October 30, 2017
SANTA CLARA, Calif., Oct. 30, 2017 /PRNewswire/ — Chegg, Inc. (NYSE: CHGG), the Smarter Way to Student, today reported financial results for the three months ended September 30, 2017.
“We had another strong quarter, with the momentum we’ve built throughout the year continuing into Q3, as we achieved 37% year over year Chegg Services subscriber growth in the quarter with record levels of engagement across our services,” said Dan Rosensweig, Chairman and CEO of Chegg, Inc. “We believe this momentum will continue into Q4 and 2018 which gives us confidence to raise our guidance for 2017 and provide an initial outlook for 2018. Three years ago, we set out long term financial targets and I am pleased to say today that we expect to meet, or exceed, all of them in 2018.”
Q3 2017 Highlights:
- Total Net Revenues of $62.6 million, a decrease of 12% year-over-year
- Total Net Revenues to Non-GAAP Total Net Revenues increased 13% year-over-year *
- Chegg Services Revenues grew 33% year-over-year to $39.5 million, or 63% of total net revenues, compared to 42% in Q3 2016
- Net Loss was $11.5 million
- Non-GAAP Net Income was $1.5 million
- Adjusted EBITDA was $5.7 million
- 1.2 million: number of Chegg Services subscribers, an increase of 37% year-over-year
- 74 million: total Chegg Study content views, an increase of 63% year-over-year
Our total net revenues are comprised of two revenue streams: (1) Chegg Services revenues, which includes Chegg Study, Chegg Tutors, our Writing Tools service, Enrollment Marketing, Brand Partnership, Internships, and Test Prep; and (2) Required Materials revenues, which includes commission revenues from Ingram Content Group (Ingram) and textbook publishers, and the rental and sale of eTextbooks.
* Chegg presents non-GAAP total net revenues as if the transition of textbook inventory investment and textbook logistics and fulfillment functions for Chegg’s print textbook business to Ingram was complete and the revenues from print textbook business were entirely commission-based. Chegg completed its transition to Ingram in November 2016 and to provide a more meaningful comparison of Chegg’s total net revenues for the third quarter of 2017, Chegg has presented the year-over-year percentage against non-GAAP total net revenues for the same period in 2016.
For more information about non-GAAP total net revenues, non-GAAP net income (loss), and adjusted EBITDA, and a reconciliation of non-GAAP total net revenues to total net revenues, non-GAAP net income (loss) to net loss, and adjusted EBITDA to net loss, see the sections of the 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.”
Fourth Quarter 2017
- Total Net Revenues in the range of $70 million to $71 million
- Chegg Services Revenues in the range of $58 million to $59 million
- Gross Margin between 69% and 71%
- Adjusted EBITDA in the range of $19 million to $20 million
Full Year 2017
- Total Net Revenues in the range of $251 million to $252 million
- Chegg Services Revenues in the range of $183 million to $184 million
- Gross Margin greater than 65%
- Adjusted EBITDA in the range of $44 million to $45 million
- Capital Expenditures of $27 million
- Free Cash Flow of $18 million
Full Year 2018
- Total Net Revenues of $295 million
- Chegg Services Revenues of $240 million
- Gross Margin greater than 70%
- Adjusted EBITDA of $74 million
Full Year 2018 Adjusted EBITDA Seasonality
The quarterly contribution of full year 2018 adjusted EBITDA is approximately 19% in Q1 2018, 24% in Q2 2018, 14% in Q3 2018 and 43% in Q4 2018.
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 fourth quarter 2017, full year 2017, and full year 2018, and a reconciliation of forward-looking net cash provided by operating activities to free cash flow for the full year 2017, see the below sections of the press release titled “Use of Non-GAAP Measures,” “Reconciliation of Forward-Looking Net Income (Loss) to EBITDA and Adjusted EBITDA” and “Reconciliation of Forward-Looking Net Cash Provided by Operating Activities to Free Cash Flow.” Our adjusted EBITDA outlook does not include any amortization for intangible assets of Cogeon GmbH as the amount of any such amortization cannot be appropriately estimated at this time. We have not reconciled our 2018 quarterly adjusted EBITDA seasonality guidance to net loss because we do not provide guidance on quarterly 2018 total net revenues, net loss or the reconciling items between adjusted EBITDA and net loss as a result of the uncertainty, timing, and the potential variability of these items. The actual amount of total net revenues, net loss, and such reconciling items will have a significant impact on our 2018 quarterly adjusted EBITDA. Accordingly, a reconciliation of the non-GAAP financial measure guidance to the corresponding GAAP measure is not available without unreasonable effort.
An updated investor presentation and an investor data sheet can be found on Chegg’s Investor Relations website http://investor.chegg.com.
Chegg puts students first. As the leading student-first connected learning platform, Chegg strives to improve the overall return on investment in education by helping students learn more in less time and at a lower cost. 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.