Chegg 2013 Annual Report Download - page 103

We believe that our existing sources of liquidity will be sufficient to fund our operations, debt service and
repayment obligations for at least the next 12 months. However, our future capital requirements will depend on
many factors, including the level of investment in textbooks to support our print textbook business and our ability
to recover our source costs through the rental of textbooks and as we liquidate textbooks at the end of their
lifecycle, our rate of revenue growth, our sales and marketing activities and the timing and extent of our spending
to support our technology and development efforts. To the extent that existing cash and cash equivalents,
investments and cash from operations are insufficient to fund our future activities, we may need to raise
additional funds through public or private equity or debt financing. Additional funds may not be available on
terms favorable to us or at all. If adequate funds are not available on acceptable terms, or at all, we may be
unable to adequately fund our business plans and it could have a negative effect on our business, operating cash
flows and financial condition.
The following table sets forth our cash flows (in thousands):
Year Ended December 31,
2013 2012 2011
Consolidated Statements of Cash Flows Data:
Net cash provided by operating activities .......... $ 63,706 $ 54,681 $ 32,754
Net cash used in investing activities .............. $(153,090) $(88,103) $(59,926)
Net cash provided by (used in) financing activities . . . $ 145,218 $ 19,845 $ (8,750)
Cash Flows from Operating Activities
Although we incurred net losses in 2013, 2012 and 2011, we generated positive cash flows from operating
activities in each period presented, which was primarily the result of our increased textbook revenue. Cash flows
from operating activities are also influenced by the increase in expenses we incur to support the growth in our
business. The substantial majority of our net revenue is from e-commerce transactions with students, which are
settled immediately through payment processors, and our accounts payable are settled based on contractual
payment terms with our suppliers. As a result, changes in our operating accounts are generally a source of cash
overall, although they can be a use of cash in the second and fourth quarters of each year as payables become due
and new bookings are generally at their low point. In addition, we have significant non-cash operating expenses
such as textbook library depreciation expense, other depreciation and amortization expense and stock-based
compensation expense. In 2013, 2012 and 2011, our non-cash operating expenses and changes in operating assets
and liabilities more than offset our net loss.
Net cash provided by operating activities in 2013 was $63.7 million. Although we incurred a net loss of
$55.9 million, our net loss was more than offset by significant non-cash operating expenses, including textbook
library depreciation expense of $64.8 million, other depreciation and amortization expense of $11.6 million,
stock-based compensation expense of $37.0 million and loss from write-offs of textbooks of $5.9 million.
Net cash provided by operating activities in 2012 was $54.7 million. Although we incurred a net loss of
$49.0 million, our net loss was offset by significant non-cash operating expenses, including textbook library
depreciation expense of $57.2 million, other depreciation and amortization expense of $12.6 million, stock-based
compensation expense of $18.0 million and loss from write-offs of textbooks of $4.6 million.
Net cash provided by operating activities in 2011 was $32.8 million. Although we incurred a net loss of
$37.6 million, our net loss was offset by significant non-cash operating expenses, including textbook library
depreciation expense of $56.1 million, other depreciation and amortization expense of $7.3 million, stock-based
compensation expense of $13.1 million and loss from write-offs of textbooks of $5.3 million. In addition, we
used cash from operations in 2011 as a result of an $8.2 million reduction in accrued liabilities, primarily related
to the liabilities assumed in connection with our acquisitions in the second half of the year, a $4.9 million
reduction in accounts payable due to the timing of vendor payments and a $3.6 million increase in prepaid
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