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The Student Hub
Dan Rosensweig, CEO //
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SM
Andy Brown, CFO
// May 2015
Confidential Material – Chegg Inc. © 2005 - 2015. All Rights Reserved.
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, anticipated events or trends and similar
expressions concerning matters that are not historical facts. In some cases you can identify forward-looking statements by references to future periods
and use of terminology such “outlook,” “pro forma,” “as if,” “new,” “transition,” or similar words or phrases which are predictions of or indicate future
events or trends and which do not relate solely to historical matters. These forward-looking statements include, without limitation those regarding
Chegg’s new digital business model to result from the transition of its print textbook rental business to Ingram, the pro forma presentations of Chegg’s
results of operations as if the transition of its print textbook business to Ingram were complete, and all statements about Chegg’s financial outlook. These
statements are not guarantees of future performance, but are based on management’s expectations as of the date of this presentation and assumptions
that are inherently subject to uncertainties, risks and changes in circumstances that are difficult to predict. Forward-looking statements involve known and
unknown risks, uncertainties and other factors that may cause actual results, performance or achievements to be materially different from any future
results, performance or achievements. Important factors that could cause actual results to differ materially from those expressed or implied by the
forward-looking statements in this presentation include the following: Chegg’s ability to attract new students, increase engagement and increase
monetization; competitive developments, including pricing pressures; Chegg’s ability to build and expand its digital offerings; Chegg’s ability to develop
new products and services on a cost-effective basis and to integrate acquired businesses and assets; the impact of seasonality on the business; Chegg’s
partnership with Ingram and the parties’ ability to achieve the anticipated benefits of the strategic alliance, including the potential impact of the economic
risk-sharing arrangements between Chegg and Ingram on Chegg’s results of operations; Chegg’s ability to effectively control operating costs; changes in
Chegg’s addressable market; changes in the education market; and general economic and industry conditions. All information provided in this
presentation is as of the date hereof and Chegg undertakes no duty to update this information except as required by law. These and other important risk
factors are described more fully in documents filed with the Securities and Exchange Commission, including Chegg’s Annual Report on Form 10-K filed
with the Securities and Exchange Commission on March 6, 2015, and could cause actual results to vary from expectations.
Use of Non-GAAP Measures
In addition to financial results presented in accordance with generally accepted accounting principles (GAAP), this presentation includes certain forwardlooking non-GAAP financial measures of financial performance, including free cash flow, adjusted EBITDA and pro forma revenue. These non-GAAP
financial measures are in addition to, and not a substitute for or superior to, measures of financial performance prepared in accordance with GAAP, and
may be different from non-GAAP financial measures used by other companies. In addition, these non-GAAP measures have limitations in that they do
not reflect all of the amounts associated with Chegg's results of operations as determined in accordance with GAAP. Reconciliations of these non-GAAP
financial measures to the most directly comparable GAAP financial measures, are contained in the Appendix to this presentation.
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Confidential Material – Chegg Inc. © 2005 - 2015. All Rights Reserved.
From Directed Education to Self-Directed Learning
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Confidential Material – Chegg Inc. © 2005 - 2015. All Rights Reserved.
Education is a $1 Trillion U.S. Market
That is Being Disrupted
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Confidential Material – Chegg Inc. © 2005 - 2015. All Rights Reserved.
Poor Outcomes, Insanely High Costs…
Not OK
10.6%
$1.1 Trillion+
Student Loan Debt1
Unemployed2
Recent Grads
45%
41%
of Grads are in
jobs not requiring
4-year degree3
Drop out
of college4
Need Relentless Focus on Student Outcomes
Material 3– Voice
CheggofInc.
2005 - 2015.
All Rights
Sources: 1 NY Federal Reserve; 2 BureauConfidential
of Labor Statistics;
the ©
Graduate
(McKinsey
and Reserved.
Chegg); 4 National Center for Education Statistics
Chegg was Hatched to Address Student Problems
Foundation
Build big brand that
students value, become
#1 Textbook Renter
Expansion
Integration
Acceleration
Extend reach into
high school and offer more
services to college students
Build one connected cloudbased platform for students
from high school to first job
To all digital model,
creating high growth,
high margin business
that serves student needs
The Story of Chegg…Still Being Written
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Confidential Material – Chegg Inc. © 2005 - 2015. All Rights Reserved.
Solving Students’ Problems is a Big Business $84 Billion
$6.5B
College Recruiting
$53B
Back-To School
$11B
Tutoring,
Test Prep &
Counseling
Get into College
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$10B
Required Material
Go to College
$11B
Tutoring, Test
Prep &
Counseling
Succeed & Graduate
Confidential Material – Chegg Inc. © 2005 - 2015. All Rights Reserved.
$5B
Career Recruiting
Get First Job
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 - 2015. All Rights Reserved.
Helping Students Today Requires
Leveraging Technology & Data to Answer These Questions
High School
College
Should I go to
college?
What courses do I
take?
How can I do
better in class?
What college
should I go to?
What major
should I study?
How do I build
career skills?
How do I pay for
college?
What materials do
I need for
classes?
Where do I find an
internship?
How do I improve
my chances?
What else do I
need?
Get me a job!
Confidential Material – Chegg Inc. © 2005 - 2015. All Rights Reserved.
Students Use Chegg to Solve Problems
Because Chegg Improves Their Outcomes
Confidential Material – Chegg Inc. © 2005 - 2015. All Rights Reserved.
Chegg
Reaches
75% of U.S. College Bound High School &
50% of U.S. College Students
15 M+
$500+ M
10,000+
Students* reached
Saved by students
Online Tutors
6M
1 M+
190,000+
Textbooks delivered
Digital Subscribers
Internships listed
Chegg Achieved Scale by Putting Students First
*U.S. College Bound High School & College Students
Source: Data as of December 2014
Confidential Material – Chegg Inc. © 2005 - 2015. All Rights Reserved.
The Leading Connected Student First Learning Platform
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Confidential Material – Chegg Inc. © 2005 - 2015. All Rights Reserved.
Unlocking The Value
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Confidential Material – Chegg Inc. © 2005 - 2015. All Rights Reserved.
Total Revenue
Digital Revenue
$304.8m
19%
74%
$91.2m
$52.5m
$256.6m
Serving Students is a Great Business
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Confidential Material – Chegg Inc. © 2005 - 2015. All Rights Reserved.
How We Make Money
Advertisers
Pay Chegg to Match
them with Students
Pay Chegg for Learning
Materials and Services
Schools
Chegg Study
Brand Partners
Chegg Tutors
Employers
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Students
Textbooks & eTextbooks
Confidential Material – Chegg Inc. © 2005 - 2015. All Rights Reserved.
Q2 2015
FISCAL 2015
Revenue
$61m to $65m
$300m to $315m
Digital Revenue
$28m to $30m
$135m to $145m
Gross Margin %
41% to 43%
34% to 36%
Adj. EBITDA*
$1.5m to $2.5m
Break even or better
Free Cash Flow*
$15m to $25m
Chegg’s 2015 Outlook
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*Non-GAAP financial measure
Confidential Material – Chegg Inc. © 2005 - 2015. All Rights Reserved.
Total Revenue
Free Cash*
Flow
Digital
Revenue
Print
Revenue
2013
2014
2015
2016
Revenue re-accelerates when
transition is complete in 2017.
Gross profits and EBITDA
improve immediately.
2017
Book
Investment
2013
2014
2015
2016
2017
Higher free cash flow and
stronger balance sheet.
Significantly more working capital
to expand digital platform.
New Textbook Model Accelerates Digital Transition
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*Non-GAAP financial measure
Confidential Material – Chegg Inc. © 2005 - 2015. All Rights Reserved.
35%
30%
Seasonality*
Reflects transition to
commission based
revenue that is recognized
immediately.
25%
20%
15%
10%
Print
Digital
Total
5%
0%
Q1'15
Q2'15
*shown on a pro-forma basis
2015 Revenue Seasonality
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Confidential Material – Chegg Inc. © 2005 - 2015. All Rights Reserved.
Q3'15
Q4'15
34% growth
Pro Forma Revenue*
Reflects total quarterly
revenue as if the transition to
Ingram were complete
Q1'14
*Non-GAAP Financial Measure
Pro Forma Q1 Growth
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Confidential Material – Chegg Inc. © 2005 - 2015. All Rights Reserved.
Q1'15
Pro Forma* View of Chegg’s Business Model
$142.7m
42% CAGR
$101.9m
Chegg as Pure
Digital Business
$72.8m
$49.5m
Ingram Commission
Digital Revenue
Digital Model: Higher Growth, Higher Margins, Higher Profits
*As If Ingram Deal Were in Place Since 2011
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Confidential Material – Chegg Inc. © 2005 - 2015. All Rights Reserved.
REVENUE GROWTH
25%+
GROSS MARGIN %
60%+
EBITDA MARGIN
25%+
NEW MODEL
Target Operating Model - 2017
Chegg’s New Digital Model
Higher growth, margins & profit
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Confidential Material – Chegg Inc. © 2005 - 2015. All Rights Reserved.
The Student Hub
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Confidential Material – Chegg Inc. © 2005 - 2015. All Rights Reserved.
SM
Appendix
Adjusted EBITDA guidance for the second quarter includes approximately $13 million for
textbook depreciation and excludes approximately $14 million for stock-based
compensation; $1.0 million for amortization of intangible assets; $0.5 million for
restructuring charges; $1.0 million for transitional logistic charges; and $1.0 million for
acquisition-related costs. It assumes, among other things, that no additional business
acquisitions, investments, restructurings, or legal settlements are concluded and that
there are no further revisions to stock-based compensation estimates.
Adjusted EBITDA guidance for fiscal 2015 includes approximately $42.0 million for
textbook depreciation and excludes approximately $57.0 million for stock-based
compensation; $5.0 million for amortization of intangible assets; $6.0 million for
restructuring charges; $4.0 million for transitional logistic charges; and $2.0 million for
acquisition-related costs. It assumes, among other things, that no additional business
acquisitions, investments, restructurings, or legal settlements are concluded and that
there are no further revisions to stock-based compensation estimates.
Free Cash Flow is defined as cash flow from operations plus net book investment and
investment in property, plant and equipment.
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Confidential Material – Chegg Inc. © 2005 - 2015. All Rights Reserved.