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International Day of Education: tech solutions can break down social barriers

By Paul Malpas, ESG distribution lead at Nordea Asset Management

When the UN unveiled its Sustainable Development Goals in 2015, the role of education was identified as critical for the success of all 17 goals.

Indeed, the organisation labels education as a human right, a public good, and a public responsibility.

Within our Global Climate and Social Impact strategy, education is a key pillar of our ‘inclusion and opportunities’ theme, where we actively seek companies offering solutions to ensure equal access to education. On this International Day of Education (24 January), it is important to recognise the providers making a positive difference, such as US education technology group Chegg.

In the US, college completion rates vary widely along socioeconomic lines. Here, the affordability of course materials is a major issue, with 15% of tuition fees at a four-year public institution – on average $410 per year – spent on textbooks. In 2020, 63% of students chose to skip buying or renting a textbook due to the high overall cost.

Chegg’s learning platform offers cost-effective digital and physical textbook rentals, helping students save up to 90%. The company currently has 6.6 million subscribers, with year-on-year growth running at 67%. It is also pleasing to note Chegg’s solution is being used by students from diverse social backgrounds – with 32% of subscribers from a minority background, and 34% coming from a family with an income less than $25,000 per annum.

The Covid-19 pandemic saw an inflection point for the education technology space, with hesitancy to online education decreasing due to forced adoption. We believe the market still underestimates Chegg’s growth potential, as the company continues to expand its education ecosystem, in terms of content/tools and geographic reach. With revenues of $198m and a 29% adjusted EBITDA margin, Chegg is also one of the few players in the education market with a balance sheet flexible enough to pursue strategic M&A or invest to organically accelerate growth.

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