Slide 1: Q1-24 Investor Presentation
Q1-24 Investor Presentation Apr 29, 2024 Chegg
Slide 2: Safe Harbor Statement
Safe Harbor Statement Forward-Looking Statements This presentation contains forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements relate to expectations, beliefs, projections, future plans and strate
Slide 3: Who Are We?
Slide 4: Leading Direct-To-Student Connected Learning Platform
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 Flow Generation; Increased Foc
Slide 5: Q1-24 Highlights
Q1-24 Highlights Chegg Nathan Schultz is being promoted to Chegg’s President & CEO, effective June 15. Dan Rosensweig will step into the role of Executive Chairman. Nathan has been core to Chegg’s success from the earliest days as a textbook rental company, to leveraging Al to create a truly persona
Slide 6: 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 increase expense management efforts, while continuing to drive
Slide 7: AI at Chegg - Personal Learning Assistant
Al at Chegg - Personal Learning Assistant The advances in artificial intelligence have created opportunities for Chegg. We pivoted the company to harness Al to better serve learners around the world. We are building a personalized, interactive, on-demand learning companion backed by proprietary data
Slide 8: Rolling out the new Chegg Experience
Rolling out the new Chegg Experience The process of embedding Al 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 capabilities, with a new simple interface and a unified asking ex
Slide 9: Reigniting the Chegg Growth Flywheel
Reigniting the Chegg Growth Flywheel We are pulling multiple levers to help fuel the flywheel PRODUCT = Since introducing Automated Solutions, we’ve seen a 4 significant increase in engagement. In Q1-24, global \ learners asked 9M questions, up from 4M a year ago, and . . our Al content creation dro
Slide 10: 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, accuracy, and cost = _ a Match in pets database or routes optimal rch ase lel or tional No ine Student asks match in a q
Slide 11: We Are Building An Industry-Leading Proprietary AI Stack
We Are Building An Industry-Leading Proprietary Al 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, (2)
Slide 12: We're entering an exciting new chapter, driven by the advances in AI
We’re entering an exciting new chapter, driven by the advances in Al To help illustrate Chegg’s vision for Al, what we’re building over the next several years, and how our user experience is changing, we created the following videos: & Is this structur p-coumaric acid Transforming the Chegg’s Vision
Slide 13: Chegg at a Glance: Financial and KPI Highlights 2023
Chegg at a Glance: Financial and KPI Highlights 2023 $716 Million $222 Million TOTAL REVENUE ADJUSTED EBITDA 7.7 Million 31% SUBSCRIPTION SERVICES ADJUSTED EBITDA MARGIN SUBSCRIBERS $100 Million $173 Million INTERNATIONAL REVENUE FREE CASH FLOW $597 Million CONVERTIBLE NOTE REPURCHASES AT $92 MILLIO
Slide 14: It's Harder to Be a Student
It’s Harder to Bea They’re Faced with They Aren’t Prepared for Student Mounting Costs the Workplace 26% 38% 0 Over 25 years old Don’t graduate ) 52 % Of graduates are underemployed, and even a ~38% S36K decade after graduation, 45% are underemployed 4) Average student loan balance per borrower ®) Ar
Slide 15: Chegg's Integrated Platform of Connected Services
Chegg’s Integrated Platform of Connected Services Subscription Services Chegg Chegg Study Personalized step-by-step learning support powered by artificial intelligence, computational engines and subject-matter experts. Our databse includes 119 million solutions Chegg Writing A leading provider of on
Slide 16: Large Global Academic Market Opportunity
Large Global Academic Market Opportunity CA, AU and UK Secondary oy 100M Students Total students 34M English Language US University?) and High Instruction as a School Students) Medium - Tertiary neces eteeeneeeeeesensererersesererers Students Outside the US, CA, AU, UK") 5 / 5.7MUS. 7.7M 2.0M Intern
Slide 17: Overwhelming value and unique competitive advantages
Overwhelming value and unique competitive advantages Chegg Online On-demand Personalized Adaptive Affordable Backed by Expert Human Help
Slide 18: Student demographics
28% First generation 23% Family income <$20k 53% Minorities 61% Female 26% Over 25 years old 5% work Full-Time / 33% Part-Time —a —= ~~ Source: Chegg Consumer Insights, Oct 2023»@uarterly. Marketing irackersChegg Servicestusersifthe beet 3 months (Collegen-284),including Ghegeleeny Mathway, Easybib,
Slide 19: 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 Chega S2uce: Consumer insights Oct 2023. Dynata Sample US College students n= 895. GQ STEM-B = Science, Tech, Engineering, Math, or Business d 19
Slide 20: Chegg Delivers Positive Learner Outcomes
Chegg Delivers Positive Learner Outcomes Learn & Understand 89% Say that Chegg helps them learn their coursework. And 88% say Chegg helps them better understand the concepts they are studying in school. Better Grades Help When You Need It 91% Say that Chegg helps them figure it out if they get stuck
Slide 21: Chegg's Approach to ESG: Our Six Pillars
Chegg’s Approach to ESG: Our Six Pillars We foster an environment We help learners succeed by centered on respect, where providing the type of help they diversity and inclusion are Focus on need, when they need it, in the celebrated, and employees can People Help Learners format they want to receive
Slide 22: Financial Highlights: Q1 2024 Revenue and Subscribers
Financial Highlights: @1 2024 Revenue and Subscribers Total Revenue Subscription Services Skills & Other Revenue (Smillions) Revenue (Smillions) (Smillions) | S20 | Q1-23 Q1-24 Q1-23 Q1-24 @1-23 Q1-24 Subscription Services Subscribers (millions) Q1-23 Q1-24 = The year-over-year decrease in Subscript
Slide 23: Financial Highlights: Q1 2024 Expenses ex-SBC
Financial Highlights: @1 2024 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 $110 $102 49 $ $46 $36 $35 $35 fo $39 $38 58% 58% Lé.| @1-23 Q1-24 Q1-23 Q1-24 Q@1-23 Q1-24 @1-23 Q1-24 Q1-
Slide 24: Financial Highlights: Q1 2024 Adj. EBITDA Margin, Free Cash Flow, and CapEx
Financial Highlights: @1 2024 Adj. EBITDA Margin, Free Cash Flow, and CapEx Adjusted EBITDA Free Cash Flow CapEx $58 $47 $56 $25 $28 31% oa 30% oY Q1-23 Q1-24 Q1-23 Q1-24 Q1-23 Q1-24 uSmillions @% of Revenue mS millions @% of Revenue mSmillions @% of Revenue = Free Cash Flow of $25M represented a 54
Slide 25: 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 $0.36 $0.27 $0.28 $0.26 $0.18 $0.09 $0.02 0.11) ($0.11) ($0.16) Q1-23 Q2-23 Q3-23 Q4-23 Q1-24 m GAAP Net (loss) income per share, diluted m Non-GAAP Net (loss) income per share, diluted
Slide 26: Healthy Balance Sheet with History of Returning Capital to Shareholders
Healthy Balance Sheet with History of Returning Capital to Shareholders Cash and Debt (3/31/24) = We have opportunistically retired both convertible debt and equity, returning over $1.2 billion and $950 million, respectively, to investors through repurchases over the last three-plus years, $12 inclu
Slide 27: Chegg Subscribers, Revenue, and Adjusted EBITDA
Chegg Subscribers, Revenue, and Adjusted EBITDA Subscription Services Total Revenue (S in millions) Subscribers ( millions) 7 s ts 81 4 $776 $767 : $644 66 30 $411 31 $321 I FY'18 FY'19 FY'20 FY'21 FY'22 FY'23 FY'18 FY'19 FY'20 FY21 FY'22 $716 FY'23 Chegg Adjusted EBITDA is a non-GAAP measure. Recon
Slide 28: Strong FCF Generation
Strong FCF Generation Chegg continues to deliver strong free cash flow and margins = Strong free cash flow conversion from adjusted EBITDA (historical range has been ~50%-80%) = Free cash flow CAGR strong, >30% "Content remains the largest driver of CapEx Free Cash Flow Chegg FCF (Smillion) & Conver
Slide 29: Business Outlook
Business Outlook Total Net Revenue Subscription Services Revenue Gross Margin % Adjusted EBTIDA? CapEx Free Cash Flow! (1) Non-GAAP financial measure. Q1 2024 Results $174m $154m 73% $47m $28m $25m Q2 2024 Guidance $159m - $161m $144m - $146m 70%-71% $38m - $40m Chegg See appendix for reconciliation
Slide 30: 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. " GT! purchased our pr
Slide 31: Appendix
Slide 32: Reconciliation of Net (Loss) Income to EBITDA and Adjusted EBITDA
Reconciliation of Net (Loss) Income to EBITDA and Adjusted EBITDA CHEGG, INC. RECONCILIATION OF NET (LOSS) INCOME TO EBITDA AND ADJUSTED EBITDA (in thousands) (unaudited) Three Months Ended March 31, 2024 2023 Net (loss) income $ (1.420) $ 2.186 Interest expense, net 650 1,268 Provision for income t
Slide 33: Reconciliation of Net Income (Loss) to EBITDA and Adjusted EBITDA
Reconciliation of Net Income (Loss) to EBITDA and Adjusted EBITDA Chegg Net income (loss) Interest expense, net Provision for (benefit from) income taxes Print textbook depreciation (CHEGG, INC. RECONCILIATION OF NET INCOME (LOSS) TO EBITDA AND ADJUSTED EBITDA (in thousands) (unaudited) ‘Years Ended
Slide 34: Reconciliation of Forward-Looking Net Income to EBITDA and Adjusted EBITDA
Reconciliation of Forward-Looking Net Income to EBITDA and Adjusted EBITDA Chegg CHEGG, INC. RECONCILIATION OF FORWARD-LOOKING NET INCOME TO EBITDA AND ADJUSTED EBITDA (in thousands) (unaudited) Three Months Ending June 30, 2024 Net income $ 1,900 Interest expense, net 500 Provision for income taxes
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 CHEGG, INC. RECONCILIATION OF NET CASH PROVIDED BY OPERATING ACTIVITIES TO FREE CASH FLOW (in thousands) (unaudited) Three Months Ended March 31, 2024 2023 Net cash provided by operating activities $ 53,318 $ 73,160 Purcha
Slide 36: Reconciliation of Net Cash Provided by Operating Activities to Free Cash Flow
Reconciliation of Net Cash Provided by Operating Activities to Free Cash Flow Chegg CHEGG, INC. RECONCILIATION OF NET CASH PROVIDED BY OPERATING ACTIVITIES TO FREE CASH FLOW (in thousands) (unaudited) Years Ended December 31, 2023 2022 2021 2020 2019 2018 2017 2016 Net cash provided by operating act
Slide 37: Reconciliation of GAAP Expenses to Expenses Excluding Share Based Compensation
CHEGG, INC. RECONCILIATION OF GAAP EXPENSES TO EXPENSES EXCLUDING SHARE BASED COMPENSATION (in thousands) (unaudited) Three Months Ended March 31, 2024 2023 Cost of revenue….......................................................................................... $ 46,456 $ 49,150 Share-based compen
Slide 38: Reconciliation of Net Income (Loss) per Share, Diluted to Non-GAAP Net Income per Share
Reconciliation of Net Income (Loss) per Share, Diluted to Non-GAAP Net Income per Share, Diluted CHEGG, INC. RECONCILIATION OF NET INCOME (LOSS) PER SHARE, DILUTED TO NON-GAAP NET INCOME PER SHARE, DILUTED (unaudited) Three Months Ended March31, June 30, rember December March 31, 2023 2023 2023 31,