Chegg, Inc.

Greetings and welcome to Check Inks, a second quarter 2025 earnings conference call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star, then zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Tracy Ford. Thank you. You may begin.

Good afternoon. Thank you for joining Chegg's second quarter 2025 conference call. On today's call are Nathan Schultz, President and CEO, and David Longo, 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 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 statement. We caution you to consider the important factors that could cause actual results to differ materially from those in the forward-looking statement. In particular, we refer you to the cautionary language included in today's earnings release and the risk factors described under Chegg's annual report on Form 10-K for the year ended December 31, 2024, filed with the Securities and Exchange Commission on February 24, 2025. as well as our other filings with the SEC. Any forward-looking statements 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 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 Nathan.

Thank you, Tracy. Hello, and thank you for joining Chegg's second quarter 2025 earnings call. Today's call will be structured in two areas. First, an update on the strategic review process. And second, deep on depth on our transformation to profitable growth, specifically within skills and BUSU, which we believe will be the growth engines for Chegg going forward. As part of the strategic review process, in conjunction with our advisors, we have undertaken comprehensive evaluation of both our internal operations in the broad market landscape to drive the best possible outcome for our stockholders and maximize long-term shareholder value. As a reminder, we are exploring a range of outcomes, including being acquired, undertaking a go-private transaction, or remaining a public standalone company. We continue to engage with a select group of parties. Q2 was a good quarter for Chegg. We surpassed our guidance and delivered $105 million in revenue and $23 million in adjusted EBITDA. I'm pleased by our continued focus on disciplined expense management, having identified an additional $17 million in capex and expense savings that will be realized in 2026. Additionally, I'm encouraged by the revenue growth in Busuu and the reinvention of Chegg Study into a personalized learning assistant that continues to get less expensive to run thanks to AI. We remain firmly on track to achieve the targets outlined in our previously announced restructuring efforts, reduce our non-GAAP expense by $165 to $175 million in 2025, and now expect the total non-GAAP expense savings in 2026 to be between $110 and $120 million. As we look towards 2026, Chegg is evolving into a skills-focused organization, investing in two large growth areas, language learning and workplace readiness and upskilling. These businesses, Busuu and Skills respectively, represent the future of our company and will serve as the primary growth engines, while our core academic product, Chegg Study, will remain a valuable service for millions of students and generate meaningful cash that will support our investments in Busuu and Skills. Busuu is our language learning business that caters to adults who need to learn a new language to better their life or career. This is an enormous market of 78 million success-seeking learners with a 3.2 billion market opportunity. Our recent investments are paying off, and if you haven't tried Busuu yet, now is a great time. We encourage you to explore the new AI-powered features, including our new Speaking Bytes product. Busuu continues on a strong path. achieving a 15% year-over-year revenue increase in Q2, with good performance in both the B2C and B2B segments. Q2's B2C revenue increased 6% year-over-year, and in the second half of the year, B2C focus will be on product innovation with continued emphasis on AI as a driver for personalization. BUSU's B2B business achieved an even more impressive 39% year-over-year revenue growth, continuing a robust double-digit growth trajectory, including retention improving by 22 percentage points year-over-year. Throughout H2, we will continue our rollout with Guild into the English language learning vertical and expand our offering with Learning Pathways, which offers personalized courses focused on key language and professional skills for specific roles in industries. We've had a significant B2B traction in the DOC region as well with new partners such as HSF Fenster and Turin and Hubert Burda Media. We remain confident that Busuu will achieve $48 million in revenue in 2025 and will be adjusted EBITDA positives in the first quarter of 2026. Our skills business focuses on the $40 billion market-serving workplace readiness and upskilling for professional adults looking to move ahead in their careers. We have spent the last 12 months modernizing our product offering and prioritizing three growth areas, AI programs, career fundamentals, and professional upskilling. We're really excited to see exactly what we want. Enrollments have increased 16% quarter over quarter and 11% increase in monthly active users across our new programs quarter-over-quarter. Looking ahead to Q3, we'll continue to invest in and expand our go-to-market strategies for skills, so here are the priorities. We're focusing on growing our direct B2B presence as well as deepening our relationship with distribution partners such as GILT. We are also pursuing ACE credit recommendations for several of our skills programs to account for college credits, helping to support those seeking degrees and creating a bridge for us to monetize students as they transition from our academic services to our career services. Finally, we are continuing to strengthen and broaden our programs, expanding our reach into the enormous upskilling market opportunity. For a complete view of our skills catalog, please reference our investor deck. We're optimistic about the potential for our skills business and believe it is on a path to profitability and positive double-digit growth in 2026. Chegg Study continues to serve millions of students, and our investments in AI have transformed Chegg Study into a personalized learning coach that helps students succeed and improve their opportunity to graduate. Earlier this year, we launched Solution Scout and AI-powered practice and flashcard generators. We're getting really positive feedback with students reporting a 23% lift in the statement, Chegg helped me learn today, and a 17% lift in students who intend to use Chegg in the next 30 days. Most importantly, our monthly retention rate is up 117 basis points in Q2. For the rest of 2025, we'll continue to push the differentiated and personalized nature of our product. Research from the Pew Center confirms that the freshman class of 2025 is expected to be the biggest, most diverse ever. This September, we'll introduce two new core capabilities into the existing user interface pushing Chase Eddy into a personalized learning coach for the modern learner. First, we are building a smart planning tool to help students set learning goals, organize their work, and stay on track with personalized step-by-step guidance. Second, we are introducing a voice interface when combined with visual aids, and a thoughtful AI agent will deepen learning across topics and disciplines. Voice matters for learning because it improves comprehension and memory, clarifies thinking, and increases engagement. Finally, our business institution pilot program continues to expand, moving from five active pilot programs at the start of the year to now 23. With many pilots in place, we are now focusing on efficacy studies validating what we have always known, students who use Chegg perform better academically. We believe there is a tremendous opportunity to support a broad range of students in achieving their academic goals while increasing persistence in graduation rates. To wrap us up, we continue to make progress towards the strategic alternatives process and are pleased with the positive trends we are seeing in Busuu and Skills and the technology investments we've made in Chegg Steady to allow the business to run efficiently and be the investment vehicle for the company in 2026. With that, I'll turn it over to David.