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Chegg Reports Third Quarter 2015 Results

The following excerpt is from the company's SEC filing.

Company Reports Record Customers; Digital Revenue up 45%

SANTA CLARA, Calif., November 2, 2015 /PRNewswire/ -- Chegg, Inc. (NYSE:CHGG), the Student Hub, today reported financial results for the three months ended September 30, 2015.

“We had a record fall semester reaching more than 2 million customers in the quarter driven by the popularity of our digital services,” said Dan Rosensweig, Chairman and CEO of Chegg. “This was also our biggest textbook season ever, and the final one shipping from our warehouse. Moving forward, all buying and logistics will be handled by our partner Ingram and I want to thank our entire Kentucky warehouse team for putting students first through to the last book shipped. We couldn’t be more proud of the team and of the work they have done to help millions of students to save time, save money and get smarter.”

An updated investor presentation can be found on Chegg’s Investor Relations website

http://investor.chegg.com

Q3 2015 Financial Highlights:

Total Revenue

of $81.3 million;

Digital Revenue

of $38.2 million, up 45% year-over-year and now comprising 47% of total revenue;

Print Revenue

$43.1 million;

GAAP Gross Profit

of $19.6 million;

Non-GAAP Gross Profit

of $22.3 million;

Adjusted EBITDA Loss

of $(8.9) million, an improvement of 47% year-over-year;

GAAP Net Loss

of $(24.2) million;

Non-GAAP Net Loss

of $(10.9) million;

GAAP Earnings Per Share (EPS):

$(0.28);

Non-GAAP EPS:

$(0.12); and

Cash, Cash Equivalents and Investments:

$105 million with $0 debt.

Q3 2015 Business Highlights:

2 million:

Total number of Chegg customers in the quarter;

825,000:

Number of digital subscribers on the Chegg platform in Q3, up 23% year-over-year;

Approximate percentage of traffic that comes to Chegg organically;

Chegg Study paid subscriber monthly renewal rate;

25 million:

Number of jobs viewed on Chegg’s Career Center or Internships.com;

250,000:

New students registered on Chegg’s Career Center or Internships.com; and

280,000:

Number of job applications submitted through Chegg’s Career Center or Internships.com.

Business Outlook:

Our outlook for the fourth quarter and fiscal year 2015 is comprised of two revenue lines, including print revenue, which consists of revenue that Chegg continues to derive from the rental or sale of textbooks directly to students, and of digital revenue, which consists of revenue from digital learning services, advertising, and commission-based revenue from our e-commerce partners such as Ingram.

We are reaffirming our outlook for the second half of 2015 as stated in our prior earnings release dated August 3, 2015, but with a higher mix of revenue recognized in Q3 than previously expected. This was primarily due to our partner, Ingram, exceeding expectations in the number of books they fulfilled, resulting in more commission-based revenue recognized in Q3 than previously planned. We also saw a higher proportion of student purchases, which are recognized in the quarter (versus rentals that are recognized ratably over the rental period), than we had anticipated.

Fourth Quarter 2015

Total Revenue

in the range of $68 million and $74 million;

in the range of $38 million and $42 million;

Total Gross Margin on both a GAAP and Non-GAAP basis

between 56% and 58%; and

profit of between $10 million and $15 million.

Adjusted EBITDA guidance for the fourth quarter includes approximately $6.6 million for textbook depreciation; and excludes approximately $12.7 million for stock-based compensation, $0.6 million for amortization of intangible assets, $0.7 million for restructuring charges, $0.1 million for transitional logistic charges, and $0.2 million for acquisition-related costs. 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 2015

in the range of $295 million and $310 million;

in the range of $137 million and $145 million;

between 36% and 38%;

of breakeven to $5 million; and

Free cash flow

in the range of $15 million and $20 million.

Adjusted EBITDA guidance for fiscal 2015 includes approximately $43.4 million for textbook depreciation; and excludes approximately $44.5 million for stock-based compensation, $4.8 million for amortization of intangible assets, $4.0 million for restructuring charges, $6.0 million for transitional logistic charges, and $1.9 million for acquisition-related costs. 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

The Chegg Third Quarter teleconference and webcast is scheduled to begin at 1:30 p.m. Pacific Standard Time on Monday, November 2, 2015. 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 Standard Time (or 4:30 p.m. Eastern Standard Time). 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 Standard Time November 2, 2015, until 11:59 p.m. Eastern Standard Time November 9, 2015, by calling (877) 870-5176 or +1 (858) 384-5517, with Conference ID 13621413. An audio archive of the call will also be available at

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

, 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

Use of Non-GAAP Measures

To supplement Chegg’s financial results presented in accordance with Generally Accepted Accounting Principles (GAAP), this press release and the accompanying tables and the related earnings conference call present non-GAAP financial measures, including adjusted EBITDA, non-GAAP gross profit and margin, non-GAAP operating expenses, non-GAAP net loss, non-GAAP EPS and free cash flow. 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...


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