Slide 1: The Student Hub
The Student Hub SM Dan Rosensweig, CEO // Andy Brown, CFO // February 2016 Confidential Material – Chegg Inc. © 2005 - 2016. 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 - 2016. 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 - 2016. All Rights Reserved. 4
Slide 5: Poor Outcomes and Insanely High Costs are not OK
Poor Outcomes and Insanely High Costs are not OK $1.1 Trillion+ 10.6% Unemployed 2 Student Loan Debt1 45% 41% of Grads are in Drop out jobs not requiring of college4 4-year degree3 Need Relentless Focus on Student Outcomes Confidential Sources: 1. NY Federal Reserve; 2. Bureau Material –3.Chegg of L
Slide 6: The Story of Chegg is 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 an all digital model, students value, become high school and offer more based platform for students creating a high growth, #1 Textbook Ren
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: The Gap Between Students, Universities and Employers has Grown Significantly in Last 5 Years
The 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 - 2016. All Rights Reserved.
Slide 9: Helping Today's Students Requires Leveraging Technology & Data to Answer These Questions
Helping Today’s Students 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
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 - 2016. All Rights Reserved.
Slide 11: Financial Model
Financial Model Confidential Material – Chegg Inc. © 2005 - 2016. All Rights Reserved. 11
Slide 12: The Chegg Platform
The Chegg Platform Required Materials Chegg Services Students purchase their required class materials Students subscribe to our Learning Services Print Textbooks & eTextbooks Chegg Study Ingram Commissions Chegg Tutors Test Prep Advertisers, Schools, Brands and Employers pay us to match them to stud
Slide 13: Pro Forma Revenue Growth
Pro Forma Revenue Growth (In Millions) $200 Pro Forma Revenue: Consists of Chegg Services Chegg Services Revenue and Required Materials Pro Forma Revenue FY'12-'15 CAGR: 56% $160 Chegg Services Revenue: Consists of : $120 $94 1. Learning Services a. Chegg Study $68 b. Chegg Tutors $80 $42 c. Test Pr
Slide 14: Understanding Required Materials
Understanding Required Materials % of Required Materials Pro Forma Revenue 100% 8% 19% 26% 32% 80% 60% 92% 40% 81% 74% 68% 20% 0% FY'12 FY'13 FY'14 FY'15 * Shown as if Textbook transition to Ingram Commission Ingram Commission eTextbooks *In 2H15, student demand for print rental shifted sharply to m
Slide 15: Chegg Services Subscriber Growth
Chegg Services Subscriber Growth Total Chegg Customers Chegg Services Subscriber Growth 1.0m 3.1m 2.9m 2.4m 0.7m 2.0m 0.5m 0.3m FY'12 FY'13 FY'14 FY'15 FY ‘12 FY ‘13 FY ‘14 FY ‘15 Chegg%Services Required%Materials Chegg Services Subscribers have Tripled in 3 Years Confidential Material – Chegg Inc.
Slide 16: Our Chegg Services Platform is Highly Profitable on a Non-GAAP Basis
Non-GAAP Gross Margin %* 100% 80% 60% 40% 20% 0% FY'12 FY'13 FY'14 FY'15 Chegg Services Total Chegg Our Chegg Services Platform is Highly Profitable on a Non-GAAP Basis *Excludes stock-based compensation. See the Appendix for the GAAP to Non-GAAP reconciliation Confidential Material – Chegg Inc. © 2
Slide 17: Chegg's 2016 Outlook
Q1 2016 Fiscal 2016 Total GAAP Revenue $60m to $65m $230m to $250m Pro Forma Revenue* $44m to $47m $170m to $185m Chegg Services Revenue $24m to $26m $115m to $125m Gross Margin %* 38% to 40% 48% to 50% Adjusted EBITDA* $(2m) to breakeven $10m to $20m Chegg’s 2016 Outlook *Starred metrics include No
Slide 18: Chegg's New Digital Model: Higher Growth, Margins & Profit
CHEGG SERVICES REVENUE GROWTH 20% REVENUE GROWTH ~30% GROSS MARGIN % 30% GROSS MARGIN % >60% EBITDA MARGIN % (6%) EBITDA MARGIN % >25% PRE-TRANSITION MODEL NEW MODEL 2011 – 2014 (average) Target Operating Model (full year 2018) Chegg’s New Digital Model Higher Growth, Margins & Profit Confidential M
Slide 19: Appendix
Appendix Confidential Material – Chegg Inc. © 2005 - 2016. All Rights Reserved. 19
Slide 20: Historical Quarterly Pro Forma Revenue
Historical Quarterly Pro Forma Revenue $50m $40m $30m $20m $10m $- Q1'13 Q2'13 Q3'13 Q4'13 Q1'14 Q2'14 Q3'14 Q4'14 Q1'15 Q2'15 Q3'15 Q4'15 Required Materials $20.1 $6.6 $21.9 $8.5 $20.8 $7.1 $27.1 $11.2 $23.3 $11.3 $24.9 $12.4 Chegg Services $8.4 $10.1 $10.6 $12.8 $13.5 $14.9 $18.0 $21.7 $22.5 $22.5
Slide 21: Expected 2016 Seasonality
Expected 2016 Seasonality %"Breakdown" 1st"Half" 2nd"Half" Total%GAAP%Revenue%/%Pro%Forma% 46%% 54%% Revenue% Chegg%Services%Revenue% 43%% 57%% Adjusted%EBITDA% 26%% 74%% To better assist you on the seasonality of revenue and profitability during the transition of our model, we have provided expecte
Slide 22: Reconciliation of GAAP to Non-GAAP Financial Measures
Reconciliation of GAAP to Non-GAAP Financial Measures Confidential Material – Chegg Inc. © 2005 - 2016. All Rights Reserved. 22
Slide 23: Reconciliation of GAAP to Non-GAAP Gross Margin
Reconciliation of GAAP to Non-GAAP Gross Margin CHEGG, INC. RECONCILIATION OF GAAP TO NON-GAAP GROSS MARGIN (in thousands, except percentages) (unaudited) FY12 FY13 FY14 FY15 Chegg Services GAAP net revenue $ 24,644 $ 41,829 $ 68,117 $ 94,285 GAAP gross profit $ 18,334 $ 33,051 $ 51,734 $ 75,167 Sha
Slide 24: Reconciliation of GAAP to Pro Forma
Reconciliation of GAAP to Pro Forma Confidential Material – Chegg Inc. © 2005 - 2016. All Rights Reserved. 24
Slide 25: The Student Hub
The Student Hub SM Confidential Material – Chegg Inc. © 2005 - 2016. All Rights Reserved. 25