Slide 1: The Middle Class
THE MIDDLE CLASS Dan Rosensweig CEO of Chegg, Inc April 17th 2018 Confidential Material / Chegg Inc. © 2005 – 2018 / All Rights Reserved
Slide 2: Americans feel under attack.
Americans feel under attack. Income Globalization Wealthy Get Technological Inequality Fears 3x More Degrees Changes Gain in real wages 2000-2017 Bachelor attainment rate 40% 72% 18% of Americans believe 74% of Americans worry free trade agreements about a future where have been a bad thing 55% robo
Slide 3: Chegg is a voice of the student.
Chegg is a voice of the student. 4B page views1 10M+ unique visitors per month1 8M+ registered users 360% increase in Chegg digital subscribers from 2013-2017 Source: Chegg 1 ‘ComScore U.S. Media Metrix Multi-Platform, Audience Duplication Report, September 2017. Universe: Home and 3 work; Data Sour
Slide 4: Chegg is uniquely positioned to understand industry trends and student needs.
Chegg is uniquely positioned to understand industry trends and student needs. 2015 2016 2017 2018 4 Confidential Material / Chegg Inc. © 2005 – 2018 / All Rights Reserved
Slide 5: Education is a business that has a lifecycle like any other.
Education is a business that has a lifecycle like any other. Just ask university presidents. FINANCIAL INSTABILITY? CLOSING DOORS? ENROLLMENT? 47% 69% are uncertain about their institution’s 82% are concerned believe more than financial stability 5 universities will about target close in 2018 enroll
Slide 6: Education has evolved in the past and has to again.
Education has evolved in the past and has to again. AGRICULTURAL AGE INDUSTRIAL AGE DIGITAL AGE 1800s | Local 1900s | Local Today | Global Goal: prepare workers for Goal: prepare workers for Goal: ? agriculture and industrial age auto manufacturing, oil and gas, jobs in rail and steel chemicals, ele
Slide 7: Even the government tried to help students.
Even the government tried to help students. THOSE WHO MAKE IT THOSE WHO DON’T Higher Education Act (1965) – DEBT federal aid drove enrollment but not degrees earned $37K $7K average student debt for average student debt2 college dropouts3 3X $3.4M enrollment 1 lifetime expected earnings for EARNINGS
Slide 8: Most students don’t make it through the gauntlet.
Most students don’t make it through the gauntlet. drop out or don’t 45% go to college 37% don’t graduate1 16M HS STUDENTS 20M IN COLLEGE THOSE THAT DO WONDER… 44% Source: NCES, BLS, Federal Reserve Bank of New York, and Chegg estimates. of graduates are in jobs that don’t require a degree 8 1 Nation
Slide 9: The future is not bright for those who opt out.
The future is not bright for those who opt out. RETAIL SALESPERSON LANDSCAPER CASHIER BARTENDER FAST FOOD WORKER TRUCK DRIVER WAITER / WAITRESS DISHWASHER JANITOR TAXI DRIVER CONSTRUCTION WORKER WAREHOUSE WORKER 9 Source: BLS (2016) , Chegg Analysis Confidential Material / Chegg Inc. © 2005 – 2018 /
Slide 10: The jobs are just going away.
The jobs are just going away. 55% of those jobs will be automated by 2030. RETAIL SALESPERSON LANDSCAPER CASHIER BARTENDER FAST FOOD WORKER TRUCK DRIVER WAITER / WAITRESS DISHWASHER JANITOR TAXI DRIVER CONSTRUCTION WORKER WAREHOUSE WORKER 10 Source: BLS (2016), Chegg Analysis, McKinsey Global Instit
Slide 11: There’s already an economic disparity.
There’s already an economic disparity. Real median earnings by educational attainment (1979 = 100) 120 Bachelor or 110 above 100 High school 85 graduates 80 84 Some college or associate 73 Less than high school 60 1979 2017 11 Source: BLS (1979-2017), FRED (1979-2017), Chegg analysis Confidential Ma
Slide 12: Why this is happening…
Why this is happening… TOMORROW’S JOBS GROWTH MULTIPLE1 Machine Learning 9.8x Data Scientist 6.5x Sales Development Rep 5.7x Customer Success Manager 5.6x Big Data Developer 5.5x Full Stack Engineer 5.5x Director of Data Science 4.9x Full Stack Developer 4.5x Brand Partner 4.5x 1 2012 -- 2017 12 Sou
Slide 13: Confidential Material / Chegg Inc. © 2005 – 2018 / All Rights Reserved
Confidential Material / Chegg Inc. © 2005 – 2018 / All Rights Reserved 13 13
Slide 14: In order to serve them, we need to know who they are.
In order to serve them, we need to know who they are. And who they are, ain’t who they used to be. 1970 Now Older than 25 years old 28% 40% Minority enrollment 15% 42% Female students 42% 56% Working >30 hours / week 12% 40% English is not first language1 4% 11% Have children _ 26% - TODAY’S EDUCATI
Slide 15: The reason they go is to get a better job.
The reason they go is to get a better job. 85% 73% get a better job make more money 15 Source: UCLA Higher Education Research Institute (2016) Confidential Material / Chegg Inc. © 2005 – 2018 / All Rights Reserved
Slide 16: The real reasons they opt out are time and money.
The real reasons they opt out are time and money. If college and work are at the same time, you’re forced to choose work. 71% 52% 43% 35% 34% Needed work Can’t afford Classes weren’t Not worth the Classes too & money tuition & fees useful money difficult 16 Source: Bill and Melinda Gates (2009) Conf
Slide 17: Eating or reading. This is a terrible choice.
Eating or reading. This is a terrible choice. of college students 36% are food insecure Students are studying, working, looking for jobs, preparing for the future… all while hungry. Source: Wisconsin Hope Lab (2018) Image: ”Eltman, Frank, AP, :”More food banks serve hungry college students” http://m
Slide 18: Don’t let me tell you – let them.
Don’t let me tell you – let them. 18 Confidential Material / Chegg Inc. © 2005 – 2018 / All Rights Reserved
Slide 19: Confidential Material / Chegg Inc. © 2005 – 2018 / All Rights Reserved
Confidential Material / Chegg Inc. © 2005 – 2018 / All Rights Reserved
Slide 20: Source: NCES, Chegg Analysis
Confidential Material / Chegg Inc. © 2005 – 2017 / All Rights Reserved 20 Source: NCES, Chegg Analysis Confidential Material / Chegg Inc. © 2005 – 2018 / All Rights Reserved
Slide 21: Students are telling us what to do.
Students are telling us what to do. 60% 55% of students believe digital learning tools 47% of students used had a positive of students use impact on online tutorials smartphones performance2 to help them with in class, behind school work only laptops1 in 20173 EMBRACE TECHNOLOGY TO EXPAND LEARNING S
Slide 22: Confidential Material / Chegg Inc. © 2005 – 2017 / All Rights Reserved Confidential
Confidential Material / Chegg Inc. © 2005 – 2017 / All Rights Reserved Confidential Material / Chegg Inc. © 2005 – 2018 / All Rights Reserved
Slide 23: Students, employers, and institutions aren’t seeing eye-to-eye.
Students, employers, and institutions aren’t seeing eye-to-eye. What students say What universities What employers say they want say they offer they’re getting 85% 23% 66% college freshmen private four year executives are say that getting a college presidents not satisfied with better job is a very
Slide 24: Most can’t imagine the future. But we must.
Most can’t imagine the future. Image:"Theodor Hildebrand und Sohn”, In the Year 2000. But we must. Confidential Material / Chegg Inc. © 2005 – 2018 / All Rights Reserved
Slide 25: Technology is relentless in the face of early detractors.
Technology is relentless in the face of early detractors. “[T]he telephone may really “Good enough for our “The virtual keyboard will be be a device of the enemies transatlantic friends […] but about as useful for tapping of the Republic” unworthy of the attention of out emails and text messages The
Slide 26: Chegg has lived this and survived to tell the story.
Chegg has lived this and survived to tell the story. 2013 2018 440M content views in 2017 69%+ from 2016 80%+ textbook revenue 20M questions and answers Flat growth +6M in 20171 No profit 9PM EST is when students Huge need for cash use Chegg the most Confidential Material / Chegg Inc. © 2005 – 2017
Slide 27: We have good role models.
We have good role models. REINVENTION DISRUPTION Then Now Then Now 8M 12M 4.5% 25.5% Creative Pros Users Revenue CAGR Revenue CAGR Image: “Adobe Photoshop 7.0” Amazon.com 27 Source: Adobe (2013), Fortune (2017), Netflix and Disney regulatory filings (2007-2017) Confidential Material / Chegg Inc. © 2
Slide 28: If you don’t embrace - you lose the race.
If you don’t embrace - you lose the race. If the demand is there someone else will meet it. Market Cap: $254B Market Cap: $699B Equity Value: $1B Market Cap: $27B 28 Note: Market capitalizations as of 4/13/18; Warner Music Group equity value as of 2011 acquisition Confidential Material / Chegg Inc.
Slide 29: Winners have things in common.
Winners have things in common. Relevant Brands Own Their Customer Own Their Data Own Their Distribution Channel Own Their Proprietary Content 29 Confidential Material / Chegg Inc. © 2005 – 2018 / All Rights Reserved
Slide 30: Netflix vs. Movie Theaters.
Netflix vs. Movie Theaters. Hours of Content Watched (in billions)1,2 23.8 MORE CONTENT 19.8 MORE CONVENIENT MORE AVAILABLE MORE AFFORDABLE MORE DIVERSE 2.5 2.5 2014 2017 HAS CREATED MORE CONSUMERS Netflix Movie Theater AND MORE CONTENT CREATORS Source: Netflix regulatory filings and press releases
Slide 31: Graduate programs were early adopters.
Graduate programs were early adopters. Why did graduate programs move online? Students are older Students have other commitments Students want to remain employed Prepare students to get a job Physical constraints of classroom and time GRADUATE PROGRAMS WERE FORCED TO EVOLVE TO ATTRACT STUDENTS Sourc
Slide 32: It’s time for undergraduate programs to catch up.
It’s time for undergraduate programs to catch up. PROBLEM SOLUTION Limited classes Unlimited content online Fixed times On-demand Fixed locations On every device Limited number of educators and Expand number of educators and tutors when students need them tutors and make them available 24/7 Limited
Slide 33: Confidential Material / Chegg Inc. © 2005 – 2018 / All Rights Reserved
Confidential Material / Chegg Inc. © 2005 – 2018 / All Rights Reserved