Chegg (CHGG) 5 Feb 242023 Q4 Earnings call transcript

Greetings, and welcome to Chegg Inc.'s Fourth Quarter 2023 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce Tracey Ford, Vice President of Investor Relations and ESG for Chegg. Thank you.

You may begin.

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

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[Operator of Markets. Capital the from BMO Instructions] Jeff with Our Silber question comes line first

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Our comes the of & next question Company. Ryan MacDonald from Needham with line

Andy, best congrats the the and David, of future promotion. on luck in

of like answered Can overall you guess, cost me get about margin we answering in that Can start terms of, how quarter translate first get answers. and to just talk guidance Let some expansion sounds talk today questions what And of to start need to the into some to the percentage perhaps of of the the you're -- for on benefits see a being sort questions. here savings to you I total as that automated questions the mix implies? are automated in. about there's it relative then answers that sort by what real

looking exactly That's at. we're what Yes.

a we would from about remarks, articulated So it popular less, we popular. XX% be how we for and automated but became and talking answering getting us language what We is the really to be what quickly answers prepared taking will you models should should automated own our new about that talking cost answers, how tailwind be the start year. of own question know We it's as where looking be on and But what in large know didn't we talking we're answers. already, based developing result course of our over the this a it simply the the because AI. of call didn't

We have quality algorithm. a

in way you of first all So now, fully the rolled the because models. the out much different right the we won't of year see savings of in large haven't part language

answering. over the this expectation majority going year, of and answering, will go through course be year and human is questions the and fewer of fewer automated this through the by new The overwhelming end all there'll of

then to So you been content really a should reduction the of has money of to end the a see spend on again come first, coming year down and towards in the we as result expansion is substantially you this of going begin amount margin but it's CapEx year which -- see that 'XX. down, right,

ChatGPT a said, have our we content that they also way the high But one level that models that year So we don't pay we're can super get for ability language the it. will it. will to question all Chegg about it or in we the about to quality. from have improvement of the is very many and for this because Bard out flat answer else. well. cost to or do that the excited from and the the of meaningful anybody to as can students be rest quality it generate I And so And large expect think questions take And of XXx get as

more is and real have more it and that we other that The people us don't questions find benefit traffic, get to pay comes indexed, the for in.

was [indiscernible] And Chegg built, that's questions So that faster to originally volume we Q&A. it's answer. a way when just we now lot built going be the can of first because the just

ever started really of until month, X mid-January. think month don't the we've million questions in which just doesn't and I January, get answered that's a

about And Super priorities -- priorities pathway to that or then appreciate growth. back talked the Dan. growth helpful I 'XX returning in color. you that, obviously is of X and

think that universities enrollment Sounds like the driving But with as promotional and Chegg. within sort macro, to that. help you to how for about of important algorithm growth is pricing to going the is obviously return colleges

sort do that And for into how sort your of sort this how you of of building you assumptions -- are year?

U.S. Look, sort products got course when U.S. Yes. right? the open, it just size of just jumped and of has COVID, pricing It's new think answers during just is it one. had people know why course, indexing of then effect. and But And launched it question, But and can has the to of new I the it's things then COVID, effect. frankly. We promotional of not outside they the I because the just the understand new an of beginning a stop ChatGPT you out wide biggest the is, do, sort automated that the reversed me an U.S., that -- let outside and

you the when register given enrollment, students but Chegg not convert. or will year yes, in average in think about Chegg, for million year, on have So will a over that last U.S. XX

enrollment. have with that And universe so do that to nothing we whole after to go has

those retention so Chegg which quality, that's cross at growth. is And good. to responses key So chasm We high, to can rate loyal the now our think we that think into customers our no quality because the the goal is immediacy give is near people with the so becoming because get them. term, one to of the high else

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with from Our comes next line of Raymond the Peterson question Brian James.

to Andy and congrats Well-deserved David.

question. up So Ryan's follow on just want -- I to

year-over-year. to that the you've with lot and how should and and scaling done mentioned with being see dollars time this year, also just about the look I'm intensity roll XXXX, takes I to arc out how we the R&D automation, should LMs. for in the to longer You've different languages puts think curious term? done R&D a that maybe actually platform opportunity down but

really Really, Yes. good question.

very, tracking if the that of has try a with very you grown so like OpEx and substantially take been for see you you our while, years, hopefully, not those look be Chegg to a couple people it's flat. relatively have last been efficient So OpEx, for we and in capital at

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another there question? is Operator,

question with Fuhrman Alex Our next the comes line from of Craig-Hallum.

with of customer with your Is little core you change a going given Can AI? that the versus stuck years Are It years ago a some few students ago? of types on of everything outs the now other any of about core at Chegg. terms there your few your in terms today either talk pop who sounds options. in have student like Can the about exams talk a maybe you bit major biggest or call at versus field or bit years might X-year midterm study part-time X maybe anything or AI-powered or casual you're looking little margin two focusing or more final a of month of versus users of kind around that in schools, for differently like on that, a couple status versus full-time or ago? age a

It's Yes. an awesome question.

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or The very into are growth going, very they numbers. large X biggest students in shifting buckets areas for where X are big

So is one online. of them

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about a know of we that. information So lot

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giant growth a real area sports The to second is programs. seeing that big the country with state schools incredible move is

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rather way. us, they the school enjoy tell go And by what that's they where they'd can themselves. to a So exactly

we're on the speculating us. it. show, have what It's numbers and told what not it's So they

they is is third much area the got very and their students feel they're developing The funded by as color more they programs, big those the HBCUs you gravitating, to are of reason and might and culturally finally and imagine, -- align government there.

our X figure areas how out spending So those trying are big to of more we're to time where reach now them.

The other students classes. thing STEM-B taking are day is every even though more

of in already AI places, hard is growth we about, benefit those U.S. Chegg over not opportunities expand giant you a it's optimize course, bit that able of other the a seeing the And on next We are build that. for countries. even U.S., sort places imagine to question, of then, what we'll that which and is around the like years India, but growing several really promotion to the those for little us of TAM result good in countries really in of can of a One ask expect results as be -- our And is Philippines, you more. that we increasingly out, are bigger outside asked to is to the is Mexico, try the that TAM so outside STEM-B. as

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Goldman question comes Sheridan of the from with Sachs. Eric next Our line

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substantive questions. Yes. Those are X very

second the one because can take one. remember I that me first Let

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of history midterm professor. is Professor the of when question beyond data just the are the prepare? that does the at? school what So answer. when mind there's that we gets and data years There's you is, Who your final have So How is.

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the Jeffries. Our next of line Brent with comes question from Thill

you're guided guiding XX% think year-on-year. to mid- QX revenues EBITDA down As it And I digit. guide, single high to relates down to

we're getting think on do is health growth and question and EBITDA? revenue I when to you the return

Andy why is the But in you already the can first here and of part Well, answer that second retirement. because what going be quarter. model the answer in is I'll it I think I'll forward is

promotional say going we be headwind to will think of customers saying than would because that. asked, when we to that. potential we do drive them return So prepared that tailwind, because otherwise of comfortable have And today not going have a in to pricing. a We sooner will plus more to to are ability our we'll questions AI we to more return feel have index, we from

to quarters, see -- we track able time articulate you'll with, think report this the that we when we about COVID fact and year. last This post our so fewer margins in be to And you'll that customers all because be is net you'll with customers back able is started gap absolutely to fewer can -- So What we people we few than off when to were we're quarter do our over think path. we And able of other rolled dealing happens. see to year continue the to the think that should have that grow. . And more gap, this that. on path we that we net estimate and on the year but be the next last we're our we to the customers be currently historical we margins did return we our do because we'll -- what company a that But able where were. stuff starts able with than X% every year assuming that to that starting be close. we'll guidance, how see that's to growth, and you'll return

line KeyBanc Jason Celino the Our of next Markets. from comes Capital question with

Jason for Devin is This [indiscernible] on today.

also automated answers. question on Ryan's on follow-up quick one Just

within automated answers, have non-STEM are area responses subjects the maybe you little STEM questions bit to being that less the I business ability believe answered for subjects? more also a that's I Or the think terms Chegg. is by of the these automated to in provide seen answers quality having an penetrated in

Yes. Terrific question.

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to phase is questions. the next students, questions they're and students conversational asking with nature, to to that helpful them be for because already able ask are Those one questions asking be will us already going which them first us fun the deeper what addition the we'll students in really are asking is be answer to allows that us people and STEM-B The us? are AI are because

inefficient they're them answer been really is cost one have perhaps the because subjects. they're what -- to try categories first into to deeper deep So that into for going us the

So the that's . first thing.

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our take that's though, focusing part, comfortable. get just first this we're we answer We're and will we questions. But of the that outside those map LLM we now subjects comfortable more have where map. then just answer each is not for going It's is absolutely and today. road other that we can quality move XX building we third road XX can The course and the that ourselves have the year to the on of are. of be the to And that with same part of to subjects to of currently part accuracy

further no hand for are like There to back questions in the closing it remarks. to Rosensweig I'd queue. Dan

Thank you, everybody.

flywheel opportunity positive and do so. been rebuilding with on the continue efficient from headwinds service, We've and new costs. generate are the repeat, other potential then last COVID, with and to the of tailwind a post-COVID, balance in years expect we AI, really strong a new is to capital, company extremely we automated that, it's product, then AI back But growth net answering real we lot the to with profit, been despite is Just new of which to complex flow, moving lot to several we and our cash shape moving with a absolute our sheet. generate on variables, is cash

and And -- faster which very the These very things we've moving it easy. done. as are than exciting a speed time. fast is in we're not It's moving so ever

not better the you've be new look of this the time. I'd in forward take a with just people And And ahead much hire us. not the want And quarter Chegg good And had fill expectation we've well. had like because of and Andy. every in it better We where role. going I the Brown, you'll replace just work rest it's ago And have. of friend. today role, made have execute you of momentum rebuild years joined, if David made decisions the is got of we we've of partner, had accounts. he and said, that would to you couple see I've welcome to people lot not the we that I David And a had and year to that future Andy's I would to that base -- can back net we a say to Andy nobody to so Longo course, a the the never hope very that I brought

mark to my thank next you, friend. you talk And is your thanks, indelible. quarter. everybody, And So

and teleconference. Ladies today's Thank conclude does this participation. for gentlemen, you your

disconnect time, this a may wonderful lines your have day. You and at