clock menu more-arrow no yes

Chegg Will Outsource All Its Print Textbooks to Remake Itself as a Digital-Only Company

The move will hurt revenue but boost profitability.

BPTU/Shutterstock

Six months ago, online education portal Chegg said it was starting to unload some of its print textbook inventory, in part to make investors happy.

Today, it announced it has reached an agreement to unload the remainder of its inventory by the end of 2016. CEO Dan Rosensweig says investors should be “ecstatic.”

Under the agreement with book distributor Ingram Content Group, Chegg will continue to market print textbook rentals to its customers while Ingram handles order fulfillment and shipping. Chegg will cut its inventory in half by the end of this year, and get rid of all of it by the end of 2016.

Chegg’s revenue will take a bit of a hit as a result, because it will be able to book only a 20 percent commission on print books as revenue going forward rather than the 100 percent of a rental or sale it recognized previously.

At the same time, the company is betting that investors will like the deal because it should dramatically increase the company’s profitability in the long run. So far, it looks like it’s working: The stock traded up as much as 12 percent in after-hours trading on Monday.

“This is the company we’ve been dreaming of for five years,” Rosensweig told Re/code in an interview.

In addition to selling and renting textbooks and e-books, Chegg offers other services such as internship search tools and tutoring help. The company has felt pressure from Amazon’s entry into the textbook rental market, and the e-commerce giant’s ability to afford storage of books around the country.

In the fourth quarter, Chegg earned $1.7 million on $84.4 million in revenue, which marked a 9 percent increase over the same quarter last year.

This article originally appeared on Recode.net.