Note 10. Restructuring In June 2023, we announced a reduction in workforce to better position the Company to execute against its AI strategy and to create long-term, sustainable value for its students and investors. This resulted in a management approved restructuring plan that impacted approximately 90 employees primarily in the United States. During the nine months ended September 30, 2023, we recorded restructuring charges of $5.7 million related to one-time employee termination benefits classified on ou ...

Financial Data and Key Metrics Changes - Total revenue for Q2 was $183 million, driven by subscription services revenue of $166 million, with approximately 4.8 million subscribers on the platform [48][49] - Adjusted EBITDA was $60 million, representing a 33% margin, exceeding guidance [49] - Free cash flow was $56 million, attributed to strong operating performance and higher interest rates, with interest income contributing $10.7 million [49] - The company ended the quarter with $808 million in cash and investments, and total convertible debt outstanding was $773 million, resulting in $35 million of net cash [51] Business Line Data and Key Metrics Changes - Subscription services revenue was $166 million, while sales and other revenue was $17 million, driven by strong growth in skills [49] - The gross margin was 74%, slightly higher than expected, contributing to the adjusted EBITDA beat [49] Market Data and Key Metrics Changes - The company noted that new account growth had improved, with a significant increase in engagement and retention rates observed in Q2 [72][120] - The U.S. market remains the primary focus, with summer school being predominantly a U.S. experience [86] Company Strategy and Development Direction - The company is rapidly pivoting to leverage AI advancements, believing that strong brand loyalty and valuable data sets can drive growth [72][73] - Chegg plans to build its own large language models (LLMs) to create a differentiated learning experience, utilizing proprietary data and subject matter experts [52][77] - The new Chegg experience will roll out over the next two semesters, combining generative AI with Chegg's proprietary solutions [76][81] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in returning to growth, with positive trends in customer acquisition and retention [31][120] - The company anticipates that the impact of new AI capabilities will enhance its competitive position and improve margins over time [55][95] Other Important Information - The company repurchased $427 million of its outstanding convertible debt and used some savings to retire 3.4 million shares of common stock for approximately $35 million [51] - The company expects Q3 total revenue to be between $151 million and $153 million, with subscription services revenue between $135 million and $137 million [53] Q&A Session Summary Question: How will the new AI experience differ from CheggMate? - The new AI experience will be integrated into Chegg's existing platform, enhancing user experience with personalized learning based on extensive data [60][62] Question: Are there different trends in subscribers between the U.S. and overseas markets? - Most data is U.S.-based, but international testing has shown similar positive engagement trends [86] Question: What are the implications of the new strategy on costs and investments? - The new strategy is expected to be more cost-effective, potentially increasing margins and reducing capital expenditures over time [95][96] Question: What is the timeline for the rollout of new payment capabilities? - The new payment capability is set to launch this month, which is expected to positively impact subscriber growth [108] Question: What is the outlook for subscriber counts moving forward? - While Q2 subscriber counts were lighter than expected, improvements in retention and new account growth are anticipated as the year progresses [149][150]

FORM 10-Q Table of Contents Unless the context requires otherwise, the words "we," "us," "our," "Company" and "Chegg" refer to Chegg, Inc. and its subsidiaries taken as a whole. NOTE ABOUT FORWARD-LOOKING STATEMENTS Table of Contents Table of Contents Table of Contents 6 | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | |------------------------------------------------------------------------------------|---------------------------|-----------------------------|-------|-------|------------ ...

Financial Data and Key Metrics Changes - Total revenue for Q1 2023 was $188 million, driven by subscription services revenue of $168 million, with approximately 5.1 million subscribers on the platform [11][12] - Adjusted EBITDA was $58 million, representing a 31% margin, and free cash flow was $56 million, benefiting from strong operating performance and higher interest rates [27][28] - The company ended the quarter with $1.2 billion in cash and investments, and entered into a $150 million accelerated share repurchase agreement, expected to reduce outstanding shares by approximately 7% [12][28] Business Line Data and Key Metrics Changes - Subscription services revenue was $168 million, while skills and other revenue was $19 million, driven by strong growth in skills, offset by a change in the required materials model [11] - The company is focusing on expanding its skills business, with new offerings and partnerships, including language learning and leadership programs [7][54] Market Data and Key Metrics Changes - Q1 2023 saw an all-time high for app acquisitions in Mexico, attributed to the rollout of a localized app [9] - The company plans to introduce a new payment system for India to capture customers during the peak back-to-school season [9] Company Strategy and Development Direction - The introduction of CheggMate, in collaboration with OpenAI, aims to enhance personalized learning experiences by combining AI technology with Chegg's proprietary data and subject matter expertise [6][10] - The company is prioritizing investments in AI and skills, with a focus on improving learning outcomes and expanding its market presence [10][54] - Chegg is committed to maintaining industry-leading margins and cash flows while making necessary adjustments to its cost structure [50][108] Management's Comments on Operating Environment and Future Outlook - Management noted a significant spike in student interest in ChatGPT since March, impacting new customer growth, but retention rates remain strong [5][22] - The company is cautious in its forward outlook due to recent industry developments, providing guidance only for the next quarter [13][41] - Management emphasized the importance of adapting to technological shifts and leveraging AI to enhance the user experience and maintain competitive advantages [23][72] Other Important Information - The company is focusing on localization efforts to make services more accessible in various markets, including India, Turkey, Mexico, and South Africa [9][66] - CheggMate is expected to launch in beta later this month, with plans for rapid iteration and feedback incorporation [24][70] Q&A Session Summary Question: What happened in March regarding ChatGPT's impact? - Management noted that the launch of ChatGPT in March led to a significant increase in usage, affecting new customer growth, but retention remains strong [30][74] Question: Can you discuss the Skills business and its strategic vision? - Management highlighted the positive performance of the Skills business and the potential for substantial growth, particularly through partnerships with companies like Guild [54][90] Question: How is the company planning to manage costs while investing in AI? - Management indicated that investments in AI would replace some content costs, allowing for more efficient operations while maintaining high margins [34][50] Question: What are the expectations for CheggMate's rollout? - Management expressed excitement about the rapid rollout of CheggMate, emphasizing the need for constant iteration and feedback to enhance the product [70][76] Question: How does the competitive landscape look with the rise of AI solutions? - Management believes that Chegg's unique data, content, and user experience will provide a competitive edge over other vendors leveraging AI [72][74]

Forward-Looking Statements developments, including pricing pressures and other services targeting students; Chegg's ability to build and expand its services offerings; Chegg's ability to integrate acquired businesses and assets; the impact of seasonality and student behavior on the business; the outcome of any current litigation and investigations; Chegg's ability to effectively control operating costs; changes in Chegg's addressable market; regulatory changes, in particular concerning privacy, marketing, a ...

Financial Performance - Net revenues for the three months ended March 31, 2023, were $187.6 million, a decrease of 7.3% from $202.2 million in the same period of 2022[113]. - Subscription Services revenues accounted for 90% of net revenues in Q1 2023, up from 86% in Q1 2022[110]. - Gross profit for Q1 2023 was $138.5 million, representing a gross margin of 74%, compared to $147.2 million and a 73% margin in Q1 2022[113]. - Total operating expenses for Q1 2023 were $142.9 million, slightly up from $141.8 million in Q1 2022, resulting in an operating loss of $4.4 million compared to an income of $5.4 million in the prior year[113]. - Net income for Q1 2023 was $2.2 million, a significant decrease from $5.7 million in Q1 2022, reflecting a net margin of 1% compared to 3%[113]. Cash Flow and Liquidity - Net cash provided by operating activities for the three months ended March 31, 2023, was $73.2 million, down from $80.0 million in the same period of 2022, reflecting a decrease of approximately 8.5%[59][60]. - Net cash used in investing activities during the three months ended March 31, 2023, was $106.8 million, compared to $363.1 million in the same period of 2022, indicating a significant reduction of approximately 70.7%[61][62]. - Net cash used in financing activities for the three months ended March 31, 2023, was $158.9 million, primarily due to common stock repurchases of $151.3 million[63]. - As of March 31, 2023, the company's principal sources of liquidity included cash, cash equivalents, and investments totaling $1.2 billion[149]. - The company anticipates that existing sources of liquidity will be sufficient to fund operations and debt service obligations for at least the next 12 months[146]. Debt and Interest Expenses - The estimated fair value of the 2026 notes as of March 31, 2023, was $393.1 million, an increase from $385.0 million as of December 31, 2022[52]. - The estimated fair value of the 2025 notes as of March 31, 2023, was $617.7 million, down from $640.5 million as of December 31, 2022[52]. - The company issued $1.0 billion in aggregate principal amount of 0% convertible senior notes due in 2026 and $700 million in 0.125% convertible senior notes due in 2025[53]. - The total interest expense recognized related to the 2026 notes for the three months ended March 31, 2023, was $325, compared to $650 in the same period of 2022[69]. - The total interest expense recognized related to the 2025 notes for the three months ended March 31, 2023, was $948, slightly up from $947 in the same period of 2022[69]. Operating Expenses - Research and development expenses for Q1 2023 were $46.9 million, down from $52.4 million in Q1 2022, representing 25% of total revenues[113]. - Sales and marketing expenses decreased by $5.5 million, or 13%, to $37.0 million, accounting for 20% of net revenues[138]. - General and administrative expenses increased by $12.1 million, or 26%, to $59.0 million, representing 31% of net revenues[139]. - Share-based compensation expense totaled $33.7 million in Q1 2023, compared to $33.1 million in Q1 2022[113]. Share Repurchase and Investments - The company entered into an accelerated share repurchase agreement for $150.0 million, resulting in the immediate retirement of approximately 7.6 million shares[102]. - As of March 31, 2023, the company had $492.6 million remaining under its $2.0 billion share repurchase program[104]. - The company has committed $15.0 million to invest in Sound Ventures AI Fund, L.P., focusing on artificial intelligence companies[117]. Other Income and Changes - Other income, net increased by $5.9 million, or 95%, primarily due to an increase in interest income of $9.8 million[140]. - The company experienced an adverse impact on subscriber acquisitions due to increased student interest in artificial intelligence technologies[118]. - The company experienced cumulative losses of $68.4 million from operations as of March 31, 2023[144]. - No material changes in contractual obligations were reported aside from operating lease obligations[145].

Outside of Europe, other laws further regulate behavioral, interest-based, or tailored advertising, making certain online advertising activities more difficult and subject to additional scrutiny. For example, the CCPA grants California residents the right to opt-out of a company's sharing of personal data for advertising purposes in exchange for money or other valuable consideration. As individuals become increasingly aware of and resistant to the collection, use, and sharing of personal information in conn ...

Chegg, Inc. (NYSE:CHGG) Q4 2022 Results Conference Call February 6, 2023 4:30 PM ET Company Participants Tracey Ford - Vice President of Investor Relations & ESG Dan Rosensweig - Co-Chairperson & Chief Executive Officer Andy Brown - Chief Financial Officer Conference Call Participants Jeff Silber - BMO Capital Markets Bryan Smilek - JP Morgan Stephen Sheldon - William Blair Josh Baer - Morgan Stanley Ryan MacDonald - Needham & Company Mike Grondahl - Northland Securities Jason Celino - KeyBanc Capital Marke ...

Q3-22 Investor Presentation Nov 1, 2022 Safe Harbor Statement Forward-Looking Statements This presentation contains forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements relate to expectations, beliefs, projections, future plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts. In some cases, you can identify forward-looking statements by r ...

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