Udemy, Inc. Q3 FY2025 earnings call

• Subscription Growth: Consolidated subscription revenue grew 8% YOY, beating revenue guidance and delivering 15th consecutive quarter of better-than-expected adjusted EBITDA. - Platform Pillars: Four critical pillars of Udemy's platform include skill acquisition, mastery, validation, and amplification, leveraging AI and human expertise. - Consumer Focus: Evolving from selling courses to enabling careers, launching career-focused subscription offerings (certification and career journeys), and partnering with Indeed for higher conversion rates. - Enterprise Business: Udemy Business revenue up 5% YOY, generating $7 million net new ARR, with strong pipeline in technology, manufacturing, and financial services sectors.

Udemy Business: Revenue of $133 million, up 5% year-over-year, with $7 million net new ARR, ending with $527 million in ARR. Consumer: Generated $63 million in revenue this quarter, ended the third quarter with nearly 295,000 paid subscribers (exceeding year-end target of 250,000), subscription revenue from Consumer was up 43% year-over-year and accounts for 19% of the segment's revenue. Consolidated subscription revenue grew 8% year-over-year and makes up 74% of total revenue.

• 2025: Consolidated subscription revenue expected to grow in high-single digits. Q4 total revenue expected $191M-$194M, full year 2025 revenue range $787M-$790M. Adjusted EBITDA guidance raised to $92M-$94M. - 2026: Expected consolidated subscription revenue growth closer to double digits, accounting for ~3/4 of total revenue, with acceleration in Consumer subscriptions and intentional reduction in Transactional core sales.

• COVID Era Contracts: Pressure on net dollar retention from downsells of COVID era contracts. - Go-to-Market Transitions: Headwinds from previously announced go-to-market team transitions, though work is behind us. - AI Integration: Uncertainties around effective integration of AI and LLMs into learning experiences and monetization.

Q: Ryan MacDonald on Consumer segment strategy, incentivizing Transactional customers to convert to subscription, and updates on consumer revenue monetization.

A: Hugo Sarrazin discussed changing call to action, optimizing website, reactivating customers, partnerships like Indeed, and progress on ad programs and certification journeys.

Q: Ryan MacDonald on Udemy Business net new pipeline and renewal trends.

A: Sarah Blanchard talked about net dollar retention, stabilizing net dollar retention, progress on go-to-market team transition, and working with outside firm for SMB churn.

Q: Yi Fu Lee on L&D budgets, impact on Udemy, and cross-chasm for spending acceleration.

A: Hugo Sarrazin discussed L&D teams under pressure, Udemy's broader solution, go-to-market transformation, and examples of consolidating vendors.

Q: Yi Fu Lee on EBITDA, investments, and net new ARR confidence.

A: Sarah Blanchard talked about EBITDA outperformance, investments in AI and platform, and confidence in net new ARR due to pipeline growth and go-to-market team progress.

Q: Josh Baer on EBITDA context, transition impact, and investment areas.

A: Sarah Blanchard discussed EBITDA changes due to subscription transition and investments in platform, personalization engine, and partnerships.

Q: Stephen Sheldon on Udemy Business ARR and Consumer revenue stabilization.

A: Sarah Blanchard clarified net new ARR is sequential, and Consumer revenue stabilization expected mid-2026.

Q: Jason Tilchen on AI Role Plays use cases and wallet share.

A: Hugo Sarrazin discussed unique use cases like performance reviews and customer rehearsals, and future monetization of AI Role Plays.

Q: Nafeesa Gupta on instructor churn and AI platform traffic acquisition.

A: Hugo Sarrazin addressed instructor engagement through new revenue sources and tools, and strategic approach to AI platform traffic.

Q: Devin Au on UB large customer pipeline vs net add.

A: Sarah Blanchard and Hugo Sarrazin discussed expansion and consolidation contributing to pipeline growth.

Q: Yi Fu Lee on partnerships with educational institutions and tech firms.

A: Hugo Sarrazin talked about closing the loop on certification and aligning career journeys with job outcomes through partnerships.