Chegg (NYSE:CHGG) stock is falling hard on Tuesday after the direct-to-student learning platform company released its latest earnings report. In the second quarter of 2024, Chegg released an updated guidance for the third quarter of the year. This has it expecting revenue for the quarter to range from $133 million to $135 million. Investors aren't happy about that when comparing it to Wall Street's estimate of $143.05 million. Here's what Chegg Chief Financial Officer David Longo said about this guidance. " ...

ATLANTA, Aug. 06, 2024 (GLOBE NEWSWIRE) -- Holzer & Holzer, LLC is investigating whether Chegg, Inc. ("Chegg" or the "Company") (NYSE: CHGG) complied with federal securities laws. On August 5, 2024, Chegg reported financial results for the three months ended June 30, 2024, and announced the Company was taking "$481.5 million of non-cash impairment charges." Following this news, the price of the Company's stock dropped. If you purchased Chegg stock and suffered a loss on that investment, you are encouraged t ...

Financial Data and Key Metrics Changes - In Q2 2024, the company reported revenue of $146.8 million and adjusted EBITDA of $44.1 million, exceeding guidance [7][15] - Total revenue for the quarter was $163 million, down 11% year-over-year, with Subscription Services revenue at $147 million [16] - Adjusted EBITDA margin for Q2 was 27%, above guidance due to better-than-expected revenue and ongoing expense management [17] - Free cash flow was negative $3.6 million, impacted by restructuring severance payments and increased net working capital [18] Business Line Data and Key Metrics Changes - The company had 4.4 million subscribers in Q2, with 25% from international markets [16] - Subscription Services ARPU decreased by 3% year-over-year, primarily due to international promotional pricing [16] - Skills and other revenue was $16 million, a decrease of 4% year-over-year [16] Market Data and Key Metrics Changes - The company noted strong monthly retention for Chegg Study and Study Pack, which increased by 23 basis points year-over-year [16] - The number of questions asked by students increased by 74% year-over-year, with 16.2 million questions asked in H1 2024, representing a 109% year-over-year increase [7] Company Strategy and Development Direction - The company is undergoing a significant restructuring to create a leaner organization, aiming for non-GAAP expense savings of $40 million to $50 million by 2025 [6] - A new product vision aims to evolve Chegg from a solutions-based platform to one that supports the whole student with comprehensive academic support [6] - The company plans to launch a marketing campaign targeting platforms like TikTok and Instagram to increase brand awareness and reach [10] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism regarding the fall enrollment cycle, noting the need for more data in September and October to assess trends [21] - The company is focused on extending its brand reach and improving conversion rates among current students [21] - Management acknowledged industry pressures and the challenges of the changing landscape, emphasizing the need for steady execution of their growth plan [19] Other Important Information - The company is launching a fully localized experience in Mexico by the end of September, which will serve as a model for future localization efforts [13] - A partnership with Max, a leading streaming service, will enhance the value of Chegg subscriptions [14] Q&A Session Summary Question: How is the company feeling about the fall enrollment cycle? - Management indicated that they are using external resources to assess the fall cycle and noted that enrollment expectations appear flat [21] Question: Can you provide color on the Q3 guidance assumptions? - Management stated that Q3 guidance reflects retention rates and subscriber enrollments based on visibility from the first half of the year [24] Question: Have there been improvements in the top of the funnel with conversational features? - Management noted that while conversational features are engaging 70% of subscribers, they are not expected to drive top-of-funnel growth immediately [27] Question: Can you elaborate on the Q3 EBITDA margin guidance? - Management explained that Q3 is typically a challenging quarter due to fixed costs and that restructuring benefits will materialize more in the following year [31] Question: How is the restructuring influencing the workforce and international strategy? - Management emphasized the importance of retaining top talent and applying technology to enhance educational outcomes both domestically and internationally [44] Question: How is the AI platform influencing competitive positioning? - Management highlighted that the focus is on applying AI to enhance education rather than merely competing with other players [46] Question: What is the outlook for international ARPU? - Management indicated that international ARPU will remain lower due to pricing strategies but can still be profitable with improved product-market fit [48]

Q2-24 Investor Presentation August 5, 2024 Chegg 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 statem ...

[Item 1. Financial Statements (unaudited)](index=4&type=section&id=Item%201.%20Financial%20Statements%20(unaudited)) [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Total assets decreased to $1.11 billion by June 30, 2024, from $1.73 billion, mainly due to goodwill and intangible asset reductions | Metric | June 30, 2024 (in thousands) | December 31, 2023 (in thousands) | | :----------------------------------- | :--------------------------- | :------------------------------- | | **Assets** | | | | Total current assets | $433,548 | $414,835 | | Long-term investments | $259,925 | $249,547 | | Property and equipment, net | $179,278 | $183,073 | | Goodwill | $189,769 | $631,995 | | Intangible assets, net | $12,848 | $52,430 | | Deferred tax assets | $2,287 | $141,843 | | Total assets | $1,114,330 | $1,727,235 | | **Liabilities** | | | | Total current liabilities | $485,286 | $518,462 | | Total long-term liabilities | $263,544 | $264,155 | | Total liabilities | $748,830 | $782,617 | | **Stockholders' Equity** | | | | Total stockholders' equity | $365,500 | $944,618 | - Goodwill decreased by **$442,226 thousand (70%)** from **$631,995 thousand** to **$189,769 thousand**[9](index=9&type=chunk) - Intangible assets, net, decreased by **$39,582 thousand (75%)** from **$52,430 thousand** to **$12,848 thousand**[9](index=9&type=chunk) - Deferred tax assets decreased by **$139,556 thousand (98%)** from **$141,843 thousand** to **$2,287 thousand**[9](index=9&type=chunk) [Condensed Consolidated Statements of Operations](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Significant net loss reported for Q2 2024, driven by substantial impairment expense and declining net revenues | Metric (in thousands, except per share) | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :-------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net revenues | $163,147 | $182,853 | $337,497 | $370,454 | | Gross profit | $117,736 | $135,441 | $245,589 | $273,892 | | Total operating expenses | $602,743 | $154,137 | $733,087 | $297,034 | | Loss from operations | $(485,007) | $(18,696) | $(487,498) | $(23,142) | | Net (loss) income | $(616,884) | $24,612 | $(618,304) | $26,798 | | Basic net (loss) income per share | $(6.01) | $0.21 | $(6.03) | $0.22 | | Diluted net (loss) income per share | $(6.01) | $(0.11) | $(6.03) | $(0.08) | - Impairment expense of **$481,531 thousand** was recorded for both the three and six months ended June 30, 2024, significantly impacting operating expenses and net income[12](index=12&type=chunk) - Net revenues decreased by **11%** for the three months and **9%** for the six months ended June 30, 2024, compared to the same periods in 2023[12](index=12&type=chunk) [Condensed Consolidated Statements of Comprehensive (Loss) Income](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20(Loss)%20Income) Substantial total comprehensive loss reported for Q2 2024, primarily driven by the net loss | Metric (in thousands) | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :----------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net (loss) income | $(616,884) | $24,612 | $(618,304) | $26,798 | | Other comprehensive income (loss) | $757 | $2,159 | $(5,176) | $14,309 | | Total comprehensive (loss) income | $(616,127) | $26,771 | $(623,480) | $41,107 | [Condensed Consolidated Statements of Stockholders' Equity](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders'%20Equity) Stockholders' equity significantly decreased to $365.5 million due to a large accumulated deficit from net loss | Metric (in thousands) | Balances at December 31, 2023 | Balances at June 30, 2024 | | :----------------------------------- | :---------------------------- | :------------------------ | | Common Shares | 102,824 | 103,361 | | Additional Paid-In Capital | $1,031,627 | $1,075,989 | | Accumulated Other Comprehensive Loss | $(34,739) | $(39,915) | | Accumulated Deficit | $(52,373) | $(670,677) | | Total Stockholders' Equity | $944,618 | $365,500 | - The accumulated deficit increased substantially from **$(52,373) thousand** to **$(670,677) thousand**, reflecting the net loss incurred during the period[20](index=20&type=chunk) - Share-based compensation expense contributed **$50,111 thousand** to additional paid-in capital during the six months ended June 30, 2024[20](index=20&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Operating cash flow decreased, investing cash flow increased, and financing cash flow significantly reduced | Cash Flow Activity (in thousands) | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :---------------------------------- | :----------------------------- | :----------------------------- | | Net cash provided by operating activities | $67,545 | $135,907 | | Net cash (used in) provided by investing activities | $(64,096) | $129,453 | | Net cash used in financing activities | $(5,635) | $(563,819) | | Net decrease in cash, cash equivalents and restricted cash | $(2,491) | $(298,262) | | Cash, cash equivalents and restricted cash, end of period | $135,485 | $177,592 | - Net cash provided by operating activities decreased by **50%** (**$68,362 thousand**) primarily due to lower bookings and timing of bill payments[120](index=120&type=chunk) - Net cash used in investing activities increased by **150%** (**$193,549 thousand**) mainly due to lower proceeds from maturities and sales of investments, and higher purchases of property and equipment, partially offset by lower purchases of investments[121](index=121&type=chunk)[122](index=122&type=chunk) - Net cash used in financing activities decreased by **99%** (**$558,184 thousand**) primarily due to the absence of common stock repurchases and convertible senior notes repayments in 2024[122](index=122&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=11&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) [Note 1. Background and Basis of Presentation](index=11&type=section&id=Note%201.%20Background%20and%20Basis%20of%20Presentation) Chegg provides AI-powered learning support as a single segment; impairment expense added to operating expenses - Chegg provides AI-powered academic support and access to subject matter experts, helping students build academic, life, and job skills[27](index=27&type=chunk) - The company operates as a single operating and reportable segment[29](index=29&type=chunk) - Impairment expense, totaling **$481,531 thousand**, was added as a component within operating expenses, comprising goodwill (**$439,683**), intangible assets (**$31,862**), and property and equipment, net (**$9,986**)[29](index=29&type=chunk)[30](index=30&type=chunk) [Note 2. Revenues](index=12&type=section&id=Note%202.%20Revenues) Net revenues decreased by 11% (Q2) and 9% (H1) due to fewer subscribers and lower Chegg Skills bookings | Revenue Category (in thousands) | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | Change ($) | Change (%) | | :------------------------------ | :------------------------------- | :------------------------------- | :--------- | :--------- | | Subscription Services | $146,813 | $165,855 | $(19,042) | (11)% | | Skills and Other | $16,334 | $16,998 | $(664) | (4)% | | Total net revenues | $163,147 | $182,853 | $(19,706) | (11)% | | Revenue Category (in thousands) | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | Change ($) | Change (%) | | :------------------------------ | :----------------------------- | :----------------------------- | :--------- | :--------- | | Subscription Services | $300,864 | $334,295 | $(33,431) | (10)% | | Skills and Other | $36,633 | $36,159 | $474 | 1% | | Total net revenues | $337,497 | $370,454 | $(32,957) | (9)% | - Accounts receivable, net, decreased by **$10.4 million (33%)** due to lower bookings from Chegg Skills and seasonality[39](index=39&type=chunk) - Deferred revenue decreased by **$10.3 million (19%)** primarily due to lower bookings from Chegg Skills and seasonality[39](index=39&type=chunk) [Note 3. Net (Loss) Income Per Share](index=14&type=section&id=Note%203.%20Net%20(Loss)%20Income%20Per%20Share) Significant basic and diluted net loss per share reported for Q2 and H1 2024, contrasting with prior year | Metric | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :-------------------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net (loss) income (in thousands) | $(616,884) | $24,612 | $(618,304) | $26,798 | | Weighted average shares, basic (in thousands) | 102,604 | 117,977 | 102,474 | 120,828 | | Net (loss) income per share, basic | $(6.01) | $0.21 | $(6.03) | $0.22 | | Weighted average shares, diluted (in thousands) | 102,604 | 132,944 | 102,474 | 137,416 | | Net (loss) income per share, diluted | $(6.01) | $(0.11) | $(6.03) | $(0.08) | - The significant net loss for the current periods resulted in basic and diluted EPS of **$(6.01)** and **$(6.03)** respectively, compared to positive EPS in the prior year[41](index=41&type=chunk) [Note 4. Cash and Cash Equivalents, Investments and Fair Value Measurements](index=15&type=section&id=Note%204.%20Cash%20and%20Cash%20Equivalents,%20Investments%20and%20Fair%20Value%20Measurements) Diversified cash and investment portfolio maintained, with fair values consistent with costs and strategic investments | Category (in thousands) | Fair Value Level | Adjusted Cost (June 30, 2024) | Fair Value (June 30, 2024) | | :---------------------- | :--------------- | :---------------------------- | :------------------------- | | Cash and cash equivalents | | $133,068 | $133,068 | | Short-term investments | Level 1/2 | $213,146 | $212,396 | | Long-term investments | Level 1/2 | $261,001 | $259,925 | | Total | | $607,215 | $605,389 | - The company sold its investment in Sound Ventures AI Fund for **$15.5 million** on January 1, 2024, realizing a gain of **$3.8 million**[47](index=47&type=chunk) - An investment of **$6.0 million** in Knack Technologies, Inc. is accounted for at cost, with no impairment recorded[48](index=48&type=chunk) [Note 5. Property and Equipment, Net](index=16&type=section&id=Note%205.%20Property%20and%20Equipment,%20Net) Property and equipment, net, decreased to $179.3 million, impacted by $10.0 million impairment and Chegg Skills write-off | Category (in thousands) | December 31, 2023 | | :---------------------- | :---------------- | | Content | $346,749 | | Software | $51,855 | | Leasehold improvements | $10,857 | | Furniture and fixtures | $4,607 | | Computer and equipment | $3,496 | | Property and equipment (gross) | $417,564 | | Less accumulated depreciation and amortization | $(234,491) | | Property and equipment, net | $183,073 | - Depreciation and content amortization expense for the six months ended June 30, 2024, was **$31.9 million**, down from **$39.4 million** in the prior year[49](index=49&type=chunk) - A **$10.0 million** impairment expense was recorded for property and equipment (**$6.6 million** content, **$3.4 million** software) in Q2 2024, classified as impairment expense[51](index=51&type=chunk) - A **$1.1 million** write-off and accelerated depreciation of content assets were recorded due to discontinuing Chegg Skills, classified as cost of revenues[50](index=50&type=chunk) [Note 6. Goodwill and Intangible Assets](index=17&type=section&id=Note%206.%20Goodwill%20and%20Intangible%20Assets) Significant impairment expenses for goodwill ($439.7M) and intangibles ($31.9M) recorded due to stock price decline - A goodwill impairment expense of **$439.7 million** was recorded during the three months ended June 30, 2024, due to the fair value of the reporting unit being less than its carrying value[51](index=51&type=chunk) | Goodwill Balance (in thousands) | Six Months Ended June 30, 2024 | Year Ended December 31, 2023 | | :------------------------------ | :----------------------------- | :--------------------------- | | Beginning balance | $631,995 | $615,093 | | Impairment expense | $(439,683) | — | | Foreign currency translation adjustment | $(2,543) | $16,902 | | Ending balance | $189,769 | $631,995 | - An intangible asset impairment expense of **$31.9 million** was recorded for Busuu assets during the three months ended June 30, 2024, as expected future undiscounted cash flows were insufficient to recover the carrying value[53](index=53&type=chunk) | Intangible Assets (in thousands) | Gross Carrying Amount | Accumulated Amortization | Accumulated Impairment | Net Carrying Amount (June 30, 2024) | | :------------------------------- | :-------------------- | :----------------------- | :--------------------- | :---------------------------------- | | Developed technologies | $106,703 | $(61,167) | $(29,369) | $12,209 | | Content libraries | $12,230 | $(11,883) | — | $347 | | Customer lists | $34,190 | $(32,774) | — | $118 | | Trade and domain names | $16,213 | $(13,169) | $(2,493) | $174 | | Total intangible assets | $169,336 | $(118,993) | $(31,862) | $12,848 | [Note 7. Convertible Senior Notes](index=18&type=section&id=Note%207.%20Convertible%20Senior%20Notes) Outstanding convertible senior notes due 2026 ($244.5M) and 2025 ($358.9M), with 2025 notes now a current liability - The 2026 notes have a principal amount of **$244.5 million** and an initial conversion price of **$107.55** per share[58](index=58&type=chunk)[59](index=59&type=chunk) - The 2025 notes have a principal amount of **$358.9 million** and an initial conversion price of **$51.56** per share, and are classified as a current liability as of June 30, 2024[58](index=58&type=chunk)[59](index=59&type=chunk)[60](index=60&type=chunk) | Interest Expense (in thousands) | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2024 | | :------------------------------ | :------------------------------- | :----------------------------- | | 2026 notes total interest expense | $160 | $321 | | 2025 notes total interest expense | $491 | $980 | - Capped call transactions are in place for both notes, effectively increasing the conversion price and reducing potential dilution[63](index=63&type=chunk) [Note 8. Commitments and Contingencies](index=20&type=section&id=Note%208.%20Commitments%20and%20Contingencies) Company faces various legal proceedings, including derivative and class actions, with a $7.0 million net contingent liability - The company is facing multiple stockholder derivative and class action lawsuits alleging breach of fiduciary duty and securities fraud[65](index=65&type=chunk)[68](index=68&type=chunk)[69](index=69&type=chunk)[70](index=70&type=chunk) - A settlement agreement is being pursued with JPMorgan Chase Bank, N.A. regarding investment proceeds from TAPD, Inc. (Frank), with a probable and reasonably estimable loss contingency accrued[66](index=66&type=chunk) - Pearson Education, Inc. filed a copyright infringement complaint against Chegg, which the company intends to vigorously defend[71](index=71&type=chunk) - The FTC finalized an order in January 2023 requiring Chegg to implement a comprehensive information security program, with no monetary penalties[72](index=72&type=chunk) - A net contingent liability of **$7.0 million** (contingent liabilities less insurance loss recovery) has been recorded for legal matters[73](index=73&type=chunk) [Note 9. Guarantees and Indemnifications](index=21&type=section&id=Note%209.%20Guarantees%20and%20Indemnifications) Company indemnifies directors, officers, and vendors; fair value of agreements is immaterial, with no liabilities recorded - Chegg indemnifies its directors and officers, with potential exposure limited by a directors' and officers' insurance policy[74](index=74&type=chunk) - The company also has indemnification agreements with various vendors, with an unlimited maximum potential future indemnification amount[74](index=74&type=chunk) - The fair value of these indemnification agreements is believed to be immaterial, and no liabilities were recorded as of June 30, 2024[74](index=74&type=chunk) [Note 10. Stockholders' Equity](index=21&type=section&id=Note%2010.%20Stockholders'%20Equity) Final ASR delivery completed; $3.7 million remains under repurchase program; H1 2024 share-based compensation was $47.3 million - In February 2024, **2,115,952 shares** were repurchased related to the final delivery of the November 2023 ASR agreement[75](index=75&type=chunk) - As of June 30, 2024, **$3.7 million** remained authorized under the securities repurchase program, with no cash repurchases during the three and six months ended June 30, 2024[76](index=76&type=chunk) | Share-based Compensation Expense (in thousands) | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2024 | | :---------------------------------------------- | :------------------------------- | :----------------------------- | | Cost of revenues | $466 | $979 | | Research and development | $7,123 | $16,332 | | Sales and marketing | $1,726 | $3,866 | | General and administrative | $8,732 | $26,159 | | Total share-based compensation expense | $18,047 | $47,336 | - Total unrecognized share-based compensation expense was approximately **$98.9 million** as of June 30, 2024, with a weighted-average vesting period of approximately **1.6 years**[77](index=77&type=chunk) [Note 11. Restructuring and Other Related Charges](index=22&type=section&id=Note%2011.%20Restructuring%20and%20Other%20Related%20Charges) Restructuring plan initiated in June 2024, resulting in $6.7 million in charges and $2.2 million impairment of lease assets - The company recorded **$6.7 million** in restructuring charges during the three months ended June 30, 2024, primarily for one-time employee termination benefits[79](index=79&type=chunk) - An additional **$3 million** to **$4 million** in restructuring charges are estimated for the next two fiscal quarters, with the plan expected to be substantially completed by Q1 2025[79](index=79&type=chunk) - A **$2.2 million** impairment expense was recorded for lease-related assets (ROU assets and leasehold improvements) due to the closure of two international offices[81](index=81&type=chunk) [Note 12. Income Taxes](index=23&type=section&id=Note%2012.%20Income%20Taxes) Income tax provision significantly increased by **$118.7 million** (Q2) and **$123.5 million** (H1) due to a valuation allowance against deferred tax assets | Provision for Income Taxes (in thousands) | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :---------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Provision for income taxes | $(138,345) | $(19,681) | $(147,404) | $(23,857) | - The increase in tax provision was primarily driven by a **$141.6 million** valuation allowance established against U.S. federal and state deferred tax assets[83](index=83&type=chunk) - The valuation allowance was deemed necessary due to negative evidence, including cumulative losses influenced by impairment expense[83](index=83&type=chunk) [Note 13. Subsequent Event](index=23&type=section&id=Note%2013.%20Subsequent%20Event) India office lease amended in July 2024, increasing future minimum lease payments by approximately $12.3 million - An amendment to the India office lease in July 2024 will increase future minimum lease payments by approximately **$12.3 million**[84](index=84&type=chunk) - The accounting for the lease amendment is ongoing as of the financial statement issuance date[84](index=84&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=23&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) [Overview](index=24&type=section&id=Overview) Chegg provides AI-powered learning support, recorded $481.5M impairment, and initiated a restructuring plan in June 2024 - Chegg's long-term strategy focuses on utilizing Subscription Services to increase student engagement, expanding offerings with AI integration, and international market expansion[88](index=88&type=chunk) - The company recorded **$481.5 million** in impairment expense during Q2 2024 due to a sustained decline in stock price, industry developments, and financial performance[88](index=88&type=chunk) - A restructuring plan in June 2024 included a workforce reduction, closure of two international offices, and discontinuation of direct-to-customer Chegg Skills offerings, with expected cost savings in fiscal year 2025[89](index=89&type=chunk) [Subscription Services](index=25&type=section&id=Subscription%20Services) Subscription Services, including various Chegg offerings and Busuu, form the majority of net revenues, recognized ratably - Subscription Services include Chegg Study Pack, Chegg Study, Chegg Writing, Chegg Math, and Busuu, offering AI-powered academic support, writing tools, math solvers, and language learning[91](index=91&type=chunk) - Subscription Services accounted for **90%** and **89%** of net revenues during the three and six months ended June 30, 2024, respectively[92](index=92&type=chunk) - Revenues from Subscription Services are primarily recognized ratably over the monthly subscription period[91](index=91&type=chunk) [Skills and Other](index=25&type=section&id=Skills%20and%20Other) Skills and Other, including Chegg Skills and advertising, represented 10-11% of net revenues, with Chegg Skills no longer direct-to-customer - Skills and Other revenues include Chegg Skills (professional courses), advertising services, and print/eTextbooks[93](index=93&type=chunk) - This product line constituted **10%** and **11%** of net revenues for the three and six months ended June 30, 2024, respectively[93](index=93&type=chunk) - Chegg Skills will no longer be offered directly to customers following the June 2024 restructuring[89](index=89&type=chunk) [Seasonality of Our Business](index=25&type=section&id=Seasonality%20of%20Our%20Business) Business is seasonal, with highest revenues in Q4 and marketing expenses in Q1/Q3, affecting sequential comparisons - Revenues from Subscription Services are recognized ratably, leading to highest revenues and profitability in the fourth quarter[94](index=94&type=chunk) - Marketing expenses are highest in the first and third quarters, causing revenue and expense concentrations to not always coincide[94](index=94&type=chunk) - Sequential quarterly comparisons of results may not provide meaningful insight due to these seasonal factors[94](index=94&type=chunk) [Components of Results of Operations](index=25&type=section&id=Components%20of%20Results%20of%20Operations) Significant net loss for Q2 and H1 2024, driven by $481.5M impairment, declining revenues, and increased operating expenses | Metric (in thousands) | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net revenues | $163,147 | $182,853 | $337,497 | $370,454 | | Gross profit | $117,736 | $135,441 | $245,589 | $273,892 | | Total operating expenses | $602,743 | $154,137 | $733,087 | $297,034 | | Loss from operations | $(485,007) | $(18,696) | $(487,498) | $(23,142) | | Net (loss) income | $(616,884) | $24,612 | $(618,304) | $26,798 | - Impairment expense of **$481,531 thousand** was the primary driver of the increased operating expenses and net loss for the current periods[97](index=97&type=chunk) - Total share-based compensation expense decreased by **50%** for the three months and **32%** for the six months ended June 30, 2024, compared to the prior year[98](index=98&type=chunk)[104](index=104&type=chunk)[106](index=106&type=chunk) [Net Revenues](index=27&type=section&id=Net%20Revenues) Net revenues decreased by 11% (Q2) and 9% (H1) due to fewer Subscription Services subscribers and lower Chegg Skills enrollments | Revenue Category (in thousands) | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | Change ($) | Change (%) | | :------------------------------ | :------------------------------- | :------------------------------- | :--------- | :--------- | | Subscription Services | $146,813 | $165,855 | $(19,042) | (11)% | | Skills and Other | $16,334 | $16,998 | $(664) | (4)% | | Total net revenues | $163,147 | $182,853 | $(19,706) | (11)% | - The decrease in Subscription Services revenues was primarily due to a **9%** and **8%** decrease in subscribers for the three months ended June 30, 2024, and March 31, 2024, respectively[100](index=100&type=chunk) - Skills and Other revenues decreased by **4%** for the three months ended June 30, 2024, mainly due to lower direct-to-customer enrollments in Chegg Skills[100](index=100&type=chunk) [Cost of Revenues](index=27&type=section&id=Cost%20of%20Revenues) Cost of revenues decreased by 4% (Q2) and 5% (H1) due to lower depreciation and contractor spend, despite slight gross margin decline | Metric (in thousands) | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | Change ($) | | :-------------------- | :------------------------------- | :------------------------------- | :--------- | | Cost of revenues | $45,411 | $47,412 | $(2,001) | | Share-based compensation expense | $466 | $560 | $(94) | | Restructuring charges | $191 | $12 | $179 | - The decrease in cost of revenues for the three months was mainly due to lower depreciation and amortization (**$3.2 million**) and contractor spend (**$1.5 million**), partially offset by higher web hosting fees (**$1.0 million**) and the absence of a gain on textbook disposition (**$1.2 million**)[101](index=101&type=chunk) - Gross margins decreased from **74%** to **72%** for the three months and from **74%** to **73%** for the six months ended June 30, 2024[101](index=101&type=chunk)[102](index=102&type=chunk) [Operating Expenses](index=28&type=section&id=Operating%20Expenses) Total operating expenses significantly increased due to a **$481.5 million** impairment expense, despite decreases in other expense categories | Operating Expense (in thousands) | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | Change ($) | Change (%) | | :------------------------------- | :------------------------------- | :------------------------------- | :--------- | :--------- | | Research and development | $43,651 | $52,872 | $(9,221) | (17)% | | Sales and marketing | $23,545 | $30,956 | $(7,411) | (24)% | | General and administrative | $54,016 | $70,309 | $(16,293) | (23)% | | Impairment expense | $481,531 | — | $481,531 | n/m | | Total operating expenses | $602,743 | $154,137 | $448,606 | n/m | - Share-based compensation expense within operating expenses decreased by **50%** for the three months and **32%** for the six months ended June 30, 2024[104](index=104&type=chunk)[106](index=106&type=chunk) - Restructuring charges within operating expenses increased by **15%** for the three and six months ended June 30, 2024[104](index=104&type=chunk)[106](index=106&type=chunk) [Research and Development](index=29&type=section&id=Research%20and%20Development) R&D expenses decreased by 17% (Q2) and 12% (H1) due to lower employee-related expenses, including share-based compensation - Research and development expenses decreased by **$9.2 million (17%)** for the three months and **$11.7 million (12%)** for the six months ended June 30, 2024[107](index=107&type=chunk) - The decrease was primarily attributable to lower employee-related expenses, including share-based compensation expense[107](index=107&type=chunk) [Sales and Marketing](index=29&type=section&id=Sales%20and%20Marketing) Sales and marketing expenses decreased by 24% (Q2) and 21% (H1) due to reductions in depreciation, paid marketing, and employee costs - Sales and marketing expenses decreased by **$7.4 million (24%)** for the three months and **$14.1 million (21%)** for the six months ended June 30, 2024[108](index=108&type=chunk)[109](index=109&type=chunk) - Key drivers for the decrease included lower depreciation and amortization (**$3.3 million** for three months), lower paid marketing expenses (**$3.0 million** for three months), and reduced employee-related expenses[108](index=108&type=chunk)[109](index=109&type=chunk) [General and Administrative](index=29&type=section&id=General%20and%20Administrative) G&A expenses decreased by 23% (Q2) and 15% (H1) due to lower employee-related expenses, including share-based compensation - General and administrative expenses decreased by **$16.3 million (23%)** for the three months and **$19.7 million (15%)** for the six months ended June 30, 2024[110](index=110&type=chunk)[111](index=111&type=chunk) - The decrease was primarily due to lower employee-related expenses, including share-based compensation expense[110](index=110&type=chunk)[111](index=111&type=chunk) [Impairment Expense](index=30&type=section&id=Impairment%20Expense) Significant impairment expense of **$481.5 million** recorded for Q2 and H1 2024, covering goodwill, intangible, and long-lived assets - Impairment expense totaled **$481.5 million** for both the three and six months ended June 30, 2024[112](index=112&type=chunk) - This expense consisted of impairments of goodwill, intangible assets, and other related long-lived assets[112](index=112&type=chunk) [Interest Expense and Other Income, Net](index=30&type=section&id=Interest%20Expense%20and%20Other%20Income,%20Net) Interest expense decreased; other income significantly declined due to absence of prior-year gains and lower interest income | Metric (in thousands) | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | Change ($) | | :------------------------------------ | :------------------------------- | :------------------------------- | :--------- | | Interest expense, net | $(651) | $(1,114) | $463 | | Other income, net | $7,119 | $64,103 | $(56,984) | | Total interest expense, net and other income, net | $6,468 | $62,989 | $(56,521) | - Interest expense, net, decreased by **$0.5 million (42%)** for the three months and **$1.1 million (45%)** for the six months, primarily due to partial early extinguishments of convertible senior notes in 2023[113](index=113&type=chunk) - Other income, net, decreased by **$57.0 million (89%)** for the three months and **$58.3 million (77%)** for the six months, mainly due to the absence of a **$53.8 million** gain on early extinguishment of debt in 2023 and a decrease in interest income[114](index=114&type=chunk) [Provision for Income Taxes](index=30&type=section&id=Provision%20for%20Income%20Taxes) Income tax provision significantly increased by **$118.7 million** (Q2) and **$123.5 million** (H1) due to a valuation allowance against deferred tax assets | Provision for Income Taxes (in thousands) | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | Change ($) | | :---------------------------------------- | :------------------------------- | :------------------------------- | :--------- | | Provision for income taxes | $(138,345) | $(19,681) | $(118,664) | - The increase in tax provision was primarily due to the establishment of a valuation allowance against U.S. federal and state deferred tax assets[116](index=116&type=chunk) [Liquidity and Capital Resources](index=31&type=section&id=Liquidity%20and%20Capital%20Resources) Chegg had **$605.4 million** in liquidity; operating cash decreased by **50%**, investing cash increased by **150%**, and financing cash decreased by **99%** | Metric (in thousands) | June 30, 2024 | December 31, 2023 | Change ($) | Change (%) | | :---------------------------------------------------- | :------------ | :---------------- | :--------- | :--------- | | Cash, cash equivalents and short-term and long-term investments | $605,389 | $579,561 | $25,828 | 4% | | Convertible senior notes, net | $600,917 | $599,837 | $1,080 | 0% | - Principal sources of liquidity were **$605.4 million** in cash, cash equivalents, and investments as of June 30, 2024[118](index=118&type=chunk) | Cash Flow Activity (in thousands) | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | Change ($) | Change (%) | | :---------------------------------- | :----------------------------- | :----------------------------- | :--------- | :--------- | | Net cash flows from operating activities | $67,545 | $135,907 | $(68,362) | (50)% | | Net cash flows from investing activities | $(64,096) | $129,453 | $(193,549) | (150)% | | Net cash flows from financing activities | $(5,635) | $(563,819) | $558,184 | (99)% | - The company has incurred cumulative losses of **$670.7 million** from operations as of June 30, 2024[118](index=118&type=chunk) [Critical Accounting Policies, Significant Judgments and Estimates](index=32&type=section&id=Critical%20Accounting%20Policies,%20Significant%20Judgments%20and%20Estimates) No material changes in critical accounting policies or estimates occurred during H1 2024 compared to the 2023 Annual Report on Form 10-K - No material changes occurred in critical accounting policies and estimates during the six months ended June 30, 2024[124](index=124&type=chunk) - Estimates are based on historical experience, current business conditions, and future expectations, with actual results potentially differing materially[123](index=123&type=chunk) [Recent Accounting Pronouncements](index=32&type=section&id=Recent%20Accounting%20Pronouncements) No material impact from adopted pronouncements in H1 2024; company is evaluating FASB ASUs 2024-02, 2023-09, and 2023-07 - No material impact from recently adopted accounting pronouncements during the six months ended June 30, 2024[35](index=35&type=chunk) - The company is evaluating the impact of ASU 2024-02 (Codification Improvements), ASU 2023-09 (Income Tax Disclosures), and ASU 2023-07 (Reportable Segment Disclosures), all effective for annual periods beginning after December 15, 2024 (or interim periods for ASU 2023-07)[33](index=33&type=chunk)[34](index=34&type=chunk)[35](index=35&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=33&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) No material changes in market risk reported for H1 2024 compared to the 2023 Annual Report on Form 10-K - No material changes in market risk were reported for the six months ended June 30, 2024[127](index=127&type=chunk) [Item 4. Controls and Procedures](index=33&type=section&id=Item%204.%20Controls%20and%20Procedures) Disclosure controls and procedures were effective as of June 30, 2024, with no material changes in internal control over financial reporting - Disclosure controls and procedures were evaluated and deemed effective at a reasonable assurance level as of June 30, 2024[129](index=129&type=chunk) - No material changes in internal control over financial reporting occurred during the three months ended June 30, 2024[130](index=130&type=chunk) [Item 1. Legal Proceedings](index=34&type=section&id=Item%201.%20Legal%20Proceedings) Company is subject to various legal proceedings and claims, including intellectual property and employment disputes, detailed in Note 8 - The company is involved in various legal proceedings and claims, including alleged infringement of intellectual property rights, employment claims, and general contract disputes[132](index=132&type=chunk) - Additional information on legal proceedings is available in Note 8, 'Commitments and Contingencies,' of the financial statements[132](index=132&type=chunk) [Item 1A. Risk Factors](index=34&type=section&id=Item%201A.%20Risk%20Factors) No material changes to the company's risk factors were reported from the 2023 Annual Report on Form 10-K - No material changes to risk factors were reported from the Annual Report on Form 10-K[133](index=133&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=34&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) No unregistered sales of equity securities or common stock repurchases occurred during Q2 2024 - No unregistered sales of securities occurred during the three months ended June 30, 2024[134](index=134&type=chunk) - The registrant did not purchase any of its common stock during the three months ended June 30, 2024[134](index=134&type=chunk) [Item 5. Other Information](index=34&type=section&id=Item%205.%20Other%20Information) No Section 16 officers or directors adopted or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during Q2 2024 - No Section 16 officers or directors adopted or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the quarter[135](index=135&type=chunk) [Item 6. Exhibits](index=35&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the Quarterly Report on Form 10-Q, including certifications and XBRL documents - Exhibits include certifications from the CEO and CFO (31.01, 31.02), a certification pursuant to 18 U.S.C. Section 1350 (32.01), and various Inline XBRL documents (101.INS, 101.SCH, 101.CAL, 101.LAB, 101.PRE, 101.DEF, 104)[137](index=137&type=chunk) [Signatures](index=36&type=section&id=Signatures) The report was signed on August 5, 2024, by David Longo, Chief Financial Officer of Chegg, Inc - The report was signed by David Longo, Chief Financial Officer of Chegg, Inc., on August 5, 2024[139](index=139&type=chunk)

EXHIBIT 99.01 Chegg Reports 2024 Second Quarter Earnings SANTA CLARA, Calif., August 5, 2024 /BUSINESS WIRE/ -- Chegg, Inc. (NYSE:CHGG), the leading student-first connected learning platform, today reported financial results for the three months ended June 30, 2024. "Q2 has been transformational for Chegg, completing our restructure, outlining an exciting vision for the future, and completing the rollout of conversational instruction capability and automated solutions just in time for the back-to-school sea ...

Chegg (CHGG 10.88%) stock is making big gains in Tuesday's trading. The company's share price was up 12.8% as of 11:30 a.m. ET, according to data from S&P Global Market Intelligence. Has Chegg stock hit a bottom? With the stock trading at $3.65 per share as of this writing, the new target actually suggests downside of roughly 11%. Even with today's gains, Chegg is down roughly 68% year to date. Will Chegg keep getting crushed by AI? Rather than paying for Chegg's premium offerings or even providing platform ...

We have found that the best way to discover great value opportunities is to pair a strong Zacks Rank with a great grade in the Value category of our Style Scores system. The Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits. The Value category of the Style Scores system identifies undervalued companies by looking at a number of key metrics. These include the long-favored P/E ratio, P/S ratio, earnings yield, cash flow per sh ...

These stocks are down as much as 74% this year. Tap into your inner contrarian. It doesn't have to stay that way. I think all three stocks have a chance to deliver meaningful gains in the final six months of 2024. They may not make back the ground they lost in the first half of this year, but even a modest bounce from these humble starting lines can beat the market. Let's take a closer look. It's hard to believe that UiPath has been roughly cut in half this year. As a leading provider of robotics, automatio ...

Parkev Tatevosian, CFA has positions in Chegg. The Motley Fool recommends Chegg. The Motley Fool has a disclosure policy. Parkev Tatevosian is an affiliate of The Motley Fool and may be compensated for promoting its services. If you choose to subscribe through his link, he will earn some extra money that supports his channel. His opinions remain his own and are unaffected by The Motley Fool. ...