Thank you, Tracey, and welcome everyone to Chegg’s Q1 2021 earnings call.
Even as COVID is receding in the United States, we know many are still dealing with real challenges.
So we hope all of you and your families are healthy and well. And despite the ongoing global uncertainty, Chegg has had a tremendous start to the year. I want to thank our team for their focus and execution to deliver on our student-first mission to ensure learners around the world have the support and the resources they need. And while our US business remains incredibly strong, we are very excited about our significant international growth, and on our way to exceeding our 1 million subscriber goal.
We continue to fire on all cylinders, and our Q1 results reflect the popularity and importance of Chegg services, which experienced 64% subscriber growth, reaching a record 4.8 million subscribers in the quarter. To put that in perspective, it is almost 1 million more subscribers than we had in all of 2019. And our overall year-over-year revenue grew by 51%. These results and continued momentum give us the confidence to once again raise our full year guidance. And Andy will walk you through the financial details shortly. Direct-to-consumer platforms like Chegg who own the relationship with their customer, own the data, their channels of distribution and their content, are in the best position to serve their customers grow faster and be more profitable at scale. Having that relationship and data allows Chegg to more effectively and immediately differentiate our services and respond faster to our students evolving needs. We believe our ability to invest in our existing services and add new and better services, while increasing margins puts Chegg in a unique position to impact the future of hire - of the higher education ecosystem.
Our market is only getting bigger and more important and we are excited about Chegg’s position to lead and capture these new growth areas. Content quality, comprehensiveness and effectiveness are the mode that allows change to provide overwhelming value to students.
This quarter, we added 6 million new solutions to our expert Q&A database, which now has more than 59 million solutions, and 33% of the new questions came from our international subscribers. The more expert generated content we offer, and the higher the quality, the better our growth, renewals and retention for students in the US and around the world. This supports our view that Chegg services are truly global in nature. This also applies to newly added services, like Mathway, which we acquired last year, and invested in, which led to accelerated growth due to the strength of the Chegg brand, our reach and our platform.
Our vision of offering overwhelming value to students is exemplified by the introduction of our Chegg study path bundle, which more and more of our customers are subscribing to. And with our continued efforts around limiting account sharing, we are seeing positive impact in customer acquisition, and an increased lifetime value. COVID-19 was a wake up call for the education industry, with many now trying to rapidly transition online.
For those of you who are new to our story, Chegg services were built from the beginning to support students online, on demand with high quality differentiated content in multiple modalities on every device, where they are - whether they are on campus or off campus. Chegg is focused on providing world class academic services that help students master their subjects, better understand their course material, and have better outcomes on their learning journey.
In addition, we have expanded offerings to include skills-based learning.
As it is clear more people have to learn more things over the course of their careers, particularly for tech enabled jobs.
Although the skills category is early for us, we believe it represents an enormous opportunity for Chegg on a global basis in the coming years. We believe education must evolve to meet the changing needs of modern students. Students today are older, many have children, have jobs, have less time, and they need and deserve more support. The learner economy supports them by helping more learner’s access more subjects, more modalities and more content from expert educators to help them take their education and careers into their own hands. Both the number of students and the length of time they will spend learning are dramatically expanding, which is why Chegg will meet this opportunity by continuing to invest in expert high quality content of all types from even more sources to become a unified global learning platform for academic support and skills.
As we look ahead, I could not be prouder of the Chegg team, who continue to overperform in very difficult circumstances. And I want to share my appreciation as we once again were named one of Fortune Magazine's Best technology companies to work for, and we won eight awards from comparably, including being named on the lists for Best Company Culture and Best Company Outlook.
We are fortunate to be a mission driven company at a time when what we provide is more important than ever. We see the learner economy only getting bigger and more impactful. We believe Chegg’s core business of academic support and skills has significant growth ahead of it and, with a strong balance sheet, we will always look for opportunities to better serve the student. Chegg will continue to lead the transition from learning to earning, and support students no matter the path they take in their academic and professional careers. And with that I will turn it over to Andy. Andy? Thanks, Dan. And good afternoon, everyone. Q1 was a great quarter project. We ended the year with momentum that continued through the quarter with our financials and business metrics exceeding our expectations, giving us the confidence to increase our guidance for full year 2021.
We also completed a capital raise, giving us the additional balance sheet flexibility and capacity to continue to invest in growth areas, while remaining opportunistic with external opportunities to fuel growth. With that as a backdrop, let me walk you through the Q1 results.
For Q1, total revenue grew 51% to $198 million. This was primarily driven by subscriber growth of 64%, which includes a 12% contribution from Mathway, which we acquired in Q2 of 2020. This resulted in Chegg Services revenue of $162 million, or 62% growth over Q1 of 2020. We experienced strong growth across our subscription services in the US and around the world. Required Materials revenue exceeded our expectations during the quarter as we saw increased demand for textbook sales versus rentals, which increases in-period revenue versus rentals that are recognized ratably over the semester, resulting in moderated gross margins for the quarter.
All of this resulted in an 80% year-over-year increase in adjusted EBITDA to $57 million, demonstrating the continued leverage and power of our subscription model, which allows us to invest for future growth, while improving our adjusted EBITDA margin.
Our business model inherently supports operating leverage as we scale, the majority of our subscribers are acquired through unpaid channels, our content is created once and then used many times by learners across the globe, and much of our learning content we offer is relevant globally.
We have a proven history of expanding our adjusted EBITDA margin, while investing in future growth and we believe Chegg’s brand, reach, and balance sheet will allow us to continue to do so.
Looking at the balance sheet, we ended the quarter with $2.6 billion of cash and investments. This includes a capital raise we completed in February of $1.1 billion. We believe the combination of our direct-to-student model, balance sheet, and cash flows are the strongest in the education industry and put us in the best position to grow organically and, should opportunities become available, through acquisition.
We continue to believe consolidation is likely in our industry, and as such, the strength of our balance sheet puts us in the pole position should opportunities present themselves.
Moving on to guidance.
As a result of our strong Q1 results and continued momentum, we are raising our guidance for the year.
For 2021, we now expect total revenue to be between $790 and $800 million, with Chegg Services revenue between $675 and $685 million, gross margin between 68% and 69%, and adjusted EBITDA between $275 and $280 million, or 35% adjusted EBITDA margin, which is up 100 basis points from our prior guidance.
For Q2 we expect, total revenue to be between $188 and $190 million, with Chegg Services revenue between $166 and $168 million, gross margin between 69% and 70%, and adjusted EBITDA between $72 and $74 million. In closing, we had another strong quarter. We delivered above the high end of our expectations, giving us confidence to increase full year guidance.
We continue to believe that we will be a high-growth company with expanding margins for the foreseeable future, even after lapping the extraordinary growth we experienced over the last year, which reflects the importance of Chegg’s services to our students and the strength of our operating model. With that, I’ll turn the call over to the operator for your questions.