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, ~~2023~~2024


☐			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 ~~24, 2023,~~22, 2024, the Registrant had ~~119,716,256~~102,217,351 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, ~~2023~~2024 and December 31, ~~2022~~2023

Condensed Consolidated Statements of Operations - for the Three Months Ended March 31, ~~2023~~2024 and ~~2022~~2023

Condensed Consolidated Statements of Comprehensive (Loss) Income ~~(Loss)~~ - for the Three Months Ended March 31, ~~2023~~2024 and ~~2022~~2023

Condensed Consolidated Statements of Stockholder's Equity - for the Three Months Ended March 31, ~~2023~~2024 and ~~2022~~2023

Condensed Consolidated Statements of Cash Flows - for the Three Months Ended March 31, ~~2023~~2024 and ~~2022~~2023

Notes to Condensed Consolidated Financial Statements

Item 2.

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

2018

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

2724

Item 4.

Controls and Procedures

2724

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, EasyBib, the Chegg “C” logo, ~~Busuu~~ and ~~Thinkful~~Busuu 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 results of operations are forward-looking statements. The words “believe,” “may,” “will,” “would,” “could,” “estimate,” “continue,” “anticipate,” “intend,” “project,” “endeavor,” “expect,” “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, ~~2022.~~2023. Moreover, we operate in a very competitive and rapidly changing environment and new risks emerge from time to 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.

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.

Table of Contents

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, 2023		December 31, 2022			March 31, 2024	December 31, 2023
Assets	Assets
Current assets	Current assets
Current assets
Current assets
Cash and cash equivalents	Cash and cash equivalents	$	281,302	$	473,677
Short-term investments	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
Accounts receivable, net of allowance of $290 and $376 at March 31, 2024 and December 31, 2023, respectively
Prepaid expenses	Prepaid expenses	25,486		28,481
Other current assets	Other current assets	30,832		34,754
Total current assets	Total current assets	637,484		1,144,400
Long-term investments	Long-term investments	613,863		216,233
Property and equipment, net	Property and equipment, net	201,305		204,383
Goodwill	Goodwill	622,679		615,093
Intangible assets, net	Intangible assets, net	73,086		78,333
Right of use assets	Right of use assets	29,770		18,838
Deferred tax assets	Deferred tax assets	163,776		167,524
Other assets	Other assets	19,824		20,612
Total assets	Total assets	$	2,361,787	$	2,465,416
Liabilities and stockholders' equity	Liabilities and stockholders' equity					Liabilities and stockholders' equity
Current liabilities	Current liabilities					Current liabilities
Accounts payable	Accounts payable	$	13,058	$	12,367
Deferred revenue	Deferred revenue	58,568		56,273
Accrued liabilities	Accrued liabilities	68,026		70,234
Current portion of convertible senior notes, net
Total current liabilities	Total current liabilities	139,652		138,874
Long-term liabilities	Long-term liabilities					Long-term liabilities
Convertible senior notes, net	Convertible senior notes, net	1,189,650		1,188,593
Long-term operating lease liabilities	Long-term operating lease liabilities	23,064		13,375
Other long-term liabilities	Other long-term liabilities	2,662		7,985
Total long-term liabilities	Total long-term liabilities	1,215,376		1,209,953
Total liabilities	Total liabilities	1,355,028		1,348,827
Commitments and contingencies (Note 6)	Commitments and contingencies (Note 6)					Commitments and contingencies (Note 6)
Stockholders' equity:	Stockholders' equity:					Stockholders' equity:
Preferred stock, $0.001 par value per share, 10,000,000 shares authorized, no shares issued and outstanding	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
Common stock, $0.001 par value per share: 400,000,000 shares authorized; 101,569,933 and 102,823,700 shares issued and outstanding at March 31, 2024 and December 31, 2023, respectively
Additional paid-in capital	Additional paid-in capital	1,120,344		1,244,504
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(45,338)		(57,488)
Accumulated deficit	Accumulated deficit	(68,367)		(70,553)
Total stockholders' equity	Total stockholders' equity	1,006,759		1,116,589
Total liabilities and stockholders' equity	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,

2023

2022

Net revenues

187,601

202,244

Net revenues

Cost of revenues

49,150

55,085

Gross profit

138,451

147,159

Gross profit

Operating expenses:

Research and development

46,907

52,415

Research and development

Sales and marketing

37,017

42,498

General and administrative

58,973

46,870

General and administrative

Total operating expenses

142,897

141,783

(Loss) income from operations

(4,446)

5,376

Total operating expenses

Loss from operations

Interest expense, net and other income, net:

Interest expense, net

(1,268)

(1,597)

Interest expense, net

Other income, net

12,076

6,180

Total interest expense, net and other income, net

10,808

4,583

Total interest expense, net and other income, net

Income before provision for income taxes

6,362

9,959

Provision for income taxes

(4,176)

(4,217)

Net income

2,186

5,742

Net income per share

Provision for income taxes

Net (loss) income

Net (loss) income per share

Basic

0.02

0.04

Diluted

0.02

0.04

Weighted average shares used to compute net income per share

Diluted

Weighted average shares used to compute net (loss) income per share

Basic

123,710

132,162

Diluted

124,304

133,270

Diluted

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,
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)


	Three Months Ended March 31,
	2024		2023
Net (loss) income	$	(1,420)	$	2,186
Other comprehensive (loss) income
Change in net unrealized (loss) gain on investments	(1,970)		3,812
Change in foreign currency translation adjustments	(3,963)		8,338
Other comprehensive (loss) income	(5,933)		12,150
Total comprehensive (loss) income	$	(7,353)	$	14,336

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, 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, 2024
	Common Stock
	Shares	Par Value		Additional Paid-In Capital		Accumulated Other Comprehensive Loss		Accumulated Deficit		Total Stockholders’ Equity
Balances at December 31, 2023	102,824	$	103	$	1,031,627	$	(34,739)	$	(52,373)	$	944,618
Repurchases of common stock	(2,116)	(2)		(112)		—		—		(114)

Net share settlement of equity awards	862	1		(4,294)		—		—		(4,293)
Share-based compensation expense	—	—		30,616		—		—		30,616

Other comprehensive loss	—	—		—		(5,933)		—		(5,933)
Net loss	—	—		—		—		(1,420)		(1,420)
Balances at March 31, 2024	101,570	$	102	$	1,057,837	$	(40,672)	$	(53,793)	$	963,474


	Three Months Ended March 31, 2023															Three Months Ended March 31, 2023
	Common Stock
		Shares
		Shares
		Shares											Par Value	Additional Paid-In Capital	Accumulated Other Comprehensive Loss		Accumulated Deficit	Total Stockholders’ Equity
Balances at December 31, 2022

Repurchases of common stock
Repurchases of common stock
Repurchases of common stock

		Three Months Ended March 31, 2022
		Common Stock
Issuance of common stock upon exercise of stock options
		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

Issuance of common stock upon exercise of stock options	Issuance of common stock upon exercise of stock options	54	—		455		—		—		455
Net share settlement of equity awards	Net share settlement of equity awards	401	1		(7,467)		—		—		(7,466)
Share-based compensation expense	Share-based compensation expense	—	—		34,911		—		—		34,911
Other comprehensive loss		—	—		—		(31,588)		—		(31,588)
Other comprehensive income
Net income	Net income	—	—		—		—		5,742		5,742
Balances at March 31, 2022		126,682	$	127	$	1,176,765	$	(36,922)	$	(331,449)	$	808,521
Balances at March 31, 2023

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,
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,
2023 2022
Supplemental cash flow data:
Cash paid during the period for:
Interest $ 437 $ 437
Income taxes, net of refunds $ 2,017 $ 1,101
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases $ 2,866 $ 1,852
Right of use assets obtained in exchange for lease obligations:
Operating leases $ 12,407 $ 2,715
Non-cash investing and financing activities:
Accrued purchases of long-lived assets $ 3,941 $ 5,778


	Three Months Ended March 31,
	2024		2023
Cash flows from operating activities
Net (loss) income	$	(1,420)	$	2,186
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Share-based compensation expense	29,289		33,746
Depreciation and amortization expense	19,687		25,543

Deferred income taxes	2,877		3,441
Operating lease expense, net	1,567		1,496
Amortization of debt issuance costs	541		1,057
Loss from write-off of property and equipment	478		120










Other non-cash items	(31)		(5)
Change in assets and liabilities:
Accounts receivable	6,705		1,578
Prepaid expenses and other current assets	3,583		8,485
Other assets	(1,270)		2,803
Accounts payable	(6,589)		(336)
Deferred revenue	(1,159)		2,012
Accrued liabilities	640		(2,569)
Other liabilities	(1,580)		(6,397)
Net cash provided by operating activities	53,318		73,160
Cash flows from investing activities
Purchases of property and equipment	(28,017)		(17,166)


Purchases of investments	(79,028)		(497,372)
Maturities of investments	50,731		407,759


Proceeds from sale of strategic equity investment	15,500		—
Net cash used in investing activities	(40,814)		(106,779)
Cash flows from financing activities
Proceeds from common stock issued under stock plans, net	—		145
Payment of taxes related to the net share settlement of equity awards	(4,294)		(7,736)
Repurchase of common stock	—		(151,311)


Net cash used in financing activities	(4,294)		(158,902)
Effect of exchange rate changes	(226)		187
Net increase (decrease) in cash, cash equivalents and restricted cash	7,984		(192,334)
Cash, cash equivalents and restricted cash, beginning of period	137,976		475,854
Cash, cash equivalents and restricted cash, end of period	$	145,960	$	283,520

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


	Three Months Ended March 31,
	2024		2023
Supplemental cash flow data:
Cash paid during the period for:
Interest	$	224	$	437
Income taxes, net of refunds	$	641	$	2,017
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	2,216	$	2,866
Right of use assets obtained in exchange for lease obligations:
Operating leases	$	—	$	12,407
Non-cash investing and financing activities:
Accrued purchases of long-lived assets	$	6,302	$	3,941


	March 31,
	2024		2023
Reconciliation of cash, cash equivalents and restricted cash:
Cash and cash equivalents	$	143,747	$	281,302
Restricted cash included in other current assets	224		63
Restricted cash included in other assets	1,989		2,155
Total cash, cash equivalents and restricted cash	$	145,960	$	283,520

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. (“we,” “us,” “our,” “Company” or “Chegg”), headquartered in Santa Clara, California, was incorporated as a Delaware corporation in July 2005. Millions of people all around the world ~~Learn~~learn with Chegg. No matter the goal, level, or style, Chegg helps learners learn with confidence. We provide 24/7 on-demand support, and our personalized learning assistant leverages the power of artificial intelligence (“AI”), more than a hundred million pieces of proprietary content, as well as a decade of learning insights. Our ~~mission is~~platform also helps learners build essential life and job skills to ~~improve~~accelerate their path from learning to earning, and we work with companies to offer learning ~~outcomes by putting students first. We support life-long learners starting with~~programs for 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.employees.

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, ~~2023,~~2024 and our results of operations, results of comprehensive (loss) income, ~~(loss),~~ stockholders' equity and cash flows for the three months ended March 31, ~~2023~~2024 and ~~2022.~~2023. Our results of operations, results of comprehensive (loss) income, ~~(loss),~~ stockholders' equity, and cash flows for the three months ended March 31, ~~2023~~2024 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, ~~2022~~2023 (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, ~~2023~~2024 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, ~~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.

~~Table ofContents~~

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

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
2023.

Recent Accounting Pronouncements

Recently Issued Accounting Pronouncements Not Yet Adopted

~~There were no accounting pronouncements~~In December 2023, the Financial Accounting Standards Board (FASB) issued ~~during~~Accounting Standards Update (ASU) 2024-02, Codification Improvements—Amendments to Remove References to the ~~three months ended March 31, 2023 that would~~Concepts Statements. ASU 2024-02 removes various references to the FASB’s Concepts Statements from the FASB’s Accounting Standards Codification. Early adoption is permitted, and the guidance will be applied prospectively with the option to apply retrospectively. The guidance is effective for annual periods beginning after December 15, 2024. We did not early adopt ASU 2024-02 and do not believe it will have a ~~material~~significant impact on our financial ~~statements.~~statements, however, we are currently in the process of evaluating the impact.

Table of Contents

Recently Adopted Accounting Pronouncements

We did not adopt any ~~new standards or updates issued~~accounting pronouncements during the three months ended March 31, ~~2023~~2024 that had a material impact on our financial statements.

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 table ~~sets forth~~presents our total net revenues for the periods shown disaggregated for our Subscription Services and Skills and Other product lines (in thousands, except percentages):


		Three Months Ended March 31,				Change					Three Months Ended March 31,						Change
		2023		2022		$		%			2024			2023				$			%
Subscription Services	Subscription Services	$	168,440	$	173,037	$	(4,597)	(3)	%	Subscription Services	$	154,051	$	$	168,440	$		$	(14,389)	(9)		(9)	%
Skills and Other	Skills and Other	19,161		29,207		(10,046)		(34)
Total net revenues	Total net revenues	$	187,601	$	202,244	$	(14,643)	(7)

During the three months ended March 31, ~~2023~~2024 and ~~2022,~~2023, we recognized revenues of ~~$39.1~~$37.5 million and ~~$30.9~~$39.1 million, respectively, that were included in our deferred revenue balance at the beginning of each respective reporting period.

Contract Balances

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


						Change									Change
		March 31, 2023		December 31, 2022			$		%		March 31, 2024		December 31, 2023			$		%

Accounts receivable, net	Accounts receivable, net	$	22,000	$	23,515		$	(1,515)	(6)	%
Accounts receivable, net
Accounts receivable, net											$	24,741	$	31,404		$	(6,663)	(21)	%
Contract assets	Contract assets	11,505		11,946			(441)		(4)
Deferred revenue	Deferred revenue	58,568		56,273			2,295		4

During the three months ended March 31, ~~2023~~2024 our accounts receivable, net balance decreased by ~~$1.5~~$6.7 million, or 6%21%, primarily due to timing of billings and seasonality of our business. During the three months ended March 31, ~~2023,~~2024, our contract assets balance decreased by ~~$0.4~~$0.6 million, or 4%7%, primarily due to cash collections from our ~~Thinkful~~Chegg Skills service. During the three months ended March 31, ~~2023,~~2024, our deferred revenue balance ~~increased~~decreased by ~~$2.3~~$1.3 million, or 4%2%, primarily due to timing of bookings and seasonality of our business.

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Note 3. Net (Loss) Income Per Share

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

Three Months Ended
March 31,

2023

2022

Three Months Ended
March 31,

2024

Basic

Numerator:

Net income

2,186

5,742

Numerator:

Net (loss) income

Denominator:

Weighted average shares used to compute net income per share, basic

123,710

132,162

Denominator:

Weighted average shares used to compute net (loss) income per share, basic

Net income per share, basic

0.02

0.04

Net (loss) income per share, basic

Diluted

Numerator:

Net income

2,186

5,742

Numerator:

Net (loss) income

Denominator:

Weighted average shares used to compute net income per share, basic

123,710

132,162

Denominator:

Weighted average shares used to compute net (loss) income per share, basic

Shares related to stock plan activity

594

1,108

Weighted average shares used to compute net income per share, diluted

124,304

133,270

Weighted average shares used to compute net (loss) income per share, diluted

Net income per share, diluted

0.02

0.04

Weighted average shares used to compute net (loss) income per share, diluted

Net (loss) income per share, diluted

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


		Three Months Ended March 31,
		2023	2022
		Three Months Ended March 31,
		Three Months Ended March 31,
		Three Months Ended March 31,
		2024
		2024
		2024
Shares related to stock plan activity
Shares related to stock plan activity
Shares related to stock plan activity	Shares related to stock plan activity	6,283	2,300
Shares related to convertible senior notes	Shares related to convertible senior notes	18,226	22,875
Shares related to convertible senior notes
Shares related to convertible senior notes
Total common stock equivalents	Total common stock equivalents	24,509	25,175
Total common stock equivalents
Total common stock equivalents

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

The following tables ~~show~~present our cash and cash equivalents, and investments’ fair value level classification, adjusted cost, unrealized gain, unrealized loss and fair value as of March 31, ~~2023~~2024 and December 31, ~~2022~~2023 (in ~~thousands except for fair value levels)~~thousands):


		March 31, 2023										March 31, 2024
		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		$	31,393	$	—	$	—	$	31,393

Money market funds	Money market funds	Level 1	149,731		—		—		149,731
Commercial paper		Level 2	100,216		—		(38)		100,178
Money market funds
Money market funds

Total cash and cash equivalents
Total cash and cash equivalents
Total cash and cash equivalents	Total cash and cash equivalents		$	281,340	$	—	$	(38)	$	281,302
Short-term investments:	Short-term investments:										Short-term investments:

Corporate debt securities
Corporate debt securities
Corporate debt securities	Corporate debt securities	Level 2	$	214,883	$	—	$	(2,435)	$	212,448
U.S. treasury securities	U.S. treasury securities	Level 1	30,190		—		(21)		30,169
Agency bonds	Agency bonds	Level 2	35,253		—		(6)		35,247
Total short-term investments	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	$	364,729	$	1,003	$	(366)	$	365,366
U.S. treasury securities	U.S. treasury securities	Level 1	99,424		470		(54)		99,840
Agency bonds		Level 2	148,669		74		(86)		148,657

Total long-term investments	Total long-term investments		$	612,822	$	1,547	$	(506)	$	613,863
Total long-term investments
Total long-term investments


		December 31, 2022										December 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		$	33,532	$	—	$	—	$	33,532
Money market funds	Money market funds	Level 1	440,145		—		—		440,145

Total cash and cash equivalents	Total cash and cash equivalents		$	473,677	$	—	$	—	$	473,677
Total cash and cash equivalents
Total cash and cash equivalents
Short-term investments:	Short-term investments:										Short-term investments:
Commercial paper		Level 2	$	11,744	$	—	$	(29)	$	11,715

Corporate debt securities
Corporate debt securities
Corporate debt securities	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
Total short-term investments	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	$	125,735	$	158	$	(909)	$	124,984
U.S. treasury securities	U.S. treasury securities	Level 1	30,633		122		—		30,755
Agency bonds		Level 2	60,635		—		(141)		60,494

Total long-term investments	Total long-term investments		$	217,003	$	280	$	(1,050)	$	216,233
Total long-term investments
Total long-term investments

As of March 31, ~~2023,~~2024, we determined that the unrealized losses on our investments were not driven by credit related factors. During the three months ended March 31, ~~2023~~2024 and ~~2022,~~2023, we did not recognize any losses on our investments due to credit related ~~factors. During the three months ended March 31, 2023~~factors and ~~2022,~~ our realized gains and losses on investments were not significant.

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The following table ~~shows~~presents our cash equivalents and investments' adjusted cost and fair value by contractual maturity as of March 31, ~~2023~~2024 (in thousands):


		Adjusted Cost		Fair Value		Adjusted Cost	Fair Value
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	149,731		149,731
Total	Total	$	1,143,095	$	1,141,636

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

Strategic ~~Investment~~Investments

In May 2023, we entered into a $15.0 million commitment to invest in Sound Ventures AI Fund, L.P. (Sound Ventures), a limited partnership that invests in artificial intelligence companies, for an approximate 6% ownership. We accounted for our investment under the equity method of accounting. As of December 31, 2023, the carrying amount of our investment was $11.7 million. On January 1, 2024, we sold our investment for a total cash consideration of $15.5 million, resulting in a gain of $3.8 million. The cash payment received was included within cash flows from investing activities on our condensed consolidated statements of cash flows and the gain was included within other income, net on our condensed consolidated statements of operations.

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, 2024 and 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, 2024 and 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.~~notes (defined below). 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, ~~2023~~2024 and December 31, ~~2022~~2023 was ~~$393.1~~$205.4 million and ~~$385.0~~$202.9 million, respectively. The estimated fair value of the 2025 notes as of March 31, ~~2023~~2024 and December 31, ~~2022~~2023 was ~~$617.7~~$337.8 million and ~~$640.5~~$329.5 million, respectively. For further information on the notes, refer to Note 5, “Convertible Senior Notes.”

Note 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~~March/April 2019, we issued ~~$700~~$800 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.

~~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), 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 certain circumstances. During the ~~following circumstances:~~

•~~during any calendar quarter commencing after~~three months ended March 31, 2024, the ~~calendar quarter ending on December 31, 2020 for~~circumstances allowing holders of 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~~to convert were 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 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.~~met.

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,~~As of March 31, 2024, the 2025 notes ~~may~~were classified as a current liability on our condensed consolidated balance sheets as they will be ~~settled in shares of our common stock, cash or a combination of cash and shares of our common stock,~~convertible 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~~option of the ~~notes may require us to repurchase for cash all or~~holder at any ~~portion~~time beginning December 15, 2024 and will mature on March 15, 2025, both of ~~their notes at a repurchase price equal to 100% of~~which are within 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, 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.

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

March 31, 2023 December 31, 2022
2026 Notes 2025 Notes 2026 Notes 2025 Notes
Principal $ 500,000 $ 699,979 $ 500,000 $ 699,979
Unamortized issuance costs (4,512) (5,817) (4,837) (6,549)
Net carrying amount $ 495,488 $ 694,162 $ 495,163 $ 693,430
next twelve months.

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The following table ~~sets forth~~presents the net carrying amount of the notes (in thousands):


	March 31, 2024				December 31, 2023
	2026 Notes		2025 Notes		2026 Notes		2025 Notes
Principal	$	244,479	$	358,914	$	244,479	$	358,914

Unamortized issuance costs	(1,560)		(1,456)		(1,721)		(1,835)
Net carrying amount	$	242,919	$	357,458	$	242,758	$	357,079

The following table presents the total interest expense recognized related to the notes (in thousands):


		Three Months Ended March 31,
		2023		2022
		Three Months Ended March 31,
		Three Months Ended March 31,
		Three Months Ended March 31,
		2024
		2024
		2024
2026 notes:
2026 notes:
2026 notes:	2026 notes:
Contractual interest expense	Contractual interest expense	$	—	$	—
Contractual interest expense
Contractual interest expense
Amortization of issuance costs
Amortization of issuance costs
Amortization of issuance costs	Amortization of issuance costs	325		650
Total 2026 notes interest expense	Total 2026 notes interest expense	$	325	$	650
Total 2026 notes interest expense
Total 2026 notes interest expense
2025 notes:
2025 notes:
2025 notes:	2025 notes:
Contractual interest expense	Contractual interest expense	$	216	$	215
Contractual interest expense
Contractual interest expense
Amortization of issuance costs	Amortization of issuance costs	732		732
Amortization of issuance costs
Amortization of issuance costs
Total 2025 notes interest expense
Total 2025 notes interest expense
Total 2025 notes interest expense	Total 2025 notes interest expense	$	948	$	947

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, ~~2023,~~2024, cover 9,297,800 and ~~13,576,513~~6,961,352 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 6. Commitments and Contingencies

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,~~has filed a ~~putative consumer class action in~~motion to dismiss the ~~United States District Court for~~case, which is pending before 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.Court. The Company disputes these claims and intends to vigorously defend itself in this matter.

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On December 22, 2022, JPMorgan Chase Bank, N.A. (JPMC) asserted a demand for repayment by the Company of certain investment proceeds received by the Company in its capacity as an investor in TAPD, Inc. (more commonly known as “Frank”). JPMC seeks such repayment pursuant to certain provisions in the existing Support Agreement between JPMC and the Company that was entered into in connection with JPMC's acquisition of Frank. JPMC has alleged fraud on the part of certain former Frank executives regarding the quantity and quality of its customer accounts. The Company is not at fault, however is pursuing a settlement agreement with JPMC. As of March 31, 2024, we believe a loss is probable and reasonably estimable, and we have previously recognized an estimated loss contingency accrual of $7.0 million within general and administrative expense on our consolidated statements in 2023.

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. On August 15, 2023, the Company received an order granting its motion to compel arbitration, and the case was stayed and administratively closed pending the conclusion of arbitration. The ~~Company disputes these claims~~parties have since resolved this matter, and ~~intends to vigorously defend itself in this matter.~~the related settlement amount did not have a significant impact on our financial statements.

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. On February 22, 2023, Plaintiff filed an Amended Shareholder Derivative Complaint. This matter has been consolidated with Choi, below, and both matters are stayed. The Company disputes these claims and intends to vigorously defend itself in this matter.

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. 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 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. On September 7, 2022, KBC Asset Management and The Pompano Beach Police & Firefighters Retirement System were appointed as lead plaintiff in 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 has filed a motion to dismiss the case, which was denied by the Court. 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. Pearson filed an Amended Complaint on May 10, 2023, and the Company filed an amended answer on June 7, 2023. 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) regarding certain alleged deceptive or unfair acts or practices related to consumer privacy and/or data security. On October 31, 2022, the FTC published the parties’ agreed-upon consent order regarding Chegg’s privacy and 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 retain, offer users ~~multifactor~~multi factor authentication to secure their accounts, and allow users to request access to and delete their data. No monetary penalties or fines were included in the Final Order. We continue to work with the FTC on the implementation of and compliance with the Final Order.

WeAside from the loss contingency accrual recorded related to the Frank matter, we have not recorded any ~~loss contingency accruals~~contingent liabilities related to the above matters as we do not believe that a loss is probable and reasonably estimable in these matters. We

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are not aware of any other pending legal matters or claims, individually or in the aggregate, ~~that~~which 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.

Note 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, ~~2023.~~2024.

Note 8. Stockholders' Equity

Share Repurchases

~~On February 23,~~During the three months ended March 31, 2024, we repurchased 2,115,952 shares of our common stock related to the final delivery of our November 2023 ~~we entered into an~~ accelerated share repurchase (ASR) ~~agreement with a~~agreement. The November 2023 ASR settled, and we were not required to make any additional cash payments or delivery of common stock to the financial institution ~~(2023 ASR). We accounted for~~upon settlement.

During the year ended December 31, 2023, ~~ASR as two separate transactions,~~we repurchased a ~~repurchase~~total 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 $150.0 million and received an initial delivery of 7,599,74726,505,979 shares of our common stock, which ~~were retired immediately. The~~included the initial delivery of 13,498,313 shares offrom our ~~common stock represented approximately 80 percent of the fixed amount paid of $150.0 million, which was based on the share price of our common stock on the date of execution. The~~November 2023 ASR, ~~along with $1.3 million~~3,433,157 shares from open market transactions in ~~associated costs, primarily consisting~~June 2023, and the total delivery of ~~an estimated 1% excise tax, were recorded as a reduction to additional paid in capital on~~9,574,509 shares from our ~~condensed consolidated statements of stockholders’ equity.~~

On February ~~22, 2022 and December 3, 2021, we entered into~~2023 ASR, ~~agreements with financial institutions. During the year ended December 31, 2022, we received a total of 11,562,475 shares of our common 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,~~August 2023, our board of directors approved a ~~$1.0 billion~~$200.0 million increase to our existing securities repurchase program authorizing the repurchase of up to ~~$2.0~~$2.2 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, 2024, we had no cash repurchases of our common stock or notes. As of March 31, ~~2023,~~2024, we had ~~$492.6~~$3.7 million remaining under the securities 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~~The following table presents total share-based compensation expense recorded ~~for employees and non-employees is as follows~~ (in thousands):






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

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During the three months ended March 31, ~~2023~~2024 and ~~2022,~~2023, we capitalized share-based compensation expense of ~~$1.0~~$1.3 million and ~~$1.8~~$1.0 million, respectively. As of March 31, ~~2023, our~~2024, total unrecognized share-based compensation expense ~~related to RSUs and PSUs~~ was approximately ~~$207.0~~$113.1 million, which ~~will~~is expected to be recognized over the remaining weighted-average vesting period of approximately ~~2.2~~1.8 years.

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~~Activity~~The following table presents activity for outstanding RSUs and ~~PSUs is as follows:~~PSUs:


		RSUs and PSUs Outstanding			RSUs and PSUs Outstanding
		Shares Outstanding	Weighted Average Grant Date Fair Value		Shares Outstanding	Weighted Average Grant Date Fair Value
Balance at December 31, 2022		9,155,680	$	36.03
Balance at December 31, 2023
Granted	Granted	1,631,910	16.63
Released	Released	(1,192,925)	37.50
Forfeited	Forfeited	(447,107)	34.03
Balance at March 31, 2023		9,147,558	32.48
Balance at March 31, 2024

~~Note 9. Subsequent Event~~

In May 2023, we entered into a $15.0 million commitment to invest in Sound Ventures AI Fund, L.P., a limited partnership that invests in artificial intelligence companies. The initial accounting for the investment is in process as of the issuance date of our financial statements and therefore we are unable to make any additional disclosures.

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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~~learn with Chegg. No matter the goal, level, or style, Chegg helps learners learn with confidence. We provide 24/7 on-demand support, and our personalized learning assistant leverages the power of artificial intelligence (“AI”), more than a hundred million pieces of proprietary content, as well as a decade of learning insights. Our ~~mission is~~platform also helps learners build essential life and job skills to ~~improve~~accelerate their path from learning to earning, and we work with companies to offer learning ~~outcomes by putting students first. We support life-long learners starting with~~programs for 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.employees.

Our long-term strategy is centered upon our ability to utilize our 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,~~As AI technologies continue to advance, we are taking advantage of the increased opportunities by leveraging new tools to better serve our students. We realigned our investments and resources around AI in 2023, and have redesigned our user experience, developed our own large language models, launched automated solutions and built proprietary algorithms to optimize the quality and accuracy of our content to build our personalized learning assistant. We remain focused on rolling out enhancements and features that will deliver an even richer personalized learning assistant. We believe ~~that~~ the investments we have made ~~to achieve our current scale~~ will allow us to ~~drive increased~~maintain strong operating margins ~~over time that, together with increased contributions of our Subscription Services, will~~and cash flows and enable us to ~~sustain profitability and remain cash-flow positive in the long-term.~~return to revenue growth over time. 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, and other factors, such as the rapidly changing development of artificial intelligence technologies and global macroeconomic conditions, which continue to evolve 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,II, Item 1A, “Risk Factors.”

During the three months ended March 31, ~~2023~~2024 and ~~2022,~~2023, we generated net revenues of $174.4 million and $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 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 and include Chegg Study Pack, Chegg Study, Chegg Writing, Chegg Math, and ~~Busuu. Students~~Busuu and students typically pay to access our Subscription Services on a monthly basis. Revenues from our Subscription Services are primarily recognized ratably over the monthly subscription period whereas the number of subscribers are determined as those who have paid to access our services at any time during the period. Changes in revenues are primarily related to changes in subscribers however they may not necessarily coincide as a result of timing. Our Chegg Study subscription service provides ~~“Expert Questions~~access to personalized, step-by-step learning support powered by AI, computational engines, and ~~Answers” and step-by-step “Textbook Solutions,” helping students with their course work.~~subject matter experts. 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 subscription service, including Mathway, 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 ~~services, which also includes additional features such as flashcards, concept videos, practice questions and quizzes, and instructor-created materials through Uversity. Our~~services. Subscribers to Busuu have access to a premium language learning platform that offers a comprehensive ~~solution~~support through ~~a combination of~~ self-paced lessons, live classes with expert tutors and ~~the ability~~a huge community of members to ~~learn and~~ practice ~~with members of the Busuu language learning community.~~alongside.

In the aggregate, Subscription Services revenues were ~~90%~~88% and ~~86%~~90% of net revenues during the three months ended March 31, ~~2023~~2024 and ~~2022,~~2023, respectively.

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Skills and Other

Our Skills and Other product line includes revenues from Skills, advertising services, print textbooks and eTextbooks. Our skills-based learning platform offers professional courses focused on the ~~most in-demand~~latest 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 and eTextbooks, which helps students save money compared to the cost of buying new.

In the aggregate, Skills and Other revenues were ~~10%~~12% and ~~14% of net revenues~~10% during the three months ended March 31, ~~2023~~2024 and ~~2022,~~2023, respectively.

Seasonality of Our Business

Revenues from Subscription Services are primarily recognized ratably over the subscription term which has generally resulted in our highest revenues and profitability in the fourth quarter as it reflects more days of the academic year. Certain variable expenses, such as marketing 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.

Results of Operations

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






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

Total operating expenses	Total operating expenses	142,897		76		141,783		70
(Loss) income from operations		(4,446)		(2)		5,376		3

Total operating expenses

Total operating expenses
Loss from operations
Loss from operations
Loss from operations
Total interest expense, net and other income, net
Total interest expense, net and other income, net
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
Income before provision for income taxes
Income before provision for income taxes
Provision for income taxes	Provision for income taxes	(4,176)		(2)		(4,217)		(2)
Net income		$	2,186	1	%	$	5,742	3	%
Provision for income taxes
Provision for income taxes
Net (loss) income
Net (loss) income
Net (loss) income

(1) Includes share-based compensation expense as follows:

(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	$	527			$	623
Cost of revenues
Cost of revenues
Research and development
Research and development
Research and development	Research and development	10,914				11,776
Sales and marketing	Sales and marketing	2,499				4,386
Sales and marketing
Sales and marketing
General and administrative
General and administrative
General and administrative	General and administrative	19,806				16,299
Total share-based compensation expense	Total share-based compensation expense	$	33,746			$	33,084
Total share-based compensation expense
Total share-based compensation expense

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Three Months Ended March 31, ~~2023~~2024 and ~~2022~~2023

Net Revenues

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


		Three Months Ended March 31,				Change				Three Months Ended March 31,					Change
		2023		2022		$		%				2024			2023			$			%
Subscription Services	Subscription Services	$	168,440	$	173,037	$	(4,597)	(3)	%		Subscription Services	$	154,051	$	$	168,440	$	$	(14,389)	(9)		(9)	%
Skills and Other	Skills and Other	19,161		29,207		(10,046)		(34)
Total net revenues	Total net revenues	$	187,601	$	202,244	$	(14,643)	(7)

Subscription Services revenues decreased ~~$4.6~~$14.4 million, or 3% during the three months ended March 31, 2023, compared to the same period in 2022. The 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 future. Subscription Services revenues were 90% and 86% of net revenues during the three months ended March 31, 2023 and 2022, respectively. Skills and Other revenues decreased $10.0 million, or 34%9%, during the three months ended March 31, ~~2023~~2024 compared to the same period in ~~2022. The decrease~~2023, which was primarily due to ~~lower revenues from print textbooks and eTextbooks as a result of recognizing revenue on a net basis from~~an 8% decrease in subscribers who have paid to access our ~~partnership with GT Marketplace, LLC that began in April 2022, and lower advertising revenues, partially offset by an increase in revenues related to our Skills offering.~~services. Skills and Other revenues ~~were 10% and 14% of net revenues~~increased $1.1 million, or 6%, during the three months ended March 31, 2024 compared to the same period in 2023, ~~and 2022, respectively.~~primarily due to pricing increases in our programmatic advertising services as well as our Chegg Skills offering.

Cost of Revenues

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


		Three Months Ended March 31,				Change				Three Months Ended March 31,					Change
		2023		2022		$		%				2024			2023			$			%
Cost of revenues(1)	Cost of revenues(1)	$	49,150	$	55,085	$	(5,935)	(11)	%		Cost of revenues(1)	$	46,497	$	$	49,150	$	$	(2,653)	(5)		(5)		%

(1) Includes share-based compensation expense of:	(1) Includes share-based compensation expense of:	$	527	$	623	$	(96)	(15)	%
(1) Includes share-based compensation expense of:
(1) Includes share-based compensation expense of:												$	513		$	527		$	(14)		(3)		%

Cost of revenues decreased ~~$5.9~~$2.7 million, or ~~11%~~5%, during the three months ended March 31, ~~2023,~~2024, compared to the same period in ~~2022. The decrease~~2023, which was primarily ~~attributable~~due to ~~the absence of print textbook and eTextbook related costs of $10.3 million and~~ lower ~~web hosting fees of $2.3 million, partially offset by higher other~~ depreciation and amortization ~~expense of $5.3 million.~~expense. Gross margins ~~increased~~decreased to ~~74%~~73% during the three months ended March 31, ~~2023,~~2024, from ~~73%~~74% during the same period in ~~2022.~~

2023.

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Operating Expenses

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


		Three Months Ended March 31,				Change				Three Months Ended March 31,						Change
		2023		2022		$		%
	2024														2024				2023				$			%
Research and development(1)	Research and development(1)	$	46,907	$	52,415	$	(5,508)	(11)	%		Research and development(1)	$	44,435	$		$	46,907	$		$	(2,472)	(5)		(5)	%
Sales and marketing(1)	Sales and marketing(1)	37,017		42,498		(5,481)		(13)
General and administrative(1)	General and administrative(1)	58,973		46,870		12,103		26

Total operating expenses	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:	(1) Includes share-based compensation expense of:
Research and development	Research and development	$	10,914	$	11,776	$	(862)	(7)	%		Research and development	$	9,209	$		$	10,914	$		$	(1,705)	(16)		(16)	%
Sales and marketing	Sales and marketing	2,499		4,386		(1,887)		(43)
General and administrative	General and administrative	19,806		16,299		3,507		22
Share-based compensation expense	Share-based compensation expense	$	33,219	$	32,461	$	758	2

Research and Development

Research and development expenses decreased ~~$5.5~~$2.5 million, or ~~11%~~5%, during the three months ended March 31, ~~2023~~2024 compared to the same period in ~~2022. The decrease~~2023, which was primarily ~~attributable~~due to lower employee-related expenses, including share-based compensation ~~expense, of $2.1 million.~~expense. Research and development expenses as a percentage of net revenues were ~~25%~~26% during the three months ended March 31, ~~2023~~2024 compared to ~~26%~~25% during the same period in ~~2022.~~2023.

Sales and Marketing

Sales and marketing expenses decreased by ~~$5.5~~$6.6 million, or ~~13%~~18%, during the three months ended March 31, ~~2023,~~2024, compared to the same period in ~~2022.~~2023. The decrease was primarily attributable to lower depreciation and amortization expense of $2.9 million, lower paid marketing expenses of ~~$3.5~~$2.3 million, and lower employee-related expenses, including share-based compensation expense, of ~~$1.2~~$1.1 million. Sales and marketing expenses as a percentage of net revenues were ~~20%~~17% during the three months ended March 31, ~~2023~~2024 compared to ~~21%~~20% during the same period in ~~2022.~~2023.

General and Administrative

General and administrative expenses ~~increased $12.1~~decreased $3.4 million, or ~~26%~~6%, during the three months ended March 31, ~~2023~~2024 compared to the same period in ~~2022.~~2023. The ~~increase~~decrease was primarily due to ~~higher~~lower employee-related expenses, including share-based compensation expense, of ~~$9.6~~$4.3 million, ~~and~~partially offset by higher ~~information technology service expenses~~professional fees of ~~$1.4~~$1.2 million. General and administrative expenses as a percentage of net revenues were ~~31%~~32% during the three months ended March 31, ~~2023~~2024 compared to ~~23%~~31% during the same period in ~~2022.~~2023.

Interest Expense and Other Income, Net

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


		Three Months Ended March 31,				Change				Three Months Ended March 31,					Change
		2023		2022		$		%				2024			2023			$			%
Interest expense, net	Interest expense, net	$	(1,268)	$	(1,597)	$	329	(21)	%		Interest expense, net	$	(650)	$	$	(1,268)	$	$	618	(49)		(49)	%
Other income, net	Other income, net	12,076		6,180		5,896		95
Total interest expense, net and other income, net	Total interest expense, net and other income, net	$	10,808	$	4,583	$	6,225	136

Interest expense, net decreased ~~$0.3~~$0.6 million, or ~~21%~~49%, during the three months ended March 31, ~~2023~~2024 compared to the same period in ~~2022,~~2023, primarily due to the partial ~~extinguishment~~early extinguishments of ~~the 2026~~our convertible senior notes in ~~2022.~~2023.

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Other income, net ~~increased $5.9~~decreased $1.3 million, or ~~95%~~11%, during the three months ended March 31, ~~2023~~2024 compared to the same period in ~~2022~~2023, primarily due to ~~an increase~~a decrease in interest income of ~~$9.8~~$4.3 million, partially offset by the ~~absence of the $4.6 million~~ gain on ~~foreign currency remeasurement~~the sale of ~~purchase consideration related to~~ our ~~acquisition~~strategic equity investment in Sound Ventures of ~~Busuu.~~$3.8 million.

Provision for ~~Income Taxes~~income taxes

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

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


	Three Months Ended March 31,				Change
	2024		2023		$		%
Provision for income taxes	$	(9,059)	$	(4,176)	$	(4,883)	117	%

Provision for income taxes ~~remained relatively flat~~increased $4.9 million, or 117%, during the three months ended March 31, ~~2023~~2024 compared to the same period in ~~2022, however, there were significant changes~~2023. The increase was primarily due to the absence of the benefit of releasing uncertain tax positions in India in 2023 and a lower tax deduction associated with share-based compensation expense, partially offset by ~~the absence of~~ a ~~valuation allowance benefit~~decrease in federal and state income taxes in the ~~current quarter as a result of releasing our valuation allowance against a substantial amount of our U.S. deferred tax assets in 2022.~~United States.

Liquidity and Capital Resources

The following table presents our cash, cash equivalents and investments and convertible senior notes as of the periods shown (in thousands, except percentages):


					Change
	March 31, 2024		December 31, 2023		$		%
Cash, cash equivalents and short-term and long-term investments	$	612,425	$	579,561	$	32,864	6	%
Convertible senior notes, net(1)	600,377		599,837		540		0

(1) Consists of the current and long-term portion of convertible senior notes, net.

Cash, cash equivalents, and investments increased $32.9 million during the three months ended March 31, 2024 primarily due to the net cash provided by operating activities of $53.3 million, partially offset by the purchases of property and equipment of $28.0 million. Convertible senior notes, net increased $0.5 million during the three months ended March 31, 2024 primarily due to amortization of issuance costs.

As of March 31, ~~2023,~~2024, our principal sources of liquidity were cash, cash equivalents, and investments totaling ~~$1.2 billion,~~$612.4 million, 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 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. We have entered into accelerated share repurchase programs with financial institutions for $750.0 million, repurchased shares in open market transactions for $23.1 million and repurchased our convertible senior notes in privately-negotiated transactions for aggregate consideration of $734.4 million. 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.

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, 2023, we have incurred cumulative losses of $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.

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, 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~~sources of liquidity are insufficient to fund our future ~~activities,~~operations, 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. As of March 31, 2024, we have incurred cumulative losses of $53.8 million from our operations and we may incur additional losses in the future.

Most of our cash, cash equivalents, and investments are held in the United States. AsWe plan to repatriate a portion of the earnings from our subsidiary in India and therefore accrued $4.0 million of tax expense related to such future distributions as of March 31, ~~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~~2024. As a result of the Tax Cuts and Jobs Act, we anticipate the U.S. federal impact for the remaining foreign jurisdictions 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~~There were no material changes in our ~~cash flows (in thousands):~~

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

~~Cash Flows from Operating Activities~~

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The following table presents our condensed consolidated statements of cash flows data (in thousands):


	Three Months Ended March 31,				Change
	2024		2023		$		%

Net cash provided by operating activities	$	53,318	$	73,160	$	(19,842)	(27)	%
Net cash used in investing activities	(40,814)		(106,779)		65,965		(62)	%
Net cash used in financing activities	(4,294)		(158,902)		154,608		(97)	%

Net cash provided by operating activities decreased $19.8 million, or 27%, during the three months ended March 31, ~~2023~~2024 compared to the same period in 2023. The decrease was ~~$73.2 million. Our~~primarily driven by lower net (loss) income of ~~$2.2 million was increased by significant non-cash operating expenses including share-based compensation expense of $33.7~~$3.6 million and ~~other~~a decrease in non-cash adjustments of $11.0 million which was primarily related to lower 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~~lower share-based compensation ~~expense of $33.1 million and other depreciation and amortization expense of $20.3 million.~~

~~Cash Flows from Investing Activities~~expense.

Net cash used in investing activities decreased $66.0 million, or 62%, during the three months ended March 31, 2024 compared to the same period in 2023 ~~was $106.8 million~~ and was primarily related to ~~the~~lower purchases of investments of ~~$497.4~~$418.3 million and proceeds from the sale of our strategic investment of $15.5 million, partially offset by lower proceeds from the maturities of our investments of $357.0 million and higher purchases of property and equipment of ~~$17.2 million, partially offset by the maturities of investments of $407.8~~$10.9 million.

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 financing activities decreased $154.6 million, or 97%, during the three months ended March 31, 2024 compared to the same period in 2023 ~~was $158.9 million~~ and was primarily related to the absence of repurchases of our common ~~stock of $151.3 million and payment of $7.7 million in taxes related to the net share settlement of equity awards.~~stock.

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.

~~Table ofContents~~

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. 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, ~~2023~~2024 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, ~~2022.~~2023.

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 material changes in our market risk during the three months ended March 31, ~~2023,~~2024, 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, ~~2022.~~2023.

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, ~~2023,~~2024, 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.

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PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

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. See Note 6, “Commitments and Contingencies,” 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.~~10-Q for more information on our 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, ~~2022,~~2023, 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, ~~2023.~~2024.

Purchases of Securities by the Registrant and Affiliated Purchasers

The following table ~~summarizes~~presents the securities repurchase activity during the three months ended March 31, ~~2023~~2024 (in thousands, except average price paid per security and total number of securities repurchased):


Period	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	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, 2023
January 1 - January 31	January 1 - January 31	—	—	—	—	642,564
February 1 - February 28(1)		7,599,747	—	7,599,747	150,000	492,564
February 1 - February 29(1)
March 1 - March 31	March 1 - March 31	—	—	—	—	492,564

(1) ~~On February 23,~~The 2,115,952 shares of our common stock relate to the final delivery of our November 2023 ~~we entered into an~~ accelerated share repurchase (ASR) ~~agreement with~~agreement. The total dollar amount purchased pursuant to a ~~financial institution (2023 ASR) to repurchase $150.0 million of our outstanding common stock. In exchange for~~publicly-announced plan is zero as we made an upfront payment of $150.0 million ~~we received an initial delivery of 7,599,747 shares of our common stock. The average price paid per security is not applicable as final settlement did not occur during~~in November 2023.

ITEM 5. OTHER INFORMATION

Rule 10b5-1 Trading Plans

During the three months ended March 31, ~~2023. SeeNote 8, “Stockholders' Equity,”~~2024, none of our ~~accompanying Notes to Condensed Consolidated Financial Statements included~~Section 16 officers or directors adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement” as defined in ~~Part I,~~ Item ~~1, “Financial Statements (Unaudited)”~~408 of ~~this Quarterly Report on Form 10-Q for additional information on~~Regulation S-K during the ~~securities repurchase program.~~covered period.

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ITEM 6. EXHIBITS

   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
               X
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
               X
32.01**
Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
               X
101.INS Inline XBRL Instance Document                X
101.SCH Inline XBRL Taxonomy Extension Schema                X
101.CAL Inline XBRL Taxonomy Extension Calculation                X
101.LAB Inline XBRL Taxonomy Extension Labels                X
101.PRE Inline XBRL Taxonomy Extension Presentation                X
101.DEF Inline XBRL Taxonomy Extension Definition                X
104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). X

Incorporated by Reference

Exhibit
No.

Exhibit

Form

File No

Filing Date

Exhibit No.

Filed
Herewith

10.01*

Executive Chairman Agreement between Dan Rosensweig and Chegg, Inc. dated April 24, 2024

10.02*

Employment Agreement between Nathan Schultz and Chegg, Inc. dated April 24, 2024

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 David Longo, 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).



*			Indicates a management contract or compensatory plan.
**			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.

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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 1, 2023~~April 29, 2024	By:	/S/ ~~ANDREW BROWN~~DAVID LONGO
		~~Andrew Brown~~David Longo
		Chief Financial Officer (Duly Authorized Officer and Principal Financial Officer)

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	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


	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