratios

The current ratio for the company as of September 30, 2024, stands at 2.61, calculated as total current assets of $821,197,000 divided by total current liabilities of $314,808,000. The quick ratio, which excludes inventory, is 2.61 as well, as there are no significant inventories reported.

Analysis of Working Capital Trends

Working capital, defined as current assets minus current liabilities, is $506,389,000 for the period ending September 30, 2024. This reflects a slight decrease from $534,226,000 as of December 31, 2023, indicating a 5.2% decline in working capital over the nine-month period.

Cash Flow Statements Overview

The cash flow from operating activities for the nine months ended September 30, 2024, is $76,146,000, an increase from $18,071,000 for the same period in 2023. Investing activities yielded a cash inflow of $41,735,000, while cash used in financing activities amounted to $54,296,000.

Potential Liquidity Concerns or Strengths

The company has reported a strong cash position with cash and cash equivalents amounting to $719,439,000 as of September 30, 2024. This reflects an increase from $656,321,000 at the end of the previous year, indicating a positive liquidity trend. However, the decline in working capital may point to potential liquidity challenges if current liabilities continue to grow without a corresponding increase in current assets.

Is Coursera, Inc. (COUR) Overvalued or Undervalued?

Valuation Analysis

Price-to-Earnings (P/E) Ratio

The current P/E ratio stands at –, indicating that the company is in a net loss position. In the latest earnings report, the net loss was $(13.7) million or (7.8)% of revenue.

Price-to-Book (P/B) Ratio

The P/B ratio is currently 1.58. The book value per share, calculated from the total stockholders' equity of $593.3 million and 157.6 million shares outstanding, is approximately $3.77.

Enterprise Value-to-EBITDA (EV/EBITDA) Ratio

The EV/EBITDA ratio is calculated as follows: The enterprise value is approximately $1.5 billion and the EBITDA for the last quarter was $13.3 million, leading to an EV/EBITDA ratio of approximately 112.7.

Stock Price Trends

Over the past 12 months, the stock price has fluctuated between a low of $9.50 and a high of $15.00. As of the latest trading session, the stock price is approximately $12.50, reflecting a 4.5% increase year-to-date.

Dividend Yield and Payout Ratios

The company does not currently pay a dividend, resulting in a dividend yield of 0%. The payout ratio is also 0% due to the absence of dividends.

Analyst Consensus on Stock Valuation

Analyst consensus indicates a Hold rating based on the current valuation metrics and market conditions.

Key Risks Facing Coursera, Inc. (COUR)

Key Risks Facing Coursera, Inc.

The financial health of Coursera, Inc. is influenced by various internal and external risk factors. Below is a detailed breakdown of these risks as identified in recent earnings reports and filings.

Industry Competition

Coursera operates in the online education market, which is characterized by intense competition. Key competitors include platforms like Udacity, edX, and LinkedIn Learning, which can affect market share and pricing strategies. The competitive landscape is further complicated by the entry of new players leveraging advanced technologies and unique course offerings.

Regulatory Changes

Changes in regulations regarding online education and data privacy could pose significant risks. Compliance with regulations such as the General Data Protection Regulation (GDPR) in Europe and other local laws is critical. Non-compliance could lead to fines or restrictions that impact operational capabilities.

Market Conditions

Economic downturns and changes in consumer spending can adversely affect enrollment rates. For instance, during economic contractions, potential learners may prioritize immediate employment over further education, leading to decreased revenue from course offerings.

Operational Risks

Operational risks include reliance on technology infrastructure and data security. Cybersecurity threats could compromise user data and disrupt services. Additionally, the need for continuous content updates and platform enhancements requires significant investment and resources.

Financial Risks

As of Q3 2024, Coursera reported a net loss of $13.7 million, or 7.8% of revenue, compared to a net loss of $32.1 million, or 19.4% of revenue a year ago. The company faces challenges in achieving profitability, as evidenced by an accumulated deficit of $838.6 million. Furthermore, operating expenses remain substantial, with research and development costs at $31.6 million and sales and marketing expenses at $59.0 million for the quarter.

Strategic Risks

Strategic risks include the potential failure to expand partnerships with universities and industry leaders. The ability to attract and retain educator partners is crucial for maintaining a robust course catalog. As of September 30, 2024, Coursera had 162 million registered learners and 1,564 paid enterprise customers, reflecting growth but also highlighting the need for continued expansion to sustain revenue.

Mitigation Strategies

To address these risks, Coursera has implemented several strategies:

• Expense Reduction Initiative: The company announced a commitment to reducing overall expenses, targeting at least $30 million in annualized structural cost savings.
• Focus on Core Capabilities: Management has emphasized a focus on core capabilities to drive long-term growth, which includes enhancing the learning platform and expanding course offerings.
• Investment in Cybersecurity: Increased investment in cybersecurity measures to protect user data and maintain platform integrity is crucial for operational stability.

Future Growth Prospects for Coursera, Inc. (COUR)

Future Growth Prospects for Coursera, Inc. (COUR)

Key Growth Drivers

The company is focusing on several key growth drivers that are expected to facilitate its expansion in the coming years:

• Product Innovations: The introduction of more than 20 new and upgraded generative AI certificates and specializations from industry leaders such as Google, IBM, and Microsoft is anticipated to attract more learners and enhance the learning experience.
• Market Expansions: The total number of registered learners reached 162 million as of September 30, 2024, with an addition of over 7 million new registered learners in the third quarter alone, reflecting the company’s successful market penetration.
• Strategic Partnerships: The company has welcomed ten new educator partners, including prestigious institutions like the University of Oxford and IMD Business School, which can enhance its course offerings and credibility.

Future Revenue Growth Projections

For the fourth quarter of 2024, the company expects revenue in the range of $174 to $178 million and for the full year, revenue is projected between $690 to $694 million. This reflects a growth from $515.5 million in total revenue for the nine months ended September 30, 2024, compared to $466.9 million for the same period in 2023.

Earnings Estimates

The adjusted EBITDA for the full year 2024 is anticipated to be in the range of $36.5 to $38.5 million, with a raised midpoint of the EBITDA margin outlook to 5.4%.

Strategic Initiatives and Partnerships

The company has announced several strategic initiatives that may drive future growth:

• New Talent Development Programs: Collaborations with companies like Aptiv (Ireland) and JSW Group (India) to expand its corporate training offerings.
• Government Partnerships: The partnership with the Saudi Arabia Ministry of Communications and Information Technology for human capital development in digital skills highlights the potential for government contracts.
• Learning Platform Enhancements: The launch of Coursera Coach for interactive instruction aims to enhance user engagement and learning outcomes.

Competitive Advantages

The company possesses several competitive advantages that position it well for growth:

• Strong Brand Recognition: With partnerships from over 350 leading universities and industry partners, the company has established itself as a trusted brand in online learning.
• Diverse Course Offerings: The broad catalog of content, including Professional Certificates, Guided Projects, and degree programs, caters to various learning needs.
• Robust User Base: The significant increase in registered learners and paid enterprise customers, which now totals 1,564, up 19% from a year ago, demonstrates strong demand for its services.

Financial Performance Overview

The financial metrics indicate a positive trend in operational efficiency and profitability, which is crucial for sustaining growth in the competitive online education sector.

Article updated on 8 Nov 2024

Resources:

• Coursera, Inc. (COUR) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Coursera, Inc. (COUR)' financial performance, including balance sheets, income statements, and cash flow statements.
• SEC Filings – View Coursera, Inc. (COUR)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.