• Revenue: Increased 6% year-over-year to $195 million.
• Udemy Business Revenue: $126 million, up 16% year-over-year.
• Annual Recurring Revenue (ARR): $505 million, up 14% from a year ago.
• Gross Margin: 64%, a 400 basis point improvement from the previous year.
• Net Income: Approximately $10 million or 5% of revenue.
• Adjusted EBITDA: Approximately $12 million or 6% of revenue.
• Free Cash Flow: Negative $10 million for the quarter, positive $32 million year-to-date.
• Cash and Equivalents: $358 million at quarter end.
• Net Dollar Retention Rate (NDRR): 99%, 104% for large customers.
• Consumer Revenue: $69 million, down 8% year-over-year.
• Operating Expense: $119 million or 61% of revenue.
• Guidance for 2024 Revenue: $780 million to $783 million, nearly 7% growth at midpoint.
• Guidance for 2024 Adjusted EBITDA Margin: Approximately 4.5% of revenue.

• Warning! GuruFocus has detected 2 Warning Sign with UDMY.

Release Date: October 29, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Udemy Inc (NASDAQ:UDMY) delivered a strong Q3 with revenue and adjusted EBITDA margin exceeding the high end of guidance ranges.
• Revenue grew 6% year-over-year despite a 2-point headwind from foreign exchange rates.
• Udemy Business achieved a milestone of over $500 million in annual recurring revenue (ARR), up 14% from the previous year.
• The company successfully implemented cost-saving measures, achieving over $50 million in savings against an initial target of $25 million.
• Udemy Inc (NASDAQ:UDMY) launched AI-powered skills mapping and an AI assistant, enhancing its product offerings and customer engagement.

Negative Points

• Udemy Inc (NASDAQ:UDMY) continues to face pressure on net dollar retention, with upsells taking longer than historical norms.
• The company is experiencing temporary headwinds in the SMB and consumer segments due to resource reallocation towards large enterprise customers.
• Consumer revenue declined by 8% year-over-year, driven by lower individual course purchases.
• The EMEA region is showing muted growth, contributing to overall revenue headwinds.
• The company expects high single-digit revenue decline rates in the consumer segment for the next year, impacting overall growth.

Q & A Highlights

Q: How are the new AI-enabled capabilities changing sales conversations with larger enterprises, and when might these lead to growth impacts? A: Gregory Brown, CEO, explained that AI capabilities like skills mapping and AI learning assistants are already impacting sales processes by automating previously manual tasks. These tools help organizations assess skills gaps and personalize learning experiences, leading to increased adoption and engagement. Over 1,000 enterprises have started using these AI tools, and early signals are positive.

Q: How would you characterize the corporate L&D spending environment compared to earlier this year? A: Gregory Brown noted that while there is continued scrutiny on budgets, this presents an opportunity for Udemy to consolidate L&D content and strategy. He shared an example of a Fortune 100 tech company choosing Udemy over a competitor due to the breadth of content and platform adoption. The market is undergoing transformations with skills-based organizations and AI, which will take time to fully develop.

Q: Can you provide more details on the integration with Workday and its benefits? A: Gregory Brown highlighted that the integration maps Udemy Business content to Workday Skills Cloud, allowing learners to display developed skills and admins to view employee skills. This promotes internal mobility, a key value proposition for both companies. To benefit, one must be both a Udemy and Workday customer.

Q: What processes are being put in place to focus on larger customers, and how quickly might this impact pipeline conversion? A: Gregory Brown stated that the new CRO, Rob Rosenthal, is enhancing sales capabilities, focusing on key verticals, and improving account planning and sales enablement. This effort aims to up-level the sales organization and is expected to impact pipeline conversion next year.

Q: Can you provide more color on geographical performance and areas for improvement? A: Sarah Blanchard, CFO, mentioned that EMEA is experiencing muted growth, while APAC and LATAM show higher growth. Udemy is building teams and hiring key leaders in these regions to capitalize on opportunities, given the company's global revenue base.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.