Chegg 2015 Annual Report Download - page 86

Download and view the complete annual report

Please find page 86 of the 2015 Chegg annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 139

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131
  • 132
  • 133
  • 134
  • 135
  • 136
  • 137
  • 138
  • 139

Table of Contents
47
Cost of Revenues
The following table sets forth our cost of revenues for the periods shown (dollars in thousands):
Year Ended
December 31, Change in 2015 Change in 2014
2015 2014 2013 $ % $ %
Cost of revenues(1) . . . . . . . . . . . . . . . . . $ 189,849 $ 210,985 $ 175,060 $ (21,136) (10)% $ 35,925 21%
(1) Includes share-based compensation expense
of: $ 262 $ 617 $ 1,185 $ (355) (58 )% $ (568) (48)%
Cost of revenues in the year ended December 31, 2015 decreased by $21.1 million, or 10%, compared to the same period
in 2014. The decrease in absolute dollars and as a percentage of revenues for the year ended December 31, 2015 was primarily
due to a decrease in textbook depreciation of $26.6 million, write-offs related to our print textbook library of $5.2 million and
lower warehouse personnel costs of $5.6 million. These decreases resulted from Ingram's fulfillment of more print textbook
rental orders and the closure of our warehouse in Kentucky. These savings were partially offset by higher cost related to sales
of print textbooks of $15.5 million and the cost of digital content of $1.6 million. As a result, gross margins increased to 37% in
the year ended December 31, 2015, from 31% in the year ended December 31, 2014, as Chegg Services continued to be a larger
percentage of our business.
Cost of revenues in the year ended December 31, 2014 increased $35.9 million, or 21%, compared to the same period
during 2013. The increase in absolute dollars and as a percentage of revenues for the year ended December 31, 2014 was
primarily due to an increase in textbook depreciation of $5.4 million, write-offs related to our textbook library of $4.7 million,
the cost of digital content of $4.4 million, and higher warehouse personnel costs of $0.5 million. The cost of digital content
increased during the year ended December 31, 2014 due to our expansion of digital content solutions made available to
students. In addition we experienced an increase in the cost of textbooks purchased of $16.2 million, which was primarily
driven by increased unit shipments and we had higher order fulfillment costs of $4.4 million, which is primarily comprised of
shipping and handling expenses.
Further, as we move towards Ingram taking title and risk of loss for the print textbook inventory needed to fulfill all print
textbooks rentals and sales, we anticipate our total cost of revenues will continue to decrease and our total gross margins will
continually increase.
Operating Expenses
The following table sets forth our operating expenses for the periods shown (dollars in thousands):
Year Ended
December 31, Change in 2015 Change in 2014
2015 2014 2013 $ % $ %
Technology and development(1) . . . . . . $ 59,391 $ 49,386 $ 41,944 $ 10,005 20% $ 7,442 18%
Sales and marketing(1) . . . . . . . . . . . . . . 64,082 72,315 50,302 (8,233)(11) 22,013 44
General and administrative(1) . . . . . . . . 45,209 41,837 40,486 3,372 8 1,351 3
Restructuring charges . . . . . . . . . . . . . 4,868 — — 4,868 n/m — n/m
Gain on liquidation of textbooks . . . . (4,326) (4,555)(1,186) 229 (5)(3,369) 284
$ 169,224 $ 158,983 $ 131,546 $ 10,241 6% $ 27,437 21%
(1) Includes share-based compensation expense
of:
Technology and development . . . . . . . . . . . $ 11,992 $ 10,451 $ 9,414 $ 1,541 15 % $ 1,037 11 %
Sales and marketing. . . . . . . . . . . . . . . . . . . 7,901 11,300 7,107 (3,399) (30) 4,193 59
General and administrative . . . . . . . . . . . . . 18,620 14,520 19,252 4,100 28 (4,732) (25)
Share-based compensation expense. . . . $ 38,513 $ 36,271 $ 35,773 $ 2,242 6 % $ 498 1 %
_______________________________________
n/m - not meaningful