SANTA CLARA, Calif.,
July 30, 2018 /PRNewswire/ -- Chegg, Inc. (NYSE: CHGG),
the Smarter Way to Student, today reported financial results for
the three months ended June 30, 2018.
"We had a great Q2; achieving 32% total revenue growth, driven
by 38% year-over-year Chegg Services revenue growth and subscriber
growth of 45%," said Dan Rosensweig,
Chairman and CEO of Chegg, Inc. "We expanded our services,
introduced the Chegg Math Solver subscription and, through the
acquisition of StudyBlue, added flashcards, one of the most popular
learning tools used by students around the world. We enter the fall
semester with significant momentum, giving us confidence to once
again raise our guidance for the year."
Q2 2018 Highlights:
- Total Net Revenues of $74.2 million, an
increase of 32% year-over-year
- Chegg Services Revenues grew 38% year-over-year to
$61.8 million, or 83% of total net
revenues, compared to 79% in Q2 2017
- Net Loss was $3.9 million
- Non-GAAP Net Income was $15.5 million
- Adjusted EBITDA was $19.3 million
- 1.7 million: number of Chegg Services subscribers, an
increase of 45% year-over-year
- 158 million: total Chegg Study content views, an
increase of 62% year-over-year
Total net revenues include revenues from Chegg Services and
Required Materials. Chegg Services includes Chegg Study, Chegg
Writing, Chegg Tutors, Chegg Math Solver, Brand Partnership, Test
Prep, Internships and Chegg CareerMatch. Required Materials
includes rental and sale of print textbooks and eTextbooks.
For more information about non-GAAP net income and adjusted
EBITDA, and a reconciliation of non-GAAP net income to net loss,
and adjusted EBITDA to net loss, see the sections of this press
release titled "Use of Non-GAAP Measures," "Reconciliation of Net
Loss to EBITDA and Adjusted EBITDA," and "Reconciliation of GAAP to
Non-GAAP Financial Measures."
Business Outlook:
Third Quarter 2018
- Total Net Revenues in the range of $68 million
to $69.5 million
- Chegg Services Revenues in the range of
$52 million to $53.5 million
- Gross Margin between 71% and 73%
- Adjusted EBITDA in the range of $10 million to
$11 million
Full Year 2018
- Total Net Revenues in the range of $306
million to $311 million
- Chegg Services Revenues in the range of
$248 million to $251 million
- Gross Margin between 73% and 75%
- Adjusted EBITDA in the range of $79 million to $81
million
- Capital Expenditures in the range of $30 million to $35
million
For more information about the use of forward-looking non-GAAP
measures, a reconciliation of forward-looking net loss to EBITDA
and adjusted EBITDA for the third quarter 2018 and full year 2018,
see the below sections of the press release titled "Use of Non-GAAP
Measures," and "Reconciliation of Forward-Looking Net Loss to
EBITDA and Adjusted EBITDA." Our adjusted EBITDA outlook does not
include any amortization for intangible assets of StudyBlue, Inc.
as the amount of any such amortization cannot be appropriately
estimated at this time.
An updated investor presentation and an investor data sheet can
be found on Chegg's Investor Relations website
http://investor.chegg.com.
Prepared Remarks - Dan
Rosensweig, CEO Chegg, Inc.
Thank you, Tracey and welcome everyone. It's been an exciting
first half of 2018, and we are thrilled to report another
great quarter. And as a result, we are, once again, raising
our guidance for the full year. We outlined three key priorities
for the year: meeting our financial goals, expanding our TAM, and
adding new capabilities that leverage our reach, our student graph,
and the strength of the Chegg brand. Our team has stayed focused on
executing against these priorities, and, in a moment, Andy will
walk you through our financial results in greater detail.
In Q2, we delivered outstanding growth across our business,
reaching 32% total revenue growth year-over-year and 38% Chegg
Services growth, driven by 45% subscriber growth. As our numbers
suggest, the power of the Chegg brand is at an all-time high and we
enter the fall semester with significant momentum.
Chegg Study remains the center of our flywheel and we continue
to expand the depth and breadth of the content and capabilities we
offer students, which expands both the TAM and the engagement. In
Q2, we increased our catalog of textbook solutions to over 30,000
ISBNs and our library of proprietary, expert answers and solutions
is now nearly 24 million, an increase of 42% year-over-year. And
students seem to be valuing Chegg Study more than ever, as
evidenced by an increase in usage. We had over 315 million Chegg
Study content views in the first half of the year, which is up 60%
year-over-year. We believe the more content and modalities that we
add, the more popular and indispensable Chegg will become.
We will continue to invest in ways to create greater value for
our students, as we have with our writing service. Writing is one
of the most underserved areas in education, with 75% of high school
seniors lacking proficiency in writing competencies. We are already
providing help to students in this category and we have over 100
million annual visits to our writing sites and 130 million
citations were added in Q2 of this year. We have always had the
view that technology can speed up the process of citing sources and
creating bibliographies but, more importantly, we believe that
technology can be used to teach people how to write. Our
acquisition of WriteLab, an A.I.-enabled writing platform, which we
announced in Q2, allows us to provide more personalized writing
tools to students, helping address their specific pain points and
academic challenges for grammar, sentence structure, writing style,
and more. This accelerates our ability to take students from citing
to writing.
As powerful as A.I. technology is, we know that every one of our
services is enhanced when it is backed by integrated expert human
help. Students continue to validate our strategy as over 60% of our
Tutor customers come from other services across the Chegg platform.
In addition, we have learned that students prefer chat-based
tutoring, versus live video-based tutoring. So, we continue to
re-architect our system to build more capabilities, allowing more
students and tutors to leverage chat, enabling us to provide high
quality, personalized tutoring at a very low cost.
Math is another subject area where students struggle. As 33% of
high school graduates in the U.S. lack basic math skills and 64% of
students are unprepared for college-level math. To meet this need,
in June we launched a desktop version of the Chegg Math Solver
subscription. This service helps students understand math by
providing guided, step-by-step explanations to help them learn
difficult concepts in subjects like pre-algebra, pre-calculus,
calculus, and linear algebra. It is designed to increase
comprehension and understanding of the subject matter and
accelerate learning in high school and college. We will continue to
increase the number of subjects we cover in the months and years
ahead, and plan to expand from the current desktop service to
mobile in the back half of this year.
With the addition of math to our growing suite of Chegg
Services, we have started testing our first bundle, the Chegg Study
Pack, which we anticipate launching in the fall of 2019. This
combines Chegg Study, with Math Solver and EasyBib Plus, our math
and writing subscriptions, into a single subscription
offering. Students will have access to all three services,
for the first time, seamlessly integrated and for a
substantial discount.
Students trust Chegg to provide services that help them master
their academic experience and we feel that we are in the very early
stages of services we can provide to help students to improve their
outcomes. As such, we will continue to expand the products and
services we offer when we see an opportunity to address key pain
points. Our most recent example is our exciting acquisition of
StudyBlue. And, in that spirit, we couldn't be more thrilled to add
StudyBlue to the Chegg family of services, as research shows that
37% of students are using flashcards to accelerate their learning
online. Our vision is to make our flash tools the most
comprehensive and easy-to-use study tools. With nearly 500 million
pieces of user-generated content already, we plan to grow that and
pair it with the professional content including content that is
currently available on Chegg. We believe this will create the most
useful and robust free flashcard service available. By making it
free, we expand our funnel deeper in to high school and the college
market and open up more opportunities to serve students around the
world.
Even as we continue to expand in the learning space, we know
that 85% of all students say they go to college to get a better
job. So, we are investing in our CareerMatch platform which
utilizes our reach and our proprietary data to help match students
to the best job opportunities for them. We just expanded our
beta test, which will enable us to learn and adapt the services
even better to the demands of both students and employers.
Chegg reaches a huge and valuable audience, which has led more
brands to approach us to find creative and impactful ways to
connect with students. The extension of our partnership with
Sallie Mae is one such example. We
will now be able to offer the Study Starter benefit, which gives
borrowers with new Sallie Mae Smart Option Student Loan or a
Sallie Mae Parent Loan, access to a
suite of study support services from Chegg platform and now for the
next three years.
As we look to the future, our team's passion for our mission is
at an all-time high. For the first time in Chegg's history, we
participated in the Great Place to Work Survey and, thanks to the
responses of our employees, we were honored with the distinction of
being certified as A Great Place to Work. By building a company
that is committed to its mission, focused on putting students
first, and leverages the talents of our employees to improve
student outcomes, we have seen growth across our key business
metrics while building a culture that attracts and retains top
talent. We are incredibly optimistic about the path ahead of us. We
see tremendous opportunity to utilize technology and the internet
to transform learning, making it online, on-demand, personalized,
adaptive, affordable, and backed by human help. Our goal is to
accelerate the time it takes for a student to go from learning to
earning. And we feel like we're just getting started.
And with that, I will turn it over to Andy.
Prepared Remarks - Andy Brown,
CFO Chegg, Inc.
Thanks Dan and good afternoon everyone.
It's been a great first half of the year for our company, with
all key metrics and financials ahead of our expectations. The
strong results we achieved in the first half and the momentum we
carry into Q3, gives us confidence to raise our guidance again for
2018.
Specifically, for the second quarter, total revenue was
$74.2 million, above the high-end of
our guidance and a 32% increase year-over-year, with both Chegg
Services and Required Materials exceeding our expectations. Chegg
Services revenue increased 38% year-over-year, driven by continued
strong demand for our subscription services. Required Materials
first half revenue was comparable to the prior year, indicating we
continue to take share in a declining market.
This resulted in gross margin coming in higher than we expected
reaching 76%, as much of the incremental revenue from the
subscription services goes straight to the gross margin line due to
its relatively fixed cost structure.
Our strong performance in both revenue and gross margin drove
adjusted EBITDA of $19.3 million.
Adjusted EBITDA margin for the quarter was 26%, and 24% for the
first half of the year.
We ended the quarter with cash and investments of $482 million, bolstered by a very successful
convertible debt offering early in the quarter. We believe we now
have one of the strongest operating models and balance sheets in
the education industry.
As we look to the second half of the year, we are increasing our
guidance based on Q2 results and continued strong demand for our
subscription services. The updated guidance takes into account the
recent acquisitions of WriteLab and StudyBlue. These acquisitions
will not contribute to revenue or subscribers in 2018 but will add
several million dollars of operating expenses. The momentum of our
subscription services has allowed us to absorb these additional
costs, while still raising adjusted EBITDA guidance for the
year.
As a result, for Q3 we expect:
- Total revenue to be between $68
and $69.5 million, with
- Chegg Services revenue between $52 and $53.5
million;
- Gross margin between 71% and 73%;
- And adjusted EBITDA between $10
and $11 million.
For full year 2018, we now expect:
- Total revenue to be between $306
and $311 million, with Chegg Services
revenue between $248 and $251 million;
- Gross margin between 73% and 75%;
- And adjusted EBITDA between $79
and $81 million or approximately 26%
margin.
- And finally, we expect CapEx to remain in the $30 to $35 million
range, with approximately 80% being used to fuel expansion of
content and add new modalities such as video to our subscription
services. We believe these investments increase engagement on
our platform and expand our TAM.
In closing, it's been a strong first half. We delivered above
the high-end of our expectations, we strengthened our balance
sheet, we made acquisitions that extend our market opportunity and
add overwhelming value to our students and we see this momentum
continuing into the second half of the year.
With that, I'll turn the call over to the operator for your
questions.
Conference Call and Webcast Information
To access the call, please dial 1-877-407-4018, or outside the
U.S. +1-201-689-8471, five minutes prior to 1:30 p.m. Pacific
Daylight Time (or 4:30 p.m. Eastern Daylight Time).
A live webcast of the call will also be available
at http://investor.chegg.com under the Events &
Presentations menu. An audio replay will be available
beginning at 4:30 p.m. Pacific Daylight Time on July 30,
2018, until 8:59 p.m. Pacific Standard Time on
August 6, 2018, by calling 1-844-512-2921, or outside the U.S.
+1-412-317-6671, with Conference ID 13680591. An audio archive of
the call will also be available
at http://investor.chegg.com.
Use of Investor Relations Website for Regulation FD
Purposes
Chegg also uses its media center website,
http://www.chegg.com/mediacenter, as a means of disclosing material
non-public information and for complying with its disclosure
obligations under Regulation FD. Accordingly, investors should
monitor http://www.chegg.com/mediacenter, in addition to
following press releases, Securities and Exchange
Commission filings and public conference calls and
webcasts.
About Chegg
Chegg puts students first. As the leading student-first
connected learning platform, Chegg strives to improve the overall
return on investment in education by helping students learn more in
less time and at a lower cost. Chegg is a publicly-held
company based in Santa Clara, California and trades on
the NYSE under the symbol CHGG. For more information,
visit www.chegg.com.
Use of Non-GAAP Measures
To supplement Chegg's financial results presented in accordance
with generally accepted accounting principles in the United States (GAAP), this press release
and the accompanying tables and the related earnings conference
call contain non-GAAP financial measures, including adjusted
EBITDA, non-GAAP operating expenses and margin, non-GAAP income
from operations, non-GAAP net income, non-GAAP weighted average
shares, and non-GAAP net income per share. For reconciliations of
these non-GAAP financial measures to the most directly comparable
GAAP financial measures, please see the section of the accompanying
tables titled, "Reconciliation of Net Loss to EBITDA and Adjusted
EBITDA," "Reconciliation of GAAP to Non-GAAP Financial Measures,"
and "Reconciliation of Forward-Looking Net Loss to EBITDA and
Adjusted EBITDA."
The presentation of these non-GAAP financial measures is not
intended to be considered in isolation from, as a substitute for,
or superior to, the financial information prepared and presented in
accordance with GAAP, and may be different from non-GAAP financial
measures used by other companies. Chegg defines (1) adjusted EBITDA
as earnings before interest, taxes, depreciation and amortization,
or EBITDA, adjusted to exclude share-based compensation expense,
other income (expense), net, restructuring charges, and
acquisition-related compensation costs; (2) non-GAAP income from
operations as loss from operations excluding share-based
compensation expense, amortization of intangible assets,
restructuring charges, and acquisition-related compensation costs;
(3) non-GAAP income from operations margin as non-GAAP income from
operations divided by total net revenues; (4) non-GAAP net income
as net loss excluding share-based compensation expense,
amortization of intangible assets, restructuring charges,
acquisition-related compensation costs, and amortization of debt
discount and issuance costs; (5) non-GAAP weighted average shares
outstanding as weighted average shares outstanding adjusted for the
effect of dilutive options, restricted stock units and warrants;
and (6) non-GAAP net income per share is defined as non-GAAP net
income divided by non-GAAP weighted average shares outstanding. To
the extent additional significant non-recurring items arise in the
future, Chegg may consider whether to exclude such items in
calculating the non-GAAP financial measures it uses.
Chegg believes that these non-GAAP financial measures, when
taken together with the corresponding GAAP financial measures,
provide meaningful supplemental information regarding Chegg's
performance by excluding items that may not be indicative of
Chegg's core business, operating results or future outlook. Chegg
management uses these non-GAAP financial measures in assessing
Chegg's operating results, as well as when planning, forecasting
and analyzing future periods and believes that such measures
enhance investors' overall understanding of our current financial
performance. These non-GAAP financial measures also facilitate
comparisons of Chegg's performance to prior periods.
As presented in the "Reconciliation of Net Loss to EBITDA and
Adjusted EBITDA," "Reconciliation of GAAP to Non-GAAP Financial
Measures," and "Reconciliation of Forward-Looking Net Loss to
EBITDA and Adjusted EBITDA" tables below, each of the non-GAAP
financial measures excludes one or more of the following items:
Share-based compensation expense.
Share-based compensation expense is a non-cash expense that
varies in amount from period to period and is dependent on market
forces that are often beyond Chegg's control. As a result,
management excludes this item from Chegg's internal operating
forecasts and models. Management believes that non-GAAP measures
adjusted for share-based compensation provide investors with a
basis to measure Chegg's core performance against the performance
of other companies without the variability created by share-based
compensation as a result of the variety of equity awards used by
other companies and the varying methodologies and assumptions
used.
Amortization of intangible assets.
Chegg amortizes intangible assets that it acquires in
conjunction with business combinations, which results in non‑cash
operating expenses that would not otherwise have been incurred had
Chegg internally developed such intangible assets. Chegg believes
excluding the accounting expense associated with acquired
intangible asset from non-GAAP measures allows for a more accurate
assessment of its ongoing operations.
Restructuring charges.
Restructuring charges primarily relate to expenses related to
the exit of Chegg's print coupon business, and Chegg's strategic
partnership with the National Research Center for College &
University Admissions. These restructuring charges are excluded
from non-GAAP financial measures because they are the result of
discrete events that are not considered core-operating activities.
Chegg believes that it is appropriate to exclude restructuring
charges from non-GAAP financial measures because it enables the
comparison of period-over-period operating results from continuing
operations.
Acquisition-related compensation costs.
Acquisition-related compensation costs include compensation
expense resulting from the employment retention of certain key
employees established in accordance with the terms of the Imagine
Easy, Cogeon GmbH, and WriteLab acquisitions. In most cases, these
acquisition-related compensation costs are not factored into
management's evaluation of potential acquisitions or Chegg's
performance after completion of acquisitions, because they are not
related to Chegg's core operating performance. In addition, the
frequency and amount of such charges can vary significantly based
on the size and timing of acquisitions and the maturities of the
businesses being acquired. Excluding acquisition-related
compensation costs from non-GAAP measures provides investors with a
basis to compare Chegg's results against those of other companies
without the variability caused by purchase accounting.
Amortization of debt discount and issuance costs
Under GAAP, we are required to separately account for the
liability (debt) and equity (conversion option) components of our
convertible senior notes that were issued in private placements in
April 2018. Accordingly, for GAAP
purposes we are required to recognize the effective interest
expense on our convertible senior notes and amortize the debt
discount and issuance costs over the term of the notes. The
difference between the effective interest expense and the
contractual interest expense, and the amortization expense of debt
discount and issuance costs are excluded from management's
assessment of our operating performance because management believes
that these non-cash expenses are not indicative of ongoing
operating performance. Chegg believes that the exclusion of the
non-cash interest expense provides investors an enhanced view of
our performance and enables the comparison of period-over-period
results.
Forward-Looking Statements
This press release contains forward-looking statements made
pursuant to the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995, which include, without limitation
statements regarding Chegg's ability to meet or exceed its long
term financial targets in 2018; Chegg's momentum, and those
included in the investor presentation referenced above, those
included in the "Prepared Remarks" sections above, and all
statements about Chegg's outlook under "Business Outlook." The
words "anticipate," "believe," "estimate," "expect," "intend,"
"project," "endeavor," "will," "should," "future," "transition,"
"outlook" and similar expressions, as they relate to Chegg, are
intended to identify forward-looking statements. These statements
are not guarantees of future performance, and are based on
management's expectations as of the date of this press release and
assumptions that are inherently subject to uncertainties, risks and
changes in circumstances that are difficult to predict.
Forward-looking statements involve known and unknown risks,
uncertainties and other factors that may cause actual results,
performance or achievements to differ materially from any future
results, performance or achievements. Important factors that could
cause actual results to differ materially from those expressed or
implied by these forward-looking statements include the following:
Chegg's ability to attract new students, increase engagement and
increase monetization; the rate of adoption of Chegg's offerings;
the effect of Chegg's acquisition of Imagine Easy Solutions,
Cogeon, WriteLab, and StudyBlue; Chegg's ability to strategically
take advantage of new opportunities to leverage the Student Graph;
competitive developments, including pricing pressures; Chegg's
anticipated growth of Chegg Services; Chegg's ability to build and
expand its services offerings; Chegg's ability to develop new
products and services on a cost-effective basis and to integrate
acquired businesses and assets; the impact of seasonality on the
business; Chegg's partnership with Ingram and the parties' ability
to achieve the anticipated benefits of the partnership, including
the potential impact of the economic risk-sharing arrangements
between Chegg and Ingram on Chegg's results of operations; Chegg's
ability to effectively control operating costs; changes in Chegg's
addressable market; changes in the education market; and general
economic, political and industry conditions. All information
provided in this release and in the conference call is as of the
date hereof and Chegg undertakes no duty to update this information
except as required by law. These and other important risk factors
are described more fully in documents filed with the Securities and
Exchange Commission, including Chegg's Quarterly Report on Form
10-Q filed with the Securities and Exchange Commission on
April 26, 2018, and could cause
actual results to vary from expectations.
CHEGG,
INC.
|
CONDENSED
CONSOLIDATED BALANCE SHEETS
|
(in thousands,
except for number of shares and par value)
|
(unaudited)
|
|
|
|
|
|
June 30,
2018
|
|
December 31,
2017
|
Assets
|
|
|
|
Current
assets
|
|
|
|
Cash and cash
equivalents
|
$
384,926
|
|
$
126,457
|
Short-term
investments
|
80,938
|
|
81,742
|
Accounts receivable,
net of allowance for doubtful accounts of $333 and $259 at June 30,
2018 and
December 31, 2017, respectively
|
8,096
|
|
10,855
|
Prepaid
expenses
|
8,707
|
|
2,043
|
Other current
assets
|
7,742
|
|
7,845
|
Total current
assets
|
490,409
|
|
228,942
|
Long-term
investments
|
15,957
|
|
20,305
|
Property and
equipment, net
|
51,516
|
|
47,493
|
Goodwill
|
135,842
|
|
125,272
|
Intangible assets,
net
|
22,591
|
|
21,153
|
Other
assets
|
4,256
|
|
3,765
|
Total
assets
|
$
720,571
|
|
$
446,930
|
Liabilities and
stockholders' equity
|
|
|
|
Current
liabilities
|
|
|
|
Accounts
payable
|
$
5,337
|
|
$
7,049
|
Deferred
revenue
|
13,710
|
|
13,440
|
Accrued
liabilities
|
29,460
|
|
31,074
|
Total current
liabilities
|
48,507
|
|
51,563
|
Long-term
liabilities
|
|
|
|
Convertible senior
notes, net
|
276,578
|
|
—
|
Other long-term
liabilities
|
6,767
|
|
4,305
|
Total long-term
liabilities
|
283,345
|
|
4,305
|
Total
liabilities
|
331,852
|
|
55,868
|
Commitments and
contingencies
|
|
|
|
Stockholders'
equity:
|
|
|
|
Preferred stock,
$0.001 par value – 10,000,000 shares authorized, no shares
issued and outstanding
|
—
|
|
—
|
Common stock, $0.001
par value 400,000,000 shares authorized; 113,551,003 and
109,667,640
shares issued and outstanding at June 30, 2018 and
December 31, 2017, respectively
|
114
|
|
110
|
Additional paid-in
capital
|
787,480
|
|
782,845
|
Accumulated other
comprehensive loss
|
(661)
|
|
(282)
|
Accumulated
deficit
|
(398,214)
|
|
(391,611)
|
Total stockholders'
equity
|
388,719
|
|
391,062
|
Total liabilities and
stockholders' equity
|
$
720,571
|
|
$
446,930
|
CHEGG,
INC.
|
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
|
(in thousands,
except per share amounts)
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
Net
revenues
|
$
74,222
|
|
$
56,317
|
|
$
151,171
|
|
$
118,919
|
Cost of
revenues(1)
|
17,784
|
|
17,042
|
|
38,008
|
|
38,438
|
Gross
profit
|
56,438
|
|
39,275
|
|
113,163
|
|
80,481
|
Operating
expenses(1):
|
|
|
|
|
|
|
|
Research and
development
|
26,218
|
|
19,899
|
|
51,751
|
|
39,201
|
Sales and
marketing
|
11,437
|
|
10,098
|
|
26,773
|
|
26,062
|
General and
administrative
|
19,479
|
|
14,501
|
|
37,735
|
|
29,843
|
Restructuring
charges
|
15
|
|
59
|
|
235
|
|
959
|
Gain on liquidation
of textbooks
|
—
|
|
—
|
|
—
|
|
(4,766)
|
Total
operating expenses
|
57,149
|
|
44,557
|
|
116,494
|
|
91,299
|
Loss from
operations
|
(711)
|
|
(5,282)
|
|
(3,331)
|
|
(10,818)
|
Interest expense and
other income (expense), net:
|
|
|
|
|
|
|
|
Interest expense,
net
|
(3,664)
|
|
(18)
|
|
(3,684)
|
|
(37)
|
Other income
(expense), net
|
894
|
|
(9)
|
|
1,458
|
|
(208)
|
Total interest
expense and other income (expense), net
|
(2,770)
|
|
(27)
|
|
(2,226)
|
|
(245)
|
Loss before provision
for income taxes
|
(3,481)
|
|
(5,309)
|
|
(5,557)
|
|
(11,063)
|
Provision for income
taxes
|
428
|
|
716
|
|
969
|
|
1,363
|
Net loss
|
$
(3,909)
|
|
$
(6,025)
|
|
$
(6,526)
|
|
$
(12,426)
|
Net loss per share,
basic and diluted
|
$
(0.03)
|
|
$
(0.06)
|
|
$
(0.06)
|
|
$
(0.13)
|
Weighted average
shares used to compute net loss per share, basic and
diluted
|
112,738
|
|
95,047
|
|
111,826
|
|
93,943
|
|
|
|
|
|
|
|
|
(1)Includes share-based compensation
expense as follows:
|
|
|
|
|
|
|
|
Cost of
revenues
|
$
103
|
|
$
88
|
|
$
197
|
|
$
155
|
Research and
development
|
3,529
|
|
3,387
|
|
7,662
|
|
6,628
|
Sales and
marketing
|
1,730
|
|
1,201
|
|
3,319
|
|
2,327
|
General and
administrative
|
6,681
|
|
4,423
|
|
12,507
|
|
8,267
|
Total share-based
compensation expense
|
$
12,043
|
|
$
9,099
|
|
$
23,685
|
|
$
17,377
|
CHEGG,
INC.
|
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
(in
thousands)
|
(unaudited)
|
|
|
|
|
|
Six Months Ended
June 30,
|
|
2018
|
|
2017
|
Cash flows from
operating activities
|
|
|
*
|
Net loss
|
$
(6,526)
|
|
$
(12,426)
|
Adjustments to
reconcile net loss to net cash provided by operating
activities:
|
|
|
|
Depreciation and
amortization expense
|
10,665
|
|
9,093
|
Share-based
compensation expense
|
23,685
|
|
17,377
|
Gain on liquidation
of textbooks
|
—
|
|
(4,766)
|
Loss from write-offs
of textbooks
|
—
|
|
314
|
Interest accretion on
deferred consideration
|
—
|
|
(626)
|
Amortization of debt
discount and issuance costs
|
3,421
|
|
—
|
Deferred income
taxes
|
(315)
|
|
—
|
Other non-cash
items
|
115
|
|
(55)
|
Change in assets and
liabilities:
|
|
|
|
Accounts
receivable
|
2,609
|
|
1,989
|
Prepaid expenses and
other current assets
|
(6,773)
|
|
9,072
|
Other
assets
|
(500)
|
|
473
|
Accounts
payable
|
(1,712)
|
|
(3,591)
|
Deferred
revenue
|
270
|
|
(2,379)
|
Accrued
liabilities
|
(2,678)
|
|
1,181
|
Other
liabilities
|
1,254
|
|
858
|
Net cash provided by
operating activities
|
23,515
|
|
16,514
|
Cash flows from
investing activities
|
|
|
|
Proceeds from
liquidations of textbooks
|
—
|
|
6,943
|
Purchases of
marketable securities
|
(66,634)
|
|
—
|
Maturities of
marketable securities
|
71,980
|
|
—
|
Purchases of property
and equipment
|
(10,087)
|
|
(12,507)
|
Acquisition of
business, net of cash acquired
|
(14,438)
|
|
—
|
Net cash used in
investing activities
|
(19,179)
|
|
(5,564)
|
Cash flows from
financing activities
|
|
|
|
Common stock issued
under stock plans, net
|
18,050
|
|
9,765
|
Payment of taxes
related to the net share settlement of equity awards
|
(40,314)
|
|
(14,850)
|
Payment of deferred
cash consideration related to acquisitions
|
—
|
|
(16,750)
|
Proceeds from
issuance of convertible senior notes, net of issuance
costs
|
335,601
|
|
—
|
Purchase of
convertible senior notes capped call
|
(39,227)
|
|
—
|
Repurchase of common
stock
|
(20,000)
|
|
—
|
Net cash provided by
(used in) financing activities
|
254,110
|
|
(21,835)
|
Net increase
(decrease) in cash, cash equivalents and restricted cash
|
258,446
|
|
(10,885)
|
Cash, cash
equivalents and restricted cash, beginning of period
|
126,963
|
|
77,433
|
Cash, cash
equivalents and restricted cash, end of period
|
$
385,409
|
|
$
66,548
|
|
|
|
|
Supplemental cash
flow data:
|
|
|
|
Cash paid during the
period for:
|
|
|
|
Interest
|
$
37
|
|
$
48
|
Income
taxes
|
$
944
|
|
$
821
|
Non-cash investing
and financing activities:
|
|
|
|
Accrued purchases of
long-lived assets
|
$
5,337
|
|
$
1,144
|
|
|
|
|
Restricted cash
included in other current assets:
|
|
|
|
Cash and cash
equivalents
|
$
384,926
|
|
$
66,086
|
Restricted cash
included in other assets
|
483
|
|
462
|
Total cash, cash
equivalents and restricted cash
|
$
385,409
|
|
$
66,548
|
|
* Adjusted to reflect
the adoption of ASU 2016-18.
|
CHEGG,
INC.
|
RECONCILIATION OF
NET LOSS TO EBITDA AND ADJUSTED EBITDA
|
(in
thousands)
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
Net loss
|
$
(3,909)
|
|
$
(6,025)
|
|
$
(6,526)
|
|
$
(12,426)
|
Interest expense,
net
|
3,664
|
|
18
|
|
3,684
|
|
37
|
Provision for income
taxes
|
428
|
|
716
|
|
969
|
|
1,363
|
Depreciation and
amortization expense
|
5,448
|
|
4,704
|
|
10,665
|
|
9,093
|
EBITDA
|
5,631
|
|
(587)
|
|
8,792
|
|
(1,933)
|
Share-based
compensation expense
|
12,043
|
|
9,099
|
|
23,685
|
|
17,377
|
Other (income)
expense, net
|
(894)
|
|
9
|
|
(1,458)
|
|
208
|
Restructuring
charges
|
15
|
|
59
|
|
235
|
|
959
|
Acquisition-related
compensation costs
|
2,456
|
|
1,500
|
|
4,704
|
|
3,000
|
Adjusted
EBITDA
|
$
19,251
|
|
$
10,080
|
|
$
35,958
|
|
$
19,611
|
CHEGG,
INC.
|
RECONCILIATION OF
GAAP TO NON-GAAP FINANCIAL MEASURES
|
(in thousands,
except percentages and per share amounts)
|
(unaudited)
|
|
|
|
|
|
|
|
|
`
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
Net
revenues
|
$
74,222
|
|
$
56,317
|
|
$
151,171
|
|
$
118,919
|
|
|
|
|
|
|
|
|
Operating
expenses
|
$
57,149
|
|
$
44,557
|
|
$
116,494
|
|
$
91,299
|
Share-based
compensation expense
|
(11,940)
|
|
(9,011)
|
|
(23,488)
|
|
(17,222)
|
Amortization of
intangible assets
|
(1,446)
|
|
(1,375)
|
|
(2,863)
|
|
(2,778)
|
Restructuring
charges
|
(15)
|
|
(59)
|
|
(235)
|
|
(959)
|
Acquisition-related
compensation costs
|
(2,456)
|
|
(1,500)
|
|
(4,704)
|
|
(3,000)
|
Non-GAAP operating
expenses
|
$
41,292
|
|
$
32,612
|
|
$
85,204
|
|
$
67,340
|
|
|
|
|
|
|
|
|
Operating expenses
as a percent of net revenues
|
77.0%
|
|
79.1%
|
|
77.1%
|
|
76.8%
|
Non-GAAP operating
expenses as a percent of net revenues
|
55.6%
|
|
57.9%
|
|
56.4%
|
|
56.6%
|
|
|
|
|
|
|
|
|
Loss from
operations
|
$
(711)
|
|
$
(5,282)
|
|
$
(3,331)
|
|
$
(10,818)
|
Share-based
compensation expense
|
12,043
|
|
9,099
|
|
23,685
|
|
17,377
|
Amortization of
intangible assets
|
1,446
|
|
1,375
|
|
2,863
|
|
2,778
|
Restructuring
charges
|
15
|
|
59
|
|
235
|
|
959
|
Acquisition-related
compensation costs
|
2,456
|
|
1,500
|
|
4,704
|
|
3,000
|
Non-GAAP income from
operations
|
$
15,249
|
|
$
6,751
|
|
$
28,156
|
|
$
13,296
|
|
|
|
|
|
|
|
|
Net loss
|
$
(3,909)
|
|
$
(6,025)
|
|
$
(6,526)
|
|
$
(12,426)
|
Share-based
compensation expense
|
12,043
|
|
9,099
|
|
23,685
|
|
17,377
|
Amortization of
intangible assets
|
1,446
|
|
1,375
|
|
2,863
|
|
2,778
|
Restructuring
charges
|
15
|
|
59
|
|
235
|
|
959
|
Acquisition-related
compensation costs
|
2,456
|
|
1,500
|
|
4,704
|
|
3,000
|
Amortization of debt
discount and issuance costs
|
3,421
|
|
—
|
|
3,421
|
|
—
|
Non-GAAP net
income
|
$
15,472
|
|
$
6,008
|
|
$
28,382
|
|
$
11,688
|
|
|
|
|
|
|
|
|
Weighted average
shares used to compute net loss per share
|
112,738
|
|
95,047
|
|
111,826
|
|
93,943
|
Effect of dilutive
options and restricted stock units
|
11,449
|
|
9,517
|
|
12,450
|
|
8,497
|
Non-GAAP weighted
average shares used to compute non-GAAP net income per
share
|
124,187
|
|
104,564
|
|
124,276
|
|
102,440
|
|
|
|
|
|
|
|
|
Net loss per
share
|
$
(0.03)
|
|
$
(0.06)
|
|
$
(0.06)
|
|
$
(0.13)
|
Adjustments
|
0.15
|
|
0.12
|
|
0.29
|
|
0.24
|
Non-GAAP net income
per share
|
$
0.12
|
|
$
0.06
|
|
$
0.23
|
|
$
0.11
|
CHEGG,
INC.
|
RECONCILIATION OF
FORWARD-LOOKING NET LOSS TO EBITDA AND ADJUSTED
EBITDA
|
(in
thousands)
|
(unaudited)
|
|
|
|
|
|
|
Three Months
Ending
September 30, 2018
|
|
Year Ending
December 31, 2018
|
|
Net loss
|
$
(15,600)
|
|
$
(14,700)
|
|
Interest expense,
net
|
4,000
|
|
11,700
|
|
Provision for income
taxes
|
600
|
|
2,100
|
|
Depreciation and
amortization expense
|
6,100
|
|
23,200
|
|
EBITDA
|
(4,900)
|
|
22,300
|
|
Share-based
compensation expense
|
13,400
|
|
50,500
|
|
Other income,
net
|
(900)
|
|
(3,200)
|
|
Restructuring
charges
|
200
|
|
400
|
|
Acquisition-related
compensation costs
|
2,700
|
|
10,000
|
|
Adjusted
EBITDA*
|
$
10,500
|
|
$
80,000
|
|
* Adjusted EBITDA
guidance for the three months ending September 30, 2018 and the
year ending December 31, 2018 represents the midpoint of the ranges
of $10 million to $11 million and $79 million to $81 million,
respectively. Our adjusted EBITDA outlook does not include any
amortization for intangible assets of StudyBlue, Inc. as the amount
of any such amortization cannot be appropriately estimated at this
time.
|
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SOURCE Chegg, Inc.