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    Udemy (UDMY)

    UDMY Q3 2024: Record EBITDA, Enterprise Upsell Fuels $70M 2025 Goal

    Reported on May 23, 2025 (After Market Close)
    Pre-Earnings Price$8.46Last close (Oct 29, 2024)
    Post-Earnings Price$8.95Open (Oct 30, 2024)
    Price Change
    $0.49(+5.79%)
    • Enterprise Expansion Opportunity: Udemy’s focus on large enterprise customers—with over 5,000 such accounts and penetration below 10%—suggests significant upside through increased deal sizes and higher profitability from upselling existing customers.
    • AI-Driven Engagement: The early adoption of AI-enabled capabilities (including skills mapping and an AI assistant) by more than 1,000 enterprises is driving higher platform engagement and is expected to accelerate sales cycles and product adoption.
    • Operational Efficiency and Margin Improvement: Robust cost-saving initiatives along with a strategic shift towards high-margin enterprise segments have already contributed to record adjusted EBITDA and a strong profitability outlook.
    • Consumer Revenue Decline: The company expects high single-digit declines in its consumer segment, which puts downward pressure on overall revenue growth.
    • Restructuring Headwinds: The strategic shift to reduce SMB capacity by about $20 million introduces short-term headwinds and lower net customer adds, potentially impacting top-line growth during the transition.
    • Longer Sales Cycles & Regional Weakness: The ongoing elongation of sales cycles—especially in key regions like EMEA—could delay revenue realization and strain net retention rates.
    1. 2025 Guidance
      Q: What growth range for UV in 2025?
      A: Management expects 2025 to be a transition year facing headwinds—such as a $20M reduction in SMB capacity and EMEA challenges—with a target of about $70M adjusted EBITDA, setting the stage for $130–$150M by 2026.

    2. Expansion Focus
      Q: More revenue from existing or new large customers?
      A: They stressed that deeper penetration within the current enterprise base—currently below 10%—offers the greatest opportunity to drive growth through strategic, high-value engagements.

    3. Product Expansion
      Q: How will upsell initiatives drive revenue?
      A: By leveraging an expanded product platform that now includes key AI enhancements, they plan to secure larger upfront deals instead of relying on incremental growth.

    4. UV Growth Range
      Q: Is UV growth about 14–16% in 2025?
      A: They clarified that although overall revenue faces headwinds, the UV segment is expected to grow in the lower double digits once the transition effects are fully absorbed.

    5. AI Impact
      Q: How are AI capabilities affecting enterprise sales?
      A: Early signals from AI tools like skills mapping and an AI assistant are already shortening sales cycles and enhancing personalized engagement with large enterprises.

    6. Net Retention
      Q: What are the net retention dynamics?
      A: The company reported a stable net dollar retention of about 99% overall and 104% for large customers, reflecting a measured pace in upsell activity amid longer sales cycles.

    7. Retention Drivers
      Q: What will drive improved net retention?
      A: By enhancing product adoption and providing strategic support in developing both technical and business skills, they expect to bolster retention gradually over time.

    8. Enterprise Pipeline
      Q: What processes support large enterprise conversion?
      A: New initiatives include refined account planning and enhanced sales enablement aimed at engaging senior decision-makers in key verticals to streamline the pipeline.

    9. L&D Outlook
      Q: How is the corporate L&D spending environment?
      A: Despite tighter budgets, companies are consolidating their L&D spend, which creates an opportunity for a comprehensive platform that addresses both content needs and skills development.

    10. EMEA Performance
      Q: How is Udemy Business performing in EMEA?
      A: In EMEA, growth has been muted with longer sales cycles, though churn has stayed relatively stable, highlighting regional market challenges.

    11. Regional Performance
      Q: Which regions are showing strong performance?
      A: APAC and LATAM are driving robust growth, while EMEA lags, all contributing to over 60% of revenue coming from outside the U.S..

    12. Net Adds
      Q: Why did net customer adds decline?
      A: The drop in net adds is mainly due to a strategic reallocation from SMBs toward large enterprises, a shift expected to stabilize as the focus tightens upmarket.

    13. Workday Integration
      Q: What does the Workday integration entail?
      A: It connects Udemy’s business content to Workday’s Skills Cloud, enhancing internal mobility and providing joint value when both systems are leveraged together.

    14. Customer Choice
      Q: Will customers lean toward LMS platforms or content providers?
      A: The choice is case-by-case; when platforms offer native skills mapping, customers may use those capabilities, but Udemy remains vital for its comprehensive content approach.

    15. Product Roadmap
      Q: Beyond AI, what's next for product innovation?
      A: With Eren Bali’s return, they are unifying product and engineering functions to accelerate innovation, though further specifics will emerge in upcoming announcements.

    Research analysts covering Udemy.