Q4-25 Investor Presentation February 9, 2026 © 2024 Chegg, Inc. / All Rights Reserved Safe Harbor Statement Forward-Looking Statements This investor 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, our restructuring plans, including their size, the amount and timing of the charges we will incur in connection with them and the amount and timing of cost savings; our expectati ...

Key Takeaways Chegg's Q3 free cash flow turned negative largely due to one-time settlement and restructuring costs.Legacy subscription revenues are sliding as AI tools and search changes weigh on demand.Chegg's skilling pivot and discounted valuation may restore cash flow if execution stays on track.Chegg, Inc. (CHGG) reported negative free cash flow in the third quarter of 2025, which raised concerns about its financial trajectory. However, a closer look suggests the shortfall may be more transitional than ...

Core Insights - The edtech market is experiencing a shift towards digital learning, particularly AI-based solutions, benefiting companies like Chegg, Inc. (CHGG) and Duolingo, Inc. (DUOL) [1] Company Overview - Chegg focuses on homework help, textbook services, and tutoring, while Duolingo operates a language-learning platform, both addressing the evolving needs of students in digital education [2] Chegg Stock Analysis - Chegg is transforming its business model with Chegg Skilling, integrating Busuu and Chegg Skills, targeting the growing global skilling market valued at over $40 billion [3] - The new segments are expected to achieve 14% year-over-year growth, reaching $70 million in annual revenues by 2025 [3] - Chegg is prioritizing cash preservation, reducing capital expenditure by 60%, with 2025 capex projected at $27 million, down from $60-$65 million in 2024 [5] - Despite these efforts, Chegg faces challenges from traffic losses due to AI tools and changes in Google search, leading to subscriber attrition and weaker advertising demand [6] Duolingo Stock Analysis - Duolingo is benefiting from increased user engagement, with daily active users (DAUs) growing by 35.8% to 50.5 million and monthly active users (MAUs) increasing by 19.6% to 135.3 million year-over-year [7] - The expansion of Duolingo Max is contributing to subscriber growth, although its adoption is slower than anticipated [7] - Duolingo is diversifying its offerings beyond language learning, with chess usage surpassing math and music on iOS, indicating potential for market expansion [9] - However, user growth moderation in the U.S. and underperformance of Duolingo Max raise concerns about future monetization [10][11] Stock Performance & Valuation - Over the past six months, Chegg's stock performance has been above Duolingo's, despite both showing a declining trend [12] - Duolingo has historically traded at a premium valuation compared to Chegg, which currently trades at a discount [13][14] - Chegg's earnings estimate for 2026 indicates a 221.4% year-over-year growth, while Duolingo's estimate shows a decline of 51.6% [17][18] Investment Outlook - Chegg is undergoing a strategic reset towards the skilling market, with a discounted valuation and stable earnings estimates suggesting potential for a contained downside [20] - Duolingo, while showing strong engagement metrics, faces execution risks due to moderating user growth and a premium valuation [21] - It is suggested that investors may favor Chegg stock over Duolingo stock at this time due to the higher-risk turnaround potential and valuation support [22]

Core Insights - Chegg, Inc. (CHGG) is shifting its focus from legacy academic services to its skilling business, with a significant reduction in capital expenditure expected to enhance cash preservation and operational efficiency [1][4][8] Group 1: Business Strategy and Financials - Chegg has split its operations into two divisions: a legacy academic business and Chegg Skilling, with all new growth investments directed towards the skilling sector, which is estimated to exceed $40 billion [2] - The company anticipates a 60% reduction in capital expenditure, projecting total capex for 2025 to be around $27 million, down from $60-65 million in 2024 [1][8] - Chegg Skilling is expected to generate approximately $70 million in revenue by the end of 2025, with a projected 14% year-over-year growth in Q4 2025 [2] Group 2: Earnings Estimates and Performance - The Zacks Consensus Estimate indicates a loss of 14 cents for 2025, while earnings estimates for 2026 have improved to a profit of 18 cents, reflecting a significant projected growth of 228.6% year-over-year [5][6] - Chegg's stock has outperformed other players in the EdTech sector, gaining 4.7% over the past month, contrasting with declines in shares of competitors like Duolingo and Coursera [7][10] Group 3: Competitive Landscape and Valuation - Chegg operates in a competitive environment alongside established companies such as Duolingo and Coursera, which have seen their stock prices decline recently [10] - Currently, Chegg's stock is trading at a forward 12-month price-to-earnings (P/E) ratio of 5.13, significantly lower than Duolingo's 42.37 and Coursera's 15.67, indicating a potential undervaluation [11][12]

Core Insights - Chegg, Inc. has officially split its business into two segments: a growth-oriented Chegg Skilling and a legacy academic services unit, aiming to leverage its language-learning platform, Busuu [2][4] Business Strategy - Chegg is focusing on expanding Busuu into Latin America (LATAM), targeting B2B skilling opportunities while moving away from its struggling academic services [3][4] - Busuu's unique approach to language learning emphasizes conversational fluency, aligning with enterprise demand for practical communication skills [3][4] Financial Performance - Chegg Skilling is projected to generate approximately $70 million in revenue by the end of 2025, with a year-over-year growth rate in the mid-teens [5][8] - The company has implemented aggressive cost restructuring, allowing for selective investments in expansion without straining cash flow [5][8] Market Position - Chegg's stock has increased by 13.5% over the past month, outperforming the Zacks Internet - Software industry and the S&P 500 Index [6][8] - The company is currently trading at a forward 12-month price-to-earnings (P/E) ratio of 5.57, significantly lower than competitors like Duolingo and Coursera, which have P/E ratios of 43.67 and 15.88, respectively [10][11] Earnings Estimates - The Zacks Consensus Estimate for Chegg's 2025 loss has widened to 14 cents, while estimates for 2026 earnings have improved to 18 cents [12][13] - The 2025 estimate indicates a year-over-year decline of 118.7%, while the 2026 estimate suggests a growth of 228.6% [13]

Core Insights - Chegg, Inc. has redefined its business model with the introduction of Chegg Skilling, integrating Busuu and Chegg Skills to tap into the growing global skilling market, estimated at over $40 billion [1] Business Model and Growth Strategy - Chegg Skilling focuses on AI skills and upskilling for frontline workers, with both Busuu and Chegg Skills showing double-digit growth. The segment is projected to achieve $70 million in annual revenues by 2025, with a year-over-year growth rate of 14% [2] - The company is enhancing its B2B focus through successful partnerships, such as with Guild, to secure contracts from employers seeking scalable training solutions, with plans for expansion into Latin America [2] Financial Restructuring - Chegg is implementing a significant cost restructure, aiming to reduce non-GAAP expenses from $536 million in 2024 to under $250 million by 2026, alongside a 60% cut in capital expenditures next year [3] - Improved operational discipline has led to better-than-expected adjusted EBITDA results in Q3 2025, indicating that the new leaner model is starting to yield positive outcomes [3] Market Position and Competition - Chegg operates in a competitive ed-tech landscape alongside Duolingo and Udemy, each employing different strategies to capture market share [5][7] - Duolingo excels in language learning with a gamified app, while Udemy leverages a vast marketplace model with independent instructors to meet evolving professional learning needs [6] Stock Performance and Valuation - Chegg's stock has declined by 22.6% over the past month, underperforming compared to the Zacks Internet - Software industry and the S&P 500 Index [8] - The stock is currently trading at a forward 12-month price-to-sales (P/S) ratio of 0.35, indicating a discounted valuation compared to industry peers, which may present an attractive entry point for investors [11] Earnings Estimates - The Zacks Consensus Estimate for Chegg's 2025 loss has widened to 14 cents, while estimates for 2026 earnings have increased to 18 cents, reflecting a year-over-year decline of 118.7% for 2025 and a projected growth of 228.6% for 2026 [13][14]

Core Insights - Chegg, Inc. (CHGG) has experienced a significant decline of 45.4% in its stock price over the past three months, contrasting with a 10.1% decline in the Zacks Internet-Software industry and an 8.9% gain in the broader Computer and Technology sector [2][3] Company Performance - Chegg is facing multiple pressures, including declining traffic in its legacy academic services, substantial year-over-year revenue contraction, and an operational reset due to recent restructuring [3] - The company is transitioning towards a skilling-focused model, which is influenced by shifts in student behavior and competition from AI-driven alternatives [3] Restructuring and Cost Management - Chegg has implemented a major restructuring to enhance long-term profitability, dividing operations into a legacy academic business and a growth-oriented skilling business [9][10] - The restructuring has led to a 46% year-over-year reduction in non-GAAP operating expenses in Q3 2025, with expectations for total non-GAAP expenses to drop from $536 million in 2024 to under $250 million by 2026 [11] Skilling Business Growth - The consolidation of Busuu and Chegg Skills into a single "Chegg Skilling" unit is projected to achieve 14% year-over-year revenue growth for Q4 2025, with sustained double-digit growth anticipated beyond 2025 [12] - Demand for workforce training in areas such as AI and language learning is increasing, aligning with broader corporate training trends [12][13] Legacy Academic Operations - Despite challenges, the legacy academic services segment remains valuable, with over 130 million questions in its database, allowing for efficient operation with fewer resources [14] - This segment is expected to continue generating solid cash flow, providing funding for future investments in the skilling business [15] Financial Outlook - Chegg anticipates significant improvement in free cash flow in 2026, supported by lower operating expenses and capital expenditures [16] - Capital expenditures fell by 63% year-over-year in Q3 2025, with an additional 60% reduction expected in 2026, enhancing cash preservation while maintaining product quality [17] Valuation and Earnings Estimates - Chegg's stock is currently trading at a forward price-to-sales (P/S) ratio of 0.34X, significantly lower than industry peers like Coursera and Udemy [18][20] - Earnings estimates for 2026 have increased to 18 cents per share, indicating a year-over-year growth of 228.6% [21] Investment Opportunity - Chegg's strategic restructuring, growth in the skilling business, and disciplined cost management create a solid foundation for potential recovery, making it an attractive investment opportunity despite near-term uncertainties [23]

Group 1 - Chegg, Inc. has decided to remain a standalone public company after a year-long strategic review, concluding that independence maximizes long-term shareholder value [1] - The company announced a restructuring plan aimed at strengthening cash flow and focusing on the $40+ billion skilling market, which includes reducing its workforce by 388 roles (about 45%) [2] - Chegg expects its "Skills" businesses to generate approximately $70 million in revenue for 2025, with double-digit growth anticipated in 2026 [2] Group 2 - Executive Chairman Dan Rosensweig has returned to the roles of president and CEO, while Nathan Schultz has taken on the role of executive advisor to the CEO and board [1] - The restructuring plan targets a reduction of $100–$110 million in non-GAAP expenses for 2026 and anticipates incurring $15–$19 million in severance charges [2] - Chegg reiterated its Q3 2025 revenue and adjusted EBITDA guidance, indicating a focus on delivering services with a lower cost structure [2]

Financial Data and Key Metrics Changes - In Q3 2025, total revenue was $78 million, a decrease of 42% year-over-year, primarily due to reduced traffic leading to fewer subscribers and less subscription revenue [10] - Non-GAAP operating expenses were $49 million, a reduction of approximately $41 million, or 46% year-over-year, driven by restructuring efforts [11] - Adjusted EBITDA for Q3 was $13 million, representing a margin of 17% [11] - Free cash flow for Q3 was negative $900,000, impacted by a one-time $7.5 million settlement payment to the FTC and $5.5 million in severance payments [12] - The company concluded the quarter with cash and investments of $112 million and a net cash balance of $49 million [12] Business Line Data and Key Metrics Changes - The company has split into two units: Chegg Skilling, expected to have sustainable double-digit growth, and legacy academic services, focusing on cash generation [5][6] - Chegg Skilling is expected to end 2025 with strong momentum, anticipating a 14% year-over-year growth and full-year revenue of $70 million [8] - The legacy academic business is expected to generate cash for several years despite challenges from reduced Google traffic [22] Market Data and Key Metrics Changes - The skilling market is currently valued at over $40 billion, with a focus on workforce, AI, and language learning [7] - Chegg Skilling is positioned to capture growth in the B2B market, transitioning from a B2C model [16] Company Strategy and Development Direction - The company aims to rebuild and reinvent itself, focusing on the skilling market and leveraging its assets for long-term value creation [5][9] - A strategic shift towards the skilling market is seen as essential for future growth, with all growth resources allocated to this segment [16] - The company is investing in AI to enhance its offerings and improve operational efficiency [11] Management's Comments on Operating Environment and Future Outlook - Management acknowledges the disruptive impact of AI on traditional business models and is adapting to these changes [5][6] - The company is optimistic about its ability to grow in the skilling market, with expectations of double-digit growth in the coming quarters [10][12] - Management believes they have hit the bottom and are now positioned for future growth and profitability [13] Other Important Information - The company has undergone significant restructuring, which included a reduction of nearly 400 employees to streamline operations [17] - The transition to a B2B model is expected to provide a more stable and secure business environment [24] Q&A Session Summary Question: Strategic product priorities for skilling and resource allocation - All growth resources will be directed towards the skilling business, focusing on B2B opportunities and sustainable growth [16] Question: Support for the legacy academic business - The legacy business will continue to operate efficiently, leveraging its existing database and technology to generate cash [22] Question: Initiatives for the Busuu business and growth confidence - The company is focusing on repackaging learning mechanisms for B2B and leveraging AI for conversational learning [27][29] Question: Investments and channels for the skilling business - The company is exploring new distribution channels and building a B2B Salesforce to expand its market reach [34][36] Question: Impact of reduced traffic on skilling business - The skilling business is not expected to face headwinds from reduced traffic, as it is positioned for growth [38]

Financial Performance - Total revenue for Q3 2025 was $78 million, a 43% decrease year-over-year[35] - Adjusted EBITDA for Q3 2025 was $13 million, compared to $22 million in Q3 2024[37] - Free cash flow for Q3 2025 was -$1 million, impacted by $55 million in severance payments and a $75 million settlement payment[39] - Capital Expenditures (CapEx) in Q3 2025 were $6 million, down 63% year-over-year[39] - The company ended the quarter with $112 million in cash and investments, resulting in a net cash balance of $49 million[42] Business Strategy and Outlook - The company is splitting into two units: Chegg Skilling (growth business) and legacy academic services (cash flow generation)[8] - Chegg Skilling is expected to have sustainable double-digit growth[8] - Chegg Skilling revenue is expected to increase approximately 14% year-over-year in Q4 2025, driving total revenue of approximately $70 million for the year[10] - Q4 2025 total net revenue is guided to be between $70 million and $72 million[44] - Q4 2025 Adjusted EBITDA is guided to be between $10 million and $11 million[44] - Full-year 2025 CapEx is anticipated to be approximately $27 million, with a targeted further reduction of approximately 60% in 2026[39]