Shares of Chegg (NYSE) surged more than 19% in after-hours trading following the announcement of a major restructuring plan, which includes cutting 23% of its global workforce.
The education technology company expects to achieve adjusted savings of $40 million to $50 million by 2025 through these layoffs, the closure of two international offices, and other cost-reduction measures. Chegg also anticipates incurring $10 million to $14 million in charges related to the restructuring, with most of these expenses occurring by the fourth quarter of 2024.
Chief Executive Nathan Schultz, who took over on June 1, stated that these changes will streamline the company, making it “more focused, more efficient, uncomplicated, and quicker-moving.”
Schultz emphasized that the company’s renewed focus on its core audience—the student—will enable it to meet an unmet need with a distinctive, comprehensive, and education-centered offering.
Following the announcement, analysts from BMO predicted a positive reaction in Chegg’s stock. The company’s shares have dropped by over 75% year-to-date due to investor concerns about the impact of AI-enhanced chatbots, such as OpenAI’s ChatGPT, on demand for Chegg’s services.
In May, Chegg warned that student interest in ChatGPT could hurt new customer growth, prompting the company to suspend its full-year outlook. This warning, coupled with the suspension, led to a significant decline in Chegg’s market capitalization, wiping out nearly $1 billion.
Despite the challenges, Schultz expressed confidence in Chegg’s ability to return to steady subscriber growth, although he acknowledged that the process will “take time.” He also cautioned that an improvement in overall revenue declines might not be evident “until next year.”
Analysts at Jefferies found the new initiatives “promising” but are awaiting “proof points of the strategy working out.”
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