Chegg jumps on Q1 beat, print improvement

|By:, SA News Editor

After growing just 3% Y/Y in Q4, Chegg's (CHGG +6.4%) traditional print textbook rental sales (still 76% of total revenue) rose 13% Y/Y in seasonally important Q1 on the back of 25% unit growth. Digital revenue (the remaining 24%) grew 66% vs. 70% in Q4.

Chegg expects Q2 revenue of $61M-$65M, largely below a $65M consensus. But full-year guidance of $310M-$320M is in-line with a $314.7M consensus.

Gross margin fell 700 bps Y/Y in Q1 to 12.2%. But Chegg expects GM to rebound to 36% in Q2, and be in a 27%-29% range for the whole of 2014. On the CC (transcript), Chegg stated its digital gross margin was 55%, and predicted it would "expand to over 65%" in 2014.

Digital subs rose 64% Y/Y to 554K, and total active members grew 25%. Chegg asserts 1/3 of members are now using two or more services.

With shares having gone into earnings down 56% from a November IPO price of $12.50, expectations were low.

Q1 results, PR