| SIGNIFICANT ACCOUNTING POLICIES | 2. SIGNIFICANT ACCOUNTING POLICIES Principles of Consolidation The Consolidated Financial Statements include the Company and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. Use of Estimates The preparation of Consolidated Financial Statements in conformity with GAAP requires management to make estimates, judgments, and assumptions that affect the reported amounts of assets and liabilities and related disclosures as of the date of the Consolidated Financial Statements, as well as the reported amounts of revenue and expenses during the reporting period. We base our estimates on historical experience, current conditions, and various other factors that we believe to be reasonable under the circumstances. Significant items subject to such estimates, judgements, and assumptions include, but are not limited to, those related to the determination of principal versus agent and variable consideration in our revenue contracts; stock-based compensation expense; period of benefit for capitalized commissions; internal-use software costs; useful lives of long-lived assets; the carrying value of operating lease right-of-use assets; the valuation of intangible assets; loss contingencies and potential recoveries; and income tax expense, including the valuation of deferred tax assets and liabilities, among others. Actual results could differ from those estimates, and any such differences could be material to our Consolidated Financial Statements. Cash, Cash Equivalents, and Restricted Cash We consider all highly liquid investments with an original maturity of three months or less at the date of purchase to be cash equivalents. Our cash and cash equivalents consist of cash and money market funds at financial institutions, and are stated at cost, which approximates fair value because of their immediate or short-term maturities. Our restricted cash primarily consists of letters of credit required to fulfill certain operating lease agreements. Restricted cash, current is included in prepaid expenses and other current assets, and restricted cash, non-current is included in other assets, both in the Consolidated Balance Sheets. Marketable Securities Marketable securities consist of U.S. Treasury securities, with an original maturity between three months and one year at the date of purchase, and are classified as available-for-sale (“AFS”) debt securities. We view these securities as available to support current operations and have classified all AFS debt securities as current assets. AFS debt securities are initially recorded at cost and periodically adjusted to fair value with unrealized gains and losses reported as a component of accumulated other comprehensive income in the Consolidated Balance Sheets. We evaluate our AFS debt securities with an unamortized cost basis in excess of estimated fair value to determine what amount of that difference, if any, is caused by expected credit losses. Realized gains and losses as well as credit-related impairment losses are included in other expense, net in the Consolidated Statements of Operations. Any remaining impairment is included in accumulated other comprehensive income (loss). Accounts Receivable, Net Accounts receivable, net includes trade accounts receivable, both billed and unbilled, net of an allowance for credit losses. Billed receivables are recorded at the invoiced amount in the period that our right to consideration becomes unconditional, with payment terms on invoiced amounts typically ranging from 30 to 60 days. Unbilled receivables, or contract assets, are recorded when revenue is recognized prior to our unconditional right to consideration. A contract asset is a right to consideration that is conditional upon factors other than the passage of time. We establish an allowance for credit losses based on our assessment of the collectibility of accounts receivable. This assessment considers various factors, including the age of each outstanding invoice, each customer’s expected ability to pay, the collection history with each customer, current economic conditions, and reasonable and supportable forecasts of future economic conditions over the life of the receivable, when applicable, to determine whether a specific allowance is appropriate. Accounts receivable deemed uncollectible are charged against the allowance for credit losses when identified. The allowance for credit losses and related activities were not material for the years ended December 31, 2024, 2023, and 2022. Property, Equipment, and Software, Net Property, equipment, and software, net is stated at cost, less accumulated depreciation and amortization. We record depreciation and software amortization using the straight-line method over the estimated useful lives of the assets, which typically range from two Educator Partner Costs We have various agreements with educator partners that grant us the right to host their intellectual property on our platform. In return, educator partners earn a fee that we recognize as a content cost in the same period in which the related revenue is recognized. This cost is classified as a cost of revenue in the Consolidated Statements of Operations. One such agreement stipulated that certain fees earned by the educator partner were to be allocated to a development fund to be held and spent by Coursera on activities such as developing, marketing, and advertising the educator partner's content, according to a mutually agreed upon plan. We recognized the liability and related expenses associated with this development fund consistent with the timing of when we recognized educator partner content costs given our liability is established in the same period the revenue is recognized. The expenses are classified in the Consolidated Statements of Operations based on the nature of the underlying spend. The liability associated with the development fund is recorded within other accounts payable and accrued expenses in the Consolidated Balance Sheets. During the first quarter of 2023, we entered into an amendment with this educator partner, who started earning typical content fees, which are recorded within cost of revenue in the Consolidated Statements of Operations. Leases We determine if an arrangement is a lease and its classification at inception by evaluating various factors, including if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration, among other facts and circumstances. Right-of-use (“ROU”) assets represent our right to use an underlying asset for the lease term and are included in operating lease ROU assets on our Consolidated Balance Sheets. Lease liabilities represent our obligation to make lease payments according to the arrangement and are included in operating lease liabilities, current and non-current, on our Consolidated Balance Sheets. We do not have any finance leases. ROU assets and lease liabilities are recognized at the commencement date based on the present value of minimum remaining lease payments over the lease term. For this purpose, we include payments that are fixed and determinable at the commencement date, including initial direct costs incurred and excluding lease incentives received. We use the implicit rate when it is readily determinable. Otherwise, we use our incremental borrowing rate based on the information available at the commencement date to determine the present value of future lease payments. Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise such options. Our lease agreements may contain variable costs such as common area maintenance, insurance, real estate taxes, or other costs. Variable lease costs are expensed as incurred in the Consolidated Statements of Operations. Operating lease expense is recognized on a straight-line basis over the lease term. We do not separate lease and non-lease components and do not recognize ROU assets and operating lease liabilities arising from leases with an initial lease term of 12 months or less. Additionally, any impairment of an ROU asset and other lease-related assets, including leasehold improvements, furniture and fixtures, and computer equipment, resulting from entering into a sublease arrangement is recognized in the Consolidated Statements of Operations in the period the sublease agreement is executed. We recognize sublease income as a reduction to our operating lease expense on a straight-line basis over the sublease term. Refer to Note 6 for additional information. Internal-Use Software and Website Development Costs We capitalize certain costs associated with our internal-use software and website development during the application development stage. This occurs when management with the relevant authority authorizes and commits to the project’s funding, it is probable that the project will be completed, and the software will be used as intended. These costs include personnel and related employee benefits expenses for employees who are directly associated with and who devote time to software and website development projects. Such costs are amortized on a straight-line basis over the estimated useful life of the related asset, typically two Intangible Assets, Net Intangible assets, net is stated at cost, net of accumulated amortization. We amortize our finite-lived intangible assets on a straight-line basis over their estimated useful lives, which range from two Impairment of Long-Lived Assets We monitor events and changes in circumstances that could indicate the carrying amounts of our long-lived assets, including deferred partner fees, property, equipment, software, intangible assets, and operating lease ROU assets, may not be recoverable. When such events or changes in circumstances occur, we assess the recoverability of long-lived assets by determining whether the carrying value of such assets will be recovered through their undiscounted expected future cash flows. If the future undiscounted cash flows are less than the carrying amount of these assets, we recognize an impairment loss based on the excess of the carrying amount over the fair value of the assets. Impairment losses related to long-lived assets were immaterial during the year ended December 31, 2024. During the year ended December 31, 2023, we recognized an impairment loss of $861 related to capitalized internal-use software and website development costs. During the year ended December 31, 2022, we recognized impairment losses related to deferred partner fees of $2,915, our operating lease ROU asset of $2,304, and related property and equipment of $904. Treasury Stock We record repurchases of our common stock as treasury stock, at cost. Incremental direct costs associated with the repurchase of our common stock, including excise tax, are included in the cost of the shares acquired. We use the average cost method to account for reissuances of our treasury stock. If shares of treasury stock are reissued at a price higher than its cost, the gain is recorded to additional paid-in capital. If shares of treasury stock issued at a price lower than its cost, the loss is recorded to additional paid-in capital to the extent there are previous net gains included in the account. Losses in excess of previous net gains are recorded to accumulated deficit only once there is no additional paid-in capital. Loss Contingencies We regularly review the status of each significant matter and assess its potential likelihood of loss or exposure. We record an accrual for loss contingencies for legal proceedings when we believe that an unfavorable outcome is both (i) probable and (ii) the amount or range of any possible loss can be reasonably estimated. The actual liability in any such matters may be materially different from our estimates, if any, which could result in the need to adjust the liability and record additional expenses. Legal fees related to potential loss contingencies are expensed as incurred. Insurance recoveries associated with loss contingencies are recognized when realization becomes probable and estimable, the associated costs have been recognized in the financial statements, and the losses are clearly attributable to the insured event. Revenue We recognize revenue from contracts with customers for access to the learning content hosted on our platform and related services. Revenue is recognized when control of the promised services is transferred to our customer, reflecting the consideration we expect to receive in exchange for these services. We apply judgment in determining our customer’s ability and intent to pay, based on a variety of factors including the customer’s historical payment experience, credit, or financial information. Consumer customers are required to pay in advance. At contract inception, we assess the performance obligations, or deliverables, we have agreed to provide in the contract and determine if they are individually distinct or if they should be combined with other performance obligations. Contracts with multiple performance obligations require an allocation of the transaction price to each performance obligation based on each one’s relative standalone selling price. We combine performance obligations when an individual performance obligation does not have standalone value to our customer. For example, our customers do not have the ability to take possession of the software supporting our platform, so our contracts are typically accounted for as service arrangements with a single performance obligation. We have a stand-ready obligation to provide learners with continuous access to our learning platform and deliver related support services for a specified term. For this reason, these services are generally viewed as a stand-ready performance obligation consisting of a series of distinct daily services. We typically satisfy these performance obligations over time as the services are provided. A time-elapsed output method is used to measure progress because our efforts are expended evenly throughout the period given the promise of a stand-ready service. Fixed fees for these services are generally recognized ratably over the contract term. We include any fixed consideration within our contracts as part of the total transaction price. Generally, we include an estimate of the variable amount within the total transaction price and update our assumptions over the duration of the contract. None of our contracts contain a significant financing component. Taxes collected from customers and remitted to governmental authorities are not included within the total transaction price. At times, we are party to multiple concurrent contracts or contracts that combine multiple services. These situations require judgment to determine if multiple contracts should be combined and accounted for as a single arrangement. In making this determination, we consider (i) the economics of each individual contract and whether or not it was negotiated on a standalone basis, and (ii) if multiple promises represent a single performance obligation. Contract modifications require judgment to determine if the modification should be accounted for as (i) a separate contract, (ii) the termination of the original contract and creation of a new contract, or (iii) a cumulative catch-up adjustment to the original contract. When evaluating contract modifications, we must identify the performance obligations of the modified contract and determine both the allocation of revenues to the remaining performance obligations and the period of recognition for each identified performance obligation. We generate revenue from our three reportable segments: Consumer, Enterprise, and Degrees. Refer to Note 13 for our disaggregation of revenue. We are generally the principal with respect to our Consumer and Enterprise revenue arrangements as we control the performance obligation and are the primary obligor with respect to delivering access to course content. Additionally, we have inventory risk through recoupable advances sometimes paid to educator partners. Consumer Revenue We generate revenue from consumers by selling access to learning content hosted on our platform. Consumer products include single course certifications, professional certificates, and catalog-wide subscriptions. Access to single courses is generally purchased at a fixed price for a set period of time, typically six months. Professional certificates are a series of courses offered by the same educator partner, with learners provided access on a month-to-month subscription basis. Coursera Plus is our catalog-wide consumer subscription product, sold in monthly or annual subscriptions. All Consumer learners pay in advance, and revenue is recognized ratably over the contract term once access has been granted to the learner, as learners have unlimited access to the course content during the contract term. Consumer learners are entitled to a full refund up to two weeks after payment is received. We estimate and establish an allowance for refunds based on historical refund rates, which was immaterial as of December 31, 2024 and 2023. Enterprise Revenue We sell subscription licenses to businesses, organizations, governments, and educational institutions. These licenses provide their learners with the ability to enroll in courses and Specializations and receive certifications upon completion. Enterprise contracts are typically between one Degrees Revenue Universities contract with us to facilitate the delivery of their bachelor’s and master’s degree programs or postgraduate diplomas. Degrees revenue contracts involve the performance of a number of promises, including but not limited to hosting the degree content on our learning platform, providing content authoring tools, course production support, marketing, and platform technical support services. As a result, the university is our customer with respect to Degrees revenue. We earn a service fee based on a percentage of total tuition collected by the university from Degrees students, net of refunds. As a result, the revenue we earn is dependent upon the number of learners enrolled and the tuition charged by the university. This is a form of variable consideration, and we estimate the amount of revenue using an expected value method. These estimates are refined each reporting period until the consideration becomes known, generally at the time the final term enrollment report is provided by the university. We have a stand-ready obligation to perform services throughout the contract term during which degree content is hosted on our platform. Degrees revenue is generally earned and paid by the university for each academic term and is recognized ratably from the start of a term through the start of the following term. The Degrees learning experience is delivered on the same proprietary learning platform used by Consumer and Enterprise customers. There is no direct contractual revenue arrangement between Coursera and Degrees students, whose contractual arrangement is directly with the universities. In addition to the learning platform, the universities are obligated to provide their students with additional services, such as designing the curriculum, setting admission criteria, making admission and financial aid decisions, real-time teaching, independently awarding credits, certificates, or degrees, and providing academic and career counseling. For these reasons, the universities control the delivery of degrees hosted on our platform. As a result, we recognize only the service fee we receive from the universities as our Degrees revenue. Deferred Revenue Deferred revenue, or contract liabilities, consists of consideration recorded in advance of performance obligations being delivered and is classified as current or non-current based on the related period in which services are expected to be provided. Contract Acquisition and Fulfillment Costs Contract acquisition costs consist of sales commissions and related payroll taxes associated with obtaining contracts with Enterprise and Degrees customers. Deferred Commissions Contract acquisition costs are costs we incur that are directly related to securing a contract and are primarily related to sales commissions and related payroll taxes earned by our Enterprise and Degrees sales forces. These costs are deferred and then amortized on a straight-line basis over the expected period of benefit. We amortize these costs over four years, as the commissions paid upon a contract renewal are not commensurate with the commissions paid on the initial contract, and as such, the sales contract term is not commensurate with the expected period of benefit. Sales commissions and related payroll taxes primarily paid for Enterprise contract renewals are amortized over the renewal term, which is generally two years. On an annual basis, we assess the expected period of benefit, considering the average contract term length, the life of the underlying technology, and other factors. Deferred commissions and related payroll taxes are recorded within deferred costs or other assets in the Consolidated Balance Sheets, depending on the timing of the related amortization. They are amortized to sales and marketing in the Consolidated Statements of Operations. Deferred Partner Fees These fulfillment costs, which are paid to educator partners in advance of completing our performance obligations, are recorded within prepaid expenses and other current assets or other assets in the Consolidated Balance Sheets, depending on the timing of the related revenue recognition. They are then amortized into cost of revenue ratably over the subscription term. Cost of Revenue Cost of revenue consists of content costs, which are typically fees paid to educator partners, and expenses associated with the operation and maintenance of our platform. These expenses include the cost of servicing support requests from paid learners and educator partners, hosting and bandwidth costs, amortization of acquired technology, internal-use software, and content assets, customer payment processing fees, and attributed facilities costs. Fair Value Measurements Fair value is defined as the price that would be received for an asset or the ‘ exit price’ that would be paid to transfer a liability in the principal or most advantageous market in an orderly transaction between independent market participants on the measurement date. The fair value hierarchy requires an entity to maximize the use of observable inputs, where available. This hierarchy prioritizes the inputs into three broad levels as follows: Level 1 — Inputs are unadjusted quoted prices in active markets for identical assets or liabilities. Level 2 — Inputs are quoted prices for similar assets and liabilities in active markets or inputs that are observable for the assets or liabilities, either directly or indirectly through market corroboration, for substantially the full term of the financial instruments. Level 3 — Inputs are unobservable inputs based on our own assumptions used to measure assets and liabilities at fair value. The inputs require significant management judgment or estimation. The classification of a financial asset or liability within the hierarchy is determined based on the lowest-level input that is significant to the fair value measurement. Concentrations of Risk Financial instruments that potentially subject us to concentration of credit risk consist of cash, cash equivalents, and marketable securities. We only invest in high-credit-quality instruments and maintain our cash equivalents and marketable securities in fixed-income securities. We place our cash primarily with domestic financial institutions that are federally insured within statutory limits. For the purpose of assessing the concentration of credit risk with respect to accounts receivable and significant customers, we treat a group of customers under common control or customers that are affiliates of each other as a single customer. For the years ended December 31, 2024, 2023, and 2022, we did not have any customers that accounted for more than 10% of our revenue. As of December 31, 2024 and 2023, we had one customer that accounted for 12% and 10% of our net accounts receivable balance, both of which were collected within typical business terms. Our business model relies on educational content and credentialing programs from educator partners. Our largest educator partner has global brand recognition and supplies a variety of in-demand content across multiple domains. The loss of or significant reduction in this partnership or one of our other largest educator partners could have a material adverse effect on our financial position, results of operations, and cash flows. Income Taxes We are treated as a corporation under applicable federal and state income tax laws and are subject to income taxes in the United States and numerous foreign jurisdictions. Significant judgment is required in determining our income tax expense and deferred tax assets and liabilities, including evaluating uncertainties in the application of accounting principles and complex tax laws. We utilize the asset and liability method under which deferred tax assets and liabilities arise from the temporary differences between the tax basis of an asset or liability and its reported amount in the Consolidated Balance Sheets, as well as from net operating losses (“NOLs”) and tax credit carryforwards. Deferred tax amounts are determined by using the tax rates expected to be in effect when the taxes will be paid or refunds received, as provided for under currently enacted tax law. The effect on deferred taxes of changes in tax rates and laws in future periods, if any, is reflected in the Consolidated Financial Statements in the period enacted. A valuation allowance is established if, based upon the available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. We consider the available evidence, both positive and negative, including historical levels of income, expectations, and risks associated with estimates of future taxable income in assessing the need for a valuation allowance. Certain of our earnings are indefinitely reinvested offshore and could be subject to additional income tax if repatriated. It is not practicable to determine the unrecognized deferred tax liability on a hypothetical distribution of those earnings. Determination of income tax expense requires estimates and can involve complex issues that may require an extended period to resolve. We recognize estimated tax liabilities when such liabilities are more likely than not to be sustained upon examination by the taxing authority. Further, the estimated level of annual earnings before income tax can cause the overall effective income tax rate to vary from period to period. Final determination of prior-year tax liabilities, either by settlement with tax authorities or expiration of statutes of limitations, could be materially different than estimates reflected in assets and liabilities and historical income tax expense. The outcome of these final determinations could have a material effect on our income tax expense or cash flows in the period that determination is made. We recognize interest and penalties related to income tax matters as a component of income tax expense in the Consolidated Statements of Operations. Stock-Based Compensation Expense We measure and recognize compensation expense for stock-based awards granted to employees, directors, and non-employees based on the estimated grant date fair value. Stock-based awards include restricted stock units (“RSUs”), stock options, performance stock units (“PSUs”) and restricted stock awards as well as stock purchase rights granted to employees under our employee stock purchase plan (“ESPP Rights”). The fair value of RSUs, PSUs, and restricted stock awards is based on the fair value of our common stock on the grant date. We estimate the fair value of stock options and ESPP Rights using the Black-Scholes option-pricing model, which requires the use of the following assumptions: Expected Term —The expected term represents the period that our stock-based awards are expected to be outstanding. For option grants considered to be “plain vanilla,” we determine the expected term using the simplified method, which deems the term to be the average of the time to vesting and the contractual life of the options. For ESPP Rights, the expected term represents the term from the first day of the offering period to the purchase date. Risk-Free Interest Rate —The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant for zero-coupon U.S. Treasury notes with maturities approximately equal to the expected term of the stock option or ESPP Rights. Expected Volatility —The expected volatility for stock options is derived from the average historical stock volatilities of several unrelated public companies within our industry that we consider to be comparable to our business, and to the extent available, our historical volatility over a period equivalent to the estimated expected term. The expected volatility for ESPP Rights is based on the historical volatility of our common stock over the estimated expected term. Dividend Yield —The expected dividend was assumed to be zero as we have never paid dividends and have no current plans to do so. Stock-based compensation is generally recognized on a straight-line basis over the requisite service period, which usually matches the vesting period. Forfeitures are recognized as they occur. Net Loss Per Share Attributable to Common Stockholders Basic and diluted net loss per share attributable to common stockholders is computed using the two-class method required for participating securities. Basic net loss per share is computed by dividing net loss attributable to common stockholders by the weighted-average number of shares of common stock outstanding during the period. Diluted net loss per share is computed by giving effect to all potentially dilutive common stock equivalents to the extent they are dilutive. In this calculation, common stock options, RSUs, PSUs, and ESPP Rights are considered to be common stock equivalents. However, they have been excluded from the calculation of diluted net loss per share attributable to common stockholders due to their anti-dilutive effect for the periods presented. Comprehensive Loss Comprehensive loss includes net loss and other comprehensive income (loss), net of tax. Other comprehensive income (loss), net of tax, refers to revenue, expenses, gains, and losses that, under GAAP, are recorded as an element of stockholders’ equity but are excluded from net loss. Research and Development Expenditures for the research and development of our technology and non-refundable contributions to develop educator partner content are expensed when incurred, unless they qualify as internal-use software development costs. Research and development costs primarily consist of personnel costs, consulting services, content development contributions, and attributed facilities costs. Advertising Costs Advertising costs are expensed as incurred and are included in sales and marketing in the Consolidated Statements of Operations. For the years ended December 31, 2024, 2023, and 2022, these costs were $62,390, $44,818, and $39,940. Foreign Currency The majority of our sales contracts are denominated in U.S. dollars, and the functional currency of our international subsidiaries is also the U.S. dollar. We remeasure monetary assets and liabilities denominated in currencies other than the functional currency to the functional currency at period-end exchange rates. Foreign currency transaction gains and losses resulting from this remeasurement are recognized within other expense, net in the Consolidated Statements of Operations. Recent Accounting Pronouncements New Accounting Pronouncements Recently Adopted In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures , which requires public entities to disclose information about their reportable segments’ significant expenses and certain other segment items on an interim and annual basis if they are regularly provided to the chief operating decision maker (“CODM”). We adopted ASU 2023-07 effective January 1, 2024, using a retrospective method. Content costs paid to educator partners were the only |
