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Chegg Reports First Quarter 2016 Results

SANTA CLARA, Calif., May 2, 2016 /PRNewswire/ -- Chegg, Inc. CHGG, +2.20% the Student Hub, today reported financial results for the three months ended March 31, 2016.

"Chegg is off to a great start in 2016 as we saw strong momentum across our businesses, highlighted by 37% subscriber growth in Chegg Services," said Dan Rosensweig, Chairman and CEO of Chegg. "We are also excited to announce the strategic acquisition of Imagine Easy Solutions, a leading provider of online writing tools. With this acquisition, Chegg now has the ability to help students address one of their biggest academic pain points, writing. This issue is underscored by the fact that nearly 25% of incoming freshmen who are required to take remedial writing courses."

An updated investor presentation and an investor data sheet can be found on Chegg's Investor Relations website http://investor.chegg.com.

Q1 2016 Financial Highlights:

  • GAAP Revenue of $66.7 million, a decrease of 21% compared to Q1 2015;
  • Pro forma Revenue of $46.8 million, an increase of 2% year-over-year;
  • Chegg Services Revenue grew 14% year-over-year to $25.6 million, or 38% of total revenues compared to 26% in Q1 2015;
  • Required Materials Revenue of $41.1 million compared to $62.4 million in Q1 2015;
  • GAAP Gross Profit was $27.7 million;
  • Non-GAAP Gross Profit was $27.8 million;
  • Adjusted EBITDA was $(0.5) million;
  • GAAP Net Loss was $15.7 million; and
  • Non-GAAP Net Loss was $2.8 million.

Pro forma revenue and the related year-over-year percentage increase presents revenue as if the transition of textbook inventory investment and textbook logistics and fulfillment functions for Chegg's print textbook business to Ingram Content Group (Ingram) was complete and the revenue from print textbook business was entirely commission-based. For more information about pro forma revenue and a reconciliation of pro forma revenue to revenue, see the sections of the press release titled "Use of Non-GAAP Measures" and "Reconciliation of GAAP to Non-GAAP Financial Measures".

Q1 2016 Business Highlights:

  • 750,000: number of Chegg Services subscribers in Q1;
  • 79%: renewal rate for Chegg Study subscribers in the quarter;
  • 3 million: questions viewed in Chegg Study in Q1;
  • 258,000: new students registrations on Internships.com; and
  • $21 million: remaining Chegg textbook inventory.

Business Outlook:

Our outlook for the second quarter of and fiscal year 2016 is comprised of two revenue streams: Required Materials revenue which includes print textbooks, eTextbooks, and Ingram commission revenue; and Chegg Services revenue, which includes Chegg Study, Chegg Tutors, Enrollment Marketing, Brand Partnerships and Careers.

Second Quarter 2016

  • Revenue in the range of $48 million and $52 million;
  • Pro Forma Revenue in the range of $36 million and $40 million;
  • Chegg Services Revenue in the range of $28 million and $30 million;
  • Gross Margin between 56%; and 58%; and
  • Adjusted EBITDA in the range of $5 million and $7 million.

Adjusted EBITDA guidance for the second quarter includes approximately $2.8 million for textbook depreciation and excludes approximately $10.5 million for stock-based compensation expense, $0.6 million for amortization of intangible assets; and $1.0 million for acquisition-related costs. It does not include an amortization for intangible assets of Imagine Easy Solutions as the amount of any such amortization cannot be appropriately estimated at this time. It assumes, among other things, that no additional business acquisitions, investments, restructuring actions, or legal settlements are concluded and that there are no further revisions to stock-based compensation estimates.

Fiscal Year 2016

  • Revenue in the range of $239 million and $257 million;
  • Pro Forma Revenue in the range of $179 million and $192 million;
  • Chegg Services Revenue in the range of $124 million and $132 million;
  • Gross Margin between 48% and 50%; and
  • Adjusted EBITDA in the range of $13 million and $22 million.

Fiscal 2016 guidance includes approximately $7 million in revenue and $2 million in Adjusted EBITDA from the Imagine Easy acquisition.

Adjusted EBITDA guidance for fiscal 2016 includes approximately $10.5 million for textbook depreciation and excludes approximately $44 million for stock-based compensation expense; $2.2 million for amortization of intangible assets; credit of $44,000 for restructuring charges; and $5.0 million for acquisition-related costs. It does not include an amortization for intangible assets of Imagine Easy Solutions as the amount of any such amortization cannot be appropriately estimated at this time. It assumes, among other things, that no additional business acquisitions, investments, restructuring actions, or legal settlements are concluded and that there are no further revisions to stock-based compensation estimates.

Conference Call and Webcast Information

To access the call, please dial (877) 407-4018, or outside the U.S. +1 (201) 689-8471, five minutes prior to 1:30 p.m. Pacific Daylight Time (or 4:30 p.m. Eastern Daylight Time) on May 2, 2016. A live webcast of the call will also be available at http://investor.chegg.com under the Events & Presentations menu. An audio replay will be available beginning at 8:00 p.m. Eastern Daylight TimeMay 2, 2016, until 11:59 p.m. Eastern Daylight TimeMay 9, 2016, by calling (877) 870-5176 or +1 (858) 384-5517, with Conference ID 13634835. An audio archive of the call will also be available at http://investor.chegg.com.

Use of Investor Relations Website for Regulation FD Purposes

Chegg also uses its media center website, http://www.chegg.com/mediacenter, as a means of disclosing material non-public information and for complying with its disclosure obligations under Regulation FD. Accordingly, investors should monitor http://www.chegg.com/mediacenter, in addition to following press releases, Securities Exchange Commission filings and public conference calls and webcasts.

About Chegg

Chegg puts students first. As the leading student-first connected learning platform, the company makes higher education more affordable, more accessible, and more successful for students. 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.

Use of Non-GAAP Measures

To supplement Chegg's financial results presented in accordance with U.S. generally accepted accounting principles (GAAP), this press release and the accompanying tables and the related earnings conference call contain non-GAAP financial measures, including pro forma revenue, adjusted EBITDA, non-GAAP gross profit and margin, non-GAAP operating expenses, non-GAAP net loss and non-GAAP net loss per share. For reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures, please see the section of the accompanying tables titled, "Reconciliation of GAAP to Non-GAAP Financial Measures" and "Reconciliation of GAAP Net Loss to EBITDA and Adjusted EBITDA."

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) Non-GAAP total pro forma net revenue as revenue as if it had already transitioned to a fully commission-based revenue model with Ingram for its print textbook business, (2) adjusted EBITDA as earnings before interest, taxes, depreciation and amortization, or EBITDA, adjusted for textbook depreciation and to exclude stock-based compensation expense, acquisition-related compensation costs, restructuring charges, transitional logistic charges and other income, net, (3) non-GAAP gross profit as gross profit excluding share-based compensation and transitional logistic charges, (4) non-GAAP gross margin is non-GAAP gross profit divided by GAAP total net revenue, (5) non-GAAP net loss as GAAP net loss excluding share-based compensation expense, amortization of intangible assets, acquisition related compensation costs, restructuring (credits) charges...


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