Chegg, Inc. (CHGG) Earnings Call Transcript & Summary

Hello, everyone. Welcome to Day 3 of the Needham Technology and Media Conference. I'm Ryan MacDonald. I lead our ed tech research efforts here at Needham. And it's my pleasure to have Chegg's CFO, Andy Brown, here with me for this fireside chat. Hi, Andy.

Good morning, Ryan. So formal.

So formal. Well, this is going to be a 40-minute fireside chat. We will -- I'll go about 30 minutes and try to leave between 5 and 10 minutes left for questions. So for those listening in, if you do have a question for Andy, you can insert that in your chat box and send it over, and I'll be sure to have it asked and answered. But with that, let's -- why don't we get started? So Andy, as customary with many of our fireside chats, why don't we start with a brief overview of Chegg for those that might not be familiar?

That's probably very few people. But nonetheless, let's give that a whirl. So there's -- I think -- let's just take a look at where Chegg is today. I mean Chegg is an online direct-to-student subscription service in very simple terms. Now we didn't start out that way. We started out with -- for some of you that have some history, we started out renting textbooks, which we still do. It's just not the primary business today. And that was how the company started with the founders. I look at our company as being refounded about 11 years ago when our CEO and the rest of the management team over a few years came on board with our CEO, Daniel Rosensweig. And Dan always had the vision that it just -- it shouldn't just be about textbooks. It could be any type of educational service can be delivered direct to the students. And it should be available anytime, anywhere in any place. In other words, 24/7. I mean very much like pretty much everything we do today is, right? If you think about how we consume things today, it's on demand. I mean, everything is on demand, whether it's videos, whether it's e-commerce transactions, whatever it is. And so Dan had that vision, and that's what we've been executing on for the last 10 years to where we are today. And that is an online subscription business that has literally millions and millions -- we had 6.5 million subscribers and -- over 6.5 million subscribers. And it really revolves around, I'll call it, 3 core subscriptions for the core Chegg today. And then additionally, we started expanding into what we call skills area about 2 years ago. So let me kind of walk through the core subscriptions because I think that will help people understand what we do. So the first subscription is what we call Chegg Study. And Chegg Study is primarily for college-based students, and it helps them with their studies as they go through university. It's -- and I always like to put it this way. If colleges were doing what they were supposed to do, Chegg Study wouldn't exist. But they're not, and they can't afford to, and so we're the help mechanism for students. It's $14.95 a month. And what it allows students to do is access what we call textbook solutions. So if you remember at the end of a textbook, if you -- when you went to college, there were problems that you're supposed to solve to see if you understood the concepts. We provide the step-by-step solutions for those concepts. So it helps kids understand, and they can check their work and see did that work. And then the second big part of Chegg Study is what we call Expert Q&A. And so if a student has any other question, and it can be on any subject, we guarantee an answer back. If they ask the question on the platform, we guarantee an answer back in 4 hours or less. And many times, it's almost immediate because we have almost 60 million questions asked and archived on the platform today. So -- and then what we've done with Chegg Study, and it's a little bit -- I always kind of -- it's almost analogous to Amazon Prime. And that is we've just added capability after capability. So beyond textbook solutions and Expert Q&A, we've added a video-based tutoring as it were. We've added practice tests and assessments, and we continue to add things, pretty much like Amazon has done with Prime where originally it was really just video -- I mean 2-day shipping, then they added videos and movies and fresh and music and all of that stuff. So that's Chegg Study. The second subscription service we have, and this is a freemium service, is what we call Chegg Writing. And we've got several properties that help students with writing. There's -- in the neighborhood of 30 million to 40 million students that access these properties on an annual basis. And much of the music for free, where we provide citations and bibliography for students when they upload their paper. But then we also offer them things like grammar help, sentence structure, plagiarism help and things like that. And that's a premium. That's a $9.95 premium service that literally hundreds of thousands of students access. And then the third subscription we have is what we call Math. And more recently, the biggest part of our Math offering today is what we call Mathway. It's an acquisition we made -- wow, right a year ago.

Almost a year ago.

One year ago. And that's -- Mathway was and is a leading provider of math solutions. And that's become a very large subscription service for us, much bigger than we thought it would be when we acquired it a year ago. And then the last subscription we have is what we call the Chegg Study Pack. And the Chegg Study Pack is taking Writing, Math and Chegg Study and offering it for a premium price of $19.95. So that's the core of Chegg today. And if you're wanting to invest in Chegg, you're really investing in that as far as the core business today. The second part of our business is we recognized many years ago that there's different types of learning. And what I just talked about was academic learning. So it's helping you as you're going through that academic process. But what's become more and more relevant over the last many years is skills-based learning, where people just want to learn a skill to be able to either get a job or get a better job. And we recently -- and I say recently, over the last 1.5 years or so, have started getting into the skills space. It's a very small piece of our business today, but we do believe it will be a very big part of our business and a big growth factor over the next many, many, many years. And so that's the core Chegg today. And I'll just kind of finish this up. Most of what we have done up until about a year ago or so was primarily within the U.S. And one of the big expansion areas for us over the last year, 1.5 years is be going outside the U.S., particularly with our academic services. And that's become a big strategic thrust for us. We believe it's a huge growth opportunity for us. We believe, ultimately, international should be larger than the U.S. And that has been a big growth driver really over the last year, 1.5 years. And we believe that we're likely to have at least 1 million subscriptions outside the U.S. this year. So I'll stop there. That was a whole...

Great. Great overview.

Yes. So let's talk about the recent Q1 results. You reported yet another strong quarter, and it was really based on a balanced mix of subscriber adds across core Chegg Study domestically, international and Mathway is nicely contributing as well. But when we look at the subscriber adds domestically, we're clearly continuing to see a benefit from online learning. But interestingly enough, we saw an acceleration of the declines in undergrad enrollments this spring versus this fall. Can you talk about what the dynamics that really helps continue to drive healthy subscriber growth for Chegg in the quarter despite that headwind?

Yes. So you're absolutely right. There's certainly been headwinds with respect to enrollments, both in the fall of last year and then again in the spring of this year. That wasn't a surprise to us, to be honest with you. We had baked that into our thinking as we forecast the business. That was -- it's pretty obvious that, that was going to occur. Having said that, there continues to be a huge need for help. There's whether -- even with those kids that are on campus today, there's less and less on-campus help for those kids that are not on campus and are learning from home or remotely. Clearly, they don't have access to even those small amount of resources. So that's one of the things we see. For Chegg specifically, the other thing we're seeing, and this is something we have talked about for some period of time, and that is we have been doing a very diligent job with respect to account sharing, right? So that has certainly been a nice tailwind for us. And for those on the call that are not familiar, we implemented some technological solutions for account sharing starting in the middle of last year and then additionally in the fall. Because what we realized was that we had a -- where we probably had -- for every student that was subscribing to Chegg Study, we may have had 1 or 2 that weren't that were sharing an account. And so that was one of the things that we implemented last year. We do think that is -- we're benefiting from that. And the third thing, which is a little bit different than your question but there's no question we're benefiting from, is the fact that we're seeing a significant growth outside the U.S. as students are starting to see us for the first time in international countries.

Now looking ahead to the fall semester, it's obviously really too early to tell how things are going to shake out. But I'll ask you the question that you've probably been asked about a thousand times in the last 6 months. Assuming we returned to primarily in-person learning this fall, what gives you the confidence in your ability to retain the so-called COVID cohort of the subscribers you added in 2020?

Yes. We're not sure it's a COVID cohort. So I just want to make sure that's clear. I mean there were quite a few things that occurred kind of in the middle of 2020 that we're -- I call it, we're lapping as it were, right? One is the COVID part. What part of that is COVID? But at almost the same time, we started doing things around account sharing. So how much of that is COVID and how much is account sharing? And we do believe a big part of that is actually what we have done, which is account sharing, and that continues. And the second one is -- the third one, excuse me, is international. And so there are really 3 dynamics that we are lapping. It's not just about -- it certainly isn't just about COVID. But what we do know is this -- is that what we saw last year was just an acceleration of what we call the inevitable. And that is that more and more educational services were going to go online. More and more students, once they found that they could get on-demand educational services, why would they go away, right? I mean because that's how they live their normal lives. Everything is on demand. And so as we go back to in-person learning, which I'm -- we're -- our thinking is the vast majority will be in learning in U.S. colleges by the time we get to the fall. I mean, just -- it seems like it's inevitable, using the word again. So that is our plan. But we also recognize that -- and I think everybody recognizes that the on-campus help is probably going to be diminished, partly because of the fear of obviously the pandemic, but partly because budgets continue to be compressed. And so I think there's a lot of dynamics that are going on. I think -- but I do think this -- the move to online help, online instruction, online anything, I think that it's -- I don't think going back on-campus is going to materially change that. But yes, we're planning for kids to be on-campus in the fall.

Yes. And I mean -- and it doesn't -- it sounds like whatever assumptions you're making sound fairly conservative as you kind of look towards the back half of the year. But I mean, is there anything you're seeing within sort of activity within the subscriber base today that would cause you to plan additional promotions to try to -- where you feel like you need to incentivize learners to stay active moving forward?

No, not really. We don't. One of the interesting things about our business, and you've known this for some years, Ryan, is that we don't spend a lot on advertising. Most of our acquisitions are through word-of-mouth, other through SEO. I mean one of the beauties -- the cool things about our Expert Q&A is that every time a student asks a unique question, we then index it in the search engines. And so if that question or the similar question is asked again, then we get that free student. So no, we don't see that. There's -- it's certainly not planning on that. Now having said that, we -- I always remind our team you've got an unlimited marketing budget because we have constraints around what that next subscriber is going to be. So if they can spend $10 million more in the fall, that's going to be really a good thing for us because we're always measured on that incremental subscriber. And if that incremental subscriber meets the CAC we want, we're going to spend the money. But we haven't found that to be the case for the last 10 years since I've been at the company. So we're not planning on anything. We don't see a need to.

Got it. That's a good segue into international. So obviously, that's obviously becoming a healthy contributor both in over the last, say, 12 months, but also in Q1. What -- when you think about what's driving the adoption outside the U.S., how do you view the mix of sort of organic inbound interest or inbound traffic from students versus targeted investments that you've talked about making into additional countries?

Yes. So we're seeing some things that are very similar to the U.S. that we saw in the U.S., and that is when kids went off-campus internationally back in, call it, March or April of last year and the first thing kids do, I mean it's not a big surprise, whether or not you're in the U.S., the U.K., Turkey, wherever you are, you go online. I need help. I've got a question. There aren't very many Cheggs -- in fact, I don't think there's any Cheggs around there. And so they ultimately found us. And so we do see -- still the vast majority of our traffic is SEO. Now are we spending more percentage-wise on paid marketing assets? Obviously, yes, we're trying to build the brand and things like that. So we are spending as a percentage of the, I'll call it, the subscribers more on international, but it's not like we're -- every -- it's not like we're -- 50% of the subscribers come through paid. It's absolutely not even close to that, right? Still, SEO is the big driver. So that's been encouraging. The second thing is we've started to do -- we've started to do what I'll call brand surveys outside the U.S. for the first time. And we started that about 1.5 years -- about 15 months ago. And we are starting to see our brand outside the U.S., which is cool because there's no substitute for our brand halo, right, if you think about it. I mean the things that we see in the U.S. where you see kids that are posting "I Chegged it," there's nothing more better than it being a verb, Chegg being a verb, right? I Googled it. I Chegged it. And so we are starting to see the similar dynamics outside the U.S. as we are in certain countries that we saw inside the U.S. And I think kind of talking to our Chief Marketing Officer, and she's kind of like we're kind of outside the U.S. in certain countries, maybe 3 or 4 years behind where we are today in Chegg. So it all makes sense. And so we do see a similar dynamic. And once again, as we're going outside the U.S., what we haven't seen, thus far, is any real -- anything that's like Chegg. And I don't mean just the service itself. I also mean the brand, direct to students, right? So that is one of the significant advantages that we have. There is no competition out there the best we can see the countries we're going into. And so it's greenfield for us, both from a -- what we do and branding. And so it gives us that permission to keep going and going and going.

Yes. I'm curious, that's really interesting on the brand surveys and how you're conducting that. I know you've talked about unaided brand awareness sort of domestically and how strong that is, and you highlight that in the investor presentation. When you're doing these surveys outside the U.S., are you comparing yourself to popular brands with students or consumers? Or are they like-for-like versus other education-focused brands?

Well, very similar to what we do in the U.S. I mean, when you talk -- start looking at brands within, for example, when we start looking at unaided awareness, and you've seen this in our investor deck, which is sitting right in front of me, I mean, we even compare to Amazon, right, because it's Amazon, right? So it's not just educational services. It's also what do they think of when they think about if they need -- if they need something while they're in doing their educational services. And so we do the same thing, same methodology outside the U.S. And like I said, we're not at the same level as we are in the U.S., but the encouraging thing is we're not that far behind and -- we're just not that far behind.

My survey work has indicated a nice inflection point in adoption within the main English-speaking countries outside the U.S. But I'm curious, in which countries where English is not the primary language are you seeing the strongest adoption rates with the investments you've made?

Yes. We -- it's interesting. We haven't gotten into that specifically. But I can tell you, it's not just English-speaking countries. So we went into this thinking initially, this is about 2 years ago, that we'd focus on the English-speaking, the ones that you know about, Canada, Australia, U.K., in that order, by the way. And then we'd evaluate and then we go more into the English learning. What we've found out is that, in fact, we're more relevant sooner in those, what I'll call, non-English-speaking but English-learning countries, right? There's a lot of English-learning countries, where the primary -- where their first language isn't English. So there's -- I think I've told you this before. Tracey and I, who's our Vice President, Investor Relations, I mean, we sit down once a quarter with our -- with the lady that runs our international business, our international operations. And the first time we sat down with her, and this was maybe about a year ago, and she goes through the countries and the subscribers and we're like, "We got that many subscribers in Turkey?" I mean it wasn't like 1,000 -- or 100 or 1,000. It was like tens of thousands. And I'm like, "Turkey? How did that happen?" Right? So some of it's -- I hate to use the term, some of it's brilliant by accident, but there is some brilliance by accident. But it gets to the point, right? When students need help, they go to the Internet and they find Chegg. That's what you -- that's really the core message here. Now do we know as much about all of those countries as we do the U.S.? The answer is no. Not yet, but we will. But still, it's that dynamic that students are looking for help. And Chegg is -- certainly, if you're a college student, the primary place where -- if you're searching, you come up with -- we're the place to go for help, and that's what we're seeing.

And given that you're focusing on English-learning markets, do you have to invest additionally to localized content in those markets? Or can you really be effective with what's already on the platform?

Well, there's a kind of a yes and a yes, kind of a yes, or a yes and a no. It's -- the answer is that the beauty of the content that we have, particularly for an English learner, is the fact that whether or not you're in the U.S. or the U.K. or Turkey, it doesn't matter. STEM is STEM. A quadratic equation is quadratic equation. I mean it's just -- it is what it is. And so the beauty of the model is that once we have the content, it doesn't matter which country you're in. The second part of your question really is more about -- are we going to localize it for local languages. And the answer is, ultimately, at some point, yes. We're doing a little bit of that today, not a lot, but we are looking at what it takes for us to localize content in certain countries or regions to have potentially, at some point, Expert Q&A where they answer in the local language. So those are all things that are likely to evolve over many years. I always remind people we're kind of 10 years into the journey in the U.S. or maybe 1.5 years into the journey internationally. We talk about 1 million subscribers this year outside the U.S. And I'd have to go to my -- I don't have it in my deck here, but I think the first time we had 1 million subscribers inside the U.S. was probably -- Tracey will correct me if I'm wrong, 2014 or 2015? So we're -- the point being is there's a journey here. We're -- and I expect this journey to last many, many years. And ultimately, if we're successful, as I believe we can be, let's call it, 10 years from now, you and I talking, we've got more subscribers outside the U.S. than we have in the U.S. because the TAM is at least, what, 3x?

If not more. Yes. Absolutely. Okay. Shifting to Mathway. We -- you mentioned it earlier, but we're about 2 weeks shy of, I think, the 1-year anniversary of the announcement. How has the Mathway team performed compared to your expectations so far? And I think there were some earnouts that were involved in the initial acquisition. What was their achievement, I guess, compared to those targets?

Well, okay. So I'm not a big baseball fan, I will just say. No, I will say I do support the Oakland As, if I do, just for the -- I'm not a Giants fan. But I think a 600-foot home run is a long home run. Is that fair?

I guess. Yes.

I think that's right. That's Mathway for us. I mean I jokingly tell people I said, "Oh, my God, thank goodness, we didn't have to buy them at this point given their performance." It was -- the founders blew through the performance. I mean just like -- and we were happy to pay it because that meant the business was doing exceedingly well. So it has done -- yes, it's just been -- it's just much better than we had originally thought. I think -- and I think part of it is we've kind of left it alone, but we help in just subtle areas, potentially with marketing and how -- but we just basically said, go run your business. Part of it, it was because they had the incentive by us. And I think we've learned from that. I think we've learned from the fact that let's help, but let's not over-help. Let's not over -- be anxious to integrate. Let's just see how this business works. And truth be told, I would suspect -- and if we were buying this business today, if it had performed as a stand-alone business the way it has performed for us, the price tag on that would have been 2, 3 or 4x. It's been -- it's fabulous. And it's a great product. Students are -- it's just -- it's been a home run and a big one.

You talked about a little bit there. You have a policy historically on acquisitions of leaving the asset alone for the first year and then looking to do more on the integration or content development side, et cetera. So now that we're approaching the 1-year mark, how should investors think about what the priorities are for Mathway moving forward? And should we expect some -- a full integration into the Chegg platform to the extent where it's deeply embedded within the bundle? And can you talk about that a bit?

Well, at some point, the answer is yes, most likely. Well, I'd say the answer is most likely yes. Given the success that we have seen with Mathway thus far, we're tending to be a little bit more hands off. Let them run the business. Let them do it well. The bundle is doing extraordinarily well with the old Chegg Math Solver product, right? The old -- I use that because there will be some integration there. But when we look at the Chegg Study Pack today, it's got the right -- the math part of it is the Chegg Study Pack, so -- and that's done exceedingly well. So we're kind of at this point where we're not in a hurry to integrate, to be honest with you. We're going to take our time. There's nothing that is broken. In fact, it's going -- as we just mentioned, better than we would have thought. So I think the integration is going to be much slower on -- well, no, I don't even think. The integration is going to be much slower on Mathway, and we're going to be more -- just a little bit more careful. There are certainly things we have already done on the Mathway product. I mean a lot of people don't even know that there's an ad component to the Mathway product. So one of the things we have brought to bear is the fact that on our writing side of our business, we've got folks that are world -- literally world-class at programmatic advertising. And so we brought that to bear, for example. So that's a little bit of an integration, but not integrating into the core product experience. It's more on the advertising side. So yes, so it's -- we're going to try to -- we're like -- this is an area where we're going to tread a little bit more carefully. And we're not in a hurry to screw it up.

Well, it's still -- when we ask students, it seems like Mathway still maintains a pretty strong brand value with students, and they know it. So I think that always ends up being a bit tricky if you add -- make it Mathway by Chegg or just make it the Chegg Math Solver tool, do you sacrifice some of that? So that makes sense. In terms of the ARPU trends, I think many analysts and investors, myself included, have been surprised by the continued decline in ARPU for the past 5 quarters, despite the fact that you acquired Thinkful, you initially launched the Chegg Study Pack in fall of 2019. Can you walk us through the dynamics that are at play here? And when do you think we'll start to see material contribution to the point where you start to see that ARPU expand?

Okay. So you now hit the #1 question that we get asked. Ding, ding, ding. So yes, so you're absolutely right. If you take our services business, divide it by the subscribers that we provide you, something doesn't work. I get it. I get it. The challenge -- there's a couple of challenges in that. I'll call it a rudimentary calculation, right? The first thing is not all of our Chegg services are subscriptions businesses, right? You've got things, brand advertising, you've got programmatic advertising, blah, blah. I'll just go through that. The second thing that you have is what we just talked about is that Mathway is doing exceedingly well. That isn't a $14.95 or a $19.95 subscription. It's $9.95, and that's the peak. Remember when I told you we haven't actually changed anything on Mathway. Well, they're still offering a $39.95 annual subscription. Do the math on that one, right? That's not a lot of math to say that's about $3.50 a month. So there's a whole bunch of dynamics going on. What we do internally, however, is what we do is we measure the ARPU by subscription, right? So the important ARPU that you're talking about is Chegg Study and Chegg Study Pack. That's kind of what was expected, right? You add the $19.95, then ARPU should go up. Well, it is, and that in -- within that confine, right, because we've seen a much better take rate on the Study Pack than we'd originally thought just 12 months ago. But with all of the other dynamics, it's just difficult. And some -- you'll have some quarters where you'll see an uptick year-over-year, and you'll see some quarters where it's a downtick. And a big part of it is mix and a big part of it is the contribution from those other, I'll call them, services. And they're typically not growing as fast. In fact, not typically, they don't grow as fast as our subscriptions, right? So you're getting more subscribers and then the slower businesses aren't growing as fast. So that's the challenge we have. But as we look at it internally, we're seeing a nice uptick in ARPU, not a step spread, but a continued uptick in ARPU. And that's what we would have expected with the Study Pack. It wasn't going to be this immediate jump because we're only offering it to our new subscribers and re-subscribers. We weren't offering it to our renewal base, right? So it takes a while for that to get through it. We figure, within a couple of years, probably 80% to 85% of all of our subscribers would have been given the option for the bundle because you have kids, for example, right now, we're in the middle of May. This is where we have the most cancels, right, between the middle of May and middle of June because kids are getting out of school. Well, if they resubscribe in the fall, they'll be exposed to the bundle. They'll like have an opportunity to get the bundle as it were, not exposed. They have an option to get the bundle. So you kind of cycle through folks. And so it will be that. What we're seeing and what we expected is that gradual increase in the ARPU for our Chegg Study, Chegg Study Pack kind of subscription base.

Got it. Now you've talked previously about as international scales and you get to 10% contributor on international that, that obviously will be disclosed. Would we expect to see a similar dynamic with Mathway if it gets to that 10% level, either subscribers or revenue, if that's something that starts to break -- broken out?

Well, certainly, that's not a requirement for us to do that, right? It's just a subscription. There are certain requirements the SEC has regarding what we have to break out. But yes, if international becomes 10% of our consolidated businesses, it will get broken out. That's just the way it has to be. And in fact, if any one country becomes 10%, you have to break it out, but that won't be the case. But as far as breakouts beyond that, we've been reticent to do that. We think we're more of a platform company where it's -- and breaking out things gets awfully messy. I think that -- I think we're better served -- and truth be told, I know we get questions about this a lot, but I think, in general, we're better served reporting how we're reporting. We'll let -- can I imagine over the next several years or call it -- I always imagine 5 years from now, could there be more breakouts, potentially more breakouts, as other parts of the business get to scale. But certainly, international is likely to be the first that we break out separately.

Got it. In regards to account sharing, you spoke a little bit before about some of the processes you put in place to cut down on that. Given that more students were back living on campus or around campus this spring, albeit still learning online, can you talk about any proof points that you're seeing that, one, the processes are working to limit account sharing? And two, that previous account sharers are converting to paying subscribers?

Well, we're pretty certain that users are converting. And then one of the proof points that we're seeing is -- and I think we've talked about this in the past, is that what we call our P1 retention. In other words, our month 1 retention has always been kind of the -- has been the lowest. And once people retain for 1 month, 2, 3, 4, 5 and 6 will be just super high. What we really saw as we started introducing our -- the account sharing initiatives is that, that P1 retention got better and better and better. Because guess what, those kids that were actually -- were subscribing for the first time had already used us, right? Makes sense. They've already used us, right? So yes, so we're pretty certain a big part of what has happened is we saw that through our retention. As far as when kids go back to campus, when you look at the technological solutions that we put in place, and that is the ability to only have 2 devices and then having the MFA capability, we're not -- have we solved 100% of the accounts there? And the answer is probably not. Kids are smart. But have we solved 95% at least? I would think yes. And so we don't get -- are not overly concerned about that. We certainly haven't seen any abuses as kids have gone back on to campus on spring. But I think the real measure is going to be the fall. Let's just be clear. But I don't think -- there's nothing to suggest that we haven't solved at least 95% of the problem.

How about an update on the performance of Thinkful? What are the investment priorities for that business as things currently stand? Should we expect to see additional announcements like the one with ASU? Or do you view like the university partnership is more of a one-off and continuing to focus on sort of direct to student?

Well, so to be clear, for everybody on the call, skills for us is a big growth area. But we're early in that game. And we dipped our toe with Thinkful. This Thinkful is a direct-to-student -- kind of generally direct-to-student higher-priced immersive courses. We are looking -- the ASU is thus looking for ways to distribute those classes, all that content. And we -- it's kind of a beginning. As I imagine skills 5 years from now or 10 years from now, I imagine it very much like our academic, where if you think about our academic side of our business, we acquired many businesses along the way, and I would expect that we add additional assets along the way also on the skills base. So you can imagine us 5 years or 10 years from now having 2 or 3 or 4 assets that comprise a very large multi-hundred million dollar business just like the academic side of our business is today. So we're super early. You can expect many different offerings over a period of time, like I said, very similar to the academic side.

And that's, I guess, a good segue into the M&A question because it's one we obviously get quite often. You've got about $2 billion in cash on the balance sheet now, I think, hired a new Chief Strategy Officer that's got quite the extensive M&A background. So what -- how do you view the approach to M&A moving forward or evolving moving forward since you've historically looked at more smaller tuck-in acquisitions that you've been able to grow? What do you view between sort of tuck-ins versus maybe something a bit larger to make a bit more of a splash into the space?

Well, I think the beauty of our capital structure is we can do both. To your point, we've done primarily smaller acquisitions. Although I will remind you that when we did the Imagine Easy acquisition, what, 5 years ago, it was 15% of our market cap. It may have only been a $60 million acquisition, but it was 15% of our market cap. So you got to make sure you define what size means. But the bottom line is, yes, we have the ability to do larger transactions. And I think, given where we are today as a company in the -- as we're approaching, call it, $800 million of revenue, we are looking for acquisitions that, I call it, big enough to matter, right? So -- and my goal with doing the capital raise is putting us in a position where we have the ultimate flexibility to do larger transactions if they make sense. Now having said that, the philosophy, how we look at transactions hasn't changed. And that is -- they've got to leverage some of our -- got to either leverage some of our core assets or something, whether it's the brand, whether it's the platform, whether it's the users. There's a whole bunch of things that we look at, and it has to be in the fair way, right, no matter how big it is. So those are the things we look at. Now what's different from maybe 3 years ago to where we are today, we're looking -- we're now looking on both sides of the thing. We look at academic on the academic side. Mathway is a good example of that. And then also to fuel the skills business. And so we also look on that side. So I'm -- so we're just at a point where we've got the ultimate flexibility. And pretty much every asset that comes available whether it's on the academic side or the skill side, the nice thing is everybody knows we're one of the few strategics that could afford those assets, whether it's -- I'll just go back in history. I mean, we obviously didn't do these transactions, but Instructure on the academic side came by, we looked at that. Pluralsight came by, we looked at that. But they weren't the right assets. But the fact is we could have afforded them if we thought they were the right assets. They just weren't for a variety of reasons. And they're doing great where they're at, at this point. So yes, so we're acquisitive, both on the academic and on the skills side of the business.

Yes. And you -- I mean, you talked about the skills. Obviously, you see a great opportunity there and that it seems to have been a focus. But does anything about the recent sort of increase in consolidation or M&A activity in the core academics business sort of make you look a little bit more in trying to be either more defensive of market share or more proactive or speeding up the move internationally on that business?

Well, if you think about things that are happening on the academic side, most of those are actually not in that direct-to-student, right? There's not a lot of -- there's not -- I mean there's been just a few couple of small transactions, but nothing of -- that's material. I think you're likely to see larger transactions on the academic side that are consolidating stuff that service the institution and things like that. But on the direct-to-student side, most of the -- any consolidation in the direct-to-student side is likely to be, as you know, with a privately held company. There's not a lot of large privately held companies that are direct-to-student, right?

Exactly. Awesome. We are just about up on time, but Andy, so we'll leave it there. So thank you very much for joining me as usual, and it was a great conversation, and thanks for everyone who dialed in and was listening. Have a great rest of the conference.

Thank you, Ryan, and thank you, everybody.