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Chegg CFO: Skills-based learning ‘is playing a much larger role’

Chegg CFO Andy Brown joins Yahoo Finance Live to discuss earnings, how college learning is changing, the growth of corporate skills-based learning and language learning, as well as the student debt crisis.

Video Transcript

BRAD SMITH: While homework helper, Chegg, they aced their third quarter and boosted its full year outlook for revenue and adjusted EBITDA as college enrollment begins to stabilize here a little bit more. Chegg's Chief Financial Officer Andy Brown joins us now. Andy, thanks so much for taking the time and helping us run through the quarter. If you've got to think of one catalyst that really sticks out to you within the business from this past period, what is that?

ANDY BROWN: Yeah, it's been an interesting 12 months for Chegg. And as you had mentioned, things what we're seeing in the headwinds that we saw maybe a year ago have now stabilized. As far as catalysts with respect to Chegg, I mean, one of the things that we have been doing is pushing what I'll call offering our premium priced option, we call the Chegg study pack.

And we continue to see great momentum there, adding more value to the study pack and more of our students are taking that premium priced option. And that's had a very nice impact on not just our revenue growth, but our-- but our earnings. And as you saw in our report, we blew through our earnings. And we raised our guidance quite significantly.

BRAD SMITH: When we think of the past two years, it's really changed the way that a lot of colleges, universities might think about where people can be educated from, how they can be educated. What type of opportunities does that create for Chegg even in kind of a Renaissance moment for education or kind of a new normal that we're heading towards?

ANDY BROWN: Well, when we came to Chegg, our CEO came 13, 14 years ago. I'm now in my 13th year here. We were a textbook renter, but our vision was always that we would offer many types of services online. And we used to use the term, and continue to use the term, that you bet on the inevitable. And the inevitable is that-- is that more and more things are going to be done online.

And so we embarked upon offering subscription services, homework help services, that were exactly how students wanted, and that is they're relatively inexpensive. They're online. They're available 24 by 7. And those are the types of services that students expect. And we continue to deliver.

Whereas the traditional college experience was all of the help was on campus, but that's not that new-- that's not the modern student today. Well, I think a lot of people don't realize is that you may think of a traditional four-year residential school, but many students in today's environment are actually part-time students.

They're commuting into community colleges. They don't have the ability to get help at the institution. And so we provide that opportunity to learn anywhere, anytime, anyplace.

JULIE HYMAN: And Andy, you guys are also expanding more into things that have nothing to do with traditional students, that is college students, right? You're looking more to the corporate world as well. I know you have a partnership that allows companies to give their employees language learning. How big a part of your business is that? And how much are you looking to that business for growth?

ANDY BROWN: Yeah, so you've talked about our skills platform. And we've believed for a long period of time that while most of what we do today or have historically has been academic learning. We believe skills-based learning will play a much larger role, is playing a much larger role, and will continue to play a larger role in the future.

So to your point, we have several skills products. One is what we call our Thinkful line of services. And then more recently Language Learning with Busuu. And we do work with a company called Guild that then delivers those services to large corporations, like a Chipotle, and a Walmart, and so forth.

And more recently, and what we announced on our earnings call, is that we were going to be including our language skills services through Guild starting in 2023. So we do believe, when you imagine Chegg I'll call it two to three years from now, skills will be a much bigger part of our revenue and contribution.

JULIE HYMAN: And what about profit? I know you guys are, according to analysts and according to what we heard from you all, you're shifting more to focus on profitability. You saw an adjusted EBITDA in the positive. Where is that coming from? How are you guys achieving that? And what are some of your targets on that front?

ANDY BROWN: Yeah. So we've always focused on profitable growth. That's always something that we've talked about at our company. And as you can see, we continue to do that. We had a nice beat in Q4.

But inherently in our model because we've got a fairly fixed content cost and much of our users come through unpaid sources, it's just natural that as we scale our margins will scale. And I'll just remind everybody. I mean, we're profitable across every line, it's not just EBITDA, it's not just non-GAAP. We're GAAP profitable.

So we do believe that will continue. We're not going to put a cap on where that would be. We're not at a steady state profitability yet. We do believe that as we scale, we will continue to increase our margins.

BRAD SMITH: Andy, while we have you. This has been a significant year, perhaps the most significant that I can remember, in terms of student loan debt relief and kind of the conversation to advance the cost of college and reforming the high expenses that families and individuals incur. Perhaps from the Chegg lens you can give us your read through moving forward from here, where some of these costs can start coming down, given that Chegg was one of those platforms that ultimately can reduce the costs on the book front that were so expensive for a lot of college goers and education seekers.

ANDY BROWN: Yeah. So you know, it is painful. And I think this is more of a it pains me to see college students going to college taking on large debt, but then are unavailable to actually pay it, pay it off. And that's what you're seeing. So there's that disconnect on the ROI. In many cases, not all cases, but in many cases the ROI.

And I think that is a big part of what as a society we need to fix. What is the ROI of going to college so we don't get into these situations where students fundamentally can't pay that debt off, which is real simple. There isn't-- there wasn't an ROI on that particular student's education. So I think that's the fix that we need to do. And that's still-- that still hasn't-- that still hasn't been accomplished.

JULIE HYMAN: Andy Brown, thanks so much for being here. Chegg's Chief Financial Officer. Appreciate it.