Chegg Reports 2024 First Quarter Earnings
Chegg, Inc. reported its 2024 first-quarter earnings, revealing a leadership change with Nathan Schultz becoming the new CEO. The company highlighted its focus on AI-enabled personalized learning experiences to benefit students. Despite a decrease in total net revenues and subscription services revenues, Chegg showcased growth in non-GAAP net income and adjusted EBITDA. The company aims for a 30% or greater Adjusted EBITDA margin by 2025. The business outlook for the second quarter includes projected revenues and margins.
Nathan Schultz's appointment as the new CEO signals a focus on enhancing personalized learning experiences through AI.
Chegg reported growth in non-GAAP net income and adjusted EBITDA despite a decrease in total net revenues and subscription services revenues.
The company's strategic investments in new products aim to increase value for students and expand the audiences it serves.
Total net revenues and subscription services revenues experienced a year-over-year decrease in the first quarter of 2024.
The number of subscription services subscribers decreased by 8% year-over-year, posing a challenge for Chegg's user base growth.
The gross margin for the first quarter was lower than desired, indicating potential constraints on profitability.
Insights
Announces Nathan Schultz as incoming CEO, Dan Rosensweig to become Executive Chairman
“Nathan has been core to Chegg’s success from our earliest days as a textbook rental company, to leveraging AI today to create a truly personalized learning assistant,” said Dan Rosensweig, CEO & President of Chegg, Inc. “As we are seeing encouraging signs of how our new AI enabled platform will serve more students, in more ways, it’s the right time for Nathan to step in and lead, and I could not be more excited about Chegg’s future.”
“We had a very productive first quarter and successfully rolled out the first of many AI enabled experiences that will strengthen our product-market fit in 2024 and beyond,” said Nathan Schultz, incoming CEO & President. “The investments we are making in our new product are designed to increase our value to students, enhance their learning experience, and expand the audiences we can serve. We are also working to align our expense base relative to current revenue trends, with the goal of
First Quarter 2024 Highlights
-
Total Net Revenues of
$174.4 million 7% year-over-year -
Subscription Services Revenues of
$154.1 million 9% year-over-year -
Gross Margin of
73% -
Non-GAAP Gross Margin of
75% -
Net Loss was
$1.4 million -
Non-GAAP Net Income was
$29.6 million -
Adjusted EBITDA was
$46.7 million -
4.7 million Subscription Services subscribers, a decrease of
8% year-over-year
Total net revenues include revenues from Subscription Services and Skills and Other. Subscription Services includes revenues from our Chegg Study Pack, Chegg Study, Chegg Writing, Chegg Math, and Busuu offerings. Skills and Other includes revenues from Chegg Skills, Advertising, and any other revenues not included in Subscription Services.
For more information about non-GAAP net income, non-GAAP gross margin and adjusted EBITDA, and a reconciliation of non-GAAP net income to net (loss) income, gross margin to non-GAAP gross margin and adjusted EBITDA to net (loss) income, see the sections of this press release titled, “Use of Non-GAAP Measures,” “Reconciliation of Net (Loss) Income to EBITDA and Adjusted EBITDA,” and “Reconciliation of GAAP to Non-GAAP Financial Measures.”
Business Outlook
Second Quarter 2024
-
Total Net Revenues in the range of
$159 million $161 million -
Subscription Services Revenues in the range of
$144 million $146 million -
Gross Margin between
70% and71% -
Adjusted EBITDA in the range of
$38 million $40 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 2024, 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 https://investor.chegg.com.
Prepared Remarks - Dan Rosensweig, CEO & President, Chegg, Inc.
Thank you, Tracey, and welcome everyone to Chegg’s Q1 2024 earnings call. It’s a truly exciting day for Chegg as I am thrilled to announce that Nathan Schultz is being promoted to Chegg’s President & CEO, effective June 1st. The board and I have been focused on succession planning for the last several years to put Chegg in the best position to continue to drive the future of education. Nathan has spent the last 16 years helping build Chegg into the leading global online learning platform that it is today. From our earliest days as a textbook rental company to leveraging AI today, Nathan has been at the core of our success. Nathan has always led with a student-first mindset and a passion for innovating how, when, and where people learn. I will be stepping in to the role of Executive Chairman and working with Nathan and the board during this next exciting phase of the company. Over the last few years, Nathan has worked to bolster our current leadership team by adding a new Chief Marketing Officer, a new SVP of Business Operations, and a new Chief Product Officer to work alongside Chuck Geiger, our Chief Technology Advisor. The board and I are excited about this management team and the future of the business under Nathan’s leadership.
We see the proliferation of AI, and our ability to uniquely harness its potential in education, as a transformative moment for Chegg. We’ve embraced AI and have completely rebuilt our user experience and services, rolling out a multi-year product-led growth plan to emerge from the post-covid period and return to revenue and profit growth. The transition will take time, but we are already seeing encouraging signs of how our new AI enabled platform will serve more students, in more ways, than ever before. This makes this the right time for Nathan to step in to this new role and write the next chapter of the Chegg story. So, with that, I will turn it over to Nathan. Congratulations, Nathan.
Prepared Remarks - Nathan Schultz, Incoming CEO & President, Chegg, Inc.
Thank you, Dan. I want to take a moment to acknowledge the tremendous impact you have had over the last 14 years, both on Chegg and on me, personally. I am grateful for your leadership, your wisdom, and your counsel as we re-founded the company so many years ago, expanding the vision for how Chegg could serve learners around the world. From print textbooks to our IPO, from homework help to becoming a fully digital learning platform, you have helped steer us through so many critical transitions and we would not be where we are today without you. And where we are today is a company that is truly revolutionizing how we serve students around the world. We have rolled out a new interface for Q&A and developed a proprietary AI platform, including our own 26 large language models, uniquely verticalized for education. We are only just starting to realize our vision for Chegg as a personalized learning assistant, and we will continue to iterate and develop how we bring a best-in-class learning experience to our customers.
We had a productive first quarter, continuing to roll out, and improve upon, our AI enabled experiences that will strengthen our product-market fit in 2024 and beyond. Executing against a multi-year product roadmap is essential to returning to subscriber growth, as we continue to cycle through the customer expansion, we experienced during the pandemic. We are focused on increasing our relevancy with students and getting Chegg back to consistent positive growth in total revenue, Adjusted EBITDA, and free-cash flow. We are already seeing encouraging trends in two important and early indicators: retention rate, which for Q1 is up over 100 basis points year-over-year, and engagement. We have designed the Chegg platform with students at the center, focusing on providing a learning experience that capitalizes on immediacy, accuracy, and quality. To give you a sense of how quickly this is scaling, in Q1 of this year we had over 9 million questions asked compared to 3.9 million new questions asked at the same time last year. And, as more questions are asked, we generate more content, which drives more traffic, which we believe will lead to new customers in future quarters. This is the power of the Chegg flywheel. In fact, our question increase in Q1 has already driven a return to growth in the
As we develop an education focused AI platform, we believe it is essential to own our large language models and quality assurance layer. This allows Chegg to verticalize our AI for education specifically and is essential in our pursuit to control quality and accuracy at a lower cost than leveraging generic AI platforms. Chegg was built for this moment. Our unique assets, such as our over 100 million pieces of education content, our reach with learners around the globe, and our over 150,000 subject-matter experts, come together to deliver the most effective learning experience possible.
Over the next few quarters, we are focused on rolling out enhancements and features that deliver an even richer personalized learning experience. Whether that means real time conversational support with our AI tutor, generating flashcards, generating practice problems, or creating a focused study guide. Our platform is designed to anticipate, generate, and deliver personalized solutions, which we expect will increase our value to students and expand the audiences we can serve in a cost-efficient way.
We have been testing pricing and packaging in the
As we look ahead, I could not be more excited for the future and the path Chegg is on. Reimagining and reinventing how we can best serve learners around the world is our mission at Chegg, and the opportunity to deliver a truly personalized learning experience has never been bigger nor more critical. And I am grateful to have this opportunity to expand where, when, and how we serve learners because of Dan’s leadership. On behalf of our employees, the board, and our leadership team, I want to take a moment again to thank you, Dan, for everything you have done for Chegg over the last 14 years. Your legacy will always be the way you care deeply for the people around you and how you always root for their success; whether that is championing an employee to reach their potential or encouraging a student to realize their dreams, you have changed many lives during your tenure at Chegg, including mine, and we are all deeply indebted.
And with that I will turn it over to David…
Prepared Remarks - David Longo, CFO, Chegg, Inc.
Thank you, Nathan, and congratulations. Dan, I also want to thank you and I look forward to your continued guidance as you transition to your executive chairman role.
Today, I will present our financial performance for the first quarter of 2024, as well as our outlook for Q2.
As Nathan mentioned, we had a very productive quarter. We were acutely focused on delivering our new AI-driven experience to global learners and making progress on crucial metrics, like engagement and retention. We believe these actions will support both revenue and Adjusted EBITDA growth over time. We continued to deliver strong profitability and cash flows in the quarter, and our balance sheet remains very healthy. We are prioritizing creating shareholder value and emphasizing prudent expense management, as we navigate the path back to growth.
Focusing on our first quarter performance, total revenue was
First quarter Adjusted EBITDA of
Free Cash Flow was
Looking at the balance sheet, we ended the quarter with cash and investments of
The progress we are making with the product experience and refueling the flywheel, starting with automated solutions and engagement, will take time to build our new account acquisitions and renewal base before we see a positive impact on total subscribers and revenue. As a reminder, our unique subscription business model is reliant on two large customer acquisition periods—Q1 and Q4—as well as the student lifecycle. Meanwhile, as mentioned previously, we will increase our focus on efficiently managing expenses to maintain strong profitability and cash flows.
With respect to Q2 guidance we expect:
-
Total revenue between
$159 $161 million $144 $146 million - Gross margin to be in the range of 70 and 71 percent;
-
And adjusted EBITDA between
$38 $40 million
In closing, we are seeing encouraging signs in the business and are excited about the continued development of our personalized and interactive student interface. We believe we are well-positioned to meet the current and future needs of learners. The opportunity ahead for Chegg is tremendous and I am confident in our team and our ability to execute.
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
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. No matter the goal, level, or style, Chegg helps learners learn with confidence. We provide 24/7 on-demand support, and our personalized learning assistant leverages the power of artificial intelligence (“AI”), more than a hundred million pieces of proprietary content, as well as a decade of learning insights. Our platform also helps learners build essential life and job skills to accelerate their path from learning to earning, and we work with companies to offer learning programs for their employees. Chegg is a publicly held company based in
Use of Non-GAAP Measures
To supplement Chegg’s financial results presented in accordance with generally accepted accounting principles in
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 share-based compensation expense, other income, net, acquisition-related compensation costs, and transitional logistic charges; (2) non-GAAP cost of revenues as cost of revenues excluding amortization of intangible assets, share-based compensation expense, acquisition-related compensation costs, and transitional logistic charges; (3) non-GAAP gross profit as gross profit excluding amortization of intangible assets, share-based compensation expense, acquisition-related compensation costs, and transitional logistic charges; (4) non-GAAP gross margin is defined as non-GAAP gross profit divided by net revenues, (5) non-GAAP operating expenses as operating expenses excluding share-based compensation expense, amortization of intangible assets, and acquisition-related compensation costs; (6) non-GAAP income from operations as loss from operations excluding share-based compensation expense, amortization of intangible assets, acquisition-related compensation costs, and transitional logistic charges; (7) non-GAAP net income as net (loss) income excluding share-based compensation expense, amortization of intangible assets, acquisition-related compensation costs, amortization of debt issuance costs, the income tax effect of non-GAAP adjustments, gain on sale of strategic equity investment, and transitional logistic charges; (8) non-GAAP weighted average shares outstanding as weighted average shares outstanding adjusted for the effect of shares for stock plan activity and shares related to our convertible senior notes, to the extent such shares are not already included in our weighted average shares outstanding; (9) non-GAAP net income per share is defined as non-GAAP net income divided by non-GAAP weighted average shares outstanding; and (10) free cash flow as net cash provided by operating activities adjusted for purchases of property and equipment. 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) Income 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 or includes 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.
Income tax effect of non-GAAP adjustments.
We utilize a non-GAAP effective tax rate for evaluating our operating results, which is based on our current mid-term projections. This non-GAAP tax rate could change for various reasons including, but not limited to, significant changes resulting from tax legislation, changes to our corporate structure and other significant events. Chegg believes that the inclusion of the income tax effect of non-GAAP adjustments 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 the sale of our equity investment in Sound Ventures. We believe that it is appropriate to exclude the gain from non-GAAP financial measure 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.
Transitional logistics charges.
The transitional logistics charges represent incremental expenses incurred as we transition our print textbooks to a third party. 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. 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, 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 our future growth and the future of learning, the impact of artificial intelligence (AI) technology on our financial condition and results of operations, Mr. Schultz's planned promotion to President and CEO and the timing of such promotion, Mr. Rosensweig's planned transition to the role of Executive Chairman and the timing of such transition, our belief that the proliferation of AI, and our ability to harness its potential in education, is a transformative moment for Chegg, our ability to execute on our multi-year product-led growth plan and return to revenue and profit growth, our AI enabled platform being able to serve more students, in more ways, than ever before, our ability to revolutionize how we serve students around the world, our vision for Chegg as a personalized learning assistant, our iteration and development of how we bring a best-in-class learning experience to our customers, our AI enabled experiences strengthening our product-market fit in 2024 and beyond, our execution against a multi-year product roadmap and our ability to return to subscriber growth, our ability to cycle through the customer expansion that Chegg experienced during the pandemic, our ability to get back to consistent positive growth in total revenue, Adjusted EBITDA, and free-cash flow, trends in retention rate and engagement, our focus on providing a learning experience that capitalizes on immediacy, accuracy, and quality, the power of the Chegg flywheel, our belief that we will gain traffic and new customers in future quarters as a result of the generation of more content as more questions are asked, our belief that there is a growing opportunity to reach more customers with our new and expanded user experience, our development of an education focused AI platform, our belief that it is essential to own our own large language models and quality assurance layer, which allows us to verticalize our AI for education specifically and is essential in our pursuit of control quality and accuracy at a lower cost than leveraging generic AI platforms, our belief that Chegg is built for this moment, our unique assets, such as our over 100 million pieces of education content, our reach with learners around the globe, and our over 150,000 subject-matter experts, coming together to deliver the most effective learning experiences possible, our focus over the next few quarters on rolling out enhancements and features that deliver an even richer personalized learning experience, the features of our personalized learning experience, including real time conversational support with our AI tutor, generating flashcards, generating practice problems, or creating a focused study guide, our expectation that our platform being designed to anticipate, generate, and deliver personalized solutions will increase our value to students and expand the audiences we can serve in a cost-efficient way, our continued testing of pricing and packaging options in the
CHEGG, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands, except for number of shares and par value) (unaudited)
|
||||||||
|
March 31,
|
|
December 31,
|
|||||
Assets |
|
|
|
|||||
Current assets |
|
|
|
|||||
Cash and cash equivalents |
$ |
143,747 |
|
|
$ |
135,757 |
|
|
Short-term investments |
|
247,013 |
|
|
|
194,257 |
|
|
Accounts receivable, net of allowance of |
|
24,741 |
|
|
|
31,404 |
|
|
Prepaid expenses |
|
20,429 |
|
|
|
20,980 |
|
|
Other current assets |
|
30,010 |
|
|
|
32,437 |
|
|
Total current assets |
|
465,940 |
|
|
|
414,835 |
|
|
Long-term investments |
|
221,665 |
|
|
|
249,547 |
|
|
Property and equipment, net |
|
188,430 |
|
|
|
183,073 |
|
|
Goodwill |
|
628,784 |
|
|
|
631,995 |
|
|
Intangible assets, net |
|
48,143 |
|
|
|
52,430 |
|
|
Right of use assets |
|
23,521 |
|
|
|
25,130 |
|
|
Deferred tax assets |
|
140,200 |
|
|
|
141,843 |
|
|
Other assets |
|
15,961 |
|
|
|
28,382 |
|
|
Total assets |
$ |
1,732,644 |
|
|
$ |
1,727,235 |
|
|
Liabilities and stockholders' equity |
|
|
|
|||||
Current liabilities |
|
|
|
|||||
Accounts payable |
$ |
20,119 |
|
|
$ |
28,184 |
|
|
Deferred revenue |
|
54,056 |
|
|
|
55,336 |
|
|
Accrued liabilities |
|
73,555 |
|
|
|
77,863 |
|
|
Current portion of convertible senior notes, net |
|
357,458 |
|
|
|
357,079 |
|
|
Total current liabilities |
|
505,188 |
|
|
|
518,462 |
|
|
Long-term liabilities |
|
|
|
|||||
Convertible senior notes, net |
|
242,919 |
|
|
|
242,758 |
|
|
Long-term operating lease liabilities |
|
16,460 |
|
|
|
18,063 |
|
|
Other long-term liabilities |
|
4,603 |
|
|
|
3,334 |
|
|
Total long-term liabilities |
|
263,982 |
|
|
|
264,155 |
|
|
Total liabilities |
|
769,170 |
|
|
|
782,617 |
|
|
Commitments and contingencies |
|
|
|
|||||
Stockholders' equity: |
|
|
|
|||||
Preferred stock, |
|
— |
|
|
|
— |
|
|
Common stock, |
|
102 |
|
|
|
103 |
|
|
Additional paid-in capital |
|
1,057,837 |
|
|
|
1,031,627 |
|
|
Accumulated other comprehensive loss |
|
(40,672 |
) |
|
|
(34,739 |
) |
|
Accumulated deficit |
|
(53,793 |
) |
|
|
(52,373 |
) |
|
Total stockholders' equity |
|
963,474 |
|
|
|
944,618 |
|
|
Total liabilities and stockholders' equity |
$ |
1,732,644 |
|
|
$ |
1,727,235 |
|
|
CHEGG, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share amounts) (unaudited)
|
|||||||
|
Three Months Ended
|
||||||
|
|
2024 |
|
|
|
2023 |
|
Net revenues |
$ |
174,350 |
|
|
$ |
187,601 |
|
Cost of revenues(1) |
|
46,497 |
|
|
|
49,150 |
|
Gross profit |
|
127,853 |
|
|
|
138,451 |
|
Operating expenses: |
|
|
|
||||
Research and development(1) |
|
44,435 |
|
|
|
46,907 |
|
Sales and marketing(1) |
|
30,375 |
|
|
|
37,017 |
|
General and administrative(1) |
|
55,534 |
|
|
|
58,973 |
|
Total operating expenses |
|
130,344 |
|
|
|
142,897 |
|
Loss from operations |
|
(2,491 |
) |
|
|
(4,446 |
) |
Interest expense, net and other income, net: |
|
|
|
||||
Interest expense, net |
|
(650 |
) |
|
|
(1,268 |
) |
Other income, net |
|
10,780 |
|
|
|
12,076 |
|
Total interest expense, net and other income, net |
|
10,130 |
|
|
|
10,808 |
|
Income before provision for income taxes |
|
7,639 |
|
|
|
6,362 |
|
Provision for income taxes |
|
(9,059 |
) |
|
|
(4,176 |
) |
Net (loss) income |
$ |
(1,420 |
) |
|
$ |
2,186 |
|
Net (loss) income per share |
|
|
|
||||
Basic |
$ |
(0.01 |
) |
|
$ |
0.02 |
|
Diluted |
$ |
(0.01 |
) |
|
$ |
0.02 |
|
Weighted average shares used to compute net (loss) income per share |
|
|
|
||||
Basic |
|
102,343 |
|
|
|
123,710 |
|
Diluted |
|
102,343 |
|
|
|
124,304 |
|
|
|
|
|
||||
(1) Includes share-based compensation expense as follows: |
|
|
|
||||
Cost of revenues |
$ |
513 |
|
|
$ |
527 |
|
Research and development |
|
9,209 |
|
|
|
10,914 |
|
Sales and marketing |
|
2,140 |
|
|
|
2,499 |
|
General and administrative |
|
17,427 |
|
|
|
19,806 |
|
Total share-based compensation expense |
$ |
29,289 |
|
|
$ |
33,746 |
|
CHEGG, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) (unaudited)
|
||||||||
|
Three Months Ended
|
|||||||
|
|
2024 |
|
|
|
2023 |
|
|
Cash flows from operating activities |
|
|
|
|||||
Net (loss) income |
$ |
(1,420 |
) |
|
$ |
2,186 |
|
|
Adjustments to reconcile net (loss) income to net cash provided by operating activities: |
|
|
|
|||||
Share-based compensation expense |
|
29,289 |
|
|
|
33,746 |
|
|
Depreciation and amortization expense |
|
19,687 |
|
|
|
25,543 |
|
|
Deferred income taxes |
|
2,877 |
|
|
|
3,441 |
|
|
Operating lease expense, net |
|
1,567 |
|
|
|
1,496 |
|
|
Amortization of debt issuance costs |
|
541 |
|
|
|
1,057 |
|
|
Loss from write-off of property and equipment |
|
478 |
|
|
|
120 |
|
|
Other non-cash items |
|
(31 |
) |
|
|
(5 |
) |
|
Change in assets and liabilities: |
|
|
|
|||||
Accounts receivable |
|
6,705 |
|
|
|
1,578 |
|
|
Prepaid expenses and other current assets |
|
3,583 |
|
|
|
8,485 |
|
|
Other assets |
|
(1,270 |
) |
|
|
2,803 |
|
|
Accounts payable |
|
(6,589 |
) |
|
|
(336 |
) |
|
Deferred revenue |
|
(1,159 |
) |
|
|
2,012 |
|
|
Accrued liabilities |
|
640 |
|
|
|
(2,569 |
) |
|
Other liabilities |
|
(1,580 |
) |
|
|
(6,397 |
) |
|
Net cash provided by operating activities |
|
53,318 |
|
|
|
73,160 |
|
|
Cash flows from investing activities |
|
|
|
|||||
Purchases of property and equipment |
|
(28,017 |
) |
|
|
(17,166 |
) |
|
Purchases of investments |
|
(79,028 |
) |
|
|
(497,372 |
) |
|
Maturities of investments |
|
50,731 |
|
|
|
407,759 |
|
|
Proceeds from sale of strategic equity investment |
|
15,500 |
|
|
|
— |
|
|
Net cash used in investing activities |
|
(40,814 |
) |
|
|
(106,779 |
) |
|
Cash flows from financing activities |
|
|
|
|||||
Proceeds from common stock issued under stock plans, net |
|
— |
|
|
|
145 |
|
|
Payment of taxes related to the net share settlement of equity awards |
|
(4,294 |
) |
|
|
(7,736 |
) |
|
Repurchase of common stock |
|
— |
|
|
|
(151,311 |
) |
|
Net cash used in financing activities |
|
(4,294 |
) |
|
|
(158,902 |
) |
|
Effect of exchange rate changes |
|
(226 |
) |
|
|
187 |
|
|
Net increase (decrease) in cash, cash equivalents and restricted cash |
|
7,984 |
|
|
|
(192,334 |
) |
|
Cash, cash equivalents and restricted cash, beginning of period |
|
137,976 |
|
|
|
475,854 |
|
|
Cash, cash equivalents and restricted cash, end of period |
$ |
145,960 |
|
|
$ |
283,520 |
|
|
|
Three Months Ended
|
|||||||
|
|
2024 |
|
|
|
2023 |
|
|
Supplemental cash flow data: |
|
|
|
|||||
Cash paid during the period for: |
|
|
|
|||||
Interest |
$ |
224 |
|
|
$ |
437 |
|
|
Income taxes, net of refunds |
$ |
641 |
|
|
$ |
2,017 |
|
|
Cash paid for amounts included in the measurement of lease liabilities: |
|
|
|
|||||
Operating cash flows from operating leases |
$ |
2,216 |
|
|
$ |
2,866 |
|
|
Right of use assets obtained in exchange for lease obligations: |
|
|
|
|||||
Operating leases |
$ |
— |
|
|
$ |
12,407 |
|
|
Non-cash investing and financing activities: |
|
|
|
|||||
Accrued purchases of long-lived assets |
$ |
6,302 |
|
|
$ |
3,941 |
|
|
|
March 31, |
|||||||
|
|
2024 |
|
|
|
2023 |
|
|
Reconciliation of cash, cash equivalents and restricted cash: |
|
|
|
|||||
Cash and cash equivalents |
$ |
143,747 |
|
|
$ |
281,302 |
|
|
Restricted cash included in other current assets |
|
224 |
|
|
|
63 |
|
|
Restricted cash included in other assets |
|
1,989 |
|
|
|
2,155 |
|
|
Total cash, cash equivalents and restricted cash |
$ |
145,960 |
|
|
$ |
283,520 |
|
|
CHEGG, INC. RECONCILIATION OF NET (LOSS) INCOME TO EBITDA AND ADJUSTED EBITDA (in thousands) (unaudited)
|
||||||||
|
Three Months Ended
|
|||||||
|
|
2024 |
|
|
|
2023 |
|
|
Net (loss) income |
$ |
(1,420 |
) |
|
$ |
2,186 |
|
|
Interest expense, net |
|
650 |
|
|
|
1,268 |
|
|
Provision for income taxes |
|
9,059 |
|
|
|
4,176 |
|
|
Depreciation and amortization expense |
|
19,687 |
|
|
|
25,543 |
|
|
EBITDA |
|
27,976 |
|
|
|
33,173 |
|
|
Share-based compensation expense |
|
29,289 |
|
|
|
33,746 |
|
|
Other income, net |
|
(10,780 |
) |
|
|
(12,076 |
) |
|
Acquisition-related compensation costs |
|
255 |
|
|
|
2,460 |
|
|
Transitional logistics charges |
|
— |
|
|
|
253 |
|
|
Adjusted EBITDA |
$ |
46,740 |
|
|
$ |
57,556 |
|
|
CHEGG, INC. RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES (in thousands, except percentages and per share amounts) (unaudited)
|
||||||||
|
Three Months Ended
|
|||||||
|
|
2024 |
|
|
|
2023 |
|
|
Cost of revenues |
$ |
46,497 |
|
|
$ |
49,150 |
|
|
Amortization of intangible assets |
|
(3,142 |
) |
|
|
(3,339 |
) |
|
Share-based compensation expense |
|
(513 |
) |
|
|
(527 |
) |
|
Acquisition-related compensation costs |
|
(6 |
) |
|
|
(5 |
) |
|
Transitional logistics charges |
|
— |
|
|
|
(253 |
) |
|
Non-GAAP cost of revenues |
$ |
42,836 |
|
|
$ |
45,026 |
|
|
|
|
|
|
|||||
Gross profit |
$ |
127,853 |
|
|
$ |
138,451 |
|
|
Amortization of intangible assets |
|
3,142 |
|
|
|
3,339 |
|
|
Share-based compensation expense |
|
513 |
|
|
|
527 |
|
|
Acquisition-related compensation costs |
|
6 |
|
|
|
5 |
|
|
Transitional logistics charges |
|
— |
|
|
|
253 |
|
|
Non-GAAP gross profit |
$ |
131,514 |
|
|
$ |
142,575 |
|
|
|
|
|
|
|||||
Gross margin % |
|
73 |
% |
|
|
74 |
% |
|
Non-GAAP gross margin % |
|
75 |
% |
|
|
76 |
% |
|
|
|
|
|
|||||
Operating expenses |
$ |
130,344 |
|
|
$ |
142,897 |
|
|
Share-based compensation expense |
|
(28,776 |
) |
|
|
(33,219 |
) |
|
Amortization of intangible assets |
|
(856 |
) |
|
|
(2,911 |
) |
|
Acquisition-related compensation costs |
|
(249 |
) |
|
|
(2,455 |
) |
|
Non-GAAP operating expenses |
$ |
100,463 |
|
|
$ |
104,312 |
|
|
|
|
|
|
|||||
Loss from operations |
$ |
(2,491 |
) |
|
$ |
(4,446 |
) |
|
Share-based compensation expense |
|
29,289 |
|
|
|
33,746 |
|
|
Amortization of intangible assets |
|
3,998 |
|
|
|
6,250 |
|
|
Acquisition-related compensation costs |
|
255 |
|
|
|
2,460 |
|
|
Transitional logistics charges |
|
— |
|
|
|
253 |
|
|
Non-GAAP income from operations |
$ |
31,051 |
|
|
$ |
38,263 |
|
|
|
Three Months Ended
|
|||||||
|
|
2024 |
|
|
|
2023 |
|
|
Net (loss) income |
$ |
(1,420 |
) |
|
$ |
2,186 |
|
|
Share-based compensation expense |
|
29,289 |
|
|
|
33,746 |
|
|
Amortization of intangible assets |
|
3,998 |
|
|
|
6,250 |
|
|
Acquisition-related compensation costs |
|
255 |
|
|
|
2,460 |
|
|
Amortization of debt issuance costs |
|
541 |
|
|
|
1,057 |
|
|
Income tax effect of non-GAAP adjustments |
|
713 |
|
|
|
(7,855 |
) |
|
Gain on sale of strategic equity investment |
|
(3,783 |
) |
|
|
— |
|
|
Transitional logistics charges |
|
— |
|
|
|
253 |
|
|
Non-GAAP net income |
$ |
29,593 |
|
|
$ |
38,097 |
|
|
|
|
|
|
|||||
Weighted average shares used to compute net (loss) income per share, diluted |
|
102,343 |
|
|
|
124,304 |
|
|
Effect of shares for stock plan activity |
|
792 |
|
|
|
— |
|
|
Effect of shares related to convertible senior notes |
|
9,234 |
|
|
|
18,226 |
|
|
Non-GAAP weighted average shares used to compute non-GAAP net income per share, diluted |
|
112,369 |
|
|
|
142,530 |
|
|
|
|
|
|
|||||
Net (loss) income per share, diluted |
$ |
(0.01 |
) |
|
$ |
0.02 |
|
|
Adjustments |
|
0.27 |
|
|
|
0.25 |
|
|
Non-GAAP net income per share, diluted |
$ |
0.26 |
|
|
$ |
0.27 |
|
|
CHEGG, INC. RECONCILIATION OF NET CASH PROVIDED BY OPERATING ACTIVITIES TO FREE CASH FLOW (in thousands) (unaudited)
|
||||||||
|
Three Months Ended
|
|||||||
|
|
2024 |
|
|
|
2023 |
|
|
Net cash provided by operating activities |
$ |
53,318 |
|
|
$ |
73,160 |
|
|
Purchases of property and equipment |
|
(28,017 |
) |
|
|
(17,166 |
) |
|
Free cash flow |
$ |
25,301 |
|
|
$ |
55,994 |
|
|
CHEGG, INC. RECONCILIATION OF FORWARD-LOOKING NET INCOME TO EBITDA AND ADJUSTED EBITDA (in thousands) (unaudited)
|
||||
|
Three Months Ending
|
|||
Net income |
$ |
1,900 |
|
|
Interest expense, net |
|
500 |
|
|
Provision for income taxes |
|
900 |
|
|
Depreciation and amortization expense |
|
20,500 |
|
|
EBITDA |
|
23,800 |
|
|
Share-based compensation expense |
|
22,000 |
|
|
Other income, net |
|
(7,000 |
) |
|
Acquisition-related compensation costs |
|
200 |
|
|
Adjusted EBITDA* |
$ |
39,000 |
|
|
* Adjusted EBITDA guidance for the three months ending June 30, 2024 represent the midpoint of the range of |
||||
View source version on businesswire.com: https://www.businesswire.com/news/home/20240429080890/en/
Media Contact: Heather Hatlo Porter, press@chegg.com
Investor Contact: Tracey Ford, IR@chegg.com
Source: Chegg
FAQ
Who is the incoming CEO of Chegg?
Nathan Schultz is the incoming CEO of Chegg.
What were Chegg's total net revenues for the first quarter of 2024?
Chegg reported total net revenues of $174.4 million for the first quarter of 2024.
What is the projected range for Chegg's Total Net Revenues in the second quarter of 2024?
Chegg's projected range for Total Net Revenues in the second quarter of 2024 is between $159 million to $161 million.
What is the goal for Chegg's Adjusted EBITDA margin by 2025?
Chegg aims for a 30% or greater Adjusted EBITDA margin by 2025.
