Chegg, Inc.

Greetings. Welcome to the Chegg Inc. Third Quarter 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. I will now turn the conference over to your host, Tracy Ford, Vice President of Investor Relations and ESG for Chegg. Thank you. You may begin.

Good afternoon. Thank you for joining Chegg's third quarter 2021 conference call. On today's call are Dan Rosenzweig, co-chairperson and CEO, and Andy Brown, chief financial officer. A copy of our earnings press release, along with our investor presentation, is available on our investor relations website, investor.chegg.com. A replay of this call will also be available on our websites. We routinely post information on our website and intend to make important announcements on our Media Center website at chegg.com slash Media Center. We encourage you to make use of these resources. Before we begin, I would like to point out that during the course of this call, we will make forward-looking statements regarding future events, including the future financial and operating performance of the company. These forward-looking statements are subject to material risks and uncertainties. that could cause actual results to differ materially from those in the forward-looking statements. We caution you to consider the important factors that could cause actual results to differ materially from those in the forward-looking statements. In particular, we refer you to the cautionary language included in today's earnings release and the risk factors described in Chegg's annual report on Form 10-K filed with the Securities and Exchange Commission on February 22, 2021, as well as our other filings with the SEC. Any forward-looking statements that we make today are based on assumptions that we believe to be reasonable as of this date. We undertake no obligation to update these statements as a result of new information or future events. During this call, we will present both GAAP and non-GAAP financial measures. Our GAAP results and GAAP to non-GAAP reconciliations can be found in our earnings press release and the investor slide deck found on our IR website, investor.cheg.com. We also recommend you review the investor data sheet, which is also posted on our IR website. Now I will turn the call over to Dan.

Thank you, Tracy, and welcome everyone to Chegg's Q3 2021 earnings call. Over the last year and a half, we experienced extraordinary growth and in the midst of a strong year, had a solid third quarter. However, in late September, it became clear to us that the education industry is experiencing a slowdown that we believe is temporary. This industry-wide dynamic was unanticipated and is a direct result of the COVID-19 pandemic. A combination of variance, increased employment opportunities, and compensation, along with fatigue, have all led to significantly fewer enrollments than expected this semester. And those students who have enrolled are taking fewer and less rigorous classes and are receiving less graded assignments. We believe this is a post-pandemic impact that will affect this school year, but is not sustainable for higher education long term. Learning sites and apps, both free and paid in the US and Canada, have experienced significantly reduced traffic since the fall semester began. Despite these trends, our team continues to execute at a very high level. In fact, CHEG has experienced year-over-year increases in retention and adoption of CHEG study packs, which has positively impacted our ARPU by 5% in Q3. In the rest of the world, we continue to see very robust subscription and revenue growth. While still early, international is clearly becoming a meaningful part of our business, and we have already exceeded our target of 1 million international subscribers. We believe that, in time, international will be larger for us than the U.S. This is why we are investing in key areas such as localization of content and language, as well as our e-commerce and pricing platform. These infrastructure investments will allow us to take local currency and offer both variable and local pricing, and we believe these capabilities will help increase penetration in large, untapped markets where pricing is a major variable for success. We should be ready to leverage these investments by the fall of 2022. At a global level, students are increasingly turning to the Internet and Chegg to improve their learning and outcomes. Domestically, personalization, expanding beyond the textbook to courses, and supporting additional non-STEM subjects remain our focus to increase our domestic PAMs. Chegg is uniquely positioned to personalize each student's learning journey and bring them additional services because we have so many subscribers, so much data, and such relevant content. Therefore, we have the ability to personalize and expand the value we offer existing customers and create new value for our new customers. A great example of this is our investment in Uversity, which is off to a very strong start. Although early, and not yet live for students, we have already received over 20,000 pieces of content in STEM and non-STEM subjects from faculty at over 700 schools, including many of the most prestigious schools in the world who will help students learn while earning more for themselves. This offering has been so popular with faculty that we have already paid over $4 million to educators. We are excited for the future of Uversity which is building stronger relationships with institutions and professors, and we are grateful for the passion these educators from around the world are showing to furthering education and support for students through CHE. The degree-based pathway will continue to be very large in the United States, and we expect that it will grow again after the pandemic. But one of the lessons we see is just how much technology influences and empowers the world. Therefore, we are increasing our investment in digital skills training, which is important to an increasing percentage of the population around the world. Within the space, one of the key trends is more employers providing skilling, reskilling, and upskilling to their current employee base and using this benefit to attract new employees. That is why we are excited to announce our new partnership with Guild, which will launch next year. Guild is a leader in serving large corporations with employers offering to pay for the employees' undergraduate degrees, as well as provide skilling and upskilling curriculum. Thinkful courses will be offered to employees at relevant companies through the Guild platform, creating a new opportunity for domestic growth. As we look ahead, we remain strong believers in the growth of online education support and skills services around the world. As we manage through this moment in time, we will remain focused on building long-term value for both learners and our shareholders. The last two years have created a situation nobody could have anticipated and have clearly temporarily affected the higher education industry. But what is also clear is that more people are going to learn more things, especially online, and that will only create more opportunity for checks. We remain the market leader. With a beloved brand, a strong moat, and our services continue to help millions of learners all around the world. As students rely on us to learn their course material and better understand concepts, which improves their outcomes. We are in a great position to come out of this temporary slowdown stronger than ever and take advantage of the opportunities before us. And through it all, we remain focused on our long-term mission of putting students first in everything that we do. And with that, I'll turn it over to Andy. Andy?