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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549 
FORM 10-K/A
(Amendment No.1)
(Mark One)
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2021
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________ to ___________
Commission File Number              001-40956
Udemy, Inc.
(Exact Name of Registrant as Specified in its Charter)
Delaware27-1779864
(State or Other Jurisdiction of
Incorporation or Organization)
(I.R.S. Employer Identification No.)
600 Harrison Street, 3rd Floor
San Francisco, California
94107
(Address of Principal Executive Offices)(Zip Code)
(415) 813-1710
(Registrant’s Telephone Number, Including Area Code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, $0.00001 par valueUDMYThe Nasdaq Stock Market
Securities registered pursuant to section 12(g) of the Act: None
(Title of class)
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes ☐ No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Yes ☐ No
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes      No ☐ 
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes     No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☐
Accelerated filer 
Non-accelerated filer  
Smaller reporting company 
Emerging growth company 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.    

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared to issued its audit report.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).  Yes     No 

The aggregate market value of the common stock held by non-affiliates of the registrant on December 31, 2021, based on the closing price of the registrant’s common stock as reported by the Nasdaq Stock Exchange on that date, was approximately $1.1 billion. The registrant has elected to use December 31, 2021 as the calculation date because on June 30, 2021 (the last business day of the registrant's most recently completed second fiscal quarter), the registrant was a privately held company. This calculation does not reflect a determination that certain persons are affiliates of the registrant for any other purpose.

As of March 15, 2022, 139,534,116 shares of the registrant’s common stock were outstanding.

DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant’s Definitive Proxy Statement relating to the registrant’s 2022 Annual Meeting of Stockholders are incorporated by reference into Part III of this Annual Report on Form 10-K where indicated. Such Definitive Proxy Statement will be filed with the Securities and Exchange Commission within 120 days after the end of the registrant’s fiscal year ended December 31, 2021.

i

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EXPLANATORY NOTE

This Amendment No. 1 on Form 10-K/A (this “Form 10-K/A”) amends the Annual Report on Form 10-K of Udemy, Inc. for the fiscal year ended December 31, 2021, originally filed with the Securities and Exchange Commission (the “SEC”) on March 25, 2022 (the “Original 10-K”). This Form 10-K/A is being filed to amend and refile Part II, Item 8 to properly reflect the audit report delivered by our independent registered public accounting firm, Deloitte & Touche LLP (“Deloitte”), and to disclose Deloitte’s tenure as our auditor, which was inadvertently excluded in the original filing.

Pursuant to the rules of the SEC, we have also included as exhibits currently dated certifications required under Sections 302 and 906 of the Sarbanes-Oxley Act of 2002. We are amending and refiling Part IV, Item 15 to reflect the inclusion of those certifications, along with any changes to Part IV, Item 15 that occurred after the date of the Original 10-K.

Except as described above, no other changes have been made to the Original 10-K. Except as otherwise indicated herein, this Form 10-K/A continues to speak as of the date of the Original 10-K, and we have not updated the disclosures contained therein to reflect any events that occurred subsequent to the date of the Original 10-K. The filing of this Form 10-K/A is not a representation that any statements contained in items of the Original 10-K other than Part II, Item 8; Part IV, Item 15; and the aforementioned portions of the cover page are true or complete as of any date subsequent to the Original 10-K.
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Part II
Part IV

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PART II. 
Item 8. Consolidated financial statements

The following financial statements are filed as part of this report:

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders and the Board of Directors of Udemy, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Udemy, Inc. and subsidiaries (the “Company”) as of December 31, 2021 and 2020, the related consolidated statements of operations, comprehensive loss, redeemable convertible preferred stock and stockholders’ equity (deficit), and cash flows, for each of the three years in the period ended December 31, 2021, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/ DELOITTE & TOUCHE LLP

San Francisco, California

March 25, 2022


We have served as the Company’s auditor since 2019.
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Udemy, Inc.
Consolidated Balance Sheets
(in thousands, except per share amounts)

December 31,December 31,
20212020
Assets
Current assets:
Cash and cash equivalents$533,868 $175,031 
Accounts receivable, net of allowance for doubtful accounts of $678 and $643 as of December 31, 2021 and December 31, 2020, respectively.
73,180 46,257 
Prepaid expenses and other current assets15,927 6,036 
Deferred contract costs, current18,898 9,640 
Total current assets641,873 236,964 
Property and equipment, net9,887 9,106 
Capitalized software, net20,054 14,013 
Restricted cash, non-current2,900 2,900 
Deferred contract costs, non-current25,647 16,197 
Strategic investments10,000  
Intangible assets, net13,597  
Goodwill12,646  
Other assets3,247 2,916 
Total assets$739,851 $282,096 
Liabilities, redeemable convertible preferred stock, and stockholders' equity (deficit)
Current liabilities:
Accounts payable$34,627 $23,710 
Accrued expenses and other current liabilities40,140 46,778 
Content costs payable35,961 31,483 
Accrued compensation and benefits22,341 20,403 
Deferred revenue208,274 141,439 
Total current liabilities341,343 263,813 
Deferred revenue, non-current2,280 937 
Other liabilities, non-current6,528 3,927 
Total liabilities350,151 268,677 
Commitments and contingencies (Note 9)
Redeemable convertible preferred stock:
Redeemable convertible preferred stock, $0.00001 par value - zero and 86,348,646 shares authorized; zero and 85,391,338 shares issued and outstanding; and aggregate liquidation value of zero and $274,009 as of December 31, 2021 and December 31, 2020, respectively.
 274,104 
Stockholders' equity (deficit):
Preferred stock, $0.00001 par value- 50,000,000 and zero shares authorized; zero shares issued and outstanding as of December 31, 2021 and December 31, 2020, respectively.
  
Common stock, $0.00001 par value - 950,000,000 and 150,000,000 shares authorized; 139,164,693 and 35,627,503 shares issued and outstanding as of December 31, 2021 and December 31, 2020, respectively.
1  
Additional paid-in capital848,229 117,818 
Accumulated other comprehensive loss(1) 
Accumulated deficit(458,529)(378,503)
Total stockholders’ equity (deficit)389,700 (260,685)
Total liabilities, redeemable convertible preferred stock, and stockholders' equity (deficit) $739,851 $282,096 
See accompanying notes to consolidated financial statements.
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Udemy, Inc.
Consolidated Statements of Operations
(in thousands, except per share amounts)

Fiscal Year Ended December 31,
202120202019
Revenue$515,657 $429,899 $276,327 
Cost of revenue236,024 209,253 143,510 
Gross profit279,633 220,646 132,817 
Operating expenses
Sales and marketing227,023 192,600 126,436 
Research and development66,107 50,643 34,379 
General and administrative64,410 50,783 40,033 
Total operating expenses357,540 294,026 200,848 
Loss from operations(77,907)(73,380)(68,031)
Other income (expense)
Interest income (expense), net(16)(1,146)87 
Other income (expense), net(920)55 (384)
Total other expense, net(936)(1,091)(297)
Net loss before taxes(78,843)(74,471)(68,328)
Income tax provision(1,183)(3,149)(1,375)
Net loss attributable to common stockholders$(80,026)$(77,620)$(69,703)
Net loss per share attributable to common stockholders
     Basic and diluted$(1.46)$(2.33)$(2.57)
Weighted-average shares used in computing net loss per share attributable to common stockholders
     Basic and diluted54,972,827 33,384,438 27,096,379 
See accompanying notes to consolidated financial statements.
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Udemy, Inc.
Consolidated Statements of Comprehensive Loss
(in thousands)

Fiscal Year Ended December 31,
202120202019
Net loss$(80,026)$(77,620)$(69,703)
Change in unrealized gain on marketable securities   54 
Foreign currency translation losses(1)  
Comprehensive loss$(80,027)$(77,620)$(69,649)
See accompanying notes to consolidated financial statements.
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Udemy, Inc.
Consolidated Statements of Redeemable Convertible Preferred Stock and
Stockholders’ Equity (Deficit)
(in thousands, except per share amounts)
Redeemable Convertible
Preferred Stock
Common StockAdditional
Paid-In
Capital
Accumulated
Other
Comprehensive
Loss
Accumulated
Deficit
Total
Stockholders’
Equity (Deficit)
SharesAmountSharesAmount
Balance— January 1, 201979,472,483 $155,645 26,595,462 $ $54,399 $(54)$(237,913)$(183,568)
Stock-based compensation— — — — 9,208 — — 9,208 
Unrealized gain on investments— — — — — 54 — 54 
Exercise of stock options— — 4,024,143 — 11,265 — — 11,265 
Cumulative effect of adoption of ASC Topic 606— — — — — — 6,733 6,733 
Vesting of early-exercised stock options— — — — 421 — — 421 
Net loss— — — — — — (69,703)(69,703)
Balance—December 31, 201979,472,483 155,645 30,619,605  75,293  (300,883)(225,590)
Issuance of Series E Convertible Preferred Stock, net of $52 issuance costs
2,569,043 39,948 — — — — — — 
Issuance of Series F Convertible Preferred Stock, net of $2,320 issuance costs
3,349,812 78,511 — — — — — — 
Stock-based compensation— — — — 32,135 — — 32,135 
Exercise of stock options— — 5,007,898 — 10,383 — — 10,383 
Vesting of early exercised stock options— — — — 7 — — 7 
Net loss— — — — — — (77,620)(77,620)
Balance—December 31, 202085,391,338 274,104 35,627,503  117,818  (378,503)(260,685)
Exercise of Series A-1 redeemable convertible preferred stock warrants12,595 163 — — — — — — 
Conversion of redeemable convertible preferred stock to common stock upon initial public offering(85,403,933)(274,267)85,403,933 1 274,266 — — 274,267 
Issuance of common stock in connection with initial public offering, net of issuance costs and underwriting discount— — 15,150,000 — 408,416 — — 408,416 
Stock-based compensation— — — — 36,701 — — 36,701 
Exercise of stock options— — 2,921,957 — 11,028 — — 11,028 
Restricted stock issued for business combination— — 61,300 — — — — — 
Cumulative translation adjustment— — — — — (1)— (1)
Net loss— — — — — — (80,026)(80,026)
Balance—December 31, 2021 $ 139,164,693 $1 $848,229 $(1)$(458,529)$389,700 
See accompanying notes to consolidated financial statements.
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Udemy, Inc.
Consolidated Statements of Cash Flows
(in thousands)

Fiscal Year Ended December 31,
202120202019
Cash flows from operating activities:
Net loss$(80,026)$(77,620)$(69,703)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization15,297 11,055 8,740 
Amortization of deferred sales commissions17,801 7,486 3,038 
Stock-based compensation34,680 31,618 8,963 
Provision for doubtful accounts326 182 642 
Change in fair value of warrant liability 52 58 
Other  95 
Changes in operating assets and liabilities:
Accounts receivable (27,000)(19,632)(10,578)
Prepaid expenses and other assets(9,903)(3,344)(1,727)
Deferred contract costs(36,508)(18,943)(10,685)
Accounts payable, accrued expenses and other liabilities7,272 17,488 26,279 
Content costs payable4,389 6,615 3,113 
Deferred revenue66,568 54,667 25,310 
Net cash provided by (used in) operating activities(7,104)9,624 (16,455)
Cash flows from investing activities:
Purchases of property and equipment(5,335)(5,180)(3,328)
Capitalized software costs(12,868)(9,357)(7,793)
Purchase of marketable securities  (1,542)
Proceeds from sale and maturity of marketable securities  27,274 
Payments related to business combinations, net of cash acquired(24,490)  
Purchases of strategic investments(10,000)  
Net cash provided by (used in) investing activities(52,693)(14,537)14,611 
Cash flows from financing activities:
Net proceeds from exercise of stock options10,878 10,383 11,265 
Net proceeds from issuance of redeemable convertible preferred stock2 120,710  
Payment of redeemable convertible preferred stock issuance costs(2,250)  
Payment of deferred offering costs(5,183)  
Cash proceeds from initial public offering415,187   
Net cash provided by financing activities418,634 131,093 11,265 
Net increase in cash, cash equivalents and restricted cash358,837 126,180 9,421 
Cash, cash equivalents and restricted cash—Beginning of period
177,931 51,751 42,330 
Cash, cash equivalents and restricted cash—End of period
$536,768 $177,931 $51,751 
Supplemental disclosures of cash flow information:
Interest paid$90 $48 $5 
Income taxes paid$385 $154 $120 
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Supplemental disclosure of non-cash investing and financing activities:
Accrued redeemable convertible preferred stock issuance costs$ $2,250 $ 
Unpaid deferred offering costs$1,586 $ $ 
Stock-based compensation in capitalized costs$2,571 $749 $281 
Increase (decrease) in purchases of property and equipment included in liabilities$(186)$131 $76 
Vesting of early-exercised stock options, net$ $7 $421 
Acquisition holdback liability$1,500 $ $ 
See accompanying notes to consolidated financial statements.
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Udemy, Inc.
Notes to Consolidated Financial Statements

1.Organization and description of business
Description of business
Udemy, Inc. (“Udemy” or the “Company”) was incorporated in January 2010 under the laws of the state of Delaware. The Company is headquartered in San Francisco, California.
Udemy is a global marketplace platform for teaching and learning, connecting millions of learners to the skills they need to succeed. The Company’s platform allows learners all over the world to access affordable and relevant content from expert instructors. Udemy combines high-quality content, insights and analytics, and technology into a single, unified platform that is purpose-built to meet the specific needs of both individual learners and enterprise customers.
Initial public offering
On October 29, 2021, the Company completed its initial public offering ("IPO") of common stock, in which it sold 14,500,000 shares. The shares were sold at a price to the public of $29.00 per share for net proceeds of $397.4 million, after deducting underwriting discounts and commissions of $23.1 million. Underwriters were granted an option for a period of 30 days to purchase up to 2,175,000 additional shares of common stock. Upon the completion of the IPO, deferred offering costs of $6.8 million were reclassified into additional paid-in capital as a reduction of the net proceeds received from the IPO. Upon the closing of the IPO, all outstanding shares of the Company’s redeemable convertible preferred stock automatically converted into 85,403,933 shares of common stock on a one-for-one basis.

On November 24, 2021, the underwriters exercised the right to purchase 650,000 additional shares of common stock from the Company, resulting in additional net proceeds of $17.8 million, after deducting underwriting discounts and commissions of $1.0 million. The remaining option to purchase additional shares expired unexercised at the end of the 30 day period.

2.Summary of significant accounting policies
Basis of consolidation and presentation—The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany transactions and balances have been eliminated in consolidation, and all other normal and recurring adjustments that are, in the opinion of management, necessary for a fair presentation of the results of the periods presented have been made.
Segment information—The Company defines its segments as those operations the chief operating decision maker (“CODM”), determined to be the Chief Executive Officer of the Company, regularly reviews to allocate resources and assess performance. For the fiscal years ended December 31, 2021, 2020, and 2019, the Company operated under two operating and reportable segments: Consumer and Enterprise. The Company continually monitors and reviews its segment reporting structure in accordance with Accounting Standards Codification (“ASC”) Topic 280, Segment Reporting, to determine whether any changes have occurred that would impact its reportable segments. For further information on the Company’s segment reporting, see Note 17 “Segment and geographic information.”
Use of estimates—The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the consolidated financial statements and the results of operations during the reporting periods.
Significant estimates and assumptions reflected in the consolidated financial statements include, but are not limited to, allowance for doubtful accounts, useful lives of property and equipment, capitalization of internally
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developed software and associated useful lives, stock-based compensation, determination of the income tax valuation allowance and the potential outcome of uncertain tax positions, estimated instructor withholding tax obligations, estimated period of consumption for consumer learners’ single course purchases, fair value of the Company’s common stock and convertible preferred stock, the period of benefit for deferred commissions, the fair value and associated useful lives of intangible assets and goodwill acquired via business combinations, and the valuation of privately-held strategic investments, including impairments. Management periodically evaluates such estimates and assumptions for continued reasonableness.
Actual results may ultimately differ from management’s estimates and such differences could be material to the financial position and results of operations.

Coronavirus disease 2019 (“COVID-19”)—In March 2020, the World Health Organization declared the outbreak of the coronavirus disease named COVID-19 a pandemic. The COVID-19 pandemic has created and may continue to create significant uncertainty in global financial markets. This uncertainty may positively or adversely impact certain aspects of the business, including but not limited to customer demand and spending, the ability to raise capital, impairment of assets, and cash collections. While the Company has not experienced a material negative impact to its business, results of operations, financial position, and liquidity, the future duration, impact, and disruption of the COVID-19 outbreak to the Company’s operations is uncertain.

Revenue recognition—On January 1, 2019, the Company adopted ASC Topic 606, Revenue from Contracts with Customers using the modified retrospective method. The Company’s two sources of revenues are its Consumer and Enterprise business channels.

Consumer revenue—The Company generates revenue by selling access to course content on the Udemy platform directly to individual learners. Consumer revenues consist of (i) single course purchases and (ii) consumer subscriptions. All contracts with consumer customers are billed in advance and require payment by the customer prior to accessing any course content, or in the case for new consumer subscription customers, upon expiration of the 7-day free trial.

After checkout, consumer customers purchasing a single course receive a lifetime access license to the digital course content in addition to stand-ready access to the Udemy platform online services needed to access the content. Consumer subscription plans offer on-demand access to a library of courses over a subscription term, as well as additional features and functionalities.

Consumer revenue transactions are governed by Udemy’s standard terms of use. The time between a customer’s payment and the receipt of funds is not significant. Payment terms are generally fixed and do not include variable consideration. Consumer revenues are recorded net of actual and estimated refunds and exclude any taxes that are collected from learners and remitted to governmental authorities. Consumer revenue arrangements do not include significant obligations associated with warranties.

Consumer subscriptions are typically one-month in duration and paid in advance, with new customers able to sign up for a 7-day free trial period. Subscribers have continuous access to enroll in and consume an unlimited number of curated courses included in the subscription catalog on the platform during the subscription term. Subscribers retain access to the courses in which they enroll for the duration of their subscriptions (including any renewal period), even if the instructor subsequently elects to remove the course from the Company’s subscription programs. The continual access to the platform represents a series of distinct services, as the Company continually provides access to, and fulfills its obligation to, the customer over the contract term. Consumer subscriptions automatically renew at the end of each month. Customers may cancel renewal of their subscription at any point but will retain their access to the platform until the end of the current subscription term.

Enterprise revenue—The Company generates revenue by selling subscription licenses to a variety of enterprise and government customers.

The Company’s subscription contracts with enterprise customers generally have annual or multi-year contractual terms and consist of a fixed quantity of seat licenses, which allows each seat to access an unlimited number of course enrollments during the contract term. Subscribers retain access to the courses in which they enroll for the duration of their subscriptions (including any renewal period), even if the instructor subsequently elects to remove the course from the Company’s subscription programs. Enterprise contracts are typically
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evidenced by a fully executed Master Services Agreement with an accompanying executed Order Form specifying the contractual subscription term and pricing. Revenue is recognized ratably over the respective contractual subscription term beginning on the date that the platform is made available to the customer.

Standard subscription agreements have auto-renewal clauses, which allow the agreement to continue after the expiration of the initial term. The Company’s standard billing terms are to invoice upfront annually for contracts with terms of one year or longer. For contracts that are less than one year, the Company generally bills in advance on a quarterly or semi-annual basis. The Company recognizes unbilled receivables that relate to consideration for services completed but not billed as of period end. The unbilled receivables are recorded in accounts receivable, net, and are not material for any period presented.

Revenue from contracts with customers is recognized when control of promised services is transferred. The amount of revenue recognized reflects the consideration the Company expects to be entitled to receive in exchange for these services. The Company accounts for revenue contracts with customers using the five-step model under ASC Topic 606:

    1) Identify the contract with a customer

Udemy determines a contract with a customer to exist when the contract is approved, each party’s rights regarding the services to be transferred can be identified, the payment terms for the services can be identified, the customer has the ability and intent to pay, and the contract has commercial substance. At contract inception, the Company evaluates whether two or more contracts should be combined and accounted for as a single contract and whether the combined or single contract includes more than one performance obligation. The Company applies judgment in determining the customer’s ability and intent to pay, which is based on a variety of factors, including the customer’s historical payment experience if available. Consumer customers are generally required to pay in advance using a credit card. Generally, enterprise customers are billed upfront annually for contracts with terms of one year or longer or in advance quarterly or semi-annually for contracts with terms of less than one year.

    2) Identify the performance obligations in the contract

Performance obligations committed in a contract are identified based on the services that will be transferred to the customer that are both capable of being distinct, whereby the customer can benefit from the service either on its own or together with other resources that are readily available from third parties or from Udemy, and are distinct in the context of the contract, whereby the transfer of the services and the products is separately identifiable from other promises in the contract. Customers do not have the ability to take possession of the software supporting the platform and, as a result, contracts are accounted for as service arrangements.

The non-exclusive lifetime access license associated with single course purchases and the licensed content associated with subscriptions are not considered distinct from the Udemy platform, because the course content is significantly integrated, and highly interdependent and interrelated with the platform. Specifically, the learner does not obtain control of the course content’s functionality without the Udemy platform. Accordingly, management concluded there is a single, combined performance obligation, which is customer’s access to the online content on the Udemy platform, representing a series of distinct services as the Company continually provides access to and fulfills its obligation to allow access to licensed content and platform functionality to the learner.

    3) Determine the transaction price

The transaction price is determined based on the consideration to which Udemy expects to be entitled in exchange for transferring services to the customer. The prices for Consumer and Enterprise, or Udemy Business (“UB”), contracts are fixed at contract inception and do not contain significant estimates related to variable consideration. With respect to single course purchases, consumers may request a full refund within 30 days after the initial purchase transaction. The Company estimates and establishes a refund reserve based on historical refund rates, which has historically been immaterial. None of the Company’s contracts contain a significant financing component. Revenue excludes taxes
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collected from customers, which are subsequently remitted to governmental entities (e.g., sales and other indirect taxes).

    4) Allocate the transaction price to performance obligations in the contract

Contracts that contain multiple performance obligations require an allocation of the transaction price to each performance obligation based on each performance obligation’s relative standalone selling price.

As access to content is not considered distinct from the Udemy platform hosting services, the transaction price is allocated to a single performance obligation.
    5) Recognize revenue when or as performance obligations are satisfied

Revenue is recognized at the time the related performance obligation is satisfied by transferring the control of the promised service to a customer. Revenue is recognized in an amount that reflects the consideration that Udemy expects to receive in exchange for those services. Udemy has a stand ready obligation to deliver its services continually throughout the requisite contract period, which is either lifetime access for consumer customers or the contractual subscription term for UB and consumer subscription customers. As such, the Company recognizes revenue on a straight-line basis as it satisfies the performance obligation, using an estimated service period for individual consumers enrollments and the contractual subscription term for UB and consumer subscription customers.

Other than the circumstances noted below, no significant judgment has historically been required in determining the amount and timing of revenue from the Company’s contracts with customers.

Principal vs. agent—In order to determine if Consumer and Enterprise revenues should be reported gross or net of payments to third-party instructors, the Company evaluated whether Udemy acts as the principal in sales of its online course offerings. An entity is the principal if it controls a good or service before it is transferred to the end customer. Key indicators that management evaluated in determining gross versus net treatment included but are not limited to:

• the nature of the Company’s promise to the customer, as well as the distinct performance obligation identified;

    • the underlying contract terms and conditions between the parties to the transaction;

• which party is primarily responsible for fulfilling the promise to provide the specified good or service to the end customer;

• which party has inventory risk before the specified good or service has been transferred to the end customer; and

    • which party has discretion in establishing the price for the specified good or service.

Based on an evaluation of the above indicators, management determined that the Company is the principal to learners who purchase access to online course content via consumer and enterprise offerings. The Company controls the promised goods or services (i.e., access to course content via the Udemy platform) before it is transferred to the customer and is primarily responsible for fulfillment with respect to delivering access to course content. The Company is the entity which licenses content to learners as the agreements with instructors grant the Company the right to sub-license content to its learners at its discretion. The Company also has substantial discretion to determine the pricing of its offerings. Therefore, the Company reports the gross purchase price paid by the customer related to these arrangements in the revenues caption of the consolidated statements of operations and the payments to instructors as content costs within cost of revenues.

Estimated service term for consumer single course purchases—The Company considers a variety of data points when determining the estimated service period for a consumer learner’s consumption of a single course purchase, including, the weighted-average number of days between a learner’s first and last day that content is
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accessed on the platform, the average total hours consumed, the average number of days in which learner activity stabilizes, and the weighted-average number of days between learners’ enrollment and the last date the course content is accessed online. Management also considers known online trends, the service periods of historical course content available on the platform, and to the extent publicly available, service periods of competitors’ online content that is similar in nature to the Company’s. The Company believes consideration of all of these factors enables the Company to determine the best representation of the time period during which consumer learners access the online course content on the Company’s platform and therefore the service period over which the Company provides services to learners. Determining the estimated service period is subjective and requires management’s judgment. Future usage patterns may differ from historical usage patterns, and the estimated service period may change in the future. The estimated service period for consumer single course purchase transactions is four months from the date of enrollment.

The Company records contract liabilities when cash payments are received or due in advance of performance to deferred revenue. Deferred revenue primarily relates to the advance consideration allocated to remaining performance obligations received from customers.

The price of subscriptions is fixed at contract inception and the Company’s contracts do not contain significant estimates related to variable consideration. As a result, the amount of revenue recognized in the periods presented from performance obligations satisfied (or partially satisfied) in prior periods was not material.

In connection with the adoption of ASC 606, the Company recorded an increase in total assets of $6.7 million and a reduction of accumulated deficit of $6.7 million as of January 1, 2019, which is attributed to deferred contract costs. The Company applied the practical expedient in Topic 606 and did not evaluate contracts of one year or less for the existence of a significant financing component.

Cost of revenues—Costs of revenues are related to content costs (which are payments to instructors), payment and mobile processing fees, costs associated with the hosting of digital content, and employee related expenses for the customer support organization, including salaries, benefits, stock-based compensation, facilities and other expenses, depreciation of network equipment, and amortization of capitalized software

Advertising costs—Advertising costs are expensed as incurred. Advertising expense is recorded in sales and marketing expenses in the consolidated statements of operations and was $105.2 million, $110.5 million and $72.6 million for the fiscal years ended December 31, 2021, 2020, and 2019, respectively.

Research and development—Research and development costs are expensed as incurred. Research and development expenses include salaries, benefits, stock-based compensation, facilities, office costs, contracted services, supplies, and other miscellaneous expenses.

Stock-based compensation—The Company accounts for its stock-based compensation pursuant to ASC Topic 718, Compensation-Stock Compensation, which requires the measurement and recognition of stock-based awards using the estimated fair value of the awards on the date of grant. Stock-based awards include stock options, restricted stock units (“RSUs”), stock appreciation rights (“SARs”), and restricted stock granted to employees, directors, and non-employees, and stock purchase rights granted to employees under the Employee Stock Purchase Plan (“ESPP Rights”).

The Company estimates the fair value of RSUs and restricted stock based on the fair value on the date of grant. The Company estimates the fair value of stock options, SARs, and ESPP Rights using the Black-Scholes option-pricing model, which requires the use of the following subjective and complex assumptions:

Expected term—For stock options and SARs, the Company has elected to use the midpoint of the vesting term and contractual expiration period to compute the expected term, as the Company does not have sufficient historical information to develop reasonable expectations about future exercise patterns and post-vesting employment termination behavior. For ESPP Rights, the expected term is equal to the purchase periods in a given offering period.

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Risk-free interest rate—The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant for zero-coupon U.S. Treasury notes with maturities approximately equal to the award’s expected term.

Expected volatility—Since the Company does not have a sufficient trading history of its common stock, the Company estimated volatility based on the average historical stock price volatility of comparable publicly-traded companies.

Dividend yield—The expected dividend was assumed to be zero as the Company has never paid dividends and has no current plans to do so.

Stock appreciation rights granted to employees are settled in cash upon exercise. The Company accounts for SARs in the other liabilities, non-current caption in the accompanying consolidated balance sheets. Vested and outstanding SARs are subject to remeasurement at each balance sheet date using the Black-Scholes option-pricing model and the assumptions described above, and any change in fair value is recognized as a component of expense. The Company adjusts the fair value of the liability for vested and outstanding SARs until the earlier of the exercise or expiration of the SARs.

For awards with only service-based vesting conditions, the Company recognizes the resulting stock-based compensation on a straight-line basis over the requisite service period of the awards. Stock-based compensation for awards that are subject to performance conditions are attributed separately for each vesting tranche of the award. The Company accounts for forfeitures in the period they occur.

Income taxes—The Company accounts for income taxes in accordance with ASC 740, Income Taxes (“ASC 740”), which requires an asset and liability approach in accounting for income taxes. Under this method, the tax provision includes taxes currently due plus the net change in deferred tax assets and liabilities. Deferred tax assets and liabilities arise from the temporary differences between the tax basis of an asset or liability and its reported amount in the consolidated financial statements, as well as from net operating loss and tax credit carryforwards. Deferred tax amounts are determined by using the tax rates expected to be in effect when the taxes will actually be paid or refund received, as provided for under currently enacted tax law. A valuation allowance is provided for the amount of deferred tax assets that, based on available evidence, is not expected to be realized.

ASC 740 prescribes a recognition threshold and measurement attributes for financial statement disclosure of tax positions taken or expected to be taken on a tax return. Under this guidance, the impact of an uncertain income tax position on the income tax return must be recognized at the largest amount that is more likely than not to be sustained upon audit by the relevant taxing authority. An uncertain income tax position will not be recognized if it has less than a 50% likelihood of being sustained. The Company recognizes interest accrued related to uncertain tax positions as a component of the provision for income taxes. There was no accrued interest or penalties associated with any uncertain tax positions, nor was any interest expense recognized during the fiscal years ended December 31, 2021, 2020 and 2019. The Company does not currently anticipate that any significant increase or decrease to uncertain tax positions will be recorded during the next twelve months.

Translation of foreign currency— The Company’s reporting currency is the U.S. dollar. The Company determines the functional currency for each of its foreign subsidiaries by reviewing their operations and currencies used in their primary economic environments. Assets and liabilities for foreign subsidiaries with functional currency other than U.S. dollar are translated into U.S. dollars at the rate of exchange existing at the balance sheet date. Statements of operations amounts are translated at average exchange rates for the period. Translation gains and losses are recorded in accumulated other comprehensive income (loss) as a component of stockholders’ equity (deficit). Remeasurement gains and losses are included in other income (expense), net in the consolidated statements of operations. Monetary assets and liabilities are remeasured at the exchange rate on the balance sheet date and nonmonetary assets and liabilities are measured at historical exchange rates.
Net loss per share attributable to common stockholders—Prior to the completion of the Company’s IPO and the conversion of all outstanding preferred shares into common stock, basic and diluted net loss per share attributable to common stockholders was computed in conformity with the two-class method required for
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participating securities. The Company considered all series of its redeemable convertible preferred stock to be participating securities as the holders of such stock had the right to receive nonforfeitable dividends on a pari passu basis in the event that a dividend was paid on common stock. Under the two-class method, the net loss attributable to common stockholders was not allocated to the redeemable convertible preferred stock as the preferred stockholders did not have a contractual obligation to share in the Company’s losses.

Basic net loss per share is computed by dividing net loss attributable to common stockholders by the weighted-average number of shares of common stock outstanding during the period. Diluted net loss per share is computed by giving effect to all potentially dilutive common stock equivalents to the extent they are dilutive. For purposes of this calculation, common stock options, RSUs, contingently issuable shares under the Company’s ESPP plan, and early exercised common stock options subject to repurchase, are considered to be common stock equivalents but have been excluded from the calculation of diluted net loss per share attributable to common stockholders as their effect is anti-dilutive for the periods presented. For fiscal years ended December 31, 2020 and 2019, outstanding redeemable convertible preferred stock and redeemable convertible preferred stock warrants were also considered to be common stock equivalents, but were excluded from the calculation of diluted net loss per share attributable to common stockholders as their effect was anti-dilutive for the periods presented.

Comprehensive income (loss)—Comprehensive loss consists of two components, net loss and other comprehensive loss, net of tax. Other comprehensive loss, net of tax, refers to revenue, expenses, gains, and losses that under GAAP are recorded as an element of stockholders’ equity (deficit) but are excluded from net loss. The Company’s other comprehensive income for the fiscal year ended December 31, 2021 consisted of foreign currency translation gains and losses. The Company recorded no other comprehensive income or loss for the fiscal year ended December 31, 2020. The Company’s other comprehensive income for the fiscal year ended December 31, 2019 consisted of changes in unrealized holding gains on available-for-sale securities.

Cash and cash equivalents—As of December 31, 2021 and 2020, cash and cash equivalents include on demand deposits and money market funds with banks which have remaining maturities at the date of purchase of less than ninety days. Cash equivalents also include amounts in transit from certain payment processors for credit and debit card transactions, which typically settle within five business days. Cash and cash equivalents are carried at cost, which approximates fair value.

Restricted cash—Restricted cash primarily consists of cash restricted in connection with lease agreements for the Company’s facilities. Restricted cash is included in current assets for leases that expire within one year from the balance sheet date and in non-current assets for leases that expire in more than one year from the balance sheet date.

December 31, December 31,
Reconciliation of cash, cash equivalents and restricted cash20212020
Cash and cash equivalents$533,868 $175,031 
Restricted cash, current  
Restricted cash, non-current2,900 2,900 
Total cash, cash equivalents and restricted cash$536,768 $177,931 

Marketable securities—The Company’s marketable securities are comprised of asset-backed securities, U.S. treasury securities, corporate debt securities and commercial paper. The Company determines the appropriate classification of its marketable securities at the time of purchase and reevaluates such designation at each balance sheet date. The Company has classified and accounted for its marketable securities as available-for-sale securities as the Company may sell these securities at any time for use in its current operations or for other purposes, even prior to maturity. As a result of sales and maturities of the Company’s previously outstanding investment portfolio during the fiscal year ended December 31, 2019, there are no marketable securities within the consolidated balance sheets as of the fiscal years ended December 31, 2021 and 2020.

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Accounts receivable and allowance for doubtful accounts—Accounts receivable represent amounts owed to the Company for enterprise subscriptions. Also included in accounts receivable are amounts due from payment processors or mobile application store partners that settle over a period longer than five business days. Accounts receivable balances are recorded at the invoiced amount and are non-interest-bearing.

Accounts receivable are presented net of allowances for doubtful accounts. Management assesses the Company’s ability to collect outstanding receivables and records allowances when collection becomes doubtful. The provision for bad debt is recorded in general and administrative expenses in the accompanying consolidated statements of operations. These estimates are based on the assessment of the credit worthiness of the Company’s customers based on multiple sources of information and analysis of such factors as the Company’s historical collection experience and industry and geographic concentrations of credit risk. Accounts receivable deemed to be uncollectible are written off, net of any amounts that may be collected.

Balance at Beginning of PeriodCharged to ExpensesCharges Utilized/Written-offBalance at End of Period
Allowance for doubtful accounts
Year Ended December 31, 2019
$422 $642 $(482)$582 
Year Ended December 31, 2020
$582 $182 $(121)$643 
Year Ended December 31, 2021
$643 $326 $(291)$678 

Concentration of credit risk—Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash and cash equivalents, restricted cash, and accounts receivable. For cash, cash equivalents, and restricted cash, the Company is exposed to credit risk in the event of default by the financial institutions to the extent the amounts recorded on the accompanying consolidated balance sheets are in excess of federal insurance limits.
The Company generally does not require collateral or other security in support of accounts receivable. To reduce credit risk, management performs ongoing evaluations of its customers’ financial condition. The Company analyzes the need for reserves for potential credit losses and records allowances for doubtful accounts when necessary. The Company had no customer which accounted for more than 10% of total accounts receivable as of December 31, 2021 and as of December 31, 2020. No customer accounted for more than 10% of total revenue during the fiscal years ended December 31, 2021, 2020 and 2019.
Deferred offering costs—Deferred offering costs consist of direct and incremental legal, accounting, and other fees related to the Company’s initial public offering (“IPO”). In prior periods, these costs were capitalized in the prepaid expenses and other current assets caption on the consolidated balance sheets. Upon completion of the IPO, the deferred offering costs were offset against IPO proceeds within additional paid in capital in the consolidated balance sheet.

Deferred contract costs—Sales commissions earned by the Company’s sales force are considered incremental and recoverable costs of obtaining a contract with a customer. These costs are deferred and then amortized on a straight-line basis over a period of benefit which is determined to be four years. The Company determined the period of benefit by taking into consideration the length of terms in its customer contracts, changes and enhancements in course offerings, and other factors. In addition, a portion of the revenue share retained by enterprise reseller partners from sales to UB customers is considered an incremental and recoverable cost of obtaining a contract with a customer. This cost is deferred and amortized on a straight-line basis over the service term of the corresponding contractual subscription term.

Amounts expected to be recognized within one year of the consolidated balance sheet dates are recorded as deferred contract costs, current, while the remaining portion is recorded as deferred contract costs, non-current in the consolidated balance sheets. Deferred contract costs are periodically analyzed for impairment. Amortization expense is included in sales and marketing expenses in the accompanying consolidated statements of operations.

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Property and equipment, net—Property, equipment, and purchased software are stated at cost, less accumulated depreciation and amortization. Depreciation is computed using the straight-line method over the estimated useful lives of the respective assets, which are generally three years for computers, purchased software, and equipment, and five years for furniture and fixtures. Leasehold improvements are amortized using the straight-line method over the shorter of the estimated useful lives of the assets or the term of the related lease. Expenditures for repairs and maintenance are charged to expense as incurred. Upon disposition or retirement, the cost and related accumulated depreciation are removed from the accounts and the resulting gain or loss, if any, is reflected as operating expenses in the consolidated statements of operations.

Capitalized software, net—The Company capitalizes costs to develop software for internal use incurred during the application development stage. Costs related to preliminary project activities and post implementation activities are expensed as incurred. Once an application has reached the development stage, qualifying internal and external costs are capitalized until the software feature is substantially complete and ready for its intended use. Capitalized qualifying costs are amortized on a straight-line basis when the software is ready for its intended use over an estimated useful life, which is generally three years. The Company evaluates the useful lives of these assets and test for impairment whenever events or changes in circumstances occur that could impact the recoverability of these assets.

Goodwill and intangible assets—Intangible assets are amortized over their estimated useful lives. Each period, the Company evaluates the estimated remaining useful life of its intangible assets and whether events or changes in circumstances warrant a revision to the remaining period of amortization. Management tests for impairment whenever events or changes in circumstances occur that could impact the recoverability of these assets.

Goodwill represents the excess purchase price over net assets acquired in the Company’s business combinations. The Company evaluates and tests the recoverability of its goodwill for impairment at least annually during its fourth quarter of each fiscal year or more often if and when circumstances indicate that goodwill may not be recoverable.

Impairment of long-lived assets—The Company evaluates the carrying value of long-lived assets, such as property and equipment, whenever events or changes in circumstances indicate that the carrying value of the asset may not be recoverable. An impairment loss is recognized when estimated undiscounted future cash flows expected to result from the use of the asset, including disposition, are less than the carrying value of the asset. The impairment to be recognized is measured by the amount by which the carrying amount exceeds the fair value of the assets. The Company did not identify any impairment losses on long-lived assets for fiscal years ended December 31, 2021, 2020 and 2019.

Deferred revenue—The Company records contract liabilities to deferred revenue for amounts billed to customers in advance of the performance obligations being satisfied, and primarily consists of the unearned portion of enterprise and consumer services. The Company also recognizes an immaterial amount of contract assets, or unbilled receivables, primarily relating to consideration for services completed but not billed at the reporting date. Unbilled receivables are classified as receivables when the Company has the right to invoice the customer.

Fair value of financial instruments—The Company considers fair value as the exchange price that would be received for an asset or paid to transfer a liability, an exit price, in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. Valuation techniques used to measure fair value are either observable or unobservable. Observable inputs reflect assumptions that market participants would use in pricing an asset or liability based on market data obtained from independent sources, while unobservable inputs reflect a reporting entity’s pricing based on their own market assumptions.

The Company utilizes the following three-level fair value hierarchy to establish the priorities of the inputs used to measure fair value:

Level 1—Unadjusted quoted prices in active markets for identical assets or liabilities;

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Level 2—Inputs are observable, unadjusted quoted prices for similar assets or liabilities in an active market, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable and market-corroborated inputs which are derived principally from or corroborated by observable market data; and

Level 3—Inputs are derived from valuation techniques in which one or more significant inputs or value drivers are unobservable.

The carrying amounts of cash, cash equivalents, restricted cash, and accounts receivable, as well as accounts payable, approximate fair value due to the relatively short-term maturities and are classified as short-term assets and liabilities, respectively, in the accompanying consolidated balance sheets.

The fair value measurements of assets that are measured at fair value on a recurring basis are as follows (in thousands):

Fair Value Hierarchy
Level 1Level 2Level 3
Year Ended December 31, 2020
Strategic investments$ $ $ 
Total as of December 31, 2020
$ $ $ 
Year Ended December 31, 2021
Strategic investments$ $ $10,000 
Total as of December 31, 2021
$ $ $10,000 

The fair value measurements liabilities that are measured at fair value on a recurring basis are as follows (in thousands):
Fair Value Hierarchy
Level 1Level 2Level 3
Year Ended December 31, 2020
Cash settled stock appreciation rights$ $ $268 
Redeemable convertible preferred stock warrants  160
Total as of December 31, 2020
$ $ $428 
Year Ended December 31, 2021
Cash settled stock appreciation rights$ $ $818 
Total as of December 31, 2021
$ $ $818 

Warrants issued for the Company’s redeemable convertible preferred stock were subject to remeasurement at each balance sheet date and any change in fair value was recognized as a component of other income (expense), net. The Company adjusted the liability for changes in fair value until the earlier of the exercise or expiration of the warrants or the completion of a liquidation event, including the closing of a qualifying initial public offering, at which time all redeemable convertible preferred stock warrants would be converted into warrants to purchase common stock and, accordingly, the liability would be reclassified to stockholders’ equity (deficit). As of December 31, 2021, the Company no longer had outstanding redeemable convertible preferred stock warrants.

The Company measured the redeemable convertible preferred stock warrants using Level 3 unobservable inputs within the Black-Scholes option-pricing model. The Company used various key assumptions, such as the fair value of redeemable convertible preferred stock, volatility, the risk-free interest rate, and expected term (remaining contractual term of the warrants). The Company monitored the fair value of the redeemable
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convertible preferred stock warrants annually, with subsequent gains and losses from remeasurement of Level 3 financial liabilities recorded through other income (expense), net in the consolidated statements of operations. Generally, increases (decreases) in the fair value of the underlying stock and estimated term would result in a directionally similar impact to the fair value measurement.

See Note 2 “Summary of Significant Accounting Policies—Stock-Based Compensation” for the valuation methodology and inputs used to measure the fair value of the stock appreciation rights.

See Note 2 “Summary of Significant Accounting Policies—Strategic Investments” for the valuation methodology and inputs used to measure the fair value of the strategic investments.

In January 2010, the Company issued warrants to purchase up to 1,562,689 shares of the Company’s Series A-1 redeemable convertible preferred stock at an exercise price of $0.196 per share. The initial term of the warrant was five years from the issuance of Series A-1, which occurred in September 2011, and had an automatic extension for an additional five years if the Company was not public by the original expiration date. Prior to the years ended December 31, 2020 and 2019, 1,550,094 of the warrants had been exercised. As of December 31, 2020 and 2019, 12,595 warrants remained outstanding and were carried at fair value in accrued expenses and other current liabilities and other liabilities, respectively, on the consolidated balance sheets.

The remaining outstanding 12,595 warrants were exercised on January 20, 2021 for an immaterial amount of cash proceeds, at which time the Company reclassified the $0.2 million fair value of the warrants into Series A-1 redeemable convertible preferred stock on the consolidated balance sheet. The change in fair value of the warrants between December 31, 2020 and the exercise date was immaterial.

A summary of the changes in the fair value of Level 3 financial instruments, of which changes in warrant fair value and vesting and remeasurement of stock appreciation rights are recognized in the consolidated statements of operations, is as follows (in thousands):

WarrantsSARsStrategic InvestmentsTotal
Balance—January 1, 2019$50 $— $— $50 
Change in fair value of redeemable convertible preferred stock warrants58 — — 58 
Vesting and remeasurement of stock appreciation rights— 36 — 36 
Balance—December 31, 2019
108 36 — 144 
Change in fair value of redeemable convertible preferred stock warrants52 — — 52 
Vesting and remeasurement of stock appreciation rights— 232 — 232 
Balance—December 31, 2020
160 268  428 
Exercise of redeemable convertible preferred stock warrants(160)— (160)
Vesting and remeasurement of stock appreciation rights— 550 — 550 
Purchases of strategic investments— — 10,000 10,000 
Balance—December 31, 2021
$ $818 $10,000 $10,818 


Strategic investments— The Company holds an investment in equity securities of a privately held company without a readily determinable fair value and in which the Company does not have a controlling interest. Investments in equity securities without readily determinable fair values are initially recorded at cost and are subsequently adjusted to fair value for impairments and price changes from observable transactions in the same or a similar security from the same issuer. This practice is referred to as the measurement alternative.

Privately held equity securities are valued using significant unobservable inputs or data in inactive markets. This valuation requires judgment due to the absence of market prices and inherent lack of liquidity and are classified
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as Level 3 in the fair value hierarchy. In determining the estimated fair value of investments in privately held companies, the Company utilizes the most recent data available including observed transactions such as equity financing transactions of the investees and sales of the existing shares of the investees’ securities. In addition, the determination of whether an observed transaction is similar to the equity securities held by the Company requires significant management judgment based on the rights and preferences of the securities.

The Company assesses its investment portfolio of privately held equity securities quarterly for impairment. The impairment analysis for investments in equity securities includes a qualitative analysis of factors including the investee’s financial performance, industry and market conditions, and other relevant factors. If an equity investment is considered to be impaired the Company will establish a new carrying value for the investment and recognize an impairment loss through the consolidated statement of operations.

Redeemable convertible preferred stock—The redeemable convertible preferred stock issued by the Company provides the preferred stockholders certain rights regarding events that are outside the control of the Company. This includes the right to redeem the preferred stock upon a specified passage of time or upon the occurrence of certain deemed liquidation events where the holders of the preferred stock are entitled to receive cash or other assets. As such, the redeemable convertible preferred stock is classified as mezzanine (or temporary) equity as it contains terms that could force the Company to redeem the shares for cash or other assets upon the occurrence of an event not solely within the Company’s control. The Company’s series of redeemable convertible preferred stock represent equity instruments in legal form, are not mandatorily redeemable financial instruments, and do not constitute unconditional obligations that may require issuance of a variable number of the Company’s shares. Furthermore, since the series of redeemable convertible preferred stock are neither currently redeemable nor probable of becoming redeemable, no subsequent remeasurement of the amounts presented outside of stockholders’ equity (deficit) is required.

Business combinations—In accordance with applicable accounting standards, the Company estimates the fair value of acquired assets and assumed liabilities as of the acquisition date of business combinations. The purchase consideration is allocated to the tangible assets acquired, liabilities assumed, and intangible assets acquired based on their estimated fair values. The purchase price is determined based on the fair value of the assets transferred, liabilities assumed, and equity interests issued, after considering any transactions that are separate from the business combination. The excess of fair value of purchase consideration over the fair values of the identifiable assets and liabilities is recorded as goodwill. Such valuations require management to make significant estimates and assumptions, especially with respect to intangible assets and deferred revenue. Significant estimates in valuing certain intangible assets include, but are not limited to, future expected cash flows from acquired customer relationships and developed technology, costs to recreate acquired vendor relationships, royalty rates, and discount rates.

The estimates are inherently uncertain and subject to revision as additional information is obtained during the measurement period for an acquisition, which may last up to one year from the acquisition date. During the measurement period, management may record adjustments to the fair value of tangible and intangible assets acquired and liabilities assumed, with a corresponding offset to goodwill. After the conclusion of the measurement period or the final determination of the fair value of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recorded to earnings.

Recently adopted accounting pronouncements—In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606), amending revenue recognition guidance and requiring more detailed disclosures to enable users of financial statements to understand the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The Company adopted ASC 606 on January 1, 2019, by applying the modified retrospective approach to all contracts that were not completed as of January 1, 2019. The Company applied the practical expedient in Topic 606 and did not evaluate contracts of one year or less for the existence of a significant financing component. The Company recorded an increase in total assets of $6.7 million and a reduction of accumulated deficit of $6.7 million as of January 1, 2019, which is attributed to the deferral of sales commission costs.

In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows. The standard requires that the statements of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. The Company adopted the ASU on January 1, 2019. As a result of adopting the ASU, the Company includes restricted cash with cash and cash
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equivalents when reconciling the beginning-of-period and end-of-period total amounts presented on the statements of consolidated cash flows.

In July 2018, the FASB issued ASU No. 2018-09, Codification Improvements, which clarifies, corrects errors in and makes improvements to several topics in the FASB ASC. The transition and effective date guidance is based on the facts and circumstances of each amendment. Some of the amendments do not require transition guidance and were effective upon issuance of the ASU. This ASU is effective for the Company for its fiscal year ended December 31, 2020. The Company adopted the ASU on January 1, 2020. The adoption of this ASU did not have a material impact on the Company’s consolidated financial statements.
In June 2018, the FASB issued ASU No. 2018-07, Compensation-Stock Compensation (Topic 718): Improvements to Non-employee Share-Based Payment Accounting. The updated guidance simplifies the accounting for non-employee share-based payment transactions. The amendments in the new guidance specify that Topic 718 applies to all share-based payment transactions in which a grantor acquires goods or services to be used or consumed in a grantor’s own operations by issuing share-based payment awards. This ASU is effective for the Company for its fiscal year ended December 31, 2021, with early adoption permitted. The Company early-adopted the ASU on January 1, 2020. The Company was required to remeasure any liability-classified non-employee awards that have not been settled as of the adoption date through a cumulative-effect adjustment to retained earnings as of the beginning of the fiscal year of adoption. The adoption of this ASU did not have a material impact on the consolidated financial statements.
In August 2018, the FASB issued ASU 2018-13, Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement (Topic 820). ASU 2018-13 modifies the disclosure requirements for fair value measurements by removing, modifying, or adding certain disclosures. The ASU was effective for the Company beginning in its fiscal year ending December 31, 2020. The Company adopted the ASU on January 1, 2020. The adoption of this ASU did not have a material impact on the consolidated financial statements.
The Company is an emerging growth company (“EGC”), as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). Under the JOBS Act, EGCs can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act until those standards apply to private companies. The Company has elected to use this extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date that it (i) is no longer an EGC or (ii) affirmatively and irrevocably opts out of the extended transition period provided in the JOBS Act. As a result, the consolidated financial statements may not be comparable to companies that comply with the new or revised accounting pronouncements as of public company effective dates.

In August 2018, the FASB issued ASU No. 2018-15, Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract. The ASU aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. The Company adopted the standard with an effective date of January 1, 2021 using the prospective transition adoption approach. Capitalized implementation costs are recorded in prepaid expenses and other current assets and other assets in the consolidated balance sheet. The adoption of this ASU did not have a material impact on the consolidated financial statements.
New accounting pronouncements not yet adopted—In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). This standard introduces the new leases standard that applies a right-of-use (“ROU”) model and requires a lessee to record, for all leases with a lease term of more than 12 months, an asset representing its right to use the underlying asset and a liability to make lease payments. At inception, lessees must classify all leases as either finance or operating based on five criteria. Balance sheet recognition of finance and operating leases is similar, but the pattern of expense recognition in the income statement, as well as the effect on the statement of cash flows, differs depending on the lease classification. In June 2020, the FASB issued ASU No. 2020-05 in 2020, Effective Dates for Certain Entities, which deferred the effective date for nonpublic entities, including EGCs, that had not yet adopted the original ASU. Under the amended guidance, the leasing standard will be effective for the Company’s fiscal year beginning after December 15, 2021, and early adoption is still permitted.

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The Company expects to use the modified retrospective approach upon adoption. The Company also plans to elect the package of practical expedients, the use of hindsight in determining the lease term, and the practical expedient to not recognize a ROU asset or lease liability for leases with a term of 12 months or less. The Company expects the impact of adopting this standard will result in the recognition of between $16.5 million to $19.0 million in operating ROU assets and between $19.0 million to $21.0 million in operating lease liabilities in its condensed consolidated balance sheets. The difference between the amounts of operating ROU assets and operating lease liabilities consists of deferred rent and prepaid rent to be derecognized upon transition. The transition is not expected to have a cumulative impact to retained earnings on the adoption date, and the Company expects the impact of adoption to the consolidated statements of operations to be immaterial.
In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which replaces the existing incurred loss impairment model with an expected credit loss model and requires a financial asset measured at amortized cost to be presented at the net amount expected to be collected. The FASB issued ASU 2019-10 in November 2019, which deferred the effective date for nonpublic entities, including EGCs, that had not yet adopted the original ASU. Under the amended guidance, the standard will be effective for the Company’s fiscal year beginning after December 15, 2022, and early adoption is still permitted. The Company is currently assessing the potential impact of the new standard on the Company’s consolidated financial statements.
In December, 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740), Simplifying the Accounting for income Taxes, which simplifies the accounting for income taxes by removing certain exceptions to the general principles of income taxes and reducing the cost and complexity in accounting for income taxes. The ASU is effective for the Company’s fiscal year beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022. The Company is currently assessing the potential impact of the new standard on the Company’s consolidated financial statements.

In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805), Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, which aims to improve the accounting for acquired revenue contracts with customers in a business combination by addressing diversity in
practice and inconsistency related to (1) recognition of an acquired contract liability and (2) payment terms and their effect on subsequent revenue recognized by the acquirer. The ASU is effective for the Company’s fiscal year beginning after December 15, 2022. Early adoption of the amendments is permitted, including adoption in an interim period.

3. Revenue recognition

Deferred revenueRevenue recognized during the fiscal year ended December 31, 2021 from amounts included in deferred revenue as of December 31, 2020 was $139.5 million. Revenue recognized during the fiscal year ended December 31, 2020 from amounts included in deferred revenue as of December 31, 2019 was $83.4 million. Revenue recognized during the fiscal year ended December 31, 2019 from amounts included in deferred revenue as of December 31, 2018 was $62.4 million.

The below table presents a summary of deferred revenue balances by reportable segment (in thousands):
December 31,December 31,
20212020
Deferred revenue:
Enterprise$148,966 $84,241 
Consumer61,588 58,135 
Total deferred revenue$210,554 $142,376 

Remaining performance obligationsRemaining performance obligations represent the aggregate amount of the transaction price in contracts for performance obligations not delivered, or partially undelivered, as of the end of the reporting period. Remaining performance obligations relate to unearned revenue from consumer single course purchase arrangements and unearned and unbilled revenue from multi-year enterprise subscription contracts with future installment payments at the end of any given period. As of December 31,
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2021, the aggregate transaction price for remaining performance obligations was $329.1 million, of which 73% is expected to be recognized during over the next twelve months and the remainder thereafter.

Deferred contract costsThe following table represents a rollforward of the Company’s deferred contract costs (in thousands):
Balance at Beginning of PeriodAdditionsAmortization ExpenseBalance at End of Period
Year ended December 31, 202125,837 36,509 (17,801)44,545 
Year ended December 31, 202014,380 18,943 (7,486)25,837 
Year ended December 31, 20196,733 10,685 (3,038)14,380 

4.Consolidated balance sheet components
Prepaid expenses and other current assets consist of the following (in thousands):
December 31,December 31,
20212020
Prepaid expenses$12,465 $4,904 
Capitalized cloud computing costs, short term808  
Short term deposits745  
Other current assets1,909 1,132 
Prepaid expenses and other current assets$15,927 $6,036 

Property and equipment, net consisted of the following (in thousands):
December 31,December 31,
20212020
Computers and equipment$6,798 $6,171 
Furniture and fixtures4,701 4,181 
Purchased software383 280 
Leasehold improvements18,932 15,164 
Construction in progress18 16 
Total property and equipment30,832 25,812 
Less accumulated depreciation and amortization(20,945)(16,706)
Property and equipment, net$9,887 $9,106 
Depreciation and amortization expense was $4.5 million, $4.2 million, and $3.8 million for the fiscal years ended December 31, 2021, 2020 and 2019, respectively.
Capitalized software consisted of the following (in thousands):
December 31,December 31,
20212020
Capitalized software$43,804 $28,472 
Less accumulated amortization(23,750)(14,459)
Capitalized software, net$20,054 $14,013 
Amortization expense of capitalized software was $9.3 million, $6.9 million and $4.9 million for the fiscal years ended December 31, 2021, 2020 and 2019, respectively.

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As of December 31, 2021, expected amortization expense for capitalized software over the remaining asset lives is as follows (in thousands):
2022$9,723 
20237,328 
20243,003 
Total expected amortization$20,054 

5. Strategic investments

In October 2021, the Company made a strategic investment of $10.0 million in cash for preferred shares of privately held online education platform technology company. The estimation of fair value for this investment requires the use of significant unobservable inputs, and as a result, the Company classifies this investment as Level 3 within the fair value hierarchy.

The carrying value of this investment is adjusted based on price changes from observable transactions of identical or similar securities of the same issuer (referred to as the measurement alternative) or for impairment. Any changes in carrying value are recorded within other income (expense), net in the consolidated statements of operations. As of December 31, 2021, there have been no observable transactions that would cause the Company to adjust the carrying amount investment, resulting in no realized or unrealized gains or losses for the fiscal year ended December 31, 2021.

The Company evaluates this investment for impairment at each reporting period based on a qualitative assessment that considers various potential impairment indicators. This evaluation consists of several factors including, but not limited to, an assessment of a significant adverse change in the economic environment, significant adverse changes in the general market condition of the geographies and industries in which the investee operates, and other publicly available information that affects the value of the investment. No adverse factors were noted in the Company’s assessment performed as of December 31, 2021, resulting in no impairment losses during the fiscal year ended December 31, 2021.

The company did not own any strategic investments as of December 31, 2020.
6. Business combinations
On August 24, 2021, the Company completed its acquisition of CorpU, an online learning platform and content catalog focused on blended executive training. The acquisition is intended to deepen the Company’s UB offerings through CorpU’s cohort-based learning in scalable, virtual environments. The transaction has been accounted for as a business combination.

The purchase price was $28.6 million, of which $27.1 million was paid at closing with the remaining balance recorded in the accrued expenses and other current liabilities caption of the accompanying consolidated balance sheets. The remaining balance is expected to be paid in August 2022 after adjustment for any indemnification losses incurred by the Company for which it is entitled to recover.

The Company issued 61,300 shares of restricted common stock to a former executive of CorpU, which is not included in the calculation of the acquisition purchase price, and is accounted for as post-acquisition stock-based compensation over a three year term.

The total purchase consideration of the CorpU acquisition was allocated to the tangible and intangible assets acquired, and liabilities assumed, based upon their respective fair values as of the date of the acquisition. Management determined the preliminary fair values based on a number of factors, including a valuation from an independent third-party valuation firm. The excess of the purchase price over the net assets acquired was recorded as goodwill. Goodwill is attributable to the assembled workforce and anticipated synergies arising from the acquisition, and has been allocated to the Enterprise reporting segment for the purposes of annual impairment testing. The goodwill recorded in the acquisition is not expected to be deductible for income tax purposes.
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The assets acquired and liabilities assumed were recorded at fair value as follows (in thousands):
Cash and cash equivalents$2,641 
Accounts receivable, net250 
Prepaid expenses and other current assets67 
Property and equipment, net133 
Intangible assets15,100 
Goodwill12,646 
Accounts payable and other liabilities(596)
Deferred revenue(1,610)
Total acquisition consideration$28,631 

The Company has included the financial results of CorpU in the consolidated financial statements from the date of acquisition, which for the fiscal year ended December 31, 2021 was not material. The business combination does not qualify as an acquisition of a significant business, and therefore pro forma financial statements were not required. Acquisition costs of $0.3 million are included in general and administrative expenses in the consolidated financial statements for fiscal year ended December 31, 2021.

7. Intangible assets, net and goodwill

As of December 31, 2021, intangible assets, net acquired as part of the CorpU business combination were as follows (in thousands):
Estimated Useful LivesIntangible Assets, GrossAccumulated AmortizationIntangible Assets, Net
Customer relationships6 years$5,500 $(323)$5,177 
Vendor relationships 3 years4,500 (529)3,971 
Developed technology3 years4,200 (493)3,707 
Tradename2 years900 (158)742 
Total