Chegg’s digital revenue jumps 71% in Q4 and 74% for 2014
February 25, 2015 12:51 PM
Digital growth continues to drive gains at online textbook rental company Chegg Inc., No. 114 in the Internet Retailer 2014 Top 500 Guide.
34% of Chegg’s 2014 fourth-quarter revenue came from digital sales, compared with 22% in the same period a year ago, according to the e-commerce firm, which on Monday released its quarterly and annual earnings. Digital revenue increased 71% in the quarter to $28.5 million, according to the company. For the year, digital sales as a percentage of revenue increased to 30% from 21% in 2013.
“This is an important revenue mix shift for Chegg, since our digital businesses command a much higher gross margin than our print businesses,” said Andy Brown, chief financial officer, according to the Seeking Alpha transcript of the earnings call.
Chegg, which also provides career advice, homework help and other services for college students, also said Monday that it had reached an agreement to expand its partnership with Ingram Content Group Inc. The new deal means Chegg will eliminate ownership of print books, transferring that responsibility to Ingram so that 100% of Chegg’s revenue will be digital by the end of 2016, the company said.
Ingram handles sourcing, warehousing, fulfillment and rental returns of inventory, and Chegg receives a commission of about 20% for textbooks rented or sold through its web and mobile sites. “On May 1 of this year, Ingram will take over all future rental textbook purchases,” Brown said during the earnings call. “While Chegg will continue to own the branding and customer experience around textbook rental, Ingram will be responsible for the logistics and funding new inventory.”
Chegg will move its existing book inventory to Ingram warehouses and close its Kentucky facility by the end of this year. Chegg will own the materials but rent and liquidate them in the coming semesters, and revenue will be counted as print revenue through 2016, Brown said.
"We set a record in the fourth quarter for members, customers and digital subscribers, and with the planned partnership with Ingram we can complete our transition to digital student hub, where we grow faster, have higher margins and create more value for students and investors," said Dan Rosensweig, Chegg’s chairman and CEO.
For the fourth quarter ending Dec. 31, Chegg reported:
- Net revenue of $84.42 million, an increase of 9.5% from $77.12 million in Q4 of 2013.
- Digital revenue of $28.5 million, up 70.7 % compared with $16.7 million in the year-ago quarter.
- Digital sales were 34% of total revenue, up from 22% in the same period a year ago.
- Print revenue of $55.9 million, a 7.6% decrease compared with $60.5 million in the year-ago quarter.
- Net income of $1.68 million compared with a net loss of $5.42 million in Q4 of 2013.
- Spending on technology and development of $12.39 million, a 1.6% decrease from $12.59 million.
- Sales and marketing spending was at $19.02 million, up 39.2% from $13.66 million in Q4 of 2013.
For all of 2014, Chegg reported:
- Net sales of $304.83 million, up 19.3% compared with $255.58 million in 2013.
- Digital revenue of $91.2 million, a 73.7% increase compared with $52.5 million in 2013
- Digital sales were 30% of total revenue, up from 21% in fiscal 2013.
- Print revenue was $213.7 million, 5.2%increase from $203.1 million a year ago.
- Net loss of $64.76 million compared with a net loss of $55.21 million in 2013.
- Spending on technology and development was $49.39 million, up 17.8% from $41.94 million the year before.
- Sales and marketing spending was $72.32 million, a 43.8% increase from $50.30 million in 2013.