Chegg (CHGG) Q2 2024 earnings summary

Executive summary

• Q2 2024 revenue was $163.1 million, down 11% year-over-year, with Adjusted EBITDA of $44.1 million (27% margin), exceeding guidance.

• Completed a major restructuring, reducing global workforce by ~23%, closing two offices, and discontinuing direct-to-customer Chegg Skills, targeting $40–$50 million in non-GAAP expense savings in 2025.

• Launched new AI-driven features, including conversational instruction, with 70% subscriber engagement and a 74% year-over-year increase in questions asked.

• Announced a new product vision to support students holistically, expanded Chegg Perks with a Max partnership, and prepared for a fully localized launch in Mexico.

• Recorded a $481.5 million non-cash impairment charge and a $141.6 million non-cash tax valuation allowance, resulting in a Q2 net loss of $616.9 million.

Financial highlights

• Subscription Services revenue was $146.8 million (down 11% YoY); Skills and Other revenue was $16 million (down 4% YoY).

• Gross margin was 72% in Q2 2024; non-GAAP gross margin was 75%.

• Free cash flow was negative $3.6 million, impacted by restructuring-related severance and working capital timing.

• Ended Q2 with $605 million in cash and investments and a net cash balance of $4.5 million.

• Operating expenses (excluding impairment) decreased across R&D, sales and marketing, and G&A.

Outlook and guidance

• Q3 2024 guidance: total net revenues of $133–135 million, Subscription Services revenue of $116–118 million, gross margin of 67–68%, and adjusted EBITDA of $19–21 million.

• 2025 targets: 30%+ adjusted EBITDA margin, at least $100 million in free cash flow, and $40–$50 million in annual non-GAAP expense savings from restructuring.

• Management expects $3–$4 million in additional restructuring charges over the next two quarters.