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

Okay. So we're going to get going with our next fireside chat. My pleasure to have Dan Rosensweig, CEO of Chegg, here with us today at the Goldman Sachs conference. Dan, thanks for doing it. Great to see you in person.

Thank you, and I hope you're not one of the people Goldman is laying off next week.

I hope so. I hope not either. I could use a little rest though for this week.

You handle 40 companies. I think you deserve rest.

Yes. So well, thanks for being part of the conference. I think, Dan, to kick it off, one of the things I would like to do in these sessions, maybe give a little perspective to folks listening and the folks in the room of where the company is right now, what you're trying to build after, and you've got so many different opportunity sets and products that you put in the market, maybe just table set for us on the current state of the company.

Yes. Fair question. So I've been with the company 13 years. We've been public for, I guess, 8.5. And where are we with all this is a really fair question. And next week, we're actually doing our annual meeting with our Board where we do a strategy offsite, and it's fun because the Board presents to me in different directions they think the company could go. When you think about digital transformation and you think about what industries have been affected and are just optimizing and what industries are about to go through incredible upheaval, I think everybody agrees that health care, certain parts of finance and certainly education are really yet to be digitized at the level that they can be. So it's hard to know -- people use the analogy, what inning are you in? It's hard to know what inning or what quarter you're in, but we don't think we're anywhere near a place where we even know what the industry is going to look like. Like it's that early in our opinion. We happen to be a company that grows. We happen to be, I think, the only edtech company that is profitable on an EBITDA level, on a GAAP level, on a free cash flow level. So we have the best arsenal to take advantage of whatever the opportunities are that present themselves as you go forward. But the simplicity of our model is this. We want to sell the people we have more things, and we want to get more people to sell things to. The first thing we started with was textbooks, and we said we wanted to build a big brand that people felt provided overwhelming value and build a giant list and then figure out what was next. The truth is when we started, there were no digital products that anybody was paying for online. There were 0. I mean most of our digital revenue when we went public were eTextbooks. So -- this is like echoing, this mic. Can you guys still hear me?

Yes.

Thanks. So right before we went public, one of our Board members, still a Board member today, a very smart person said, "How do you know you're going to have the right to educate people? All you've done is rent them textbooks." And my answer was, I don't know, but if we can't figure that out, I don't think we have much of a company. So our job was to figure that out. And it turns out we're the largest educator now in the United States. We educate more people than anybody. So our brand has 88% name recognition. And the expectation of what they believe we can bring to them is substantial. And it's not just academic support, it's job and skills-based support, everything from resume writing to the actual skill itself, excel. I'm sitting on the Board of Adobe Creative Suite, Salesforce. 50% of all college graduates go into sales. There's not a single company -- a single college that has a major in sales. So then you take what we call Chegg Life, which is the biggest challenges on college campuses today, other than cost, which is insane. It's life that gets in the way. So mental health. We have a mental health epidemic like you can't conceivably imagine right now on college campuses. And it shows itself in many forms from drugs to alcohol, sexual assault to dropouts, like it is horrible. As a father of daughters, it is scary. And I sat on 2 college boards and my family actually paid for the rape kit at one of the colleges because when I read the numbers, like it is bad. And so we serve a very specific and large and growing audience of people that have put their hand up, that have entered the fray that said, "I need to get something better for myself." So you're going to see us expanding not only with academic services and skills-based services but other things around mental health and financial literacy and resume writing and the other things that people need. And whether they become more opportunities to sell to our existing customer list or become lists that we can grow into because that's what they want from us rather than the other things, the research shows absolutely that Chegg has earned that right to provide those things. So that's just domestically. Outside the U.S., we're super early, which is there's 3 categories of people, the first one, we got really big on. We already have well over 1 million subscribers outside the U.S. Try to find any other company in education that has anything near that pain. It doesn't exist because the value we give is overwhelming and confidence building. The first group were STEM-based students who speak English and are taking their classes in English in those countries. The second grouping are people that are taking STEM that speak some version of English but aren't necessarily taking the class in English. And that's why we're starting to localize the content as we started in Turkey and then the next one is Mexico. And then the third one is people who take it not in English and don't speak English. So we have plenty of room to grow. The challenges that we face where we grew so fast, we were not technologically ready yet to present in local currency, local language or do price testing. We had no ability to change the price outside the U.S. until this summer. So the next big phase is to figure out what the price conversion ratio is in those 6 big countries that you and I have talked about before. So whether it's Indonesia or whether it's India or Philippines, Mexico, these are the places where we already have huge top-of-the-funnel traffic but haven't figured out the right pricing for conversion ratio. The good news is unlike the subscription services you're familiar with that make no money, we make a ton of money and everything that we sell will be profitable outside the U.S. So there's no loss leaders because the cost to produce it is already done. So if you ask me where the table is, it's been a very complicated last -- I mean we were 19 straight quarters of beat and raise. We -- you could set your watch to us or Apple could set it for you, if you want it. And then we had 2 out of 3 that were just like what the hell is going on. And so the rest of this year and going into next year, the goal is to get back that consistency of understanding the market. And I think we're approaching that, and that's exciting for us.

Great. Okay. I want to zoom out with one more big picture question. I think companies like yourself, all get lumped together in sort of this broader array of companies...

By people like you. I don't lump us with that c***.

Or I would say the broader class of investors and analysts. And say, there's education, there's technology at play. How do you think about who you compete with on a day-to-day basis in your avenues of business? And how do you think about the competitive landscape evolving going forward?

It's a great question because I come from the ZDNet days and special interest publishing days and then CNET, then Yahoo!, which was much broader, and then Guitar Hero, which is much more specific. So the one thing that I've always learned, it doesn't matter if I think we have competitors. It's who else somebody could do something with instead of doing it with us. And so there's an array of free options that people can use. They're not all that sustainable and the quality isn't good. And if you saw our research, it would show you that where they use the free option, most of them also already use us because we're the confidence builder. You can be certain our information is accurate. You can't be certain the other way. And when you're paying all this money and you're trying to get a grade, you're trying to pass a class or you're trying to go on and get a degree, you can't be wrong. So you can't take shortcuts. But in the textbook business, and we just got out of owning it, but it was us by ourselves and it was the retail stores and then it was Amazon. It's like, okay, that was no fun. And -- but for the learning services area, the skills area, as a very smart person said in our one-on-one, is more competitive. And it is, but it's a much larger market. But in the academic support areas, it's really on-campus support or lack of knowledge of who we are, which is basically freshmen, first semester freshman and sophomore, then our name recognition just becomes massive. So really, it's -- the thing that we've got to do that we are doing now through Uversity and other things we're doing, the product we have is basically for 10 million of the 20 million U.S. students. We're building content for the other 10 million. And if you want to know who the other 10 million are, it's the ones that don't major in STEM-B. That's who they are. So they're your history majors and your political science majors and your art majors and your other people. We can give them support also. We just haven't had to until this point. So what you'll hear us talk about is how we grow the TAM in the U.S. and how we grow our ARPU per customer through our bundles and packages and then additional packages and eventually, membership. And I think what people will be surprised about when we start to talk about our '23, which will be in February when we report in February, is our business just keeps getting more profitable. This is -- I watched Google do this to Yahoo!. There are businesses that just mint money. Ours is one of them.

So with that as a backdrop, and you talked a little bit about some of the international markets and some of the opportunities, maybe we'll go down the international road first because that seems like a pretty wide open space for -- to mine for growth.

It is.

And I want to understand a little bit better how you think about building scale, how do you think about aligning investments in content and distribution and building a brand when you think about the international opportunity.

So think of it in 3 different parts. The first part was what you were just catching. During COVID, when international students went off-campus, they discovered us. We had done a lot of smart work. We have done all the SEO work. It just wasn't yielding anything because they weren't familiar with searching for stuff to help them. When they went off-campus, they found us. That was the first big jump. And that's why even before Busuu, we had 1 million subscribers outside the U.S. And that happened like in 2 years. So now it's about finding those places and we picked 6 so far, where we're really going to focus on. The top of the funnel is already large. So we don't have to build traffic. What we have to build is what will convert them and keep them, and that's the stage we're at now.

Okay. And in terms of like how investors should think about the timetable of a lot of that playing out. Is that the next few years where you see those investments yield execution results in revenue and profitability? How should we think about that?

Yes. I think nothing for us is like 5 years because I don't think we know what's going to happen in 5 years. So we look and we say, what do we feel comfortable if we make this investment, we're going to get this ROI. Now we've been wrong, and we've been right way more than we've been wrong. But that's how we think about the business. So we think of things in 2- to 3-year time slots. When we're wrong, it takes longer. Like in skills, when we first got into it, we said we're going to go direct to consumer. Then that market ended because all corporations started to pay for it. So there was no direct-to-consumer market. That's going to flip back during a recession, but it's not right now. That's why we did the relationship with Guild. That took 1.25 years to negotiate, but that's really going to pay off for us. So -- but everything for us is sort of a 2- to 3-year return on the capital that we invest, whether we buy a company like Busuu, when we think we'll get a return and start to get profitable soon, and then we'll really start to get a really good return on that one. So that's our time frame of how we think about it. We don't think about 10 years because, first of all, I'm 61, I don't know if I'll be alive in 10 years. But honestly, having been a guy who's been in technology since 1983 and met every single person you've ever heard about when I used to sell them ads, none of these people think 10 years because there's no 10 years to think about. There's always a competitor. There's always a change in technology. There's currency changes. There's all these things now we've learned about pandemic and wars. And for the first time, not for people my age, but for the first time, people are hearing about the word inflation. So we just try to look at what's in front of us. The school years get broken into 2 sections. So our real year is August to May, although we report January to December. So everything we do is like, how many semesters can we find out if what we said was right? The first thing is, are they interested in it? Then do they convert? Then do they engage? Then did they renew? Did they renew at the same levels they did before? That just takes several semesters. So we say 3 semesters, that's 1.5 years. That's how we know if we start to get it right or not.

Okay. Turning to the core product. I think it was interesting, you recently raised price on Chegg Study in mid-July. When any company raises price, I'm always curious about 2 things. Number one, walk us through some of the decision process that went into raising the price of the product. And how should we all be thinking about that price increase sort of running through the model over the next 12 months.

Yes. So one of the benefits of being a data-driven company is you don't have to be a genius. You can actually find out. So we don't make business decisions like that without knowing what the answer is going to be in advance. Now could the test be wrong? Sure. Could something have changed? Sure. But for the most part, we knew when we wanted to take it, we knew what we wanted to take, we knew why we wanted to take it, we knew if we had the ability to take it. So what's the logic? The logic is we have probably gotten 20x more content in there in the last few years. So we're not getting the value that we deserve. The second thing is we know we've had and have substantial pricing power. One of the things that did surprise us was the percentage of people that were taking the bundle was much higher than we thought. So that $19.95 versus $14.95 at the time, that told us, for sure, people understand our value. Our subscribers understand our value. And we had 2 years of like, wow, that's surprising, and they're staying on just as long as the $14.95. It wasn't like they paid more and did 1 less month. So we netted out 0. We actually got the full benefit. But the cleverness of our team -- sorry. The cleverness of our team was the goal wasn't to take the price increase on the lower product. The goal is to get everybody to pay $19.95. So by closing the gap in price, we saw in the test that a higher percentage of people would look at the 2 offerings and say, this is just such a better value. So we expected to see 3%, 4%, 5% more people taking the bundle, which is actually $19.95 rather than the $14.95 and now $15.95. So once we felt comfortable that, that was what was going to happen, that's what we did. So the students -- I mean anybody that follows us knows that we maybe in 11 [ negative tweaks ]. Like new students didn't know. We're taking our renewals in October. So the next big date is October 2, the week of October 2. But by law and by courtesy, with 45 days in advance, we had to notify every subscriber that we were going to raise their price $1. And the feedback was sure thing, nothing. So I feel very confident that it was the right decision, that we're seeing what we wanted. The base will go up $1, the renewals will go up $1, and a higher percentage of people are taking the bundle and that's all good for ARPU and yield.

Yes, I wanted to talk about that dynamic. So how should we be thinking of or the collective investment community be thinking about the mix you expect to see as a result of this decision? Because obviously...

If you think 3 years from now, as we said, 2 or 3 years from now, obviously, our objective is to get everybody to pay $19.95. We could do that today. It would have a massive positive impact on revenue and profits. It's not the right way to treat a student. And it's certainly not the right way to treat them in this world. So step one, build the bundle. Step 2, get more people to take it and renew at the same rate as the base. Third, take the dollar increase to get more people to take the bundle. So I'm hoping in 3 years that the overwhelming majority of people are paying the $19.95. And then eventually, the goal is to build a membership program where they're actually annualizing twice as much revenue to us as they pay us now, but they're getting 5x as much value. But that all has to come in stages. The first one was a single product, then 2 choices, then increase renewals, then add nonacademic stuff into the bundle. So Uversity is academic stuff, but it's going into the bundle. You'll see some stuff where we're putting nonacademic stuff into the bundle, get more and more people to convert. Once we get a high enough percentage where they're all close to $19.95, we can just do $19.95. And then the next step will either be a $24.95 or an annual membership of $200. So we're really excited about the ability to produce revenue and profit because it's not that students don't have the money. They just don't want to be ripped off, and they get our core value. I mean if you can appreciate -- and it's even hard for me to really appreciate this. Last September and October, about 1.5 million students that were supposed to be in the system didn't show up. And yet, look at the health of our business. So you know the model is really strong, and you know the real proposition of students loving us, the ones that went -- needed us, they stayed, even at a time where they wouldn't want to.

Last one on this area. Do you either already see or is there an expectation of how the spin up into a bundle or using price as a lever would play out differently internationally versus in the U.S.?

We do not -- here's what we know and here's what we have no clue about. What we know is weirdly enough, the percentage of people that are taking the bundle outside the U.S. is very similar to the percentage of people taking it inside the U.S. That was a surprise because we didn't do anything. We didn't plan it. Literally the same case, we had to roll out English to every country, and it's like, which one do you want? The renewals always start slower when you get a new customer base, but are rapidly catching up to the same renewal experience that we see in the U.S. That's what we know. But what we don't know is what is the next big jump going to be in subscribers, what price does that need to be, will there be bundles, will it just be a discounted price, will we do it by time access. We're now building the ability to say, look, for $5, 2 hours. So we have lots of choices. We don't know the answer to that yet, but we will find it out because it's all knowable. The ability to test tells you the answer before you have to make a big strategic decision, so I really love this business for that reason. Like I was not at all worried about taking the dollar because we had spent over a year testing every iteration. And most times, the test comes back worse than the actuals because once you have the actuals, everybody is committed to making it work. And so we're very happy.

Okay. Good. I want to turn next to Uversity as a topic. Can you talk a little bit about what you're building there? And how should we be thinking about the scale of content that you're trying to build inside that initiative? And what kind of levels of investment we should be watching for as you build content there?

This is a really important question for us and for investors, which is what is your CapEx going to be? And what percentage of your EBITDA is going to become free cash flow? And a lot of that has to do with how much we spend on content creation. So you can debate it, and I don't know who would be right, the decision we made or someone else's point of view. We decided to invest heavily last year in something called Uversity. What is it? It's us going directly to professors at the top colleges in the world and paying them for their content, practice quizzes, study guides, lecture notes, practice tests. And that increased our capital expenditure quite substantially this year, deliberately, and we articulated it. It's not like we surprised people with it. But it came on the heels of the work -- the year being not what we all hoped it would be. So we'll have our call soon. We'll talk about the numbers, but we have hundreds of thousands of pieces of content. So we're ahead of the amount of content we thought we would get. Now the plan is to figure out which of those content is great for marketing, which ones students -- which ones will make students convert at a higher number or engage and stay on longer, which ones they value the most. Then the next iteration of Uversity expenditure will be much more efficient and much less because we'll be able to target just the specific content that students value, which is really what it was all about to begin with. So you can expect our capital expenditure on Uversity to be significantly less next year than this year, which means you'll see better free cash flow next year and better free cash flow as a ratio of EBITDA and better EBITDA. The other content that we spend is literally questions. So new questions that we don't currently have in our 100 million question database. Common sense would tell you that sometimes, they're going to run out of new questions. I've been wrong for 8 years. However, we now know in the U.S. that the new questions per customer is down, which is good because that means our capital expenditure will be less, and the value of immediate response is higher for the customer. They would rather we already have the solution for them to learn from than have to go spend 4 hours to go get it for them. So it's actually a better experience. And so we just are going to get more and more and more efficient with the use of cash, and each of our subscribers will be more efficient on a capital basis than it's ever been. So I'm very excited about our profitability going forward. I mean I know everybody is talking about profitability. We've always been -- well, not always, but the last 5, 6, 7 years, we've always been profitable because I don't know how to sustain a business if you don't generate [ cash ].

Maybe one -- just one last follow-up in this area. If we were to zoom out and look ahead a number of years, what sort of scale of content or mix of content you think you're trying to solve for, for the platform?

It's a really -- it's a great question and the answer is going to suck. The answer is, I don't have to guess. The students tell us. So rather than me have to go seek content, if we don't have it, they ask. And once they ask, we know what they want. So unlike -- people used to love the Netflix business model because they're like -- they don't have to guess what you want. They already know you're watching Adam Sandler, even though you deny it. And they pay Adam Sandler a fortune to produce content because they can go back and look backwards. We don't have to look back. We can look at right now. If we don't have what they want, they ask for it, and then we can build it. So whatever we do, it's going to be based on what the academic road map is for them, whether they take an online school, an offline school, whether they're trying to get a degree or trying to get a certificate. We're agnostic to what they need to learn. They tell us what they want that we don't have, and we can get them -- we can build that database up substantially. So it's really, really, really efficient, and I'm very happy about that because if we had to guess, it'd be impossible. There's 6,000 schools in the United States and every one of the professors in their own small business. So we couldn't guess.

Right. Understood. One other area I wanted to touch upon is, obviously, skills-based learning is becoming such a bigger percentage of the broader education landscape and professional landscape. You're obviously building towards that as an opportunity set as well. Talk a little bit about what you built and how you think that's going to evolve in the years ahead.

So when we bought Thinkful, our belief at the time was lower the price, build better support and then build stipends and build an income-sharing agreement. And then we would be able to blow away everybody because they all have to split their money with schools where they have an incredible cost of customer acquisition. And that was going extraordinarily well until full employment came. When full employment came, corporations started to pay for their employees to get skills. So the direct market sort of just dried up. You can see that's reflected in Udemy's business. You can see that business has declined while the B2B business has gone up. The B2B business is very crowded, not really our strength. We look for a unique pathway which we found in our partnership with Guild and in direct relationships we're going to build. Guild serves the frontline worker, not the engineering, which is a very crowded space. The frontline workers, so if you think of Walmart with 1.5 million cashiers, where you think of Amazon warehouse people or Starbucks baristas, the runway warehouse people. There are skills that, that subset uniquely needs that Guild has done a brilliant job under Rachel building these relationships with the largest corporations in the world, Walmart and Chipotle, medical companies, like really, really, really big companies. We leverage the channel they've already sold with content these corporations say they actually want to provide to their employees. We keep a substantial percentage of all that revenue as profit. So it's literally software, write once, use many times. So as their customer base penetrates deeper into the companies they have, and as they add new customers, we ride along with their sales team without a cost of sales -- well, except the commission we give Guild, and the rest of it is -- eventually becomes profit for Chegg. So that's a business that only started in January of this year. It's already ahead of every one of our projections, which we've talked about on our calls, which is why I feel comfortable saying it here. That could be a substantial business in just a few years. The difference is, unlike these other companies that are in a highly competitive segment of the market, right? The Courseras, the Udemys, all fine companies run by really good people, they don't make any money. And some of them have said they don't know when or if they're going to make any money. That isn't Chegg's problem. So that puts us in the driver seat because I don't think we fully understand how many frontline workers there are. So your GM, these are the people that are manufacturing the cars, right? So Marriott, these are the people that are all checking us in. These are a different kind of worker. The courses range from 900 to 19,000. So it's a much higher ARPU for Chegg, of which we keep 70% of that. So it's a really good business as long as they continue to do well, but we're not going to be dependent on them exclusively. Nobody should be. So the next thing we're doing is building our own partnerships where Guild doesn't want to go. We'll never overlap with them because they're our partner, and we love them, and they love us. But there's a lot of companies that don't want the education part. They just want the skills part and they bring both. So on the skills part, we're going indirect, we'll build that business. And then the third part is really inexpensive but highly profitable classes around Salesforce and Adobe and Excel and all these other things that every college kid should learn that we'll be able to market directly to our students because through our personalization platform, we're going to know their major. And if we know their major, we're going to be able to predict the industry they're going to go into. And if they're going to go into that industry, we already know the job skills you all want them to have. As I said to every analyst in this room, what is the #1 thing you look for when you're hiring a junior analyst? You all give me this mumbo jumbo, they got to be bright, they got to be this. So I was like, what if they can't use Excel? Oh, we won't hire them. So what Chegg can do is provide that kind of opportunity for them to learn at a really low price or be part of one of our bundles. And so we just see growth ahead.

Yes.

Does that make sense?

That makes sense completely.

We chose a very specific segment, which is huge, which is the frontline worker. Not the deep engineering person where everybody is fighting for.

Like the career certificate, that business, that...

That segment.

[indiscernible]

No, no. We -- it's okay to get the certificate, but it's a certificate on AWS. It's not...

The Google, the Facebook...

Right. Those are things that everybody wants and has. And you can see them all over LinkedIn, people are proud to put their Chegg or their Thinkful certificate up there.

Got it. Okay. I do want to allow if people have any questions in the audience.

We can't see how much time is left because it fell over.

Yes, I've got it. It's about 10 minutes left. So it didn't fall over, it's just actually being kind of covered up. So we got 9 minutes left. But any questions from the audience? If not, I can keep going. No? Okay. I do want to ask about the Busuu acquisition you guys did. Seems like an element where you're pretty excited about what this asset can turn into over the medium to long term. Talk a little bit about why that was the right acquisition for you as a company. How is the integration going? And then I've got maybe 1 or 2 follow-ups.

So what were we thinking? The first question, which as I said earlier, we want to sell more things to the people we have and we want to have more people to sell things to. So we don't have to overthink the business model. Busuu is one of those benefits from both. 26% of Busuu's audience in Europe was already students. We already know that 1 out of every 2 college students say they want or need to learn a language, and we already know that they all know the name Duolingo and none of them know the name Busuu. So the ability for us to take that asset and market it to students at 0 cost was a huge opportunity to leverage an asset that they have and our ability to market it. So in the U.S., we're just now launching what they call Busuu 3.0. That will be a freemium model in the U.S., much like Duolingo because we have huge front-end traffic, but you hit a paywall on the second click. And so if you've got a choice to go to somebody where you don't hit a paywall, for obvious reasons, you're going to go that direction, unless you already know the brand and Busuu is not a brand they know in the U.S. yet. So in the next several years, we're going to make Busuu a household name to every student because we have every student. So -- and we're going to do a freemium model in the U.S. So that's really exciting for us. So that's how we could leverage our audience on behalf of them. The other thing is we went into -- we were just talking about skills. Language is an essential global skill now. So just like coding or just like certain things, internationalization requires people to speak multiple languages. More and more corporations, much to your surprise, are offering to teach languages because not everybody who comes into the company knows to speak the language. But if you're working on The Trade Desk in Japan or if you're going to move, you need to know multiple languages. So Busuu actually came with a very sneaky and growing B2B business, up-selling their skills there. So it's the same thing as the skills in the U.S., which is we have direct-to-consumer, we're going to go through partnerships, and we're going to distribute it through people like Guild. So we see all of those elements of growth that they couldn't do on their own because they were fully under -- they were an underfunded company for 9 years. And why now was because they put themselves up for sale now. They were going to sell to a large publisher. They called and said, every meeting we go to, there's 60 of them and 3 of us, we're not going to survive. Would you please come and take us? And we did the analysis, and we felt we could get a very good price for a growing business that was moving into profitability, and that's good for us. And we thought we could grow it faster and make it more profitable, way faster than they could.

Okay. A quick follow up there. When you think about both the stand-alone business and/or what that businesses you alluded to could do for the broader subscriber funnel across all of Chegg's products, which are you more excited about? Which one is sort of attracting more of your time and capital?

It's too soon to know. It's a very fair question, but we only closed the deal in January. It's January 13, and a lot has been going on this year, and so we haven't picked one over the other yet. I'm very excited about the freemium version coming to the U.S. because I already know one out of every 2 want language on my list. And we're just going to see how good we are at getting them to take Busuu over other choices.

Okay. Let me -- I've got 2 more questions in the last few minutes we have. We have one on the side.

Yes. So [indiscernible].

Let me just -- can you repeat that?

Yes, I can repeat it, which is in our last call, we talked about the summer school was more robust than it historically had been. And the question is, is that really a temporary thing because they were just catching up on all the things they didn't do during COVID. And for those who haven't listened to the call, you can read the transcript. We did intensive research on exactly that question because we wanted to know the answer ourselves. We won't really know it's a full pattern. And if it is, it's great news for Chegg because that extends the number of months people will subscribe. That's just pure profit for us, right? Think of every payment period as an extra $17 per subscriber. So in that world, it would be great. We believe because the research tells us that these students are -- that subset of students that take summer school are looking at school as a 12-month a year proposition now, not a semester thing. They're more online, they're more in the state schools, they're more community colleges, and they're more the ones that are never going to graduate in 4 years and never had a plan. You may not know this, but if you -- almost every college in this country only publishes their 6-year graduation right now. That somehow became a standard and there's nobody mentioning it, right? So 43% of people who go to college never get a degree. So what -- for that to be what we hope would mean that they're taking fewer classes during the regular semester but taking classes over the summer, so they take the collective amount of credit. What we saw this summer was way more people taking summer school than they had in the past. We said on the call that the survey said 83% of them said they were going to go into the fall. And usually, that means that we're going to have a robust fall. So that's what we're all hoping for. The question as to whether or not this is a more permanent condition won't be known until next summer. But in every circumstance, it's all been good for Chegg.

Any other quick ones from the audience? Any other one? So yes, maybe I'll just end on one big picture question. We got about 2 minutes left. You talked a lot about a lot of different initiatives where you want to take the platform. Maybe bring it all together for us in sort of one answer, how should we be thinking about...

If I could do that, we wouldn't have 30 minutes here.

Yes. You allocating capital against the growth opportunities you see, what are you most sort of interested in? Or what do you think is going to potentially generate the highest level of ROI for you as a platform when you align capital against growth? And maybe the mix with that.

Yes, it's a very interesting question. We're now at the stage of a company where our balance sheet can create value as opposed to just the operations. And I had the real honor and pleasure when I was at Yahoo! of having Sue Decker as our CFO, and she was always a big fan of free cash flow, and she was always a big can of capital -- a big fan of capital allocation and returning. So we announced that we could buy a -- we could do a securities buyback. We have plenty of cash for our industry right now. We bought back nearly $0.5 billion of our debt at a 20% discount. So a guaranteed cash return for our shareholders in a very short period of time, still leaving us with well over $1 billion in cash, still leaving us with a company that generates cash. So we now have a better ratio of revenue to debt. We now have much less debt, and we're going to generate more free cash flow next year and the year after, and it's going to generate more each year. I don't mean just like each year, we'll generate free cash flow, but it should go up each year. So we're in a very good position to create value for our shareholders in many ways now, which a couple of years ago is not something that Chegg could do. As it comes to acquisitions, which I think is the core of your question. Our philosophies remain the same. What could leverage our platform that we could grow faster and more profitably than they could on their own, where we're not paying for that upside in advance? We have been very deliberate and very careful. You've noticed that a lot of people have made a lot of acquisitions in the education space, whether it was Byju buying every company in the world, right, or some of these other companies. You could assume nothing got sold in our industry without somebody telling us it was for sale because we're the ones with the most cash and actual liquid outcome for the investors. So you can assume we chose not to buy all those companies or pay that amount for each of the companies because we are very, very, very careful with trying to return for our shareholders because we don't -- we're not desperate to change our business model. We think the subscriber model, becoming the bundle model, becoming the membership model, adding in nonacademic services, and the mental health and other areas, which you'll see shortly, and then the skills area offer really significant growth opportunities, both domestically and outside the U.S. So if we add, it will have to be because we feel it's the right asset to accelerate growth of either what we have or what they have. Some of them will grow what we have faster. Some of them will grow -- are able to grow what they have faster. But if they can't do that and if it's not a good price, we're just not going to do it because other companies buy things because they don't like their core model. We buy things because our core model could accelerate them. And that's what we think about. So my old boss used to tell me, don't be in a hurry to make a mistake, and we're in no hurry to make a mistake.

Completely understood, Dan. I really want to thank you for doing it in person.

Thanks for inviting me. You bet.

It was great to see you, and please join me in thanking Chegg for being part of the conference this year.