He has quickly scaled our enterprise business and built a powerful go to market engine that has more than doubled our ARR in two years. Greg is passionate about learning and our mission, and I am confident that he's the best executive to lead Udemy to me through the next stage of growth. It is a bit of sweet moment, however, since we shared with our employees yesterday that we are reducing our global workforce by 10%. We are taking steps to better align our cost structure with our expectations for revenue, demand and profitability. This decision was extremely difficult since the talented team members that were impacted all contributed to Udemy's success. It's with a heavy heart that we wish our departing colleagues all the best. We are committed to supporting them as they transition to their next opportunity.

Looking ahead, we believe this action positions us well to balance growth and margin expansion in a challenging environment. Going forward, the company is in good hands with Greg and the rest of the Udemy leadership team, as I plan to stay on for a year as an adviser to support a seamless transition. Since this is my last call, I want to send a warm thank you to the analyst and investor community that supported me, Udemy and our entire team as we took the company public, our customers and learners around the world for choosing Udemy as their learning platform, our instructors for creating the impactful content that sets our company apart and finally, to my colleagues at Udemy, for your hard work in advancing our mission and building this great business.

With that, I'll now turn the call over to Udemy's next CEO, Greg Brown.

Greg Brown: Thank you, Gregg. I'm tremendously grateful for your leadership and for entrusting me to run Udemy Business for these past two years. It's been an opportunity of a lifetime and I'm honored to step into the CEO role. Gregg leaves behind an amazing legacy, which I'm excited to build upon. He set Udemy on a clear path for long term sustainable growth and his accomplishments allow me to assume the CEO role with the company already positioned as a global leader. Under Gregg's leadership, we grew revenue by nearly 180%. We accelerated the growth of Udemy Business and delivered strong net dollar retention. We built an exceptional leadership team and talented global workforce. And we successfully took the company public in 2021.

I think we can all agree that Gregg truly earned this retirement. Thank you for your service, mentorship and guidance, Gregg. We wish you all the very best. As a final point on the transition, we're fortunate to have a strong leader like Stephanie Stapleton Sudbury to take the reins as President of Udemy's business. Stephanie was identified long ago as my successor and during her time leading our customer success team, she helped shape Udemy's business' product, customer and go to market strategy. She had solid relationships with our largest customers and is directly responsible for consistently driving our best in class retention and understands our customers' needs better than anyone. I'm extremely confident in Stephanie's ability to take Udemy's business to the next level.

Now I wanted to take a moment to touch on some of the trends we're seeing in our business and set the stage for 2023. The Udemy Business segment continues to be our main growth engine and our pipeline for new business is strong. We are encouraged by the continued strength of that business, which is supported by an accelerating shift from offline to online skills development. Companies everywhere are looking for more efficient and timely ways to reskill and upskill their employees. Udemy provides a solution that enables customers to stay ahead of the pace of change driven by advancements in technology, while also investing in retaining their best talent and increasing productivity. To illustrate this point, a recent study conducted by IDC confirmed that Udemy Business customers experienced meaningful business gains while also realizing platform costs and hiring efficiencies.

Study participants reported a nearly 5 times increase in upskilled employees, approximately 30% higher productivity and significant hiring and recruiting cost savings. In this environment, we are also benefiting from vendor consolidation that is happening as companies tighten their budgets. Udemy offers the most comprehensive learning solution, allowing customers to reduce their vendor load and costs. Our broad, high quality and fresh content is a distinct competitive advantage. As you've heard from us before, our solution also drives higher learning engagement. This improves stickiness as our customers frequently use employee adoption and engagement as key metrics to validate their training and education budgets. To that point, we recently closed a multiyear deal with Capgemini, a global technology services company.

Capgemini chose Udemy Business as its learning content partner, primarily to support the launch of their new Capgemini engineering and industry academy. Udemy was selected for the breadth and depth of our content collection and the flexibility with which we can meet their content needs for cutting edge business and technical skills. Our speed to market and agility due to the marketplace model were the key reasons we were chosen. The partnership and services we offer and our strategic customer success approach were also influential in establishing this scaled enterprise contract and ensuring the successful rollout of Udemy Business at Capgemini. We continue to see a trend of longer contract lengths materializing, particularly with our larger customers.

In fact, Quarterly revenue from multiyear deals increased 129% year-over-year and now accounts for over 42% of Udemy Business revenue. That being said, we're not immune to the macroeconomic impacts. We did experience some elongated sales cycles as customers are taking more time to closely assess their vendor options and to make budgetary decisions. We first saw this from our smaller customers in Q3. But by the second half of Q4, we started to see the same trend emerge with larger customers. We expect customers to continue to leverage Udemy just at a slower pace over the near term. On the consumer side of the business, we continue to track instructors to our platform who are producing a massive amount of high quality, fresh content to our marketplace, the best of which is curated into our Udemy Business catalog.

More than 80% of our total revenue comes from courses that are accessible on both our marketplace and the Udemy Business catalog. That means the majority of our revenue comes from exclusive content. We now have more than 200,000 courses available on our marketplace with more than 4,700 new courses added on average each month. The speed in which new content is created for our marketplace provides us with a competitive advantage over others in our space that use a traditional published remodel. A great example of this is that we now have more than 150 courses available on ChatGPT, which just launched two months ago and has become the fastest growing service term on both Udemy Business and our marketplace. Of those courses, nearly 20% are non-English and 11 have been approved and added to the Udemy Business catalog thus far.

To date, we've only seen one course published by our competitors. Before I turn the call over to Sarah, I wanted to set the stage for 2023 by sharing our strategic priorities for the year. Although it maybe a challenging year, there are many trends that we expect will be favorable for Udemy, including the continued shift from offline to online, increasing digital transformation, greater work from home flexibility and renewed investment and continuous skill development for workforces. With all that in mind, Udemy's 2023 strategic priorities include: one, establishing Udemy as the platform of choice for professional learns and increasing skill development through new learning modalities. We plan to continue partnering with our instructors to launch more immersive and hands on learning experiences.

We will also leverage AI to create more engaging, personalized learning experiences and help instructors maximize the value and quality of their content on the platform. Two, introducing validation of skills acquisition through badging and professional certification. To support Udemy learners in advancing their careers and to help companies assess existing talent, we are partnering with major technology companies to develop professional badges and certifications as an official endorsement that a learner has demonstrated acquisition of the required skills. Three, accelerating global scale of the business outside of the United States. We plan to continue investing in strategic partnerships that either extend our marketing reach or the capabilities and reach of our global sales go to market.

Through relationships with key brands and local market leaders that have reach and scale, we expect to continue driving awareness and adoption of our offerings. Four, increasing company wide operational efficiency and progressing toward profitability. We will continue to prioritize efficient investments in our highest growth opportunities as we accelerate our path to becoming a profitable company. We plan to deliver a profitable second half of 2023 and full year 2024 on an adjusted EBITDA basis. As you can see, it's going to be a busy year for Udemy and I'm optimistic about the future of this company. The opportunity available to us is massive, well beyond 2023. I look forward to leading the company as its new CEO and I'm committed to delivering long term sustainable growth and building shareholder value over time.

Now I'll turn the call over to Sarah for a financial review and outlook.

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Sarah Blanchard: Thank you, Greg. We had a solid quarter and ended the year considering the current macro backdrop. Total fourth quarter revenue increased 22% year-over-year to $165 million and for the full year, revenue increased 22% to $629 million, both of which were within our guidance range, including the negative impact of FX. Since nearly 60% of our revenue is from outside of the US, the year-over-year increase in total revenue includes a negative impact of 4 percentage points from changes in FX rates in both Q4 and the full year. We also exceeded the high end of our Q4 and full year 2022 adjusted EBITDA margin guidance ranges as we continue to focus on operational efficiencies and driving towards profitability. Q4 revenue growth was driven by the strength of Udemy Business.

The segment accounted for 50% of total full year revenue for the first time, well ahead of the goal we set at the time of our IPO. That being said, we did experience some elongating sales cycles, pushing some deals into Q1. At the same time, the consumer marketplace remains healthy. Although segment revenue was down year-over-year in Q4, driven by the negative impact of FX, Udemy's marketplace continues to produce a steady source of organic leads and serves as a powerful content creation engine that provides fresh, high quality courses that ultimately feed the Udemy's business content library. As we move down the P&L, note that all financial metrics are non-GAAP unless stated otherwise. I will keep my remarks focused on the fourth quarter results.

Our news release, which can be found in our Investor Relations Web site, includes the financial tables with results for the three and 12 month periods ended December 31, 2022. Q4 gross profit was $94 million, up 29% year-over-year. Gross margin was 57%, a 320 basis point improvement from Q4 of 2021, driven by the continued revenue mix shift to Udemy Business since content cost as a percent of revenue are lower for that segment. Total operating expense was $119 million or 72% of revenue compared to 75% in Q4 of last year as we continue to focus on driving company wide operational efficiency. Within OpEx, sales and marketing expenses were 47% of total revenue compared to 50% for the same quarter last year. We typically experienced some seasonality during the fourth quarter when we ramp up our marketing investments around Black Friday.

Due to the current macroeconomic environment, we reduced spend on consumer marketing this year in order to maintain a reasonable ROI and also shifted the balance of spend toward Udemy Business where we see greater long term growth potential. R&D expense was 14% of revenue compared to 12% in Q4 2021. We are investing in areas that we believe support learner outcomes and increase ROI such as immersive learning modalities, business skills, AI and machine learning. And finally, G&A expense was 11% of revenue versus 13% a year ago. On the bottom line, net loss in the quarter was $23 million or negative 14% of revenue. Adjusted EBITDA loss was $20 million or negative 12% of revenue, well ahead of our guidance range of negative 17% to negative 15%, driven by our continued focus on efficient expense management.

Moving on to key cash flow and balance sheet items. We ended the year with $465 million of unrestricted cash, cash equivalents and marketable securities. Increasing DSO changes in working capital timing and a onetime payment to settle our instructor withholding tax reserve resulted in a negative $34 million in free cash flow for Q4. Now turning to our results by segment, starting with our Enterprise segment or Udemy Business. We grew Q4 revenue to $91 million or an increase of 57% year-over-year, which includes a negative 4 percentage point impact from changes in FX rates. Segment gross profit for the quarter was $60 million or 67% of segment revenue, roughly flat year-over-year. Annual recurring revenue was $372 million at the end of Q4, up 55% year-over-year.

We saw a bit of a deceleration in ARR growth, primarily due to the reasons Greg outlined earlier but ended the quarter with nearly 14,000 Udemy's business customers, up 32% from a year ago. We continue to see strong adoption and retention across all geographies, particularly with larger companies, but that is being somewhat offset by softness in smaller businesses and elongating sales cycles. In many cases, we are landing with meaningfully higher deal sizes and contract lengths and continue to gain traction with our newer products, Udemy Business Pro and cohort learning. Those trends impacted our customer retention, resulting in Q4 Udemy's business net dollar retention rate of 115%, or a 200 basis point decrease from the prior quarter. However, net dollar retention for our Udemy's business large customers or those with at least 1,000 employees was 123%, which was flat with the prior quarter.

Not only are we seeing solid retention of our existing customers but those larger customers are looking for the most efficient solutions to partner with to achieve their long term company wide learning and development goals, which is driving an increase in seat expansion and contract lengths. Turning to our Consumer segment. Although Q4 revenue was $75 million or down 4% year-over-year, that includes a negative 5 percentage point impact from FX. Taking the FX impact into consideration, it is encouraging to see the continued resilience of our marketplace even in this challenging environment. Segment gross profit was $37 million or 50% of segment revenue, approximately 240 basis points higher than in Q4 2021. The year-over-year expansion in Consumer segment gross margin was primarily driven by the timing of revenue recognition relative to instructor payments.

Our marketplace continues to be vibrant and healthy. During Q4, our platform saw nearly 35 million monthly average unique global visitors, up 6% year-over-year and more than 1.3 million monthly average buyers purchased a course of subscription, down approximately 2% year-over-year on meaningfully lower consumer marketing spend. Now I'd like to introduce our outlook for the next quarter and full year 2023. We are cautiously optimistic about 2023 as we balance the momentum we are seeing in our main growth engine with the macro uncertainty. Many of the positive trends that we experienced at the end of 2022 are expected to continue this year, including a shift from offline to online learning and vendor consolidation. We believe that growth maybe somewhat offset, especially in the near term by smaller corporations reducing their learning and development budgets and companies in all geographies closely evaluating vendors, which may translate into sales cycle elongation across the board.

We also expect our Consumer segment revenue to decrease slightly year-over-year due to the FX impact and shifting our spend to the Udemy Business growth engine. For modeling purposes, while we do not plan to provide segment guidance going forward, we wanted to share some high level insight on our anticipated Udemy Business and consumer segment quarterly patterns with our outlook, so you can better understand how we're thinking about the respective businesses. With all that in mind, we expect Q1 revenue to be between $168 million and $172 million, with Udemy's business segment revenue as a percentage of total revenue remaining relatively flat with the prior quarter due to our Q4 2022 consumer promotion cycle and revenue recognition. Assuming foreign currency exchange rates remain constant, FX is expected to negatively impact Q1 year-over-year total revenue growth by approximately 6 percentage points.

For Udemy Business, while we expect Q1 year-over-year growth to moderate as compared to Q4, we believe a year-over-year growth rate in the mid 40s is achievable. For the rest of the year, while Udemy Business' growth may slow a bit, we believe that we can sustain mid 30s year-over-year growth each quarter, including the negative effect of FX and continued macroeconomic pressure. By year end, we anticipate Udemy Business revenue will grow to approximately 60% of total revenue. Turning to Consumer. We expect segment revenue to be up slightly in Q1 compared to Q4. However, we anticipate consumer revenue to be down low double digits year-over-year on a percentage basis in Q1, including the impact of FX. Similar to last year, we expect consumer revenue to be down sequentially in Q2 as a result of our most significant promotions occurring around year end, which benefits Q1 due to the timing of revenue recognition.

We expect growth rates to improve in the back half of the year due in part to the easing of the impact from FX headwinds. Taking all of that into consideration, for the full year 2023, we expect revenue to be between $700 million and $730 million or 14% year-over-year growth at the midpoint, including an estimated 3 percentage point negative impact from FX. And finally, for adjusted EBITDA margin, excluding severance costs, we expect Q1 margin of negative 10% to negative 8%. We expect to deliver adjusted EBITDA margin expansion each quarter on a sequential basis, with the most significant increase from Q1 to Q2, driven by the cost savings associated with the reduction in workforce. As I mentioned earlier, we expect to be profitable on an adjusted EBITDA basis for the second half of the year, with Q3 expected to be near breakeven and Q4 to be positive.

As a result, we expect full year 2023 margin to be between negative 4% and negative 2%. At the midpoint, this implies nearly 500 basis point adjusted EBITDA margin expansion for the full year. Importantly, we remain confident in our ability to deliver full year profitability on an adjusted EBITDA basis in 2024. As Greg said at the outset, we are cautiously optimistic about 2023 and the opportunity ahead. The trends we are seeing today, particularly in our Udemy Business segments, are very encouraging for the long term. We will continue to make strategic investments in areas of the business that represent the greatest long term growth opportunities while committing to continued cost discipline in order to deliver a profitable second half of the year.

And with that, we'll open up the call for your questions. Moderator?

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