UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, ~~2022~~2023


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _________ to _________

Commission file number 001-36180

CHEGG, INC.

(Exact name of registrant as specified in its charter)


Delaware						20-3237489
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

3990 Freedom Circle

Santa Clara, CA, 95054

(Address of principal executive offices)

(408) 855-5700

(Registrant’s telephone number, including area code)


Title of each class	Trading symbol(s)	Name of each exchange on which registered
Common stock, $0.001 par value per share	CHGG	The New York Stock Exchange

•Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 (Exchange Act) during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

•Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No ¨

•Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	x	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
Emerging growth company	☐

•If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

•Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No x

•As of April ~~25, 2022,~~24, 2023, the Registrant had ~~125,894,774~~119,716,256 outstanding shares of Common Stock.

Table of Contents

TABLE OF CONTENTS

Page

PART I - FINANCIAL INFORMATION

Item 1.

Financial Statements (unaudited):

Condensed Consolidated Balance Sheets - March 31, ~~2022~~ 2023 and December 31, 2 ~~021~~2022

Condensed Consolidated Statements of Operations - for the Three Months Ended March 31, ~~2022~~ 2023 and 2 ~~021~~2022

Condensed Consolidated Statements of ~~ComprehensiveLoss~~Comprehensive Income (Loss) - for the Three Months Ended March 31, ~~2022~~2023 and 2 ~~021~~2022

Condensed Consolidated Statements of Stockholder's Equity - for the Three Months Ended March 31, ~~2022~~2023 and 2 ~~021~~2022

Condensed Consolidated Statements of Cash Flows - for the Three Months Ended March 31, ~~2022~~2023 and 2 ~~021~~2022

Notes to Condensed Consolidated Financial Statements

Item 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations

2220

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

3027

Item 4.

Controls and Procedures

3027

PART II - OTHER INFORMATION

Unregistered Sales of Equity Securities and Use of Proceeds

Unless the context requires otherwise, the words “we,” “us,” “our,” “Company” and “Chegg” refer to Chegg, Inc. and its subsidiaries taken as a whole.

Chegg, Chegg.com, Chegg Study, ~~internships.com, Research Ready,~~ EasyBib, the Chegg “C” logo, Busuu and Thinkful are some of our trademarks used in this Quarterly Report on Form 10-Q. Solely for convenience, our trademarks, trade names and service marks referred to in this Quarterly Report on Form 10-Q appear without the ®, ™ and SM symbols, but those references are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights to these trademarks and trade names. Other trademarks appearing in this Quarterly Report on Form 10-Q are the property of their respective holders.

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NOTE ABOUT FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements contained in this Quarterly Report on Form 10-Q other than statements of historical fact, including statements regarding our future results of operations and financial position, our business strategy and plans, and our objectives for future operations ~~and the impact of the ongoing coronavirus (COVID-19) pandemic on our financial condition~~ and results of operations are forward-looking statements. The words “believe,” “may,” “will,” “would,” “could,” “estimate,” “continue,” “anticipate,” “intend,” “project,” “endeavor,” “expect,” ~~“plans~~“plan to,” “if,” “future,” “likely,” “potentially,” and similar expressions are intended to identify forward-looking statements. We have based these forward-looking statements largely on our current expectations and projections about future events and trends that we believe may affect our financial condition, results of operations, business strategy, short-term and long-term business operations and objectives, and financial needs. These forward-looking statements are subject to a number of risks, uncertainties, and assumptions, including those described in Part I, Item 1A, “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2021.~~2022. Moreover, we operate in a very competitive and rapidly changing ~~environment. New~~environment and new risks emerge from time to ~~time, such as the COVID-19 global pandemic. Many of the risks and uncertainties are currently elevated by, and may or will continue to be elevated by, the current COVID-19 pandemic.~~time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties, and assumptions, the future events and trends discussed in this Quarterly Report on Form 10-Q may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements. You should read this Quarterly Report on Form 10-Q completely and with the understanding that our actual future results may be materially different from what we expect. ~~We qualify all of our forward-looking statements by these cautionary statements.~~

Our forward-looking statements speak only as of the date of this Quarterly Report on Form 10-Q, and we undertake no obligation to revise or publicly release the results of any revision to these forward-looking statements, except as required by law. Given these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements.

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PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)

CHEGG, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except for number of shares and par value)

(unaudited)
March 31,
2022 December 31,
2021
Assets
Current assets
Cash and cash equivalents $ 267,731 $ 854,078
Short-term investments 915,431 691,781
Accounts receivable, net of allowance of $156 and $153 at March 31, 2022 and December 31, 2021, respectively 19,918 17,850
Prepaid expenses 28,882 35,093
Other current assets 14,671 23,846
Total current assets 1,246,633 1,622,648
Long-term investments 435,413 745,993
Textbook library, net 10,651 11,241
Property and equipment, net 187,743 169,938
Goodwill 641,284 289,763
Intangible assets, net 102,685 40,566
Right of use assets 18,879 18,062
Other assets 19,182 21,035
Total assets $ 2,662,470 $ 2,919,246
Liabilities and stockholders' equity
Current liabilities
Accounts payable $ 9,549 $ 11,992
Deferred revenue 60,458 35,143
Accrued liabilities 85,424 67,209
Total current liabilities 155,431 114,344
Long-term liabilities
Convertible senior notes, net 1,679,534 1,678,155
Long-term operating lease liabilities 12,456 12,447
Other long-term liabilities 6,528 7,383
Total long-term liabilities 1,698,518 1,697,985
Total liabilities 1,853,949 1,812,329
Commitments and contingencies (Note 8) 0 0
Stockholders' equity:
Preferred stock, $0.001 par value per share, 10,000,000 shares authorized, no shares issued and outstanding — —
Common stock, $0.001 par value per share: 400,000,000 shares authorized; 126,681,972 and 136,951,956 shares issued and outstanding at March 31, 2022 and December 31, 2021, respectively 127 137
Additional paid-in capital 1,176,765 1,449,305
Accumulated other comprehensive loss (36,922) (5,334)
Accumulated deficit (331,449) (337,191)
Total stockholders' equity 808,521 1,106,917
Total liabilities and stockholders' equity $ 2,662,470 $ 2,919,246


	March 31, 2023		December 31, 2022
Assets
Current assets
Cash and cash equivalents	$	281,302	$	473,677
Short-term investments	277,864		583,973
Accounts receivable, net of allowance of $344 and $394 at March 31, 2023 and December 31, 2022, respectively	22,000		23,515
Prepaid expenses	25,486		28,481
Other current assets	30,832		34,754
Total current assets	637,484		1,144,400
Long-term investments	613,863		216,233
Property and equipment, net	201,305		204,383
Goodwill	622,679		615,093
Intangible assets, net	73,086		78,333
Right of use assets	29,770		18,838
Deferred tax assets	163,776		167,524
Other assets	19,824		20,612
Total assets	$	2,361,787	$	2,465,416
Liabilities and stockholders' equity
Current liabilities
Accounts payable	$	13,058	$	12,367
Deferred revenue	58,568		56,273
Accrued liabilities	68,026		70,234
Total current liabilities	139,652		138,874
Long-term liabilities
Convertible senior notes, net	1,189,650		1,188,593
Long-term operating lease liabilities	23,064		13,375
Other long-term liabilities	2,662		7,985
Total long-term liabilities	1,215,376		1,209,953
Total liabilities	1,355,028		1,348,827
Commitments and contingencies (Note 6)
Stockholders' equity:
Preferred stock, $0.001 par value per share, 10,000,000 shares authorized, no shares issued and outstanding	—		—
Common stock, $0.001 par value per share: 400,000,000 shares authorized; 119,628,297 and 126,473,827 shares issued and outstanding at March 31, 2023 and December 31, 2022, respectively	120		126
Additional paid-in capital	1,120,344		1,244,504
Accumulated other comprehensive loss	(45,338)		(57,488)
Accumulated deficit	(68,367)		(70,553)
Total stockholders' equity	1,006,759		1,116,589
Total liabilities and stockholders' equity	$	2,361,787	$	2,465,416

See Notes to Condensed Consolidated Financial Statements.

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CHEGG, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share amounts)

(unaudited)


		Three Months Ended March 31,				Three Months Ended March 31,
		2022		2021				2023		2022
Net revenues	Net revenues	$	202,244	$	198,378		Net revenues	$	187,601	$	202,244
Cost of revenues	Cost of revenues	55,085		71,384			Cost of revenues	49,150		55,085
Gross profit	Gross profit	147,159		126,994			Gross profit	138,451		147,159
Operating expenses:	Operating expenses:						Operating expenses:
Research and development	Research and development	52,415		46,131			Research and development	46,907		52,415
Sales and marketing	Sales and marketing	42,498		26,214			Sales and marketing	37,017		42,498
General and administrative	General and administrative	46,870		37,870			General and administrative	58,973		46,870

Total operating expenses	Total operating expenses	141,783		110,215			Total operating expenses	142,897		141,783
Income from operations		5,376		16,779
Interest expense, net and other income (expense), net:
(Loss) income from operations							(Loss) income from operations	(4,446)		5,376
Interest expense, net and other income, net:							Interest expense, net and other income, net:
Interest expense, net	Interest expense, net	(1,597)		(1,929)			Interest expense, net	(1,268)		(1,597)
Other income (expense), net		6,180		(77,208)
Total interest expense, net and other income (expense), net		4,583		(79,137)
Income (loss) before provision for income taxes		9,959		(62,358)
Other income, net							Other income, net	12,076		6,180
Total interest expense, net and other income, net							Total interest expense, net and other income, net	10,808		4,583
Income before provision for income taxes							Income before provision for income taxes	6,362		9,959
Provision for income taxes	Provision for income taxes	(4,217)		(2,821)			Provision for income taxes	(4,176)		(4,217)
Net income (loss)		$	5,742	$	(65,179)
Net income (loss) per share
Net income							Net income	$	2,186	$	5,742
Net income per share							Net income per share
Basic	Basic	$	0.04	$	(0.49)		Basic	$	0.02	$	0.04
Diluted	Diluted	$	0.04	$	(0.49)		Diluted	$	0.02	$	0.04
Weighted average shares used to compute net income (loss) per share
Weighted average shares used to compute net income per share							Weighted average shares used to compute net income per share
Basic	Basic	132,162		134,352			Basic	123,710		132,162
Diluted	Diluted	133,270		134,352			Diluted	124,304		133,270

See Notes to Condensed Consolidated Financial Statements.

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CHEGG, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE ~~LOSS~~INCOME (LOSS)

(in thousands)

(unaudited)

Three Months Ended
March 31,
2022 2021
Net income (loss) $ 5,742 $ (65,179)
Other comprehensive loss
Change in net unrealized loss on investments, net of tax (12,917) (1,894)
Change in foreign currency translation adjustments, net of tax (18,671) (874)
Other comprehensive loss (31,588) (2,768)
Total comprehensive loss $ (25,846) $ (67,947)


	Three Months Ended March 31,
	2023		2022
Net income	$	2,186	$	5,742
Other comprehensive income (loss)
Change in net unrealized gain (loss) on investments, net of tax	3,812		(12,917)
Change in foreign currency translation adjustments, net of tax	8,338		(18,671)
Other comprehensive income (loss)	12,150		(31,588)
Total comprehensive income (loss)	$	14,336	$	(25,846)

See Notes to Condensed Consolidated Financial Statements.

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CHEGG, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(in thousands)

(unaudited)

Three Months Ended March 31, 2022
Common Stock
Shares Par
Value Additional Paid-In
Capital Accumulated Other Comprehensive Loss Accumulated
Deficit Total Stockholders’ Equity
Balances at December 31, 2021 136,952 $ 137 $ 1,449,305 $ (5,334) $ (337,191) $ 1,106,917
Repurchases of common stock (10,725) (11) (300,439) — — (300,450)
Issuance of common stock upon exercise of stock options 54 — 455 — — 455
Net share settlement of equity awards 401 1 (7,467) — — (7,466)
Share-based compensation expense — — 34,911 — — 34,911
Other comprehensive loss — — — (31,588) — (31,588)
Net income — — — — 5,742 5,742
Balances at March 31, 2022 126,682 $ 127 $ 1,176,765 $ (36,922) $ (331,449) $ 808,521


	Three Months Ended March 31, 2023
	Common Stock
	Shares	Par Value		Additional Paid-In Capital		Accumulated Other Comprehensive Loss		Accumulated Deficit		Total Stockholders’ Equity
Balances at December 31, 2022	126,474	$	126	$	1,244,504	$	(57,488)	$	(70,553)	$	1,116,589
Repurchases of common stock	(7,600)	(7)		(151,304)		—		—		(151,311)
Issuance of common stock upon exercise of stock options	18	—		144		—		—		144
Net share settlement of equity awards	736	1		(7,736)		—		—		(7,735)
Share-based compensation expense	—	—		34,736		—		—		34,736
Other comprehensive income	—	—		—		12,150		—		12,150
Net income	—	—		—		—		2,186		2,186
Balances at March 31, 2023	119,628	$	120	$	1,120,344	$	(45,338)	$	(68,367)	$	1,006,759

Three Months Ended March 31, 2021
Common Stock
Shares Par
Value Additional Paid-In
Capital Accumulated Other Comprehensive Loss Accumulated
Deficit Total Stockholders’ Equity
Balances at December 31, 2020 129,344 $ 129 $ 1,030,577 $ 1,530 $ (422,601) $ 609,635
Cumulative-effect adjustment related to adoption of ASU 2020-06 — — (465,006) — 86,868 (378,138)
Issuance of common stock in connection with equity offering, net of offering costs 10,975 11 1,091,455 — — 1,091,466
Equity component on conversions of 2023 notes and 2025 notes — — (11,305) — — (11,305)
Issuance of common stock upon conversions of 2023 notes 126 — 11,237 — — 11,237
Net proceeds from capped call related to conversions of 2023 notes and 2025 notes — — 23,577 — — 23,577
Issuance of common stock upon exercise of stock options 44 — 346 — — 346
Net share settlement of equity awards 828 1 (59,176) — — (59,175)
Share-based compensation expense — — 23,647 — — 23,647
Other comprehensive loss — — — (2,768) — (2,768)
Net loss — — — — (65,179) (65,179)
Balances at March 31, 2021 141,317 $ 141 $ 1,645,352 $ (1,238) $ (400,912) $ 1,243,343


	Three Months Ended March 31, 2022
	Common Stock
	Shares	Par Value		Additional Paid-In Capital		Accumulated Other Comprehensive Loss		Accumulated Deficit		Total Stockholders’ Equity
Balances at December 31, 2021	136,952	$	137	$	1,449,305	$	(5,334)	$	(337,191)	$	1,106,917
Repurchases of common stock	(10,725)	(11)		(300,439)		—		—		(300,450)


Issuance of common stock upon exercise of stock options	54	—		455		—		—		455
Net share settlement of equity awards	401	1		(7,467)		—		—		(7,466)
Share-based compensation expense	—	—		34,911		—		—		34,911
Other comprehensive loss	—	—		—		(31,588)		—		(31,588)
Net income	—	—		—		—		5,742		5,742
Balances at March 31, 2022	126,682	$	127	$	1,176,765	$	(36,922)	$	(331,449)	$	808,521

See Notes to Condensed Consolidated Financial Statements.

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CHEGG, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

Three Months Ended
March 31,
2022 2021
Cash flows from operating activities
Net income (loss) $ 5,742 $ (65,179)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Print textbook depreciation expense 1,521 3,760
Other depreciation and amortization expense 20,285 14,846
Share-based compensation expense 33,084 23,100
Amortization of debt issuance costs 1,382 1,626
Gain on foreign currency remeasurement of purchase consideration (4,628) —
Loss on early extinguishment of debt — 78,152
Loss on change in fair value of derivative instruments, net — 7,148
Loss from write-off of property and equipment 626 757
Gain on sale of strategic equity investment — (5,338)
(Gain) loss on textbook library, net (610) 4,028
Operating lease expense, net of accretion 1,640 1,589
Other non-cash items (737) 87
Change in assets and liabilities, net of effect of acquisition of businesses:
Accounts receivable 292 2,240
Prepaid expenses and other current assets 21,722 (25,075)
Other assets 8,342 1,058
Accounts payable (7,534) 6,597
Deferred revenue 8,554 15,988
Accrued liabilities (7,555) 9,386
Other liabilities (2,091) (1,197)
Net cash provided by operating activities 80,035 73,573
Cash flows from investing activities
Purchases of property and equipment (29,533) (18,984)
Purchases of textbooks (3,692) (4,527)
Proceeds from disposition of textbooks 2,499 4,038
Purchases of investments (273,280) (925,748)
Maturities of investments 342,059 181,315
Proceeds from sale of strategic equity investment — 6,845
Acquisition of businesses, net of cash acquired (401,125) (7,891)
Net cash used in investing activities (363,072) (764,952)
Cash flows from financing activities
Proceeds from common stock issued under stock plans, net 456 347
Payment of taxes related to the net share settlement of equity awards (7,467) (59,176)
Proceeds from equity offering, net of offering costs — 1,091,466
Repayment of convertible senior notes — (189,849)
Proceeds from exercise of convertible senior notes capped call — 24,812
Repurchases of common stock (300,450) —
Net cash (used in) provided by financing activities (307,461) 867,600
Effect of exchange rate changes 4,628 —
Net (decrease) increase in cash, cash equivalents and restricted cash (585,870) 176,221
Cash, cash equivalents and restricted cash, beginning of period 855,893 481,715
Cash, cash equivalents and restricted cash, end of period $ 270,023 $ 657,936


	Three Months Ended March 31,
	2023		2022
Cash flows from operating activities
Net income	$	2,186	$	5,742
Adjustments to reconcile net income to net cash provided by operating activities:
Share-based compensation expense	33,746		33,084
Other depreciation and amortization expense	25,543		20,285
Deferred income taxes	3,441		(746)
Operating lease expense, net of accretion	1,496		1,640
Amortization of debt issuance costs	1,057		1,382
Gain on foreign currency remeasurement of purchase consideration	—		(4,628)
Print textbook depreciation expense	—		1,521
Loss from write-off of property and equipment	120		626
Gain on textbook library, net	—		(610)
Other non-cash items	(5)		9
Change in assets and liabilities, net of effect of acquisition of business:
Accounts receivable	1,578		292
Prepaid expenses and other current assets	8,485		21,722
Other assets	2,803		8,342
Accounts payable	(336)		(7,534)
Deferred revenue	2,012		8,554
Accrued liabilities	(2,569)		(7,555)
Other liabilities	(6,397)		(2,091)
Net cash provided by operating activities	73,160		80,035
Cash flows from investing activities
Purchases of property and equipment	(17,166)		(29,533)
Purchases of textbooks	—		(3,692)
Proceeds from disposition of textbooks	—		2,499
Purchases of investments	(497,372)		(273,280)
Maturities of investments	407,759		342,059
Acquisition of business, net of cash acquired	—		(401,125)
Net cash used in investing activities	(106,779)		(363,072)
Cash flows from financing activities
Proceeds from common stock issued under stock plans, net	145		456
Payment of taxes related to the net share settlement of equity awards	(7,736)		(7,467)
Repurchases of common stock	(151,311)		(300,450)
Net cash used in financing activities	(158,902)		(307,461)
Effect of exchange rate changes	187		4,628
Net decrease in cash, cash equivalents and restricted cash	(192,334)		(585,870)
Cash, cash equivalents and restricted cash, beginning of period	475,854		855,893
Cash, cash equivalents and restricted cash, end of period	$	283,520	$	270,023


		Three Months Ended March 31,					Three Months Ended March 31,
		2022		2021			2023		2022
Supplemental cash flow data:	Supplemental cash flow data:					Supplemental cash flow data:
Cash paid during the period for:	Cash paid during the period for:					Cash paid during the period for:
Interest	Interest	$	437	$	502	Interest	$	437	$	437
Income taxes, net of refunds	Income taxes, net of refunds	$	1,101	$	3,063	Income taxes, net of refunds	$	2,017	$	1,101
Cash paid for amounts included in the measurement of lease liabilities:	Cash paid for amounts included in the measurement of lease liabilities:					Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	Operating cash flows from operating leases	$	1,852	$	1,998	Operating cash flows from operating leases	$	2,866	$	1,852
Right of use assets obtained in exchange for lease obligations:	Right of use assets obtained in exchange for lease obligations:					Right of use assets obtained in exchange for lease obligations:
Operating leases	Operating leases	$	2,715	$	—	Operating leases	$	12,407	$	2,715
Non-cash investing and financing activities:	Non-cash investing and financing activities:					Non-cash investing and financing activities:
Accrued purchases of long-lived assets	Accrued purchases of long-lived assets	$	5,778	$	904	Accrued purchases of long-lived assets	$	3,941	$	5,778
Issuance of common stock related to repayment of convertible senior notes		$	—	$	11,237


		March 31,				March 31,
		2022		2021				2023		2022
Reconciliation of cash, cash equivalents and restricted cash:	Reconciliation of cash, cash equivalents and restricted cash:						Reconciliation of cash, cash equivalents and restricted cash:
Cash and cash equivalents	Cash and cash equivalents	$	267,731	$	656,168		Cash and cash equivalents	$	281,302	$	267,731
Restricted cash included in other current assets	Restricted cash included in other current assets	70		38			Restricted cash included in other current assets	63		70
Restricted cash included in other assets	Restricted cash included in other assets	2,222		1,730			Restricted cash included in other assets	2,155		2,222
Total cash, cash equivalents and restricted cash	Total cash, cash equivalents and restricted cash	$	270,023	$	657,936		Total cash, cash equivalents and restricted cash	$	283,520	$	270,023

See Notes to Condensed Consolidated Financial Statements.

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CHEGG, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 1. Background and Basis of Presentation

Company and Background

Chegg, Inc. ~~(Chegg, the Company,~~ (“we, ~~us,~~” “us,” “our,” “Company” or ~~our)~~“Chegg”), headquartered in Santa Clara, California, was incorporated as a Delaware corporation in July 2005. Millions of people all around the world Learn with Chegg. Our mission is to improve learning and learning outcomes by putting students first. We support life-long learners starting with their academic journey and extending into their careers. The Chegg platform provides products and services to support learners to help them better understand their academic course materials, and also provides personal and professional development skills training, to help them achieve their learning goals.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) and applicable rules and regulations of the U.S. Securities and Exchange Commission (“SEC”) regarding interim financial reporting. The condensed consolidated financial statements include the results of Chegg, Inc. and its wholly-owned subsidiaries. Significant intercompany balances and transactions have been eliminated. In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments, including normal recurring adjustments, necessary to present fairly our financial position as of March 31, ~~2022,~~2023, our results of operations, results of comprehensive ~~loss,~~income (loss), stockholders' equity and cash flows for the three months ended March 31, ~~2022~~2023 and ~~2021.~~2022. Our results of operations, results of comprehensive ~~loss,~~income (loss), stockholders' equity, and cash flows for the three months ended March 31, ~~2022~~2023 are not necessarily indicative of the results to be expected for the full year.

We have a single operating and reportable segment and operating unit structure. The condensed consolidated financial statements and related financial information should be read in conjunction with the audited consolidated financial statements and the related notes thereto that are included in our Annual Report on Form 10-K for the year ended December 31, ~~2021~~2022 (the Annual Report on Form 10-K) filed with the SEC.

There have been no material changes to our significant accounting policies as compared to the significant accounting policies described in our Annual Report on Form 10-K.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates, judgments, and assumptions that affect the reported amounts of assets and liabilities; the disclosure of contingent liabilities at the date of the financial statements; and the reported amounts of revenues and expenses during the reporting periods. We base our estimates on historical experience, knowledge of current business conditions, and various other factors we believe to be reasonable under the circumstances. These estimates are based on management’s knowledge about current events and expectations about actions we may undertake in the future. Actual results could differ from these estimates, and such differences could be material to our financial position and results of operations. There have been no material changes in our use of estimates during the three months ended March 31, ~~2022~~2023 as compared to the use of estimates disclosed in Part II, Item 8 “Consolidated Financial Statements and Supplementary Data” contained in our Annual Report on Form 10-K for the year ended December 31, ~~2021.~~2022.

Reclassification of Prior Period Presentation

In order to conform with current period presentation, $0.7 million of deferred tax assets during the three months ended March 31, 2022 has been reclassified from other non-cash items on our condensed consolidated statements of cash flows. This change in presentation does not affect previously reported results.

Leases

During the three months ended March 31, 2023, we extended our existing lease agreement related to our corporate headquarters in Santa Clara and reassessed lease terms related to office spaces internationally in India, resulting in the recording of $12.4 million of right of use assets in exchange for lease liabilities.

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The aggregate future minimum lease payments and reconciliation to operating lease liabilities as of March 31, 2023, are as follows (in thousands):


	March 31, 2023
Remaining nine months of 2023	$	6,388
2024	7,875
2025	6,625
2026	5,940
2027	5,515
Thereafter	1,902
Total future minimum lease payments	34,245
Less imputed interest	(4,322)
Total lease liabilities	$	29,923

Condensed Consolidated Statements of Operations Details

Other income, ~~(expense),~~ net consists of the following (in thousands):

Three Months Ended
March 31,
2022 2021
Loss on early extinguishment of debt $ — $ (78,152)
Loss on change in fair value of derivative instruments, net — (7,148)
Gain on sale of strategic equity investments — 5,338
Gain on foreign currency remeasurement of purchase consideration(1)
4,628 —
Interest income 1,477 2,049
Other 75 705
Total other income (expense), net $ 6,180 $ (77,208)

~~(1)~~ ~~For further information, see Note 5,“Acquisition.”~~


	Three Months Ended March 31,
	2023		2022
Interest income	$	11,263	$	1,477
Gain on foreign currency remeasurement of purchase consideration	—		4,628
Other	813		75
Total other income, net	$	12,076	$	6,180

Recent Accounting Pronouncements

Recently Issued Accounting Pronouncements Not Yet Adopted

There were no accounting pronouncements issued during the three months ended March 31, ~~2022~~2023 that would have ana material impact on our financial statements.

Recently Adopted Accounting Pronouncements

~~In October 2021,~~We did not adopt any new standards or updates issued during the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2021-08, Business Combinations-Accounting for Contract Assets and Contract Liabilities from Contracts with Customers (Topic 805). The new guidance requires contract assets and contract liabilities acquired inthree months ended March 31, 2023 that had a business combination to be recognized in accordance with Accounting Standards Codification (ASC) Topic 606 as if the acquirer had originated the contracts. The standard is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years, and early adoption is permitted. We early adopted ASU 2021-08material impact on ~~January 1, 2022 and applied it to~~ our ~~acquisition of Busuu. The most significant impacts were an increase in contract liabilities, contained within deferred revenue, and goodwill.~~financial statements.

In May 2021, the FASB issued ASU 2021-04, Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options. ASU 2021-04 aims to clarify and reduce diversity in an issuer’s accounting for modifications or exchanges of freestanding equity-classified written call options that remain equity classified after modification or exchange based on the economic substance of the modification or exchange. Early adoption is permitted and the guidance must be applied prospectively to all modifications or exchanges that occur on or after the date of adoption. The guidance is effective for annual periods beginning after December 15, 2021. We adopted ASU 2021-04 on January 1, 2022 under the prospective method of adoption and there was no impact to our results of operations as we did not modify or exchange any freestanding equity-classified written call options.

Note 2. Revenues

Revenue Recognition

Revenues are recognized when control of the promised goods or services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services. The majority of our revenues are recognized over time as services are performed, with certain revenues being recognized at a point in time.

We have changed our revenue disaggregation to Subscription Services and Skills and Other to better reflect the nature and timing of revenue and cash flows. Subscription Services includes revenues from our Chegg Study Pack, Chegg Study, Chegg Writing, Chegg Math, and Busuu offerings. Skills and Other includes revenues from our Skills, advertising services, print textbooks and eTextbooks offerings. We no longer present our Required Materials product line separately as we no longer have significant revenue from our print textbook and eTextbooks offerings.

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The following ~~tables set~~table sets forth our total net revenues for the periods shown disaggregated for our ~~Chegg~~Subscription Services and ~~Required Materials~~Skills and Other product lines (in thousands, except percentages):

Three Months Ended
March 31, Change
2022 2021 $ %
Chegg Services $ 184,812 $ 162,351 $ 22,461 14 %
Required Materials 17,432 36,027 (18,595) (52)
Total net revenues $ 202,244 $ 198,378 $ 3,866 2


	Three Months Ended March 31,				Change
	2023		2022		$		%
Subscription Services	$	168,440	$	173,037	$	(4,597)	(3)	%
Skills and Other	19,161		29,207		(10,046)		(34)
Total net revenues	$	187,601	$	202,244	$	(14,643)	(7)

During the three months ended March 31, ~~2022~~2023 and ~~2021,~~2022, we recognized revenues of $39.1 million and $30.9 million, ~~and $29.5 million,~~ respectively, ~~of revenues~~ that were included in our deferred revenue balance at the beginning of each respective reporting period. ~~During the three months ended March 31, 2022 and 2021, we recognized $4.8 million and $10.7 million, respectively, of operating lease income from print textbook rentals that we own.~~

Contract Balances

The following table presents our accounts receivable, net, contract assets and deferred revenue balances (in thousands, except percentages):


						Change						Change
		March 31, 2022		December 31, 2021			$		%			March 31, 2023		December 31, 2022		$		%

Accounts receivable, net	Accounts receivable, net	$	19,918	$	17,850		$	2,068	12	%	Accounts receivable, net	$	22,000	$	23,515	$	(1,515)	(6)	%
Contract assets	Contract assets	13,670		14,231			(561)		(4)		Contract assets	11,505		11,946		(441)		(4)
Deferred revenue	Deferred revenue	60,458		35,143			25,315		72		Deferred revenue	58,568		56,273		2,295		4

During the three months ended March 31, ~~2022~~2023 our accounts receivable, net balance ~~increased~~decreased by ~~$2.1~~$1.5 million, or ~~12%~~6%, primarily due to timing of billings and seasonality of our business. During the three months ended March 31, ~~2022,~~2023, our contract assets balance decreased by ~~$0.6~~$0.4 million, or 4%, primarily due to our Thinkful service. During the three months ended March 31, ~~2022,~~2023, our deferred revenue balance increased by ~~$25.3~~$2.3 million, or ~~72%~~4%, primarily due to ~~acquired deferred revenue in conjunction with our acquisition~~timing of ~~Busuu and increased~~ bookings and seasonality of our business.

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Note 3. Net Income ~~(Loss)~~ Per Share

The following table sets forth the computation of basic and diluted net income ~~(loss)~~ per share (in thousands, except per share amounts):


		Three Months Ended March 31,				Three Months Ended March 31,
		2022		2021				2023		2022
Basic	Basic						Basic
Numerator:	Numerator:						Numerator:
Net income (loss)		$	5,742	$	(65,179)
Net income							Net income	$	2,186	$	5,742
Denominator:	Denominator:						Denominator:
Weighted average shares used to compute net income (loss) per share, basic		132,162		134,352
Weighted average shares used to compute net income per share, basic							Weighted average shares used to compute net income per share, basic	123,710		132,162

Net income (loss) per share, basic		$	0.04	$	(0.49)
Net income per share, basic							Net income per share, basic	$	0.02	$	0.04

Diluted	Diluted						Diluted
Numerator:	Numerator:						Numerator:
Net income (loss)		$	5,742	$	(65,179)
Net income							Net income	$	2,186	$	5,742

Denominator:	Denominator:						Denominator:
Weighted average shares used to compute net income (loss) per share, basic		132,162		134,352
Weighted average shares used to compute net income per share, basic							Weighted average shares used to compute net income per share, basic	123,710		132,162
Shares related to stock plan activity	Shares related to stock plan activity	1,108		—			Shares related to stock plan activity	594		1,108

Weighted average shares used to compute net income (loss) per share, diluted		133,270		134,352
Weighted average shares used to compute net income per share, diluted							Weighted average shares used to compute net income per share, diluted	124,304		133,270

Net income (loss) per share, diluted		$	0.04	$	(0.49)
Net income per share, diluted							Net income per share, diluted	$	0.02	$	0.04

The following potential weighted-average shares of common stock outstanding were excluded from the computation of diluted net income ~~(loss)~~ per share because including them would have been anti-dilutive (in thousands):


		Three Months Ended March 31,		Three Months Ended March 31,
		2022	2021			2023	2022
Shares related to stock plan activity	Shares related to stock plan activity	2,300	3,563		Shares related to stock plan activity	6,283	2,300
Shares related to convertible senior notes	Shares related to convertible senior notes	22,875	28,818		Shares related to convertible senior notes	18,226	22,875
Total common stock equivalents	Total common stock equivalents	25,175	32,381		Total common stock equivalents	24,509	25,175

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Note 4. Cash and Cash Equivalents, ~~and~~ Investments and Fair Value Measurements

The following tables show our cash and cash equivalents, and investments’ fair value level classification, adjusted cost, unrealized gain, unrealized loss and fair value as of March 31, ~~2022~~2023 and December 31, ~~2021~~2022 (in thousands except for fair value levels):


		March 31, 2022										March 31, 2023
		Fair Value Level	Adjusted Cost		Unrealized Gain		Unrealized Loss		Fair Value			Fair Value Level	Adjusted Cost		Unrealized Gain		Unrealized Loss		Fair Value
Cash and cash equivalents:	Cash and cash equivalents:										Cash and cash equivalents:
Cash	Cash		$	39,413	$	—	$	—	$	39,413	Cash		$	31,393	$	—	$	—	$	31,393

Money market funds	Money market funds	Level 1	228,318		—		—		228,318		Money market funds	Level 1	149,731		—		—		149,731

Commercial paper											Commercial paper	Level 2	100,216		—		(38)		100,178
Total cash and cash equivalents	Total cash and cash equivalents		$	267,731	$	—	$	—	$	267,731	Total cash and cash equivalents		$	281,340	$	—	$	(38)	$	281,302
Short-term investments:	Short-term investments:										Short-term investments:
Commercial paper		Level 2	$	86,583	$	—	$	(443)	$	86,140

Corporate debt securities	Corporate debt securities	Level 2	765,556		9		(6,045)		759,520		Corporate debt securities	Level 2	$	214,883	$	—	$	(2,435)	$	212,448
U.S. treasury securities	U.S. treasury securities	Level 1	54,718		—		(436)		54,282		U.S. treasury securities	Level 1	30,190		—		(21)		30,169
Agency bonds	Agency bonds	Level 2	15,501		—		(12)		15,489		Agency bonds	Level 2	35,253		—		(6)		35,247
Total short-term investments	Total short-term investments		$	922,358	$	9	$	(6,936)	$	915,431	Total short-term investments		$	280,326	$	—	$	(2,462)	$	277,864
Long-term investments:	Long-term investments:										Long-term investments:
Corporate debt securities	Corporate debt securities	Level 2	$	346,032	$	—	$	(7,939)	$	338,093	Corporate debt securities	Level 2	$	364,729	$	1,003	$	(366)	$	365,366
U.S. treasury securities	U.S. treasury securities	Level 1	99,294		—		(1,974)		97,320		U.S. treasury securities	Level 1	99,424		470		(54)		99,840

Agency bonds											Agency bonds	Level 2	148,669		74		(86)		148,657
Total long-term investments	Total long-term investments		$	445,326	$	—	$	(9,913)	$	435,413	Total long-term investments		$	612,822	$	1,547	$	(506)	$	613,863


		December 31, 2021										December 31, 2022
		Fair Value Level	Adjusted Cost		Unrealized Gain		Unrealized Loss		Fair Value			Fair Value Level	Adjusted Cost		Unrealized Gain		Unrealized Loss		Fair Value
Cash and cash equivalents:	Cash and cash equivalents:										Cash and cash equivalents:
Cash	Cash		$	30,324	$	—	$	—	$	30,324	Cash		$	33,532	$	—	$	—	$	33,532
Money market funds	Money market funds	Level 1	823,754		—		—		823,754		Money market funds	Level 1	440,145		—		—		440,145

Total cash and cash equivalents	Total cash and cash equivalents		$	854,078	$	—	$	—	$	854,078	Total cash and cash equivalents		$	473,677	$	—	$	—	$	473,677
Short-term investments:	Short-term investments:										Short-term investments:
Commercial paper	Commercial paper	Level 2	$	124,211	$	2	$	(33)	$	124,180	Commercial paper	Level 2	$	11,744	$	—	$	(29)	$	11,715
Corporate debt securities	Corporate debt securities	Level 2	552,609		36		(546)		552,099		Corporate debt securities	Level 2	491,459		—		(4,130)		487,329
U.S. treasury securities											U.S. treasury securities	Level 1	85,271		—		(342)		84,929

Agency bonds		Level 2	15,500		2		—		15,502
Total short-term investments	Total short-term investments		$	692,320	$	40	$	(579)	$	691,781	Total short-term investments		$	588,474	$	—	$	(4,501)	$	583,973
Long-term investments:	Long-term investments:										Long-term investments:
Corporate debt securities	Corporate debt securities	Level 2	$	724,517	$	—	$	(3,277)	$	721,240	Corporate debt securities	Level 2	$	125,735	$	158	$	(909)	$	124,984
U.S. treasury securities	U.S. treasury securities	Level 1	24,860		—		(107)		24,753		U.S. treasury securities	Level 1	30,633		122		—		30,755

Agency bonds											Agency bonds	Level 2	60,635		—		(141)		60,494
Total long-term investments	Total long-term investments		$	749,377	$	—	$	(3,384)	$	745,993	Total long-term investments		$	217,003	$	280	$	(1,050)	$	216,233

As of March 31, ~~2022,~~2023, we determined that the ~~declines in the market value of~~unrealized losses on our ~~investment portfolio~~investments were not driven by credit related factors. During the three months ended March 31, ~~2022~~2023 and ~~2021~~2022, we did not recognize any losses on our investments due to credit related factors. During the three months ended March 31, 2023 and 2022, ~~and 2021,~~ our ~~gross~~ realized gains and losses on investments were not significant.

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The following table shows our cash equivalents and investments' adjusted cost and fair value by contractual maturity as of March 31, ~~2022~~2023 (in thousands):


		Adjusted Cost		Fair Value			Adjusted Cost		Fair Value
Due in 1 year or less		$	922,358	$	915,431
Due in 1-2 years		445,326		435,413
Due within one year						Due within one year	$	380,542	$	378,042
Due after one year through three years						Due after one year through three years	612,822		613,863
Investments not due at a single maturity date	Investments not due at a single maturity date	228,318		228,318		Investments not due at a single maturity date	149,731		149,731
Total	Total	$	1,596,002	$	1,579,162	Total	$	1,143,095	$	1,141,636

Investments not due at a single maturity date in the preceding table consisted of money market funds.

Strategic Investment

In July 2022, we completed an investment of $6.0 million in Knack Technologies, Inc. (Knack), a privately held U.S. based peer-to-peer tutoring platform for higher education institutions. We do not have the ability to exercise significant influence over Knack's operating and financial policies and have elected to account for our investment at cost as it does not have a readily determinable fair value. We did not record any impairment charges during the three months ended March 31, 2023, as there were no significant identified events or changes in circumstances that would be considered an indicator for impairment. There were no observable price changes in orderly transactions for the identical or similar investments of the same issuer during the three months ended March 31, 2023.

Financial Instruments Not Recorded at Fair Value on a Recurring Basis

We report our financial instruments at fair value with the exception of the notes. The estimated fair value of the notes was determined based on the trading price of the notes as of the last day of trading for the period. We consider the fair value of the notes to be a Level 2 measurement due to the limited trading activity. The estimated fair value of the 2026 notes as of March 31, ~~2022~~2023 and December 31, ~~2021~~2022 was ~~$818.8~~$393.1 million and ~~$840.0~~$385.0 million, respectively. The estimated fair value of the 2025 notes as of March 31, ~~2022~~2023 and December 31, ~~2021~~2022 was ~~$708.8~~$617.7 million and ~~$682.2~~$640.5 million, respectively. For further information on the notes, refer to Note 7,5, “Convertible Senior Notes.”

~~Note 5. Acquisition~~

On January 13, 2022, we completed our acquisition of 100% of the outstanding shares of Busuu Online S.L (Busuu) in cash, an online language learning company that offers a comprehensive solution through a combination of self-paced lessons, live classes with expert tutors and the ability to learn and practice with members of the Busuu language learning community. The acquisition helps to expand our existing offerings and global reach through language learning, allowing us to drive further into international markets.

~~The following table presents the preliminary allocation of purchase consideration recorded on our condensed consolidated balance sheet as of the acquisition date (in thousands):~~


	~~Busuu~~
~~Cash and cash equivalents~~	$	~~20,525~~
~~Accounts receivable~~	~~2,446~~
~~Right of use assets~~	~~2,715~~
~~Other acquired assets~~	~~3,710~~
~~Acquired intangible assets~~	~~71,600~~
~~Total identifiable assets acquired~~	~~100,996~~
~~Accounts payable~~	~~(5,174)~~
~~Accrued liabilities~~	~~(22,749)~~
~~Deferred revenue~~	~~(16,761)~~
~~Long term operating lease liabilities~~	~~(2,038)~~
~~Net identifiable assets acquired~~	~~54,274~~
~~Goodwill~~	~~367,376~~
~~Total fair value of purchase consideration~~	$	~~421,650~~

The estimates and assumptions regarding the fair value of certain tangible assets acquired and liabilities assumed, the valuation of intangible assets acquired, income taxes, and goodwill are subject to change as we obtain additional information during the measurement period, which usually lasts for up to one year from the acquisition date.

Goodwill is primarily attributable to the potential for expanding our offerings to include an online language learning platform and global reach allowing us to drive further into international markets. Substantially all of the amounts recorded for intangible assets and goodwill are deductible for tax purposes.

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~~The following table presents the details of the allocation of purchase consideration to the acquired intangible assets (in thousands, except weighted-average amortization period):~~

Busuu
Amount Weighted-Average Amortization Period (in months)
Trade name $ 4,600 72
Customer lists 18,000 24
Developed technology 49,000 84
Total acquired intangible assets $ 71,600 68

During the three months ended March 31, 2022 and year ended December 31, 2021, we incurred acquisition-related expenses of $0.5 million and $5.3 million, respectively, associated with our acquisition of Busuu, which have been included in general and administrative expense on our condensed consolidated statement of operations.

The purchase consideration was paid in Euros, which is different from our functional currency of United States Dollars. We initially funded an equivalent of $417.0 million that was remeasured at $421.7 million at closing, which is included in our statement of cash flows as a cash outflow from investing activities net of cash acquired, resulting in a $4.6 million gain included in other income (expense), net on our condensed consolidated statement of operations.

The Busuu purchase agreement provides for additional payments of up to approximately $25.5 million, subject to the continued employment of certain key employees. These payments are not included in the fair value of the purchase consideration but rather are expensed ratably as acquisition-related compensation costs and classified based on the seller's job function, on our condensed consolidated statement of operations. As of March 31, 2022, we have recorded approximately $1.8 million within accrued liabilities on our condensed consolidated balance sheets for these payments.

Since the acquisition date, we have recorded revenues and net loss from Busuu of $9.6 million and $8.0 million, respectively. These results should not be taken as representative of future results of operations of the combined company. The following unaudited supplemental pro forma revenues and earnings is for informational purposes only and presents our combined results as if the acquisition of Busuu had occurred on January 1, 2021. During the three months ended March 31, 2022 and 2021, our unaudited supplemental pro forma revenues from Busuu would have been $202.9 million and $208.6 million, respectively. During the three months ended March 31, 2022 and 2021, our unaudited supplemental pro forma earnings would have been a net income of $5.4 million and net loss of $74.1 million, respectively. The unaudited supplemental pro forma earnings information includes the historical combined operating results adjusted for acquisition-related compensation costs, amortization of intangible assets, share-based compensation expense and acquisition-related expenses and does not necessarily reflect the actual results that would have been achieved, nor is it necessarily indicative of our future consolidated results.

~~Note 6. Goodwill and Intangible Assets~~

~~Goodwill consists of the following (in thousands):~~


	~~Three Months Ended March 31, 2022~~
~~Beginning balance~~	$	~~289,763~~
~~Additions due to acquisitions~~	~~367,376~~
~~Foreign currency translation adjustment~~	~~(15,855)~~

~~Ending balance~~	$	~~641,284~~

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~~Intangible assets consist of the following (in thousands, except weighted-average amortization period):~~

March 31, 2022
Weighted-Average Amortization Period (in months) Gross Carrying Amount Accumulated Amortization Foreign Currency Translation Adjustment Net Carrying Amount
Developed technologies 80 $ 106,703 $ (34,921) $ (2,165) $ 69,617
Content libraries 60 12,230 (7,447) — 4,783
Customer lists 35 34,190 (14,756) (772) 18,662
Trade and domain names 52 16,213 (9,993) (197) 6,023
Indefinite-lived trade name — 3,600 — — 3,600
Total intangible assets, net 67 $ 172,936 $ (67,117) $ (3,134) $ 102,685

December 31, 2021
Weighted-Average Amortization
Period
(in months) Gross
Carrying
Amount Accumulated
Amortization Foreign Currency Translation Adjustment Net
Carrying
Amount
Developed technologies 76 $ 57,521 $ (31,790) $ — $ 25,731
Content library 60 12,230 (6,836) — 5,394
Customer lists 47 16,190 (12,432) — 3,758
Trade and domain names 44 11,613 (9,530) — 2,083
Indefinite-lived trade name — 3,600 — — 3,600
Total intangible assets, net 65 $ 101,154 $ (60,588) $ — $ 40,566

~~During the three months ended March 31, 2022 and 2021, amortization expense related to our finite-lived intangible assets totaled approximately $6.4 million and $4.4 million, respectively.~~

~~As of March 31, 2022, the estimated future amortization expense related to our finite-lived intangible assets is as follows (in thousands):~~

Remaining nine months of 2022 $ 20,402
2023 25,203
2024 13,858
2025 11,744
2026 11,396
Thereafter 16,482
Total $ 99,085

Note 7.5. Convertible Senior Notes

In August 2020, we issued $1.0 billion in aggregate principal amount of 0% convertible senior notes due in 2026 (2026 notes). The aggregate principal amount of the 2026 notes includes $100 million from the initial purchasers fully exercising their option to purchase additional notes. In March 2019, we issued $700 million in aggregate principal amount of 0.125% convertible senior notes due in 2025 (2025 notes, together with the 2026 notes, the notes) and in April 2019, the initial purchasers fully exercised their option to purchase $100 million of additional 2025 notes for aggregate total principal amount of $800 million. The notes were issued in private placements to qualified institutional buyers pursuant to Rule 144A of the Securities Act of 1933, as amended.

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The total net proceeds from the notes are as follows (in thousands):


	2026 Notes		2025 Notes
Principal amount	$	1,000,000	$	800,000
Less initial purchasers’ discount	(15,000)		(18,998)
Less other issuance costs	(904)		(822)
Net proceeds	$	984,096	$	780,180

The notes are our senior, unsecured obligations and are governed by indenture agreements by and between us and Computershare Trust Company, National Association (as successor to Wells Fargo Bank, National ~~Association,~~Association), as Trustee (the indentures). The 2026 notes bear no interest and will mature on September 1, 2026, unless repurchased, redeemed or converted in accordance with their terms prior to such date. The 2025 notes bear interest of 0.125% per year which is payable semi-annually in arrears on March 15 and September 15 of each year, beginning on September 15, 2019. The 2025 notes will mature on March 15, 2025, unless repurchased, redeemed or converted in accordance with their terms prior to such date.

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Each $1,000 principal amount of the 2026 notes will initially be convertible into 9.2978 shares of our common stock. This is equivalent to an initial conversion price of approximately $107.55 per share, which is subject to adjustment in certain circumstances. Each $1,000 principal amount of the 2025 notes will initially be convertible into 19.3956 shares of our common stock. This is equivalent to an initial conversion price of approximately $51.56 per share, which is subject to adjustment in certain circumstances.

Prior to the close of business on the business day immediately preceding June 1, 2026 for the 2026 notes and December 15, 2024 for the 2025 notes, the notes are convertible at the option of holders only upon satisfaction of the following circumstances:

•during any calendar quarter commencing after the calendar quarter ending on December 31, 2020 for the 2026 notes and June 30, 2019 for the 2025 notes, if the last reported sale price of our common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the respective conversion price for the notes on each applicable trading day;

•during the ~~5-business~~five-business day period after any 10 consecutive trading day period (the measurement period) in which the trading price per $1,000 principal amount of notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price of our common stock and the conversion rate on each such trading day;

•if we call any or all of the notes for redemption, at any time prior to the close of business on the second scheduled trading day immediately preceding the redemption date; or

•upon the occurrence of certain specified corporate events described in the indentures.

On or after June 1, 2026 for the 2026 notes and December 15, 2024 for the 2025 notes until the close of business on the second scheduled trading day immediately preceding the respective maturity dates, holders may convert their notes at any time, regardless of the foregoing circumstances. Upon conversion, the notes may be settled in shares of our common stock, cash or a combination of cash and shares of our common stock, at our election.

If we undergo a fundamental change, as defined in the indentures, prior to the respective maturity dates, subject to certain conditions, holders of the notes may require us to repurchase for cash all or any portion of their notes at a repurchase price equal to 100% of the principal amount of the notes to be repurchased, plus accrued and unpaid interest to, but excluding, the fundamental change repurchase date. In addition, if specific corporate events, described in the indentures, occur prior to the respective maturity dates, we will also increase the conversion rate for a holder who elects to convert their notes in connection with such specified corporate events.

During the three months ended March 31, ~~2022,~~2023, the conditions allowing holders of the 2026 notes and 2025 notes to convert were not met and therefore the 2026 notes and 2025 notes are not convertible the following quarter. ~~During the year ended December 31, 2021, we issued 2,983,011 shares of our common stock related to the redemption of our 2023 notes.~~

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The net carrying amount of the notes is as follows (in thousands):


		March 31, 2022				December 31, 2021				March 31, 2023						December 31, 2022
		2026 Notes		2025 Notes		2026 Notes		2025 Notes				2026 Notes		2025 Notes			2026 Notes		2025 Notes
Principal	Principal	$	1,000,000	$	699,979	$	1,000,000	$	699,982		Principal	$	500,000	$	699,979		$	500,000	$	699,979

Unamortized issuance costs	Unamortized issuance costs	(11,659)		(8,786)		(12,309)		(9,518)			Unamortized issuance costs	(4,512)		(5,817)			(4,837)		(6,549)
Net carrying amount	Net carrying amount	$	988,341	$	691,193	$	987,691	$	690,464		Net carrying amount	$	495,488	$	694,162		$	495,163	$	693,430

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The following ~~tables set~~table sets forth the total interest expense recognized related to the notes (in thousands):


		Three Months Ended March 31,					Three Months Ended March 31,
		2022		2021			2023		2022
2026 notes:	2026 notes:					2026 notes:
Contractual interest expense	Contractual interest expense	$	—	$	—	Contractual interest expense	$	—	$	—
Amortization of issuance costs	Amortization of issuance costs	650		650		Amortization of issuance costs	325		650
Total 2026 notes interest expense	Total 2026 notes interest expense	$	650	$	650	Total 2026 notes interest expense	$	325	$	650
2025 notes:	2025 notes:					2025 notes:
Contractual interest expense	Contractual interest expense	$	215	$	237	Contractual interest expense	$	216	$	215
Amortization of issuance costs	Amortization of issuance costs	732		808		Amortization of issuance costs	732		732
Total 2025 notes interest expense	Total 2025 notes interest expense	$	947	$	1,045	Total 2025 notes interest expense	$	948	$	947
2023 notes:
Contractual interest expense		$	—	$	66
Amortization of issuance costs		—		168
Total 2023 notes interest expense		$	—	$	234

Capped Call Transactions

Concurrently with the offering of the 2026 notes and 2025 notes, we used $103.4 million and $97.2 million, respectively, of the net proceeds to enter into privately negotiated capped call transactions which are expected to reduce or offset potential dilution to holders of our common stock upon conversion of the notes or offset the potential cash payments we would be required to make in excess of the principal amount of any converted notes. The capped call transactions automatically exercise upon conversion of the notes and as of March 31, ~~2022,~~2023, cover 9,297,800 and 13,576,513 shares of our common stock for the 2026 notes and 2025 notes, respectively. These are intended to effectively increase the overall conversion price from $107.55 to $156.44 per share for the 2026 notes and $51.56 to $79.32 per share for the 2025 notes. The effective increase in conversion price as a result of the capped call transactions serves to reduce potential dilution to holders of our common stock and/or offset the cash payments we are required to make in excess of the principal amount of any converted notes. As these transactions meet certain accounting criteria, they are recorded in stockholders’ equity as a reduction of additional paid-in capital on our condensed consolidated balance sheets and are not accounted for as derivatives. The fair value of the capped call instrument is not remeasured each reporting period. The cost of the capped call is not expected to be deductible for tax purposes.

Note 8.6. Commitments and Contingencies

We may from time to time be subject to certain legal proceedings and claims in the ordinary course of business, including claims of alleged infringement of trademarks, patents, copyrights, and other intellectual property rights; employment claims; and general contract or other claims. We may also, from time to time, be subject to various legal or government claims, demands, disputes, investigations, or requests for information. Such matters may include, but not be limited to, claims, disputes, or investigations related to warranty, refund, breach of contract, employment, intellectual property, government regulation, or compliance or other matters.

On March 1, 2023, Plaintiff Shiva Stein, derivatively on behalf of Chegg, filed a stockholder derivative complaint in the Court of Chancery of the State of Delaware (Case No. 2023-0244-NAC) asserting breach of fiduciary duty, unjust enrichment, and waste of corporate asset claims against members of Chegg’s Board and certain Chegg officers. The matter is stayed. The Company disputes these claims and intends to vigorously defend itself in this matter.

On February 14, 2023, Plaintiff Brian Stansell, individually and on behalf of other similarly situated stockholders of Chegg, filed a putative class action complaint in the Court of Chancery of the State of Delaware (Case No. 2023-0180) on behalf of all Chegg stockholders who were eligible to vote at Chegg's 2022 Annual Stockholders' Meeting, asserting breach of fiduciary duty claims against the members of Chegg's Board. The Company disputes these claims and intends to vigorously defend itself in this matter.

On December 27, 2022, Plaintiff Sheri Moyer, individually and on behalf of all others similarly situated, filed a putative consumer class action in the United States District Court for the Northern District of California (Case No. 22-cv-09123) on behalf of all purchasers of a Chegg product or service as part of an automatic renewal plan or continuous service offer within the past four years. The Company disputes these claims and intends to vigorously defend itself in this matter.

On November 9, 2022, Plaintiff Joshua Keller, individually and on behalf of all others similarly situated, filed a putative class action in the United States District Court for the Northern District of California (Case No. 22-cv-06986) on behalf of

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individuals whose data was allegedly impacted by past data breaches. The Company disputes these claims and intends to vigorously defend itself in this matter.

On March 30, 2022, Joseph Robinson, derivatively on behalf of Chegg, filed a shareholder derivative complaint against Chegg and certain of its current and former directors and officers in the United States District Court for the Northern District of California, alleging violations of securities laws and breaches of fiduciary ~~duties, among others (the “Robinson Matter”). The Robinson Matter~~duties. On February 22, 2023, Plaintiff filed an Amended Shareholder Derivative Complaint. This matter has been consolidated with ~~the~~ Choi, ~~Matter (described below)~~below, and ~~has been stayed on the same terms.~~both matters are stayed. The Company disputes these claims and intends to vigorously defend itself in this matter.

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On January 12, 2022, Rak Joon Choi, derivatively on behalf of Chegg, filed a shareholder derivative complaint against Chegg and certain of its current and former directors and officers in the United States District Court for the Northern District of California, alleging violations of securities laws, breaches of fiduciary duties, unjust enrichment, abuse of control, gross mismanagement, and waste of corporate ~~assets, among others (the “Choi Matter”).~~assets. On February 22, 2023, Plaintiff filed an Amended Shareholder Derivative Complaint. This matter has been consolidated with Robinson, above, and both matters are stayed. The Company disputes these claims and intends to vigorously defend itself in this matter. On March 1, 2022, the court entered an order deeming the Choi Matter related to the Leventhal Matter (described below). On March 29, 2022, the plaintiff and defendants in the Choi matter entered into a stipulation and order staying action stipulating that the Choi Matter shall be stayed during the pendency of the Leventhal Matter.

On December 22, 2021, Steven Leventhal, individually and on behalf of all others similarly situated, filed a purported securities fraud class action on behalf of all purchasers of Chegg common stock between May 5, 2020 and November 1, 2021, inclusive, against Chegg and certain of its current and former officers in the United States District Court for the Northern District of California (Case No. 5:21-cv-09953), alleging that Chegg and several of its officers made materially false and misleading statements in violation of Sections 10(b) and 20(a) of the Securities Exchange Act of ~~1934 (the “Leventhal Matter”).~~1934. On September 7, 2022, KBC Asset Management and The Pompano Beach Police & Firefighters Retirement System were appointed as lead plaintiff in ~~this matter~~the case. On December 8, 2022, Plaintiff filed his Amended Complaint and seeks unspecified compensatory damages, costs, and expenses, including counsel and expert fees. The Company disputes these claims and intends to vigorously defend itself in this matter.

On September 13, 2021, Pearson Education, Inc. (Pearson) filed a complaint captioned Pearson Education, Inc. v. Chegg, Inc. (Pearson Complaint) in the United States District Court for the District of New Jersey against the Company (Case 2:21-cv-16866), alleging infringement of Pearson’s registered copyrights and exclusive rights under copyright in violation of the United States Copyright Act. Pearson is seeking injunctive relief, monetary damages, costs, and attorneys’ fees. The Company filed its answer to the Pearson Complaint on November 19, 2021. Pearson’s June 29, 2022 Motion for Leave to File Amended Complaint seeking to add Bedford, Freeman & Worth Publishing Group, LLC d/b/a Macmillan Learning as a plaintiff was denied. The Company disputes these claims and intends to vigorously defend itself in this matter.

On June 18, 2020, we received a Civil Investigative Demand (CID) from the Federal Trade Commission (FTC) ~~to determine whether we may have violated Section 5 of the FTC Act or the Children's Online Privacy Protection Act (COPPA), as they relate to~~regarding certain alleged deceptive or unfair acts or practices related to consumer privacy and/or data security. ~~We have provided~~On October 31, 2022, the FTC ~~with~~published the ~~requested responses to interrogatories~~parties’ agreed-upon consent order regarding Chegg’s privacy and ~~follow-up questions and have produced documents pertaining to data breach incidents and our~~ data security practices. On January 27, 2023, the FTC finalized its order ("Final Order") requiring Chegg to implement a comprehensive information security program, limit the data the Company can collect and ~~privacy practices generally.~~

~~On May 12, 2020, we received notice that 15,107 arbitration demands~~retain, offer users multifactor authentication to secure their accounts, and allow users to request access to and delete their data. No monetary penalties or fines were filed against us on April 30, 2020 by individuals all represented by the same legal counsel. Each individual claimant claimed to have suffered more than $25 thousand in damages as a result of the unauthorized access of certain items of their user data in April 2018. On July 1, 2020, an additional 1,007 arbitration demands were filed by the same counsel, making identical allegations. On August 12, 2020, an additional 577 arbitration demands were filed by the same counsel, making identical allegations. Related cases were filed by the same counsel in Maryland and California. We disputed that these claimants had a valid basis for seeking arbitration, asserted that they have acted in bad faith and have been working with the Maryland and California courts and plaintiffs’ counsel on resolution of these claims. The Maryland case is now closed. On August 22, 2021, Chegg and the claimants' legal counsel, on behalf of its clients, entered into a settlement agreement, pursuant to which each eligible claimant that signs a release agreement agrees, among other things, to dismiss with prejudice all claims against Chegg that such claimant currently maintains in exchange for such claimant's pro rata portion of the settlement amount. Claimants had until January 26, 2022 to sign their release agreements. As a result of the settlement, all but 4 petitions to compel arbitrationincluded in the ~~California action were dismissed with prejudice.~~Final Order.

We have not recorded any loss contingency accruals related to the above matters as we do not believe that a loss is probable in these matters. We are not aware of any other pending legal matters or claims, individually or in the aggregate, that are expected to have a material adverse impact on our consolidated financial position, results of operations, or cash flows. However, our analysis of whether a claim will proceed to litigation cannot be predicted with certainty, nor can the results of litigation be predicted with certainty. Nevertheless, defending any of these actions, regardless of the outcome, may be costly, time consuming, distract management personnel and have a negative effect on our business. An adverse outcome in any of these actions, including a judgment or settlement, may cause a material adverse effect on our future business, operating results and/or financial condition.

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Note 9.7. Guarantees and Indemnifications

We have agreed to indemnify our directors and officers for certain events or occurrences, subject to certain limits, while such persons are or were serving at our request in such capacity. We may terminate the indemnification agreements with these persons upon termination of employment, but termination will not affect claims for indemnification related to events occurring prior to the effective date of termination. We have a directors’ and officers’ insurance policy that limits our potential exposure up to the limits of our insurance coverage. In addition, we also have other indemnification agreements with various vendors against certain claims, liabilities, losses, and damages. The maximum amount of potential future indemnification is unlimited.

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We believe the fair value of these indemnification agreements is immaterial. We have not recorded any liabilities for these agreements as of March 31, ~~2022.~~2023.

Note ~~10.~~8. Stockholders' Equity

~~Accelerated~~ Share Repurchases

On February ~~22, 2022,~~23, 2023, we entered into an accelerated share repurchase (ASR) agreement with a financial institution ~~(2022~~(2023 ASR). We accounted for the ~~2022~~2023 ASR as 2two separate transactions, a repurchase of our common stock and an equity-linked contract indexed to our common stock that met certain accounting criteria for classification in stockholders' equity. Upon execution, we paid a fixed amount of ~~$300.0~~$150.0 million and received an initial delivery of ~~8,562,255~~7,599,747 shares of our common stock, ~~over the following 3 business days,~~ which were retired immediately. The initial delivery of shares of our common stock represented approximately 80 percent of the fixed amount paid of ~~$300.0~~$150.0 million, which was based on the share price of our common stock on the date of execution. The ~~2022~~2023 ASR, ~~was~~along with $1.3 million in associated costs, primarily consisting of an estimated 1% excise tax, were recorded as a reduction to additional paid in capital on our condensed consolidated statements of stockholders’ equity. The 2022 ASR settled during the second quarter of 2022 and we received an additional delivery of 837,001 shares of our common stock, which were retired immediately. The 2022 ASR resulted in a total repurchase of 9,399,256 shares of our common stock at a volume-weighted-average price, less an agreed upon discount, $31.9174 per share. We were not required to make any additional cash payments or delivery of common stock to the financial institutions upon settlement.

On February 22, 2022 and December 3, 2021, we entered into an ASR ~~agreement~~agreements with a financial ~~institution (2021 ASR) to repurchase $300.0 million of our outstanding common stock. The 2021 ASR settled during~~institutions. During the ~~three months~~year ended ~~March~~December 31, 2022, ~~and~~ we received ~~an additional delivery~~a total of ~~2,163,219~~11,562,475 shares of our common ~~stock.~~stock from these ASR agreements, which were retired immediately. Additionally, during the year ended December 31, 2022, we repurchased 1,146,803 shares of our common stock in open market transactions.

Securities Repurchase Program

In June 2022, our board of directors approved a $1.0 billion increase to our existing securities repurchase program authorizing the repurchase of up to $2.0 billion of our common stock and/or convertible notes, through open market purchases, block trades, and/or privately negotiated transactions or pursuant to Rule 10b5-1 plans, in compliance with applicable securities laws and other legal requirements. The timing, volume, and nature of the repurchases will be determined by management based on the capital needs of the business, market conditions, applicable legal requirements, and other factors. As of March 31, 2023, we had $492.6 million remaining under the repurchase program, which has no expiration date and will continue until otherwise suspended, terminated or modified at any time for any reason by our board of directors.

Share-based Compensation Expense

Total share-based compensation expense recorded for employees and non-employees is as follows (in thousands):


		Three Months Ended March 31,				Three Months Ended March 31,
		2022		2021				2023		2022
Cost of revenues	Cost of revenues	$	623	$	362		Cost of revenues	$	527	$	623
Research and development	Research and development	11,776		7,959			Research and development	10,914		11,776
Sales and marketing	Sales and marketing	4,386		2,919			Sales and marketing	2,499		4,386
General and administrative	General and administrative	16,299		11,860			General and administrative	19,806		16,299
Total share-based compensation expense	Total share-based compensation expense	$	33,084	$	23,100		Total share-based compensation expense	$	33,746	$	33,084

During the three months ended March 31, ~~2022~~2023 and ~~2021,~~2022, we capitalized share-based compensation expense of $1.0 million and $1.8 million, ~~and $0.5 million,~~ respectively.

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~~RSU and PSU Activity~~

~~Activity for RSUs and PSUs is as follows:~~

RSUs and PSUs Outstanding
Shares Outstanding Weighted Average Grant Date Fair Value
Balance at December 31, 2021 8,171,462 $ 46.36
Granted 2,472,933 33.21
Released (642,952) 68.70
Forfeited (598,243) 44.26
Balance at March 31, 2022 9,403,200 $ 41.51

As of March 31, ~~2022,~~2023, our total unrecognized share-based compensation expense related to RSUs and PSUs was approximately ~~$296.1~~$207.0 million, which will be recognized over the remaining weighted-average vesting period of approximately ~~2.5~~2.2 years.

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Activity for RSUs and PSUs is as follows:


	RSUs and PSUs Outstanding
	Shares Outstanding	Weighted Average Grant Date Fair Value
Balance at December 31, 2022	9,155,680	$	36.03
Granted	1,631,910	16.63
Released	(1,192,925)	37.50
Forfeited	(447,107)	34.03
Balance at March 31, 2023	9,147,558	32.48

Note ~~11.~~9. Subsequent Event

In ~~April 2022,~~May 2023, we entered into ~~definitive agreements regarding the sale of our print textbook library and~~a $15.0 million commitment to invest in Sound Ventures AI Fund, L.P., a limited partnership with GT Marketplace, LLC (doing business as “BBA”) for our Required Materials offering. We will continue to offer our Required Materials offering on our website and maintain relationships with the students, however, BBA has purchased our existing print textbook library for $14 million, subject to payment terms and certain adjustments, and will continue to make print textbook investments and provide fulfillment logistics for print textbook transactions. We expect that ~~we will continue to fulfill eTextbook transactions through the end of 2022, at which point BBA will fulfill eTextbook transactions.~~

As a result of the partnership with BBA, revenues from print textbook transactions will consist of a revenue share of the total transactions recognized immediately rather than the total amounts recognized ratably over the rental term, generally a two- to five-month period. Revenues from eTextbook transactions will continue to be recognized at the gross amount ratably over the contractual period, generally a two- to five-month period, through the expected transition period, at which point they will be recognized as a revenue share immediately. We will no longer incur significant costs of revenue such as order fulfillment fees primarily related to shipping and fulfillment, publisher content fees for eTextbooks after transition to BBA, and print textbook depreciation and write off expense. We will continue to incur costs of revenue such as payment processing fees and employee related costs as well as ongoing operating expenses such as platform infrastructure maintenance and transition costs. Upon board of directors approvalinvests in April 2022, our net textbook library and unrecognized deferred revenue related to print textbook transactions became a held for sale asset group which was subsequently sold to BBA at a gain as the consideration exceeds the carrying amount of the held for sale asset group.artificial intelligence companies. The initial accounting for the ~~sale of our print textbook library~~investment is in process as of the issuance date of our financial statements and therefore we are unable to make any additional disclosures.

2119

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion of our financial condition and results of operations in conjunction with our condensed consolidated financial statements and the related notes included in Part I, Item 1, “Financial Statements (unaudited)” of this Quarterly Report on Form 10-Q. In addition to historical consolidated financial information, the following discussion contains forward-looking statements that reflect our plans, estimates, and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. See the section titled “Note about Forward-Looking Statements” for additional information. Factors that could cause or contribute to these differences include those discussed below and elsewhere in this Quarterly Report on Form 10-Q.

Overview

Millions of people all around the world Learn with Chegg. Our mission is to improve learning and learning outcomes by putting students first. We support life-long learners starting with their academic journey and extending into their careers. The Chegg platform provides products and services to support learners to help them better understand their academic course materials, and also provides personal and professional development skills training, to help them achieve their learning goals.

~~Students subscribe~~Our long-term strategy is centered upon our ability to utilize Subscription Services to increase student engagement with our learning platform. We plan to continue to invest in the expansion of our offerings and technology platform to provide a more compelling and personalized solution and deepen engagement with students. In addition, we believe that the investments we have made to achieve our current scale will allow us to drive increased operating margins over time that, together with increased contributions of our Subscription Services, will enable us to sustain profitability and remain cash-flow positive in the long-term. Our ability to achieve these long-term objectives is subject to numerous risks and uncertainties including our ability to attract, retain, and increasingly engage the student population, reduced traffic to our ~~subscription~~ services, ~~collectively referred~~and other factors, such as the rapidly changing development of artificial intelligence technologies and global macroeconomic conditions, which continue to asevolve and affect our business and results of operations. Student interest in and usage of artificial intelligence technologies have increased, which we believe has and may continue to negatively impact the number of subscriber acquisitions. As a result, we are experiencing an adverse effect on our operating results, growth and financial condition, which may continue. These risks and uncertainties are described in greater detail in Part I, Item 1A, “Risk Factors.”

During the three months ended March 31, 2023 and 2022, we generated net revenues of $187.6 million and $202.2 million, respectively. We have changed our revenue disaggregation to Subscription Services and Skills and Other to better reflect the nature and timing of revenue and cash flows. Subscription Services includes revenues from our Chegg Study Pack, Chegg Study, Chegg Writing, Chegg Math, and Busuu offerings. Skills and Other includes revenues from our Skills, advertising services, print textbooks and eTextbooks offerings. We no longer present our Required Materials product line separately as we no longer expect to have significant revenue from our print textbook and eTextbooks offerings.

We have presented revenues for our two product lines, Subscription Services ~~which~~and Skills and Other, based on how students view us and the utilization of our products by them. More detail on our two product lines is discussed in the next two sections titled “Subscription Services” and “Skills and Other.”

Subscription Services

Our Subscription Services can be accessed internationally through our websites and on mobile ~~devices. Our primary~~devices and include Chegg ~~Services include~~Study Pack, Chegg Study, Chegg Writing, Chegg Math, ~~Solver, Chegg Study Pack, Busuu, Mathway~~ and ~~Thinkful.~~Busuu. Students typically pay to access Subscription Services on a monthly basis. Our Chegg Study subscription service provides “Expert Questions and Answers” and step-by-step “Textbook Solutions,” helping students with their course work. When students need writing help, including plagiarism detection scans and creating citations for their papers, they can use our Chegg Writing subscription service. Our Chegg Math ~~Solver and~~subscription service, including Mathway, ~~subscription services help~~helps students understand math by providing a step-by-step math solver and calculator. We also offer our Chegg Study Pack as a premium subscription bundle of our Chegg Study, Chegg Writing, and Chegg Math ~~Solver~~ services, which also includes additional features such as flashcards, concept videos, ~~and~~ practice questions and ~~quizzes.~~quizzes, and instructor-created materials through Uversity. Our ~~Thinkful skills-based learning platform offers professional courses focused on the most in-demand technology skills.~~

Required Materials includes our print textbook and eTextbook offerings, which help students save money compared to the cost of buying new. We offer an extensive print textbook library primarily for rent and also for sale both on our own and through our print textbook partners. We partner with a variety of third parties to source print textbooks and eTextbooks directly or indirectly from publishers.

In April 2022, we entered into definitive agreements with BBA such that we will continue to offer our Required Materials offering on our website and maintain relationships with the students, however, BBA has purchased our existing print textbook library and will continue to make print textbook investments and provide fulfillment logistics for print textbook transactions. We expect that we will continue to fulfill eTextbook transactions through the end of 2022, at which point BBA will fulfill eTextbook transactions. We expect that our partnership with BBA provides an opportunity to grow faster with higher margins.

~~In January 2022, we completed our acquisition of~~ Busuu ~~Online S.L. (Busuu), an online~~ language learning ~~company that~~platform offers a comprehensive solution through a combination of self-paced lessons, live classes with expert tutors and the ability to learn and practice with members of the Busuu language learning community.

~~During the three months ended March 31, 2022 and 2021, we generated net revenues of $202.2 million and $198.4 million, respectively.~~

We continue to experience a slowdown in the education industry as a result of the COVID-19 pandemic and macroeconomic conditions, such as inflation, which resulted in a decline in traffic to education technology services, such as the ones we provide. A combination of increased employment opportunities and compensation, along with students taking less classes, all led to significantly fewer enrollments than expected. Those students who have enrolled are taking fewer and less rigorous classes and are receiving less graded assignments. As a result, we are experiencing a deceleration in the growth rates of our services and revenues that may continue.

Our long-term strategy is centered upon our ability to utilize Chegg Services to increase student engagement with our learning platform. We plan to continue to invest in the expansion of our Chegg Services to provide a more compelling and personalized solution and deepen engagement with students. In addition, we believe that the investments we have made to achieve our current scale will allow us to drive increased operating margins over time that, together with increased

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contributions of Chegg Services, will enable us to sustain profitability and remain cash-flow positive in the long-term. Our ability to achieve these long-term objectives is subject to numerous risks and uncertainties, including our ability to attract, retain, and increasingly engage the student population, reduced traffic to our services, intense competition in our markets, the ability to achieve sufficient contributions to revenue from Chegg Services, and other factors, such as the COVID-19 pandemic, which continues to evolve and affect our business and results of operations. The COVID-19 pandemic subjects our business to numerous risks and uncertainties, most of which are beyond our control and cannot be predicted, including post-pandemic enrollment trends and student behaviors, such as the number and intensity of the courses selected. These risks and uncertainties are described in greater detail in Part I, Item 1A, “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021.

We have presented revenues for our two product lines, Chegg Services and Required Materials, based on how students view us and the utilization of our products by them. More detail on our two product lines is discussed in the next two sections titled “Chegg Services” and “Required Materials.”

~~Chegg Services~~

Our Chegg Services product line for students primarily includes Chegg Study, Chegg Writing, Chegg Math Solver, Chegg Study Pack, Busuu, Mathway, and Thinkful. Students typically pay to access Chegg Services on a monthly basis. We also work with leading brands to provide students with discounts, promotions, and other products that, based on student feedback, delight them.

~~In the aggregate, Chegg~~Subscription Services revenues were ~~91%~~90% and ~~82%~~86% of net revenues during the three months ended March 31, ~~2022~~2023 and ~~2021,~~2022, respectively.

~~Required Materials~~

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Skills and Other

Our ~~Required Materials~~Skills and Other product line includes revenues from Skills, advertising services, print textbooks and eTextbooks. ~~Revenues from~~Our skills-based learning platform offers professional courses focused on the most in-demand technology skills. We work with leading brands and programmatic partners to deliver advertising across our platforms. We also provide a platform for students to rent or buy print textbooks that we own are primarily recognized as the total transaction amount ratably over the rental term, generally a two- to five-month period. Revenues from print textbooks owned by a partner are recognized as a revenue share on the total transactional amount immediately when a print textbook ships to a student. Additionally, Required Materials includes revenues fromand eTextbooks, which ~~are primarily recognized ratably over~~helps students save money compared to the ~~contractual period, generally a two- to five-month period.~~cost of buying new.

~~In the aggregate, Required Materials~~Skills and Other revenues were 9%10% and ~~18%~~14% of net revenues during the three months ended March 31, ~~2022~~2023 and ~~2021,~~2022, respectively.

Seasonality of Our Business

Revenues from ~~Chegg~~Subscription Services ~~print textbooks that we own, and eTextbooks~~ are primarily recognized ratably over the subscription term ~~a student subscribes to our Chegg Services, rents a print textbook or has access to an eTextbook. This~~which has generally resulted in our highest revenues and profitability in the fourth quarter as it reflects more days of the academic year. ~~Our~~Certain variable expenses, ~~related to cost of revenues and~~such as marketing ~~activities~~expenses, remain highest in the first and third quarters such that our profitability may not provide meaningful insight on a sequential basis.

As a result of these factors, the most concentrated periods for our revenues and expenses do not necessarily coincide, and comparisons of our historical quarterly results of operations on a sequential basis may not provide meaningful insight into our overall financial performance.

~~Table of Contents~~

Results of Operations

The following table summarizes our historical condensed consolidated statements of operations (in thousands, except percentage of total net revenues):


		Three Months Ended March 31,								Three Months Ended March 31,
		2022				2021					2023		2022
Net revenues	Net revenues	$	202,244	100	%	$	198,378	100	%			Net revenues	$	187,601	100	%	$	202,244	100	%
Cost of revenues(1)	Cost of revenues(1)	55,085		27		71,384		36				Cost of revenues(1)	49,150		26		55,085		27
Gross profit	Gross profit	147,159		73		126,994		64				Gross profit	138,451		74		147,159		73
Operating expenses:	Operating expenses:											Operating expenses:
Research and development(1)	Research and development(1)	52,415		26		46,131		23				Research and development(1)	46,907		25		52,415		26
Sales and marketing(1)	Sales and marketing(1)	42,498		21		26,214		13				Sales and marketing(1)	37,017		20		42,498		21
General and administrative(1)	General and administrative(1)	46,870		23		37,870		19				General and administrative(1)	58,973		31		46,870		23

Total operating expenses	Total operating expenses	141,783		70		110,215		55				Total operating expenses	142,897		76		141,783		70
Income from operations		5,376		3		16,779		9
Total interest expense, net and other income (expense), net		4,583		2		(79,137)		(40)
Income (loss) before provision for income taxes		9,959		5		(62,358)		(31)
(Loss) income from operations												(Loss) income from operations	(4,446)		(2)		5,376		3
Total interest expense, net and other income, net												Total interest expense, net and other income, net	10,808		5		4,583		2
Income before provision for income taxes												Income before provision for income taxes	6,362		3		9,959		5
Provision for income taxes	Provision for income taxes	(4,217)		(2)		(2,821)		(2)				Provision for income taxes	(4,176)		(2)		(4,217)		(2)
Net income (loss)		$	5,742	3	%	$	(65,179)	(33)	%
Net income												Net income	$	2,186	1	%	$	5,742	3	%

(1) Includes share-based compensation expense as follows:	(1) Includes share-based compensation expense as follows:											(1) Includes share-based compensation expense as follows:
Cost of revenues	Cost of revenues	$	623			$	362					Cost of revenues	$	527			$	623
Research and development	Research and development	11,776				7,959						Research and development	10,914				11,776
Sales and marketing	Sales and marketing	4,386				2,919						Sales and marketing	2,499				4,386
General and administrative	General and administrative	16,299				11,860						General and administrative	19,806				16,299
Total share-based compensation expense	Total share-based compensation expense	$	33,084			$	23,100					Total share-based compensation expense	$	33,746			$	33,084

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Three Months Ended March 31, ~~2022~~2023 and ~~2021~~2022

Net Revenues

The following table sets forth our total net revenues for the periods shown for our ~~Chegg~~Subscription Services and ~~Required Materials~~Skills and Other product lines (in thousands, except percentages):

Three Months Ended
March 31, Change
2022 2021 $ %
Chegg Services $ 184,812 $ 162,351 $ 22,461 14 %
Required Materials 17,432 36,027 (18,595) (52)
Total net revenues $ 202,244 $ 198,378 $ 3,866 2


	Three Months Ended March 31,				Change
	2023		2022		$		%
Subscription Services	$	168,440	$	173,037	$	(4,597)	(3)	%
Skills and Other	19,161		29,207		(10,046)		(34)
Total net revenues	$	187,601	$	202,244	$	(14,643)	(7)

~~Chegg~~Subscription Services revenues ~~increased $22.5~~decreased $4.6 million, or ~~14%,~~3% during the three months ended March 31, ~~2022,~~2023, compared to the same period in ~~2021.~~2022. The ~~increase~~decrease was primarily due to a decrease in overall students subscribing to Chegg Study and Chegg Study Pack. As a result of an increase in student interest and usage of artificial intelligence technologies, we are currently experiencing an adverse impact to our business and results of operations, which may continue in the ~~introduction of enhanced and new offerings, including our acquisition of Busuu, which closed in January 2022, and increased global brand awareness and penetration. Chegg~~future. Subscription Services revenues were ~~91%~~90% and ~~82%~~86% of net revenues during the three months ended March 31, 2023 and 2022, respectively. Skills and ~~2021, respectively. Required Materials~~Other revenues decreased ~~$18.6~~$10.0 million, or ~~52%~~34%, during the three months ended March 31, ~~2022~~2023 compared to the same period in ~~2021.~~2022. The decrease was primarily due to ~~various~~lower revenues from print ~~textbook logistics challenges~~textbooks and eTextbooks as a result of recognizing revenue on a net basis from our partnership with GT Marketplace, LLC that began in April 2022, and lower ~~unit volumes driven~~advertising revenues, partially offset by ~~decreased college enrollments. Required Materials~~an increase in revenues related to our Skills offering. Skills and Other revenues were 9%10% and ~~18%~~14% of net revenues during the three months ended March 31, ~~2022~~2023 and ~~2021,~~2022, respectively.

~~As a result of our partnership with BBA, we expect Required Material revenues to decrease due to recognizing a revenue share of the total transaction amount rather than the total transaction amount.~~

Cost of Revenues

The following table sets forth our cost of revenues for the periods shown (in thousands, except percentages):


		Three Months Ended March 31,				Change				Three Months Ended March 31,						Change
		2022		2021		$		%				2023		2022			$		%
Cost of revenues(1)	Cost of revenues(1)	$	55,085	$	71,384	$	(16,299)	(23)	%		Cost of revenues(1)	$	49,150	$	55,085		$	(5,935)	(11)	%

(1) Includes share-based compensation expense of:	(1) Includes share-based compensation expense of:	$	623	$	362	$	261	72	%		(1) Includes share-based compensation expense of:	$	527	$	623		$	(96)	(15)	%

Cost of revenues decreased ~~$16.3~~$5.9 million, or ~~23%~~11%, during the three months ended March 31, ~~2022,~~2023, compared to the same period in ~~2021.~~2022. The decrease was primarily attributable to ~~lower order fulfillment fees~~the absence of $12.3 million driven by lower unit volumes, lower net loss on textbook library of $4.6 million, primarily due to a reduction in write-downs, lower cost of textbooks purchased by students of $3.3 million, lower print textbook ~~depreciation expense~~and eTextbook related costs of ~~$2.2~~$10.3 million and lower ~~customer support~~web hosting fees of ~~$1.9~~$2.3 million, partially offset by higher other depreciation and amortization expense of ~~$4.1 million, higher web hosting fees of $2.4 million, and incremental cost of tutors, as a result of our acquisition of Busuu, of $2.2~~$5.3 million. Gross margins increased to ~~73%~~74% during the three months ended March 31, ~~2022,~~2023, from ~~64%~~73% during the same period in ~~2021.~~2022.

~~As a result of our partnership with BBA, we expect cost of revenues to decrease and margins to improve over time.~~

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Operating Expenses

The following table sets forth our total operating expenses for the periods shown (in thousands, except percentages):


		Three Months Ended March 31,				Change				Three Months Ended March 31,						Change
		2022		2021		$		%				2023		2022			$		%
Research and development(1)	Research and development(1)	$	52,415	$	46,131	$	6,284	14	%		Research and development(1)	$	46,907	$	52,415		$	(5,508)	(11)	%
Sales and marketing(1)	Sales and marketing(1)	42,498		26,214		16,284		62			Sales and marketing(1)	37,017		42,498			(5,481)		(13)
General and administrative(1)	General and administrative(1)	46,870		37,870		9,000		24			General and administrative(1)	58,973		46,870			12,103		26

Total operating expenses	Total operating expenses	$	141,783	$	110,215	$	31,568	29	%		Total operating expenses	$	142,897	$	141,783		$	1,114	1

(1) Includes share-based compensation expense of:	(1) Includes share-based compensation expense of:										(1) Includes share-based compensation expense of:
Research and development	Research and development	$	11,776	$	7,959	$	3,817	48	%		Research and development	$	10,914	$	11,776		$	(862)	(7)	%
Sales and marketing	Sales and marketing	4,386		2,919		1,467		50			Sales and marketing	2,499		4,386			(1,887)		(43)
General and administrative	General and administrative	16,299		11,860		4,439		37			General and administrative	19,806		16,299			3,507		22
Share-based compensation expense	Share-based compensation expense	$	32,461	$	22,738	$	9,723	43	%		Share-based compensation expense	$	33,219	$	32,461		$	758	2

Research and Development

Research and development expenses ~~increased $6.3~~decreased $5.5 million, or ~~14%~~11%, during the three months ended March 31, ~~2022~~2023 compared to the same period in ~~2021.~~2022. The ~~increase~~decrease was primarily attributable to ~~higher~~lower employee-related expenses, including share-based compensation expense, of ~~$5.5 million and higher technology expenses to support our research and development of $1.5~~$2.1 million. Research and development expenses as a percentage of net revenues were ~~26%~~25% during the three months ended March 31, ~~2022~~2023 compared to ~~23%~~26% during the same period in ~~2021.~~2022.

Sales and Marketing

Sales and marketing expenses ~~increased~~decreased by ~~$16.3~~$5.5 million, or ~~62%~~13%, during the three months ended March 31, ~~2022,~~2023, compared to the same period in ~~2021.~~2022. The ~~increase~~decrease was primarily attributable to ~~increased international~~lower marketing ~~spend, including incremental marketing spend from Busuu,~~expenses of ~~$10.0~~$3.5 million ~~higher~~and lower employee-related expenses, including share-based compensation expense, of ~~$3.0 million, and higher other depreciation and amortization expense of $2.1~~$1.2 million. Sales and marketing expenses as a percentage of net revenues were ~~21%~~20% during the three months ended March 31, ~~2022~~2023 compared to ~~13%~~21% during the same period in ~~2021.~~2022.

General and Administrative

General and administrative expenses increased ~~$9.0~~$12.1 million, or ~~24%~~26%, during the three months ended March 31, ~~2022~~2023 compared to the same period in ~~2021.~~2022. The increase was primarily due to higher employee-related expenses, including share-based compensation expense, of ~~$8.6~~$9.6 million and higher information technology service expenses of $1.4 million. General and administrative expenses as a percentage of net revenues were ~~23%~~31% during the three months ended March 31, ~~2022~~2023 compared to ~~19%~~23% during the same period in ~~2021.~~

The increases in employee-related operating expenses during the three months ended March 31, 2022, compared to the same period in 2021, are largely driven by incremental employees from our acquisition of Busuu.2022.

Interest Expense and Other Income, ~~(Expense),~~ Net

The following table sets forth our interest expense and other income, ~~(expense),~~ net, for the periods shown (in thousands, except percentages):

Three Months Ended
March 31, Change
2022 2021 $ %
Interest expense, net $ (1,597) $ (1,929) $ 332 (17) %
Other income (expense), net 6,180 (77,208) 83,388 n/m
Total interest expense, net and other income (expense), net $ 4,583 $ (79,137) $ 83,720 n/m

*n/m - not meaningful

~~Table of Contents~~


	Three Months Ended March 31,				Change
	2023		2022		$		%
Interest expense, net	$	(1,268)	$	(1,597)	$	329	(21)	%
Other income, net	12,076		6,180		5,896		95
Total interest expense, net and other income, net	$	10,808	$	4,583	$	6,225	136

Interest expense, net decreased $0.3 million, or ~~17%~~21%, during the three months ended March 31, ~~2022,~~2023 compared to the same period in ~~2021, primary~~2022, primarily due to the ~~full redemption~~partial extinguishment of the ~~2023~~2026 notes in ~~2021.~~2022.

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Other income, ~~(expense),~~ net increased ~~$83.4~~$5.9 million, or 95%, during the three months ended March 31, ~~2022,~~2023 compared to the same period in ~~2021,~~2022 primarily due to an increase in interest income of $9.8 million, partially offset by the absence of the ~~$78.2~~$4.6 million ~~loss~~gain on ~~early extinguishment~~foreign currency remeasurement of ~~debt~~purchase consideration related to our acquisition of ~~a portion of the 2025 notes and the $7.1 million net loss on the change in fair value of derivative instruments.~~Busuu.

Provision for Income Taxes

The following ~~tables set~~table sets forth our provision for income taxes for the periods shown (in thousands, except percentages):

Three Months Ended
March 31, Change
2022 2021 $ %
Provision for income taxes $ (4,217) $ (2,821) $ (1,396) 49 %


	Three Months Ended March 31,				Change
	2023		2022		$		%
Provision for income taxes	$	(4,176)	$	(4,217)	$	41	(1)	%

Provision for income taxes ~~increased $1.4 million, or 49%,~~remained relatively flat during the three months ended March 31, ~~2022~~2023 compared to the same period in ~~2021 primarily~~2022, however, there were significant changes due to ~~base erosion and anti-abuse taxes~~the benefit of releasing uncertain tax positions in India partially offset by the absence of a ~~decrease~~valuation allowance benefit in ~~withholding taxes.~~the current quarter as a result of releasing our valuation allowance against a substantial amount of our U.S. deferred tax assets in 2022.

Liquidity and Capital Resources

As of March 31, ~~2022,~~2023, our principal sources of liquidity were cash, cash equivalents, and investments totaling ~~$1.6~~$1.2 billion, which were held for working capital purposes. The substantial majority of our net revenues are from e-commerce transactions with students, which are settled immediately through payment processors, as opposed to our accounts payable, which are settled based on contractual payment terms with our suppliers.

In ~~November 2021,~~June 2022, our board of directors approved a ~~$500.0 million~~$1.0 billion increase to our existing securities repurchase program authorizing the repurchase of up to ~~$1.0~~$2.0 billion of our common stock and/or convertible notes, through open market purchases, block trades, and/or privately negotiated transactions or pursuant to Rule 10b5-1 plans, in compliance with applicable securities laws and other legal requirements. The timing, volume, and nature of the repurchases will be determined by management based on the capital needs of the business, market conditions, applicable legal requirements, and other factors. ~~During the three months ended March 31, 2022 and year ended December 31, 2021, we~~We have entered into accelerated share repurchase programs ~~to repurchase a total of $600.0~~with financial institutions for $750.0 million, ~~of our outstanding common stock. Additionally,~~repurchased shares in ~~2021 we have repurchased $57.4~~open market transactions for $23.1 million and ~~$100.0 million of aggregate principal amount of the 2023~~repurchased our convertible senior notes ~~and 2025 notes, respectively,~~ in ~~privately negotiated~~privately-negotiated transactions for an aggregate consideration of ~~$149.6~~$734.4 million. As of March 31, 2023, we had $492.6 million ~~and $184.9 million, respectively. $65.5 million remains~~remaining under the repurchase program, which has no expiration date and will continue until otherwise suspended, terminated or modified at any time for any reason by our board of directors.

In February 2021, we completed an equity offering in which we raised net proceeds of $1,091.5 million, after deducting underwriting discounts and commissions and offering expenses (2021 equity offering). In August 2020 and March/April 2019, we closed offerings of our 2026 notes and 2025 notes, generating net proceeds of approximately $984.1 million and $780.2 million, respectively, in each case after deducting the initial purchasers’ discount and estimated offering expenses payable by us. The 2026 notes and 2025 notes mature on September 1, 2026 and March 15, 2025, respectively, unless converted, redeemed or repurchased in accordance with their terms prior to such dates.

As of March 31, ~~2022,~~2023, we have incurred cumulative losses of ~~$331.4~~$68.4 million from our operations and we may incur additional losses in the future. Our operations have been financed primarily by our initial public offering of our common stock (IPO), our 2017 follow-on public offering, our convertible senior notes offerings, our 2021 equity offering, and cash generated from operations.

~~There~~Aside from the changes in operating lease obligations as disclosed in Note 1, “Background and Basis of Presentation,” of our accompanying Notes to Condensed Consolidated Financial Statements included in Part I, Item 1, “Financial Statements (Unaudited)” of this Quarterly Report on Form 10-Q, there were no other material changes in our commitments under contractual obligations, as disclosed in Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained in our Annual Report on Form 10-K for the year ended December 31, ~~2021.~~2022.

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We believe that our existing sources of liquidity will be sufficient to fund our operations and debt service obligations for at least the next 12 months. Our future capital requirements will depend on many factors, including our rate of revenue growth, our investments in research and development activities, our acquisition of new products and services, and our sales and marketing activities. To the extent that existing cash and cash from operations are insufficient to fund our future activities, we may need to raise additional funds through public or private equity or debt financing. Additional funds may not be available on terms favorable to us or at all. If adequate funds are not available on acceptable terms, or at all, we may be unable to adequately fund our business plans and it could have a negative effect on our business, operating cash flows and financial condition.

Most of our cash, cash equivalents, and investments are held in the United States. As of March 31, ~~2022,~~2023, our foreign subsidiaries held an insignificant amount of cash in foreign jurisdictions. We currently do not intend or foresee a need to repatriate these foreign funds; however, as a result of the Tax Cuts and Jobs Act, we anticipate the U.S. federal impact to be minimal if these foreign funds are repatriated. In addition, based on our current and future needs, we believe our current funding and capital resources for our international operations are adequate.

The following table sets forth our cash flows (in thousands):


		Three Months Ended March 31,					Three Months Ended March 31,
		2022		2021			2023		2022
Condensed Consolidated Statements of Cash Flows Data:	Condensed Consolidated Statements of Cash Flows Data:					Condensed Consolidated Statements of Cash Flows Data:
Net cash provided by operating activities	Net cash provided by operating activities	$	80,035	$	73,573	Net cash provided by operating activities	$	73,160	$	80,035
Net cash used in investing activities	Net cash used in investing activities	(363,072)		(764,952)		Net cash used in investing activities	(106,779)		(363,072)
Net cash (used in) provided by financing activities		(307,461)		867,600
Net cash used in financing activities						Net cash used in financing activities	(158,902)		(307,461)

Cash Flows from Operating Activities

Net cash provided by operating activities during the three months ended March 31, 2023 was $73.2 million. Our net income of $2.2 million was increased by significant non-cash operating expenses including share-based compensation expense of $33.7 million and other depreciation and amortization expense of $25.5 million.

Net cash provided by operating activities during the three months ended March 31, 2022 was $80.0 million. Our net income of $5.7 million was increased by the change in our prepaid expenses and other current assets of $21.7 million. We also had significant non-cash operating expenses including share-based compensation expense of $33.1 million and other depreciation and amortization expense of $20.3 million.

Cash Flows from Investing Activities

Net cash ~~provided by operating~~used in investing activities during the three months ended March 31, ~~2021~~2023 was ~~$73.6 million. Our net loss~~$106.8 million and was related to the purchases of ~~$65.2 million was offset by significant non-cash operating expenses including print textbook depreciation expense~~investments of $3.8 million, other depreciation and amortization expense of $14.8 million, share-based compensation expense of $23.1 million, the loss on early extinguishment of debt of $78.2 million, the net loss on the change in fair value of derivative instruments of $7.1$497.4 million and the ~~net loss on textbook library~~purchases of ~~$4.0~~property and equipment of $17.2 million, ~~which was primarily due to increased write-downs,~~ partially offset by the ~~gain on sale~~maturities of ~~strategic equity investment~~investments of ~~$5.3~~$407.8 million.

~~Cash Flows from Investing Activities~~

Net cash used in investing activities during the three months ended March 31, 2022 was $363.1 million and was related to the acquisition of a business of $401.1 million, the purchases of investments of $273.3 million, the purchases of property and equipment of $29.5 million, and the purchases of textbooks of $3.7 million, partially offset by the maturity of investments of $342.1 million and proceeds from the disposition of textbooks of $2.5 million.

Cash Flows from Financing Activities

Net cash used in ~~investing~~financing activities during the three months ended March 31, ~~2021~~2023 was ~~$765.0~~$158.9 million and was primarily related to the ~~purchases~~repurchases of ~~investments~~common stock of ~~$925.7 million, the purchases of property and equipment of $19.0 million, the acquisition of business of $7.9~~$151.3 million and payment of $7.7 million in taxes related to the ~~purchases~~net share settlement of ~~textbooks of $4.5 million, partially offset by the maturity of investments of $181.3 million, proceeds from the sale of strategic~~ equity ~~investment of $6.8 million, and proceeds from the disposition of textbooks of $4.0 million.~~

~~Cash Flows from Financing Activities~~awards.

Net cash used in financing activities during the three months ended March 31, 2022 was $307.5 million and was primarily related to the repurchases of common stock of $300.5 million and payment of $7.5 million in taxes related to the net share settlement of equity awards.

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Net cash provided by financing activities during the three months ended March 31, 2021 was $867.6 million and was related to the net proceeds from our equity offering of $1,091.5 million, proceeds from 2023 notes and 2025 notes capped call instruments of $24.8 million, and proceeds from the issuance of common stock under stock plans of $0.3 million, partially offset by the repayment of a portion of our 2023 notes and 2025 notes of $189.8 million and payment of $59.2 million in taxes related to the net share settlement of equity awards.

Critical Accounting Policies, Significant Judgments and Estimates

Our condensed consolidated financial statements are prepared in accordance with generally accepted accounting principles in the United States. The preparation of these condensed consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, costs and expenses and related disclosures. These estimates form the basis for judgments we make about the carrying values of our assets and liabilities, which are not readily apparent from other sources. We base our estimates and judgments on historical experience and on various other assumptions that we believe are reasonable under the circumstances. On an ongoing basis, we evaluate our estimates and assumptions. The current COVID-19 pandemic has caused uncertainty and disruption in the global economy and financial markets. We are not aware of any specific event or circumstance that would require updates to our estimates or judgments or require us to revise the carrying value of our assets or liabilities. These estimates may change as new events occur and additional information is obtained. Our actual results may differ from these estimates under different assumptions or conditions.

There have been no material changes in our critical accounting policies and estimates during the three months ended March 31, ~~2022~~2023 as compared to the critical accounting policies and estimates disclosed in Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained in our Annual Report on Form 10-K for the year ended December 31, ~~2021.~~2022.

Recent Accounting Pronouncements

For relevant recent accounting pronouncements, see Note 1, “Background and Basis of Presentation,” of our accompanying Notes to Condensed Consolidated Financial Statements included in Part I, Item 1, “Financial Statements (unaudited)” of this Quarterly Report on Form 10-Q.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There have been no ~~other~~ material changes in our market risk during the three months ended March 31, ~~2022,~~2023, compared to the disclosures in Part II, Item 7A, “Quantitative and Qualitative Disclosures about Market Risk” contained in our Annual Report on Form 10-K for the year ended December 31, ~~2021.~~2022.

ITEM 4. CONTROLS AND PROCEDURES

(a)Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, as of the end of the period covered by this report.

In designing and evaluating our disclosure controls and procedures, management recognizes that any disclosure controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs.

Based on management’s evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures are designed to, and are effective to, provide assurance at a reasonable level that the information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures.

(b)Changes in Internal Control over Financial Reporting

During the three months ended March 31, ~~2022,~~2023, there were no changes in our internal control over financial reporting identified in connection with the evaluation required by Rules 13a-15(d) and 15d-15(d) of the Exchange Act that occurred that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.We continue to monitor the impact of the COVID-19 pandemic and, despite many of our employees working remotely, have not experienced any changes that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

ITEM 1A. RISK FACTORS

Our operations and financial results are subject to various risks and uncertainties, including those described in Part I, Item 1A, “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2021,~~2022, which could adversely affect our business, financial condition, results of operations, cash flows, and the trading price of our common stock. There have been no material changes in our risk factors from our Annual Report on Form 10-K.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Unregistered Sales of Securities

We had no unregistered sales of our securities during the three months ended March 31, ~~2022.~~2023.

Purchases of Securities by the Registrant and Affiliated Purchasers

The following table summarizes the securities repurchase activity during the three months ended March 31, ~~2022~~2023 (in thousands, except average price paid per security and total number of securities repurchased):

Period Total Number of Securities Repurchased Average Price Paid Per Security Total Number of Securities Purchased Pursuant to Publicly-Announced Plan Total Dollar Amount Purchased Pursuant to Publicly-Announced Plan Maximum Dollar Amount Remaining Available for Repurchase Pursuant to Publicly-Announced Plan
As of December 31, 2021 — $ — — $ — $ 365,491
January 1 - January 31(1)
2,163,219 28.3914 2,163,219 — 365,491
February 1 - February 28(2)
8,562,255 — 8,562,255 300,000 65,491
March 1 - March 31 — $ — — $ — $ 65,491


Period	Total Number of Securities Repurchased	Average Price Paid Per Security	Total Number of Securities Purchased Pursuant to Publicly-Announced Plan	Total Dollar Amount Purchased Pursuant to Publicly-Announced Plan	Maximum Dollar Amount Remaining Available for Repurchase Pursuant to Publicly-Announced Plan
January 1 - January 31	—	—	—	—	642,564
February 1 - February 28(1)	7,599,747	—	7,599,747	150,000	492,564
March 1 - March 31	—	—	—	—	492,564

(1) On December 3, 2021, we entered into an ASR agreement with a financial institution (2021 ASR) to repurchase $300.0 million of our outstanding common stock. The 2021 ASR settled during the three months ended March 31, 2022 and we received an additional delivery of 2,163,219 shares of our common stock. The total dollar amount purchased pursuant to a publicly-announced plan is zero as we made the upfront payment of $300.0 million during the three months ended December 31, 2021.

~~(2)~~ On February ~~22, 2022,~~23, 2023, we entered into an accelerated share repurchase (ASR) agreement with a financial institution ~~(2022~~(2023 ASR) to repurchase ~~$300.0~~$150.0 million of our outstanding common stock. In exchange for an upfront payment of ~~$300.0~~$150.0 million, we received an initial delivery of ~~8,562,255~~7,599,747 shares of our common stock. The average price paid per security is not applicable as final settlement did not occur during the three months ended March 31, 2022. The 2022 ASR settled during the second quarter of 2022 and we received an additional delivery of 837,001 shares of our common stock at a volume-weighted-average price, less an agreed upon discount, $31.9174 per share.2023. See

~~See~~ Note ~~10,~~8, “Stockholders' Equity,” of our accompanying Notes to Condensed Consolidated Financial Statements included in Part I, Item 1, “Financial Statements (Unaudited)” of this Quarterly Report on Form 10-Q for additional information on the ~~2021 and 2022 ASR.~~

securities repurchase program.

~~Table of Contents~~

Aside from the 2021 and 2022 ASR, we did not repurchase any of our securities during the three months ended March 31, 2022, other than in connection with the forfeiture of common stock by holders of restricted stock units in exchange for payments of statutory tax withholding amounts on behalf of the holders arising as a result of the vesting of restricted stock units.

3228

Table of Contents

ITEM 6. EXHIBITS

~~Incorporated by Reference~~

Exhibit
No.

~~Exhibit~~

~~Form~~

~~File No~~

~~Filing Date~~

~~Exhibit No.~~

Filed
Herewith

~~31.01~~

~~Certification of Dan Rosensweig, Chief Executive Officer and Co-Chairperson, pursuant to Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002~~

~~31.02~~

~~Certification of Andrew Brown, Chief Financial Officer, pursuant to Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002~~

32.01**

~~Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002~~

~~101.INS~~

~~Inline XBRL Instance Document~~

~~101.SCH~~

~~Inline XBRL Taxonomy Extension Schema~~

~~101.CAL~~

~~Inline XBRL Taxonomy Extension Calculation~~

~~101.LAB~~

~~Inline XBRL Taxonomy Extension Labels~~

~~101.PRE~~

~~Inline XBRL Taxonomy Extension Presentation~~

~~101.DEF~~

~~Inline XBRL Taxonomy Extension Definition~~

~~104~~

~~Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).~~

Incorporated by Reference

Exhibit
No.

Exhibit

Form

File No

Filing Date

Exhibit No.

Filed
Herewith

3.1

Amended and Restated Bylaws of Chegg, Inc., as amended on March 15, 2023.

8-K

001-36180

3/21/23

3.1

31.01

Certification of Dan Rosensweig, Chief Executive Officer and Co-Chairperson, pursuant to Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.02

Certification of Andrew Brown, Chief Financial Officer, pursuant to Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.01**

Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101.INS

Inline XBRL Instance Document

101.SCH

Inline XBRL Taxonomy Extension Schema

101.CAL

Inline XBRL Taxonomy Extension Calculation

101.LAB

Inline XBRL Taxonomy Extension Labels

101.PRE

Inline XBRL Taxonomy Extension Presentation

101.DEF

Inline XBRL Taxonomy Extension Definition

104

Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).




**			This certification is deemed not filed for purposes of section 18 of the Securities Exchange Act of 1934, as amended (Exchange Act), or otherwise subject to the liability of that section, nor shall it be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act.

3329

Table of Contents

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


	CHEGG, INC.
May ~~2, 2022~~1, 2023	By:	/S/ ANDREW BROWN
		Andrew Brown
		Chief Financial Officer (Duly Authorized Officer and Principal Financial Officer)

3430


	March 31, 2022		December 31, 2021
Assets
Current assets
Cash and cash equivalents	$	267,731	$	854,078
Short-term investments	915,431		691,781
Accounts receivable, net of allowance of $156 and $153 at March 31, 2022 and December 31, 2021, respectively	19,918		17,850
Prepaid expenses	28,882		35,093
Other current assets	14,671		23,846
Total current assets	1,246,633		1,622,648
Long-term investments	435,413		745,993
Textbook library, net	10,651		11,241
Property and equipment, net	187,743		169,938
Goodwill	641,284		289,763
Intangible assets, net	102,685		40,566
Right of use assets	18,879		18,062
Other assets	19,182		21,035
Total assets	$	2,662,470	$	2,919,246
Liabilities and stockholders' equity
Current liabilities
Accounts payable	$	9,549	$	11,992
Deferred revenue	60,458		35,143
Accrued liabilities	85,424		67,209

Total current liabilities	155,431		114,344
Long-term liabilities
Convertible senior notes, net	1,679,534		1,678,155
Long-term operating lease liabilities	12,456		12,447
Other long-term liabilities	6,528		7,383
Total long-term liabilities	1,698,518		1,697,985
Total liabilities	1,853,949		1,812,329
Commitments and contingencies (Note 8)	0		0
Stockholders' equity:
Preferred stock, $0.001 par value per share, 10,000,000 shares authorized, no shares issued and outstanding	—		—
Common stock, $0.001 par value per share: 400,000,000 shares authorized; 126,681,972 and 136,951,956 shares issued and outstanding at March 31, 2022 and December 31, 2021, respectively	127		137
Additional paid-in capital	1,176,765		1,449,305
Accumulated other comprehensive loss	(36,922)		(5,334)
Accumulated deficit	(331,449)		(337,191)
Total stockholders' equity	808,521		1,106,917
Total liabilities and stockholders' equity	$	2,662,470	$	2,919,246


	Three Months Ended March 31, 2021
	Common Stock
	Shares	Par Value		Additional Paid-In Capital		Accumulated Other Comprehensive Loss		Accumulated Deficit		Total Stockholders’ Equity
Balances at December 31, 2020	129,344	$	129	$	1,030,577	$	1,530	$	(422,601)	$	609,635
Cumulative-effect adjustment related to adoption of ASU 2020-06	—	—		(465,006)		—		86,868		(378,138)
Issuance of common stock in connection with equity offering, net of offering costs	10,975	11		1,091,455		—		—		1,091,466
Equity component on conversions of 2023 notes and 2025 notes	—	—		(11,305)		—		—		(11,305)
Issuance of common stock upon conversions of 2023 notes	126	—		11,237		—		—		11,237
Net proceeds from capped call related to conversions of 2023 notes and 2025 notes	—	—		23,577		—		—		23,577
Issuance of common stock upon exercise of stock options	44	—		346		—		—		346
Net share settlement of equity awards	828	1		(59,176)		—		—		(59,175)
Share-based compensation expense	—	—		23,647		—		—		23,647
Other comprehensive loss	—	—		—		(2,768)		—		(2,768)
Net loss	—	—		—		—		(65,179)		(65,179)
Balances at March 31, 2021	141,317	$	141	$	1,645,352	$	(1,238)	$	(400,912)	$	1,243,343


	Busuu
	Amount		Weighted-Average Amortization Period (in months)
Trade name	$	4,600	72
Customer lists	18,000		24
Developed technology	49,000		84
Total acquired intangible assets	$	71,600	68


	March 31, 2022
	Weighted-Average Amortization Period (in months)	Gross Carrying Amount		Accumulated Amortization		Foreign Currency Translation Adjustment		Net Carrying Amount
Developed technologies	80	$	106,703	$	(34,921)	$	(2,165)	$	69,617
Content libraries	60	12,230		(7,447)		—		4,783
Customer lists	35	34,190		(14,756)		(772)		18,662
Trade and domain names	52	16,213		(9,993)		(197)		6,023
Indefinite-lived trade name	—	3,600		—		—		3,600
Total intangible assets, net	67	$	172,936	$	(67,117)	$	(3,134)	$	102,685


	December 31, 2021
	Weighted-Average Amortization Period (in months)	Gross Carrying Amount		Accumulated Amortization		Foreign Currency Translation Adjustment		Net Carrying Amount
Developed technologies	76	$	57,521	$	(31,790)	$	—	$	25,731
Content library	60	12,230		(6,836)		—		5,394
Customer lists	47	16,190		(12,432)		—		3,758
Trade and domain names	44	11,613		(9,530)		—		2,083

Indefinite-lived trade name	—	3,600		—		—		3,600

Total intangible assets, net	65	$	101,154	$	(60,588)	$	—	$	40,566


Remaining nine months of 2022	$	20,402
2023	25,203
2024	13,858
2025	11,744
2026	11,396
Thereafter	16,482
Total	$	99,085