Chegg, Inc. CHGG), a student-first connected learning platform, reported third-quarter 2016 adjusted loss of 13 cents per share, which was narrower than the Zacks Consensus Estimate of a loss of 17 cents.
Total net revenue of $71.3 million surpassed the Zacks Consensus Estimate of $67.67 million by 5.4% but declined 12% year over year. However, non-GAAP total net revenue of $55.5 million increased 22% year over year driven by 44% growth at Chegg Services.
Chegg Services revenues of $29.7 million increased 44% year over year. Required Materials revenues of $41.7 million deteriorated 31.3% from $60.7 million in the prior-year quarter.
Chegg Service subscriber base totaled 800,000 in the quarter – a new record for Chegg – representing more than 40% growth over last year.
Adjusted gross profit of $32.7 million increased 46.2% during the quarter. Adjusted gross margin of 45.8% was a significant improvement from 27.5% in the prior-year quarter, owing to increased benefits and synergies from its learning services.
Q4 Guidance
Total revenue is projected in the $48–$52 million band. Chegg Service revenues are expected in the range of $41 million and $44 million.
Gross margin is estimated between 65% and 67% while adjusted EBITDA will likely be between $12 million and $14 million.
Fiscal 2016 Guidance
Total net revenue is expected in the $191 million to $195 million range while Chegg Service revenues are projected in the $126 million to $129 million band.
Gross margin is anticipated between 51% and 53% while adjusted EBITDA is expected in the range of $18 million to $20 million.
Fiscal 2017 Guidance
Total net revenue is projected at $230 million while Chegg Service revenues are estimated at around $172 million. Adjusted EBITDA is projected at $35 million.
Financials
Chegg had cash and cash equivalents of $90.2 million as of Sep 30, 2016, compared with $67,029 million as of Dec 31, 2015.
CHEGG INC Price, Consensus and EPS Surprise
Chegg currently carries a Zacks Rank #3 (Hold).
Stocks to Consider
Better-ranked stocks in the Internet software industry include Apigee Corp. APIC, Castlight Health, Inc. CSLT and Evolent Health, Inc. EVH.
All the three companies carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Castlight’s full-year 2016 earnings are expected to witness a 29.89% increase while that of Grand Canyon are expected to grow 65.5%.
For fiscal 2017, Apigee’s earnings are projected to increase 14.7%.
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