Udemy, Inc. ((UDMY)) has held its Q3 earnings call. Read on for the main highlights of the call.
Elevate Your Investing Strategy:
- Take advantage of TipRanks Premium at 50% off! Unlock powerful investing tools, advanced data, and expert analyst insights to help you invest with confidence.
In Udemy, Inc.’s latest earnings call, the sentiment was largely positive, reflecting strong growth in subscription revenue and strategic partnerships. The company is successfully transitioning to a subscription-first model, although it faces short-term challenges such as declines in Consumer segment revenue and pressures on retention rates due to legacy contracts. Despite these hurdles, Udemy is well-positioned for long-term growth.
Subscription Revenue Growth
Udemy reported an 8% year-over-year growth in consolidated subscription revenue, which now makes up 74% of the company’s total revenue. This growth underscores the momentum behind Udemy’s strategic shift towards a subscription-first model, highlighting the company’s commitment to this approach.
Consumer Segment Success
The Consumer segment exceeded expectations by surpassing its full-year paid subscribers target. Subscription revenue in this segment increased by an impressive 43% year-over-year, showcasing the effectiveness of Udemy’s strategies in attracting and retaining individual learners.
Udemy Business Segment Performance
The Udemy Business segment also showed promising results, with a 5% increase in revenue year-over-year and $7 million in net new annual recurring revenue (ARR). This indicates a robust performance in the enterprise sector, contributing positively to Udemy’s overall financial health.
Improved Profitability
Udemy achieved a GAAP net income of approximately $2 million, a significant turnaround from a $25 million loss in Q3 2024. The adjusted EBITDA margin improved to 12%, marking a 600-basis-point enhancement from the previous year, reflecting the company’s improved operational efficiency.
Strategic Partnerships and Innovations
The company has forged new partnerships with Pearson and others, alongside developing AI Role Play and personalized learning experiences. These innovations are designed to enhance Udemy’s platform, aiming to provide more tailored and effective learning solutions.
Consumer Segment Revenue Decline
Despite the growth in subscriptions, the Consumer segment’s revenue is projected to decline by about 9% for the full year 2025. This decline highlights the transitional challenges Udemy faces as it pivots to a subscription-first model.
Net Dollar Retention Rate Pressure
Udemy’s total net dollar retention rate was 93%, affected by downsells from COVID-era contracts. However, the company noted stability in gross dollar retention, indicating resilience in maintaining existing customer relationships.
Impact of Strategic Shift on Revenue
The strategic pivot to a subscription-first model is creating short-term headwinds for the Consumer segment’s revenue growth, impacting overall revenue expectations. This shift is essential for long-term growth, despite its immediate challenges.
Forward-Looking Guidance
Looking ahead, Udemy anticipates sustaining high-single-digit growth in consolidated subscription revenue for 2025, with expectations of double-digit growth in 2026. The company is investing in AI and strategic partnerships to enhance its platform, focusing on skill acquisition and mastery to support both enterprise and individual learners.
In conclusion, Udemy’s earnings call reflects a company in transition, with a positive outlook for long-term growth despite current challenges. The strategic pivot to a subscription-first model is showing promising results, particularly in subscription revenue growth and profitability improvements. As Udemy continues to innovate and expand its partnerships, it is well-positioned to capitalize on future opportunities in the education sector.