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Chegg (CHGG) Q1 Loss In Line with Estimates, Sales Beat

Chegg, Inc. CHGG, a student-first connected learning platform, recently reported first quarter 2016 adjusted loss of 16 cents per share, which was in line with the Zacks Consensus Estimate.

Total net revenue of $66.7 million surpassed the Zacks Consensus Estimate of $63 million by about 6%.  Total revenue declined 21% year over year.  Revenues exceeded the company’s expected range of $60 million and $65 million. 

Chegg Services Revenue of $25.6 million increased 14% year over year. Required Materials Revenue of $41.1 million declined 34.1% from $62.4 million in the prior year quarter.

Adjusted gross profit of $27.8 million increased 26.4% during the quarter. Adjusted gross margin of 41.6% increased significantly from 25.9% reported in the prior year quarter, owing to strong performance of Chegg Study.  

Chegg announced the acquisition of Imagine Easy Solutions, a provider of online writing tools. This new addition to Chegg targets a wide range of students who need to take remedial writing courses in their freshmen year.

Second Quarter Outlook

Chegg’s expects revenue for second quarter 2016 to range between $48 million and $52 million. Adjusted EBITDA is expected to range between $5 million to $7 million in the quarter.

2016 Outlook Raised

Chegg raised its guidance for 2016, owing to its latest acquisition and positive demand trends. The company expects revenue for fiscal 2016 to range between $239 million and $257 million, higher than the prior expectation of $230 million and $250 million. Adjusted EBITDA is expected to range between $13 million to $22 million, higher than the prior expectation of $10 million to $20 million.

Chegg currently carries a Zacks Rank #2 (Buy).

Investors interested in the consumer discretionary sector can consider Box, Inc. BOX, Medical Transcription Billing, Corp. MTBC and Benefitfocus, Inc. BNFT. While Box and Medical Transcription Billing sport a Zacks Rank #1 (Strong Buy), Benefitfocus holds a Zacks Rank #2.

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