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Chegg, Inc. (CHGG - Free Report) , a student-first connected learning platform, reported adjusted loss of 4 cents in second-quarter 2017, narrower than the Zacks Consensus Estimate of a loss of 5 cents.

Meanwhile, net revenue of $56 million outshined the Zacks Consensus Estimate of $53 million by 5.7% and increased 6.3% year over year. This also surpassed the $52–$54 million range projected by Chegg.

Inside the Headline Numbers

Chegg Service revenues of $44.7 million increased 50% year over year and was slightly above the expected range of $42 million to $44 million. Chegg Service subscriber base totaled 1.2 million in the quarter, higher than 1.1 million in the previous quarter.

Gross profit of $39.3 million increased 24.4% in the quarter. Gross margin of 70% was at the high end of the company’s guided range driven by strength in Chegg Study and Writing Tools services.

Adjusted EBITDA of $10.1 million shows substantial improvement from the year-ago level of $7.2 million. The figure is also above the company’s expectations of $7–$9 million in adjusted EBITDA.

Chegg had cash and cash equivalents of $66.1 million as of Jun 30, 2017, compared with $49.7 million as of Jun 30, 2016.

Q3 Guidance

Total net revenue in expected in the range of $56 million to $58 million, while Chegg Services Revenues are estimated in the $37 million to $39 million band.

Gross margin is anticipated between 60% and 62%, while adjusted EBITDA is expected at around $3–$4 million.

2017 Guidance

Total net revenue is now projected in the range of $241 million to $243 million, higher than $235 million to $240 million expected earlier. Chegg Service revenues are estimated in the $180–$182 million band, higher than $175–$180 million anticipated earlier.

Gross margin is expected to be greater than 65%, while adjusted EBITDA is likely to come in between $41 million and $42 million, higher than $38–$40 million expected earlier.

Capital expenditures are estimated in the band of $20 million to $25 million. Free cash flow is projected in the $18 million to $20 million range.

Chegg, Inc. Price, Consensus and EPS Surprise


Zacks Rank

Chegg has a Zacks Rank #3 (Hold).

Stocks to Consider

Better-ranked stocks in the same industry include Atlassian Corporation Plc (TEAM - Free Report) , HubSpot, Inc. (HUBS - Free Report) and Twitter, Inc. (TWTR - Free Report) . All three companies sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Atlassian surpassed earnings estimates in all of the past four quarters, with an average beat of 70.83%, while HubSpot surpassed earnings estimates in each of the trailing four quarters at an average of 20.7%.

Twitter also beat earnings in the trailing four quarters, with an average beat of 50.37%.

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