Good day. Welcome to the Udemy second quarter 2023 earnings conference call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on a touch-tone phone. To withdraw your question, please press star, then two. Please note, this event is being recorded. I would now like to turn the conference over to Dennis Walsh, Vice President, Investor Relations. Please go ahead. Thank you, and welcome to Udemy's Q2 2023 earnings conference call. Joining me today are Udemy's Chief Executive Officer, Greg Brown, and Chief Financial Officer, Sarah Blanchard. During this conference call, we will make forward-looking statements within the meaning of federal securities laws. These statements involve assumptions and are subject to known and unknown risks and uncertainties that could cause actual results to differ materially from those discussed or anticipated. For a complete discussion of risks associated with these forward-looking statements, we encourage you to refer to our most recent Form 10-K and Form 10-Q filings with the Securities and Exchange Commission. Our forward-looking statements are based upon information currently available to us. We caution you to not place undue reliance on forward-looking statements, and we do not undertake and expressly disclaim any duty or obligation to update or alter our forward-looking statements, except as required by applicable law. In addition, during this call, certain financial performance measures may be discussed that differ from comparable measures contained in our financial statements prepared in accordance with U.S. generally accepted accounting principles, referred to by the Securities and Exchange Commission as non-GAAP financial measures. We believe that these non-GAAP financial measures assist management and investors in evaluating our performance in comparing period-to-period results of operations in a more meaningful and consistent manner, as discussed in greater detail in the supplemental, supplemental schedules to our earnings release. A reconciliation of these non-GAAP measures to the most comparable GAAP financial measures is included in our earnings press release. These reconciliations, together with additional supplemental information, are available on the investor relations section of our website. A replay of today's call will also be posted on the website. With that, I will now turn the call over to Greg. Thank you, Dennis, and good afternoon to everyone on the call. Udemy delivered strong second quarter results. Revenue came in at more than $178 million, for a 16% year-over-year increase, and exceeded the high end of our guidance range. That growth was driven by a 36% year-over-year increase in Udemy Business revenue. On the bottom line, we delivered our first quarter of positive adjusted EBITDA as a public company, thanks to our continued focus on operational efficiencies and prudent expense management. We are proud of our team for their commitment and continued execution against our strategic initiatives, particularly as we navigate this unpredictable macroeconomic environment. While the current backdrop presents some near-term challenges, Udemy is well positioned to capitalize on meaningful long-term tailwinds for our business that are shaping the future of work. First, there is a profound transformation happening right now that impacts every industry, the rise of the skills-based organization. Second is the continued interest and application of generative AI across customers of all sizes. I'd like to take a few moments today to provide color on those trends. In conversations with enterprise customers across all industries and regions, the number one theme we hear from CEOs is that ensuring their workforce has the skills required to achieve their strategic objectives is a top priority. This represents a massive opportunity for Udemy to provide the necessary reskilling and upskilling that companies around the world will require for their workforce, and that individuals need to stand out in the hyper-competitive job market. In addition, the accelerating pace of innovation means that organizations require support to establish learning strategies and objectives for their teams, and also a way to measure and validate skills acquisition. While degrees will always have relevance, they do not validate the practical skills the individual has mastered, which can lead to qualified internal and external talent being overlooked. For this reason, forward-thinking organizations are shifting to a more skills-based approach. By focusing on skills, not just degrees, companies can vastly expand and diversify their talent pool to fill open roles, as well as drive increased internal mobility by reskilling and upskilling existing talent. As companies shift from offline to online to reskill and upskill their workforce, they realize it is a more efficient and cost-effective solution that drives high ROI, boosts morale, and provides significant cost savings. To give you a sense of the size of the potential savings, a recent study found that the average per-employee spend on L&D by employers worldwide was approximately $1,300 per head in 2021. The cost for one Udemy Business license starts at just $360 per year. As you can imagine, the cost savings for a global enterprise are meaningful. When companies embrace a culture of continuous learning, they future-proof their workforce. Demand for technical skills has never been higher, with nearly 90% of companies reporting skills gaps within their organization, and many executives believing that finding talent with specialized skills is a major challenge. L&D leaders must understand the skill level of their workforce, particularly within technology-focused areas. Yet, one of their top concerns is that they do not have a reliable strategy for measuring the success of their learning programs. To help customers address this need, Udemy has introduced badging as a part of its Integrated Skills Framework, a comprehensive skill-building approach for organizations. The framework will enable customers to keep pace with innovation through a series of exciting new offerings. Working with Udemy, organizations will be provided with a seamless way to quickly assess their current skills landscape and identify critical skills gaps. In addition, it provides employees with an effective way to acquire and demonstrate skill mastery through the acquisition of leading certifications and badges. At the core of our badging program is Udemy's Certification Prep Center. We have made it simple to discover curated learning paths, including labs and assessments, to help professionals prepare for certification, exams, and badges. This will enable learners to validate mastery of in-demand skills such as AWS, Azure, CompTIA, and more. As of today, our catalog includes certification preparation for nearly 200 highly sought-after and reputable badges across more than 160 certification topics and nearly 30 subject areas. The other meaningful tailwind is the evolution of generative AI and its ability to accelerate change across all industries and geographies. Professional learners recognize the importance of understanding how generative AI will impact their role, and how they can leverage these technologies to be more effective or to land their next job. On the enterprise side of our business, customers across all industries are asking Udemy to help them develop AI and digital transformation strategies to become more agile, durable, and competitive. The level of engagement on our platform related to this topic is unprecedented. In the seven months since ChatGPT was launched, Udemy has seen more than 1.4 million enrollments in the more than 1,000 courses on the topic on our platform. Taking that a step further, the number of minutes consumed for ChatGPT-related content during Q2 increased nearly 300% from the prior quarter. This is a clear indication that people recognize the importance of understanding this technology and are discovering that they can receive high-quality skills training via Udemy. During the past few months, we've continued to invest in further integrating generative AI throughout our platform. We are committed to delivering products and features that support instructors with content generation, deliver more personalized learning experiences, and help organizations identify and address skills gaps. On our last call, we shared plans to roll out new smart search capabilities, which is one of the several enhancements that leverage the power of generative AI to provide learners with more personalized, bite-sized learning experiences. Subsequent enhancements will include skills-based guidance that automatically recommends Udemy learning paths based on defined objectives, including badge, acquisition, and certification. In addition, we've begun to incorporate generative AI into our reports for our corporate learning solution, Leadership Academy, to provide admins with increased visibility into learning outcomes. We have also introduced further automation into the generation of these reports to speed up time to value and ensure leaders can access the right data as soon as they need it. Our investments in generative AI are expected to provide meaningful tailwinds for learner demand, enhance personalized learning, deepen our customer relationships, and further accelerate the pace at which we can add new, relevant, and immersive content. You can expect to hear more updates over time on how we are leveraging this exciting technology. As you can see, we believe that these trends, the rise of skills-based organizations and generative AI, will continue to increase in importance and are expected to present significant opportunities for our business. As companies embrace a culture of continuous learning with the goal of future-proofing their workforce, we believe demand for Udemy will continue to grow. Before I turn the call over to Sarah, I'd like to highlight that we've significantly strengthened Udemy's board and leadership team with three seasoned professionals who will further develop our strategic vision and help scale our business globally. First, we welcome Sohaib Abbasi as independent board chairman. Sohaib brings more than 30 years of deep enterprise software and strategic leadership experience, including more than 10 years serving as CEO of Informatica. We also recently bolstered our executive leadership team with two newly created positions. First, we appointed our Chief Marketing Officer, Genefa Murphy, who brings extensive experience leading marketing initiatives for fast-growing software and technology companies. Second, we added a Chief Product Officer, Prasad Raje, who brings a wealth of enterprise SaaS product experience to Udemy. I'm very proud of the world-class executive leadership team that we have built as we heighten our focus on driving results at every level of the organization. We look forward to Sohaib, Genefa, and Prasad's contributions as we take Udemy to the next level and continue to lead the transformation to a skills-based economy. Now, I'll turn the call over to Sarah for a financial review. Thank you, Greg. I'll focus my comments on the key financial highlights and then provide our outlook for Q3 and full year 2023. You can find the complete set of financial tables in our news release, which is available on our investor relations website. As Greg mentioned at the outset, we delivered solid Q2 results. Revenue increased 16% year-over-year to $178 million, and exceeded the high end of our guidance range by $4 million. The year-over-year growth included a negative impact from foreign exchange or FX of 3 percentage points. Our enterprise segment, or Udemy Business, drove our total revenue growth, delivering revenue of $102 million, or an increase of 36% year-over-year. Included in that growth was a 3 percentage point headwind from changes in FX rates. This is a major milestone for Udemy, as it was our first quarter delivering more than $100 million in Udemy Business revenue. We ended the quarter with annual recurring revenue, or ARR, of $420 million, up 33% from a year ago. Our consolidated net dollar retention rate for Q2 was 108%. The rate was 115% for large customers, or those with 1,000 or more employees. Gross dollar retention remained stable, large customer churn was minimal, and growth in multi-year contracts continued during the quarter. This is a testament to the strength of our customer relationships, driven by the clear value and impact that Udemy provides to help them achieve their strategic outcomes. However, we do expect some pressure to continue on net dollar retention as some companies remain hesitant to move forward with expansions and upsells during this unpredictable macroeconomic environment. The strong Udemy Business growth was slightly offset by a 2% year-over-year decline in consumer segment revenue, which included a - 3 percentage point impact from FX. We continue to be encouraged by the vibrancy of our marketplace, which fuels the powerful flywheel effect that has the ability to increase customer engagement and reduce acquisition costs over time. Traffic was up 8% year-over-year during Q2 to 34 million unique visitors, despite spending significantly less on performance marketing than we did a year ago. More than 80% of learners enroll in courses to develop professional skills, which creates a healthy funnel of leads for Udemy Business. Also, attracting instructors organically to create courses continues to be a strength. As a result, we saw an 11% year-over-year increase in courses in the Udemy catalog, with nearly 5,000 new courses added each month. As we move down the PNL, note that all financial metrics are non-GAAP unless stated otherwise. Q2 gross margin was 59%, a 100 basis point improvement from Q2 2022, driven by the continued revenue mix shift to Udemy Business, since content costs as a percent of revenue are lower for that segment. Udemy Business accounted for 57% of total revenue in Q2, which represents a meaningful mix shift from 49% a year ago. With nearly 15,000 Udemy Business customers and growing, this mix shift is expected to continue toward our long-term target of approximately 75% of revenue. Total operating expense was $108 million, or 61% of revenue, and 500 basis points lower than Q2 of last year. Sales and marketing expense represented 39% of revenue, down 200 basis points year-over-year. R&D expense was 13%, or flat compared with the same period last year, and G&A expense was 9%, down 300 basis points compared with last year. On the bottom line, net loss in the quarter was approximately $1 million, or -1% of revenue. Adjusted EBITDA was approximately $2 million, or +1% of revenue, which represents a 700 basis point expansion year-over-year and 400 basis points better than our high end of the guidance range. This was another major milestone for Udemy, as it was our first time showing positive adjusted EBITDA since our IPO. The better-than-expected adjusted EBITDA result was primarily driven by revenue outperformance and our disciplined approach to driving operational efficiency throughout the organization. We continue to maintain financial flexibility that allows us to make opportunistic investments that can accelerate or enhance our strategy and returns. Moving on to key cash flow and balance sheet items. We ended the quarter with $469 million of unrestricted cash, cash equivalents, restricted cash, and marketable securities. Free cash flow for the quarter was positive $10 million due to improved collections, timing, and lower expenses. Turning to our outlook for Q3 and full year 2023. During the second quarter, we did not see any signs that the macro environment is improving. Within Udemy Business, we are seeing further sales cycle elongation and additional layers for deal approvals. We are also seeing smaller deal sizes as companies optimize their budgets during this time of uncertainty. As we continue to adapt and manage the business through this unpredictable macroeconomic environment, there are challenges that ultimately may impact our results in the near term. With that in mind, we expect Q3 revenue to be between $176 million and $180 million. Assuming foreign currency exchange rates remain constant, FX is expected to negatively impact Q3 year-over-year total revenue growth by approximately 2 percentage points. Due to the continued macro-related dynamics I just mentioned, we now expect Udemy Business growth in the near term to be pressured more than we had originally anticipated. As a result, we currently believe a 2023 Udemy Business year-over-year revenue growth rate in the low 30s is achievable, versus our previous view of mid-30s. On the bottom line, we anticipate Q3 adjusted EBITDA margin of -0.5% to +1.5%. Looking ahead, we are on track to deliver a profitable second half of the year. Now expect Q3 adjusted EBITDA to come in stronger than Q4, due to the better-than-expected consumer performance in the second quarter and resulting Q3 revenue recognition. For the full year, we are narrowing our range on revenue to be between $712 million and $720 million, which still anticipates 16% year-over-year growth at the midpoint. That growth includes an estimated 3 percentage point negative impact from FX, assuming no further changes in rates. For full year 2023 adjusted EBITDA margin, we currently expect between -1% to breakeven, or a 750 basis point expansion at the midpoint compared to 2022. Looking ahead, while we do not plan to provide formal 2024 guidance until our Q4 2023 earnings call, we'd like to provide color on how we are thinking about the business heading into next year. As a reminder, at our November 2022 Investor Day, we shared that we thought we would be able to drive 23%-25% total revenue growth in 2024. Due to the deterioration of the macro environment since that time, we now believe our total 2024 revenue growth will be lower than the range we had provided. That said, for full year 2024, we continue to believe Udemy Business will represent more than 60% of total revenue. Non-GAAP gross margins will be 58%-59%, and we absolutely remain committed to delivering positive adjusted EBITDA for the full year of 2024. It is important to note that while we are adapting in real time and navigating some short-term obstacles, we feel confident that the long-term opportunity available to Udemy is as strong as ever. In closing, Udemy delivered a solid performance in an uncertain environment. Our results illustrate the agility in our business model. We beat expectations on both top and bottom line, delivered more than $100 million in Udemy Business revenue, and reported our first quarter of positive adjusted EBITDA as a public company, ahead of plan. The foundation we are laying today is expected to yield sustainable recurring revenue growth and generate attractive profit and cash flows over time. We look forward to continuing to deliver value to all of our stakeholders and updating everyone on our progress. With that, we'll open up the call for your questions. Moderator? We will now begin the question-and-answer session. To ask a question, you may press star, then one on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then two. At this time, we will pause momentarily to assemble our roster. The first question today comes from Ryan MacDonald with Needham. Please go ahead. Hi, thanks for taking my question, and congrats on a nice quarter. Maybe just starting on, the, the guidance you just provided, especially as we think about fiscal 2024. As you think about, what type of investments might need to be made to reinvigorate the growth rate in UB going into next year, how do you factor that in, I guess, around the targets for still being adjusted EBITDA breakeven, into next year? Do you, do you feel like the, the run rate of where you're investing there right now is, is enough to sort of help drive that growth, as the market recovers? Or do you feel like new investments will be required? Hi, Ryan. Thanks for the question. You know, as you can see, like, like many companies, we are currently adapting to a very dynamic environment. That being said, we feel good about the investments that we've made to date in our go-to-market team and also in our product. We're committed to delivering an EBITDA positive full 2024, and that takes into consideration a range of outcomes based on what the macro does and the investment that we would need to make from a go-to-market perspective in order to achieve those outcomes. All right. That's really- I'll just add, Ryan. I'll add, Ryan. I'll just add, Ryan, real quick, that as soon as we see the macroeconomic environment improving and the impact on our sales cycle elongation coming back to more normal cycle times, we absolutely are going to lean in and start investing in go-to-market growth. You know, as soon as that happens, we will trigger that. You know, as you just alluded to, whether it be the back half of this year or next year, we're not sure when that's gonna happen, but when it does, we will absolutely move. Super helpful color. Greg, maybe just to follow up with you. You know, appreciate the comments about sort of this evolving environment within the enterprise around a shift towards skills-based learning. I'm curious what you think the impact or what the impact will be in terms of how enterprise organizations choose to allocate spend in that environment. Do you think that this shift to skills-based learning accelerates the consolidation trend or creates sort of a new, maybe funding environment or sort of reinvigorates the funding environment around L&D spending for this skills-based learning? It's a good question, Ryan, and we're already seeing that play out now. I'll give you a couple examples. Unilever, Greg, you're set up to let us talk about it. A significant expansion with Unilever this past quarter, driven by their intent to reskill and upskill their entire workforce to, quote, unquote, "future fit," their organization with the skills necessary for them to achieve their organizational objectives. They want to get this done by 2025. In addition to that, they've selected us to support their digital university program, which they've just launched this past year, in accordance with their focus around skills development.... So this is real. It's happening in real time, and we're seeing examples of this and wins, you know, reflected in the commitment organizations have in shifting from, you know, long-form learning and degrees to skills that can be applied now to get work done. In fact, interestingly enough, as we're preparing for the call, the White House this week came out with a report on a national cyber workforce and education strategy, and I'm just going to read a couple lines that are relevant here. "A skills-based approach is critical to connect more Americans to good careers. They should compete for jobs based on what they can do rather than merely credentials." We're seeing it pretty much in from all vectors, federal government, we're seeing it from customers, we're hearing it from employees. So this is a massive secular shift that we're seeing, that we're on the front end of, that is not only going to drive the play to our favor, and it's going to drive organizations to us based on, you know, our marketplace and our unique position that we have to keep up with the pace of change and aid them in developing the skills necessary for them to stay up with, the, you know, technological advancements that are coming at us in real time. We obviously know what's going on with generative AI, and, and we saw a couple key wins, just to add briefly, just to add a couple key wins this last quarter from large multinational enterprises that told us they selected us because of the breadth and depth in our marketplace, around AI. These organizations are focused on upping the digital literacy, across their organizations, but specific to AI, and they made investments in our platform and us as a long-term strategic partner, as a result. It's playing out right now, Ryan, and we're on the front end of a big trend. Thanks for taking the time, I'll hop back in the queue. The next question comes from Terry Tillman with Truist. Please go ahead. Great. Good afternoon, Dan. This is Connor Passarella on for Terry. First question, maybe a little bit more high level, just on the recent executive hires, Chief Product Officer, Chief Marketing Officer. I guess, how do you see the evolution of the platform from a product and messaging standpoint, evolving as you continue to position yourselves to take a skills-based platform approach to learning with these executives? Yeah, it's a good question. Thank you for it. Without question, that is the case. You know, we saw an opportunity as we're looking forward, and projecting from our, from a strategic perspective, the capability we need to have in our business to deliver the value and impact to our customers, and that really led us to bringing on Genefa and Prasad. Prasad, to help us. You know, Prasad comes with, you know, a tremendous amount of depth, and capability around AI. The company he was just with, he rearchitected their entire platform, founded based on generative AI, in terms of the rearchitecting of that. We, without question, are bringing him in to help do the same thing here, both, in terms of how we get operational leverage and embedding AI in how we run our business, as well as how we develop product and the value that that product, is going to have externally on customers as we move forward and better understand how we can leverage AI to improve the overall learning experience. Then on the marketing side, we really have not invested historically in building Udemy into a global brand that everybody is well aware of and understands how we can help them as an individual, a team, or an organization, transform lives through learning, whether it be their life or the lives of the org-- the individuals in their organization. Genefa has got, you know, just tremendous relevant background and experience, that, you know, we couldn't be more excited to have in our business now to help carry us forward. Not only helping to build the brand, but to optimize our go-to-market motion, as we come out of this economic downturn, step on the gas, and really start scaling on a global basis. Both executives are going to have a significant impact on our ability to take the next step in our evolution of realizing our vision, to transform lives through learning. Great. That's, that's really helpful. Appreciate the color. maybe just as a quick follow-up, just wanted to touch on immersive learning and, and UPro. just, I guess, how's the adoption of UPro continue to trend this quarter? then maybe what kind of additional immersive learning capabilities are you looking to maybe layer into the platform? Thank you. Yeah, thanks for the question. Really happy with the continued adoption and growth of UPro within our global customer base, and we're really starting to see that global expansion happen with respect to UPro. You know, this last quarter, talking about global nature, you know, large Latin American bank came inbound and had a bake off, you know, which is usual competitive bake off. Selected us for two primary reasons: the immersive learning capability that we provide with UPro and the badging capability that we're launching, that we've already launched the first phase of, and we're, you know, phase two is in flight. You know, their focus, you know, at that point in time, was consolidation. They want to consolidate to one platform that they believe was going to be the right platform and company to help lead them forward in their digital transformation, and they selected us to do that. Their quote to us was: You've saved us months of work by being able to consolidate onto one platform and do all of the work with one partner that we were doing with multiple. You know, really excited about the impact that UPro is having and expect that to continue. What was the second part of the question? I lost that. Yeah, no, just, any, any additional immersive learning capabilities you may be looking at as well, inside of UPro or just in general? It's a good question. Yes, we are looking at other immersive learning capabilities and modalities that we believe could be an extension of, on- into and of our platform. Nothing to speak of to date in terms of new modalities that we're layering in, into the platform, but, you know, we are exploring a number of different options, and for us, it's build, partner, buy. You know, as, as we've talked about on prior calls, you know, we do have an opportunity here, sitting in a, you know, a, a good position, to acquire capabilities that would potentially enable us to extend the modalities on our platform. That's something that, you know, that, you know, we'll talk about, when, when the appropriate time comes. Got it. Thanks, Greg. The next question comes from Brett Knoblauch with Cantor Fitzgerald. Please go ahead. Hi, guys. Thanks for taking my question. I guess, you know, we're seeing kind of GDP growth accelerate in the U.S., you know, at least hold up a lot better than we all anticipated. You know, I guess it's not, you know, really accelerating. You find out what seems like every company making AI their number one priority. I guess, like, what specifically in macro is leading to the weakness? Is it just like L&D not being as mission-critical as we thought, you know, it was going to be in a post-pandemic world? It seems like you guys are very well positioned to, you know, capture this unique moment in time where AI is just beginning to kind of reverberate through, you know, enterprises, and they need skills for that. It's like there should be more, I feel like, of a, a tailwind for you guys. I know you talked about demand on the platform in minutes for, you know, ChatGPT and AI, but I guess, how is that not translating into, you know, more kind of enterprise demand? Hey, Brett, thanks for the question. We actually are seeing it translate into enterprise demand. You know, we had a couple large wins, one in particular with a European engineering and technology firm that purchased our platform, if you will, or selected us as their partner for specifically for upskilling across the organization, but embedding AI as a critical component of that buying decision based on the breadth and depth of the AI content that we have on platform. There were a number of those. You know, we are seeing it impacting our ability to win in the enterprise. Now let me just take a step back and, and talk a little bit about, you know, what's going on in the business that I, I believe will help answer this question. The top funnel for us, is extremely encouraging, right, in terms of, you know, pipe generation, lead generation into the top of the funnel. What we are seeing is some sales cycle elongation that we alluded to, you know, just a few minutes ago. That's a macro, you know, circumstance, if you will, that we know is short term, but it's impacting, you know, our, our ability to move deals through the pipeline and get those deals closed. It is a timing situation. I wanna make sure that everybody clearly hears that from us, is that we strongly believe that this is timing based on the fact that customers continue to tell us that the importance of upskilling and reskilling has never been higher in their organizations. They're we're not seeing a material decrease in budget per head, per employee, right, and allocated to upskilling and reskilling. That may be happening with respect to broader education. We're not seeing that or hearing that with respect to upskilling and reskilling. What is happening is, you know, what CFOs around the world have been doing, including our own, which is making sure that they're keeping a close watch on what's happening from a macro and geopolitical perspective, and being more conservative than we've seen in the past with respect to allocating spend. We know that's gonna change at some point in time. You know, we see the same indicators that everybody else is seeing, that we think this is gonna be a soft landing, and that can, that could start to have a positive impact sooner than later. Sales cycle elongation and, and timing is really the reason why we're seeing a little bit of what we're seeing on the ARR side. This, we strongly believe this is short term and that, you know, it's gonna change, you know, like you all are alluding to, as soon as the macroeconomic climate, improves, which could be sooner than later. Sure. If I could just add maybe just one more on kind of, net revenue retention. Is the decline there, can you maybe just parse that through, you know, what's coming from upsell or, you know, kind of fewer upsell or fewer expansion versus churn? Has churn kind of been what you'd expected? Has churn picked up from what you'd expected, or is that, you know, kind of sequential decline mostly related to expansion? Yeah, thanks for the question. Really what you're seeing is the same thing that we're seeing kind of across the board, which is these longer sales cycles are impacting the speed at which we're expanding and upselling. Again, the long-term opportunity, it hasn't changed. When the macro improves, we expect sales cycles to normalize and, and net dollar retention to return. Perfect. Thank you, guys. The next question comes from Noah Herman with Oppenheimer. Please go ahead. Hey, guys, Hey, guys, this is Noah Oppen- from Morgan. Just a, a quick question, with respect to the, the, the macro environment. Are, are you seeing, you know, do you see it maybe like a, a, a sequential, you know, step down in the macro environment, potential, you know, incremental pressure? Just wanna get a sense of, you know, whether or not the elongation of sales cycles, if, if that's, you know, increasing on a sequential basis and maybe just what you've kind of seen through, through July. Thanks. Yeah, I'll take that. We did see sales cycles further elongate in the second quarter, and we do expect that to continue in the back half of this year and potentially into the first half. What we expect to see is, from an ARR perspective, you know, growing at a, at a fairly similar amount quarter-over-quarter until the macro starts to come back, the sales cycles come back down, and we'll start seeing increases in productivity from our sales team. Okay, great. And then just a quick follow-up, but can you maybe just provide us an update on the international expansion as well as the partnership strategy there, and maybe just which regions you're sort of seeing the most traction with getting the business at this point? Thank you. Yeah. Yeah, thanks for the question. On the international expansion side, we continue to see our new ventures division operate at a very high level. Japan continues to be one of our fastest growing countries. Our partner, Benesse, there continues to perform at a very high level. From a productivity standpoint, couldn't be happier with what we're seeing there. One data point that I think is relevant is we're now in over 60% of the Nikkei 225. We're seeing further expansion into, you know, the Japanese market. We had a major event there this last quarter. We had, you know, effectively, we oversold the event in terms of the interest in what we're doing as far as upskilling and reskilling our ability to help organizations and countries. You know, again, very happy with what we're seeing there. We've taken that model, and we ported that model to Korea, Vietnam, and then China, and we're seeing very similar traction and trajectory in Korea. Vietnam and China are much earlier, so it's early days there, but Korea had a really nice quarter as well. I feel really good about, you know, the investments in Asia Pacific on that front. Additional to that, our partnership with AWS also had international impact. This last quarter, we had multiple six-figure deals close through the partnership with AWS. We also saw something that was a bit of a surprise, and, and, you know, a surprise, obviously, to the good when I explain what it is, which is we had a number of deals that, for a variety of different reasons, were stalled. Budget potentially was being reevaluated, and when we introduced the AWS partnership and explained that their retained committed budget against the AWS partnership could be allocated toward Udemy, it unlocked these deals, and one of them was a, you know, $500,000 annual contract value deal with a large financial services organization, and we saw a number of these. Couldn't be more excited about the momentum we're starting to see with Amazon, and their commitment to the partnership is equally exciting as the impact on customers and our ability to extend reach around the world. You know, this is just one example of. We're seeing, you know, meaningful, meaningful traction in both areas and Latin America as well. You know, we, you know, we continue to see our partners in both Brazil and Mexico expand and accelerate, you know, in market, as we're fueling their growth. Internationally, feel good about what we're seeing. As a reminder, if you wish to ask a question, please press star, then one to enter the question queue. The next question comes from Stephen Sheldon with William Blair. Please go ahead. For taking my questions. First one here, wanted to dig in a little more on the badging and specifically how important it could be to enterprise customers to be able to provide skills badges to employees. Just thinking about it from an employer's perspective, you positively might get more visibility into skills within your organization, but it could also arguably make your employees that get badges more marketable if they wanted to move to another company. Just curious if that's ever a concern you hear, or does it kind of seem like providing badges and these kind of skills pathways will become broadly accepted, or accepted, if employers don't offer them, you know, could hurt their ability to re-recruit talent? Just curious what you're hearing in conversations on this front, although, I know it's really early. Yeah, Steve, thanks for the question. It is early, but I believe the short answer is, I believe the latter is how it's gonna play out, that it's gonna be more of a standard, and that if employers and organizations don't offer validation in the form of badging and certifications, you know, they're gonna be a bit of an outlier. I believe this soon is gonna be a standard in, in most organizations. You know, as we talked about, you know, we couldn't be more excited about the Integrated Skills Framework that we're bringing to market and the impact we're already starting to see it have on our ability to win deals. I just mentioned, you know, we're, we're winning business right now, as a result of the initial capability that we've launched, as well as what's to come. What's to come is, is probably as, if not more exciting than, than what we've already got out there. You know, right now, organizations, you know, have the ability, you know, with first base, to understand the skills that are being acquired, and skills benchmarks, how their organization stacks up against other organizations in a particular marketplace or vertical. What's coming is the ability to identify skills gaps within your organization and address those skills gaps with pre-built paths, right? That are gonna enable them. It's really kind of completing the, the, the circle, if you will, or the flywheel that they need to continue to, to, you know, to, to accelerate, as far as their ability to keep up with the pace of change and upskill and reskill their employees, to enable them to reach the outcomes they're trying to achieve as an organization. We've done a tremendous amount of work with our customers, our advisory councils and the like, and we have, you know, a strong, signal from our customers and everybody that we work with, that this is exactly what they need in a hyper-competitive world, not just today, but tomorrow, to, you know, be able to execute their strategy. I feel really good about the early impact, feel really good about the response from the marketplace, and I feel even better about where we're going and what's to come. Great to hear. Yeah, that's really helpful. Then as a follow-up, just, you know, I, I think you maybe talked about still seeing some good growth in multi-year contracts. You know, what do you see in terms of willingness for enterprises to sign up for multi-year contracts in this environment? Within that, kind of how do you think about balancing pricing in order to secure these multi-year deals and, and maybe the trade-off between the two? Assume you're giving up some to secure the, the, the longer commitments. Yes, demand, what are you, what are you seeing in terms of the willingness to sign up, and how do you think about balancing pricing to secure it? Yeah, I'll start, and then, Sarah, feel free to add. I feel really good about, you know, what we saw in terms of multi-year contracts, come in this last quarter. We actually saw, you know, a slight bump, right? You know, we continue to execute very well, in terms of our sales organization, you know, executing the play, if you will. That only, only happens if the customer believes that there's value, strategic value, which gives them the confidence and willingness to sign a multi-year contract. You know, I believe, again, we're executing well in market. The other thing I think that's important to note is our competitive win rate actually increased this quarter, right? As a result of, you know, a lot of what we're doing from a product perspective, as well as the adjustments we've made, to our go-to-market motion and the way that we're approaching customers, and how we can add value and impact in the environment we're operating. You know, I think from that standpoint, you know, our teams are doing a nice job of adapting and adjusting to the conditions we're operating in. Sarah, I don't know if there's anything you'd like to add. Yeah, I'll just add from a pricing perspective, you know, we have a very typical enterprise SaaS multi-year discount model, and that has not changed. Like Greg said, you know, the percent of ARR coming from multi-year deals is up quarter-over-quarter. We saw a little bit of pressure on multi-year deals in new business, still were able to sell a number of multi-year deals and, and certainly within our upsells and expansions as well. Good to hear. Thank you. Thank you. The next question comes from Josh Baer with Morgan Stanley. Please go ahead. Great, thanks for the question. Apologies if this was asked already, but was hoping you could give an update on your federal business. Also was wondering if there's an opportunity to take these new badging initiatives and initiatives around skilling into schools, like into the academic worlds, in addition to just the business world. If that's something on the radar, like schools acknowledging that there might be learning gaps in preparing their students for jobs or careers, could bring Udemy and this new, new offering to its students? Hey, Josh. Thanks for the question. I'll start with the last one first. You know, with respect to schools and the opportunity there, I very much agree that, you know, there is an opportunity for us to explore. We have not done that to date in terms of, you know, doing the diligence and, and spending the time to understand how we could, you know, 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, you know, to report on that. As far as government business, you know, we did, you know, and we continue to, to continue to invest on, in the government sector, there's no doubt. can't talk about a lot of what we're doing there, you know, we did have a significant win this last quarter with a branch of the U.S. government, that is very focused on skilling. I mean, just coming back to skilling. They've got a large contingent of folks, in the organization that are contractors, in addition to the folks that are, you know, government employed. We're doing some very interesting things there. I just can't talk a lot about it for ob- for probably obvious reasons. You know, we continue to invest in the government segment, and, you know, we continue to see, you know, steady progress there. Sarah, I don't know if there's anything you want to add. No, that sounds good. Thanks, Josh. Great. Thank you. Once again, if you would like to ask a question, please press star, then one to enter the question queue. The next question comes from Devin Au with KeyBanc Capital Markets. Please go ahead. Great, thanks for taking our questions. I have another question on, 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, you know, just given how in-demand skills are and the increasing need for learners to, you know, 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. Yeah, we do. Thanks for the question. You know, we, we are already seeing that now because there's, 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. You know, we strongly believe that our approach is the right approach, you know, to enabling organizations to understand, you know, how they need to be executing against as the skills-based economy opportunity. Yes, fully expect the adoption to be faster than what we've seen in some of our other products for those reasons. Great. No, that's, that's, 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 Q4 guidance is kind of baking in some step-up in operating expenses. Any notable expenses may be done, pushed out into Q4 or any seasonality, one-time items that we should be, you know, mindful of? Thank you. Yeah, thanks for the question. The one normal seasonality step-up that we see from an OpEx perspective is in the fourth quarter, around our biggest promotion cycle in the marketplace. It's our 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. Where previously we'd expected EBITDA to grow, we expect it to actually, on a sequential basis, decrease slightly, we will be profitable for the back half. Great. Thank you so much. Thanks for the question. This concludes our question and answer session. I would like to turn the conference back over to Greg Brown for any closing remarks. 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. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.