Thank you for standing by. This is the conference operator. Welcome to the Chegg Inc's Fourth Quarter 2022 Earnings Conference Call. As a reminder, all participants are in listen-only mode, and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. To join the question queue, you may press star then one on your telephone keypad. Should you need assistance during the conference call, you may signal an operator by pressing star and zero. I would now like to turn the conference over to Tracey Ford, VP of Investor Relations and ESG. Please go ahead. Good afternoon. Thank you for joining Chegg's Fourth Quarter 2022 Conference Call. On today's call are Dan Rosensweig, Co-chairperson and CEO, and Andy Brown, Chief Financial Officer. A copy of our earnings press release, along with our investor presentation, is available on our Investor Relations website, investor.chegg.com. A replay of this call will also be available on our website. We routinely post information on our website and intend to make important announcements on our Media Center website at chegg.com/mediacenter. We encourage you to make use of these resources. Before we begin, I would like to point out that during the course of this call, we will make forward-looking statements regarding future events, including the future financial and operating performance of the company. Before we begin, I would like to point out that during the course of this call, we will make forward-looking statements regarding future events, including the future financial and operating performance of the company. These forward-looking statements are subject to material risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. We caution you to consider the important factors that could cause actual results to differ materially from those in the forward-looking statement. In particular, we refer you to the cautionary language included in today's earnings release and the risk factors described in Chegg's annual report on Form 10-K filed with the Securities and Exchange Commission on February 22nd, 2022, as well as our other filings with the SEC. Any forward-looking statements that we make today are based on assumptions that we believe to be reasonable as of this date. We undertake no obligation to update these statements as a result of new information or future events. During this call, we will present both GAAP and non-GAAP financial measures. Our GAAP results and GAAP to non-GAAP reconciliations can be found in our earnings press release in the investor slide deck found on our IR website, investor.chegg.com. We also recommend you review the investor data sheet, which is also posted on our website. I will turn the call over to Dan. Thank you, Tracey. Welcome everyone to our 2022 Q4 earnings call. Chegg ended the quarter and the year on a strong note, beating the high end of our guidance with services revenue growing 10%, finishing the year with over 8 million subscribers and generating over $150 million in free cash flow. The last few years, we saw significant headwinds in higher education, including the loss of nearly 1.5 million students during COVID. Through it all, the Chegg team executed very well, positioning us for a much bigger future. In the second half of the year, we saw significant improvements in new subscriber growth, increased take rates for Chegg Study Pack, which is now 40%, and retention for CSP is now nearly equal to that of Chegg Study. In addition, we also saw increased demand over the year for Chegg Skills through our partnership with Guild. We believe that this positive momentum will continue and lead to accelerating revenue growth in the second half of 2023. After the initial wave of the COVID pandemic, as students returned to campus, we saw fewer of them enroll, and those that did took fewer classes. There was also less of an emphasis on academic rigor from both students and professors. This created a reduction in the demand for higher education support services and ultimately a substantial loss in our subscriber base, particularly in the first half of 2022. Since August, higher education has begun to normalize, which has helped us start to climb out of the COVID hole and helped us increase our new subscriber growth. This shift, along with the strong execution from our team, led to better performance and predictability. We see new opportunities for growth. Domestically, we have continued to expand our content offerings with initiatives like Uversity, which adds professor-created content in new subjects and formats to our platform, allowing us to be relevant to millions of students that we historically haven't served. We also invested in improving the quality of our existing experiences with our new structured Q&A platform, which enables our experts to create better and clearer learning solutions for students. Early feedback has been very positive. Students tell us they prefer this format and believe it is more helpful to understand the topic and learn the concepts so they can solve the problems on their own. Our new Ask and Learn platform provides students with richer and more personalized learning experience from Chegg. We will continue making smart investments in content, technology, and AI to improve our value, quality, and relevance to even more students around the world. Internationally, we've also made progress localizing our content. We created new apps for Turkey and one in Spanish, initially targeting students in Mexico. We launched local pricing in four countries, and we are currently testing and optimizing pricing in nine other countries. All of these efforts make our services more personalized and accessible to learners everywhere, and we are expanding into new markets to reach more students. To expand into new growth categories, we invested in our language learning platform, Busuu. We are making great strides with the launch of our freemium version for the United States and have already seen increased registration and engagement, which we believe will lead to future revenue growth. We also invested in one of the hottest growth areas in education, skills-based learning. We expanded our partnership with Guild, growing significantly faster than we expected, which suggests that this is a big opportunity for Chegg. Outside of the U.S., we launched a pilot program in Africa with Nexford as the demand for skilling frontline workers is now global. As the opportunity grows, we are expanding our range of courses from technology fundamentals to cybersecurity. We are also excited for all that is ahead, and in 2023, we will continue making strategic investments for that growth. The opportunity to better serve learners continues to evolve and expand and now includes helping students solve some of their biggest non-academic challenges. That is why we now provide free access to Calm, the world's number one app for sleep, meditation, and relaxation through Chegg, and we just announced a partnership with DoorDash to offer DashPass for students for free to our subscribers. These offerings help students deal with their mental health and help them save money. We believe these partnerships not only increase our TAM, but will also increase conversion and retention, allowing us to improve ARPU over time. These types of initiatives are designed to deepen engagement, accelerate growth, strengthen brand loyalty, and importantly, help learners by delivering overwhelming value. Our ability to partner with these companies also validates how valuable our audience is to some of the biggest brands. The hot topic right now is AI and machine learning. We've all seen that large language models, such as ChatGPT, have captured the attention of many people. We believe AI will have a significant effect on human capabilities and humanity overall. AI and machine learning models are not new to Chegg. We have been leveraging these technologies within our platform for years, and we believe these continued advancements will benefit Chegg and students. As an example, we've been using GPT-2 inside of our writing products, improving our ability to provide support with grammar, paraphrasing, and sentence structure. We also use it to increase speed and quality while reducing the cost of content development. We will continue to build and leverage AI tools, including those from OpenAI and others, allowing us to expand our content capabilities, increase the number of ways students can learn through our platform, and increase our efficiency. Importantly, we believe the best learning experience for students will leverage AI, will use a combination of vertical experts who utilize data, ML models, and AI on a user platform designed specifically for learning. The last several years have been very challenging for everyone. However, the best, most innovative companies come out of difficult times and are able to improve their market position. We are very excited about the next chapter for Chegg and are energized by the scale of the opportunity in front of us. We believe there is significant growth ahead for our business, both domestically and internationally, and that we are in the best position to drive some of the most transformative trends to shape our industry. The investments that we've been making and our priorities in 2023 are all designed to return Chegg to double-digit growth. With that, I'll turn it over to Andy. Thanks, Dan. Good afternoon, everyone. Today, I will discuss our financial performance for the fourth quarter and full year 2022, as well as our outlook for 2023. As Dan mentioned, we ended the year on a positive note, with revenue, adjusted EBITDA, and free cash flow all coming in above the high end of our expectations. While the beginning of the year did not transpire as we initially thought due to external factors, including reduced enrollments and uncertain economic conditions, the Chegg team performed well, demonstrating the strength and resiliency of our operating model, where we continued to grow Chegg Services revenue, drive profits and cash flow while many others struggled. Looking more specifically at our 2022 performance, total revenue was $767 million, with Chegg Services growing 10% to $734 million, with six points of growth coming from Busuu, which we acquired in January 2022. We increased our total services subscriber base to 8.2 million, with 2.1 million coming from international. This increased the diversity of our revenue streams as international represented 15% of total revenue in 2022, an increase from 11% in 2021. We were very pleased that we were able to deliver an Adjusted EBITDA margin of 33% or $255 million, free cash flow margin of 20% or $155 million, which represented 61% of adjusted EBITDA above the high end of our expectations. As we survey the broader learning landscape. It's clear we have best-in-class margins and free cash flow, and we expect to increase free cash flow margin in 2023. Looking at Q4, total revenue was $205 million, driven by better-than-expected Chegg Services revenue growth of 7% to $201 million, which led to adjusted EBITDA of $74 million, the high end of our expected range. Looking at the balance sheet, we ended the year with cash and investments of $1.3 billion. This was bolted by the aforementioned free cash flow of $155 million. We believe our balance sheet and operating model that generates significant cash flows represent a competitive advantage that can drive shareholder value, whether that be through adding assets or prudent security repurchases, both of which we did in 2022. During the year, we demonstrated the power of our balance sheet by opportunistically buying back $500 million in principle of our convertible securities for approximately $400 million. As a reminder, as of December 31st, we had $643 million remaining under the securities repurchase program. As we enter 2023, we no longer have significant revenue from Required Materials. Required Materials is now 100% revenue share based, and we expect it to represent less than $5 million of revenue for the full year. Therefore, we are changing the way we report revenue to better represent what Chegg is now, predominantly a large subscription service with several other smaller product offerings that, while important, have yet to reach scale. Our revenue breakouts moving forward will be Subscription Services, which includes all of our subscription offerings, including Chegg Study, Chegg Study Pack, Mathway, Chegg Writing subscriptions, and Busuu. The other bucket will be called Skills and Other, which today represents skills, advertising, and the required materials revenue share. We believe this new breakout will allow our investors to better monitor and evaluate our business trends. To provide full transparency, we have provided additional details on both the new and historical revenue breakouts in the data sheet and in the investor deck, which are available on the investor relations website. Before I go into specific 2023 guidance, I want to provide a little bit more context on the numbers. As we discussed last year, the issues of low enrollment, a strong labor market, and inflation impacted the higher education industry and led to reduced traffic to education support sites. While the business executed well with stellar retention, record Chegg Study Pack take rates, macro headwinds negatively impacted our new subscriber growth. As Dan mentioned, new subscriber growth turned the corner in mid-2022. That improvement has continued. Our plan reflects this momentum continuing through 2023, where the benefits become more evident in our revenue starting in the second half of 2023 and into 2024. On the non-subscription side of the business, we expect continued growth in Chegg Skills, offset by a decline in required materials as we have fully transitioned out of textbook ownership. We are forecasting reduced advertising revenues due to the well-documented headwinds in the macro advertising environment. We also expect to see a meaningful increase in free cash flow in 2023, resulting from both strong operating performance, including a reduction in CapEx for the year and a higher interest rate environment. Also, to assist with modeling, we have added a slide to the investor deck of our investor relations website that includes expected revenue and adjusted EBITDA seasonality for 2023. Specifically, for 2023, we expect total revenue to be in the range of $745 million-$760 million, with subscription revenue in the range of $675 million-$690 million. Gross margins to be in the range of 71%-73%. Adjusted EBITDA to be in the range of $240 million-$250 million, with free cash flow increasing to $185 million-$195 million, or approximately 80% of adjusted EBITDA. Finally, we expect CapEx to be in the $80 million-$85 million range, which as a reminder, is mostly content. Moving to Q1 of 2023, we expect total revenue to be betwean $184 million and $186 million, with subscription revenue between $166 million and $168 million. Gross margin to be in the range of 72%-73%, Adjusted EBITDA to between $53 million and $55 million. Finally, in addition to building a great business, we are also building a great company, and that can only be done by building a strong culture and being a good citizen in our community. I want to acknowledge our ESG team, led by Tracey, for some recent accolades Chegg has received. We were thrilled to be upgraded to AAA by MSCI, their highest rating, and we also recently were added to Sustainalytics 2023 Top ESG Company list. All of this took a tremendous amount of work from our team, and we couldn't be more proud of the progress we have made. With that, I'll turn the call over to the operator for your questions. Thank you. We will now begin the question-answer session. To join the question queue, you may press star then one on your telephone keypad. You will hear a tone acknowledging your request. If you are using a speakerphone, please pick up your handset before pressing any keys. To withdraw your question, please press star then two. We will pause for a moment as callers join the queue. The first question comes from Jeff Silber with BMO Capital Markets. Please go ahead. On that. Jeff, are you there? Specifically. Oh. Can you hear me? Hello? Okay. Okay. We can hear you now. Can you? Yes. Okay. Sorry about that. wanted to start with subscriber growth. You talked about your new subscribers, growth turning a corner. specifically in the U.S., are your U.S. subscribers growing, and do you expect that to continue to grow into 2023? Dan, you're on mute. I'll take it first. Yes. The answer is yes. Both are growing, and we expect both to continue to grow. What Andy referred to in the prepared remarks was there were hundreds of thousands of subscribers that did not come back from that 1.5 million group. Because students... If you recall in our earnings calls a year ago, there was no academic rigor. We had a double whammy hit us at the beginning of the year. As you saw, over the year, things progressed for us, and they began to reveal themselves in our numbers. We are seeing continued growth in new accounts both domestically and internationally. In international, in some of the countries, we're seeing it, because they're coming back, but also because of the choices that we made, which is we lowered the prices in a number of countries, and that's making a big deal in subscriber growth. We've also invested in the Turkish app and the Mexican app. We're seeing not only increased renewals, but also substantial increased conversion. The choices and investments we made have been working. In the U.S., it's not simply the return to school, it's because of the investments we've made in content and expanding the content, in the relationships that we've done with Calm, and we're beginning to see the impact of DoorDash. We'll see whether or not it continues to improve retention or not. It's too soon around that. Also the investments we're making in the quality and personalization of the site. All those things are helping. Again, as Andy said in his prepared remarks, began to see in the summer school time, an increase in new accounts, and we're seeing that through the first five weeks of this year. We have a large hole to dig out of, but as you see it from the way the seasonality works, as we dig out of it, we exit the year in substantially higher growth and go into 2024 with an expectation to return to double-digit growth. That's a combination of the investments we've made, the expansion of the TAM, the growth of new accounts, plus continued improvement in Chegg Study Pack take rate and renewals. Those things are beginning to show promise. We just have to, you know, spend the year digging out of that hole, and we are. Okay. Appreciate that. I also appreciate the dialogue about AI and machine learning. It's really helpful that you guys pointed out what you've been doing all along. I'm just curious, again, there's been a lot of, you know, media speculation about ChatGPT and what it's been doing, and I know the product, you know, is in its infancy. Are you seeing any impact on your business in terms of new subscribers growth or returning subscribers this quarter? No. Nothing at all that is noticeable. Obviously, we're gonna track it, but we've seen nothing. We've seen continued really powerful renewals and reduction in cancellations. We've seen continued high take rates of Chegg Study Pack. The fact that we crossed 40% at the end of last year and we continue to see that, I think is a very powerful statement. I mean, look, it's early with that, but no, nothing that we've seen right now. Our expectation, and I think you're gonna see it from a lot of companies.. Remember, Chat, they've already said that they do not plan to keep it free. They can't run it if it's free. It's gonna be an API-based business where we will be participating and using it to enhance our product. We think it's gonna be a big opportunity to say you can get everything from them, plus what you get from us, plus all the expansions. At the moment, we feel like the plan we have in place is the right plan, and it's pretty exciting. The more these things develop, the more the companies who are the leaders in this space use them to their advantage, and that's our plan. At the moment, we see no degradation of anything. Okay. Thanks so much. Appreciate the color. Yep. The next question comes from Doug Anmuth with JP Morgan. Please go ahead. Hey, it's Bryan Smilek from JPMorgan on for Doug. Thanks for taking my questions today. Just to start, thinking about the 2023 guide, what gives you confidence that growth will meaningfully continue to re-accelerate as you enter the back half of 2023 and into 2024? Can you just discuss the roadmap to achieving higher normalized growth rates longer term? Yeah. When we look at our guides, particularly as the first question was on the new subscriber growth, we're already on the trajectory. We're not expecting anything dramatically different than what we're on. To a great extent, it's kind of what I call it's kind of called subscription math, right? It takes a while to refill the renewal base, which is what we're dealing with right now. The trajectory we saw starting in the second half of last year, we just expect to continue not to dramatically increase in any way for us to meet our numbers. Got it. Thanks for taking my question. Did we lose... Okay. Okay. I thought we lost something. Okay. Operator, is there another call? I assume there's more questions. If I could just sort of, while the operator's figuring this out, just sort of add a little color to what Andy just said there, which is our plan, if we achieve it, and obviously we wouldn't put it out if we expected not to, but things can happen over the course of the year, shows a constant progress of growth, when you exit the year at that number with the new subscriber growth, the base being filled back up, the rollover of the subscription math, as Andy pointed out, the continued take rate of Chegg Study Pack and the renewal near equality between Chegg Study and Chegg Study Pack. The company returns to substantial growth over the course of 2023 at the end of the year and then into 2024. We have all the leverage in the model in terms of you're already seeing increased free cash flows from the company. We feel like this is a year that we've gotta get through to refill that hole, and it's the hole that we talked about last year when we had to change the guidance because literally a million and a half kids didn't show up. Our confidence in what we're seeing is very strong, and it's very positive, and we're seeing also growth in skills. We feel like the next several years you'll see that sustained growth because the businesses and the choices that we made to invest are returning in that direction, and it's very positive what we see right now. All right. Our next question comes from Stephen Sheldon with William Blair. Please go ahead. Hey, thanks. Seems like one of the bigger potential growth drivers here is keeping students on the platform longer. Just curious how you're thinking about, you know, what's a realistic expectation for that? How do things like Calm and the DoorDash memberships kind of play into that and other forms of student support? How optimistic are you that you can extend that student retention, and what would the financial implications be? Yeah, great question. The goal has been to go from historically two days a year to 365 days a year. We've done an incredible job getting close to 5+ months per student, and the goal is to keep them over the summer or in the December-January period before school starts. These are examples of the kinds of things that we're doing. If you take a look, for example, at the Calm deal and the DoorDash deal, students get them for free. It's a value. The two of them together equals a value greater than the price of what they pay for Chegg. The hope is that they continue to use it over the summer because they get other benefits outside of the academic support. The way to look at it is for each month that they stay on, it's on average another $17. you know, it's a 15% or 20% increase depending on when that starts to work and how well that works. The deals are designed to do that, to increase conversion and increase the take rate and increase retention. What we've seen so far is, yes, it's helping on conversion, so you see new accounts growing, and you see take rates now being over 40%, which I think is pretty remarkable. The next way we'll take a look at it is over the summer, and we'll see the impact on retention. We still know yet because it's too early. We just launched them. That is the vision and the goal for adding these things. Eventually to become a 12-month service, which goes from academic support to non-academic support to skills-based support. Just adding more and more value to our services to students so that they stay on for much longer periods of time. The economic impact will be quite substantial when it works. Great. Thank you. Yep. The next question comes from Josh Baer with Morgan Stanley. Please go ahead. Great. Thank you for the question. I was hoping you could talk a little bit about your subscriber base and the composition of it and how it breaks down between STEM versus humanities or literature. Yeah. Three to four years ago, the way college students broke down was there were more humanities and non-STEM B than there were STEM. Now it's more STEM B than it is non-STEM B. Ours breaks down 90% STEM B with humanity users using us within a quarter or a semester where they have to take a class. The goal with content expansion Uversity and ultimately using the AI content creation is to go beyond that so we're relevant for those students every semester, even if they're not taking STEM classes. That is what we've been talking about for the last few years. That's what we mean by the expansion of the TAM, the 5 million students that we historically have not been the primary learning service for. With the use of AI, Chat AI, as well as Uversity, we're expanding that content. We think that's gonna help a lot and help us grow in those areas. Okay, thanks. You know, the difficulty is this year, we gotta get through that hole. If you saw the inside of the company, you say the hole is getting filled up very fast. If it continues to get filled up very fast, you'll see the growth return and sustain because the investments we've made are paying off, at least internally in the company. It's just that's a hole that was just something nobody would have expected. 1.5 million students left, a bunch of professors didn't assign anything, and that's hundreds of thousands of subscribers. What I'm really excited about is if you look back before COVID, we only had about 3 million subscribers. Now we have almost twice as many, even though we lost a bunch, we're still 2x what we were just in 2019. We see ourselves returning to growth. We just have to fill that hole, and that's what we're doing now. When we do, you'll see double-digit growth return and all of that fall to free cash flow and improving margins. We just gotta execute, execute this year. And I'm very excited we're able to do it, with increasing our free cash flow substantially. A lot of good news happening on top of the fact that, we're just not growing that fast externally in the first half of the year. Thanks, Dan. I was hoping I could ask one on the Study Pack reaching around 40% of all subscribers. I guess really, like, where can this go? Then I'm also just wondering if from a linearity perspective, like, does this consistently trend higher? Also just wondering if there's seasonality with study pack adoption or usage around finals, you know, similar to the rest of your business. Thanks. Yeah. Great questions and ones that we couldn't answer a year and a half ago or two years ago when we launched these. Now we have multiple semesters, renewal periods, and we've been able to improve the investment. Look, we know we have additional pricing power. We took the dollar increase, and we said by taking that dollar increase, we would also be able to move more people to Chegg Study Pack, and we did. More people are when, you know, we're almost at one out of two willing to pay $19.95 rather than $15.95. The expectation is as we add more value, we'll be able to not only move poor people in there, Chegg Study Pack will become the base. These are all steps that we're taking in terms of to get us to much higher ARPU and much higher profitability per customer. In difficult times, the last thing we wanna do is use that pricing power. We want them to volunteer for it, and four out of 10 are doing that now. That's a very big step for us and something that we think is gonna yield investors a great return. In terms of, you know, what's happened, every semester since we launched it, there's been a higher take rate. Every semester since we've launched it, we've been able to improve retention. We're almost at parity. I mean, it's within 2 points of parity right now, and that's a huge step for us. Ultimately, though, you can imagine the base price of Chegg being closer to $19.95 than $15.95 and the pack being higher because we keep adding more value. Our view is you need to take each step at a time. You need to confirm that this is accurate. We only saw about 7,000 loss of customers out of 8 million customers when it came to taking the price increase. We know we have substantially more price increase, and we're just not leveraging it beyond getting people to take Study Pack right now. Great. Thank you. Next question comes from Ryan MacDonald with Needham & Company. Please go ahead. Hi. Thanks for taking my question. Dan, I wanted to ask about the localized pricing initiatives. You talked about that you're testing in nine additional countries right now. As we think about how that's being factored into the fiscal 2023 revenue outlook, how should we start to think about when those nine countries where you're testing and go officially live and what sort of impact you expect that to have on ARPU trends in the near term? Yeah. We expect it to have. Remember, we have to deal with semesters. The actual school year is late August through May. We're in the spring of this year. Any increase in enrollment, any increase in change in behavior isn't gonna happen till the second half of the year. That's the way our business works. Again, that's a variable in the front half of the year about why you don't see a big jump up in the first half of the year 'cause you're dealing with the same subscriber pool that we had in the fall of the year, which we did take a step up. We expect to continue. What we've seen in every country that we've done it is substantial improvement in conversion and with retention remaining where it was. We're seeing improvements across the board. We're rolling them out over the course of this year. All nine additional ones will be rolled out by the second half of the year. We'll start to see that impact in subscriber growth in the second half of the year. A lot of the ARPU decline that might come from charging less in those will be offset by the fact that so many people are taking Study Pack and renewing at higher rates in the U.S. Super helpful. Maybe just a follow-up question in regards to Busuu. You talked about you are rolling out the freemium model, and you're starting to see more engagement there. Just curious how you're thinking about the cross-sell strategy potential between Busuu and the core Chegg Study user base and whether what you're doing or if there's anything you can do around promotional pricing to kinda continue to drive that motion. Thanks. Yeah, great question again. We're testing the promotional pricing to existing Chegg customers because remember part of the premise of why we bought it was that 50%-55% of U.S. college students said they need or want to learn a language. We didn't have the right product for them. Offering one with an automatic paywall when there's one with a freemium model, we knew wasn't going to work. That's why we've invested in the freemium model. We're beginning to see positive results from doing that. I think you'll see the cross-promotion in the fall semester, which is the first semester of the year. Everything right now is to keep our growth that we've been seeing since last August of new accounts continuing to go and adding more value in Study Pack with Calm and with DoorDash. Those are our priorities right now. They're working. We're pleased where we are right now to be able to achieve the numbers that we put out, which would lead us to exiting the year at a much, much higher growth rate. Excellent. Thanks for taking my questions. Yeah, thanks for asking. The next question comes from Mike Grondahl with Northland Securities. Please go ahead. Hey, guys. Thanks. I don't know if I heard how the dollar price increase to existing subscribers in October went and kind of the retention related to that? Hi, Mike. We only lost about 7,000 customers in total. What it says is we have extraordinary pricing power because the value of Chegg continues to go up. The investment in personalization, utilizing AI to make the user experience better, utilizing it to be able to get more content in for lower prices. These are all things that allowed us to take it really with absolutely no disruptions whatsoever. At the same time, you can see the pricing power we have by the fact that four out of 10 are taking the $19.95 product. The students are willing to pay more for value, and we're adding that value. We know that we could do more sooner. We don't think it's a good idea to do more sooner. The ultimate goal, Mike, is to move everybody to $19.95 and then have the Study Pack be at a higher price. Adding DoorDash now and adding Calm now, and you'll see other announcements coming out over the course of the year, puts us in the position to do that. We're very careful about picking the right times to do these for students because that's the relationship that wins us all this business. Got it. Then you mentioned Calm and DoorDash. Can we expect like a third, a fourth, and a fifth over the next year? I mean, do you plan to build up those perks or benefits, you know, couple more, several more? Yeah. I don't wanna put a number around it because not sure what it would suggest to people, but the answer is yes. You will see more over the course of the year. You'll see more, potentially in the base. You'll see more in the Study Pack. You'll see more opportunities outside of those things because the demand to have access to our audience is only increasing, and we have the most efficient access to the audience. I mean, we're talking about two of the leading brands that we're working with already, and you'll see other very well-known brands that we're working with now to figure out what is the best way for them to reach college students through Chegg and advantage the Chegg student by doing so and improve our business. Yes, the answer is yes. Got it. Thank you. The next question comes from Jason Celino with KeyBanc Capital Markets. Please go ahead. Hey, guys. Just one question from me. You know, even with the savings that we're getting from the textbook transition and, you know, the benefits from the price increases and the higher take rate Study Pack, you know, it's disappointing to see the margins still compress this year. Is this just a function of lack of top-line growth? Are there any leverage drivers we can think about outside of just revenue growth accelerating? Thanks. Good question. You know, we can still continue to drive pretty stellar margins, and particularly if you take a look at cash flow, I mean, our cash flow margin is actually increasing this year, or at least we're forecasting it to increase this year. As far as the levers go, I mean, the big levers are revenue growth. When you, when you think about it, you know, incrementally when you, when you think about adding a subscription, probably in the very short term, $0.95 of the dollar drops to the bottom line. Our focus internally is driving new subscribers, driving retention, through all of the through many of the things that Dan has already talked about. We're certainly early in the year, we're on a path to do that. That's going to be the real driver. Okay. Great. Thank you. Thank you. It's just a, sort of a follow-on to that question. The leverage comes with obviously revenue growth. We could be a lot more profitable at any time, the things that we're investing in, again, it's hard because it gets masked by the big hold. We think that they are working, and as the company grows, the margins will grow. I think as Andy has said multiple times, we're nowhere near fixed data margins. We expect this company to be closer to 40% than where we are now. And really, it is the gross margins of the company allow these things to fall to the bottom line over time. you know, we're still investing in skills and language, and those continue to improve dramatically year-over-year. It's really a function right now of just executing on our plan, and the margins automatically get higher. The next question comes from Brent Thill with Jefferies. Please go ahead. Hey. Hey, thanks, guys. This is David Lustberg, gone for Brent. Thanks for taking the questions. Two, if I may. To start, you guys talked a little bit about the subscription path and adding more value and increasing the pricing of Chegg Study Pack over time. Just curious if you guys have thought about, you know, the optionality to do annual subscriptions for a slight price decrease or even, you know, create a higher price bundle that includes things like Busuu and, you know, skills-based learning embedded inside of that. Is it really just focusing on the Chegg Study Pack that you have now? Yeah, great question also. The answer is yes. You can expect you'll see an annual subscription from us. Believe it or not, it was technologically a challenge for us to be able to do that. We now can do that. We are looking and we are testing, what the right price would be for an annual subscription. Yes. Now we have reasons for people to want to stay annually, right? Initially, without something over the summer like Calm or DoorDash or the other things that we'll be adding, it's just a matter of sort of discounting with the hope that people will stay on longer to save the credit card. We wanted to actually give them real reasons to do it and real value to do it. Yeah, you can expect to see that from us, eventually. Just as a reminder, on some of our other subscription products, we do have annual subscriptions. For example, Mathway and Busuu both do annual subscriptions. In fact, Busuu is predominantly an annual subscription. Just wanted to give you that information also. Yeah. No, that's super helpful. Appreciate the color. Then, you know, one more on AI and ChatGPT. Appreciate the color that you provided in the intro, Dan, super helpful. I think it would be really great if maybe you could provide a little bit more color around how long you guys have been using AI, you know, what the level of investment has looked like. Then as you guys think about, you know, 2023 and 2024 and beyond that, do you guys plan to, you know, increase your investments around AI? You know, maybe some of that come from in-house, or do you guys continue to partner with, you know, some of the leading AI vendors out there? Appreciate it. You'll see both. Machine learning we've been using for five, six, seven years. Those are the algorithms, those are the things that we do to match people to the right content, to match us to the right experts. As AI has been getting better, and we've been using our own plus external, we've really focused on getting the efficiency of the question answering and the scale and the speed and the quality up a lot. You can see a substantial reduction we have in CapEx. The cost to get a solution is now substantially less than it used to be based on the investments we've made in technology like ML and AI. We've been able to reduce duplication. We've been able to get better quality answers, to get them answered faster. All of those things have saved us a tremendous amount of money and improved the quality of the product over time. That's never gonna end. What you will see for the first time later on in the year will be user-based experiences that will be more obvious to the consumer. Think about a scenario where we have what the AI companies don't have. We have the 100+ million questions that are asked and answered. What we can use AI technology to be able to do is to be able to say something like, "You've gone through this solution. Do you want us to build you a sample test, a multiple question test?" We can make the questions you've asked easier for you to understand if you're not understanding the concept. Everything that we'll be using it for on the user side will be able to have the user be more engaged and expand the ways that they can learn at the level that they're more capable of learning at. We're actually really excited. You know, I think we, like everybody else, was impressed. I have the good fortune of sitting on the Adobe board, I've seen all the AI investments that they're making on images and other things. It was less of a surprise for us, it's really impressive. It doesn't do what we do yet. I think we've discovered there's maybe 6% overlap in what they can provide versus what we provide. Of the 6%, I think that currently 50% of them were wrong. We have time to work with them, but we expect a number of vendors. We expect to work with whoever the best vendor is to do the things that we wanna do to help students be able to learn better through us. It's actually a very exciting time. It's a real substantial platform shift, and I don't think there's been one of this magnitude probably since mobile. My experience is that the companies that utilize this, these are companies that are building APIs for companies like ours to do exactly these things. The verticality, the experts that we have, the knowledge, the user experience designed specifically for learning is gonna be our moat and our advantage. What we have plus what they have. Got it. The next question comes from Brian Peterson with Raymond James. Please go ahead. Hi, this is Jessica Ong for Brian. Thanks for taking my question. I just got a high-level question. As we start the spring semester In the U.S. Is there a certain time that it started semester where you typically see adoption rates really increase with your different subscriptions? When is that for the spring? Has there been any deviation so far from that pattern in 2023? Thanks. I'm sorry, you broke up just a little bit. Do we see what in the spring? It's like. Do you mind repeating it? Yeah. I have a question. Is there a certain time in the start of semester where typically see adoption rates really increase for your subscriptions? like, when is that in the spring, and has there been any deviations from that pattern in 2023? Oh, okay. It's sort of the timing. you know, we've been at this a long time, so our timing is pretty good. Textbooks was always harder, but the subscription services are easier now once it returned to some form of normalcy in the middle of last year. Beginning of last year was nearly impossible because we just didn't expect so many people not to show up. Now that we're back to understanding the size of these markets, each semester has its own world. Like, September is the biggest month of the year for us. In this case, for the spring semester, the biggest days for new account growth, what have passed us, meaning we're... When Andy says that we like what we see, it's because we passed it the three biggest days of new account growth. It's really the second, third, and first, second, third week of January and the first week of February, and then it's September, October leading up to midterm. The second half of the year is always substantially bigger than the first half of the year. The rollover that we expect to get from the first half of the year fills that base that we lost a year ago. That's, that's how we build back to growth, and that's the path we think we're on right now. Got it. Thank you. Did that. Yep. Did that answer it for you? Yeah. Okay, good. The next question comes from Eric Sheridan with Goldman Sachs. Please go ahead. Thank you so much. Maybe just zooming out and asking two sort of big picture questions as we look out over the next six to 12 months and put a finer point on some of the themes of the call. When you look out to the next school year, starting, you know, out in August, September, October, what do you see as the two to three things that are the top priorities for you on the investment side or the product side that you think will set the company up well for that landscape as you see it now? Second, I know someone asked earlier about annual plans. How do you see the broader pricing matrix for the company sort of evolving, not only just into the next school year, but on a multi-year view, so you're striking the right balance between value provided and sort of value received from your basic users? Thanks. Yeah. I would say that the answer to the first part of your question is the investments that we've been making are starting to show real signs of payoff. In the Skills area, we think in the Busuu area, certainly in DoorDash, Calm in terms of the Chegg Study Pack, the rate increase we took. Probably the newest area of focus or the only additional area of focus, it's more just executing on what we've been executing on, which is creating more content, expanding the TAM in the United States, getting the pricing right from outside the United States, building into the bundles, get the higher take rate. We'll be now that these AI products are released, our teams have been working feverishly with them to be able to incorporate them into the user experience. That's probably the only priority that is one that we haven't already been working on, in a substantial way. The priorities of last year are the priorities of this year with that addition. Those will set up, set us up, we think, very well. In terms of the pricing scenarios, the plan has been we have a multi-year plan, which is the first plan was to put out a bundle, get people to use the bundle, get retention near equality, and then take a raise in the base that was very small, but one that we could capture with losing almost nobody and push conversion more towards the bundle. Those things have worked. The next step is to be able to build an annual subscription plan, which becomes an annual membership plan. In addition to that, ultimately, the first package of $15.95 will probably be the base at $19.95. These are all over the next couple of years. We're very judicious about when we take it. We test these things. The reason we were so successful is because we knew the outcome before we did it because we had tested it for a year. We have to make sure that, unlike other companies, we have basically six weeks out of the year where all our growth comes from. We can't afford to make a mistake, so we take our time with these things. You will see us move towards more in the bundle, higher take rate. Once we get over the number that we want to get over, you can imagine it that becoming the base. Adding on annual subscriptions with discounts. We have a plan. All of that will generate a lot more revenue and a lot more margin and a lot more free cash flow. It's just not what you should expect to see in 2023. 2023 is the year that we wanna return to excellent subscriber growth because we've already gotten ourselves to really excellent retention growth. Taking price increases now will hurt us from filling that base that we lost a year ago. That's our view. Great. Thank you so much. Yep. This concludes the question-and- answer session. I would like to turn the conference back over to Dan Rosensweig for any closing remarks. Okay, thanks, everybody. Well, one sec. This has been a very challenging time over the last couple of years. In the ed tech space, we're growing. We're the only company that is profitable. We're increasing our margins on free cash flow. The investments we've made are returning our new subscribers to growth, and our retention continues to go up. We believe that the execution is what's critical to us to achieve these numbers and to return to much more substantial growth and higher profitability. We couldn't do all of this without the incredible employees that we have. Andy pointed out, you know, the ESG categories. You know the number of awards that we won for inclusion and for the balance of growth and the quality of employees to be able to attract the right kind of people who care about the mission that we're on. You might have also seen today that we announced a very important partnership with the United States government and the Vice President of the United States. We announced today that we'll be working with the Vice President along with other people to help skill up and provide academic support in Honduras with the expectation and hope to train thousands of people who, instead of immigrating here, will become much more productive employees in their own companies. It's a validation of what Chegg can do in terms of helping people learn. We'll also provide new areas of growth. There's a lot of good going on at Chegg. We just gotta get through the first half of this year. As we do, we will be returning to growth and greater profitability. I really wanna thank everybody for joining the call. I wanna send our thoughts and our prayers to the people in Turkey. We have a lot of students there, and we have a lot of contractors there, and we're checking on them. None of this is easy, but all of this is worth doing. We're grateful for our employees, and thank you everybody for dialing in. Talk to you next quarter. This concludes today's conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.