Chegg, Inc.’s (CHGG - Free Report) first quarter 2018 adjusted earnings of 1 cents per share was in line with the Zacks Consensus Estimate and increased substantially from the prior-year quarter’s loss of 3 cents. The upside can be attributed to increased investments behind new subjects, content, formats and services.
Net revenues of $76.9 million surpassed the consensus estimate of $74.4 million by 3.5% and rose 23% year over year. The uptrend was primarily backed by increase in Chegg Services revenues.
Post the earnings release, shares of Chegg returned more than 5.9% in after-hours trading on Apr 26. Also, the company’s shares have rallied 140.7% in the past year, outperforming the industry’s rise of 23.4%.
Let’s delve deeper into the numbers.
Chegg Services Revenues & Subscription Details
Chegg’s total net revenues are derived from two streams, Chegg Services revenues and Required Materials revenues.
Chegg Services revenues of $56.3 million increased 37% year over year and was above the guidance of $54-$55.5 million. The upside was driven by an increased rate of subscription. The Chegg Services subscriber base totaled 1.6 million in the quarter, up 44% year over year.
Total Chegg Study content views surged 59% year over year to 158 million.
Operating Highlights
Gross profit of $56.7 million in the quarter increased 37.6% from the year-ago quarter’s level. Gross margin of 73.7% was higher than the prior-year quarter and the company’s expectations, courtesy of additional revenues from Chegg Services.
Adjusted EBITDA of $16.7 million shows a substantial improvement from the year-ago quarter’s level by improving 75%. The figure is also slightly above the company’s earlier expectations of $14-$16 million.
Chegg, Inc. Price, Consensus and EPS Surprise
Balance Sheet
Chegg had cash and cash equivalents of $106.8 million for the period ending Mar 31, 2018, compared with $126.5 million as of Dec 31, 2017.
Second-Quarter 2018 Guidance
Net revenues are expected in the range of $69-$71 million, whereas Chegg Services Revenues are anticipated in the band of $58-$60 million. Gross margin is expected to increase between 74% and 75%, and adjusted EBITDA is projected within $17-$18.5 million.
2018 Guidance
For 2018, the company expects net revenues in the range of $300-$305 million, higher than the previous range of $295-$300 million. Chegg Services Revenues are projected in the range $243-$246 million, up from previous projection of $240-$243 million.
Gross margin between 72% and 74% is expected for 2018, same as the previous range. The company expects adjusted EBITDA in the range of $77-$79 million, up from previous range of $74-$76 million.
Capital expenditures are still expected within $30-$35 million.
Zacks Rank & Stocks to Consider
Chegg has a Zacks Rank #3 (Hold).
A few better-ranked stocks in the Computer and Technology sector are Nice Systems (NICE - Free Report) , Twitter, Inc. and Veeva Systems Inc. (VEEV - Free Report) , each flaunting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Nice System’s and Twitter’s earnings for 2018 are expected to grow 12.2% and 36.4% respectively.
Veeva Systems’ fiscal 2019 earnings are expected to grow 12.2%,
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Chegg, Inc.’s (CHGG - Free Report) first quarter 2018 adjusted earnings of 1 cents per share was in line with the Zacks Consensus Estimate and increased substantially from the prior-year quarter’s loss of 3 cents. The upside can be attributed to increased investments behind new subjects, content, formats and services.
Net revenues of $76.9 million surpassed the consensus estimate of $74.4 million by 3.5% and rose 23% year over year. The uptrend was primarily backed by increase in Chegg Services revenues.
Post the earnings release, shares of Chegg returned more than 5.9% in after-hours trading on Apr 26. Also, the company’s shares have rallied 140.7% in the past year, outperforming the industry’s rise of 23.4%.
Let’s delve deeper into the numbers.
Chegg Services Revenues & Subscription Details
Chegg’s total net revenues are derived from two streams, Chegg Services revenues and Required Materials revenues.
Chegg Services revenues of $56.3 million increased 37% year over year and was above the guidance of $54-$55.5 million. The upside was driven by an increased rate of subscription. The Chegg Services subscriber base totaled 1.6 million in the quarter, up 44% year over year.
Total Chegg Study content views surged 59% year over year to 158 million.
Operating Highlights
Gross profit of $56.7 million in the quarter increased 37.6% from the year-ago quarter’s level. Gross margin of 73.7% was higher than the prior-year quarter and the company’s expectations, courtesy of additional revenues from Chegg Services.
Adjusted EBITDA of $16.7 million shows a substantial improvement from the year-ago quarter’s level by improving 75%. The figure is also slightly above the company’s earlier expectations of $14-$16 million.
Chegg, Inc. Price, Consensus and EPS Surprise
Balance Sheet
Chegg had cash and cash equivalents of $106.8 million for the period ending Mar 31, 2018, compared with $126.5 million as of Dec 31, 2017.
Second-Quarter 2018 Guidance
Net revenues are expected in the range of $69-$71 million, whereas Chegg Services Revenues are anticipated in the band of $58-$60 million. Gross margin is expected to increase between 74% and 75%, and adjusted EBITDA is projected within $17-$18.5 million.
2018 Guidance
For 2018, the company expects net revenues in the range of $300-$305 million, higher than the previous range of $295-$300 million. Chegg Services Revenues are projected in the range $243-$246 million, up from previous projection of $240-$243 million.
Gross margin between 72% and 74% is expected for 2018, same as the previous range. The company expects adjusted EBITDA in the range of $77-$79 million, up from previous range of $74-$76 million.
Capital expenditures are still expected within $30-$35 million.
Zacks Rank & Stocks to Consider
Chegg has a Zacks Rank #3 (Hold).
A few better-ranked stocks in the Computer and Technology sector are Nice Systems (NICE - Free Report) , Twitter, Inc. and Veeva Systems Inc. (VEEV - Free Report) , each flaunting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Nice System’s and Twitter’s earnings for 2018 are expected to grow 12.2% and 36.4% respectively.
Veeva Systems’ fiscal 2019 earnings are expected to grow 12.2%,
Looking for Stocks with Skyrocketing Upside?
Zacks has just released a Special Report on the booming investment opportunities of legal marijuana.
Ignited by new referendums and legislation, this industry is expected to blast from an already robust $6.7 billion to $20.2 billion in 2021. Early investors stand to make a killing, but you have to be ready to act and know just where to look.
See the pot trades we're targeting>>
Zacks Names "Single Best Pick to Double"
From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.
It’s a little-known chemical company that’s up 65% over last year, yet still dirt cheap. With unrelenting demand, soaring 2022 earnings estimates, and $1.5 billion for repurchasing shares, retail investors could jump in at any time.
This company could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in little more than 9 months and NVIDIA which boomed +175.9% in one year.
Free: See Our Top Stock and 4 Runners Up >>
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