Shares of education-technology platform Chegg (NYSE:CHGG) marched 10.1% higher in June, according to data provided by S&P Global Market Intelligence. That's a great one-month return, but pales in comparison to the 80% return shareholders have enjoyed so far in 2020.
Chegg had a couple of newsworthy events in June helping move the needle, including its acquisition of Mathway and its $500 million buyback plan.
On June 4, Chegg announced it had acquired Mathway, a global company mainly used by high school students to improve their math skills. The company paid $100 million in cash, which is 7.7 times Mathway's net revenue in 2019. Considering Chegg generated $411 million in revenue in 2019, Mathway's $13 million doesn't increase overall revenue much. But Chegg's president said he sees the deal "significantly expanding" the company's total addressable market.
Later in the month, Chegg announced it's buying back $500 million in securities between now and the end of 2021. Some of the repurchases will be common stock on the open market. But included in the plan are convertible notes that will be negotiated privately. We don't know the final mix of securities to be repurchased, but $500 million is a lot for a mid-cap company.
In May, Chegg noted in its first-quarter earnings call that it's seeing robust subscriber growth. With schools closed by the coronavirus, an online education platform makes sense. The company is guiding for a whopping 45% growth in subscribers in the second quarter.
That's incredible, but one might question if this kind of growth is sustainable long term. There's reason to believe it is. At the Jefferies Virtual Consumer Conference, Chegg's CFO said the company is realizing there was a lot of password sharing prior to the pandemic. But now that people are distancing, those who may have borrowed a password before are signing up for their own account. That's an encouraging sign for Chegg's long-term adoption. Incidentally, the stock is up 7% just since that event.