Udemy (UDMY) Q3 2024 earnings summary

Executive summary

• Q3 2024 revenue reached $195.4M, up 6% year-over-year, surpassing guidance and driven by operational efficiency and strong Enterprise segment growth, while Consumer revenue declined 8% due to lower course purchases.

• Udemy Business ARR exceeded $500M for the first time, up 14% year-over-year, with large customer ARR growing 15% and strong enterprise momentum.

• Adjusted EBITDA margin reached 6%, up 200 bps year-over-year, with significant cost-saving actions implemented, including over $50M in annualized savings, double the initial target.

• Launched AI-powered skills mapping and AI assistant, enhancing personalized learning and engagement for Enterprise clients.

• Leadership changes include the return of founder Eren Bali as CTO, consolidating product and engineering oversight.

Financial highlights

• Q3 revenue was $195.4M, up 6% year-over-year, with Udemy Business revenue at $126.1M, up 16%; Consumer revenue declined 8% to $69.3M.

• Gross margin improved to 63% (up 500 bps year-over-year); Udemy Business gross margin was 74%.

• Adjusted EBITDA was $11.6M (6% margin), up 41% year-over-year; net loss was $25.3M, primarily due to $11.3M in restructuring charges.

• Free cash flow for Q3 was -$10M, but $32M year-to-date; cash, cash equivalents, and marketable securities totaled $358.3M at quarter-end.

• Repurchased $51M in shares during Q3, with $141.6M spent on buybacks year-to-date under a $150M program.

Outlook and guidance

• Full-year 2024 revenue guidance raised to $780M–$783M, with Udemy Business expected to grow ~17% and Consumer to decline ~6%.

• Full-year Adjusted EBITDA margin outlook increased to 4.5% of revenue; Q4 revenue expected at $193M–$196M, with 3% year-over-year growth at midpoint.

• 2025 expected to be a transition year with ~$70M Adjusted EBITDA, impacted by reduced SMB capacity and EMEA softness.

• Targeting $130M–$150M Adjusted EBITDA in 2026 and 20% margin by 2027.

• FX expected to negatively impact revenue growth by 2 percentage points for Q4 and full year.