Shares of Chegg (CHGG -1.35%) plunged on Tuesday after the online education company said inflation was taking a heavy toll on student enrollment.
As of 12:20 p.m. ET, Chegg's stock price was down more than 30%.
Chegg's revenue rose 2% year over year to $202.2 million in the first quarter, fueled by a 14% increase in services revenue. The gains were driven by a 12% rise in Chegg Services subscribers, to 5.4 million, which were boosted by the company's acquisition of language learning platform Busuu in January.
Chegg's adjusted net income, in turn, grew 8% to $50.1 million, or $0.32 per share. That was above Wall Street's estimates for adjusted per-share profits of $0.24.
However, Chegg slashed its full-year guidance due to intensifying macroeconomic challenges that are driving more people to prioritize "earning over learning," according to CEO Dan Rosensweig.
"The issues of enrollment, the economy, and now inflation have all impacted our industry," Rosensweig said. "Students continue to take fewer classes and those they do take are often less rigorous, with fewer or more limited assignments."
Chegg now expects to generate revenue of $740 million to $770 million and adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) of $220 million to $235 million in 2022. That's down sharply from the company's prior guidance for revenue of $830 million to $850 million and adjusted EBITDA of $260 million to $270 million.
Still, Rosensweig believes Chegg is well situated for an eventual recovery in demand for educational services. "We expect these challenges to be temporary and when they subside, our operating model, balance sheet, and leading brand put us in a strong position to accelerate our growth," Rosensweig said.