Chegg Services Revenues increased 14%
Year-over-Year
Chegg, Inc. (NYSE:CHGG), the leading student-first connected
learning platform, today reported financial results for the three
months ended March 31, 2022.
“We had a solid first quarter, and Chegg is executing well
against our strategic objectives, despite continued industry
headwinds,” said Dan Rosensweig, CEO & President of Chegg, Inc.
“We expect these challenges to be temporary and when they subside,
our operating model, balance sheet, and leading brand, put us in a
strong position to accelerate our growth.”
Q1 2022 Highlights:
- Total Net Revenues of $202.2 million, an increase of 2%
year-over-year
- Chegg Services Revenues grew 14% year-over-year to
$184.8 million, or 91% of total net revenues, compared to 82% in Q1
2021
- Net Income was $5.7 million
- Non-GAAP Net Income was $50.1 million
- Adjusted EBITDA was $62.2 million
- 5.4 million: number of Chegg Services subscribers, an
increase of 12% year-over-year, which includes 0.6 million
subscribers from our newly acquired Busuu service
- In April 2022, we entered into a partnership with an
independent book reseller to transition out of our print textbook
library and fulfillment logistics responsibilities while allowing
us to continue offering print textbooks and eTextbooks to
students
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, Busuu, 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 income
(loss), and adjusted EBITDA to net income (loss), see the sections
of this press release titled “Use of Non-GAAP Measures,”
“Reconciliation of Net Income (Loss) to EBITDA and Adjusted
EBITDA,” and “Reconciliation of GAAP to Non-GAAP Financial
Measures.”
Business Outlook:
Second Quarter 2022
- Total Net Revenues in the range of $188 million to $192
million
- Chegg Services Revenues in the range of $183 million to
$187 million
- Gross Margin between 76% and 77%
- Adjusted EBITDA in the range of $66 million to $68
million
Full Year 2022
- Total Net Revenues in the range of $740 million to $770
million
- Chegg Services Revenues in the range of $710 million to
$740 million
- Gross Margin between 73% and 74%
- Adjusted EBITDA in the range of $220 million to $235
million
- Capital Expenditures in the range of $120 million to
$130 million
For more information about the use of forward-looking non-GAAP
measures, a reconciliation of forward-looking net income (loss) to
EBITDA and adjusted EBITDA for the second quarter 2022 and full
year 2022, see the below sections of the press release titled “Use
of Non-GAAP Measures,” and “Reconciliation of Forward-Looking Net
Income (Loss) to EBITDA and Adjusted EBITDA.”
An updated investor presentation and an investor data sheet can
be found on Chegg’s Investor Relations website https://investor.chegg.com.
Prepared Remarks - Dan Rosensweig, CEO
Chegg, Inc.
Thank you, Tracey and welcome everyone to our Q1 2022 earnings
call. We started the year with a solid quarter; Chegg Services grew
14% year-over-year with 5.4 million subscribers. In addition, we
are announcing a new partnership with an independent book reseller,
enabling us to continue to offer print and e-textbooks to students,
while our partner handles inventory and fulfillment. We expect this
deal to improve our margins and growth rates over time.
As noted in our fourth quarter call, we entered the year with
momentum, however this trend has not continued at the level we
expected. The issues of enrollment, the economy, and now inflation
have all impacted our industry. Students continue to take fewer
classes and those they do take are often less rigorous, with fewer
or more limited assignments. With higher wages and increased cost
of living, more people are shifting their priorities towards
earning over learning, resulting in a lower course load, or
delaying enrollment in school at this time. In the U.S. alone, we
have seen approximately 1 million students forgo or postpone higher
education over the last two years. The impact of these factors is
evident in the reduced traffic to higher education support
services. This has made forecasting at this time challenging, and
while we expect many of these trends to be temporary, we are
reducing our guidance to better reflect the current market
conditions, which Andy will walk you through.
That being said we are executing well against these current
conditions and indications are that we are outperforming our
sector. With approximately 50% of the world population under the
age of 30, and technology impacting what we learn, how we learn,
where we learn and when we learn, the global need for affordable,
high quality, dependable, academic support and skills-based
learning will only grow. Our goal during this time is to gain
greater market share and invest in future growth.
Students who are using paid support services this semester are
overwhelmingly choosing Chegg. We are experiencing strong
engagement, our highest take rate for the Chegg Study Pack, and
outstanding retention rates. Along with the increased take rate for
the Chegg Study Pack, our continued efforts in the expansion,
quality, discoverability, and personalization of our content drove
strong retention, which increased the ARPU of our business.
These are powerful endorsements of the critical role Chegg plays
in the lives of students. We remain bullish on the post-pandemic
era, so we are staying focused on investments in our future;
specifically, international expansion, language learning, skills
training, and supplemental support services like soft skills and
financial literacy. Our reach is expanding globally. And we are
improving both our content library and technology platform to
increase students’ ability to discover our more than 100 million
pieces of learning materials, thereby improving student
outcomes.
Domestically, we continue to be focused on our key priorities
including the student-facing launch of Uversity this fall, which
will increase the breadth and quality of our content, deepen our
relationships with academic institutions, and expand the number of
students who can learn from Chegg. To-date, professors have
uploaded over 140,000 approved pieces of instructional content and
Uversity will soon be rolling out to faculty in the UK and
Canada.
Our international expansion continues to perform well led by the
adoption of Chegg Study and the Chegg Study Pack, and accelerated
by the addition of Busuu. We continue to grow our subscribers and
take market share and we are now offering local content and user
experiences in key markets. We are currently accepting local
currencies in five countries and expect to expand to at least three
new markets by the end of this year. In addition, we are price
testing in eight countries to determine the optimal price-to-value
equation, and we are excited to have recently launched our first
fully localized app in Turkey. Our next localized app will be in
Spanish and that will increase our TAM in both the U.S. and other
key countries like Mexico as well as emerging Latin American
markets.
We are also building new B2B channels for both our skills and
language services and are pleased with their early success. Busuu
has direct relationships with over 500 companies, and our skills
distribution partner Guild now reaches over 4 million front-line
workers, which is an important channel for Chegg. We are proud to
have graduated our first Guild cohorts from our new programs in
technology fundamentals and advanced programs, like cyber security.
With recent research showing that 82% of global workers polled plan
to train in new digital skills in the next 5 years, we believe
these kinds of programs represent a major opportunity for
Chegg.
Beyond the academic and professional needs of students, there is
an enormous opportunity to improve student lives beyond the
classroom. 83% of U.S. students feel they need to learn more about
money and finances and half are struggling with their mental
health. Chegg is investing in serving these vital student needs and
will continually work to support them beyond academics and
skills.
Given the current environment, we are very proud of how the
Chegg team continues to execute. We will manage through the
volatility and expect to return to higher and more predictable
growth over time. Through all of this, we will never lose sight of
our mission: to put students first around the world.
And with that I will turn it over to Andy…
Prepared Remarks - Andy Brown, CFO
Chegg, Inc.
Thanks Dan and good afternoon everyone.
Q1 was a solid quarter for Chegg, with revenues coming in within
the guidance range, while adjusted EBITDA continued to be strong
and ahead of our expectations despite the volatility from the
pandemic and unfavorable education industry trends. These
conditions have made forecasting more challenging in the near term
and as a result, we are reducing our full year expectations. I will
walk you through our updated guidance shortly, along with the
changes to Required Materials from our new partnership.
With that backdrop, let me walk you through the Q1 results.
For Q1, total revenue grew to $202 million. This was driven by
Chegg Services growth of 14% to $185 million, as subscribers grew
to 5.4 million during the quarter, which included approximately
600,000 subscribers from our newly acquired Busuu service. Gross
margin came in slightly higher than expected as we continue to get
benefits as we scale. All of this resulted in adjusted EBITDA
margin of 31% or $62 million, exceeding our initial estimates, even
as we made significant investments for future growth.
Looking at the balance sheet, we ended the quarter with $1.6
billion of cash and investments. During the quarter, we used $422
million to purchase Busuu and $300 million for our accelerated
share repurchase which was completed in April. We continue to
believe the combination of our operating model, balance sheet, and
cash flows are among the strongest in the education industry and
put us in an ideal position to grow organically, and should
opportunities become available, through acquisition.
In early April we entered into an agreement to sell our
remaining textbook library and to offer both physical and digital
textbooks through a partner, where we will receive a single-digit
percentage commission. Being student-first, we have continued to
offer textbooks even as it stopped contributing positively to our
financials. This new relationship gives us the opportunity to
continue to serve students and ultimately grow faster with higher
margins. We have provided details in our earnings deck on the
investor relations website regarding the transition, including the
impact to both revenues and costs. Starting in 2023 we expect this
partnership will contribute approximately $7 - $10 million in
annual revenue, which given its size, will be consolidated into
Chegg Services revenue, and as such, we will only report a single
revenue line.
Moving on to guidance. As we continue to navigate the evolving
impacts of the economy and the pandemic, the historical patterns of
our business, including seasonality and intra-semester student
behavior have changed. While these factors have made forecasting
more complicated, we believe over time it will return to greater
predictability.
As a result, for 2022 we now expect:
- Total revenue to be between $740 and $770 million,
- With Chegg Services revenue between $710 and $740 million,
- Gross margin between 73% and 74%,
- And adjusted EBITDA between $220 and $235 million, or 30%
adjusted EBITDA margin.
For Q2 we now expect:
- Total revenue to be between $188 and $192 million,
- With Chegg Services revenue between $183 and $187 million,
- Gross margin between 76% and 77%,
- And adjusted EBITDA between $66 and $68 million.
In closing, despite the turbulence in the industry we continue
to invest prudently in growth such as international expansion,
Uversity, personalization, expanding our non-academic and skills
offerings, and language learning with Busuu, all while delivering
best in class margins and generating significant cash flows. Along
with the strength of our balance sheet, we believe this puts us in
pole position when these industry headwinds subside.
With that, I’ll turn the call over to the operator for
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 https://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 2, 2022, until 8:59 p.m. Pacific Daylight Time (or
11:59 p.m. Eastern Daylight Time) on May 9, 2022, by calling
1-844-512-2921, or outside the U.S. +1-412-317-6671, with
Conference ID 13729217. An audio archive of the call will also be
available at https://investor.chegg.com.
Use of Investor Relations Website for
Regulation FD Purposes
Chegg also uses its media center website, https://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 https://www.chegg.com/press, in addition to
following press releases, Securities and Exchange Commission
filings and public conference calls and webcasts.
About Chegg
Millions of people all around the world Learn with Chegg. Our
mission is to improve learning and learning outcomes by putting
students first. We support life-long learners starting with their
academic journey and extending into their careers. The Chegg
platform provides products and services to support learners to help
them better understand their academic course materials, and also
provides personal and professional development skills training, to
help them achieve their learning goals. 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 Income (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 (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 for print textbook depreciation expense and to
exclude share-based compensation expense, other income (expense),
net, acquisition-related compensation costs, transitional logistic
charges and restructuring charges; (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 (loss)
income from operations excluding share-based compensation expense,
amortization of intangible assets, acquisition-related compensation
costs, and transitional logistic charges; (4) non-GAAP net income
as net income (loss) excluding share-based compensation expense,
amortization of intangible assets, acquisition-related compensation
costs, amortization of debt discount and issuance costs,
transitional logistic charges, the loss on early extinguishment of
debt, the net loss on change in fair value of derivative
instruments, and the gain on sale of strategic equity investments;
(5) non-GAAP weighted average shares outstanding as weighted
average shares outstanding adjusted for the effect of outstanding
stock options, RSUs, PSUs, and shares related to our convertible
senior notes, to the extent such shares are not already included in
our weighted average shares outstanding; (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 adjusted for 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 Income (Loss) to
EBITDA and Adjusted EBITDA,” “Reconciliation of GAAP to Non-GAAP
Financial Measures,” “Reconciliation of Forward-Looking Net Income
(Loss) 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, including those that
contribute to generating revenues, that it acquires in conjunction
with acquisitions, which results in non-cash expenses that may not
otherwise have been incurred. Chegg believes excluding the expense
associated with intangible assets from non-GAAP measures allows for
a more accurate assessment of its ongoing operations and provides
investors with a better comparison of period-over-period operating
results. No corresponding adjustments have been made related to
revenues generated from acquired intangible assets.
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 issuance costs.
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 with a better
comparison of period-over-period operating results.
Loss on early extinguishment of debt.
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
that was acquired. The gain on sale of strategic equity investment
is a one-time event and we believe its exclusion provides investors
with a better comparison of period-over-period operating
results.
Transitional logistics charges.
The transitional logistics charges represent incremental
expenses incurred as we transition our print textbooks to a new
third party logistics provider. Chegg believes that it is
appropriate to exclude them from non-GAAP financial measures
because it is the result of an event that is not considered a
core-operating activity and we believe its exclusion provides
investors with a better comparison of period-over-period operating
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.
Effect of shares related to convertible senior notes.
The effect of shares related to convertible senior notes
represents the dilutive impact of our convertible senior notes, to
the extent such shares are not already included in our weighted
average shares outstanding as they were antidilutive on a GAAP
basis.
Free cash flow.
Free cash flow represents net cash provided by operating
activities adjusted for 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, the expectations regarding Chegg's execution against
its strategic objectives, outperformance of our sector, the
positioning of Chegg to accelerate growth, the Required Materials
transition, including margin improvements, revenue growth or
contribution, the operational aspects of the transition, the
expected timing and benefits of the transition, and costs savings,
among others, the temporary nature of industry headwinds, including
certain trends in employment and wages, student behavior, our
industry, and the economy, our revenue growth, margins, retention
rates and cash flow generation, the growth in the need for academic
support and skills-based learning, our expansion into new markets,
our goals and expectations to gain market share and invest in
future growth, including in international expansion, language
learning, skills training, and supplemental support services, our
ability to forecast our results, our future revenue presentation,
the anticipated student-facing launch of Uversity and its
anticipated benefits, the belief that Chegg will manage through
volatility and the expectation of returning to higher and more
predictable growth, the financial guidance, as well as 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:
the effects of the COVID-19 pandemic on Chegg’s business and the
economy generally; Chegg’s ability to attract new, and retain
existing, students, to increase student engagement, and to increase
monetization; changes in employment and wages and the uncertainty
surrounding the evolving educational landscape, enrollment and
student behavior; changes in search engine methodologies that
modify Chegg’s search result page rankings, resulting in decreased
student engagement on Chegg’s website; competition in aspects of
Chegg’s business, and Chegg's expectation that such competition
will increase; Chegg’s ability to maintain its services and systems
without interruption, including as a result of technical issues,
cybersecurity threats, or cyber-attacks; third-party payment
processing risks; adoption of government regulation of education
unfavorable to Chegg; the rate of adoption of Chegg’s offerings;
mobile app stores and mobile operating systems making Chegg’s apps
and mobile website available to students and to grow Chegg’s user
base and increase their engagement; Chegg’s ability to expand
internationally; colleges and governments restricting online access
or access to Chegg’s website; Chegg’s ability to strategically take
advantage of new opportunities; competitive developments, including
pricing pressures and other services targeting students; 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 and student behavior on the business; Chegg's brand and
reputation; the outcome of any current litigation and
investigations; the successful transition of Required Materials;
Chegg’s ability to effectively control operating costs; changes in
Chegg’s addressable market; regulatory changes, in particular
concerning privacy and marketing; changes in the education market,
including as a result of COVID-19; and general economic, political
and industry conditions, including inflation and war. 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, 2021 filed with the
Securities and Exchange Commission on February 22, 2022, and could
cause actual results to differ materially from expectations.
CHEGG, INC.
CONDENSED CONSOLIDATED BALANCE
SHEETS
(in thousands, except for
number of shares and par value)
(unaudited)
March 31, 2022
December 31, 2021
Assets
Current assets
Cash and cash equivalents
$
267,731
$
854,078
Short-term investments
915,431
691,781
Accounts receivable, net of allowance of
$156 and $153 at March 31, 2022 and December 31, 2021,
respectively
19,918
17,850
Prepaid expenses
28,882
35,093
Other current assets
14,671
23,846
Total current assets
1,246,633
1,622,648
Long-term investments
435,413
745,993
Textbook library, net
10,651
11,241
Property and equipment, net
187,743
169,938
Goodwill
641,284
289,763
Intangible assets, net
102,685
40,566
Right of use assets
18,879
18,062
Other assets
19,182
21,035
Total assets
$
2,662,470
$
2,919,246
Liabilities and stockholders'
equity
Current liabilities
Accounts payable
$
9,549
$
11,992
Deferred revenue
60,458
35,143
Accrued liabilities
85,424
67,209
Total current liabilities
155,431
114,344
Long-term liabilities
Convertible senior notes, net
1,679,534
1,678,155
Long-term operating lease liabilities
12,456
12,447
Other long-term liabilities
6,528
7,383
Total long-term liabilities
1,698,518
1,697,985
Total liabilities
1,853,949
1,812,329
Commitments and contingencies
Stockholders' equity:
Preferred stock, $0.001 par value per
share, 10,000,000 shares authorized, no shares issued and
outstanding
—
—
Common stock, $0.001 par value per share:
400,000,000 shares authorized; 126,681,972 and 136,951,956 shares
issued and outstanding at March 31, 2022 and December 31, 2021,
respectively
127
137
Additional paid-in capital
1,176,765
1,449,305
Accumulated other comprehensive loss
(36,922
)
(5,334
)
Accumulated deficit
(331,449
)
(337,191
)
Total stockholders' equity
808,521
1,106,917
Total liabilities and stockholders'
equity
$
2,662,470
$
2,919,246
CHEGG, INC.
CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS
(in thousands, except per
share amounts)
(unaudited)
Three Months Ended
March 31,
2022
2021
Net revenues
$
202,244
$
198,378
Cost of revenues(1)
55,085
71,384
Gross profit
147,159
126,994
Operating expenses:
Research and development(1)
52,415
46,131
Sales and marketing(1)
42,498
26,214
General and administrative(1)
46,870
37,870
Total operating expenses
141,783
110,215
Income from operations
5,376
16,779
Interest expense, net and other income
(expense), net:
Interest expense, net
(1,597
)
(1,929
)
Other income (expense), net
6,180
(77,208
)
Total interest expense, net and other
income (expense), net
4,583
(79,137
)
Income (loss) before provision for income
taxes
9,959
(62,358
)
Provision for income taxes
(4,217
)
(2,821
)
Net income (loss)
$
5,742
$
(65,179
)
Net income (loss) per share
Basic
$
0.04
$
(0.49
)
Diluted
$
0.04
$
(0.49
)
Weighted average shares used to compute
net income (loss) per share
Basic
132,162
134,352
Diluted
133,270
134,352
(1) Includes share-based compensation
expense as follows:
Cost of revenues
$
623
$
362
Research and development
11,776
7,959
Sales and marketing
4,386
2,919
General and administrative
16,299
11,860
Total share-based compensation expense
$
33,084
$
23,100
CHEGG, INC.
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
Three Months Ended
March 31,
2022
2021
Cash flows from operating
activities
Net income (loss)
$
5,742
$
(65,179
)
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Print textbook depreciation expense
1,521
3,760
Other depreciation and amortization
expense
20,285
14,846
Share-based compensation expense
33,084
23,100
Amortization of debt issuance costs
1,382
1,626
Gain on foreign currency remeasurement of
purchase consideration
(4,628
)
—
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
626
757
Gain on sale of strategic equity
investment
—
(5,338
)
(Gain) loss on textbook library, net
(610
)
4,028
Operating lease expense, net of
accretion
1,640
1,589
Other non-cash items
(737
)
87
Change in assets and liabilities, net of
effect of acquisition of businesses:
Accounts receivable
292
2,240
Prepaid expenses and other current
assets
21,722
(25,075
)
Other assets
8,342
1,058
Accounts payable
(7,534
)
6,597
Deferred revenue
8,554
15,988
Accrued liabilities
(7,555
)
9,386
Other liabilities
(2,091
)
(1,197
)
Net cash provided by operating
activities
80,035
73,573
Cash flows from investing
activities
Purchases of property and equipment
(29,533
)
(18,984
)
Purchases of textbooks
(3,692
)
(4,527
)
Proceeds from disposition of textbooks
2,499
4,038
Purchases of investments
(273,280
)
(925,748
)
Maturities of investments
342,059
181,315
Proceeds from sale of strategic equity
investment
—
6,845
Acquisition of businesses, net of cash
acquired
(401,125
)
(7,891
)
Net cash used in investing activities
(363,072
)
(764,952
)
Cash flows from financing
activities
Proceeds from common stock issued under
stock plans, net
456
347
Payment of taxes related to the net share
settlement of equity awards
(7,467
)
(59,176
)
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
Repurchases of common stock
(300,450
)
—
Net cash (used in) provided by financing
activities
(307,461
)
867,600
Effect of exchange rate changes
4,628
—
Net (decrease) increase in cash, cash
equivalents and restricted cash
(585,870
)
176,221
Cash, cash equivalents and restricted
cash, beginning of period
855,893
481,715
Cash, cash equivalents and restricted
cash, end of period
$
270,023
$
657,936
Three Months Ended
March 31,
2022
2021
Supplemental cash flow data:
Cash paid during the period for:
Interest
$
437
$
502
Income taxes, net of refunds
$
1,101
$
3,063
Cash paid for amounts included in the
measurement of lease liabilities:
Operating cash flows from operating
leases
$
1,852
$
1,998
Right of use assets obtained in exchange
for lease obligations:
Operating leases
$
2,715
$
—
Non-cash investing and financing
activities:
Accrued purchases of long-lived assets
$
5,778
$
904
Issuance of common stock related to
repayment of convertible senior notes
$
—
$
11,237
March 31,
2022
2021
Reconciliation of cash, cash
equivalents and restricted cash:
Cash and cash equivalents
$
267,731
$
656,168
Restricted cash included in other current
assets
70
38
Restricted cash included in other
assets
2,222
1,730
Total cash, cash equivalents and
restricted cash
$
270,023
$
657,936
CHEGG, INC.
RECONCILIATION OF NET INCOME
(LOSS) TO EBITDA AND ADJUSTED EBITDA
(in thousands)
(unaudited)
Three Months Ended
March 31,
2022
2021
Net income (loss)
$
5,742
$
(65,179
)
Interest expense, net
1,597
1,929
Provision for income taxes
4,217
2,821
Print textbook depreciation expense
1,521
3,760
Other depreciation and amortization
expense
20,285
14,846
EBITDA
33,362
(41,823
)
Print textbook depreciation expense
(1,521
)
(3,760
)
Share-based compensation expense
33,084
23,100
Other income (expense), net
(6,180
)
77,208
Acquisition-related compensation costs
3,079
2,421
Transitional logistics charges
348
—
Adjusted EBITDA
$
62,172
$
57,146
CHEGG, INC.
RECONCILIATION OF GAAP TO
NON-GAAP FINANCIAL MEASURES
(in thousands, except
percentages and per share amounts)
(unaudited)
Three Months Ended
March 31,
2022
2021
Operating expenses
$
141,783
$
110,215
Share-based compensation expense
(32,461
)
(22,738
)
Amortization of intangible assets
(2,801
)
(2,335
)
Acquisition-related compensation costs
(3,069
)
(2,421
)
Non-GAAP operating expenses
$
103,452
$
82,721
Income from operations
$
5,376
$
16,779
Share-based compensation expense
33,084
23,100
Amortization of intangible assets
6,442
4,449
Acquisition-related compensation costs
3,079
2,421
Transitional logistics charges
348
—
Non-GAAP income from operations
$
48,329
$
46,749
Net income (loss)
$
5,742
$
(65,179
)
Share-based compensation expense
33,084
23,100
Amortization of intangible assets
6,442
4,449
Acquisition-related compensation costs
3,079
2,421
Amortization of debt issuance costs
1,382
1,626
Transitional logistics charges
348
—
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
investments
—
(5,338
)
Non-GAAP net income
$
50,077
$
46,379
Weighted average shares used to compute
net income (loss) per share, diluted
133,270
134,352
Effect of shares for stock plan
activity
—
3,563
Effect of shares related to convertible
senior notes
22,875
28,818
Non-GAAP weighted average shares used to
compute non-GAAP net income per share, diluted
156,145
166,733
Net income (loss) per share, diluted
$
0.04
$
(0.49
)
Adjustments
0.28
0.77
Non-GAAP net income per share, diluted
$
0.32
$
0.28
CHEGG, INC.
RECONCILIATION OF NET CASH
PROVIDED BY OPERATING ACTIVITIES TO FREE CASH FLOW
(in thousands)
(unaudited)
Three Months Ended
March 31,
2022
2021
Net cash provided by operating
activities
$
80,035
$
73,573
Purchases of property and equipment
(29,533
)
(18,984
)
Purchases of textbooks
(3,692
)
(4,527
)
Proceeds from disposition of textbooks
2,499
4,038
Free cash flow
$
49,309
$
54,100
CHEGG, INC.
RECONCILIATION OF
FORWARD-LOOKING NET INCOME (LOSS) TO EBITDA AND ADJUSTED
EBITDA
(in thousands)
(unaudited)
Three Months Ending
June 30, 2022
Year Ending
December 31, 2022
Net income (loss)
$
1,000
$
(31,100
)
Interest expense, net
1,600
6,500
Provision for income taxes
1,900
8,500
Textbook library depreciation expense
—
1,500
Other depreciation and amortization
expense
21,700
90,300
EBITDA
26,200
75,700
Textbook library depreciation expense
—
(1,500
)
Share-based compensation expense
36,000
145,000
Other income, net
(500
)
(7,600
)
Acquisition-related compensation costs
3,300
13,000
Transitional logistics charges
2,000
2,900
Adjusted EBITDA*
$
67,000
$
227,500
* Adjusted EBITDA guidance for the three months ending June 30,
2022 and year ending December 31, 2022 represent the midpoint of
the ranges of $66 million to $68 million and $220 million to $235
million, respectively.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20220502005257/en/
Media Contact: Marc Boxser, press@chegg.com Investor Contact:
Tracey Ford, IR@chegg.com
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