Chegg, Inc.’s (CHGG - Free Report) fourth-quarter 2018 earnings and revenues topped the Zacks Consensus Estimate, given higher-than-expected margins and strong contribution from Chegg Services. The educational technology company also lifted its guidance for 2019, helping Chegg’s shares to gain 10.1% in after-hour trading on Monday.
The company’s adjusted earnings of 25 cents per share came ahead of the analysts’ expectation of 21 cents by 19.1%. The reported figure also increased more than 66% from the year-ago profit level of 15 cents. The upside can be attributed to increased investments in new subjects, content, formats and services.
Net revenues of $95.7 million surpassed the consensus mark of $91.7 million by 4.3% and rose 30% year over year. The uptrend was primarily backed by an increase in Chegg Services revenues.
Chegg Services Revenues & Subscription Details
Chegg’s total net revenues are derived from two streams, namely Chegg Services and Required Materials.
Chegg Services revenues (accounting for 85% of total net revenues) of $81.7 million increased 35% year over year. The upside was driven by an increased rate of subscription. The Chegg Services subscriber base totaled 1.9 million in the quarter, up 34% year over year.
Total Chegg Study content views surged 32% year over year to 224 million in the quarter.
Operating Highlights
Gross profit of $73.6 million in the quarter increased 36% from the year-ago level. Gross margin of 76.9% was higher than the prior-year quarter’s 73.6% and also surpassed the company’s expectation, courtesy of additional revenues from Chegg Services.
Adjusted EBITDA of $34.8 million reflects a substantial improvement of 65.1% from the year-ago level of $21.1 million.
2018 Highlights
Adjusted earnings came in at 55 cents, beating the consensus estimate of 50 cents and also improving 96.4% year over year. Total revenues increased 26% to a record $321 million, beating analysts’ expectation of $317.1 million.
Importantly, Chegg Services' revenues grew 37% to $254 million and hit a record of 3.1 million subscribers, reflecting an increase of 850,000 or 38% from 2017. Gross margin expanded 600 basis points (bps) to 75% from 69% in 2017, resulting in adjusted EBITDA of $83 million (up 80% from 2017) or 26% of total revenues.
Balance Sheet
Chegg had cash and cash equivalents of $374.7 million for the period ended Dec 31, 2018 compared with $126.5 million as of Dec 31, 2017.
First-Quarter 2019 Guidance
Net revenues are expected in the range of $93.5-$95.5 million, whereas Chegg Services revenues are anticipated in the band of $72.5-$74.5 million. Gross margin is expected between 74% and 75%, and adjusted EBITDA is projected within $22-$23 million.
2019 Guidance Raised
The company now expects net revenues in the range of $390-$395 million, higher than the previous expectation of $388 million. Chegg Services Revenues are projected in the range $327-$331 million, up from previous projection of $326 million.
Gross margin is expected between 75% and 76% for 2019 compared with 75% projected earlier. The company expects adjusted EBITDA in the range of $115-$118 million, up from previous projection of $112 million. Notably, this represents approximately 350 bps increase from 26% achieved in 2018.
Capital expenditure is expected within $40-$50 million.
Zacks Rank & Other Stocks to Consider
Currently, Chegg has a Zacks Rank #2 (Buy).
Other top-ranked stocks in the Computer and Technology sector include AudioEye, Inc. (AEYE - Free Report) , Benefitfocus, Inc. and The Meet Group, Inc. , each flaunting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
AudioEye, Benefitfocus and Meet Group’s earnings for 2019 are expected to grow 33.3%, 72% and 19.4%, respectively.
Zacks' Best Stock-Picking Strategy
It's hard to believe, even for us at Zacks. But from 2000-2018, while the market gained +4.8% per year, our top stock-picking strategy averaged +54.3% per year.
How has that screen done lately? From 2017-2018, it sextupled the market's +15.8% gain with a soaring +98.3% return.
Free – See the Stocks It Turned Up for Today >>
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 >>
Chegg, Inc.’s (CHGG - Free Report) fourth-quarter 2018 earnings and revenues topped the Zacks Consensus Estimate, given higher-than-expected margins and strong contribution from Chegg Services. The educational technology company also lifted its guidance for 2019, helping Chegg’s shares to gain 10.1% in after-hour trading on Monday.
The company’s adjusted earnings of 25 cents per share came ahead of the analysts’ expectation of 21 cents by 19.1%. The reported figure also increased more than 66% from the year-ago profit level of 15 cents. The upside can be attributed to increased investments in new subjects, content, formats and services.
Net revenues of $95.7 million surpassed the consensus mark of $91.7 million by 4.3% and rose 30% year over year. The uptrend was primarily backed by an increase in Chegg Services revenues.
Chegg Services Revenues & Subscription Details
Chegg’s total net revenues are derived from two streams, namely Chegg Services and Required Materials.
Chegg Services revenues (accounting for 85% of total net revenues) of $81.7 million increased 35% year over year. The upside was driven by an increased rate of subscription. The Chegg Services subscriber base totaled 1.9 million in the quarter, up 34% year over year.
Total Chegg Study content views surged 32% year over year to 224 million in the quarter.
Operating Highlights
Gross profit of $73.6 million in the quarter increased 36% from the year-ago level. Gross margin of 76.9% was higher than the prior-year quarter’s 73.6% and also surpassed the company’s expectation, courtesy of additional revenues from Chegg Services.
Adjusted EBITDA of $34.8 million reflects a substantial improvement of 65.1% from the year-ago level of $21.1 million.
2018 Highlights
Adjusted earnings came in at 55 cents, beating the consensus estimate of 50 cents and also improving 96.4% year over year. Total revenues increased 26% to a record $321 million, beating analysts’ expectation of $317.1 million.
Importantly, Chegg Services' revenues grew 37% to $254 million and hit a record of 3.1 million subscribers, reflecting an increase of 850,000 or 38% from 2017. Gross margin expanded 600 basis points (bps) to 75% from 69% in 2017, resulting in adjusted EBITDA of $83 million (up 80% from 2017) or 26% of total revenues.
Balance Sheet
Chegg had cash and cash equivalents of $374.7 million for the period ended Dec 31, 2018 compared with $126.5 million as of Dec 31, 2017.
First-Quarter 2019 Guidance
Net revenues are expected in the range of $93.5-$95.5 million, whereas Chegg Services revenues are anticipated in the band of $72.5-$74.5 million. Gross margin is expected between 74% and 75%, and adjusted EBITDA is projected within $22-$23 million.
2019 Guidance Raised
The company now expects net revenues in the range of $390-$395 million, higher than the previous expectation of $388 million. Chegg Services Revenues are projected in the range $327-$331 million, up from previous projection of $326 million.
Gross margin is expected between 75% and 76% for 2019 compared with 75% projected earlier. The company expects adjusted EBITDA in the range of $115-$118 million, up from previous projection of $112 million. Notably, this represents approximately 350 bps increase from 26% achieved in 2018.
Capital expenditure is expected within $40-$50 million.
Zacks Rank & Other Stocks to Consider
Currently, Chegg has a Zacks Rank #2 (Buy).
Other top-ranked stocks in the Computer and Technology sector include AudioEye, Inc. (AEYE - Free Report) , Benefitfocus, Inc. and The Meet Group, Inc. , each flaunting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
AudioEye, Benefitfocus and Meet Group’s earnings for 2019 are expected to grow 33.3%, 72% and 19.4%, respectively.
Zacks' Best Stock-Picking Strategy
It's hard to believe, even for us at Zacks. But from 2000-2018, while the market gained +4.8% per year, our top stock-picking strategy averaged +54.3% per year.
How has that screen done lately? From 2017-2018, it sextupled the market's +15.8% gain with a soaring +98.3% return.
Free – See the Stocks It Turned Up for Today >>
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 >>
Get the latest research report on CHGG - FREE
Get the latest research report on AEYE - FREE