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Chegg (CHGG) Reports Narrower-than-Expected Loss in Q1

Chegg, Inc. CHGG, a student-first connected learning platform, reported adjusted loss of 3 cents in first-quarter 2017, narrower than the Zacks Consensus Estimate of a loss of 6 cents.

Meanwhile, net revenue of $62.60 million surpassed the Zacks Consensus Estimate of $58.35 million by 7.3% but declined 6% year over year. However, non-GAAP total net revenue increased 34% year over year, driven by growth in Chegg Services.

Chegg Service revenues of $41 million increased 61% year over year. Chegg Service subscriber base totaled 1.1 million in the quarter.

Gross profit of $41.2 million increased 48.7% during the quarter. Gross margin of 66% rose on the back of strong top-line growth and increased synergies from Chegg Services.

Adjusted EBITDA of $9.5 million compares favorably with the year-ago loss of $0.49 million. The figure is also 30% above the high-end of the company’s expectations,. Notably, this represents the first profitable quarter on an adjusted EBITDA basis for the company.


Chegg had cash and cash equivalents of $70.3 million as of Mar 31, 2017, compared with $41.5 million as of Mar 31, 2016.

Chegg, Inc. Price, Consensus and EPS Surprise


2Q17 Guidance

Total Net Revenues in expected in the range of $52 million to $54 million, while Chegg Services Revenues are estimated in the $42 million to $44 million band.

Gross margin is anticipated between 68% and 70%, while adjusted EBITDA is expected to be around $7–$9 million.

2017 Guidance

Total Net Revenues is projected in the range of $235 million to $240 million while Chegg Service revenues are projected in the $175–$180 million range,

Gross margin is expected to be greater than 65% while adjusted EBITDA in the $38 million to $40 million range.

Capital expenditures are estimated in the band of $20 million to $25 million. Free cash flow is expected in the $15 million to $20 million range.

Zacks Rank

Chegg has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Stocks to Consider

Better-ranked stocks in the same industry include 2U, Inc. TWOU, Amaya Inc. AYA and Everbridge, Inc EVBG. All three companies carry a Zacks Rank #2 (Buy).

2U surpassed earnings estimates in all of the past four quarters, with an average beat of 24.74%.

Amaya is expected to witness 10.1% earnings growth in 2017. Everbridge is likely to see 7.1% earnings growth in 2017.

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