Chegg changes its business model and hopes the market will value it like an internet company

On Monday, textbook company Chegg announced a partnership with Ingram Content Group that the company thinks will “fundamentally reshape” its business model.

Chegg will now earn a commission on each book rented, not the full rental price, though the company will no longer invest in inventory going forward.

A Chegg spokesman told Business Insider:

This deal fundamentally reshapes Chegg’s business model, from a company that from 2011-2014 has averaged 20% growth, 30% gross margin, and EBITDA margin of -6% to a company with 25+% growth, 60+% gross margins and 25+% EBITDA margin by 2017.

Chegg also told Business Insider that the company’s transition, “is going to be difficult for some investors to grok, as our total revenue will actually decline in 2015 before re-accelerating in 2016.”

Over the last year, Chegg shares haven’t done much, rising about 1.5%. According to Chegg, about 33% of its outstanding shares are being held short, or bet that the price will go lower.

Along with this announcement, Chegg also released a slide presentation updating its outlook to accompany a conference call with investors set for 5:00 pm ET.

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