Earnings call transcript Q1 2023

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Operator

Greetings, and welcome to the Chegg First Quarter 2023 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. [Operator Instructions] As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Tracey Ford. ahead. go Please

Tracey Ford

of you Relations call. Thank center and Chegg's quarter is A first and with release, Good investor our today's for call conference presentation copy and Officer. our routinely post Financial media information On website investor.chegg.com. call Brown, on at Co-Chairperson earnings are this XXXX on press We of Andy website make along will also announcements Investor our encourage website. make afternoon. website available Chief intend joining our We A replay Dan be to CEO; important Rosensweig, available resources. you on of use chegg.com/mediacenter. on our to these

will as new future obligation to believe the We well no Securities this the be these of the SEC. based refer statements our I Before These future and in the that that other forward-looking reasonable to in regarding material cause from date. risk to the results statements. today financial Exchange make are events, Chegg's could that on would assumptions could materially including Any out to actual today's on language factors as statements the to risk caution events. we cautionary a you are with actual particular, we the In earnings Commission operating statements point company. factors to forward-looking that information materially forward-looking consider we make XX, like the described those forward-looking we XX-K filings from performance Form annual We of that future in included statements of to release, statements. differ as XXXX, differ cause important we course begin, undertake or to uncertainties the during subject and the filed forward-looking call result results and of with in report February those you update on this as

present will measures. both GAAP and we this During call, non-GAAP

the deck results our GAAP our slide website investor IR can non-GAAP found release to and GAAP reconciliations be on in Our and earnings press investor.chegg.com.

investor also IR you We the website. also review sheet, on recommend posted which our data is

Now, to over call turn I Dan. will the

Dan Rosensweig

Thank you, total had our call. and Tracey, adjusted earnings solid XXXX Chegg above a our QX everyone guidance QX quarter, ending welcome revenue and to on EBITDA.

shared that pace we going Education believe are to last during with generative is and this negatively. you business, and Chegg. time, than As impacted. large and over used are advantage both our society that people believe will to. And models a already call, we faster positively affect At AI language we being

part were on of no expectations In the impact growth, ChatGPT noticeable first the meeting and account new we ups. sign saw new year, on we our from

spike a new impact having However, growth. significant our student believe interest since March, on in we now an it's We ChatGPT. in saw customer

retention very we continue Fortunately, Chegg and that suggesting of rates, value already rates. those retain to see to us at continue high students the us who strong understand choose

play be outlook. out. Chegg. that expecting intend you walk it's Andy prudent those a news too early will tell how Because in positive trends, to it's are We good would also historically which We for this enrollment recovery the we guidance our shortly. to to through quarter's with details only and will this be forward next more time at cautious Therefore, provide believe

on my most mobile explosion the our the Internet discuss with of company embracing discussions, the rapid and immediately. months coming into quickly Altman prioritize AI Several we technology of incorporation to out the And that next Throughout pace. career, those can very cloud. Sam is witnessed And ago I've significant it We technology we and And shifts platform the the in the creation evolving of a Chegg and that the Chegg, of utilization to all software met believe to of and reoriented AI AI movement shift. future aggressively see education. at of are to at from is AI services. the big we focus I

big real taxonomy use over the we the of power ChatGPT student with make of experts a accurate, of in harness when OpenAI. will to pieces in announced learning years billions an owns, Chegg's cooperation distinctive our which of from experience easy of manner. and recently learning The nature network our our matter first conversational effective, CheggMate conversational ChatGPT and data that The will is CheggMate, with Chegg. experts in introduction establish more and XX offered to combination personalized, paired step XXX,XXX proprietary subject last the the with matter improving and all fast and adaptive, outcomes exclusively to Chegg coupled subject of unique learning as powerful of time proprietary the content tool learning CheggMate and

increase for language where history verticals Large users, focused created. and CheggMate -- but are is reducing value our to being that of and proprietary with that and human build step-by-step enduring blend with relevancy. would are ensure while lead the time believe similar is size trust suggests Based human relationship learning why along needs. is future CheggMate tests content currently with to offer models of support. students learning assessments, strengthen feedback in Ultimately, technology the personalized on based our our a designed study to to will prefer have search, horizontally, to support individual the over of research, is solutions. will of leading Which an XX% It we in AI experts category an their believe tailored learning we of students market costs. Chegg's the instant used practice accuracy and and introduction and and we serve involved studies style individual

a expand fast access and very And with month. moving later will test this we are the launch of We beta iterate, year. throughout we CheggMate as

seeing Calm, benefits services, Chegg to value, DoorDash creating improved goal are and subscribers for our partnerships Chegg with the the strengthening value subscriptions value brand in more introduced all our add adding more improved from the deliver and to we to expect content we future. overwhelming non-academic recently with retention. with and is offerings are outcomes As our our of partner and added These offers

Our continues also well. in us perform to skilled for we bigger even partnership our ahead opportunity extremely an with business. And see Guild

are We we language focus programs, learning offerings, product winning including of Leadership award advancements our the will the introducing artificial to new latest intelligence offerings UX student include as Busuu, meet courses Other demand. and additions catalog expand and on employer new Guild. Frontline both course while in future through Design

to more, To courses, our we completion skills improve even of which based will improve we expect learning add outcomes support conversational rates. real all time to believe

I to served take moment and roles of take in ready Fillmore, Senior John will also take his today at decade. welcome his leading his to skills, big tenure of I business about the step years. opportunity talking wisdom Colin over during counsel, John the friendship, wholeheartedly Chegg recent cannot news Skills. variety is to acknowledge a Chegg be Coggins, President enough want the last after are of him a our Vice President as key Don who want we for in XX own While us skills support. one to that to another career, which our I thank and Chang leadership we joins

geographic our pricing school for our to of a plan growth end, content continue it more North so a South to America content to experiences personalized can new To local system roll we to we payment outside in and markets. expand in to Turkey, to accessible Africa, during and Mexico, user services rollout as new we everyone QX, customers make are to peak and priorities that of the see countries to India and Our localize capture back pricing season like localized subscription or lever. and India and out

app in out an our Mexico where QX high app. all-time XXXX In localized rolled we acquisitions for fact, was recently

advantage the We and are AI about excited the fast of leverage to optimistic the students. moving and best are to future

are at coupled with for in smooth and Our unique in enables benefit and overnight make rarely to start. our will the transitions of learning don't These and deep us our enable a grow to the position happen business the our this expertise future us reality customers our shareholders. industry

learning as XX experience for customer and a the focused has exclusively great of led of to of than are subject our of content AI propel educating will unique into position created With students, Our loyalty XXX,XXX on brand students by experts. of incredible our and improving a more category learning pieces Chegg exciting future. benefits proprietary the Chegg. years taxonomy, with leader needs recognition billions matter Combined

are for the making on. to on are we We opportunity adjustments certainly our for Chegg. a need we meet industry head embarking And this new and chapter

leader We for in model to the sheet, investments our balance position platform, we the the as and enhance future are industry. have brand, and a needed appropriate experience confident make the operating

that, to I turn over will Andy? with Andy. it And

Andy Brown

delivered EBITDA by services was solid a was revenue QX everyone. Total met cash strong afternoon, exceeded revenue flow. adjusted subscription of as good and and our driven million, and or Dan, million. Thanks, quarter $XXX we guidance revenue $XXX

During million million, share. quarter, change the a approximately and required we growth model, was the by the platform. which is had $XX Skills primarily driven by on revenue skills, subscribers now in in other offset X.X strong materials revenue

quarter, contributing from in XX% in in slightly operating XX year margin or to a With and of million an $XX margin contributed strong million performance adjusted and of $XX cash million EBITDA increase Gross interest the guidance, which beating higher as income free $XX ago came was than flow result rates. quarter. at came interest higher million the expected, a which

sheet, Looking balance of $X.X and the with investments. cash ended the at we quarter billion

by accelerated during we we completed entered outstanding shares expect share will repurchase million, approximately will During $XXX of an X% and reduce the which be into QX. quarter, agreement

term to the in to are model, industry, to operating believe strongest among of sheet, long We continue cash will continue education value. us which drive allow the and combination our flows the shareholder balance

guidance, to is current have that confidence given certain. beyond to to the quarter, industry on developments, in our our Moving ability forecast we less visibility while recent continue

such, guiding only, exist. As while current we conditions be quarter these to the will

expenses limited important lean in visibility, CapEx margins and evaluating also and existing we maintain we as even reduce areas AI. flow leading to industry this are into cash investments Given to

million million, million to services XX% For margin gross revenue adjusted total between between and and QX, expect with between we XX% EBITDA $XX revenue and between subscription $XXX million be million. million and and $XXX $XXX $XX $XXX

current there With better in as operating a meet this and is future flows. equipped the for believe value allows we long believe model sheet students well expect as needs driving while technology balance students, All drive closing, an term nobody that and or will investments. to shareholder investments AI we and Chegg. better to brand our In industry margins we allows than leading best-in-class us as strong serve of embracing cash

operator over With questions. for the your I'll call that, to turn the

Operator

Thank you.

first We Your Markets. from question-and-answer session. Please Instructions] will Silber Jeff question now [Operator a Capital ahead. be BMO comes with go conducting

Jeff Silber

curious really weren't impact. know happened just so I'm last seeing call, of in much March. the what you I Thanks taking really for much my question. on an

You repeated ChatGPT. it today think? March? in you what in But do terms changed of What

Dan Rosensweig

we're pay site or forward. said us subscribers to around are on see success to substantial the just that the margin not people we in remarks, have would to the And go try. that going handily pay on are research that free to pretty It's for free we term longer As margin. on great prepared new CheggMate beginning be time have reluctant have who based yet. the expect finals that normally were the past It's mid-terms all closer a our and now we with sites defeated over in will we've

and and thing product. given to try -- product first But prepared usage students things. in And on the businesses the remarks $XXX fastest fact the customers obviously, fastest margin, it's these subscription our we that, the million obviously, ever the are that these a of in do in as growing manner put

is that So, term. new product being as out not which that and we're the seen, now. we prudent in good for out, year we're we bringing news and just in build not in It's We're term expected we're the tremendous and a the extraordinarily is in Study of And at still is bringing millions was what in just saw with us it wanted renewals careful. level being a customers, in the customers. uptick millions just Chegg CheggMate new What come get rate we're that take interest still we out about short not usage long or we high roll bringing and right that, are and our prudent in you've and the high. CheggMate new and for of customers until

August know but So early reveal end those September, when usage anything all because news, March, good did another the doesn't of we're until things just really summer it won't ChatGPT out came were we really bump just because being in smart and anything. of this

it. So that's

Jeff Silber

CapEx going don't on Okay. there's evaluating your of even to Appreciate expenses planning spending though to AI. much little are still talk in are bit How reduce and margins? color. we that. or be know you AI what a talked Can goals you're about maintaining if I areas spending CheggMate? about in Andy, that? terms you And in any

Andy Brown

Yes.

mean, flows many, our maintaining like continue the goals is many cash industry years. I and clear for margins leading past margins So, on we have to

incremental product product planning As as cash we moderating this far mean, flow. make out resources make shift the on will it's little have the term our we and on particularly adjustments the bit the Dan -- comes out high over I'll But impact, investments -- again, that those sure have appropriate beta -- long ensure be we'll expect call once comes we initial it's there early -- several where there. areas continue as resource making product, to early. AI and a quarters on the do margins free month in reallocation changes, -- have investments strong a we're making over it will But I CapEx. the to and and to mentioned, that AI. And to Dan we'll still next

Jeff Silber

color. All the Appreciate right.

Operator

Thanks.

Doug ahead. go Next Anmuth Please question JPMorgan. with

Doug Anmuth

kind taking guess make the forward? do CheggMate, to going have need on for business a just place you -- you curious you so the just investments. around that to a but kind investments just Thanks what follow-up the some more need much feel of might of what need team personnel, you what AI and hiring like incur right Maybe do costs questions. or from you not everything of to and just an become perspective AI of in I

and leaders talk could the about we place? of that Skills new just business you bit in guideposts strategic Thanks. second, more about and roadmap about how hoping then little Just should business vision think the in And a with the product forward? going some

Dan Rosensweig

Doug. Thanks, Yes.

been been on So we've side, last working fortunate AI many the for that years. technology AI on the the we've with

have the skill terms So and in team, core that's that good. of all and sets we

be to been and think content, be more is with honest are we an combination and CheggMate you. our shifting getting aggressively, time that the have special they to can However, data, because and faster sauce us, shifting taxonomy out We of nimble the immediately differentiate it's our team our exciting our us. about learning for what do, will

of just And so we're actually the but very excited about and very motivated the to competitive move for because quickly, opportunity size of not the reasons. reasons,

you continuing So because big the AI we'll the personnel have about that Skills, refocusing we'll be as company. those. we're we And likely priorities and and be on areas adding to shift mentioned, are growth and our excited of those personnel

as the cost rollout, a in CapEx AI. the been, because One, In terms timing but even our CapEx for our us of because it's not, invest better we the better cost, budget, that of than the also that we AI year of of given content will this of be believe costs. is replacement similar, if other this actually what part aggressively

this be allow so, us to a the more basis will content cheaper efficient, get overall. unit actually content And on actually and per more

we pay will So sponsor asked once and of have start for building it have we're one is into and once ChatGPT content we'll that. asked, time. control very much that only the Also, CheggMate, the we for those to in them

really this for for to really, us. So us and be and is very clarifying very we think going really, efficient finding

in more a over lot the most profitable think time, we've and been we've the amongst we the states. company most that despite even profitable fact companies or than get profitable been bigger So we'll

As doubling Skills, it where it's down working. area relates because we're it's another to

years. with been Guild over quite next the very business So be a we relationship positive. has of the That's that substantial can believe couple

Guild much employees in of our to Guild, As now very interesting though it's companies even interesting existing customers area much through because new the customers they like Walmart, change technology business, also biggest of to these paid and with the more are is more now the to these business it's than offer education on their skills they and evolved most before, because its companies adding is ever skilling Chipotle, continue were focusing college in but been customers, advantage its than AI.

and having then those very there go AI building And traction. AI to important courses launched with we design So on is in feature creative and of good going some and that, UI itself. we're be that's lot to and of top on a [indiscernible]

to business want we're what to other and we And our people of areas that nicely. in Chegg So for going business because and offering quite we're more who two break track but shipping, out offering subscriptions. it, those is

take But from is skills. have to that consideration into the coming down. for growth You ads to business be we that all in plan

making it. for we're very about it's So and that up whole excited

Andy Brown

Yes. requirement And XXX% growth all of correct, just being the growth revenue in skills materials adds change from changing -- the and for the the course -- headwinds risk is clarity recognizing in XXX% the there, revenue. and all Dan to is

Dan Rosensweig

Yes.

can't So it to have just at look you look quarter-by-quarter. at it you year-over-year, really

data, So to fired the that CheggMate be, in the which big do learn nature, up to our could the our at them reduction be education can't we use with use need is partner doing, Sam it's to us technology, the real able what part will it, get is it expand actually our technology. to the stage can you come what do what we the answers, conference, in do? you Chegg. going And might but content are is were of recognize we're the they reasons that that customer time of all But didn't of reception one really interview and Yes, to nature, our conversational was cost which learning about have to would you largest that some Sam things. they AI ChatGPT ability and And of Skills. combination as content, on can as think our on they the announcement

And so about future. really the excited we're

bigger like platform said, like the or for cloud prepared time in I mobile whether a of is in Doug, and and the that's companies that very end, and But bumpy now. the like shift invest it was and the that on period for focused vertical, their very it Internet, win what's in very we're utilize and [indiscernible] long as it's mobile, the -- the the right lumpy for But run is technology for all first the are uncertain. remarks, there in was

term less important sure long So model a but we're the very lot the short the term, will is allows generate to. profitable than to continue because in of cash we make us business

Doug Anmuth

Appreciate both. you that. Thank

Operator

Goldman Next ahead. Sheridan question, Sachs. with Eric Please go

Eric Sheridan

so much. can. Maybe I questions two Thanks if

First, looking ChatGPT love data. would but were April get little a I belabor granularity. not even comments out March, know the some to to have might you where for but to point, your more

understand, it as when better And already you your That are you user or be gross to seeing does for Just existing a among the headwind would see habits consumption change choices? these act base? potential one. consumption addition number

traditional And of you've who or so then have of bit beta are Can much. behavior in there? CheggMate in benchmark more Chegg consumption I testing we folks habits anything beta contrast about CheggMate learned know so Thanks beta. is users a just versus you the

Dan Rosensweig

excellent Yes, question.

launching -- too it's this the one, it's not because is, soon we're second answer month. The

contrast next we're what interesting. on they're in call, the it. for It's our good behavior idea learning Because us, think And terms interesting. exciting it's and a I how of to it's using but so it's probably

the first question one, -- question? repeat the the it, was On first

Eric Sheridan

what comment in elements adds just a Thank April. then [indiscernible] you. you've maybe gross of really how versus consumption? It's seen Yeah. of And March,

Dan Rosensweig

not study adds rate take actually people of take take issue. It is is It issue. that a retention $XX.XX numbers all not is rate We're taking record seeing issue. at gross XXX% a Retention in of the path.

continues number that elevate. to So

call. over It think it XX% our continues I on to elevate. said last we was

add the they still the we business, we a as new need subscription power, impact on of course bringing in before to months. still the what first pricing customers start figure But is a have means that are know term. of us longer This know -- that we really if people margin. over forecasting that six gross know So that we millions Chegg out it's we value we

it focused exclusively it's to new. So this that's really aware so just we it's where because at point. And almost be of have

and really quarter So comfortable September, been we next have until just in take done new retention and learn the won't the be six to the much that to It impact. phenomenal next other make a August it we're But to able quarter forecasting summer after we're relates this [indiscernible]. very last right, because now one. off But sure taking been last quarters and understand can we questions including -- that CheggMate the really has behavior. answer to as comes rate

doing we a been not falling go aggressively it we're now. for our company and prepare that just do is to And all technological this and adjust thing. It's to that acknowledgement a an So there's need And after so. adjust our sky of cost shift. and structure it

Operator

Next question, MacDonald go ahead. Company. Needham and Please with Ryan

Ryan MacDonald

taking Hi. maybe the off awareness and CheggMate to questions. as you're CheggMate Thanks my for the beta starting first of offering. grow do really on testing Dan,

that of been dynamics, we in questions from accuracy how I today, has a that, can adoption ensure always think sort of of rebuild so awareness perspective. do like of sort which that lack into guess, that the GPT the brand market of, is offering new that around ChatGPT students sort reacceleration of are from subscriber you you things building this the trusted their brand Chegg one in going hear But and of that CheggMate I fall? for sort is retention -- gross

Dan Rosensweig

example on doing. we're is launch chance That that had an launch. our video what is working know impressively. see don't Yes. and It to of we're if a you the correct the I exactly one question video

on an offset with Board the and sitting of Fireflies. benefits Adobe So,

insight of lot a how all had of I've to So into think this. about

do the [indiscernible] than that and sure reason you people, copy to our product goes the with. it, very be that itself. make ChatGPT. which continue experience reminding we exactly taxonomy inside our of is said, are to solid have extraordinarily are. essential. that over to will actually is goal very, what accuracy learning for high time, just And the now, you understand retention really right we subject, the benefits So not them extraordinarily And to Those That's we well perform to with the continue we Chegg with,

is going CheggMate what of is building an students the other is, But new we it's they and the user what user will the point brilliance to if be out to be this experience. learning will showing the get. tied we everything part it. bring to we're is just what all we going ChatGPT That students because they're with leave contemplated one better, be any know appreciate will AI capability thing let lose. and environment. that use of they own won't to to is or can large if value Chegg, built we experience user that the learning how have AI shouldn't experience into to we That like the will If is is so our not own. the that of own use one Mathway shift AI this our is Chegg that model, they If itself our Chegg, it capability

that else. is anywhere you Chegg can't you and the to in in but anywhere we each, product of else is can't get the sure experience the are get understand get terms of the So that essential the value user combined and make what it's you students value the building of way

an essential of part as So it.

on to go product, So an aggressively the marketing this a after I to of we want product the expand beloved it views you is the for we're use XX and aggressively that mean, moment This you'd TikTok. in is have and challenge market going very appreciate. at to think going is that's a and after viral, is million that. the we be we be reasons on and that understand surprised margin opportunity our TikTok. Chegg

combined So why the making in $XX.XX. their the it's sure we're interest all to $XX.XX or the and value the in of of students best and and pay us value together understand

Ryan MacDonald

the Helpful to color localization there. a as want I on Maybe follow-up. touch efforts.

You apps good do some seeing here. the starting talked you're countries in where success that pricing to you're about in three localized

think of quarter, sort how or on about more that available nine in sort the last the of you've that testing localized But should across pricing I of efforts and of countries. we broadly -- think think localization generally you XX I think the maybe should when sort in? the I country ramping testing have been you're

Dan Rosensweig

There's about nine that on. we are focused

Some mentioned year, on I system prepared payment India for of half is of But is them demand India. honestly for The in in high. high. remarks. getting right we in focus think the a the the second Chegg extraordinarily Meaningfully

ability accept that cards. is a was to low. partner worked which mistake. we That cards cards credit their the is meaningfully Our as rather did payments pay, way credit with took to We than the they debit like

will the that ready for fall. so, be And

is of internationally obviously the on and fall that, funnel and on Philippines, high. to top really is and it's Conversion be really it’s the based of --what But the the UK, focus. is for growth low. biggest Australia, area where based for focus Mexico, big Canada CheggMate our imagine, going India logic you'd places like So of the

it's payment that's So and the then pricing about about system.

way, the instant with Initially One of the to cool got things to by AI initially. though, deal These advantages things we is translation play really over Chegg's challenge the going allow to about, will at cost. for no time.

Ryan MacDonald

Makes sense. Thanks color. for the

Operator

Stanley. question go Please Josh Baer with ahead. Next Morgan

Josh Baer

guess can with Great. Thanks question. for the fast you go how wondering CheggMate. I

the platform, guess, until potential in longer of takes bundle describe not of a cohorts testing lot risk you And and international, improve or example. missing Study as to obviously, it the some auto sort methodical, of back the there lot to disrupt it I there's Pack those meantime. renewal, to a next thinking the I cases, semester for of some of out waiting on think new in students

of can will fast compare? you how CheggMate the So go? rollout How

Dan Rosensweig

Yes. are internally. Again, they're really these the because questions exactly questions great we're asking

the advantage. this So particular to methodical has going case, our we've worked done to nature is advantage. to things work speed our of how In

focus our about but ChatGPT of And the so, of was we're sit components resource the for were much we a really of talk lot hours chance that and couple together. of be aggressively, a of -- it a where the to down and of they I the and we to now could after where started launch lot together to the fortunate able talking it how more about work and very value each reallocation, Sam are going going and

example of the this What encourage you to of been on everybody we've couple to special months at of see And I video how watch Conference was product be. last GSV So sort the working saw visual this. the can it. again,

So it is We're to our We're we iteration. the models. to goal going to I the retrain prompts. mean models. going are to up. physically as to daily This going doing. we rewrite aggressively We're are as going capable to train the feedback. is going constant going the get be of We're ramp

holding from nothing are back this. We

the that's ramp is, hopefully, answer really it fast. that So And at is good. speed will the

Josh Baer

then on ChatGPT, AI open the Thanks, Brainly, that really obviously, higher-level Khan well have you and also there are ignoring Dan. of there performs or And announced Academy, are vendors another tutors vendors AI sort there question against. AI ChatGPT who Chegg using solutions competition. built on API. other But for Quizlet, Like out like

everyone the your and like get the does advantage the has same gets like all to the Chegg going intense other that trained things? -- Or environment competitive leverage of all that data because those on ChatGPT more is So competitive in because forward? dynamic the models

Dan Rosensweig

gets though. at the same way, leverage to Not Yes. everybody

-- brand taxonomy clear. capital to matters, This data is the structure, your be the ours reputation user So learning is superior set content with that come else's. models. let's ad one been us going mentioned brand The companies have companies to experience, most you They unsuccessful. quality, which of of you well, mentioned tried free matters. down and matters, Every dramatically defeat to unsuccessful, and those the have everybody to

form any So or think [indiscernible]. superior far of the shape what is their anything they're top they're dynamic why And or not doing exemplify we'll content, launching their capable change on chatbots in does doing of we to way, favor. we're in

can imagine. the -- launched, course, products So they've perspective our we've, one that they and every apart you of torn as of

speaking what is our from in view our own see marketplace. this we So our dynamics of in

the us some margin of is that answer. is to short-term going The they for if the challenge want an us. that, be get issue can just And who on students for version

language, your focused opportunity experience, in to on. long-term with ability is our Chegg learning just instantly So we're accuracy The in anywhere reputation, any taxonomy, quality simple user for in be much any subject is pocket bigger. brand what reputation reputation,

on our heels. we're So on not toes, our

be need what I do where rest because will heels flashcard on for create think world the you of a the in can ChatGPT their flashcard. a more them

This can't the in but to favor, do. we it me we Chegg are book because our all to in is we've It term, them, we works seriously. entered AI dynamic all take beat as Everybody seriously short says reminds text the that not beat when got is anything as taken going this So market. Amazon do. of sites them,

So it's it's In It's lot ways, really really intense. clarifying, the but of up for focusing. a it's challenge. fun, we're

Josh Baer

Thank you. Great.

Operator

Please with go Jefferies. Thill Next ahead. question, Brent

Brent Thill

ChatGPT. actual consumer aside behavior, to on any execution you set and do this blamed this you team, of is you issues? those other look at pin Or Dan, XXX% if internal

Dan Rosensweig

to exactly hoping We until were what were around we do March. doing

time So launch because the four, variable consideration to the three. was the And into time midterms. degree, had of around and then four it you to some taken that change with we

sky-is-falling when every shifts. who's just since the that's technology on for not a is that's thing. PC, cycle so This been economic a cycles management company of since saw of margin. is XXXX And that this Again, been with long the launch and those is a around around we through every believing one this

the these very we're impact learn advantage did things. people of in be things that in things -- those and a didn't for big take works long means. Chegg how NFT. This they're assessment coin we'll way launch as we learn us real right? one do Bitcoin see fact to change important and own things We're people the threats. have real that going to to or betting to the more on launching and are the our let's is to where going will or as work, saw use And of and well, not do the output We're transformational a need -- or payments, access what run. see world to you We as to never greater We fall this learn these going

Chegg This do Take believe, that and want in long I've rate business. Mexico, us. terms Internet, us, the on then the was the Study there's was in of on. to And one there renewals of believe set thing and around biggest been we're of record breaks. We companies head of is just the mobility So the from Launch Pack, ahead rest that's enough levels. for there is the their app business that, and if to know it records that day taking of we and this. don't other challenge

for we're very we're And are about we go to excited but possibilities after what from have one, doing. day the and it to future, that's going the so,

So right margin nothing and it's on saw, else this that it's we now. the

Brent Thill

revenue frame business, you headwinds (ph) it if the to in is this five about on could it think do be of move is percentage can about business things to years think on the this how out, size a -- Pack, And Pack? Study still when Study to that the today Yes. the -- the Or offset? still continue [Skills] of as you where you three

Dan Rosensweig

Study they thought marginal of Well, did fine. funnel It's about I'm customers. you doing top the is Skills? on just about setback sorry, the about conversion Pack talk

Brent Thill

Yes.

five three the could revenue? you a be Skills your [indiscernible] to as think total and business, percentage where today of think Just on then it I years

Dan Rosensweig

Skills, on price is, On per closer away, Study, me average, a but subscriber number looking shouldn't is way everybody for the do Look, like substantial. we here's Chegg I get the month -- So to $XX customer average a is now the right the $X,XXX. Study give on to Chegg Pack. math simplest

then keep And we of of so, when Guild. revenue that and we XXX% give X that to percentage

have of pay take we'll cost of for not for us. them that we So the cost the and content that. of not margins. It's distribution, the really They marketing. all high cost the gross it's It's

they us, bigger get skills the for And And education, increasingly really, grown that growing fast things and on learning focused rather AI business. the the this excited So about and top -- UX business better for more on base. it's really is is and the get than higher the like design. deeper more people get and corporations we higher never of that it's an it

could So without substantial I away, our as it overall giving the pretty revenue. be number think a percentage of

Andy Brown

to I growing our Brent, clear, be business. just it's mean, Yes, fastest

yes, excited We're it's percentage current super and think than at Skills, further by quarter. time. will not we rapid to about continue to So pretty over we're grow definition, any this going a be business of going our out rate. obviously But it a different

Brett Thill

you. Thank Okay.

Operator

Next question, Jason Celino go with Please KeyBanc. ahead.

Jason Celino

be or -- taking that my Andy, CheggMate I for -- cost? With much thanks sorry it, missed it of will bundle? the questions. Great. Dan, how but will if And part

Dan Rosensweig

we Yes. to announce, it's to truthfully yet get decide. and That's have something something we

for on audience always XX% So already we up know like the it. views We agree there could all that could was from and would And to more several our believe of charge testing of initially it. we pay we we research is internal our that this. announced take something prices for and that more

growth as possible the Having to as new on side. said subscriber to that, we want return fast

likely way go $XX.XX substantial determine for tomorrow, which will those to all product would We in you and range are smartest and the embedded now, and the and decided. And they've addicted -- to a initially, that point, $XX.XX to all be, right version of have getting are the ahead ahead opportunities is of options this we of and a The EBITDA. great, just higher $XX.XX, out be increase yet one We they've within product. what now, to getting addicted getting the in us, the making we'll would to so it whole it's then people right what Chegg those And revenue a at on think go there, been $XX.XX then brand of in is we way us. awareness are could new month ARPU exactly could be product, $XX.XX. options be the but the

Jason Celino

student's if kind video a I'll sure mentioning. But to what And after from No, Okay. a might look, the perspective, that to CheggMate to than alluded does you've like that's differ go student be it watch feel how look helpful. keep this directly? beta. of you in just ChatGPT the then and

Dan Rosensweig

Yes. where you it. points video will give data to But highlight some on going. we're The

conversational. First, some the matter for a cooler. it will of have I done. it more be that reasons, a lot Two, doesn't students will really know lot look people, but much

that are, question, if a you anything. will once to in this just And than you remember month. in, is anything, doesn't rather back it will not and can every knows all. ask you want free you a know it And having who because do, at pay the put So what particular does not chat personalized the it you unless to go you it time $XX ask

be we'll question are. For you've that us, have we this that other and asked, textbook questions because the we'll We in on your people already you class, you. know able we for around know also the we all the know know asked to know that based the who prompts you're interested write

part to with. question able you're know be also struggling we'll of particular what So the

you uniquely write to and it be can now, you in it It which whatever relevant or on But -- automatically for before. you to just assessment, we We'll on can the things do way before Chegg. it able write question. do based say, are couldn't want thing to that language not ask now exclusively do of your you're choose all however do because way. was and the So question all it's on assessment an that one say questions conversationally be And way you inside in answered in exclusively the that even suck able you well can a say the you, we the we if we'll assessment which doing parts These the the I you've actually build understand build we that could created might weaknesses, [indiscernible]. question. to

that to going literally on it's like side. So tutor live a is feel your working

us also you have likely want certainty this? and to here, like of around to to you what based things you're These would well. all struggling also able advance before. you're has uniquely into that And the in things history you're knowing doing Which this on CheggMate, and years where you the class. experience or of play Chegg like great. going had be need because build doing be of as of to like, you're might is look this gamification more things real Or that that have in it the differentiation looks is it We'll ChatGPT. in done to inside XX Do be this now We're at to the hey, user not never able to program accuracy. we know particular are is you

Jason Celino

Perfect. Thank you.

be. of it you thing an the how sorry, to just the example I'm because has amazing chance video really give this does watch

Operator

ahead. Next Fuhrman question, Please go Hallum. with Craig Alex

Alex Fuhrman

mentioned could in want opportunities that And sellable for you see ahead to this some product guys. or could of fall to how my starting is have this Thanks Hi, some year. go Curious your are taking thinking capitalizing signs on question. Wondering, in you that that? what there enrollment plan to improved about you -- out be you remarks of a you that there semester? kind be way prepared new what are later the

Dan Rosensweig

testing mean it. summer I aggressively to going over the be of months. it ahead not we're are We

the are on in begin to summer. the always indications we see what based So

and we're remember say about school, fall those seeing short numbers you same the thing. again, we plus there's last which signs public If to began of that of see enrollment the year, to signs strong beginnings summer talk led

some be degree all news good should in that to in term. mitigating So the short

intend that very to the we this through But very us. for aggressively are channels market efficient

XX% our organic. today over remember, of So is of traffic all

-- be is. our social fewer for been channels what we Chegg, to the we redeveloping what do, there'll that using The make of have to people sure that site we'll sure and advocate all that people understand it use on impact difference focus is we've on AI. be make to So more all the the the to things explain influencers AI,

new a anybody ways, as than some as can. up you're And on end faster And quickly challenging to to it's very you don't, coming time losing. because in going it's you and got So jump it thought. it's if technology, you

high always it's or is, Chegg your have to for quickly the we to school not you able to code it dreams as do you to we beyond that be and or that, couldn't flip that in efficiently we exciting But companion pocket The be other as side capabilities really with help in build before. as only that things college. in because be

very to it So past. be we're our in the reason this aggressive the all future very, is very, about about It's going future. because There's now. no right

Alex Fuhrman

That’s Okay. Dan. really helpful. Thanks,

Operator

Next James. ahead. go Please with Peterson question, Brian Raymond

Unidentified Participant

been changes of to and want LTV just your you're see as this Jessica environment. want Wong I is just there but you're to asset items, for like to changing ask current investment I line how you're to This Hi. Have by any guiding I approaching posture Brian. on -- not CheggMate rolling give CAC know given other a especially OpEx sense out and initiatives?

Dan Rosensweig

is is of will allocation, acquisition new so we've overly reduction it's customer many that because customer deprioritized are cost are things CheggMate our to in business resource not or But base things. things growing about businesses or had to CAC not in our been that comparison those cheap, focus become growing on. skills to variables the of consumer the that Yes. and LTV really one important

flow. investment taken constructive of we've So steps on already a we very of generate cash because lot remain free choices profitable and a to lot intend

time is that the frame LTV positively. to to to areas CAC about over return as it it the On in really, you want do relates to Chegg think what

short months -- within three year spend XX people we're or profitably when going to In all that years of focused on in adjustment customers down the because of years have an we our is return on that and we're term, go into the can terms spending, is and now, can from money we now, year. that efforts but CheggMate in ready. are in-year two So one

Unidentified Participant

And Thanks. just it. Got one question. quick more

subscribers DoorDash breaks? usage summer the follow-up Calm you your How talking have you been of retaining the about like school we're seeing role to So and are also Thanks. with for with over seeing earlier, partnerships signs helping trends. already

Dan Rosensweig

both because Study really and we've break. on asking number for going what $XX.XX and for it's the thank too our But because to success overwhelming part in in the Yes. that you strategy, the the is school an over provide early that now to there seen to up. value of it's Well, Pack question, that which we've been been pay people focused has important

to we Pack can bundling attribute So into the these two partially things rather than that Study base.

for signed The we've by been have that DoorDash. second number existing that surprised customers already up, of is the had thing been positively customers particularly

also customers at with continues aggressive they more a on they lower get have to for that those sign existing on, percentage and much early than as we are we cancel that take up customers that seen as So Chegg DoorDash, up, don't. that least

will So but had the the signs haven't are yet. positive, indicating very it summer we be

operator, have we I think Okay, last one question.

Operator

ahead. Ramnani question, Arvind Next Piper Please with go Sandler.

Arvind Ramnani

question. about are of you the wanted models investments, public change a the pricing and to thinking way that of some you've the a these a I big taking investments, I of you just for head so way make will our certainly sort in there's And you lot and you appreciate price. to that going it operate, like company, these changes? making the have and business include all kind on, recognizing as like Thanks where you're ask, Hi. of change, but got to these how

make. an kind Sort change, of things is kind that some that of one to you sideways measures you're while of have what's making don't the move of in place which important

Dan Rosensweig

it I to there's to more then sitting how been you I and education you, that Adobe went We've going on through Board, meaningful know be anybody's to question. mind doubt. changes going model model Yes, than If don't which world AI the don't the explained there's to space, [indiscernible]. fair any in to course, be is in the changes. already of meaningful, And explain has before. think we is doubt through

was thing what it. That's commitment we've to do first to the done. make So the

was second to going expenses to company and be reprioritize our much The aggressive. to have thing personnel recognize we're that our to the inside more

the of a and CPUs to those our without our costs capital in an investment of was all GPUs cost work look discounting to at our the the of recognize is things to take content that future able within and be of CapEx structure this Third structurally and in and in company. terms that and understand offset

All done. of those that have working been things and on are things already have we

against We retention can business monitor and our are where XX know rates versus customers our have we minutes expectations. we new -- every and exactly

So impact we all inside of made. choices company know the have of guardrails we the to a lot the

came the As methodical one the we've to we've earlier that test have that up very things. of we questions of the because to a ability make is decisions about been had lot

So probably the public last certainty fact we've I understand seen want biggest have people as shift that in it's a to despite faster the you company, years. XX move the greater technological and

to way our our aspect on reach, our our that by of student. it don't the we of going take so every are that the that needs get monitor the succeed, existing capability, focusing our we we user And brand, we're always capable of the business data, we We believe which experience, surprised customers. monitoring

us have that customers the to yet new It's use first. on the focused customers really margin we're the that on and

So It's that model same that not articulated. pretty is you've straightforward. the complexity

the things that take. will track the increases We CheggMate will, other how behavior versus be And part or to and the those whatever part time, service models and people able they to over use take service. pricing their though, future usage we of we the much pricing change inform that to choose of choose how

try philosophy than but because bit little our in we guess, a to change best We to try going -- than rather guess. our don't best we'd and like, we not not our you'd test So to take rather longer that's be right.

when took take X we years lost a us going to of ask out customers it, when people increase, when million. we for X,XXX So we're price

the test because things. things we -- are we we so And those monitor that and know

value and goal So the and they the that love really longer, still that. But is stay to to the want is This new go we'll that now, diligent very that once another customers us win we about they toy play battle. they case. is and about have the be in with and they same, overwhelming always and subscribe, to careful student that stay

Arvind Ramnani

one quick very helpful. follow-up. just That's And

what's have fast Like should sitting Chegg years in As Chegg, to sort the this investors that to the kind and the during how six way have forward think months, measure XX as right? you'll period? during external months, interim, best in But I who like transition we of to real-time the company, access of kind like a mean adopted months, next much like don't of get data. XX we like and sort interim in the scenario, are of evaluating this I and scenario where Chegg X track of quickly.

Dan Rosensweig

measure don't that I able and know of the and it now year. end track be you'll the between to

I think how you're to to is. going have wait see to CheggMate

You'll evaluate that. it this for call the A on thank you people of done and lot with for shared have and us, yourself.

Your own shows student prefer that ChatGPT. research Chegg that over clearly

I an it. monitor to think external will So there be ways

going again. in of impact tell happen not there that the continuing willingness a we could conversion we're be summer company. fall. way we'll to and to you do, top giant funnel are expect look track on, Those stay out to the the short the stay retention, or the the had in to things people very which quarter, usage, have we're is CheggMate inside high. We watch understand and but that going And we're large new staying quarter. situation length of the rates, where we're in annual because first we time to to going and is it's don't we're fall to term we of monitor until going pay guidance regularly because we Externally, a that Internally, this the -- in only now second to in cancel for just going what's more going never really rates ChatGPT saying good engagement, to we're we're watch watch thing what to going is redemption

so effort and don't when trying been a so come we futile technologies it for do And to it's want to us, new it. predict out,

it Those retention, excellent try to into check returned expect more, then will funnel to we a going that take just are willingness be think us lot having rates, healthier. this time to pay But we're the that over until time. length I we we'll to six think obviously learn that things of continued over globally if in short rate But sure faster. continued we growth, of to do you to what and goals term, I'm for next are much we able the we to increase the higher And wait be I the that continued not the seek go have report continued all track a XXXX. So as months. better

Operator

further There closing Thank for over you. like Dan would are I turn no remarks. to floor questions. to the

Dan Rosensweig

people companies. Ziff the Thank where questions. everybody. Thanks very interesting had time I great experience , for very a This I you, Davis of people first. Internet same the both We matinee saw largest where do. to adopt AI that go similarities we before going exciting for is my now to older the at publisher computer was younger see we people where and see

very moving aggressively our excited. and positively are and open And and wide we eyes with so,

in this challenge need head we long but the term, term in think that we is best short interest, meet the We in our recognize do to on.

that But it's rocky of a while we're This transitions We one have for actually those all been also lot to we've done. be successful we believe to a market up questions. until for answer a us. going the in opens able bigger

date. execute we're as just down, we report as so, continue to head on keep have done And and to out and going what communicate aggressively we to our learn

everybody Thank thank you. for we So dialing in.

Operator

today's concludes teleconference. This

your may your for and disconnect you lines participation. You thank

Chegg (CHGG) 1 May 232023 Q1 Earnings call transcript