Media & Entertainment

Despite High IPO And Solid First Quarter, Chegg Plummets As Investors Worry Over Long-Term Prospects

Comment

In November, eight-year-old education company Chegg debuted on the New York Stock Exchange under the ticker symbol “CHGG.” In the days prior, Chegg had priced its initial public offering at $12.50/share, high above its expected range of $9.50 to $11.50, and raised about $187.5 million in total at a valuation of close to $1.1 billion.

One of the first to bring textbook rental online, over the years, Chegg found a wide audience as an online bookseller. However, more recently, with pressure from Amazon, Apple and others, Chegg has been undergoing a gradual expansion, and “re-positioning.” In spite of its survival and its high debut in its IPO, it seems that investors aren’t so confident — at least in its short-term prospects.

Chegg debuted on the NYSE at $12.50, but quickly plummeted to $9.64 in its first day of trading. The following day, the slide kept pace, and Chegg was at $8.88 by market close.

Three months later, the onslaught has continued. Yesterday, the company released its first earnings report since going public, and in spite of Q4 revenues of $77 million, which represented a 12 percent increase from the year prior, Chegg’s stock has continued to fall. By Friday’s close, the stock had fallen 22 percent to $6.17, where it has hovered since.

Nonetheless, Chegg Chairman and CEO Dan Rosensweig called 2013 a “banner year” for Chegg, referring one would suspect to the fact that digital revenue grew 70 percent year-over-year to $16.7 million — 22 percent of total revenues compared to 14 percent in Q4 2012. Meanwhile, the company saw print revenue of $60.5 million, a 3 percent increase compared to Q4 2012, while its gross profit came in at $39.5 million, flat year-over-year on a GAAP basis. On a non-GAAP basis, gross profit was $40.3 million.

Its gross margins declined to 51.3 percent from 57.7 percent, while adjusted EBITDA (without textbook depreciation) was $18.6 million, relatively flat when compared to Q4 2012. This also included a $1.8 million loss on textbook liquidations during Q4 2013, and a $2.3 million loss on liquidations in Q4 2012.

With a GAAP net loss of $5.4 million, investors don’t seem to be particularly confident. Chegg has only $76.9 million in cash on company balance sheets at the end of the year, and it’s still yet to prove that it can keep margins in check as it continues to attempt to increase revenue.

The other issue is that Chegg’s forecast for the coming year expects lower gross margins and higher net losses — never a good combo — while print revenue increased only 3 percent over the same year. This is somewhat of a break from what it’s been able to do lately, as Chegg managed an about-face, growing revenue and keeping expenses flat. Part of the reason: The company now reaches 30 percent of college students in the U.S. and 40 percent of college-bound high school seniors. It’s a valuable demographic.

Chegg was likely able to mask some of the holes in its playbook heading into IPO, but many are still worried about its long-term viability. And, while things weren’t too bad from an earnings report this quarter, it still has a long road ahead.

More TechCrunch

Some Indian government websites have allowed scammers to plant advertisements capable of redirecting visitors to online betting platforms. TechCrunch discovered around four dozen “gov.in” website links associated with Indian states,…

Scammers found planting online betting ads on Indian government websites

Around 550 employees across autonomous vehicle company Motional have been laid off, according to information taken from WARN notice filings and sources at the company.  Earlier this week, TechCrunch reported…

Motional cut about 550 employees, around 40%, in recent restructuring, sources say

The deck included some redacted numbers, but there was still enough data to get a good picture.

Pitch Deck Teardown: Cloudsmith’s $15M Series A deck

The company is describing the event as “a chance to demo some ChatGPT and GPT-4 updates.”

OpenAI’s ChatGPT announcement: What we know so far

Unlike ChatGPT, Claude did not become a new App Store hit.

Anthropic’s Claude sees tepid reception on iOS compared with ChatGPT’s debut

Welcome to Startups Weekly — Haje‘s weekly recap of everything you can’t miss from the world of startups. Sign up here to get it in your inbox every Friday. Look,…

Startups Weekly: Trouble in EV land and Peloton is circling the drain

Scarcely five months after its founding, hard tech startup Layup Parts has landed a $9 million round of financing led by Founders Fund to transform composites manufacturing. Lux Capital and Haystack…

Founders Fund leads financing of composites startup Layup Parts

AI startup Anthropic is changing its policies to allow minors to use its generative AI systems — in certain circumstances, at least.  Announced in a post on the company’s official…

Anthropic now lets kids use its AI tech — within limits

Zeekr’s market hype is noteworthy and may indicate that investors see value in the high-quality, low-price offerings of Chinese automakers.

The buzziest EV IPO of the year is a Chinese automaker

Venture capital has been hit hard by souring macroeconomic conditions over the past few years and it’s not yet clear how the market downturn affected VC fund performance. But recent…

VC fund performance is down sharply — but it may have already hit its lowest point

The person who claims to have 49 million Dell customer records told TechCrunch that he brute-forced an online company portal and scraped customer data, including physical addresses, directly from Dell’s…

Threat actor says he scraped 49M Dell customer addresses before the company found out

The social network has announced an updated version of its app that lets you offer feedback about its algorithmic feed so you can better customize it.

Bluesky now lets you personalize main Discover feed using new controls

Microsoft will launch its own mobile game store in July, the company announced at the Bloomberg Technology Summit on Thursday. Xbox president Sarah Bond shared that the company plans to…

Microsoft is launching its mobile game store in July

Smart ring maker Oura is launching two new features focused on heart health, the company announced on Friday. The first claims to help users get an idea of their cardiovascular…

Oura launches two new heart health features

Keeping up with an industry as fast-moving as AI is a tall order. So until an AI can do it for you, here’s a handy roundup of recent stories in the world…

This Week in AI: OpenAI considers allowing AI porn

Garena is quietly developing new India-themed games even though Free Fire, its biggest title, has still not made a comeback to the country.

Garena is quietly making India-themed games even as Free Fire’s relaunch remains doubtful

The U.S.’ NHTSA has opened a fourth investigation into the Fisker Ocean SUV, spurred by multiple claims of “inadvertent Automatic Emergency Braking.”

Fisker Ocean faces fourth federal safety probe

CoreWeave has formally opened an office in London that will serve as its European headquarters and home to two new data centers.

CoreWeave, a $19B AI compute provider, opens European HQ in London with plans for 2 UK data centers

The Series C funding, which brings its total raise to around $95 million, will go toward mass production of the startup’s inaugural products

AI chip startup DEEPX secures $80M Series C at a $529M valuation 

A dust-up between Evolve Bank & Trust, Mercury and Synapse has led TabaPay to abandon its acquisition plans of troubled banking-as-a-service startup Synapse.

Infighting among fintech players has caused TabaPay to ‘pull out’ from buying bankrupt Synapse

The problem is not the media, but the message.

Apple’s ‘Crush’ ad is disgusting

The Twitter for Android client was “a demo app that Google had created and gave to us,” says Particle co-founder and ex-Twitter employee Sara Beykpour.

Google built some of the first social apps for Android, including Twitter and others

WhatsApp is updating its mobile apps for a fresh and more streamlined look, while also introducing a new “darker dark mode,” the company announced on Thursday. The messaging app says…

WhatsApp’s latest update streamlines navigation and adds a ‘darker dark mode’

Plinky lets you solve the problem of saving and organizing links from anywhere with a focus on simplicity and customization.

Plinky is an app for you to collect and organize links easily

The keynote kicks off at 10 a.m. PT on Tuesday and will offer glimpses into the latest versions of Android, Wear OS and Android TV.

Google I/O 2024: How to watch

For cancer patients, medicines administered in clinical trials can help save or extend lives. But despite thousands of trials in the United States each year, only 3% to 5% of…

Triomics raises $15M Series A to automate cancer clinical trials matching

Welcome back to TechCrunch Mobility — your central hub for news and insights on the future of transportation. Sign up here for free — just click TechCrunch Mobility! Tap, tap.…

Tesla drives Luminar lidar sales and Motional pauses robotaxi plans

The newly announced “Public Content Policy” will now join Reddit’s existing privacy policy and content policy to guide how Reddit’s data is being accessed and used by commercial entities and…

Reddit locks down its public data in new content policy, says use now requires a contract

Eva Ho plans to step away from her position as general partner at Fika Ventures, the Los Angeles-based seed firm she co-founded in 2016. Fika told LPs of Ho’s intention…

Fika Ventures co-founder Eva Ho will step back from the firm after its current fund is deployed

In a post on Werner Vogels’ personal blog, he details Distill, an open-source app he built to transcribe and summarize conference calls.

Amazon’s CTO built a meeting-summarizing app for some reason