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Udemy, Inc. (UDMY)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 2024 delivered solid top-line growth and record profitability: revenue $199.9M (+5% YoY) and Adjusted EBITDA $19.5M (10% margin), materially ahead of the company’s Q3 guidance for Q4 ($193–$196M revenue; ~6% margin). Management stated results “beat expectations across all key metrics.”
  • Enterprise (Udemy Business) remained the growth engine: Q4 revenue $130.1M (+13% YoY) with segment adjusted gross margin at 75% (+600 bps YoY), while Consumer revenue declined 7% YoY to $69.8M.
  • 2025 outlook: revenue $787–$803M (flat to +2% YoY including ~2pt FX headwind) and Adjusted EBITDA $75–$85M (~10% margin), with CFO explicitly raising 2025 EBITDA expectations by $10M versus prior context ($70M). Q1 2025 guide: revenue $195–$199M; Adjusted EBITDA $17–$19M.
  • Strategic narrative: intensified focus upmarket on large enterprises; early progress includes ARR growth 4 points higher in large enterprise vs SMB and ~50 deals >$100k ARR in Q4. Generative AI product roadmap (skills mapping, AI assistant, AI role-play simulations) underpins differentiation and engagement.
  • Potential stock reaction catalysts: clear beat vs company guidance, raised 2025 EBITDA outlook, segment margin expansion from instructor revenue share changes, and completion of $150M buyback in 2024.

What Went Well and What Went Wrong

  • What Went Well

    • Enterprise momentum and unit economics: Q4 Udemy Business revenue rose 13% YoY to $130.1M; segment adjusted gross margin expanded to 75% (+600 bps YoY), aided by instructor revenue share changes.
    • Profitability inflection: Adjusted EBITDA reached $19.5M (10% margin) in Q4; full-year Adjusted EBITDA $43.0M (5% margin). “Adjusted EBITDA came in significantly above the high end of our guidance range.”
    • AI-enabled platform differentiation: Skills Mapping and AI Assistant launched in 2024; Q4 disclosed plans for AI-assisted role-play simulations and scaled assessments; ~10x increase in generative AI course consumption in 2024. “Soon, every learner… will have access to the equivalent of a top expert…”

  • What Went Wrong

    • Consumer weakness persisted: Q4 Consumer revenue declined 7% YoY to $69.8M; monthly average buyers modestly up sequentially but still below prior-year cohort.
    • Net Dollar Retention softening: Consolidated UB NDRR slipped to 98% (from 99% in Q3 and 101% in Q2); large customer NDRR to 103% (from 104% in Q3 and 108% in Q2). CFO noted elongated upsell cycles and budget scrutiny.
    • Near-term revenue growth headwinds: 2025 guide implies flat-to-low single-digit growth driven by FX (~2pt headwind), reduced SMB sales capacity ($20M impact), and Q1 UB sequential decline (short quarter days and FX).

Financial Results

MetricQ2 2024Q3 2024Q4 2024
Revenue ($USD Millions)$194.4 $195.4 $199.9
GAAP Net Loss ($USD Millions)$(31.8) $(25.3) $(9.9)
GAAP EPS (Basic & Diluted, $USD)$(0.21) $(0.17) $(0.07)
Non-GAAP Net Income ($USD Millions)$(6.5) $10.1 $15.5
Non-GAAP Diluted EPS ($USD)$(0.01) $0.07 $0.10
Gross Margin (%)62% 63% 64%
Adjusted EBITDA ($USD Millions)$5.5 $11.6 $19.5
Adjusted EBITDA Margin (%)3% 6% 10%
SegmentQ2 2024Q3 2024Q4 2024
Udemy Business Revenue ($USD Millions)$120.6 $126.1 $130.1
UB Adjusted Gross Margin (%)72% 74% 75%
Consumer Revenue ($USD Millions)$73.8 $69.3 $69.8
Consumer Adjusted Gross Margin (%)56% 54% 53%
KPIQ2 2024Q3 2024Q4 2024
Udemy Business ARR ($USD Millions)$492.6 $504.6 $516.9
Total UB Customers16,595 16,848 17,096
UB Net Dollar Retention Rate (%)101% 99% 98%
UB Large Customer NDRR (%)108% 104% 103%
Consumer Monthly Average Buyers1.29 1.31 1.32

Comparison vs company guidance (Q4 2024):

MetricCompany Guidance for Q4 2024Actual Q4 2024
Revenue ($USD Millions)$193–$196 $199.9
Adjusted EBITDA Margin (%)~6% 10%

Estimates (S&P Global) for Q4 2024 were unavailable due to access limitations; see Estimates Context below.

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Revenue ($USD Millions)Q1 2025N/A (first issuance)$195–$199 New
Adjusted EBITDA ($USD Millions)Q1 2025N/A (first issuance)$17–$19 New
Revenue ($USD Millions)FY 2025N/A (first issuance)$787–$803 New
Adjusted EBITDA ($USD Millions)FY 2025~$70 (context from Q3 call) $75–$85 Raised (by ~$10M)
Basic Shares (Weighted Avg)Q1 2025N/A148M New
Diluted Shares (Weighted Avg)Q1 2025N/A150M New
Basic Shares (Weighted Avg)FY 2025N/A150M New
Diluted Shares (Weighted Avg)FY 2025N/A152M New
FX AssumptionQ1 2025 & FY 2025N/A~2pt negative YoY FX impact; rates held constant from Q4 2024 end New

Earnings Call Themes & Trends

TopicPrevious Mentions (Q-2 and Q-1)Current Period (Q4 2024)Trend
AI/technology initiativesQ2: Announced skills mapping & AI assistant roadmap; focus on AI-enabled learning . Q3: Launch of AI Assistant and Skills Mapping; partnerships (Workday) .Q4: ~10x gen-AI consumption; AI-assisted role-playing simulations and scaled assessments; instructor-led creation with AI tooling .Accelerating product innovation; deepening AI integration.
Upmarket enterprise focusQ2: Strategic shift to large enterprise; unit economics better . Q3: $50M cost savings; reallocating capacity; EMEA softness noted .Q4: ARR growth 4 pts higher in large enterprise vs SMB; ~50 deals >$100k ARR; improving win rates .Continued emphasis; early execution progress.
Macro/FX & cyclesQ2/Q3: Elongated sales cycles; budget scrutiny; FX ~2pt headwind .Q4: CFO reiterated elongated upsell cycles; Q1 guide includes 2pt FX headwind and shorter quarter days .Stable but subdued; FX still a headwind.
Consumer marketplaceQ2: consumer down; vibrancy focus; traffic up from low-cost initiatives . Q3: down 8% YoY; revitalization effort .Q4: down 7% YoY; career academies launching in 1H’25 with dual enterprise/consumer use cases .Headwinds persist; revitalization planned.
Regional trendsQ3: Strength in APAC/LATAM; EMEA muted .Q4: Strong quarter in NAMER and LATAM; signals of improving environment .APAC/LATAM strength; EMEA softness continues.
Capital allocationQ3: Ongoing buybacks; $51M Q3 purchases .Q4: Completed $150M repurchase program; disciplined approach going forward .Program concluded; opportunistic stance maintained.

Management Commentary

  • CEO framing: “Udemy ended the year strong with results that beat expectations across all key metrics… Our strategic pivot to focus resources upmarket to better serve large enterprise customers is on track.”
  • AI leadership vision: “We are about to enter a new era of learning, one defined by AI, personalization, and immersive experiences… giving everyone… access to a learning experience that is as effective as one-on-one training.”
  • Enterprise execution signals: “ARR growth from large enterprise customers was 4 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.”
  • Margin drivers: “Gross margin for our Udemy Business segment came in at 75%… primarily due to the instructor revenue share change… We lowered the instructor take rate again on January 1 to 17.5%,… and it will move down to 15% next year.”
  • 2025 posture: “We are raising our expectations for full year adjusted EBITDA by approximately $10 million… [to] $75 million to $85 million.”

Q&A Highlights

  • Consumer monetization and engagement: Management expects career academies and marketplace improvements to drive subscription mix and engagement; academies have monetization opportunities beyond engagement.
  • AI vs non-AI course demand: Soft skills (leadership, communications) demand rising alongside technical/AI content; cited large-scale enterprise consolidation win for broad skills solution.
  • Buybacks and capital allocation: Program completed; future repurchases to remain opportunistic within disciplined capital framework (growth, M&A, capital return).
  • UB Q1 sequential dynamics: Expected slight sequential revenue dip in Q1 from FX headwind, reduced SMB capacity ($20M), and fewer days in the quarter; not expected to persist through 2025.
  • Career academies roll-out: Initial six academies in 1H’25 with diverse career paths; dual deployment for consumer and enterprise; broader scaling thereafter.
  • ARR trajectory: Net new ARR muted in 1H’25 with ramp in back half as territories settle; ARR as leading indicator ahead of revenue.
  • Macro/administration: Too early to call meaningful changes; some signs of budgets opening, but need another quarter or two to be definitive.

Estimates Context

  • Wall Street consensus (S&P Global) for Q4 2024 EPS and revenue was unavailable at time of analysis due to access limitations. As a result, we cannot provide an estimates-based beat/miss comparison for EPS and revenue.
  • Company vs guidance comparison indicates a clear beat: Q4 revenue $199.9M vs $193–$196M guided, and Adjusted EBITDA margin 10% vs ~6% guided. This, alongside raised FY 2025 Adjusted EBITDA ($75–$85M vs prior ~$70M context), suggests potential upward revisions to Street profitability estimates, even as top-line growth remains tempered by FX and SMB capacity actions.

Key Takeaways for Investors

  • Enterprise-led mix shift and instructor take-rate reductions are expanding gross margins and EBITDA ahead of expectations; FY25 EBITDA raised to $75–$85M (~10% margin). Near-term trading catalyst: profitability outperformance vs company guidance.
  • Top-line growth will be modest in 2025 (flat to +2% YoY including ~2pt FX headwind) as SMB capacity is reduced and Q1 faces calendar/FX impacts; watch for ARR acceleration in 2H’25.
  • Consumer remains a drag (-7% YoY in Q4), but career academies and marketplace enhancements could stabilize the segment and support enterprise use cases—key optionality for medium-term growth.
  • AI product differentiation (skills mapping, AI assistant, role-plays) is driving engagement and broadening value beyond technical training into soft skills—competitive moat to win large, multi-department deals.
  • NDRR pressure has moderated (total 98%; large customer 103%); stabilizing retention and growing large enterprise seat expansion are critical for durable double-digit UB growth post-transition.
  • Capital allocation remains disciplined post $150M buyback completion; expect opportunistic actions balanced with reinvestment and selective M&A.
  • Monitoring points: FX trajectory, EMEA demand normalization, pace of enterprise expansions/win rates, consumer academy adoption, and margin execution against FY25/FY26 pathways (target $130–$150M EBITDA in 2026).