Udemy, Inc. Q4 FY2023 earnings call

• Udemy closed 2023 with strong results, exceeding revenue and adjusted EBITDA margin expectations.
• In 2023, Udemy grew its learner base by 10 million, added over 1,800 net new Udemy Business customers, and partnered with 1EdTech for Open Badges.
• Q4 2023 financials: Revenue $190M, up 15% y/y; Udemy Business revenue $115M, up 27% y/y; ARR $466M, up 25% y/y; gross margin 59%; adjusted EBITDA $4M, 2% of revenue.
• 2024 strategic priorities include establishing Udemy as a skills development platform of choice, elevating the brand globally, supporting Udemy Business growth, accelerating global expansion, and transforming the platform with AI-powered capabilities.

Udemy's financial performance in Q4 2023: Revenue was $190 million, up 15% year-over-year. Udemy Business revenue increased 27% year-over-year to $115 million, contributing 61% of total revenue in Q4. The consumer marketplace had ~34 million average monthly unique visitors, with ~5,000 new courses added monthly on average. Full-year 2023 saw revenue increase 16% year-over-year, with Udemy Business delivering 34% year-over-year revenue growth.

• Q1 2024 revenue expected to be between $193 and $196 million.
• Full-year 2024 revenue guidance: $795-$810 million, 10% y/y growth at midpoint, including 3% negative FX impact.
• Adjusted EBITDA margin target for full year: 150-200 basis points.
• Anticipate ARR growth to reaccelerate in the back half of 2024 as strategic investments begin to deliver returns.

• Macro economic volatility causing elongated sales cycles and slower-than-expected conversions.
• Execution issues in regions like Korea, Vietnam, and EMEA.
• Softer performance in Vietnam, South Korea, and EMEA regions impacting ARR.

Q: Stephen Sheldon on revenue guidance and macro trends A: Sarah Blanchard discussed macroeconomic volatility, execution issues in certain regions, and expectations for ARR growth to accelerate in the back half Q: Curtis Nagle on consumer marketing pullback A: Sarah Blanchard explained balancing investments in Udemy Business and consumer, with focus on UB first due to growth potential Q: Ryan MacDonald on brand investment and product AI A: Greg Brown talked about low brand awareness in key markets and AI investments like skills mapping and learning assistant transforming learning experience Q: Josh Baer on rule of 40 and margins A: Sarah Blanchard mentioned working towards rule of 40, balancing growth and profitability, and long-term EBITDA margin target of 15-20% by 2027 Q: Conor Pesarella on badging and certification adoption A: Greg Brown shared examples of organizations saving time and improving efficiency with badging and certification on Udemy platform Q: David Lusk on AI LLM and consumer application A: Greg Brown explained use of transcripts from courses to power AI for answering questions and plans to port capabilities to consumer Q: Noah Herman on quarter linearity and demand A: Sarah Blanchard noted bookings concentrated in last month of Q4, taking actions to address execution issues Q: Brett Knoblauch on budgetary hesitancy for rescaling A: Greg Brown highlighted momentum in enterprise segment, examples of organizations expanding relationships, and confidence in executing strategy despite macro challenges Q: Jeff Meuler on sales cycles and lead quality A: Sarah Blanchard said sales cycles stable but elongated, and improved lead quality leading to higher win rates Q: Devin Au on ARL growth and net retention A: Sarah Blanchard discussed expectations of ARL growth picking up in back half and focus on net new ARR and lead quality