CHGG - Earnings call transcript Q3 2018

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Operator

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

As a reminder, this conference is being recorded. pleasure your my Tracey now is to host, introduce Ford. It you. Thank may Tracey, you begin.

Tracey Ford

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

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Dan Rosensweig

Thank you, welcome and Tracey, everyone.

we close As business. back-to-school our are continued of we out another about excited season, growth the

team to goals to on lower learning cost Our accelerate remains our education the path of the and from focused earning.

as As growth will is XX% Andy revenue brands XX% Chegg a students. of over financial great XX% This on brand amongst recognition QX our as grew ever in powerful services through shortly. which result, led The results with strength subscriber year-over-year. you to has walk college

more will their education of of before are on to over important and in of than debt market while pursue giant are demanding we showing X% take pushing asked over U.S. they their the working and are XX. students in more that As are the a the believe on to students the today’s are and through given also that school participates even parents an busy behind the representing generation XX% its They college invest over the GDP. demand on-demand, a we about That seeing are without XX% not clear four student over need. human on offer market lead is age address are education to any forces is and of opportunity change that are as and surprising of is industry students the be offer which our the services XX% we we change we themselves approach we more we is Modern excited XXXX, for why and with and products first adaptive, and basis, them; college driving annual will that clear the the U.S. the which way that remain of ROI us students Chegg. for a putting backed path trillion out the the help. them to we of focused of is they $X are of realign lives. pain being going seek biggest so industry This affordable, population is by points, needs strong It we future. investment the services yield dramatic and they that we student. The personalized content students larger in doing most online, one constituent, Three

recent We breadth this and expands depth, model. is engagement the believe student the our that and the the continue on improve We this of in initiatives. of center remains quality through Study all you walk well seen highlights positively the expand some to flywheel. increases of results want business to and This we thus most the the updates outcome. far impacts have Chegg year, number our services TAM, evident I of the as our to offerings, as

in result, QX expert and over solutions. content year-over-year. in and This ISBNs almost XX,XXX our modalities views now XX% and, XXX to XX million up we XX% growth, drove year-over-year, over answers invest in and propriety archived. content catalog students continue represents answered million have We expanding to That questions serve the alone, of as and a

lower continue have subscribers margins. will which has in Study increased increased higher when retention, higher because, yielded seen we do, invest and to customer We engagement, acquisition, Chegg we

we investing are in also future. our we While in are investing core, our

English, points version subjects where college Writing. Math requiring and these We are enhanced remediation quarter, XX% learning provide in addresses writing of students broader structure, in they support for key are Writing sentence writing, our where, starting acquisition including access product to more pain subject A.I. of we or on launched are and now our offer, of expanding mobile initial and greater provide our the to grammar, we our help plagiarism, support expand more. With WriteLab, machine want are types when, it. the a recent increased we to to Chegg and we seeing product demand of students continue to around services, range offerings now bibliography Last XX Math, they QX both, leverage more million strong our over citations rely Chegg over this and citation quarter and of With over uploaded students and students. services, new to adaptive creating papers a subscription in on X and million way. new to of Chegg writing an math our In service alone. personalized

help. as for our over A.I. it from made Tutor have they XX% is us and to and many allows clear technology That improve evident students, of learning they the customers from increasingly also benefit and to experience best chat and Chegg human turning the the other While accelerate services other come across platform. format, solutions help are at text-based get that works for the in demanding time, their that schedules. They to

for introduce on the platform, in students second chat-based new XXXX. expect tutors, We capabilities the to of both half and

overwhelming the classes. to began for why and As their we opportunities Chegg Math all offers includes look remains value their the help recently and Study, is bundle to save to can business, new master that the the students, them money, Writing, one we products same; time, more This skills affordable more content, mission Study students offer and Chegg testing our price. Chegg get learn them future save Pack, services and our the students smarter. increase a and we Chegg of to we We believe

In addition job. shows say XX% students are saving to and get that their better money research in to improving of grades, college they a

QX, future. campus of will that So, University Central an CareerMatch Chegg launch delighted their feedback with the our as events on-campus first of our part on CareerMatch hosted interacted be by were we in at We Florida. Chegg we important students and received. We team of excited about feel were thousands the of

hard are Chegg our experience is team work abilities Our the CareerMatch can we to student’s incorporating on impact gathered to insights earning. enthusiastic go have learning we about at and from product into the

that proud are couldn’t team gotten think XXX We Top in work were Best our first. to have and to dedication increasing doing benefit to point first amazing industry putting improving Andy? to a take their commitment we ambitious, I very why a to top our students. Sized will of want influenced that, We We thrilled list mission-driven in the XX to by a distinction. education to direction creative in Fortune’s is with and the Places moment lowering this And Medium and Andy. by we the an will year employees cost, believe moving we grateful this turn being and over the outcome, student built have team, work it is applying the access which thank we always is for to of the without for deeply and company and our increasingly is that we place are

Andy Brown

had expectations. These metrics a our confidence good our great Chegg for quarter strong give again us guidance and and Dan, the raise Thanks, our results XXXX. with third afternoon, of financials to everyone. ahead business

providing also our growth for the which represents XXXX, leverage initial outlook model. and are continued in We

of educational relying of their has the connected integrated team students extremely outcomes. what proud on Chegg Chegg’s as We are increasingly accomplished, are improve services platform to

semester Services XXXX of million, balance of For great XXX adjusted more over Materials model, EBITDA above and XX.X% margins late Required well and and rush, cash, responding balance after QX double our to model. XXXX, approximately associated the achieved is drove line top demonstrating are with results increase quarter generates on the strongest with leverage in in costs announced our million, of that was incorporating the resulted expectations. sheet. achieved our This revenue in both XX.X%, quarter, what of Based we the the in of of for our XXXX. strength to revenues the the QX the performance total the of strong industry. even believe ended we a We Chegg anticipated cash of our the guidance This our the one we data significant investments and XX.X in fall third XX.X education incident which gross with increasing the September. exceeding we We expectations, on million of than operating sheet

XX% XX% For between million, XX XX between expect now million Services XX.X XX% and between approximately revenue Chegg EBITDA and XX and we million million million XX revenue adjusted and represents and million, total year-over-year. margin growth QX which XX.X between gross with

full investments and guidance. revenue total between year increasing EBITDA margin are these million, content XX% XXX of for and million we expansion engagement to XXX year-over-year. with million add our and XXXX XX% margin, result, expect be our and with subscription XX.X and between XX% fuel our modalities XX.X XXX services. more We million, We approximately a or between XXX our Services we between XX% believe as TAM revenue value expect now million XX% and approximately XX XX create Chegg more to million, CapEx new And for increase EBITDA video and than between now growing being used and gross million such on adjusted expand As million platform, finally, students.

to Turning XXXX.

Our growing initial to million total XXX with for revenue is approximately approximately XXX Chegg XX% Services revenue million. expectation

be growth aligned revenue as revenue subscriber of We the larger Services and a rates expect XXXX, Chegg portion to contributor. subscription more our closely becomes in

be XX% margin gross to XXX points X to expect We expand XX%, adjusted and million. to approximately or EBITDA margin

those quarter, Required Chegg XXXX XXXX. be we and For you to of revenue to modeling Materials by seasonally Services similar expect

IR turn investor shift adjusted been the over provide in the another giving high QX. with StudyBlue. which provided invest of However, and of while out delivered site. guidance to deck improve Details earnings on the our above full due We end have slightly strong outcomes. associated for that in to operator in and we building acquisitions will services cadence the us to increase new all existing student expenses call continuing the both and that, a of quarter strong our release outlook year I’ll With the In quarterly powers expectations, closing, XXXX, WriteLab our services had EBITDA and to questions. Web for the our press your initial content confidence to the

Operator

you. Thank

now session. Instructions]. will question-and-answer be conducting We a [Operator

Markets. Capital Please comes first ahead. Silber from question go Jeff BMO Our with

Jeff Silber

hate guys plan a Thanks. quarter, this the so had to bring little a beginning right bit so you can your happened you what color sure but with make to the us breach, more and since again? security Thanks what found this on I far is doesn’t happen much. at up you good what give

Dan Rosensweig

our quickly okay. they It’s wish you it in guidance, one to our of don’t it other in of that happened. as really add I our Hi. that see in we can guidance, that to think filed. That’s how which team to hadn’t or significant But are any and the what grateful we’re relates wasn’t We anything question Yes. our happened. means to much the reflected on forward-looking It X-K We rallied. business. really results all the way have there

have the on that really with possible. as out list Internet. and in a everybody as we students world the Once to quickly. made sure acted legally add situation used But So there’s quickly notified the of or live we could, courtesy just what lot our a reacted not we this. found on out quickly incredibly in we we was, a as that communicated We We whether we were don’t much exception aggressively as of very going they well. was very customers to quickly. shame it’s responded and current are a we incredibly And where they our this

all what we proud of filed team can the reasons been responded great you that our results you the and results. in for can way have are we imagine, which than are X-K so already And much the but other add they I’m what the have to see don’t really

Jeff Silber

And on subscriber since you think impact any don’t then? growth had it’s

Dan Rosensweig

To our seen with anything got in I stuff. when finished other. credit look what because I access that didn’t at what one particular way that expect they Again, not case and at look would this be that information, no guidance meaningful where suggest cards, or none case honest would financial was I we’ve is, we of you when no the to we the that be

do to security their change reasons. having in behavior of credit changing to of needed with change their So their that There we card. no something is was change anybody regularly they any no the anyway in and do was password exception that for there that

given course So We we spectrum been But things happen. over now the comfortable things. On between were different usual overall, that days, are those we to of business of mailed time. guidance. as with our there over the the of and got period responses, had then, very kinds out, it’s

Jeff Silber

bit Can enough. found fair Can the about with what Okay, you we Study back business? far? so little a Pack the to shift you terms of talk pilots in

Dan Rosensweig

Yes. early. Very, very very,

that. process it, sure we. was the Math. actually everybody Step and Writing could I we in make the two are excited we Math know was me because first Let walk prepared on make the desktop the acquired sure overall on necessary mentioned it and for through and we it bundles. we that part everybody’s as one acquired do was to Step get that we’re about in launched our when be and assets United NetSuite excited I’m steps mobile things were States product the we the us to remarks to that now of about working. to it that and like that allowed was place way because along able satisfied of get in but the NetSuite super Part company, the was to

where to are anything anticipate messaging we So that our the 'XX, of process. we just I is and in have works want other And thought place remind testing semesters. businesses and remember don’t really in everybody the been to we’ve that we any business we in be impact versus and the people’s pricing course is even way because we’d

business summer. very to our is building we the periods. mid-June. have in So a period lot work hard mid-August We Then of basically

of add anything, anything, develop to features, their bugs up teams get clean off Our things. work new all the butt out the

after and we happen before able August. changes June So on any won’t now where have going to certain we’re make we test that want and to semesters right then significant things until

any deliberately we won’t we said you have So this, our impact on doing numbers. deliberately said see we’re that

for don’t year reflect these. our So next numbers

news. good all So that’s

Jeff Silber

back queue. jump Okay, the Thanks much. I’ll so great. in

Dan Rosensweig

Thank you.

Operator

comes ahead. JPMorgan. next Anmuth from Doug question Our Please go with

Doug Anmuth

Thanks the for questions. taking

year could little just XX% First, gross for you’re this XX% and to a you talk about I looking I know think in bit margins? 'XX. XX%

can then point product then Thanks. know that to I year. if should you those for is we trying of the $XX a $XX And how higher? there gross I next Pack, to how did tied can in rolling you the the that the about understand leverage way I’m think And bundle So to I XXX million. Study year? guess basis there’s EBITDA, be that the next points Materials guess of a I bit just decline pointed later know million forward? we the going about talk out terms that little secondly, and you Required out to saw margins

Andy Brown

Yes.

expanded contemplated model you more which is more as continued you’re as of we’ve when our Doug, So, see highly in they the to have that’s gross XXXX. at our subscription margins, going to our of business leveraged. and business, And look the go side into aware

XXXX. as goes, the start of as in earlier, next is mentioned had to Dan it contemplated be for Pack will exactly of $XX far is really would year, rollout $XX what would period it isn’t as right? to Dan XXXX. but is As Materials Study we mentioned, by time Required million we’re earliest said it Study a semesters. range. in doing the XXXX do, that a of Materials, more Pack than We’ve respect event late Required thought kind believe, With The We to million it’s that a it

mentioned in We’re past than see that fall and we of do clearly that prepared it slightly continue semester. in the business that think time to for is at point part that I we’d exceeding remarks this anticipated. better this I’d

unusual Required So in business. there’s Materials particularly nothing the

Dan Rosensweig

seeing expect part a going growth. down like business market I’m on is business the that what little and see and up share by over whole But picking has mean growth. the didn’t performing. we’re to of lost which Yes, we’re you been We

have, do space. most recognition of people benefits to just execution, has that other the we that in the the we I and think failing our a with lot the offer of brand

Materials and of Required satisfied actually that of to the So in And execution team. consignment continued with getting for eTextbooks. stronger very the gradual we’re because shift us business even our is increase actually

advantage Chegg those the shareholders. and things to our our All of are of students and

So actually been better that anticipated. for has us business we than

Doug Anmuth

Thank Okay. you.

Dan Rosensweig

you. Thank

Operator

question Please Thill go next Brent Jefferies. with comes ahead. Our from

Brent Thill

afternoon. Good

I as there? a next year, Just and into could initiatives guidance just to baking you’re it was any that guidance what if role relates for new playing the curious through you walk

Andy Brown

can Yes, initial for the so early. you and guidance well, as the guidance year next tell it’s fairly –

and our now. subscription believe important we once We Pack in reiterate. introduce only strength particularly as period in look Writing so emergence the for new. include we October biggest products, It doesn’t and Study, core just core doesn’t include again for is are the year, and Chegg So into anticipate the It Study products then right Math in We’re more Pack. Chegg this fall. right to during But we the 'XX. when to I’d of this forth. at services, which is and right? as continued of instance, time anything doesn’t anticipate the is XXXX But we It’s Study at pricing the us it distributor that – in test get things next messaging continue

anticipate example, from for We event. going is to of 'XX doesn’t that think anything a CareerMatch. it So, XXXX, more be

So it’s is said, which, I like of and Writing Math. business our the core Study,

Dan Rosensweig

the things. But investing cost side the of in it those does include

Andy Brown

point, Good Dan. you. Thank

Dan Rosensweig

we our don’t revenue not we’re guidance. expecting – put So in risky

channel done investments incredibly they things very careful we’re which need up to future, be can. and create making excited we is we’d a you’re to data, the great understand work to we’re what the owning to so the than And at else lot value should our of content that we’re owning a able students of seeing and which benefits not for way making the show overwhelming is what owning we’re want. the articulating are These by now about And think the model. that and in can And lower about. I and one cost anybody we’ve owning proprietary students investments the customer, guessing be

business that EBITDA I think the those all has become. of increase and margins, future you by the just basis XXX So in points the our core do how can really our fact gross things increase investing while shows we strong

Brent Thill

the in And growth and defensive like to as market’s become just it about but rollover deals Dan, a little you with your being bit, be XXX real move just cash, And through a business? And larger more as up. downdraft quicker than on you to continue? sensitivity just to a some you’re just can a you offense that. little would the more quick, Obviously insulated feels little potentially blessed follow talk willing most, on we going saw through starts also talk more this with million

Dan Rosensweig

Interesting question. in. terrific times Yes, we live

currency tariffs, our of the news those tax things. – exchanges So cuts, straightforward. who for any We team we things, and in tax important who very businesses. are very think in model those to election, the done business, the of much the to have people win business and They is has that our Chegg very don’t or the opportunity. are run, And the Andy variables all cuts, election, Brexit, are none very not work good doesn’t thanks wins variables clean, It’s lots business. business a those of huge upside have more simple

from they fortunate our we negatively. a we affect even – breach, are things lot those we for market years business for don’t our had that a these of very turmoil, working all that have we’re standpoint So

days you So the been deliberately the that’s alive do has us things come. question enough, I’m that faster. rainy knows anybody raised who this news. because was which We XX, asked to long the time The good second has capital very encouraged and

done had come, and the rate. armed cost at they’re our want go is when can and interest at that what’s capital Andy almost know lowest them, much with you work extraordinarily and don’t Tracey zero that capital know the cost it don’t You as to raise thanks low of they cause to be as going capital going but to you to to you

do So have we capital. that

at our so don’t necessary know believe have could very our have looking able that the business be going ROI grow for but cost benefit U.S. we us the a faster all to have always different expensive reach, result our for we’ll lower I do buy places things students to a our only are of for or to move data don’t solve assets for create would from they assets to be and and in that leverage spaces. to world. that not value we brand, value have We over students, eventually over time big still model in leverage large pain time we more what that be create I know faster They have, we’ll we students and that to points to can to to it. this. and accretive we more what what that very have as add They’re the want that have, them

And happening that balance either than to up tumultuous they their they are what do or amount marketplace. this like companies runway available they is we terms sheet your point looking of might. become at weaker have, that times otherwise ends the so in But in of constantly earlier

same to have the are they’re us going And But through us do those go if Study Chegg things got that we’ve to situations Chegg through like things Writing got we arise. so Math. and criteria which like and prepared gone

it’s and in about balance at a clear direct student this kicks can industry flow sheet having and enthusiastic business and So space. strong we’re very the in that that rate, that the free off is work leader a growing we’re that to the cash having great model to because

Brent Thill

you. Thank

Dan Rosensweig

Thank you.

Operator

question Corey Please from comes ahead. next First Greendale Our with Analysis. go

Ken Wang

for on Wang Corey. This is Thanks. Ken Hi.

strong on congratulations very another off, quarter. First

Dan Rosensweig

Ken. you, Thank

Andy Brown

Thanks, Ken.

Ken Wang

I anymore qualitatively that on improvement, anything add retention? you wondering, can maybe offer speak and you’ve seen detail but any more to on you that? mentioned just So think can that you just

Dan Rosensweig

retention and so allow the people continue of should. premise most executing of great have content within they horizontally to is does it that more we Yes, isn’t people learn our who and of as it’s funnel the content, into they’re thinking for but funnel support expands TAM have the goes believed on deeper deeper And the things All not positively that or the of we us adding and obviously retention. only videos way. affect also top that the they have those the that content subscription different when content three think in this to increase meaning but growth about funnel, services we’re the

to we longer. what and on can so continue And are starting students staying is see earlier that

test time We prices, our XXXX you found you Study five through testing and some in the for over point last comps know Chegg one pricing years. of sales. from time price We test to yourself see also of our a might because of

know have that us prices when we that to And strength at pricing we have to is been ago, also gets closer. strength. We four three has pricing ago students raised for what example, this because ago, is we ability years about overwhelming year, our notable most two years content. continue and that gap the years much seeing value the And because add are look to

It’s a interesting just value we’re creating the you them. how very of just If that suggest thing. focus on growth of utilization for the the services, think I much

the effectively when more that own in have in Spotify, you the and to you to day if own and fact go world we’re channel platform use. a products basis the just consumer should and any the companies build do the own you a than that the efficiently modern But Again, extraordinary you month-to-month be the reasons customer, We’re content, data, you us giant more which they things you more kind other that the Internet Netflix, model. these helps of is own able are our one expensive I’d in expensive retention back on more of a it. expensive are for we’re the in that those

Just great alone that. is a the example Q&A of

Ken, hopefully, for answers you. that So it

Ken Wang

you mentioned in or Thank for customer That’s reaching meaningful you acquisition can prepared whether might whether sort Yes. costs. some you. helpful. remarks, of offer just the in And on plateau continuing you then going also improvements Anything your the off efficiencies potential future? just you further be see

Dan Rosensweig

would Writing, that like It’s think doing top is channel Math. commerce organic we whole based of can we on lot parts a on to we’re improve things that like doing funnel of And upon think to continue very we the say redesigns the redesigns – find more to can I we’re to the brand, bring us StudyBlue, based question. the new like what fair traffic. we efficiency will of a flows, There’s things our

this the will So And helpful. businesses. we’re we million at million That’s we’re forget these number it’s a think compared giant a X to that subscribers substantially companies where the just that years all-access that subs but that people announcing be I target ago to get year. percentages to scale that on paying they on media few in are some now have will and any do over at compared new not X alone given of bigger quarter, their were

think real scale, that impact the add meaningful I So on margins. these and EBITDA CPAs margins at

Ken Wang

Great. Congratulations again. Thank you.

Dan Rosensweig

you. Thank

Operator

Our Please go Howe comes with Research. next from Chris question ahead. Barrington

Chris Howe

in Howe is Great guys. Paris. This Alex Chris quarter sitting for

Dan Rosensweig

Thank you.

Chris Howe

a you. had questions remaining Just few for

is that first stay to term. returning students first follow the one use about adapting just the question You of near tutoring how the are you’re length up on specifically utilization rate, Ken’s The in adding the in mentioned and Tutor service? often text-based and

as see you’re as far trends? student there your seeing wanted Just specific on to what inputs

Dan Rosensweig

offline we designed same online tutoring tutoring. spent service terrific time really Tutor the take really video-based building build again, people From lot put and it of a our meant the in the in and drive the we site format, Yes, which a did question. site standpoint to into early to on

And so written in capabilities in chat based. the lot we and eliminated of a

see their as reason this out to that the better format, that great back certain go course model the older year, than them roll we other one. that results this and another is a we’re is of to we So over in

calls a As said are more they a lot the get calls a weekends from time-to-time, interesting lot have because and time lot video on privacy. have they more I’ve earlier because more we

week, anywhere they it they and or wherever But privacy. phones do be, the or can on may less time have in bus from during less During they their chat, at are, library. the they the work

open scale. So to up. the to whenever way, goes entire it rebuild do that allow we be business tutoring utilize platform takes capabilities able to time up to them But that the at

Chris Howe

that school you’re as those eventually the additional on Math then middle high for into attractive well and that group? Writing, you’re as to just and And incoming funnels share students things as as And helpful. school color those relates freshmen out within penetrating of EasyBib. me That’s that last seeing seeing Can perhaps what how one it far as markets? some you one different

Dan Rosensweig

Yes, it’s an area obviously that at. look we

we one things. four EasyBib when or at the Writing. is the enhanced have It’s talk of we that that’s those brands about clarify is of for of each biggest. to And that the at Just subscription people, expanding writing service bottom the writing,

So it. a goes into that funnel it’s premium

student themselves. the that parent the would paid don’t we than grades because see So down stuff require the lower generally a rather in

us only So StudyBlue, and Not all are Math didn’t in audiences for services you’re have right. don’t designed but to ingrained we also have absolutely yet. get really – they Writing we

high going are deeper those people that capabilities includes into different all includes the but ones also more school it need of in because that around So world. going global, countries

a it’s So long-term play.

faster it teams accelerate a and it and Fortunately to asset fortunately got Writing we at Chegg. these before are the together it, profitable great it, more two under was even we’d grow it expand coming and assets but been make able great

we So new be them for make going make are invest picks us be like opportunities we that which audiences available us. faster, to to to we more it out those going profitable we we in assets, them them them grow are more is to better, the get figure and but feel we incredible how up

the Writing really over middle XX can What for million So you number I the a have about look course year. I school. it’s don’t you number, Writing users of if at the is tell collective use

so high that’s at market U.S. market, when school million. a U.S. And you about college the look take XX and

we’ve can continues feel we bring benefits to in [ph], see a the got them been the lot that of don’t cap things And by in a it’s – or know exist. now freshmen extraordinary too. it have into them And in on to younger of the that earlier Chegg fact we Study already people tentacles but because about have those see way seen we the us we want they’re the to network. of we textbook more of has penetration second really for So because we how it to them the reduction a talked when to it grow. you with see semester is acquire cheaper like fact which And Chegg our first do get because that we which we freshmen the on pay them accelerated Study one challenges and we for semester had

So we’re all the success to contribute of these assets having.

Chris Howe

it. Thanks, I appreciate Dan and Andy.

Dan Rosensweig

you. Thank

Andy Brown

Thank you.

Operator

with comes Our Martinuzzi Eric from next question Markets. go ahead. Lake Street Please Capital

Eric Martinuzzi

Yes, a two part question It’s from CapEx. me. the regarding

it when and asked been done to old we’ve answered was range XX XX. it’s bit that up little to base. now Historically, bumped around XX building and talking we’re data here. you’ve kind of that XXXX, For The up XX a

in XXXX? And have XXXX case you know to if part the second the question to the do what is of with CapEx then expectations that. curious in fact for has here Just for

Andy Brown

Yes.

look this year, expanding a So, that last the bit example, we’ll last at that things, and year content, XX last you we’ve we two content time for combination earlier it’s talked time over about right? have about do of upwards about maybe is videos, started the end we’ve this the this by for talked to One little or this and than Eric, we videos of a CapEx of XX, you right, been months year. when XX,XXX what year

about. that – new had like Dan was talked added new the an modality So

globe of So that over We’ve of don’t was but the into got been We’ve we’re second is on details a company. our adding we’ve X,XXX across to the And including our as we get there. to and lot facilities part so part facilities. additive now and this that Santa adding a the Clara. growing in employees been

So those this components year. are the for larger

early. be ROI we as may it for whether our we’ve the And call. next more specific a onto be you be. We it it give got content we’ll come be be textbook on whatever comes objectives whether that we’ll model details February into but it for Q&A, As when We’ve the solutions, as content. when you XXXX and been operating obviously always rigorous it’s we’re little year, planning continuing to gave through we process look it videos, whether

Eric Martinuzzi

Okay. Thank you.

Andy Brown

You bet.

Operator

from Our ahead. Please next Capital Mike Markets. Northland Grondahl comes question go with

Mike Grondahl

number. a congratulations another XX% sub Yes. Guys, growth. That’s nice on

Dan Rosensweig

Thank you.

Mike Grondahl

Any update where the kind of you’re internationally? or Canada, Australia UK on thinking

Dan Rosensweig

Yes.

be the imagine us it’s increasingly area over next to we many will additive So that an years.

the it’s licenses publish question substantial if market they is are great you alone. as are a a of and And of together, of same really market U.S. this why the those countries As in in those country reminder, already exact combine countries. a to about we publishers for size percentage have three that the as from reminder XX% the content

organic other prioritizing markets. growth those are and we bundles and in things However, are seeing we

add. We we terms of are in any sure as our making it any to of year, want next – first part expect that now expect don’t we and time just investing content CapEx are part about to big that other we beginning things And that of we year. localized the announcements add, this

We are of a site site making way .uk a still localize site a charge. or sure localize some to as pricing debating .ca can and we and content whether the requires or or .au not it opposed we the the

going we So – are for we’re feel us independent sort very we very our are but to time. things own robust markets actions. find us that strategic beginning on now to of over all And already those of students were see we’re those working be

things. we’re bullish So on really those

Mike Grondahl

the the textbook? Chegg season Anything That’s back-to-school to out during effort on or the call for a good sign. even marketing Study

Dan Rosensweig

have – of so of reminder, areas organic. can as plus a spend you sort we I that our time our to do is do What is the list traffic to on that XX%

incredible customers have out our mouth, from we percentage about all another it of We incredible of of customer. finding have result as come of a referrals, word a substantial

contribute and bringing recognition, our We paid we The traffic and marketing, do what these Sallie brand all the site. do SEO. we are to validation what into things are the brand direct our XXX, Music deal, world class in Mae Cengage deal Unlimited then in in like that things

we search. side, On side our you ROI on want where paid the paid and it the we and money and Spotify it. of spend would a has that, Facebook a And have Pandora cap lifetime number every would that majority historically. imagine exactly we to things do of spend one and and the we we spend that value those do when on number We specific a

think a also and number. our five of special such plus decreasing efficient efficient great on is more don’t finding uniquely that but a becoming a word I less business. last anything for the they blessed actual And of our we and an of they you’ll things are, us And that invest work. of is by These are, So we are things but the them; result we the in revenue XX% we’re recognition us we great mouth less And in brand the in four, it’s invest brand. in distribution that more the partnerships more that efficient see terms and them. the the decreasing know that three, – of result are driving percentage marketing, years it’s spend paid our channels and

Mike Grondahl

Thanks lot. Great. a

Dan Rosensweig

Mike. Thanks, Yes.

Operator

Please from ahead. with comes go question Morgan Essex Brian Next Stanley.

Brian Essex

and taking the for afternoon Good thank Hi. question. you

hit, leverage you in incremental that How points got Dan which of wanted I tech and guess assumptions embedded? facilities, some you’re but do to your was incremental tech bit there. rate I more just on the couple as color may leverage? on think to how note your is operating that. increase are And G&A of of but year-on-year, development made just have you general for a leverage? nice in down. dev, that I you’re think sustainable marketing little came costs what expanding you obviously about You’ve invest leverage points I those questions of think And a on the and touched going on just one Andy sales efficiency, and

Andy Brown

and are specifically expect more international we careers line the whether tutoring that as see what both it honest growth, and and anticipate to line The Andy, you. products you of don’t G&A it for fact leverage you we current getting really complexity. G&A as really sales is current whether be business – Math And it’s with the kind and invest to our products the far any in year Brian, then it’s future the Study, hit on drives on but it would on like of continuing line revenue our marketing complex things be particularly and be our is products, seeing matter next and we G&A the to on that. Writing not costs

we’re So and at But like there. you’re investments least you XXX the net-net it or estimate areas. bips said, seeing is initial of XXXX. why marketing SG&A our expansion the for And that’s big seeing the are that’s

Dan Rosensweig

I wouldn’t didn’t I future growth. chime making be for investments us me significant important if And That and in. includes

the we grow business here is So this CareerMatch. future that we’re StudyBlue, lot the invest very giving not in margins like future. a going meaningful in opportunity core around our only not think just this. we be will but that on like so It’s to things optimizing in are strong There’s invest assets,

So at enthusiastic Chegg. about we’re opportunities the future beyond

Brian Essex

how brand was marketing particularly And new much on strength the the Sallie side guess versus scale of usual and sales initiatives like Mae? and I as

Dan Rosensweig

Sallie of spend, Mae. we spend us. terms spend on don’t They on In

Brian Essex

and leverage be of that driving down initiatives the will partnership building but right, your to traffic keep coming incremental terms dollar driving new just Maybe you relative that site, so what wondering leverage? in to wise I’m greater brand

Dan Rosensweig

and to that really business. early of assumptions long-term perform, our I appreciate we Sallie understand for the in us we we When is impact on forecasting versus it’s and Unlimited question. with to things Cengage the them they’re paid I’m initiatives. all how do we’re build how the – sure assumed very make I other think of each not Mae going these

it’s and But to direct so a better be fair very question. can’t work our to it’s early company why to that eliminate can’t efficient. determination. don’t better, too that able that’s capital us work constantly speak things that we and think And I towards just – really reprioritize make I – things every for I is

Brian Essex

we magnitude of growing sneak Is still subscription get And per and way that revenues? a in revenue on can other in is one handle it. subscriber services can I services on any there Got line? revenue

Andy Brown

ARPU components. the the of our look fact larger businesses, what our it’s words, overall seeing growing. the other and as is becoming And In is subscription mentioned growing the I’ve at a the So in other component business. subscription-based business we’re percent the is yes. you of faster answer When than prepared remarks is in

Brian Essex

you. Great, helpful. Thank

Operator

comes question from Group. Next Capital ahead. Please go Alex Fuhrman with Craig-Hallum

Alex Fuhrman

semester. the hoping you’re content taking content. how and Thank strong I my your things making are in for you regarding to question couple ask and congratulations was start investment the a with A Great. about the on interacting of to students

faster the views the actual at calls, content of content your the Services a than the the you’ve like number and has number of been and views Chegg looking on alluded conference that views to of last some using bit it’s the a they’re probably could same the were it of revenue, over than getting if couple more little increasing students value your your the product been growing base years that paying subscriber I it faster we over which interpret imagine last for content it. and looks Just of the lot growing usage

like a if a on than that related your base Just as Just why which recent blip number the views build you events of of over and numbers amount about bit last time. extreme or kind the the still Are is events some curious this data too. in there Notice the were you the your either base one-time to to think looks here kind of quarter of natural sort little that the content out outpacing quarter XX% wondering or beginning bit over would about a up view just come XX% a this evolution we fall weather most in user should a less in that’s huge larger time expect semester? for evolving of base? or year user numbers breach if on may some converge but going those how that’s the seen product we’ve you the has little be it those radar think and content

Dan Rosensweig

of to the in go answer, we meaning QX. which thoughtful a they’re thoughtful see reporting to as is right? very at I’m sure quarter, they think a is lot we at start It engagement with you’re I we’ll given not maybe look be about what Yes, question. not on on way. basis engagement the has about declined when use can, continues we do A that it And per the don’t up. we’re all. has So

textbook subscription QX, September so until starts August. start where don’t really business the businesses And in our in later

use Also that there more to and rate numbers. the them is are is core the make massive to and content. So content want more goal the necessarily need. top variables. isn’t and seasonality they goal growth on to more actually sure extraordinarily And The get have of we

stay model. when were where old remember to I for That’s we’re was we ads not longer, days put trying Yahoo! it. to to I and create create So – the would our ad more not environments more at try them on we pages business – when

really simply say searchability the to desktop we a supply it cloud? consume have it So on don’t more the subscribe Do dots the came we connected Is which have in really to Our want that the achieve is as desire it good? Do have is time? except as to And the have to the So classes in good? want? us do It can not from? online? that they which can consume. we those good? necessarily have speed things them they we much for they we quality the really modality? we’ve that Does Is have covering in they on like. business and a here have We of given that the and us sense? benefit make right more more improve achieve, may it they goal that format don’t Do of isn’t they like. like do and at ubiquitous? model well don’t we how mobile? can is they they to that that exactly add they the know know Is value because increased what like what what it we are and we they what engagement, what there Is stuff we in Do we really

Alex Fuhrman

or subjects all you’ve and that Thank those textbooks amount about the kind that make for existing that added curious data into building Q&A where have, existing that things? those gone of of you going on either base then of investment deeper us subjects, where of you in just some answers answer extra Can new give Yes, this Just base or terms primarily expert you sense. to obviously millions have does building sense a And thinking that. a out that data combination of tremendous found a has home. year.

Dan Rosensweig

do spend time because all time that’s avoid of where of no spend on we for of to we is that lot Yes, lot incremental we a because a questions, technology value. money spend first duplicate on

they that the asked sell its of that may each almost rate surprised of institutions are in doubling the cover. almost of the has is that by questions questions continue three it’s answer, answer And overwhelming those which growth. get has because don’t question as They before, of many as the of into So newer questions that nature been they online of growth is the areas lots these to run system All I’m happen. learning out course we for the a we I The that of see changed. terms as haven’t think matter we’re majority either of textbooks version brand publishers of new new of where means things I’ll are changed. combination people the number are questions professor questions. don’t subject year that we as they that The well subjects. books,

to adjunct understand country. million adjunct need have a in of and professors are there’s with and that them lot professors different curriculums. filling this things TAs Colleges X.X You

will or are study is teaching Canada, across of more And the into move of increasingly some board we the where relevant then UK to getting you and who So countries start kinds it. we want I from the expect we remain matter as what similar questions that subject other no Australia. that growth

it So think versus when those that assets anybody came value, differentiator knew powerful don’t up I else. we have this it this sanely And is and one we of with much understood value. moat an had we incredible would would

love search every in So those have it drives one other then people questions. of similar ROI gets a we it and it who positive questions because because re-indexed has just

our of competency versus differentiator a the and anyone is powerful real else. this core company So

Alex Fuhrman

you. Thank That’s really helpful.

Dan Rosensweig

All you. right, thank

Operator

question comes Raymond Please with from Kessler James. go Aaron Next ahead.

Aaron Kessler

of have a questions. I couple Yes,

First you’re get like on talked of those as as of maybe of on STEM about progress terms maybe give maybe penetration. Also kind eTextbooks, Chegg little it expanding in you know to I more colleges. us well a Study, four-year just just an kind initiatives? beyond trying update you sounds Can against beyond

Thank what kind going us here? forward of give latest eTextbook’s the maybe adoption Just around the color and you you. expect

Dan Rosensweig

the Yes, I’ll first. eTextbooks start with

embraced of think For when of many of years And rental X%. the X% such it that and college a us allowed take at the eTextbooks sort also then terms industry rental if I disruptor such to anchored what publishers got consignment. differentiator the correctly the textbook to a the us cost in that was became themselves in model as they into and publishers that’s got into consignment place And increasingly eTextbooks. that how would up students show

and agnostic now. consignment of same For relatively particularly had the us gross we were – margins amount we with that

directly them we helping Chegg to of the their more it do students and the monitor on benefit connect online. the they the more able supply could really we be to our have and services digital, and was But us right for So services publishers our more they’re recapture more understand into was how they market. what that when

investors, noticeably good us an in students, that our for in and been are for above the that where that’s area semester So now good seeing for nice growth seeing we’re penetration good for and area is each and we terms of XX% publishers. good

area current the eTextbook business really to any that going dramatic predict because we’re it’s change that by determined not is an the situations. – really So publishers’

the The being continue earlier other question struggle lot a that we’re we’re those around beneficiary not comment think going that may made because I bookstore to a other which think the we to filling a that STEM of beyond example. publishers asked goes to of of to gaps it whereas the college those of for is as lot questions. we’re going Chegg’s struggle are I in not back the an while. way see be, a

balance year? add new how want things. want in we length So get of student we to want into the stays top the a to that the with debate deeper We it we major? always to it each to expand much of their try Do we of us expand those time Do a one do to to do content to funnel?

a you to the big of we ISBNs is to majors deeper I deepest think lifetime a And have a of over way we But through gives of into seniors. the of now, because lot of financial funnel. so the The to through majors. the we even always to lot a benefit and us reason of just couple said for increase thousands. that smaller classes into customer the continue all for get value the majors deeper just not it’s Study, new the get something classes once into we Chegg have freshmen the want by and the a and top go we XX,XXX mixture categories freshmen

that way we have have wildcard start students in we is we they are bad taking drive have, it want for that we questions the cycle. is this So continue And are extraordinary at new positive but a but looking taking rate always classes why if using which good Q&A The that. customers they’re that we courses way, to in see a then to way that and in good ask a don’t TAM. really not growth. helps and they expand It’s virtuous that we that’s don’t of our a

Aaron Kessler

Thanks Got lot. a it. Great.

Operator

to to comments. floor Dan Thank for you. the over turn like I’d closing

Dan Rosensweig

everybody call. joining the Thank you for

first time that Work has Valley small surrounded our wonderful the HR by building, and at following for particularly bring the applied how and expectation a continue smaller in on gratitude to they’re our department shout execution of but love And and students day mission, mission that couple dreams appreciation place example top was matters resulted employees can grateful town like have you’ll And out focusing dedication positive have and and to outcomes to are wildest employees they best the and Silicon does to bring in be and really and great been result the their here. to support think every XXX a a able been better XX I our Fortune the behemoths We’re journey very Valley the and work come the story along giving the in if company Places been Entering is our really been and people show a culture the for our companies really brightest Top our as the want have the see company who this first ours They a like was in give teams a to our mission-driven in continue Silicon years. of last vision, company. to this of to the investors on the that’s you’ve year I work. the for But to Tracey. and that. that and us, track beyond hard unique a broken to love then building,

So you thanks and Chegg. continue semester. everybody we’ll for all employees students for next to our to And you thanks everything joining the see for that do for and call

Operator

concludes Thank teleconference. today’s you. This

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

Chegg (CHGG) 29 Oct 182018 Q3 Earnings call transcript