Udemy Reports Third Quarter 2024 Results
Delivered stronger-than-expected profitability driven by disciplined approach to operational efficiency
Surpassed $500 million in Udemy Business Annual Recurring Revenue
Raises Full Year 2024 Outlook
SAN FRANCISCO, Oct. 29, 2024 (GLOBE NEWSWIRE) -- Udemy (NASDAQ:UDMY), a leading online skills marketplace and learning platform, today reported results for the three-month period ended September 30, 2024. Udemy has provided a supplemental deck with earnings highlights, which is available for download on the "Quarterly Results" section of the Investor Relations website.
Third Quarter 2024 Financial Results and Key Operating Data Summary(in millions, except customers, percentages, and basis points)
Three Months Ended September 30,
% Change
Nine Months Ended September 30,
% Change
2024
2023
YoY
2024
2023
YoY
Revenue
$
195.4
$
184.7
6
%
$
586.6
$
539.4
9
%
Gross Profit
$
123.1
$
107.5
15
%
$
364.7
$
309.5
18
%
Gross Margin
63
%
58
%
500
bps
62
%
57
%
500
bps
Non-GAAP Gross Profit
$
125.3
$
110.0
14
%
$
371.9
$
316.8
17
%
Non-GAAP Gross Margin
64
%
60
%
400
bps
63
%
59
%
400
bps
Net Loss
$
(25.3
)
$
(16.8
)
(51
)
%
$
(75.4
)
$
(87.0
)
13
%
Non-GAAP Net Income (Loss)
$
10.1
$
7.7
31
%
$
8.8
$
(1.9
)
563
%
Adjusted EBITDA
$
11.6
$
8.2
41
%
$
23.5
$
3.8
518
%
Adjusted EBITDA Margin
6
%
4
%
200
bps
4
%
1
%
300
bps
Enterprise Segment
Total Customers
16,848
15,378
10
%
UB Annual Recurring Revenue
$
504.6
$
443.1
14
%
UB Net Dollar Retention Rate
99
%
106
%
(700
)
bps
UB Large Customer Net Dollar Retention Rate
104
%
114
%
(1,000
)
bps
Segment Revenue
$
126.1
$
109.1
16
%
$
364.3
$
306.0
19
%
Segment Gross Profit
$
92.8
$
74.3
25
%
$
264.7
$
204.4
30
%
Segment Gross Margin
74
%
68
%
600
bps
73
%
67
%
600
bps
Consumer Segment
Monthly Average Buyers
1.31
1.41
(7
)
%
1.35
1.38
(2
)
%
Segment Revenue
$
69.3
$
75.6
(8
)
%
$
222.3
$
233.4
(5
)
%
Segment Gross Profit
$
37.6
$
40.3
(7
)
%
$
122.3
$
125.4
(2
)
%
Segment Gross Margin
54
%
53
%
100
bps
55
%
54
%
100
bps
"Udemy delivered solid third quarter results with revenue and adjusted EBITDA margin above the high end of our guidance ranges, and we achieved a new milestone of over $500 million in Udemy Business Annual Recurring Revenue," said Greg Brown, Udemy's President and CEO. "Our disciplined approach to driving operational efficiencies throughout the business, coupled with the recently announced strategic cost-saving actions, have generated significant growth in adjusted EBITDA this year. As a result, we are raising our full year 2024 adjusted EBITDA outlook."
"Longer-term, we remain focused on execution of our strategic initiatives, further optimizing our cost structure, and directing resources toward opportunities with the highest potential return. We believe these actions position Udemy to deliver high-quality, profitable growth and to lead the enterprise skills development category well into the future," concluded Brown.
Third Quarter 2024 Financial Highlights
Total revenue increased 6% year-over-year to $195.4 million. Revenue growth includes a negative impact of 2 percentage points from changes in foreign exchange (FX) rates year-over-year.
Enterprise segment, or Udemy Business, revenue of $126.1 million increased 16% year-over-year, including the negative impact of 2 percentage points from changes in FX rates year-over-year.
Udemy Business Annual Recurring Revenue (ARR) increased 14% year-over-year to $504.6 million.
Consumer segment revenue of $69.3 million decreased 8% year-over-year, including the negative impact of 3 percentage points from changes in FX rates.
Cash, cash equivalents, restricted cash, and marketable securities was $358.3 million at the end of the quarter.
Business and Operational Highlights
Added new, or expanded existing, relationships with Udemy Business customers globally, including ABB (Netherlands), Crédito Agricola (Portugal), Ericsson (Sweden), Infosys Limited (India), Marriott International (U.S.), Nationwide Building Society (UK), Primerica (U.S.), Saudi Aramco (Saudi Arabia), UnionDigital Bank (Philippines), Uniqlo Europe (UK), and West Japan Railway Company (Japan).
Launched new AI-enabled capabilities within Udemy's Intelligent Skills Platform, including AI Assistant, Skills Mapping and AI-powered learning paths that provide innovative, personalized learning experiences for organizations and individuals.
Announced Udemy's new regional hub in Mexico City, Mexico to enable scaling of operations and faster delivery of personalized, high-quality learning experiences to meet the evolving needs of organizations and professionals.
Partnered with Workday to introduce a new integration within Workday Skills Cloud that enhances an organization's ability to directly align learning with workforce development.
Share Repurchase Program Udemy returned capital to shareholders through its $150 million share repurchase program. During Q3, the company spent approximately $51 million to buy back 6.3 million Udemy shares in the open market.
Financial OutlookUdemy provides guidance based on current market conditions and expectations. Actual results may differ materially. Please refer to the comments below regarding forward-looking statements.
The following table reflects Udemy's financial outlook for its fourth quarter and full year ending December 31, 2024.
Three months ending December 31, 2024
Year ending December 31, 2024
Revenue
$193 to $196 million
$780 to $783 million
Adjusted EBITDA Margin1
Approximately 6.0%
Approximately 4.5%
Weighted Average Share Count, Basic2
148 million
151 million
Weighted Average Share Count, Diluted2
149 million
156 million
1. Udemy has not provided a quantitative reconciliation of forecasted Adjusted EBITDA to forecasted GAAP net income (loss) within this earnings release because the company is unable, without making unreasonable efforts, to calculate certain reconciling items with confidence. 2. Udemy's outlook for weighted average share count, basic and diluted, excludes any impact from potential future repurchase activities under our share repurchase program.
The revenue guidance range above assumes historical changes in FX rates will have a negative 2 percentage point impact on fourth quarter year-over-year revenue growth and a negative 2 point impact on full year 2024 revenue growth. Udemy's revenue guidance assumes FX rates will remain unchanged from the end of the third quarter of 2024.
Webcast InformationUdemy will host a conference call and webcast at 2:00 p.m. PT / 5:00 p.m. ET today, Tuesday, October 29, to discuss its third quarter 2024 financial results and outlook. A link to the live webcast and recorded replay of the conference call will be available on the "Quarterly Results" section of Udemy's Investor Relations website at https://investors.udemy.com/. The live call may also be accessed via telephone at (833) 630-1963 domestically and (412) 317-5702 internationally. The archived replay of the webcast will be available for approximately one year.
Non-GAAP Financial MeasuresTo supplement the consolidated financial statements prepared and presented in accordance with U.S. generally accepted accounting principles ("GAAP"), this press release contains certain non-GAAP financial measures as defined below. We believe that these non-GAAP financial measures, when taken together with the corresponding GAAP financial measures, provide useful information to investors and others in understanding and evaluating our operating results because our management team and board of directors use these non-GAAP financial measures for the purposes of assessing operating results and business planning. These non-GAAP financial measures also provide useful measures for period-to-period comparisons of our business by removing the effect of certain non-cash expenses and certain variable charges.
Adjusted EBITDA and Adjusted EBITDA Margin
We calculate Adjusted EBITDA as net loss determined in accordance with GAAP, adjusted to exclude i) interest income; ii) interest expense; iii) provision for income taxes; iv) depreciation and amortization; v) other expense, net, including gains and losses from the remeasurement of foreign currency assets and liabilities into their functional currency; vi) stock-based compensation expense; and vii) restructuring charges. We calculate Adjusted EBITDA Margin as Adjusted EBITDA divided by revenue for the same period. We have not reconciled our expectations for Adjusted EBITDA and Adjusted EBITDA Margin to net loss and net loss margin, respectively, the most directly comparable GAAP measures, because certain items are out of our control or cannot be reasonably predicted and a reconciliation for the guidance for Adjusted EBITDA and Adjusted EBITDA Margin is not available without unreasonable effort.
Non-GAAP Net Income (Loss) and Non-GAAP Net Income (Loss) Per Share, Basic and Diluted
We define non-GAAP net income (loss) as net loss, adjusted to exclude stock-based compensation expense, amortization of acquired intangible assets, and restructuring charges.
We define non-GAAP net income (loss) per share, basic, as non-GAAP net income (loss) divided by weighted-average shares used to compute net loss per share, basic. We define non-GAAP net income (loss) per share, diluted, as non-GAAP net income (loss) divided by weighted-average shares used to compute net loss per share, diluted, which adjusts for the potentially dilutive effects of our employee equity incentive plans.
Non-GAAP Gross Profit and Non-GAAP Gross Margin
We define non-GAAP gross profit as gross profit, adjusted to exclude stock-based compensation expense and the amortization of acquired intangible assets. We calculate non-GAAP gross margin as non-GAAP gross profit divided by revenue for the same period.
Udemy's non-GAAP financial measures may be different from non-GAAP financial measures used by other companies. The presentation of non-GAAP financial measures is not intended to be considered in isolation or as a substitute for, or superior to, financial measures determined in accordance with GAAP. Because of the limitations of non-GAAP financial measures, you should consider the non-GAAP financial measures presented herein in conjunction with Udemy's financial statements and the related notes thereto. Please refer to the non-GAAP reconciliations in this press release for a reconciliation of these non-GAAP financial measures to the most comparable financial measure prepared in accordance with GAAP.
Key Business Metrics
Udemy Business customers
We count the total number of Udemy Business ("UB") customers at the end of each period. To do so, we generally count unique customers using the concept of a domestic ultimate parent, defined as the highest business in the family tree that is in the same country as the contracted entity. In some cases, we deviate from this methodology, defining the contracted entity as a unique customer despite the existence of a domestic ultimate parent. This often occurs where the domestic ultimate parent is a financial owner, government entity, conglomerate, or acquisition target where we have contracted directly with the subsidiary. We define a UB customer as a customer who purchases Udemy via our direct sales force, reseller partnerships or through our self-service platform.
Udemy Business Annual Recurring Revenue
We disclose our UB ARR as a measure of our Enterprise revenue growth. ARR represents the annualized value of our UB customer contracts on the last day of a given period. Only revenue from closed UB contracts with active seats as of the last day of the period are included.
Udemy Business Net Dollar Retention Rate and Udemy Business Large Customer Net Dollar Retention Rate
We disclose UB Net Dollar Retention Rate, or UB NDRR, as a measure of revenue growth for all UB customers within our Enterprise segment, including UB Large Customers, which we define as companies with at least 1,000 employees. We calculate UB NDRR as the total ARR at the end of a trailing twelve-month period divided by the total ARR at the beginning of a trailing twelve-month period for the cohort of all UB customers active at the beginning of the trailing twelve-month period. We calculate UB Large Customer NDRR as the total UB Large Customer ARR at the end of a trailing twelve-month period divided by the total Large Customer ARR at the beginning of a trailing twelve-month period for the cohort of UB customers with at least 1,000 employees active at the beginning of the trailing twelve-month period. Total ARR and Large Customer ARR at the end of a trailing twelve-month period are calculated as ARR and Large Customer ARR, respectively, at the beginning of a trailing twelve-month period that are then adjusted for upsells, downsells, and churns for the same cohort of customers during that period. Large Customer ARR represents the annualized value of contracts for UB customers with active seats and having at least 1,000 employees on the last day of a given period.
Monthly average buyers
A buyer is a consumer who purchases a course or subscription through our direct-to-consumer offering. We first determine the number of monthly buyers by taking the total buyers of single courses during a given month plus the total active, paid consumer subscribers at any point in that month, adjusting for duplicate buyers that may be present in both totals. We then calculate monthly average buyers by taking an average of the monthly buyer totals over a particular period, such as a fiscal year. Our monthly average buyer count is not intended as a measure of active engagement, as not all buyers are active at any given time or over any given period.
Segment revenue and segment gross profit
Segment revenue represents the revenue recognized from our two segments, Enterprise (or Udemy Business), and Consumer. Segment gross profit is defined as segment revenue less segment cost of revenue, which include content costs, hosting and platform costs, customer support services, and payment processing fees that are allocable to each segment. Segment gross profit excludes amortization of capitalized software, amortization of intangible assets, depreciation, and stock-based compensation allocated to cost of revenue as our chief operating decision maker does not include the information in his measurement of the performance of the operating segments.
Forward-Looking StatementsThis press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 and the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, but are not limited to, statements regarding Udemy's expectations relating to future operating results and financial position, including the fourth quarter and full year 2024, and future periods; anticipated future expenses and investments; our business strategy and plans; the impact of our strategic initiatives and operational efficiency initiatives and our ability to successfully execute on these initiatives; market growth; and our market position and potential market opportunities. The words "believe," "may," "will," "estimate," "potential," "continue," "anticipate," "intend," "expect," "could," "would," "project," "plan," "target," and similar expressions are intended to identify forward-looking statements.
Forward-looking statements are subject to known and unknown risks and uncertainties and are based on potentially inaccurate assumptions that could cause actual results to differ materially from those expected or implied by the forward-looking statements. Actual results may differ materially from the results predicted and reported results should not be considered as an indication of future performance.
The potential risks and uncertainties that could cause actual results to differ from the results predicted include, among others, those risks and uncertainties included under the caption "Risk Factors" and elsewhere in our publicly available filings with the Securities and Exchange Commission. All information provided in this release is as of the date hereof, and we undertake no duty to update this information unless required by law.
About UdemyUdemy (NASDAQ:UDMY) transforms lives through learning by ensuring everyone has access to the latest and most relevant skills. Through the Udemy Intelligent Skills Platform and a global community of diverse and knowledgeable instructors, millions of learners gain expertise in a wide range of technical and professional skills, from generative AI to leadership. The Udemy marketplace provides learners with thousands of up-to-date courses in dozens of languages, offering a variety of solutions to achieve their goals. Udemy Business empowers enterprises to offer on-demand learning for all employees, immersive learning for tech teams through Udemy Business Pro, and cohort learning for leaders through Udemy Business Leadership Academy. Udemy Business customers include Fender®, Glassdoor, On24, The World Bank, and Volkswagen. Udemy is headquartered in San Francisco with hubs in Austin and Denver, USA; Ankara and Istanbul, Türkiye; Dublin, Ireland; Melbourne, Australia; and Chennai, Gurugram, and Mumbai, India.
Udemy, Inc.Condensed Consolidated Statements of Operations(in thousands, except share and per share amounts)(unaudited)
Three Months Ended September 30,
Nine Months Ended September 30,
2024
2023
2024
2023
Revenue
$
195,417
$
184,722
$
586,623
$
539,392
Cost of revenue (1)(2)
72,362
77,264
221,888
229,903
Gross profit
123,055
107,458
364,735
309,489
Operating expenses (1)(2)
Sales and marketing
85,997
76,492
260,288
