CHEGG, INC Q1 FY2025 earnings call

• The strategic review process with Goldman Sachs is ongoing, having had dozens of meetings with interested parties. - Chegg Study's core product, Chegg Study, is being innovated on, with recent releases like Solution Scout and an AI-powered Create feature. - Busuu's Q1 revenue growth, with B2C benefiting from AI-driven enhancements and B2B showing strong double-digit growth, expecting ~$48 million in revenue in 2025 and to be adjusted EBITDA positive by Q1 2026. - Skills product is set for a breakout year in 2025, with a pilot program entered into with EdifyOnline and Noodle in Q1, expecting to expand the Guild business in Q2 and Q3, on a path to profitability and positive revenue growth in 2026. - Announced further cost reduction plans, including closing physical offices in the US and Canada, limiting upper funnel marketing, reducing new product development efforts, and cutting general and administrative expenses, affecting ~248 employees, resulting in $45 million to $55 million of savings in 2025 and $100 million to $110 million in 2026. - Repurchased $65.2 million in aggregate principal amount of 2026 convertible notes at a $7.8 million discount to par, and repaid the full principal amount of $358.9 million of 2025 convertible notes.

Total revenue in the first quarter of 2025 was $121 million, a 30% year-over-year decrease. Subscription Services revenue was $108 million, with 3.2 million subscribers, a year-over-year decline of 31%. Skills and Other revenue was $14 million in the quarter, which includes the new revenue stream from content licensing. $4 million of revenue was generated from content licensing in Q1, and an additional $7 million is expected in Q2. Busuu's Q1 revenue increased 7% year-over-year, driven by growth in both B2C and B2B businesses. The B2C business benefits from AI-driven product enhancements, and the B2B business had a 29% year-over-year revenue increase.

• For Q2, total revenue is expected to be between $100 million and $102 million, with Subscription Services revenue between $85 million and $87 million. - Gross margin is expected to be in the range of 64% to 65%. - Adjusted EBITDA is expected to be between $16 million and $17 million.

• Macro economic trends are putting pressure on the company and business trends are expected to worsen before improving. - Google's expansion of AI Overviews is keeping web traffic captive in the Google search experience and migrating search to Gemini. - Language model companies are turning to academia for validation, such as OpenAI giving college students free access to GPT Plus and Anthropic launching a free education offering.

Q: Ryan MacDonald asked about the terms and time frame of the licensing deals signed during the quarter and the size of the licensing opportunity.

A: Nathan Schultz responded that they are licensing question-and-answer pairs from the Chegg archive, which is very early days with a small set of content licensed to top tech companies, and the pilots with universities are growing from 5 to 15 and expected to reach 40 by year-end, with a seat-based license model and positive feedback from schools.

Q: Ryan MacDonald followed up with a question about feedback from university partners and willingness to pay for the content library.

A: Nathan Schultz stated that they are very encouraged by the growth in pilots from Q4 to Q1, it's a seat-based license model, and schools see it as an opportunity related to student success and financial necessity, with positive feedback from schools.