Connor Passarella: This is Connor Passarella on for Terry. Just on the first one, I wanted to dig a little deeper into some of the customer dynamics within UB. So just for large customers, the more than 1,000 employees. How do that segment fuel from a demand perspective versus smaller customers? And maybe how can we think about the growth breakdown between these segments on the mid 30s UB growth guidance for this year?
Greg Brown: So coming out of Q4, look, as we enter Q4 and into mid Q4, we really were not seeing significant impact in our enterprise business. And what we saw in December as we went to the back half of December is with some elongation in sales cycles, and that resulted in some deals pushing into Q1. And organizations were doing what candidly what we were doing and I think what most organizations were doing, which is assessing the budgetary concerns that they had in Q4 as well as trying to really get clear on what their budget was going to look like for ’23. So some of those decisions were in a holding pattern. We are starting to see some of those decisions free up and some of the budgets starting to be allocated in Q1. We’re encouraged by what we’re seeing early Q1, but still a long way to go.
And as far as buying trends within that segment, and I talked earlier about what we’re seeing from a continued momentum offline to online as well as consolidation. But we’re also seeing that as I’m engaging with CLOs, what they’re telling me and us is that they’re not pulling back on their allocation or budget per employee, they may have, in some cases, reduce their workforce, so maybe not as many employees. But for most of them, it’s as important now if not more important, to continue to invest in the skilling, be it upscaling or reskilling of their employees, to enable them as an organization to reach their strategic imperatives and outcomes as they’re navigating their way through this downturn. And so as much as we have seen some budgets constrict and go into a bit of a holding pattern, what we’re hearing is those budgets for the year on a per employee basis are not — we’re not seeing significant degradation.
So it does give us confidence in our enterprise business as we move into 2023. I don’t know, Sarah, if there’s anything you wanted to add to that?
Sarah Blanchard: I think that was well said.
Patrick Schultz: Maybe just other quick follow-up on the new product side. How has the rollout of the learning assessments has been going and maybe if there’s any important customer feedback you’ve had here? I really appreciate the time, guys.
Greg Brown: I’m very encouraged. Some of these upsells that I mentioned do include our Udemy Pro immersive learning capability product, and so very encouraged about what we’re seeing. And most larger organizations are moving with a sequence deployment phase deployment, if you will. And those initial phased deployments, we’re seeing very, very good signs and very good uptick, adoption and outcomes inline with expectations. So very encouraged. And again, the breadth of our platform really does give us a unique position in the marketplace and that we’ve got immersive learning capability and our leadership academy coupled with our market leading on demand library that is unique. And so we’re taking advantage of that and our customers are really taking advantage of it as well.
Sarah Blanchard: I would just add to that we’ve spoken about our customer success team and how we really partner with our customers to help them roll out these new features and capabilities and get their teams engaged and see that , so that they’re able to get the ROI from the dollars that they’re spending with us. And so there’s a lot to be said about having this broad platform, this great content. But very importantly also, we do partner with them to ensure that they’re seeing that uptick and that success.
Operator: Our next question comes from Jason Celino with KeyBanc Capital Markets.
Jason Celino: Greg Brown, when we think about the longer sales cycle commentary in enterprise, are you seeing impact more in any one vertical, maybe say in tech, curious what you’re seeing?
Greg Brown: We have seen it a bit in technology, which is no surprise because that is also where we’ve seen the bulk of the organizational adjustments that have been announced over the last weeks and months. So tech is one vertical that we have seen a little bit of the pause pullback. But again, starting to see that free up as we move into Q1. But also bear in mind, we don’t have high concentration in any one vertical. We’ve got — if you look at the exec advisory council or boards that we have and the areas by which we’re demonstrating very strong capability to drive organizational upskilling and reskilling on a global basis, there’s no one concentration in tech. We do very, very well in financial services, as I mentioned earlier, as well as professional services, consulting, healthcare, retail and so on and so forth.
So that does play to our advantage in that. If any one sector does start to see softness it’s more impacted than other sectors. We do have the ability to tilt in other directions without really losing a step. But initially, the tech vertical was a vertical that we did see some pullback.
Jason Celino: And then Sarah, getting to EBITDA profitability sooner, it seems like the prudent decision now, especially in ad tech. I’m curious what type of flexibility have you built in, in case some of these top line business trends maybe potentially deteriorate further?
Sarah Blanchard: So I think the macro environment, Q4, we really did see a pretty significant deceleration and elongating of sales cycles, and we do expect that to continue. At the same time, as Greg said, things do look like they’re loosening up a little bit. We feel really good about the balance that we have laid out as far as confident in our ability to deliver profitability in the second half, even with continued macroeconomic pressure and at the same time being thoughtful about the ability to also step in and put our foot on the gas should things open up and take advantage of the opportunity. So it’s a very balanced approach. We do not expect in our planning right now for anything to improve, and it can work in a little bit and we’ll be okay. At the same time, we’re still investing in the things that matter and we know the steps that we’ll take really quickly when things start to loosen out.
Operator: Our next question comes from Brent Thill with Jefferies.
David Lustberg: This is David Lustberg on for Brent. I appreciate you answering some questions. Maybe just thinking about the overall enterprise opportunity. There’s a lot of different players out there, it seems like everyone in education tech wants a piece of that pie. Just curious, how do you think about some of these newer entrants being maybe a little bit more price competitive, are you seeing any of that? Just curious to get your thoughts on the competition standpoint.
Greg Brown: We’re not seeing anything new in terms of competition upmarket in our enterprise segment. What you described as far as new entrants that are a bit more and price competitive, we’re seeing that more down market in the SMB side of our business, and that’s not a surprise. And we’ve seen that for some time now and we expect to continue to see it. And we’re making appropriate adjustments if and where it makes sense to enable our teams to compete effectively in the SMB segment. But on the Enterprise segment, not seeing anybody new materially, and don’t necessarily expect that to change in any rapid fashion. That usually happens over time. There will be no surprises as we start to keep our eyes on the landscape and better understand based on the customers’ needs, whether or not there’s somebody else that’s out there that can fulfill those needs as successful as we can.
So yes, that’s about the best way I can answer it. Nothing material on the enterprise side, seeing it down market.
David Lustberg: And then maybe for Sarah, I just wanted to double down on the comment around the FY24 guide. I believe you said reiterating what you said at the Analyst Day. But maybe just provide a little bit more commentary around what gives you confidence that you could get back to that level of growth. Obviously, it implies somewhat of a strong acceleration in growth. So I think you pointed out like ’23 revenue is obviously well and so you have that impact. But maybe walk through what gives you the confidence that you can get back to that mid-20% growth in ’24?
Sarah Blanchard: Yes, I think a few things. I think the first thing, and Greg mentioned this a little bit. But even though we’re seeing some elongating sales cycles, our win rate was actually higher in Q4 than it was a year ago in Q4. And so we continue to see the strength in our business. We continue to see that — our offering, which is fundamentally different from anything else that is out there because of our marketplace, because we can keep up with the pace of change and that pace of change continues to increase. It is a different offering, it is global. We have 14 local languages. We continue to see strength in our net dollar retention at 123%, for customers it’s over 1,000 employees. And so we have an enormous opportunity for expansion and upsell.
We continue to extend and upsell with them. And we are increasingly — our growth rates are based on Udemy Business. And so we’ve got stability in the consumer business. We think that stability is going to continue. We are very focused on what we can control and the things that we’re investing in are going to continue to drive increased engagement and retention and improved unit economics, and all of that’s going to result in top line growth. So we feel really good about the targets that we put out there.
Greg Brown: I just want to add one thing, we mentioned this on prior calls. But we still are only 10% penetrated in our enterprise customer base. And our team, as Sarah just mentioned and I mentioned earlier, our win rates are increasing. Coupled with the trend of consolidation within these larger enterprises gives us a lot of confidence that we’ve got a lot of runway in our enterprise segment. At the same time, we’re adding new enterprise customers every quarter. They give us more opportunity to expand and grow. So we very much believe we’re on the front end of a massive opportunity on the enterprise side of our business, holistically, our business, specific to the question on the enterprise side, and we’ve got the right platform and the right team to go take advantage of.
Sarah Blanchard: The other thing I would add, and we’ve spoken about this a little bit as well, is continued traction that we see in Udemy Business Pro and our cohort based leadership offering, that’s additional growth that we can take advantage of within existing customers and new customers.
Operator: Our last question is from Tom Singlehurst with Citi.
Tom Singlehurst: Actually, just a couple of quick ones, if that’s okay. First one, that weakness in the sort of enterprise pipeline to the elongation of the sales process. Can you just give us a sense of whether there is a sort of geographic sort of nuance step? I know some of the other companies exposed to enterprise sort of L&D budgets of singled out the UK as a market has been weaker than the US, for example. So any color on that would be great. And then I’ve got a follow-up, if that’s okay.
