Chegg posts strong growth in providing homework help as it moves out of the textbook business
August 6, 2015 12:33 PM
Textbook e-retailer and online student services provider Chegg Inc. reported 62% growth in its digital business in Q2, as it continues its transition out of the textbook rental business.
Chegg, founded in 2007 as an online textbook e-retailer and rental service, brings in 45% of its revenue from online services it provides to college students, such as homework help and tutoring. Its goal is for that to reach 100% by 2017, and it is progressively turning over more of the logistics of textbook sales and rentals to Ingram Content Group, a distributor of physical and digital goods.
As part of the partnership, Chegg will collect 20% of textbook sale and rental revenue, which allows for “much higher growth, margins and free cash flow” for Chegg, CEO Dan Rosensweig told analysts on a quarter-end conference call. “We believe that our current businesses are in their very early stage and then our student hub represents an enormous opportunity as education becomes increasingly digital and self-directed. Education is $1 trillion industry in the U.S. alone.”
For the period ended June 30, 2015, Chegg, No. 117 in the Internet Retailer 2015 Top 500 Guide, reported:
- Total sales of $67.1 million, a 4.0% increase compared with $64.5 million in the second quarter of 2014.
- Digital revenue of $30.2 million, up 62% year over year, and now comprising 45% of total revenue.
- Approximately $13.3 million in technology and development expenses, an 11.5% I GET 9.0% increase compared with $12.2 million
- Sales and marketing expenses of $12.4 million, down 16.2% from $14.8 million.
- Net loss of $10.1 million versus a loss of $8.2 million.
During the transition with Ingram Content Group, Chegg will report its revenue on a pro-forma basis, or as if the transition to Ingram of the textbook business was complete and all print revenue was commission-based digital revenue. On a pro-forma basis, Q2 revenue was $32.7 million, an increase of 37% year over year.
Chegg also added 200,000 new customers during the quarter and counts 700,000 digital subscribers. About 70% of customers use Chegg for something other than textbook rental, and 41% of them subscribe to a paid digital service.
For the first six months of the year, Chegg also posted:
- Total sales of $151.9 million, a 9.4% increase compared with $138.9 million in the first half of 2014.
- Technology and development expenses of $29.4 million, up 25.1% from $23.5 million.
- Sales and marketing expenses of $33.8 million, up 13.4% from $29.8 million.
- Net loss of $38.7 million compared with $34.0 million.