Udemy, Inc.

Good day and welcome to Udemy's first quarter of 2024 earnings conference call. Participants will be in a listen only mode during the call. And should you need any assistance, please flag a conference specialist by pressing the star key followed by zero. After the prepared remarks, we will conduct a question and answer session. To ask a question, you may press star then one on your telephone keypad. To remove a question, please press star then two. Please also note that today's call is being recorded. I would now like to turn the call over to Dennis Walsh, Vice President of Investor Relations. Please go ahead.

Thank you, Joe. Joining me today are Udemy's Chief Executive Officer, Greg Brown, and Chief Financial Officer, Sarah Blanchard. During this 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 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 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 support 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 news 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. It was a good start to the year for Udemy, and we continue to be excited about the significant opportunity in front of us. During Q1, we further expanded our global enterprise customer base and executed on our strategy to meet customers' evolving needs with our innovative intelligence skills platform. Looking at our results for the first quarter, we met expectations for revenue and adjusted EBITDA margin. Total revenue increased 12% year over year, while we grew Udemy business revenue by 24% compared to Q1 2023. These results reflect the increased global demand for reskilling and upskilling, as the pace of change driven by advancements in technology, such as generative AI, continues to shape the way we learn and work. Today, I'd like to discuss the current demand environment and how we're positioning Udemy to more effectively capture market share in our category. I'll then discuss the actions we're taking to address the short-term challenges to our business in order to deliver on our growth expectations for the year and beyond. We continue to see solid demand across most sectors and regions as companies seek a partner to support their workforce learning and development needs in all capacities. Udemy is differentiated by the high quality, immersive, and localized learning experiences we provide. Our comprehensive solution is purpose-built to provide three essential learning modalities, on-demand, immersive, and cohort-based. This combination allows us to offer an end-to-end solution where professional learners and organizations around the world can easily identify and quickly develop the skills they need to deliver better business outcomes today and in the future. The benefits of our approach are reflected in our results and some of the milestones we hit this quarter. During Q1, we entered into new or expanded existing relationships with enterprise customers including Pepsi, Flutter Entertainment, and the South African Reserve Bank. In total, we now have more than 16,000 Udemy business customers in over 150 countries. Notably, we have more than doubled our enterprise customer base in the past three years. This is a testament to the value we provide and the continued innovation we're building into our comprehensive platforms. For example, a leading global IT consulting company based in Europe expanded their relationship with us during Q1. By leveraging the Udemy Business Platform to prepare for internal IT certifications, the customer experienced a 17% increase in certifications per consult, which in turn allows them to charge a higher rate for their services. More recently, in order to support their business objectives related to certification and generative AI upskilling, the company expanded their deployment of Udemy Business Pro. By assessing and guiding learners' capabilities, Udemy Business Pro enables technical professionals to achieve their desired learning and business outcomes more quickly and effectively. Also during the quarter, a customer that's been with Udemy since 2017 and is a global leader in AI computing expanded their relationship with us. This is another example of a customer that has been effectively leveraging Udemy for AI training and IT certification prep. The expansion of seats from 3,000 to 9,000 Almost one-third of their total employees underscores the tangible impact our platform has had on their business. We see this use case for AI training and IT certification preparation as a long-term driver of demand going forward. In just over a year since ChatGPT launched, we've seen more than 4 million enrollments in the 2,000-plus AI courses in the Udemy catalog. This massive surge in interest from individuals and organizations demonstrates the rapidly growing need to upskill talent on generative AI. Based on what we've seen in the past year, we believe generative AI will have a significant lasting impact across nearly every industry, region, and professional role. Organizations will require employees to cultivate new skills to adapt to change, and certain roles may be replaced entirely. A key reason why Udemy's unique marketplace model is so compelling is how quickly we can expand and adapt our content catalog. This enables organizations to stay ahead of trends in technology, enabling them to better understand and apply these advancements. For example, within a few days of ChatGPT's launch, we were the first platform to have a course instructing learners on the topic. In less than two months, we had over 100 courses on ChatGPT available. as compared to only one course available across all other competitive offerings. This is the perfect example of our marketplace in action and how we can effectively leverage our expert instructor network to quickly meet our customers' needs. As generative AI alters the way we work, the development of soft skills ranging from strategic thinking to effective interpersonal communication is becoming more critical than ever. At Udemy, we recognize the pivotal role that developing leadership soft skills plays in harnessing the full potential of generative AI. Our intelligent skills platform is designed to not only enhance technical proficiency, but also to cultivate these essential soft skills. By integrating advanced technology skills with soft skills development, our platform ensures that leaders are well equipped to implement new technologies effectively and lead their teams through organizational changes. This helps organizations achieve better business outcomes and also enhances engagement on our platform. As engagement increases on our platform, it generates a virtuous cycle where the more learners engage, the more data we can collect. That data, in turn, translates into valuable insights that customers can then leverage to make more informed business decisions. As organizations increasingly rely on our platform to develop their workforce, the increased engagement unlocks long-term growth opportunities enables us to provide more effective learning experiences. Ultimately, we see Udemy's platform as mission critical for fostering a more agile, resilient, and skilled workforce that is better equipped to tackle the challenges of today and the opportunities of tomorrow. Further illustrating this growing opportunity, a recent KPMG survey found that nearly 75% of business leaders rank generative AI as the top emerging technology that will impact their business over the next year and a half. However, in a recent study conducted by Udemy, we found that only 55% of employees are confident in their management team's ability to seize the opportunities and mitigate the risks brought upon by generative AI. At Udemy, we are committed to bridging this gap by supporting our customers and strengthening the skills of their leadership teams. Our comprehensive skills development programs, including the cohort-based Udemy Business Leadership Academy, are tailored to equip leaders with advanced technical knowledge, as well as the soft skills needed to innovate and lead confidently in an increasingly competitive and evolving environment. Recently, a multi-product Udemy business customer added additional Leadership Academy cohorts after seeing positive results following their first engagement. Insurance provider Blue Cross Blue Shield of North Carolina was seeking new ways to help their customer service leaders better connect with and coach their direct reports in a hybrid work environment. To support this effort, the Customer Pilot Leadership Academy and noticed immediate changes among the pilot group of leaders, including improved communication skills and additional leadership traits that were not exhibited prior to the pilot. Additionally, many of the leaders felt that they were able to connect better in interviews with candidates. The team also saw significant value in analytics and data from this program that Udemy provided. Because of the success of the program, the company added two additional cohorts within six weeks of the delivery of our insights. During Q1, we also launched our GenAI Skills Pack to enable Udemy Business customers to upskill their workforce on generative AI in order to achieve better business outcomes. The Skills Pack supports leaders and other workers in establishing a fundamental understanding of the technology and how to apply it responsibly to enhance productivity, communication, and project management. Since its launch, the Skills Pack has driven meaningful pipeline generation, further validating the growing demand for developing generative AI skills for companies of all sizes, sectors, and regions. The use cases I highlighted provide you with a snapshot of the value we're delivering for our customers every day. However, we recognize that we can do better in certain areas of the business. We are committed to addressing the execution challenges that impacted our outlook for the year. As we mentioned on our last earnings call, we identified issues with two reseller partners in the APAC region, and we experienced some softness in EMEA, as well as some underperforming cohorts within larger markets. Since that time, we began taking action to address these issues, including hiring general managers on the ground in South Korea and Vietnam to oversee our reseller partners in those markets. In addition, we have commenced a search for a chief revenue officer to lead Udemy Business. as our current leader will be leaving the company in June. We make good progress with our search for a new leader with strong go-to-market leadership experience, scaling global businesses from 500 million to a billion in revenue and beyond. The current Udemy business leader will support the transition, and I will be actively involved while the new leader ramps into their role. We expect to have more to share on this soon. Altogether, these actions will address the short-term challenges leading to improved long-term performance. To wrap up, the innovative capabilities we're embedding in our intelligent skills platform, coupled with the demand from the global transformation to a skills-based economy and the rapid advancements of generative AI, are expected to drive meaningful momentum and engagement on our platform. Over the long term, these trends are also poised to unlock substantial opportunities for our business. As the corporate world increasingly adopts a culture of continuous learning aimed at future-proofing the workforce, We anticipate Udemy's platform will become even more mission critical. Now, I'll turn the call over to Sarah for a financial review.