Chegg's Financial Chess Move: Retiring Debt Amid Strategic Pivot

SANTA CLARA, CA – December 29, 2025 – Education technology company Chegg, Inc. (NYSE:CHGG) announced today a strategic financial maneuver, repurchasing a portion of its convertible debt at a discount. The company entered into privately negotiated agreements to buy back approximately $8.9 million in principal amount of its 0% Convertible Senior Notes due 2026 for a cash price of roughly $8.3 million.

While the transaction size is modest relative to Chegg's past financials, the move is a significant indicator of the company's current capital management strategy. It comes as Chegg navigates a critical transformation, shifting its core business model toward the professional skilling and workforce development market. This debt repurchase sheds light on how the company is shoring up its balance sheet and managing legacy financial instruments during a period of fundamental change.

Deconstructing the Debt Deal

To understand the significance of the repurchase, one must look back to the origin of these specific notes. Chegg issued $1 billion of these 0% Convertible Senior Notes in August 2020, a time when the company's stock was trading at a much higher valuation. The notes carried an initial conversion price of approximately $107.55 per share, representing a substantial premium over the stock price at the time.

This structure offered investors a unique proposition: no regular interest payments (the "0% coupon"), but the potential for significant upside if Chegg's stock price surpassed the lofty conversion threshold, at which point the notes could be converted into company shares. However, the market landscape has changed dramatically for Chegg. With its stock trading at $0.95 as of today's market close, the conversion feature is, for all practical purposes, dormant. The $107.55 conversion price is a distant memory, meaning the notes are trading purely as debt instruments.

This dynamic created an opportunity for Chegg. Because the notes offer no yield and their equity conversion option is far out of the money, their market value has fallen below their principal face value. By stepping in to repurchase them for $8.3 million, Chegg effectively retires $8.9 million of debt, booking a gain of $0.6 million on the transaction and immediately reducing its liabilities. This is a prudent move to clean up the balance sheet by removing a financial instrument designed for a different era of the company's growth story.

A Pattern of Prudent Capital Management

This latest repurchase is not an isolated event but rather a continuation of a deliberate strategy. The transaction was conducted under Chegg's existing securities repurchase program, a flexible tool that allows the company to buy back its own stock or debt. Following this deal, which is expected to close on December 30, 2025, Chegg will have approximately $141.8 million remaining under this authorization.

This action follows a much larger, similar transaction just over a year ago. In November 2024, Chegg announced the repurchase of approximately $116.6 million of the same 2026 notes for about $96.2 million in cash. The consistent pattern of buying back this specific series of convertible notes at a discount demonstrates a clear priority for management: methodically reduce debt and simplify the capital structure.

After the latest transaction closes, about $53.9 million in principal amount of the 2026 notes will remain outstanding, a fraction of the original $1 billion issuance. This systematic deleveraging strengthens the company's financial position, reduces interest-free debt obligations, and eliminates the potential for future shareholder dilution from these specific notes, however remote that possibility may seem at current stock prices.

Fortifying the Foundation for a Strategic Pivot

The context for these financial maneuvers is Chegg's profound strategic pivot. Once a dominant player in the student-focused academic support space, the company has faced significant headwinds from the rise of generative AI tools, which can replicate many of its core homework-help functions. In response, Chegg has embarked on an ambitious transformation, reorienting its business toward what it identifies as a $40 billion global skilling market.

This new focus includes providing tools for workplace readiness, professional upskilling, and language learning, targeting a customer base of lifelong learners and businesses seeking to train their workforce. Such a fundamental business model shift is capital-intensive and carries significant execution risk. It requires investment in new products, marketing to a different audience, and potentially strategic acquisitions.

In this light, the debt repurchase can be seen as a foundational move. By using available cash to clean up its balance sheet, Chegg is enhancing its financial resilience. The $8.3 million cash outlay represents a notable portion—approximately 13%—of the company's $63.3 million in cash and cash equivalents reported at the end of the third quarter of 2025. While this reduces near-term liquidity, it is an investment in long-term stability. A stronger balance sheet with lower debt can improve a company's credit profile and provide greater flexibility to fund its new strategic initiatives without relying on dilutive equity financing or more expensive debt in the future.

This financial discipline sends a message of confidence to investors that management is carefully stewarding capital as it navigates this challenging but necessary transition. By optimizing its financial structure, Chegg is building a more stable platform from which to launch its next chapter and compete in the crowded and fast-evolving professional education landscape. The journey to reinvent itself is long, but these calculated financial steps demonstrate a clear focus on building a durable enterprise for the future.