Core Insights - Chegg, Inc. is heavily investing in artificial intelligence to transform its business model amid significant subscriber losses, reporting Q2 2025 revenues of $105.1 million, a 36% decline year-over-year, with subscription revenue down 39% to $89.7 million and a 40% drop in subscribers to 2.6 million [1][8] Business Model and AI Integration - Management is optimistic that efficiency improvements and product innovation will stabilize the business, with AI tools like Solution Scout and AI-driven flashcard generators enhancing user engagement and satisfaction [2] - Non-GAAP expenses decreased by 33% in Q2, allowing Chegg to achieve $23.1 million in adjusted EBITDA despite revenue challenges [2] Growth Segments - Busuu and Skills are identified as growth segments, with Busuu's language-learning platform experiencing a 15% revenue increase, driven by a 39% rise in its B2B business, while Skills saw a 16% quarter-over-quarter enrollment growth [3] Future Outlook - For Q3, management projects revenues to be between $75 million and $77 million, indicating ongoing traffic challenges, raising questions about AI's potential to drive sustainable growth in a competitive edtech environment [4] Competitive Landscape - Chegg faces increasing competition from companies like Coursera and Duolingo, with Coursera focusing on AI-driven personalization and enterprise partnerships, and Duolingo expanding its offerings in language learning and other subjects [5] Stock Performance and Valuation - Chegg's stock has increased by 41.3% over the past three months, outperforming the Zacks Internet - Software industry [6] - The stock is currently trading at a forward 12-month price-to-sales (P/S) ratio of 0.42, indicating a discount compared to industry peers [10] Earnings Estimates - The Zacks Consensus Estimate for Chegg's 2025 loss per share has improved to 11 cents from 40 cents over the past month, with a projected 33.8% decline in sales for 2025 [12]

Financial Data and Key Metrics Changes - In Q2 2025, the company reported total revenue of $105 million, a decrease of 36% year over year [20] - Adjusted EBITDA for the quarter was $23 million, representing a margin of 22% [21] - The company had 2.6 million subscribers during the quarter, reflecting a year over year decline of 40% [20] - Non-GAAP operating expenses were $64 million, a reduction of approximately $31 million or 33% year over year [20] - Free cash flow for the second quarter was negative $12 million, impacted by severance payments and annual prepayment for hosting expenses [21] - The company concluded the quarter with cash and investments of $114.1 million and a net cash balance of $52 million [22] Business Line Data and Key Metrics Changes - The skills and other revenue segment generated $15 million in Q2, including approximately $7 million from content licensing [20] - Busuu, the language learning business, achieved a 15% year over year revenue increase in Q2, with B2C revenue increasing by 6% year over year and B2B revenue growing by 39% year over year [10][11] - The skills business saw a 16% increase in enrollments quarter over quarter and an 11% increase in monthly active users [12] Market Data and Key Metrics Changes - The language learning market has a significant opportunity, with 78 million success-seeking learners and a $3.2 billion market potential [10] - The skills market is valued at $40 billion, focusing on workplace readiness and upskilling for professional adults [12] Company Strategy and Development Direction - The company is undergoing a strategic review process, exploring options including acquisition, going private, or remaining public [6][7] - The focus is shifting towards skills and Busuu as primary growth engines, with investments in language learning and workplace readiness [8][12] - Chegg Study will continue to serve as a valuable service while generating cash to support investments in Busuu and Skills [8] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the potential for the skills business and its path to profitability and double-digit growth in 2026 [14] - The company is adapting to evolving consumer expectations and market turbulence, particularly in the Busuu and Skills segments [22] - Management highlighted the importance of proving value in the institutional market to drive significant revenue growth in 2026 and beyond [30] Other Important Information - The company is on track to achieve non-GAAP expense savings of $165 million to $175 million in 2025 and $100 million to $110 million in 2026 [19] - The company has successfully cured its stock price deficiency and regained compliance with NYSE's price listing requirements [22] Q&A Session Summary Question: Regarding Busuu's growth in the B2B segment - Management indicated that growth is driven by both direct sales efforts and strong relationships with partners like Guild, emphasizing their ability to control their growth trajectory [24][26] Question: On Chegg Study's institutional pilots - Management noted the importance of proving value to schools and plans to continue adding partners while focusing on performance metrics to drive predictable growth [28][30] Question: About the B2C performance of Busuu - Management attributed steady performance to targeting the right consumer persona and enhancing product features with AI to improve engagement [35][36] Question: Positioning of the skills business in the AI education market - Management expressed optimism about the skills business, highlighting a transition to micro-learning formats that align with current market demands [39][41]