UDMY - NASDAQ

Good afternoon, and welcome to Udemy's First Quarter 2023 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] 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 first quarter 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. 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 and comparing period-to-period results of operations in a more meaningful and consistent manner as discussed in greater detail in the supplemental schedules to our earnings release. A reconciliation of these non-GAAP measures to the most comparable GAAP financial measure 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 to 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 started off the year strong as we beat expectations on both top and bottom line. Total revenue of 176 million was up approximately 16% year-over-year and surpassed the high-end of our guidance range by $4 million. We also demonstrated progress toward achieving profitability on an adjusted EBITDA basis. The Udemy Business segment, we saw revenue increase nearly 47% year-over-year on another solid quarter. I'm proud of our team for their dedication and for delivering such strong results, particularly in this environment. In the current backdrop, organizations increasingly recognize that they must prioritize investment in learning and development to fully optimize the most valuable resource, their talent. There are a number of reasons for this that I wanted to highlight. First, organizations need to bridge skill gaps with fewer available resources. A study from McKinsey found that nearly 90% of CEOs have identified a skill gap in their workforce. It has become a critical priority to have a strategy to bridge that gap. By building integrated company-wide learning programs, organizations can upskill and reskill their talent to better position the businesses for long-term success. Second, learning drives engagement and productivity. A study from Gallup found that the cost of disengaged employees reached nearly $8 trillion in 2021. That's a staggering amount which has accelerated in recent years. If employees don't feel engaged, they'll be less productive, making it more difficult for organizations to grow or achieve goals. Third, these investments increase employee retention, which translates into significant cost savings. There's study that shows it can cost 1.5x to 2x annual salary to replace a skilled employee. When companies invest in career development, employees are likely to be happier in their role, be more productive, and stay longer. The result is an upskilled loyal workforce that better meets the evolving needs of the business. Fourth, upskilling and reskilling employees generates a high long-term ROI. An economic downturn presents an opportunity to invest in learning programs that help companies stay competitive and agile. Some companies are taking advantage of this temporary slowdown to upskill and/or reskill employees to prepare for an eventual improvement in the macroeconomic environment. At Udemy, we provide CLOs and heads of learning with ongoing support for developing the skills necessary within their workforce to achieve desired organizational outcomes. Empowering employees with platforms, capabilities and learning content is now a strategic imperative for organizations to enable learning, growth, and development. This is essential not only to meet today's needs, but also to prepare for future needs as technology continues to evolve rapidly in an increasingly competitive environment. We hear this from existing and potential customers every day. Not only do we offer a learning platform that is fundamentally different from any other offering, but we also provide strategic support with our customer success organization to help customers establish and achieve their goals. This combination contributes to our strong win rates across all geographies and industries. During Q1, we welcomed many new value customers and expanded relationships with existing customers, including Cisco Systems, Ericsson, Procter & Gamble, and Stripe to name a few. Ultimately, we ended the quarter with nearly 14,400 global customers or a 24% year-over-year increase. Our pipeline is robust, but macroeconomic conditions continue to present short-term headwinds. Like last quarter, we experienced longer sales cycles. For the first time, we saw upsell and expansion deals elongate in all geographies and with companies of all sizes as businesses closely evaluate their spend. During Q1, we continued to make progress on our international expansion through our partnership strategy, particularly in the Asia Pacific region, where Udemy Business has gained meaningful traction in Japan, South Korea, and Vietnam. For example, Udemy expanded its influence with LG Electronics through our strategic partnership with Woongjin Thinkbig in Korea. LG chose Udemy to empower its employees because it provides their organization with the most comprehensive learning platform to upskill their global workforce and stay competitive in the category. It has become increasingly critical that companies offer an integrated approach to learning and professional skills development. Many forward-thinking companies are taking more immersive learning modalities to promote greater employee engagement and to enhance the learning experience. In fact, during Q1, we won a 7-figure vendor consolidation deal with a Fortune 100 company. The organization selected Udemy to upskill and reskill their workforce based on the breadth and quality of our content catalog and for the technical immersive learning experiences we deliver with our UPro offering. UPro provides an inverse personalized learning experience to accelerate skills development across key roles in IT, development, and data analytics. UPro enables technology professionals to achieve their learning outcomes to professional certifications more effectively through paths, assessments, workspaces, and labs. In the past year, customer adoption of UPro has increased nearly [indiscernible]. Udemy's primary focus is skill development for professional learners and organizations across the globe. Customers come to Udemy because we provide a next-generation learning platform. We offer a vibrant marketplace that fuels the growth of Udemy Business, and we measure that vibrancy in 3 ways: traffic, course creation, and instructor earnings. Traffic has held steady with approximately 34 million visitors coming to Udemy each month, even on significantly lower performance marketing spend. This provides a massive opportunity to drive engagement and increase conversion into individual course purchases, as well as personal and Udemy Business plan subscriptions, particularly as we increase our investment in generative AI and personalization. Course creation remains strong. Udemy instructors added more than 16,000 new courses to our marketplace during Q1. We also curated more than 1,900 highly rated courses into our Udemy Business catalog during the quarter. Courses related to artificial intelligence and ChatGPT are in high demand from our Udemy Business customers. Our instructors are incentivized to create content to address those demands, which contributed to the strong course creation we saw this quarter. As engagement increases on our platform, so does instructor earnings. Last year, we paid out close to $200 million to instructors. Instructors know they can build a great business on Udemy if they create compelling and in-demand content and are incentivized to update existing content often to optimize their traction with our massive global audience learnings. As you can tell, we are proud of the platform we've built and are even more bullish about the future. We're excited about the possibilities for AI to transform the learning industry, and we plan to be a leader in the category. Udemy is harnessing the power of AI to supercharge our instructors, learners and organizations to improve lives through learning. We are dedicated to providing high-quality, relevant learning that is driven by the collective talent of our instructors and our ever-evolving learning ecosystem. Our network of nearly 75,000 instructors who share their expertise through our platform are the core of Udemy. Their expert guidance remains at the heart of our content model. And now with the support of AI, they can more quickly translate their unique knowledge and instructional styles into effective learning. This year, we'll be launching in-platform tools to assist instructors with the creation of active learning experience. For example, we just released a new AI-enabled tool to assist instructors of software development courses with creating Java, Python, and C++ coding exercises. What used to take instructors an hour or more to create can now be done in just a few minutes. This is the first in a number of innovations that we'll be launching this year. In the second half of the year, we will bring AI-assisted active learning to topics beyond software development and introduce tools to help instructors create questions or assessments related to the content and their courses. There are more than 200,000 courses on Udemy, representing over 1 million hours of content on thousands of topics. Udemy content discovery has traditionally focused on pointing learners to entire courses. Recently, we introduced a new AI capability that recommend specific video lectures within a course based on their occupational goals. We were excited to see the access to bite-sized learning led to meaningful increases in engagement. In the next few months, we will roll-out new smart search capability that make it even easier for subscription learners to locate specific learning content. Learners will be able to describe their goals or ask questions in simple language, and then through smart search capability, we'll display relevant courses and specific video lecture results that most directly address what the learner wants to learn. These new capabilities will enable learners to more effectively access the breadth of information within Udemy's course catalog. As change accelerates, organizations face an enormous challenge to identify and close skill gaps in their workforce. We're helping organizations understand skill gaps within their workforce, and growing their employees effectively and strategically. Recently, we partnered with the 1EdTech consortium to bring Open Badges to the Udemy platform. Open Badges, which are used by a number of popular industry certifications, provide a transparent, industry accepted standard for representing the specific learning objectives that must be met for a learner to demonstrate proficiency in a skill. In the second half of this year, we will launch new capabilities to help learners self-assess their proficiency on skills and more easily find content to help close those gaps. These features will point learners to targeted learning content based on results of assessments that measure preparedness for leading third-party industry certificates based on Open Badges. Giving managers a view into the badging and certifications within our organization will also help customers identify the skills available within their teams and address any gaps. AI is evolving. And the way we use it to drive learning will evolve, too. As more people turn to Udemy to learn about AI, we're excited to use it to make learning more efficient, personalized and powerful than ever before. Before I turn it over to Sarah, I wanted to provide an update for my first few months in the CEO role. As I mentioned before, our long-term strategy is not changing. As we lead the transformation of the online learning category, we are taking action today on near-term priorities that we believe position us for long-term sustainable and profitable growth. For example, we are reinvigorating our internal operations and culture to drive our operating plan forward with greater speed and agility. This includes a heightened focus on accountability and results at every level in our organization as we work towards delivering exceptional performance and outcomes. Specifically, we are ensuring that all teams are equipped with well-defined, tangible objectives and goals that are fully aligned with our broader performance strategy. Next, our product team is prioritizing resources towards initiatives that will deliver the highest returns and have the most long-term value for our business. This includes launching skill validation later this year, as well as incorporating AI and deep learning throughout our platform. And finally, in order to achieve our profitability target on an adjusted EBITDA basis, while also driving top line growth, we are laser-focused on efficiently managing our cost structure and maintaining flexibility to invest in high-return opportunities. Although the macroeconomic backdrop continues to present some uncertainties in the near-term, our long-term tailwinds remain, including the shift from offline to online, renewed investments in L&D and increasing prioritization of skill development. It's still early days in this transformation of the online learning category, but I'm excited as ever about Udemy's future. Now, I'll turn it over to Sarah for our financial review.

Thank you, Greg. I'll focus on [indiscernible] and the key financial highlights and then provide our outlook for Q2 fiscal year 2023. You can find the complete stack of financial tables in our news release, which is available on our Investor Relations website. Udemy delivered Q1 results that exceeded the outlook that we provided for both revenue and adjusted EBITDA margin. Total first quarter revenue increased 16% year-over-year to $176 million, including a negative impact from foreign exchange or FX of 5 percentage points. The revenue growth was driven by our Enterprise segment, or Udemy Business, which delivered Q1 revenue of 95 million or an increase of 47% year-over-year. Included in this growth was a 3 percentage points headwind from changes in FX rates. The year-over-year growth was driven by an increase in Udemy Business customers and expansion activity, compared with the same period last year as organizations around the world continue to recognize the value of investing in their talent through integrated learning and skills development programs. This is also reflected in our annual recurring revenue, or ARR, which was $396 million at quarter end, up 42% on the year ago. We ended Q1 with a consolidated net dollar retention rate of 112%. The rate was 120% of large customers are those with 1,000 or more employees. While we did see some pressure on net dollar retention, we continue to see stable growth dollar retention overall and low churn in our large accounts. We anticipate that our net dollar retention rate will remain pressured as companies continue to navigate economic challenges and closely scrutinize every dollar spent. The strong Udemy Business growth was somewhat offset by a 7% year-over-year decline in Consumer segment revenue, which included a negative 6 percentage points impact from FX. As we move down the P&L, note that all financial metrics are non-GAAP unless stated otherwise. Q1 gross margin was 58%, a 100 basis point improvement from Q1 of 2022, driven by the continued revenue mix shift to Udemy Business since content cost as a percent of revenue are lower for that segment. Udemy Business accounted for 54% of total revenue in Q1, which represents a meaningful mix shift from 43% a year ago. Total operating expense was $130 million or 54% of revenue, 100 basis points lower than Q1 of last year. Sales and marketing expense represented 41% of revenue, which was flat year-over-year. R&D expense was 14% compared with 13% last year. And G&A expense was 9% compared with 11% of revenue a year ago. On the bottom line, net loss for this quarter was negative $8 million or negative 4.7% of revenue. Adjusted EBITDA loss was negative $6 million or negative 4% of revenue or 400 basis points better at the high end of our guidance range. This margin expansion demonstrates that our efforts to drive more efficiencies in our cost structure have been effective. We're also maintaining the flexibility to make opportunistic investments that will help to accelerate our longer-term growth goals, including AI, credentials and personalization. Moving on to key cash flow and balance sheet items. We ended the quarter with nearly 450 million of unrestricted cash, cash equivalents, restricted cash and marketable securities. Free cash flow for the quarter was negative 23 million due to increase in DSO and changes in working capital requirements. Now turning to our outlook for Q2 and full year 2023. During the first quarter, the uncertain macroeconomic environment persisted. That uncertainty resulted in longer lead sales cycle and additional layers for deal approval for many companies. We do not anticipate these trends will meaningfully change in the near term, and our guidance for the year assumes no material improvement or deterioration. With that in mind, we expect Q2 revenue to be between 172 million and 174 million. Assuming foreign currency exchange rates remain constant, FX is expected to negatively impact Q2 and year-over-year total revenue growth by approximately 4 percentage points. As we shared in our Q4 call, we expect Udemy Business segment revenue will grow at the mid-30s range year-over-year, and that Consumer segment revenue will decline sequentially for Q1. On the bottom line, we anticipate Q2 adjusted EBITDA margin of negative 5% to negative 3%. Looking further ahead, in considering the uncertain macro environment, we are cautiously optimistic about the rest of the year. Given the strong Q1 results, we're bringing up the low end of our revenue outlook. We now expect full-year revenue to be between $702 million and $730 million or 14% year-over-year growth at the midpoint. That growth includes an estimated 2 percentage points negative impact from FX, assuming no further changes in range. Our outlook assumes the healthy demand and pipeline creation continues instead of being better. Our continued cost efficiency initiatives are expected to translate into a full-year 2023 adjusted EBITDA margin between negative 3.5% and negative 1.5%, an improvement versus our previous guidance of negative 4% to negative 2%, due to the adjusted EBITDA fee in Q1. This fee also leads to the full-year margin improvement being more front-end loaded than initially expected, and so for that half adjusted EBITDA, we are now expecting modest improvement in Q3 towards breakeven and for Q4 to be slightly positive. In closing, Udemy's dedication to executing our strategic growth plan and our focus on efficient expense management in this challenging macro environment allowed us to deliver Q1 results that exceeded expectations. Udemy is well-positioned to navigate near-term headwinds and emerges a more durable business. We are excited for Udemy's next stage of growth as we continue to drive for profitability and build shareholder value. So with that, we'll open up the call for your questions. Moderator?

[Operator Instructions] Our first question is from Ryan MacDonald with Needham. Please go ahead.

Hi, thanks for taking my questions and congrats on a really nice quarter and start to the year. Maybe starting with Sarah, just given the outlook commentary and maybe a little bit for Greg as well. Just curious, as you look out through the rest of the year, obviously, cautiously optimistic, but macro environment is obviously still volatile. Maybe where do you see the most potential for variability as you look across UB versus the Consumer segment for the rest of the year?

Hey Ryan, thanks for the question. So listen, I think there's a few things. The first is the more our mix shift in revenue moves towards UB, the more visibility we have. And as you know, we're sitting on a pretty strong base of revenue from Udemy Business. So, I think there is some uncertainty just globally, especially around SMB. So, we're still seeing a lot of uncertainty in the smaller business from the macro. Enterprises continue buying, although at a slower pace. We do continue to see those elongated sales cycles. So, pipeline is strong. It's just the timing of when that comes in. On the Consumer side, as you know, we're not focused on the top line in Consumer. We're really focused on the marketplace vibrancy. So, while we're happy to see the way the Consumer business is performing, what we're really happy to see is all the new courses that were added and the concept that's coming on. So, I think, listen, we're going to continue to see macro pressure. We're feeling good about the guidance that we've put out and the work that the team is doing to deliver a strong 2023.

Ryan, let me add to that, just to add a little more color. As Sarah mentioned, our pipeline, it does remain strong. We're over 40% ahead of where we were last year with respect to our Q3 pipeline. So – and as she mentioned, we still have to convert, and the pressure on sales cycles, as you alluded to, it is going to be bumped throughout the year, but we're very encouraged by the top of the funnel feeling very, very strong and healthily. A couple of the other macro trends we talked about in prior calls are playing out in a significant way. One is consolidation. We just mentioned that we had a 7-figure consolidation with a large multinational. We're seeing a number of these across our customer base. And a couple of them I'll just highlight. One was a large financial services organization that went through a round layoffs. And subsequent to that round of layoffs, made the decision that they were going to lean into a wall-to-wall deployment with the focus on ensuring that they could bridge the skill gaps that they have as a result of the layoff, as well as ongoing pace of change, in addition to keeping engagement high across their employee base. We saw a similar one with a mid-sized software company, where they had two rounds of layoffs, and subsequently decided to go wall-to-wall and expand the relationship for similar reasons. And then we've also seen a lot of really strong momentum around our UPro product, which gives us a lot of confidence in the back half of the year that we're going to see continued expansion there. We have one of the large Fortune 100 multinational expand Udemy Pro from what was an initial deployment of 10,000 seats to 40,000 seats as a result of a validated pilot that we can significantly increase the pace by which technical certifications were being completed in the organization, which had a direct correlation to their ability to actually increase billings associated with those individuals acquiring those certifications. So, we're seeing some very strong, very positive trends amidst what is a choppy and still somewhat difficult macro environment. So, a lot of encouraging signs gives us confidence that the back half of the year is going to hold firm.

That's extremely helpful color. I appreciate that, Greg and Sarah. Maybe just given those comments, because it does sound like that the opportunity for additional expansions is pretty strong given the consolidation trend. When we look at the NDRR number at 112% and 120%, respectively, obviously, understandably coming down because of the elongations. But where would we expect that to stabilize or what are you seeing in terms of the trend line there?

Yes. So listen, we're proud of the 120% large customer net dollar retention in this environment. But as you just said, we are experiencing downward pressure, and we do expect to continue to see that. We don't give out guidance on net dollar retention. But the macro is impacting our overall booking. What we're happy to see is that the percentage of bookings that's coming from our existing customers that are upsells continues to grow, and it was the highest quarter ever in Q1. So, there's overall pressure, but we continue to expand with our customers, and that's because they really see the value of our product. Our gross dollar retention remains stable. We continue to have low churn with our larger customers, and there's a huge opportunity to expand with existing customers over time. We just think it's going to be a little harder this year and take a little longer. So, we do think there's going to be continued pressure on that. But long-term – the long-term forecast for that is good, and that's because the conversations we're having with our customers is that skilling and upskilling and partnering with someone like Udemy is it's not a benefit, it's a strategic imperative. It's how they are going to keep their employees with the – have the skills that they need to deliver and bare business outcomes.

Super helpful. Thanks again for the great color and congrats.

Thank you.

The next question is from Rob Oliver with Baird. Please go ahead.

Great, thanks. Good evening. I had two questions. Greg, one for you first, and then Sarah, I had a follow-up for you. So Greg, I'm curious, I just wanted to ask about generative AI and ChatGPT. I mean you guys were really quick, and I think your model really demonstrated its strength and its ability to, kind of get these ChatGPT courses out into the hands of your UB customers really quickly. You said 1,900 new courses from UB in the quarter. I'd just be curious, of those like what you saw in ChatGPT and how that like drove utilization. I don't – we talk to a lot of software developers, and it's their number 1 focus times 10. And then also would love to know, bigger picture, what that's doing for the land and expand and cross-sell and upsell motion because I have to believe that this could serve as a catalyst for many enterprises that might have here the [indiscernible] but on the fence. And I'll have a follow-up after. Thanks.

Rob, thanks for the question. I'll answer the last one first. Our ability to leverage our marketplace, which, as you all know, is very unique, and that enables us to keep up with the pace of change in a very different way than anybody else in the category in that our instructors are developing content, in many cases, ahead of the releases of technologies along the likes of ChatGPT and others. And it really is why you see the breadth and depth of content on, in this instance, ChatGPT, both in our marketplace, as well as in our UB catalog. And we're winning business as a result of it. I'll give you an example. A large cryptocurrency company that, as you can imagine, the pace of change in that category is as high as any other category that we serve and after they did their analysis on us via the competition made the decision that we were the right platform for them based on that specific analysis, and they were looking at ChatGPT, generative AI, and insight that was going to give them confidence that we were going to be able to continue to upskill and reskill their employees at the pace of change of their business, while also being able to impact with the amount of folks that they're hiring in that organization, the learning experience of their emerging leaders. So, they went in and invested in our Leadership Academy to continue to evolve and develop the leaders and the emerging leaders in their organization, as well as to support innovation that was going to be needed along the lines of GPT and the pace of change. So – and we've got a number of these types of examples. And I'll just say, at the macro level, if you wouldn't mind, let me comment on AI in general and how we view AI. We view AI as not only – not a threat, but we view it as a massive opportunity for our business. So, we just talked quite a bit about that. But learners come to us to acquire critical skills necessary to be successful in their careers in an ever-changing environment. And we're harnessing the power of AI to redefine the next generation of learning, and we couldn't be more excited about it. And we touched on some of those examples that I'll hit on briefly in terms of what we're doing now to have significant impact. For instructors, we're building tools and amplifying capabilities on our platform that enable them to develop content faster, more efficiently and deliver a more effective learning experience overall. And for learners, we're making that experience more personalized and engaging through AI, and we're going to be talking more about that in quarters to come. And for customers, we're providing data and insights to enable them to identify and address skill gaps that, without question, are apparent today, and they're going to be more apparent as AI continues to disrupt the many jobs and the kind of current trajectories that are currently in flux to many organizations, including ours, and we're rethinking as well. So look, we're going to build – affect instructors, learners and customers in a significant way going forward. And the coding exercise tool we highlighted, as well as smart search are just the first of many capabilities we're going to be releasing this year that are going to enable us to, again, redefine the next generation of what learning looks like in corporations.

That's really helpful. Appreciate that, Greg. And hi Sarah, just a brief one for you. Just you guys, clearly, vendor consolidation is the theme. I know you guys have been calling that out. And it appears that it's been gaining traction. You're also doing well internationally with some really large global enterprises. I think in the past, you said that kind of deal – multi-year deals have been in the 40s as a percentage of revenue. I'm just curious if you're seeing any shift there as you move in this vendor consolidation phase and towards these larger international deals, if you're seeing more on the multiyear deal side? Thanks again.

Thanks for the question, Rob. We continue to see multi-year deals increase every quarter. This quarter is no exception. And so our customers really are across the globe leaning in and really looking to us as their long-term partner to keep their employees up to date to the skills that they need.

I'll just add briefly that in addition to having the strongest quarter we've had with respect to multiyear deals from new business, we also saw an 80% increase in deals over $100,000 in value and in recurring revenue value. So again, all trending in the right direction. A lot of strength in what our sales organization is delivering with respect to strategic relationships that are adding meaningful value to the learning experience within our customers. As a result of that, customers being confident in signing long-term strategic contracts with us on a large scale.

The next question is from Terry Tillman with Truist. Please go ahead.

Hi, good afternoon Greg, Sarah, and Dennis. Nice job on the results. And also, I think the investor engagement series is great. In fact, I think one of the ones you all talked about are that – you all had presented, it talked about the importance of L&D budgets, and then they popped in the press release today in terms of an important new customer expansion deals. So I like that series and looking forward to hearing more on that. Also, Greg, as I just go through my clumsy preamble, we've got good soundbites now for the e-mails we seemingly get every half hour on AI and how it's going to impact businesses such as yourself. So thanks for the, like, real-life data points to the contrary. Finally, to my question. The first question, Greg, for you is, as it relates to generative AI and ChatGPT, do you see more of a benefit, whether tactically or strategic or not, on the Consumer side or the UB side, kind of more on the near-term? And then the second part of that question is, do you think that generative AI actually, if we look out over the next 12 months, is more impactful to the revenue line in a good way or actually more operational excellence, whether it's helping your instructors, whether it's R&D, quicker pace or go-to-market optimization?

Let's do the last one first, Terry. Look, in terms of operational, I think it's both, as far as operational efficiency. I think it's going to enable us to enable our instructors to be a lot more efficient in developing the learning experience that they're delivering through the content that they're putting on the marketplace, that we're then extending into the UB catalog at they qualify that. So, the velocity there is going to enable us to be a lot more efficient, effective as partners with our instructors. And it's not only keeping up with the pace of change, but improving the overall experience for learners within corporations, large and small. So, we're excited about that. And from a revenue perspective, yes, absolutely, I believe it is going to have an impact. It is today, because customers now are paying a lot of attention to the vendor selection process with respect to the content that is enabling them to stay ahead of whatever innovation is coming out to stay ahead of – or us with the pace of change, I should say. And we're doing a great job of that. Our marketplace facilitates that in a way that's very difficult for those that are out there competing against us to match. So that does enable us to win more business, which affects our top line revenue. And so, we're seeing that today. And the expansion deals that I mentioned, some of the new business that I mentioned, as well as I'll give an example of what we call a boomerang. A customer that was working with multiple vendors, we were one of them, decided to go with the other vendor based on price. Quality was poor. Content wasn't delivering as expected. Came back to us and went wall to wall. And that's interestingly enough, with – through the partnership with Amazon. So, we talked about our relationship and growing partnership with Amazon. So, this was the largest partnership deal we've closed with Amazon, multi-six-figure deal. That deal got down as fast as a byproduct of that customer having that relationship with Amazon. And that was, again, coming back to us, paying more because of the quality of experience and our ability to keep up with the pace of change. So, I think AI is going to, without question, affect top line, is going to affect productivity of our instructors and affect our ability to deliver a higher quality experience in-market.

Appreciate the color. And I guess, Sarah, just a quick follow-up for you. I didn't write this down fast enough. For 2Q, did you say mid-30s for UB or Enterprise? And then what did you say sequentially? And what I'm curious, if you would, buy it on the full-year question anything directionally on both segments? Thank you.

Yes, yes, we did say UB mid-30s for growth for the second quarter, and that we expect Consumer with this typical seasonality to be down quarter-over-quarter. And for the year, we do anticipate that we're going to exit the year with UB growing in the mid-30s. And we saw that strong performance with Consumers. So, a little bit of a mix shift, but still plan exiting the year near – with UB near [60%] [ph].

Okay, great. Thanks.

The next question is from Brent Thill with Jefferies. Please go ahead.

Hi, guys. This is David on for Brent. Appreciate you taking the questions. Sorry to continue on the AI trend, but just wanted to follow up and clarify, and Greg, thanks for the color and you guys not seeing it as a threat in general. But I think a lot of folks out there are super curious. I was hoping we can dive in deeper after obviously another education tech company got cut in half off of AI fears. But as you think about AI, I know you said you think of it as a benefit, not a headwind. But curious how you think about the idea of potentially folks who might have used your platform to learn about something in the past, maybe they're using an AI tutor on the side. Is that something that you guys could see as a threat? Maybe is that something you guys are working on? It would just be great to kind of hammer home on the AI strategy. And then I have a follow-up. Thanks.

David, thanks for your question. We're looking at a number of different ways to leverage and integrate AI into our platform. And I'm not going to comment specifically on anything with respect to where we're at with tutors and coaching and what have you. But you could assume that all of those are areas that we're investing time, energy and resource to better understand how that could enhance the overall learning experience. And at the point in time we're ready to talk about it, we surely will. But I think all of us would say right now, we have a clear view on what we believe AI is going to enable us to do and I just highlighted that. But 6, 12, 18 months from now, we're all going to be learning as [we're going] [ph], right? And so, what's in our line of sight right now is all opportunity for us as we're looking how to better enable our instructors to deliver an enhanced experience. And we do feel strongly that the instructor experience matters a lot, right? We do not feel that at any point in time in the near future is they're going to be able to hit a button and generate content and experience that's going to mirror the experience that our instructors deliver through the years of honing their craft and understanding how to deliver information and assemble information in a way that's going to be best received and digested and learned by whoever is on the other side. There's art in there as well as science. And AI is all about science right now. And that's going to blow over time. We're going to adapt to it. And we're paying a lot of attention to that. But right now, the lens we're looking through, we view all this opportunity, and we are making investments to better understand how we can look at things like coaching and mentoring what have you, assistance, that would be additive to our platform. And more to come down the road when we were prepared to talk about it.

Yes. That's helpful. And I think the point on content was another one I was going to add, so I appreciate you clarifying on that. And then maybe for Sarah, I know you mentioned on the churn. I know you guys had historically very low churn, but just curious any color you can provide on how churn has trended? Obviously, you guys are benefiting from vendor consolidation. But curious if maybe the churn metric is seeing any headwinds from that same dynamic? Appreciate it guys. Thanks so much.

Yes. What we're seeing is a little bit of pressure on churn from the smaller businesses, the ones who are really struggling. But our gross dollar retention has remained stable for a long period of time within our large customers, and we continue to see low churn in that population.

The next question is from Josh Baer with Morgan Stanley. Please go ahead.

Great. Thank you for the question. I wanted to ask, one, on sort of top line and demand, what you're seeing and what you're expecting, and maybe do so in the context of the full-year guidance. I think full-year guidance range now 12% to 16%, but with Q1 in the books and kind of a tight range for Q2, that I think implies something like 9% growth in the back half at the low-end and 18% at the high-end. So, pretty different scenarios there. I was hoping you could provide some context or commentary on the assumptions behind what's at the low end and what's at the high end? What does that look like the rest of the year? Thanks.

Yes, thanks for the question. Listen, I think we're trying to really take into consideration the fact that we are in a tough macro environment. And that while we continue to see really strong demand, Greg spoke about our pipeline growth earlier on [indiscernible]. We know that closing those deals is going to take longer. There's some choppiness. Deals are going through more layers of approval than ever before. And everybody is looking at their budgets and revisiting them. So, it really is about us taking a look at all this demand, and knowing that our customers are looking to us to be this partner to them to upsell and resell, which is necessary in this world today and becomes more and more necessary each month that goes on and the pace of innovation continues to increase. And at the same time, it's just going to take time. And so for us, it's about just being realistic in an environment like this. You can have significant demand, but it's going to take longer potentially to get to that demand. We are assuming no material improvement or deterioration, and it's just going to, kind of remain to be seen.

Great. Thanks Sarah.

The next question is from Jason Celino with KeyBanc Capital Markets. Please go ahead.

Hey, it's Devin on for Jason today. Thanks for taking our questions. I want to ask about Consumer, just given the outperformance there in the quarter. Any additional context on, kind of the linearity of how conversion and overall demand has kind of trended throughout the quarter?

Devin, thanks for the question. Listen, we were happy to see that consumer remained really stable, especially given the last 6 quarters, we spent decreasing our investment, our marketing spend on the Consumer side. And so, it's been great to see. We're glad to see that the conversion is strong. And for us, we're not making any specific investments in Consumer. What we're doing is, we're making investments in our platform around the learning experience, around the things that Greg spoke about that is going to continue to impact the ability for us to deliver outcomes for our learners. And so, there may be some of that, that is within those numbers. There could be part cyclicality. It's too early to tell. We're just happy to see that stability, and we're happy to see the vibrancy in the marketplace, which is so important to us.

Got it. Thanks for the color. And just one more and sorry to ask another question on AI, but kind of just curious, just based on your observations, what specific AI-related courses are your learners taking on the platform? Just want to get a little color on what's driving that?

Yes, happy to answer. I can't really be more specific, Devin, there's over 1,000 on our platform right now. And we've got well over – I think, well over – it's approaching 50 now. And it's gone beyond that in our UB collection. It's everything from introduction to AI. A lot of it is early days with introduction. So, folks could really start to understand what this concept around AI and deep learning is and understand a little bit more around ChatGPT and then GPT4 now, which has evolved from 3, and a little bit of just, again, context around how it all works to developers and folks on the tech side of the house looking to acquire skills that they can now use to enable AI in their organization. So, next level training, next level development. And all of this is rapidly being deployed on our platform as the market continues to roll, the pace is moving, folks understand it. They have an opportunity to monetize on our marketplace, as well as within UB and are developing content literally at a pace we've never seen before, right? So, it really is changing day-by-day, week-by-week in terms of the quality, the quantity as well as topics, and then the evolution of those topics in terms of who's engaging and what are they looking to learn. But everything from introduction to deep learning on how to apply the AI in specific businesses.

Great. Appreciate the color.

[Operator Instructions] The next question is from Stephen Sheldon with William Blair. Please go ahead.

Hi. You've got [indiscernible] on for Stephen. First, so clearly, it sounds like vendor consolidation has continued to serve to your advantage. And I just wanted to ask if you've seen any notable change in strategy from any of your peers, your competitors in terms of maybe specifically pricing or anything in general?

Yes. Thanks for the question. I wouldn't say anything that I would consider material. Without question, the market is competitive, and the way that our peers and competitors are approaching that in one hand is via price. But we're reacting to that the way our team always has, which is selling on value. And I mentioned that boomerang deal. Price without quality end up doing exactly that, right? Boomerang is back to the company or the series of companies that can actually deliver against the outcomes that an organization is looking to achieve. And so, we are continuing to stay the course, selling on value. We're competing very, very effectively as a result of the numbers that you're seeing our team is delivering. And we're not going to be deviating from that. And as pricing pressure comes down from competition, we're going to be really leaning into the value and impact we can and will have as a long-term partner in helping an organization truly reshape the learning experience they're delivering as a result of the capability we're bringing to market via AI, as well as the partnership of our customer success team delivers in terms of strategy and delivery against that strategy. So, no change in terms of our path and focus on execution. But yes, we are seeing a little bit of pricing pressure, but not materially different.

Got it. That's clear. Thanks Greg. And then given some of the weakness you've seen in your UBN market, I just wanted to quickly ask how you're thinking about investing in sales capacity there in terms of maybe more heavily leveraging partners internationally, and I guess, in general, just maintaining capacity for a potential recovery?

Yes. Happy to answer that. We're investing heavily on a global basis in our partnerships, be it new ventures, as well as [Technical Difficulty] and really around the world, Latin America, Asia Pacific, EMEA. This is an area that we have been investing and are continuing to lean into those investments. And we're very encouraged by the results we're seeing and the impact our teams are having through these partnerships. And that will continue. I'm sorry, what was the second part of the question?

Just the rest of go-to-market theme and...

Go-to-market theme. Yes, as far as go to market, look, Sarah, I think, has done a really nice job of highlighting our approach on this, which is, it's a little bit of wait and see. As soon as we see green shoots and opportunities to start scaling our global sales organization again, we are going to do so. Our hope is that's going to be in the back half of this year. But the macro is going to have a large determining factor on if and when that happens this year. Our hope is it, without question, it does. But again, there are some things that are out of our control, and we're going to continue to closely monitor that and we act accordingly. Sarah, I don't know if there's anything you want to add to that.

No, that's exactly right. There are areas that we are still leaning in a little bit where we continue to see overperformance. As we talked about before, we look by segment, by region, and that's how we make our decision. And we just keep a close eye, and we'll put our foot on the gas at the appropriate time in the right area.

Got it. That’s very helpful. Thank you both.

This concludes our question-and-answer session. I would like to turn the conference back over to Greg Brown for any closing remarks.

Yes, I'd just like to thank everybody for joining us on the call, and look forward to speaking with you again in August. Have a great rest of the day.