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6 days ago
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Chegg Reports 2025 Second Quarter Earnings
SANTA CLARA, Calif.--(BUSINESS WIRE)--Chegg, Inc. (NYSE:CHGG), the leading student-first connected learning platform, today reported financial results for the three months ended June 30, 2025. 'We had a good Q2, exceeding our guidance and actively engaging on the strategic review process and the transformation of Chegg. We remain focused on implementing AI to transform Chegg Study, making it a more efficient business to run, while still differentiating our product and adding value to millions of students,' said Nathan Schultz, Chief Executive Officer & President of Chegg, Inc. 'In addition, we are evolving to be a skills focused organization, with Busuu and Skills, both representing a tremendous market opportunity and Chegg's future growth engines.' Second Quarter 2025 Highlights Total Net Revenues of $105.1 million, a decrease of 36% year-over-year Subscription Services Revenues of $89.7 million, a decrease of 39% year-over-year Gross Margin of 66% Non-GAAP Gross Margin of 68% Net Loss was $35.7 million Non-GAAP Net Income was $10.8 million Adjusted EBITDA was $23.1 million 2.6 million Subscription Services subscribers, a decrease of 40% year-over-year Total net revenues include revenues from Subscription Services and Skills and Other. Subscription Services includes revenues from our Chegg Study Pack, Chegg Study, Chegg Writing, Chegg Math, and Busuu offerings. Skills and Other includes revenues from Chegg Skills, advertising services, content licensing, print textbooks and eTextbooks. For more information about non-GAAP net income, non-GAAP gross margin and adjusted EBITDA, and a reconciliation of non-GAAP net income to net loss, gross margin to non-GAAP gross margin and adjusted EBITDA to net loss, see the sections of this press release titled, 'Use of Non-GAAP Measures,' 'Reconciliation of Net Loss to EBITDA and Adjusted EBITDA,' and 'Reconciliation of GAAP to Non-GAAP Financial Measures.' Business Outlook Total Net Revenues in the range of $75 million to $77 million Subscription Services Revenues in the range of $67 million to $69 million Gross Margin between 56% and 57% Adjusted EBITDA in the range of $7 million to $8 million For more information about the use of forward-looking non-GAAP measures, a reconciliation of forward-looking net loss to EBITDA and adjusted EBITDA for the third quarter 2025, see the below sections of the press release titled 'Use of Non-GAAP Measures,' and 'Reconciliation of Forward-Looking Net Loss to EBITDA and Adjusted EBITDA.' An updated investor presentation and an investor data sheet can be found on Chegg's Investor Relations website Prepared Remarks - Nathan Schultz, CEO & President Chegg, Inc. Thank you, Tracey. Hello and thank you for joining Chegg's second-quarter 2025 earnings call. Today's call will be structured in two areas: first, an update on the strategic review process; and second, detail and depth on our transformation to profitable growth, specifically within Skills and Busuu, which we believe will be the growth engines for Chegg going forward. As part of the strategic review process, in conjunction with our advisors, we have undertaken a comprehensive evaluation of both our internal operations and the broader market landscape to drive the best possible outcome for our stockholders and maximize long-term shareholder value. As a reminder, we are exploring a range of outcomes including being acquired, undertaking a go-private transaction, or remaining as a public standalone company. We continue to engage with a select group of parties. Q2 was a good quarter for Chegg. We surpassed our guidance and delivered $105 million in revenue and $23 million in adjusted EBITDA. I'm pleased by our continued focus on disciplined expense management, having identified an additional $17 million in CapEx and expense savings that we will realize in 2026. Additionally, I'm encouraged by the revenue growth in Busuu, and the reinvention of Chegg Study into a Personalized Learning Assistant that continues to get less expensive to run thanks to AI. We remain firmly on track to achieve the targets outlined in our previously announced restructuring efforts and reduce non-GAAP expenses by $165 -175 million in 2025 and now expect the total non-GAAP expense savings in 2026 to be $110-120 million. As we look towards 2026, Chegg is evolving into a skills focused organization, investing in two large growth areas: language learning, and workplace readiness and upskilling. These businesses, Busuu and Skills respectively, represent the future of our company and will serve as our primary growth engines, while our core academic product, Chegg Study, will remain a valuable service for millions of students and generate meaningful cash that will support our investments in Busuu and Skills. Busuu, is our language learning business that caters to adults who need to learn a new language to better their life or career. This is an enormous market of 78 million success seeking learners with a $3.2 billion market opportunity. Our recent investments are paying off, and if you haven't tried Busuu yet, now's a great time—we encourage you to explore our new AI-powered features, including our new speaking bites product. Busuu continues on a strong path, achieving a 15% year-over-year revenue increase in Q2, with good performance in both the B2C and B2B segments. Busuu's B2C revenue increased 6% year-over-year. In the second half of the year, B2C focus will be on product innovation with continued emphasis on AI as a driver for personalization Busuu's B2B business achieved an even more impressive 39% year-over-year revenue growth, continuing a robust double-digit growth trajectory, including retention improving by 22 percentage points year over year. Throughout H2, we will continue our rollout with Guild into the English learning vertical and expand our offering with Learning Pathways , which offer personalized courses focused on key language and professional skills for specific roles and industries. We have had significant B2B traction in the DACH region with new partners such as HSF Fenster & Turen and Hubert Burda Media. We remain confident that Busuu will achieve approximately $48 million of revenue in 2025 and will be adjusted EBITDA positive by the first quarter of 2026. Our Skills business focuses on the $40 billion dollar market serving workplace readiness and upskilling for professional adults looking to move ahead in their careers. We spent the last 12 months modernizing our product offering and prioritizing three growth areas: AI programs, career fundamentals and professional upskilling. We're really excited to be seeing exactly what we want: enrollments have increased 16% quarter over quarter, and an 11% increase in monthly active users across our new programs quarter over quarter. Looking ahead to Q3, we will continue to invest in and expand our go-to-market strategy for Skills. Here are our priorities: We are focusing on growing our direct B2B presence as well as deepening relationships with distribution partners such as Guild. We are also pursuing ACE Credit recommendations for several of our Skills programs to count for college credits, helping to better support those seeking degrees and creating a bridge for us to monetize students as they transition from our academic services to our career services. Finally, we are continuing to strengthen and broaden our programs, expanding our reaching into the enormous upskilling market opportunity. For a complete view of our skills catalog, please reference our Investor Deck. We are optimistic about the potential for our Skills business and believe it is on a path to profitability and positive double digit revenue growth in 2026. Chegg Study continues to serve millions of students, and our investments in AI have transformed Chegg Study into a personalized learning coach that helps students succeed and improve their opportunity to graduate. Earlier this year we launched Solution Scout and AI-powered practice and flashcard generators. We're getting positive feedback, with students reporting a 23% lift in the statement 'Chegg helped me learn today' and a 17% lift in students who 'intend to use Chegg in the next 30 days.' Most importantly, our monthly retention rate was up 117 basis points in Q2. For the rest of 2025, we'll continue to push the differentiated and personalized nature of our product. Research from the Pew Center confirms that the freshman class of 2025 is expected to be the biggest, most diverse ever. This September, we'll introduce two new core capabilities into the existing user interface; pushing Chegg Study into a personalized learning coach for the modern learner: First, we are building a smart planning tool to help students set learning goals, organize their work, and stay on track with personalized, step-by-step guidance. Second, we are introducing a voice interface that, when combined with visual aids and a thoughtful AI agent, will enable deeper learning across topics and disciplines. Voice matters for learnings because it improves comprehension and memory, clarifies thinking and increases engagement. Finally, our business-to-institution pilot program continues to expand, moving from 5 active pilot programs at the start of the year, to now 23. With many pilots in place, we are focused on efficacy studies validating what we have always known: students who use Chegg perform better academically. We believe there is a tremendous opportunity to support a broader range of students in achieving their academic goals while increasing persistence and graduation rates. To wrap us up, we continue to make progress towards the strategic alternatives process, and are pleased with the positive trends we've seen in Busuu and Skills, and the technology investments we've made in Chegg Study to allow the business to run efficiently and be the investment vehicle for the company in 2026. With that, I'll turn it over to David. Prepared Remarks - David Longo, CFO Chegg, Inc. Thank you, Nathan and good afternoon. Today, I will be presenting our financial performance for the second quarter of 2025, along with the company's outlook for the third quarter. We delivered a good second quarter, exceeding our guidance on both revenue and adjusted EBITDA. We continue to prioritize disciplined cost management in line with our business outlook. We are on target to fully realize the non-GAAP expense savings objectives we previously announced of $165 - $175 million in 2025, and $100 - $110 million in 2026. As Nathan highlighted earlier, we are not stopping there. We have identified an additional $10 million of operating expense savings and $7 million in CapEx savings in 2026. Expense discipline is now in our DNA, and we are committed to unlocking each and every opportunity to strengthen cash flow and create shareholder value. In the second quarter, total revenue was $105 million, a decrease of 36% year-over-year. This includes Subscription Services revenue of $90 million. We had 2.6 million subscribers during the quarter, representing a year-over-year decline of 40%, as we continue to feel the impact of lower traffic, largely due to Google AI Overviews. Despite the traffic trends, retention and ARPU increased year over year, demonstrating that when students find Chegg, they value the service and are retaining as well as ever. Skills and Other revenue was $15 million in the quarter, which includes approximately $7 million of revenue from content licensing. As we outlined last quarter, these content licensing agreements are non-exclusive and for a small percentage of our content. Non-GAAP operating expenses were $64 million in the quarter, a reduction of approximately $31 million, or 33%, year-over-year, driven by the execution of our multiple restructurings. Our second quarter adjusted EBITDA was $23 million, representing a margin of 22%. Capital expenditures for the quarter were $7 million, a decrease of 60% year-over-year. We anticipate full-year 2025 CapEx of approximately $30 million, with a targeted further reduction of approximately 50% in 2026. Through innovative use of AI, we are on track to reduce content and software development CapEx by over $50 Million in 2026 versus 2024, while still delivering a high-quality experience that our students expect from us. Free cash flow for the second quarter was negative $12 million, which was impacted by severance payments of $12.5M related to our restructuring, as well as our annual pre-payment for hosting expenses. Looking at the balance sheet, we concluded the quarter with cash and investments of $114.1 million and a net cash balance of $52 million. Looking ahead, for Q3 guidance, we expect: Total revenue between $75 and $77 million, with Subscription Services revenue between $67 and $69 million; Gross margin to be in the range of 56 to 57 percent; And adjusted EBITDA between $7 and $8 million. In closing, we have adapted our business in response to evolving consumer expectations and ongoing market turbulence. We are especially encouraged by the momentum we are seeing in Busuu, as well as the strong potential of Skills, and for both to be significant growth drivers in our portfolio. We are investing in these platforms to accelerate growth and ensure they remain key drivers of long-term shareholder value. At the same time, we continue to align our cost structure to support our priorities of generating cash flow and maximizing value for shareholders. Finally, I am pleased to announce that we have successfully cured our stock price deficiency during the quarter and regained compliance with the NYSE's price listing requirements. With that, I will turn the call over to the operator for your questions. Conference Call and Webcast Information To access the call, please dial 1-877-407-4018 or outside the U.S. +1-201-689-8471. A live webcast of the call will also be available at under the Events & Presentations menu. Participants can also access the call using the Call me link for instant telephone access to the event, which will be active 15 minutes before the scheduled start time. An audio replay will be available from 7:30 p.m. Eastern Time on August 5, 2025, until 11:59 p.m. Eastern Time on August 12, 2025, by calling 1-844-512-2921 or outside the U.S. +1-412-317-6671, with Access ID 13755135. An audio archive of the call will also be available at Use of Investor Relations Website for Regulation FD Purposes Chegg also uses its Investor Relations website, as a means of disclosing material non-public information and for complying with its disclosure obligations under Regulation FD. Accordingly, investors should monitor in addition to following press releases, Securities and Exchange Commission filings and public conference calls and webcasts. About Chegg Chegg provides individualized learning support to students as they pursue their educational journeys. Available on demand 24/7 and powered by over a decade of learning insights, the Chegg platform offers students artificial intelligence (AI)-powered academic support thoughtfully designed for education coupled with access to a vast network of subject matter experts who help ensure quality and accuracy. No matter the goal, level, or style, Chegg helps millions of students around the world learn with confidence by helping them build essential academic, life, and job skills to achieve success. Chegg is a publicly held company based in Santa Clara, California and trades on the NYSE under the symbol CHGG. For more information, visit Use of Non-GAAP Measures To supplement Chegg's financial results presented in accordance with generally accepted accounting principles in the United States (GAAP), this press release and the accompanying tables and the related earnings conference call contain non-GAAP financial measures, including adjusted EBITDA, non-GAAP cost of revenues, non-GAAP gross profit, non-GAAP gross margin, non-GAAP operating expenses, non-GAAP income from operations, non-GAAP net income, non-GAAP weighted average shares, non-GAAP net income per share, and free cash flow. For reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures, please see the section of the accompanying tables titled, 'Reconciliation of Net Loss to EBITDA and Adjusted EBITDA,' 'Reconciliation of GAAP to Non-GAAP Financial Measures,' 'Reconciliation of Net Cash Provided by Operating Activities to Free Cash Flow,' and 'Reconciliation of Forward-Looking Net Loss to EBITDA and Adjusted EBITDA.' The presentation of these non-GAAP financial measures is not intended to be considered in isolation from, as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP, and may be different from non-GAAP financial measures used by other companies. Chegg defines (1) adjusted EBITDA as earnings before interest, taxes, depreciation and amortization or EBITDA, adjusted for share-based compensation expense, other income, net, acquisition-related compensation costs, impairment expense, restructuring charges, content and related assets charge and transitional logistic charges; (2) non-GAAP cost of revenues as cost of revenues excluding amortization of intangible assets, share-based compensation expense, acquisition-related compensation costs, restructuring charges, content and related assets charge, and transitional logistic charges; (3) non-GAAP gross profit as gross profit excluding amortization of intangible assets, share-based compensation expense, acquisition-related compensation costs, restructuring charges, content and related assets charge, and transitional logistic charges; (4) non-GAAP gross margin is defined as non-GAAP gross profit divided by net revenues, (5) non-GAAP operating expenses as operating expenses excluding share-based compensation expense, amortization of intangible assets, acquisition-related compensation costs, restructuring charges, impairment expense, impairment of lease related assets, and loss contingency; (6) non-GAAP income from operations as loss from operations excluding share-based compensation expense, amortization of intangible assets, acquisition-related compensation costs, restructuring charges, impairment expense, content and related assets charge, impairment of lease related assets, loss contingency, and transitional logistic charges; (7) non-GAAP net income as net loss excluding share-based compensation expense, amortization of intangible assets, acquisition-related compensation costs, amortization of debt issuance costs, the income tax effect of non-GAAP adjustments, restructuring charges, impairment expense, content and related assets charge, impairment of lease related assets, gain on sale of strategic equity investment, gain on early extinguishment of debt, loss contingency and transitional logistic charges; (8) non-GAAP weighted average shares outstanding as weighted average shares outstanding adjusted for the effect of shares for stock plan activity and shares related to our convertible senior notes, to the extent such shares are not already included in our weighted average shares outstanding; (9) non-GAAP net income per share is defined as non-GAAP net income divided by non-GAAP weighted average shares outstanding; and (10) free cash flow as net cash provided by operating activities adjusted for purchases of property and equipment. To the extent additional significant non-recurring items arise in the future, Chegg may consider whether to exclude such items in calculating the non-GAAP financial measures it uses. Chegg believes that these non-GAAP financial measures, when taken together with the corresponding GAAP financial measures, provide meaningful supplemental information regarding Chegg's performance by excluding items that may not be indicative of Chegg's core business, operating results or future outlook. Chegg management uses these non-GAAP financial measures in assessing Chegg's operating results, as well as when planning, forecasting and analyzing future periods and believes that such measures enhance investors' overall understanding of our current financial performance. These non-GAAP financial measures also facilitate comparisons of Chegg's performance to prior periods. As presented in the 'Reconciliation of Net Loss to EBITDA and Adjusted EBITDA,' 'Reconciliation of GAAP to Non-GAAP Financial Measures,' 'Reconciliation of Forward-Looking Net Loss to EBITDA and Adjusted EBITDA,' and 'Reconciliation of Net Cash Provided by Operating Activities to Free Cash Flow,' tables below, each of the non-GAAP financial measures excludes or includes one or more of the following items: Share-based compensation expense. Share-based compensation expense is a non-cash expense that varies in amount from period to period and is dependent on market forces that are often beyond Chegg's control. As a result, management excludes this item from Chegg's internal operating forecasts and models. Management believes that non-GAAP measures adjusted for share-based compensation expense provide investors with a basis to measure Chegg's core performance against the performance of other companies without the variability created by share-based compensation as a result of the variety of equity awards used by other companies and the varying methodologies and assumptions used. Amortization of intangible assets. Chegg amortizes intangible assets, including those that contribute to generating revenues, that it acquires in conjunction with acquisitions, which results in non‑cash expenses that may not otherwise have been incurred. Chegg believes excluding the expense associated with intangible assets from non-GAAP measures allows for a more accurate assessment of its ongoing operations and provides investors with a better comparison of period-over-period operating results. No corresponding adjustments have been made related to revenues generated from acquired intangible assets. Acquisition-related compensation costs. Acquisition-related compensation costs include compensation expense resulting from the employment retention of certain key employees established in accordance with the terms of the acquisitions. In most cases, these acquisition-related compensation costs are not factored into management's evaluation of potential acquisitions or Chegg's performance after completion of acquisitions, because they are not related to Chegg's core operating performance. In addition, the frequency and amount of such charges can vary significantly based on the size and timing of acquisitions and the maturities of the businesses being acquired. Excluding acquisition-related compensation costs from non-GAAP measures provides investors with a basis to compare Chegg's results against those of other companies without the variability caused by purchase accounting. Amortization of debt issuance costs. The difference between the effective interest expense and the contractual interest expense are excluded from management's assessment of our operating performance because management believes that these non-cash expenses are not indicative of ongoing operating performance. Chegg believes that the exclusion of the non-cash interest expense provides investors with a better comparison of period-over-period operating results. Content and related assets charge. The content and related assets charge represents a write off of certain content and related assets. The content and related assets charge is excluded from non-GAAP financial measures because it is the result of a discrete event that is not considered core-operating activities. Chegg believes that it is appropriate to exclude the content and related assets charge from non-GAAP financial measures because it enables the comparison of period-over-period operating results. Income tax effect of non-GAAP adjustments. We utilize a non-GAAP effective tax rate for evaluating our operating results, which is based on our current mid-term projections. This non-GAAP tax rate could change for various reasons including, but not limited to, significant changes resulting from tax legislation, changes to our corporate structure and other significant events. Chegg believes that the inclusion of the income tax effect of non-GAAP adjustments provides investors with a better comparison of period-over-period operating results. Restructuring charges. Restructuring charges represent expenses incurred in conjunction with a reduction in workforce. Chegg believes that it is appropriate to exclude them from non-GAAP financial measures because they are nonrecurring and the result of an event that is not considered a core-operating activity. Chegg believes that it is appropriate to exclude the restructuring charges from non-GAAP financial measures because it provides investors with a better comparison of period-over-period operating results. Impairment expense. Impairment expense represents the impairment of goodwill, intangible assets, and property and equipment. Chegg believes that it is appropriate to exclude them from non-GAAP financial measures because they are the result of discrete events that are not considered core-operating activities and are not indicative of our ongoing operating performance. Chegg believes that it is appropriate to exclude the impairment expense from non-GAAP financial measures because it provides investors with a better comparison of period-over-period operating results. Impairment of lease related assets. The impairment of lease related assets represents impairment charge recorded on the ROU asset and leasehold improvements associated with the closure of our offices. The impairment of lease related assets is the result of an event that is not considered a core-operating activity and we believe its exclusion provides investors with a better comparison of period-over-period operating results. Loss contingency. We record a contingent liability for a loss contingency related to legal matters when a loss is both probable and reasonably estimable. The loss contingency is excluded from non-GAAP financial measures because they are the result of discrete events that are not considered core-operating activities. Chegg believes that it is appropriate to exclude the loss contingency from non-GAAP financial measures because it enables the comparison of period-over-period operating results. Impairment of strategic equity investment. The impairment of strategic equity investment represents a one-time event to record an impairment charge on our strategic equity investment. The impairment of strategic equity investment is a non-cash expense and we believe the exclusion from non-GAAP financial measures provides investors with a better comparison of period-over-period results. Gain on sale of strategic equity investment. The gain on sale of strategic equity investment represents a one-time event to record the sale of our equity investment in Sound Ventures. We believe that it is appropriate to exclude the gain from non-GAAP financial measure because it is the result of an event that is not considered a core-operating activity and we believe its exclusion provides investors with a better comparison of period-over-period operating results. Gain on early extinguishment of debt. The difference between the carrying amount of early extinguished debt and the reacquisition price is excluded from management's assessment of our operating performance because management believes that these non-cash gains are not indicative of ongoing operating performance. Chegg believes that the exclusion of the gain on early extinguishment of debt provides investors with a better comparison of period-over-period operating results. Effect of shares for stock plan activity. The effect of shares for stock plan activity represents the dilutive impact of outstanding stock options, RSUs, and PSUs, to the extent such shares are not already included in our weighted average shares outstanding. Effect of shares related to convertible senior notes. The effect of shares related to convertible senior notes represents the dilutive impact of our convertible senior notes, to the extent such shares are not already included in our weighted average shares outstanding. Free cash flow. Free cash flow represents net cash provided by operating activities adjusted for purchases of property and equipment. Chegg considers free cash flow to be a liquidity measure that provides useful information to management and investors about the amount of cash generated by the business after the purchases of property and equipment, which can then be used to, among other things, invest in Chegg's business and make strategic acquisitions. A limitation of the utility of free cash flow as a measure of financial performance is that it does not represent the total increase or decrease in Chegg's cash balance for the period. 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 ongoing restructuring plan, including the amount and timing of the charges we will incur in connection with the restructuring and the impact of the restructuring on our non-GAAP financial measures, including the amount of cost savings and the timing of those savings; our ability to increase efficiency across the business and to manage our expenses prudently as the competitive landscape evolves; our strategy to diversify our revenue streams with question-and-answer pair licensing, business-to-institution programs and other enterprise offerings; our ability to weather current and future business challenges and to stabilize the business; the impact of generative AI for academic support on the education ecosystem at large, including universities and education technology companies broadly; the speed, scale and potential impact of Google's AIO rollout; our ongoing litigation against Google and its outcome; student adoption of generative AI products; and all statements about our outlook under 'Business Outlook,' including our Q2 2025 guidance, including total revenue, Subscription Services revenue, gross margin, and adjusted EBITDA, as well as those included in the investor presentation referenced above and the 'Prepared Remarks' sections above. The words 'anticipate,' 'believe,' 'estimate,' 'expect,' 'intend,' 'project,' 'endeavor,' 'will,' 'should,' 'future,' 'transition,' 'outlook' and similar expressions, as they relate to Chegg, are intended to identify forward-looking statements. These statements are not guarantees of future performance, and are based on management's expectations as of the date of this press release and assumptions that are inherently subject to uncertainties, risks and changes in circumstances that are difficult to predict. Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements to differ materially from any future results, performance or achievements. Important factors that could cause actual results to differ materially from those expressed or implied by these forward-looking statements include the following: the effects of AI technology on our business and the economy generally; our ability to stabilize the business by attracting new learners to, and retaining existing learners on, our learning platform in light of declining revenue and user traffic; the impact and effectiveness of our internal restructuring activities; our ability to effectively control operating costs; our ability to innovate and offer new products and services in response to competitive technology and market developments, including generative AI; the outcome and effects of our exploration of strategic alternatives, which may not be successful and may disrupt our ongoing business, result in increased expenses and present other risks; competition in all aspects of our business, including with respect to AI and our expectation that such competition will increase; the outcome of our litigation against Google; our ability to maintain our services and systems without interruption, including as a result of technical issues, cybersecurity threats, or cyber-attacks; third-party payment processing risks; the outcome of any current litigation and investigations; and general economic, political and industry conditions, including escalating international trade tensions, including tariffs and trade restrictions, fluctuating inflation, recession and war. All information provided in this release and in the conference call is as of the date hereof, and Chegg undertakes no duty to update this information except as required by law. These and other important risk factors are described more fully in documents filed with the Securities and Exchange Commission (the 'SEC'), including our Annual Report on Form 10-K for the year ended December 31, 2024 filed with the SEC on February 24, 2025, as supplemented by the Company's subsequent Quarterly Reports on Form 10-Q and other SEC filings, and could cause actual results to differ materially from expectations. CHEGG, INC. (in thousands, except for number of shares and par value) (unaudited) June 30, 2025 December 31, 2024 Assets Current assets Cash and cash equivalents $ 36,825 $ 161,475 Short-term investments 48,815 154,249 Accounts receivable, net of allowance of $125 and $190 at June 30, 2025 and December 31, 2024, respectively 18,055 23,641 Prepaid expenses 23,683 17,100 Other current assets 76,548 81,094 Total current assets 203,926 437,559 Long-term investments 28,474 212,650 Property and equipment, net 135,491 170,648 Intangible assets, net 8,194 10,347 Right of use assets 19,418 22,256 Other assets 8,950 15,491 Total assets $ 404,453 $ 868,951 Liabilities and stockholders' equity Current liabilities Accounts payable $ 8,321 $ 15,159 Deferred revenue 34,759 39,217 Accrued liabilities 121,373 115,360 Current portion of convertible senior notes, net 62,516 358,605 Total current liabilities 226,969 528,341 Long-term liabilities Convertible senior notes, net — 127,344 Long-term operating lease liabilities 17,700 18,509 Other long-term liabilities 1,928 1,776 Total long-term liabilities 19,628 147,629 Total liabilities 246,597 675,970 Commitments and contingencies Stockholders' equity: Preferred stock, $0.001 par value per share, 10,000,000 shares authorized, no shares issued and outstanding — — Common stock, $0.001 par value per share: 400,000,000 shares authorized; 107,821,415 and 104,880,048 shares issued and outstanding at June 30, 2025 and December 31, 2024, respectively 108 105 Additional paid-in capital 1,133,686 1,114,550 Accumulated other comprehensive loss (33,350 ) (32,233 ) Accumulated deficit (942,588 ) (889,441 ) Total stockholders' equity 157,856 192,981 Total liabilities and stockholders' equity $ 404,453 $ 868,951 Expand CHEGG, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share amounts) (unaudited) Three Months Ended June 30, Six Months Ended June 30, 2025 2024 2025 2024 Net revenues $ 105,120 $ 163,147 $ 226,507 $ 337,497 Cost of revenues (1) 35,478 45,411 89,451 91,908 Gross profit 69,642 117,736 137,056 245,589 Operating expenses: Research and development (1) 28,717 43,651 58,145 88,086 Sales and marketing (1) 17,417 23,545 43,031 53,920 General and administrative (1) 59,966 54,016 99,340 109,550 Impairment expense — 481,531 2,000 481,531 Total operating expenses 106,100 602,743 202,516 733,087 Loss from operations (36,458 ) (485,007 ) (65,460 ) (487,498 ) Interest expense, net and other income, net: Interest expense, net (41 ) (651 ) (508 ) (1,301 ) Other income, net 2,059 7,119 15,056 17,899 Total interest expense, net and other income, net 2,018 6,468 14,548 16,598 Loss before provision for income taxes (34,440 ) (478,539 ) (50,912 ) (470,900 ) Provision for income taxes (1,223 ) (138,345 ) (2,235 ) (147,404 ) Net loss $ (35,663 ) $ (616,884 ) $ (53,147 ) $ (618,304 ) Net loss per share, basic and diluted $ (0.33 ) $ (6.01 ) $ (0.50 ) $ (6.03 ) Weighted average shares used to compute net loss per share, basic and diluted 106,908 102,604 106,039 102,474 Share-based compensation expense: Cost of revenues $ 131 $ 466 $ 369 $ 979 Research and development 1,584 7,123 4,796 16,332 Sales and marketing 413 1,726 1,474 3,866 General and administrative 5,784 8,732 12,530 26,159 Total share-based compensation expense $ 7,912 $ 18,047 $ 19,169 $ 47,336 Restructuring charges: Cost of revenues $ 741 $ 191 $ 741 $ 191 Research and development 6,833 2,082 7,792 2,082 Sales and marketing 2,010 906 2,142 906 General and administrative 9,338 3,549 11,167 3,549 Total restructuring charges $ 18,922 $ 6,728 $ 21,842 $ 6,728 Expand CHEGG, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) (unaudited) Six Months Ended June 30, 2025 2024 Cash flows from operating activities Net loss $ (53,147 ) $ (618,304 ) Adjustments to reconcile net loss to net cash provided by operating activities: Share-based compensation expense 19,169 47,336 Depreciation and amortization expense 48,320 39,393 Deferred tax assets 149 141,032 Operating lease expense, net of accretion 2,019 3,141 Amortization of debt issuance costs 418 1,081 Loss from write-offs of property and equipment 558 1,657 Gain on early extinguishment of debt (7,360 ) — Realized gain on sale of investments (752 ) — Impairment expense 2,000 481,531 Impairment of lease related assets 3,004 2,189 Impairment of strategic equity investment 6,000 — Loss contingency 7,500 — Other non-cash items 325 82 Change in assets and liabilities: Accounts receivable 6,114 10,561 Prepaid expenses and other current assets (941 ) (12,173 ) Other assets 928 (773 ) Accounts payable (6,038 ) (12,045 ) Deferred revenue (5,945 ) (10,226 ) Accrued liabilities (1,113 ) (4,057 ) Other liabilities (1,522 ) (2,880 ) Net cash provided by operating activities 19,686 67,545 Cash flows from investing activities Purchases of property and equipment (15,895 ) (45,817 ) Purchases of investments (793 ) (123,669 ) Maturities of investments 107,710 89,890 Proceeds from sale of investments 181,158 — Proceeds from sale of strategic equity investment — 15,500 Net cash provided by (used in) investing activities 272,180 (64,096 ) Cash flows from financing activities Repayment of convertible senior notes (416,492 ) — Payment of taxes related to the net share settlement of equity awards (1,037 ) (7,825 ) Proceeds from common stock issued under stock plans, net 391 2,190 Net cash used in financing activities (417,138 ) (5,635 ) Effect of exchange rate changes 491 (305 ) Net decrease in cash, cash equivalents and restricted cash (124,781 ) (2,491 ) Cash, cash equivalents and restricted cash, beginning of period 164,359 137,976 Cash, cash equivalents and restricted cash, end of period $ 39,578 $ 135,485 Expand Six Months Ended June 30, 2025 2024 Reconciliation of cash, cash equivalents and restricted cash: Cash and cash equivalents $ 36,825 $ 133,068 Restricted cash included in other current assets 1,014 540 Restricted cash included in other assets 1,739 1,877 Total cash, cash equivalents and restricted cash $ 39,578 $ 135,485 Expand CHEGG, INC. (in thousands) (unaudited) Three Months Ended June 30, Six Months Ended June 30, 2025 2024 2025 2024 Net loss $ (35,663 ) $ (616,884 ) $ (53,147 ) $ (618,304 ) Interest expense, net 41 651 508 1,301 Provision for income taxes 1,223 138,345 2,235 147,404 Depreciation and amortization expense 16,226 19,706 48,320 39,393 EBITDA (18,173 ) (458,182 ) (2,084 ) (430,206 ) Share-based compensation expense 7,912 18,047 19,169 47,336 Other income, net (2,059 ) (7,119 ) (15,056 ) (17,899 ) Restructuring charges 18,922 6,728 21,842 6,728 Loss contingency 7,500 — 7,500 — Impairment of strategic equity investment 6,000 — 6,000 — Impairment of lease related assets 3,004 2,189 3,004 2,189 Impairment expense — 481,531 2,000 481,531 Content and related assets charge — 729 — 729 Acquisition-related compensation costs — 173 — 428 Adjusted EBITDA $ 23,106 $ 44,096 $ 42,375 $ 90,836 Expand CHEGG, INC. (in thousands, except percentages and per share amounts) (unaudited) Three Months Ended June 30, Six Months Ended June 30, 2025 2024 2025 2024 Cost of revenues $ 35,478 $ 45,411 $ 89,451 $ 91,908 Amortization of intangible assets (1,076 ) (3,071 ) (2,153 ) (6,213 ) Share-based compensation expense (131 ) (466 ) (369 ) (979 ) Restructuring charges (741 ) (191 ) (741 ) (191 ) Content and related assets charge — (729 ) — (729 ) Acquisition-related compensation costs — (5 ) — (11 ) Non-GAAP cost of revenues $ 33,530 $ 40,949 $ 86,188 $ 83,785 Gross profit $ 69,642 $ 117,736 $ 137,056 $ 245,589 Amortization of intangible assets 1,076 3,071 2,153 6,213 Share-based compensation expense 131 466 369 979 Restructuring charges 741 191 741 191 Content and related assets charge — 729 — 729 Acquisition-related compensation costs — 5 — 11 Non-GAAP gross profit $ 71,590 $ 122,198 $ 140,319 $ 253,712 Gross margin % 66 % 72 % 61 % 73 % Non-GAAP gross margin % 68 % 75 % 62 % 75 % Operating expenses $ 106,100 $ 602,743 $ 202,516 $ 733,087 Share-based compensation expense (7,781 ) (17,581 ) (18,800 ) (46,357 ) Amortization of intangible assets — (435 ) — (1,291 ) Restructuring charges (18,181 ) (6,537 ) (21,101 ) (6,537 ) Loss contingency (7,500 ) — (7,500 ) — Impairment of strategic equity investment (6,000 ) — (6,000 ) — Impairment of lease related assets (3,004 ) (2,189 ) (3,004 ) (2,189 ) Impairment expense — (481,531 ) (2,000 ) (481,531 ) Acquisition-related compensation costs — (168 ) — (417 ) Non-GAAP operating expenses $ 63,634 $ 94,302 $ 144,111 $ 194,765 Loss from operations $ (36,458 ) $ (485,007 ) $ (65,460 ) $ (487,498 ) Share-based compensation expense 7,912 18,047 19,169 47,336 Amortization of intangible assets 1,076 3,506 2,153 7,504 Restructuring charges 18,922 6,728 21,842 6,728 Loss contingency 7,500 — 7,500 — Impairment of strategic equity investment 6,000 — 6,000 — Impairment of lease related assets 3,004 2,189 3,004 2,189 Impairment expense — 481,531 2,000 481,531 Content and related assets charge — 729 — 729 Acquisition-related compensation costs — 173 — 428 Non-GAAP (loss) income from operations $ 7,956 $ 27,896 $ (3,792 ) $ 58,947 Expand Three Months Ended June 30, Six Months Ended June 30, 2025 2024 2025 2024 Net loss $ (35,663 ) $ (616,884 ) $ (53,147 ) $ (618,304 ) Share-based compensation expense 7,912 18,047 19,169 47,336 Amortization of intangible assets 1,076 3,506 2,153 7,504 Amortization of debt issuance costs 41 540 418 1,081 Restructuring charges 18,922 6,728 21,842 6,728 Loss contingency 7,500 — 7,500 — Impairment of strategic equity investment 6,000 — 6,000 — Impairment of lease related assets 3,004 2,189 3,004 2,189 Impairment expense — 481,531 2,000 481,531 Income tax effect of non-GAAP adjustments 2,009 129,937 2,537 130,650 Gain on early extinguishment of debt — — (7,360 ) — Gain on sale of strategic equity investment — — — (3,783 ) Content and related assets charge — 729 — 729 Acquisition-related compensation costs — 173 — 428 Non-GAAP net income $ 10,801 $ 26,496 $ 4,116 $ 56,089 Weighted average shares used to compute net loss per share 106,908 102,604 106,039 102,474 Effect of shares for stock plan activity 455 310 617 513 583 9,234 3,585 9,234 107,946 112,148 110,241 112,221 Net loss per share $ (0.33 ) $ (6.01 ) $ (0.50 ) $ (6.03 ) Adjustments 0.43 6.25 0.54 6.53 Non-GAAP net income per share $ 0.10 $ 0.24 $ 0.04 $ 0.50 Expand CHEGG, INC. RECONCILIATION OF FORWARD-LOOKING NET LOSS TO EBITDA AND ADJUSTED EBITDA (in thousands) (unaudited) Three Months Ending September 30, 2025 Net loss $ (24,200 ) Interest expense, net 100 Provision for income taxes 700 Depreciation and amortization expense 15,200 EBITDA (8,200 ) Share-based compensation expense 7,900 Other income, net (1,200 ) Restructuring charges 9,000 Adjusted EBITDA $ 7,500 * Adjusted EBITDA guidance for the three months ending September 30, 2025 represent the midpoint of the range of $7 million to $8 million, respectively. Expand
India Today
02-08-2025
- Business
- India Today
Meet the 5 Indian students shortlisted for Global Student Prize 2025 top 50
In a proud moment for India, five students have made it to the top 50 shortlist for the Global Student Prize 2025 – a prestigious international award by the Varkey Foundation, run in partnership with five Indian students were selected from nearly 11,000 nominations and applications from 148 prize recognises extraordinary students making a real-world impact beyond academics, and awards USD 100,000 to the 'At Chegg, we're proud to support and celebrate the changemakers who aren't just imagining a better world – they're building it,' said Nathan Schultz, President and CEO of Chegg, Inc.'From environmental and social justice to education, health, and youth empowerment, this year's Global Student Prize finalists are tackling the world's most pressing challenges with courage and innovation," he the five Indian students shortlisted in this year's top 50:ADARSH KUMAR: BIHAR'S BARRIER-BREAKER He became the first student to win a Rs 30-lakh full scholarship to JPIS and now helps others secure the same. Growing up in Champaran, Bihar, where electricity was scarce and money scarcer, Adarsh Kumar dared to dream big. Raised by a single mother who worked as a domestic help, he left home at 14 with Rs 1,000 and an old laptop to pursue education in couldn't afford coaching, so he used public libraries and Wi-Fi to teach self-belief led him to found Skillzo, a platform that has trained over 19,500 underserved youths. His earlier project, Mission Badlao, brought vaccines, tree plantations, and school access to rural also co-built Sparkle and Education-21 with IITs, reaching thousands became the first student to win a Rs 30-lakh full scholarship to JPIS and now helps others secure the same. As a Google Youth Advisor, he advocates for equitable tech access, and his future plan includes SkillzoX, a low-bandwidth AI mentorship tool for rural India.2. MANNAT SAMRA: GIVING SECOND CHANCES Ranked in the top 1% of her class, Mannat has earned awards from the Diana Foundation and Rochester University. Mannat Samra, 17, is redefining criminal justice and refugee education. Her prison reform work has helped over 50,000 incarcerated people, from delivering communication training to launching India's first job portal for ex-convicts. Through Bridge, she supports small businesses run by formerly incarcerated also mentors refugee students, helping some gain entry to universities like Stanford. Her social enterprise SustainaBite turns food waste into high-protein flour, and she co-developed SecureSense, an AI system protecting borderland in the top 1% of her class, Mannat has earned awards from the Diana Foundation and Rochester idea incubator has nurtured dozens of youth-led projects, and she now plans to scale up prison reintegration and career counselling in juvenile vision is clear: 'No one is a prisoner of their circumstances.'3. SHIVANSH GUPTA: THE VOICE OF THE INVISIBLE Through government partnerships, he's trained over 40,000 rural women in financial literacy. From Haryana, Shivansh Gupta is changing how we understand gender economics and youth leadership. His academic work, published in journals like SocArxiv, explores unpaid labour and patriarchy's economic Shivansh isn't just a thinker – he's a government partnerships, he's trained over 40,000 rural women in financial literacy. His non-profit, The Teen Debater, has taught debate and critical thinking to 10,000+ students in over 250 schools, especially in India's Tier 2 and Tier 3 invented ParkinStep, a $5 wearable that helps Parkinson's patients walk safely, inspired by his great-grandfather.A national economics medallist, he's also a musician and debater who's competed at Harvard, Oxford and next goal? To scale ParkinStep and expand his educational work to marginalised youths globally.4. DHIRAJ GATMANE: RESTORING DIGNITY TO ELDERS Despite chronic illness and financial hardship, Dhiraj excelled in academics and has published AI research at Oxford and Imperial College London. In the tribal areas of Dadra and Nagar Haveli, Dhiraj Gatmane saw how older people suffered in silence. That empathy led to Second Sunrise, a youth-led movement reaching over 3.5 million elderly in 20+ Sunrise has built 350 green homes, conducted 120,000 health screenings, and trained 150,000 elders in digital skills through e-waste-powered Tech Pods. Dhiraj's model blends sustainability with care, using recycled materials, solar energy, and intergenerational chronic illness and financial hardship, Dhiraj excelled in academics and has published AI research at Oxford and Imperial College future plan includes drone-deployed labs, AR heritage trails, and a global NFT art campaign led by elders and him, 'Innovation is about proximity to those we often forget.'5. JAHAAN ARORA: MEALS, MENTORSHIP, AND A MOVEMENT Through his environmental initiative, Trash Mafia Kids, he's helped divert 20 tonnes of waste from landfills and recycled thousands of items. Jahaan Arora started by raising funds to feed 40 HIV+ children. Today, his project, 1 Million Meals, has served 950,000 meals and supported children with cerebral palsy and HIV/AIDS across India. It also won a USD440,000 grant from the Azim Premji also created $ocialCred$, a youth timebanking platform where students exchange volunteer hours for mentorship and skills. The platform now includes 11,900 children from five countries, clocking 168,000+ hours of community his environmental initiative, Trash Mafia Kids, he's helped divert 20 tonnes of waste from landfills and recycled thousands of globally, Jahaan has spoken at the World Time Banking Conference and aims to reach 1 million meals and 1 million civic hours by IMPACTWhether in a tribal village, a courtroom, or a refuge shelter, these five students have one thing in common – they're proving that age is no barrier to impact. Their stories echo a global truth: when young minds lead with heart, change becomes not just possible – but year's shortlisted Indian changemakers are not only academic achievers but also builders of global social innovation.'Their story is a powerful reminder that education is a catalyst for solving global challenges. At a time when the world is changing rapidly, investing in education has never been more vital. It's how we prepare the next generation to lead with purpose, think boldly, and shape a better future,' said Sunny Varkey, Founder of the Varkey Foundation.- Ends
Yahoo
04-06-2025
- Business
- Yahoo
CHGG Q1 Earnings Call: Revenue Decline, Cost Cuts, and Strategic Alternatives Take Center Stage
Online study and academic help platform Chegg (NYSE:CHGG) fell short of the market's revenue expectations in Q1 CY2025, with sales falling 30.4% year on year to $121.4 million. Its non-GAAP loss of $0.06 per share was significantly below analysts' consensus estimates. Is now the time to buy CHGG? Find out in our full research report (it's free). Revenue: $121.4 million (30.4% year-on-year decline) Adjusted EPS: -$0.06 vs analyst estimates of $0 (significant miss) Adjusted Operating Income: -$11.75 million vs analyst estimates of -$4.31 million (-9.7% margin, significant miss) Revenue Guidance for Q2 CY2025 is $101 million at the midpoint, below analyst estimates of $111.3 million EBITDA guidance for Q2 CY2025 is $16.5 million at the midpoint, below analyst estimates of $16.87 million Adjusted EBITDA Margin: 15.9% Services Subscribers: 3.19 million, down 1.47 million year on year Market Capitalization: $129 million Chegg's first quarter results were driven by continued declines in its core subscription business, as referenced by CEO Nathan Schultz, who cited ongoing industry headwinds and increased competition from generative AI tools. Schultz emphasized the company's efforts to diversify revenue through early-stage content licensing deals with leading technology firms and an expanding institutional pilot program. He also noted that operational restructuring and workforce reductions were implemented to address the ongoing subscriber and traffic declines affecting the business. CFO David Longo highlighted that these cost-saving measures are designed to realign Chegg's expense base with its reduced revenue outlook, following two rounds of restructuring in 2024 and further cuts announced this quarter. Looking ahead, Chegg's management signaled that persistent macroeconomic and industry challenges will continue to create pressure on revenues and subscriber growth in the near term. Schultz cautioned that 'business trends will worsen before they get better,' referencing competitive threats from large language models and changes in student behavior. The company is prioritizing diversification through content licensing, institutional sales, and investments in Busuu and Chegg Skills, both of which are expected to become more meaningful contributors. Ongoing strategic review efforts, including potential acquisition or going private, remain active, with Schultz describing early discussions with interested parties as encouraging. Cost containment and new business lines are central to Chegg's path forward. Chegg's management attributed the quarter's performance to severe subscription declines in its main business, offset by nascent revenue streams and aggressive cost reduction measures. Content licensing gains: Management highlighted two new licensing agreements with major technology companies, leveraging Chegg's proprietary question-and-answer archive. CEO Nathan Schultz noted that these deals represent a small fraction of Chegg's content library and are considered pilots, with the potential for broader adoption as large language models seek high-quality, human-verified data to train their systems. Institutional pilot program expansion: The business-to-institution (B2B) initiative grew from five to 15 university pilots over the quarter, aiming to reach 40 by year-end. Schultz explained that these partnerships use a seat-based licensing model, providing students access to Chegg's services via their institutions and addressing colleges' concerns over student persistence and graduation rates. Product and feature updates: Chegg released Solution Scout, which allows students to compare outputs from multiple AI models alongside Chegg's proprietary content, and introduced Create, an AI-powered feature enabling students to generate study material from their own classwork. These updates are designed to differentiate Chegg Study amid rising AI competition. Busuu and Skills performance: The Busuu language learning unit delivered 7% year-over-year revenue growth, with management pointing to successful AI-driven enhancements and strong B2B momentum. The Chegg Skills product entered new pilot partnerships in India and the U.S., with management forecasting positive adjusted EBITDA for both Busuu and Skills by 2026. Restructuring and cost control: Chegg announced another major restructuring, including a 22% workforce reduction and closure of U.S. and Canada offices. These actions are expected to generate $45–$55 million in savings for 2025 and over $100 million annually from 2026, following earlier cost-cutting measures in 2024. Chegg expects ongoing industry disruption, AI competition, and further cost alignment to shape its outlook for the remainder of the year. AI-driven competition intensifies: Management acknowledged that free AI-powered tools from large technology companies are eroding Chegg's direct-to-student traffic and subscriber base. Schultz specifically cited Google's AI Overviews and OpenAI's student offerings as major headwinds, signaling that these dynamics are expected to worsen before stabilizing. Revenue diversification efforts: The company aims to offset subscription declines by expanding content licensing deals and institutional contracts. Management believes these new revenue streams could become more meaningful over time but cautioned that they are in early stages and have yet to fully replace lost subscription revenues. Ongoing cost reductions: Chegg's restructuring initiatives are intended to realign its expense base with shrinking revenues. Management expects that, combined with previous cuts, these actions will significantly lower operating costs, but acknowledged that the near-term outlook remains pressured as the core business continues to contract. Looking ahead, the StockStory team will be monitoring (1) the scale and commercial impact of Chegg's content licensing agreements with additional technology partners, (2) the conversion rate of institutional pilots into longer-term contracts with colleges and universities, and (3) execution and follow-through on cost reduction plans. We will also track Busuu's ability to sustain growth and Chegg Skills' progress toward profitability. Chegg currently trades at a forward EV/EBITDA ratio of 2×. At this valuation, is it a buy or sell post earnings? The answer lies in our full research report (it's free). Donald Trump's victory in the 2024 U.S. Presidential Election sent major indices to all-time highs, but stocks have retraced as investors debate the health of the economy and the potential impact of tariffs. While this leaves much uncertainty around 2025, a few companies are poised for long-term gains regardless of the political or macroeconomic climate, like our Top 5 Strong Momentum Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025). Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-micro-cap company Tecnoglass (+1,754% five-year return). Find your next big winner with StockStory today. Error while retrieving data Sign in to access your portfolio Error while retrieving data Error while retrieving data Error while retrieving data Error while retrieving data
Yahoo
13-05-2025
- Business
- Yahoo
Q1 2025 Chegg Inc Earnings Call
Tracey Ford; Vice President, Investor Relations; Chegg Inc Nathan Schultz; Chief Operating Officer; Chegg Inc David Longo; Chief Financial Officer, Principal Financial Officer, and Treasurer; Chegg Inc Ryan MacDonald; Analyst; Needham & Company Operator Greetings, and welcome to the Chegg first-quarter 2025 earnings call. (Operator instructions) As a reminder, this conference is being recorded. I'd now like to turn the conference over to your host, Tracey Ford, Vice President, Investor Relations for Chegg. Thank you. You may begin. Tracey Ford Good morning. Thank you for joining Chegg's first-quarter 2025 conference call. On today's call are Nathan Schultz, President and CEO; and David Longo, Chief Financial Officer. A copy of our earnings release, along with our investor presentation is available on our Investor Relations website, A replay of this call will also be available on our website. We routinely post information on our website and intend to make important announcements on our media center website at We encourage you to make use of these resources. Before we begin, I would like to point out that during the course of this call, we will make forward-looking statements regarding future events, including the future financial and operating performance of the company. These forward-looking statements are subject to material risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. We caution you to consider the important factors that could cause actual results to differ materially from those in the forward-looking statements. In particular, we refer you to the cautionary language included in today's earnings release and the risk factors described in Chegg's annual report on Form 10-K for the year ended December 31, 2024, filed with the Securities and Exchange Commission on February 24, 2025, as well as our other filings with the SEC. Any forward-looking statements that we make today are based on assumptions that we believe to be reasonable as of this date. We undertake no obligation to update these statements as a result of new information or future events. During this call, we will present both GAAP and non-GAAP financial measures. Our GAAP results and GAAP to non-GAAP reconciliations can be found in our earnings press release on the investor slide deck found on our IR website, We also recommend you review the investor data sheet, which is also posted on our IR website. Now I will turn the call over to Nathan. Nathan Schultz Thank you, Tracey. Hello, everyone, and thank you for joining Chegg's first-quarter 2025 earnings call. Q1 was a good quarter for Chegg. We surpassed our revenue and adjusted EBITDA guidance, generated approximately $16 million in free cash flow and diversified our revenue in two key ways. First, the expansion of our business institution effort, which has expanded from 5 pilots to 15 pilots from Q4 to Q1 and is well on track to reach our goal of 40 by the end of the year. Second, licensing our question and answer pairs to language model companies. We've signed two agreements and believe that this is just the tip of the iceberg for this program. David will address the financial details of these deals. Concerning our strategic review process, we've made significant progress. As a reminder, we undertook this effort last quarter with Goldman Sachs, to explore the range of outcomes to maximize shareholder value, including being acquired, undertaking a go-private transaction, or remaining a public stand-alone company and continue to believe this is the right step to maximize shareholder value. To date, we've had dozens of meetings with interested parties ranging from strategic tech and education companies to private equity firms. Early indications are positive, and we are encouraged by the conversations and the value these organizations see in our business. Here's what's capturing potential acquirers retention. First is our core product, Chegg Study, a verticalized and personalized student support platform. As you may have seen, we keep innovating on the behalf of students with the recently released Solution Scout, which allows students to compare multiple language models against Chegg's proprietary content, and our Practice service now has a new AI-powered feature called Create, that empowers students to generate customized content directly from their own class materials, delivering a highly customized and personalized study experience. Next is Busuu, our language learning service, which continues to perform very well. Q1 revenue increased 7% year-over-year, driven by growth in both the B2C and B2B businesses. The B2C business is seeing the benefits of AI-driven product enhancements such as Speaking Practice, which is driving deep engagement and strong performance in customer acquisition and retention. The B2B business maintained strong double-digit growth in Q1, achieving 29% year-over-year revenue increase, driven by a strategic focus on retaining and growing large enterprise clients. We expect Busuu to achieve approximately $48 million in revenue in 2025 and to be adjusted EBITDA positive by the first quarter of 2026. Our reinvented skills product is set up for what I believe will be a breakout year in 2025. Chegg Skills provides skill building for the modern workforce, including foundational digital skilling and broad-based AI training and is trending toward the highest outcomes we've seen to date. In Q1, we entered into a pilot program with EdifyOnline and Noodle to provide AI programs that support a higher education initiative in India. In Q2 and Q3, we expect to further expand our Guild business and add additional partners. We believe Skills is on a path to profitability and positive revenue growth in 2026. And finally, there is significant value in our library of proprietary and high-quality questions and answer pairs and our network of subject matter experts. We've continued to make improvements in our content operations with a new quality control rubric, as we prepare for the content licensing opportunity I mentioned earlier. As we have said many times, Content is the heart and soul of our Chegg Study business, and these improvements in our QC rubric will serve both students and our new content licensing initiative. While we exceeded expectations in Q1 and see great value in the areas of the business I just went through, we believe the macroeconomic trends will continue to put pressure on our company and business trends will worsen before they get better. Google and their expansion of AI Overviews continues to keep traffic captive in the Google search experience and migrate search to Gemini. Additionally, language model companies are turning to academia for validation with OpenAI recently giving college students free access to GPT Plus, and Anthropic launching a free education offering. As a result, we are once again taking proactive measures to align costs with our business outlook. We executed two restructurings in 2024, and today, we are announcing further cost reduction plans. This restructuring will include expense reductions across our business, including closing physical offices in the US and Canada by the end of the year, limiting our upper funnel marketing, reducing new product development efforts, and finally cutting our general and administrative expenses. Chegg Skills and Busuu are not affected as we are encouraged by the progress these businesses have made and we are investing in their growth. As a part of this, we regrettably will be parting ways with approximately 22% or 248 of our talented team members, which is a challenging decision and one I'm saddened by. The impact is concentrated in the US and Canada and predominantly affects Chegg Study and corporate services, which will result in a 66% reduction in these areas of our business. The actions today will drive $45 million to $55 million in savings in 2025, with full year savings of $100 million to $110 million in 2026. This is on top of the $120 million of 2025 savings we are on track to fully realize from our two 2024 restructuring initiatives. These decisions continue to be challenging, and we do not make them lightly. I want to personally thank each talented team member for their contributions to Chegg. To conclude, I want to reinforce the key points from what I shared today. Our strategic alternatives process is going well and is the best way to maximize shareholder value and keep Chegg's student-first Mission thriving. We believe the strategy for Chegg Study providing true learning outcomes for students is enduring, and while our direct-to-student penetration normalizes, we're diversifying our revenue through two key opportunities in question-and-answer pair licensing and institutional direct contracts. We're continuing to make the hard decisions to align our revenue decline in Chegg Study with our operating expenses as challenging as they are. And finally, we are excited about the performance of Busuu and the opportunity for Skills, both of which are primed for a breakout year and expected to be adjusted EBITDA positive in 2026. With that, I'll turn it over to David. David Longo Thank you, Nathan, and good afternoon. Today, I will be presenting our financial performance for the first quarter of 2025, along with the company's outlook for the second quarter. We delivered a good first quarter, surpassing our guidance on both revenue and adjusted EBITDA, and generated $16 million in free cash flow. Despite ongoing industry headwinds, we remain committed to our student-first strategy and prudent cost management in line with our business outlook. As part of this commitment, we announced the restructuring today, which I will elaborate on shortly. Additionally, during the quarter, we took further steps to enhance our capital structure by repurchasing $65 million of our 2026 convertible notes at a discount. In the first quarter, total revenue was $121 million, a decrease of 30% year-over-year. This includes Subscription Services revenue of $108 million. We had 3.2 million subscribers during the quarter, representing a year-over-year decline of 31%. Skills and Other revenue was $14 million in the quarter, which includes our new revenue stream from content licensing. So far, we have executed two content licensing deals with two of the top 10 technology companies in the world, generating $4 million of revenue in Q1, and we expect an additional $7 million in Q2. These deals represent less than 5% of our content library and are nonexclusive, allowing us the opportunity to license the content to other companies. We are in discussion with other companies to expand licensing efforts even further. In the first quarter, gross margin was 56%. During the quarter, we streamlined our product offerings and discontinued certain content and internally used software assets, resulting in a onetime charge of $16.2 million of accelerated depreciation recorded in cost of revenues. This negatively impacted gross margin by 13 percentage points. Non-GAAP operating expenses were $80.5 million in the quarter, a reduction of approximately $20 million or 20% year-over-year, driven by the execution of the restructurings we announced last year. We are on track to achieve the full year savings of $120 million from these actions. The complete savings will be realized throughout this year. Our first quarter adjusted EBITDA was $19 million, representing a margin of 16%. Free cash flow for the quarter was $15.8 million despite incurring approximately $8 million in cash outlays related to employee severance from our restructurings. Capital expenditures for the quarter were $9 million, down 69% year-over-year as we are now fully realizing the benefits of our investments in AI. As mentioned earlier, in the first quarter, we opportunistically repurchased $65.2 million in aggregate principal amount of our 2026 convertible notes at a $7.8 million discount to par. Our 2025 convertible notes matured in March, and we repaid the full principal amount of $358.9 million. Looking at the balance sheet. We concluded the quarter with cash and investments of $126 million and a net cash balance of $64 million. As Nathan outlined earlier, we are executing an additional restructuring plan to continue to align our cost structure with our revenue as we navigate the continued industry challenges and a negative impact on our business. This restructuring will impact 248 employees or approximately 22% of the company. This restructuring will result in non-GAAP expense savings of $45 million to $55 million in 2025 and $100 million to $110 million in 2026, stemming from employee departures, cost rationalizations and real estate savings. We have negotiated a penalty-free agreement with our landlord to exit our Santa Clara lease prior to the expiration date, as we seek a smaller office workspace. We expect to incur charges of approximately $34 million to $38 million related to this restructuring, representing mostly severance payments. Of this charge, we expect $31 million to $35 million will be incurred in cash with the remaining amount representing noncash charges. We expect that a substantial portion of the cash and noncash charges will be incurred in the second and third quarters. We anticipate completing these activities and substantially all charges by December 31, 2025. The cost savings from the two fully implemented restructurings announced in 2024, coupled with the restructuring announced today will result in a combined non-GAAP savings of $165 million to $175 million in 2025. Looking ahead, industry challenges continue to cause a notable decline in traffic and subscriber acquisitions. These conditions are a source of continued pressure on our business and are impacting our financial outlook. For Q2 guidance, we expect total revenue between $100 million and $102 million with the subscription services revenue between $85 million and $87 million, gross margin to be in the range of 64% to 65%, and adjusted EBITDA between $16 million and $17 million. In closing, while ongoing industry challenges impacting Chegg Study continue to affect our financial performance, the opportunity to support and serve students remains. We are taking the right steps to align the cost structure. At the same time, we continue to evaluate a range of strategic alternatives to ensure we are maximizing value for our shareholders and are encouraged by the interest we have received. With that, I will turn the call over to the operator for your questions. Operator (Operator instructions) Ryan MacDonald, Needham & Company. Ryan MacDonald Hi, thanks for taking my questions. Nathan, maybe to start, I wanted to get a little bit more color on the licensing deals that you were able to sign during the quarter. Obviously, generating some nice incremental revenue in first and second quarter here. But can you give us a sense of sort of the terms in terms of time frame of how long these licensing agreements are typically lasting? And then how are you thinking about the total size of this licensing opportunity when you look at across all of the sort of large model companies out there that you could license this to? Thanks. Nathan Schultz Ryan, thanks very much for the question. I appreciate it. Let's start off by just reminding everyone what we're licensing. So what we're talking about here is the question and answer pairs. The $125 million question and answer pairs within the Chegg archive and obviously constantly growing. These are questions that are being created, obviously, through both our Human and our Agentic systems. They are then verified by humans, which comes back to the question, why this content so interesting. As we've already talked about, we have -- we sit on some of the highest quality created by qualified experts and trusted by millions of students data, that is very valuable to language model companies as they seek to continue to train their models. We're -- as David pointed out, I pointed out in my prepared remarks, we are really early days in this. We've licensed very, very, very small set of our content at the moment as we kind of just pilot, I would call pilot these agreements into some of the biggest tech companies in the world. I do think that there's a nice business model here, and we're really just getting started with this program Ryan MacDonald Got it. And then maybe as a follow-up. Great to see that the pilots with the universities are continuing to grow, and you've got or expected to have 40 by year-end. Can you just talk about sort of what the feedback you're getting from university partners thus far and then sort of the willingness to pay and purchase the content library as a point of access for students? Thanks. Nathan Schultz Yes, absolutely. We're very encouraged. A lot of growth, obviously, from Q4 last year to Q1 this year, getting up to 15 pilots and just having the momentum where we can see 40 for this year. It's good to remind everyone that what this is, is about institutions delivering our experience directly to the student, which we think is really great, obviously, for Chegg, but even better for students. It's done through a seat-based license model. So obviously, the schools are buying a number of seats. Honestly, this is one of those areas where we just -- we see the inevitable, which is schools having to spend more time think about persistence. I think you probably all know this, almost 40% of students don't graduate college. That causes kind of a massive hole in tuition. So we see this as a significant opportunity as colleges simply to zero in on student success as a means of really financial necessity. So very encouraged with what we see so far and getting very positive feedback from the schools looking to take some of those pilots, which will run for the next few months and then turn them into full contracts. Ryan MacDonald Thanks for the color. Operator (Operator instructions) Thank you. We've come to the end of our question and answer session. And this concludes our call today. We'd like to thank you for your interest and participation. You may now disconnect your lines. Tracey Ford Goodbye. 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New York Post
12-05-2025
- Business
- New York Post
Homework tool Chegg to slash 22% of workforce as AI bots steal away students
Chegg on Monday announced plans to slash 22% of its workforce as artificial intelligence bots steal students away from its study and homework help tools. The online platform, which offers textbook rentals and step-by-step homework tutorials, said it has been struggling as Google's AI Overviews squash web traffic, and firms like OpenAI and Anthropic offer discounts and deals to college students on their language models. 'We believe the macroeconomic trends will continue to put pressure on our company and business trends will worsen before they get better,' CEO Nathan Schultz said in a press release. Chegg announced plans to slash its workforce as AI bots steal away customers. Pavlo Gonchar/SOPA Images / Shutterstock 'As part of this, we regrettably will be parting ways with approximately 22% or 248 of our talented team members, which is a challenging decision and one I'm saddened by,' he added. Chegg also plans to close its physical offices in the US and Canada by the end of the year, as well as cut back on new product development and reduce administrative costs. These cost-cutting measures will save Chegg approximately $45 million to $55 million in 2025, and $100 million to $110 million in 2026, the company said. It expects to incur restructuring charges of $34 million to $38 million, mostly from severance payments. Shares in Chegg jumped 4.8% on Monday. Chegg disclosed its subscriber count declined 31%, to 3.2 million, as the company reported its first-quarter results on Monday. Chegg reported a decline in subscribers and subscription revenue on Monday. JHVEPhoto – Revenue plunged 30% to $121 million, as revenue from subscription services fell by nearly a third to $108 million. It suffered a net loss of $17.5 million in the same period. In February, Chegg filed a federal antitrust lawsuit against Google, claiming the search engine's AI summaries, which populate at the top of the results page, have decimated its site traffic and revenue. Google has argued that its AI summaries send web traffic to 'a greater diversity of sites.'
