August 5, 2014, 11:47 AM

Online textbook rental company Chegg drives Q2 growth with digital education tools

Chegg also announces a deal to outsource the fulfillment of print textbook orders so it can better focus on its digital initiatives.

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Chegg Inc., whose e-commerce site rents textbooks to students and provides them with tutoring and other services, experienced strong sales growth during the second quarter, as its digital services business continues to outgrow its print textbook operations. Chegg yesterday posted net sales of $64.5 million, a 15.4% increase compared with $55.9 million in the second quarter of 2013

For several quarters, Chegg, No. 114 in the Internet Retailer Top 500 Guide, has been transitioning away from being solely a textbook retailer and rental house to more of a digital hub for students that provides such services as online tutoring, homework help and a career center.

Taking another step in that direction, Chegg has signed a deal with Ingram Content Group Inc. to take over sourcing, warehousing, fulfillment and rental returns of all inventory, the retailer announced this week. Going forward, Chegg will receive a commission of around 20% for textbooks rented or sold through its web and mobile sites.

Chegg will continue to maintain a large catalog of textbooks, acquire customers and market its products, CEO Dan Rosensweig told investors and analysts on its earnings call yesterday. “The real benefit is that now we can do so using significantly less cash, reducing our inventory risk, and freeing up cash to invest and grow our digital businesses,” he added. “For Ingram, the partnership fuels profitable growth to a large and growing customer base. Collectively we believe we can offer better and more competitive service.”

For the period ended June 14, Chegg reported:

  • Net sales of $64.5 million, a 15.4% increase compared with $55.9 million in the second quarter of 2013
  • Digital revenue of $18.7 million, up 54% from approximately $12.2 million.
  • Print revenue of $45.8 million, an increase of 5% from around $43.5 million.
  • Net loss of $8.2 million, compared with a loss of $3.4 million in Q2 of 2013.
  • Spending on technology and development was $12.2 million, up 24.5% from $9.8 million.
  • Sales and marketing expenses were $14.8 million, up 70.1% from $8.7 million.

Digital revenue represented 29% of total sales during the quarter, compared with 22% in the second quarter of last year. The company aims to bring in 50% of its revenue from its digital businesses by 2016.

For the first half of the year, the company also reported:

  • Net sales of $138.9 million, up 18.8% from $116.9 million in the first half of last year.
  • Net loss of $34.0 million, compared with a loss of $21.2 million.

Chegg began trading as a public company in August 2013.



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