CHGG - Earnings call transcript Q3 2019

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Operator

Greetings, welcome to Chegg Incorporated Third Quarter 2019 Earnings Conference Call. [Operator Instructions] Please note, this conference is being recorded.

I would now like to turn the conference over to your host, Tracey Ford, Vice President of Investor Relations for Chegg. Thank you, you may begin.

Tracey Ford

Good afternoon. Chegg's XXXX joining call. for you third conference quarter Thank and Dan Andy On are Co-Chairperson CEO; today's call Officer. Rosensweig, and Financial Brown, Chief

chegg.com/mediacenter. copy center website. our intend resources. announcements press encourage presentation A make call website will We A earnings and with available this website post our investor on on use information be our our our replay release of important is routinely to Relations our to these Investor along at at make also media website We investor.chegg.com. you available of of on

Before statements uncertainties during and future financial we begin, forward-looking subject are could I events, will would call that our like risks the statements. results actual cause future forward-looking to the operating materially point to material performance the to out of make that differ including regarding of course forward-looking the and in from statements we These this those company.

and consider from caution the the today's materially included differ important to could in In results with the to that release Exchange Securities risk earnings other our on Quarterly in the well factors filings particular, cautionary Commission you as we those language XX, as We the to July XXXX, you and XX-Q refer cause Form in statements. forward-looking with factors Report on Chegg's SEC. the actual filed described

no date. result future undertake on we a believe that information We or are to to statements assumptions statements as forward-looking events. based make reasonable of we new Any this today that update of be as obligation these

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

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

you which website. posted recommend the our is also IR also datasheet, review We on Investor

Now I over will the Dan. to call turn

Dan Rosensweig

Thank you, and everyone. welcome, Tracey,

to growth report exceeding both delighted quarter, growth. XX% another XX% revenue adjusted and business year-over-year and expectations, financial great delivering We EBITDA our are

goals, which our the of expand in invest strength key reach, to opportunities to our our Our our are that and our financial and teams execute graph against leverage meet brand. priorities, continue TAM, student our

with We detail. why Andy our our is which you in greater XXXX are are to far, again pleased confident performance raise guidance, through which will once thus walk we

growth academic we We can as in we see services. all strength the the Thinkful. and And of our leverage believe acquisition incredible continue enter we skills-space through to of that

because category, After it skills-based was direct-to-students in that Chegg’s was spending a the leader in most some of learning jobs the training extension modern the skills-based Thinkful for analyzing economy. the a of it clear years offerings. demand We natural is chose for

students their extend We learning, that we succeed journey. journey. academic which outcomes. student’s And have helping always helped both now quality, on professional them by reach affordable throughout are Chegg synergistic can and professional improves their and high Thinkful academic online and provide our we

want Chegg And of the to I detail model, greater and channel grow that Thinkful This a Chegg the we the direct-to-student data. team the profitable. through efficiently, Thinkful take addition customer, curriculum, quality just has the a allows content, content, the relevance which and to accelerate like means us the the of will increase new walk own momentarily. and it will services into faster in the of more to ultimately and make moment I and business you more welcome family the

student's to high diversity study, expert of integrity, needs. Our with serve academic to students growing Chegg in services led the by provide formats content continue multiple

they them where the can to where we to we our and world. expand are are need to support from students wherever be, offerings, help in studying As up-level continue they more they

access moat. which textbook over QX it adding keeps students Chegg our proprietary use alone, to allows solutions and content our record Within million library and million study, content of to XX XXX has in just answers, a videos, now expert

now to plagiarism service, turn more. sentence helping students In addition Chegg improve write. writing millions another ability for to their to grammar, helping to structure, students learn and Chegg powerful subjects, us students of master is their

their In for different are over the class to to QX and to It's alone, of entered students come before. as and Students higher support to various states are system English the diverse generated needs papers They of have preparedness review. system evolve today or for million XX month way students are many, trying that more older, clear the more students. than make in ever increasingly second their X.X backgrounds million is the language. needs the from submitted citations and over socio-economic middle education original

adaptive affordable price high why for them more day the support critical. been students. for never XX So, integrity, increase quality, Chegg access hours need to and a exists has academic can that services opportunity an high at That's

continue Math invest as in features will adding We more more and to have platform Chegg the our Chegg Solver, and and add our with services Chegg Tutors. services to content we to Prep,

of together, subset We significant subscribers. services these more to providing see a even an value to them opportunity and our bundle integrate

Our prices students. for goal a keep low, to our our also value by be increase ARPU always and overwhelming but will to choice offering

We we As call And pleased with are in acquisition, Pack. upgraded have customer year. been we The so we to far. school responses seen middle customer the with calls, interfere base seasonality an want Pack the careful will roll-out the Study previous have focus of testing Chegg shared on to the course of be business. Study on of we new not we current our given bundle, our which

timeframe. of push guidance, will which over bundle the detail largest half And the in Andy shortly. of the during course the the rolled is will be But of all our September, the this in year, So XXXX. second will reflected be out August, back-to-school

and a and address drive reach for our helps us extend critical brand, to customers. our continues business our millions strong textbook with of pinpoint relationships Our build students

in Our world's thrilled partnership with to one we with FedEx, exciting next an of have new premier Ingram are logistics today of year we expires announce and and that May agreement shipping the companies.

product When to want Ingram room and warehouse we XXXX, we convey that changer and we in acquisition could partner the their a needed game signed the finance and our Ingram handle wonderful deal with team. a gratitude for relationship logistics, his was with the been CEO, partner of who a Chegg. John entire to has Ingram textbooks, and

For are deal to story to transition with new in allowed see become the the business our today. the the you us to growth, company margin of those invest you who Ingram digital of high high

delivery serve When can FedEx. have meet that experience and to to agreement students a least needs excited for shipping at as is provider be the and future, we serve overtime and speed more why world-class years size, of who wanted we look over our And of five logistics FedEx agreement one the scale students day our for customers. evolved. our and effective in This cost provide of our will anticipate our with and XX% new better better Chegg place we needs are for faster our we business. announce could the

journey opportunities. primary academic they But purpose are is their the of students of increasing Supporting essential. that report education for job XX% facts the the pursue higher

entirely said customers, the deliver are base for have to the this customer is for important consistently service our that as current employers, as for feel uniquely the students We as to skills-based prepare well an we family. positioned new economy, institutions, the learning students. to We as workforce for bringing to Chegg well more increasingly

platform we over business excited a into that believe high time. will We're margin scale add to to service another the high growth

us, subjects. now Thinkful’s will and any did competitive expert This to for hours our student of to moat. utilize Our and core like plan similar and demand experience for chat-based to take a is with only better to but a XX audience not provide skills-based Study, will day to expand learning any differentiate academic but a our on advantage assets Chegg in create opportunities, tutoring only we provide Q&A, what not strong students, support

for are of ever time means the And quality at industry cost like skills the training low to current move the the need envision Chegg jobs, over putting workforce. learner. several areas, continues expanding growth an day of modern some is software, we initially data, meet by the The align biggest digital years student needs address we focused the needs our curriculum of the changing high while and which high. rapidly first, to next all the to modern to on

support to better job accreditation their simply in communities. a degree, get a get it's is or whether goal Our to students,

team for what what excited am even we of us. is achieved and have our I over But ahead more I'm proud of the decade. last

We it's our has business, have on that and our mission stayed focused of students - putting our not grown culture. in reflected first only but

be honored great this performance our part thrilled cannot Sized In work, for company. we addition Fortune again team to Chegg I'm to and incredible be of a strong quarter, Best such Medium business Magazine's named once thank making XXXX. I XXX place America Workplaces one to in of for our this enough were to

I Andy. And it over turn to will with that,

Andy Brown

Thanks Dan, everyone. and good afternoon

our give with ahead business quarter again and of results our confidence for raise our us great the guidance another to metrics expectations. XXXX. financials had These Chegg strong

We model. our the expected materials includes offering the new of are our which It providing required addition also partner our a base leverage as in strong logistics of much outlook move to skills-based and result also growth XXXX, a represents continued our continue for and initial changes to the of larger FedEx. Thinkful, to

time to of we our to even to we the accomplished, as the While Chegg future excited what learning we team proud offerings already are more extremely continue about has are increase earning. the from accelerate

million XXXX above leverage XX.X XX% both drove our the XX% expectations. scale. model EBITDA XX%. increase of strong at adjusted a XX.X Looking was This of an performance and at topline resulted over margins in achieved required revenue the well QX, This million expectations, QX, services materials and increase we of what with our quarter, third demonstrating in Chegg to exceeding of continued our XXXX total gross

more the education with this in our to billion combination landscape us advantage continues Along and a competitive quarter of the the direction. believe in of the significant model believe balance strongest ended X.X direct-to-student We operating our and sheet, evolves provides move our model, the education cash we We flows are investments. and scale, with as than industry. cash

the outlook logistics our partner guidance, XXXX. for our you let in transition walk me FedEx, to we get I as through our Before is to which expectations new

As these needs significantly three continue with of rental Dan portfolio approximately to Consignment and grow. and prices to years. Required mentioned, Along units capital in have require full a changed become reduced the Materials of XX% textbooks. textbook dramatically has which have factors keep lower landscape no capital e-Textbooks,

to print need we During textbooks for rental. small transition, student of deploy to this amounts ongoing - will capital own

approximately result As spend XXXX, to decrease XX we expect XXXX, and in year thereafter. to this XX in net and dramatically million decline to a million textbook inventory each on plan liquidations, number of

e-Textbooks As the consignment an transition continues. to

to all time they logistics. which to at of We FedEx handle complete expect the be will XXXX textbook the end transition by print

gets revenue a how stabilize we of required will. expect a Materials While the XXXX in as change do EBITDA recognized and the changes These and to breakeven a We service. result not earnings XXXX continue dollars investor not have reduce slightly operate our IR are on likely to fundamentals gross expected and change, provided the total XXXX Materials but anticipate margin. increase then it and adjusted the will Therefore website. to Required Required to profit company revenue press it been available will in release as in of gross this change, deck or

on increasing our results guidance from are QX, strong for full we the Based XXXX. year

revenue X, we includes consideration Chegg into approximately revenue last from call. we dates semester closed the Thinkful October start million on million, that X million and and fall million which mentioned XXX and QX, which on XXX later now earnings Services between total XXX XXX takes expect between For million

result, Gross between million which our X we full a XXXX are from and between between EBITDA guidance, expect and adjusted million. we now gross million, and year Thinkful loss margin XXX XXX and XX% EBITDA increasing XX% revenue XX between million Services and XX XX% margin total Chegg and XXX XX% million, a XXX XXX million with includes XXX between million As between and and million million, revenue adjusted

with XXX Turning XXX to Services to revenue XXXX, our approximately million growing is approximately million. revenue for Chegg total initial expectation

over aligned Services We will revenue closely year. to rates expect the subscriber growth course continue of the Chegg and remain

textbooks. than result the the of exclusively changes revenue We XX%, that expect recognition revenue be gross of slightly to ownership XXXX lower result margin will approximately from and of cost our

the result modeling basis you over margin adjusted changes leverage continued seasonality the investor At of with time, those press XXX earnings have release increasing these But adjusted we website. to quarter we expanding and deck in provided by million, in model the on same a XXX points as expected the XXXX EBITDA IR expect XXXX. the EBITDA of

increase of initial end XXXX. the we We outlook is confidence strong closing, full in a giving In strong to another us high had year guidance QX. our provide delivered It for quarter expectations, above from students low services, of that while with the becoming is model outcomes to value, move improving by and serving earning. envy the high directly their education landscape helping learning increasingly our clear cost them and

I'll questions. turn over for operator to that, With the call the your

Operator

Our Instructions] the your with first [Operator proceed Please Alex from of Paris line Research. question comes question. Barrington with

Alex Paris

been some and within you the may news breach deal. as data Good as far the that And off to afternoon, knew intangible of quarter. the looks the before there Dan the and know, where and recent of I on as timing the Thinkful, with comment - Andy, news that you highlight prior value you I'd played, acquisition, business. can the congrats like my for on that questions, partnership that to for whether Starting FedEx to promising has moved

so can specifically competitive for to can Thinkful you Thinkful. was needs gauge of how may you done Chegg can observed you in a already in positive characterize, taking historically, market Thinkful characterize you the on the regard platform? the have reflective More you they've acquisition done note, share student but of And in and environment

Dan Rosensweig

So, is Dan, you. this thank

personally their you and was the data moment lot information of as so, announcing. customer was and don't fortunately identifiable obviously, than to There made charge cognizant it no smaller we ours, breach, is so have, know, much no card they which credit obviously ours, we not base and more. the nothing. a amounted ahead information, they were to similar Let's the no, - the knew start with Of aware, they news that were

open credit So immediately, in neither a the happen notify afterwards, which did, follow information. can people that avoid and the exact and all these as And over but relates technology at we as we because non-variable PII it card looked fact any we has are as fortunately, situations everybody, ago that to the the protocols asked everything tell things did that them this. transparency, was best unfortunately to that to notify same was of communicate going we the us life one years we it to or deliberately complete

in we player are one We outside very student acquisition some the be allowed them every good them looking the - direct anybody. years the the space, didn't of was which that revenue closest extraordinarily them with competitive was of good the at of similar. spent we although look the price better some you partnerships, are mission, rates. lower to the at which So part felt they at person, to These put so in two terms good single the to content, of are the a different, and at companies sell our graduation put chose to space are may because of to some to the student, have first to very

their graduation focused on which customers of was content, who high really rates, to was were somebody and about XX% jobs. finding Second, extraordinarily quality high led graduating which

that it a as that When a selling it things into most, that's the going you corporations, that's done that graduate. doing we've that's most, hear the these reality the lot most, we're to why space. the person pay we're they willing companies to the who very are it's not for directly complete of so, for it, why nascent values is, always And the it, and they it that's why they they renew, why and needs pay

not planning go that's really to doing. dollars corporate want on to We plan taking are them of rest the All what we're direct.

What are into a the So to the needed were better, alone channel, of distribution and ability can help growing the then they their support and was system actually educate expand anytime in at quite people what faster, was space, chat-based expert day get plugged global. curriculum they which our night, people system help take that needed and sort to or unstuck, tutoring nicely. their it they and Q&A

sense perfect but are couldn't And very so the early, be more sides. marriage early excited make We really both and, was good. the to starts

it, is, those about answer exactly to know, So they're students and so spaces huge. to question share, you I market time. to it's our talk we Everything we early is because so all nascent, acquired last too which your are the why be survey Alex, think to going

have find is to students. people of college And tracking know which relates place we're we election some to may got why to as information polls, you it premier

we we go students. also surveys, We groups, focus do also have with also meet

not so, by we find rather to the mistakes find try a make out ability we out. And go we saying just we're think, go have and not speculator, actually hey, we big

anything be else an tie personal to their a students them skills-based capability was things wanted education one academic and And than more finance, that to get to job. the learning the and able was second to two

absolute So students. yes, from overwhelming response an is our to the feedback this

Alex Paris

to wonderful can low and potential additional Pack, learning Thinkful. and last with into to hanging fruit provide in just how of color is you for package? offering external the Study perhaps satisfy rollout that Has will study my some That's highlights of for what addition regard different is Pack position to the question been offered a student My incentivized Study commentary new the you're And there be going upgrade to bundle be to versus students price. versions and one thoughts any current one curiosity, will customer? a

Dan Rosensweig

and over year opt very it comfortable the and that done wanting to confirmed the a good responsiveness students answer really roll very of So of last we really, course we the size integrated really excited to percentage all more about feel to as we for detailed their in are very really, that question, that. research it out. And the good learning of experience try questionnaire that students we've

the or but then XXth the to we've to going likely value at that school big we'll we was going said sent end very academic and early contributor anything else, a be So that of lot year year we think time. a to add the year be last of over this that the it's really case starting

And testing so that actually been the used in can this, who's anybody it. responsiveness has see great been we've I

the Chegg rate XXXX called Pack, at ARPU we subscription increase over Study pricey seat. time continue growth as our very it's So of high which and continue should a to

not do As other is the see to we will or huge whether opportunities. is overtime outs we growth answer What yes.

example, that state organizing students we to students opportunities. for the in think all online schools. growth a college be them online, huge we over of XX% now for developed not community there's There's for content because going And are over alone. those domestic school go California to will So of profit million are directly

So there's that just to not over multiple in check value anything core for to do because business a be learning going I versions sure the execute everything do we to Makes we're time. really want of make well. to We're and rush our so is well. growing sense? in going

Operator

[Operator from Corey next Analysis. First Instructions] proceed question Greendale line the question. comes Our of with Please with your

Corey Greendale

Corey Hi, Greendale.

with, I synergy the entry. for - know So sense just existing you one is XXXX? plus one Thinkful, to try start I could to maybe Chegg understand what of I been of can some give a elaborate guess I then, you two see Thinkful specifically? part you're one the what but And has it, on the that I revenue follow think your with assuming space the funnel myself I'll to of limit kind barriers which generally as just, of about up, which question, in questions you us moat well is

Andy Brown

Yes.

Thinkful with million rate at, respect which there we independent to They about were is $XX we're that when approximately are which last the we year growing growing and the expecting, been they that in was is XX%. So that revenue revenue same full did as Corey, announced an about we've of September, Andy, XXXX. company, the this articulated

small, a much will the check even that's business move based for much, good Chegg over as baseline with. overall anticipation But it though learning business. into forward, a skills services consolidated we So the that start I will relative we to know, services, you It's time. the just is be you to still the think relatively believe become larger

way that's So the think it. there, but it'll get consolidated in to about

Dan Rosensweig

highly a your own a look, question, yes, space anything in like to don't and to competitive And without moat moat. we

those is to are through misunderstanding doing, training, And so corporate we companies local two that I focused to think pay school, or are this corporate which dollars comparing that go a not we on to either are very are doing, not which to people expensive. which the getting

of XX-XX. the They profits name use school, the brand in the the split they revenue

of or were so and product we've anybody significant build not to unique. not curious we because and particularly we high and split how real a is plus still moat, answer result that very we whether piece costs and in then a we margin chosen can the to that, it's value, time. online, with secret exactly the estate can which same the is no barrier be a than expensive all have the that a don't is be in because And have location the The than or work very is did study they're price the to would we Chegg a to hire incredibly every lower high to class the as are going having be yes at of could what professors else take people many they're different back quality there single path people and pricing, revenue and know make

all the created actually has seems skills just created, are that and me one in online it fast they advantages other people that because not. for to one over get model help were This business to of job. was trades, the created this itself get Those models a to were was

the area is very being confident a that the other is chat-based The Q&A. and we tutoring feel in expert moat

to they are to nobody or to to to So goes to X have a once versions competitors, call to hours They or the in anybody if morning. to talk imagine have to they today a of time somebody get schedule who where week. scheduled those go o'clock it, and they you office talk want a scenario have

anything live help our services to so what high the Whether ability quality other makes with. study that you're and stuck to in Chegg get unique different so instant is

rates will quality, And graduation and has employability so lower and increase them. else improve nobody increase costs, that

do to tried has company other it. Every

look call and you to centers they're dropping people most it's in stay If in school to things, of have and the people they and because so and that the online giant teach keep to at out. universities a desire other the We're much much relevant, very personalized alone much robust, much one more let and moat big more the it a already in begun makes more so think going difference better, the to no model. it. to have it's has be trying because trying from else even graduate about technology, It significant

Corey Greendale

Great.

a If, funnel which quick agree that, would that follow-up the also just the you're things given cost advantage concept designed plus So on it's quality, Dan. of provide plus, of right, understand I’m the if high suggesting, I that's with it, way, like lower what you is adding understand the the today if the way chat a I some have. plus, the they you by I that's costs to saying sure timing that you - you already are what's If expect the right to that? are and programs are the relative of

Dan Rosensweig

So to doing again. able with much anybody cost make we be we are to we money more and to introducing than a else lower going a have can courses multiple level lot expect because, costs can be

for know, them entire online these the already about infrastructure products you thing You amazing the do expert Q&A. we've when built and

for infrastructure entire the built already tutoring. chatting We've

incremental to support to these So these all students. are be small able costs

different points and students. price So versions out these we different to will advantage curriculum be at rolling multiple of

else high the very a no they Thinkful, Thinkful get Chegg that And, big has rates, that they're people clear that students one it's that's to who they but jobs, has. are going different be they're And want graduated going advantage learn thing that's to going haven't pace Chegg yet. they're companies to master's to is other to the have capabilities going to differently, learn want demand, faster. and on want at to They're to love going

proud So we're of very that.

Operator

Please comes question question. Thill line the with your next Jefferies. of Brent proceed with from Our

Brent Thill

a question guidance. on Just the

going what a look Your like next looks terms of growth. in year year guidance to high to you're this putting up XX% match growth,

increases give break the the break how of that the for don't to of us to a way price in next are drivers think easy of there's lot take know down an other sense next you've drivers. would acquisitions questions you. growth year. underlying into a you I drivers year there taken when that to I some the for the apart additions Thank if those you

Andy Brown

Yes.

why Brent, that don't I'll take So one.

you about our particularly the Chegg year talked same when growth. So guidance earlier the we've the on and we the what overall services was that I revenue approximately will that as growth next that subscriber about look line, anticipate at the given be

So - Chegg the still adding to what's relative really, in study - business. Chegg while Thinkful, it's point relatively small this writing time the and at we're

on the that, So new the expansion. really top the that's of a what's of be be those the Chegg are continued but business. year, will margin would as more but of side Dan year driving business the line Pack the that next our towards driving part school the the had drivers And study starting primarily core core Obviously mentioned, the when we broadly is deploy study. it year, more and Study latter part

Brent Thill

international no Andy, year. next just to for that is quick included clarify. number There in

Andy Brown

for been we've international Right. No, time. some

for that ago, multi-currency, Canadian period a and investments it's for incremental know, for started our talked handling to international recall so year. we of localizing much small customers some about the is more which intentional being small how capability cost time, been respect time, this with you fairly were we multi-currency of And couple relatively just I we've but And introduced and if a correctly. we content, marketing, months

driver four yes. guidance within and bigger we investments going two, for of all the So bigger XXXX, guidance for one, for next a is in to years be to we're continue believe those continues XXXX, to making the the three, international future be growth, over

Dan Rosensweig

and opportunities to a that. And we do got this nicely are are by is see Dan, lot, under are have is subscriptions online those opportunities where domestically got the Brent, grow continue students to all the as because now are a profit places And all for those way that. over go we years, about we penetrated to after million been not it's next for several We've to colleges. schools, which community that think we

after. And add then continue the comes then to and international, other countries we'll will

So of it's for about XXXX, growth not just think ahead great us XXXX, for we opportunities see many XXXX, but the you to when come. for years

Operator

Our Please next line question. proceed your with question with of comes William from Stephen Sheldon the Blair.

Stephen Sheldon

think ask as to what face just of XXXX, are pedal, would to the about talked English you think international, really and you international the ramp push about, a talk more you Wanted I as about in know, internationally little and can about we guess you the you challenges countries? cadence investments try speaking but even to expect a some, that you'll XXXX, adoption international those the when risks you drive investments or bit

Dan Rosensweig

think, you completely I content let - there's be that Spotify, which made, say, must to start is significant subscription perhaps me people be okay, the business questions the you like by really is different. other which lot be in of must capital I out consumer investments asked, think So need is that countries to a need like important thing buy separating Netflix,

licenses that to different. completely are have You have

five space the majority world. of the education not that dominate publishers that. the same is like The The U.S., dominate

others don't. And now have advantage that so we an

not we country be only don't assumed do to incremental The is whether massive what the this to in have not we're thing it's rollout we the really do is obstacle, we country. we everything or know guidance year rate. be a make to We is going say because the in second path, the take the and there'll don't that in whatever we investments. investing have have to or Everything

to. what those engineering seeing not significant things. mentioned things local cards response. local great It's there'll and in it requires it Andy local taxes not or billing take We're and content able those being kinds really and than be not it like of to investment. whether actually That's work it is It's credit requires more work.

not local we're So movies to go having or local get music.

a and just And a of lot roll lot that bear. better, a capable model makes We're a more actually different lot our out. a easier

make right country, difficulties but each amounts the question, we to really or of make sure in able be content. that the asked you are price amounts, small the we it is to which So that local what whatever what going that relevant add sure just It's risks? we that we are

be that we've the done sure the make We to U.S. really with the channels. And going Google's these index I to work year in then sure correctly? make bill as school best things and it's want we to to we able understanding it successfully

So difficult out XX it time, do one countries to at to it's very roll to right. do,

So we're very systematic.

start is followed or Canada the to believe followed by Korea. South U.K., places like followed like And the by it not, important us with, surprisingly by for most places far Australia, with the the with and there's And real everything we content from inside same study comes answer. expert localized publishers. demand check because the the Arabia, Q&A XX% be can do Saudi

of to unique this shareholders company be companies it. to that had our it's really So and and do to do benefit to our the other it's have able to

we a see that So obstacle it's the not ahead just do major we except going work. to

it's itself And so growing do things try many one has too margin a at the has been right, do put very doing because urgency we is and strong, we it at to fast. time not so what not high it risk model the It to doing fast. anything have to is,

Stephen Sheldon

to on just for update are tutoring business, there. wanted an the going how Dan And ask trends

quarters the then solutions? talked you couple last about the tutors the think Chegg over business, fastest need and growing integration do more you and between kind I how core of much that being study of

Dan Rosensweig

to can started the response. subscribe you you model minute. for paid the now because time roll the it's much context, takes is out. platform one has is we or several chat-based very for years said rather The ago, I just what use so month so and it's interesting a is is can than - where It's very as necessarily this technology. good it getting time to by mean now not hearing which it Yes, do It

thousands the we that then, started to we things or study like huge what per to impact, have I And yet, pack, not ability so it the beginning a a earlier, of out. actually things impact only the to good is getting something to put value not but nice class. that that It's is we're which put backup real to study a like it have is Thinkful roll discovered but where up dollars inside mentioned

chance to better subject help somebody ability in and core any and to live to master subject human put experts health have it the a have that faster through get We graduate.

of into what actually real in. make no matter the a so to about integrate And in Thinkful human, to that's lot is category what to new excited and now our be it's efforts going because already you're stuck no country a and it really started curriculum you're I've it anybody matter we're right that value sure talk can to

skills, it's job a If if academic great. So skill, an it's great.

supporting as standalone its So as going yes, now a It's it's rolling but value real curriculum. more is be to out. add students we rolled out service,

Operator

Our Silber of the next line Please Capital with Jeff BMO your question question. proceed comes Markets. from with

Jeff Silber

in over closed on recently still for and have books, areas think you that you billion future what simple Given you expect cash to just $X.X we M&A? focus should acquisition on your I

Andy Brown

focus six that well look it us really can changed leverage now, is platform, you've data, ago overwhelming cost. value hasn't with our and that changed Yes, low pretty I - our provide day. years known leverage opportunities we six And is simple our leverage at can students hasn't Jeff. from for that to mean and from our the brand, It to

that it were have into don't to said a two specific continues into I And, skilled years think more we it, Dan but like makes to get we space. space education at details, or team the look the into and looking sense

Thinkful those then price as do if pull, find and we right very thoughtful was the we criteria can we're value at that we So good. paid what of meets for think and believe and then I the all we we something and you see, about

at to we do at us. when and going there's we those the that future we be things And so a look educational across believe opportunities for look landscape,

some the in markets last As over you high know there's valuations private there, the pretty been years. several

we We believe us capital fit capital it's we reduce, acquisition. that those have that to the right that and when are to make the make an if for valuations allow have would reduce we decide Chegg, the likely they

area, So specific but look not acquisitions… at a we it's look we at those when are the internally that things

Dan Rosensweig

your Jeff question. next please ahead. ask Go

Jeff Silber

kind gears wanted there going to to progress on be - Okay. wondering back services. to was, Thinkful I'm measure thought just process way to Thanks. the going I just Thinkful Chegg Thinkful. of for be Is us combined a of what I guess is the forward? going why switch within the to outside

Dan Rosensweig

Andy question answer the I'll in second let a second.

we In debt go purposes gone so of terms of a and students the at students they're substantially. up job. of business college in thought for is XX% direct a us the million actually our for that ways can there paying Unfortunately, pretty to has crisis level cost which the college a and system, for in they're every Thinkful of getting to looking be process into is student clear, going looking things. get a to knowing two to Student students is on the something. that And for every student it's are job something all the them If and all investment that have for turn network are channel X them.

no and are they helping their school, them their which ability provide we at which skills know go them opportunity, We have available to major, to them an jobs the cost and class, need. their understand, directly

it to alone that do all. a at and reason significant is So a advantage

people more educate in thing is specific for jobs. more to that group get looking other age to ways are every themselves The and

online multiple chose can a is extraordinarily community. and there. local Q&A there there able right the to are expert we of because major is our learn have unfilled skilling, And there affordable make the millions and skilling. space millions to to be We a not jobs in lead with layers direct So skilling pre-skilling, that there ability is of and job impact skilling, it's things is our chat-based to there now actually your tutoring

you there is more colleges, do of them reading the scheduling that is lot a but is conflict go between are can't at there think if even all academic than students of tracks, the and one So time you going professional a they tracks, know and that to to a because eating. community

we that the we opportunity be couldn't so, game have and more And change excited about space it. in to the just

- we good the It's space. surprise, this And worth right and And work two and I a we're did seeing curriculum right said, the not Andy right in said, years’ just with super like company or with very pump. response. model investigated the the everybody like about of

Andy Brown

and we writing. other by Yes, did underestimate right. We well found that that add into - is felt we you is team the really culture got to I then the just like can't culture, a our when the this way might with thing we - one fit

super companies is a So which very and the two fit there important. cultural is strong between

Operator

Please question. Our with line from with comes next of Company. Ryan Needham question your & the MacDonald proceed

Ryan MacDonald

way to obviously pay that are you offers What your I is students taking guess over model talk that ability profitability that in courses the the general noticed How especially have Thinkful a agreements. business income about pricing regarding plans sharing front versus the acquisition, does can Thinkful of up income I - if the the of of including, share mix sort and sort taking scale does how the there time? those affect all agreements. number that as different are it students to here.

Dan Rosensweig

of answer that Andy in to sort fill going the and let the rest. I'll question, I'm details ISA

very interesting a it's thing. So

classroom may number seats it's your who like If you're your a pay, limited and seat a or and you money you affect to give is you may a empty, of not all very airline profitability and seat with leaves somebody risk. which and that in a could an have big lose it's

number have it's concern when an But have and all. don't you seats, at you online unlimited of that

and ability to have we which that sheet, risks out because interest it And have the the we a a do it there $X ISA to then balance the the cost ability take incremental really have risk. not billion So customer is a very on you do you charge online adding risk offline. means that of and we when when fact taking and an not go different is

add capital to no being classroom. is it the used to There

not pay succeed If somebody you or dorm online, seats. to same the a that gave pass seat that graduate, who and you room not the of number on were to person's share college doing seat with fill agreement can opportunity student that didn't somebody or only you and money, lose scenarios but didn't or it unlimited an and a didn't income in

in So and for learn others learn able ultimately be low it’s things how sort to of then to Chegg get chance areas, unique to it. income underrepresented to opportunity that pay areas can to for a really recreate students help

So to it model student as - direct related that skills-based was the space. reasons love the one to the of we

different and very in puts anybody So, us else that has position. than a great

Ryan MacDonald

will sort is be Yes this awesome Chegg that as for Thinkful for well there on charge clarification follow-up a Study students for Thanks. that? then is the they I and included included that intent separate or tuition is a Chegg of - pay a comment, to program and offer the guess the Study in

Dan Rosensweig

or home baby. you're extraordinary plus tutoring, morning work which your chat-based you or a can very we XX,XXX means built in students. let’s offer the We question has The plan Study Thinkful - Chegg answer to when at Nobody at in proven expertise a at o'clock a or fair Chegg else bring a time inside that any human experts for of don't mode. fed network the with over can that. which afternoon capabilities Yes Study, you're X question. X that any at we is an It's after

costs, before. part tuition, and again would that a ever to in will come why way that to been lower to else no somebody you support better no, have we'll of will the significant over able advantage have will you support systems, able a content, be be has have support which to one Chegg So is better will

As very at you you most job was I convince a to to their said, in telemarketers cost of high pay. so these that companies, stay get to

to so Our that that, confident that feedback educators actual finish the do, has always because learn been are there going seen. and in going are that you what subjects who you to can you be we've I to help the came

Operator

comes question proceed from Craig-Hallum. Our Please Alex the with of Fuhrman line question. your next with

Alex Fuhrman

just getting should you a in unpack the of bit of little a seems that some play revenue expected like lot other and you Looks per if out like per really in the for Services. wondering I'm Certainly can opportunities revenue of to subscriber. us growth terms just bundle versus really between be initiatives terms number nice we there's have expect of to subscribers up. Chegg for that your how XXXX see in student

be kind curious thinking you that should XXXX put way number how out for - that to of get Just you'll we today? that about the

Andy Brown

now, close way the Yes we're the and topline in What's at subscribers Study looking and the Andy the growth the going yeah, business. we're to are some of degree to really businesses right those very size Alex business projecting of two writing what drive rates we for XXXX. like likely said that particularly I that said Chegg to and remarks, to prepared Chegg again be the it given the business so the it’s Services, overall

is like respect ARPU, bottom goes the the May. bundle to to start you is subscribers going school semesters, the big Dan August to as With through and our to we will line the subscribers, deploying starts said. know, of then in it push year only be existing new end And but in time it over offer fall potentially

So push August. be in the big will

then XXXX So into it and see far ARPU towards rolling may in of significant some end likely the see increases not we as the ARPU - will but deployed to increases, gets until XXXX. year fully as

how it’s right year - looking we're things now, a XXXX. for that's like for really seeing nice So but looking really

Dan Rosensweig

noticeable see the quite year but growth, ARPU setting said, nicely because we'll XXXX, exiting subscriber That's we'll only the And not to Andy up as for see expectation. great begin growth.

Operator

next Capital your of proceed with question with question. from Markets. Our Northland the Please Mike Grondahl comes line

Mike Grondahl

the congratulations and guys thanks quarter. Yes on

quick real Solver and performing? Chegg Math Writing, the how those Just are

Dan Rosensweig

This is Dan.

capabilities we've citations which to is million well. bibliographies, when XX-year-old used expanding game better which remember extraordinarily Chegg by being was in basically obvious are, by it anybody. change half is just a I'll we XX performing over it it's do able start I and been one, - went it from do than its three years company. mean, and was, does seeing And able the It to what Writing people. - that which a is most the So, what with acquired

of the create have very grammar those us subscription and see but all can which you the allowed and in things sentence remarks, structure profitable plagiarism actually And included prepared have and checker the a to been numbers ability checker do business. to

is - of because and and not years growth, old, we expect it at seen invested wonderful country So, levels business different continue cities. a enough is in couple what that only unfortunately we of is education lot to have different this but people, country in a of because that the

supported to haven't There who is people and been how or cost. learn need write or at been to high and Chegg taught low does tutored quality a lot that to of able

and what here learn fact and in and excited writing to do then can helping really are this people how people off AI now write. right we're and So about

been that's powerful. so And extraordinarily

Math nicely, On people that's it, want add everybody Math include we we can real value. Math, It so value has questions. again, remind in it the Math, that is just to its grows along the great. to able I grows, quite writing acquired to so to it Chegg a can build bump and But subscribe Study and be so we and more Pack, videos with but

beginning new you at creative led out the to that has and put we and site test on see And existing subscribers chunk for opt all that. a of can to look nice that again, of the that to

doesn't with September. be to only customers year at And big till beginning deal it's the a going why we to to year we the the start as school think so of start because the start XXXX or August going exit new that's because we're

the goal why So Study really global, really, but well. to doing Pack. That's we Math was is be It's it. its acquired inside

Operator

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

Eric Martinuzzi

materials, actually be but has with the and going The that again. to thought take FedEx few thinking the fee owning books we'll new My model - be don't that? want do a here, reversed question book, strategic is we've the What commission to with Ingram, relationship the books, from seems to I'm like a and we strategically right? of new it and own now to the the on don't buying going required the rental we're was years departure the want we back was, the behind

Dan Rosensweig

thinking it. strategic of lot a there's Well, behind

who you year weren't, believe were relationship back had and we believe of million beginning, people a Amazon spending with we the to market. we business. and had we believe a built entered We remember were gave over going of Amazon warehouse to go $XXX and price. plan a lowered those We on the out the we For textbooks. We only Ingram. one

back because had problem biggest world expensive. because of and first one were a the We Today, that of problem, to reason XXX% textbooks the for very capitalize all, that's solving that That the logistics. right? want buy them of price But a the then costs has we precipitously, better. textbooks very not little. class they logistics were for is we dropped number students serve And can the the is issue

E-textbooks years, and the because whole The it second for don't us one's point means nearly few become consignment we have just - of of capital be thing a whole is XX% which out the consignment to putting anything give and E-textbooks textbooks front market, in gets no as going pay up is the books. of anyway they

we we So better world the total all what you cheaper. really of in class textbooks get And they're case, We logistics. a and the of for value this buy, ourselves. can was wanted for return

Overwhelming least we was how several majority going get And the so of times. extend one's ability the to little longer-term a to the and This years at strategy cash. partner. books buy, by on We're from five do not the going deal that very use be get still to would can us, have Ingram. a then the owned we that the table better but are ones had on on we return has we

solved And our problems, so different of different now. at the companies all stage we just

Eric Martinuzzi

we the could to us get So that, with faster, we really their that does allow hands this sought felt service we better, Ingram didn't come the books faster. out situation, in do so down to, that? we students it partner do can can a

Dan Rosensweig

used money in have cost today almost and was five ago it's nothing. we years of And the textbooks the substantial to to and invest amount

that I $XX total we a XXXX spend might out in of million. think pointed Andy

went It a for for being our the on sheet, for insignificant a the students. and return balance We balance to but from delivery problem investors company it's get of overwhelming our better better have service our a over billion. sheet

Operator

your from question Knoblauch with final Brett Berenberg. Our comes with question. line Please of proceed

Brett Knoblauch

of about Just relationship. FedEx to kind talk that

any you'd free you're guidance about what any to XXXX spend Looking spend for you CapEx besides cash Is textbooks flow, on said on XX textbooks? next at going year. million there

Andy Brown

be would to million Yes, CapEx going to in a we we guide obviously, textbook. but XXXX $XX are the for that February typically or call, adding we in

that for beyond year flow been to as those saying it's obviously to that where right flow more would would our anticipating or blip. be some the adjusted textbooks, XXXX we going just of a XX% purchase and out initial to XX% will that's cash of same it EBITDA. anticipate XXXX. free in for need XX%, were bit a temporary than we've But one to somewhere conversion free As Well, be little XX% strong time, we but still maybe certainly period textbooks, cash

Brett Knoblauch

all? I roughly anything on or And for internally try recently bundle combat doing platform new that then as just affected to your maybe their competition, you $XX maybe Bartleby Has maybe there and ads you're to your ready thoughts strategy business of to seen launch your get get and I've and this XX. on is Bartleby offering just want Is lot at for that? a

Dan Rosensweig

radar. know a don't this little sounding They I too the way on say don't without even confident. appear to best the

rate. can see growth So our you

think I speaks it itself. for

up it just - our and for show us. no students So doesn't for

Operator

further like call the I Rosensweig remarks. questions over closing queue, the back for there no Since would Mr. left to any turn in Dan to are

Dan Rosensweig

years business students or and pain to solve their succeed of need not, early and all, to for help we'd were if and us. business our our in rental transition it textbook joining thank XX academic first our their everybody started recognized going journey. offerings we on ago biggest you Believe journey model we Well points with

time, critical we now and students. Chegg continue we Chegg of as expand offer to quality of careers, as Thinkful, has globally which academic services by economy professional now both quantity critical global In is period and students The both mentioned exciting. success recognition growing the XX% today's journey help is the them a very academic brand is journey their and skills needed achieved we short today their in of helping to during and their addition master

more TAM And the for create our services, adding and see grown, constantly as as and Always increased value to serve. adding can customers capabilities expand a students. we been our for content. ourselves That's we of platform the always have and value customers the now goal we more expanding number

of end first journey seems than that my this bigger just ever look marks be and and interesting at XX it's opportunity year getting important Although to to more years the the Chegg, started before.

be chapter you of And we're more ahead truly who've we And So excited. to thank we excited as I story. of about Chegg to XXXX, look really next couldn't want excited next us, the about I can journey next see year and its been to with you the on you talking early, we're we think look and forward on the but all super to call.

much. very all you thank So

Operator

today's concludes teleconference. This

have at participation day. wonderful disconnect for Thank time. now you a your may You your and lines this

Chegg (CHGG) 4 Nov 192019 Q3 Earnings call transcript