 Udemy reported revenue of $184.7mn in 3Q23, up 17% YoY. The Udemy Business’s results exceeded expectations and our forecast for the quarter, while the consumer segment revenue remained flat YoY. Total customers of the Udemy Business (UB) segment increased by 14% YoY to 15,378, while the company increased the number of Consumer segment customers by 7% YoY to 1.41mn. Udemy’s gross profit reached $107.5mn in 3Q, up 20% YoY. The Adjusted EBITDA reached $8.2mn in 3Q23 compared to a $12.9mn loss a year ago. The company reported positive net cash from operating activities of $5.26mn in 9M23 compared to $30.3mn negative operating CF a year ago. Udemy Business revenue reached $109.1mn, up 30% YoY generating $74.3mn gross profit (+32% YoY). Udemy Business’s Annual Recurring Revenue (ARR) reached $443mn, up 26% YoY. The list of Udemy Business customers globally now includes Assurant, Bosch Global Software Technologies (India), Compasso Tecnologia (Brazil), Deutsche Telekom (Slovakia), DHL Express (Belgium), Schlumberger Limited (US), Vimeo (US), and others. Most of UB’s customers are in North America and Asia Pacific. Consumer segment revenue was $75.6mn, up 1%, with gross profit of $40.3mn, up 4% YoY. The company said over 100,000 users in the consumer segment subscribed for personal plans. Udemy is confident the personal plan will gain more subscribers in the future as the demand for reskilling and innovation is sustainable in the post-Covid environment. Strategic reseller partnerships are developed in Asia to bring new customers to Udemy’s platform. Udemy plans to increase brand awareness globally, support marketing efforts, and make improvements on the platform to improve the all-user experience. Innovative solutions will be integrated for learners, business customers, and instructors to improve the experience on the platform. The company revamped the instructors’ AI-powered Coding Exercise practice insights dashboards to include learner engagement insights and launched a badging certification tracker to motivate UB learners. Generative AI attracts a lot of attention and contributes to the growing number of courses and higher learners engagement. The total instructor earnings grew faster than the market in the last three years, and will exceed $200mn in FY23, according to the company. Udemy announced the potential adjustment of the instructors’ revenue share for all subscription-based plans. Instructor partners earn 25% of subscription revenue based on pro-rate consumption of their content. The instructor share will be reduced from 25% in 2023 to 20% in 2024, 17.5% in 2025, and to 15% by 2026. The adjustment will likely contribute to a higher margin for Udemy. The company’s cash and equivalent were $328mn, and marketable securities were $151mn as of the end of September 2023. The company reported a $5.5mn interest income in 3Q23, while stock-based compensation reached $23.5mn. The company increased the number of shares by 7.3% YoY as of 30/9/2023.  The company’s guidance narrowed revenue to $184-187mn in 4Q23 and to $723-726mn in FY23. Adj EBITDA may reach 0.0%-1.0% in 4Q and 0.5%-1.0% in FY23, according to Udemy. The instructors’ revenue share adjustment shall contribute to the gross margin growth from 57% in 2023 by 3p.p. per year to around 70% by 2027. The company expects to make opportunistic investments to support growth and to reach Adj EBITDA of 15-20% by 2027. We updated our model. The company plans to increase the number of shares to 161mn in 4Q23 from the reported 151mn in 3Q23 and 143mn in 4Q22. The stock compensation plan helps to achieve a positive Adj EBITDA; however, it drives the dilution for shareholders on a per-share basis. We based our price target on fully diluted 161mn shares. We adjusted our forecasts and changed our 12-month price target to $15.6 from $15.3 per share. We rate the stock Buy.