Chegg, Inc. · NYSE:CHGG
Chegg — Q1 2015 Earnings Presentation
23 slides from Chegg's earnings presentation, May 2015
Slide 1: The Student Hub
The Student Hub SM Dan Rosensweig, CEO // Andy Brown, CFO // May 2015 Confidential Material – Chegg Inc. © 2005 - 2015. All Rights Reserved. 1
Slide 2: Safe Harbor: Forward-Looking Statements
SAFE HARBOR Forward-Looking Statements This presentation contains forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements relate to expectations, beliefs, projections, future plans and strategies, anti
Slide 3: From Directed Education to Self-Directed Learning
From Directed Education to Self-Directed Learning Confidential Material – Chegg Inc. © 2005 - 2015. All Rights Reserved. 3
Slide 4: Education is a $1 Trillion U.S. Market That is Being Disrupted
Education is a $1 Trillion U.S. Market That is Being Disrupted Confidential Material – Chegg Inc. © 2005 - 2015. All Rights Reserved. 4
Slide 5: Poor Outcomes, Insanely High Costs…
Poor Outcomes, Insanely High Costs… Not OK $1.1 Trillion+ 10.6% Unemployed2 Student Loan Debt1 Recent Grads 45% 41% of Grads are in Drop out jobs not requiring of college4 4-year degree3 Need Relentless Focus on Student Outcomes Sources: 1 NY Federal Reserve; 2 BureauConfidential Material 3– Voice o
Slide 6: The Story of Chegg…Still Being Written
Chegg was Hatched to Address Student Problems Foundation Expansion Integration Acceleration Build big brand that Extend reach into Build one connected cloud- To all digital model, students value, become high school and offer more based platform for students creating high growth, #1 Textbook Renter s
Slide 7: Solving Students' Problems is a Big Business $84 Billion
Solving Students’ Problems is a Big Business $84 Billion $6.5B College Recruiting $53B Back-To School $11B $11B Tutoring, $10B Tutoring, Test $5B Prep & Required Material Career Recruiting Test Prep & Counseling Counseling Get into College Go to College Succeed & Graduate Get First Job Confidential
Slide 8: Gap Between Students, Universities and Employers has Grown Significantly in Last 5 Years
Gap Between Students, Universities and Employers has Grown Significantly in Last 5 Years Students Expect Technology to Eliminate the Obstacles of Time, Geography, Relevance and Cost Confidential Material – Chegg Inc. © 2005 - 2015. All Rights Reserved.
Slide 9: Helping Students Today Requires Leveraging Technology & Data to Answer These Questions
Helping Students Today Requires Leveraging Technology & Data to Answer These Questions High School College Should I go to What courses do I How can I do college? take? better in class? What college What major How do I build should I go to? should I study? career skills? What materials do How do I pa
Slide 10: Students Use Chegg to Solve Problems Because Chegg Improves Their Outcomes
Students Use Chegg to Solve Problems Because Chegg Improves Their Outcomes Confidential Material – Chegg Inc. © 2005 - 2015. All Rights Reserved.
Slide 11: Chegg Reaches 75% of U.S. College Bound High School & 50% of U.S. College Students
Chegg 75% of U.S. College Bound High School & Reaches 50% of U.S. College Students 15 M+ $500+ M 10,000+ Students* reached Saved by students Online Tutors 6M 1 M+ 190,000+ Textbooks delivered Digital Subscribers Internships listed Chegg Achieved Scale by Putting Students First *U.S. College Bound Hi
Slide 12: The Leading Connected Student First Learning Platform
The Leading Connected Student First Learning Platform Confidential Material – Chegg Inc. © 2005 - 2015. All Rights Reserved. 12
Slide 13: Unlocking The Value
Unlocking The Value Confidential Material – Chegg Inc. © 2005 - 2015. All Rights Reserved. 13
Slide 14: Serving Students is a Great Business
Total Revenue Digital Revenue $304.8m 74% $91.2m 19% $52.5m $256.6m Serving Students is a Great Business Confidential Material – Chegg Inc. © 2005 - 2015. All Rights Reserved. 14
Slide 15: How We Make Money
How We Make Money Advertisers Students Pay Chegg to Match Pay Chegg for Learning them with Students Materials and Services Schools Chegg Study Brand Partners Chegg Tutors Employers Textbooks & eTextbooks Confidential Material – Chegg Inc. © 2005 - 2015. All Rights Reserved. 15
Slide 16: Chegg's 2015 Outlook
Q2 2015 FISCAL 2015 Revenue $61m to $65m $300m to $315m Digital Revenue $28m to $30m $135m to $145m Gross Margin % 41% to 43% 34% to 36% Adj. EBITDA* $1.5m to $2.5m Break even or better Free Cash Flow* $15m to $25m Chegg’s 2015 Outlook *Non-GAAP financial measure Confidential Material – Chegg Inc. ©
Slide 17: New Textbook Model Accelerates Digital Transition
Total Revenue Free Cash* Flow Digital Revenue Print Book Revenue Investment 2013 2014 2015 2016 2017 2013 2014 2015 2016 2017 Revenue re-accelerates when Higher free cash flow and transition is complete in 2017. stronger balance sheet. Gross profits and EBITDA Significantly more working capital impr
Slide 18: 2015 Revenue Seasonality
35% 30% Seasonality* 25% Reflects transition to commission based 20% revenue that is recognized immediately. 15% 10% Print 5% Digital Total 0% Q1'15 Q2'15 Q3'15 Q4'15 *shown on a pro-forma basis 2015 Revenue Seasonality Confidential Material – Chegg Inc. © 2005 - 2015. All Rights Reserved. 18
Slide 19: Pro Forma Q1 Growth
Pro Forma Revenue* 34% growth Reflects total quarterly revenue as if the transition to Ingram were complete Q1'14 Q1'15 *Non-GAAP Financial Measure Pro Forma Q1 Growth Confidential Material – Chegg Inc. © 2005 - 2015. All Rights Reserved. 19
Slide 20: Pro Forma View of Chegg's Business Model
Pro Forma* View of Chegg’s Business Model $142.7m 42% CAGR $101.9m Chegg as Pure Digital Business $72.8m $49.5m Ingram Commission Digital Revenue Digital Model: Higher Growth, Higher Margins, Higher Profits *As If Ingram Deal Were in Place Since 2011 Confidential Material – Chegg Inc. © 2005 - 2015.
Slide 21: Chegg's New Digital Model
REVENUE GROWTH 25%+ GROSS MARGIN % 60%+ EBITDA MARGIN 25%+ NEW MODEL Target Operating Model - 2017 Chegg’s New Digital Model Higher growth, margins & profit Confidential Material – Chegg Inc. © 2005 - 2015. All Rights Reserved. 21
Slide 22: The Student Hub
The Student Hub SM Confidential Material – Chegg Inc. © 2005 - 2015. All Rights Reserved. 22
Slide 23: Appendix
Appendix Adjusted EBITDA guidance for the second quarter includes approximately $13 million for textbook depreciation and excludes approximately $14 million for stock-based compensation; $1.0 million for amortization of intangible assets; $0.5 million for restructuring charges; $1.0 million for tran