Udemy, Inc. (UDMY) Cash Flow Statement

The persistent gap between net income and operating cash flow is primarily attributable to stock-based compensation, which averaged $18.4M per quarter, and depreciation, which added roughly $6M quarterly. This suggests that reported losses overstate the cash consumption of the business, but investors should note that SBC represents real dilution to shareholders. The negative OCF/NI ratios in most quarters reflect the accounting losses, yet the underlying cash generation appears more resilient than GAAP results imply.

The FCF margin improved from negative territory in 2023Q4 to a positive 7.8% by 2026Q1, driven by stable operating cash flow and minimal capital expenditures. This suggests that the company has reached a cash flow inflection point, but the sustainability of this trajectory is questionable given the stagnant top line. The recent quarters show FCF ranging from $7.1M to $39.0M, with the 2025Q2 spike likely reflecting favorable working capital timing, which may not recur.

The extremely low capex-to-revenue ratio (0.1% to 1.2%) suggests that Udemy's primary investment is in content acquisition, which is treated as a variable cost rather than a fixed asset. This structure provides flexibility but may limit the company's ability to build proprietary content assets. The near-zero capex also means that free cash flow closely tracks operating cash flow, making working capital swings the primary driver of quarterly volatility.

The consistent negative working capital changes indicate that the company is using cash to fund receivables or pay down deferred revenue, which may reflect the timing of enterprise subscription billings. The 2025Q2 quarter saw a positive working capital contribution of $5.1M, which helped boost FCF, but this was an exception. Investors should monitor the deferred revenue balance, as it provides insight into enterprise momentum and may explain some of the working capital swings.

Buyback activity was concentrated in 2024, with $150.2M spent in the first three quarters, but slowed significantly in 2025 and 2026, with only $28.3M in 2025Q3 and $27.2M in 2025Q4. This suggests management may be conserving cash as growth decelerates. The lack of dividends and minimal acquisition activity implies that capital allocation is primarily directed toward operational needs and opportunistic buybacks, which may signal limited high-return investment opportunities.

The massive gap between cumulative net income and operating cash flow highlights the importance of non-cash charges, particularly SBC, which exceeded net losses in most periods. This suggests that while the company is generating cash, it is doing so at the cost of significant shareholder dilution. The divergence also indicates that the business may be more cash-generative than GAAP profitability suggests, but investors should adjust for the dilutive impact of SBC when valuing the company.