Chegg 2014 Annual Report Download - page 76

Table of Contents
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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
You should read the following discussion of our financial condition and results of operations in conjunction with our
consolidated financial statements and the related notes included in Part II, Item 8, “ Consolidated Financial Statements and
Supplementary Data” of this Annual Report on Form 10-K. In addition to our historical consolidated financial information, the
following discussion contains forward-looking statements that reflect our plans, estimates, and beliefs. Our actual results could
differ materially from those discussed in the forward-looking statements. See the “Note about Forward-Looking Statements”
for additional information. Factors that could cause or contribute to these differences include those discussed below and
elsewhere in this Annual Report on Form 10-K, particularly in Part I, Item 1A, “Risk Factors.”
Overview
Chegg is the leading student-first connected learning platform. Our goal is to help students transition from high school
to college to career, with a view to improving student outcomes. This means we help students find the right school to
accomplish their goals, get better grades and test scores while in school, and gain valuable skills to help them enter the
workforce. By helping students learn more in less time and at a lower cost, we are improving the overall return on investment
in education. During 2014, nearly 7.5 million students turned to Chegg to save time, save money and get smarter.
In 2014 we matched approximately 5.0 million domestic and international students with colleges and universities and
other academic institutions (collectively referred to as colleges) in the United States. Students get help finding the best fit
school for them and colleges are able to reach the best candidates at a fraction of the cost of traditional marketing. Once in
college, we provide a range of products and services to help students save time, save money, and get smarter. We offer an
extensive print textbook and eTextbook library for rent and sale, in part through our strategic partnership with Ingram. In 2014,
we delivered over 6.1 million textbooks and eTextbooks, and over 1.0 million students subscribed to our digital services, such
as our Chegg Study service, which provides Textbook Solutions and Q&A, that helps students with their homework. When
students are really stuck, they can reach a live tutor online, anytime, anywhere. To date, our tutors have delivered over 10.9
million minutes of help, charged by the minute. Finally, we provide access to over 190,000 internships to help students gain
skills which are critical to securing their first job.
To deliver to our student services, we partner with a variety of third parties. We work with over 750 colleges who rely
on us to help shape their incoming classes. During 2014, we sourced print textbooks, eTextbooks and supplemental materials
directly or indirectly from thousands of publishers in the United States, including Pearson, Cengage Learning, McGraw Hill,
Wiley and MacMillan. We have a large and growing network of students and professionals who leverage our platform to tutor
in their spare time. More than 65,000 employers leverage our platform to post their internships. In addition, because we have a
large student audience, local and national brands partner with us to reach the college and high school demographic.
During the year ended December 31, 2014, 2013 and 2012, we generated net revenues of $304.8 million, $255.6 million
and $213.3 million, respectively, and in the same periods had net losses of $64.8 million, $55.9 million and $49.0 million,
respectively. We plan to continue to invest in the long-term growth of the company, particularly further investment in the
technology that powers our platform and the Student Graph and in the development of products and services that serve
students. In 2014 we completed four acquisitions to expand our digital offerings, including internships.com, InstaEdu, Campus
Special and Bookstep. Certain of these acquisitions will allow us to expand our offerings to a wider number of individuals
while at the same time growing our core businesses. Our newer products and services, or any other products and services we
may introduce or acquire, may not be integrated effectively into our business, achieve or sustain profitability or achieve market
acceptance at levels sufficient to justify our investment.
Our strategy for achieving and maintaining profitability is centered upon our ability to become a digital centric business
by using our digital offerings to increase student engagement with our connected learning platform. We intend to accelerate the
growth of our higher margin digital offering while maintaining our leadership in print textbook rental by expanding our
strategic partnership with Ingram. We expect the planned expansion of our partnership with Ingram to allow us to focus
exclusively on our digital offerings by 2017, which will allow us to reduce the operating expenses we incur to acquire and
maintain a print textbook library. During our transition to digital offerings, we will continue to buy used books on Ingram’s
behalf including books through our buyback program and invoice Ingram at cost. As part of the expanded strategic partnership,
we would provide Ingram with extended payment terms in 2015 and 2016 for the purchase of textbooks, before moving to
normal payment terms in 2017. To deepen student engagement we plan to continue to invest in the expansion of our digital
offerings to provide a more compelling and personalized solution. We believe this expanded and deeper penetration of the
student demographic will allow us to drive further growth in our enrollment and brand marketing services. In addition, we
believe that the investments we have made to achieve our current scale will allow us to drive increased operating margins over