Udemy, Inc.

Good day and welcome to Udemy's fourth quarter and full year 2024 conference call. All participants will be in a listen-only mode. Should you need assistance, please signal conference specialists 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 touchtone phone. And 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 Mr. Dennis Walsh. Please go ahead, sir.

Thank you, Chuck. Joining me today are Udemy's Chief Executive Officer, Greg Brown, and Chief Financial Officer, Sarah Blanchard. For this call, we will also be joined by Udemy's founder and Chief Technology Officer, Aaron Bali. During the 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 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, 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 conference 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 SEC as non-GAAP financial measures. We believe that these non-GAAP financial measures support management and investors in evaluating our performance and comparing period-to-period results of operations in a more meaningful and consistent manner. 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'll now turn the call over to Greg.

Thank you, Dennis, and good afternoon to everyone on the call. Udemy ended the year strong, with results that beat expectations across all key metrics. We delivered full-year revenue growth of 8% year-over-year, which includes two points of headwind from FX, and adjusted EBITDA came in significantly above the high end of our guidance range. This performance reflects the disciplined execution of our strategy and our relentless focus on operational efficiency. As we close out 2024, I'm proud of the Udemy team for their invaluable contributions to the momentum we have built and the foundation we've laid for the future. There is still work to be done, and although 2025 will be a transition year, we're confident that we have a clear plan to capture the significant opportunity in front of us and we accelerate our growth. Looking back at 2024 reminds me of our partner McLaren's incredible journey to winning Formula One's 2024 Constructors' Championship. Just as McLaren continuously adapted to challenges and introduced bold innovations, we too embrace change. We find our strategy and are leaning in to accelerating product innovation. In F1, success is all about agility and precision, whether it's making critical pit stop decisions or deploying game-changing technology. Similarly, in our business, adapting to market dynamics and staying laser-focused on delivering value for our customers is crucial. Both partners' journeys underscore the importance of resilience, innovation, and the willingness to adapt to change in order to cross the finish line as a leader. Recognizing that it's how you execute and evolve that will ultimately define success, Udemy embarked on a strategic transition over the past few months to refocus our resources upmarket to better serve our large enterprise customers. We firmly believe our approach to focus on these highest return opportunities is the right one and is the most impactful way to drive long-term growth and value creation. This shift aligns with the evolving demands of the market, where large enterprises are prioritizing scalable, comprehensive solutions to meet their business needs. Today, I'm pleased to share early signs of progress on the execution of our strategy. ARR growth from large enterprise customers was four points higher than ARR growth from SMB customers, and we closed nearly 50 deals over 100,000 in ARR, the most for any quarter this year. Further, large enterprise customers continue to show higher retention rates compared to SMB customers, while upsell and cross-sell opportunities within this cohort are yielding tangible results. Analog Devices, ARM, NASDAQ, and Kelanova are just a few examples of large enterprises that we added as new customers or expanded relationships with during Q4. These early results are promising. We are deepening our penetration into this market segment where the unit economics are stronger and are solidifying Udemy's position as a leader in shaping the future of work around the world. Large enterprises also understand the urgency of upskilling their teams to stay competitive. especially in the face of rapid technological advancements like generative AI. Business leaders recognize that AI has the potential to rapidly reshape their companies, industries, and the future of work as a whole. And now, they are turning to Udemy to support their plans to develop and implement holistic AI and upscaling strategies. According to the World Economic Forum's 2025 Future of Work Report, Approximately 80% of companies plan to reskill and upskill the workforce over the next five years to take advantage of the power of AI. Further, workers can expect that, on average, approximately 40% of their existing skill sets will be transformed or become outdated by 2030. As organizations begin to scale their AI projects to optimize processes, enhance decision-making, and drive growth, workers will be required to quickly develop proficiency. Udemy is uniquely positioned to help close the skills gap by empowering both enterprises and individual learners with tailored learning paths that align with AI's rapidly evolving role in the workplace. Our recent data illustrates this point, showing a nearly 10x increase in generative AI course consumption on Udemy in 2024. While AI capabilities unlock immense potential, it's soft skills like leadership, creativity, and communication that will determine whether individuals and organizations thrive. To that end, Gartner reports that 85% of business leaders expect the need for soft skill development to increase significantly in 2025. For enterprise leaders, the challenge will be equipping their teams with technical proficiency and fostering the soft skills needed to navigate complex AI-enabled environments. Udemy's platform addresses both needs, offering a holistic approach that combines technical and soft skills development. We're incredibly well-positioned to meet this moment. and we're starting from a position of strength. Our Unparalleled Marketplace is a unique collection of the most relevant professional skills development content for the most in-demand topics. Every day, learners from more than 17,000 businesses worldwide are actively engaging with our curated content, rating and reviewing it, sharing outcomes, and signaling demand for new skills as emerging technologies are introduced. This creates a dynamic flywheel that empowers individuals and organizations to build skills at the pace of change. Udemy's speed-to-market advantage to address skills needs is unmatched and will solidify our position as the go-to skills development destination for professionals and enterprises alike. As a recent example, DeepSeek AI made a big splash last month. The unprecedented rise of DeepSeek shows that innovation is not slowing down. It's accelerating. Just a few days after its models were released, Udemy had more than 10 deep-seat courses across multiple languages, and we did not see any from our leading competitors. Content is the foundation upon which Udemy was built. We will combine this with the scale of our marketplace and AI-enabled learning experiences to lead the next generation of learning and skills development. Soon, every learner, no matter where they are, will have access to the equipment of an expert guiding them through their career and upskill journey. Before I wrap up, I want to outline our strategic priorities for 2025. First, we're allocating resources to our large enterprise customers where we see the greatest opportunity for growth and the highest returns on our investments. By focusing our efforts on this cohort, we can leverage our platform to deliver strategic impact at scale. As we said last quarter, we will continue to support our existing SMB customers and will be more efficient in pursuing new SMB customers. Second, with only about 10% penetration, we're prioritizing deeper engagement with our existing large enterprise customer base. Many of these customers have only begun to scratch the surface of the value that Udemy can deliver, and our goal is to help them unlock the full potential of our platform. This includes expanding adoption across departments, delivering AI-powered role-specific learning paths, and deepening relationships with decision makers to drive higher renewal rates and upsell opportunities. Third, we will continue to support growth through strategic partnerships. Strengthening our global distribution capabilities, opening new routes to market, and offering additional ways to access the Udemy platform are all essential components of this strategy. Fourth, we're revitalizing our consumer marketplace, which remains a critical part of Udemy's unique value proposition and fuels the growth of Udemy business. While this segment is facing headwinds, we're poised to be the go-to destination for career development. We're taking decisive action to return the segment to growth in an efficient way. The work we're doing to focus the learner experience on career development will be impactful across both consumer and Udemy business segments. Finally, we will continue to drive operational efficiency across all areas of the business to ensure we maintain our durable business model and the ability to respond to evolving market dynamics and invest in our future. In 2024, we executed on a $50 million cost savings program, which is already driving increased profitability and giving us flexibility to make targeted investments in our product roadmap and will accelerate our growth. These five priorities represent the pillars of our strategy for 2025. We're as excited as ever about our future. Udemy is well positioned to harness the power of AI throughout our platform, and we're confident that our efforts and product roadmap will enable us to capture the immense opportunity ahead. We've taken some hard but important steps, and 2025 represents an important transition year that will enable our next chapter of success. We're thrilled to have our founder, Aaron Bali, back at Udemy in the role of Chief Technology Officer and on our call today. His visionary approach and deep understanding of our platform make him the perfect leader to accelerate product innovation. Aaron created the foundation that makes Udemy so unique, and now, with the power of generative AI, He's poised to take the learning experience to an entirely new level. And with that, I'll now turn the call over to Aaron.