Chegg Surges 20% in After-Hours Trade, Announces Restructuring Plan and Layoffs
Chegg Inc experienced a 20.3% surge in post-market deals on Monday after announcing a significant restructuring plan. This plan includes the departure of 441 employees, representing 23% of the company's global workforce.
Company’s Vision
Nathan Schultz, Chegg’s President and CEO, outlined the new direction by stating, “Today, we executed a restructuring effort, a major step in my plans to refocus Chegg and return to subscriber and revenue growth. These changes are designed to make us a more focused, more efficient, uncomplicated, and quicker-moving company. Our renewed focus on our core audience – the student – will allow us to address an unmet need with an offering that is differentiated, holistic, and verticalized for education.”
New Strategy
The new strategy involves delivering holistic and unique product offerings for students. This approach will integrate several key aspects into a single affordable platform:
- Organizational proficiency
- Early career learning
- Financial literacy
- Community
The goal is to address gaps in the student experience, setting Chegg apart from other companies that offer one-dimensional learning support or generic offerings.
Unique Selling Proposition
Chegg's unique platform will leverage:
- Artificial intelligence specific to education
- Proprietary learning model
- Over 100 million pieces of content
- Subject matter experts ensuring quality
- 360-degree functional support services
Analysts’ Reaction
After the announcement, BMO analysts commented, "We expect the stock to react positively."
Financial Impact
By 2025, the company anticipates non-GAAP expense savings of $40 million to $50 million, resulting from:
- Employee departures
- Closure of two offices outside of the United States
- Other cost rationalizations
Chegg predicts incurring a $10 million to $14 million charge related to the restructuring, with about half of this in the second quarter and most charges incurred by the fourth quarter of 2024.
Conclusion
Chegg's restructuring is a bold move aimed at refocusing on its core student audience and achieving significant growth and efficiency. This plan has been well received by the market, as evidenced by the stock surge, and seeks to position Chegg uniquely in the educational support sector.
