Total Revenue Increased 51% Year-Over-Year
Chegg, Inc. (NYSE:CHGG), a Smarter Way to Student®, today
reported financial results for the three months ended March 31,
2021.
“We are in a unique position to impact the future of the higher
education ecosystem,” said Dan Rosensweig, CEO & President of
Chegg, Inc., “Our strong brand and momentum will allow us to
continue to grow and take advantage of the ever-expanding
opportunities in the learner economy.”
Q1 2021 Highlights:
- Total Net Revenues of $198.4 million, an increase of 51%
year-over-year
- Chegg Services Revenues grew 62% year-over-year to
$162.4 million, or 82% of total net revenues, compared to 76% in Q1
2020
- Net Loss was $65.2 million which included a $78.2
million loss on early extinguishment of debt related to 2025
notes
- Non-GAAP Net Income was $46.4 million
- Adjusted EBITDA was $57.1 million
- 4.8 million: number of Chegg Services subscribers, an
increase of 64% year-over-year
- 356 million: total Chegg Study content views
Total net revenues include revenues from Chegg Services and
Required Materials. Chegg Services primarily includes Chegg Study,
Chegg Writing, Chegg Math Solver, Chegg Study Pack, Mathway, and
Thinkful. Required Materials includes 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:
Second Quarter 2021
- Total Net Revenues in the range of $188 million to $190
million
- Chegg Services Revenues in the range of $166 million to
$168 million
- Gross Margin between 69% and 70%
- Adjusted EBITDA in the range of $72 million to $74
million
Full Year 2021
- Total Net Revenues in the range of $790 million to $800
million
- Chegg Services Revenues in the range of $675 million to
$685 million
- Gross Margin between 68% and 69%
- Adjusted EBITDA in the range of $275 million to $280
million
For more information about the use of forward-looking non-GAAP
measures, a reconciliation of forward-looking net income to EBITDA
and adjusted EBITDA for the second quarter 2021 and full year 2021,
see the below sections of the press release titled “Use of Non-GAAP
Measures,” and “Reconciliation of Forward-Looking Net Income to
EBITDA and Adjusted EBITDA.”
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 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 U.S.
business remains incredibly strong, we are very excited about our
significant international growth and are 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’s 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 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
moat that allows Chegg 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 U.S.
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 Pack 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 wakeup 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,
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 our offerings to include skills-based learning, as it is
clear more people will 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 learners 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
8 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…
Prepared Remarks - Andy Brown, CFO
Chegg, Inc.
Thanks Dan and good afternoon everyone.
Q1 was a great quarter for Chegg. We entered 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
percent 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 U.S. 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.
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 (or 7:30 p.m. Eastern Daylight
Time) on May 3, 2021, until 8:59 p.m. Pacific Standard Time (or
11:59 p.m. Eastern Daylight Time) on May 10, 2021, by calling
1-844-512-2921, or outside the U.S. +1-412-317-6671, with
Conference ID 13718513. 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/press, 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/press, in addition to
following press releases, Securities and Exchange Commission
filings and public conference calls and webcasts.
About Chegg
Chegg is A Smarter Way to Student®. We strive to improve
educational outcomes by putting the student first. We support
students on their journey from high school to college and into
their career with tools designed to help them learn their course
materials, succeed in their classes, save money on required
materials, and learn the most in-demand skills. Our services are
available online, anytime and anywhere. 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,
non-GAAP income from operations, non-GAAP net income, non-GAAP
weighted average shares, non-GAAP net income per share, and free
cash flow. 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,” “Reconciliation of Net Cash Provided
by Operating Activities to Free Cash Flow,” and “Reconciliation of
Forward-Looking Net Income 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 for print textbook depreciation expense and to
exclude share-based compensation expense, other (expense) income,
net, and acquisition-related compensation costs; (2) non-GAAP
operating expenses as operating expenses excluding share-based
compensation expense, amortization of intangible assets, and
acquisition-related compensation costs; (3) non-GAAP income from
operations as income from operations excluding share-based
compensation expense, amortization of intangible assets, and
acquisition-related compensation costs; (4) non-GAAP net income as
net loss excluding share-based compensation expense, amortization
of intangible assets, acquisition-related compensation costs,
amortization of debt discount and issuance costs, the loss on early
extinguishment of debt, the loss on change in fair value of
derivative instruments, net, and gain on sale of strategic equity
investment; (5) non-GAAP weighted average shares outstanding as
weighted average shares outstanding adjusted for the effect of
dilutive options, restricted stock units, and shares related to our
convertible senior notes; (6) non-GAAP net income per share is
defined as non-GAAP net income divided by non-GAAP weighted average
shares outstanding; and (7) free cash flow as net cash provided by
operating activities excluding purchases of property and equipment,
purchases of textbooks and proceeds from disposition of textbooks.
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,” “Reconciliation of Forward-Looking Net Income to EBITDA
and Adjusted EBITDA,” and “Reconciliation of Net Cash Provided by
Operating Activities to Free Cash Flow” 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 expense 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 assets from non-GAAP measures allows for a more accurate
assessment of its ongoing 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
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.
Beginning January 1, 2021, as a result of our adoption of
Accounting Standards Update (ASU) 2020-06 (ASU 2020-06), we account
for our convertible senior notes entirely as a liability and no
longer record interest expense related to the amortization of the
debt discount. We continue to recognize the effective interest
expense on our convertible senior notes and amortize the debt
issuance costs over the term of the convertible senior notes. We
adopted ASU 2020-06 under the modified retrospective method applied
to convertible senior notes outstanding as of January 1, 2021 and
have not changed previously disclosed amounts or provided
additional disclosures for comparative periods. Prior to our
adoption of ASU 2020-06, we were required to separately account for
the liability (debt) and equity (conversion option) components of
our convertible senior notes and 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 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.
Loss on early extinguishment of debt.
Beginning January 1, 2021, as a result of our adoption of ASU
2020-06 and accounting for our convertible seniors notes entirely
as a liability, we are required to compare the total consideration
of extinguished convertible senior notes to the respective carrying
amounts and record loss. Prior to our adoption of ASU 2020-06, we
were required to separately account for the liability (debt) and
equity (conversion option) components of our convertible senior
notes which required us to estimate the fair value of extinguished
or converted convertible senior notes and compare to the respective
carrying amount to record a loss. The loss on early extinguishment
of debt is not considered a core-operating activity and we believe
its exclusion provides investors with a better comparison of
period-over-period operating results.
Loss on change in fair value of derivative instruments, net.
Our convertible senior notes embedded conversion options and
related capped call instruments meet certain conditions for
exclusion as derivative instruments and instead meet conditions to
be classified in equity. The embedded conversion features and
capped call transactions are not remeasured as long as they
continue to meet the conditions for equity classification,
otherwise they are classified as derivative instruments and
recorded at fair value with changes in fair value recorded in other
(expense) income, net. The loss on change in fair value of
derivative instruments is not considered a core-operating activity
and we believe its exclusion provides investors with a better
comparison of period-over-period operating results.
Gain on sale of strategic equity investment.
The gain on sale of strategic equity investment represents a
one-time event to record a gain on our strategic equity investment
in a foreign entity that was acquired. The gain on sale of
strategic equity investment is a non-cash expense and we believe
the exclusion of the impairment charge from non-GAAP financial
measures provides investors with a better comparison of
period-over-period results.
Effect of shares for stock plan activity.
The effect of shares for stock plan activity represents the
dilutive impact of outstanding stock options, RSUs, and PSUs
calculated under the treasury stock method. Basic and diluted net
loss per share was the same under GAAP, as the inclusion of all
potential common shares outstanding would have been anti-dilutive,
however, these common shares are dilutive when calculating non-GAAP
weighted average shares outstanding as we were in a non-GAAP net
income position.
Effect of shares related to convertible senior notes.
Beginning January 1, 2021, as a result of our adoption of ASU
2020-06, the effect of shares related to convertible senior notes
represents the dilutive impact of outstanding convertible senior
notes calculated under the if-converted method which assumes all
outstanding convertible senior notes are converted at the beginning
of the period resulting in a higher share count when calculating
the dilutive impact. Prior to our adoption of ASU 2020-06, the
effect of shares related to convertible senior notes represents the
dilutive impact of outstanding convertible senior notes calculated
under the treasury stock method.
Basic and diluted net loss per share was the same under GAAP, as
the inclusion of all potential common shares outstanding would have
been anti-dilutive, however, these shares are dilutive when
calculating non-GAAP weighted average shares outstanding as we were
in a non-GAAP net income position.
Free cash flow.
Free cash flow represents net cash provided by operating
activities excluding purchases of property and equipment and
purchases of textbooks and including proceeds from the disposition
of textbooks. Chegg considers free cash flow to be a liquidity
measure that provides useful information to management and
investors about the amount of cash generated by the business after
the purchases of property and equipment and textbooks, which can
then be used to, among other things, invest in Chegg's business and
make strategic acquisitions. A limitation of the utility of free
cash flow as a measure of financial performance is that it does not
represent the total increase or decrease in Chegg's cash balance
for the period.
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 the impact of the ongoing coronavirus
(COVID-19) pandemic on Chegg’s financial condition and results of
operations, Chegg's continued momentum and 2021 guidance; 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 ongoing uncertainty regarding the return
of students to in-person classes and remote learning, and the
effects of COVID-19 on college enrollment, Chegg’s ability to
attract new students from high schools and colleges, which are
populations with inherently high turnover; the ease of accessing
Chegg’s offerings through search engines; the rate of adoption of
Chegg’s offerings; the effect and integration of Chegg’s
acquisition of Imagine Easy Solutions, Cogeon, WriteLab, StudyBlue,
Thinkful and Mathway; Chegg’s ability to strategically take
advantage of new opportunities; competitive developments, including
pricing pressures and other services targeting students; 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 reputation with students and tutors; the outcome
of any current litigation and investigations; the ability of our
logistics partner to manage the fulfillment processes; Chegg’s
ability to effectively control operating costs; changes in Chegg’s
addressable market; regulatory changes, in particular concerning
education, privacy and marketing; changes in the education market;
and general economic, political and industry conditions, including
the ongoing COVID-19 pandemic. 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 Annual Report on Form 10-K
for the year ended December 31, 2020 filed with the Securities and
Exchange Commission on February 22, 2021, 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)
March 31,
December 31,
2021
2020
Assets
Current assets
Cash and cash equivalents
$
656,168
$
479,853
Short-term investments
1,215,944
665,567
Accounts receivable, net of allowance of
$169 and $153 at March 31, 2021 and December 31, 2020,
respectively
11,633
12,913
Prepaid expenses
25,256
12,776
Other current assets
26,625
11,846
Total current assets
1,935,626
1,182,955
Long-term investments
711,224
523,628
Textbook library, net
24,000
34,149
Property and equipment, net
134,093
125,807
Goodwill
290,601
285,214
Intangible assets, net
49,798
51,249
Right of use assets
22,617
24,226
Other assets
25,602
24,030
Total assets
$
3,193,561
$
2,251,258
Liabilities and stockholders'
equity
Current liabilities
Accounts payable
$
14,902
$
8,547
Deferred revenue
48,608
32,620
Accrued liabilities
78,089
68,565
Current portion of convertible senior
notes, net
109,494
—
Total current liabilities
251,093
109,732
Long-term liabilities
Long-term portion of convertible senior
notes, net
1,673,946
1,506,922
Long-term operating lease liabilities
17,551
19,264
Other long-term liabilities
7,628
5,705
Total long-term liabilities
1,699,125
1,531,891
Total liabilities
1,950,218
1,641,623
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; 141,317,066 and 129,343,524 shares issued and
outstanding at March 31, 2021 and December 31, 2020,
respectively
141
129
Additional paid-in capital
1,645,352
1,030,577
Accumulated other comprehensive (loss)
income
(1,238
)
1,530
Accumulated deficit
(400,912
)
(422,601
)
Total stockholders' equity
1,243,343
609,635
Total liabilities and stockholders'
equity
$
3,193,561
$
2,251,258
CHEGG, INC.
CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS
(in thousands, except per
share amounts)
(unaudited)
Three Months Ended March
31,
2021
2020
Net revenues
$
198,378
$
131,590
Cost of revenues(1)
71,384
42,390
Gross profit
126,994
89,200
Operating expenses:
Research and development(1)
46,131
39,541
Sales and marketing(1)
26,214
20,238
General and administrative(1)
37,870
26,145
Total operating expenses
110,215
85,924
Income from operations
16,779
3,276
Interest expense, net and other (expense)
income, net:
Interest expense, net
(1,929
)
(13,427
)
Other (expense) income, net
(77,208
)
4,960
Total interest expense, net and other
(expense) income, net
(79,137
)
(8,467
)
Loss before provision for income taxes
(62,358
)
(5,191
)
Provision for income taxes
2,821
522
Net loss
$
(65,179
)
$
(5,713
)
Net loss per share, basic and diluted
$
(0.49
)
$
(0.05
)
Weighted average shares used to compute
net loss per share, basic and diluted
134,352
122,428
(1) Includes share-based compensation
expense as follows:
Cost of revenues
$
362
$
169
Research and development
7,959
6,991
Sales and marketing
2,919
2,186
General and administrative
11,860
8,988
Total share-based compensation expense
$
23,100
$
18,334
CHEGG, INC.
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
Three Months Ended March
31,
2021
2020
Cash flows from operating activities
Net loss
$
(65,179
)
$
(5,713
)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Print textbook depreciation expense
3,760
3,527
Other depreciation and amortization
expense
14,846
9,243
Share-based compensation expense
23,100
18,334
Amortization of debt discount and issuance
costs
1,626
12,946
Loss on early extinguishment of debt
78,152
—
Loss on change in fair value of derivative
instruments, net
7,148
—
Loss from write-off of property and
equipment
757
—
Gain on sale of strategic equity
investment
(5,338
)
—
Loss (gain) on textbook library, net
4,028
(1,175
)
Operating lease expense, net of
accretion
1,589
1,053
Other non-cash items
87
(312
)
Change in assets and liabilities, net of
effect of acquisition of business:
Accounts receivable
2,240
4,929
Prepaid expenses and other current
assets
(25,075
)
(9,707
)
Other assets
1,058
(1,425
)
Accounts payable
6,597
(436
)
Deferred revenue
15,988
16,973
Accrued liabilities
9,386
15,972
Other liabilities
(1,197
)
(1,242
)
Net cash provided by operating
activities
73,573
62,967
Cash flows from investing activities
Purchases of property and equipment
(18,984
)
(19,965
)
Purchases of textbooks
(4,527
)
(36,830
)
Proceeds from disposition of textbooks
4,038
2,170
Purchases of investments
(925,748
)
(112,421
)
Maturities of investments
181,315
121,784
Purchase of strategic equity
investment
—
(2,000
)
Proceeds from sale of strategic equity
investment
6,845
—
Acquisition of business, net of cash
acquired
(7,891
)
—
Net cash used in investing activities
(764,952
)
(47,262
)
Cash flows from financing activities
Proceeds from common stock issued under
stock plans, net
347
2,667
Payment of taxes related to the net share
settlement of equity awards
(59,176
)
(46,836
)
Proceeds from equity offering, net of
offering costs
1,091,466
—
Repayment of convertible senior notes
(189,849
)
—
Proceeds from exercise of convertible
senior notes capped call
24,812
—
Net cash provided by (used in) financing
activities
867,600
(44,169
)
Net increase (decrease) in cash, cash
equivalents and restricted cash
176,221
(28,464
)
Cash, cash equivalents and restricted
cash, beginning of period
481,715
389,432
Cash, cash equivalents and restricted
cash, end of period
$
657,936
$
360,968
Three Months Ended March
31,
2021
2020
Supplemental cash flow data:
Cash paid during the period for:
Interest
$
502
$
500
Income taxes, net of refunds
$
3,063
$
756
Cash paid for amounts included in the
measurement of lease liabilities:
Operating cash flows from operating
leases
$
1,998
$
1,572
Non-cash investing and financing
activities:
Accrued purchases of long-lived assets
$
904
$
8,020
Issuance of common stock related to
repayment of convertible senior notes
$
11,237
$
—
March 31,
2021
2020
Reconciliation of cash, cash equivalents
and restricted cash:
Cash and cash equivalents
$
656,168
$
359,101
Restricted cash included in other current
assets
38
306
Restricted cash included in other
assets
1,730
1,561
Total cash, cash equivalents and
restricted cash
$
657,936
$
360,968
CHEGG, INC.
RECONCILIATION OF NET LOSS TO
EBITDA AND ADJUSTED EBITDA
(in thousands)
(unaudited)
Three Months Ended March
31,
2021
2020
Net loss
$
(65,179
)
$
(5,713
)
Interest expense, net
1,929
13,427
Provision for income taxes
2,821
522
Print textbook depreciation expense
3,760
3,527
Other depreciation and amortization
expense
14,846
9,243
EBITDA
(41,823
)
21,006
Print textbook depreciation expense
(3,760
)
(3,527
)
Share-based compensation expense
23,100
18,334
Other (expense) income, net
77,208
(4,960
)
Acquisition-related compensation costs
2,421
940
Adjusted EBITDA
$
57,146
$
31,793
CHEGG, INC.
RECONCILIATION OF GAAP TO
NON-GAAP FINANCIAL MEASURES
(in thousands, except
percentages and per share amounts)
(unaudited)
Three Months Ended March
31,
2021
2020
Operating expenses
$
110,215
$
85,924
Share-based compensation expense
(22,738
)
(18,165
)
Amortization of intangible assets
(2,335
)
(2,467
)
Acquisition-related compensation costs
(2,421
)
(940
)
Non-GAAP operating expenses
$
82,721
$
64,352
Income from operations
$
16,779
$
3,276
Share-based compensation expense
23,100
18,334
Amortization of intangible assets
4,449
2,467
Acquisition-related compensation costs
2,421
940
Non-GAAP income from operations
$
46,749
$
25,017
Net loss
$
(65,179
)
$
(5,713
)
Share-based compensation expense
23,100
18,334
Amortization of intangible assets
4,449
2,467
Acquisition-related compensation costs
2,421
940
Amortization of debt discount and issuance
costs
1,626
12,946
Loss on early extinguishment of debt
78,152
—
Loss on change in fair value of derivative
instruments, net
7,148
—
Gain on sale of strategic equity
investment
(5,338
)
—
Non-GAAP net income
$
46,379
$
28,974
Weighted average shares used to compute
net loss per share
134,352
122,428
Effect of shares for stock plan
activity
3,563
4,376
Effect of shares related to convertible
senior notes
28,818
3,968
Non-GAAP weighted average shares used to
compute non-GAAP net income per share
166,733
130,772
Net loss per share
$
(0.49
)
$
(0.05
)
Adjustments
0.77
0.27
Non-GAAP net income per share
$
0.28
$
0.22
CHEGG, INC.
RECONCILIATION OF NET CASH
PROVIDED BY OPERATING ACTIVITIES TO FREE CASH FLOW
(in thousands)
(unaudited)
Three Months Ended March
31,
2021
2020
Net cash provided by operating
activities
$
73,573
$
62,967
Purchases of property and equipment
(18,984
)
(19,965
)
Purchases of textbooks
(4,527
)
(36,830
)
Proceeds from disposition of textbooks
4,038
2,170
Free cash flow
$
54,100
$
8,342
CHEGG, INC.
RECONCILIATION OF
FORWARD-LOOKING NET INCOME TO EBITDA AND ADJUSTED EBITDA
(in thousands)
(unaudited)
Three Months Ending June 30,
2021
Year Ending December 31,
2021
Net income
$
25,500
$
5,900
Interest expense, net
1,800
7,000
Provision for income taxes
1,900
8,500
Textbook library depreciation expense
3,700
15,400
Other depreciation and amortization
expense
14,000
59,500
EBITDA
46,900
96,300
Textbook library depreciation expense
(3,700
)
(15,400
)
Share-based compensation expense
29,000
115,000
Other (expense) income, net
(700
)
75,200
Acquisition-related compensation costs
1,500
6,400
Adjusted EBITDA*
$
73,000
$
277,500
* Adjusted EBITDA guidance for the three months ending June 30,
2021 and year ending December 31, 2021 represent the midpoint of
the ranges of $72 million to $74 million and $275 million to $280
million, respectively.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20210503005656/en/
Media Contact: press@chegg.com Investor Contact: Tracey Ford,
IR@chegg.com
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