Udemy (UDMY) FY Conference May 14, 2025 08:40 AM ET Speaker0 Okay. I think we'll get started. Thanks everyone for coming today to JPMorgan's TMZ conference. I'm delighted to be hosting Udemy, current CEO Hugo Sarazin. Thanks so much for joining us, Hugo. Speaker1 Thank you for having me. Speaker0 Yeah, so maybe we could start with a quick introduction about yourself, about you to me, and what your reasons were for joining the company recently. Speaker1 Okay. Very good. Let's start with the easy one. 30 year ...

Group 1 - Udemy experienced a significant stock price decline of nearly 12% in April, attributed to investor sentiment and external economic factors [1] - The company underwent a sudden CEO transition from Greg Brown to Hugo Sarrazin, which contributed to shareholder unease [2][6] - An analyst downgrade from Truist Securities reduced the price target for Udemy from $10 to $7, reflecting concerns about the company's positioning in a potential recession [4][6] Group 2 - The economic climate is causing fears of a recession, which typically leads consumers to cut back on non-discretionary spending, impacting Udemy's business model [5] - Despite reporting a more than tripled non-GAAP net income of nearly $17.9 million year over year, Udemy's revenue growth was only 2%, reaching slightly over $200 million [8] - Current guidance for the second quarter and full year was in line with analyst expectations, but the overall sentiment remains cautious regarding Udemy's potential for significant growth [8][9]

Core Insights - The article emphasizes a strong foundation in fundamental analysis and the identification of undervalued companies with long-term growth potential [1] Investment Approach - The investment strategy combines value investing principles with a focus on long-term growth, advocating for the purchase of quality companies at a discount to their intrinsic value [1] - The approach encourages holding investments for an extended period to allow for compounding of earnings and shareholder returns [1]

Core Insights - Udemy, Inc. reported revenue of $200.3 million for Q1 2025, reflecting a year-over-year increase of 1.8% and an EPS of $0.12, up from $0.03 a year ago, exceeding the Zacks Consensus Estimate of $197.04 million by 1.66% [1] - The company achieved an EPS surprise of 20.00%, with the consensus EPS estimate being $0.10 [1] Financial Performance Metrics - The Enterprise Segment's Annual Recurring Revenue reached $519 million, surpassing the estimated $512.99 million [4] - The Consumer Segment had an average of 1.41 million monthly buyers, slightly above the estimated 1.4 million [4] - Total customers in the Enterprise Segment were 17,216, exceeding the average estimate of 17,111 [4] - Revenue from the Enterprise Segment was $127.70 million, compared to the average estimate of $125.84 million, marking a year-over-year increase of 8.6% [4] - Revenue from the Consumer Segment was $72.60 million, which is below the average estimate of $70.79 million, representing a year-over-year decline of 8.3% [4] Stock Performance - Udemy's shares have returned -12.2% over the past month, contrasting with the Zacks S&P 500 composite's -0.2% change [3] - The stock currently holds a Zacks Rank 3 (Hold), indicating potential performance in line with the broader market in the near term [3]

Company Performance - Udemy, Inc. reported quarterly earnings of $0.12 per share, exceeding the Zacks Consensus Estimate of $0.10 per share, and showing an increase from $0.03 per share a year ago, representing an earnings surprise of 20% [1] - The company posted revenues of $200.3 million for the quarter ended March 2025, surpassing the Zacks Consensus Estimate by 1.66%, and an increase from $196.85 million year-over-year [2] - Over the last four quarters, Udemy has surpassed consensus EPS estimates three times and topped consensus revenue estimates four times [2] Future Outlook - The sustainability of Udemy's stock price movement will depend on management's commentary during the earnings call and the company's earnings outlook [3][4] - The current consensus EPS estimate for the upcoming quarter is $0.09 on revenues of $195.94 million, and for the current fiscal year, it is $0.41 on revenues of $791.3 million [7] - The estimate revisions trend for Udemy is mixed, resulting in a Zacks Rank 3 (Hold), indicating that shares are expected to perform in line with the market in the near future [6] Industry Context - The Internet - Software industry, to which Udemy belongs, is currently ranked in the bottom 44% of over 250 Zacks industries, suggesting that the industry's outlook can significantly impact Udemy's stock performance [8] - Empirical research indicates a strong correlation between near-term stock movements and trends in earnings estimate revisions, which can be tracked by investors [5]

Business Overview - Udemy's consumer marketplace has attracted 79 million learners across over 180 countries, with a network of 85,000 instructors offering over 250,000 courses in 75 languages[117]. - Udemy generates a majority of its revenue outside North America and sees significant opportunities for expansion in underserved regions[128]. - The company is actively investing in growth, focusing on larger enterprise customers and strategic partnerships, while anticipating operating expenses to decrease as a percentage of revenue over time[129]. Revenue and Financial Performance - Revenue for the three months ended March 31, 2025, was $200.3 million, representing a 2% increase from $196.8 million in the same period of 2024[152]. - Enterprise revenue increased by $10.1 million, or 9%, to $127.7 million, accounting for 64% of total revenue, while Consumer revenue decreased by $6.7 million, or 8%, to $72.6 million[153][154]. - Gross profit for the three months ended March 31, 2025, was $129.4 million, with a gross margin of 65%, up from 61% in the prior year[155][158]. - Total operating expenses decreased by $9.4 million, or 7%, to $133.9 million, driven by reductions in sales and marketing and research and development expenses[158]. - Udemy Business Annual Recurring Revenue (ARR) grew by 8% to $519.0 million, up from $479.4 million in the prior year[170]. - Adjusted EBITDA improved significantly to $21.1 million in Q1 2025 from $6.5 million in Q1 2024, reflecting operational efficiency initiatives[184]. Cost Structure and Efficiency - The revenue mix is shifting towards the higher-margin Enterprise segment, which is expected to grow faster than the Consumer segment, benefiting overall margins[127]. - Cost of revenue is primarily driven by content costs, which are expected to decrease as the company increases revenue from its Enterprise offering[138]. - Operating expenses are expected to decrease as a percentage of revenue over time, driven by operational efficiency and high-growth opportunities[139]. - Stock-based compensation expense totaled $18.0 million for the three months ended March 31, 2025, down from $22.7 million in the prior year[149]. Instructor Revenue Share Changes - The company plans to reduce the instructor revenue share for subscription offerings from 25% to 15% by 2026, with adjustments to 20% effective January 1, 2024, and 17.5% effective January 1, 2025[136]. - Net loss decreased to $1.8 million in Q1 2025 from $18.3 million in Q1 2024, driven by reduced instructor revenue share and lower operational costs[184]. Customer Metrics - Udemy Business customers increased by 1,146, or 7%, to 17,216 as of March 31, 2025, reflecting the company's global expansion strategy[168]. - Monthly average buyers decreased by 2% year-over-year, totaling 1,412,000 in Q1 2025 compared to 1,442,000 in Q1 2024[176]. - Udemy Business net dollar retention rate decreased to 96% in Q1 2025 from 104% in Q1 2024, while the large customer net dollar retention rate fell to 100% from 111%[174]. Cash Flow and Investments - As of March 31, 2025, the company had cash, cash equivalents, and restricted cash totaling $190.7 million, along with marketable securities of $167.4 million[186]. - Cash provided by operating activities was $12.2 million in Q1 2025, down from $21.0 million in Q1 2024, primarily due to changes in operating assets and liabilities[195]. - Net cash used in investing activities was $7.4 million for the three months ended March 31, 2025, primarily due to $78.6 million in purchases of marketable securities[198]. - Net cash used in financing activities was $5.9 million for the three months ended March 31, 2025, primarily driven by taxes paid related to net share settlement of employee equity awards[200]. Tax and Accounting Policies - The company has a full valuation allowance against U.S. federal and state deferred tax assets due to uncertainty in realizing these assets, maintaining this allowance until consistent taxable income is achieved[147]. - There have been no material changes to the company's critical accounting policies and estimates compared to the previous year[203]. - The company did not have any relationships with unconsolidated entities or financial partnerships during the periods presented[201]. Market and Economic Factors - The pace of adoption for cloud-based skill development solutions is expected to increase as technology becomes critical to business operations, although customer adoption rates remain uncertain[130]. - A hypothetical 100 basis points change in interest rates would not result in a material increase or decrease in the market value of the company's portfolio of cash equivalents and marketable securities[206]. - The company's reporting currency is the U.S. dollar, and fluctuations in foreign currency exchange rates may cause transaction gains and losses[207]. - The company has not entered into any hedging arrangements with respect to foreign currency risk or other derivative financial instruments[207].

Udemy (UDMY) Q1 2025 Earnings Call April 30, 2025 05:00 PM ET Company Participants Dennis Walsh - VP - Investor RelationsHugo Sarrazin - CEOSarah Blanchard - CFOTerry Tillman - Managing DirectorNafeesa Gupta - VP - Equity ResearchNoah Herman - VP - Equity Research Conference Call Participants Ryan Macdonald - Senior AnalystJason Tilchen - Director & Senior Equity research AnalystJoshua Baer - Executive Director - Software Equity Research AnalystYi Fu Lee - Equity Research AnalystJeffrey Meuler - AnalystDevi ...

Financial Data and Key Metrics Changes - In Q1 2025, Udemy's quarterly revenue surpassed $200 million for the first time, with adjusted EBITDA exceeding expectations [32][38] - Udemy Business annual recurring revenue (ARR) was $519 million, up 8% year over year, with ARR from large customers increasing by 9% [33] - Total company gross margin improved to 65%, a 300 basis point increase from Q1 2024, driven by changes in content costs and a shift towards Udemy Business [38] Business Line Data and Key Metrics Changes - Udemy Business revenue was $128 million, a 9% year-over-year increase, despite a one percentage point headwind from foreign exchange rates [33] - Consumer segment revenue was $73 million, down 8% year over year, with a negative three percentage point impact from foreign exchange [36] - Subscription revenue across both segments now accounts for 68% of total revenue, representing a 500 basis point expansion year over year [37] Market Data and Key Metrics Changes - Approximately 60% of Udemy's revenue comes from outside the U.S., indicating a strong global presence [16] - The company added approximately 120 net new Udemy Business customers, increasing the global customer base by 7% year over year to over 17,200 [33] Company Strategy and Development Direction - Udemy is transforming from a content provider to an AI-powered reskilling platform, focusing on large enterprises in key verticals [11][14] - The company aims to increase emphasis on consumer subscriptions, which saw revenue rise nearly 40% year over year in Q1 [15] - A full-stack localization strategy will be implemented across high-potential markets to enhance market-specific product experiences [17] Management's Comments on Operating Environment and Future Outlook - Management expressed caution regarding the top line outlook due to external uncertainties, particularly in the consumer segment [40] - The company is focusing on operational efficiency and has implemented $50 million in annualized cost savings to navigate potential headwinds [42] - Management remains optimistic about long-term growth opportunities, particularly in AI and enterprise reskilling [28][45] Other Important Information - The company introduced Career Accelerators, which are curated role-specific learning paths aimed at enhancing personalized learning experiences [22] - Udemy's AI innovations are reducing program creation time by 80% on average, enabling targeted development journeys [22] Q&A Session Summary Question: Key observations from the first 45 days of tenure - Management highlighted the need for better packaging and merchandising of AI offerings and the opportunity to support consumer learners in their career growth [47][51] Question: Contribution from new career accelerators - Management expects career accelerators to be exciting for learners but remains cautious due to macroeconomic uncertainties affecting consumer sentiment [62][64] Question: Conversations with enterprise customers - Management noted increased questions about consolidation and ROI, indicating a shift towards demonstrating value from Udemy's offerings [75][76] Question: Changes in consumer subscription focus - Management confirmed that changes in pricing, packaging, and marketing efforts are underway to enhance consumer subscriptions [87][90] Question: AI opportunity and upsell potential - Management indicated that AI is central to conversations with existing customers, with plans to package targeted AI offerings for different organizational personas [94][95]

1Q 2025 Earnings Presentation April 30, 2025 Safe Harbor Notice This presentation and any accompanying oral commentary include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include all statements other than those of historical fact, including information concerning our future operating results and financial position, anticipated future expenses and investments, business strategies and plans, market growth, market position an ...

Revenue Performance - Total revenue increased 2% year-over-year to $200.3 million, with a negative impact of 2 percentage points from foreign exchange rates[5] - Enterprise segment revenue of $127.7 million increased 9% year-over-year, including a negative impact of 1 percentage point from foreign exchange rates[5] - Consumer segment revenue decreased 8% year-over-year to $72.6 million, with a negative impact of 3 percentage points from foreign exchange rates[5] - Udemy Business Annual Recurring Revenue (ARR) increased 8% year-over-year to $519.0 million[5] - Revenue for Q1 2025 was $200.3 million, a 2.3% increase from $196.8 million in Q1 2024[26] Profitability and Loss - Net loss was $1.8 million, a significant improvement of 90% year-over-year, while Adjusted EBITDA was $21.1 million, representing an 800 basis point expansion in margin to 11%[5] - Net loss for Q1 2025 decreased to $1.8 million from $18.3 million in Q1 2024, with net loss per share improving from $(0.12) to $(0.01)[34] - Adjusted EBITDA for Q1 2025 was $21.1 million, compared to $6.5 million in Q1 2024, reflecting an adjusted EBITDA margin of 11%[35] Operating Expenses - Total operating expenses for Q1 2025 were $133.9 million, down from $143.3 million in Q1 2024, primarily due to reduced sales and marketing expenses[26] - Stock-based compensation expense for Q1 2025 was $18.0 million, down from $22.7 million in Q1 2024[34] Customer Growth and Engagement - Added 2 million new learners and nearly 120 net new Enterprise customers, ending the quarter with a total of 79 million learners and 17,216 Enterprise customers[5] - The company continues to focus on expanding its Udemy Business offerings, targeting enterprise clients with on-demand learning solutions[24] Financial Guidance - Guidance for Q2 2025 revenue is projected between $195 million and $199 million, with full year 2025 revenue guidance between $772 million and $794 million[7] - The company expects a negative impact of 1.5 percentage points on Q2 year-over-year revenue growth due to foreign exchange rates[8] Market Recognition - Recognized as a Strategic Leader in the 2025 Fosway 9-Grid™ for Digital Learning, highlighting its market position[5] Cash and Receivables - Cash, cash equivalents, and restricted cash at the end of Q1 2025 totaled $190.7 million, slightly down from $191.8 million at the beginning of the period[30] - Accounts receivable increased to $111.2 million in Q1 2025 from $88.2 million in Q4 2024, indicating improved sales performance[28] - Deferred revenue increased to $326.3 million in Q1 2025, up from $291.1 million in Q4 2024, suggesting strong demand for Udemy's services[28] Gross Profit - Gross profit for Q1 2025 was $129.4 million, compared to $120.6 million in Q1 2024, resulting in a gross margin of 65%[32]