Why Chegg Is Acquiring Thinkful For $80 Million

By Dan Anderson ● September 6, 2019
  • Educational tech company Chegg announced it is acquiring Thinkful for $80 million. These are the details behind the deal.

Education technology company Chegg announced it is acquiring Thinkful — an online learning company that offers professional courses directly to students across America — for $80 million. The deal is an all-cash transaction. And 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.

This acquisition was already approved by the boards of directors of Chegg and Thinkful. And it is expected to close early in the fourth quarter of 2019 subject to customary closing conditions.

Launched in 2012 by Darrell Silver and Daniel Friedman, Thinkful is known for offering high-quality outcomes-focused curricula coupled with live experts to give learners highly sought-after technology skills like engineering, data science, data analytics and product design. And within six months of graduation, 85% Thinkful’s users get jobs in their field of study.

“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 Chegg CEO Dan Rosensweig in a statement. “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.”

Thinkful is seeking 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. And 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.

“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,” added Silver. “Becoming part of the Chegg platform will allow us to accelerate course development, lower the cost for students, grow, and increase our reach.”

With the rise of artificial intelligence, the International Labor Organization estimates that the impact of rapid automation on most developed countries including the US is causing a mismatch between existing traditional qualifications and the skills required in many jobs. So this creates a growing need to address workforce shortages in skills in the digital economy.

“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,” explained Chegg’s President of Learning Services Nathan Schultz. “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.”

Thinkful’s 2018 net revenue was around $14 million, an increase of about 30% year-over-year. As part of Chegg, the company is expecting the acquisition of Thinkful to result in a Q4 2019 adjusted EBITDA loss of approximately $4 million. And as the service scales, the company is expecting adjusted EBITDA to be breakeven in 2020 and to contribute to Chegg’s adjusted EBITDA in fiscal years thereafter.

With the Thinkful contribution, Chegg’s updated 2019 guidance is expected to hit $400 million – $404 million with Chegg Services revenue being $332 million – $334 million. And the 2019 adjusted EBITDA is expected to hit $117 million – $120 million
 with no change to Q3 guidance as the transaction is expected to close in Q4.