UDEMY, INC. Management's discussion and analysis of financial condition and results of operations (form 10-K) – Marketscreener.com

Overview
Key factors impacting our performance
Ability to attract and engage new learners and Udemy Business customers
Ability to retain and expand our existing learner and customer relationships
Ability to source in-demand content from our instructors
Impact of mix of consumer and enterprise segments
Ability to expand our international footprint
Our investment in growth
Pace of adoption of cloud-based skill development solutions
Components of results of operations
Revenue
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Cost of revenue
Operating expenses
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Sales and marketing
General and administrative
Interest income (expense), net
Other income (expense), net
Other income (expense), net consists primarily of foreign currency transaction gains and losses.
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Results of operations
The following table summarizes our results of operations for the periods presented. The results below are not necessarily indicative of results to be expected for future periods. Results are as follows (in thousands):
(1)Includes stock-based compensation expense as follows (in thousands):
31,618 $ 8,963
(2) Includes amortization of intangible assets as follows (in thousands):
$ – $ –
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The following table summarizes our results of operations as a percentage of revenue for each of the periods indicated:
Comparison of the fiscal years ended December 31, 2021 and 2020
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Cost of revenue, gross profit and gross margin
$ 294,026 $ 63,514 22 %
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Total other income (expense), net
Certain key business metrics and non-GAAP financial metrics
Monthly average buyers
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monthly average buyers, in comparison to more normalized results seen during the year ending December 31, 2021.
Udemy Business Annual Recurring Revenue
Udemy Business annual recurring revenue $ 239,257 $ 137,621 $ 75,079
Udemy Business Net Dollar Retention Rate
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growth of our revenue base, the penetration within our learner base, expansion of products and features, and our ability to retain our UB customers.
2019
132 %
Segment revenue and segment gross profit
For the fiscal year ended December 31, 2021, the increase in the Consumer segment gross margin was primarily due to a reduction in consumer content costs and payment processing fees as a percentage of Consumer revenue.
Enterprise segment gross profit $ 122,970 $ 67,926 $ 31,921 Enterprise segment gross margin
In addition to the measures presented in our consolidated financial statements, we use the following non-GAAP financial metrics identified below to help us evaluate our business, formulate business plans, and make strategic decisions.
Adjusted EBITDA and adjusted EBITDA margin
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We define adjusted EBITDA margin as adjusted EBITDA divided by revenue for the same period.
The following table provides a reconciliation of net loss, the most directly comparable GAAP financial measure, to adjusted EBITDA (in thousands):
(87)
1,375
8,740
8,963
Liquidity and capital resources
Sources of funds
Use of funds
Our main source of operating cash is payments received from our customers. Our primary use of cash from operating activities are for personnel-related expenses, instructor payments, advertising expenses, indirect taxes, and third-party cloud infrastructure expenses.
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Investing activities
For the fiscal year ended December 31, 2021, net cash used in investing activities was $52.7 million, primarily as a result of our acquisition of CorpU, strategic investments, capital expenditures for property and equipment, and capitalized software costs.
For the fiscal year ended December 31, 2019, net cash provided by investing activities was $14.6 million, primarily as a result of net sales and maturities of marketable securities, offset by capital expenditures for property and equipment and capitalized software costs.
Financing activities
For the fiscal year ended December 31, 2020, net cash provided by financing activities was $131.1 million, primarily as a result of proceeds from our issuance of redeemable convertible preferred stock and issuance of common stock following employee stock option exercises.
For the fiscal year ended December 31, 2019, net cash provided by financing activities was $11.3 million, primarily as a result of proceeds from issuance of common stock following employee stock option exercises.
Off-balance sheet arrangements
Critical accounting policies and estimates
Revenue recognition
1) Identify the contract with a customer
2) Identify the performance obligations in the contract
3) Determine the transaction price
4) Allocate the transaction price to performance obligations in the contract
5) Recognize revenue when or as performance obligations are satisfied
Subsequent to our IPO in October 2021, the fair value of common stock is determined on the grant date using the closing price of our common stock.
• contemporaneous valuations of our common stock performed by independent third-party specialists;
• the prices, rights, preferences, and privileges of our redeemable convertible preferred stock relative to those of our common stock;
• the prices paid for redeemable convertible preferred stock sold to third-party investors by us and prices paid in secondary transactions of common stock, including any tender offers;
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• our stage of development;
• the likelihood of achieving a liquidity event, such as an initial public offering, a merger, or acquisition of our company given prevailing market conditions;
• the operational and financial performance of comparable publicly traded companies; and
• the U.S. and global capital market conditions and overall economic conditions.
We account for stock-based compensation from stock-based awards using the estimated fair value of the awards on the date of grant. Stock-based awards include stock options, restricted stock units (“RSUs”), stock appreciation rights (“SARs”), and restricted stock granted to employees, directors, and non-employees, and stock purchase rights granted to employees under the Employee Stock Purchase Plan (“ESPP Rights”).
Risk-Free Interest Rate-The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant for zero-coupon U.S. Treasury notes with maturities approximately equal to the award’s expected term.
Dividend Yield-The expected dividend was assumed to be zero as we have never paid dividends and have no current plans to do so.
Instructor withholding tax obligations
Income taxes
We are subject to income taxes in the United States and numerous foreign jurisdictions. Significant judgment is required in determining our income tax expense and deferred tax assets and liabilities, including evaluating uncertainties in the application of accounting principles and complex tax laws.
Business combinations
Goodwill and intangible assets
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Ta bl e of Contents Goodwill represents the excess purchase price over assets acquired in the Company’s business combinations. The Company evaluates and tests the recoverability of its goodwill for impairment at least annually during its fourth quarter of each fiscal year or more often if and when circumstances indicate that goodwill may not be recoverable.
Recent accounting pronouncements
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