Tech

Chegg CEO projects sustained growth in 2021 after boost from remote learning

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Key Points
  • The shift to remote learning sparked a surge in business for Chegg in 2020, and CEO Dan Rosensweig does not see that exponential growth easing up much in the new year.
  • "When the pandemic is over, we don't expect growth to significantly slow because this is not just the trend, this is what it's going to be and this is what it has to be," he told CNBC.
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Chegg CEO Dan Rosensweig on remote learning and 2021 expectations

The shift to remote learning sparked a surge in business for Chegg in 2020, and CEO Dan Rosensweig doesn't see that exponential growth easing up much in the new year.

"When the pandemic is over, we don't expect growth to significantly slow because this is not just the trend, this is what it's going to be and this is what it has to be," he said Tuesday on CNBC's "Squawk Alley."

As U.S. colleges shut down campuses or limited in-person classes due to the coronavirus pandemic, Chegg shares barely blinked. The stock's triple-digit rise on the market this year reflects the company's bet on the inevitable, according to Rosensweig, the former Yahoo executive who has led Chegg over the past decade.

"We're looking at what the inevitable looks like in the next few years," he added.

Chegg was launched in 2005 by Iowa State University students with hopes of disrupting the textbook market with rentals. Now a more tech-savvy company, Chegg is benefiting from the sudden disruption of society caused by efforts to slow the spread of Covid-19, posting record growth above 60% in its last two quarters, up from the roughly 30% quarterly growth it posted in the past.

The company has built an interconnected learning platform that offers e-textbooks, on-demand and online tutoring services.

James Tahaney loads textbooks on to a pallet in preparation for shipping at the Chegg warehouse in Shepherdsville, Kentucky, April 29, 2010.
John Sommers II | Bloomberg | Getty Images

While Chegg does business in higher education, the impact of remote learning can be felt in college and grade school classrooms, Rosensweig said. A leading education servicer, the company now boasts 3.9 million subscribers, up 29% from a year ago.

Alongside many parents now working from home, many K-12 students are adapting to learn-from-home trends. Rosensweig said school districts will also need to adapt to a hybrid model, equipping schools with technology that can be used both in the classroom and remotely. Every student will also need broadband access, he added.

In higher education, the proverbial college student is not exactly what most people expect in the U.S., Rosensweig said. Students are getting older, with the average age being 25 years old in the U.S., and need an education curriculum that's more skills-based and flexible to work schedules.

Even when students return to physical classrooms, Chegg hopes to capitalize on the need for technology to supplement and enhance the learning experience.

"The American student doesn't look like what people think that it does, and they need more help," said Rosensweig, adding that "40% of them are working 30 hours a week or more [and] cannot be scheduled in a classroom, it has to be more remote."

Chegg is also now eyeing international growth, which Rosensweig said was not on the company's radar just six months ago. While Chegg's business, which has brought in $438.62 million in the first three quarters of 2020, is heavily reliant on the U.S., the company now has exposure to some 190 countries, Rosensweig said.

Chegg's revenues through September has already topped what it brought in all of 2019.

"What the pandemic has done is really reveal just how important it is not just domestically but internationally," Rosensweig said.

Chegg shares were down less than 1% midday Wednesday. Since bottoming during the coronavirus-induced sell-off in March, the stock is up about 260%.