Chegg 2015 Annual Report Download - page 89

Table of Contents
50
Liquidity and Capital Resources
As of December 31, 2015 our principal sources of liquidity were cash, cash equivalents and investments totaling $89.1
million, which were held for working capital purposes. Our cash equivalents and investments are composed primarily of
commercial paper, corporate securities, money market funds and agency bonds. We also have an aggregate principal amount of
$30.0 million available under our revolving credit facility with an accordion feature that, subject to certain financial criteria,
allows us to borrow up to a total of $65.0 million. The revolving credit facility expires in August 2016. As of December 31,
2015, we were in compliance with all financial covenants and had no amounts outstanding under the revolving credit facility.
As a result of our expanded strategic partnership with Ingram, we will continue to buy used print textbooks on Ingram’s
behalf, including print textbooks through our buyback program, and invoice Ingram at cost. We provided Ingram with extended
payment terms in 2015 and will continue to do so in 2016 for the purchase of print textbooks, before moving to normal
payment terms in 2017. We have a reimbursement balance due from Ingram included within other current assets on the
consolidated balance sheet related to the purchase of these textbooks of $28.9 million as of December 31, 2015. As a result of
our strategic partnership with Ingram, we anticipate having significantly more working capital.
During the year ended December 31, 2015, our proceeds from print textbook liquidations exceeded our investment in
print textbooks and resulted in a cash inflow of $6.0 million as a result of our strategic partnership with Ingram whereby we no
longer make new investments in the print textbook library and since May 1, 2015, Ingram was responsible for all new
investments in the print textbook library. During the years ended December 31, 2014 and 2013 our investment in print
textbooks, net of proceeds from textbook liquidations was $54.7 million and $84.3 million, respectively.
As of December 31, 2015, we have incurred cumulative losses of $329.1 million from our operations and we expect to
incur additional losses in the future. Our operations have been financed primarily by net proceeds from the sales of shares of
our convertible preferred stock, through various debt financing activities and our IPO.
We believe that our existing sources of liquidity will be sufficient to fund our operations and debt service obligations for
at least the next 12 months. Our future capital requirements will depend on many factors including our rate of revenue growth,
our investments in technology and development activities, our acquisition of new products and services and our sales and
marketing activities. 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.
Most of our cash is held in the United States. As of December 31, 2015 our foreign subsidiaries held an insignificant
amount of cash in foreign jurisdictions. We currently do not intend or foresee a need to repatriate these funds. In addition, based
on our current and future needs, we believe our current funding and capital resources for our international operations are
adequate.
The following table sets forth our cash flows (in thousands):
Year Ended
December 31,
2015 2014 2013
Consolidated Statements of Cash Flows Data:
Net cash (used in) provided by operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (82) $ 68,475 $ 63,706
Net cash provided by (used in) investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 8,271 $ (87,350) $ (153,090)
Net cash provided by (used in) financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,723 $ (1,872) $ 145,218
Cash Flows from Operating Activities
Although we incurred net losses during the years ended December 31, 2015, 2014 and 2013, our net losses were partially
or fully offset by non-cash expenditures. The substantial majority of our net revenues is from e-commerce transactions with
students, which are settled immediately through payment processors, as opposed to our accounts payable, which 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
orders are generally at their low point. In addition, we have significant non-cash operating expenses such as print textbook