Udemy, Inc. (NASDAQ:UDMY) Q2 2023 Earnings Call Transcript

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Greg Brown: Hi, Josh. Thanks for the question. I’ll start with the last one first. With respect to schools and the opportunity there, I very much agree that there is an opportunity for us to explore. We have not done that to-date in terms of doing the diligence and spending the time to understand how we could best serve schools in this capacity. Not to say that, it’s not an opportunity for us going forward and something we may look at. We just haven’t — we haven’t made it a focus to-date. So, no progress to report on that. As far as government business we did — and we continue to invest on — in the government sector there’s no doubt. Can’t talk about a lot of what we’re doing there but we did have a significant win in this last quarter with a branch of the US government that is very focused on skilling.

I mean just coming back to skilling. And we have got a large contingent of folks in the organization that are contractors in addition to the folks that are government employed. And we’re doing some very interesting things there. I just can’t talk a lot about it for probably obvious reasons. But we continue to invest in the government segment and we continue to see steady progress there. And Sarah, I don’t know if there’s anything you want to add?

Sarah Blanchard: No, that sounds good. Thanks Josh.

Josh Baer: Great. Thank you.

Operator: [Operator Instructions] The next question comes from Devin Au with KeyBanc Capital Markets. Please go ahead.

Devin Au: Great. Thanks for taking our question. I have another question on badging. Greg, wanted to get your thoughts on just the adoption pace of this product. I know the macro currently isn’t the most favorable but just given how in-demand skills are and the increasing need for learners to validate and showcase their skills do you foresee like a faster adoption of this product versus your other modules that you have? Just curious on your thoughts there.

Greg Brown: Yes, we do. Thanks for the question. We are already seeing that now, because there’s pent-up demand candidly for validation in the form of badging and certification. It’s a concept that’s been out in market for some time now. We strongly believe that our approach is the right approach to enabling organizations to understand how they need to be executing against the skills-based economy opportunity. And yes, fully expect the adoption to be faster than what we’ve seen in some of our other products for those reasons.

Devin Au: Great. That’s good to hear and really helpful details. Maybe my follow-up for Sarah. I don’t know if my math is correct seems like the implied 4Q guidance is kind of baking in some step-up in operating expenses. Any notable expenses may be done — pushed out into 4Q or any seasonality one-time items that we should be mindful of? Thank you.

Sarah Blanchard: Yes, thanks for the question. The one normal seasonality step-up that we see from an OpEx perspective, it’s in the fourth quarter around our biggest promotion cycle in the marketplace, so for Black Friday, Cyber Monday. The other thing that’s happening is if you’re referring to our Q3 EBITDA being higher than our Q4 that is due to the overperformance of our Consumer business in the second quarter that a lot of that revenue gets recorded in the third quarter. And so where previously we’d expected EBITDA to grow, we expect it to actually, on a sequential basis, decrease slightly, but we will be profitable for the back half.

Devin Au: Great. Thank you so much.

Sarah Blanchard: Thanks for the question.

Operator: This concludes our question-and-answer session. I would like to turn the conference back over to Greg Brown for any closing remarks.

Greg Brown: I’d just like to thank everybody for joining the call, and we look forward to speaking with you again in November. Have a great rest of the day.

Operator: The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.

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