Okay. I think we'll get started. Thanks, everyone, for coming today to JPMorgan's TMC Conference. I'm delighted to be hosting Udemy current CEO, Hugo Sarrazin. Thanks so much for joining us, Hugo.
Thank you for having me.
Yeah. Maybe we could start with a quick introduction about yourself, about Udemy, and what your reasons were for joining the company recently.
Okay. Very good. Let's start with the easy one. Thirty years in tech across a series of different roles, most of it at McKinsey, where I was on the West Coast, served a bunch of iconic tech companies in the software space, in the service space, in the hardware space, a whole range. I also worked with private equity when they invested in tech, often also in EdTech. I spent the last four years at UKG as the President and Chief Product and Technology Officer, where I helped double the size of the company. It's now almost 15,000 employees. We've had a quarter of a billion dollars of revenue in 2023. The last time that was public, just to kind of give you a bit of a sense of scale and scope, we introduced eight AI products that are broadly used.
It was a space that was very close to this one. It was in the HCM space, serving CHRO and chief people officer. I got to experience a lot of the end buyer, understanding their issues. I think it's really applicable to the space. In terms of your second part of the question, what drew me to Udemy? A few things. First, there's a personal aspect. There's always a personal story. Both my parents were first-time first in their families to go to university. I saw the impact it had on social mobility. Our family is currently clearly different than what they've experienced. The second piece, I did have the opportunity, I did spend a lot of time in school. I did a PhD in robotics and a bunch of AI stuff back in the early 1990s. I love learning.
I worked also on an advisory basis for the Prime Minister of Canada on the future of education, and even at Stanford when they were making the transition to MOOCs. Learning has been a passion play. Reason number one. Reason number two, it is a space that has gone through a lot of change, but has not yet fully realized its potential. I was excited by Udemy because Udemy is one of the players that has the broadest platform and could end up being the one that will restructure or frame what this could be. I want to be a part of that. We are going to talk about some of the investment thesis I had behind that.
I was really drawn to the opportunity because I really wanted to do what's right in terms of creating that social mobility, helping a lot of folks realize their full potential, and then do it with a platform that could be very, very powerful.
Yeah. No, that's great. You've been in the CEO role for roughly two months now. I understand you've had some time to speak with some customers, partners, other key stakeholders of the business. What have been some of your key observations about the company? What is sort of your vision over the next couple of years?
Yeah. I used to do this for a living. Get into a new company, quickly assess the industry. I did this before I started. I did this in the last 60 days. What I told the employees on day one, on the first town hall, I said, hey, I'm going to be learning. I'm going to spend a lot of time with our customers, our partners, our employees. I did that. I think almost 150 customers, many instructors, something like 250 employees, like a really thorough review of everything and anything under the sun. What I come back with is I was excited before coming. I'm even more excited now. The opportunity is phenomenal. There are, both from a market point of view and from what this platform can do, there were things I hoped I could find, and I found under the hood.
The product roadmap is pretty exciting. There's more to do, but there was already some good stuff. The transition to the large enterprise side was in flight. It was exactly the right direction of travel. There was some really exciting stuff we've done to improve the bottom line that's delivering results. That foundation is really, really good. Now, to the second part of your question, where to? Here's where I'm going to get a bit into the investment thesis. There's an overhang on the EdTech space. The overhang is at least in part driven by what people think AI is going to do to this space. Is it really going to bring the cost of content creation to zero? Because you can. You can now today take a PowerPoint chart and dump it into a wonderful tool, and it will create some sort of little talking avatar.
You can put the same PowerPoint into another gizmo, and it will create a podcast for you. That is an overhang. What is going to happen to the space if now you have AI that can do these wonderful things? I have the thesis that actually it is going to unleash a bunch of new wonderful things. I am going to try to make the case for that and tell you why I think Udemy, in that context, is well positioned to do that. The first one, it is creating new demand. In the last six months, not six months, 60 days, I spent a lot of time with enterprise leaders. They are all saying AI is really overwhelming. I do not know how to do the reskilling of my organization. I do not know what it means for marketing. I do not know what it means for HR.
I don't know what it means for finance. I don't know what it means for legal, my frontline employees. Every CEO goes to some wonderful conference and comes back and says, hey, I've heard that XYZ is doing some AI amazing thing. Why can't we do the same thing? Everybody now is trying to figure out what to do. Every vendor, whether it's Salesforce, ServiceNow, the Googles of the world, they're all coming up with their own version of things. There is a moment in time right now where reskilling is the demand question. That's wonderful because we have 4,000 AI classes on the platform to facilitate reskilling. That's new demand, demand that did not exist a year ago. That's number one. Number two, I think online learning did not fulfill its potential. Full stop. Full stop.
It was wonderful to change the economic distribution and create an opportunity for long-form video to be distributed and reach thousands, millions of people around the world. It did not fundamentally change the experience. You choose whether you are a beginner, an intermediate, or advanced, and then you go. We are going to walk you through the same learning experience, no matter who you are, what you know, and what your learning experience is. This is where AI changes the game. This is why we have this amazing opportunity to raise the effectiveness of learning.
Because now you can start, and I can go through 250,000 courses, reverse engineer using AI, a bunch of assessment that an instructor cannot create on their own, create a bunch of assessment, start you at the beginning of your journey for reskilling with an assessment, understand where your learning gaps are, then take the curriculum, which is long-form, reassemble it to meet the gaps. That's pretty amazing. I can do massively personalized learning. That experience is better, more engaging. You will complete the classes, which is often the issue that many traditional players have. You will have better learning outcomes. You can deliver a better ROI. My ability now to show up to a business leader and say, take this reskilling program, it will be personalized to your need because I'm using AI in a very powerful way.
I will create a feedback loop. I can introduce it in the flow of work. There's a lot of new things now that AI is creating. That's the opportunity. Our entire product roadmap right now is made to do one thing, is to take what made Udemy great in this first round, which is this marketplace, the two-sided gizmo, blah, blah, blah, but now inject AI for the creators and inject AI for the learners. That is a huge, huge opportunity. What that allows us to do is this mega idea, at least I think it's a mega idea, is online catalogs are interesting, but not the future. The future is about an AI-enabled platform that will facilitate the reskilling of the workforce of the future. I can deliver an ROI, and I can become mission-critical for large enterprise.
Yeah. So maybe there's a lot to unpack there.
Yes. I just went in to give you the investment thesis in the most succinct way.
No, that's great. I mean, you have recently launched a few AI offerings, like Skills Mapping, Learning Assistant. What has been sort of the feedback from those recently?
I couldn't be more proud. I mean, we've only begun, by the way. It is just basic, basic, and it's already a game changer. We can do skill mapping. Imagine this basic, you're a CHRO, and you're trying to figure out what are the initiatives to reposition your workforce from A to B. You need to assess the skills that B requires. You need to assess your starting point. You need to connect the two. Nobody can do that today. Nobody. It's amazing. There's a huge opportunity to connect the two and then connect it to skill program, not learning program, skill program. I'm making a very important difference. There's skill acquisition, there's skill mastery, and there's skill recency. Those are three characteristics that need to coexist to deliver the ROI.
The skill mapping stuff right now, people are saying, wow, this is a good first step. We're now getting there. The AI assistant, again, very basic. We're able to be within a class, do the whole AI consumption of the thing, and then give you the ability to search through the class. That's pretty good. I mean, wait until what we do next. We're going to go across the whole catalog. We're going to do even more because now what we need to create for you, both on the consumer and on the business, and it'll be a bit different, and we can go into that difference in a second. We want to have your companion to make you successful in the world.
Instead of being a transaction, it becomes kind of something that sticks with you in the same way that you do not want to cut your Spotify subscription or your Netflix subscription. You want to keep that. That is kind of part of the vision. We need to get to that level of intimacy with you as a person who wants to be successful and needs to learn a bunch of things. That is the tutor. We have recently launched another thing that is really, it is a role play. Literally, what is it, two and a half weeks now? Role play, we are using AI to create an ability to test certain scenarios. Here, we are not the first one. We did not invent this idea, right? There are other people who do that. Some people have been working on it in the traditional publisher model.
They got 80, 80 role plays. A role play is like, hey, let's have a tough conversation during a performance review, or let's kind of practice how to run a meeting, right? You can have these role plays. We have this marketplace. What we did is we created in the platform the ability to create role play. Day one, we got 32. Day two, we got 200. After one week, we got 400. Now, we're two and a half weeks. We got 1,400 role plays. This is the power of a platform solution versus a publishing. I'm going to keep emphasizing that we're trying to enable the creators to create a lot of these role plays. Will they all be great? No. There's going to be the range of things.
Again, because people can choose, they can vote, we will get the better role plays to make it to the top. We are very focused on making the platform AI-enabled so that we can do role plays. We can do labs. We can do assessment. We can do everything to make you more successful. We are doing it in a platform way. We are very excited. There is more. I will just say one last thing, which is we are at the very beginning. We took, as I said, it is a two-sided platform, one for the creator, one for the learner. On the creator, we took the same set of tools, and now we are making it available to the large enterprise.
Now, if large enterprise can begin to have agency with the content and use these AI tools to create the role plays that are specific to how they'd like to do X, Y, Z in there, then they do custom creation. What you have is stickiness, stickiness, stickiness, stickiness in a way that an online catalog could not deliver.
Are you starting to see some, I know it's pretty recent, but are you starting to see some of these newer tools drive more customer conversations or even maybe some conversions or maybe even expansion of contracts?
It's early days. I can tell you that in my conversation, what I'm telling you as the narrative here, the arc, people are saying, wow, this is a different experience. This is a different story than what we've heard from others. The fact that we can now have agency, it's a pretty big deal. It's a really big deal because L&D teams have been wondering, hey, what's my role in this moving forward? I'm like, hey, I'm here to help you. I'm going to make it easy for you to have a different role in this new future where you can bring your expertise, your understanding of the company to make sure that these learning and reskilling journeys are built custom to you. I think this is going to be pretty powerful.
Got it. Maybe we could talk a little bit more about the business segments. Maybe first starting off with consumer, it's slightly over a third of the total revenue today, just below a $300 million run rate. Growth has been sort of volatile in this business, but it's been very anchored towards, like you said, last quarter, a transaction-based approach. It seems like you're really making a big push to shift that over to subscription going forward. Maybe help us understand what initiatives you're taking to revitalize that part of the business.
Yeah. Great question. If I step all the way back, we came from the B2C world, the consumer side. That's our history. That's where this marketplace came from. It was an amazing innovation when it was an innovation. At the end of the day, we kept the model too heavily focused on transaction. That is a hard way to make a living, one transaction at a time. You need to fill the bucket with lots of consumers. Then you need to monetize each one of them and go back to the ones who bought one thing to make sure they bought a second thing and a third thing and a fourth thing. It is really also diminishing the impact of the platform. As I've just told you, with AI, we can kind of be your companion.
We're making a hard pivot towards subscription. Our B2B side is subscription already. Our consumer, 13% of our 300 million is subscription. We want to grow that significantly because, first of all, it delivers a better experience. It helps the end user, the learner, achieve more. Because the economics are different, we have an LTV to CAC, just the economics is much better. It allows us to reinvest for the learners. It allows us to be very deliberate in the way we choose to acquire and nurture customers. It is a really important shift that we're doing. In terms of initiative, we're doing a few things. You can already go, not this week. This week, that's special. In general, you can now see on our marketplace, we're emphasizing subscription more than we've ever had before. We're changing the way we merchandise things.
Instead of emphasizing all the wonderful one-off, we're going to emphasize subscription. That's one. Two, in our customer acquisition, we're shifting some of the emphasis towards more subscription and nurturing customers from transaction to subscription. There's a lot of proprietary channel for those migrations. We actually know where people live. We know where 80 million people live. We're going to sit down with them and try to make the case. We're also introducing new products and new subscriptions. We used to only have one subscription. It's kind of limited. You either hit the mark or miss. We created Career Accelerators earlier two weeks ago. We have six of them. We're going to monetize that as subscription because, again, we're trying to make it clear. We're here to help you achieve your goal.
We've got a bunch of other subscriptions that are in the hopper that we're exploring. We're going to introduce a bit later this year. A very important transition for us.
Yeah. On Career Accelerators, it seems like an interesting new offering. You're basically making professional development more accessible for people. What has been some of the early learnings from that? Is there any way to kind of get a sense for how it may impact growth for that segment?
The main idea is be more outcome-focused, even for consumer, right? People want to be successful. They want to be, and as we know right now, the economy is, there's a lot of transition, folks, from one type of role to another. We want to give people more control. Again, this word, I keep using it. It's a very important word, agency. If you have agency with the outcome, you have more engagement. We're trying to find ways to get that level of engagement and helping our consumer do that. We're assembling a learning path. That's content. It's this, again, the idea that these different classes together help you move up the ladder and achieve a better outcome for yourself as a career. We're including assessment. We're including badging and recognition.
Over time, we've got a bunch of additional value-added services and merchandising opportunity. I'm not ready to announce them that we're going to introduce along with that. That makes these careers more not just episodic, but ongoing. I mean, if you want to become a cloud engineer, it's not just for three months. It's forever, right, or for a period of time. It could be multiple years. How do we become that? What kind of additional membership? What additional recognition? What kind of community do you want to be a part of? There's some really, really interesting thing. The feedback so far is actually pretty good. Now, what we need to determine is what are all the different flavors of careers that we want to be supporting? Also, how do we ladder those things up?
How do we bring together folks that are like-minded to participate and help each other and encourage each other?
Maybe the other portion of the business is on the Udemy Business side. That is about a $500 million run rate business. It's growing positively. Growth has decelled, but you're only less than 10% penetrated with Udemy across your existing 17,000 customers. Aside from macro, which maybe we'll touch on a little bit, how would you sort of characterize the opportunity over the next year or two to really increase the penetration of that 10%?
Yeah. Our enterprise business is growing at 9%. I mean, I wish we were almost at 10%. I could have said double digit, but we did not quite make it. It is growing faster than anybody else in the industry. It is a really, really important part of our business. As we all know, enterprise monetizes at a different rate. Our LTV to CAC there is good. It is already a subscription business, and we like that. Seventeen thousand large enterprise, nobody comes close to that. Very iconic brands, very large brands. We made a shift a year ago towards five verticals, move up and focus more on large enterprise versus SMB. We are pretty happy with what we are seeing. We got 40 deals last quarter that were more than $100,000. We think that strategy is a winning strategy.
Right now, we're at a moment in time where the opportunity ahead is humongous. The stats that you've quoted is the important stat. We need to figure out, and I'll hit that, 10% penetration in the installed base. That is phenomenal. I've never come across a situation where you have only 10% penetration. It begs the question, why is that? Why is that? There's a few pieces to the answer. One piece of the answer is there are different buying centers in large organizations. We need to do a better job doing the account coverage and meeting all these different buying centers, which I think as we do this transition to large enterprise, we're getting our heads around. The second, we until recently had three SKUs. That's it. It's the Udemy Enterprise, Udemy Pro, or the cohort-based.
That's it, three SKUs to try to meet all the needs, all the personas, all the types of workers. That's incredible. It's such a missed opportunity to do basic segmentation based on an understanding of the needs of different populations in a large organization. One of the things we're doing right now is we're going back to the drawing board and saying, OK, how do we create packages that meet the needs of different types of users? The frontline workers don't need a 30,000 course offering. They don't. It's absolutely not what they need. To try to monetize that at the same price as we are trying to monetize a, again, back to my cloud engineer, makes no sense. We are going to do a lot of willingness to pay and appropriate segmentation to cover better the needs in an account. That's one.
The second, we need to recognize where we've come and where we're going as an industry. This industry benefited from this horrific thing called COVID by accelerating an enormous amount of future purchase in a very short amount of time. That is one way to accelerate revenue growth. Now what we need to do is help deliver on the ROI. When you were in the period of COVID, a lot of purchase was done just to kind of offer a thing to the employees that were all stuck at home in their basement or in their studio. It was not an ROI-based purchase. Now, we have a product that delivers a really good ROI, better than the average for all sorts of reasons. We can go into that.
The second way we're going to go after beyond better account coverage, beyond more product-tailored segmentation is we're going to go make the case for the ROI. We're in an economic uncertain time. Usually, people ask a tough question about your spend. I like our chances when there's a consolidation play in an account. I like our chances because our mousetrap is a stronger mousetrap. We want these conversations to happen because we can demonstrate the engagement. We can demonstrate the learning outcome. We can demonstrate how AI is going to help. Our roadmap is pretty powerful. That's the other way we think we're going to move from a 10% penetration to something a bit more reasonable and exciting.
With that, it seems like you're really changing some of the messaging too around consolidation, cost savings. Does that require you to sort of revisit the sales incentives or some of the playbook there?
Yeah. So we're doing a bunch of that in the first 60 days. The first one is really emphasizing I mentioned earlier that there is right now this is a moment. This may not have been a moment six months ago, at least when I was at UKG. I didn't hear it from CHRO and Chief People Officer. Now I'm hearing it. There is a moment right now. AI is it. We are changing the messaging so that we can kind of bring to the forefront that conversation and make sure that we merchandise what we're offering to meet that. That's one piece. The second is we are being very thoughtful about the moment of uncertainty and trying to be proactive in saying, we got a better offer. Let me help you, CHRO.
You may not have had to demonstrate the ROI, but we're going to help you because we know we've got a better way to do that. We're going to help you. We're bringing forward a bunch of value engineering tools to demonstrate the value. We're sitting down proactively with our customers to kind of help with that. Yeah, both of these require retooling of the sales plays, retooling of the enablement. We had already made some incentive changes to facilitate expansion. We did not need to do much there. The first two, absolutely.
I think coming into this year, I think we all had a little bit more clarity with the macro where it was headed until maybe some recent headlines in the last month or so. I mean, you delivered, I think, what was like a fine Q1 from a P&L perspective. You are taking a more prudent guidance posture based on some of the signals you're seeing. Maybe just if you can kind of help us understand what are some of those signals and your take on the macro.
Yeah. So I mean, Q1, we delivered top line and bottom line. We actually did really well on the bottom line. It was a really good Q1. For the bottom line, it is 10 quarters in a row where we have delivered really to the bottom line. I think the team has done some really, really good work. I want to kind of call them out for that. Right now, we are not seeing a lot of mixed signal in this moment in time. I mean, sorry, let me kind of rephrase that. It is not affecting the way the pipeline has been built for Q2. That being said, in the conversation, we have things like, I will give you an example. We have a large government account. All of a sudden, the person we were dealing with no longer is there.
They were Doge, if that's a verb. What does that mean? It means that it will take longer to close that thing because the person with whom we were having the conversation just disappeared. There's a bit of that in the water. Not everywhere. We're not seeing it in some geography. We're not seeing it in some sector. It led us to try to be a bit cautious for the second half of the year. We feel confident that those numbers that we guided to, we can achieve. Who knows? Who could have predicted all of this? What happened this week will be different than what will happen tomorrow. It will be different than what will happen. I mean, it is unprecedented times. We're trying to be conservative.
So far, it's not really impacting pipeline or conversions as of so far?
Q2, we're in really good shape.
OK, got it. Maybe just on the we only have a minute or so here. Maybe just we can talk about international. I know that's also like a nice untapped opportunity to sort of tackle there. Maybe if you can kind of characterize what you're seeing on the international front and ways to expand there.
Yeah. So 60% of our revenue are coming from international. We have the broadest number of language that we cover in our offering, which is great. The opportunity is so big, so big. We do not do local activation. We do not have on the consumer side in market folks who are kind of making sure that a marketing campaign in India does not run in the middle of a cricket game. It is pretty obvious stuff. Imagine if we start doing that. On the consumer side, we have a really, really fun opportunity to do full stack in market activation. On the B2B side, we do have either partners in the country or a sales team in the country. There, we are doing the normal motion. We are seeing back to where we are on a differentiated basis. APAC and LATAM are incredibly robust right now, incredibly robust.
We're feeling really good about that. The diversification we have from a geographic point of view is one of the appeals of the business.
Yeah. I think with that, we just ran out of time. Thanks so much for attending.
Thank you.
Appreciate it. Thank you.