Total Revenue and Subscribers grow 35%
year-over-year
Chegg, Inc. (NYSE:CHGG), a Smarter Way to Student®, today
reported financial results for the three months ended March 31,
2020.
“In these difficult times Chegg performed ahead of our
expectations and we are grateful to have helped so many students.”
said Dan Rosensweig, CEO of Chegg, Inc., “Our belief is that, in
every industry, a crisis often accelerates the inevitable and that
is what we see happening in higher education.”
“While we are comfortable providing guidance for Q2, there are
many unknowns, such as school start dates, enrollment trends, and
whether schools will be taught on-campus, online or both,” said
Andy Brown, CFO of Chegg, Inc., “As such, it is difficult to
predict how much, if any of Chegg’s first half momentum will
continue, therefore we believe it is premature to update our
guidance for the second half of the year.”
Q1 2020 Highlights:
- Total Net Revenues of $131.6 million, an increase of 35%
year-over-year
- Chegg Services Revenues grew 33% year-over-year to
$100.4 million, or 76% of total net revenues, compared to 77% in Q1
2019
- Net Loss was $5.7 million
- Non-GAAP Net Income was $29.0 million
- Adjusted EBITDA was $31.8 million
- 2.9 million: number of Chegg Services subscribers, an
increase of 35% year-over-year
- 235 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 Tutors, Chegg Math Solver 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 2020
- Total Net Revenues in the range of $135 million to $137
million
- Chegg Services Revenues in the range of $115 million to
$117 million
- Gross Margin between 74% and 75%
- Adjusted EBITDA in the range of $48 million to $50
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 2020, 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 2020
earnings call. We are living through an unprecedented time and we
want to take a moment to acknowledge the tremendous challenges that
our society is facing. First, we want to give our heartfelt thanks
to all the frontline workers, first responders, and caregivers who
are putting themselves in harm’s way for all of us. I also want to
thank the institutions, professors, and administrators who were
able to rapidly shift the curriculum online to continue supporting
their students. All of us have been impacted by COVID-19, some much
more adversely than others. With the many ripple effects now
impacting our economy and our education system, we feel fortunate
to be able to report that our Chegg employees and their families
are healthy, and that our business is performing at an accelerated
level. We also hope that all of you listening in today are healthy,
safe, and well.
In mid-March, as we started navigating the impacts of COVID-19,
we prioritized the health and well-being of our employees and their
families. We then moved quickly to set up our teams to work
remotely and were able to seamlessly continue providing Chegg
products and services to our students. The fact that we were able
execute this transition so effectively is a testament to the
adaptability of our employee’s and the investments we have made in
our technology and infrastructure. More importantly, due to the
strength of our business and our balance sheet, we have been able
to retain our staff, meet the increased needs of our business as it
grows, and continue to make important investments in our
future.
As a student first company, we can appreciate that there are
many underserved students who depend on their institutions for
support and now must seek help elsewhere. Our goal during this
crisis is to do all we can to help the most students, which is why
we partnered with Verizon where, together, we are providing the
most in-need students in their network free access to our Chegg
Study Pack to help them finish their semester.
However, for many students, the impact of COVID-19 goes beyond
just affecting their academics; some have lost their jobs, some
fear losing them, and many may not be able to find jobs when they
graduate. So, we are ramping up our efforts through Thinkful, as we
recognize our responsibility to help as many students as possible
get the skills they need to prepare them for the post COVID-19
workforce. Specifically, we are expanding our curriculum,
substantially increasing access to our scholarships, and we are
working to reduce prices even further, which we plan to roll out
later this summer. Our goal is to help more students, of more
diverse backgrounds, to get the in-demand skills they need to
compete in today’s economy. Chegg’s vision has always been to
increase access to high quality learning content, with on-demand
support, all while lowering the financial risk to our students.
We are a global company and our teams around the world are
committed to investing in their communities. So, along with our
employees, we are proud to have stepped-up our support for
non-profits who are focusing on issues like food insecurity during
this crisis, as so many students’ lost access to on-campus food
banks when their schools had to close. We feel fortunate that we
can provide this help. To date we have already committed
approximately one million dollars to help students and our local
communities impacted by the effects of COVID-19.
Clearly, the education industry was hit hard, and schools had to
act immediately, without any precedent for moving exclusively
online. As students were required to leave campus and learn from
home, we began to see some remarkable trends.
- We saw a substantial increase in new subscribers, both
domestically and globally.
- We saw a marked increase in engagement from our existing
subscribers; and
- We are seeing a meaningful increase in the take rate of our new
Chegg Study Pack, much earlier than we expected.
The financial impact on our business is quite meaningful, so I
want to turn it over to Andy to walk you through the details and
our guidance. Andy?
Prepared Remarks - Andy Brown, CFO
Chegg, Inc.
Thanks Dan and good afternoon everyone.
As Dan mentioned, our hope is that you and your families remain
healthy and safe during these unusual times. This is clearly a
global situation. Along with the pandemic, economies are slowing at
unprecedented rates and unemployment is soaring, having a profound
impact on people’s lives.
While many traditional companies are unfortunately being hurt as
a result, we believe that direct to consumer companies like Chegg,
that are digital and serve an essential need, are experiencing
increased levels of growth since the outbreak of the COVID-19
virus. Since mid-March, we have seen a mix shift in our business as
advertising revenue has decreased from an industry wide slowdown,
while at the same time, we also have seen a substantial increase in
our subscription services driven by new US and international
subscribers to our platform, as well as increased success with our
account sharing efforts, and we see these trends continuing into
Q2. The first two months of the quarter started strong, with
subscriber growth at 33%, the acceleration of growth since
mid-March added an additional two points in the quarter, increasing
growth to 35%. This continued acceleration is having a profound
impact on Q2, as we now expect Q2 subscriber growth to be greater
than 45%.
While we are comfortable providing guidance for Q2, there are
many unknowns, such as school start dates, enrollment trends, and
whether schools will be taught on-campus, online or both. As such,
it is difficult to predict how much, if any of Chegg’s first half
momentum will continue, therefore we believe it is premature to
update our guidance for the second half of the year.
With that as a backdrop, let me walk you through the Q1 results
and our guidance for Q2.
For Q1, total revenue grew 35% to $132 million. This was
primarily driven by subscriber growth of 35%, resulting in Chegg
Services revenue of $100 million. Required Materials had a very
strong spring rush as the transition to textbook ownership and to
our new logistics partner FedEx has gone exceedingly well. This
strong topline growth drove adjusted EBITDA of $32 million, ahead
of what we expected.
Looking at the balance sheet, we ended the quarter with $1.0
billion of cash and investments. 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
for a post COVID-19 education environment.
Moving to Q2, which incorporates the changes to the environment
we discussed earlier, we expect:
- Total revenue to be between $135 and $137 million;
- With Chegg Services revenue between $115 and $117 million;
- Gross margin between 74% and 75%;
- And adjusted EBITDA between $48 and $50 million.
Before I turn the call back over to Dan, I want to give a big
shout out to my Finance team because it’s the first time our
company has had to close the books, produce financials, get
statements reviewed by our auditors, and do an earnings call all
from our homes and outside our offices. The level of detail,
coordination, and nights and weekends it took to do this was
extraordinary and I want to thank everyone on my team. You guys
rock!
With that, here is Dan.
Prepared Remarks - Dan Rosensweig, CEO
Chegg, Inc.
Thank you, Andy and thank you our finance team, you do rock! As
you can see from our numbers, Chegg is experiencing dramatic growth
during this time. And, because we serve millions of students across
the globe, many people have asked us what the lessons from COVID-19
are and its impact on the future of higher education. Our belief is
that, in every industry, a crisis often accelerates the inevitable
and that is what we are seeing happening now in higher education.
The reality is students were already learning online, were under
supported by their schools who had diminishing budgets, so that the
need for virtual learning support was already expanding. But,
almost overnight, when schools around the world had to move 100%
online, that trend accelerated and has revealed the true potential
and the value of what Chegg has to offer. The numbers say it best,
and what they reflect is that students have an even greater need
for high-quality, low-cost, personalized, and adaptive online
education to help them learn and master their curriculum. As we
think about the lasting impact on the future of higher education
globally, we see these trends continuing. The student population is
more diverse and more global. They have different socio-economic
backgrounds and are of many different ages. They also come with
various skills and experiences but what they have in common is the
need for more online support because, the fact is, they are
increasingly learning on their own, with less support from their
schools. We also believe more students are going to need to learn a
variety of new skills, over the course of their careers, and will
need access to low cost, on-demand, high quality skills online.
Our ability to meet students’ needs is due to the incredible
work of our Chegg team. We are grateful for the dedication of our
employees, as they take on many new responsibilities at home and
still maintain their focus on our student-first mission. It is
their passion and commitment that has built our culture, which has
permeated from our physical offices to our virtual offices around
the world, so I want to thank them all. I also want to encourage
everyone to continue to do your job and do your part to keep our
communities safe by staying home and staying well. As a company,
and as a society, we know we will get through this together and I
look forward to updating you on our progress this summer. At this
time, I will turn the call over to the operator for questions.
Thank you.
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
Standard Time (or 4:30 p.m. Eastern Standard 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 Standard Time (or 7:30 p.m. Eastern Standard
Time) on May 4, 2020, until 8:59 p.m. Pacific Standard Time (or
11:59 p.m. Eastern Standard Time) on May 11, 2020, by calling
1-844-512-2921, or outside the U.S. +1-412-317-6671, with
Conference ID 13701788. 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. As the leading
direct-to-student learning platform, we strive to improve
educational outcomes by putting the student first in all our
decisions. We support students on their journey from high school to
college and into their career with tools designed to help them pass
their test, pass their class, and save money on required materials.
Our services are available online, anytime and anywhere, so we can
reach students when they need us most. 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, 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 income, net,
restructuring charges, and acquisition-related compensation costs;
(2) non-GAAP income from operations as income (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 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
and purchases 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.
Restructuring charges.
Restructuring charges primarily relate to 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, WriteLab, and Thinkful 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
2019 and 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 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.
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 2020 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; 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, and Thinkful; Chegg’s
ability to strategically take advantage of new opportunities to
leverage the Student Graph; 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; the ability of our logistics partners to
manage the fulfillment processes; the effect of Chegg's transition
to using FedEx as its logistics partner; 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 filed with the
Securities and Exchange Commission on February 20, 2020 and Chegg's
Quarterly Report on Form 10-Q for the quarterly period ended March
31, 2020 to be filed with the Securities and Exchange Commission,
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, 2020
December 31, 2019
Assets
Current assets
Cash and cash equivalents
$
359,101
$
387,520
Short-term investments
404,794
381,074
Accounts receivable, net of allowance of
$160 and $56 at March 31, 2020 and December 31, 2019,
respectively
6,493
11,529
Prepaid expenses
17,852
10,538
Other current assets
19,528
16,606
Total current assets
807,768
807,267
Long-term investments
273,114
310,483
Textbook library, net
31,673
—
Property and equipment, net
97,889
87,359
Goodwill
214,323
214,513
Intangible assets, net
32,075
34,667
Right of use assets
14,608
15,931
Other assets
23,554
18,778
Total assets
$
1,495,004
$
1,488,998
Liabilities and stockholders'
equity
Current liabilities
Accounts payable
$
13,605
$
7,362
Deferred revenue
35,753
18,780
Current operating lease liabilities
5,234
5,283
Accrued liabilities
47,241
39,964
Total current liabilities
101,833
71,389
Long-term liabilities
Convertible senior notes, net
913,249
900,303
Long-term operating lease liabilities
13,012
14,513
Other long-term liabilities
3,983
3,964
Total long-term liabilities
930,244
918,780
Total liabilities
1,032,077
990,169
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; 123,542,833 and 121,583,501 shares issued and
outstanding at March 31, 2020 and December 31, 2019,
respectively
124
122
Additional paid-in capital
890,258
916,095
Accumulated other comprehensive loss
(5,362
)
(1,096
)
Accumulated deficit
(422,093
)
(416,292
)
Total stockholders' equity
462,927
498,829
Total liabilities and stockholders'
equity
$
1,495,004
$
1,488,998
CHEGG, INC.
CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS
(in thousands, except per
share amounts)
(unaudited)
Three Months Ended March
31,
2020
2019
Net revenues
$
131,590
$
97,409
Cost of revenues(1)
42,390
23,335
Gross profit
89,200
74,074
Operating expenses:
Research and development(1)
39,541
32,692
Sales and marketing(1)
20,238
18,717
General and administrative(1)
26,145
23,670
Restructuring charges
—
22
Total operating expenses
85,924
75,101
Income (loss) from operations
3,276
(1,027
)
Interest expense, net and other income,
net:
Interest expense, net
(13,427
)
(4,232
)
Other income, net
4,960
1,567
Total interest expense, net and other
income, net
(8,467
)
(2,665
)
Loss before provision for income taxes
(5,191
)
(3,692
)
Provision for income taxes
522
626
Net loss
$
(5,713
)
$
(4,318
)
Net loss per share, basic and diluted
$
(0.05
)
$
(0.04
)
Weighted average shares used to compute
net loss per share, basic and diluted
122,428
116,730
(1) Includes share-based compensation
expense as follows:
Cost of revenues
$
169
$
125
Research and development
6,991
4,917
Sales and marketing
2,186
1,808
General and administrative
8,988
8,188
Total share-based compensation expense
$
18,334
$
15,038
CHEGG, INC.
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
Three Months Ended March
31,
2020
2019
Cash flows from operating activities
Net loss
$
(5,713
)
$
(4,318
)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Print textbook depreciation expense
3,527
—
Other depreciation and amortization
expense
9,243
6,785
Share-based compensation expense
18,334
15,038
Amortization of debt discount and issuance
costs
12,946
4,005
Gain on textbook library, net
(1,175
)
—
Deferred income taxes
(311
)
—
Operating lease expense, net of
accretion
1,053
1,049
Other non-cash items
(1
)
(44
)
Change in assets and liabilities:
Accounts receivable
4,929
4,024
Prepaid expenses and other current
assets
(9,707
)
(11,522
)
Other assets
(1,425
)
(1,166
)
Accounts payable
(436
)
(1,836
)
Deferred revenue
16,973
8,858
Accrued liabilities
15,972
216
Other liabilities
(1,242
)
(3,148
)
Net cash provided by operating
activities
62,967
17,941
Cash flows from investing activities
Purchases of property and equipment
(19,965
)
(14,060
)
Purchases of textbooks
(36,830
)
—
Proceeds from disposition of textbooks
2,170
—
Purchases of investments
(112,421
)
(21,572
)
Maturities of investments
121,784
48,805
Purchase of strategic equity
investment
(2,000
)
—
Net cash (used in) provided by investing
activities
(47,262
)
13,173
Cash flows from financing activities
Common stock issued under stock plans,
net
2,667
6,982
Payment of taxes related to the net share
settlement of equity awards
(46,836
)
(76,044
)
Proceeds from issuance of convertible
senior notes, net of issuance costs
—
682,594
Purchase of convertible senior notes
capped call
—
(85,050
)
Repurchase of common stock
—
(20,000
)
Net cash (used in) provided by financing
activities
(44,169
)
508,482
Net (decrease) increase in cash, cash
equivalents and restricted cash
(28,464
)
539,596
Cash, cash equivalents and restricted
cash, beginning of period
389,432
375,945
Cash, cash equivalents and restricted
cash, end of period
$
360,968
$
915,541
Three Months Ended March
31,
2020
2019
Supplemental cash flow data:
Cash paid during the period for:
Interest
$
500
$
—
Income taxes
$
756
$
626
Cash paid for amounts included in the
measurement of lease liabilities:
Operating cash flows from operating
leases
$
1,572
$
1,126
Non-cash investing and financing
activities:
Accrued purchases of long-lived assets
$
8,020
$
5,127
March 31,
2020
2019
Reconciliation of cash, cash equivalents
and restricted cash:
Cash and cash equivalents
$
359,101
$
914,500
Restricted cash included in other current
assets
306
121
Restricted cash included in other
assets
1,561
920
Total cash, cash equivalents and
restricted cash
$
360,968
$
915,541
CHEGG, INC.
RECONCILIATION OF NET LOSS TO
EBITDA AND ADJUSTED EBITDA
(in thousands)
(unaudited)
Three Months Ended March
31,
2020
2019
Net loss
$
(5,713
)
$
(4,318
)
Interest expense, net
13,427
4,232
Provision for income taxes
522
626
Print textbook depreciation expense
3,527
—
Other depreciation and amortization
expense
9,243
6,785
EBITDA
21,006
7,325
Print textbook depreciation expense
(3,527
)
—
Share-based compensation expense
18,334
15,038
Other income, net
(4,960
)
(1,567
)
Restructuring charges
—
22
Acquisition-related compensation costs
940
3,078
Adjusted EBITDA
$
31,793
$
23,896
CHEGG, INC.
RECONCILIATION OF GAAP TO
NON-GAAP FINANCIAL MEASURES
(in thousands, except
percentages and per share amounts)
(unaudited)
Three Months Ended March
31,
2020
2019
Net revenues
$
131,590
$
97,409
Operating expenses
$
85,924
$
75,101
Share-based compensation expense
(18,165
)
(14,913
)
Amortization of intangible assets
(2,467
)
(1,790
)
Restructuring charges
—
(22
)
Acquisition-related compensation costs
(940
)
(3,078
)
Non-GAAP operating expenses
$
64,352
$
55,298
Operating expenses as a percent of net
revenues
65.3
%
77.1
%
Non-GAAP operating expenses as a percent
of net revenues
48.9
%
56.8
%
Income (loss) from operations
$
3,276
$
(1,027
)
Share-based compensation expense
18,334
15,038
Amortization of intangible assets
2,467
1,790
Restructuring charges
—
22
Acquisition-related compensation costs
940
3,078
Non-GAAP income from operations
$
25,017
$
18,901
Net loss
$
(5,713
)
$
(4,318
)
Share-based compensation expense
18,334
15,038
Amortization of intangible assets
2,467
1,790
Restructuring charges
—
22
Acquisition-related compensation costs
940
3,078
Amortization of debt discount and issuance
costs
12,946
4,005
Non-GAAP net income
$
28,974
$
19,615
Weighted average shares used to compute
net loss per share
122,428
116,730
Effect of shares for stock plan
activity
4,376
10,031
Effect of shares related to convertible
senior notes
3,968
3,332
Non-GAAP weighted average shares used to
compute non-GAAP net income per share
130,772
130,093
Net loss per share
$
(0.05
)
$
(0.04
)
Adjustments
0.27
0.19
Non-GAAP net income per share
$
0.22
$
0.15
CHEGG, INC.
RECONCILIATION OF NET CASH
PROVIDED BY OPERATING ACTIVITIES TO FREE CASH FLOW
(in thousands)
(unaudited)
Three Months Ended March
31,
2020
2019
Net cash provided by operating
activities
62,967
17,941
Purchases of property and equipment
(19,965
)
(14,060
)
Purchases of textbooks
(36,830
)
—
Proceeds from disposition of textbooks
2,170
—
Free cash flow
$
8,342
$
3,881
CHEGG, INC.
RECONCILIATION OF
FORWARD-LOOKING NET INCOME TO EBITDA AND ADJUSTED EBITDA
(in thousands)
(unaudited)
Three Months Ending June 30,
2020
Net income
$
5,100
Interest expense, net
13,400
Provision for income taxes
900
Print textbook depreciation expense
3,500
Other depreciation and amortization
expense
10,400
EBITDA
33,300
Print textbook depreciation expense
(3,500
)
Share-based compensation expense
19,000
Other income, net
(3,700
)
Acquisition-related compensation costs
3,900
Adjusted EBITDA*
$
49,000
* Adjusted EBITDA guidance for the three months ending June 30,
2020 represents the midpoint of the ranges of $48 million to $50
million.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200504005627/en/
Media Contact: press@chegg.com Investor Contact: Tracey Ford,
IR@chegg.com
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