School districts and universities are currently plotting remote learning plans, hybrid arrangements and in-person classes, but amid the uncertainty is one sure thing: Online learning is a boom market.
The latest example is Chegg'ssecond quarter, which was well ahead of estimates. The online education company, which includes learning content, textbooks, tutors, writing help and apps such as Mathway, also raised its outlook for 2020.
Cheggreported second quarter net income of $10.6 million, or 8 cents a share, on revenue of $153 million, up 63% from a year ago, and well ahead the sales estimate of $136.6 million. Non-GAAP earnings for the second quarter were 37 cents a share, a nickel better than expectations.
Digital education accelerated:
For the third quarter, Chegg projected revenue growth topping 45% to $140 million to $145 million. For 2020, Chegg is projecting revenue between $605 million to $615 million.
Wall Street was expecting Chegg to report 2020 revenue of $551 million. For the third quarter, Wall Street was expecting revenue of $123.4 million.
Chegg ended its second quarter with 3.7 million subscribers including recently acquired Mathway. Chegg Study content had 375 million views in the quarter.
CEO Dan Rosensweig said Chegg saw unprecedented engagement and numerous records in the second quarter. Chegg is landing subscribers as schools wrestle with online experiences and hybrid strategies. Rosensweig added that Chegg's long-term strategy is being accelerated as the higher education bubble bursts due to COVID-19.
As education becomes more disaggregated, platforms such as Chegg will start owning the direct relationships with students and customers. Rosensweig said on an earnings conference call:
Rosensweig added:
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Chegg's plan is to step up its investment cadence. CFO Andrew Brown said the company is planning to accelerate investments in device management and features. Chegg will step up these investments as the company is becoming more profitable. Brown said:
Chegg can have the confidence to invest and raise its outlook because there are multiple ways it can play demand.
For instance, many incoming university students are planning gap years or community college given tuition costs for a virtual experience. Rosensweig said Chegg will be utilized no matter what the format and that reality provides an opportunity for its Thinkful service.
Rosensweig also outlined the to-do list for investments. "Everything we're doing, we expected to do. We just accelerated it by moving it up. So this is something that will benefit us not only short term but in the long term, both from a revenue growth area and profitability area. So we're super excited about that opportunity," said Rosensweig.
Here's the list:
The tab, according to Brown, is likely to be in the "tens of millions of dollars range," but "is the right thing to do."
"So yes, it's been fairly significant, but it's coming with significant profitability at the same time," said Brown.
More education:
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