Chegg and Ingram Form Strategic Alliance Accelerating Chegg’s Transition to Digital Revenue
Chegg Maintains Student Brand, Owns Customer Relationship and Data, Leverages Ingram’s World-class Logistics, Inventory Management and Network of Warehouses
Chegg, The Student Hub, today announced a significant strategic alliance with Ingram Content Group Inc., the world’s largest distributor of books.
Key elements of the alliance include Chegg continuing to own the customer experience, including catalog, end-user pricing, marketing, customer support, ongoing student relationships and data. In addition, Chegg and its brand partners will continue to deliver surprise and delight to students with the products found inside of Chegg-branded boxes, which Ingram will use to fulfill orders.
Ingram will be responsible for the sourcing, warehousing, fulfillment, shipping and rental returns of their inventory and Chegg will receive a commission for textbooks rented or sold through its web and mobile sites, recording such commissions as digital revenue.
Chegg has already begun transferring ownership of a combination of current and new inventory to Ingram in anticipation of textbook volume for the upcoming fall semester. Chegg expects this will result in a substantial reduction in net cash expenditures on textbooks in Q3 2014 and in the second half of 2014.
Chegg and Ingram expect to continue migrating inventory ownership over the next several academic semesters, further reducing Chegg’s use of cash on print textbooks. Chegg expects this to strengthen its balance sheet and cash flow.
“We continue putting students first, reinforcing our direct relationship with them and accelerating our transition to digital revenue,” said Dan Rosensweig, chairman and CEO of Chegg. “By leveraging Ingram’s world-class logistical capabilities, this alliance allows Chegg to maintain all of the advantages of brand, customer acquisition, marketing and data from the print textbook business, while freeing up significant cash.”
“This is a long-term strategic growth opportunity,” said John Ingram, chairman and CEO of Ingram Content Group. “Together, we will improve service and delivery speed for Chegg’s students through the combined forces of Chegg’s consumer brand and reach, and our expertise in distribution and logistics.”
Chegg will discuss this agreement in more detail on its earnings call today, August 4, 2014, at 2:00 p.m. PDT (5:00 p.m. EDT). A live webcast of the call will be available online at http://investor.chegg.com under the Events & Presentations menu.
Chegg puts students first and is proud to have saved students and their families more than $450 million in 2013 alone. As the leading student-first connected learning platform, Chegg’s Student Hub makes higher education more affordable and more accessible, all while improving student outcomes. 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
Ingram Content Group Inc. is a subsidiary of Nashville-based Ingram Industries Inc. The company got its start in 1964 as a textbook depository and has since grown and transformed into a comprehensive publishing industry services company that offers numerous solutions, including physical book distribution, print-on-demand and digital services. Committed to the success of its partners, Ingram works closely with publishers, retailers, libraries and schools around the world to provide them with the right products and services to help them succeed in the dynamic and increasingly complex world of content publishing. Ingram’s operating units are Ingram Book Company, Lightning Source Inc., Vital Source Technologies, Inc., Ingram Periodicals Inc., Ingram International Inc., Ingram Library Services Inc., Spring Arbor Distributors Inc., Ingram Publisher Services Inc., Tennessee Book Company LLC, Coutts Information Services, and ICG Ventures Inc. Learn more about Ingram Content Group at www.ingramcontent.com.
This press release contains forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, which include, without limitation those regarding Chegg’s expectation that its net cash expenditures will be substantially reduced in Q3 2014 and in the second half of 2014; Chegg’s expectation that it will continue to migrate inventory ownership over the next several academic semesters, and its expectation that it will reduce its cash use on print textbooks to strengthen its balance sheet and cash flow; Chegg’s expectation that leveraging Ingram’s logistical capabilities will allow it to maintain its brand, customer acquisition, marketing and data from the print textbook business while freeing up significant cash; and Chegg’s expectation that the strategic alliance with Ingram will improve service and delivery speed. These statements are not guarantees of future performance, but are based on management’s expectations as of the date of this press release and assumptions that are inherently subject to uncertainties, risks and changes in circumstances that are difficult to predict. Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements to be materially different from any future results, performance or achievements. Important factors that could cause actual results to differ materially from those expressed or implied by these forward-looking statements include the following: challenges in integrating the Ingram strategic alliance; changes in Chegg’s addressable market; competition, including changes in the competitive environment, pricing changes, and increased competition; Chegg’s ability to build and expand its digital services offerings, including to develop new products and services and on a cost-effective basis and to integrate acquired businesses and assets; Chegg’s ability to attract new students, increase engagement and increase monetization; expenses that exceed expectations; the impact of seasonality on the business; and general economic and industry conditions. These and other important risk factors are described more fully in documents filed with the Securities and Exchange Commission, including Chegg’s Form 10-Q for the quarter ended March 31, 2014, and could cause actual results to vary from expectations. Additional information will also be set forth in our Quarterly Report on Form 10-Q for the quarter ended June 30, 2014. All information provided in this release and in the conference call is as of the date hereof and Chegg undertakes no duty to update this information except as required by law.