Chegg to buy VC-backed Thinkful for $80 mln

Chegg Inc has agreed to acquire Thinkful, an online learning platform, for $80 million. The deal is expected to close early in the fourth quarter of 2019. Thinkful’s backers included Owl Ventures and Tribeca Venture Partners.

PRESS RELEASE

SANTA CLARA, Calif., Sept. 4, 2019 /PRNewswire/ — Chegg, Inc. (NYSE: CHGG), a Smarter Way to Student, announced today that it has entered into a definitive agreement to acquire Thinkful, an online learning platform that offers professional courses directly to students across America. 85% of Thinkful graduates get jobs in their field of study within six months of graduating their program.

“With the anticipated addition of Thinkful to our platform, Chegg will continue to expand our offerings and make it easier for students to accelerate their path from learning to earning,” said Dan Rosensweig, CEO of Chegg. “Students are increasingly looking to improve their professional opportunities by learning the most relevant job skills, either while in school or soon after. Adding Thinkful courses to our suite of Chegg Learning Services will enable us to empower students to obtain in-demand, high-quality job skills, for the fastest-growing job categories, with affordable prices. Thinkful has achieved strong revenue growth of greater than 30% year-over-year because it has focused on going directly to students and helping them gain the most valuable skills for today’s workforce.”

Founded in 2012 by Darrell Silver and Daniel Friedman, Thinkful offers high-quality, online, outcomes-focused curricula, coupled with live experts, to give learners highly sought-after technology skills such as engineering, data science, data analytics and product design.

“We founded Thinkful because we saw millions of people with no way to achieve a fulfilling career, especially in high-tech fields, and we knew we could fix it,” said Darrell Silver, CEO of Thinkful. “Becoming part of the Chegg platform will allow us to accelerate course development, lower the cost for students, grow, and increase our reach.”

Thinkful, which has been referred to as “the future of higher learning in America,”1 seeks to make its programs broadly available by offering high-quality content at low costs and with a variety of payment options, including income share agreements. Thinkful’s average customer is 30 years-old, two-thirds of its customers work while in their classes, and half do not have a college degree.

The International Labor Organization estimates that the impact of rapid automation on most developed countries, including the United States, is causing a mismatch between existing traditional qualifications and the skills required in many jobs. This creates a growing need to address workforce shortages in skills in the digital economy.2

“Being student-focused and going direct to students is at the heart of Chegg. As a result, we have an in-depth understanding of what students want in both academic and career services. Students want us to provide a relevant, outcomes-focused, pathway to help them get tech-enabled jobs and advance professionally once they are in those jobs,” said Nathan Schultz, President of Learning Services at Chegg. “We believe that providing affordable, high-quality, human-supported, skills-based training represents an incredible opportunity to improve outcomes for learners, expands our TAM, and continues to realign our education system towards workforce development both in the United States and around the world,” Schultz added.

Chegg expects to acquire Thinkful for approximately $80 million in an all-cash transaction. There are potential additional payments of up to $20 million, which may be paid in cash or restrictive stock units, at Chegg’s sole discretion, subject to performance-based contingencies. The acquisition, which was approved by the boards of directors of Chegg and Thinkful, is expected to close early in the fourth quarter of 2019, subject to customary closing conditions.

Chegg expects, assuming an early fourth quarter close of the acquisition, the Q4 2019 revenue contribution of Thinkful, after the effect of the fair-value adjustment through purchase accounting to Thinkful’s deferred revenue, to be approximately $2 million. Thinkful’s 2018 net revenue was approximately $14 million, an increase of approximately 30% year-over-year. As part of Chegg, we expect the impact of the acquisition of Thinkful to result in a Q4 2019 adjusted EBITDA loss of approximately $4 million, and as the service scales, we expect its adjusted EBITDA to be breakeven in 2020 and to contribute to Chegg’s adjusted EBITDA in fiscal years thereafter.

Updated Chegg 2019 guidance including the Thinkful contribution, which assumes an early Q4 close:
Total 2019 revenue: $400 million – $404 million, with Chegg Services revenue $332 million – $334 million
2019 adjusted EBITDA: $117 million – $120 million
No change to Q3 guidance as transaction is expected to close in Q4
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.”

About Chegg

Chegg puts students first. As the leading student-first connected learning platform, Chegg strives to improve the overall return on investment in education by helping students learn more in less time and at a lower cost. 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.