Chegg, Inc.

Thank you for standing by. This is the conference operator. Welcome to the Chegg, Inc. second quarter 2022 earnings conference call. As a reminder, all participants are in listen-only mode and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. To join the question queue, you may press star then one on your telephone keypad. Should you need assistance during the conference calls, you may signal an operator by pressing star and zero. I would now like to turn the conference over to Tracy Ford, Vice President of Investor Relations and ESG. Please go ahead.

Good afternoon. Thank you for joining CHEG's second quarter 2022 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.cheg.com. A replay of this call will also be available on our website. 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 Security and Exchange Commission on February 22, 2022, 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 due information or future events. During the 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 on 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 in our IR website. Now, I will turn the call over to Dan.

Thank you, Tracy, and welcome everyone to our Q2 2022 earnings call. Chegg had a good second quarter, with Chegg Services revenue growing 9% year-over-year, increasing to 5.3 million subscribers for the quarter. Our team is doing an excellent job of executing on the current opportunities in front of us. And with the impact of constant upgrades to our user experience, we are seeing continued strong conversion rates, as well as over 100 basis point increase in our Chegg Study and Chegg StudyPak retention rate year over year. We are executing very well in our services strategy, resulting in record high take rates for our Chegg StudyPak. This bodes very well for future increases in both ARPU and lifetime value of our growing customer base. Our newer investments, such as Chegg Skills and Busuu, are also starting to scale, which is contributing to improvements to our top and bottom lines now, and we believe even more so in the future. Given these positive trends, we are moderately raising our guidance for the year, which Andy will walk you through. The last few years have been challenging for higher education ecosystem with impacts on enrollment, course load, and the overall mental health of both students and faculty. At CHEGS, we have always been focused on solving big student pain points and helping improve learning outcomes. We help students master their subjects and better understand their course material while increasingly providing them with high quality skills-based learning opportunities to make them more employable. In doing so, We believe we substantially improve graduation rates and the ROI of their learning journey. The results speak for themselves, as 92% of students reported that Chegg helps them learn their coursework better, and 94% say they get better grades when they use Chegg to understand their coursework. As a learning leader in higher education, Chegg is constantly monitoring our industry, particularly through the lens of the student. We are seeing some very interesting new trends in our most recent survey As the data suggests, a significantly higher number of students are taking summer school this year compared to last year. The reasons are a direct result of the COVID experience. And a significant number of them are taking summer school to accelerate the pace of getting their degree and catch up on their courses. Our previous studies show that students were taking fewer and easier courses during the pandemic. So it's no surprise that this summer they are taking harder classes, specifically subjects in STEM B. What is also interesting is that we believe students are increasingly thinking about their academic journey as a 12-month endeavor in order to better balance work, force load, and family throughout the year. In fact, 38% of students surveyed are extending college so they can make more money now. They can do this because schools are going increasingly online, making summer school more convenient and accessible. In addition, 85% of summer school students surveyed said they plan to attend or have already enrolled in school for the fall. Historically, higher summer attendance has indicated stronger student enrollment in the fall semester. If these trends continue, it is good for the higher education industry as a whole and Chegg in particular. For the back to school season, our priorities in the U.S. are the continued rollout of Learn with Chegg, our personalization platform, which we believe will expand our TAM to new users and increase our value to existing customers, both of which should improve conversion and retention over time. We are also rolling out the student-facing side of Uversity, significantly expanding the content, courses, and learning tools for students this fall. As our value to students increases, so does our pricing power. In mid-July, we initiated a very moderate $1 price increase in our base check study service, going from $14.95 to $15.95 for our monthly subscription. All other pricing in the U.S. remains the same. This has been rolled out initially to only new Chegg Study customers, but we will be expanding to include all existing subscribers in October. According to our price tests over the past several months, we expect to see a minimal decrease in conversion while seeing an increased number of students choosing the Chegg Study Pack bundle because the price value relationship is even better. Our ultimate goal is to have all students subscribe to the Chegg Study Pack, which is why we recently added University content into the bundle, making it even more attractive and valuable offering. Through University, we are adding the content students have specifically been requesting, such as practice tests, quizzes, and study guides from professors from some of the top universities in the world. And we are providing new content and new formats that we have previously not had on check. Over time, we believe Uversity will expand our TAM in the U.S. and globally in both STEM and non-STEM subjects. We are very excited about the impact Uversity will have on student outcomes, as well as the traction we are already seeing from educators, as there are now more than 180,000 pieces of professor-developed content on our platform And we have over 6,000 professors who have already been verified to participate from almost 30% of all higher education institutions in the US. And that number continues to increase. The student benefits are clear. And we are excited to see how faculty are leveraging Uversity as a new distribution channel to educate even more students around the world. These efforts lead to increased dynamic learning and personalization for our students. And as learning shifts to classes and courses versus textbooks, so does Che. The more we personalize the user experience, the more we can program individualized learning pathways around their needs, styles, and their preferred learning sources. All of this should improve engagement, retention, and ultimately their learning outcomes. Outside North America, our goal is to rapidly increase our subscriber base by finding the optimal price-to-conversion relationship in each country. while also ensuring we have high quality and relevant content that has been localized to serve those needs. Due to our investments in infrastructure, price testing, and payments, CHEG is already serving more than a million students outside of North America. As we grow, we are increasing our focus on some of the biggest near-term opportunities, which include Australia, Turkey, South Korea, Saudi Arabia, India, and Mexico. Students have made it clear that they need more than just academic support, which is why we are scaling our efforts and shape skills both direct to consumer and through our partnership with Guild. Guild is proving to be an excellent partner and we are experiencing early positive momentum. We continue to increase our catalog where we see the opportunity to meet more learner demand through our direct student offering and through Guild as they expand their customer list. Our programming strategy is to align our courses with the most in-demand skills in the market, and our most popular courses include cybersecurity, software engineering, data analytics, and design UX, with price ranges ranging between $1,250 and $9,500 per course. Students are having a positive experience with our curriculum, resulting in both strong take rates and course completions. We are very excited to be working with some of the biggest companies in the world through Guild, and we continue to believe that by offering high-quality skills training through employer partnerships and direct students, Chegg Skills, including Busuu, will be a significant player in a very large market in the future. Like our skills business, language learning is desired by both corporations and students, so our plan is to integrate Busuu into our skills platform in the coming years. As our audience expands, so do the needs of students. As a result, we have recently launched new, high-quality content in the categories of financial literacy, career soft skills, and mental health, which you can now find on Chegg and through large distribution channels such as Yahoo and MSN, helping to extend the Chegg brand. In addition to content, you can expect to see us partner with leaders in these categories with product offerings to our students starting in 2023. As always, the great work we have accomplished this last quarter would not be possible without our amazing employees. Their tireless work to put students first has once again resulted in continued recognition for our teams. Over the past few months, we were proud to win comparably awards for women, diversity, and our entire leadership team, as well as being named one of Fortune's best place to work for millennials. So I want to celebrate our incredible employees for this recognition. And with that, I will turn it over to Andy.