• Total Revenue: $143.5 million, a decrease of 24% year over year.
• Subscription Services Revenue: $128.5 million, down 23% year over year.
• Subscribers: 3.6 million, representing a decline of 21%.
• Subscription Services ARPU: Decreased by 3% year over year.
• Skills and Other Revenue: $14.9 million, down 31% year over year.
• Adjusted EBITDA: $37 million, representing a margin of 25%.
• Free Cash Flow: $4.8 million.
• Capital Expenditures: $13 million, down 52% year over year.
• Cash and Investments: $528 million.
• Net Cash Balance: $42 million.
• Q1 2025 Revenue Guidance: $114 million to $116 million.
• Q1 2025 Subscription Services Revenue Guidance: $104 million to $106 million.
• Q1 2025 Gross Margin Guidance: 66% to 67%.
• Q1 2025 Adjusted EBITDA Guidance: $13 million to $14 million.

• Warning! GuruFocus has detected 6 Warning Signs with CHGG.

Release Date: February 24, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Chegg Inc (NYSE:CHGG) surpassed its Q4 guidance for both revenue and adjusted EBITDA, demonstrating strong financial performance despite industry challenges.
• The company has integrated AI and machine learning into its product stack, reducing content creation costs by over 70% while maintaining high quality.
• Chegg Inc (NYSE:CHGG) launched a successful brand marketing campaign, resulting in improved click-through and conversion rates, and increased awareness among underclassmen by 16%.
• The Busuu language learning service transitioned to a premium business model, increasing the first 30-day conversion rate by 31% and achieving 9% year-over-year revenue growth.
• Chegg Inc (NYSE:CHGG) is expanding its enterprise business, with revenue up 46% in 2024, and plans to continue this growth with additional partnerships and reseller relationships.

Negative Points

• Chegg Inc (NYSE:CHGG) is facing significant challenges due to Google's AIO, which has impacted its traffic, revenue, and workforce, leading to a strategic review process.
• Total revenue for Q4 2024 decreased by 24% year over year, with subscription services revenue down 23% and a 21% decline in subscribers.
• The company experienced a temporary dip in monthly retention rates in November and December, affecting subscription services ARPU.
• Skills and other revenue decreased by 31% year over year due to a market shift away from traditional boot camps and a decline in advertising revenue.
• Chegg Inc (NYSE:CHGG) is filing a complaint against Google LLC and Alphabet Inc, alleging unfair competition and unjust enrichment, which could lead to prolonged legal proceedings.

Q & A Highlights

Q: With respect to the Q1 2025 guidance, can you unpack the incremental operating leverage in the business and how it translates to adjusted EBITDA? A: David Longo, CFO: Our model is efficient, with about $900,000 of every $1 million in sales dropping to the bottom line. We're optimistic about our product initiatives, like the comparison tool and next best actions, which should drive engagement and retention. We're also increasing our marketing efforts to bring traffic back to the site.

Q: Can you elaborate on the shift into new revenue streams, particularly the enterprise offerings and business-to-institution programs? A: Nathan Schultz, CEO: The program addresses persistence and graduation rates, with a seat-based pricing model. We have several pilots and aim to expand to 35 more this year. The goal is to provide tools for every student and potentially move to full campus-wide implementations.

Q: Can you discuss churn throughout the quarter and how it may differ between subscribers engaging with Gen AI features versus non-Gen AI users? A: David Longo, CFO: We saw a dip in retention in November and early December, which returned to historical levels by late December. The dip could be due to users experimenting with other tools, but retention has since stabilized.

Q: Regarding the Solution Scout, is the strategy to showcase Chegg solutions as superior or to provide students with multiple options? A: Nathan Schultz, CEO: It's both. We aim to save students time and provide value by comparing Chegg's solutions with other models. This helps students understand differences and similarities, enhancing engagement and learning.

Q: What are institutions considering when partnering with Chegg, and do they help build student awareness of Chegg's full value proposition? A: Nathan Schultz, CEO: Institutions focus on persistence and graduation. They recognize students already use various services and aim to integrate Chegg's offerings to better serve students, aligning with academic standards and honor codes.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.