Udemy, Inc. Q1 FY2025 earnings call

• Hugo Sarrazin highlighted exceeding Q1 revenue and adjusted EBITDA guidance, shared his background in tech and why he joined Udemy, and discussed the company's mission, global reskilling opportunity, and leveraging AI to transform into an AI-powered reskilling platform. - Mentioned customer examples of large enterprise deals, expansion of partners, global market activation, and AI-powered capabilities like Career Accelerators and AI-assisted role play. - Sarah Blanchard discussed financial highlights, margin expansion, segment performance, the appointment of a Chief Customer Experience Officer, and the company's outlook including cautious top-line guidance for the year while raising adjusted EBITDA expectations.

Udemy Business segment: Revenue was $128 million, up 9% year-over-year, with Udemy Business Annual Recurring Revenue (ARR) at $519 million, up 8% from a year ago. ARR from large customers increased by 9%, and over 40 new business deals with north of $100,000 in ARR were closed. Growth margin for the segment was 75% for Q1, up 300 basis points from the prior year. Consumer segment: Revenue was $73 million, in line with expectations, down 8% year-over-year including a negative three percentage point impact from FX. Subscription revenue across both segments now accounts for 68% of total, a 500 basis point expansion year-over-year.

• Second quarter revenue guidance: $195 to $199 million, midpoint implies 1% year-over-year increase, with FX expected to negatively impact by 150 basis points. Udemy Business revenue expected to increase ~6% YOY (50 basis points FX headwind), consumer revenue down 7% (300 basis points FX headwind). - Full-year 2025 revenue guidance: $772 to $794 million, midpoint implies slight 50 basis point YOY decline (100 basis points FX headwind). Consumer revenue midpoint implies down ~9% YOY (250 basis points FX headwind). - Adjusted EBITDA guidance: Second quarter $22 to $24 million (~12% of revenue). Full-year 2025 $77 to $87 million (~10% of revenue at midpoint).

• Macro-economic uncertainty and geopolitical developments may contribute to a more cautious spending environment and decreased consumer confidence. - Potential headwinds in North America and EMEA where economic signals are mixed; monitoring certain focus verticals like IT consulting firms with federal government contract exposure and manufacturing organizations impacted by tariff-related uncertainties.

Q: Ryan MacDonald asked Hugo about key observations in his first 45 days and near-term priorities.

A: Hugo mentioned focusing on merchandising and packaging AI offerings, leaning into consumer subscriptions, leveraging distribution to partner with others, and excitement about the role play and instructor ecosystem.

Q: Ryan MacDonald followed up asking about consumer career accelerators and UB RFP activity.

A: Sarah Blanchard said consumer career accelerators are exciting but cautious due to macro uncertainty; UB sees RFP volume for consolidation and Hugo added on ROI and consolidation trends.

Q: Jason Tilchen asked about enterprise customer conversations.

A: Hugo talked about uncertainty leading to RFPs, more consolidation questions, ROI focus, and AI fluency for all organization roles.

Q: Terry Tillman asked about consumer subscriptions payback.

A: Sarah Blanchard said subscription shift has potential but some GMV delay, excited about personalized learning but external uncertainty exists.

Q: Josh Baer asked about consumer subscription changes.

A: Hugo said changes include pricing, packaging, marketing, with AB testing and experimentation.

Q: Yi Fu Lee asked about AI upsell/cross-sell and packaging with CCO.

A: Hugo discussed targeted AI packages, monetization opportunities, and embedding role play in UB Enterprise.

Q: Nafeesa Gupta asked about consumer softness geography.

A: Sarah Blanchard said price sensitivity in North America/EMEA and geographical mix contribute.

Q: Noah Herman asked about sales changes.

A: Hugo said strategy is good, some early benefits, need to tweak packaging, pricing, merchandising, and leverage CCO for expansion.

Q: Jeff Meuler asked about partner opportunities.

A: Hugo talked about expanding partner ecosystem including HCM SaaS and others.

Q: Devin Au asked about net dollar retention.

A: Sarah Blanchard said one-point drop in gross dollar retention due to sales organization changes and ramping reps, excited about CCO to unlock retention opportunity.