Chegg, Inc. · NYSE:CHGG
Chegg — Q4 2023 Earnings Presentation
37 slides from Chegg's earnings presentation, Feb 5, 2024
Slide 1: Q4-23 Investor Presentation
Q4-23 Investor Presentation Feb 5, 2024 © 2024 Chegg, Inc. / All Rights Reserved
Slide 2: Safe Harbor Statement
Safe Harbor Statement Forward-Looking Statements cyber-attacks; third-party payment processing risks; adoption of government regulation of education This presentation contains forward-looking statements made pursuant to the safe harbor provisions of the unfavorable to Chegg; the rate of adoption of
Slide 3: Who Are We?
We put learners first. Our mission is to improve learning and learning outcomes by putting students first, in school and beyond. Who Are We? We strive to improve the overall return on investment in education by helping learners learn more in less time and at a lower cost. Chegg’s personal learning a
Slide 4: Investment Highlights
Investment Highlights Leading Direct-To-Student Connected Learning Platform Large Addressable Markets in Early Stages of Growth including Personalized Artificial Intelligence-driven Academic Learning Tools, International, Skills, and Language Learning High Margin Model with Strong Free Cash Fl
Slide 5: 2024 Priorities
2024 Priorities We are seeing green shoots in subscriber engagement, acquisitions, and retention, but it will take time to build our renewal base before we see a positive impact on total subscribers and revenue. In the meantime, we will continue to be prudent with expense management and prioritizati
Slide 6: AI at Chegg – Personal Learning Assistant
AI at Chegg – Personal Learning Assistant The advances in artificial intelligence have created opportunities for Chegg. We pivoted the company to harness AI to better serve learners around the world. We are building a personalized, interactive, on-demand learning companion backed by proprietary data
Slide 7: Rolling out the new Chegg Experience
Rolling out the new Chegg Experience The process of embedding AI into every facet of Chegg’s platform is ongoing and iterative as we build a truly personalized learning assistant 2023 2H24 In September we started to show users updated We plan to layer more personalization into the experience capabil
Slide 8: Reigniting the Chegg Growth Flywheel
Reigniting the Chegg Growth Flywheel We are pulling multiple levers to help fuel the flywheel PRODUCT Since introducing automated answers, we’ve seen a significant increase in engagement. In January, Chegg SUBSCRIBERS QUESTIONS delivered 2.2 million instant solutions (up 3X vs. last year) Total su
Slide 9: Proprietary Solution Flow Technology Incorporating Automated Answers
Proprietary Solution Flow Technology Incorporating Automated Answers Chegg technology automatically routes questions to the best source that optimizes solution relevancy, speed, accuracy, and cost Proprietary question routing Match in Provide existing technology solution to the database question O
Slide 10: We Are Building An Industry-Leading Proprietary AI Stack
We Are Building An Industry-Leading Proprietary AI Stack That Will Deliver Personalized Learning at Scale Integration into Chegg Study and Chegg Skills Conversational and guided learning experience based on student needs Questions automatically routed to either (1) existing content database, (
Slide 11: Transforming the User Experience
We’re entering an exciting new chapter, driven by the advances in AI To help illustrate Chegg’s vision for AI, what we’re building over the next several years, and how our user experience is changing, we created the following videos: Is this structure correct? Transforming the Chegg’s Vision, Powere
Slide 12: Chegg at a Glance: Financial and KPI Highlights 2023
Chegg at a Glance: Financial and KPI Highlights 2023 $716 Million $222 Million $597 Million TOTAL REVENUE ADJUSTED EBITDA CONVERTIBLE NOTE REPURCHASES AT $92 MILLION DISCOUNT TO PAR 7.7 Million 31% >$300 Million SUBSCRIPTION SERVICES ADJUSTED EBITDA MARGIN STOCK REPURCHASES SUBSCRIBERS $100 Million
Slide 13: Today's Learners Face More Pressure Than Ever
Today’s Learners Face More Pressure Than Ever It’s Harder to Be a They’re Faced with They Aren’t Prepared for Student Mounting Costs the Workplace 26% 38% Over 25 years old(1) Don’t graduate (2) 39.5% Of recent graduates are ~38% $36K underemployed (4) Average student loan balance Are employed (1) p
Slide 14: Chegg's Integrated Platform of Connected Services
Chegg’s Integrated Platform of Connected Services Subscription Services Skills & Other Skills / Thinkful Chegg Study High quality online skills-based courses in areas Personalized step-by-step learning support such as AI Prompt Engineering, Applying AI, powered by artificial intelligence, computatio
Slide 15: Large Global Academic Market Opportunity
Large Global Academic Market Opportunity 18M CA, AU and UK Secondary and Tertiary Students(4) 100M Total students 48M 34M English Language US University(2) and High Instruction as a School Students(3) Medium - Tertiary Students Outside the US, CA, AU, UK(1) 7.7M5 5.7M U.S. 2.0M International Chegg S
Slide 16: Overwhelming value and unique competitive advantages
Online Overwhelming On-demand value and unique Personalized competitive Adaptive Affordable advantages Backed by Expert Human Help © 2024 Chegg, Inc. / All Rights Reserved 16
Slide 17: Chegg Serves Students of Diverse Backgrounds
Chegg Serves Students of Diverse Backgrounds 28% First generation 23% Family income <$20k 53% Minorities 61% Female 26% Over 25 years old 5% work Full-Time / 33% Part-Time Source: Chegg Consumer Insights, Oct 2023, Quarterly Marketing Tracker. Chegg Services users in the past 3 months (C
Slide 18: Majority of U.S. College Students are taking STEM-B Courses
Majority of U.S. College Students are taking STEM-B Courses 21% Not STEM-B Major but taking STEM-B Courses 61% STEM-B Major 18% No STEM-B Source: Consumer Insights Oct 2023. Dynata Sample US College students n= 895. STEM-B = Science, Tech, Engineering, Math, or Business © 2024 Chegg, Inc. / All Righ
Slide 19: Chegg Delivers Positive Learner Outcomes
Chegg Delivers Positive Learner Outcomes Learn & Better Grades More Efficient Help When You Build Confidence Understand Need It 89% 91% 90% 91% 83% Say that Chegg helps Say they get better Say that they work Say that Chegg helps Say that Chegg helps them learn their grades when they use more efficie
Slide 20: Chegg's Approach to ESG: Our Six Pillars
Chegg’s Approach to ESG: Our Six Pillars Public We foster an environment centered on respect, where We help learners succeed by providing the type of help they Recognition diversity and inclusion are Focus on need, when they need it, in the celebrated, and employees can Help Learners format they wan
Slide 21: Financial Highlights: Q4 2023 Revenue and Subscribers
Financial Highlights: Q4 2023 Revenue and Subscribers Total Revenue Subscription Services Skills & Other Revenue Subscription Services ($millions) Revenue ($millions) ($millions) Subscribers (millions) 200 200 200 6.0 5.0 150 150 150 4.0 100 $205 $188 100 100 3.0 $178 $166 5.0 2.0 4.6 50 50 50 1.0 $
Slide 22: Financial Highlights: Q4 2023 Expenses ex-Stock Based Comp (SBC)
Financial Highlights: Q4 2023 Expenses ex-Stock Based Comp (SBC) Cost of Research and Sales and General and OpEx ex-SBC Revenue ex-SBC Development ex-SBC Marketing ex-SBC Administrative ex-SBC 120 120 100% 120 100% 120 100% 120 100% $112 100% $98 100 100 80% 100 80% 100 80% 100 80% 80% 80 80 80 80 8
Slide 23: Financial Highlights: Q4 2023 Adj. EBITDA Margin, Free Cash Flow, and CapEx
Financial Highlights: Q4 2023 Adj. EBITDA Margin, Free Cash Flow, and CapEx Adjusted EBITDA Free Cash Flow CapEx1 80 $74 80 70% 8070% 70% $66 60% 60% 60% 60 60 50% $54 $52 6050% 50% 40% 40% 40% 40 40 40 30% 30% $26 30% 36% 35% $20 20 20 20% 26% 28% 2020% 20% 10% 10% 10% 0 0 0% 00% 10% 14% 0% Q4-22 Q
Slide 24: Financial Highlights: Net (loss) income per share, diluted
Financial Highlights: Net (loss) income per share, diluted GAAP and Non-GAAP Net (loss) income per share, diluted $1.50 $1.30 $1.23 $1.10 $0.90 $0.70 $0.37 $0.40 $0.36 $0.50 $0.32 $0.27 $0.28 $0.21 $0.18 $0.30 $0.04 $0.06 $0.01 $0.02 $0.09 $0.10 ($0.10) ($0.30) ($0.11) ($0.16) ($0.50) Q1-22 Q2-22 Q3
Slide 25: Healthy Balance Sheet with History of Returning Capital to Shareholders
Healthy Balance Sheet with History of Returning Capital to Shareholders Cash and Debt (12/31/23) We have opportunistically retired both convertible debt and equity, returning approximately $1.2 billion and over $950 million, respectively, to investors through $580 repurchases over the last three-p
Slide 26: Chegg Subscribers, Revenue, and Adjusted EBITDA
Chegg Subscribers, Revenue, and Adjusted EBITDA Subscription Services Total Revenue ($ in millions) Chegg Adj. EBITDA ($million) & Subscribers ( millions) Margin (%) $266 $255 $776 $222 8.1 $767 $207 7.8 7.7 $716 $644 6.6 $125 $411 3.9 $321 $83 3.1 $46 $21 FY'18 FY'19 FY'20 FY'21 FY'22 FY'23 FY'18 F
Slide 27: Strong FCF Generation
Strong FCF Generation Chegg continues to deliver strong free cash flow Free Cash Flow and margins Chegg FCF ($million) & Conversion (from Adjusted EBITDA) $177 Strong free cash flow conversion from $173 adjusted EBITDA (has been ~50%-80%) 32% $155 FCF CAGR Free cash flow CAGR strong, >30%(1) FY1
Slide 28: Business Outlook
Business Outlook Q4 2023 Results Q1 2024 Guidance Total Net Revenue $188m $173m - $175m Subscription Services Revenue $166m $155m - $157m Gross Margin % 76% 73%-74% Adjusted EBTIDA1 $66m $43m - $45m CapEx $26m Free Cash Flow1 $52m (1) Non-GAAP financial measure. See appendix for reconciliation of a)
Slide 29: Required Materials Transition
Required Materials Transition In April 2022, we entered into a partnership with an independent book reseller. This partnership allowed us to transition out of our textbook library and fulfillment logistics responsibilities while still offering print and eTextbooks to students. GT1 purchased our pr
Slide 30: Appendix
Appendix © 2024 Chegg, Inc. / All Rights Reserved
Slide 31: Reconciliation of Net Income to EBITDA and Adjusted EBITDA
Reconciliation of Net Income to EBITDA and Adjusted EBITDA © 2024 Chegg, Inc. / All Rights Reserved 31
Slide 32: Reconciliation of Net Income (Loss) to EBITDA and Adjusted EBITDA
Reconciliation of Net Income (Loss) to EBITDA and Adjusted EBITDA © 2024 Chegg, Inc. / All Rights Reserved 32
Slide 33: Reconciliation of Forward-Looking Net Loss to EBITDA and Adjusted EBITDA
Reconciliation of Forward-Looking Net Loss to EBITDA and Adjusted EBITDA © 2024 Chegg, Inc. / All Rights Reserved 33
Slide 34: Reconciliation of Net Cash Provided by Operating Activities to Free Cash Flow
Reconciliation of Net Cash Provided by Operating Activities to Free Cash Flow © 2024 Chegg, Inc. / All Rights Reserved 34
Slide 35: Reconciliation of Net Cash Provided by Operating Activities to Free Cash Flow
Reconciliation of Net Cash Provided by Operating Activities to Free Cash Flow © 2024 Chegg, Inc. / All Rights Reserved 35
Slide 36: Reconciliation of GAAP Expenses to Expenses ex-SBC
Reconciliation of GAAP Expenses to Expenses ex-SBC CHEGG, INC. RECONCILIATION OF GAAP EXPENSES TO EXPENSES EXCLUDING SHARE BASED COMPENSATION (in thousands) (unaudited) Three Months Ended December 31, 2023 2022 Cost of revenue….........................................................................
Slide 37: Reconciliation of Net (Loss) Income per Share, Diluted to Non-GAAP Net Income per Share, Diluted
Reconciliation of Net (Loss) Income per Share, Diluted to Non-GAAP Net Income per Share, Diluted © 2024 Chegg, Inc. / All Rights Reserved 37