Greetings, and welcome to Chegg's third quarter 2023 earnings conference call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Tracey Ford, Vice President of Investor Relations and ESG. Please go ahead. Good afternoon. Thank you for joining Chegg's third quarter 2023 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. 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 statements. 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 21st, 2023, 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 IR website. Now, I will turn the call over to Dan. Thank you, Tracey, and welcome everyone to our 2023 Q3 earnings call. Chegg had a good quarter, delivering better-than-expected results as we saw stabilization in new accounts and increases in overall retention and in the take rate of Chegg Study Pack. In addition to our academic services, we continue to invest in skills where we are seeing very strong growth, all of which is good for the future of Chegg. Six months ago, leveraging the breakthroughs of artificial intelligence, we began to completely reinvent what we offer, how we offer it, and to whom we offer it. New technology platforms create a lot of hype and noise, but as the hype gives way to facts, we believe Chegg is in a great position to build the most impactful, scalable, AI-enabled personal learning assistant, which will expand our opportunities to serve more students in more ways and at a lower cost per customer. The history of the internet has shown us that verticals win. Leading companies with a strong brand, category expertise, scale, and resources can invigorate growth and create new opportunities when they move quickly and embrace change. In the world of AI, Chegg has particularly valuable and proprietary assets for education and learning, including our student-first brand, a reputation for quality and accuracy, and our unique content and data set. Chegg also has a proven track record for improving student outcomes. Now, by combining the best of what Chegg has to offer with the advancements in artificial intelligence, we are creating new opportunities to better serve our students. It has been nearly a year since ChatGPT launched. We have all learned a lot and are experiencing how AI is impacting our lives. We know that students are using ChatGPT, but what is interesting is that they are using it for a variety of things in addition to education. Because Chegg is verticalized for learning, what isn't surprising is that when students try us and compare us to more general AI solutions, Chegg outperforms. That has led to incredibly high retention rates, and we are maintaining high customer satisfaction, such as 91% of students report that when they use Chegg, they get better grades. 89% say Chegg helps them learn their course material, and 90% say they work more efficiently when using Chegg to understand their coursework. We are now introducing new AI capabilities and features, which we expect will do even more for students. We are excited about what we are building, and we are moving quickly and rolling out the first phase of our new user experience. In September, we started to show our first cohort of users the updated capabilities with a new, simple interface and a unified asking experience. This means Chegg can provide answers from our proprietary database of more than 150,000 subject matter experts, and now with generative AI. We are focused on usage, quality, accuracy, and speed, and are on track to introduce our own large language models trained on Chegg's unique data. In the coming months, you will see us offer more features, including multi-turn chat, which will create a simple and conversational experience and introduce personalized AI-enhanced learning aids, such as practice tests, assessments, study guides, and flashcards. We also plan to let students connect to each other and share content. Over time, all of this is designed to expand our TAM and increase our relevancy to millions more students than we serve today. It's truly an exciting time at Chegg. We are executing well against our plan, and we are on track to roll out even more features to more students in Q1 of 2024. We have only one agenda: to serve the student. What we do is incredibly hard to replicate, giving us a powerful moat. The combination of our successful learning taxonomy, our over 100 million solutions generated by Chegg subject matter experts, and now the ability to leverage artificial intelligence, means we can do what generic AI platforms cannot do. Our vision for a truly personalized learning assistant is coming to life. To make it easier for you to see what we are building, we've created a video for you that is available on our IR website, where you can see how the product is evolving. We believe this will give you a sense of just how powerful Chegg can become, including our ability to blend our academic support and skills efforts by integrating career pathways into the student experience. We are beginning to see the investments we've made in skills pay off. By leveraging the latest advances in AI to accelerate our program development, we are able to create relevant, customized, high-impact programs faster and at a lower cost. We will also be releasing a suite of AI training programs over the coming months. Through our B2B partnership and direct-to-student efforts, we continue to see Chegg Skills grow and expect it to become a meaningful contributor in the years ahead. We are widening the aperture for Chegg, and we hope to reach a much larger audience of learners, one that historically we have been unable to serve before. This is where much of the future growth will come from, and our plan is to continue to execute each quarter towards this vision. Before I turn it over, I want to acknowledge Andy as he plans to retire once we hire his replacement early next year. I am deeply grateful for the incredible contributions Andy has made during his 12 year tenure at Chegg. Under his leadership, we have grown from a physical textbook rental business to a global online learning platform that has supported more than 22 million students over the last decade. He guided us through our transition to a fully digital business, and in doing so, grew our digital revenue from zero to over $700 million annually. In fact, when Andy took on the role of CFO, Chegg was unprofitable, but today, Chegg is profitable and is expected to generate nearly $220 million in Adjusted EBITDA and approximately $170 million in Free Cash Flow this year. These are remarkable accomplishments, and none of them would have been possible without Andy's leadership and vision. On a personal note, I want to thank Andy for his partnership, guidance, and friendship over the last decade. He has truly left an indelible mark on this company and will forever be part of the Chegg and Rosensweig family. With that, I will turn it over to Andy. Thanks, Dan, for those kind words. It's been an amazing journey over the past 12+ years, and I'm extremely thankful to you and the Chegg team, and proud of what we have collectively accomplished. Also, a big shout-out to Tracey and Diana. You, you are the best IR team I've had the pleasure to work with. You guys are just awesome. Our company has become an industry leader, a cherished brand that is loved by millions of students worldwide, with a future that is incredibly exciting. Having the opportunity to work for a mission-driven company that is integral to helping students learn has been super rewarding, and I thank you. Now, back to business. Q3 was a good quarter, exceeding our revenue on Adjusted EBITDA guidance, and as Dan mentioned, we are encouraged by the continued positive trends, such as increasing retention rate and Chegg Study Pack take rate. Total revenue was $158 million, driven by subscription services revenue of $140 million, where we had 4.4 million subscribers during the quarter. Skills and other revenue was $18 million, driven by strong growth in skills, offset primarily by the change in the required materials model, which is now a revenue share, as well as some advertising softness. We remain disciplined on the expense side, aligning investments with our AI-focused strategy, which supported another Adjusted EBITDA beat this quarter versus guidance, coming in at $39 million or 25% margin. We had two one-time items that impacted our GAAP gross margin and net income for the quarter. First, during the design of our new generative AI experience, we determined that certain content and system types were no longer necessary. As a result, we have taken a charge of $41.8 million, of which approximately $38.2 million was included in cost of goods sold, which impacted gross margin, and $3.6 million included in G&A. The second item is we recorded a gain of $32.1 million from the repurchase of some of our outstanding convertible debt at a discount during the quarter, which was recorded in other income. We have a strong balance sheet and drive significant free cash flow, which we expect will continue, and for full-year 2023, we now expect free cash flow to be approximately $170 million. We have opportunistically retired both convertible debt and equity, returning approximately $1.2 billion and $800 million, respectively, to investors through repurchases over the last three years. We ended the quarter with $674 million of cash and investments, with total convertible debt outstanding of $603 million at par value. We continue to believe that the combination of our operating model, balance sheet, and cash flows sets us up to deliver on our mission to serve students across the world, leverage AI to expand our offerings and our TAM, and ultimately return to growth while maintaining strong profitability. Now, moving on to guidance. For Q4, we expect total revenue to be between $185 million and $187 million, with subscription services revenue between $164 million and $166 million, gross margin between 73%-74%, and Adjusted EBITDA between $62 million and $64 million, or 34% margin. In closing, we expect the development of AI will allow Chegg to embrace a much larger opportunity over time. We believe there is nobody better equipped to meet the current or future needs of students than Chegg. We have an industry-leading brand, proprietary data, strong operating model, and a balance sheet to extend our leadership in the future. With that, I'll turn the call over to the operator for your questions. Thank you. We will now be conducting a question-and-answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Your first question comes from Jeff Silber with BMO Capital Markets. Please go ahead. Thanks so much for taking my question. In your prepared remarks, Dan, you talked about the new user experience and how you started with the first cohort in September. I was hoping you could tell us a little bit about that cohort, how large it is, and what's the planned rollout from here to reach your entire user base? Yes, thanks. So the rollout goes to two groups. Obviously, it goes to existing customers, and it goes to new customers. So, we started at 1% rollout. We went to 10% rollout. We're already now at 25% rollout, so it continues to go up because the response has been really positive. So you can expect... Well, what we've done, and we have a video coming out for you to be able to see it. What we've done is we've improved two things to begin with, which is the user interface is much simpler, much more intuitive, easy to use, and then we are now also able to generate answers to questions using generative AI in addition to the 150,000 experts in our database of over 100 million. So that is what we're rolling out now. The next big phase, where the user experience will change even more dramatically, will, when we do Multi-turn Chat, which will be coming closer to the end of this year and then to the first quarter of next year. So it's been really positive. Feedback has been really positive, which is why we've gone to, from 1% to 25%, and we think it's gonna make a massive difference in, future growth, and we're- Hello? incredibly excited about it. Hello? Yeah, I'm sorry. I must have lost you there. So, Okay. Thanks. I'll just read the transcript. You don't have to repeat anything. So actually, let me just ask my follow-up question. I apologize. Sure. You mentioned in terms of existing and new customers, I just was wondering if we can get a little bit more color from a subscriber perspective. I know initially when ChatGPT was kind of called out, it was hitting new customers. Are you seeing any difference between existing and new customer signing? Well, what we said in the prepared remarks was we're seeing record retention. So when students use Chegg, and they use generative AI, ChatGPT, and others, we win handily. And that is because we have a proven experience that actually improves outcomes, teaches the student, doesn't just give the answer, and is designed specifically and exclusively for the learning experience. And so when students see that, plus you combine with the accuracy and quality, we win handily, and that's why our retention is doing extraordinarily well. So the battle's gonna be messaging for new customers, and we're already seeing from the rollout test that you talked about earlier, we're already seeing very positive response from new customers, as they start to see the new user interface and the first part of the experience. So we're extraordinarily optimistic right now because really it's just a matter of getting the message out, getting the product out, executing well on that, getting it communicated, and then, you know, we continue to improve all of our metrics, including getting close to where we wanted to get to in new account growth, so we can start to expand new account growth and grow again. So we're really excited about where we are, and the plan seems to be working so far. All right. Thanks so much for the color. Yep. Next question, Kunal Madhukar with UBS. Please go ahead. Hi, thanks for taking my question. A couple, if I could. One, on the international side, could you give us a sense of what you're seeing on the international front in terms of growth? And second would be, again, on the international side, competition. So how is your content relevant to customers, or students internationally? And what kind of competitive landscape do you face in places like Brazil, Latin America, and Mexico? Thank you. Sure. So on the international front, as you recall, in 2019, we really didn't have an international business. Now it's over 10% of our business, so we've made substantial progress. Similar to the U.S., when COVID came and we peak COVID, we almost doubled the number of new accounts that we would be doing in the course of a year during peak COVID. And of course, as COVID has gone away, those numbers have gone down. And so we are now beginning to start to look to return to growth of new accounts, and we're seeing great progress in that. And international is actually one of the places where we're really seeing great progress. The relevancy goes up because of AI. We're able to translate better, translate less expensive, and we're able to build out more categories faster. So that's a really positive step. And we're also finding the right pricing. So as cost per customer goes down, margins will go up, even if we reduce pricing internationally. So that's all been really positive, and so I would say we're making really great progress in international, even more so than the U.S. right now, and the U.S. is making really good progress. Next question, Ryan MacDonald with Needham & Company. Please go ahead. Hi, congrats on a nice quarter, and, thanks for taking my question, Andy. Best of luck. Dan, maybe just can you, dig into the, the subscriber trends, and what we're seeing, on a quarter-over-quarter basis more, and maybe just sort of, clarify on, on the what you mean on the retention side versus what you're seeing in terms of net new subscriber growth. And when you think maybe we start to see that, subscriber number or count sort of trough and start to show growth as we look over the next few quarters here? Yeah. So, you know, Andy has coined the phrase subscription math, so in his honor, upon his retirement, I'll sort of walk us through this a little bit, which is when an account comes up for renewal, what we mean by we've seen incredibly high renewal rates is, of those that come up for renewal, they are renewing at a much higher rate and staying on longer than they ever have. And we're also seeing a significant improvement in take rate, which is, you know, almost if one out of every two new customers now is taking the more expensive version, and they're retaining at the same rate as the less expensive version. So those mechanisms are all extraordinarily positive and is why we're able to improve our profitability and generate a lot of free cash flow, and it's really positive for the business. So the opportunity is to start to sell more new accounts. We are selling significantly more new accounts in 2023 than we did in 2019 before COVID. I mean, it's millions more a year. So we still generate millions of new accounts a year. What we have to do is overcome the incredible rise that we took in COVID and then hit the trough, as you point out, which we think we're approaching that trough on new account growth, where, And with the new product and the new marketing messages and the new capabilities that we're gonna have in it, we think that we're somewhere around the trough. I can't pick the particular day or moment. On a given day, we're at the trough. Some days we're above the trough, some days we're a little bit below the trough, but we're where we wanted to get to first. And then from there, we start to grow again. And so that is the entire effort of the company, is to invigorate growth again. We have, you know, a lot of variables in which we need to execute on, but as we're executing on, we expect that's exactly what's going to happen. Helpful color. Thanks. Maybe on international, you know, last quarter, you talked about rolling out a new payment infrastructure in India as part of the international growth, and I think that was supposed to come online in August. It seems like in some of our survey work that you're starting to see more of an uptick there. But can you just talk about, you know, India and how big that opportunity is, and if you're starting to see some of that stronger momentum from the new payment infrastructure? Thanks. Yeah. I'll start with the second part first. Yes, we are seeing, It's not just the payment infrastructure that we had to do. You're right, we did that, but it's also getting the appropriate pricing in India, which we've been able to do. So what's interesting and really positive is when we lower prices internationally, we obviously see an increase in conversion, which is exactly what you'd want. But we're also seeing an uptick in people that take the more expensive version of what we have. So when you take the increase in conversion and the higher take rate of the more expensive product, the margins on the product are remaining very similar right now to what they were before, which is a really positive step. Now, in terms of the size of what we think India can be, we actually think it could be millions. That's our objective, is in India. It's got the largest English-speaking community outside of America. There's a huge focus on learning, a huge focus on STEM, and an increasing awareness of Chegg. And as we roll out the AI capabilities, we think that's even going to expand well beyond that. Also, as we mentioned, that we're starting, you know, our expectations over time to build community, and we think sharing of Chegg will also be a great viral way to accelerate growth. So I would say India is a real highlight of what we're seeing right now, and again, your survey with work, I think, backs that up. Appreciate it. Thanks again. Yep. Next question, Doug Anmuth with JPMorgan, please go ahead. Hey, it's Bryan Smilek, on for Doug. Thanks for taking my questions, and congrats on the retirement, Andy. You know, just to start, can you just walk us through results from the back-to-school season and how it shaped up versus your expectations? And then, I guess, secondly, just shifting a bit, you know, can you elaborate more on the skill strategy and, you know, what are the drivers of success that you're seeing there so far? Thank you. Yeah. So, back to school has gone well. I mean, look, it's the third quarter in a row now where we've beaten our own expectations, both on the top line and on the bottom line, and quite substantially. So, all of those are reflections of excellent execution that our team has been doing, and you see them in the results. So we would say that it's going very well versus our original expectations. We're ahead of where we thought we would be in the number of subscribers we have, in our retention numbers. And so all of this is good news. The opportunity for Chegg, as I said, is to expand the aperture, open it up. Because we can use AI now, we have more ways to add more content at a lower cost per content and make it relevant to a much larger group of people. And that is really exciting and really the, you know, one of the biggest growth opportunities that we've seen in years. So we're fired up about that. On the skills side, we've made an investment over the last couple of years to really change the way we do skills, to make them lower cost, higher quality, greater completion rates, and work through our B2B partners, particularly Guild, and we're seeing excellent growth. So year-over-year growth of skills is quite high, and if it continues this way, we expect it to be a very meaningful part of our business in the years to come. Because we're expanding not just through Guild, but we're expanding direct to corporations, where we signed our first customer, Indeed. Rather than lay people off, that they are going to use us to retrain their employees. So this is exactly the kind of investments that we wanted to make in businesses that have high ARPU. I mean, the average ARPU of our Chegg Study, Chegg Study Pack customer is $17. These are as much as $5,000. So we are really bullish on where we're going with skills. Now, the next big opportunity is, as we talked about in the prepared remarks, and as you can see in the video, if you take a look at it, is we're building skills taxonomy. So what we wanna do is help college kids assess where they really are with the kind of skills that they need to be employable on top of their academic learnings, and then help them master those skills so that they can, in fact, be employable. These are all things that are now possible, that we've always wanted to do, that are made much more possible because of the combination of Chegg and AI. And so this is the direction that we intend to go, which is B2B through Guild, B2B direct to the corporations, and direct to student through Chegg. So these are all future growth opportunities that we're building now. Next question, Josh Baer with Morgan Stanley, please go ahead. Great, thanks for the question, and Andy, congratulations on your planned retirement. You mentioned the pretty large charge on the GAAP basis related to the content and systems no longer necessary. I was hoping you'd just provide some color on what that means, the types of content and systems that you're referring to, and then what it means from a cost savings perspective, looking forward. Yeah. It's, you know, it's actually not that large, truth be told. When you look over the last, call it, 10 years or so, we've spent literally hundreds of millions of dollars on content. So relatively speaking, it's small, and it's a hodgepodge of a whole bunch of different things that are included in that. So yeah, it's something that as the team went through and looking at what the new Chegg experience is going to be, and it was starting to roll that out, there were certain aspects that the team decided wasn't going to be part of the, as I'll call it, the new Chegg. And as a result, we took the charge. And, like I said, it's like I said, relatively small. From an impact going forward, you know, it does. Most of that, as I said in my prepared remarks, rolls through the cost of goods sold. So it does have, you know, a couple hundred, maybe upwards of 300 basis point impact on the gross margin. But nonetheless, it was necessary and relatively small in the scheme of things. Okay. Thank you, Andy. And then, Oh, go ahead. Go ahead. I was gonna say, just to clarify that point, it's a positive impact on the gross margins. Oh, yeah, yes. Yeah, I'm sorry, I'm sorry. Poor, poor choice. Yes, thank you. Oh, no, that, that was clear. That was clear. And then wanted to just get just a quick update on Study Pack. Sort of talked about adoption trends in a couple ways, pretty positively. Just wondering, like, overall, are you still thinking about ARPU and Study Pack adoption as a growth driver? Like, is there more room to go? And then in relation to Gen AI and the new customers coming on board, is it sort of consistent behavior with other alternatives out there? Thank you. Yeah, you're gonna have to explain the last part of that question again, but let me just address the first part of it. So, you know, when we first started rolling out Chegg Study Pack, we had about a 13% take rate, and we're now up to over 50%. So yes, we continue to see it as a driver. But I think what ultimately is gonna happen now. I'm not sure people have really understood the level of change that we are doing with our product. So in less than a year, we are completely reinventing the Chegg user experience to be much broader, much more relevant to a bigger group of people, and much more global in its nature. The new experience will likely end up maybe with just one SKU rather than two, but with two different price points, depending on the capabilities that students are gonna want access to. We think between AI and skills and the other issues that we're helping students address, there's a real opportunity to continue to improve our ARPU on a per-customer basis. We are focused on testing, messaging, and pricing. I wouldn't expect that anytime soon. I think the single most important thing that we need to do is to get the new product and user experience out there. If we continue to see the positive feedback that we're getting now, then I think you're gonna see that just as we've laid out over the course of the rest of this year and the first quarter of next year. Then we'll keep adding and adding and adding. The key is just creating overwhelming value so that students see the value in the pricing, and every time that we have done that, we've been able to be successful. Great. Thanks, Dan. Next question, Brent Thill with Jefferies. Please go ahead. Andy, great working with you over the years. You know, one of the questions I've asked you guys for kind of multiple years is just, you've had a really high margin, and given a lot of the AI components that you have to build out, why not spend a little more to kind of get the right infrastructure in for the next five years? Can you do the AI infrastructure and keep your margins, you know, where they're at? You obviously guided to a pretty strong margin for next quarter. If you could just update the trade-offs that you're thinking through here. Yeah, I'll start and let Andy and let Andy end with a flourish. This is a highly profitable business. I mean, we have 70%+ gross margins. We have EBITDA margins that we believe will continue to grow as we grow. And as Andy has pointed out over the years, we'll likely approach 40% EBITDA margins as we get even bigger and bigger, which we are working very hard to return to that growth path. So the spending is we've increased our spending in each of the categories over the last bunch of years as we see opportunities to invest. I can tell you, as the CEO, we have not held back on investing things that we think are valuable to students and valuable to investors. We're just fortunate that our business model can produce as much as $170 million in free cash flow this year, as an example. So, you know, I think, you know, when people look how to value this company, we've got a company that's gonna do nearly $220 million in EBITDA, $170 million in free cash flow, with a big growth opportunity ahead of it. And as we see those opportunities, like we did in Skills, we invested in it. Like we transformed the company to all digital, we invested in it, like we are doing now with AI. We're not holding anything back from AI. We're just able to repurpose a number of the costs of things that were higher costs of content creation to now more efficient costs of content creation. So, I will tell you that when we see opportunities to move faster and grow, we will. It's very hard to replicate what Chegg does. These are complicated systems and processes and learning taxonomies, and we wanna get it right, so we don't have the situation that AI has, where students don't trust it. We wanna be in a situation where our accuracy and relevancy, and user experience are designed the way students expect it, and that's why we continue to get such high results and such high retention. I'll let Andy sort of address any other parts of that. No, Dan, I think you nailed it, and I think the key thing here is we're not starving the business at all. We're making massive investments. We made a big investment in Scale AI that we talked about last quarter. And it's something I remind our team at frequently, and that is, you know, to Dan's point, we're driving more EBITDA on free cash flow than many of our competitors are doing in revenue. And so when we need to deploy capital, we can do it, and we will do it, and we are doing it in our new Generative AI product. So, we're absolutely feeding the business, and we, you know, our goal, like Dan said earlier, is to get back on a growth track, and we'll make the appropriate investments to do that. Thank you. Next question, Jason Celino with KeyBanc Capital Markets. Please go ahead. Great. Thanks for taking my questions. You know, just a couple from me. Nice to hear the initiatives from the skills side. Can you just talk about the, the go-to-market there, particularly as you try to target, you know, some corporate customers like Indeed? Yeah. So, I think it's sort of fascinating. One of the things that I've, I'm not sure that we even understood the value of, was that over the last bunch of years, we've had as many as 22 million students subscribe to Chegg, and many more use free versions of our writing product and others. So we've had tens of millions of students that have gone into the workplace. So our brand is actually quite popular. And so as we were working with Guild, and as we saw that Guild business grow, and then we saw that our completion rates got beyond 50%, which is really hard to do with online courses, we began to be approached by people like, "Well, can you do this for us? But we don't necessarily want to take the whole situation with Guild, because Guild does online education as well as skills. And so that prompted us to build a tiger team that is going into corporations that know Chegg, that have a lot of employees that have used Chegg, that value Chegg. And so that is how we got started. We hired Colin Coggins, who is now running that group, and so he's responsible for all of those efforts, and he's making immediate progress, to be honest with you. Indeed is just the first of what we imagine will be many over time. There's a lot of large companies. The difference that we do versus other companies out there that do skills. So if you take some companies, they have a marketplace of skills, and they package it, and they sell what they have. Other companies have a very limited scope of what they build their content for, and that content may or may not be updated regularly. Chegg has become a bespoke content creator in the skills space because we're creating for students as well as for Guild, which is frontline workers, and now as well as for corporations. The corporations come to us, and they say, "Look, the single most important thing that we need to reeducate or train our employees on is this." Originally, these skills businesses grew B2B because it was a benefit being offered. Come to our company, and you can train on this stuff. Now it's becoming an imperative where the corporation is saying, "This is exactly what we need to do." And one of the benefits of AI has been we've gone from 13 weeks of creating a course and hundreds of thousands of dollars to five or six weeks and maybe $40,000. So our ability to do it at a much, much greater speed and much bigger scale, personalized specifically to the needs of those corporations, has improved. And so that's why, we're starting to make real good progress on our own corporate B2B. Okay, great, helpful. And then when I think about the stabilization you're seeing on the retention side, how much of partnerships come into play? And then when we think about future partners, like what are the types of characteristics or, you know, things you look for in that? Thanks. I just, you broke up a little bit. You're talking about retention and partnerships. Is that what you were asking about? Yeah, yeah. So, look, we have, we have really great partnerships so far with Calm and now Tinder, and DoorDash are examples, and others are looking to work with us. We use it in two different ways. One of them is to help increase conversion, and the other is to help improve retention. Because the way the deals work is the students can't get access to the free DoorDash or the free Tinder or the free Calm if they don't retain on Chegg. And as you've seen, our retention numbers are going up. It's for a whole host of reasons, quality being the single most important thing, but the overall value of which these partnerships are adding to it. So yes, we are being approached by and we are in discussions with a number of people and different ways to offer a Chegg Premium pack and other things that we can do because students value the ability to get access to the things that they want through Chegg. And these partners really value the ability to reach college students more efficiently than they ever have before. And so it's been a positive surprise for us, to be honest with you. Perfect. Thanks, Dan. Yep. Next question, Brian Peterson with Raymond James. Please go ahead. Hi, thanks for taking my question. This is Jessica on for Brian. I just want a little bit of follow-up to your earlier question. In terms of headcount, what kind of investments are you considering for a hiring strategy? Like, in areas like AI and skills, which are great growth areas for you, are you looking for more personnel, or are you having- are you looking for more partnerships like Scale AI that helps cover the talent you need? Yeah, one of the things that we did earlier this year, which was very unfortunate, but back in June, we really began to understand the magnitude of what we wanted to invest in. And then we made the difficult decision to eliminate almost 90 jobs in the company so that we had the headway to be able to add jobs into our AI space. So we have moved the majority of the personnel that we plan to move. We've opened up room to be able to add people as we need to add them. In terms of AI partnerships, one of the things that we built is something internally. It's called the Orchestrator, which allows us to work with any and all AI partners, depending on which is the most efficient and relevant, to produce the best result at the best price for us, for our students, if we choose to do that. So, we're not looking for we don't need many more partnerships in order to build what we want to build. It's really about execution right now. So we've always been judicious about adding heads. We don't really add all that many heads per year, but the ones that we will add will be focused on getting all of these services rolled out the way, the way we've discussed it on the call. Great. That's great. That's good to hear. Also, as a quick follow-up, so as you're rolling out further capabilities with your AI tools, are students receptive to having AI on track, being, like, a coach in their lives beyond studying help? Like, could AI connect students to career guidance and mental wellness advice that helps keep them subscribed on Chegg even when they're done with classes? Thanks. Yes. The answer is absolutely yes, and that's precisely what we're building. So in the short term, the first step is to convert all the academic support. That is the single most valuable thing that we do and most obvious thing that we do. From there, we are building the skills pathways, which is the ability to assess, do you have the skills necessary? So just envision the following scenario: You go to school A, we know that students that go at school A that major in finance end up going into the following 10 companies in your state, and the skills that you need outside of academics to be proficient in are these things. We'll be able to tell all the students that. Then we'll be able to assess you versus your other classmates, or against an assessment test, and then we'll be able to offer you the ability to learn those skills. Those kinds of things will be, not only make Chegg more valuable while you're at school, but also be able to stay with you once you're outside of school. The second area that we're working on are the areas that were originally Chegg Life, which is financial literacy, mental health, those kinds of things. And so the ability to use a coach, precisely as you say, it's internally called the coach. It will not only encourage you to do things academically and skills, but also acknowledge when you're not getting enough sleep or when you may wanna talk to somebody. So it's precisely the kind of things that we wanna do. You know, when I joined the company 14 years ago, we said we wanted to go from four days a year, rent, return, rent, return, to 365 days a year. Well, we've gotten halfway there, or a third of the way there, I should say, and we think these new capabilities will continue to expand the reason to just stay annually on Chegg. We really have not offered an annual subscription in ages, but one of the things that once we roll out these perks and roll out these other capabilities, we do think there's gonna be an interest in an annual subscription because you will use Chegg more and more each day for things beyond just academic support. You use it for mental support, you'll use it for skill support, for coaching, for time management. There's a whole host of things that we'll be able to do that we've never been able to do before, that were always on the original desire and roadmap to do. So, yes. Thank you. Next question, Alex Fuhrman with Craig-Hallum Capital Group. Please go ahead. Hey, thanks very much for taking my question, guys. You know, wanted to ask about the marketing strategy. You know, has your marketing needed to change at all over the past couple of quarters as AI has emerged as a little bit of a competitive threat? And as you look into next year, is it you know, pretty much the same playbook, or are there any you know, differences in how you go to market with your customers that we should expect to see next year? You can expect to see differences in the messaging and differences in the format and differences in the vehicle. So I'll take each one. The first one, and the most important one, is we will be able to start to message the new capabilities. Remember, we get millions of students that come in a month, but because you come up against the paywall from day one, we will now have more valuable messaging and differentiated messaging that we think will improve conversion. That's worth a fortune to us, without even bringing in any other customers into the funnel. But of course, we want to expand the funnel, and we should be able to expand the funnel because the kinds of things that we can do will now be relevant to students well beyond just the STEM B categories. And that is one that we intend to use that increased messaging in other environments. The environment that I'm not, I don't think will surprise you, will be environments like TikTok. So it might surprise you to know that Chegg produces a lot of videos for TikTok now. The ones that don't do very well get to 100,000 people. The ones that do very well get to over one million people. So, our ability to show the product in video and message it through influencers on college campuses, we think will expand who's aware of us and what they're aware of us for, and that will be the big increase that you see in terms of Chegg's effort to get the message out once the product is rolled out more fully, which will be next year. Okay, that's really helpful. Thank you very much. Yep. Next question- By the way, we've seen really positive response from TikTok already, and we've seen the beginning of positive response on conversion for the customers that are getting the new version of Chegg. So these things are things that we hope to work and expect to work, and we're seeing good first signs of them working. Next question, Eric Sheridan with Goldman Sachs. Please go ahead. Thanks for taking the questions. Maybe two, if I can. One, one big picture, Dan: How should we be thinking about pricing power longer term with respect to AI? I know there's sort of this debate out there among investors about whether AI is something that is inflationary, deflationary, sort of offense versus defense. So would love to think about how you think about AI capabilities feeding back broader to sort of pricing and the platform over the medium to long term. And then second, more shorter-term question, just as we exit this year and go into next year, any updates on your strategy with respect to language and, and more language capabilities on the platform? Thanks. Yeah. A lot of really good questions there. Let me try to unpack them. So the first thing is l et me just get to the language one. On the language one, we have said that, you know, we acquired Busuu and, the initial, execution and integration of Busuu did not go as planned. And we are now seeing that turn around and get into positive territory again. And so that is, that is a really good scenario. There are three places for the language areas to grow. Obviously, we're in Europe, where it's, it's much more prominent, direct to the consumer. Believe it or not, B2B on its own and through the partnership with Guild are also growth areas for us as, more corporations want English language. And because we have the partnership with Guild, that's one that we think will continue to expand. And then the ultimate one is the freemium model in the U.S. All of those things are in flight now, and, you know, internally, we expect to see the results of those efforts over the course of this semester and then increasing next year. So those are our also growth opportunities, just like skills. In fact, we consider language a skill, so we think that whole category is a growth category for Chegg, even starting now. So on the ARPU area and pricing power, we have shown that we have pricing power when we rolled out the bundle. We also last year, when we took the dollar increase, we said that the dollar increase was designed to increase the number of people that took the bundle. So that actually did so by five or six points, which is what our estimate was. Going forward, I don't really see charging extra for AI as a good decision for businesses. I think it's an opportunity for the companies that do it better to pick up market share and retain their pricing. And, you know, I sit on the board of Adobe, so we have lots of these conversations there as well. For Chegg, as I mentioned earlier, I think ultimately we get to one SKU that has all of this, has the academic support, has the skills, pathways, and then has the support for the other areas of your life. And I think depending on which of those capabilities you want access to, the price point will go up. But there's always got to be, particularly for college students, a smart price point to get them started out. And so I think we see being able to improve ARPU by adding and improving the amount of things that we can provide and the number of people that are willing to pay for the higher SKU once they become Chegg customers. So yes, we know we have pricing power. We've taken that power. We could take more of that power now, but the goal is to return to new account growth, which we're getting closer and closer to every day. And so that is more of our primary focus right now than pricing. Great. Thank you. There are no further questions. I would like to turn the floor over to Dan Rosensweig for closing remarks. Yeah, listen, let me start again by thanking Andy. Without his friendship and partnership and leadership, Chegg would not be nearly as successful as it's been. You know, we love who we serve, we love the ability to serve them, and working with Andy has been one of the professional honors of my career. As we go forward, what we realize is the opportunity to do more for students and do it for more students is now opened up again because of AI. And so as we come out of the COVID, you know, accelerated growth rate that was not sustainable, we are hitting that trough, as one of you mentioned earlier, and getting to the point where retention is growing and length of time that people are growing and ARPU is growing, and it really is about adding new accounts. And, and as we get closer to where we want to get to first and then roll out the new product and new service, we see ourselves serving tens of millions more students a year over the next bunch of years. So the future at Chegg really does look exciting. The investments that we're making now are ones that we anticipate will make a big difference in our future growth. And we're really excited about the business, and, and we're proud of our team and the execution they did for the third quarter in a row to beat, and exceed and to increase the amount of cash flow that we're producing. So we're just gonna keep working hard and reporting out on those results, and I think you're gonna be very excited over the years to come. Thank you, Andy, and thanks everybody for joining. Thank you. This concludes today's teleconference. You may disconnect your lines at this time, and thank you for your participation.