Q1 2025 Udemy Inc Earnings Call
Good day and welcome to <unk> first quarter 2025 conference call.
All participants will be in a listen only mode.
After todays presentation, there will be an opportunity to ask questions.
Today's event.
Coded.
At this time I'd like to turn the floor over to <unk>, Vice President Investor Relations Mr. Dennis Walsh. Please go ahead Sir.
Speaker Change: Thank you joining me today are <unk>, Chief Executive Officer, Hugo Suraj, and Chief Financial Officer, Sarah Blanchard.
Speaker Change: During this conference call, we will make forward looking statements within the meaning of federal Securities laws.
Speaker Change: These statements involve assumptions that are subject to known and unknown risks and uncertainties that could cause actual results to differ materially from those discussed or anticipated.
Speaker Change: For a complete discussion of risks associated with these forward looking statements. We encourage you to refer to our most recent Form 10-K and Form 10-Q filings with the Securities and Exchange Commission.
Speaker Change: Our forward looking statements are based upon information currently available to us.
Speaker Change: We caution you to not place undue reliance on forward looking statements, we do not undertake and expressly disclaim any duty or obligation to update or alter our forward looking statements, except as required by applicable law.
Speaker Change: In addition, during this call certain financial performance measures may be discussed that differ from comparable measures contained in our financial statements prepared in accordance with U S. Generally accepted accounting principles referred to by the SEC as non-GAAP financial measures.
Speaker Change: We believe that these non-GAAP financial measures support management and investors in evaluating our performance and comparing period to period results of operations and more meaningful and consistent manner.
Reconciliation of these non-GAAP measures to the most comparable GAAP financial measures is included in our earnings press release.
Speaker Change: These reconciliations together with additional supplemental information are available on the Investor Relations section of our website at.
Speaker Change: A replay of today's call will also be posted on the website with that I will now turn the call over to Hugo.
Hugo: Thank you Davis and good afternoon, everyone.
Hugo: I'm honored to be here today for my first earnings call as CEO of <unk> to me and I would like to thank our board leadership team and all our employees and instructor across the globe for their warm welcome.
Hugo: Looking at our results for Q1, I am very pleased that we've exceeded the high end of our guidance for both revenue and adjusted EBITDA.
Hugo: And I want to congratulate the use of my team for delivering these results.
Speaker Change: I'll use this time to share a bit about myself why I chose joined US me My initial observation and insight into my long term vision.
Speaker Change: I have more than 30 years' experience working in tech.
Speaker Change: More than two decades at Mckinsey I work with some of the most iconic companies in Silicon valley to innovate scale and globalize their business.
Speaker Change: During that time, I guided organization through B to B and D to C. Commercial transformation and played a key role in strategy setting product development and large scale M&A.
Speaker Change: I also work extensively with private equity firms investing in tech, including many of the Ed Tech and human capital management companies that transacted in the past decade.
Speaker Change: To give you a sense of the scale at which I have operated directly.
I spent several years in leadership roles in U T G L.
Speaker Change: Leading global HCM company.
Speaker Change: I lead product and technology teams of more than 6000 employees globally.
Speaker Change: More than 80000 organization.
Speaker Change: In the first quarter of 2023, the last time you Chi-chi's results were disclosed quarterly revenue surpassed 1 billion for the first time.
Speaker Change: During my time, I spent countless hours with HR and people leader.
Speaker Change: And develop an acute understanding of their needs and challenges.
Speaker Change: Which will serve me well led you to me.
Speaker Change: <unk> successfully launched eight innovative AI product.
Speaker Change: And led many strategic acquisition significantly scaling the business.
Speaker Change: As I reflect on what excites me about US me and its future three things stand out.
Speaker Change: First you Denise mission deeply resonates with me.
Speaker Change: My father was the first person that his entire families within University.
Speaker Change: Through its relentless commitment to continuous learning ultimately became a university professor himself.
Speaker Change: This instilled in me a profound appreciation for accessible quality E learning and how we can transform that person in a whole families life.
Speaker Change: Second the global opportunity for re skilling is massive and expanding business.
Speaker Change: Business are spending billions on workforce training and individuals' are investing critical skill development to launch their career and adapt to the evolving market.
Speaker Change: AI is accelerating shifts and I wanted to be part of that.
Speaker Change: This brings me to the third reason I'm excited to leverage my experience in delivering AI solutions to solve enterprise wide challenges and what is the most significant technology inflection point and you missed the street.
Speaker Change: We have an incredible opportunity right now to implement an AI will not there will supercharge our engine.
Speaker Change: To drive the Reskilling the global workforce.
Speaker Change: Since joining you to me I have connected with our employees many of our top instructors more than 100 customers and prospects around the world and many partners.
Speaker Change: It has been an incredible experience and I'm, even more excited by our scale speed of content delivery and the impact we provide all of these factors will enable us to both redefine and lead this category and I see even more opportunity than I initially in fishing.
Speaker Change: Although it is premature for me to lay out the long term plans you can expect continuous eat where it matters and the evolution where it is needed.
Speaker Change: <unk> to me is transforming from a content provider to an AI powered reskilling platform that is business critical.
Speaker Change: And every new product and feature evaluated through an AI lands for increased productivity.
Speaker Change: And time to market.
Speaker Change: This transformation leverages the core strengths that made us an industry leader.
Speaker Change: As it relates to continually we will continue to target large enterprise in key verticals as we have discussed previously we.
Speaker Change: We are already seeing tremendous customer traction including.
Speaker Change: Our largest deal of the quarter was a multiyear enterprise wide expansion with one of the world's largest professional services firm.
Speaker Change: This was a high seven figure total contract value deal.
Speaker Change: The customer selected use me as a preferred reskilling platform to support their transition to a skill based organization.
Speaker Change: Cited our unique ability to deliver measurable business outcomes, including increasing consultants billable hours.
Speaker Change: The second example is connectwise.
Speaker Change: Software company in the U S that empowers msp's and it service management.
Speaker Change: Selected you to me as Theyre skewing partner, they expanded licenses wall to wall to all employees to support Upskilling in priority areas, such as AI and.
Speaker Change: In automation integration as well as technical Upskilling for product innovation.
Speaker Change: A third example is model N a U S des revenue management software company that selected <unk> to meet to support that organization wide Jenny I upskilling for individual and all functions.
Speaker Change: Using these Jenny I skilled backs skilled bad thing and advanced technical content, where the key differentiators that led them to selecting us.
Speaker Change: Finally, a large robotic process automation leader consolidated their learning ecosystem from three vendor to use me for their reskilling platform, the consolidations stem from our ability to deliver breadth of cutting edge content.
Speaker Change: Measurable outcome.
Speaker Change: As you can see the common theme. These example, sure.
Speaker Change: Is that the customer has a strategy in place to drive tangible business outcome.
Speaker Change: And the use of any platform is purpose built to deliver those results.
Speaker Change: As we continue to make progress moving upmarket and focusing on key verticals. We will also continue to grow our bottom line.
Speaker Change: The cost initiatives, we put in place over the past few quarter and the shift of market will allow us to deliver meaningful margin expansion this year and in 2026.
Speaker Change: While our foundation is sound.
Speaker Change: Pace and scale of our execution hasn't always match the rapidly evolving market opportunity.
Speaker Change: In today's dynamic environment, we need to accelerate innovation.
Speaker Change: Particularly in AI we.
Speaker Change: We need to tighten our execution and sharpen our focus on enterprise value creation.
Speaker Change: My experience transforming and scaling complex global businesses has prepared me to lead through this type of inflection point.
Speaker Change: A few initial areas, where we will be taking action in the near term include.
Speaker Change: First.
Speaker Change: Increasing our emphasis on consumer subscription, which saw revenue rise nearly 40% year over year in Q1.
Speaker Change: This shift represents a fundamental evolution of our business model towards more predictable high quality recurring revenue.
Speaker Change: Professionals are increasingly embracing continuous career focused skills development to be successful in today's rapidly evolving environment.
Speaker Change: Second we will be expanding our partnership ecosystem.
Speaker Change: Partners will be able to leverage <unk> global reach and technology infrastructure to create distribute and monetize specialized content and experience. While you do meet generates revenue through both content sales and platform fees.
Speaker Change: Third we are executing comprehensive global market activation.
Speaker Change: With over 60% of our revenue coming from outside of the U S. You to me is it's truly a global company, but there is more we can do we will be implementing full stack localization strategy across high potential markets. This.
Speaker Change: This means of lumping market specific product experiences.
Speaker Change: Creating culturally relevant campaigns building.
Speaker Change: Building, a localized web and mobile interface and developing tailored go to market approaches.
Speaker Change: And finally, we will pursue strategic growth opportunities, while historically, we primarily rely on organic growth there are opportunities to explore a broader strategic initiatives that could deepen our impact.
Speaker Change: As we assess these opportunities.
Speaker Change: We'll remain highly disciplined in ensuring that any actions, we take align with our mission simplify our competitive advantage and create value for all stakeholders.
Speaker Change: Now, let me dive into the AI trends, which are a huge opportunity for you to me.
Speaker Change: As everybody knows <unk> is already disrupting learning in the Ed Tech market.
Speaker Change: While some may believe that this disruption is simply about AI generated content creation. It is much more.
Speaker Change: It enhances the value of a platform player like you to me.
Speaker Change: It enables us to augment the value, we deliver to learners and creators alike.
Speaker Change: First <unk> is creating a need for new types of skills that didn't exist before this.
Speaker Change: This means increase re skilling demand and an extended addressable market and use of me intends to take advantage of that.
Second AI removes the constraint of traditional linear video learning and enables us to make the experience more personalized and therefore more effective.
Speaker Change: For example, historically, we did not tailored courses to someone's starting point beyond.
Speaker Change: Choosing a beginner's course in Germany. It's of course are in advance of course.
Speaker Change: With AI, we can evaluate the learners knowledge with AI generated assessment, leveraging our deep body of content and engagement for millions of learners.
Speaker Change: Dan we can tailor the curriculum and the learning path to alert and there's need we can.
Speaker Change: <unk> modified the modalities such as a shortfall in our role play in the lab and then use feedback loop to confirmed skilled master and retention.
Speaker Change: This approach leads to a significantly better outcome and therefore better ROI.
Speaker Change: And third you to me is a two sided AI platform.
Speaker Change: It also enables our content creator.
Speaker Change: To use new modalities more easily.
Speaker Change: It can repurpose content it.
Speaker Change: It can deliver more engaging reskilling experience and provide AI coaches that complements the instructor.
Speaker Change: We have many exciting example of AI powered capabilities that are not part of our Reskilling platform.
Speaker Change: Thousands of enterprise customers are already using our skill mapping and AI driven learning path to measure.
Speaker Change: And maximize their reskilling of ASUR.
Speaker Change: Our AI innovations are reducing program creation time by 80% on average.
Speaker Change: While enabling L. N D teams to deliver targeted high impact development journeys that aligned with strategic business outcomes.
Speaker Change: So we.
Speaker Change: We introduced career accelerators this week.
Speaker Change: He has created role specific learning path built on Nuomi skilled marketplace support more personalized learning experiences by guiding learners dwarfs career outcomes.
Speaker Change: First set of accelerators, which includes AI focused module are now live with many more launching this year.
Speaker Change: Before the end of Q2, you to me highly anticipated AI assisted role play will be available across the U E business platform.
Speaker Change: This will empower our instructors to create custom content that is truly engaged.
Speaker Change: We are confident that our approach will unleash significant innovation at a scale that publisher models cannot match.
Speaker Change: Then from a demand perspective, we have the opportunity to be the essential AI reskilling partner across the enterprise as well as for individual.
Speaker Change: You did me as an unmatched combination of content breadth learner engagement and structured learning.
Speaker Change: We currently have nearly 1700, AI and machine learning courses available unused meat business.
Speaker Change: Including more than 900 on Gen AI and approximately 4000 journey our courses on our marketplace.
Speaker Change: Our AI content drives exceptional engagement generating 10 million courses enrollment to date and adding new enrollment at a rate of 10 per minute.
Speaker Change: In a fast moving category like AI. The marketplace model you to me provides us with a significant advantage.
Speaker Change: Beyond rock content volume.
Speaker Change: We've developed many curated Jenny I skill pack tailored to specific roles and a foundation, providing the structure reskilling experience that an enterprise needs for systematic workforce transformation.
Speaker Change: Companies that aim.
Speaker Change: Aimed to build a thriving organization that fully leverage the power of AI, we will need to enables seamless collaboration not only between agents and people.
Speaker Change: But between agents themselves. They will also need to learn how to manage and train agents turn agents into cultural Ambassador and then sure agents uphold our company value.
Speaker Change: We are positioning you to me at the forefront of the AI Revolution.
Speaker Change: Becoming one of the first learning platform to integrate two groundbreaking AI protocol Google.
Speaker Change: Google's agent to agent protocol, and that's sort of a pig model context vertical.
Speaker Change: The volatile context protocol transforms how learning leaders interact with our platform.
Speaker Change: Allowing them to use natural language to design deploy and measure learning programs ultimately, reducing what used to take weeks to literally minutes.
Speaker Change: Meanwhile, the agent to agent protocol enables AI systems to collaborate seamlessly, creating powerful workflows, where specialized AI assistance can work together to support both learners and administrators.
Speaker Change: By providing structured role specific AI training for all employees and embedding. These protocols, we are creating significantly deeper integration with our customer strategic objective.
Speaker Change: This approach dramatically enhances our platform stickiness and we become embedded in their AI transformation strategy.
Speaker Change: While the use of me is to establish a foundation in the AI powered workforce Upskilling space, we have work to do in order to fully capture that opportunity.
Speaker Change: We need to significantly enhance how we market our platform and AI capabilities.
Speaker Change: Clearly articulating our differentiated value proposition to both individuals and enterprises.
Speaker Change: I'm also driving a company wise mobile isolation around the subscription first priority and we will transform our digital experience to better serve the distinct needs of our customers.
Speaker Change: We expect these initiatives will unlock growth and 26 and beyond.
Speaker Change: This is why we are continuing to invest strategically in our platform AI capabilities and enterprise solution.
Speaker Change: We are positioning you to meet to thrive in any environment, including the next wave of workplace transformation.
Speaker Change: We'll define organizational success for years to come.
Speaker Change: Autumn line, we have an opportunity to fundamentally reshape the reskilling industry in a way that no. Other player can match and that is what has me so excited about being in this role.
Speaker Change: Thank you for the opportunity to earn your trust to lead this company and to achieve that goal.
Speaker Change: I look forward to getting to know you all and appreciate you being with US on this exciting journey with that I'll now turn it.
Speaker Change: Sure Sir.
Speaker Change: Hugo.
Speaker Change: I'll cover the key financial highlights and our outlook for financial tables are available on our Investor Relations website.
Speaker Change: As you move down the P&L note that all financial metrics other than revenue are non-GAAP unless stated otherwise.
Speaker Change: Before I dive into the results I want to remind everyone that we are in a transition year.
Speaker Change: They did a restructuring in the back half of 'twenty 'twenty four pulling significant capacity out of our SMB team.
Speaker Change: That creates pressure on the topline growth, we continue to deliver meaningful margin expansion.
Speaker Change: We had a strong Q1 and Q2 is also shaping up nicely.
Speaker Change: That being said, we do think it is prudent to be conservative in our outlook in the second half or the top line given the external uncertainty.
Speaker Change: We remain confident in our ability to execute against our key priorities fitness transaction, while continuing our track record of delivering year over year, adjusted EBITDA expansion, which we've done successfully for the past 10 quarters.
Speaker Change: Our focus on operational efficiency puts us in a position to raise their expectations for adjusted EBITDA for the year. Despite a more conservative top line.
Speaker Change: Starting with Q1 quarterly revenue surpassed 200 million for the first time and adjusted EBITDA exceeded expectations.
Speaker Change: Business annual recurring revenue or <unk> was $519 million up 8% from a year ago.
Speaker Change: Ore from large customers increased by 9% and we closed over 40, new business deals during the quarter with north of $100000 in Iraq as we continue to focus up market.
Eating meat business revenue was $128 million, an increase of 9% year over year, including a one percentage point headwind from changes in FX rates.
Speaker Change: Year over year growth was primarily driven by the increase in enterprise customers.
Speaker Change: New logo acquisition and that dollar retention experienced some pressure this quarter as expected primarily due to our strategic go to market chefs and reduction in sales capacity.
Speaker Change: Approximately 120, net new business customers, increasing our global customer base by 7% year over year to more than 17200, including 5700 large customers up 9%.
Speaker Change: Our consolidated net dollar retention at quarter end was 96% while the rate was 100 per cent for large customers. These metrics do not come close to reflecting the significant expansion opportunity that is embedded within our existing customer base.
Speaker Change: <unk> has penetrated less than 10% of available seats, giving us extraordinary headroom for growth with minimal incremental customer acquisition costs.
Raj: We are doubling down on this opportunity and earlier this week, we announced the appointment of our first ever Chief customer experience Officer now Raj I teach you couldn't vote.
Raj: Yeah. That's it brings an unparalleled expertise from customer success leadership roles at Astana in 14 years at Salesforce.
Raj: She has a solid track record for building World class expansion and retention and chance. This is a strategic move that underscores our commitment to capturing that opportunity and increasing customer penetration.
Turning back to the results gross margin for our utility business segment came in at 75% for the first quarter up 300 basis points from the year prior.
Raj: This improvement is primarily due to a reduction in content and customer success costs.
Raj: In the consumer segment revenue was in line with our expectation at 73 million are down 8% on a year over year basis, including a negative three percentage point impact from FX.
Raj: Spite pressure personal plan subscriptions continue to gain traction and revenue from this offering has grown to approximately 13% of the segment's total revenue.
Raj: Yeah.
Raj: Over the past few years, we've had a transformative shift in our revenue composition toward a more predictable subscription based model.
Raj: Ascription revenue across both segments now accounts for 68% of our total representing a 500 basis point expansion year over year.
Speaker Change: When I joined you to me it just four years ago that mix was only 29%.
Speaker Change: The significant growth in subscription revenue increases visibility and contributes to gross margin expansion and improved unit economics.
Speaker Change: Q1 total company gross margin was 65% a 300 basis point improvement from Q1 2024 improve.
Speaker Change: The improvement was driven by the change to content costs as well as the continued revenue mix shift to eat meat business, which accounted for approximately 64% of total revenue in the quarter, an increase of 400 basis points year over year.
Speaker Change: Total operating expense was 160 million or 58% of revenue 400 basis points lower than Q1 of last year, driven primarily by our cost savings initiatives.
Speaker Change: And the bottom line, we delivered net income of approximately 18 million.
Speaker Change: That EBITDA was approximately 21 million or 11% of revenue representing a nearly 800 basis point expansion year over year.
Speaker Change: The better than expected result was driven by our revenue outperformance and ongoing focus on operational efficiency.
Speaker Change: Now turning to our balance sheet and cash flow metrics.
Speaker Change: We ended the quarter with 358 million in cash cash equivalents restricted cash and marketable securities and free cash flow for the quarter was $7 million.
Speaker Change: Our free cash flow for the quarter was impacted by the timing of collections and payments associated with the restructuring we expect significantly higher free cash flow in the second part here.
Speaker Change: Our solid balance sheet and cash flow allows us to maintain a long term perspective and to make disciplined investments in areas that will drive sustainable growth and value for all stakeholders.
Speaker Change: Now for our outlook.
Speaker Change: Since the start of Q2, we've seen an increased level of uncertainty, particularly related to recent geopolitical developments.
Speaker Change: Well, we have not yet seen a material impact of pipeline build or conversions. It is prudent to expect that these dynamics may contribute to a more cautious spending environment and decreased consumer confidence.
Speaker Change: Therefore, our outlook bakes in a healthy degree of conservatism on the top line, while raising our outlook on the bottom line.
Speaker Change: The primary factor contributing to a more conservative topline guidance for the year is softer than expected performance in our consumer segment.
We have already begun taking action to address consumer segment performance, while simultaneously accelerating go to market initiatives.
Speaker Change: Are you to any business segment, we are maintaining a cautious stance given the broader macroeconomic indicators. We are closely monitoring certain focused verticals that may experience greater spending caution, particularly I T consulting firms with exposure to federal government contracts and manufacturing organizations impacted by tariff related uncertainties.
Speaker Change: We will strategically focused resources towards vertical showing the strongest demand signals, ensuring we optimize our growth potential.
From a regional perspective, we are expecting potential headwinds in North America, and EMEA, where economic signals are mixed while maintaining a more optimistic outlook for APAC and Latin American markets, where we continue to see healthy growth opportunities.
Speaker Change: From an operational standpoint, we remain focused on what we can control, particularly our cost structure and capital allocation discipline.
Speaker Change: The 50 million annualized cost savings, we implemented over the past few quarters provides us with additional resilience to navigate any potential headwinds, while continuing to make investments that advance our strategic priorities.
Speaker Change: With all of that in mind, we expect second quarter revenue to be between 195, and 199 million, representing a 1% year over year increase at the midpoint.
Speaker Change: Exchange rates remain constant FX is expected to negatively impact Q2 revenue growth I 150 basis points.
Speaker Change: The midpoint of the guidance implies CW business revenue increased approximately 6% year over year, including a negative impact of 50 basis points from FX, while consumer revenue would be down 7%, including a negative 300 basis point impact from FX.
Speaker Change: On the bottom line, we expect to deliver adjusted EBITDA of 22 to 24 million or approximately 12% of revenue.
Speaker Change: For full year 2025 revenue, we now expect to be in the range of 772 to 794 million, representing a slight 50 basis point year over year decline at the midpoint, including a 100 basis point headwind from FX.
Speaker Change: The midpoint of the guidance implies to me business revenue increased approximately 5% year over year, including approximately 50 basis points of headwind from FX.
Speaker Change: For consumer the mid point of guidance implies revenue for the year to be down approximately 9% year over year, including a negative 250 basis point impact from FX.
Speaker Change: And the bottom line, we increased our full year adjusted EBITDA range as we now expect to deliver $77 million to $87 million or approximately 10% of revenue at the midpoint.
Speaker Change: This guidance reflects our unwavering commitment to operational discipline.
Speaker Change: We have built multiple levers into our operating model that allow us to adjust as needed while protecting our investments in key growth initiatives. This balanced approach to financial management has consistently enabled us to meet or exceed our profitability targets and we remain confident in our ability to continue delivering meaningful margin expansion.
Speaker Change: To summarize we had a great start to 2025, although we are being prudent about our outlook for the year, we remain as excited as ever about the long term opportunity.
Speaker Change: Throughout 2025, we will focus on executing the strategic initiatives that will position us to reaccelerate growth and drive further margin expansion.
Speaker Change: We look forward to keeping you updated on our progress so with that we'll open up the call for your questions moderator.
Speaker Change: Ladies and gentlemen at this time, we will begin the question and answers.
Speaker Change: To ask a question you May press Star and then one on your telephone keypad you.
Speaker Change: You are using a speakerphone you do as you. Please pickup your handset before pressing the keys.
Speaker Change: If at any time and the question has been addressed and you would like to withdraw. Your question you May Press Star two.
Speaker Change: At this time, we will pause momentarily to assemble the roster.
Speaker Change: Our first question today comes from Ryan Macdonald from Needham and company. Please go ahead with your question.
Ryan Macdonald: Alright, Thanks for taking my questions and Hugo welcome maybe to start with you can you just maybe dig a little deeper into sort of maybe some of the key observations you've had over the first sort of for your first 45 days of tenure here and then obviously, we're still sort of putting together the long term vision, but talked about some price.
Ryan Macdonald: <unk>, but maybe just in the near term you know the over the next 90 days in the quarter here what are your main priorities. Thanks.
Speaker Change: Thank you. Thank you Ryan as I've said I could not be more excited I was excited before joining I'm excited now that I've spent time with our customers or instructor of partners and our employees and I'll give you a couple of for example.
Ryan Macdonald: Ended up spending.
Ryan Macdonald: Three days in the U K or the power up event, we had hundreds of customers.
Ryan Macdonald: And I was just truck first by how much these customers and prospects are really keen on our success, a really deep and the understanding of what we can do.
Ryan Macdonald: But also are seeking our help and in particular, one thing that has become very apparent and what's not apparent six months ago or a year ago is yes, AI has been around for a while but now every LNG leader every chief people Officer every Chr O is being tap on the shoulder by other men.
Ryan Macdonald: <unk> of the C suite their CEO to say like do we need we need an AI transformation, we need to be AI first.
Ryan Macdonald: Design, a program to get US there and it's not easy it's not just turning to <unk> and then hoping for the best unique to kind of assign a program and I think here, we're really well positioned.
Ryan Macdonald: We've got like a lot of content what.
Ryan Macdonald: What we haven't done this talks a bit to the opportunity because we havent merchandise package and told the story effectively so that's a near term opportunity. We have we have more content more experience more.
Ryan Macdonald: Proof point of value delivery, we just need to kind of package it better and we're pushing really really hard to do that in earnest even as we speak right now there's a full blown initiatives to try to do that better to seize the opportunity. So that's one example, a second one is the consumer learner is taking over.
Ryan Macdonald: For a lot more ownership of their career.
Ryan Macdonald: They see the uncertainty in the market to see the impact of AI and they want to be in charge and has nothing to do with anything I've done, but you know coincidentally, we have these career accelerators that are showing up right at the right moment, So I'm very excited.
Ryan Macdonald: To see the impact that's going to have on our business moving forward and it gives us an opportunity to lean in more just a change we're going to lean more on subscription our business on the consumer side, it's been very very I incurred on transaction and I think we now have an opportunity to be the companion the coach tutor of.
Ryan Macdonald: Our consumer and help them through these career transition these.
Ryan Macdonald: These career growth, so really nice opportunity.
Ryan Macdonald: Third one.
Ryan Macdonald: We have distribution.
Ryan Macdonald: He served 17.
Ryan Macdonald: 17000 enterprise almost 6000 large enterprise and we have intimate relationship with many of them were helping them through their reskilling journey, we're providing them useful outcomes, but we havent leveraged that to partner with others. So I think a big off.
Ryan Macdonald: Trinity is third party and then bringing them a law that's going to take a bit longer to realize this is not a.
Ryan Macdonald: And easy lever to pull but I'm excited by the power that this can bring to our platform and then to our customer relationship creating more stickiness.
Ryan Macdonald: The fourth one.
Ryan Macdonald: And sorry for the long answer it's such a.
Speaker Change: Important thing I mean, our roadmap when I was considering joining you to me I spend a lot of time trying to understand what we were doing I looked under the Hood I was very impressed we.
Speaker Change: We were already doing some really important pivot to bring a lot more AI and refresh our two sided marketplace.
Speaker Change: And now that I'm here I'm seeing it more closely I'm, even more excited and then we've made some very very strategic that you know one of them the role play and the way we're doing the role play.
Speaker Change: It's gonna be very revolutionary.
Speaker Change: Very different than what others are doing where we're giving our instructor AI tools to create real play and because we have this ecosystem of instructor. We can scale. This fast and I just wanted to give you. An example, that's incredibly exciting what we've made this available yesterday.
Speaker Change: Populated the role play with 32.
Speaker Change: 24 hours later, we got 200.
Speaker Change: That's the power of the ecosystem, that's the power of the instructor network at play who are seeing this as an opportunity for them to enhance the value that they deliver to make their program their classes, they're reskilling journey more meaningful and I'm really excited to see what we're gonna be able to do and we've got more.
Speaker Change: Of those along the way so it's a long way of saying you know I'm really really excited about the opportunity. We do have things that we need to change in the near term.
Speaker Change: Mentioned.
Speaker Change: The merchandising and the packaging of our AI, our existing AI I've mentioned subscription putting more emphasis on that and I want to come back to something Sarah said, you know we have not fully capture the opportunity with our existing customer in terms of expansion.
Speaker Change: And I'm. So excited I've worked with many Reits out in the past she is incredibly.
Speaker Change: Our strategic she brings a wealth of experience. She has seen the movie at a different scale and I thought it was really important to make that happen immediately or as quickly as possible. So I'm excited to see what we're going to end up doing throughout the rest of the year with her leadership.
Speaker Change: Excellent excited to see how that all develops and I appreciate all the color. There. So maybe just one for you I'm following up on the updated guidance certainly makes plenty of sense being prudent in the given given the market uncertainty right now, but as we looked across the two segments consumer and U b.
Speaker Change: On the consumer side are you building in any.
Speaker Change: Our assumptions for contribution from the new career accelerators, and then on U b.
Speaker Change: It seems like you're going to be obviously done very well in these sort of content consolidation situations are you seeing any signs of sort of a pickup in RFP activity looking for more consolidations and what our win rates typically look like.
Speaker Change: In those scenarios. Thanks.
Speaker Change: Yeah. Thanks for the question Ryan So a few things on the consumer side, we do expect the career salaries there has to be very exciting for.
Speaker Change: For the learn is out there, but we want to be prudent you know then the majority as you know if our consumer revenue today. It does come from the transaction side of things, we're making meaningful progress in subscription and Hugo has kind of re shifted our emphasis to subscription first so that's really exciting but the majority is still transat.
Speaker Change: So just when we're thinking about the rest of the air there is some macro uncertainty consumer sentiment is weaker than it span.
Speaker Change: I'm in a while and so there could be some spending impact that could offset what could come from those career accelerators are and we're just getting started on those we are gonna be releasing career accelerators are throughout the year. So just being balanced with the pros and cons of those two sides of the client.
Speaker Change: On the UV side of things, we certainly are hearing and continuing what he has to say this is not necessarily new right now, but we have been hearing about consolidation we have been seeing the RFP.
Speaker Change: Volume looking for one consolidated Reskilling platform, and we know that that.
Speaker Change: Is good for you to me because of our breadth because of our depth because of what we can deliver.
Speaker Change: And at the same time, you heard Hugo talking about it's the consolidation and now what we're hearing more and more is the strong need for AI skills. So that companies can AI enabled their workforce to take advantage of what AI can do for that.
Speaker Change: So you know very excited about what that means for us and I think just being very balanced in how we view what some multiple scenarios that could play out in the back half of the year.
Speaker Change: Let me just add one thing and again it comes from the customer conversation.
Speaker Change: The uncertainty in the context right now certainly is leading to.
Speaker Change: More questions some pressure.
Speaker Change: And I think in many cases.
Speaker Change: Good question around why do you have so many providers that have overlapping skills.
Speaker Change: Mr or Mrs <unk> leader.
Speaker Change: And I love that I want.
Speaker Change: Thats to happen more often because I love our chances, we really have a better model we have more breadth, we have freshness and we're gonna be seizing those opportunities too.
Speaker Change: <unk> facilitate this consolidation and D. A thought partner, we have better demonstrated a bull ROI. So I think that that's a trend that you know I don't like the fact that the decision making is maybe stall allocated but I liked the fact that they're considering consolidation because when that happens it plays to our strengths.
Speaker Change: Okay.
Speaker Change: I appreciate all the color there.
Speaker Change: Yeah.
Speaker Change: Our next question comes from Jason <unk> from Canaccord Genuity. Please go ahead with your question.
Speaker Change: Yes. Good afternoon. Thanks for taking the question I'm, just little bit of a follow up there I'm wondering if you could share a little bit more about some of the conversations you've had with enterprise customers that are sort of in the pipeline already or customers that you are looking to sort of expand pizza.
Speaker Change: <unk> licenses that how those have evolved over the past few months and how those conversations have changed that would be really helpful. Thanks.
Jason: Yeah. Thanks, Jason you know I have 45 days of history here.
Jason: Obviously prior to being here it was still talking to roughly the same people. So I've got multiple years of experience with.
Jason: The space.
Jason: A few things I'd call out the first one I've already mentioned there is a bit of uncertainty. It does lead to more question elevated rfps.
Jason: And that's not surprising that will happen in all categories.
Jason: Second is there's.
Jason: There's a lot more question on consolidation.
Jason: And I loved that I loved that please keep asking those questions.
Jason: Third one is I'm also observing that the question of ROI.
Jason: You know what's the value we're getting from all of this spend is coming more and more often and it's it's forcing a L. M. D leaders CPO and Chr O to engage with the business around business outcome and I think that plays really well to again the platform the type of classes.
Jason: And types of re skilling that we're delivering I'll give you. One example of an incredibly.
Jason: A large financial institution.
Jason: Just you know clothes and expanded deal we triple the size of the account.
Jason: We cover 70% of the employees and we were able to demonstrate that employees, who follow certain learning path risky.
Jason: Reskilling path.
Jason: Had a 12% increase in retention.
Jason: Imagine the value that you can articulate if you're in L. A N D leader a C. P O to the business and say Hey, the fact that I'm spending this money on Nuomi is leading to.
Jason: Better retention, we don't lose the expertise we don't need to go spend money on hiring we don't need to retrain them Yadda Yadda Yadda Ya so.
Jason: What this environment gives us an opportunity to team up with our customers and connect the dots more clearly between you know attrition or onboarding or promotion rates or specific business outcome and the work that they do on our platform.
Jason: I think you know at a macro level those are the top three and then I'll wrap up with the the one that I touched on very.
Jason: At the beginning is there is right now.
Jason: A real set of question around helped me with a I still want to see.
Jason: It's not just the Dev in the I T Department, it's the whole organization and I need the frontline workers in the retail environment I need deep.
Jason: The call center agents and in a financial institution I need the legal department.
Jason: And that creates real opportunity because historically.
Jason: He was very strong in certain areas now we can go in and surface.
Jason: The whole organization and to do that effectively.
Jason: It's not a question of content, it's a question of packaging.
Jason: And going to market in the right way, so I'm very excited about that opportunity as well it will take a bit of times as we kind of retool some of our motion to retool some of our marketing retool some of our packages, but that kind of means going back to where existing customers that we already serve very well in certain areas.
Jason: And say you know, we havent offered anything around AI fluency to the frontline workers.
Jason: The back office worker to X Y Z and we know it will have a much tighter story and a set of packages that meet those specific needs.
Jason: Once again, if you would like to ask a question. Please press star and then one any sort of time, we do ask you. Please limit yourself to one question.
Terry Tillman: Next question comes from Terry Tillman from tourists Securities. Please go ahead with your question yes.
Terry Tillman: Yes, Thanks, Hugo Sara well first of all welcome Hugo and Hi, Sarah and Dennis.
Terry Tillman: It's interesting in terms of talking about the shift of the focus to consumer subscriptions you haven't been doing so bad without maybe not as much focus as you could have I think it was up 40% year over year and it's now 13% of that revenue segment, but I'm curious about is Sarah you talked about like in the second half being prudent in terms of conservatism, but if you all do kind of shift the focus and focus.
Terry Tillman: On consumer subscriptions.
Could not have kind of a more immediate payback versus you know.
Terry Tillman: Shifting focuses on the enterprise side I assume that's a quicker a quicker time to return on investment. So I'm just kind of curious how you think about the second half on the consumer subscription side, considering your linear and thank you.
Terry Tillman: Yeah, It's a great question listen at Cod. It could also have a little bit of an impact on G. M. P. When you think about a lot of that learners, who come on and they purchased a few courses initially as part of the transactional model and so some of that G. M D and some of that revenue could actually be delayed a little bit so let's.
Terry Tillman: And we're hopeful we're excited there's a ton of opportunity, especially coupled with the career accelerators and the timing in which we're making this shift in focus to career. The the push for subscription. It is the right time I would add to that the capabilities and what we can deliver from a personalized learning experience.
Terry Tillman: You can't really do that on the transactional side and the way we can under subscription. So we have a lot of optimism at the same time. There is some uncertainty we cannot control the external environment. Our heads are down we're going to continue are running hard we're excited with the 40% subscription growth, though we want to keep driving that.
Terry Tillman: Our next question comes from Josh <unk> from Morgan Stanley. Please go ahead with your question.
Josh: Great. Thanks for the question Oh, welcome and congrats Hugo I wanted to stick to consumer I'm. Just wondering if you could expand a little bit on this push.
Josh: <unk> consumer subscription what changes should we expect to see is there changes in pricing and packaging or marketing efforts.
Josh: How do you go about.
Josh:
Josh: The focus there.
Josh: Yeah.
Josh: Thank you Great question, it's yes on all of the above I think that's that's kind of the main point.
Speaker Change: Where were they.
Speaker Change: They ask and this is already a stuff. That's in motion is let's re imagined the business. If this was the best thing that we have it doesn't mean that we don't do transaction. We don't do what we've historically done I just want the organization to rethink and re imagine a world where this is the product and there's lots of.
Speaker Change: Things, we can do a it's like the positioning on our website. It is the merchandising on our website. It is creating different subscription models not just the one that we currently have it is joined.
Speaker Change: During different marketing and different value proposition positioning I think we've got a great sorry visa visa others, who do subscription are based subscription has three times more classes like.
That's really out of advantageous and it's very exciting and we think we get we have a lot to offer. So the answer is a lot of merchandising blocking and tackling theres going to be pricing.
Speaker Change: The things that we're going to end up doing also all of that onto the come because we're like in the middle of that but we're pretty excited as Sarah has mentioned, though we were trying to be cautious because we do have right now.
Speaker Change: The customer base that comes expecting transaction.
Speaker Change: They've been condition and a certain set of behavior. So we need to kind of be very thoughtful how we migrate and make sure that we don't affect.
Speaker Change: The top line too much. So I think we're we know theres going to be puts and takes we're going to do a lot of AB testing a lot of experimentation.
Speaker Change: But where we're going to we're going to push on that and see how far we can go.
East Lee: Our next question comes from East Lee from Cantor Fitzgerald. Please go ahead with your question.
You for taking my question welcome to you all and Hi, Sarah. So my question is revolving around AI. It sounds like you do me a stone go full force with the AI opportunity you got no you got to have the content was wondering like Szuba is sounded like how much all of them off sell cross sell is the AI opportunity, meaning like.
East Lee: When when you go into a deal you know how much contributions on the AI and how do you how would you package that you know.
East Lee: With the new Chief customer experience officer now in place.
East Lee: Yeah, Great question and theirs.
Speaker Change: Everybody not just in this industry across the industry. We're all learning learning our way through just say are you seeing other players come with big price change the price.
Speaker Change: A claim that we figured it out but to answer more directly your question.
Speaker Change: We have with our existing motion with our existing customer, which is often targeted at certain types of persona. We have AI often at the center of the conversation and it's included in UV enterprise.
Speaker Change: Just kind of like to be very direct that's kind of an existing motion. What we're going to end up now doing is packaging more targeted versions of this that doesn't have all the other stuff around certification and business leadership, otherwise and say hey, Here's a package that is AI specific.
Speaker Change: That you can offer to other persona in the organization at a different price.
Speaker Change: So what we're now doing is we're like targeting different parts of the organization with very very targeted package of AI capabilities. So that's kind of one dimension of the play. The second is we're going to explore what we can and should do to enhance pro which is a.
Speaker Change: No difference Q and gifts certain types of AI content in one versus the other and then we may have in a premium version of the UBM surprise I mean again no decision is being made but it is it is I'm, giving you a sense of like there are lots of different ways. We can decide to monetize what we're doing.
Speaker Change: And then I'll finish with the role play we think it's pretty exciting right now we're embedding it and you'd be surprised.
Speaker Change: There's no reason why in the future some of the role play may deliver sufficient value that on a stand alone is sufficient and we're going to keep our eyes open for monetization opportunities like this one.
Speaker Change: Thank you.
Speaker Change: Our next question comes from Nafeesa Gupta from Bank of America. Please go ahead with your question.
Speaker Change: Thank you so.
Nafeesa Gupta: First on the consumer softness that you mentioned is this more geography specific.
Nafeesa Gupta: That is more than North America U S or do you see that across.
Nafeesa Gupta: And as it pertains to like revenue, but you know what I mean, youre going down versus.
Nafeesa Gupta: Going up.
Nafeesa Gupta: Will we continue to see that.
Nafeesa Gupta: Yeah, Great question. So there's there's two aspects one is we did see some price sensitivity are in North America and N Amir.
Nafeesa Gupta: And that contributes to the S. P is for those learners.
Nafeesa Gupta: So a continued mix shift toward lower E. S. P regions within the consumer base is also contributing to that so there is a geographical Max and then there is also some price sensitivity and we think just looking at the back half that could continue particularly in North America.
Nafeesa Gupta: Our next question comes from Noah <unk> from Jpmorgan. Please go ahead with your question.
Noah: Okay. Thanks, so much for taking the questions and congrats to bill in the new role.
Noah: Obviously, you need to meet has put in motion a lot of change on the sales side could you may be talk about what portion of the changes that are already rolled out in the last couple of quarters are kind of starting to take hold now and which specific areas. Do you think you might need incremental changes near term. Thank you.
Noah: Thank you Noah.
Noah: At the macro level I, just want to reiterate that we're going to continue with the strategy as is because it is a good strategy. It is the strategies I had joined six months earlier I would recommend it and I'm very very excited by our focus on the large enterprise are focused on.
Noah: Five verticals, our focus on value selling our focus on Atlanta and expand set of motion I think that's all good.
Noah: And a lot of it takes time right. When we moved to the large enterprise segment selling cycles are longer.
Noah: We also needed to change a lot of the some of the players that were not necessarily equipped to operate as the large enterprise.
Noah: E R accounting, so we've done all of that and we're seeing some early benefits there are some.
Noah: Things, we can point to like some of the productivity measures and were pretty excited by that but again. This is going to play out through the year and I thought the team was.
Noah: Appropriately conservative in.
Noah: Sending up that's part of the business I think where the difference can be done in the near near near term and those are the tweaks. It's like the same frame, but the way we execute there.
Noah: There's even more opportunity.
Noah: Touch on a few of them one is the packaging and the pricing the merchandising I think there's some real opportunity there was a very good. The second one is you know bringing.
Noah: Bringing our new Rochester, and helping US again on the expansion motion and then helping US there is a lot of nuance there that we haven't gotten to yet and I think I just wanted to pull that forward.
Noah: We don't need to wait for an 18 month transformation I want to make it happen sooner and she has seen the movie She's got a wealth of experience and we're going to try to put in place. Some of these capabilities immediately so that we can reap the benefits sooner.
Speaker Change: Our next question comes from Jeff Mueller from Baird. Please go ahead with your question.
Jeff Mueller: Yeah. Thank you on the partner talking asking given the background.
Jeff Mueller: How are you thinking about I guess H C. M SaaS partner opportunities or is there. Another I guess broad category of partner opportunity that you think the company has historically underexploited. Thank you.
Jeff Mueller: Great question. Thank you.
The answer is a very expensive definition of partners, which includes H T M.
Jeff Mueller: But includes others are more used to a lot more of a rich ecosystem of partners that are supporting selling motions that are making are delivering the value with our customers.
Jeff Mueller: Even more rich that creates better stickiness, so we need to kind of go through all the usual suspects of partners with whom we can sell.
Jeff Mueller: Through a cell with and ways to create better together value proposition. There's I can see all of the above I think this is a.
Jeff Mueller: Untapped untapped as unfair, but we have some of it already but I think we have so much more we can do that I'm excited to start that journey.
Jeff Mueller: We're gonna.
Jeff Mueller: I'm not promising that this is a near term impact but it takes.
Jeff Mueller: Real time to put this in place for this in place and the right way, but I'm really excited by what this can deliver.
Jeff Mueller: 2026.
Speaker Change: And our next question comes from Devin how from Keybanc capital markets. Please go ahead with your question.
Speaker Change: Hi, Yeah, just one quick clarification question wanted to ask about net dollar retention, but the new B I think Sarah you mentioned SMB has kind of dragged the overall and our our downtick in quarter over quarter, but if I'm looking at the large customer net dollar retention I think that might have downtick a little bit more.
Speaker Change: And the overall average.
Speaker Change: Just kind of curious if you can share more color on what's driving that have you seen increased turn greater downside pressure.
Speaker Change: Or is this expansion activity.
Speaker Change: Need to be subdued.
Speaker Change: Category. Thanks.
Speaker Change: Yeah. Thanks for the question. So there's two parts of it one is we did see a one point drop in gross dollar retention.
Speaker Change: That we were not expecting.
Speaker Change: The other side of it is on the upsell. The upsell is impacted by those changes to the sales organization that we spoke about and then ramping those wraps up as we move them around and are brought new Fox N and so both of those are contributing to it were super excited to have <unk>, who is onboard she said no.
Speaker Change: Office this week, because we have such a massive opportunity within our 17000 customers being less than 10% penetrated and so having here to help us unlock that coupled with what we're doing around the AI merchandising and pricing and packaging lots of opportunity there net dollar retention side.
Speaker Change: Okay.
Speaker Change: And ladies and gentlemen, with that we will be concluding today's question and answer session I would like to turn the floor back over to Mr. <unk> for any closing remarks.
Speaker Change: Well.
Speaker Change: First of all thank you for joining today.
Speaker Change: Cited to be on the journey with you and we look forward to connecting again for our Q2 call in August.
Speaker Change: Yeah.
And ladies and gentlemen, the conference has now concluded we do thank you for attending today's presentation. You may now disconnect your lines.
Speaker Change: Yeah.
Speaker Change: [music].