Udemy, Inc.

Good day and welcome to the Udemy fourth quarter and full year 2022 conference call. All participants will be in listen only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your touch tone phone. To withdraw your question, please press star then two. Please note, this event is being recorded. I would now like to turn the conference over to Dennis Walsh, Udemy's Vice President of Investor Relations. Please go ahead.

Thank you, and welcome to Udemy's first quarter 2023 earnings conference call. Joining me today are Udemy Chief Executive Officer Greg Brown and Chief Financial Officer Sarah Blanchard. During this conference call, we will make forward-looking statements within the meaning of federal securities laws. These statements involve assumptions and are subject to known and unknown risks and uncertainties that could cause actual results to differ materially from those discussed or anticipated. For complete discussion of risks associated with these forward-looking statements, we encourage you to refer to our most recent Form 10-K and Form 10-Q filings with the Securities and Exchange Commission. Our forward-looking statements are based upon information currently available to us. We caution you to not place undue reliance on forward-looking statements We do not undertake and expressly disclaim any duty or obligation to update or alter our forward-looking statement, except as required by applicable law. In addition, during this call, certain financial performance measures may be discussed that differ from comparable measures contained in our financial statement, prepared in accordance with U.S. generally accepted accounting principles referred to by the Securities and Exchange Commission as non-GAAP financial measures. We believe that these non-GAAP financial measures assist management and investors in evaluating our performance and comparing period-to-period results of operations in a more meaningful and consistent manner as discussed in greater detail in the supplemental schedules to our earnings release. A reconciliation of these non-GAAP measures to the most comparable GAAP financial measure is included in our earnings press release. These reconciliations, together with additional supplemental information, are available on the investor relations section of our website. A replay of today's call will also be posted to the website. With that, I will now turn the call over to Grant.

Thank you, Dennis, and good afternoon to everyone on the call. UB started off the year strong as we beat expectations on both top and bottom line. Total revenue of $176 million was up approximately 16% year over year and surpassed the high end of our guidance range by $4 million. We also demonstrated progress toward achieving profitability on an adjusted EBIT update. The UB business segment, we saw revenue increase nearly 47% year over year on another solid quarter. I'm proud of our team for their dedication and for delivering such strong results, particularly in this environment. In the current backdrop, organizations increasingly recognize that they must prioritize investment in learning and development to fully optimize the most valuable resource, their talent. There are a number of reasons for this that I wanted to highlight. First, organizations need to bridge skill gaps with fewer available resources. A study from McKinsey found that nearly 90% of CEOs have identified a skills gap in their workforce. It has become a critical priority to have a strategy to bridge that gap. By building integrated company-wide learning programs, organizations can upskill and reskill their talent to better position their businesses for long-term success. Second, learning drives engagement and productivity. A study from Gallup found that the cost of disengaged employees reached nearly $8 trillion in 2021. That is a staggering amount, which has accelerated in recent years. If employees don't feel engaged, they'll be less productive, making it more difficult for organizations to grow or achieve goals. Third, these investments increase employee retention, which translates into significant cost savings then studies have shown it can cost 1.5 to 2x annual salary to replace a skilled employee. When companies invest in career development, employees are likely to be happier in their role, be more productive, and stay longer. The result is an upskilled, loyal workforce that better meets the evolving needs of the business. Fourth, upskilling and reskilling employees generates a high long-term ROI. An economic downturn presents an opportunity to invest in learning programs that help companies stay competitive and agile. Some companies are taking advantage of this temporary slowdown to upskill and or reskill employees to prepare for an eventual improvement in the macroeconomic environment. At Udemy, we provide CLOs and heads of learning with ongoing support for developing the skills necessary within their workforce to achieve desired organizational outcomes. Empowering employees with platforms, capabilities, and learning content is now a strategic imperative for organizations to enable learning, growth, and development. This is essential not only to meet today's needs, but also to prepare for future needs as technology continues to evolve rapidly in an increasingly competitive environment. We hear this from existing and potential customers every day. Not only do we offer a learning platform that is fundamentally different from any other offering, We also provide strategic support with our customer success organization to help customers establish and achieve their goals. This combination contributes to our strong win rates across all geographies and industries. During Q1, we welcome many new valued customers and expanded relationships with existing customers, including Cisco Systems, Ericsson, Procter & Gamble, and Stryker, to name a few. Ultimately, we ended the quarter with nearly 14,400 global customers, or a 24% year-over-year increase. Our pipeline is robust, but macroeconomic conditions continue to present short-term headlines. Like last quarter, we experienced longer sales cycles. For the first time, we saw upsell and expansion yields elongate in all geographies and with companies of all sizes, as businesses closely evaluate their span. During Q1, we continue to make progress on our international expansion through our partnership strategy, particularly in the Asia-Pacific region, where Udemy business is gaining meaningful traction in Japan, South Korea, and Vietnam. For example, Udemy expanded its influence with LG Electronics through our strategic partnership with Woonjin Think Big in Korea. LG chose Udemy to empower its employees because it provides their organization with the most comprehensive learning platform to upskill their global workforce and stay competitive in the category. It has become increasingly critical that companies offer an integrated approach to learning and professional skills development. Many forward-thinking companies are seeking more immersive learning modalities to promote greater employee engagement and to enhance the learning experience. In fact, during Q1, we won a seven-figure vendor consolidation deal with the Fortune 100 company. The organization selected Udemy to upskill and reskill their workforce based on the breadth and quality of our content catalog and for the technical immersive learning experiences we deliver with our Upro offering. Upro provides an immersive, personalized learning experience to accelerate skill development across key roles in IT, development, and data analytics. Upro enables technology professionals to achieve their learning outcomes, professional certifications, more effectively through paths, assessments, workspaces, and labs. In the past year, customer adoption of Uprobe has increased nearly 6x. Udemy's primary focus is skill development for professional learners and organizations across the globe. Customers come to Udemy because we provide next-generation learning platforms. We offer a vibrant marketplace that fuels the growth of Udemy business, and we measure that vibrancy in three ways. traffic, course creation, and instructor earnings. Traffic has held steady with approximately 34 million visitors coming to Udemy each month, even on significantly lower performance marketing specs. This provides a massive opportunity to drive engagement and increase conversion into individual course purchases, as well as personal and Udemy business plan subscriptions, particularly as we increase our investment in generative AI and personalization. Course creation remains strong. Udemy instructors added more than 16,000 new courses to our marketplace during Q1. We also curated more than 1,900 highly-rated courses into our Udemy business catalog during the quarter. Courses related to artificial intelligence and chat TPT are in high demand from our Udemy business customers. Our instructors were incentivized to create content to address those demands, which contributed to the strong course creation we saw this quarter. As engagement increases on our platform, so does instructor earnings. Last year, we paid out close to $200 million to instructors. Instructors know they can build a great business on Udemy if they create compelling and in-demand content and are incentivized to update existing content often to optimize their traction with our massive global audience of learners. As you can tell, we are proud of the platform we built and are even more bullish about the future We're excited about the possibilities for AI to transform the learning industry. We plan to be a leader in a category. Udemy is harnessing the power of AI to supercharge our instructors, learners, and organizations' improved lives through learning. We are dedicated to providing high-quality, relevant learning that is driven by the collective talent of our instructors and our ever-evolving learning ecosystem. Our network of nearly 75,000 instructors who share their expertise through our platform are the core of Udemy. Their expert guidance remains at the heart of our content model, and now with the support of AI, they can more quickly translate their unique knowledge and instructional styles into effective learning. This year, we'll be launching in-platform tools to assist instructors with the creation of active learning experiences. For example, We just released a new AI-enabled tool to assist instructors of software development courses with creating Java, Python, and C++ coding exercises. What used to take instructors an hour or more to create can now be done in just a few minutes. This is the first in a number of innovations that we'll be launching this year. In the second half of the year, we will bring AI-assisted active learning to topics beyond software development. and introduce tools to help instructors create questions for assessments related to the content in their courses. There are more than 200,000 courses on Udemy, representing over a million hours of content on thousands of topics. Udemy's content discovery has traditionally focused on pointing learners to entire courses. Recently, we introduced new AI capabilities that recommend specific video lectures within a course based on their occupational goals. We were excited to see that access to bite-sized learning led to meaningful increases in engagement. In the next few months, we will roll out new smart search capabilities that make it even easier for subscription learners to locate specific learning content. Learners will be able to describe their goals or ask questions in simple language, and this new smart search capability will display relevant courses and specific video lecture results that most directly address what the learner wants to learn. These new capabilities will enable learners to more effectively access the breadth of information within Udemy's course catalog. As change accelerates, organizations face an enormous challenge to identify and close skill gaps in their workforce. We're helping organizations understand the skill gaps within their workforce and growing their employees effectively and strategically. Recently, we partnered with the One EdTech Consortium to bring open badges to the Udemy platform Open badges, which are used by a number of popular industry certifications, provide a transparent, industry-accepted standard for representing the specific learning objectives that must be met for a learner to demonstrate proficiency in a skill. In the second half of this year, we will launch new capabilities to help learners self-assess their proficiency on skills and more easily find content to help close those gaps. These features will point learners to targeted learning content based on the results of assessments that measure preparedness for leading third-party industry certificates based on open badges. Giving managers a view into the badging and certifications within the organization will also help customers identify the skills available within their teams and address any gaps. AI is evolving, and the way we use it to drive learning will evolve too. As more people turn to Udemy to learn about AI, we're excited to use it to make learning more efficient, personalized, and powerful than ever before. Before I turn it over to Sarah, I wanted to provide an update for my first few months in the CEO role. As I mentioned before, our long-term strategy is not changing. As we lead the transformation of the online learning category, we are taking action today on near-term priorities that we believe position us for long-term, sustainable, and profitable growth. For example, we are reinvigorating our internal operations and culture to drive our operating plan forward with greater speed and agility. This includes a heightened focus on accountability and results at every level in our organization, as we work towards delivering exceptional performance and outcomes. Specifically, we are ensuring that all teams are equipped with well-defined, tangible objectives and goals that are fully aligned with our broader corporate strategy. Next, our product team is prioritizing resources towards initiatives that will deliver the highest returns and have the most long-term value for our business. This includes launching skills validation later this year, as well as incorporating AI and deep learning throughout our platform. And finally, in order to achieve our profitability target on an adjusted, keep it up basis, while also driving top line growth, we are laser focused on efficiently managing our cost structure and maintaining flexibility to invest in high-return opportunities. Although the macroeconomic backdrop continues to present some uncertainties in the near term, our long-term tailwinds remain, including the shift from offline to online, renewed investments in L&D, and increasing prioritization of skills development. It's still early days in this transformation of the online learning category, but I'm excited as ever about Udemy's future. I'll turn it over to Sarah for a financial review.