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Udemy, Inc. (UDMY)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025 beat: revenue $200.3M and adjusted EBITDA $21.1M both exceeded the high end of guidance; non‑GAAP diluted EPS was $0.12 while GAAP EPS was $(0.01) .
  • Mix and cost discipline drove margin expansion: total gross margin rose 300 bps YoY to 65% and adjusted EBITDA margin expanded 800 bps YoY to 11% .
  • Guidance reset: FY25 revenue trimmed to $772–$794M (from $787–$803M prior) on Consumer softness and macro caution, but FY25 adjusted EBITDA raised to $77–$87M, highlighting profit discipline; Q2 revenue guided to $195–$199M and adjusted EBITDA $22–$24M .
  • Narrative catalysts: accelerating AI roadmap (Career Accelerators, AI‑assisted role play, MCP/Agent2Agent protocols), subscription‑first push (consumer subs +~40% YoY; now ~13% of Consumer), and upmarket enterprise focus with consolidation wins; FX remains a modest headwind (−150 bps to Q2 YoY growth; −100 bps to FY25) .

What Went Well and What Went Wrong

What Went Well

  • Beat on both revenue ($200.3M) and adjusted EBITDA ($21.1M; 11% margin), with non‑GAAP net income of $17.9M and diluted non‑GAAP EPS $0.12; gross margin expanded to 65% .
  • Enterprise strength: UB revenue up 9% YoY to $127.7M; UB ARR up 8% YoY to $519.0M; UB segment margin +300 bps YoY to 75% .
  • AI and product momentum: launch of Career Accelerators; AI‑assisted role play deploying; integration of MCP and Agent2Agent protocols to speed program creation and orchestrate AI assistants; CEO: “every new product and feature [is] evaluated through an AI lens” .

Quotes

  • “Our Q1 results exceeded expectations for both revenue and adjusted EBITDA.” – Hugo Sarrazin, CEO .
  • “Subscription revenue across both segments now accounts for 68% of our total, representing a 500 basis point expansion year-over-year.” – Sarah Blanchard, CFO .
  • “Our AI innovations are reducing program creation time by 80% on average…” – Hugo Sarrazin .

What Went Wrong

  • Consumer pressure: segment revenue fell 8% YoY to $72.6M; management cited price sensitivity in North America/EMEA and mix shift toward lower‑ASP regions; UB NDRR declined to 96% (large customers 100%) amid sales capacity transition .
  • Guidance lowered on top line: FY25 revenue trimmed to $772–$794M (midpoint −50 bps YoY including −100 bps FX), reflecting Consumer softness and macro uncertainty (tariffs/manufacturing, federal‑exposed IT consultancies) .
  • NDRR dynamics: downtick driven by a 1‑pt drop in gross dollar retention and subdued upsell during sales realignment; expansion remains an opportunity with <10% seat penetration .

Financial Results

Consolidated P&L and Margins

MetricQ3 2024Q4 2024Q1 2025
Revenue ($M)$195.4 $199.9 $200.3
GAAP EPS (Basic & Diluted)$(0.17) $(0.07) $(0.01)
Non‑GAAP Diluted EPS$0.07 $0.10 $0.12
Gross Margin %63% 64% 65%
Adjusted EBITDA ($M)$11.6 $19.5 $21.1
Adjusted EBITDA Margin %6% 10% 11%

Q1 2025 vs S&P Global Consensus

MetricConsensusActualSurprise
Revenue ($M)$197.2M*$200.3M +$3.1M (Beat)
Primary EPS (Diluted)$0.10*$0.12 +$0.02 (Beat)

Values with asterisk were retrieved from S&P Global (Capital IQ).

Segment Breakdown

MetricQ3 2024Q4 2024Q1 2025
Enterprise (UB) Revenue ($M)$126.1 $130.1 $127.7
Enterprise Adjusted Gross Margin %74% 75% 75%
Consumer Revenue ($M)$69.3 $69.8 $72.6
Consumer Adjusted Gross Margin %54% 53% 56%

KPIs

KPIQ3 2024Q4 2024Q1 2025
UB ARR ($M)$504.6 $516.9 $519.0
Total Enterprise Customers16,848 17,096 17,216
UB Net Dollar Retention99% 98% 96%
UB Large Customer NDRR104% 103% 100%
Monthly Avg Buyers (Consumer)1.31 1.32 1.41

Additional cash flow and balance items (Q1): cash, cash equivalents, restricted cash and marketable securities $358.1M; free cash flow $7.1M (4% margin) .

Guidance Changes

MetricPeriodPrevious Guidance (Q4’24 print)Current Guidance (Q1’25 print)Change
RevenueQ2 2025—$195–$199M New
Adjusted EBITDAQ2 2025—$22–$24M New
RevenueFY 2025$787–$803M $772–$794M Lowered
Adjusted EBITDAFY 2025$75–$85M $77–$87M Raised
FX AssumptionQ2/FY25—−150 bps to Q2 YoY rev growth; −100 bps to FY25 YoY rev growth Set
Shares (Diluted)Q2/FY25150/152M 151/153M Slightly higher

Note: OI&E, tax rate guidance not provided in the release/call .

Earnings Call Themes & Trends

TopicQ3 2024 (Q‑2)Q4 2024 (Q‑1)Q1 2025 (Current)Trend
AI/TechnologyLaunched AI Assistant, Skills Mapping, AI‑powered learning paths >1,800 enterprise customers using Skills Mapping; share repurchases; upmarket focus Career Accelerators live; AI‑assisted role play; integration of Google Agent2Agent and Anthropic MCP Intensifying product cadence
Go‑to‑Market FocusStrategic cost saves; upmarket large enterprise motion 18% FY UB revenue growth; ARR $516.9M Consolidation wins; packaging/merchandising AI; subscription‑first Upmarket + packaging
ConsumerBuyers down YoY; segment down 8% YoY Consumer −7% YoY in Q4 Consumer −8% YoY; subs +~40% YoY; ~13% of segment revenue Transition to subs
Regional/MacroMexico hub; Workday integration Share repurchase; cost discipline Expect headwinds NA/EMEA; more optimism APAC/LatAm; tariffs/government exposure monitored Cautious macro
PartnershipsWorkday Skills Cloud integration Partnerships expanding (e.g., Ingram Micro) Broaden partner ecosystem; “sell through/sell with” across HCM/SaaS Expanding ecosystem

Management Commentary

  • Strategic repositioning: “Udemy is transforming from a content provider to an AI‑powered reskilling platform… every new product and feature [is] evaluated through an AI lens” .
  • Enterprise traction and ROI: multiyear expansion with a global professional services firm (high 7‑figure TCV) citing measurable outcomes (e.g., billable hours); example of a large financial institution tripling ARR with data showing 12% retention improvement for learners on defined paths .
  • Subscription‑first: “We are executing a company‑wide mobilization around the subscription‑first priority” with merchandising, packaging, and pricing tests (consumer subs +~40% YoY) .
  • Cost and profitability: “We remain confident… continuing our track record of delivering year‑over‑year adjusted EBITDA expansion, which we've done… for the past 10 quarters” .

Selected quotes

  • “Our AI innovations are reducing program creation time by 80% on average…” – CEO .
  • “Subscription revenue… now accounts for 68% of our total… a 500 bps expansion YoY.” – CFO .
  • “We’re maintaining a cautious stance… particularly IT consulting with federal exposure and manufacturing impacted by tariff‑related uncertainties.” – CFO .

Q&A Highlights

  • Consumer subscriptions pivot: Management will re‑merchandise the site, broaden subscription SKUs, and test pricing/positioning; payback could be quicker, but they’ll balance against GMV pressures from migrating transactional buyers .
  • AI packaging/monetization: Today embedded in UB Enterprise; exploring targeted AI packages by persona, potential Pro/AI premium SKUs, and standalone role‑play monetization in future .
  • Enterprise consolidation and ROI: Elongated RFP cycles but more consolidation asks; Udemy believes breadth/freshness and demonstrable ROI support higher win rates in consolidations .
  • NDRR mechanics: 1‑pt drop in gross retention and muted upsell amid sales realignment; bringing in a Chief Customer Experience Officer to drive expansion within <10% seat penetration base .
  • Macro/regions: Monitoring NA/EMEA pressure; APAC/LatAm viewed as healthier; guidance bakes conservatism despite solid Q2 setup .

Estimates Context

  • Q1 2025 results vs S&P Global consensus: revenue $200.3M vs $197.2M* (beat); Primary EPS $0.12 vs $0.10* (beat) .
  • Street revisions setup: FY25 top‑line bias likely down given lowered revenue guide (FX −100 bps impact), but EBITDA and margin forecasts likely revise up on raised FY25 adjusted EBITDA and continued cost discipline .

Values with asterisk were retrieved from S&P Global (Capital IQ).

Key Takeaways for Investors

  • Beat‑and‑raise on profitability: Q1 outperformed on revenue and adjusted EBITDA; FY25 EBITDA raised despite trimmed revenue—underscores cost control and improving unit economics .
  • Mix tailwinds to margins: UB mix at ~64% of revenue and Consumer shift to subscription (13% of segment) support sustained margin expansion into 2026, per management .
  • AI execution is the narrative: Rapid cadence (Career Accelerators, role play, MCP/Agent2Agent) and enterprise proof points should be key multiple drivers; watch for packaging/pricing announcements .
  • Enterprise consolidation opportunity: Elevated consolidation RFPs play to Udemy’s breadth and ROI; near‑term NDRR softness is more execution/mix than structural churn, with expansion runway (<10% seat penetration) .
  • Macro/FX watch items: Guidance embeds NA/EMEA caution and FX headwinds (−150 bps Q2; −100 bps FY) which may cap top‑line upside near term; APAC/LatAm remain offsets .
  • Near‑term trading: Positive setup on profitability momentum and AI catalysts; offset by Consumer softness and NDRR optics until sales capacity normalizes.
  • Medium‑term thesis: Upmarket enterprise focus + subscription‑first consumer + AI differentiation supports reacceleration in 2026 with operating leverage (management targeting meaningful margin expansion) .

Appendix: Additional Detail

  • Non‑GAAP adjustments (Q1): add‑backs included stock‑based compensation $18.0M, D&A $6.2M, restructuring $1.5M; reconciling to non‑GAAP net income $17.9M and adjusted EBITDA $21.1M .
  • Cash/FCF: $358.1M cash and securities; free cash flow $7.1M, with expectation of higher FCF in Q2 per CFO .
  • Notable Q1‑related press releases: Appointment of Chief Customer Experience Officer to accelerate expansion and retention strategy .