Coursera Inc

NYSE:COUR

Earnings Call Analysis

Revenue Growth and Profitability Achieved

In Q4, the company's revenue grew by 19% year-over-year to $168.9 million, with strength in the Consumer segment. Cost of revenues increased, while total operating expenses decreased, leading to a gross margin of 54%. Net income achieved was $9.5 million, with an adjusted EBITDA of $5.7 million. For the full year 2023, EBITDA margin improved by 550 basis points year-over-year. The Consumer segment grew 22% due to demand for Professional Certificates and AI courses. The Enterprise and Degrees segments grew by 15% and 12% respectively. Looking ahead to 2024, the company expects revenue growth of approximately 16%, with revenues in the range of $730 million to $740 million. The adjusted EBITDA is forecasted in the range of $26 million to $32 million, with a margin of about 4%.

Coursera's Forward-Looking Trajectory in Higher Education

Coursera, amidst a sweeping transformation in higher education, is positioning itself at the forefront by offering an array of accessible, affordable, and job-relevant courses. The company focuses on the long-term trend where industry microcredentials are gaining prominence, facilitating easier access to employment and college credits. This approach is expected to be particularly relevant as emerging technologies like generative AI begin to reshape the job market.

Expanding Educational Offerings and Strategic Partnerships

With nearly 20 new degree programs announced in the past year, including a Master of Data Science with a total tuition of $15,000, Coursera is expanding its offerings and aligning them with the needs of adult learners and working professionals. The company also secured a notable Authorized Instructional Platform designation from the American Council on Education, affirming the quality and value of its courses.

Innovation and Growth Across Segments

Coursera's growth is underscored by the launch of 15 new degree pathways, seeking to cater to nearly 2 million learners. The company has secured almost 40 credit recommendations, with more anticipated in 2024. New language support and the introduction of Coursera Coach are among the innovations driving higher engagement and course completion rates.

Strategic Pillars and Growth Initiatives

Coursera's GenAI Academy and the recent launch of 'Navigating Generative AI: A CEO Playbook' are part of the company's initiatives to enhance AI literacy and strategic decision-making among professionals. The company is broadening its Professional Certificates catalog and launching new degree programs focused on flexibility and affordability. These efforts are part of a four-pillar strategy to grow its consumer and enterprise segments and support institutional collaboration.

Financial Highlights and Future Outlook

Coursera experienced a revenue increase of 19% from the previous year, achieving $168.9 million in Q4, with a gross profit of $91.2 million and a gross margin of 54%. The company is proud to have exceeded its adjusted EBITDA breakeven commitment for the fourth quarter. Looking ahead to Q1, revenue is expected to range from $168 million to $172 million, and for the full year of 2024, revenue is projected to grow by approximately 16%, reaching between $730 million to $740 million. Adjusted EBITDA expectations range from $26 million to $32 million, representing a significant year-over-year margin improvement.

Earnings Call Transcript 2023-Q4

[Operator]

Ladies and gentlemen, thank you for standing by and welcome to Coursera's Fourth Quarter 2023 Earnings Call. [Operator Instructions]And please be advised that this call is being recorded.After the speakers' prepared remarks, there will be a question-and-answer session. [Operator Instructions]I would like to turn the call over to Cam Carey, Head of Investor Relations. Mr. Carey, you may begin.

[Cam Carey, executive]

Hi, everyone, and thank you for joining our Q4 and full-year 2023 earnings conference call.With me today is Jeff Maggioncalda, Coursera’s Chief Executive Officer; and Ken Hahn, our Chief Financial Officer.Following their prepared remarks, we will open the call for questions. Our press release including financial tables was issued after market close and is posted on our Investor Relations website located at investor.coursera.com where this call is being simultaneously webcast and where versions of our prepared remarks and supplemental slides are available.During this call, we will present both GAAP and non-GAAP financial measures. A reconciliation of non-GAAP measures to their most directly comparable GAAP measure can be found in today's press release and supplemental presentation, which are distributed and available to the public through our Investor Relations website. Please note, all growth percentages refer to year-over-year change unless otherwise specified. Additionally, all statements made during this call relating to future results and events are forward-looking statements based on current expectations and beliefs. These forward-looking statements include but are not limited to statements regarding the potential impacts of trends affecting our industry and business, and factors affecting the same, the anticipated benefits, and impact of our strategic assets and platform advantages, our ecosystem, platform, content, and partner relationships, our anticipated plans, and the anticipated advantages and benefits thereof, our strategy and priorities, our share repurchase program, and cash and capital allocation and our vision, business model, mission, opportunities, outlook, financial business and otherwise and future intentions. Actual results and events could differ materially from those expressed or implied in these forward-looking statements due to a number of risks and uncertainties, including those discussed in our press release, SEC filings, and supplemental materials. These forward-looking statements are not guarantees of future performance or plans and investors should not place undue reliance on them. We assume no obligation to update our forward-looking statements except as required by law.And with that, I'd like to turn it over to Jeff.

[Jeffrey Maggioncalda, executive]

Thanks, Cam, and welcome everyone. We appreciate you joining us today.I'm pleased to share that our fourth quarter marked a strong finish to a year of continued progress. We welcomed 24 million new learners, the most since 2020, growing our global learner base to more than 140 million. We expanded our educator partnerships to over 325 leading universities and companies. We grew revenue 21% over the prior year with total annual revenue of $636 million. And we achieved this growth with increased leverage, including our first positive adjusted EBITDA quarter, delivering on our commitment to build a platform and business model that scales. I remain encouraged by our momentum and am increasingly confident in our vision for the future of higher education.So let's jump in, starting with the long-term trends that are driving our business. The first trend is digital transformation. For many years, the combined forces of technology, globalization, and automation have accelerated the transformation of every institution in our society. Last year, the sweeping rise of generative AI provided a glimpse into how profoundly this new general purpose technology could reshape how we live, learn, and work. This year, organizations will begin to make the shift from experimentation to implementation but leaders are still grappling with how to make this leap. A new report by Boston Consulting Group surveyed over 1,400 C-suite executives in 50 markets and found that nearly 90% of executives rank AI and generative AI as one of their top 3 tech priorities for 2024.Despite the priority, 2/3 of these execs are either ambivalent or outright dissatisfied with their organization's progress on AI so far, citing 3 primary reasons. First, 62% of the execs cited a lack of talent and skills. Second, 47% cited an unclear AI and generative AI roadmap and investment priorities. And third, 42% cited the absence of a strategy regarding responsible AI. Organizations are facing what I refer to as a generative AI conundrum. By moving too quickly, they risk ethical, data, and regulatory pitfalls. But if a company moves too slowly to adopt, the risk of falling behind more agile competitors becomes a real threat.The only way to resolve this generative AI conundrum is enterprise skilling. And this brings me to the second major trend which is skills development. That BCG report found that only 6% of companies have managed to train more than 25% of their people on generative AI tools so far. 46% of their workforce on average, will need to undergo upskilling in the next 3 years due to generative AI. And nearly half of the leaders say that they don't yet have guidance or restrictions on AI and generative AI usage at work. As every facet of our society grapples with the need to improve their productivity, agility, and human capital in this new world of generative AI, we believe that they will require education and training to do this quickly, but safely.Like they say in F1, to go fast, you need good brakes. And I'll add, you also need skilled drivers.This leads me to the third trend driving our business, the transformation of higher education. Our vision for the future of higher education features cross-sector collaboration between academic institutions, employers, and government. This quarter, I'm excited to share an evolving customer use case that showcases many of the compelling capabilities of the platform that we've been building, including the speed and scale of collaboration between local higher education and government workforce programs, the increasingly important role of industry microcredentials, and the promise of our pathway degrees strategy.In 2020, The New York State Department of Labor partnered with Coursera as part of our free Workforce Recovery Initiative and later converted to one of our largest Coursera for government customers. Their program provides free access to skills training for unemployed and underemployed citizens across the state, and New York citizens in this program have spent more than 1.5 million hours learning on Coursera, completing over 2 million lessons. At the heart of the program is our portfolio of entry-level Professional Certificates, which are built by top companies and designed specifically for learners with no college degree or prior work experience.These branded certificates help create access to well-paying digital jobs. But increasingly learners who complete these microcredentials also earn credit towards a college degree. I'm excited to share that the recent fall term was the first semester of an expanded partnership between Coursera, The New York State Department of Labor, as well as the Empire State University or SUNY Empire. The partnership allows New Yorkers in the government's state program to transfer eligible credits from Coursera -- courses on Coursera into any of SUNY Empire's 125 bachelor's and associate degree programs. This includes our growing number of courses, specializations, and industry microcredentials that have received American Council on Education or ACE, credit recommendations, with learners eligible to receive a range of 1 to 18 college credits for learning on Coursera.Every time we launch a new certificate, secure another credit recommendation, or forge a new pathway between our open courses and degrees, we increase the value of our offering for the state of New York, SUMY Empire, and for the learners seeking more affordable and flexible and accessible solutions to advance their lives and careers. These kinds of partnerships and pathways require certain strategic assets that are unique to the Coursera platform including our leading educator partners who have created a broad catalog of trusted and branded content and credentials, our global reach to individuals and institutions, as well as our data, technology, and AI advancements that we leverage across the platform.Now let's cover some of our recent progress for each of these categories. First, our educator partners. In an era where machines are increasingly capable of producing content at scale without guardrails for quality, integrity, and accuracy, we believe that trusted institutions will play an important role in education. Since the early days of Coursera's founding, there has been a proliferation of content across the internet. But volume and value are not the same thing. Coursera is the trusted steward of the world's top university and industry brands. And we believe this powerful combination of foundational knowledge and job-relevant learning is required to serve learners in this fast-changing skills landscape.We added more than 25 new educator partners this year, including academic institutions like the London School of Business, and University of California, Berkeley, as well as a broadening list of industry partners like CVS, Dell, Moderna, Novartis, PepsiCo, and Unilever. Expert branded training is important for several reasons. It enables robust organic, top-of-funnel learner growth. It offers assurance on quality and rigor in an era of misinformation. And most importantly, it provides learners with recognized certificate and degree credentials that help them stand out with employers.Today, I'd like to provide updates on 3 areas of our catalog starting with our entry-level Professional Certificates. At the start of the year, we had 28 of these certificate training programs. To date, we've announced nearly 50 with partners like Google, IBM, Microsoft, AWS, and others, and we're not slowing down. In the coming year, we have a pipeline focused on adding new job roles from new industries with new and existing partners. We believe we are in the early stages of a long-term trend in higher education, where industry microcredentials play an increasingly prominent role in how learners acquire their first job or earn credit towards a college degree, in how campuses modernize their curriculum to create employable graduates, in how governments like New York deploy job relevant workforce training at scale, and also in how businesses rescale and redeploy talent in an era where emerging technologies like generative AI are expected to disrupt and automate a wide variety of job roles.Now onto my second catalog update, the college degree. We announced nearly 20 new degree programs in the past year, including 2 recent additions. Our first degree from the University of Pittsburgh. This Master of Data Science includes many of the attributes we're focused on, including performance-based admissions and affordable pay-as-you-go total tuition of $15,000. We also announced a Master of Science in Information Technology from IIIT Hyderabad in India, designed for learners with little-to-no computer science background looking to start a career in technology. We believe that the college degree needs to be more accessible, affordable, and job-relevant, and we continue to focus on how Coursera and our partners can uniquely address the needs of working adults.This is what we refer to as pathway degrees, where a learner can take open content like a Professional Certificate and have it count as credit towards a college degree. Our pathway degree strategy relies on 3 unique features of our business model: 1, a consumer segment with global reach and low-cost acquisition; 2, a broad and growing portfolio of Professional Certificates with credit recommendations; and 3, a broad and growing portfolio of bachelor and master degrees that enable open content to count as credit, admissions, and completion of coursework.In Q4, we launched 15 new pathways into 6 degree programs on Coursera. As an example, Ball State’s recently launched Master of Science in Data Science now allows for prior learning credit for eligible learners that complete the Google data Analytics entry-level Professional Certificate, a certificate that has cumulative historical enrollments of nearly 2 million learners. A key enabler of this strategy is our credit recognition initiative. Last quarter, I shared that we expanded our regional efforts with European Credit Transfer and Accumulation System, or ECTS, credit recommendations. To date, we have secured almost 40 credit recommendations from ACE and ECTS with more to come in 2024.Today, I'm excited to announce that we've received an Authorized Instructional Platform designation from the American Council on Education. Coursera is the first instructional platform to receive this distinction of academic integrity, security, and rigor. This deeper partnership with ACE has several benefits. It further distinguishes our platform with an important signal of quality and trust. It enables our marketing engine to better merchandise and promote the value of our growing catalog of ACE recommended content and it allows us to more quickly and seamlessly source existing ACE recommended content from other platforms, which can be migrated to Coursera while maintaining the credit recommendation.For my final catalog update, I'd like to discuss our growing selection of generative AI content. Coursera offers over 800 AI-related courses that have attracted nearly 7 million total enrollments this year. This includes new generative AI courses like the November launch by AI pioneer and Coursera Co-Founder, Andrew Ng. Andrew's course called Generative AI for Everyone enrolled 90,000 learners from over 190 countries in its first 30 days, making it the fastest-growing course of 2023. To date, the course has accumulated more than 130,000 enrollments.We're starting to see strong demand for these courses in our consumer segment, but as I touched on earlier with the data from BCG, institutions are only beginning to formulate their AI strategy. And that's why we were excited to launch our latest enterprise content offering, the Generative AI Academy just a few weeks ago. The GenAI Academy is a structured training program designed to help executives and their employees obtain the skills they need to thrive in an AI-driven workplace. We believe that high-quality education and training will be an integral part of companies unleashing the next wave of innovation and productivity using generative AI. And we're proud that the GenAI Academy features institutions at the forefront of AI, including Microsoft, Stanford Online, Vanderbilt University, DeepLearning.AI, Fractal Analytics, Google Cloud, AWS, and many others.The GenAI Academy has 2 pillars. The first is Generative AI Academy for everyone. It's a foundational literacy program that gives every employee a general understanding of GenAI's core principles, applications, and impact, including Guided Projects on how to actually use AI tools in their day-to-day jobs. And Generative AI Academy for Executives is the second pillar, which is designed to help leaders develop a deeper understanding of what generative AI is and how it is used so that they can set a GenAI strategy and navigate the risks and ethical issues associated with this new technology.As part of this pillar, I launched my new course, Navigating Generative AI: A CEO Playbook, which aims to guide executives in making strategic and ethical choices as well as lead and motivate their teams through rapid change. The course also offers access to hands-on lab Playground running on Google Gemini Pro and hosted on the Google Cloud Platform. This secure private sandbox environment lets executives not only learn how to use generative AI, but also how to apply this technology to formulate strategic plans and identify specific opportunities to create customer value and boost the productivity of their teams.In conversations with our customers and my recent discussions with business experts, government officials, and academic leaders at the World Economic Forum, we are consistently hearing that organizations need guidance and support to make sense of these new technologies, develop a strategic adoption framework, and implement a more holistic approach to the human capital development. We're in the very early stages of helping our customers navigate this change but with the launch of Generative AI Academy, we're able to better address one of their top strategic priorities and offer a more comprehensive well-designed solution for their diverse training and talent needs.That recaps our catalog progress with our educator partners.So let's move to our second major advantage, the global reach of our platform. In 2023, we added more than 200 paid enterprise customers to end the year with nearly 1,400 business, government, and campuses on Coursera. Growth came from all verticals in all regions. As I highlighted before, we consistently added around 6 million new registered learners each quarter, growing our global learner base by 20% to $142 million. This marked our fourth consecutive year of welcoming more than 20 million learners to our platform and growth continues to be broad-based with double-digit percentage increases across all regions.And to serve these learners, we've been focused on enhancing the localized experience on Coursera, which is where I'd like to start my discussion of our third advantage, the ongoing product innovation that's happening across our platform. First is an update on our AI-powered language translation initiative. We believe that high-quality education from the world's leading experts should be accessible to learners anywhere in the world. Throughout 2023, we've used advancements in the quality of machine learning to translate our catalog at a fraction of the cost and speed of using conventional human methods.Last quarter, I shared that we managed to accelerate this initiative, doubling our amount of full course translations from 2,000 to 4,000 in 7 commonly spoken languages. We saw nearly 0.5 million learners access translated courses in the initial 7 languages. Today, I'm pleased to share that we now have more than 4,000 courses, 600 specializations, and 50 certificates available in up to 18 languages, recently adding support from Mandarin, Dutch, Greek, Italian Polish, Turkish, and others. Over 58 million registered learners on our platform are based in countries where the primary language is one of these languages. It is a tangible example of how quickly AI innovations can enhance access and personalization at scale and early feedback has been very positive.We're seeing higher engagement and course completion rates with learners. And our enterprise customers, particularly governments, are excited about the ability to better serve their constituents with high-quality training and education from the best experts in the world no matter what language they speak. Another major generative AI feature we have launched is Coursera Coach. Coursera Coach is our virtual learning assistant powered by generative AI and grounded in our expert content. Early feedback from our beta program of participants is encouraging.We're seeing higher engagement for weekly active learners using Coach with capabilities like pre-quiz practice, context-relevant examples, and quick video lecture summaries as some of the most popular features. In the year ahead, we will continue to embed Coach throughout our platform, including a more personalized learning experience, career guidance, and more personalized learning pathways through content and credentials.To wrap up my opening remarks, let me remind you of several key priorities that we're focused on this year. First, we are broadening our catalog of entry-level Professional Certificates, including new partners, roles, languages, and credit recommendations to support degree pathways and campus integrations. Second, we're sourcing and launching new degree programs with a focus on flexibility, affordability, and scaled pathways so that our open content and industry microcredentials can count as credit towards college degrees. Third, we're focused on growing our enterprise segment across business, government, and campus customers, supporting institutional collaboration to better serve learner needs in this fast-changing environment.And fourth, we're deepening our platform advantages, including the broad application of generative AI for translations, personalized learning with Coach, and domain skilling with Generative AI Academy, all while driving more scale and leverage over time.I'd like to now turn it over to Ken.Ken, please go ahead.

[Kenneth Hahn, executive]

Thank you, Jeff, and good afternoon, everyone.We are pleased to report another strong quarter marked by the growing prominence of our platform for millions of learners around the world as well as the differentiated value of our focus on high-quality branded credentials. Over the past year, we continued to enjoy the benefits of our multi-sided platform, including exposure to multiple growth levers, including the needs of individuals, businesses, governments, and campuses. A common set of assets with the ability to leverage our content engine, data, marketing tools, and more across our segments and a broad global lens to better understand and navigate the trends reshaping higher education.In Q4, we generated total revenue of $168.9 million, which was up 19% from a year ago. Growth was driven by double-digit increases across our 3 segments, in particular, sustained strength in our Consumer segment results. Please note that for the remainder of the call, as I review our business performance and outlook, I'll discuss our non-GAAP financial measures unless otherwise noted. Additionally, and for the final time, I would like to remind you that our 2023 results, particularly the year-over-year comparisons of gross profit and operating expenses reflect the shift of expenses in income statement line items associated with our contract extension with our largest industry partner that took effect at the beginning of 2023.We have discussed the shift extensively in our prior earnings calls this year and expect the year-over-year comparisons to largely normalize next quarter and for all of 2024. Removing the noise from the shift in P&L geography, we drove strong bottom-line EBITDA performance on a year-over-year basis. In 2023, cost of revenue increased by 11 points as a percentage of revenue, while total OpEx decreased 17 points compared to the prior year. I continue to be pleased with our ability to balance our growth initiatives and long-term investments while demonstrating the leverage inherent in our model as our platform scales.For the fourth quarter, gross profit was $91.2 million and a 54% gross margin, which was down 9 points from the prior year period. Total operating expense was $90 million or 53% of revenue, down 17 points from the prior year period. For the individual P&L line item components of OpEx, sales and marketing expense represented 30% of total revenue, down 8 points. Research and development expense was 15% of revenue, down 5 points. And general and administrative expense was 9% of revenue, down 4 points.Finally, a year ago at this time, we provided our expectation to be adjusted EBITDA breakeven by the fourth quarter of this year, and I'm pleased to report that we exceeded that commitment. Fourth quarter net income was $9.5 million or 5.6% of revenue, and adjusted EBITDA was $5.7 million or 3.4% of revenue. We are excited to have achieved this profitability metric and expect increasing leverage in the coming year. More on that in a minute.This milestone capped off another year of demonstrating our ability to grow while creating leverage to deliver strong bottom-line performance. As a reminder of our practice, we set an annual EBITDA margin target at the beginning of the year and work within that plan based on the trajectory of the business. This year, we were able to deliver an incremental 340 basis points of annual EBITDA margin from our initial target of negative 5%. And this resulted in total annual EBITDA margin improvement of approximately 550 basis points year-over-year. The better-than-anticipated performance was the result of our overall revenue growth and strong operating expense discipline, which we were able to balance with our ongoing investments in many of the growth initiatives Jeff discussed.As you'll hear shortly, we expect to continue our consistent track record of delivering growth plus leverage in 2024.Now let's discuss cash performance and the balance sheet. And I'd like to begin with an update on our free cash flow definition. We have revised our definition to include cash outflows for purchases of content assets, a figure we already disclose in our statement of cash flows. We believe this change will be helpful to investors for 2 reasons. First, we continue to invest in the success of strategic content assets, particularly our entry-level Professional Certificates, while we are rapidly expanding with new and existing industry partners. In certain arrangements, we will help fund the production of courses and credentials in exchange for more attractive economics as well as exclusivity on Coursera's platform.Historically, this amount was not large enough to have a meaningful impact, but we intend to increase these investments on a go-forward basis as part of our broader content strategy. Second, we want to ensure that our definition most closely resembles the manner in which we analyze our financial and operating goals and that free cash flow remains aligned with adjusted EBITDA, aside from differences primarily associated with working capital changes. We believe this clarity is particularly important as our outlook anticipates strong positive free cash flow generation in the coming year.Under the revised definition and reconciliation, purchases of content assets are treated similarly to other categories of capital expenditures, effectively lowering our free cash flow computation. For clarity, all of today's materials, specifically the supplemental financial tables that accompany our press release reflect free cash flow amounts for all periods using the revised definition. With that background, free cash flow was approximately $8 million for the year, inclusive of more than $5 million in purchases of content assets in 2023, and in line with our outlook range provided at the beginning of the year.Turning to the balance sheet. We ended the quarter with approximately $722 million of unrestricted cash, cash equivalents, and marketable securities with no debt. As we enter new year, I want to remind you that our capital allocation priorities remain unchanged. We continue to focus on investments in our organic growth while valuing the resilience and the strategic optionality provided by our strong balance sheet. As Jeff discussed, the education landscape is undergoing a rapid pace of change, and we believe that our strong financial position is an asset that will help us win in our large and early markets.Next, let's discuss the performance of our segments in more detail. Consumer revenue was $97.2 million, up 22% from the prior year on strong demand for entry-level Professional Certificates and newly launched generative AI courses. As Jeff mentioned, we added another 6 million registered learners this quarter. Segment gross profit was $51.5 million or 53% of Consumer revenue compared to 73% a year ago, reflecting the impact associated with the industry partner contract extension, which is most pronounced in Consumer.To summarize, our Consumer segment is growing at scale. We believe our focus on high-quality credentials created in collaboration with the world's best brands, distinguishes our platform, differentiates the value of our offerings, which are leveraged across our segments, and allows us to shape what we expect to be a long-term trend in education towards more affordable, accessible and buildable units of learning that allows students and working adults to progress in their careers.As you'll hear shortly, in discussion of our financial outlook, we expect the ongoing strong execution demonstrated in our Consumer segment to be sustainable in the coming year.Let's move to Enterprise. Enterprise revenue was $58.3 million, up 15% from a year ago, driven by our Government and Campus verticals. Segment gross profit was $39.6 million or 68% of Enterprise revenue compared to 66% a year ago. The total number of paid Enterprise customers increased to 1,369, up 19% from a year ago. And our net retention rate for paid Enterprise customers was 98%. As we've discussed in the past several quarters, we continue to see a divergence in performance amongst our verticals. Specifically, pressuring Coursera for Business, offset by momentum in our other 2 verticals, Government, and Campus.We see corporate learning budgets remaining under pressure but hear from customers that many are in the early stages of formulating a talent strategy associated with harnessing the benefits of emerging AI technologies. Ultimately, we expect that AI will create significant changes in job functions with opportunities that will enhance employee productivity, which will, in turn, create additional demand for employee learning. At the highest level, change creates demand for learning and AI should create increasing change over the coming years. And while we navigate our slower Coursera for Business vertical growth, we are focused on continuing the strong momentum in our Government and Campus verticals, where the customer use cases are particularly well suited for the branded job-relevant credentials that are also driving our Consumer segment performance.And finally, our Degrees segment. Degrees revenue was $13.4 million, up 12% from a year ago on growth in new students and scaling of recent program launches. The total number of new Degrees students grew 22% from a year ago to 22,025. As a reminder, there's no content cost attributed to Degrees segment. So Degrees segment gross margin was 100% of revenue. And while the segment is a small portion of our overall revenue mix today, we remain focused on the long-term opportunity in Degrees.We believe that our platform is uniquely positioned to fundamentally transform the college degree. We need to start validating that potential with renewed and increasing growth. We believe that the path to better Degrees growth lies in working with our university partners to create stronger pathways between our Consumer segment where we benefit from scale as well as our growing selection of pathway degree programs.Now on to our financial outlook. For Q1, we're expecting revenue to be in the range of $168 million to $172 million. For adjusted EBITDA, we're expecting a range of negative $2 million to positive $2 million. For full-year 2024, we anticipate revenue to be in the range of $730 million to $740 million, representing approximately 16% growth at the midpoint of the range. For adjusted EBITDA, we're expecting a range of $26 million to $32 million or an adjusted EBITDA margin of approximately 4% at the midpoint of the revenue and adjusted EBITDA guidance ranges. This is a 550 basis point improvement, in line with the strong progress we made in 2023.As a reminder, we do not optimize for any single quarter. Instead, we manage our annual adjusted EBITDA margin target and work within that plan to maximize growth based on the trajectory of the business. For free cash flow, we expect to deliver at or above our adjusted EBITDA target. In addition to working capital benefits, this takes into account the increased purchases of content assets based on our revised definition. So overall, a very strong expectation around free cash flow generation even as we invest.Finally, our practice is to provide some color on the composition and pace of the business as we enter the new year, particularly given the varying impacts of the evolving environment and ongoing trends in the education industry. This includes one-time beginning of the year segment-level annual growth expectations to help you better understand how we intend to deliver on our overall guidance. For Consumer, we believe that the strong durable performance we've demonstrated over the past several years will continue, driven by learner demand for our growing selection of branded, industry microcredentials along with our rapidly expanding catalog of generative AI courses.Our initial outlook anticipates growth of approximately 20%. For Enterprise, we remain optimistic about our Government and Campus verticals, offsetting our slower business vertical growth, resulting in expected growth of more than 10%. And for Degrees, we are focused on proving out our pathway degrees strategy, including sourcing and ramping new programs in their very early stages. While we work to drive scaled pathways for faster growth, our 2024 expectation is that our Degrees segment grows by more than 10% weighted towards the second half.To summarize, we are delivering high-quality learning through our multi-sided platform and our diversified channels. We're producing growth with consistently increasing scale and leverage resulting from the complementary benefits of our 3 segments. And we're pursuing a long-term strategy from a position of financial strength, allowing us the resilience and the strategic flexibility to navigate and drive the transformation of higher education currently underway.I'll now turn the call back to Jeff for closing comments.

[Jeffrey Maggioncalda, executive]

Thanks, Ken.I want to close today's remarks by highlighting our recent recognition by the World Economic Forum. The World Economic Forum believes that scale and talent shortages are one of the most critical challenges facing society today. It impedes business growth, hinders economic prosperity, and inhibits individuals from realizing their full potential. In January, their Insight Report on Putting Skills First recognized multiple organizations, including several of our educator partners and customers like IBM, PwC, and Sanofi for their innovative efforts to resolve labor shortages, solve the skills gap, and better equip workers for the jobs of tomorrow.I'm proud to share that Coursera's credit recommendation initiative for our Professional Certificates and pathway degrees was chosen as a government and education sector lighthouse this year. The report highlights how our efforts are bridging the divide between traditional and non-traditional learning pathways. Our collaboration with industry partners fosters education that is accessible, affordable, and aligned with the evolving labor market needs.And with the growing number of credit recommendations by ACE and ECTS, we have respected third-party support that furthers our ability to extend the reach and depth of the integration use cases we are seeing with traditional academic institutions and systems of higher education. This is another validation of how our business strategy remains deeply intertwined with our founding mission. And I find it inspiring to see members of the Coursera learning ecosystem recognized for the important role that they play in enabling the future workforce, addressing skill shortages, transforming the global economy, and equipping the next generation with the education and opportunities they need to succeed in a rapidly evolving digital world.Now let's open the call for questions. Thank you.

[Operator]

[Operator Instructions] Our first question comes from the line of Josh Baer with Morgan Stanley.

[Josh Baer, analyst]

Congrats on a good finish to the year, and a strong guide. I wanted to ask on marketing spend and marketing efficiency. Sales and marketing expense declined year-over-year versus a really strong revenue growth, and that's been the theme this year. So I was hoping you could dig in a little on marketing spend. Just as your products, your certificates, catalog of offerings expand, are you spending more or less on a dollar basis? And then how has the efficiency of that spend changed?

[Kenneth Hahn, executive]

Sure, Josh. This is Ken, of course. So 2 quick things. So yes, one of the things that happened year-over-year, and we continue to talk about and this gets to be the last time we do that is we had a large partner that was spending. We were spending marketing dollars on their marketing dollars, which helped. And then in their absence, we've been spending some of our own online. There was a shift in the line items too between cost of sales and sales and marketing. So that's a portion of it. But the more fundamental answer to your question, which is important is we are seeing greater efficiency, and we've been able to deploy more marketing spend to drive some of that consumer growth in a highly profitable fashion.So I think you'll see our absolute dollar spend continue to go up with marketing because I see that trajectory continuing. It's good business.

[Josh Baer, analyst]

And if I could just add one for Jeff. Over the last year, there's been a lot of changes with Degree competitors, a couple exiting their businesses and others navigating some other challenges. I'm just wondering how all of that evolving competitive landscape has impacted Coursera's Degree business and outlook.

[Jeffrey Maggioncalda, executive]

Yes. I'd say -- thanks, Josh. I would say it clearly reflects a pretty difficult environment in North America to be in the business of providing college degrees. I mean the sentiment in America has gone pretty negative, especially among elite degrees. Labor markets remain tight and where there's often been historically countercyclicality between degrees and the labor market, I think we're seeing the same thing. You're right. Our competitors have faced very -- I'm going to say, headwinds is an understatement. I think that partly explains why it's taking us a bit of time to crack this pathway degrees opportunity. But we really do believe that there is a new need for working adults to get new skills and distinguish themselves with credentials like Professional Certificates and college degrees.And the traditional college degree could be improved dramatically by this new pathway degrees opportunity. So I'd say that we are facing a lot of the same headwinds as others have, and we have something pretty distinctively different and more advantageous that we're still trying to figure out, frankly, how to nail down and market appropriately the right degree to the right students and educate people on what degree pathways are. But what's kind of cool is when we find individuals who are in Professional Certificates where they understand that there's a degree pathway, we see retention and satisfaction to actually be higher.And to your question around marketing efficiency, we think that marketing into these distinctive, valuable Professional Certificates could improve as people realize that the value of a Professional Certificate can extend beyond the certificate to a college degree that you could earn not only more flexibly but more affordably because those credits that you're buying on Coursera can count as credit towards the college degree. So we think it's a pretty tough environment in the U.S., and we've got something pretty different, and we feel good about our long-term prospects there.

[Operator]

Your next question comes from the line of Stephen Sheldon with William Blair.

[Stephen Sheldon, analyst]

A lot of encouraging updates here. Firstly for me, just thinking about -- more about Coursera for Business. It sounds like companies are going to need a lot of support and handholding as they try to develop AI skills across the organization. But there's also coming at a time when learning and development budgets are under pressure. So from a timing perspective, when do you think the fear about getting left behind on AI skills development at the organizational level starts to overpower the cost-containment efforts they've put in place? It seems with the guidance that you put out there for Enterprise, it seems like you may not be assuming much in the 2024 guidance. So do you think it's something that could start to move the demand needle later this year, 2025-2026, I guess how are you thinking about it?

[Jeffrey Maggioncalda, executive]

Stephen, this is Jeff. Thanks. I think you're spot on. And it's an open question for sure. Will this recognition turn into reality in 2024? As you mentioned, it's not built into the model. The way I see this, from my perspective, is that the evolution of generative AI in businesses is going to happen in certain phases. And the way I like to think about it is Phase 1 is kind of conversation. It was kind of 2023 was a lot about, "Oh, look at ChatGPT, this is amazing. What's going to happen? AGI is going to take over the world." Blah, blah, blah, blah. That is giving way to a Phase 2, which is experimentation and a lot of companies are moving into that. But as I said in the script, 60% of -- 66% of execs are dissatisfied with the progress that they're making. And BCG puts 90% of companies in that category of being observers, just kind of playing around but not really doing anything.I think that the next phase is going to be what I call separation. Certain companies are going to actually figure out how to unlock the productivity and the innovation that comes from this. And a bunch of other companies will not. That will then lead, I think, to a next phase which is recognition. A recognition that the leaders are pulling away from the laggards, and then there's going to be a scramble that happens where companies say, what's happening? Why am I losing? Why am I not getting the kind of leverage that these other companies are? And then they're going to try to pile in and catch up. Now I might be wrong, and I don't know the timing of it.But one of the things we're dealing with here is institutions and individuals who are frankly overwhelmed by how fast things are changing and how much certainty exists in so many facets of the business. But as the leaders pave the way, I think there will be sort of pathways and roadmaps to say, this is what you're supposed to do to figure this out. And I feel pretty confident that learning and training is going to be a major part of what separates the leaders from the laggards. And it might be a matter of time but I see this as almost inevitable.I mean I just think scaling is going to be a really important part of taking advantage of this new technology.

[Stephen Sheldon, analyst]

And then just as a follow-up on the Consumer segment. I guess I wanted to ask a little bit about gross margins there. You've seen it. It looks like it stepped up pretty nicely sequentially over the last 2 quarters. So it's kind of the second half of the year. I know year-over-year comps get a little tricky with the things that you talked about, Ken, and have been talking about for the last year. But just generally, how are you thinking about gross margins, I guess, on the Consumer side as we think about 2024 and going forward?

[Kenneth Hahn, executive]

Sure, Stephen. The -- one of the things that's happened there, the biggest reason for that more recent improvement, we're not forecasting that into the mix necessarily going forward. But we have seen a shift towards some of the lower payout degrees where we've worked with our partners and provided funding. And it coincides with our change in free cash flow definition, by the way, because we're hopeful that we're going to do more of that going forward, where we fund some of the content. And as a result, we get higher margin business as well as proprietary great content, which we like.As you know, most of our content is not proprietary. People tend not to multisource. We're the biggest platform and the biggest channel. But when we can get it for the cost of funding, and we're also, by the way, figuring out quickly how to produce that content much more cheaply. So it's a great thing for us. The more we do of it, I'll do those deals all day long, but that's the primary reason. So a couple of our big -- almost everybody is on a 50-50 rev share, but there's a few where we get better terms because we fund it on the front end and as a result, get paid back.So you see a little bit of a shift to that in Q3, Q4. We'd like to rinse and repeat and we'll continue to do that where we get the opportunity. It's a great payback for Coursera.

[Operator]

And your next question comes from the line of Jeff Silber with BMO Capital Markets.

[Jeffrey Silber, analyst]

I was intrigued when you talked about the partnership you're having with The New York State Department of Labor. Are there any other states thinking of doing what you're doing there? It sounds like a really interesting initiative.

[Jeffrey Maggioncalda, executive]

Yes. Thanks, Jeff. We are certainly talking to many states about this. And if you just -- obviously, if you read the news and you hear what's happening in terms of perceptions of college, the ROI of buying a college degree, state funding of state schools, and also the need for services for big portions of the population that are being displaced and left behind, this kind of a program that says, look, we'll put something at scale and it's efficient to people who need upskilling, and we will also create pathways to make more relevant and affordable the degrees that are being offered, especially for state institutions. We're seeing a lot of interest in it.And by the way, it's not just in the U.S. In Kazakhstan, I think I might have mentioned a few quarters ago, we see national governments buying Coursera for Campus licenses and giving them to public and private universities throughout the country. We also mentioned The University of Texas System, which is not yet tied up with the Department of Labor there. But you can see state-by-state, sometimes with educational systems, sometimes with the government, oftentimes in collaboration, putting together these systems. And what I think is really -- I mean there's a lot of things exciting about it but one of the things that's really great is there's been a real challenge. You talk to almost anybody in government who recognizes that higher education systems are not fully meeting the needs of either students or employers. And then you say, "Well, how do you help an entire system adapt quickly to the new needs of employers and the new needs of students?"Educational institutions are not highly adaptive. They're just not built that way. Being able to bring in industry certificates via a credit recommendation system with an existing entity like an ACT, ACE, or an ECTS or we're working in Saudi Arabia. We're working in UAE. We're working in India. Country after country after country is working on this pattern. And I think it's going to be big. In India, for example, it's something called the National Skills Qualification Framework, which sits under the New Education Policy, the NEP. NASSCOM is the designated body that actually does the IT accreditation to see if it hits the standard of the National Skills Qualification Framework.And then the Indian policy, it is something called ABC, which is the Academic Bank of Credit to make college credits mobile for a doubling, what they expect to be a doubling of the number of people in college in India from 35 million to 70 million. So this is something that's happening well beyond New York, well beyond states in America. It's -- I believe this is going to be a global phenomenon.

[Jeffrey Silber, analyst]

And my second question, I guess, it has to do with the change in definition for free cash flow. You talked about, and I'm just reading from your remarks, in certain arrangements, we will help fund the production of courses and credentials in exchange for more attractive economics as well as exclusivity on your platform. I mean how common is this? What segments are this in? And should we expect gross margins to potentially go up as you move towards more of these arrangements?

[Kenneth Hahn, executive]

This is Ken Hahn. The -- as you know. So yes, we are starting to see more opportunity there with some of our partners. A lot of it has been on the tech side, and it's highly attractive content, it's content that's our bread and butter. And so we do seek to do more of those as our partners -- certain partners appreciate doing the relationship. If those continue to increase as a percentage of total, obviously, they'll drive the margin higher. And in some instances, these are 70% or 80% and in some of them, it's pure margin. It depends on the individual relationship and how much we're funding in the proprietary.I wouldn't bake anything in from an increase standpoint, but we are seeing more interest. And again, back to the free cash flow comment, that's exactly what that is, it's us setting aside funds. So we're excited to do as many of those as our partners want to. We don't need to. If we do, it will have a salutary effect on the gross margins. And again, we'll do those deals all day long.

[Jeffrey Maggioncalda, executive]

And I would add, I mentioned in the script, the platform certification from ACE, a lot of -- we see this fundamental pattern around these pathway degrees happening state-by-state around countries. And we know that working with institutions is a big part of that. We are trying to institutionalize the know-how, the know-how of what does a professional certificate look like. Which ones do you want? Who do you want to get them from? What's the basic structure of these things? How do you build them? I am seeing -- we are seeing now the ability to use generative AI tools to produce these certificates at the same quality level much more quickly and less expensively.But there's a lot of know-how that's required to do that. There's know-how in the people, the processes, the tools, and also the underlying platform, which ACE has done a review and said, look, this platform has capabilities to predict academic integrity and ensure certain levels of rigor. So institutionalizing that know-how, I think, will give us certain advantages in terms of competitive advantages as well as scale advantages that Ken is talking about that will cause us to want to lean into this more and more.

[Operator]

Your next question comes from the line of Rishi Jaluria with RBC Capital Markets.

[Rishi Jaluria, analyst]

It's nice to see continued strength in the business and the crossover to free cash flow positive. I want to maybe go back to thinking about the Enterprise side because we're now starting to see the first signs of job disruption or maybe even potential job losses as a result of AI. It still feels like enterprises are not taking reskilling and upskilling as seriously as they need to. Maybe asking the kind of same question in a different way, what do you have in your power to kind of make that message resonate deeper within actual enterprises that there is a sense of urgency around this given it's going to start with jobs, but it's probably going to be entire industries that will get disrupted as a result of this? And then I've got a quick follow-up.

[Jeffrey Maggioncalda, executive]

Yes. So Rishi, I think you're on to it. I think there is urgency. I mean I think you look out there. Everyone's talking about it. Everyone is doing something. I think that there's not clarity. People just -- the executives don't really know what to do. On this question of impact on labor market, we are -- over a long period of time, we have tried to position ourselves in terms of our business model structure. We want to make sure that we can serve institutions who need to reskill and upskill their employees, but we also want to upscale and rescale individuals. There's this question of separation that you're sort of identifying, which is some companies are going to say, we don't need 1,000, 2,000, 5,000 employees that are currently with us today.So you know what, reskilling is not really going to be our problem. We want to reskill the people who stay at our company, not the people who separate from our company. I think there's going to be kind of 2 main types of tailwinds that are going to hit us, I think. But again, this is really hard for us -- for any of us to really know. I think there is going to be a part which is serving institutions who will invest in their current and future employees who say, if I really want to improve the innovation and the quality of services I can deliver to my customers and improve the productivity of those employees who remain in my organization, I'm going to have to educate them to do that.But then I think there could be a consumer piece of this, too, for all the employees who separate, they're going to separate because their careers have been largely impacted and substantially automated. You're not going to go to some other company and get the same job that you just lost. You're going to have to learn something new and get some new career because those job prospects are not going to be very attractive on the open job labor market. We are hopeful that a lot of those impacted employees will be able to -- wherever you are in the world, whatever language you speak, you can come to Coursera, you can start with the Professional Certificate in the language of your choice, you can explore multiple job opportunities that are still in high demand that don't require a college degree or any prior work experience, which is a defining characteristic of the way we've designed these with our partners.You can take these programs online to help you get into a new career and continue on and get a college degree. So I think there might be 2 major plays here. There's the reskilling among future -- existing and future employees and maybe also reskilling in the Consumer segment for those people who are really disrupted. And I don't know the percentage, but I can tell you this, well, according to McKinsey and a lot of people I'm talking to, there are certain kinds of jobs like software engineering, where the job is going to be impacted by software, by generative AI. But at least according to McKinsey and others I hear from, there's still going to be a demand for the -- an increased demand for those skills and those jobs.On the other hand, you could look at customer operations. That's also a job type that's going to be impacted by a generative AI. But unlike software engineering, it will result in a decrease in labor market demand for those types of jobs. So even among jobs that will be impacted by generative AI, for some, it will have an overall net negative impact on labor market demand. On others and what McKinsey says is there's data scientists and computer scientists, they expect still to be increasing demand for those jobs. We'll see how it shapes out. But I think as Ken said in his script, change creates opportunity, whether it's an opportunity or threat depends on whether you have the access to education and the ability to actually skill yourself into the new opportunities that emerge.

[Rishi Jaluria, analyst]

And then maybe just quickly, sticking on the Enterprise segment, but moving a little bit to the government side, I guess as you've gone abroad and talked to some different government, what's kind of the willingness to not only adopt these solutions but to kind of bring about countrywide sponsorship of these, right? So it's not just solutions targeted at government employees but at the wider citizenry. I know you've had some success with that prior. But again, thinking to kind of the disruption to society coming from AI, how have those conversations with government agencies in that use case evolved?

[Jeffrey Maggioncalda, executive]

Yes, sure. If academic institutions are not built for adaptability, government institutions also are generally on the slower side to adapt. That being said, there are a lot of countries, particularly with younger populations, who are realizing -- there's almost 2 paths. If you do invest in education and upgrade your educational system, given the globalization of talent and the ability for people in your country to work for companies domiciled in other countries, there could be pretty good job prospects for young people if they get the skills and if you can up-level these educational systems.On the other hand, if you don't do that and you have a lot of young people in your country, if those young people are not facing good economic prospects, it becomes a problem. So what I've been seeing is generally in smaller countries with younger populations, lower general disposable income, but an upwardly mobile middle class. And this is Southeast Asia, this is India, this is Africa. This is certain parts of Latin America. We see governments more receptive and interested in moving more quickly. In more established older -- in more established countries that are a little bit wealthier with older populations, think Europe, it's been the slowest.And frankly, North America has really come along in the second half of 2023. So we're seeing some pretty nice innovation in North America. And I think there's a lot of people on both sides of the political spectrum saying we need to create a better value proposition for Americans who are trying to get good access to jobs in a world that's changing, and frankly, should not have to pay so much and spend so much time trying to get a traditional degree. So it's a pretty wide spectrum out there.

[Operator]

Your next question comes from the line of Terry Tillman with Truist Securities.

[Terrell Tillman, analyst]

Solid job on the quarter here and the outlook. I guess first question, Ken, for you, it's a multi-parter in terms of -- I appreciate all the color on the purchase of content assets, and it sounds like there's a strategic rationale for that $5 million, and I think you said in '23. Any sense on what that could look like in '24? And then on the GenAI kind of courses, anything you can share about the materiality now of revenue being generated from the GenAI content? And then I have a follow-up for Jeff.

[Kenneth Hahn, executive]

So perfect. In fact, I'll let Jeff answer your second question embedded there. And in regard to the content assets and the $5 million, we spent this last year as we announced this transition. Next year, this coming year -- the year we're in, sorry, we expect to see roughly $20 million. That's what we're budgeting today. We'll see if we can produce it less expensively to Jeff's points before with the scaling we're getting there. But I would hope we can invest that amount of money because, again, it's a great deal. So going from $5 million to $20 million. And that number becoming material is the reason we changed the definition. It made us look at it.Again, it works against us. It makes the number lower, but it's actually, in our mind, more accurate, it will track EBITDA closer. And we're going to have a great year this coming year from a free cash flow standpoint as we forecasted that and the EBITDA we're quite pleased with. So --

[Jeffrey Maggioncalda, executive]

Yes. And then in terms of the generative AI courses, we're certainly seeing a lot of demand for those, Terry. We had one enrollment per minute in 2023 on average. And if you look at enrollments in generative AI, if you look at enrollments in January of 2024, in generative AI, they're 4.5x higher than the number of generative AI enrollments in June of 2023. So we are seeing a lot of demand. And this is in the Consumer side. I would say Enterprises are -- they're trying to figure out what to do. I mean -- and I think what's going to happen is once they start kind of getting their bearings, they're going to really ramp up.When we think about what kinds of generative AI content is producing the biggest results, I mean, Andrew Ng, we said in the script, he's got Generative AI for Everyone. It's kind of almost public interest, what is this stuff? Let me play around with it. I launched the course for CEOs. Now we're starting to have AI in law, AI in this. We have a number of our university partners creating domain-specific courses, which I think will be really great. One of our most popular -- it started as a course from Vanderbilt University. It was called Prompt Engineering with ChatGPT from Jules White from Vanderbilt. It's one of our most popular courses in 2023.He followed a page out of Andrew Ng's playbook, and took a popular course, and turned it into a 4-course specialization. So now it is a prompt engineering specialization, which is more subscription-based. And there's a lot of people. It was -- that course was written up in the Wall Street Journal, basically saying if you want to double or triple your income, become a prompt engineer. And so a lot of people are coming in and taking it. I mean it's kind of the nature of what's happening. I think there's going to be a really interesting wave in 2024 that might be possible, which is not just about how might generative AI create new jobs. I think there's going to be a whole how will my job be transformed?Like Ken is a CFO, he's still going to be a CFO, I hope, in 2024, but he's going to do his job differently. And Michele, our Chief Accounting Officer is going to do her job differently. And Cam's going to do his -- and we're all going to be doing our jobs differently. I think where this really starts getting interesting is not just which new jobs get created, it's how do I need to retool for the new way I'm going to do my existing job. That's where I think you're going to see -- where we're going to see some really interesting opportunities, and we're gearing up our content engine to do -- to perform in a certain way.And by the way, we're using -- we've got a lot of generative AI tools that we're working on to be able to enhance and upgrade existing content to be generative AI-ready and relevant.

[Operator]

And your final question comes from the line of Ryan MacDonald with Needham.

[Ryan MacDonald, analyst]

Congrats on the quarter. Jeff, in one of the earlier questions, I think it was Stephen's first one on sort of Coursera for Business and sort of the phases we're in in terms of generative AI adoption. You talked about sort of being in this Phase 2 on the experimentation side. I think it's interesting sort of the GenAI Academy, new product launch you have associated with that. I'm curious, it seems like a really great product to be able to maybe capture some demand in this experimentation phase. Just curious what you're seeing sort of in terms of initial interest and adoption on that. And does this create a sort of an upsell cross-sell opportunity for Coursera in 2024 where maybe we can start to see some of the recovery in those NRR metrics?

[Jeffrey Maggioncalda, executive]

Yes. And that's definitely what we're thinking about. We launched -- the Generative AI Academy has multiple pillars. We have more to come, but the first 2 are Generative AI for Everyone and Generative AI for Execs. It's intentional. Why we did it that way? The Generative AI for Everyone, as you can imagine, it's not about the quantity of courses. Everybody doesn't need to know everything. Everybody sort of universally needs to know a few things about what it is, how it works, what the risks are, what this might mean for change, and how your job might be done differently. We are seeing and we are intending that Generative AI, especially, for Everyone, can be a way of just adding a bit more value, getting out in front of a lot more employees, becoming a lot more relevant even before the companies know exactly who needs, what skills, and how will my software engineer's job change?It's like start by laying the foundation and readiness that things are going to be changing around here. We're not charging a ton of money for it, but to your question, everybody is taking the calls. Everybody wants to talk about it. They don't -- they're not all yet organized to act on it. They don't have really big budgets yet that I've seen saying, "Yes, I got $5 million for generative AI training." But everybody knows that they're going to do generative AI. Everybody knows the training is going to be important, and they're trying to figure out how do you structure it, what should the design look like, what kind of courses, what kinds of skills. And so we'll be figuring that out.So I would say, really, I think it will help with retention. I think there will be some upsell. But again, where it will be really interesting is when you can say these specific job roles with these specific skills taught by these courses in these hands-on labs will unlock this kind of business productivity and leverage for your company. That's where I think it's going to get more interesting, and we're not there yet.

[Ryan MacDonald, analyst]

Maybe as a follow-up quick for Ken. In the prepared remarks, I'm talking about the Consumer segment here, it was noted that nearly 7 million enrollments came in for the AI courses in 2023. Can you talk about how many of those were sort of roughly net new enrollments to Coursera? And then in that context, how that -- how you're thinking about sort of that 20% growth algorithm between sort of new enrollments coming to the platform versus sort of maybe higher conversion rates in '24?

[Kenneth Hahn, executive]

Yes. Ryan, I don't have the data in front of me, that breakdown between new and existing. Generally, with new courses, it's bringing people in from the outside more. But I don't have that -- I'd be happy to share with you after assuming we can find it. I don't think it's material, non-public information. It's a good question, and I don't know the answer, but I'll find that for you, and you can --

[Jeffrey Maggioncalda, executive]

Yes. So I got the statistic.

[Kenneth Hahn, executive]

You had time to look it up.

[Jeffrey Maggioncalda, executive]

I did. There's a metric that we track internally, and I'm not going to obviously -- Cam is glaring at me right now, but there's a metric called first-time payers. So this is someone who came to the platform and paid for the first time. If you look at that quarter-on-quarter throughout 2023, the percentage year-on-year growth is quite a bit higher in Q4 than it was in Q3, which is quite a bit higher than it was in Q1. So hopefully, that reflects. I can't tell you for sure that, that was generative AI courses, but we are seeing higher year-on-year rate of growth in first-time payers on platform.

[Kenneth Hahn, executive]

Given it's a new topic, it would make sense.

[Cam Carey, executive]

All right. Great. Thanks, Ryan. That wraps today's Q&A. A replay of this webcast will be available on our Investor Relations website, along with the transcript in the next 24 hours. Thank you.

[Operator]

Ladies and gentlemen, that concludes today's call. Thank you for joining. You may now disconnect.