Chegg Reports 2024 Fourth Quarter and Full Year Financial Results

Initiates strategic review process to explore alternatives and files a complaint against Google LLC and Alphabet Inc.

SANTA CLARA, Calif.--(BUSINESS WIRE)--Chegg, Inc. (NYSE:CHGG), the leading student-first connected learning platform, today reported financial results for the quarter and year ended December 31, 2024.

"We made two important and connected decisions to maximize the future of our business and shareholder value. We are launching a strategic review process and filed a complaint against Google, which has unjustly retained traffic that has historically come to Chegg, impacting our acquisitions, revenue and employees,” said Nathan Schultz, CEO of Chegg. “As we look to stabilize Chegg’s business in 2025, we have a strong and trusted brand, millions of global subscribers, a large market opportunity, and amazing employees. Our superior product for education is verticalized, personalized, and built on a deep understanding of modern students, and we believe this year will be a turning point for Chegg.”

Fourth Quarter 2024 Highlights

• Total Net Revenues of $143.5 million, a decrease of 24% year-over-year
• Subscription Services Revenues of $128.5 million, a decrease of 23% year-over-year
• Gross Margin of 68%
• Non-GAAP Gross Margin of 72%
• Net Loss was $6.1 million
• Non-GAAP Net Income was $19.0 million
• Adjusted EBITDA was $36.6 million
• 3.6 million Subscription Services subscribers, a decrease of 21% year-over-year

Full Year 2024 Highlights

• Total Net Revenues of $617.6 million, a decrease of 14% year-over-year
• Subscription Services Revenues of $549.2 million, a decrease of 14% year-over-year
• Gross Margin of 71%
• Non-GAAP Gross Margin of 73%
• Net Loss was $837.1 million
• Non-GAAP Net Income was $85.0 million
• Adjusted EBITDA was $149.7 million
• 6.6 million Subscription Services subscribers, a decrease of 14% year-over-year

Total net revenues include revenues from Subscription Services and Skills and Other. Subscription Services includes revenues from our Chegg Study Pack, Chegg Study, Chegg Writing, Chegg Math, and Busuu offerings. Skills and Other includes revenues from Chegg Skills, Advertising, and any other revenues not included in Subscription Services.

For more information about non-GAAP net income, non-GAAP gross margin and adjusted EBITDA, and a reconciliation of non-GAAP net income to net (loss) income, gross margin to non-GAAP gross margin and adjusted EBITDA to net (loss) income, see the sections of this press release titled, “Use of Non-GAAP Measures,” “Reconciliation of Net (Loss) Income to EBITDA and Adjusted EBITDA,” and “Reconciliation of GAAP to Non-GAAP Financial Measures.”

Business Outlook

First Quarter 2025

• Total Net Revenues in the range of $114 million to $116 million
• Subscription Services Revenues in the range of $104 million to $106 million
• Gross Margin between 66% and 67%
• Adjusted EBITDA in the range of $13 million to $14 million

For more information about the use of forward-looking non-GAAP measures, a reconciliation of forward-looking net loss to EBITDA and adjusted EBITDA for the first quarter 2025, see the below sections of the press release titled “Use of Non-GAAP Measures,” and “Reconciliation of Forward-Looking Net Loss to EBITDA and Adjusted EBITDA.”

An updated investor presentation and an investor data sheet can be found on Chegg’s Investor Relations website https://investor.chegg.com.

Prepared Remarks - Nathan Schultz, CEO & President Chegg, Inc.

Thank you, Tracey. Hello everyone and thank you for joining Chegg’s fourth-quarter earnings call.

Before I cover our 2024 accomplishments and 2025 focus, I want to make sure the two announcements we are making are clear. First, we announced that we are undertaking a strategic review process and exploring a range of alternatives to maximize shareholder value, including being acquired, undertaking a go-private transaction, or remaining as a public standalone company. Second, we announced the filing of a complaint against Google LLC and Alphabet Inc. These two actions are connected, as we would not need to review strategic alternatives if Google hadn’t launched AI Overviews, or AIO, retaining traffic that historically had come to Chegg, materially impacting our acquisitions, revenue, and employees. Chegg has a superior product for education, as evident by our brand awareness, engagement, and retention. Unfortunately, traffic is being blocked from ever coming to Chegg because of Google’s AIO and their use of Chegg’s content to keep visitors on their own platform. We retained Goldman Sachs as the financial advisor in connection with our strategic review and Susman Godfrey with respect to our complaint against Google.

As the education industry at large continues to transform, Chegg has strengthened its commitment to serving students, with a clear focus on those seeking to build knowledge and achieve success along their academic journey. Through focused investment over the past year, and the integration of cutting-edge technologies, we have advanced the Chegg product offering to deliver a comprehensive, personalized and verticalized learning experience for higher education. The Chegg of today provides precisely what learners need and ensures that Chegg maintains its strong reputation for quality and trust.

• On technology in 2024, we integrated AI and machine learning into our product stack. We blended third-party AI models with our proprietary student-focused data and high-quality content, delivering more value to the learner. We are AI model-agnostic, seamlessly incorporating new frontier models like Llama, Anthropic, Mistral, GPT and new models as they become available. We use techniques like A/B testing, multi-shot prompting and Retrieval-Augmented Generation to improve how our AI learns, retrieves information in real time, and delivers consistent results. With this work complete, we are now building verticalized applications for education at a fraction of the time and cost, while also increasing our level of personalization. As we have mentioned before, our implementation of machine learning, and multiple AI models, has significantly reduced the cost of creating content by more than 70%, while keeping our quality at the high standards students expect. We stand by the quality of our content so much that in Q3 we implemented a Satisfaction Guarantee.
• On brand and marketing, last fall, we launched an innovative brand marketing campaign and activation program that reinvigorated top-of-funnel traffic, creating strong consideration, bringing in new users, and ultimately driving conversion. As a result of our full funnel program, we have seen year-over-year improvements in click-through and conversion rates, leading us to double down on this commitment in 2025. With regards to TikTok specifically, we were able to capture a 16% increase in awareness among underclassmen.
• On the product, we significantly advanced and differentiated Chegg’s AI-powered Question and Answer experience. At the front end, we have simplified the question submission process and allowed for more natural inputs and interactions. Learners now instantly receive step-by-step explanations and reinforcement, adaptive and personalized based on their individual strengths or weaknesses. Finally, at the conclusion, Chegg proactively offers students a variety of unique recommendations – called “next best actions” – to reinforce and further their learning. These product upgrades resulted in 66% more questions being asked in 2024 versus 2023, adding nearly 26 million additional solutions to our archive and contributing to the 15 basis points increase in subscriber retention over the course of the year.
• Finally, I want to touch on Busuu, our language learning service, which has done a tremendous job transitioning to a freemium business model and integrating AI as a key product feature with the introduction of Speaking Practice. This strategic refocus increased the first 30-day conversion rate to paying customers by 31% and led to 9% year-over-year revenue growth for 2024 – a trend we expect to continue in 2025. The enterprise part of this business is performing very well, with revenue up 46% in 2024, as we added an impressive set of enterprise customers including Total Energy and Carrefour. The enterprise business will continue to expand with additional organizations, reseller relationships, and our successful partnership with Guild, specifically within their English language learning category.

While we made significant headway on our technology, product, and marketing programs, 2024 came with a series of challenges, including the rapid evolution of the content landscape, particularly the rise of Google AIO, which as I previously mentioned, has had a profound impact on Chegg’s traffic, revenue, and workforce. As already mentioned, we are filing a complaint against Google LLC and Alphabet Inc. in the U.S. District Court for the District of Columbia, making three main arguments.

• First is reciprocal dealing, meaning that Google forces companies like Chegg to supply our proprietary content in order to be included in Google’s search function.
• Second is monopoly maintenance, or that Google unfairly exercises its monopoly power within search and other anti-competitive conduct to muscle out companies like Chegg.
• And third is unjust enrichment, meaning Google is reaping the financial benefits of Chegg’s content without having to spend a dime.

As we allege in our complaint, Google AIO has transformed Google from a “search engine” into an “answer engine,” displaying AI-generated content sourced from third-party sites like Chegg. Google’s expansion of AIO forces traffic to remain on Google, eliminating the need to go to third-party content source sites. The impact on Chegg’s business is clear. Our non-subscriber traffic plummeted to negative 49% in January 2025, down significantly from the modest 8% decline we reported in Q2 2024.

We believe this isn’t just about Chegg—it’s about students losing access to quality, step-by-step learning in favor of low-quality, unverified AI summaries. It’s about the digital publishing industry. It’s about the future of internet search.

In summary, our complaint challenges Google’s unfair competition, which is unjust, harmful, and unsustainable. While these proceedings are just starting, we believe bringing this lawsuit is both necessary and well-founded.

While the challenges we outlined will persist, we are focused on the clear goal of stabilizing the business through the course of 2025. We are driven by a core belief that the relevancy and need for comprehensive student success platforms – offering an adaptive, personalized experience to support learning – will only increase over the coming years. Administrators and faculty are acknowledging the need to change their teaching models and assessments to better reflect the AI-normalized environment we are now in. The dramatic disruption that came with the launch of generative AI platforms has started to stabilize as schools now understand the significant risk and impact of students GPT’ing their way through their educational journey. This view is widely supported by some recent studies:

• First, a study from The American Association of Colleges and Universities and Elon University explored the impact of generative AI on academic integrity, with 92% of faculty worried about AI undermining deep learning by overreliance on AI tools and 95% of these leaders say the teaching models at their schools will be affected significantly or to some degree by generative AI.
• Second, the latest edition of Chegg’s Global Student Survey measured the insights of nearly 12,000 undergraduate students in 15 countries. 53% of undergraduate students who have used generative AI voiced concerns about “receiving incorrect or inaccurate information”.
• Third, we conducted proprietary research on student personas and learned that at least 82% of US college students want more than what GPT offers. These students need to develop knowledge, not just get grab-and-go answers.

So, as 2025 gets underway, here’s where we are leaning in:

In 2025, on brand and marketing, we are continuing to raise brand awareness and improve conversion rates. In January, we debuted our “Get a Grip” brand campaign featuring our new amazing mascot, Ace the Octopus. A physical representation of Chegg allows us to connect with our audience in a fun way, clearly conveying how we are on and by students’ sides throughout the semester. In addition, we are continuing our expansion into new media channels, including streaming platforms like Hulu and YouTube, and social channels like Discord and Twitch. We also launched Live Office Hours on social media channels to provide students with instant, live, course-specific instruction. We aim to provide an interactive, community-based learning opportunity while introducing our brand and value to new users. Our goal is to have more than 1.5 million students attend our live programming this year. Diversification is key to funnel resiliency, and taking a full-funnel approach is necessary to make sure we are bringing in the right traffic and regrowing our customer acquisitions.

In 2025, on product, we are building experiences worthy of virality, acquisition growth, and retention, and making those experiences as universally available as possible.

• First is Solution Scout, a new product we launched earlier this month. As I mentioned earlier, students lack trust in generative AI, and they’ve told us that they’re spending too much time triangulating, comparing, and verifying solutions across multiple platforms. This results in an incredible amount of wasted time that could be spent learning! Solution Scout allows students to see side-by-side answers from multiple LLMs alongside Chegg’s solution, but what’s most important is that Chegg, through our proprietary technology, can compare and contrast the solutions, providing students a massive time save and value, and our early indications are very positive.
• We are also excited to launch an updated feature set for practice and exam preparation, personalized for each student. 71% of students report that they do not have adequate practice resources when preparing for exams, and Chegg can help coach each student to confidence. Monthly, our platform collects more than three billion data interaction points, which enables us to customize and personalize this experience. Along with our personalization, students can change the difficulty and format of questions – whether they want to learn via flashcards, multiple choice, or word problems. Students need to gain competency in their studies, and practice tailored specifically to their individual strengths and weaknesses is how they will do it.

This is the Chegg that exists right now. Our goal with our platform is simple. We want students to thrive. We want students to have that "wow” moment with Chegg. “Wow Chegg is not just a grab and go answer...wow Chegg is not just generative AI.” That “wow” moment is when a student realizes Chegg understands me and my specific needs and is a platform I can use every day to succeed in my educational journey. This “wow” moment is what will unlock our ability to stabilize our business.

Finally, on the expansion of our business model in 2025, I would like to touch on our enterprise strategy, which enables us to diversify and generate recurring revenue streams. We are continuing to expand our business-to-institution pilot program, which began in late 2024. With five pilot programs active, we hope to work with approximately 35 additional institutions by the end of the year. There is a tremendous opportunity to support a broader range of students in achieving their academic goals and increase persistence and graduation rates, which is a major issue in higher education today. We have seen early receptivity and positive feedback on how these pilots are already helping students and hope to move a number of them into full campus-wide implementations by the end of the year.

Before I hand it over to David, I want to summarize what’s most important from today’s call. We announced that we are undertaking a process to review strategic alternatives, and we filed a complaint against Google. In addition to this, here are the keys to our 2025 strategy to stabilize our business:

• Key #1: Build brand awareness, drive more qualified traffic, and increase conversion rates.
• Key #2: Expand our product set to offer unique solutions for students that increase the frequency of use and create clear and differentiated value for Chegg.
• Key #3: Diversify our revenue streams with business-to-institution programs and other enterprise offerings.

We continue to have a strong and trusted brand, a customer base of millions of global subscribers, a large market opportunity, and amazing employees to get the job done, and we believe 2025 will mark a turning point for Chegg.

With that, I’ll turn it over to David.

Prepared Remarks - David Longo, CFO Chegg, Inc.

Thank you, Nathan and good afternoon.

Today, I will be presenting our financial performance for the fourth quarter of 2024, along with the company’s outlook for the first quarter of 2025.

We delivered a solid fourth quarter, surpassing our Q4 guidance for both revenue and adjusted EBITDA. While navigating industry challenges, we remained laser-focused on executing our strategic plan, enhancing our product-market fit, and continuing to prudently manage our expenses. We remain on track to achieve 2025 non-GAAP savings of $100-120 million from our previously announced restructuring activities. Additionally, we strengthened our balance sheet by repurchasing $117 million of our 2026 convertible notes at a significant discount.

In the fourth quarter, total revenue was $143.5 million, a decrease of 24% year-over-year. This includes Subscription Services revenue of $128.5 million, down 23% year-over-year. We had 3.6 million subscribers during the quarter, representing a decline of 21%. Subscription Services ARPU decreased by 3% year-over-year, primarily driven by a temporary dip in our monthly retention rate in November and December, which has since returned to historical norms. Skills and Other revenue was $14.9 million, down 31% year-over-year, due to the market shift away from traditional bootcamps to lower cost, short-form programs, and a decline in advertising revenue from reduced traffic and sessions across our platform. We delivered adjusted EBITDA of $37 million, representing a margin of 25%.

As mentioned earlier, in the fourth quarter we opportunistically repurchased $116.6 million in aggregate principal amount of our 2026 convertible notes at a $20 million discount to par.

Free cash flow for the fourth quarter was $4.8 million, despite incurring approximately $25 million in cash outlays related to employee severance from our two restructurings in which we laid off more than 700 employees, as well as the Pearson legal settlement. As anticipated, we expect another $11 million in cash restructuring payments, with a significant portion to be incurred in Q1. Capital expenditures for the quarter were $13 million, down 52% year-over-year, of which $8.7 million were content costs. Leveraging the power of AI, CapEx content costs have decreased 56% year-over-year, while the number of questions asked increased 2%.

Looking at the balance sheet, we concluded the quarter with cash and investments of $528 million and a net cash balance of $42 million.

Looking ahead, as Nathan detailed earlier, we have an exciting and ambitious agenda for product and marketing in 2025. However, as we work towards realizing the benefits of these initiatives, industry challenges are causing a notable decline in traffic and subscriber acquisitions. These factors are putting pressure on our business and impacting our financial outlook.

For Q1 guidance, we expect:

• Total revenue between $114 and $116 million, with Subscription Services revenue between $104 and $106 million;
• Gross margin to be in the range of 66 to 67 percent;
• And adjusted EBITDA between $13 and $14 million.

In closing, despite the ongoing industry challenges that are putting pressure on our financial performance, we made significant progress in 2024 by building technology, integrating AI and enhancing products, all while prudently managing expenses. We enter 2025 with a solid foundation and are focused on stabilizing business trends.

With that, I will turn the call over to the operator for your questions. We respectfully advise that we will not be taking questions related to the company's strategic review process.

Conference Call and Webcast Information

To access the call, please dial 1-877-407-4018, or outside the U.S. +1-201-689-8471, five minutes prior to 1:30 p.m. Pacific Time (or 4:30 p.m. Eastern Time). A live webcast of the call will also be available at https://investor.chegg.com under the Events & Presentations menu. An audio replay will be available beginning at 4:30 p.m. Pacific Time (or 7:30 p.m. Eastern Time) on February 24, 2025, until 8:59 p.m. Pacific Time (or 11:59 p.m. Eastern Time) on March 3, 2025, by calling 1-844-512-2921, or outside the U.S. +1-412-317-6671, with Conference ID 13751122. An audio archive of the call will also be available at https://investor.chegg.com.

Use of Investor Relations Website for Regulation FD Purposes

Chegg also uses its media center website, https://www.chegg.com/press, as a means of disclosing material non-public information and for complying with its disclosure obligations under Regulation FD. Accordingly, investors should monitor https://www.chegg.com/press, in addition to following press releases, Securities and Exchange Commission filings and public conference calls and webcasts.

About Chegg

Chegg provides individualized learning support to students as they pursue their educational journeys. Available on demand 24/7 and powered by over a decade of learning insights, the Chegg platform offers students artificial intelligence (“AI”)-powered academic support thoughtfully designed for education coupled with access to a vast network of subject matter experts who help ensure quality and accuracy. No matter the goal, level, or style, Chegg helps millions of students around the world learn with confidence by helping them build essential academic, life, and job skills to achieve success. Chegg is a publicly held company based in Santa Clara, California and trades on the NYSE under the symbol CHGG. For more information, visit www.chegg.com.

Use of Non-GAAP Measures

To supplement Chegg’s financial results presented in accordance with generally accepted accounting principles in the United States (GAAP), this press release and the accompanying tables and the related earnings conference call contain non-GAAP financial measures, including adjusted EBITDA, non-GAAP cost of revenues, non-GAAP gross profit, non-GAAP gross margin, non-GAAP operating expenses, non-GAAP income from operations, non-GAAP net income, non-GAAP weighted average shares, non-GAAP net income per share, and free cash flow. For reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures, please see the section of the accompanying tables titled, “Reconciliation of Net (Loss) Income to EBITDA and Adjusted EBITDA,” “Reconciliation of GAAP to Non-GAAP Financial Measures,” “Reconciliation of Net Cash Provided by Operating Activities to Free Cash Flow,” and “Reconciliation of Forward-Looking Net Loss to EBITDA and Adjusted EBITDA.”

The presentation of these non-GAAP financial measures is not intended to be considered in isolation from, as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP, and may be different from non-GAAP financial measures used by other companies.

Media Contact: Mansi Bandarupalli, press@chegg.com
Investor Contact: Tracey Ford, IR@chegg.com