CHEGG, INC Q2 FY2025 earnings call

Strategic Review Process

• Exploring outcomes like acquisition, go-private, or remaining public, engaging with select parties.

Financial Performance

• Q2 revenue $105 million, adjusted EBITDA $23 million, surpassing guidance. Identified $17 million in CapEx and expense savings for 2026.

Business Segments

• Busuu: B2B growth strong, with 39% YOY revenue growth, and B2C performance driven by focus on success seekers and AI-powered features like speaking bites.
• Skills: Positioned as a growth engine, with enrollments and monthly active users increasing, and optimistic about 2026 growth.
• Chegg Study: Transformed with AI, including Solution Scout and flashcard generators, with 23% lift in learning intent and 17% lift in short-term usage, and institution pilots expanding from 5 to 23.

Expense Management

• On track to achieve non-GAAP expense savings of $165 million to $175 million in 2025 and $110 million to $120 million in 2026, with additional $10 million operating and $7 million CapEx savings in 2026.

In the second quarter, Chegg's total revenue was $105 million. Subscription services revenue was $90 million, with 2.6 million subscribers during the quarter. Skills and other revenue was $15 million, including approximately $7 million from content licensing. Busuu, the language learning business, had B2C revenue up 6% year-over-year and B2B revenue up 39% year-over-year, with a $3.2 billion market opportunity and aiming for $48 million in revenue in 2025 and adjusted EBITDA-positive in Q1 2026. Skills, focusing on workplace readiness and upskilling, saw enrollments increase 16% quarter-over-quarter and monthly active users up 11% quarter-over-quarter, with optimism for profitability and double-digit growth in 2026. Chegg Study, the core academic product, has seen improvements with AI investments, including a 23% lift in 'Chegg Help Me learn today' and 17% lift in students intending to use in 30 days, and monthly retention up 117 basis points in Q2.

Q3 Guidance

• Total revenue expected between $75 million and $77 million, subscription services revenue between $67 million and $69 million, gross margin in range of 56% to 57%, and adjusted EBITDA between $7 million and $8 million.

CapEx and Expense

• Full year 2025 CapEx expected ~$30 million, targeted 50% reduction in 2026. Through AI, on track to reduce content and software development CapEx by over $50 million in 2026 vs 2024.

• Forward-looking statements subject to material risks and uncertainties, refer to SEC filings. - Traffic decline due to Google AI overviews impacting subscriber numbers, leading to year-over-year decline in subscribers.

Q: About Busuu B2B growth durability and adding partners.

A: Nathan Schultz says the growth is driven by direct sales force growth and partnership with Guild, confident in continuing growth as they own their own destiny with sales reps driving leads and conversions.

Q: About Chegg Study institution pilots.

A: Nathan Schultz states focus on proving value, adding logos throughout the year, with efficacy reports planned in H2 2025, leading to more meaningful relationships in 2026 and beyond.

Q: About Busuu B2C performance.

A: Nathan Schultz mentions it's driven by focusing on success seekers and product enhancements with AI, like speaking bites, which make the product stickier.

Q: About Skills in AI education marketplace.

A: Nathan Schultz says Skills transitioned from traditional boot camps to micro learning, with a modern package that meets market demand for upskilling and reskilling