Chegg, Inc.

Thank you for standing by. This is the conference operator. Welcome to the Chegg, Inc. 3rd 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 1 on your telephone keypad. Should you need assistance during the conference call, you may signal an operator by pressing star and 0. I would now like to turn the conference over to Tracy Ford, VP of Investor Relations and ESG. Please go ahead.

Good afternoon. Thank you for joining CHEG's third 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 Securities 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 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 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 Q3 2022 earnings call. Chegg had a strong third quarter, exceeding both our top and bottom line expectations, with Chegg services revenue growing 8% year over year, reaching 4.8 million subscribers. Our results reflect excellent execution, and show the inherent profitability of our model while continuing to invest in future growth. We regularly monitor the trends in education and, as has been reported, U.S. undergraduate enrollment has stabilized and returned to pre-pandemic norms. What has changed is that students are increasingly going to schools offering online and hybrid classes, which are now offered by over half of the U.S. higher education institutions. In addition, 59% of U.S. students are now majoring in STEM and business, with more than 80% taking STEM B courses. Our data also suggests students are spreading their course load over the full year. We believe these trends are all positive for Chegg. We continue to make investments. We continue to make investments to increase the value of Chegg's offerings, both to our existing students as well as expand the opportunity to reach new learners. In addition to providing academic support, we are also adding non-academic services and job skills preparation, which we believe will expand our TAM, increase retention, increase ARPU, and better serve students. We believe this is a major opportunity, which is why we recently announced the promotion of Nathan Schultz to Chief Operating Officer. Nathan is now responsible for all of our direct to student offerings. For those who don't know Nathan, He has been at Chegg for 15 years and has held almost every senior role at the company. Most recently, he and his team built our learning services group, launched the Chegg Study Pack, and led the integration of writing and math way. This promotion is well-deserved, a long time in coming, and organizes the company around future growth. Congratulations, Nathan. This school year, we increased the price of our base product, Chegg Study, by $1 in the U.S. As expected, we saw a minimal impact on conversion and retention and a positive impact on the take rate for the Chegg Study Pack. Chegg Study and Chegg Study Pack are now renewing at similar rates and we see the highest satisfaction scores from students using the Chegg Study Pack. Our strategy continues to be to increase our TAM as well as the percentage of students who subscribe to the Chegg Study Pack. This increases our ARPU and profitability and most importantly, serves the students better. As we add more value, we expect to add more students, which is why we continue to invest in more forms of content, subjects, and personalization. As an example, our investment in University, which was recently made available to students, is performing well, allowing us to better target the exact learning content students want. In addition to University, Our plan is to expand value by adding non-academic services and job skills preparation in the future. So today, we are pleased to announce our partnership with Calm, the number one platform for mental fitness and well-being and the most preferred wellness brand for college users. Every Chegg StudyPatch subscriber globally will now receive Calm Premium for free, which is a $70 annual value. The mental health challenge facing college students is huge. It's real, and it's affecting their lives today. With over half the U.S. students reporting that mental health is impacting their studies, and nearly a third of students worldwide reporting their mental health has worsened since returning to campus, we hope this partnership provides some of the support they need. Internationally, we are prioritizing market share growth by delivering compelling value propositions for students in their countries, increasing our subscriber base through local pricing, content, and user experience. These efforts are focused on expanding our reach in major markets, including Turkey, where we recently launched a fully localized app and have seen a significant increase in downloads, activation, and engagement. We also just launched our Spanish language app in beta, and we believe this will be a major opportunity for us going forward. Students' needs continue to evolve, including the growth in demand for language learning. We are expanding the U.S. footprint of Busuu, and have just launched an ad-supported freemium model. With over half of US students reporting wanting to learn another language, we see a tremendous opportunity for US growth. Busuu is also now a key part of our growing partnership with Guild. Thanks to the early success of our partnership and our strong outcomes, we are pleased to announce that we are adding Busuu's language learning into Guild Marketplace in early 2023. Our partnership with Guild continues to yield excellent results And as they grow their customer base among large employers, we are seeing increased adoption of our courses, as well as a very strong learning completion rate, which is how we are measured for quality and value. We want to thank Guild and look forward to continuing to expand our partnership. The great work we have accomplished would not be possible without our amazing employees. Their tireless work to put students first has once again resulted in recognition for our teams. This quarter, We are proud to win comparably awards for our benefits and perks and compensation, work-life balance, and perhaps most important, happiest employees, as well as being recognized as the Fortune Best Workplaces for Women and for Technology. Also, Chegg employees recently participated in our first Global Day of Impact, where we furthered our commitment to put student success and health first. Together, Chegg volunteers supported 13 global organizations supporting education, hunger, mental health, and more. Our teams have helped almost 5,000 students, and I couldn't be prouder. And with that, I'll turn it over to Andy.