Q1-25 Investor Presentation May 12, 2025 © 2024 Chegg, Inc. / All Rights Reserved Safe Harbor Statement Forward-Looking Statements This press release contains forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, which include, without limitation, statements regarding our ongoing process to explore strategic alternatives and the outcome of such process; our newly announced restructuring plan, including the number of employees impacted ...

Financial Performance - Total net revenues for Q1 2025 were $121.4 million, a decrease of 30% year-over-year[6]. - Chegg reported a significant decline in revenue, with total revenue for Q1 2025 at $100 million, down 20% year-over-year[49]. - Net revenues for the three months ended March 31, 2025, were $121,387, a decrease of 30.4% compared to $174,350 in the same period of 2024[54]. - Gross profit for the same period was $67,414, down 47.4% from $127,853 year-over-year[54]. - The net loss for the three months ended March 31, 2025, was $17,484, compared to a net loss of $1,420 in the same period of 2024[54]. - Adjusted EBITDA for Q1 was $19.3 million, representing a margin of 16%[6][21]. - Adjusted EBITDA for the three months ended March 31, 2025, was $19,269, down 58.8% from $46,740 in the prior year[59]. - The company expects an adjusted EBITDA of $16,500 thousand for the three months ending June 30, 2025, which represents the midpoint of the guidance range of $16 million to $17 million[64]. Subscription Services - Subscription Services revenues were $107.6 million, also a decrease of 30% year-over-year, with 3.2 million subscribers, down 31% year-over-year[6][19]. - The company experienced a decrease in subscription services revenue, which accounted for $85 million, representing a 25% decline compared to the previous year[49]. - Chegg's outlook for Q2 2025 includes total revenue guidance of $95 million, with expectations for subscription services revenue to remain under pressure[49]. Cost Management and Restructuring - The company is implementing a restructuring plan that will result in non-GAAP expense savings of $45-$55 million in 2025 and $100-$110 million in 2026[26]. - The company is implementing a restructuring plan that will impact approximately 10% of its workforce, aimed at reducing operational costs[49]. - The company incurred restructuring charges of $2,920 thousand in the three months ended March 31, 2025, with no such charges reported in 2024[62]. Cash Flow and Investments - Chegg's cash and investments at the end of Q1 totaled $126 million, with a net cash balance of $64 million[25]. - Chegg's free cash flow for the quarter was reported at $5 million, down from $10 million in the previous year, indicating tighter liquidity[48]. - Free cash flow for the three months ended March 31, 2025, was $15,861 thousand, down from $25,301 thousand in 2024[63]. Market Position and Strategy - The company anticipates a challenging competitive landscape, particularly with the rise of generative AI technologies affecting the education sector[49]. - Chegg is exploring strategic alternatives to diversify revenue streams, including new enterprise offerings and question-and-answer pair licensing[49]. Other Financial Metrics - Gross margin for Q1 was 56%, impacted by a one-time charge of $16.2 million, which negatively affected gross margin by 13 percentage points[20]. - Chegg's non-GAAP gross margin was 60%, down from 65% year-over-year, indicating increased costs impacting profitability[49]. - The company reported a significant increase in depreciation and amortization expense to $32,094, up from $19,687 in the previous year[56]. - Research and development expenses were $29,428, down 33.8% from $44,435 in the same period of 2024[54]. - Total current liabilities decreased to $171,032 from $528,341 year-over-year, reflecting a reduction of 67.6%[54]. - The company repurchased $65 million of its 2026 convertible notes at a discount, while repaying the full principal amount of $358.9 million for its 2025 convertible notes[18][23].

Core Insights - Wall Street analysts anticipate Chegg (CHGG) will report a quarterly loss of $0.01 per share, reflecting a significant year-over-year decline of 103.9% [1] - Expected revenues for Chegg are projected at $114.49 million, which represents a decrease of 34.3% compared to the same quarter last year [1] - The consensus EPS estimate has been revised down by 12.5% over the past 30 days, indicating a collective reevaluation by analysts [1][2] Revenue Estimates - Analysts estimate 'Revenue- Skills and Other' to be $10.10 million, showing a year-over-year decline of 50.2% [4] - The 'Revenue- Subscription Services' is expected to reach $104.07 million, indicating a decrease of 32.4% from the previous year [4] Subscriber Metrics - The estimated number of 'Chegg Services subscribers' is projected to be 3.22 million, down from 4.7 million a year ago [5] - Chegg shares have increased by 41.7% over the past month, outperforming the Zacks S&P 500 composite, which rose by 11.3% [5]

Core Insights - The article discusses the investment recommendations and disclosures related to Chegg, highlighting its potential as an investment opportunity [1] Company Summary - Chegg is mentioned as a recommended stock by The Motley Fool, indicating a positive outlook for the company [1] - Parkev Tatevosian, an affiliate of The Motley Fool, may receive compensation for promoting Chegg, suggesting a vested interest in the company's performance [1]

Group 1 - The article discusses the potential for investing in undervalued stocks that are mispriced by the market as of the end of February [1] - It suggests that investors should consider joining a specific platform, Out Fox The Street, for insights on these investment opportunities [1] Group 2 - There are no specific companies or stocks mentioned in the article, and the author has no current positions in any of the companies discussed [2] - The article emphasizes the importance of conducting personal research or consulting a financial advisor before making investment decisions [3]

Core Viewpoint - Chegg has filed a federal antitrust lawsuit against Google, claiming that Google's use of AI-generated summaries in search results has significantly harmed Chegg's website traffic and revenue [1][4]. Group 1: Chegg's Allegations - Chegg alleges that Google's "AI Overviews" feature has unjustly retained traffic that historically came to Chegg, negatively impacting its acquisitions, revenue, and employees [2]. - The lawsuit accuses Google of violating the Sherman Antitrust Act and engaging in monopoly maintenance by using its dominance in online search to disadvantage smaller competitors like Chegg [4][5]. - Chegg's traffic from non-subscriber sources has reportedly fallen by 49% in January compared to the same month the previous year [5]. Group 2: Financial Performance - Chegg reported a net loss of $6.1 million on total revenue of $143.5 million for the fourth quarter, marking a 24% decrease year-over-year [6]. - The company's shares have plummeted nearly 90% over the last 12 months, with a current trading price of $1.04, leading to a valuation of just $110 million [3]. Group 3: Google's Response - Google has denied the allegations, asserting that the AI Overviews feature enhances user experience by providing more helpful search results [6][10]. - A Google spokesperson stated that the AI Overviews send traffic to a greater diversity of sites, countering Chegg's claims [7]. Group 4: Broader Context - Chegg's lawsuit adds to the mounting legal challenges facing Google, which has been previously found to have an illegal monopoly over online search by US District Judge Amit Mehta [12]. - The Justice Department has also accused Google of maintaining monopolies in the digital advertising sector [13].

Financial Data and Key Metrics Changes - In Q4 2024, total revenue was $143.5 million, a decrease of 24% year-over-year, with subscription services revenue at $128.5 million, down 23% year-over-year [40] - The number of subscribers declined by 21% to 3.6 million, and subscription services ARPU decreased by 3% year-over-year [40] - Adjusted EBITDA was $37 million, representing a margin of 25% [41] - Free cash flow for Q4 was $4.8 million, despite $25 million in cash outlays related to employee severance and legal settlements [42] - Capital expenditures were $13 million, down 52% year-over-year, with content costs decreasing by 56% due to AI integration [43] Business Line Data and Key Metrics Changes - Skills and other revenue was $14.9 million, down 31% year-over-year, attributed to a market shift towards lower-cost programs [41] - The enterprise segment saw a revenue increase of 46% in 2024, driven by new enterprise customers [18] Market Data and Key Metrics Changes - Non-subscriber traffic plummeted by 49% in January 2025, a significant decline from an 8% decrease reported in Q2 2024 [21] - The education industry is experiencing a transformation, with a notable impact from Google's AI Overviews affecting Chegg's traffic and revenue [10][19] Company Strategy and Development Direction - Chegg is undertaking a strategic review process to explore alternatives for maximizing shareholder value, including potential acquisition or going private [10] - The company is focusing on integrating AI and machine learning into its product offerings to enhance personalized learning experiences [12][14] - Chegg aims to build brand awareness and improve conversion rates through innovative marketing campaigns and new product launches [15][27] Management's Comments on Operating Environment and Future Outlook - Management highlighted the challenges posed by Google's AIO, which has significantly impacted Chegg's traffic and revenue [19][21] - The company believes that the demand for comprehensive student success platforms will increase in the coming years, despite current challenges [23] - Management expressed optimism about stabilizing the business in 2025 through strategic initiatives and product enhancements [46] Other Important Information - Chegg has filed a complaint against Google, alleging unfair competition practices that have harmed its business [10][20] - The company is committed to maintaining high-quality educational content and ensuring that students have access to reliable learning resources [21][24] Q&A Session Summary Question: Can you unpack the incremental operating leverage in the business for Q1 2025 guidance? - Management indicated that the model is efficient, with a significant portion of incremental sales translating to adjusted EBITDA, and emphasized the importance of new product initiatives [51][52] Question: Can you elaborate on the shift into new revenue streams and enterprise offerings? - Management discussed the inbound interest from institutions focusing on student persistence and graduation rates, highlighting a seat-based pricing model for the business-to-institution program [60][61] Question: Can you discuss churn and retention trends during the quarter? - Management noted a temporary dip in retention in November and December, which has since returned to historical levels, attributing fluctuations to various factors including user engagement with generative AI tools [64][66] Question: What is the strategy behind the Solution Scout product? - Management explained that Solution Scout aims to save students time by providing side-by-side comparisons of answers from multiple sources, enhancing the value of Chegg's offerings [70][73] Question: What are the key factors institutions consider when partnering with Chegg? - Management highlighted that institutions are primarily focused on improving student persistence and graduation rates, and they work to align Chegg's services with institutional needs [78][79] Question: What assumptions underlie the Q1 guidance? - Management indicated that the guidance reflects the continuation of trends observed in December, with expectations for traffic and acquisitions to stabilize [82] Question: Can you provide details on the temporary retention impact and promotional pricing strategy? - Management estimated a couple of percentage points impact on retention, translating to approximately $2-3 million in revenue, and discussed ongoing adjustments to promotional pricing strategies in international markets [87][90]

Financial Data and Key Metrics Changes - In Q4 2024, total revenue was $143.5 million, a decrease of 24% year-over-year, with subscription services revenue at $128.5 million, down 23% year-over-year [40][41] - The number of subscribers declined by 21% to 3.6 million during the quarter [40] - Adjusted EBITDA was $37 million, representing a margin of 25% [41] - Free cash flow for Q4 was $4.8 million, despite $25 million in cash outlays related to employee severance and legal settlements [42] - Capital expenditures decreased by 52% year-over-year to $13 million, with content costs down 56% year-over-year [43] Business Line Data and Key Metrics Changes - Skills and other revenue was $14.9 million, down 31% year-over-year due to a market shift away from traditional boot camps [41] - The implementation of AI and machine learning has reduced content creation costs by more than 70% while maintaining quality [14] Market Data and Key Metrics Changes - Non-subscriber traffic plummeted by 49% in January 2025, a significant decline from an 8% decrease reported in Q2 2024 [21] - The enterprise segment saw a revenue increase of 46% in 2024, driven by new enterprise customers [18] Company Strategy and Development Direction - The company is undertaking a strategic review process to explore alternatives for maximizing shareholder value, including potential acquisition or going private [10] - Chegg is focusing on enhancing its product offerings through AI integration and personalized learning experiences [12][14] - The company aims to stabilize its business in 2025 by building brand awareness, expanding product offerings, and diversifying revenue streams [36] Management's Comments on Operating Environment and Future Outlook - Management highlighted the challenges posed by Google's AI Overviews, which have negatively impacted Chegg's traffic and revenue [10][19] - The company believes that the relevance of comprehensive student success platforms will increase in the coming years [23] - Management expressed optimism about stabilizing business trends despite ongoing industry challenges [46] Other Important Information - Chegg has filed a complaint against Google, alleging unfair competition practices that have harmed its business [19][20] - The company has retained Goldman Sachs as a financial adviser for its strategic review process [11] Q&A Session Summary Question: Can you unpack the incremental operating leverage in the business for Q1 2025 guidance? - Management indicated that the model is efficient, with a significant portion of incremental sales translating to adjusted EBITDA [51] Question: Can you elaborate on the shift into new revenue streams and enterprise offerings? - Management noted that the business-to-institution program is gaining interest, focusing on student persistence and graduation rates, with a seat-based pricing model [60] Question: Can you discuss churn trends and the impact on ARPU? - Management acknowledged a temporary dip in retention but noted it has returned to historical levels [66] Question: What is the strategy behind the Solution Scout feature? - The strategy aims to save students time and provide value by comparing Chegg's solutions with those from other LLMs [72] Question: What are the key factors institutions consider when partnering with Chegg? - Institutions are primarily focused on improving student persistence and graduation rates, and they recognize the need for tailored services [78]

Q4-24 Investor Presentation February 24, 2024 Chegg © 2024 Chegg, Inc. / All Rights Reserved 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, which include, without limitation, that there continues to be a larqe market of students looking for the high-quality, proven, and differentiated learning expertise and experience that Chegg provides, that we will c ...

Core Insights - Chegg reported revenue of $143.48 million for Q4 2024, a year-over-year decline of 23.7% [1] - The EPS for the same period was $0.17, down from $0.36 a year ago [1] - The revenue exceeded the Zacks Consensus Estimate of $142.03 million by 1.02%, while EPS met the consensus estimate [1] Financial Performance - Chegg Services subscribers totaled 3.6 million, below the average estimate of 3.92 million [4] - Revenue from Skills and Other was $14.94 million, slightly below the estimated $15.08 million, representing a 22% decline year-over-year [4] - Subscription Services revenue was $128.54 million, exceeding the estimated $126.86 million, but still reflecting a 23.7% year-over-year decline [4] Market Performance - Chegg's stock has returned -2.7% over the past month, compared to a -0.5% change in the Zacks S&P 500 composite [3] - The stock currently holds a Zacks Rank 3 (Hold), indicating potential performance in line with the broader market [3]