| Significant Accounting Policies | Significant Accounting Policies Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles in the United States (U.S. 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. Significant estimates, assumptions, and judgments are used for, but not limited to: revenue recognition, recoverability of accounts receivable, determination of the useful lives and salvage value assigned to our textbook library, restructuring charges, share-based compensation expense including estimated forfeitures, accounting for income taxes, useful lives assigned to long-lived assets for depreciation and amortization, impairment of goodwill and long-lived assets, and the valuation of acquired intangible assets. 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. Principles of Consolidation The consolidated financial statements include the accounts of Chegg and our wholly owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. The consolidated financial statements have been prepared in accordance with U.S. GAAP. Cash and Cash Equivalents and Restricted Cash We consider all highly liquid investments with an original maturity date of three months or less from the date of purchase to be cash equivalents. Cash and cash equivalents, which consist of cash, money market accounts, commercial paper, corporate securities and agency bonds at financial institutions, are stated at cost, which approximates fair value. We classify certain restricted cash balances within other current assets and other assets on the accompanying consolidated balance sheets based upon the term of the remaining restrictions. As of December 31, 2016 , we had approximately $0.1 million of restricted cash that consisted of a security deposit for our offices in Oregon and New York. As of December 31, 2015 , we had approximately $0.8 million of restricted cash that consisted of a deposit pledged as security for our corporate credit cards and a letter of credit pledged as a security deposit for our headquarters and a sales office. The deposit pledged as security for our corporate credit cards of approximately $0.3 million as of December 31, 2015 is classified in other current assets in our consolidated balance sheets due to the short-term nature of the restriction. The amounts related to the security deposits of approximately $0.1 million and $0.5 million as of December 31, 2016 and 2015 , respectively, are classified in other assets in our consolidated balance sheets as these amounts are restricted for periods that exceed one year from the balance sheet dates. Investments We hold investments in marketable securities, consisting of corporate securities, commercial paper and agency bonds. We classify our marketable securities as available-for-sale investments that are either short or long-term based on the nature of each security based on the contractual maturity of the investment when purchased. Our available-for-sale investments are carried at estimated fair value with any unrealized gains and losses, net of taxes, included in accumulated other comprehensive loss in stockholders’ equity. Unrealized losses are charged against other (expense) income, net when a decline in fair value is determined to be other-than-temporary. We did not record any such impairment charges in the periods presented. We determined realized gains or losses on the sale of marketable securities on a specific identification method, and recorded such gains or losses as other (expense) income, net. For the years ended December 31, 2015 and 2014 , the Company's gross realized gains and losses on short-term investments were not significant. Accounts Receivable Accounts receivable are recorded at the invoiced amount and are non-interest bearing. We generally grant uncollateralized credit terms to our customers, which include textbook wholesalers, and marketing services customers, and maintain an allowance for doubtful accounts to account for potentially uncollectible receivables. Allowance for Doubtful Accounts We assess the creditworthiness of our customers based on multiple sources of information, and analyze such factors as our historical bad debt experience, industry and geographic concentrations of credit risk, economic trends, and customer payment history. This assessment requires significant judgment. Because of this assessment, we maintain an allowance for doubtful accounts for estimated losses resulting from the inability of certain customers to make all of their required payments. In making this estimate, we analyze historical payment performance and current economic trends when evaluating the adequacy of the allowance for doubtful accounts. Accounts receivable are written off as a decrease to the allowance for doubtful accounts when all collection efforts have been exhausted and an account is deemed uncollectible. Concentration of Credit Risk Financial instruments that potentially subject us to concentrations of credit risk consist primarily of cash and cash equivalents, restricted cash, and marketable securities invested in highly liquid instruments in accordance with our investment policy. We place the majority of our cash and cash equivalents and restricted cash with financial institutions in the United States that we believe to be of high credit quality, and accordingly minimal credit risk exists with respect to these instruments. Certain of our cash balances held with financial institutions are in excess of Federal Deposit Insurance Corporation limits. Our investment portfolio consists of investment-grade marketable securities diversified among security types, industries and issuers. Our investments were held and managed by recognized financial institutions that followed our investment policy with the main objective of preserving capital and maintaining liquidity. Concentrations of credit risk with respect to trade receivables exist to the full extent of amounts presented in the financial statements. We had no textbook wholesalers that represented greater than 10% of our net accounts receivable balance as of December 31, 2016 and two textbook wholesalers that represented 16% and 11% of our net accounts receivable balance as of December 31, 2015 , respectively. No customers represented over 10% of net revenues in 2016 , 2015 or 2014 . Textbook Library We consider our print textbook library to be a long-term productive asset and, as such, classify it as a non-current asset in our consolidated balance sheets. Cash outflows for the acquisition of our print textbook library, net of changes in related accounts payable and accrued liabilities historically was classified as cash flows from investing activities in our consolidated statements of cash flows. As a result of our strategic partnership with Ingram, since May 1, 2015, Ingram has made all new investments in the print textbook library and we also provided Ingram with extended payment terms through 2016 for the purchase of textbooks, before moving to normal payment terms in January 2017. As such, we have recorded any cash outflows as a result of this partnership as an operating activity in our consolidated statements of cash flows as we are no longer purchasing print textbooks but rather providing extended payments terms to Ingram to facilitate their purchase of new textbooks. Cash inflows received from the liquidation of print textbooks are classified as cash flows from investing activities in our consolidated statements of cash flows, consistent with other long-term asset classification of our existing print textbook library. The gain or loss from the liquidation of print textbooks previously rented is recorded as a component of operating expenses in our consolidated statement of operations and is classified as cash flow from operating activities. All print textbooks in our textbook library are stated at cost, which includes the purchase price less accumulated depreciation. We record allowances for lost or damaged print textbooks in cost of revenues in our consolidated statements of operations based on our assessment of our print textbook library on a book-by-book basis. Write-offs result from lost or damaged books, books no longer considered to be rentable, or when books are not returned to us after the rental period by our customers. We depreciate our print textbooks, less an estimated salvage value, over an estimated useful life of three years using an accelerated method of depreciation, as we estimate this method most accurately reflects the actual pattern of decline in the economic value of the assets. The salvage value considers the historical trend and projected liquidation proceeds for print textbooks. The useful life is determined based on the time period in which the print textbooks are held and rented before liquidation. In accordance with our policy, we review the estimated useful lives of our print textbook library on an ongoing basis. Depreciation expense and write-offs of print textbooks are recorded in cost of revenues in our consolidated statements of operations. During 2016 , 2015 and 2014 , print textbook depreciation expense was approximately $9.3 million , $43.6 million and $70.1 million , respectively, and write-offs were approximately $1.1 million , $5.3 million and $10.5 million , respectively. Property and Equipment Property and equipment are recorded at cost less accumulated depreciation and amortization. Depreciation and amortization are computed using the straight-line method over the following estimated useful lives of the assets: Classification Useful Life Computers and equipment 3 years Software 3 years Furniture and fixtures 5 years Leasehold improvements Shorter of the remaining lease term or the estimated useful life of 5 years Content 5 years We capitalize costs related to the purchase or development of Chegg Study and Test Prep content and amortize these costs over a period of five years. Depreciation and amortization expense are generally classified within the corresponding cost of revenues and operating expenses categories in our consolidated statements of operations. Depreciation and amortization expense during the years ended December 31, 2016 , 2015 and 2014 were approximately $9.9 million , $6.8 million and $6.2 million , respectively. The cost of maintenance and repairs is expensed as incurred. When assets are retired or otherwise disposed of, the cost and related accumulated depreciation and amortization are removed from their respective accounts, and any gain or loss on such sale or disposal is reflected in loss from operations. Software Development Costs We capitalize costs related to software developed or obtained for internal use when certain criteria have been met. Costs incurred during the application development stage for internal-use software are capitalized in property and equipment and amortized over the estimated useful life of the software, generally up to three years. We had no capitalized software development costs as of December 31, 2016 or 2015 . During the year ended December 31, 2016 , we had no amortization of capitalized software development costs and during the years ended December 31, 2015 and 2014 , the amortization of capitalized software development costs totaled approximately $0.5 million in each year. Goodwill Goodwill represents the excess of the fair value of consideration paid over the estimated fair value of assets acquired and liabilities assumed in a business acquisition. Goodwill is not amortized but rather tested for impairment at least annually on October 1, or more frequently if certain events or indicators of impairment occur between annual impairment tests. We first assess qualitative factors to determine whether it is necessary to perform the two-step quantitative goodwill impairment test. In our qualitative assessment, we consider factors including economic conditions, industry and market conditions and developments, overall financial performance and other relevant entity-specific events in determining whether it is more likely than not that the fair value of our reporting unit is less than the carrying amount. We completed our annual impairment test on October 1 of 2016 and 2015 , each of which did not result in any impairment as our qualitative assessment did not indicate that it is more likely than not that the fair value of our reporting unit is less than the carrying amount. Acquired Intangible Assets and Other Long-Lived Assets Acquired intangible assets with finite useful lives, which include developed technology, customer lists, trade names and non-compete agreements, are amortized over their estimated useful lives. We assess the impairment of acquired intangible assets and other long-lived assets when events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. Indefinite-Lived Intangibles We make judgments about the recoverability of purchased indefinite-lived intangible assets at least annually on October 1 or more frequently whenever events or changes in circumstances indicate that an impairment may exist to determine whether it is more likely than not that the carrying value of the assets may not be recoverable. Recoverability of indefinite-lived intangible assets is measured by comparing the carrying amount of the asset to the future undiscounted cash flows that the asset is expected to generate. If we determine that an individual asset is impaired, the amount of any impairment is measured as the difference between the carrying value and the fair value of the impaired asset. We completed our annual impairment test on October 1 of 2016 and 2015 , each of which did not result in any impairment. Revenue Recognition and Deferred Revenue We derive our revenues, net of allowances, for refunds or charge backs from our payment processors who process payments from credit cards, debit cards and PayPal. Revenues are recognized when the four basic criteria for revenue recognition have been met as follows: persuasive evidence of an arrangement exists, delivery has occurred and title has transferred, the sale price is fixed or determinable, and collection is reasonably assured. Revenues are presented net of sales tax collected from customers to be remitted to governmental authorities and net of allowances for estimated cancellations and customer returns, which are based on historical data. Customer refunds from cancellations and returns are recorded as a reduction to revenues. We generate revenues from our Required Materials product line including the rental of print textbooks and eTextbooks and, to a lesser extent, through the sales of print textbooks through our website purchased by us on a just-in-time basis. Rental revenues were historically recognized ratably over the term of the rental period, generally two to five months, for the print textbooks that we owned. As of November 2016, we no longer rent our print textbooks and therefore all revenues from print textbook rentals from this date forward are commission-based. Commission-based print textbook rental revenues are recognized immediately in the period the transaction occurs. Revenues from selling textbooks on a just-in-time basis are recognized upon shipment. We do not hold an inventory of textbooks for sale. Our customers pay for the rental and sale of print textbooks on our website primarily by credit card, resulting in immediate settlement of our accounts receivable. Shipping costs charged to customers in the sale or rental of textbooks are recorded in revenues and the related expenses are recorded as cost of revenues. We generate revenues from our Chegg Services product line including our Chegg Study service, our Chegg Tutors service, and our writing tools service that we offer to students. These services are offered to students through monthly or annual subscriptions and we recognize revenues ratably over the respective subscription period. Our Chegg Services also include enrollment marketing services and brand advertising, which we offer either on a subscription or on an a la carte basis. Enrollment marketing services connect colleges and graduate schools with students seeking admission or scholarship opportunities at these institutions. Brand advertising offers brands unique ways to connect with students. Finally, Chegg Services includes our internship services and our Test Prep service currently covering the ACT and SAT exams. Revenues are recognized ratably or as earned over the subscription service, generally one year. Revenues from enrollment marketing services or brand advertising delivered on an a la carte basis, without a subscription, is recognized when delivery of the respective lead or service has occurred. For these services, we bill the customer at the inception, over the term of the customer arrangement or as the services are performed. Upon satisfactory assessment of creditworthiness, we generally grant credit to our enrollment marketing services and brand advertising customers with normal credit terms, typically 30 days. Some of our customer arrangements for enrollment marketing services include multiple deliverables, which include the delivery of student leads as well as other services to the end customer. We have determined these deliverables qualify as separate units of accounting, as they have value to the customer on a standalone basis and our arrangements do not contain a right of return. For these arrangements that contain multiple deliverables, we allocate the arrangement consideration based on the relative selling price method in accordance with the selling price hierarchy, which includes: (1) vendor-specific objective evidence of fair value (VSOE), when available; (2) third-party evidence of selling price (TPE), if VSOE does not exist; and (3) estimated selling price (ESP), if neither VSOE nor TPE is available. We determine VSOE based on our historical pricing and discounting practices for the specific solution when sold separately and when a substantial majority of the selling prices for these services fall within a narrow range. TPE is determined based on competitor prices for similar deliverables when sold separately. Generally our go-to-market strategy differs from that of our peers, and our offerings contain a significant level of differentiation such that the comparable pricing of services with similar functionality cannot be obtained. If we have not established VSOE or TPE for our enrollment marketing services, we have used ESP in our allocation of arrangement consideration. Additionally, we limit the amount of revenues recognized for delivered elements to the amount that is not contingent on future delivery of services or other future performance obligations. Deferred revenue primarily consists of advanced payments from students related to rentals and subscriptions that have not been recognized, and marketing services that have yet to be performed. Deferred revenue is recognized as revenues ratably over the term or when the services are provided and all other revenue recognition criteria have been met. We evaluate whether we are acting as a principal or an agent, and therefore would record the gross sales amount and related costs as revenues or the net amount earned as commissions from the sale of third party products. Our determination is based on our evaluation of certain indicators including whether we are the principal in the transaction, are subject to inventory risk, have latitude in establishing prices and selecting suppliers, none of which is presumptive or determinative. We generally operate as the principal and so in those instances revenues are recorded at the gross sale price. We generally record the net amounts as commissions earned when such amounts are determined using a fixed percentage of the transaction price, we are not subject to inventory risk or responsible for the fulfillment of the textbooks. We operate as an agent in our strategic partnership with Ingram and therefore our revenues include a commission on the total revenues that we earn from Ingram upon their fulfillment of a rental transaction using books for which Ingram has title and risk of loss. We also present our revenues separately for rental, services and sales. Rental revenue includes the rental of print textbooks for which we take title and bear the risk of loss; service revenue includes Chegg Study, Chegg Tutors, our writing tools service, enrollment marketing, brand advertising, eTextbooks, and commissions we earn from Ingram and other e-commerce partners; sale revenue includes just-in-time sale of print textbooks and the sale of other required materials. Cost of Revenues Our cost of revenues consists primarily of expenses associated with the delivery and distribution of our products and services. Cost of revenues related to our print textbook rentals included print textbook depreciation expense, shipping and other fulfillment costs, the cost of textbooks sold, payment processing costs, write-offs and allowances related to the print textbook library, and all expenses associated with our distribution and customer service centers, including personnel and warehousing costs. The cost of textbooks sold, shipping and other fulfillment costs and payment processing expenses are recognized upon shipment, while print textbook depreciation is recognized under an accelerated method over the life of the textbook. We believe this method most accurately reflects the actual pattern of decline in the economic value of the assets, resulting in higher costs earlier in the textbook lifecycle. Cost of revenues also includes the depreciation of our eTextbook Reader software, publisher content fees for eTextbooks, content amortization expense related to content that we develop or license, including publisher agreements for which we pay one-time license fees for published content, enrollment marketing services leads purchased from third-party suppliers to fulfill leads that we are unable to fulfill through our internal database, personnel costs and other direct costs related to providing the content or services. In addition, cost of revenues includes allocated information technology and facilities costs. Technology and Development Costs Technology and development expenses consist primarily of salaries, benefits and share-based compensation expense for employees on our product and web design, engineering and technical teams who are maintaining our website, developing new products and improving existing products. Technology and development costs also include web hosting costs, third-party development costs and allocated information technology and facilities costs. We expense substantially all of our technology and development costs as they are incurred. Advertising Costs Advertising costs are expensed as incurred and consist primarily of online advertising and marketing promotional expenditures. During years ended December 31, 2016 , 2015 and 2014 , advertising costs were approximately $18.4 million , $25.0 million , and $22.4 million , respectively. Share-based Compensation Share-based compensation expense for stock options, restricted stock units (RSUs), performance-based restricted stock units (PSUs), and employee stock purchase plan (ESPP) are accounted for under the fair value method, which requires us to measure the cost of employee share-based compensation awards based on the grant-date fair value of the award. Share-based compensation expense for stock options and our ESPP is estimated at the date of grant using the Black-Scholes-Merton option pricing model while expense for RSUs and PSUs is measured based on the closing fair market value of the Company’s common stock on the date of grant. We recognize compensation cost for all share-based compensation awards that are expected to vest on a straight-line basis over the requisite service period of the awards, which is generally the option vesting period. These amounts are reduced by estimated forfeitures, which are estimated at the time of the grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. Equity awards issued to non-employees are recorded at their fair value on the measurement date and are subject to adjustment each period as the underlying awards vest or consulting services are performed. Income Taxes We account for income taxes under an asset and liability method whereby deferred tax asset and liability account balances are determined based on differences between the financial reporting and the tax basis of assets and liabilities, and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. Valuation allowances are established, when necessary, to reduce deferred tax assets to an amount that is more likely than not to be realized. We recognize the benefit from a tax position only if it is more likely than not that the position would be sustained upon audit based solely on the technical merits of the tax position. Our policy is to include interest and penalties related to unrecognized tax benefits as a component of income tax expense. Restructuring Charges Restructuring charges are primarily comprised of severance costs, contract and program termination costs, asset impairments and costs of facility consolidation and closure. Restructuring charges are recorded upon approval of a formal management plan and are included in the operating results of the period in which such plan is approved and the expense becomes estimable. To estimate restructuring charges, management utilizes assumptions of the number of employees that would be involuntarily terminated and of future costs to operate and eventually vacate duplicate facilities. Severance and other employee separation costs are accrued when it is probable that benefits will be paid and the amount is reasonably estimable. The rates used in determining severance accruals are based on our policies and practices and negotiated settlements. Restructuring charges for employee workforce reductions are recorded upon employee notification for employees whose required continuing service period is 60 days or less and ratably over the employee’s continuing service period for employees whose required continuing service period is greater than 60 days. Strategic Investment We have entered into an equity investment in a privately-held business to achieve certain strategic business objectives. Our investment in equity securities of this privately-held business is accounted for under the cost method. We periodically review this investment for other-than-temporary declines in fair value based on the specific identification method and write down investments when an other-than-temporary decline has occurred. Any fair value estimates are made based on consideration of the current cash position, recent operational performance, and forecasts of the investees. Net Loss Per Share Basic net loss per share is computed by dividing the net loss by the weighted-average number of shares of common stock outstanding during the period, less the weighted-average unvested common stock subject to repurchase or forfeiture. Diluted net loss per share is computed by giving effect to all potential shares of common stock, including stock options, warrants, restricted stock units (RSUs), and performance-based restricted stock units (PSUs), to the extent dilutive. Basic and diluted net loss per share was the same for each period presented as the inclusion of all potential common shares outstanding would have been anti-dilutive. The following table sets forth the computation of historical basic and diluted net loss per share (in thousands, except per share amounts): Year Ended 2016 2015 2014 Numerator: Net loss $ (42,245 ) $ (59,210 ) $ (64,758 ) Denominator: Weighted-average common shares outstanding 90,534 86,818 83,241 Less: Weighted-average unvested common shares subject to repurchase or forfeiture — — (36 ) Weighted average shares used to compute net loss per share, basic and diluted 90,534 86,818 83,205 Net loss per share, basic and diluted $ (0.47 ) $ (0.68 ) $ (0.78 ) The following potential weighted-average shares of common stock outstanding were excluded from the computation of diluted net loss per share attributable to common stockholders because including them would have been anti-dilutive (in thousands): Year Ended December 31, 2016 2015 2014 Options to purchase common stock 10,799 11,446 14,253 RSUs and PSUs 1,239 200 289 Employee stock purchase plan 15 — — Warrants to purchase common stock 200 299 996 Total common stock equivalents 12,253 11,945 15,538 Foreign Currency Translation The functional currency of our foreign subsidiaries is the local currency. Adjustments resulting from the translation of foreign currencies into U.S. dollars for balance sheet amounts are based on the exchange rates as of the consolidated balance sheet date. Non-monetary balance sheet items denominated in a currency other than the applicable functional currency are translated using the historical rate. Revenues and expenses are translated at average exchange rates during the period. Foreign currency translation gains or losses are included in accumulated other comprehensive loss as a component of stockholders’ equity on the consolidated balance sheets. Gains or losses resulting from foreign currency transactions, which are denominated in currencies other than the entity’s functional currency, are included in other income (expense), net in the consolidated statements of operations and were not material during 2016 , 2015 or 2014 . Recent Accounting Pronouncements In December 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2016-20 Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers . ASU 2016-20 provides for corrections and improvements for specific areas of Topic 606. In May 2016, the FASB issued ASU No. 2016-12 Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients . ASU 2016-12 provides for improvements and practical expedients for specific areas of Topic 606. In April 2016, the FASB issued ASU No. 2016-10 Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing . ASU 2016-10 provides for clarification of two aspects of Topic 606: identifying performance obligations and the licensing implementation guidance. In March 2016, the FASB issued ASU No. 2016-08 Revenue from Contracts with Customers (Topic 606) - Principal versus Agent Considerations (Reporting Revenue Gross versus Net) . ASU No. 2016-08 requires an entity to determine whether the nature of its promise to provide goods or services to a customer is performed in a principal or agent capacity and to recognize revenue in a gross or net manner based on its principal/agent designation. In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers . This standard outlines a single comprehensive model for entities to use in accounting for revenues arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. ASUs 2016-20, 2016-12, 2016-10, 2016-08, and 2014-09 allow for companies to choose to apply the standard retrospectively to each prior reporting period presented (full retrospective application) or retrospectively with the cumulative effect of initially applying the standard as an adjustment to the opening balance of retained earnings of the annual reporting period that includes the date of initial application (modified retrospective application). We plan to adopt the standard under the modified retrospective application. Each guidance is effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period. Early application is permitted only as of annual reporting periods beginning after Dece |
