Udemy, Inc.

Good day, and welcome to the Udemy second quarter 2023 earnings conference call. All participants will be in a 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 a 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, Vice President of Investor Relations. Please go ahead.

Thank you, and welcome to Udemy's second quarter 2023 earnings conference call. Joining me today are Udemy's 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 a 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 of 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, and we do not undertake and expressly disclaim any duty or obligation to update or alter our forward-looking statements, 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 statements 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 in 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 measures 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 on the website. With that, I will now turn the call over to Greg.

Thank you, Dennis, and good afternoon to everyone on the call. Udemy delivered strong second quarter results. Revenue came in at more than $178 million for a 16% year-over-year increase and exceeded the high end of our guidance range. That growth was driven by a 36% year-over-year increase in Udemy business revenue. On the bottom line, we delivered our first quarter a positive adjusted EBITDA as a public company, thanks to our continued focus on operational efficiencies and prudent expense management. We are proud of our team for their commitment and continued execution against our strategic initiatives, particularly as we navigate this unpredictable macroeconomic environment. While the current backdrop presents some near-term challenges, Udemy is well-positioned to capitalize on meaningful long-term tailwinds for our business that are shaping the future of work. First, there is a profound transformation happening right now that impacts every industry, the rise of the skills-based organization. And second is the continued interest and application of generative AI across customers of all sizes. I'd like to take a few moments today to provide color on those trends. In conversations with enterprise customers across all industries and regions, the number one theme we hear from CEOs is, is that ensuring their workforce has the skills required to achieve their strategic objectives is a top priority. This represents a massive opportunity for Udemy to provide the necessary reskilling and upskilling that companies around the world will require for their workforce, and that individuals need to stand out in the hypercompetitive job market. In addition, the accelerating pace of innovation means that organizations require support to establish learning strategies and objectives for their teams, and also a way to measure and validate skills acquisition. While degrees will always have relevance, they do not validate the practical skills the individual has mastered, which can lead to qualified internal and external talent being overlooked. For this reason, forward-thinking organizations are shifting to a more skills-based approach. By focusing on skills, not just degrees, companies can vastly expand and diversify their talent pool to fill open roles. as well as drive increased internal mobility by reskilling and upskilling existing talent. As companies shift from offline to online to reskill and upskill their workforce, they realize it is a more efficient and cost-effective solution that drives high ROI, boosts morale, and provides significant cost savings. To give you a sense of the size of the potential savings, A recent study found that the average per employee spend on L&D by employers worldwide was approximately $1,300 per head in 2021. The cost for one U2B business license starts at just $360 per year. As you can imagine, the cost savings for a global enterprise are meaningful. When companies embrace a culture of continuous learning, they future-proof their workforce. Demand for technical skills has never been higher, with nearly 90% of companies reporting skills gaps within their organization, and many executives believing that finding talent with specialized skills is a major challenge. L&D leaders must understand the skill level of their workforce, particularly within technology-focused areas. Yet, one of their top concerns is that they do not have a reliable strategy for measuring the success of their learning programs. To help customers address this need, Udemy has introduced badging as a part of its integrated skills framework, a comprehensive skill building approach for organizations. The framework will enable customers to keep pace with innovation through a series of exciting new offerings. Working with Udemy, organizations will be provided with a seamless way to quickly assess their current skills landscape and identify critical skills gaps. In addition, It provides employees with an effective way to acquire and demonstrate skill mastery through the acquisition of leading certifications and badges. At the core of our badging program is Udemy's Certification Prep Center. We have made it simple to discover curated learning paths, including labs and assessments, to help professionals prepare for certification exams and badges. This will enable learners to validate mastery of in-demand skills such as AWS, Azure, CompTIA, and more. As of today, our catalog includes certification preparation for nearly 200 highly sought after and reputable badges across more than 160 certification topics and nearly 30 subject areas. The other meaningful tailwind is the evolution of generative AI and its ability to accelerate change across all industries and geographies. Professional learners recognize the importance of understanding how generative AI will impact their role and how they can leverage these technologies to be more effective or to land their next job. On the enterprise side of our business, customers across all industries are asking Udemy to help them develop AI and digital transformation strategies to become more agile, durable, and competitive. The level of engagement on our platform related to this topic is unprecedented. In the seven months since ChatGPT was launched, Udemy has seen more than 1.4 million enrollments in the more than 1,000 courses on the topic on our platform. Taking that a step further, the number of minutes consumed for ChatGPT-related content during Q2 increased nearly 300% from the prior quarter. This is a clear indication that people recognize the importance of understanding this technology and are discovering that they can receive high-quality skills training via Udemy. During the past few months, we've continued to invest in further integrating generative AI throughout our platform. We are committed to delivering products and features that support instructors with content generation, deliver more personalized learning experiences, and help organizations identify and address skills gaps. On our last call, we shared plans to roll out new smart search capabilities, which is one of the several enhancements that leverage the power of generative AI to provide learners with more personalized, bite-sized learning experiences. Subsequent enhancements will include skills-based guidance that automatically recommends Udemy learning paths based on defined objectives, including badge acquisition and certification. In addition, We began to incorporate generative AI into our reports for our corporate learning solution, Leadership Academy, to provide admins with increased visibility into learning outcomes. We have also introduced further automation into the generation of these reports to speed up time to value and ensure leaders can access the right data as soon as they need it. Our investments in generative AI are expected to provide meaningful tailwinds for learner demand, enhance personalized learning, deepen our customer relationships, and further accelerate the pace at which we can add new, relevant, and immersive content. You can expect to hear more updates over time on how we are leveraging this exciting technology. As you can see, we believe that these trends, the rise of skills-based organizations and generative AI, will continue to increase in importance and are expected to present significant opportunities for our business. As companies embrace a culture of continuous learning With the goal of future-proofing the workforce, we believe demand for Udemy will continue to grow. Before I turn the call over to Sarah, I'd like to highlight that we've significantly strengthened Udemy's board and leadership team with three seasoned professionals who will further develop our strategic vision and help scale our business globally. First, we welcome Sohaib Abbasi as Independent Board Chairman. SoHate brings more than 30 years of deep enterprise software and strategic leadership experience, including more than 10 years serving as CEO of Informatica. We also recently bolstered our executive leadership team with two newly created positions. First, we appointed our Chief Marketing Officer, Jennifer Murphy, who brings extensive experience leading marketing initiatives for fast-growing software and technology companies. And second, we added a Chief Product Officer, Prasad Rajee, who brings a wealth of enterprise SaaS product experience to Udemy. I'm very proud of the world-class executive leadership team that we have built as we heighten our focus on driving results at every level of the organization. We look forward to Sohaib, Jenefa, and Prasad's contributions as we take Udemy to the next level and continue to lead the transformation to a skills-based economy. Now, I'll turn the call over to Sarah for a financial review.