CHEGG, INC Q2 FY26 Results

In Q2 we outperformed our expectations on revenue, adjusted EBITDA, and cash, reflecting our ability to execute against our priorities while investing for future growth. Our long-term goal remains the same: return Chegg to growth with high margins and strong free cash flow. We outperformed our expectations on revenue, adjusted EBITDA, and cash, reflecting our ability to execute against our priorities while investing for future growth. The goal remains the same: return Chegg to growth with high margins and strong free cash flow. Starting last fall, we embarked on our next big chapter, rearchitecting the company to be AI-first, building a sustainable cost structure, and strengthening our balance sheet so we could accelerate our bigger vision. Chegg’s mission, to put students first and help them move from learning to earning, has never wavered. For almost twenty years, we have evolved to meet students’ most important needs. From inventing the textbook rental model to make higher education more affordable, then providing 24/7 learning support through Chegg Study, and then adding skills-based courses to help learners build the skills needed to advance their careers. Each transition has opened up a new chapter of growth for Chegg, and the foundation we have built across our products, technology, and data now positions us to expand our focus on employability. We will help students build the skills, confidence, and connections needed to graduate, find internships, and transition to the workforce. Higher education continues to evolve, but one thing will never change; after completing whatever path they pursue, students need a job. For the nearly twenty million students entering today’s job market over the next few years, that transition is filled with challenges and uncertainty. Beginning in Q3, we are soft launching the next generation of Chegg. By combining our proprietary data, AI, and deep insight into how students learn and build careers, we will reduce the friction for students to get internships and then jobs. The new Chegg will help automate job search and matching, while adding coaching that will help students pick the right major, the right courses, and evaluate the right skills. Our plan is to automate the search, the match, and add coaching, so students build the right skills, take the right courses, and make the right connections. Chegg will handle the hard parts of applying: tailoring resumes, drafting cover letters, auto-filling and submitting applications, and even initiating alumni outreach on behalf of students. We will then add the ability for students to get company-specific interview prep, personalized feedback, and targeted skill-building courses to close any gaps standing between them and the job. The result is a platform that takes a student from “I need a job” to “I am prepared, applied, and connected” all in one place. It's this convergence of everything we have built - our academic platform, our skilling business, and our language learning capability - into one service that addresses one of the most pressing needs students face today. We have already had more than 10,000 students use the beta and provide feedback, and we will begin rolling out the new service across both Chegg and our site Internships.com, starting in the third quarter and all throughout 2027. As we expand our focus on employability, our skilling business remains an important part of the opportunity ahead. By helping organizations build workforce capabilities and helping learners develop and apply relevant skills, we are creating a platform that connects learning, skills development, and career outcomes. Chegg Skills has been built as a multi-channel platform - spanning enterprise, institutional, employer, and marketplace channels - to create a more diversified foundation for growth. We have already signed six new partners this year, including OpenSesame and Dale Carnegie, and those launches will take place over the second half of the year. We will continue to expand into enterprises and schools over the next few years using AI and data to dramatically expand and personalize our catalog while making our courses even more affordable. Our language skills are an important component of employability, helping people expand career opportunities and communicate more effectively in an increasingly global workforce. As a result, we are transforming our language offering from a language-learning app into a performance platform - helping people communicate with confidence and impact, in any language, when it counts. Our new agentic coach, which understands each learner’s goals and the context of each interaction, helps you prepare for the moments that matter, like a client call, a presentation, or an interview. Early next year, we plan to have a seamless integration of our agentic coach into the learner’s actual workflow - learning that shows up exactly when, where and how you need it. We are also expanding our Skills offerings into Europe, combining language learning with broader workforce capabilities. Underlying all of this has been the restructuring of our workforce to become AI-first. AI allows us to personalize learning, improve outcomes, and scale more efficiently and affordably, giving us a much leaner operating model that can scale much faster, which allows us to return to being a growth business with high margins. When I look at the arc of what we have built and where we are headed, I feel genuinely confident. AI created real headwinds for this company, and we responded by strengthening our balance sheet, rebuilding an AI-first cost structure, and expanding our vision toward a much larger opportunity. We are becoming an employability business - one that helps students develop skills, find internships, land jobs, and grow throughout their careers. That is a more durable market, and we are uniquely positioned to own it. The financial foundation David will walk you through is what makes this all possible, and we look forward to updating you on our progress next quarter.

Our second-quarter results exceeded our expectations, reflecting continued execution against our priorities. We are excited to take Chegg into its next chapter by expanding our focus on employability, addressing students' evolving needs while helping employers build a more skilled workforce, creating what we believe is a significant opportunity for long-term, profitable growth. As we execute on our strategy, AI is improving operational efficiency across the company and driving meaningful gains in profitability and cash generation. We also repurchased shares during the quarter, reflecting our confidence in the company's long-term value while maintaining a disciplined approach to capital allocation. In the quarter, Total Revenue was $51.8 million, exceeding our expectations. We expanded our distribution partnerships, which we expect to contribute more meaningfully later this year, while remaining focused on efficiently managing our academic services products to maximize cash generation. Chegg Study monthly retention continued to be very strong, reinforcing its long-term cash-generating potential. Turning to expenses, Q2 non-GAAP operating expenses were $32.3 million, nearly cutting our expenses in half compared to the second quarter of last year. This significant reduction reflects our disciplined approach to expense management and enhanced use of AI to improve productivity and drive efficiencies across the company. We continue to identify opportunities to further optimize our cost structure. Adjusted EBITDA for the quarter was $9.1 million, representing a margin of 17%. Second quarter CapEx was $3.7 million, down 49% year-over-year. For full year 2026, we are targeting a 60% reduction in CapEx. Free cash flow in the quarter was $6.4 million, which includes approximately $1.5 million of severance payments related to prior restructuring actions. In the first half of the year, we generated $9.5 million in free cash flow despite $14.4 million in severance payments. We expect to continue to generate meaningful free cash flow in the second half of the year. Looking at the balance sheet, we ended the quarter with $72.3 million in cash and investments and a net cash position of $38.5 million, providing us with flexibility as we execute on our priorities. We have built a strong foundation for the future and are encouraged by: •the continued durability of our academic services products driven by strong monthly retention; •the progress we are making leveraging AI to meaningfully improve our cost structure; •the early traction we are seeing with new skilling distribution partnerships; •and the significant opportunity we see to expand through employability. Together, these reinforce our confidence in generating meaningful cash flow and creating long-term value. During the second quarter, we repurchased $1.7 million of our common stock and have $120.7 million remaining on our securities repurchase authorization. We believe our shares represent an attractive use of capital. Our strong balance sheet and continued ability to generate meaningful cash flow provide us with flexibility to allocate capital where we believe will create the greatest long-term value for shareholders. That includes investing behind our strategic priorities while also evaluating further share repurchases. In addition, we expect to fully repay the convertible debt in the third quarter, further strengthening our balance sheet, increasing our financial flexibility. Moving to guidance, as we execute on our expanded opportunity focused on building an employability platform, our Academic Services and Chegg Skilling businesses are becoming increasingly integrated, and we believe Total Revenue and adjusted EBITDA are the most meaningful ways to measure progress. Beginning this quarter, we are providing guidance for Total Revenue rather than separate revenue guidance. Looking ahead to Q3 guidance, we expect: • Total revenue between $43 and $44 million; • Gross margin in the range of 48% to 49%; • And adjusted EBITDA between $1 and $2 million. In closing, we have strengthened the business for long-term success. The company is leaner, more efficient, and well positioned to generate meaningful free cash flow in 2026. We are executing our strategy with focus and discipline while leaning into a large, new opportunity, positioning us to drive sustainable growth, improve profitability, and create long-term shareholder value. We have a strong balance sheet, which provides additional financial flexibility as we continue executing our strategy.