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.

• A major restructuring was completed, 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.

• Net loss for Q2 2024 was $616.9 million, driven by a $481.5 million non-cash impairment charge and a $141.6 million non-cash tax valuation allowance.

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

• The company is evolving from a solutions-based platform to a holistic student support platform, emphasizing individualized academic and functional support.

Financial highlights

• Q2 2024 total revenue: $163.1 million (down 11% year-over-year); Subscription Services revenue: $146.8 million (down 11%); Skills and Other revenue: $16 million (down 4%).

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

• Adjusted EBITDA: $44.1 million (27% margin); free cash flow was negative $3.6 million, impacted by restructuring-related severance and working capital timing.

• Cash, cash equivalents, and investments totaled $605 million at quarter-end; net cash balance was $4.5 million.

• Net loss per share, diluted, was ($6.01) in Q2 2024; non-GAAP net income per share, diluted, was $0.24.

Outlook and guidance

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

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

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