Chegg (NYSE:CHGG) Q3: Surpasses Revenue But Stock Falls
Online academic help and study platform Chegg (NYSE:CHGG) reported results above analyst expectations in the third quarter of fiscal 2023, with revenue falling 4.18% year-over-year to $157.9 million of dollars. The company also expects next quarter revenue to be around $186 million, in line with analyst estimates. In terms of EPS, Chegg posted a GAAP loss of $0.16 per share, down from its profit of $1.23 per share in the same quarter last year.
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Chegg (CHGG) Q3 FY2023 Highlights:
- Revenue: $157.9 million vs. analyst estimates of $152.1 million (3.76% beat)
- EPS (non-GAAP): $0.18 vs. analyst estimates of $0.17 (3.38% beat)
- Fourth Quarter 2023 Revenue Guidance is $186 million at the midpoint, roughly in line with what analysts expected
- Free cash flow of $9.37 million, 83.2% less than the previous quarter
- Gross Margin (GAAP): 47.1%, up from 72.6% in the same quarter last year (71.3% excluding a one-time charge for content and related assets of $38.2 million)
- Service subscribers: 4.4 million, 400,000 less year after year
“Chegg is excellently positioned to create the most impactful, scalable, ai-enabled personal learning assistant that will expand our opportunities to serve more students, in more ways, and at a lower cost per customer,” said Dan Rosensweig, CEO. and president of Chegg, Inc. (NYSE:)
Chegg (NYSE:CHGG), which started as a physical textbook rental service, is now a digital platform that addresses students’ pain points by providing them with academic and study assistance.
Consumer Subscription Today’s consumers expect goods and services to be hyper-personalized and on-demand. Whether it’s what music they listen to, what movie they watch, or even finding a date, online consumer companies are expected to delight their customers with simple user interfaces that magically satisfy demand. Subscription models have further increased the usage and stickiness of many online consumer services.
Sales Growth Chegg’s revenue growth over the past three years has been unremarkable, averaging 11.2% annually. This quarter, Chegg beat analyst estimates but posted a 4.18% year-over-year revenue decline.
Chegg expects next quarter’s revenue to decline 9.35% year-over-year to $186 million, a further slowdown from the 1.1% year-over-year decline it posted in the same quarter last year. Before the earnings results were announced, Wall Street analysts covering the company were projecting revenue to decline -3.25% over the next 12 months.
Usage Growth As a subscription-based app, Chegg generates revenue growth by expanding both its subscriber base and the amount each subscriber spends over time.
Over the past two years, Chegg users, a key performance metric for the company, grew 2.46% annually to 4.4 million. This is one of the lowest growth rates in the consumer Internet sector.
Unfortunately, Chegg users decreased by 400K in the third quarter, a drop of 8.33% from last year.
Key Takeaways from Chegg’s Q3 Results With a market capitalization of $977.9 million, Chegg is among the smallest companies, but its cash balance of $261.3 million and free cash flow Positive results over the last 12 months give us confidence that it has the necessary resources to achieve high profitability. business growth strategy.
It was great to see Chegg beat analyst earnings and adjust EBITDA expectations this quarter. Forecasts for the next quarter for revenue and adjusted EBITDA were also in line, slightly above. Those really stood out as positives in these results. On the other hand, its user base fell and its revenue growth was quite weak. Overall, this was a mixed quarter for Chegg. The company is down 9.58% based on results and is currently trading at $8.02 per share.
The author has no position in any of the stocks mentioned in this report.
