Declining college enrollments ‘a U.S. phenomenon,’ Coursera CEO says

Coursera CEO Jeff Maggioncalda joins Yahoo Finance Live to discuss the high levels of prospective students declining college enrollments as tuition’s surge, digital education, and the outlook for online learning.

Video Transcript

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JULIE HYMAN: Enrollment challenges are escalating among universities with total post secondary enrollment decreasing by 4.1% compared to last year. That's according to a report from the National Student Clearinghouse Research Center. All of this as colleges grapple with the post-COVID era and what kind of value they're offering to students.

Joining us now to discuss what this means for online learning is Coursera CEO Jeff Maggioncalda. Jeff, thank you for being here. So what does it mean? If we are seeing fewer students, what does that mean then for your business and the opportunities for online learning?

JEFF MAGGIONCALDA: I think-- it means a lot of things. I mean, first thing that we need to think about is we have the US and we have the rest of the world. And the US, I think, is facing certain demographic challenges. I mean, the millennials have come through. That was a very big generation.

And part of what we're seeing is fewer student age people coming through the system. I think that's one of the things that's putting downward pressure on enrollments. Another thing, though, is if you look at the very elite schools with very fancy residential campuses, enrollments and applications are at very, very high levels.

I think what's happening among other types of universities and colleges, community colleges notably, is one, a pretty strong job market in the US, where we have low unemployment rates, lots of job opportunities that might have a student defer for a year or two. And then another one is the alternatives to learning that just didn't exist, say, 5, 10 years ago.

And now with the pandemic, so many students have realized the flexibility and the affordability of learning skills that could help them get better paying jobs are just much more prevalent than they were prior to the pandemic. And so I think it's a combination of those factors. But when you look at India and you look at Latin America, you look at Africa, there's a huge boom in college enrollment. So this is more of a US phenomenon that we're seeing.

BRAD SMITH: Do you think that that's kind of tied into the return on investment calculation that a lot of families, households may run themselves after two years of doing so much either hybrid or virtual learning and, with that in mind, not wanting to pay for an entire campus experience or have that tied into the costs that they are paying but to instead kind of lean more into that digital touch point that they could see, and then, ultimately, still get a similar type of opportunity on the other side of that?

JEFF MAGGIONCALDA: Absolutely. There's no doubt about it. And we are now engaging-- we launched, in May, something called Career Academy. It's basically a set of about 30 job professional certificates. And they're all oriented towards jobs. So if you want to be an IT support professional or UX designer, a cybersecurity analyst, you can take these professional certificate programs.

And they're created by IBM and Google, Salesforce, Meta. I mean, they're really good industry training programs that are available online. We have, like I said, about 30 on Coursera. But first of all, the students can take these things online and potentially defer going to college. But now increasingly at the statewide levels, we are seeing states say that the state education system will award academic credit towards a college degree for a professional certificate earned on Coursera.

And we do this with the American Council on Education where they actually review and accredit these certificates so they actually can count towards college. And so a lot of students are looking at the ROI calculation saying, I'll start my degree online on Coursera in a job training program and then have that count towards a campus-based degree program if I want to do that in a couple of years.

BRIAN SOZZI: Jeff, your CFO didn't mince any words at the Goldman conference earlier this week. He said, look, we missed last quarter. We missed last quarter, in large part because of pressures in Europe. Have any of those trends started to stabilize quarter over quarter?

JEFF MAGGIONCALDA: I would say that the biggest negative surprise was in our degree segment, which is exactly to the comment that you're making, just post-pandemic, there are a lot of students who are, I think, are saying either I'm going to defer going to college or maybe I'll take a vacation or just sort of ease back into things, not hit the books so hard. So I think across the sector, we have seen certain headwinds from the general softness in college enrollments.

You also mentioned Europe. And this is more in the Coursera for Business segment. We offer Coursera for Business and then Campuses and Governments. Governments is going great. Campus is going great. Europe is a really, really tough spot.

At least as we look at our pipeline and we look at our numbers, a lot of European consumers and businesses, I think, are just taking a little bit more of a conservative approach with their budgets and their spending as they look at energy costs, they look at uncertainties with respect to the war in Ukraine. And so we have seen some softness there. And we're not planning-- as we said in the call, we're not planning for that to be better through the end of this year.

BRAD SMITH: For some of the softness that has been seen to this point, we've seen other tech companies need to restructure their businesses to best position themselves for what they could do to serve customers even on the other side. Is there any restructuring that Coursera is going to have to do?

JEFF MAGGIONCALDA: Well, I think-- we're going through our financial planning process right now, as most companies do. And the first step-- and we had mentioned this on the call as well that the first step was to really pull back on expense growth because when you're entering these times, what you really want to do is make sure you have a lot of degrees of freedom as this sort of uncertainty unfolds and you see is it better than we thought, is it worse than we thought?

So slowing down expense growth is sort of a first thing. And then, to your point, really thinking about where are we getting the most leverage with our spend? If we're seeing a lot of activity, for instance, in Coursera for Campus in India, then maybe we'll put more resources there. There are many, many universities in India who are retooling to serve this massive population of younger people in India looking for college degrees.

So we might shift some resources from one region to another region, and also from one segment, like degrees, to another segment, like enterprise. So we're certainly evaluating that. I think every company, if they're not, they should be doing that. Thankfully, we went public, and we have about $750 million plus in the bank and no debt. So we've got plenty of resources.

And the opportunity long term has never been better for online learning. So we feel really good about the opportunity and the need in the market that we can meet. We do want to be prudent, though, about how we spend our money. And I think, like all companies, we're looking carefully at where we get the best leverage.

BRAD SMITH: Coursera CEO Jeff Maggioncalda joining us today. Thanks so much, Jeff. Appreciate it.

JEFF MAGGIONCALDA: Thanks a ton.

BRAD SMITH: Always great to catch up.