Coursera IPO Analysis

  • 26th Apr'21
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On 05th March 2021, the infamous online learning platform Coursera Inc. filed documents with the United States Securities and Exchange Commission(SEC) for a stock exchange listing.

Due to the pandemic, while other businesses went down the hill, Coursera revealed a surge in their revenue with the urgent necessity for online education.

Coursera had launched “Coursera for Campus" in late 2019, which enabled them to help educational institutions offer courses to students stuck at home during the lockdown. While this could be one factor for revenue boost, several factors have played a role in it.

Let’s get a closer look at the company’s IPO announcement.

1. About the Company

Coursera is a global online learning platform that allows remote learning and offers courses from leading universities and companies.

It was founded by Stanford University professors Daphne Koller and Andrew Ng in 2012 with a vision to provide life-transforming learning experiences for students worldwide.

According to Coursera’s official website, “77 million learners, 100+ Fortune 500 companies, and more than 6,000 campuses, businesses, and governments come to Coursera to access world-class learning—anytime, anywhere.”

Also Read: Tips for Beginners to Invest in Stock Market.

 

2. Relevant Financial Data

2.1 Business Model

Coursera has a broad range of learning offerings: Guided Projects, courses, Specializations, certificates, and degrees.

In the S-1 form submitted, the management of Coursera explains, “Our go-to-market strategy centers on leveraging the Coursera brand and our partners’ brands along with our large catalog of high-quality, free content to attract learners to Coursera efficiently. Our learners have the opportunity to engage with many of our offerings on both a freemium basis (using an audit option that allows unlimited time access but with fewer features) and a free trial basis (which allows for limited-time access but with nearly full functionality).

Once we attract learners to Coursera, our data-driven learner experience connects learners to courses, certificates, and degree programs tailored to them through a personalized discovery and nurture system. It identifies whether they are a potential Enterprise prospect.”

The company broadly categorizes its services and bifurcates the revenue into three channels: Consumer, Enterprise, and Degrees.

As per their IPO documents, the pricing model for Coursera works in the following manner:

2.1.1 Consumer 

Learners on this Consumer platform pay either one time for a single Course, Project, or a subscription basis for multi-course offerings.

 

IPO

 

2.2.2 Enterprise

This category generates revenue through three primary offerings: Coursera for Business, Coursera for Campus, and Coursera for Government.

  • Coursera for Business: Most of the Coursera for Business revenue is generated on a seat license subscription basis through their Enterprise Plan.
  • Coursera for Campus: They offer subscriptions to their college and university customers with either a fixed number of licenses or enrollments per campus or a fixed contract with unlimited learners. Coursera for Campus enables customers to begin with a freemium offering, such as Coursera for Campus Basic, which gives universities and students unlimited access to Guided Project enrollments and one-course enrollment per student per year for up to 20,000 students to enable trial before purchase.
  • Coursera for Government: Government customers are offered a fixed subscription per licensed user per year. They’ve developed a large Government pipeline from the COVID-19-related free trial provided in 2020 and expect to continue to help governments educate and reskill their populations.

Also Read: 4 Growth Stocks to Add to Your Portfolio.

2.1.3. Degrees

Coursera partners with universities worldwide to develop and deliver fully online bachelor’s and master’s degrees. Once a degree program is live on our platform, universities admit students and pay us a percentage fee based on the online student tuition in a given period.

It’s time to get into the numbers. Shall we?

2.2. Key Business Metrics

2.2.1. Registered Learners

 

 

 

Year Ended December 31,

 

 

2017

2018

2019

2020

 

 

(in millions, except percentages)

New Registered Learners

6.9

7.3

9.2

30.6

Total Registered Learners

30.1

37.3

46.4

76.6

Total Registered Learners YoY Growth

 

24%

24%

65%

 

  • Analysis:

In the year ended December 31, 2020, over 30.2 million new learners registered on Coursera, representing a 65% year-on-year increase from the approximately 46.4 million learners who were registered as of December 31, 2019.

The number of registered learners is an important indicator of Coursera’s business and future revenue trends.

2.2.2. Number of Degrees Students

 

  

2019

2020

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Number of Degrees Students

2,762

4,255

5,986

6,217

7,184

8,079

11,504

11,900

YoY Growth

 

 

 

 

160%

90%

92%

91%

 

As of December 31, 2020, Coursera has partnered with 13 universities to offer 26 bachelor’s and master’s programs with over 11,000 enrolled Degrees students across institutions, including Arizona State University, the University of Illinois, The University of London, University of Michigan, and University of Pennsylvania. 

  • Analysis:

Approximately 8,000 new Degrees students matriculated in 2020, as compared to 4,800 new Degrees students in 2019.

2.2.3. Paid Enterprise Customers

 

 

Year Ended December 31,

2019

2020

Paid Enterprise Customers

240

387

YoY Growth

 

61%

 

Coursera defines a “Paid Enterprise Customer” as a customer who purchases Coursera via our direct sales force.

 

 IPO 2

2.2.4. Segment Revenue

 

Year Ended December 31,

2017

2018

2019

2020

(in thousands, except percentages)

Consumer Revenue

$85,667

$107,554

$121,011

$192,909

YoY Growth

 

26%

13%

59%

Enterprise Revenue

$7,422

$26,812

$48,262

$70,784

YoY Growth

 

261%

80%

47%

Degrees Revenue

$2,541

$7,406

$15,138

$29,818

YoY Growth

 

191%

104%

97%

Total Revenue

$95,630

$141,772

$184,411

$293,511

YoY Growth

 

48%

30%

59%

 

  • Analysis:

  • An increase of 59% was represented in the revenue from the Consumer learners section amounting to a total of $192.9 million for the year ended December 31, 2020.
  • For the year ended December 31, 2020, revenue from their Enterprise channel totalled $70.8 million, representing a 47% year-on-year increase from December 31, 2019. In 2019 and 2020, approximately 70%, and 79%, respectively, of our total Enterprise Segment Revenue was generated from our Paid Enterprise Customers.
  • The revenue from Degrees totalled $29.8 million as on December 31, 2020, representing a 97% year-on-year increase as compared to December 31, 2019.
  • The average acquisition cost for their Degrees students is calculated by aggregating directly attributable marketing costs and dividing by the total number of new students. Coursera’s average Degrees student acquisition cost was under $2,000 over the two years ended December 31, 2020.

2.2.5. Cost of Revenue

The cost of revenue for the year ended December 31, 2019, was $89.6 million, compared to $138.8 million for the year ended December 31, 2020.

2.2.6. Segment Gross Profit

 

 

Year Ended December 31,

2017

2018

2019

2020

(in thousands, except percentages)

Consumer Gross Profit

$43,076

$57,607

$64,645

$106,509

Segment Gross Margin %

50%

54%

53%

55%

Enterprise Gross Profit

$4,717

$19,011

$34,184

$48,972

Segment Gross Margin %

64%

71%

71%

69%

Degrees Gross Profit

$2,541

$7,406

$15,138

$29,818

Segment Gross Margin %

100%

100%

100%

100%

Coursera relies on its partners to create courses for which they share a percentage of the sales with them. So the portion of the revenue it keeps is called “Gross Profit” for that particular segment. And the “Gross Margin” is the “Gross Profit” as a percentage of the segments’ revenue.
In the case of Degrees, the Gross Margin is 100% because Coursera receives a service fee per enrolled student.  

 

2.2.7. Adjusted EBITDA and Adjusted EBITDA Margin

 

 

Year Ended December 31,

2017

2018

2019

2020

(in thousands, except percentages)

Net loss

($53,270)

($43,601)

($46,719)

($66,815)

Adjusted EBITDA

($37,559)

($20,988)

($26,929)

($39,813)

Net loss margin

-56%

-31%

-25%

-23%

Adjusted EBITDA Margin

-39%

-15%

-15%

-14%

 

2.3 Other Important Data

  • In August 2019, the company acquired Rhyme Softworks LLC (“Rhyme”) which was accounted as an asset acquisition. 

Rhyme is an interactive web-based platform for learners to access hands-on short-form software training and demonstrations.

The purchase consideration consisted of $3,846 of cash and 610,556 fully vested shares of the Company’s common stock with a fair value of $3,846.

  • In July 2020, Coursera issued an aggregate of 7,647,058 shares of Series F preferred stock to 10 accredited investors at a price per share equal to $17 for an aggregate purchase price of approximately $130 million.

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2.4 Key Takeaways:

  • Coursera’s revenue was $184.4 million and $293.5 million for the years ended December 31, 2019 and 2020, respectively, representing annual growth of approximately 59%.
  • Sales and Marketing expenses as a percentage of annual revenue were 31% in 2019 and 37% in 2020.
  • The increase in revenue resulted in an increase of $37.8 million in costs related to partner fees. Content costs for the Consumer and Enterprise segments were $56.4 million and $14.1 million for the year ended December 31, 2019, respectively, compared to $86.4 million and $21.8 million for the year ended December 31, 2020, respectively. 

Content costs as a percentage of revenue for Consumer and Enterprise segments were 47% and 29% for the year ended December 31, 2019, respectively, compared to 45% and 31% for the year ended December 31, 2020, respectively. 

  • The company generated a net loss for the years ended December 31, 2019 and 2020 of $46.7 million and $66.8 million, respectively, which included $16.3 million and $16.8 million, respectively, of stock-based compensation, and a net loss margin for the years ended December 31, 2019 and 2020 of (25)% and (23)%, respectively. 

The adjusted EBITDA and adjusted EBITDA margin as a percentage of revenue were $(26.9) million and (15)%, and $(39.8) million and (14)%, for the years ended December 31, 2019 and 2020, respectively.

  • The gross margin was 51% for the year ended December 31, 2019, compared to 53% for the year ended December 31, 2020.
  • The increase in gross margin was due to a shift in the mix of revenue toward Enterprise and Degrees and economies of scale within our operations.
  • Coursera acquired Rhyme Softworks LLC in August 2019.
  • On 17th July 2020, the company announced that they raised $130 million in a Series F round of financing.

 

3. Company’s Key Competitive Strengths

According to Coursera, their competitive advantage is based on the following key strengths:

  • Trusted brand with a large learner base
  • Our consumer flywheel creates a price-to-cost advantage
  • Branded catalog of modular and stackable content and credentials
  • Network of leading academic and industry partners
  • Job-relevant, hands-on projects, and industry certificates
  • Multi-channel Enterprise model
  • Rich data analytics and Skills Graph

IPO3

 

4. Risk Factors

Coursera has identified and laid down numerous risks in their prospectus that one should read before investing in their common stock. 

Here’s the Risk Factor Summary as mentioned in their prospectus:

“In particular, risks associated with our business include, among others, the following, any of which could have an adverse effect on our business, financial condition, results of operations, or prospects:

  • Fluctuations in our quarterly and annual revenue and operating results, which could cause our stock price to fluctuate and the value of your investment to decline;
  • Our rapid growth, which may not be indicative of our future growth, and our expected decline in revenue growth rate compared to prior years;
  • Our limited operating history, which makes it difficult to predict our future financial and operating results;
  • We have incurred significant net losses since inception, and anticipate that we will continue to incur losses for the foreseeable future; 
  • The impact of the COVID-19 pandemic, which has impacted, and may continue to impact, our business, key metrics, and results of operations in volatile and unpredictable ways; 
  • The nascency of online learning solutions, the market adoption of which may not grow as we expect; 
  • Our ability to maintain and expand our partnerships with our university and industry partners;
  • Our ability to attract and retain learners; 
  • Our ability to increase sales of our Enterprise offering; 
  • Our ability to compete effectively; 
  • Our partners’ ability to comply with international, federal, and state education laws and regulations, including applicable state authorizations for their programs; 
  • Any failure to obtain, maintain, protect, and enforce our intellectual property and proprietary rights and successfully defend against claims of infringement, misappropriation, or other violations of third-party intellectual property; 
  • Any changes to the validation or applicability of the DOE “dear colleague letter,” on which our business model relies;
  • Any disclosure of sensitive information about our partners, their employees, or our learners, whether due to cyber-attack or otherwise;
  • Any disruption or failure of our platform; and
  • Our status as a B Corp, which may negatively impact our financial performance.

5. Objects of the Offer

The objects of the offer i.e where the proceeds of the offer would be used have not been finalized yet. But they do intend to invest the net proceeds received from this offering in interest-bearing securities such as money market accounts, certificates of deposit, commercial paper, and guaranteed obligations of the U.S. government as mentioned in the S1 form submitted with SEC.

6. Coursera IPO Date and Issue Price Details

The company has applied in hopes to have their common stock listed on the New York Stock Exchange under the symbol “COUR”.

The company filed documents with the SEC on March 5th, 2021. As of now, there are no details available regarding IPO dates, number of shares, and the price band.

Underwriters for this IPO:

Morgan Stanley & Co. LLC and Goldman Sachs & Co. LLC are acting as representatives, and have severally agreed to purchase with other names as well.

 

We, at OpenGrowth, are continually looking for trending startups in the ecosystem. If you want to know any further information about the startup ecosystem or have any mind-boggling ideas, do refer to the other blogs at OpenGrowth. If you have any suggestions, do let us know in the comment section below.

 

Contributor: Ayushi Vanzara 

Ayushi Vanzara is currently pursuing Chartered Accountancy. No secrets there that she loves to read! She believes words have the power of healing and is a medium that can convey like no other. She hopes to connect with people through her empathy, thoughtfulness, and by adding value to their lives. 

Sources/References:

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About the author:

Prachi Chouksey (Editor), Super admin

An artist by heart and a writer by profession, Prachi is a vivacious reader.  She believes in hard work and her dedication has never let her down. She puts her heart and soul in everthing she does. Though life has not been a bed of roses for her, she affirms that the best way to live it is to maintain an equillibrium between the tunes of life.  


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