CHGG - Earnings call transcript Q1 2018

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Operator

Greetings, and welcome to the Chegg First Quarter 2018 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation [Operator Instructions].

As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Tracey Ford, Vice President of Investor Relations.

Tracey Ford

afternoon. Good joining XXXX for call. first Chegg’s you conference quarter Thank and Dan Andy On are Chairman CEO today’s call Officer. Rosensweig, and Financial Brown, Chief copy our press presentation, A investor.chegg.com. earnings with our Investor our release, is Relations Investor along at Web site, available of call of be also this Web available A our site. will replay on our site media at site center intend post make to routinely We Web important information Web chegg.com/mediacenter. on and announcements our on these of We encourage make you resources. use to

we of report this as actual to risk filings cause we in the update that events. Chegg’s February the and Exchange we XXXX, release or statements with reasonable on differ consider course to in you earnings Before information our we factors materially to as filed to described included based and those Annual to performance language differ I during refer statements in These Commission forward-looking believe in undertake the as Form actual materially SEC. subject important as from In to We the new make Securities to would future the Company. XX-K XX, a with statements of forward-looking and you other well We future operating including we of forward-looking the statements. these on risks statements today’s on Any cause cautionary obligation from that out point that no be are result factors today results call, regarding assumptions that this date. caution that the uncertainties begin, like to and of events, make the could results particular, material the are will the could future forward-looking those forward-looking financial statements.

GAAP this During we will both and non-GAAP measures. present financial call,

found GAAP on and reconciliations site, slide the and to IR investors results be our our deck can found GAAP press in earnings Web release non-GAAP Our investor.chegg.com.

site. posted is recommend Web our investor datasheet, on review IR the We which you also also

the call turn will I Dan. over Now, to

Dan Rosensweig

we year-over-year Thank start welcome, growth subscribers. XX% XX% Chegg achieved for out Chegg a in In everyone. and by Tracey, is to revenue growth strong driven you, QX, in XXXX. Services,

momentum We performance, gives to the remainder for and our and both EBITDA of year. are us proud the for revenue the guidance our of our which raise confidence financial

remain execution set for As always, we and three XXXX. priorities on focused out

First to meet our Andy walk of guidance. more view results our will and financial improved through goal you and detailed a

prioritize new and as the Second, we space smart expanding TAM new market, formats being see where are investments to content, X to new we services. subjects, a new adding education trillion making we continue our and

the balance to our that Third, itself, presents plan graph, when opportunity we add sheet. and student brand, our our capabilities leverage new reach, our

on couldn't team we Our of more students. huge a millions because are having be motivated, impact

our both user As and more Chegg, depending couldn't with think We our a result, metrics. educational they executing I pleased journey. and financial across Students and on, be during increasingly are engagement results priorities, have our of retention. been our the our quality on growth benefiting from their which which than our Chegg's We our power believe now recognition positively more reflect engagement brand XX% is impacting of reflects services, brand brand, has college and strength rates of the campuses. the

it as become which of will model, even We also scales, more the believe reflects it our profitable. power

a past journey education relevant, eight we been the have years, affordable, and accessible. on For more to more make

feel and student response like getting are positive the of we the size started. Given just the we opportunity,

their and advancements wants, next their in big. and companies the in power relevance companies change a the every and profitable. transitions now, and from not it, efficiently are that key customer changes customer predictable, know on trends and that models the elements customers’ by industry, impacting that drive broad due need. many own evolve create Chegg businesses to focuses to increase ones and themselves few are technology these industry, going other their believe an their want leverage to channels simplifying result, to respond changes value on a their others, they effectively drives other their they experience. what are and that that their distribution they that more customers an allowing are that distinguish leaders disruptor the customers. it's think the the they and and customers they We own and want better watch for that technology are able that Internet. education to how are the except of their and them Right industries, of dependent years. they or overwhelming poised their And to Whether When Across to personalizing we and when in because happens, through industry are the win business content, are platform As user you the able distancing we are are as incumbent their model own sustainable, clear data, platform serve proprietary it the their

to companies value services, we customers, the their a creating their are that for As see grow provide less, faster, shareholders. great personalized result, therefore, acquire more able these customers company, for and

distribute you can relationship of and we our a we reach have it Our basis million many on customers, able visitors scale a and of those do profitably. more the as Chegg them, team XX industry. position XX we put And a as see, all their vast and content, as organically. coming unique create According and understand that our with traffic are at better majority month deeper a in to needs, affordably all has to we do same it in XX% to over within as which content own have annual million efficiently for do relevant an with our things can ComScore, of services

Study, led is You continued the Services served by measure This our user by but also not retention, of which strong engagement Chegg the results, all see financial Chegg million flywheel. and can continues center QX. and in the seen which We has our where growth. by we X.X see success a of of Chegg just in business growth results the record subscribers was Study of to

We to value increasing textbook increase million library XX,XXX Study Chegg We XX expert XX% year. almost catalog and which textbook of have solutions, of continued ISBNs. covers nearly answers now by which in an proprietary a textbook to now our past of the is solutions, add

up content proprietary XXX is Our year-over-year. help Study in which Chegg drive views content million QX, XX%

learn our most. at but million we and in almost students students [job] format subscription AI momentum. great improve machine the they online So lack them citations, believe student are in seen popular meets writing and formats XXX services, increases writing engagement. add competency. having Not created reflects are the meet are this service turning quality structure has to at and us we we time be able like to more. of learning the our they in Writing spelling, value XX% at subjects scale the content where more with newest also having more the Chegg see to their that adding increase We is, QX, creators learning Chegg content tremendous now to Chegg proficiency using believe that their we are in and the quantity create they more valuable which the become. We current can and and Study a a as as more sentence they believe grammar, and only popular the And taught want on-demand needed writing of level our

more students are for to both academically We because professionally writing, improve the effectively. ultimately see a outcomes to them we to write continue able major by teaching opportunity how in and to

of where to our is we students student cost One we the ability can improve reduce the competencies and businesses, to services When solve see quality, acquire network. businesses grow that the problems our and add the but not only we core build it to big grow business, value.

attach we including need of students them. capitalize growth. services. times, over have as to We students Tutors, from serves and have chat better accelerate direct and we in brand, power based students, our and Chegg our leveraged build Chegg to have we That Writing see Chegg there XX% is both the we with experiences product And can Because done to quarter continue which customers with that that our to reach Writing, see this tutoring. both that teach build our a our network demonstrated Tutors on write. a new is trend a our and Tutors, early to other towards In saw Chegg relationship trends real several

right they of and of immediate tutor that, are Chegg importance becomes inside believe because studying, we take to we the human the the health. where into platform best advantage of is in to continue on-demand position our stuck them connect where in more As inter-connected expert have students right got at technology prophetic the education, what to time. in

we huge opportunity our in early growth the see so clearly the in them. investments are will make continue of We product, also But to we current future. for

As we is the the launching be part students’ for one this XX% biggest will prepared of math. students be not a know, We which U.S. are we’ll level as Chegg math Chegg powerful later college pain-point Math, believe of year, Services of offering.

path, from significant Another connect developing the and learning which area in making will is are earning. we student career identifying to investments

they and impact classes they the can are companies or Our including data the the major paths the choices they to different they students the get team a are to skills. leads altered salaries of that will likely take, go including acquiring the earn and the taking with with, be to, graduate identify help those the job by to, different make, school classes they pathway they how likely

we We of the are path employers. a that meaningful students and into insights make in uncovering think will incredible career difference lives

customers their with and of over that, Our succeed, be channel about team evolving. one excited, of And believe to in offering the value as Increasingly, subscriber are subscription-based needs It's great can particularly start Chegg. can been the companies us, the their help to industry own drive that And own data, see distribution, energized customers Andy. it it's customers' the to profitability. a continued a it I like TAM the increase a the is are turn and that Andy? year. or owns the forward service customer, content year expand own not We for a overwhelming position our create all ahead. them to in responsive overall will is with opportunities model and our product best to under front who but looking bundle, your to doing those the which and offering we growth, that

Andy Brown

and Dan been start of has metrics Thanks, XXXX to good our everyone. all key ahead financials expectations. and afternoon, with It a great

a $XXX favorable very of terms, in on In were which leader continued sheet, us The second addition, strong strength for as position in strengthen momentum to QX, raising us achieved our into we for in the QX future growth able increased and guidance million debt a balance via full again confidence the direct-to-student raise our extends offering our and puts market. convertible position results give we quarter, XXXX. year to early in a the

both revenue prior years spring our exceeding the Materials Required for For all and continued total indications subscription million, Materials suggest quarter, we expectations. Chegg we in year-over-year see grew increase was our a share services gain Chegg XX% the during first in growth as Services and XX% to revenue rates semester. with year-over-year $XX.X Required with Services’ line

the As expected, reaching to the a This It on and incremental resulted data than students. solve fixed straight margins reach, XX.X% a for line as because in its gross higher increases continue also revenue Materials, due relatively of brand to from margin we goes much to Chegg pain-point structure. our campus. cost we gross Required we coming our reminder, Services builds provides offer in significant

and the approximately offering. Adjusted increase reach power the margin revenue over above quarter, investments us not $XX.X million, of model early that with the semester and to year. EBITDA we the increasing XX% cash EBITDA adjusted in the on than and and XX% year. the Our the ended $XXX April. along both with and from our expectations from strong the are QX XXXX, generated Based of for gross billion momentum based was quarter goal well subscription our to This, for way capital performance margin our of sheet, remainder business, full puts free of demonstrating cash was of us on QX, on our continued position flow XX% million, We allowing for business. the of putting balance of a closed of grow drove more the in guidance including strong which us our in and the leverage recent raise the $X.X invest with spring in rush into the financial the results

$XX QX million Chegg expect between revenue revenue $XX $XX $XX.X Services’ margin between million be with million. EBITDA and adjusted XX% million, $XX between million and We gross and to XX% $XX total and for million between and

revenue finally, gross existing to new the we and confidence high-end of closing, margin and XX%, that, million increase we strong approximately full services adjusted to increase all range $XXX it's your our being with the $XX growth our $XXX CapEx to engagement which been in for the We XXXX, between and our Chegg million year content will beyond. fill part $XX remain used Math, a $XXX million building Careers With subscription For million and both the between and now like while as $XXX year. turn we And content with million, investments contribute in giving expansion revenue out above million to We continuing and operator new Services the questions. guidance, in for services. expectations, of million. XX% video to call TAM. add modalities on expect between as the expect between our over the such for expect our to to believe total EBITDA our us XX% and delivered million these to I'll services of XXXX $XX invest start and be platform and In expand $XX

Operator

we’ll At Instructions]. question-and-answer be this a time, [Operator session conducting

your Thill first Please Our Brent question. Jeffries. comes from proceed question with with

Brent Thill

forward? taking the a as questions you about great around how products of opportunity maybe through both international of And talk if Can is lot you're job the and Dan, to little or balance walk potential the you lot those move there opportunities move you've a Andy just downstream. bundling. the for a of and bit these U.S., done you balancing could of a in

going steps alluded just that you’ve you to in advanced some sit speed and now? putting us bring you that get to you’re forward. to advanced ready more think do I bundling more there to are place while where on Can right

Dan Rosensweig

expansion that alone. with high XX the we users about we school reach that on side, EasyBib product So remember and own million

will the but selling have monetize our have the yet programmatic the school XX% but students there one we’re another, business, don’t series high next part software set are reach product we services. But neighborhood which we So probably through we we for and Writing sense somewhere very able high do high to increasingly believe into we year, our of yet with couple ad students. launched to over school school, school that of are of of excited in But that about students services make we’re it. is high is them, haven't Math

five keeping expansion, speaking Canada through we’re On and what first. U.S. categories, out UK English It are and major the of based same the And the three largest it's there publishers. the targets our to international And stem Canada turns from pent-up all of content. on probably is in of Australia, publishers the a Chegg. what research we Canada, countries for our the are lot that in said that same demand going is the

see forwards a positive growth starting we straight opportunity in So Canada. very

be We this and year. it to tax. the site about currency it's will building just and take Really Canadian being pay testing Canadian able

they have seasons the reminder, depending we’re of in and those every somewhere where Netflix Spotify middle May school. can we or do And on based all they this so things. of June a semesters, But have unlike we’re about year something, as working on early and so day on

won't we focusing there more believe and starting be of us. then XX% really this great is Those really the countries the in much three for of have on the incremental opportunity But until doing it market. outside reach combined So really XXXX. a at we year U.S. the end of about U.S.

the give substantive the in neighborhood that XX%. our pretty growth that's U.S., so subscriber was I And fact the in of think

that we’re opportunity. So any of without organic seeing growth domestically great

And on it. excited bundle very Andy? we’re questions, So about the

Andy Brown

at breakdown bundle we could -- clearly on simplicity, like. overwhelming to at path have look our existing an with to as some scenes like one And have delivered are we what services which and all-in-one we’re as Study, evolve the type like Writing point looking to there’s becoming we down add that for less to opportunity been of, is the Chegg or realize and what Brent, in time great work Tutors. call believe a we’ve customers is To-date, things start lot that complexity question, Math, a a value, we products subscription. bundle the for looking I will doing of behind that it, and

actually place that something would deliver being year, do it time later some in anticipate certainly we systems some probably We the could roll-out some maybe be that testing. more that for we putting that bundle. with time time around can But through thought this also comprehensively. testing in we We’re would primarily XXXX, the and XXXX,

Operator

from comes question First Corey question. with your proceed Analysis. next Our Please Greendale,

Ken Wang

This Wang on for is Corey. Ken

to on year. congratulations a off, strong start First the

mentioned based you moving So remarks chat that prepared your first in towards off, you’re tutoring.

wondering student bit any specifically little usage growth? implications you a Just more can maybe and for elaborate

Dan Rosensweig

it’s really to Yes, the fascinating watch space.

it So desired we get that from way chat-based we could their business increasingly great seems choose chat-based. learned and coaching or to we’ll the tutors health call if tutoring for the experts. see it is to or What student have is for be human now,

have XX% chat-based, have to So we with it of sense. shifted so all makes that students of the now relationships

rather if of as more students because hungry school at more or hours well. On the working use of latest going audio XX% they’re state And with remember XX% are are time, go to they say not seen country college. time. to the week when XX% while they video work, you you’ve week got students But schools, the this they have of students in during weekends absolutely information, XX and a overwhelmed when full they’re

mobile so tough more its chat-based And are it make to coaching, products every not is do more that through what nature, which that student to say is do are our available, trying issues which having. to we students helping way. want That’s more by would is they

allowing Of tutoring. to expand tutors category when the going always to do that’s chat-based course by windows to appropriate. multiple having our offer we’ll But capabilities able idea audio-based the more to one But to continue all not more within And crisis to more appropriate. today video-based services being It’s it the be dealing, is for counseling, time. work at a person experts from than that actually more makes and with are to able customer to in hotlines, be everybody efficient service, much process.

can You tutor actually pay the more.

You the student low. can the actually keep price to

now tutoring And so right that log the because chat-based. clearly get don’t a is expected they much which growth, to more all our laptop time implication wanted, have and sit the down, they is into way

obviously where lead it’s our of engineering it taking future. business. think So But in about we’re we some assumed work the is it excited in all can to

Ken Wang

thinking on any and it potential And to than update your relates pricing Study increases? as Chegg

Dan Rosensweig

is XX% obviously. were of quarter, which our So you I we are quarters these think which two is biggest see last growth XX%, the rate, Fourth

more in the and for really is looking not so product any we’re it because becomes. in the more we've to the relevant the to the difficult seen, compete, down and we’re that of more And growing it's good already valuable shape mode, gross got product margin, So the asked business. plus XX% anybody form the the the the questions way that growth bigger are shape rate or slow bigger

we know, used years. the for have the for day of do testing five last build last the to able quarter single every software be five A/B testing to years because Now, we Adobe

bundle, really pricing in to But capabilities will shoot gross to we that creating more Andy have we’re willing the right different a we pay. on bullet the power the students, we each profile. a each a which little want answered adding just at pricing price and value in going add, they’re to power that more because margin because more the actually ago be all it So things improve the of not while point. more it more But that's focusing a content we and that will know have now, we year, know to be same

think any way we too right the pull strong. So don’t a now increase see the growth, growth continue trigger, ARPU I that's profits, to reason that to is because not slowing because and while to

Operator

with question next Our Stanly. Essex Morgan Please with from comes Brian question. proceed your

Brian Essex

I wonder you Andy, or if touch Dan could on. Maybe

factors number gross you I seems Chegg bit got Could that in service. number if ARPU? maybe at -- remarks noted we're when from a that you've Tutors at I know we affects subscriber per better a tax disconnected your can if monthly look some think prepared It but and reconcile XX% on you services rates the the tax another you the revenue different comment in things looking help generally play little with just us what it. so margin. of

for So bit a on that. looking I'm of clarity just little

Dan Rosensweig

let it’s try built. will I'll because I and to our is answer once easier numbers do then to Andy, Chegg's Math

So revenue not of there other Chegg revenue, just remember inside are revenue subscription forms Services’ stream. it's

the about generated will if of if looked you the that on just just be revenue that on So the actually more that’s revenue price. result on direct and own. earlier increasing attach talking But a coming service is and at included you single just ARPU staying subscriber out, this raises report things variables more the longer, ARPU. the students and heard And into so these using we one think than of which we and rate of debt longer, is more one subscribers, bundle, a from its actually

see Study incredible And uses and we videos because keep adding publisher so every this more inside an be Chegg day almost is because of able who uses increase, Q&A also because won't videos. everybody we this, this, Q&A. And already that that we to to say the we able expert of know

will use to we is to you. can or value, look format so modality us or what we for provide Netflix it available want So you a of to like when you it of at is whichever use, piece be overwhelming it want that content

more numbers, rate. your a see an attached -- increased services we report now -- We plan to always always use future the our and but without to on of giving specific than one standpoint more than see number But bundle quarter. of rates the that’s of our every both increase the part free students answer question using that it’s we of services. is service, an attach from So paid

is network into it, interconnected actually we’re that the as year, integrating million subscription is because the building Writing actually successful. well business. on product product, doing this more quite So And we’re lot free the Writing things users as of the a XX growth of the

it’s look you number time. right visitors, the the number So a exciting visits, that pretty services XX But overall, month when use over think at million we’re of at now. visitors number clearly, you students look of I if of the

You customers growth already we paying a that rates in our to substantial look year-over-year, that a even can going we’re have are anticipated. take increase higher

so And more service one than are students the using all the time.

Brian Essex

have What just has thoughts lot EasyBib maybe previous market. as happy roadmap are future up commentary I brand? around your are a so and going then around of user, think but to different I down told to But guess or example, from didn’t she unify I idea You so an my And no daughters holder. follow on which up the brands.

your brand of in unifying some are together and at tying thoughts future everything what So point the time?

Dan Rosensweig

or and that house as going one all call the but company time, will are wrestle and that see actually with and product we is fantastic first of not calling brand question a these analysts having brand tell increasingly, house. sure we’re it’s were major children, one-time not which all releases. thinking to scale. a But you’re what their the We But

integration You’re bar. design, tool of going integration the common see to further over a of year of course this

tabs at Chegg no and SEO now, home page don’t has right writing even the So for example, reasons. with the have that reasons, we do to on other

a we product are it’s more will to into and going very more and paid Writing, into We Chegg Service. more be the clear it go -- as that

most far And want is so we is old but the and in working the EasyBib that, and XX years hard we by to. definitive it’s space. asset are on don’t

Whatsapp. losing Facebook also So don’t It’s value not to value is Instagram, you want the the brand. of of like of not they’re the lose and value losing a

have And question so what XX% becoming in now college brand with Services Chegg increasingly students. the on more our case common do even you school every year And we balanced, is measure but Chegg that asked, recognition and high name it’s specific campuses. of that we a is

hurt say we We for not magnificent do All now. name says want EasyBib, which on to Service. see sure can’t such BibMe, but it services apparently the will you which brand, I XX Chegg the it, Chegg BibMe, which is Service, global brand But is it a a don’t including says Chegg like really am a So that, overnight. you BibMe, years. if Service. why, a a people go the

So we that. working design are The on that. is on working

because croppy we patient, on piece We users numbers grow name Chegg the use. the year, those a every new have users of always are more a lot that be which they of seeing get to great work going on. every learned But clearly what croppy is and software we’ve

Operator

proceed comes from Aaron next question question. Please Our with James. Kessler, Raymond your

Aaron Kessler

for just partnership $XXX talk Study I partnerships Obviously, was as maybe million of can or First, thinking and if about said, Mae raise. consumer Study recent for can the Chegg the you well? unlike M&A how also you other daily that the potentially us Sallie give longer don’t need that Should an potential partnerships about potential with roughly update Thanks. term on you’re as Chegg you longer term? And your think we about you cash, think uses operation.

Andy Brown

our that and of with a who today is talk reach. And able the accelerate acquisition recent look of to potential fairly we When opportunistic. raise capital result you that in acquisitions. at its brand potential really Chegg make few acquisitions, core to the leverage is hasn’t growth about early It it's as our changed was So when got and the quarter view we how to be we needs that. any

goals. So nothing couple we're acquisitions. over our the of next either, changed how we've acquisitions to we view we financial years, that, make As got at has right? assets Having look the to said not anxious meet

certainly And best at is so I way a we're to it. guess the look patient acquirer,

So We those have rocket changed if with yes just things really so at look criteria. nothing it acquisitions. we work, in view meet as to so how -- the happen mode has more

Dan Rosensweig

Sallie year And a give Mae, what which school. and [SoFi] great incentive in-school the the loans know Mae base, and But Chegg a up On I provider students preferred of theirs. weeks. And relationship who Sallie is that the and think really Study more gone expectations has I of in to side not you I a they with out the think think biggest, as well our say question, it the say do so competitor in research little we’ll turned for their actually from it's one neighbors if is, thousand but of anything. loan we're partnership, Mae asset. folks, coming what premature it's Sallie that don’t And And hundred signing their would student our Sallie deciding several better been other I an well provider, has than I think been could those loan in-school on to But like expectations. announce on because side not the is the biggest, was they it the that have for sales great. refinancers

out the Mae students that months the a But a the Chegg brand worked we to don’t partnership. And Study. it. the we’re of even through first we of Sallie very free Chegg with to And so want of partnership learn, we value four ourselves take majority students gives students or year that associate until comfortable one cycled haven't Study to requested tutoring, year because

the the about Study rates So great. Sallie but is customers similar, standard learn usage Chegg and is versus which when Mae customers the activity reasonably of you renewals

So want really their they of exciting. by real offering something Chegg for Sallie so benefit the Sallie that the Mae benefit students helping gets a Mae and really acquire it's is us customers future,

Operator

question Northland Capital next Our proceed from with Please comes Grondahl, Mike question. your Markets.

Mike Grondahl

how update about remains to subscription Any thinking the XX% sure be and that roll-out? was Study to nice Chegg on the Writing see. sub-group Chegg you’re the timing

Dan Rosensweig

were that from remind what exactly students folks everything said what our on we or is it said. We better And it of has everybody get engagement was. current similar better to it works new of our the looking the initial update we This which we second call the the products. it on be driven to Math, what with folks are AI rolling very is half out to the last to remains Well, of learning only machine But paid plan in going conversion, be, of sites we the really we've just the this to we’d we want told middle to sites. time sites. the really right. be take the We to scale. sure all it to out messaging the make to have you, which honest want And year at sure we’re can We make been want to two this the what We've and make has than the version for. We be sure beginning and feedback going is can build it. it is rolling smaller our for. that biggest their larger service, with We positive, bigger gets. smaller that year

Writing scale, structure how then are, correct with them So issues help should mistake, cited, people what would they have, to help want set version them and issues but that’s like they are, just teach understand help them grammar be it, look show why we’re many the are, right if do. show able them them what to their not really and tell what at their have citations spelling and they issues what going to bibliographies,

the November. bullish And assumed out. will whatever large. audience for in timing think this It it all we’re be I rolled fully the in have free later has because But on of is out we product, changed. put year. XXXX We’ll So on so future not really the that

Mike Grondahl

And then you what Dan are on one for or items two focused ’XX? rest of the really

Dan Rosensweig

sure they’re we on what Well, second company if two. is ways which if execute continue of that. And nice performance this the will, I is it is three say. TAM. straight have, put expand one of do our And we the Xth feed being make be then to to think the honestly, financial the find able which you we to -- to quarter beast, is the we But in that remarks the to prepared would or really priorities

us investing, but a is in So are everything terms in it’s which others our has that immediate fantastic growth. and this evergreen, we’re difference between that content ours it all like investing of terms CapEx, and in is doing is of machine, is generate The proprietary content. long helps also

grow So continue us we’ve the and help continue earlier, all sub-categories to the countries, that rate to other will more categories, that asked growing. things we been can as invest in verticals, the somebody at number these then of

we don’t the making set ourselves, the priorities we So is finance around focus we don’t correctly, primary them really the for we that that’s that organize we that ourselves year discipline. that lose key sure overextend

to because now compete us education make it difficult we cash, our point available but right this it’s anybody isn’t for have Andy expect balance away, $X.X As presented it opportunity use itself said, and we at in the sheet to because the space. billion strengthen to all for with very that

we’re the to what been which years, for focused TAM, last and when students values the think rolling the then is more expanding going on execution, it’s I for out. bundle So few continue we’ve creating the focus execution, on appropriate, to execution,

Operator

comes question question. Please your proceed Eric Lake with next Martinuzzi, from Markets. Capital Street Our

Eric Martinuzzi

investments. content to on focus wanted I the

pretty talked about $XX reiterating You the the $XX licensed the course the What million. mix over original investment? basically that here the -- of a and investment is year, between million substantial content percentage-wise

Andy Brown

component million related. that actually gave, guidance generate content when facility what call look is publishers. purchase actually $XX we A of right. at say of content, what contractors content XX,XXX actually questions, is purchase to XX% I at that is million, that the we purchased, that content I’ll are India we of that Most right small XX% So our the our And from $XX about that you the with when we ourselves do.

the SEO the that’s will that -- allows index content us overall smaller of licensing get in we’re part that budget. the and So to search and the But choose. the questions the them from engine publishers

Dan Rosensweig

publisher at you look three that, had now of if ago and asked questions realize quarters actually from almost are And being amount three new we if that you the publishers, being and own. gone you questions years quarters three being from The by to on a almost than portion it’s third, -- amount way has even asked being the their that. are on were students a look all than questions less dollar the primary it, the at asking less

deals pay in we of the because to spread with our these out this it because year few half to have so, we the do best most years at was the interest just have that ago and a didn’t we time. signed payments So do build

Eric Martinuzzi

the CapEx year sign the decline what for to the the that. explains CapEx anomaly million And looking the $X.X talked at you of level? CapEx compared what million in QX investment growing in this But -- quarter, about ago $X.X

Andy Brown

So when in quarter it’s this expected. look pretty we at you with much CapEx line what

between the still expected. the Although, it know, But some I million we full QX don’t and saw that CapEx. the you payments CapEx what $XX guide, publisher as believe what will somewhere there for budget We in last year, And we $XX have be at we on we overall look year. as we quarterly the did year. said million like for was

Operator

Paris, with Alex Please comes proceed question question. Our from your research. Barrington next

Alex Paris

and regards on In first question, a one. the had question received downstream you up just the I very another then following opportunities.

As in are middle all see pull progress In able from the way seeing the to college, or the far other school students as words, funnel being to school education. move up Chegg you What high Services? you rates? along their to as these retention students

Dan Rosensweig

It's we've goal. a because for EasyBib, than real two years. the foray you obviously which that answer us give less little was our difficult into to for now, high owned That’s now school

have And those so to students. we track

using we us register have free, the that now students the realize just to go once have email site. at increasingly You register, time all other historically see students also to you why so for and we’re may or high to communicate. the time for heard it nearly back We're ability But with the customers is they them did didn’t on registered incentives and the paying through may was creating register ways, for not and as increased those on based measure. And impossible them into that they’re they which come question then we ask earlier, site. to we they communicate what text EasyBib, not

before and when you get see Chegg textbooks, go so because they continued And share and materials to first the it Study. market thing that's believe they or they do our of required up the the business, pick college not, it success can is get they so

But first later share the to difficult see Chegg you up in on that we’re picked it's textbooks, So know in better with freshmen. so incoming in with that lot do quarter to doing or quarter the at the a either and earliest. fact second can the and Study, we has

you we is is so know, there believe which career. is the connection way And our But significant, going other as a in that. which really we’re to to as us well investment

and right the the of their that So first then path building pick and if my outcome, you let me gotten we fixed this right I help at this go them only take is able pathway I if want be classes end major, our to I you the but is not school school, to decide take I getting to much in up potential skills pathways class this one pick to and paying I've the or these likely my future or money these this companies, job. change

for we’re with So of in going we directions both actually terms in amount extending spend time that us, the can of them.

Alex Paris

beyond one have mentioned, been recognition. incredible brand Can I build then the And mode XX% the to been It’s you strengthening sheet, economic even on able measure on how XX%? how need the some moving and you to get question. brand stronger balance focused be the color last would business, you’ve perhaps of as forward? What provide it and get recognition, additional areas -- how you

Dan Rosensweig

just obviously our own we we list. So use survey because can’t independent research, obviously, customer

available doing that that, as we’re using we constantly internal that And to well research So are there is forms as surveys. and help understand that. third-party multiple of use us our

textbooks go need our base, we If is. base. to The from that about external majority The customer XX,XXX with Heads call you are and them customers this to somebody as we one in mostly point, our we that that have our organic, the things for recall, get, we incoming the fact XX% textbooks measure customer still the we’re from a bigger to is other, students and come at more Chegg that recognition time or existing first overwhelming XX% the so of that as regularly of as well communicate overtime recommendation XXX% else. students way able in the that freshmen with the brand go

money So do just evolution we like spend a that’s more we that. to feel have to that don’t natural

Operator

question. next Craig-Hallum. Our question Fuhrman, comes Please your from with Alex proceed

Alex Fuhrman

And or I as was actual share with a tutors. and the the looks access like there’s months being that few you made done forward that then given the is, to One tutors tutors a of at view you the of as business, couple the and giving plan vision. share that changes, of if a lot smaller top I something of you I part a ask. Do the consequences last some better am been tutoring amongst the the look themselves. a over wanted churn by Tutors the written to concern these of lessons things were had as And sessions you plan? greater curious changes make those do going so natural with that envision you of that’s

forward? going wondering Just network that think how about we should

Dan Rosensweig

descent is say can would give many the on depending tutor I second students me they one going how The even too subject early handle on answer. time be a for to one to that the do. you is a trend at depending

on So slip something tell and for that you the information The all not that’s is common us, now. we could side terms yes.

like of felt a which going were to it. the lessons, said was undergoing too we written in were charging summer much were almost we students number that we big we because tutoring for reduce the think business, last tutors I our change very

to we up the puts that site want revenues So first. student we actually gave first some the that, for be because temporary

very can be of XX,XXX to know network. was that, never the And started didn’t the we as it be. an always of mean as up we we have it many as wanted so us. But really result that business was demand And big issue. tutoring important the to reached a But tutors going that that business, part I building believe not, at be when would to how one or point, knew

we most. and students out, think of on said previous we us from calls, decided what it that quality focused them -- We was most this and times of some believe available a many to I So ratings decided getting we subjects are to on that the cut from we were the only the were A the being ones who the tutors and in responsive needed at issue.

cut that And dramatically. pretty down we so

didn’t how claim that themselves do can information. them presenting needs hear to it you on the so tested to see what tutor that now also having each -- be we're once subject a in more fact video the So be then terms actually about is of again And good we an in, whatever they they thing. expert and

video. a lot in be and can have communicate Valley. that a it You Silicon on We a of genius ability to see not any

And so direct as opposed video-based. would just those, those on chat-based to we to

you a that. to is doing improve there to why continue whole lot all at be saw of constantly the we of that's quality, but services that So our work will

and And good so that's all planned.

Alex Fuhrman

a matter. just then And housekeeping

that don’t I about ago, free the you’re the the three cash report think months recall next your I flow in fourth that years? conversion of this rate remarks guided Is XX% quarter thinking had over your two couple of still you flow time. to as over in guidance, XX% EBITDA free how the or next prepared part years. cash hearing range

Andy Brown

exactly. Yes,

it's XXX% not has to on that the changed. So XX% and phone, for everybody

Operator

Our J.P. with Anmuth, Doug question. Morgan. comes proceed question Please your from next

Unidentified Analyst

of particularly could of in you you the comment for new just is clarification. of really subscribers, half about plan quick impact if launch my on XXX this Writing change seasonality on Math as behalf in of on second revenue? wondering about And services rest Doug. then Could accounting year? on and like is Materials on One quantify the thinking the This -- year this Ashwin question Required you quarter the -- services your

Dan Rosensweig

couple on first thing first a Yes, so of things -- one, XXX. the just

because specifically was streams. impacted Required also We the it it Chegg it Materials, it's obtained do year. With dramatically our But a to earnings it de on you on to impact And actually retained not than fairly to even impact, small didn’t and on the revenues across minor. our of one-time at our really businesses be respect say earnings haven't impacts last very take very, different -- impact XXX, can look needless articulated impact to it was just on have if Services, seasonality going you other minimis.

our not said I likely be bundle sometime be year. of really probably new as example, when any subscription, going going half you in of fact, changes significant be a tool think even -- result those think going about introduced until we Math anticipating this Math is to in and for Writing is and either material, part It's to not or most of sub, XXXX or anticipate the the to revenue in the second XXXX. we're year.

about look like with XX you when what is. So think over respect year it last that seasonality at seasonality, looks or the last months to

Andy Brown

starts But third to way school for about think the June, somewhere of the goes June week maybe around of is everything August and year a longest the length. through great middle we do

the through on summer it relates our so So education our to QX to August to be going school. now. months really summer there’s connect because those, except in quarters smallest, going big as is nothing

size. normal but their So we continue to near do nowhere well,

year, up first the the achieve really the feel our raise which we was opportunities So what because we only best about have why quarter. quarter comfortable we quarters coming is plus guidance in in raising for did these second in this very

has final both a mid-term So seasonality a doesn’t QX and a for and us have is mid-term, but QX a has final.

about So way year. think we that’s the the

Operator

Brent comes Please Jefferies. from with your Our next question. Thill, question proceed

Brent Thill

unfortunately Just and grade shutdown and XXXX. cancel just week, a were were their quick they’re curious middle that the and was going on your of they thoughts of follow out am service are the kids getting school I observations service in business? TenMarks Amazon last My Amazon in up. -- to what

Dan Rosensweig

Yes, we saw that too.

And through others themselves. the best And the try that sell I others same SaaS economics, is most tried you’re have if successful what models and institution at do about you what lower and most can carrier. districts. we requires early have does those to to to way college their our in go force, themselves. sales the schools students think work soon do not of think the versus high to school, sell to directly either school grades, and entire or We be

different pieces So able it it’s they’re to FOX growing that directly and sell invented of their difficult rate And not you’re were they And And raise very assets, going annual the we selling institutions out model. the whether understand that’s much publishers, that gross a found the government, current all we’re publishers we their then on businesses us, can’t. of have basis. positive Chegg very, capable to management are were protected. very, margins been the business is those to in, the better But pain-points, of the we’re at very with grow things. all to think have, their which just prices and or student what the getting why was solving that rental seeing, students they have we consignments fortunately, great protected its the work learning now partners, more off that we’ve They’ve in an always material to the model. is by and that to that because effect those want and more biggest

becoming of whether you a shutdown, lot are we of kick and debt just Edmodo they transactions That’s being flow. assets seen trading where was you’ve things cash not they these with of a you’ve seen things number up see where are. these So out and bought, levered

high directly company the We’re go growth, margin going be to and students. high to

the people everything out that except is why get reasons does, really doesn’t They out way, acquiring them. it? it. does really acquire get which said I of and it and out why school is got it everything Amazon well, to plus the a Amazon want Now they of do designed do customer they of clearly for help almost customers Really

would What’s been opportunity our the surprise. no partnering and in and people either have fascinating Chegg and me abandoned all players it is really education us it’s So very that are shareholders. our for a be great students assume with big to it’s

Operator

have I Ladies the end would And like back call for turn gentlemen, to to of Rosensweig the we reached and question-and-answer session. closing Dan the remarks.

Dan Rosensweig

congratulate to call is first I Monday. why instead the son So that we which want a getting a his married things, is couple of a to tomorrow, Thursday Andy moved of

in to who serve We’ve you grow at you Amazon worked very great those we Starbucks but profitably, we’re joined the millions hard be apologize, ourselves eight the scale students do Look, put So on really decrease of very to as position wanted We're excited. we’re that years and a matters. call our mission for to invest for and believe call, business company. turnover in of that here it. really our We seeing us.

space smart competitor proprietary other which and own student own of we’re it, are benefit enthusiasm make and feedback brand experience; content immediately companies their the which that all the we to and do own our at customer; all distribution, from both their Internet think we believe do, we mode data we the we student; fundamentally on a own can investments. has low, that ones I which no or software, been to or phenomenal; and we have; distancing that; and that do; expect continue themselves been high; channel have and has to built we content an we with own the and giant and the time depend can change use the time are

balance Our it's strong been. ever as as sheet is

this to excited And so We we perform next journey time. talk who we’ll on about forward been for Thank in well. look the you And quarter. you. And has we’re the to year. everybody with to us long continuing thank a really

Operator

This concludes conference. today's

you your Thank disconnect You participation. lines this at for time. may your

Chegg (CHGG) 26 Apr 182018 Q1 Earnings call transcript