Chegg to Buy Coding Bootcamp Thinkful for $80 Million

Mergers and Acquisitions

Chegg to Buy Coding Bootcamp Thinkful for $80 Million

By Wade Tyler Millward     Sep 4, 2019

Chegg to Buy Coding Bootcamp Thinkful for $80 Million

Chegg, a Santa Clara, Calif.-based publicly traded student services company, plans to buy Thinkful, a Brooklyn-based online coding bootcamp.

The acquisition will cost Chegg about $80 million in cash for Thinkful, with possible additional payments of up to $20 million in cash or stock based on performance, according to a statement Wednesday. Both companies’ boards of directors have approved the deal. It is expected to close in the fourth quarter.

Chegg had been holding onto $1.1 billion in cash, with executives saying some of the money would go toward acquisition. Last year, it bought WriteLab for $15 million in cash.

The company had been interested in entering the bootcamp space for about two years, says Nathan Schultz, Chegg president of learning services. Chegg vetted about 40 bootcamps before Thinkful won Chegg over with its direct-to-consumer strategy and less reliance on university partnerships than its competitors. “Our DNA is direct to consumer, and there are not a lot of those out there,” Schultz says. “We got bit by the Thinkful bug.”

While Chegg and Thinkful users won’t see any immediate changes, Chegg tools including its Q-and-A database and Chegg Tutors chat system. Schultz declined to say whether the Thinkful employee count will change but did say Chegg itself is hiring.

For Chegg, founded in 2005, this latest acquisition will expand its direct-to-student learning platform and add more technology career courses. For Thinkful, the acquisition means faster course development, lower cost for students and increased reach.

In one of the more expensive Thinkful programs, students pay $18,500 in tuition and $250 in an upfront fee for an immersive data science program. The program comes with four different payment options including an interest-bearing loan and an income-share agreement.

Thinkful will contribute about $2 million to Chegg’s fourth-quarter revenue. Thinkful’s 2018 net revenue was about $14 million, an increase of about 30 percent over the previous year.

Chegg expects the acquisition will cause an adjusted earnings loss of about $4 million in the fourth quarter. As the service scales, the adjusted earnings should break even in 2020.

The publicly traded company has also adjusted guidance for its future performance. It expects total 2019 revenue of between $400 and $404 million, an increase from $398 million to $402 million reported in July. It expects 2019 adjusted earnings of $117 million to $120 million, an increase from $121 million to $124 million reported in July.

Thinkful claims that 85 percent of its graduates get jobs in their field of study within six months of graduation. Courses include engineering, data science, data analytics and product design. The company offers income-share agreements and other payment options.

As of January 2018, Thinkful had raised about $16 million in venture capital since its founding in 2012. In 2017 and 2018, Thinkful bought fellow online coding schools Viking Code School and Bloc, respectively.

Earlier this year, 2U purchased Trilogy Education Services, an education company that helps set up and run short-term coding programs at university extension schools, for $750 million. At the time, 2U reported Trilogy would generate $135 million in revenue for fiscal year 2019.

   

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