Chegg says it's doubling down on students while cutting nearly a quarter of its staff

By Bill Peters

Executives say the company plans to combine academic support with 'functional support,' including financial literacy

The digital-education platform Chegg Inc. on Monday said it would slash nearly a quarter of its staff, a move it said would free up space for longer-term investments as it tries to offer more than just academic guidance to students and use more artificial intelligence.

The company, which rents out textbooks and offers online academic help, made the move after bringing aboard Nathan Schultz as its new chief executive at the beginning of this month.

In total, Chegg (CHGG) will reduce its global staff by 23%, or 441 employees, with the cuts taking place over this year. Around 40% of the jobs being cut are in the company's content-management teams in India, with the rest largely in the U.S. and Israel. The company is also closing two offices outside the U.S.

"These changes are designed to make us a more focused, more efficient, uncomplicated and quicker-moving company," Schultz said in Monday's announcement. "Our renewed focus on our core audience - the student - will allow us to address an unmet need with an offering that is differentiated, holistic and verticalized for education."

Shares jumped about 20% in after-hours trading on the news, after a 77% drop so far this year.

Chegg has faced concerns that more students are turning to ChatGPT, OpenAI's popular chatbot, for help with their homework. It has tested out price cuts to spur more demand, and raced to be more AI-centric, incorporating and refining technology around automated answers.

But subscriber counts fell during Chegg's most recent quarter. The company has said efforts to bring them back "will take time."

Executives on Monday said Chegg planned to combine academic support with "functional support," bringing things like early career learning and financial-literacy advice into a single platform. Other platforms, it said in a letter to shareholders, tended to offer "one-dimensional learning support or broad generic offerings."

The company said it would try to dedicate more effort to reaching students in high school and early college. And it said it would put more resources toward its international services - something it said it hadn't done enough.

Management also said while it has largely marketed directly to students, it would try to strike commercial agreements with schools. But Chegg said that strategy was in its early days, and that it didn't expect "meaningful revenue" from it next year.

Chegg expects to book a charge of between $10 million and $14 million related to the job cuts. Around half of that will land in the second quarter. "Substantially all" of the charges will be incurred by the fourth quarter, Chegg said.

-Bill Peters

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06-17-24 1915ET

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