Chegg 2013 Annual Report Download - page 100

Technology and Development
Technology and development expenses during 2013 increased $2.6 million, or 7%, compared to 2012.
During 2013 our employee-related expenses increased $3.2 million compared to the prior year. In addition,
stock-based compensation expense increased by $1.8 million primarily due to the grant of vested RSUs and the
vesting of previously outstanding RSUs to officers and consultants, which resulted in additional stock-based
compensation expense upon the completion of our IPO. These increases were partially offset by a decrease in
amortization of intangible assets as intangibles acquired during 2011 became fully amortized. In addition, as we
hired full-time employees we reduced our usage of contractors, resulting in savings of approximately $0.6
million during 2013 compared to 2012. Technology and development as a percentage of net revenues decreased
to 16% of net revenues in 2013 compared to 18% of net revenues in 2012.
Technology and development expenses in 2012 increased $9.7 million, or 33%, compared to 2011.
Technology and development as a percentage of net revenues increased to 18% of net revenues in 2012
compared to 17% of net revenues in 2011. The increase in absolute dollars and as a percentage of net revenues
was due to an increase in employee related compensation and benefits of approximately $5.5 million, primarily
driven by increased headcount during 2012. This increase was partially offset by a decrease in outside services of
$1.6 million as a result of hiring full-time employees. We also experienced an increase in stock-based
compensation expense during 2012 of approximately $3.8 million. This increase is primarily the result of the full
year impact of stock-based compensation expense as a result of the issuance of stock options and restricted
shares of our common stock granted in conjunction with our acquisitions during prior years, as well as an
increase in new grants. Amortization of intangible assets increased $2.2 million due to a full year of amortization
for technology acquired during 2011 through our acquisitions.
Sales and Marketing
Sales and marketing expenses during 2013 decreased by $0.8 million, or 2%, compared to 2012. Sales and
marketing expenses as a percentage of net revenues decreased to 20% during 2013 compared to 24% of net
revenues during 2012. The decrease in absolute dollars and as a percentage of net revenues is primarily attributable
to a decrease in advertising and marketing expenses of $5.1 million as a result of improved performance of search
engine optimization and increased direct traffic resulting in decreased reliance on paid advertising, which were
outperforming paid search advertising primarily utilized during 2012. There was a decrease of $0.9 million in
amortization of intangible assets as intangibles acquired during 2011 became fully amortized. These decreases were
partially offset by increased employee related expenses of $2.9 million as a result of increased average headcount
during 2013 compared to 2012 and increased stock-based compensation expense of $1.9 million primarily due to
the grant of vested RSUs and the vesting of previously outstanding RSUs to officers and consultants, which resulted
in additional stock-based compensation expense upon the completion of our IPO.
Sales and marketing expenses in 2012 increased $22.7 million, or 80%, compared to 2011. Sales and
marketing expenses as a percentage of net revenues increased to 24% in 2012 compared to 16% in 2011. The
increase in absolute dollars and as a percentage of net revenues was primarily the result of an increase in
employee-related compensation and benefits of $7.9 million, primarily due to increased headcount during 2012,
as we included a full year of expenses related to the employees that joined us as a result of our acquisition of
Zinch in October 2011 and as we invested in growing our brand and enrollment marketing services capabilities.
In addition, marketing activities increased by $6.2 million related to search advertising as a result of increased
spending to reach more customers. Allocated information technology and facilities costs increased by
$2.0 million during 2012, and our travel and entertainment expenses and outside services expenses increased by
$0.8 million and $0.6 million, respectively, due to support of our enrollment marketing services, which we
incurred a full year of expenses in 2012, since the October 2011 acquisition of Zinch. We also experienced an
increase in stock-based compensation expense during 2012 of approximately $2.1 million. This increase is the
result of new hire option grants and options and restricted shares of our common stock issued in conjunction with
our acquisitions during prior years. Amortization of intangible assets increased by $2.1 million as we recognized
a full year of amortization associated with our acquisitions completed during the second half of 2011.
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