8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

Date of report: June 4, 2020

(Date of earliest event reported)

Chegg, Inc.

(Exact Name of Registrant as Specified in Its Charter)

Delaware

(State or Other Jurisdiction of Incorporation)

001-36180	20-3237489
(Commission File Number)	(IRS Employer Identification No.)		3990 Freedom Circle
---	---	---	---
Santa Clara,	California	95054
(Address of Principal Executive Offices)			(Zip Code)

(408) 855-5700

(Registrant’s Telephone Number, Including Area Code)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common stock, $0.001 par value per share	CHGG	The New York Stock Exchange

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Item 2.01 Completion of Acquisition or Disposition of Assets.

On June 4, 2020, Chegg, Inc. (“Chegg”) acquired Mathway LLC, a Delaware limited liability company (“Mathway”), an online, on-demand math problem solving resource, pursuant to an Interest Purchase Agreement, dated as of June 4, 2020 (the “Agreement”), by and among Chegg, Mathway, and the members of Mathway (such transaction, the “Acquisition”). Pursuant to the terms of the Agreement, Chegg acquired all of the outstanding membership interests of Mathway, resulting in Mathway becoming a wholly owned subsidiary of Chegg, for approximately $100.0 million in cash, subject to the terms and conditions of the Agreement and adjustment for Mathway’s net working capital, indebtedness, unpaid transaction expenses and taxes. Approximately $88.2 million was paid at the closing of the Acquisition, $0.1 million was held in escrow as security for net working capital adjustment and $7.5 million was held in escrow as security for the Mathway members’ indemnification obligations pursuant to the Agreement. Additionally, Chegg may make up to an additional $15.0 million in cash earnout payments to the Mathway members, subject to the achievement of specified performance milestones and continued service of such members with Chegg. One-third of the earnout payments may initially become payable by June 4, 2021, the first anniversary of the closing date, and the remaining amount, if earned, will be paid quarterly over a two-year period, commencing on June 4, 2021.

Item 7.01 Regulation FD Disclosure.

On June 4, 2020, Chegg issued a press release announcing its acquisition of Mathway which includes the impact on Chegg's guidance for the quarter ending June 30, 2020. A copy of the press release is attached hereto as Exhibit 99.1.

The information in this Item 7.01 of this Current Report on Form 8-K, including Exhibit 99.1, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.

Item 9.01 Financial Statements and Exhibits.

(a) Financial statements of business acquired.

As a result of acquiring Mathway and based on the criteria in Rule 3-05 of Regulation S-X, Chegg would ordinarily be required to file certain historical audited financial statements for Mathway and corresponding pro forma financial information pursuant to Rule 11-01 of Regulation S-X. However, because Chegg believed that Mathway’s financial statements would not be material to Chegg’s stockholders and would be of limited value to investors, Chegg requested relief from the Securities and Exchange Commission (the “SEC”) from the requirement to provide historical audited financial statements of Mathway otherwise required by Rule 3-05 of Regulation S-X and the corresponding pro forma financial statements set forth in Rule 11-01 of Regulation S-X. The SEC granted the relief request on April 24, 2020.

(b) Pro forma financial information.

Reference is made to the disclosure set forth in Item 9.01(a) above.

(d) Exhibits

Exhibit No.	Description
99.1	Press release issued by Chegg, Inc., datedJune4, 2020
104	Cover Page Interactive Data File (embedded within the Inline XBRL document)

Forward-Looking Statements

This Current Report on Form 8-K contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding Chegg’s potential payment of cash earnout payments to the Mathway members and the timing of such payments. We have based these forward-looking statements largely on management’s current expectations and projections about future events and trends that we believe may affect our financial condition, results of operations, business strategy, short-term and long-term business operations and objectives, and financial needs. These forward-looking statements are subject to a number of risks, uncertainties, and assumptions, including the Mathway members’ ability to achieve the specified milestones and their continued service with Chegg, the potential impact on the business of Mathway due to the Acquisition, general economic conditions, including the ongoing effects of the COVID-19 pandemic, competition, integration risks, and the other factors described in Chegg’s most recent Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2020 filed with the SEC on May 4, 2020 and Chegg’s other SEC filings. Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties, and assumptions, the future events discussed herein may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements. These forward-looking statements are made only as of the date hereof and Chegg undertakes no obligation to revise or publicly release the results of any revision to these forward-looking statements, except as required by law.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

CHEGG, INC.
By: /s/ Andrew Brown
Andrew Brown
Chief Financial Officer

Date: June 4, 2020

Document

EXHIBIT 99.1

Chegg Acquires Mathway to Expand its Math Offerings Globally

Chegg adds a premier global math solver to its portfolio of world-class direct-to-student learning support

SANTA CLARA, Calif., June 4, 2020 /BUSINESS WIRE/ -- Chegg, Inc. (NYSE: CHGG), a Smarter Way to Student®, today announced it has acquired the popular math solver Mathway. Mathway has subscribers in approximately 100 countries and has been localized in 13 languages.

“Math proficiency is a foundational and critical pillar of learning around the world,” said Nathan Schultz, President of Learning Services at Chegg. “The modern student understands that the mastery of math is more important than ever, and Mathway has built an incredible product that students love. Bringing Mathway into the Chegg family will bring additional subject coverage, languages, and international reach, significantly expanding our TAM,” Schultz added.

Math deficiency is a large-scale issue that is pervasive in both education and workforce preparedness. In the latest OECD rankings, the US ranked 37^th^ of developed countries in terms of math proficiency^1^.

Founded in 2002 by middle school friends Frank Balcavage and Jake Kuehner, Mathway has become one of the highest rated education mobile apps^2^. Mathway teaches students with an easy-to-use solver that can be accessed through optical character recognition and offers step-by-step instruction to teach both simple and complex mathematics.

“In Mathway we set out to build a math solver that could work directly with a range of students to help them master all forms of math, and meet them at their level,” said Balcavage. “Chegg shares our direct-to-the-student, always available, step-by-step instruction model. By joining them we believe we will quickly be able to scale to help millions of students at a time when math is increasingly important,” Kuehner added.

Mathway offers a vast range of subject areas with 400+ different topics including pre-algebra, algebra, trigonometry, pre-calculus, calculus, and linear algebra, and related disciplines. In 2019, Mathway solved over 1.3 billion problems for learners.

Mathway is used across the academic spectrum for both learning and instruction; approximately half of its users are in high school, while 1 in 10 are teachers, professors or parents. Mathway’s ‘Ask an Expert - Live’ feature allows those still struggling with a concept to get immediate support.

Chegg acquired Mathway for approximately $100 million in an all-cash transaction. There are potential additional payments of up to $15 million payable in cash over the next three years that remain subject to performance and other contingencies.

Mathway's 2019 unaudited net revenue was approximately $13 million. Chegg expects the Q2 2020 revenue contribution of Mathway, after the effect of the fair-value adjustment through purchase accounting to deferred revenue, to be approximately $0.5 million and an adjusted EBITDA loss of approximately $0.5 million.

For more information about the use of forward-looking non-GAAP measures, see the below section of the press release titled "Use of Non-GAAP Measures."

^1^ http://www.oecd.org/pisa/PISA%202018%20Insights%20and%20Interpretations%20FINAL%20PDF.pdf

^2^ IOS Appstore, 4.9/5 rating

About Chegg

Chegg is a Smarter Way to Student. As the leading direct-to-student learning platform, we strive to improve educational outcomes by putting the student first in all our decisions. We support students on their journey from high school to college and into their career with tools designed to help them pass their test, pass their class, and save money on required materials. Our services are available online, anytime and anywhere, so we can reach students when they need us most. Chegg is a publicly held company based in Santa Clara, California and trades on the NYSE under the symbol CHGG. For more information, visit www.chegg.com.

Use of Non-GAAP Measures

To supplement Chegg's financial results presented in accordance with generally accepted accounting principles in the United States ("GAAP"), this press release contains the non-GAAP financial measure adjusted EBITDA. The presentation of this non-GAAP financial measure is not intended to be considered in isolation from, as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP and may be different from non-GAAP financial measures used by other companies. Chegg defines adjusted EBITDA as earnings before interest, taxes, depreciation and amortization, or EBITDA, adjusted for print textbook depreciation expense and to exclude share-based compensation expense, other income, net, restructuring charges, and acquisition-related compensation costs. To the extent additional significant non-recurring items arise in the future, Chegg may consider whether to exclude such items in calculating the non-GAAP financial measures it uses.

Chegg believes that adjusted EBITDA, when taken together with the corresponding GAAP net loss, provide meaningful supplemental information regarding Chegg's performance by excluding items that may not be indicative of Chegg's core business, operating results or future outlook. Chegg management uses adjusted EBITDA in assessing Chegg's operating results, as well as when planning, forecasting and analyzing future periods and believes that such measure enhances investors' overall understanding of our current financial performance. Adjusted EBITDA also facilitates comparisons of Chegg's performance to prior periods.

A reconciliation of forward-looking Q2 2020 adjusted EBITDA to net loss is not available without unreasonable effort due to the unavailability of certain information needed to calculate reconciling items, largely driven by the unknown effect of purchase accounting adjustments on such reconciling line items. However, Chegg believes that the change between the adjusted EBITDA guidance contained within this press release, from our most recently issued adjusted EBITDA guidance for Q2 2020 furnished in our Current Report on Form 8-K and filed with the Securities and Exchange Commission ("SEC") on May 2, 2020, will mostly impact the net loss reconciling line item.

Forward-Looking Statements

This press release may be deemed to contain forward-looking statements, which are subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, including statements regarding Chegg's belief that Mathway will significantly expand Chegg’s TAM; that Mathway will be able to quickly scale to help millions of more students; Mathway’s expected Q2 2020 revenue contribution; and Mathway’s expected contribution of $0.5 million adjusted EBITDA loss for Q2 2020. Statements regarding future events are based on management's current expectations and projections about future events and trends that we believe may affect Chegg’s financial condition, results of operations, business strategy, short-term and long-term business operations and objectives, and financial needs. These forward-looking statements are subject to a number of risks, uncertainties, and assumptions, including

the potential impact on the business of Mathway due to the acquisition, general economic conditions, including the ongoing effects of the COVID-19 pandemic, competition, integration risks, and other factors described in the "Risk Factors" section of Chegg's most recent Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2020 filed with the SEC on May 4, 2020 and Chegg's other SEC filings. Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties, and assumptions, the future events discussed herein may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements. You can obtain copies of Chegg's SEC filings on the SEC's website at www.sec.gov or at Chegg Investor Relations website at investor.chegg.com. The forward-looking statements included herein are made only as of the date hereof, and Chegg undertakes no obligation to revise or update any forward-looking statements for any reason, except as required by law.

Investor Contact	Media Contact
Tracey Ford	Marc Boxser
ir@chegg.com	press@chegg.com