Chegg, Inc. · NYSE:CHGG

Chegg — 19th Annual Needham Growth Conference (January 2017)

24 slides from Chegg's conference presentation, Jan 11, 2017

  1. Slide 1: Andy Brown, CFO – January 11, 2017

    Andy Brown, CFO January 11, 2017 1 Confidential Material – Chegg Inc. © 2005 – 2017. All Rights Reserved.

  2. Slide 2: Chegg Needham Conference Safe Harbor

    Chegg Needham Conference 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 p

  3. Slide 3: Agenda

    Agenda • Who We Are • Why We Matter • Our Results 3

  4. Slide 4: The leading student-first connected learning platform

    The leading student-first connected learning platform…focused on improving student outcomes 4 4

  5. Slide 5: A proprietary student platform

    A proprietary student platform OUR CORE SERVICES SUBSCRIBER GROWTH Learning Services: Chegg Study FY 2012 300K Chegg Tutors FY 2013 500K Chegg Writing Tools Chegg Test Prep FY 2014 700K Outcome Services: FY 2015 1,000K Brand Partnership Careers FY 2016 *Projected 1,500K Enrollment Required Materials

  6. Slide 6: Transition to a Digital Business – Essentials of the Ingram Agreement

    Transition to a Digital Business – Essentials of the Ingram Agreement • 5-year agreement started May 2015 • Ingram owns textbook purchases: $100M annual reduction in textbooks spend • Chegg receives ~20% commission on physical textbook transactions • Chegg maintains the customer relationship • Simpl

  7. Slide 7: Chegg's business flywheel

    Chegg’s business flywheel CURRENT SERVICES SOLUTIONS BOOKS Q&A STUDENT CHEGG PLATFORM TUTORS FLASHCARDS CITATIONS 7

  8. Slide 8: Chegg is nearly universally known

    Chegg is nearly universally known PERCENT UNAIDED AWARENESS (COLLEGE)1 AMAZON 26% 80% CHEGG 21% OF THOSE WHO USE CHEGG, PLAN TO GOOGLE 9% RECOMMEND US1 QUIZLET 6% 6% 78% KHAN ACADEMY BARNES & NOBLE 6% WIKIPEDIA 3% KAPLAN TEST PREP 3% OF STUDENTS HAVE HEARD OF A CHEGG SERVICE1 8 1Hall and Partners Su

  9. Slide 9: The Revenue Transition

    The Revenue Transition $305 $301 $256 $249 $230 $193 $166 $134 $99 2013 2014 2015 2016* 2017** Revenue (M) Non-GAAP Revenue (M) 9 * Represents the midpoint of guidance issued on 11.7.16 ** Represents guidance issued on 11.7.16

  10. Slide 10: The system isn't working

    The system isn’t working 50 41 44 OF STUDENTS IN REMEDIAL COURSES1 % DON’T GRADUATE22 % IN JOBS THAT DON’T REQUIRE DEGREES33 % 1http://www.ncsl.org/research/education/improving-college-completion-reforming-remedial.aspx 10 2National Center for Education Statistics, 2015 3Economic Policy Institute, 2

  11. Slide 11: Students face more pressure than ever

    Students face more pressure than ever 296% 26 $35K INCREASE IN IN- AVERAGE STUDENT DEBT FOR THE AVERAGE STATE TUITION AT AGE2 STUDENT WHEN THEY PUBLIC COLLEGE GRADUATE4 SINCE 19951 40% WORK AT LEAST 30 HOURS PER WEEK3 1National Center for Education Statistics and US Census Bureau, 2015 2Hall and Par

  12. Slide 12: Education is a massive industry

    Education is a massive industry 15 1.3 7 ARE STUDENTS1 % $ TRILLION2 % OF THE US GDP3 1National Center for Education Statistics and US Census Bureau, 2015 2https://www.federalreserve.gov/releases/g19/Current/#fn11b 12 3www.data.worldbank.org/indication/NY.GD.MKTP.CD?location +US

  13. Slide 13: A proprietary student platform

    A proprietary student platform ~ 40M 45M 800K+ UVs (12 MONTHS)1 CONTENT VIEWS SUBSCRIBERS Q3 2016 Q3 2016 ~ 10M 7M 23K UVs (ONE MONTH)2 EXPERT Q&As ISBNs 1comScore U.S. Annual Unique Visitors (Custom Analytics), Oct 2015 - Sep 2016 13 2comScore U.S. Media Metrix Multi-Platform, Audience Duplication,

  14. Slide 14: Revenue Transition to a Services Platform

    Revenue Transition to a Services Platform Millions $250 $237 $214 $207 $200 $189 $172 $150 $128 $121 $100 $94 $68 $58 $50 $42 $25 $0 2012 2013 2014 2015 2016 1 2017 2 CHEGG SERVICES NON-GAAP REVENUE REQUIRED MATERIALS 1Represents the midpoint of guidance for FY16 issued on 11.7.2016 14 2Represents F

  15. Slide 15: Investment in current and future services

    Investment in current and future services Chegg Tutors CheggMate Build & acquire new products & services Writing Tools Student Graph Careers Systems Invest in existing Chegg Study Q&A Student Graph services Chegg Study ISBNs Systems 15

  16. Slide 16: Scale drives leverage

    Scale drives leverage $4 -31 % 85 % 64 % 0 2014 YTD 2016* Q3 2015 Q3 2016 OVERALL CUSTOMER ACQUISITION COST NON GAAP OPEX AS A % OF NET REVENUE * Represents Q1-Q3 2016 16

  17. Slide 17: Interconnected platform drives profit growth

    Interconnected platform drives profit growth ADJUSTED EBITDA ($M)1 35 $ 19 $ $5 2012 2013 2014 2015 20162 20173 $ (4) $ (16) (13) $ 1Non-GAAP metric. See Appendix for reconciliation to GAAP. 2Represents the midpoint of guidance for FY16 issued on 11/7/2016. 3Represents FY17 business outlook for appr

  18. Slide 18: High-growth, profitable, cash provider

    High-growth, profitable, cash provider 2012 2017 ESTIMATE2 CHEGG SERVICES REVENUE 25M $ 172M ~$ GROSS MARGIN % 32% >60% ADJUSTED EBITDA $(16M) 1 ~$35M CAPEX (INCLUDES TEXTBOOKS) $120M ~$25M FREE CASH FLOW $( 31M) ~$20M 1Non-GAAP metric. See Appendix for reconciliation to GAAP 18 2 Guidance issued on

  19. Slide 19: Q&A

    Q&A 19 Confidential Material – Chegg Inc. © 2005 – 2017. All Rights Reserved.

  20. Slide 20: Appendix

    Appendix 20 Confidential Material – Chegg Inc. © 2005 - 2017. All Rights Reserved.

  21. Slide 21: Non-GAAP Revenue reconciliation

    Non-GAAP Revenue reconciliation FY 2012 FY 2013 FY 2014 FY 2015 FY 2016 E1 FY 2017E2 $000s Total net revenues $213,334 $255,575 $304,834 $301,373 $248,500 $230,000 Adjustment as if transition $(142,765) $(156,554) $(170,606) $(135,270) $(55,500) - to Ingram is complete Non-GAAP total net revenues $7

  22. Slide 22: Adjusted EBITDA reconciliation

    Adjusted EBITDA reconciliation RECONCILIATION OF NET LOSS TO EBITDA AND ADJUSTED EBITDA FY 2012 FY 2013 FY 2014 FY 2015 $000s Net loss: $(49,043) $(55,850) $(64,758) $(59,210) Interest expense, net 4,393 3,818 317 247 Provision for (benefit from) income taxes 29 642 186 1,479 Textbook library deprec

  23. Slide 23: Non-GAAP OPEX reconciliation

    Non-GAAP OPEX reconciliation FY 2014 Q3 YTD 2016 $000s Non-GAAP total net revenues $134,228 $143,023 Operating expenses $158,983 $131,000 Share-based compensation expense (36,271) (32,586) Amortization of intangible assets (4,970) (3,216) Restructuring credits (charges) - 298 Acquisition related com

  24. Slide 24: Adjusted EBITDA guidance for fiscal year 2016

    Adjusted EBITDA guidance for fiscal year 2016 includes approximately $9.3 million for textbook depreciation and excludes approximately $43.0 million for stock-based compensation expense; $14.1 million for other depreciation and amortization expense; $(0.3) million for restructuring charges; and $5.0

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