Slide 1: Q2-24 Investor Presentation
Q2-24 Investor Presentation August 5, 2024 © 2024 Chegg, Inc. / All Rights Reserved
Slide 2: Safe Harbor Statement
Safe Harbor Statement Forward-Looking Statements issues, cybersecurity threats, or cyber-attacks; third-party payment processing risks; adoption of government This presentation contains forward-looking statements made pursuant to the safe harbor provisions of the regulation of education unfavorable
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 services leverage m
Slide 4: Investment Highlights
Investment Highlights A Leading Direct-To-Student Connected Learning Platform verticalized for education with more than a decade of insights on student needs Large Addressable Market High Margin Model with Strong Free Cash Flow Generation; Increased Focus on Expense Management to Align with Cu
Slide 5: Q2-24 Highlights
Q2-24 Highlights Announced restructuring on 6.17.24 with Shareholder Letter. Executed a major step to refocus Chegg on a market that Chegg knows best – students. Through the restructuring effort, we now have a leaner, more efficient organization and cost structure, which will allow us to move fast
Slide 6: Q2-24 Highlights – Metrics
Q2-24 Highlights – Metrics* Chegg Study/Pack Subscribers Subscription Services Revenue Global 3,419 Global 146,813 YoY -9% YoY -11% US 2,858 US 126,104 YoY -9% YoY -10% INTL 561 INTL 20,709 YoY -6% YoY -20% Subscription Services Subscribers Chegg Study/Pack Revenue Global 4,369 Global 123,295 YoY -9
Slide 7: Chegg: 360° of individualized support for students
Chegg 360° of individualized support for students on their journey towards a degree The future Chegg is... • Designed for learners, verticalized for education and student success • Proactive, individualized guidance along every step of the student’s journey • Differentiated through AI + Content + Ex
Slide 8: 360° of Student Support – Academic and Functional
360° of Student Support – Academic and Functional Helping students not only pass the class but excel in their learning journey Academic Support Functional Support Engagement 25% Organizational & Time Management Administrative Academic Motivational Individualized Global 50% learning support S
Slide 9: We Know Students and We Know Learning
We Know Students and We Know Learning Meeting students where they are and applying learning science to improve outcomes. 100 million Q&A pairs we know the Content designed for learning subjects and topics students need to learn Subject-specific LLMs and prompt design for learning to create on-dema
Slide 10: 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 individualized learnings support for students 2023 2H24 In September we started to show users updated Layering in personalization into the student experi
Slide 11: AI at Chegg
AI at Chegg 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 an individualized, interactive, on-demand learning companion backed by proprietary data, generative AI large langu
Slide 12: Proprietary Solution Flow Technology Incorporating Automated Solutions
Proprietary Solution Flow Technology Incorporating Automated Solutions Chegg technology automatically routes questions to the best source that optimizes solution relevancy, speed, and accuracy Proprietary question routing Match in Provide existing technology solution to the database question Orche
Slide 13: Industry-Leading Proprietary AI Stack That Delivers Individualized Learning
Industry-Leading Proprietary AI Stack That Delivers Individualized Learning • Integration into Chegg Study and Chegg Skills; available across Desktop, Mobile Web, and Mobile Native User Experience • Conversational and guided learning experience based on student needs Layer • Answering routing via Or
Slide 14: 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 15: 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) 52% Of graduates are underemployed, and even a ~38% $36K decade after graduation, 45% are underemployed (
Slide 16: 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 17: 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 18: Overwhelming value for students and unique competitive advantages
Overwhelming Real-time Individualized value for students Conversational and unique Affordable competitive Backed by Expert Human advantages Help Satisfaction Guarantee © 2024 Chegg, Inc. / All Rights Reserved 18
Slide 19: 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 20: 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 21: 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 22: 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 23: Financial Highlights: Q2 2024 Revenue and Subscribers
Financial Highlights: Q2 2024 Revenue and Subscribers The year-over-year decrease in Subscription Services Revenue was primarily due to an 9% decrease in Subscription Services Subscribers, and to a lesser extent, the impact of international promotional pricing. These trends were partially offset b
Slide 24: Financial Highlights: Q2 2024 Expenses ex-Stock Based Comp (SBC)
Financial Highlights: Q2 2024 Expenses ex-Stock Based Comp (SBC) 1 We continue to take a prudent approach with expense management Cost of Revenue and Operating expenses, excluding stock-based comp, declined year-over-year in Q2-2024 1 = Q2-24 excludes non-cash impairment charge of $481.5 million
Slide 25: Financial Highlights: Q2 2024 Adj. EBITDA Margin, Free Cash Flow, and CapEx
Financial Highlights: Q2 2024 Adj. EBITDA Margin, Free Cash Flow, and CapEx Q2-24 Free cash flow was negatively impacted by severance payments in conjunction with our restructuring and an increase in net working capital largely related to the timing of accounts payable items. While interest inco
Slide 26: 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 $6.00 $4.00 $0.28 $0.18 $0.36 $0.26 $0.24 $2.00 $0.09 $0.00 ($2.00) ($0.11) ($0.16) ($0.01) ($4.00) ($6.00) ($8.00) GAAP Net (loss) income per share, diluted Non-GAAP Net (loss) income p
Slide 27: Capital Expenditures
Capital Expenditures millions Content costs in Q2-24 declined 7% year-over-year, even with a 74% increase in the number of questions answered. Graph does not include textbook liquidations of ($9.8) million in Q2-23. © 2024 Chegg, Inc. / All Rights Reserved 27
Slide 28: Healthy Balance Sheet with History of Returning Capital to Shareholders
Healthy Balance Sheet with History of Returning Capital to Shareholders Cash and Debt (6/30/24) We have opportunistically retired both convertible debt and equity, returning over $1.2 billion and $950 million, respectively, to investors through $605 repurchases over the last three-plus years, $4 i
Slide 29: Chegg Subscribers, Revenue, and Adjusted EBITDA
Chegg Subscribers, Revenue, and Adjusted EBITDA Subscription Services Total Revenue ($ 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 $21 FY'18 FY'19 FY'20 FY'21 FY'22 FY'23 FY'18 F
Slide 30: Strong FCF Generation
Strong FCF Generation Chegg has historically delivered strong free cash Free Cash Flow flow and margins Chegg FCF ($million) & Conversion (from Adjusted EBITDA) $177 Strong free cash flow conversion from $173 adjusted EBITDA (historical range has 32% $155 FCF CAGR been ~50%-80%) FY16 – FY23 Free
Slide 31: Business Outlook
Business Outlook Q2 2024 Results Q3 2024 Guidance Total Net Revenue $163m $133m - $135m Subscription Services Revenue $147m $116m - $118m Gross Margin % 72% 67%-68% Adjusted EBTIDA1 $44m $19m - $21m CapEx $17.8m Free Cash Flow1 ($3.6m) (1) Non-GAAP financial measure. See appendix for reconciliation
Slide 32: 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 33: Appendix
Appendix © 2024 Chegg, Inc. / All Rights Reserved
Slide 34: Reconciliation of Net (Loss) Income to EBITDA and Adjusted EBITDA
Reconciliation of Net (Loss) Income to EBITDA and Adjusted EBITDA © 2024 Chegg, Inc. / All Rights Reserved 34
Slide 35: 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 35
Slide 36: 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 36
Slide 37: 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 37
Slide 38: 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 38
Slide 39: Reconciliation of GAAP Expenses to Expenses ex-SBC
Reconciliation of GAAP Expenses to Expenses ex-SBC © 2024 Chegg, Inc. / All Rights Reserved 39
Slide 40: Reconciliation of Net Income (Loss) per Share, Diluted to Non-GAAP Net Income per Share, Diluted
Reconciliation of Net Income (Loss) per Share, Diluted to Non-GAAP Net Income per Share, Diluted © 2024 Chegg, Inc. / All Rights Reserved 40