Q1 2024 Coursera Inc Earnings Call

Participants

Cam Carey; Head of IR; Coursera Inc

Jeffrey Maggioncalda; President, Chief Executive Officer, Director; Coursera Inc

Kenneth Hahn; Chief Financial Officer; Coursera Inc

Rishi Jaluria; Analyst; RBC Capital Markets LLC

Ryan MacDonald; Analyst; Needham & Company LLC

Stephen Sheldon; Analyst; William Blair & Company LLC

Josh Baer; Analyst; Morgan Stanley

Brian Peterson; Analyst; Raymond James Financial Inc

Devin Au; Analyst; KeyBanc Capital Markets

Brett Knoblauch; Analyst; Cantor Fitzgerald & Co Inc

Presentation

Operator

Ladies and gentlemen, thank you for standing by, and welcome to CoStar's First Quarter 2024 earnings call. At this time, all participants are in a listen-only mode and please be advised that this call is being recorded. After the speakers' prepared remarks, there will be a question and answer session, so we'd like to ask a question during this time, please press star followed by the number one on your telephone keypad. If you would like to withdraw your question again, press star one. I'd like to turn the call over to Cam Carey, Head of Investor Relations. Mr. Carey, you may begin.

Cam Carey

Hi, everyone, and thank you for joining our Q1 2024 earnings conference call. With me today is Jeff managing Khalda, Chris Ayers, Chief Executive Officer, and Ken Hahn, our Chief Financial Officer. Following their prepared remarks, we will open the call for questions for press release, including financial tables was issued after market close and is posted on our Investor Relations website located at investor dot Coursera.com, where this call is being simultaneously webcast and were 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 the 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, including our AI and machine learning initiatives and offerings, 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 as 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

Thanks, Kim, and welcome, everyone. It's great to be with you all in Q1, we continue to make progress across our business as we navigate a dynamic environment and an evolving education landscape. We welcomed nearly 7 million new learners. We expanded our catalog offerings with new professional certificates, pathway degrees and generative AI. content. We made significant progress on getting our latest AI powered product innovations into the hands of our learners and enterprise customers, and we grew revenue 15% over the prior year period, while generating more than $8 million in adjusted EBITDA and $18 million of free cash flow.
Our first quarter revenue was lighter than we anticipated. We are seeing softness in our North American paid learners, which have an outsized impact on our in-quarter results and future performance given their higher monetization rates can I will discuss the dynamics in more detail as well as the implications on our outlook for the year. That said, our focus on branded job relevant credentials continues to resonate with the individuals and institutions that we serve. And I continue to see signs that the ecosystem that we've assembled, learners, universities, educators, businesses and governments all around the world have put Coursera in the right position to help solve the fast-changing demands of the labor market and education system.
So let me start with an update on how we see these global trends evolving. The first trend is digital transformation. For many years. The combined forces of technology and globalization have accelerated the transformation of nearly every institution in our society. It's been more than a year since the remarkable capabilities of general A., I mesmerized the world early concerns about the technology reflecting challenges the world experienced in 2020, including its potential to disrupt local economies and educational systems displaced millions of workers and demand, new types of skills that risks further widening the digital divide. We believe that the lasting impact of the pandemic towards an accelerated pace of change across every facet of society. But unlike the pandemic will serve as a catalyst to force digital adoption overnight, we remain in the early stages of understanding how Jennifer, a I will reshape the way we live, learn and work research by the University of Pennsylvania, estimates that up to half of all tasks for half of all job roles could eventually be automated. But today, I believe that the vast majority of organizations are only experimenting with the technology and are generally overwhelmed and paralyzed by what they see coming and how to respond to it. Companies, universities and governments are looking for mission-critical use cases and best practices to emerge that correctly balance the risks with the opportunities of generative AI. We believe the key to navigating this conundrum lies in high quality, education and training how agility and effective change management enabling companies to adopt generative AI. both quickly and safely Corsair itself has been navigating this generative a conundrum, and I'm excited to share that earlier this month, Harvard Business School relief, the case study titled core Sarah's foray into Gen-i, illustrating how Coursera responded to the opportunities and threats created by genotype AI. to our knowledge, this is the first case study of its kind by a top global academic institution and it sets Coursera as a thought leader and introduces higher education to the generative AI capabilities that Coursera is now offering. We believe that market pressures will eventually force institutions to take action or face the risk of being left behind. But leaders today are still grappling with how to make the leap from experimentation to implementation access to affordable, relevant and high-quality education and training will help ensure that global talent has equal access to the skills, credentials and job opportunities they need to stay relevant and compete in our fast-changing world.
This brings me to the second major trend, which is skills development, Accenture, a long-time industry partner and customer published a report in January on generating an impact on the workforce surveying thousands of CXOs and more than 5,000 employees. The report identifies a gap between leaders and employees that can help us understand barriers to workforce transformation that are facing companies this year 86% of CXOs are using general AI to some degree in their own work. And nearly all believe the Gen V AI. will be transformative for the Company and industry. However, only one in three leaders believe that they have the technology expertise or feel that they can tell a compelling transformation narrative to lead the change that's required.
As for the employees 95% see value in working with Gemini 94%. So they are ready to learn new skills. And our top concern is that they don't trust organizations to ensure positive outcomes for everyone, which is reinforced by the report, finding that only 5% of organizations are actively reskilling their workforce at scale at this moment, if organizations are going to see them moving from experimentation to implementation and unlocking the potential of these emerging technologies. We believe it must start with unlocking the potential of their talent. And this leads me to the third trend driving our business, the transformation of higher education. Two weeks ago, I was honored to join a SUGSV. in San Diego alongside some of course, they're as close as partners, Coursera Director and President of the American Council on Education or ACE., Ted Mitchell, founder of grow with Google lease, the developer and Chancellor of the University of Texas system, JB Milliken. As you may recall, last year, we announced a statewide partnership with the University of Texas system. And at this year's conference, I had the pleasure of joining the UT. system, Chancellor Milligan onstage to discuss our progress. We talked about the strategy behind our system wide micro credential program, the value of professional certificates for universities, students and employers and the need for more flexible pathways for the system to serve diverse and growing populations.
The main questions that kept coming up in the conversations with how how does the collaboration between UTi Coursera and industry partners like Google or how the students Newsy's industry micro credentials to earn college credit towards a degree? And how can other universities implement a similar model in their city state or country. I'm pleased to share that as of the spring term, every UT campus has launched Coursera Career Academy and the majority of campuses now have curriculum integration for credit, including El Paso, Permian Basin, Rio Grande Valley, San Antonio and Tyler. As of March, over 7,000 students have spent more than 100,000 hours learning online and they've earned over 16,000 core certificates from Google, Microsoft, IBM and others is a testament to both student demand and the power of university and industry collaboration to deliver solutions that are aligned with the labor market needs of the region. We believe our partnership with the University of Texas System is a replicable blueprint for the transformation of higher education is only possible due to several leading capabilities and strategic assets that are unique to the Coursera platform, including our leading educator partners who create trusted, high-quality content and credentials that organizations like ACE. increasingly recommend for credit recognition, our global reach to individuals and institutions, including our ability to facilitate collaboration by serving businesses, governments and campuses as well as the data technology and JNI powered product innovation we are investing in across our platform.
Now let me share some of the recent progress that we've made on each of these advantages.
First, let's discuss our educator partners, more than 325 of the world's leading universities and industry experts power our content engine. Recently, we were proud to welcome several new partners, including the University of Hunter's field as well as LA, Workday and the recording Academy.
Today, I'd like to provide updates on three critical areas. Our catalog certificates degrees and general AI content, starting with our entry-level professional certificates, Unilever, one of the world's leading suppliers of beauty, home and personal care products has joined our partner community and launched two data ANALYST entry-level professional certificates. These certificates are designed to qualify learners with no college degree or prior experience for an analyst role in areas like inventory, logistics, demand planning as well as data marketing, analyst roles and SEO, content, marketing and CRM. This is what we refer to as a career pathway. But increasingly, learners complete and certificates on Coursera are not choosing between a job or a degree certificate, you can provide the opportunity to unlock both a job and a degree a key enabler of our credit recognition initiative and our pathway degree strategy is our growing partnerships with organizations like the American Council on Education. We believe this is a start of a long term trend in higher education where industry micro credentials play a more critical role in how learners acquire their first job or earn credit toward the college degree in in-house campuses like the UT. system modernize their curriculum to create employable graduates to fuel the local economy and how governments deploy job relevant workforce training at scale and also in how businesses reskill and redeploy talent.
Now onto my second catalog update which is a college degree. We recently announced a pathway to reprogram from the University of Hunter's fields, a Masters in management with performance based admissions pathways to promote flexibility and accessibility all learners, regardless of prior attainment or educational background are eligible to attend to first module on Coursera and our open content catalog. Successful completion of this introductory module gains and admissions to the full degree program. And for my final catalog update, I'm excited to share the momentum we're seeing in rapidly expanding generative AI. content and credentials on Procera in an era where machines are increasingly capable of producing content at scale without guardrails for quality, integrity or accuracy, we believe that individuals will increasingly turn to quality content from trusted institutions when looking to learn skills and earn credentials. Last week, Google launched the AI. Essentials course, which in addition to teaching foundational concepts, shows learn how to use AI as a collaboration tool in their day-to-day work introductory courses taught by Google AI experts who are working to make this new technology accessible and helpful for everyone. Google's latest course, is one of the more than 75 new courses and projects in Gemini that our partners have launched since the start of the year. This includes a growing number of top research, universities and companies at the forefront of AI, including deep learning data, AI, Duke University, Google Cloud, IBM, Microsoft Vanderbilt University, and more to come in the future.
That completes my catalog update. So let's move to our second advantage, the global reach of our platform for institutions. We have grown our paid enterprise customers to 1,480 with recent additions across each of our verticals. As I highlighted before, we added nearly 7 million new registered learners, growing our global learner base to 148 million by the end of March growth continues to be broad-based with the fact that year over year increase coming from learners in our Asia Pacific region to better serve our expanding base of learners and institutions around the world. We rapidly introduce new value through generative AI-powered innovation. And this leads me to our third advantage, the ongoing product innovation occurring across our platform.
My first product update is Coursera course builder in many organizations, human resources and leadership and development teams are tasked with keeping employees informed prepared and skilled. We believe this will include creating updating and deploying learning resources that empower their workforce to keep pace with an increasing rate of change is why we lost course builder and AI. assisted offering tool that enables any business government or campus customer to easily and quickly produce high-quality custom private courses at scale based on a few simple inputs from an offer to auto generates course content, including outlines descriptions and learning objectives dramatically reducing the time and cost of content production without sacrificing quality. Then of course, areas can seamlessly blend modules of courses on Coursera from participating, world-class industry and academic partners. With content from their own experts in their own organization. For example, private and public sector, employers can quickly create and launch organizations specific courses tailored to their unique needs leadership and development teams can combine content from our industry and academic experts with relevant business context and internal expertise and higher education institutions can leverage time-saving offering tools to empower faculty to create custom courses and keep learning resources relevant and up-to-date at the speed and scale that students and employers now expect like adding guest lectures or current events to their own university courses Next, I'd like to provide an update on our AI powered translation initiative, which we recently expanded from 18 to 21 languages, adding support for learners speaking, Hindi, Japanese and Korean As a reminder, in 2023, we started translating our catalog of thousands of courses, certificates and specializations into local languages for our learners around the world as a more than 1 million learners have already accessed a I translated content in their enrolled courses and 90 million registered learners on our platform are based in countries where the primary language is one of our 21 supported translated languages. Learner feedback has been inspiring, but we've also heard from our enterprise customers, including businesses and governments who have large multinational populations. We can now have equal access to the world's top experts, no matter what local language they speak.
And finally, an update on Coursera Coach. In Q1, we broaden the access of the Coursera Coach beta program for paying consumer lenders as well as for our Coursera for business and Coursera for government customers cause usage has increased 150% since our initial beta release and I wanted to share some initial feedback from early learners. Our research revealed that many learners come to Coursera lacking the skills to learn effectively without a tutor when we talk to them the learner and said that they talk to coach like a tutor asking for summaries explanations, Quinn's practice and even career advice rather than spending hours searching for answers to the questions on external plates or creating notes from scratch. Coach has freed up their time for actual learning using Coach fundamentally improved the quality of their learning becoming an essential part of their course experience, much like the videos and assessments already in the courses and every example of our general high-powered product innovation, we have a clear strategy that focused on enhancing the value of the Corsair experience through the unique assets of our platform, the content that we have, the data we have and the scale that we've had, and we've designed these general AI products with a support for multiple large language models so that our learners, educators and customers will get to experience the rapid advancements in future models.
To wrap up my opening remarks, I'd like to share a leadership update. In 2022, we implemented a new organizational structure, including roles for a Chief Revenue Officer and Chief Operating Officer that has not delivered the growth that we need in our large but early markets. After careful consideration, I've decided to flatten our leadership team structure, elevating our three segment, general managers and creating Chief Technology Officer and Chief Product Officer roles. They will all report directly to me. This changes designed to enable our next chapter of growth, innovation and leverage all in support of our long-term strategy.
Before I turn it over to Ken, let me remind you of the key priorities we are focused on in the year ahead. 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 that are open content and industry micro credentials can count as credit towards college degrees.
Third, we're focusing 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 general AI for translations, personalized learning with Coach and content creation and course building, with course, builder, 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

Thank you, Jeff, and good afternoon, everyone. As Jeff mentioned earlier, we are pleased with our strategic progress on a number of key initiatives, but I want to begin my remarks today by making it clear that we are not satisfied with our revenue growth. In particular, our revised outlook for 2024 revenue. In the first quarter, we generated total revenue of $169.1 million, which is up 15% from a year ago. Growth was driven by double digit increases across all three of our segments, but we underperformed in consumer more on that momentarily.
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. For the first quarter, gross profit was $91.7 million and a 54% gross margin in line with prior year periods. Total operating expense was $88.2 million or 52% of revenue, down 10-percentage-points from the prior year period. For the individual line item, components of OpEx, sales and marketing expense represented 29% of total revenue, down one point. Research and development expense was 13% of revenue, down 7-point and general and administrative expense was 10% of revenue down 2-points. I remain pleased by our ability to balance our growth initiatives and long-term investments while demonstrating the leverage inherent in our model as our platform scale. Q1 net income was $11.9 million or 7% of revenue, and adjusted EBITDA was $8.3 million or 4.9% of revenue. As a reminder, we do not optimize EBITDA performance in any single quarter or rather, we set an annual EBITDA margin target and work within that plan based on the trajectory of the business. Most importantly, Q1 bottom line performance marked a strong start to the year as we continue to manage to a 2024 adjusted EBITDA margin targets of approximately 4%. So while we needed to bring down top line guidance, our targeted adjusted EBITDA margin remains unchanged.
Now let's discuss cash performance and the balance sheet. We generated strong free cash flow of approximately $18 million, which I'll remind you is inclusive of more than $2 million in purchases of content assets, which we now treat similarly to other categories of capital expenditures, effectively lowering our free cash flow computation and a progress update on our share repurchase program. In Q1, we repurchased approximately 400,000 shares of our common stock for approximately $6 million. And in April, we bought back an additional 1.1 million shares of common stock for approximately $16 million. This leaves nearly $15 million remaining under a total repurchase authorization amount of $95 million, which we expect to complete in the current quarter price dependent. We ended the quarter with approximately $725 million of unrestricted cash and cash equivalents with no debt we believe that our strong financial position is an asset that provides resilience and strategic optionality, which we believe is particularly valuable during a period of rapid technological change and the evolving education landscape.
Next, let's discuss the performance of our segments in more detail. Consumer revenue was $96.7 million, up 18% from the prior year. Segment gross profit was $51.8 million or 54% of consumer revenue in line with the prior year period. And our top of funnel activity remained robust with approximately 7 million new registered learners this quarter. With that being said, our consumer revenue was softer than anticipated. In particular, women performed in our North American region where we're experiencing a lower volume and conversion of paid learners compounded by the delay of the key content launch from one of our educator partners as compared to the timing in our financial plan. While that launch has now occurred will continue to face a future headwind on our consumer growth as our first quarter cohort of learners include a substantial shortfall in high LTV North American paid learners. We are actively pursuing opportunities to mitigate the impact on our full year results, including the acceleration of other content launches planned throughout the year. But as I'll discuss shortly in our revised guidance, we do anticipate a negative impact in both the second quarter and full year outlook.
Now let's move to enterprise. Enterprise revenue was $57.5 million, up 10% from a year ago, driven by our government and campus verticals. Segment gross profit was $39.1 million or 68% of enterprise revenue compared to 67% a year ago. The total number of paid enterprise customers increased to 1,480, up 18% from a year ago. And our net retention rate for paid enterprise customers was 94%. As we discussed the past several quarters, we continue to see a divergence in performance across our verticals, specifically pressuring Coursera for business, offset by momentum in our other two verticals, government and campus. While corporate learning budgets remain under pressure, we are leaning into the momentum in our government and campus opportunities where our unique capabilities including branded high-quality content, entry-level job role, training and credit recommendations are particularly well-suited for these customer use cases.
And finally, our degree segment to reach revenue of $14.8 million up 10% from a year ago on growth in new students and scaling of recent program launches. The total number of degrees students grew 23% from a year ago. To 22,200. As a reminder, there's no content cost attributable to the degree segment. So the green segment gross margin was 100% of revenue. And while that 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 and a growing selection of pathway degree programs.
Now on our financial outlook, taking into account the dynamics I outlined in the discussion of our consumer results for Q2, we're expecting revenue to be in the range of $162 million to $166 million for adjusted EBITDA, we're expecting a range of negative [$2 million] to positive $2 million for full year 2024. We now anticipate revenue to be in the range of $695 million to $705 million. With our revised total revenue outlook, we thought would be helpful to provide new growth expectations by segment for 2024 to reflect our latest view, we now expect all segments to grow at approximately 10% for the full year. For adjusted EBITDA, we're expecting a range of $24 million to $28 million, maintaining our adjusted EBITDA margin annual target of approximately 4%. Consistent with our messaging over the past several years, we are committed to adjusting the pacing our investments based on the trajectory of the business to ensure we manage to the annual adjusted EBITDA margin target we set at the beginning of the year.
So to summarize, we're not satisfied with our revenue trajectory for Q2 and the full year. This year's revised guidance is novel. We consider successful growth company metrics, and we've taken actions that we believe will better position ourselves for future growth opportunities. We are committed to producing growth with consistently increasing scale and leverage with a strong track record of delivering on that promise. And we are pursuing our 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

Thanks, Ken. I'd like to close today with a special use case earlier this month, I joined the World Bank in DC to speak to ministers of finance from emerging economies. 20 of the 30 countries represented in that room had partnered with Coursera during our COVID response initiatives, managed through our work with the Commonwealth of learning one of the countries served by this program was Guyana whose Ministry of Education used Coursera to train more than 36,000 Guyanese citizens with more than 190,000 course enrollments during COVID. Last month, I joined the President of Guyana and many of his ministers to launch a national training initiative that offers every Guyanese citizen and public sector employee access to Coursera. The national program will be delivered through various ministries across the country with customized learning programs for each sector. For example, the Office of the Prime Minister is using Coursera to scale public servants in digital media, communication and journalism. The Ministry of Human Services and Social Security is using Coursera to train over 4,000 women in entrepreneurship, digital finance and resilience skills, the Ministry of Health assembled at the event 900 nursing students and 800 nursing assistants students who are part of the nursing school program.
Now moving online on Coursera and the Ministry of Tourism Industry and Commerce is working with Coursera to enhance their staff skills in digital marketing, communication and data analytics for hospitality and travel. Similar to our partnership with the University of Texas system. This use case with Guyana provides a powerful example for other institutions who are looking to provide high-quality education and skills, training opportunities to large populations that otherwise wouldn't have access to help citizens and local businesses unlock their full economic potential to address skilled labor shortages and high demand industries and to diversify and drive economic growth in a fast-changing global market. Yesterday I act as both a disruptor and an enabler, whether it widens or narrows the opportunity gap hinges on our ability to make education and skilling equally accessible on a global scale businesses. Governments and academic institutions will have to work together to mitigate the human cost of a disruption and create more equal opportunities for everyone in the world of accelerating change. We are proud, of course, Suros role and especially our partners we work with who are turning the threat into an opportunity because of education. Now let's open up the call for questions.
Thank you.

Question and Answer Session

Operator

As a reminder, if you would like to ask a question during this time, please press star followed by the number one on your telephone keypad.
We'll now take our first question from the line of Rishi Jaluria with RBC.
Please go ahead.

Rishi Jaluria

All kind of wonderful. Thanks so much for taking my questions. Maybe I want to start with the softness in consumer arm and there's two pieces there, right. Number one is when did you realize this was going to become an issue and you said that there are certain steps you can take in terms of accelerating certain content partners to help mitigate that. Maybe has that already started what has been traction from there and the piece number two within consumer, I guess I'm still struggling to understand why timing of one on content release, which is now live is causing such a dramatic impact on the overall revenue trajectory.
Maybe help me understand Delta's decent. I've got a quick follow-up.

Jeffrey Maggioncalda

Hey, Rishi, this is Jeff. Yes, thanks for the question. I mean, basically, we're off to a pretty slow start on consumer in 2024. Obviously, the to the question of when we sort of knew I mean, a lot of it is predicated on the launch of a new piece of content to your question that content has launched and sort of relevant to the launch was also paid media that went along with it, particularly in North America. So the delay of the content delayed some of the spend. We saw some of the traffic lower than we had anticipated because of that delay. And even though we're seeing good results. So far, those lost months will not be recovered in terms of in terms of revenue. So that's going to be something that follows us at least through the rest of the year.
Can maybe you could talk a little bit about question on sort of the impact of the slower start in 2024 to our Q2 and 2020 foreign consumer?

Kenneth Hahn

Yes.
And I guess first and foremost, what we highlighted was the underperformance in North America broadly with lower volume in conversion and patent learners. The delay in the content launch compounded. It certainly resulted in some of the underperformance, the conversion, but it wasn't the primary point.
And Jeff, to your commentary, it was really about the lower marketing spend. So and as it relates to that content launch, so lower marketing spend, you get a lower conversion rate because that is highly qualified traffic. And so we saw way overall on the result, but it wasn't it wasn't the primary reason, but a contributing factor.

Jeffrey Maggioncalda

And I wish in terms of mitigation, I mean, one is obviously to get the content launched and put good money behind it on another is to say, all right, what kind of content is getting a lot of traction right now and probably not surprisingly, it's a I content, the idea that people want new content, both for the builders who are building these models and obviously major compensation packages going out there from companies looking to find the builders, but also the users, people who need to learn how to use this stuff. We see broad appetite for X what we saw last year in terms of people taking a I related content and of course, the population of users of AI is much bigger than the population of builders of AI. And so accelerating content launches that have to do with AI and also upgrading existing content. So it has sort of this general AI module that says here's how you do this job in a world of general. Ai are a few of the things that we are that we think are going to be promising throughout the rest of the year. And so we do see some steps to translate the demand for JNI into content launches to at least partially make up for the slow start that we had in 2024.

Rishi Jaluria

Got it. That's really helpful. And then just a quick follow-up. So the NRR for paid enterprise dropped to 94%, and that's in spite of the strength that you saw in government and corporate campus. So that would imply that the NRR for specifically for Coursera for business was a lot softer than that. Maybe again, what is causing that? Is that some layoffs still happening in the customer base? Is it just deemphasizing learning and development within those customers? And more importantly, what steps can you take outside of seeing an improving macro? See that analog is back above 100%? Thank you.

Kenneth Hahn

So Hiroshi on so the we have seen better success of super CNCPG. this year on an overall basis and see for B, you're right, has been where we've consistently underperformed we've talked a little bit about product market fit and what we're emphasizing versus the other two verticals see for CMC for G. on. However, for this quarter, as it relates to NR, the pain was spread a little bit. It wasn't just C. four b., which is where we've seen some weakness over the last year or so. We've been talking about that pretty actively, but it was also a tougher quarter on C. for G., which is what overall was the change that caused it to drop to lower than it was last quarter. To the 94%. And so again, weakness in CPG this particular quarter, which were two specific renewals and without going into detail on them, it's not something we expect to see on an ongoing basis that the fit tends to be strong and supergene, we get pretty good renewal rates.

Jeffrey Maggioncalda

And then Richie on the question of how do we how can we manage our and tried to get it up. I mean, clearly great content that people want share of AI. Academy for companies who are starting that process of re-skilling, their employees, which is going to be kind of a top-down CEO. imperative when they really get into action. But part of it too, is use cases around what kinds of learners are taking these. I mean, we actually see pretty high and IRRs on this use case of student taking Coursera as part of their degree programs. I mean the students are engaged.
They're there to learn.
They're getting credit, they're getting an issue micro credential that's looking pretty good.
So part of it too is finding use cases where we know that there's our good ability to get to the learners and the learners are interested in advancing their career through through learning certain job skills. And we think a lot of what we're seeing continues to be fairly early market traction where in not every case, do we have exactly the right product market fit when it comes to the learners, ultimately taking some of these courses, particularly in the in the government in the government segment where Ken mentioned, we had a little bit of a couple of exceptional cases where there wasn't a great fit with the learnings there, but then we absolutely have no COVID days right now.

Rishi Jaluria

Thank you.

Operator

Your next question comes from the line of Ryan MacDonald with Needham.
Please go ahead.

Ryan MacDonald

Thanks for taking my question.
If we separate out the sort of delayed course launch and the impact on consumer thoughts, obviously about broader softness and lower conversion rate.
As you've looked into the problem.
Is there specific reasons there were things that you're seeing commonalities of maybe what's driving that lower conversion rate and look to your color on that. But then as we think about the rest of the years there ways to trying to boost that conversion through discounting or any sort of other mitigating factors that you might be able to combat sort of that lower conversion rate domestically?
Thanks.

Jeffrey Maggioncalda

Yes, thanks, Ron. So I think with respect to conversion rates and it is more sensitive in the North America region, a lot of what stimulates higher conversion rates is more recent launches. I mean, generally the people who come for a more recent title, our more interested buyers in North America, they have higher disposable income to actually pay for it. We have seen some of the highest conversion rates are in the AI. content. So I think kind of an obvious mitigating strategy is to really continue to lean into Gemini and say not only launch new stuff for the builders and the users of Gemini, but upgrade and relaunch EXISTING a content because and every indication I've seen when this could be their own judge is that this just generally I will have a huge impact on the way people do their jobs. They're going to need to learn new skills to be You name it, a PR comms person or a financial analyst or supply chain manager or UX designer. We think there's a very broad opportunity to really refresh the content digital, including the longer form to appeal to this very apparently strong demand that we're seeing from learners around Gemini. So that's, I think, a one vector of mitigation that we are certainly going to be pushing on.

Ryan MacDonald

Of all maybe just as a follow-up to switching to the degree segment. And obviously, there's been a sort of a lot of turmoil or change within sort of the OPM market generally over the last six months in terms of M&A and struggles from other vendors, are you seeing any opportunities to bring in or have new it's agreed partners as a result of that period of transition that we're going through banks.

Jeffrey Maggioncalda

Yes, Ryan, we're certainly seeing it bounce, but many of the programs that are out there. They were designed for a time that no longer exists. There were designed in a time where an online degree cost the same amount as an on-campus degree, which could be $100,000 or close to that, where that economics could justify spending $25,000 to acquire a learner. And those types of programs just don't really fit our model. So with the pathway degrees where we're really pushing far more affordable credit pathways that you could start an open content and have that count towards a credit degree, we don't see a lot of those types of program designs in the portfolios of some of these traditional OPMs who've been struggling. And so I would not expect we're not anticipating seeing a lot more supply of degree programs coming on for Procera, there essentially are transplants from those traditional OPM players.

Ryan MacDonald

Thanks for taking my questions.

Jeffrey Maggioncalda

Sure.

Operator

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

Stephen Sheldon

Hey, thanks.
First one on the guidance. It assumes about 7% year-over-year revenue growth in the second quarter and then a reacceleration back closer to 10% in the second half of the year. So just curious what gives you the confidence in that second half reacceleration?

Kenneth Hahn

Sure, Stephen.
That's primarily in consumer works. We expect the acceleration, if you look at the guide we gave across the different verticals and quite a bit of that is product driven. We have a number of products coming out in the second half, particularly international payments, something we've talked about internationally and pricings on. And so we've had and we originally had put in our initial plan at the beginning of the year on a weighted average improvements that we expected to see from operating better with those products. And so that's that's the reason for the uptick in the growth as we go into Q3 and Q4 versus Q2?

Jeffrey Maggioncalda

Yes.
And some of the product innovations will basically come take advantage of the translations. And we want to couple those translations, which have obviously created a broader accessibility with, as Ken said, pricing GO pricing, payments, currency and also merchandising in international markets. So we're planning to see higher NPS, new paid learners and better conversion rates in international markets. And we also do have a number of titles that we think will be launching second half of the year that we're pretty excited about and follow the same basic pattern of other branded Professional Certificate types of titles that I've seen good success and good demand on platform.

Stephen Sheldon

Got it.
That's helpful. And then what are you seeing in terms of interest levels from perspective, Coursera for Campus customers to do something similar to what you've already launched with the University of Texas that has interest there picked up?
I guess this year has progressed?

Jeffrey Maggioncalda

Yes, I think that as we continue to show other use cases, that could be happening within a single campus while actually within a single school on a campus, the total campus, a system of campuses or even a national system like in Kazakhstan, we are definitely putting together more and more use cases. Obviously, universities are not institutions who are known for their agility. But I think just the inevitable unyielding force of change that is saying, I mean, not only are working adults looking for more flexibility, affordability with the degree programs, the curriculum that they're looking for is different. I mean, turning out to be a lot more digital and especially now with general AI, you can imagine how difficult it is for the universities to keep up with the curricular offering. And then you layer on top of that, the need to actually transform the the organizations, just the the productivity the operating leverage the way that you went to University College or other vocational school is also changing. So we are seeing a recognition that is fairly incontrovertible. That's just as like yes, this is going to be a very big change. We're going to need some help. And we think we think that Coursera that Coursera is an ideal partner and pretty unique out there. There's just not that many other players who can offer electives for the students that can count for credit, and I generate Academy to help transform the organization.

Stephen Sheldon

Got it. Thank you.

Operator

Your next question comes from the line of Josh Baer with Morgan Stanley.
Please go ahead.

Josh Baer

Great.
Thanks for the question. I wanted to come back to the enterprise segment first, I guess one of the strongest net enterprise paid account adds sequentially in a while.
So I was wondering what drove that?
And then with that in mind, and is that is that a read through to on like stable churn overall or where the growth that particularly strong, but you but the account churn was part of what contributed to the lower net retention rate?

Jeffrey Maggioncalda

Yes. Hey, Josh. So it's a few things. One is average average deal size is coming down a bit. And so companies are interested in sometimes changing out their current partners and saying, all right, look, we'll give you a certain number of license to work with our data scientists or to work with our marketing department or to work in our leadership program. And if that goes well, we'll expand it. And so part of it is kind of reshuffling a portion of an existing budget over the course, Eric, to say, we want to drive your approach to this whole thing. And then we also see a world where the budgets are stabilizing a bit. I do quarterly. I do these events where we have I have discussion forums with Corsair for business learning and development people in the different regions of the world. And I've been asking is your learning development budget getting bigger getting smaller or holding the same. And there's a at least from somewhat anecdotal pulling they have been saying, hey, we're getting ready. There's going to be a big need for reskilling due to Gemini, we're starting to see a change and the budget. And so I think we're also picking up a little bit of a stabilization. And ideally, I'm I'm optimistic that they're going to realize. And when you look at that survey that I mentioned in the script survey after survey showing then even though almost every CEO and executive says major organizational skilling and transformation is going to be required. They also say that so far, they've almost not even started yet Well, once they get their team in order their strategies harder and they're their budgets in order. We do think that there's indications that they'll be good dollars being spent on general AI related upskilling and reskilling of businesses.

Josh Baer

Got it. And then just one follow-up on the segment guide, kind of cross 10% across the board and with consumer coming in in the high 10s this quarter, like the 10% for the year you have to make sense in the context of everything you're saying, but enterprise was already at 10%, I think, and move lower sequentially. So could you talk a little bit about more about that stabilization when the net retention rate is below 100%, and we just saw that revenue ticked lower sequentially yet.

Kenneth Hahn

So I think just question the on the methodology was as simple as renewing our forecast and then taking a look at the overall growth rates with each of the segments, in particular, the enterprise group and enterprise remained at 10% as it was with the previous guidance of last quarter as well as degrees of 10%, which I'm sure you noted on enterprise again, the NRR. there was a larger shortfall than we would have expected for some one-time contracts to one-time contracts. On the government side, we do not expect those to recur. And so we think you will see the NRR bounce back, which is the biggest on lever on the revenue. So that would explain the deceleration. And then and then live importance still achieving the 10%.

Josh Baer

Thank you.

Operator

Your next question comes from the line of Brian Peterson with Raymond James.
Please go ahead.

Brian Peterson

Hey, thanks for taking the questions. I'm not sure if this is for Jeff or Ken, but would love to understand your latest thoughts on payback and your sales and marketing investments? And is there any change in how you guys are thinking about sales marketing with some of the management changes you guys have made, but love to get more color there.

Jeffrey Maggioncalda

Yes, this is Jeff.
Hey, Brian.
So I think there's obviously a difference between the consumer marketing dynamic and then the enterprise where we've got the direct sales force on the consumer side, we still continue to see pretty good returns on average spend on consumer notably with these professional certificates and especially for the newer ones. So we're feeling pretty good that there's there's demand out there. And if we market these things, we get a good return on it. We're also seeing it international markets increased return on average spend given the translations. We think that the translations have kind of opened up some opportunities to deploy paid media outside of the U.S. So we're feeling pretty good about that.
And then on the on the enterprise sales team, and I think frankly, a lot of and I've been out there and a lot of these deals that companies are truck, they know that generally our training is a big deal. They're trying to get there and together, they're trying to figure out, what does their playbook? How are they going to actually scale? What groups do they go with First, right now, they're still focused a bit on the builder saying, do we have people who understand this stuff, but I think creating some shape for those larger Gemini Academy deals will help. And so right now, the deal sizes have been on the smaller side, I'm optimistic that if they start doing larger scale training of generative AI., those mandates might expand and that will create a better return on our enterprise sales and marketing spend by the way, I'd also say on unfair for campus, we are really focused more and more and more on the for students for credit use cases where the students get the best value in the enterprise. The institution gets the best value. It does take faculty a little time to warm up to this idea. I mean, usually the university president is quite interested in it. They've got to make the decisions and sort of enact a policy to say, yes, we're going to offer these industry micro credentials as career Electus for credit that takes a bit of time. So there's a little bit of market development that we're doing with our sales and marketing team and Coursera for Campus. Frankly, I like that investment I cannot see a way that higher education is able to respond to the changes without something that looks a lot like what we're offering with these industry micro credentials that can count as credit towards categories.

Brian Peterson

Are there some additional color there?
Jeff, I know you mentioned a lot about AI content. I'd love to understand how you think about AI. in terms of the professional certificates or the consumer side? And where is the ecosystem of partners in terms of really enabling that a conflict?
There's really higher price point consumer versus business.

Jeffrey Maggioncalda

Yes, I think that the I suspect that the professional certificates with general AI are going to look like the certificate programs that all the cloud players have been doing for the last five to 10 years. The basic idea is in order to promote their platform as a leading platform, whether that's AWS or whether that's Azure, whether that's Google Cloud or IBM. They're going to want to essentially not just merchandise their platform but train people and certify people on their platform. We'll see. But in the past, the platforms have only certified the builders on those platforms. I can see a world and we're getting indications that a lot of the platform providers want to also create certification programs for the users of those platforms of which, of course, there are orders of magnitude, more users of the platforms than builders in the platform. So if things go the way that I think they might add there could be a next wave of certification programs, but a potentially much larger scale where you're certifying, not just the builders but the users.

Brian Peterson

Interesting. Thanks.

Operator

Your next question comes from the line of Devin [Au] with KeyBanc Capital Markets.
Please go ahead.

Devin Au

Great.
I guess, Jeff, thanks for taking my question. I'm not sure if you already mentioned this, but could you share the specifics on what drove the delay in that content launch from your education partner? And are there any guardrails or initiatives in place now to prevent that from happening again, down the road?

Jeffrey Maggioncalda

Yes, hey, this is gives us adjusted.
So there we only have a certain amount of visibility into the production processes for different partners. I would say that one of the things that Ken talked about last quarter, which we continue to lean into for a number of reasons, is us assisting our partners in actually building out this content a we've got a pretty good idea of what the success factors are to design and create a good piece of content and be more and more industry partners. One appear to want to work with Coursera to put their branded content on Coursera, but they're not instructional designers. So they're looking for us to help the benefits to us are a few number one we can have a basically more exclusivity on the content. Number two is if we help to build it and we're putting more resources towards building it out, we get a better share of economics. And then number three, to your question, we get better visibility into that pipeline and actually some actual management of the production process. So I would say that for a number of reasons, including the Gemini tools, making our productivity much, much better and creating high quality content at lower prices. We are basically providing more and more systems to our partners in creating these certificates, and that will give us both more control and more visibility.

Devin Au

Okay.
That's helpful. And then just staying on consumer with the lower volume and conversion of paid learners, as you called out in North America, does that softness have any potential impact to, I guess, degree segment in terms of the funnel and filling those cohorts and degree pathways in the near term.

Jeffrey Maggioncalda

It might. I don't know that the that the numbers are significant enough to materially affect that. What we find is that when we compare up the Wright college degree with the right pathway policy so you can get credit to the right segment of learners and a Professional Certificate, you can unlock your much higher conversion rates and so I think it's a bit more about getting the right pairing of certificate with degree that does at RNRL.s, a new registered learners are also looking pretty good so we feel that the top of the funnel, we brought in another 7 million globally, although you're right in North America, it's a little bit soft. We are feeling pretty good about the overall site visits and new registered learner. So I'm not too worried about that. I don't think that will become a material impact on our ability to to fill degree student cohorts. I think it's much more about unlocking these pathways and really improving the conversion rate because of that unlock between the Professional Certificate and the pathway degree.
Ken, anything you would add to that.

Kenneth Hahn

No, like I said, the exact same thing.
Thank you.

Operator

Let's take one final question.
Your final question comes from the line of Brett Knoblauch with Cantor Fitzgerald.
Please go ahead.

Brett Knoblauch

And my question guys, maybe just on comparing the LTV in your North American learners to that of the international lenders, how big of a delta between them and then do you think the new payment and currency functionality would help narrow that gap?

Jeffrey Maggioncalda

Yes.
Great question, Brett. I will I will say there's certainly a difference. Part of it is the price for when we do your pricing. Part of it is the retention, which is typically longer retention times price gives you the LTV on Canada. Can you give any general way to think about it is not something we typically disclose.

Kenneth Hahn

I know we haven't it's a multiple is the answer. It's a significant difference between North America and Western and all else. Not surprisingly, it's about per capita GDP, especially in A-Pac. So we haven't given broad guidance, but it's a multiple. It's a it's a significant difference.
And as far as new product, enabling that more or creating a change in that, we do think we'll able they'll realize more value. If you think about it, fundamentally, what we're doing around the translations is for making it accessible. So we think that should should drive both volume and over time the ability to for pricing and payment systems as well, making enabling the consumer to transact where it's difficult for them to do today, we think will give us both pricing, flexibility and future, but more important will produce more volume. So partially on the LPV. you'll see increases, but a lot of it is a function, again of per capita GDP, and there's more opportunity for us to close that gap from a value add standpoint internationally, just because we haven't done these things historically. So you'll see a little bit of both we expect.

Brett Knoblauch

Perfect.
And then if I could just have one more on the consumer side.
I guess how much of the revised consumer guidance is attributed to the delayed content versus <unk>?
Anything else that could be macro starting to impact consumers' budgets? And then with inflation continuing to be high. Is that affecting any of the demand funnel?

Kenneth Hahn

Yes, it is both, Brett, to your question. So if there is a general slowdown in the conversion, we can see some of that as a result of the delayed content launch and particularly the effect of less marketing dollars going against that content launches with against a little bit to your previous question, our highest performing highest value region from a consumer standpoint and so on. It is both on and we haven't broken out the attribution. It's hard to understand exactly between the two, but it's an element of both, but it has the slowdown at the beginning of the year around the marketing affects conversion and run rate for the rest of the year, of course, because it's a building on both conversion are the programs build over the first couple of months on. And so by delaying that it's out, it's we lose that for the year.

Brett Knoblauch

Yes.
Okay.
You appreciate it.

Jeffrey Maggioncalda

Sure.

Cam Carey

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. We appreciate you joining us.

Operator

This concludes today's conference call.