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].

Financial Data and Key Metrics Changes - The company reported quarterly revenue surpassing $200 million for the first time, with adjusted EBITDA exceeding expectations [32][37] - Udemy Business annual recurring revenue (ARR) was $519 million, up 8% year over year, with ARR from large customers increasing by 9% [32][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 [37][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, impacted by a negative three percentage point effect from foreign exchange [35] - Subscription revenue across both segments now accounts for 68% of total revenue, representing a 500 basis point expansion year over year [36] Market Data and Key Metrics Changes - 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] - Consolidated net dollar retention at quarter end was 96%, with a rate of 100% for large customers [34] - The company expects potential headwinds in North America and EMEA, while maintaining a more optimistic outlook for APAC and Latin American markets [40] Company Strategy and Development Direction - Udemy is transforming from a content provider to an AI-powered reskilling platform, focusing on enterprise value creation and operational efficiency [12][15] - The company aims to increase emphasis on consumer subscriptions, which saw revenue rise nearly 40% year over year in Q1 [16] - 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 due to external uncertainties, particularly in the consumer segment [31][39] - The company is focused on operational efficiency and has implemented $50 million in annualized cost savings to navigate potential headwinds [41] - Despite a conservative outlook, management remains optimistic about long-term growth opportunities and margin expansion [43] Other Important Information - The company appointed its first Chief Customer Experience Officer to enhance customer retention and expansion efforts [34] - AI trends are seen as a significant opportunity, with the company positioning itself as a leader in AI reskilling [19][26] - The introduction of AI-powered capabilities is expected to enhance the learning experience and improve ROI for customers [22][25] Q&A Session Summary Question: Key observations from the first 45 days and near-term priorities - Management highlighted the need to better package and merchandise AI offerings and emphasized the importance of consumer ownership in career development [45][50] Question: Contribution from new career accelerators and RFP activity - Management expects career accelerators to contribute positively but remains cautious due to macroeconomic uncertainties affecting consumer sentiment [61][63] Question: Changes in enterprise customer conversations - Conversations have evolved to focus more on ROI and consolidation, with an increased emphasis on AI fluency across organizations [70][74] Question: Impact of consumer subscriptions on revenue - Management acknowledged the potential for immediate payback from consumer subscriptions but noted possible delays in revenue from transactional models [78][80] Question: Changes in consumer subscription strategy - The company plans to reimagine its consumer subscription model, including pricing, packaging, and marketing efforts [83][86] Question: AI opportunity and upsell potential - AI is central to many conversations with existing customers, and the company is exploring targeted packages for different organizational personas [90][92]

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]

Financial Performance - Udemy's Q1 2025 revenue reached $200.3 million, a 2% year-over-year increase, despite a negative foreign exchange impact of 2 percentage points[16] - The company's gross margin was 65%, up 400 basis points year-over-year, while non-GAAP gross margin was also 65%, up 300 basis points[16] - Udemy reported a net loss of $1.8 million, a 90% improvement year-over-year, and a non-GAAP net income of $17.9 million, a 236% increase[16] - Adjusted EBITDA for Q1 2025 was $21.1 million, a 227% increase year-over-year, with an adjusted EBITDA margin of 11%, up 800 basis points[16] Enterprise Business - Udemy Business Annual Recurring Revenue (ARR) reached $519 million at the end of Q1 2025, an 8% year-over-year increase[16] - The company added 120 net new enterprise customers in Q1 2025, a 7% year-over-year increase[12,28] - Udemy closed over 40 new business deals exceeding $100,000 in ARR during the quarter[12] Subscription Model - Subscription revenue accounted for 68% of total revenue in Q1 2025, a 500 basis points year-over-year expansion[12,20] - Consumer subscriptions revenue now accounts for 13% of the segment's revenue mix, a 400 bps YoY expansion[16] Future Outlook - Udemy projects Q2 2025 revenue between $195 million and $199 million, with an adjusted EBITDA between $22 million and $24 million[43] - The company anticipates full-year 2025 revenue between $772 million and $794 million, and adjusted EBITDA between $77 million and $87 million[43]

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]

Technical Analysis - Udemy, Inc. (UDMY) has reached a significant support level, indicating a potential investment opportunity from a technical perspective [1] - A "golden cross" has occurred, where UDMY's 50-day simple moving average has broken above its 200-day moving average, suggesting a bullish breakout may be on the horizon [1] - The golden cross is characterized by a downtrend followed by a crossover of the shorter moving average over the longer moving average, leading to a positive trend reversal [2] Performance Metrics - UDMY has experienced a rally of 29.7% over the past four weeks, indicating strong upward momentum [3] - The company currently holds a 2 (Buy) rating on the Zacks Rank, further supporting the bullish outlook [3] Earnings Outlook - There have been no earnings estimate cuts for the current quarter, with four revisions higher in the past 60 days, indicating a positive earnings outlook [3] - The Zacks Consensus Estimate for UDMY has also increased, reinforcing the potential for continued gains [4]

Company Overview - Udemy, Inc. is an edtech company valued at $1.5 billion, operating an online marketplace that connects consumers with experts across various subjects for skill acquisition, development, and validation [1] Industry Insights - The company is part of the growing online education sector, which is increasingly popular as individuals seek to enhance their skills and knowledge through accessible platforms [1]