Shares of Chegg Inc. fell after hours on Monday, after the education technology platform forecast first-quarter sales that fell short of expectations and said “it’s too early to predict when we’ll see revenue and margins.” Will come back to growth.”
The company, which offers textbook rentals and tech-enabled homework help, offered the forecast as it seeks to become a more AI-driven organization, after management raised concerns last year. Was the increasing use of ChatGPT by students weighing on its fortunes? Chegg is also cutting prices for its services in hopes of a major recovery in account growth.
Chegg CHGG,
said Monday that it expects sales between $173 million and $175 million in the first quarter. That fell below analyst estimates of $180.1 million, according to FactSet data.
In its fourth-quarter earnings report, the company said sales fell 8 percent year over year to $188 million. However, the figure came in above analyst estimates of $185.9 million.
The company reported fourth-quarter net income of $9.7 million, or 9 cents per share, compared with $1.9 million, or 1 cent per share, in the same period last year. Adjusted earnings per share came in at 36 cents per share, in line with analysts’ forecasts.
Chegg also said Monday that it has appointed David Longo as its new chief financial officer, effective Feb. 21. The company’s current CFO, Andy Brown, is retiring.
Shares were down 1.7% after hours, recovering after falling nearly 10% in the minutes following the company’s earnings release. The stock is down 55.8% over the last 12 months, with most of that last May intact.
At the time, chief executive Dan Rosenzweig said he believed OpenAI’s ChatGPT chatbot was “impacting our new customer growth.” In its earnings release Monday, Chegg said that in less than a year, it has perfected its entire platform to bring more AI capabilities — including larger language models, automated response capabilities, and more. , and coding to improve the depth and accuracy of these responses. .
Rosenzweig said Monday that the process of working AI into all aspects of Chegg’s services was “ongoing and iterative.” He said its auto-responder technology is helping increase student engagement.
“The impact has been immediate and significant,” he said. “In January, Chegg’s automated answers provided students with more than 2.2 million solutions, more than three times the number of questions asked and answered this time last year.”
Chegg said it began testing price cuts for new accounts in the U.S. in the middle of last month. These efforts were followed by what the company characterized as success with these pricing plans internationally. In the fourth quarter, executives said Chegg saw an increase in new customers outside the U.S. for the first time in two years.
“Engagement, acquisition and retention greenshoots will take time to form the basis of our renewal before we see a positive impact on total subscribers and revenue,” Brown said.