Income taxes

9 Months Ended

Sep. 30, 2024

Income Tax Disclosure [Abstract]

Income taxes

8. Income taxes

The provision for income taxes for interim periods is determined using an estimate of the Company’s annual effective tax rate, adjusted for discrete items, if any, that are taken into consideration in the relevant period. Each quarter, the Company updates the estimate of the annual effective tax rate, and if the estimated tax rate changes, the Company records a cumulative adjustment to the provision.

The Company had an effective tax rate of (3.54)% and (5.08)% for the three months ended September 30, 2024 and 2023, respectively, and (3.70)% and (3.48)% for the nine months ended September 30, 2024 and 2023, respectively. The difference between the 21% statutory federal tax rate and the effective tax rate was primarily a result of income earned in jurisdictions with higher statutory tax rates, foreign withholding taxes, and tax credits offset by change in valuation allowance.

As of September 30, 2024 and December 31, 2023, the Company has provided a valuation allowance against U.S. federal and state deferred tax assets. Management continues to evaluate the realizability of deferred tax assets and the related valuation allowance. If management's assessment of the deferred tax assets or the corresponding valuation allowance were to change, the Company would record the related adjustment to income during the period in which management makes the determination.

The Company recognizes interest and penalties associated with uncertain tax positions as part of the income tax provision. To date, the Company has not recognized any interest and penalties in its condensed consolidated statements of operations, nor has it accrued for or made payments for interest and penalties.

The Company is subject to taxation in the U.S. and various foreign jurisdictions. Due to NOL carryforwards and tax credit carryforwards, the statutes of limitations remain open for tax years from inception of the Company through 2023. There are currently no income tax audits underway by U.S. federal or state tax authorities. In October 2023, the Company’s subsidiary, Udemy India LLP received a tax assessment from the India Income Tax Department, for the fiscal year ended March 31, 2021. The assessment challenged the transfer pricing

methodology used by Udemy India LLP. The Company believes the proposed adjustment is without merit and will vigorously defend its position; however, it could take a number of years to reach resolution of this matter.