Chegg, Inc. (NYSE:CHGG), a company specializing in educational services, announced a new severance plan for certain key officers and employees, including President and CEO Nathan Schultz and CFO David Longo. The Chegg, Inc. Severance Plan, approved by the Compensation Committee of the Board of Directors on October 17, 2024, is effective immediately and supersedes previous severance arrangements.
The plan outlines severance benefits upon a Qualifying Termination, which includes termination without "Cause" or resignation for "Good Reason," and in connection with a Change in Control, as defined in the Severance Plan. Benefits include a lump sum payment based on a percentage of base salary and, in some cases, a payment equal to the target annual bonus for the year of termination, prorated to the date of termination, plus a specified percentage of target bonus for the year in which the termination occurs.
Additionally, the plan provides for a number of months of COBRA coverage and certain vesting acceleration of time-based and performance-based equity awards.
The severance benefits vary depending on the employee's position and the timing of the termination in relation to a Change in Control. Enhanced severance benefits are available for Qualifying Terminations occurring on or before October 17, 2026. For instance, in the event of a Change in Control before or after October 17, 2026, Nathan Schultz would receive a severance payment equal to 150% of his base salary and target bonus, 18 months of COBRA coverage, and 100% vesting acceleration of equity awards.
David Longo would receive similar benefits, with variations based on the timing of the Change in Control and whether it occurs before or after October 17, 2026.
The introduction of the Severance Plan aligns with Chegg's strategic human resources management and executive compensation policies. The full text of the Severance Plan is included in the 8-K filing as Exhibit 10.1. This announcement is based on the press release statement filed with the SEC.
In other recent news, Chegg Inc . reported mixed results for the second quarter of 2024, surpassing its own revenue and adjusted EBITDA expectations but facing an 11% year-over-year decline in total revenue. The education technology company reported $146.8 million in revenue and $44.1 million in adjusted EBITDA, but total revenue fell to $163 million. Furthermore, Chegg announced a board reshuffle, with the departure of Sarah Bond and Dr. Paul LeBlanc from its board of directors. Despite the changes, both Citi and Goldman Sachs (NYSE:GS) maintained a Neutral rating on Chegg shares, with Goldman Sachs reducing the price target to $3.75 from the previous $7.00.
Despite these challenges, Chegg's management is committed to achieving a 30% adjusted EBITDA margin and over $100 million in free cash flow by 2025, with plans for AI integration and international expansion. The first fully localized market for Chegg will be Mexico.
InvestingPro Insights
Chegg's recent introduction of a new severance plan comes at a challenging time for the company, as reflected in its current financial metrics and market performance. According to InvestingPro data, Chegg's stock has experienced significant declines, with a 77.29% drop in the past six months and an 85.83% year-to-date price total return. This context underscores the importance of retaining key executives during a period of volatility.
Despite these challenges, InvestingPro Tips highlight that Chegg maintains impressive gross profit margins, which stood at 73.4% for the last twelve months as of Q2 2024. This strength in profitability could be crucial as the company navigates through its current difficulties. Additionally, with the stock trading near its 52-week low and at a low revenue valuation multiple, the new severance plan may be seen as a measure to stabilize leadership during a potential turnaround effort.
For investors seeking a more comprehensive analysis, InvestingPro offers 11 additional tips for Chegg, providing deeper insights into the company's financial health and market position.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.