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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

2022-02-22 compared with 2021-02-22 · 490 added, 528 removed, 819 unchanged (55% of the section changed)

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to market risk, including changes to foreign currency exchange rates, interest rates, and inflation.

We are exposed to market risk, including changes to foreign currency exchange rates and interest rates.

Foreign Currency Exchange Risk

International revenues as a percentage of net revenues is not significant and our sales contracts are denominated primarily in U.S.

A portion of our operating expenses are incurred outside the United States and are denominated in foreign currencies, which are subject to fluctuations due to changes in foreign currency exchange rates, particularly changes in the Indian Rupee.

International revenues have grown during the year ended December 31, 2021, as we have begun accepting additional foreign currencies from our international customers.

This may have an adverse impact on our total net revenues if there are unfavorable fluctuations in the exchange rate between the U.S.

Dollar and foreign currencies in which we conduct sales.

International revenues were not significant during the years ended December 31, 2020 and 2019.

A portion of our operating expenses are incurred outside of the United States and are denominated in foreign currencies, which are subject to fluctuations due to changes in foreign currency exchange rates, particularly changes in the Indian Rupee.

To date, we have not entered into derivatives or hedging strategies as our exposure to foreign currency exchange rates has not been material to our historical results of operations.

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Interest Rate Sensitivity

We had cash and cash equivalents totaling $479.9 million and $387.5 million as of December 31, 2020 and 2019, respectively, and held investments of $1.2 billion and $691.6 million as of December 31, 2020 and 2019, respectively.

Our cash and cash equivalents consist of cash and money market accounts and investments consist of commercial paper, corporate debt securities, and agency bonds.

We had cash and cash equivalents totaling $854.1 million and $479.9 million as of December 31, 2021 and 2020, respectively, and held investments of $1.4 billion and $1.2 billion as of December 31, 2021 and 2020, respectively.

Our cash and cash equivalents consist of cash and money market accounts and investments consist of commercial paper, corporate debt securities, U.S.

treasury securities and agency bonds.

Our investment policy and strategy are focused on preservation of capital, supporting our liquidity requirements, and delivering competitive returns subject to prevailing market conditions.

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We were not exposed to material risks due to changes in market interest rates given the liquidity of the cash, cash equivalents, and investments in which we invested our cash.

We carry our notes at face value less unamortized debt discount and debt issuance costs on our consolidated balance sheets.

Because the 2026 notes, 2025 notes and 2023 notes have a fixed annual interest rate of 0.0%, 0.125% and 0.25%, respectively, we do not have any economic interest rate exposure or financial statement risk associated with changes in interest rates.

We carry our notes at face value less unamortized debt issuance costs on our consolidated balance sheets.

Because the 2026 notes and 2025 notes have a fixed annual interest rate of 0.0% and 0.125%, respectively, we do not have any economic interest rate exposure or financial statement risk associated with changes in interest rates.

The fair value of the notes, however, may fluctuate when interest rates and the market price of our stock changes.

See Note 10, “Convertible Senior Notes,” of the Notes to Consolidated Financial Statements of Part II, Item 8 of this Annual Report on Form 10-K for additional information.

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CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Index to Consolidated Financial Statements

Reports of Independent Registered Public Accounting Firm

Report of Independent Registered Public Accounting Firm (PCAOB ID No.

Consolidated Balance Sheets

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Notes to Consolidated Financial Statements

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Report of Independent Registered Public Accounting Firm

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We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 22, 2022, expressed an unqualified opinion on the Company's internal control over financial reporting.

Change in Accounting Principle

As discussed in Notes 1 and 2 to the financial statements, the Company has changed its method of accounting for its convertible senior notes in the year ended December 31, 2021 due to the adoption of Accounting Standards Update No.

2020-06, Accounting for Convertible Instruments and Contracts in an Entity's Own Equity , on a modified retrospective method of transition.

Basis for Opinion

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Critical Audit Matter Description

During 2020, the Company issued $1.0 billion in aggregate principal amount of 0% convertible senior notes due in 2026 (the “notes”), which, if converted, may be settled in cash, shares of common stock, or a combination thereof, at the Company’s election.

The Company separated the notes into liability and equity components.

The carrying amount of the liability component was calculated by estimating the fair value of similar debt instruments that do not have an associated convertible feature.

The carrying amount of the equity component representing the conversion option was determined by deducting the carrying amount of the liability component from the principal amount of the notes.

Given the determination of the fair value of the liability component required management to make significant estimates and assumptions regarding the relevant valuation assumptions, auditing the valuation of the liability component required a high degree of auditor judgment and an increased extent of effort, including the need to involve professionals in our firm having

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expertise in the valuation of financial instruments, when performing audit procedures to evaluate management’s judgements and conclusions.

As discussed in Notes 2 and 10 to the consolidated financial statements, the Company adopted Accounting Standards Update 2020-06, Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06”), on January 1, 2021, under the modified retrospective method applied to convertible senior notes outstanding as of January 1, 2021.

Under ASU 2020-06, the Company’s convertible senior notes with certain embedded conversion features are no longer required to be

separated from the host contract thereby eliminating the cash conversion feature model.

Instead, these convertible debt instruments will be accounted for as a single liability measured at amortized cost under the traditional convertible debt accounting model.

In addition, after the Company’s adoption of ASU 2020-06 and during the fiscal year ended December 31, 2021, the Company extinguished $100.0 million aggregate principal amount of the 2025 convertible senior notes (“2025 notes”) for aggregate consideration of $184.9 million.

Upon execution, the Company concluded that the 2025 notes embedded conversion features no longer met the derivative scope exception and, as a result, initially recorded a derivative liability of $176.5 million, related to the fair value of extinguished 2025 notes.

The Company settled the derivative liability for aggregate consideration of $184.9 million resulting in an $8.4 million loss on change in fair value.

The carrying amount of the 2025 notes subject to the extinguishment was $98.3 million resulting in a $78.2 million loss on early extinguishment of debt.

Auditing the following elements involved a higher degree of auditor judgment and an increased extent of effort due to the nature and extent of specialized skill and knowledge required of:

(i) the Company’s accounting assessment of the adoption of ASU 2020-06, (ii) the Company’s accounting assessment of the extinguishment including the conclusion that a derivative liability existed, (iii) the calculation of the related loss on extinguishment of the 2025 Notes including the derivative liability.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the fair value of the liability component included the following, among others:

• We tested the effectiveness of internal controls over the Company’s determination of the fair value of the liability component, including controls over the relevant valuation assumptions.

• With the assistance of our fair value specialists, we evaluated the appropriateness of the valuation methodology and the reasonableness of the valuation assumptions to determine the fair value of the liability component.

Additionally, we:

◦ Tested the source information underlying the valuation assumptions used in the model to determine fair value.

◦ Tested the mathematical accuracy of the valuation model.

◦ Developed a range of independent estimates and compared those to the fair value of the liability component determined by management.

Our audit procedures related to convertible senior notes included the following, among others:

We tested the operating effectiveness of the controls over the Company’s accounting for the adoption of ASU 2020-06 and the extinguishment of the 2025 convertible senior notes.

Our testing included reading the underlying agreements and evaluating the Company’s accounting analysis related to the adoption of ASU 2020-06.

Our testing included reading the underlying agreements and evaluating the Company’s accounting analysis underlying the accounting of the convertible senior notes, including the determination of the balance sheet classification of each transaction, identification of any derivatives included in the arrangements, and determination that the 2025 convertible senior notes was a debt extinguishment.

In addition, we involved a valuation specialist to assist in our evaluation of the significant assumptions and valuation used by the Company specifically for the valuation of the derivative liability.

/s/ DELOITTE & TOUCHE LLP

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We have served as the Company’s auditor since 2018.

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Report of Independent Registered Public Accounting Firm

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In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control — Integrated Framework (2013) issued by COSO.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended December 31, 2020, of the Company and our report dated February 22, 2021, expressed an unqualified opinion on those financial statements.

As described in Management’s Annual Report on Internal Control Over Financial Reporting, management excluded from its assessment the internal control over financial reporting at Mathway, LLC, which was acquired on June 4, 2020, and whose financial statements constituted less than 1% of total assets and approximately 2% of total net revenues of the consolidated financial statement amounts as of and for the year ended December 31, 2020.

Accordingly, our audit did not include the internal control over financial reporting at Mathway, LLC.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended December 31, 2021, of the Company and our report dated February 22, 2022, expressed an unqualified opinion on those financial statements and included an explanatory paragraph relating to the Company’s adoption of Accounting Standards Update No.

2020-06, Accounting for Convertible Instruments and Contracts in an Entity's Own Equity.

Basis for Opinion

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February 22, 2022

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CONSOLIDATED BALANCE SHEETS

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

December 31, 2020 December 31, 2019

Current assets

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Short-term investments 691,781 665,567

Accounts receivable, net of allowance of $ 153 and $ 56 at December 31, 2020 and December 31, 2019, respectively

Accounts receivable, net of allowance of $ 153 at December 31, 2021 and December 31, 2020.

17,850 12,913

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Deferred revenue 35,143 32,620

Current operating lease liabilities 6,603 5,283

Accrued liabilities 67,209 68,565

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Additional paid-in capital 1,449,305 1,030,577

Accumulated other comprehensive income (loss) 1,530 ( 1,096 )

Accumulated other comprehensive (loss) income ( 5,334 ) 1,530

Accumulated deficit ( 337,191 ) ( 422,601 )

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See Notes to Consolidated Financial Statements.

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CONSOLIDATED STATEMENTS OF OPERATIONS

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General and administrative 159,019 129,349 97,586

Restructuring charges — 97 589

Total operating expenses 443,254 382,168 300,927

Income (loss) from operations 56,753 17,817 ( 6,220 )

Income from operations 78,107 56,753 17,817

Interest expense, net and other income, net:

Interest expense, net ( 6,896 ) ( 66,297 ) ( 44,851 )

Other income, net 8,683 20,063 3,987

Total interest expense, net and other income, net ( 57,614 ) ( 24,788 ) ( 7,238 )

Loss before provision for income taxes ( 861 ) ( 6,971 ) ( 13,458 )

Other (expense) income, net ( 65,472 ) 8,683 20,063

Total interest expense, net and other (expense) income, net ( 72,368 ) ( 57,614 ) ( 24,788 )

Income (loss) before provision for income taxes 5,739 ( 861 ) ( 6,971 )

Provision for income taxes 7,197 5,360 2,634

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See Notes to Consolidated Financial Statements.

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CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

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Net loss $ ( 1,458 ) $ ( 6,221 ) $ ( 9,605 )

Other comprehensive income (loss)

Change in unrealized gain on available for sale investments, net of tax 1,037 668 76

Other comprehensive (loss) income

Change in net unrealized (loss) gain on investments, net of tax ( 5,729 ) 1,037 668

Change in foreign currency translation adjustments, net of tax ( 1,135 ) 1,589 ( 745 )

Other comprehensive income (loss) 2,626 ( 77 ) ( 737 )

Other comprehensive (loss) income ( 6,864 ) 2,626 ( 77 )

Total comprehensive loss $ ( 8,322 ) $ ( 3,595 ) $ ( 9,682 )

See Notes to Consolidated Financial Statements.

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CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

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Value Additional Paid-In

Capital Accumulated Other Comprehensive Income (Loss) Accumulated

Capital Accumulated Other Comprehensive (Loss) Income Accumulated

Deficit Total Stockholders’ Equity

Balances at December 31, 2018 115,500 $ 116 $ 818,113 $ ( 1,019 ) $ ( 406,576 ) $ 410,634

Cumulative-effect adjustment to accumulated deficit related to adoption of ASUs — — — — ( 77 ) ( 77 )

Equity component of 2023 convertible senior notes, net of issuance costs — — 62,444 — — 62,444

Purchase of 2023 convertible senior notes capped call — — ( 39,227 ) — — ( 39,227 )

Repurchase of common stock ( 983 ) ( 1 ) ( 19,999 ) — — ( 20,000 )

Issuance of common stock upon exercise of stock options and ESPP 3,459 4 29,109 — — 29,113

Net share settlement of equity awards 3,322 3 ( 49,089 ) — — ( 49,086 )

Warrant exercises 34 — — — — —

Share-based compensation expense — — 52,030 — — 52,030

Other comprehensive loss — — — ( 737 ) — ( 737 )

Net loss — — — — ( 14,888 ) ( 14,888 )

Balances at December 31, 2018 115,500 116 818,113 ( 1,019 ) ( 406,576 ) 410,634

Cumulative-effect adjustment to accumulated deficit related to adoption of ASU 2016-02 — — — — ( 111 ) ( 111 )

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Balances at December 31, 2020 129,344 129 1,030,577 1,530 ( 422,601 ) 609,635

Cumulative-effect adjustment related to adoption of ASU 2020-06 — — ( 465,006 ) — 86,868 ( 378,138 )

Issuance of common stock in connection with equity offering, net of offering costs 10,975 11 1,091,455 — — 1,091,466

Equity component on conversions of 2023 notes and 2025 notes — — ( 236,921 ) — — ( 236,921 )

Issuance of common stock upon conversion of 2023 notes 2,983 3 235,518 — — 235,521

Net proceeds from capped call related to conversions and extinguishments of 2023 notes and 2025 notes — — 67,770 — — 67,770

Issuance of common stock upon exercise of stock options and ESPP 413 — 8,885 — — 8,885

Net share settlement of equity awards 1,640 2 ( 94,423 ) — — ( 94,421 )

Repurchase of common stock ( 8,403 ) ( 8 ) ( 299,992 ) — — ( 300,000 )

Share-based compensation expense — — 111,442 — — 111,442

Other comprehensive loss — — — ( 6,864 ) — ( 6,864 )

Net loss — — — — ( 1,458 ) ( 1,458 )

Balances at December 31, 2021 136,952 $ 137 $ 1,449,305 $ ( 5,334 ) $ ( 337,191 ) $ 1,106,917

See Notes to Consolidated Financial Statements.

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CONSOLIDATED STATEMENTS OF CASH FLOWS

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Loss on early extinguishments of debt 78,152 4,286 —

Loss on change in fair value of derivative instruments, net 7,148 — —

Loss from write-offs of property and equipment 2,115 1,211 1,009

Loss from impairment of strategic equity investment — 10,000 —

Gain on textbook library, net ( 1,453 ) — —

Deferred income taxes ( 109 ) ( 39 ) ( 323 )

Gain on sale of strategic equity investments ( 12,496 ) — —

Loss (gain) on textbook library, net 10,956 ( 1,453 ) —

Operating lease expense, net of accretion 5,994 4,901 4,385

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Maturities of investments 1,204,787 539,889 324,700

Proceeds from sale of strategic equity investments 16,076 — —

Acquisition of businesses, net of cash acquired ( 7,891 ) ( 92,796 ) ( 79,149 )

Purchases of strategic equity investment ( 2,000 ) — ( 10,000 )

Purchase of strategic equity investment — ( 2,000 ) —

Net cash used in investing activities ( 365,768 ) ( 732,786 ) ( 703,425 )

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Payment of taxes related to the net share settlement of equity awards ( 94,423 ) ( 80,680 ) ( 94,571 )

Proceeds from issuance of convertible senior notes, net of issuance costs 984,096 780,180 335,618

Purchase of convertible senior notes capped call ( 103,400 ) ( 97,200 ) ( 39,227 )

Proceeds from equity offering, net of offering costs 1,091,466 — —

Repayment of convertible senior notes ( 300,762 ) ( 303,967 ) —

Proceeds from exercise of convertible senior notes capped call 69,005 77,095 —

Payment of escrow related to acquisition ( 7,451 ) — —

Repurchase of common stock ( 300,000 ) — ( 20,000 )

Proceeds from issuance of convertible senior notes, net of issuance costs — 984,096 780,180

Purchase of convertible senior notes capped call — ( 103,400 ) ( 97,200 )

Net cash provided by financing activities 466,722 588,627 603,509

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Interest $ 1,053 $ 1,766 $ 1,332

Income taxes $ 3,436 $ 2,070 $ 2,097

Income taxes, net of refunds $ 7,388 $ 3,436 $ 2,070

Cash paid for amounts included in the measurement of lease liabilities:

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See Notes to Consolidated Financial Statements.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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Company and Background

(Chegg, the Company, we, us, or our), headquartered in Santa Clara, California, was incorporated as a Delaware corporation in July 2005.

A Smarter Way to Student ® .

We strive to improve educational outcomes by putting the student first.

We support students on their journey from high school to college and into their careers with tools designed to help them learn their course materials, succeed in their classes, save money on required materials, and learn the most in-demand skills.

Our services are available online, anytime and anywhere.

(“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 with Chegg.

Our mission is to improve learning and learning outcomes by putting students first.

We support life-long learners starting with their academic journey and extending into their careers.

The Chegg platform provides products and services to support learners to help them better understand their academic course materials, and also provides personal and professional development skills training, to help them achieve their learning goals.

Basis of Presentation

Our fiscal year ends on December 31 and in this report we refer to the year ended December 31, 2021, December 31, 2020, and December 31, 2019 as 2021, 2020, and 2019, respectively.

Reclassification of Prior Period Presentation

In order to conform with current period presentation, $ 6.6 million of current operating lease liabilities have been reclassified to accrued liabilities on our consolidated balance sheet as of December 31, 2020.

This change in presentation does not affect previously reported results.

Significant Accounting Policies

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Significant estimates, assumptions, and judgments are used for, but not limited to:

revenue recognition, recoverability of accounts receivable, share-based compensation expense including estimated forfeitures, accounting for income taxes, useful lives and salvage value assigned to our textbook library, useful lives assigned to long-lived assets for depreciation and amortization, impairment of goodwill and long-lived assets, the valuation of acquired intangible assets, the valuation of our convertible senior notes, internal-use software and website development costs, operating lease right of use (ROU) assets, and operating lease liabilities.

revenue recognition, share-based compensation expense including grant-date fair value of PSUs with a market-based condition and estimated forfeitures, accounting for income taxes, useful lives and salvage value assigned to our textbook library, useful lives assigned to long-lived assets for depreciation and amortization, impairment of goodwill and long-lived assets, the valuation of acquired intangible assets, and internal-use software and website development costs.

We base our estimates on historical experience, knowledge of current business conditions, and various other factors we believe to be reasonable under the circumstances.

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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.

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We hold investments in commercial paper, corporate debt securities, and agency bonds.

We classify our investments as available-for-sale that are either short or long-term based on the nature of each security based on the remaining contractual maturity of the investment.

Our available-for-sale investments are carried at estimated fair value with any unrealized gains and losses, unrelated to credit loss factors, net of taxes, included in other comprehensive income (loss) on our consolidated statements of stockholders’ equity.

Beginning in 2020, unrealized losses related to credit loss factors are now recorded through an allowance for credit losses in other income, net on our consolidated statements of operations, rather than as a reduction to the amortized costs basis in other comprehensive income (loss), when a decline in fair value has resulted from a credit loss.

We determine realized gains or losses on the sale of investments on a specific identification method, and record such gains or losses as other income, net.

For the years ended December 31, 2020, 2019 and 2018, the Company's gross realized gains and losses on investments were not significant.

Fair Value Measurements

We account for certain assets and liabilities at fair value.

We have established a fair value hierarchy used to determine the fair value of our financial instruments as follows:

Level 1—Inputs are unadjusted quoted prices in active markets for identical assets or liabilities.

Level 2—Inputs are quoted prices for similar assets and liabilities in active markets or inputs that are observable for the assets or liabilities, either directly or indirectly through market corroboration, for substantially the full term of the financial instruments.

Level 3—Inputs are unobservable inputs based on our own assumptions used to measure assets and liabilities at fair value;

the inputs require significant management judgment or estimation.

A financial instrument’s classification within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.

The methods described above may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values.

Furthermore, while we believe our valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date.

We hold investments in commercial paper, corporate debt securities, U.S.

treasury securities and agency bonds.

We classify our investments as available-for-sale that are either short or long-term based on the remaining contractual maturity of the investment.

Our investments are carried at estimated fair value with any unrealized gains and losses, unrelated to credit loss factors, net of taxes, included in other comprehensive (loss) income on our consolidated statements of stockholders’ equity.

Unrealized losses related to credit loss factors are recorded through an allowance for credit losses in other (expense) income, net on our consolidated statements of operations, rather than as a reduction to other comprehensive (loss) income, when a decline in fair value has resulted from a credit loss.

When evaluating whether an investment's unrealized losses are related to credit factors, we review factors such as the extent to which fair value is below its cost basis, any changes to the credit rating of the security, adverse conditions specifically related to the security, changes in market interest rates and our intent to sell, or whether it is more likely than not we will be required to sell, before recovery of cost basis.

We invest in highly rated securities with a weighted average maturity of twelve months or less.

In addition, our investment policy limits the amount of our credit exposure to any one issuer or industry sector and requires investments to be investment grade, with the primary objective of preserving capital and maintaining liquidity.

Fair values were determined for each individual security in the investment portfolio.

We determine realized gains or losses on the sale of investments on a specific identification method, and record such gains or losses as other (expense) income, net.

The estimated fair value of our investments are based on quoted prices in active markets for identical assets (Level 1 inputs) or inputs other than quoted prices that are observable either directly or indirectly (Level 2 inputs) in determining fair value.

Other than our money market funds and U.S.

treasury securities, we classify our fixed income available-for-sale investments as having Level 2 inputs.

The valuation techniques used to measure the fair value of our investments having Level 2 inputs were derived from non-binding market consensus prices that are corroborated by observable market data, quoted market prices for similar instruments, or pricing models such as discounted cash flow techniques.

We do not hold any investments valued with a Level 3 input.

Accounts Receivable, Net of Allowance

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Concentrations of credit risk with respect to accounts receivables exist to the full extent of amounts presented in the financial statements.

We had one customer, in each year, that represented 10 % and 11 % of our net accounts receivable balance as of December 31, 2020 and 2019, respectively.

We had no customers that represented over 10% of our net accounts receivable balance as of December 31, 2021 and we had one customer that represented 10 % of our net accounts receivable balance as of December 31, 2020.

No customers represented over 10% of net revenues during the years ended December 31, 2021, 2020 or 2019.

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Computers and equipment 3 years

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Depreciation and content amortization expense are generally classified within the corresponding cost of revenues and operating expenses categories on our consolidated statements of operations.

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 income (loss) from operations.

Internal-Use Software and Website Development Costs

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Management’s estimates of fair value are based upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates.

During the measurement period, which is not to exceed one year from the acquisition date, we may record adjustments to the assets acquired and liabilities assumed, with the corresponding offset to goodwill.

During the measurement period, which is not to exceed one year from the acquisition date, we may record adjustments to the assets acquired and liabilities assumed, with the

corresponding offset to goodwill.

Upon the conclusion of the measurement period, any subsequent adjustments are recorded to earnings.

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Our incremental borrowing rate is estimated based on the estimated rate incurred to borrow, on a collateralized basis over a similar term as our leases, an amount equal to the lease payments in a similar economic environment.

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terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise such options.

Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise such options.

We do not record leases on our consolidated balance sheet with a term of one year or less.

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Some of our leases include payments that are dependent on an index, such as the Consumer Price Index (CPI), and our minimum lease payments include payments based on the index at inception with any future changes in such indices recognized as an expense in the period of change.

Where leases contain escalation clauses, rent abatements, or concessions, such as rent holidays and landlord or tenant incentives or allowances, we apply them in the determination of straight-line operating lease cost over the lease term.

Where leases contain escalation clauses, rent abatement, or concessions, such as rent holidays and landlord or tenant incentives or allowances, we apply them in the determination of straight-line operating lease cost over the lease term.

Strategic Investments

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In April 2018, we issued $ 345 million in aggregate principal amount of 0.25 % convertible senior notes due in 2023 (2023 notes).

Collectively, the 2026 notes, 2025 notes and the 2023 notes are referred to as the “notes.” In accounting for their issuance, we separated the notes into liability and equity components, as the notes represent convertible instruments with a cash conversion feature.

The carrying amount of the liability component was calculated by measuring the fair value of similar liabilities that do not have an associated convertible feature.

The carrying amount of the equity component representing the conversion option was determined by deducting the carrying amount of the liability component from the par value of the notes.

The difference represents the debt discount, recorded as a reduction of the convertible senior notes on our consolidated balance sheet, and is amortized to interest expense over the term of the notes using the effective interest rate method.

The carrying amount of the liability component is classified as a long-term liability as we have the election to settle conversion requests in shares of our common stock.

The carrying amount of the equity component is not remeasured as long as it continues to meet the conditions for equity classification.

In accounting for the issuance costs related to the notes, we allocated the total amount of issuance costs incurred to liability and equity components based on their relative values.

Issuance costs attributable to the liability component are being amortized on a straight-line basis, which approximates the effective interest rate method, to interest expense over the term of the notes.

The issuance costs attributable to the equity component are recorded as a reduction of the equity component within additional paid-in capital.

In accounting for extinguishment of the notes, we allocated the consideration transferred between the liability and equity components in a similar manner as upon issuance.

The liability component for extinguished notes is then compared to the carrying amount of the respective extinguished notes and a gain or loss is recorded in other income, net on our consolidated statements of operations.

Collectively, the 2026 notes, 2025 notes, and the 2023 notes are

referred to as the “notes.” The notes, including the embedded conversion features, are accounted for under the traditional convertible debt accounting model entirely as a liability net of unamortized issuance costs.

The carrying amount of the liability is classified as a current liability if we have committed to settle with current assets;

otherwise, we classify it as a long-term liability as we retain the election to settle conversion requests in shares of our common stock.

The embedded conversion features are not remeasured as long as they do not meet the separation requirement of a derivative;

otherwise, they are classified as derivative instruments and recorded at fair value with changes in fair value recorded in other (expense) income, net on our consolidated statements of operations.

The fair value of any derivative instruments related to the notes are determined utilizing Level 2 inputs.

Issuance costs are amortized on a straight-line basis, which approximates the effective interest rate method, to interest expense over the term of the notes.

In accounting for conversions of the notes, the carrying amount of the converted notes is reduced by the total consideration paid or issued for the respective converted notes and the difference is recorded to additional paid-in capital on our consolidated balance sheets.

In accounting for extinguishments of the notes, the reacquisition price of the extinguished notes is compared to the carrying amount of the respective extinguished notes and a gain or loss is recorded in other (expense) income, net on our consolidated statements of operations.

Textbook Library

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We review the estimated salvage value and useful life of our print textbook library on an ongoing basis.

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Write-downs for print textbooks, print textbook depreciation expense, the gain or loss on print textbooks liquidated, and the net book value of print textbooks purchased by students at the end of the term or on a just-in-time basis are recorded in cost of revenues on our consolidated statements of operations and classified as adjustments to cash flows from operating activities.

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• Recognition of revenue when, or as, we satisfy a performance obligation

We generate revenues from our Chegg Services product line which primarily includes Chegg Study, Chegg Writing, Chegg Math Solver, Chegg Study Pack, Thinkful, and Mathway.

Revenues from Chegg Study, Chegg Writing, Chegg Math Solver, Chegg Study Pack, and Mathway are primarily recognized ratably over the respective weekly or monthly subscription period.

We generate revenues from our Chegg Services product line which primarily includes Chegg Study, Chegg Writing, Chegg Math Solver, Chegg Study Pack, Mathway and Thinkful.

Revenues from Chegg Study, Chegg Writing, Chegg Math Solver, Chegg Study Pack, and Mathway are primarily recognized ratably over the monthly subscription period.

Revenues from Thinkful are recognized either ratably over the term of the course, generally six months , or upon completion of the lessons, depending on the instruction type of the course.

Revenues from our Required Materials product line includes revenues from print textbooks that we own or that are owned by a partner as well as revenues from eTextbooks.

Beginning in 2020, our Required Materials product line includes operating leases with students for the rental of print textbooks that we own.

Beginning in 2020, our Required Materials product line includes

operating leases with students for the rental of print textbooks that we own.

Operating lease income is recognized as the total transaction amount, paid upon commencement of the lease, ratably over the lease term or rental term, generally a two - to five-month period.

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We estimate the amount of variable consideration that we will earn at the inception of the contract, adjusted during each period, and include an estimated amount each period.

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For sales of third-party products, we evaluate whether we are acting as a principal or an agent, and therefore would record the gross sales amount as revenues and related costs or the net amount earned as a revenue share from the sale of third-party products.

For sales of third-party products, we evaluate whether we are acting as a principal or an agent.

Where our role in a transaction is that of principal, revenues are recognized on a gross basis.

This requires revenue to comprise the gross value of the transaction billed to the customer, after trade discounts, with any related expenditure charged as a cost of revenues.

Where our role in a transaction is that of an agent, revenues are recognized on a net basis with revenues representing the margin earned.

Our determination is based on our evaluation of whether we control the specified goods or services prior to transferring them to the customer.

When deciding the most appropriate basis for presenting revenues or costs of revenues, both the legal form and substance of the agreement between us and our business partners are reviewed to determine each party’s respective role in the transaction.

In relation to print textbooks owned by a partner, we recognize revenues on a net basis based on our role in the transaction as an agent as we have concluded that we do not control the use of the print textbooks, and therefore record only the net revenue share we earn.

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Our cost of revenues consists primarily of expenses associated with the delivery and distribution of our products and services.

Cost of revenues primarily consists of content amortization expense related to content that we develop, license from publishers for which we pay one-time license fees, or acquire through acquisitions, payment processing costs, order fulfillment fees primarily related to outbound shipping and fulfillment as well as publisher content fees for eTextbooks, write-downs for print textbooks, the gain or loss on print textbooks liquidated, the net book value of print textbooks purchased by students at the end of the term or on a just-in-time basis, print textbook depreciation expense, personnel costs and other direct costs related to providing content or services.

Cost of revenues primarily consists of content amortization expense related to content that we develop, license from publishers for which we pay one-time license fees, or acquire through acquisitions, web hosting fees, customer support fees, payment processing costs, amortization of acquired intangible assets, order fulfillment fees primarily related to outbound shipping and fulfillment as well as publisher content fees for eTextbooks, write-downs for print textbooks, the gain or loss on print textbooks liquidated, the net book value of print textbooks purchased by students at the end of the term or on a just-in-time basis, print textbook depreciation expense, personnel costs and other direct costs related to providing content or services.

In addition, cost of revenues includes allocated information technology and facilities costs.

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Our research and development expenses consist of salaries, benefits, and share-based compensation expense for employees on our product, engineering, and technical teams who are responsible for maintaining our website, developing new products, and improving existing products.

Research and development costs also include depreciation expense, technology costs to support our research and development, outside services, and allocated information technology and facilities expenses.

Research and development costs also include technology costs to support our research and development, and outside services.

We expense substantially all of our research and development expenses as they are incurred.

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Share-based Compensation Expense

Share-based compensation expense for 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 share-based compensation awards based on the grant-date fair value of the award.

Share-based compensation expense for our ESPP is estimated at the date of grant using the Black-Scholes-Merton option pricing model while RSUs and PSUs are measured based on the closing fair market value of the Company’s common stock generally on the date of grant.

We recognize share-based compensation expense over the requisite service period, which is generally the vesting period, on a straight-line basis for ESPP and RSUs and on a graded basis for PSUs, contingent on the achievement of performance conditions.

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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.

Share-based compensation expense for restricted stock units (RSUs), performance-based restricted stock units (PSUs) with either a market-based condition or financial and strategic performance targets, and the employee stock purchase plan (ESPP) is accounted for under the fair value method based on the grant-date fair value of the award.

Share-based compensation expense for RSUs and PSUs with financial and strategic performance targets is measured based on the closing fair market value of our common stock, PSUs with a market-based condition are estimated using a Monte Carlo simulation model, and ESPP is estimated using the Black-Scholes-Merton option pricing model.

We recognize share-based compensation expense on a straight-line basis for RSUs and ESPP and on a graded basis for PSUs.

Vesting for all awards is subject to continued service over the requisite service period, which is generally the vesting period.

Vesting of PSUs with a market-based condition is also subject to the achievement of certain per share price of our common stock targets and vesting of PSUs with financial and strategic performance targets is also subject to our achievement of specified financial and strategic performance targets.

RSUs and PSUs are converted into shares of our common stock upon vesting on a one -for-one basis.

RSUs typically vest over three or four years , while PSUs with a market-based condition typically vest over a four-year period and PSUs with financial and strategic performance targets typically vest over a three-year period.

Share-based compensation expense for PSUs with a market-based condition is recognized regardless of whether the market condition is satisfied whereas share-based compensation expense for PSUs with financial performance targets is recognized upon estimated or actual achievement of such targets.

We assess the achievement of financial and strategic performance targets on a quarterly basis and adjust our share-based compensation expense as appropriate.

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.

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.

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Basic net loss per share is computed by dividing net loss by the weighted-average number of shares of common stock outstanding during the period.

Diluted net loss per share is computed by giving effect to all potential shares of common stock, including stock options, RSUs, PSUs, and shares related to convertible senior notes, 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):

Years Ended December 31,

2020 2019 2018

Net loss $ ( 6,221 ) $ ( 9,605 ) $ ( 14,888 )

Weighted average shares used to compute net loss per share, basic and diluted 125,367 119,204 113,251

Net loss per share, basic and diluted $ ( 0.05 ) $ ( 0.08 ) $ ( 0.13 )

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

Years Ended December 31,

2020 2019 2018

Options to purchase common stock 935 2,395 4,045

RSUs and PSUs 3,529 4,699 7,946

Shares related to convertible senior notes 4,942 3,526 —

Employee stock purchase plan 6 — —

Total common stock equivalents 9,412 10,620 11,991

Shares related to convertible senior notes during the year ended December 31, 2020 represents the anti-dilutive impact of our issuance of our 2023 notes and 2025 notes as the average price of our common stock was higher than the conversion price of $ 26.95 and $ 51.56 , respectively, and the conditions for conversion had been met.

Shares related to convertible senior notes during the year ended December 31, 2019 represents the anti-dilutive impact of our 2023 notes as the average price of our common stock was higher than the conversion price and the conditions for conversion had been met.

While these shares were anti-dilutive during the years ended December 31, 2020 and 2019, they may be dilutive in periods we report net income.

However, as a result of the capped call transactions, there will be no economic dilution from the 2023 notes and 2025 notes up to $ 40.68 and $ 79.32 , respectively, as exercise of the capped call instruments will reduce dilution that would have otherwise occurred when the average price of our common stock exceeds the conversion prices.

None of the shares related to our 2026

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notes were dilutive or anti-dilutive during the year ended December 31, 2020 as a result of the conditions for conversion not being met.

For further information on the notes, see Note 10, “Convertible Senior Notes.”

Diluted net loss per share is computed by adjusting net loss for all related interest expense and gains and losses recognized during the period, net of tax, and giving effect to all potential shares of common stock, including stock options, PSUs, RSUs, and shares related to convertible senior notes, to the extent dilutive.

This assumes that all stock options and dilutive convertible shares were exercised or converted and is computed by applying the treasury stock method for outstanding stock options, PSUs, and RSUs, and the if-converted method for outstanding convertible senior notes.

Under the treasury stock method, options, PSUs, and RSUs are assumed to be exercised or vested at the beginning of the period (or at the time of issuance, if later) and as if funds obtained thereby were used to purchase common stock at the average market price during the period.

Under the if-converted method, outstanding convertible senior notes are assumed to be converted into common stock at the beginning of the period (or at the time of issuance, if later).

Foreign Currency Translation

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Revenues and expenses are translated at average exchange rates during the period.

Foreign currency translation gains or losses are included in accumulated other comprehensive income (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, net in the consolidated statements of operations and were not material during the years ended December 31, 2020, 2019 or 2018.

Foreign currency translation gains or losses are included in accumulated other comprehensive (loss) income as a component of stockholders’ equity on the consolidated balance sheets.

Gains or losses resulting from the remeasurement of foreign currency transactions, which are denominated in currencies other than the functional currency, are included in general and administrative expense on the consolidated statements of operations and were not material during the years ended December 31, 2021, 2020 or 2019.

Recent Accounting Pronouncements

Recently Issued Accounting Pronouncements Not Yet Adopted

In August 2020, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2020-06, Accounting for Convertible Instruments and Contracts in an Entity's Own Equity .

ASU 2020-06 simplifies the guidance in Accounting Standards Codification (ASC) 470-20, Debt - Debt with Conversion and Other Options, by reducing the number of accounting separation models for convertible instruments, amends the guidance in ASC 815-40, Derivatives and Hedging - Contracts in Entity's Own Equity, for certain contracts in an entity's own equity that are currently accounted for as derivatives, and requires entities to use the if-converted method for all convertible instruments in the diluted earnings per share (EPS) calculation.

The guidance allows for a modified retrospective method of transition with a cumulative-effect adjustment to the opening balance sheet of accumulated deficit in the period of adoption without restating prior periods.

The guidance is effective for fiscal years beginning after December 15, 2021, with early adoption permitted no earlier than fiscal years beginning after December 15, 2020.

We will early adopt the guidance on January 1, 2021 under the modified retrospective method of transition.

Upon adoption, we expect to initially record a $ 107 million cumulative-effect adjustment to the opening balance of accumulated deficit on our consolidated balance sheet, largely due to the reduction in non-cash interest expense associated with the historical separation of debt and equity components for our notes.

In October 2021, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2021-08, Business Combinations-Accounting for Contract Assets and Contract Liabilities from Contracts with Customers (Topic 805).

The new guidance requires contract assets and contract liabilities acquired in a business combination to be recognized in accordance with Accounting Standards Codification (ASC) Topic 606 as if the acquirer had originated the contracts.

The standard is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years.

Early adoption is permitted.

We will early adopt ASU 2021-08 on January 1, 2022 and will apply it prospectively to all business combinations for which the acquisition date occurs on or after such date, such as our acquisition of Busuu.

The impact on our financial statements will depend on the contract assets and contract liabilities acquired in business combinations after January 1, 2022.

We believe the most significant impacts will be an increase in contract liabilities and goodwill on our consolidated balance sheets.

In May 2021, the FASB issued ASU 2021-04, Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options .

ASU 2021-04 aims to clarify and reduce diversity in an issuer’s accounting for modifications or exchanges of freestanding equity-classified written call options that remain equity classified after modification or exchange based on the economic substance of the modification or exchange.

Early adoption is permitted and the guidance must be applied prospectively to all modifications or exchanges that occur on or after the date of adoption.

The guidance is effective for annual periods beginning after December 15, 2021.

We will adopt ASU 2021-04 on January 1, 2022 and do not expect a material impact on our financial statements as a result of the adoption.

Recently Adopted Accounting Pronouncements

In August 2020, the FASB issued ASU 2020-06, Accounting for Convertible Instruments and Contracts in an Entity's Own Equity .

ASU 2020-06 simplifies the guidance in ASC 470-20, Debt - Debt with Conversion and Other Options.

Under ASU 2020-06, convertible instruments with embedded conversion features, that are not required to be accounted for as a derivative or that do not result in a substantial premium, are no longer required to be separated from the host contract thereby eliminating the cash conversion feature model.

Instead, these convertible debt instruments will be accounted for as a single liability measured at amortized cost under the traditional convertible debt accounting model.

ASU 2020-06 also requires the if-converted method to be applied for all convertible instruments when calculating diluted earnings per share.

We adopted ASU 2020-06 on January 1, 2021 under the modified retrospective method applied to convertible senior notes outstanding as of January 1, 2021 and have not changed previously disclosed amounts or provided additional disclosures for comparative periods.

Adoption of ASU 2020-06 resulted in an increase to convertible senior notes of $ 378.1 million and a decrease to additional paid-in capital of $ 465.0 million due to the application of the traditional convertible debt model and no longer separating the

embedded conversion feature.

Accumulated deficit also decreased by $ 86.9 million due to the reduction in non-cash interest expense related to the debt discount and we expect interest expense to decrease in future periods.

Refer to Note 10, “Convertible Senior Notes” for more information.

In March 2020, the FASB issued ASU 2020-04, Facilitation of the Effects of Reference Rate Reform on Financial Reporting .

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We do not have any hedging relationships and currently do not have material contracts impacted by reference rate reform, however, we will continue to assess contracts through December 31, 2022.

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740):

Simplifying the Accounting for Income Taxes .

ASU 2019-12 key changes include hybrid tax regimes, intraperiod tax allocation exception, and interim-period accounting for enacted changes in tax law.

We early adopted ASU 2019-12 during the second quarter of 2020 under the prospective method of adoption.

As a result of adoption, there was no modification required to the first quarter of 2020 results of operations as previously presented.

The FASB issued four ASUs related to ASC 326, Financial Instruments - Credit Losses .

In November 2019, the FASB issued ASU 2019-11, Codification Improvements to Topic 326, Financial Instruments - Credit Losses.

In May 2019, the FASB issued ASU 2019-05, Financial Instruments—Credit Losses (Topic 326):

Targeted Transition Relief.

In April 2019, the FASB issued ASU 2019-04, Codification Improvements to Topic 326, Financial Instruments—Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments— Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments.

On January 1, 2020, we adopted ASC 326, which replaces the existing incurred loss impairment model for financial assets, including trade receivables, with an expected loss model which requires the use of forward-looking information to calculate expected credit loss estimates.

Additionally, the concept of other-than-temporary impairment for available-for-sale investments is eliminated and instead requires us to focus on determining whether any unrealized loss is a result of a credit loss or other factors.

We adopted ASC 326 under the modified retrospective method for all financial assets measured at amortized cost.

Results for reporting periods beginning after adoption are presented under ASC 326 while we have not changed previously disclosed amounts or provided additional disclosures for comparative periods.

We recorded an immaterial cumulative-effect adjustment to trade receivables to the opening balance of

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accumulated deficit on our consolidated balance sheet.

We adopted ASC 326 under the prospective transition approach for available-for-sale investments which resulted in no change to amortized cost basis before and after adoption.

Credit losses related to available-for-sale investments will now be recorded through an allowance for credit losses with immediate recognition to our consolidated statement of operations rather than as a reduction to the amortized cost basis and recognition to our consolidated statements of comprehensive loss.

See above within Note 1, “Background and Basis of Presentation”, for updates to our significant accounting policies impacted by our adoption of ASC 326 as well as Note 4, “Cash and Cash Equivalents, and Investments” for more information.

In August 2018, the FASB issued ASU 2018-15, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40):

Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract .

ASU 2018-15 aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with existing guidance contained within subtopic 350-40 to develop or obtain internal-use software.

We adopted ASU 2018-15 on January 1, 2020 under the prospective method of adoption.

Revenue Recognition

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During the years ended December 31, 2021, 2020, and 2019, we recognized $ 32.6 million, $ 18.3 million and $ 17.0 million, respectively, of revenues that were included in our deferred revenue balance at the beginning of each respective fiscal year.

During the year ended December 31, 2020, we recognized an immaterial amount of previously deferred revenues recognized from performance obligation satisfied in previous periods.

During the year ended December 31, 2021, we recognized a reduction of revenues of $ 4.9 million from performance obligations satisfied in previous periods primarily due to a change in the estimated variable consideration ascribed to Thinkful.

During the year ended December 31, 2020, we recognized an immaterial amount from performance obligations satisfied in previous periods.

During the year ended December 31, 2019, we recognized $ 3.4 million of previously deferred revenues recognized from performance obligations satisfied in previous periods related to variable consideration recognized from our agreement with our Required Materials print textbook partner.

During the year ended December 31, 2018, we recognized an immaterial amount of previously deferred revenues recognized from performance obligations satisfied in previous periods.

During the year ended December 31, 2020, we recognized $ 50.8 million of operating lease income from print textbook rentals that we own.

The aggregate amount of unsatisfied performance obligations is approximately $ 32.6 million as of December 31, 2020, which are expected to be recognized into revenues over the next year.

During the years ended December 31, 2021 and 2020, we recognized $ 34.6 million and $ 50.8 million, respectively, of operating lease income from print textbook rentals that we own.

Contract Balances

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

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

December 31, Change

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Accounts receivable, net $ 17,850 $ 12,913 $ 4,937 38 %

Deferred revenue 32,620 18,780 13,840 74

Contract assets 14,231 13,243 988 7

During the year ended December 31, 2020, our accounts receivable, net balance increased by $ 1.4 million, or 12 %, primarily due to timing of billings.

During the year ended December 31, 2020, our deferred revenue balance increased by $ 13.8

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million, or 74 %, primarily due to increased bookings driven by higher Chegg Services revenue and print textbooks that we own that are recognized ratably rather than immediately.

During the year ended December 31, 2020, our contract assets balance increased by $ 9.7 million or 275 %, primarily due to the income sharing payment arrangements we offer to students for our Thinkful service.

Cash and Cash Equivalents, and Investments

The following tables show our cash and cash equivalents, and investments’ adjusted cost, unrealized gain, unrealized loss and fair value as of December 31, 2020 and 2019 (in thousands):

Deferred revenue 35,143 32,620 2,523 8

During the year ended December 31, 2021, our accounts receivable, net balance increased by $ 4.9 million, or 38 %, primarily due to timing of billings and seasonality of our business.

During the year ended December 31, 2021, our contract assets balance increased by $ 1.0 million or 7 %, primarily due to our Thinkful service.

During the year ended December 31, 2021, our deferred revenue balance increased by $ 2.5 million, or 8 %, primarily due to increased bookings and seasonality of our business.

Net Loss Per Share

Adoption of ASU 2020-06, Accounting for Convertible Instruments and Contracts in an Entity's Own Equity

ASU 2020-06 requires the if-converted method to be applied for all convertible instruments when calculating diluted earnings per share.

Under the if-converted method, outstanding convertible senior notes are assumed to be converted into common stock at the beginning of the period (or at the time of issuance, if later).

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

Years Ended December 31,

2021 2020 (1)

Net loss $ ( 1,458 ) $ ( 6,221 ) $ ( 9,605 )

Weighted average shares used to compute net loss per share, basic and diluted 141,262 125,367 119,204

Net loss per share, basic and diluted $ ( 0.01 ) $ ( 0.05 ) $ ( 0.08 )

(1) As noted above, prior period amounts have not been adjusted due to the adoption of ASU 2020-06 under the modified retrospective method .

Years Ended December 31,

2021 2020 2019

Shares related to stock plan activity 2,545 4,470 7,094

Shares related to convertible senior notes 23,300 4,942 3,526

Total common stock equivalents 25,845 9,412 10,620

Cash and Cash Equivalents, and Investments and Fair Value Measurements

The following tables show our cash and cash equivalents, and investments’ fair value level classification, adjusted cost, unrealized gain, unrealized loss and fair value as of December 31, 2021 and 2020 (in thousands, except for fair value level):

December 31, 2021

Adjusted Cost Unrealized Gain Unrealized Loss Fair Value

Fair Value Level Adjusted Cost Unrealized Gain Unrealized Loss Fair Value

Cash and cash equivalents:

Cash $ 30,324 $ — $ — $ 30,324

Money market funds 464,799 — — 464,799

Money market funds Level 1 823,754 — — 823,754

Total cash and cash equivalents $ 854,078 $ — $ — $ 854,078

Short-term investments:

Commercial paper $ 204,152 $ 24 $ ( 6 ) $ 204,170

Corporate debt securities 459,967 1,478 ( 48 ) 461,397

Commercial paper Level 2 $ 124,211 $ 2 $ ( 33 ) $ 124,180

Corporate debt securities Level 2 552,609 36 ( 546 ) 552,099

Agency bonds Level 2 15,500 2 — 15,502

Total short-term investments $ 692,320 $ 40 $ ( 579 ) $ 691,781

Long-term investments:

Corporate debt securities $ 484,275 $ 605 $ ( 283 ) $ 484,597

Agency bonds 38,995 36 — 39,031

Corporate debt securities Level 2 $ 724,517 $ — $ ( 3,277 ) $ 721,240

treasury securities Level 1 24,860 — ( 107 ) 24,753

Total long-term investments $ 749,377 $ — $ ( 3,384 ) $ 745,993

December 31, 2020

Adjusted Cost Unrealized Gain Unrealized Loss Fair Value

Fair Value Level Adjusted Cost Unrealized Gain Unrealized Loss Fair Value

Cash and cash equivalents:

Cash $ 15,054 $ — $ — $ 15,054

Money market funds 146,165 — — 146,165

Money market funds Level 1 464,799 — — 464,799

Total cash and cash equivalents $ 479,853 $ — $ — $ 479,853

Short-term investments:

Commercial paper $ 7,489 $ — $ — $ 7,489

Corporate debt securities 318,946 425 ( 78 ) 319,293

treasury securities 44,251 39 ( 4 ) 44,286

Agency bonds 10,000 6 — 10,006

Commercial paper Level 2 $ 204,152 $ 24 $ ( 6 ) $ 204,170

Corporate debt securities Level 2 459,967 1,478 ( 48 ) 461,397

Total short-term investments $ 664,119 $ 1,502 $ ( 54 ) $ 665,567

Long-term investments:

Corporate securities $ 295,103 $ 533 $ ( 158 ) $ 295,478

Agency bonds 14,999 6 — 15,005

Corporate debt securities Level 2 $ 484,275 $ 605 $ ( 283 ) $ 484,597

Agency bonds Level 2 38,995 36 — 39,031

Total long-term investments $ 523,270 $ 641 $ ( 283 ) $ 523,628

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The adjusted cost and fair value of our cash equivalents and investments as of December 31, 2020 by contractual maturity were as follows (in thousands):

As of December 31, 2021, we determined that the declines in the market value of our investment portfolio were not driven by credit related factors.

During the years ended December 31, 2021 and 2020 we did not recognize any losses on our investments due to credit related factors.

During the years ended December 31, 2021, 2020 and 2019, our gross realized gains and losses on investments were not significant.

The following table shows our cash equivalents and investments' adjusted cost and fair value by contractual maturity as of December 31, 2021 (in thousands):

December 31, 2021

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Total $ 2,265,451 $ 2,261,528

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

As of December 31, 2020, we did not consider the declines in market value of our investment portfolio to be driven by credit related factors.

We invest in highly-rated securities with a minimum credit rating of A- and a weighted average maturity of less than twelve months , and our investment policy limits the amount of credit exposure to any one issuer or industry sector.

The policy requires investments generally to be investment grade, with the primary objective of preserving capital and maintaining liquidity.

Fair values were determined for each individual security in the investment portfolio.

During the year ended December 31, 2020, we did not recognize any losses on our investments due to credit related factors.

During the years ended December 31, 2019 and 2018, we did not recognize any impairment charges.

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

Strategic Investments

In March 2020, we completed an investment of $ 2.0 million in TAPD, Inc., also known as Frank, a U.S.-based service that helps students access financial aid.

In October 2018, we completed an investment of $ 10.0 million in WayUp, Inc.

(WayUp), a U.S.-based job site and mobile application for college students and recent graduates.

Additionally, we previously invested $ 3.0 million in a foreign entity to explore expanding our reach internationally.

During the year ended December 31, 2020, we recorded a $ 10.0 million impairment charge on our investment in WayUp included within general and administrative expense on our consolidated statements of operations.

Our impairment assessment was the result of the uncertainty around WayUp's ability to raise additional funding to support their future operations.

We did not record any other impairment charges on our other strategic investments during the years ended December 31, 2020, 2019 and 2018, as there were no other significant identified events or changes in circumstances that would be considered an indicator for impairment.

We previously invested $ 2.0 million in TAPD, Inc., also known as Frank;

a U.S.-based service that helps students access financial aid.

In September 2021, we sold our investment in Frank for total consideration of $ 9.2 million, resulting in a $ 7.2 million gain included within other (expense) income, net on our consolidated statements of operations.

We received a cash payment of $ 9.0 million included within cash flows from investing activities on our consolidated statements of cash flows.

We also previously invested $ 3.0 million in a foreign entity to explore expanding our reach internationally.

In March 2021, we sold our investment in that foreign entity for total consideration of $ 8.3 million, resulting in a $ 5.3 million gain included within other (expense) income, net on our consolidated statements of operations.

We received a cash payment, net of taxes withheld, of $ 7.1 million included within cash flows from investing activities on our consolidated statements of cash flows.

We did not record any impairment charges on our strategic investments, other than a $ 10.0 million impairment charge previously recorded in 2020 on our strategic investment in WayUp, Inc., during the years ended December 31, 2021, 2020 and 2019, as there were no significant identified events or changes in circumstances that would be considered an indicator for impairment.

We considered general market conditions as a result of the COVID-19 pandemic in our impairment analysis.

There were no observable price changes in orderly transactions for the identical or similar investments of the same issuers that resulted in an upward or downward adjustment on our strategic investments during the years ended December 31, 2020, 2019 and 2018.

Fair Value Measurement

We have established a fair value hierarchy used to determine the fair value of our financial instruments as follows:

Level 1—Inputs are unadjusted quoted prices in active markets for identical assets or liabilities.

Level 3—Inputs are unobservable inputs based on our own assumptions used to measure assets and liabilities at fair value;

the inputs require significant management judgment or estimation.

A financial instrument’s classification within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.

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Financial instruments measured and recorded at fair value on a recurring basis as of December 31, 2020 and 2019 are classified based on the valuation technique level in the tables below (in thousands):

December 31, 2020

Total Level 1 Level 2

Cash equivalents:

Money market funds $ 464,799 $ 464,799 $ —

Short-term investments:

Commercial paper 204,170 — 204,170

Corporate debt securities 461,397 — 461,397

Long-term investments:

Corporate debt securities 484,597 — 484,597

Agency bonds 39,031 — 39,031

Total assets measured and recorded at fair value $ 1,653,994 $ 464,799 $ 1,189,195

December 31, 2019

Total Level 1 Level 2

Cash equivalents:

Money market funds $ 146,165 $ 146,165 $ —

Short-term investments:

Commercial paper 7,489 — 7,489

Corporate securities 319,293 — 319,293

treasury securities 44,286 44,286 —

Agency bonds 10,006 — 10,006

Long-term investments:

Corporate debt securities 295,478 — 295,478

Agency bonds 15,005 — 15,005

Total assets measured and recorded at fair value $ 837,722 $ 190,451 $ 647,271

We value our investments based on quoted prices in active markets for identical assets (Level 1 inputs) or inputs other than quoted prices that are observable either directly or indirectly (Level 2 inputs) in determining fair value.

Other than our money market funds and U.S.

treasury securities, we classify our fixed income available-for-sale investments as having Level 2 inputs.

We do not hold any investments valued with a Level 3 input.

The methods described above may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values.

There were no observable price changes in orderly transactions for the identical or similar investments of the same issuers during the years ended December 31, 2021, 2020 and 2019.

As of December 31, 2021, we had no amounts related to strategic investments recorded on our consolidated balance sheet.

Financial Instruments Not Recorded at Fair Value on a Recurring Basis

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We consider the fair value of the notes to be a Level 2 measurement due to the limited trading activity.

For further information on the notes see Note 10, “Convertible Senior Notes.”

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For further information on the notes refer to Note 10, “Convertible Senior Notes.”

The carrying amounts and estimated fair values of the notes as of December 31, 2021 and 2020 are as follows (in thousands):

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Convertible senior notes, net $ 1,678,155 $ 1,522,202 $ 1,506,922 $ 2,963,119

The carrying amount of the 2026 notes, 2025 notes and 2023 notes as of December 31, 2020 was net of unamortized debt discount of $ 226.7 million, $ 149.1 million and $ 10.0 million, respectively, and unamortized issuance costs of $ 11.3 million $ 10.2 million and $ 1.2 million, respectively.

The carrying amount of the 2025 notes and 2023 notes as of December 31, 2019 was net of unamortized debt discount of $ 184.7 million and $ 42.3 million, respectively, and unamortized issuance costs of $ 12.7 million and $ 5.0 million, respectively.

(1) Prior period amounts have not been adjusted due to the adoption of ASU 2020-06 under the modified retrospective method.

Refer to Note 10, “Convertible Senior Notes” for more information.

The carrying amount of the 2026 notes and 2025 notes as of December 31, 2021 was net of unamortized issuance costs of $ 12.3 million and $ 9.5 million, respectively, and there is no carrying amount of the 2023 notes as we settled the principal amount of the 2023 notes during the year ended December 31, 2021.

The carrying amount of the 2026 notes, 2025 notes and

2023 notes as of December 31, 2020 was net of unamortized debt discount of $ 226.7 million, $ 149.1 million and $ 10.0 million, respectively, and unamortized issuance costs of $ 11.3 million, $ 10.2 million and $ 1.2 million, respectively.

Long-Lived Assets

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Textbook library, net consisted of the following (in thousands):

December 31, 2020

Textbook library $ 27,569 $ 47,293

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Textbook library, net $ 11,241 $ 34,149

During the year ended December 31, 2020, print textbook depreciation expense was approximately $ 15.4 million and our net gain on textbook library was approximately $ 1.5 million.

During the years ended December 31, 2021 and December 31, 2020, print textbook depreciation expense was approximately $ 10.9 million and $ 15.4 million, respectively.

During the year ended December 31, 2021, net loss on textbook library was approximately $ 11.0 million, primarily due to increased write-downs, and during the year ended December 31, 2020, net gain on textbook library was approximately $ 1.5 million.

Property and Equipment, Net

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Content $ 258,005 $ 181,938

Leasehold improvements 19,574 17,738

Internal-use software and website development 29,711 15,646

Leasehold improvements 19,913 19,574

Furniture and fixtures 4,352 3,891

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Depreciation and content amortization expense during the years ended December 31, 2021, 2020, and 2019 were approximately $ 49.6 million, $ 32.6 million, and $ 24.2 million, respectively.

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2022 Acquisition

On June 4, 2020, we completed our acquisition of Mathway, LLC (Mathway), an online, on-demand math problem solving company that provides a vast range of subject areas in mathematics, including pre-algebra, algebra, trigonometry, pre-calculus, calculus, and linear algebra, and related disciplines.

This acquisition helps to strengthen our existing Chegg Math Solver service with the addition of new subjects, languages, and international reach.

The total fair value of the purchase consideration was $ 101.0 million, of which $ 93.5 million was paid in cash on the acquisition date and $ 7.5 million, included within accrued liabilities, was held in escrow as security for general representations and warranties and potential post-closing adjustments.

Any remaining escrow amount will be released 15 months after the acquisition date.

On January 13, 2022, we completed our acquisition of 100 % of the outstanding shares of Busuu Online S.L.

(Busuu), an online language learning company that offers a comprehensive solution through a combination of self-paced lessons, live classes with expert tutors and the ability to learn and practice with members of the Busuu language learning community, for approximately $ 417 million in an all-cash transaction.

The acquisition helps to expand our existing offerings and global reach through language learning, allowing us to drive further into international markets.

There are additional payments of up to $ 25 million, subject to continued service of certain key employees of Busuu, that are not included in the fair value of the purchase consideration.

During the year ended December 31, 2021, we incurred $ 5.3 million of acquisition-related expenses associated with our acquisition of Busuu, which have been included in general and administrative expense on our consolidated statements of operations.

We plan to account for the acquisition as a business combination and the initial accounting for this acquisition, including the valuation of acquired tangible and intangibles assets and liabilities assumed, is in process as of the issuance date for our financial statements, therefore, we are unable to make any additional disclosures.

2021 Acquisition

On February 22, 2021, we completed an acquisition, accounted for as a business combination, of 100 % of the outstanding shares of a company for a technology that will strengthen our content creation abilities for a purchase consideration of $ 8.0 million in cash.

Our total allocation of purchase consideration included acquired assets of $ 0.4 million, acquired developed technology intangible asset of $ 3.3 million and goodwill of $ 5.3 million less assumed liabilities of $ 1.0 million.

This acquisition did not have a material impact on our consolidated financial statements and is not expected to have a material impact in future periods.

2020 Acquisition

On June 4, 2020, we completed our acquisition of 100 % of the outstanding shares of Mathway, LLC (Mathway), an online, on-demand math problem solving company that provides a vast range of subject areas in mathematics, including pre-algebra, algebra, trigonometry, pre-calculus, calculus, and linear algebra, and related disciplines.

This acquisition helps to strengthen our Chegg Math service with the addition of new subjects, languages, and international reach.

The total fair value of the purchase consideration was $ 101.0 million, of which $ 93.5 million was paid in cash on the acquisition date and $ 7.5 million was held in escrow as security for general representations and warranties and potential post-closing adjustments.

The escrow amount was released in September 2021.

The Mathway purchase agreement provides for additional payments of up to $ 15.0 million, subject to the achievement of specified milestones and continued employment of the sellers.

These payments are not included in the fair value of the purchase consideration but rather are expensed ratably as acquisition-related compensation costs classified as research and development and general and administrative expenses, based on the seller's job function, on our consolidated statement of operations.

We have recorded approximately $ 2.9 million as of December 31, 2020, included within accrued liabilities on our consolidated balance sheet for these payments.

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

During the year ended December 31, 2021, the milestones were met.

As of December 31, 2021 and 2020, we have recorded approximately $ 0.4 million and $ 2.9 million, respectively, within accrued liabilities on our consolidated balance sheets for these payments.

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

Accounts receivable 1,132

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During the year ended December 31, 2020, we incurred $ 3.1 million of acquisition-related expenses associated with our acquisition of Mathway, which have been included in general and administrative expense on our consolidated statement of operations.

We have recorded immaterial amounts of revenue and earnings from Mathway since the acquisition date.

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We have recorded immaterial amounts of revenue and earnings from Mathway during the period since the acquisition date through December 31, 2020.

The following unaudited supplemental pro forma net loss is for informational purposes only and presents our combined results as if the acquisition of Mathway had occurred on January 1, 2019.

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2019 Acquisition

On October 1, 2019, we completed our acquisition of Thinkful, Inc.

(Thinkful), our skills-based learning platform that offers professional courses in software engineering, UX/UI design, digital marketing, data science, product management, data analytics, product design, and technical project management directly to students across the United States to expand our existing offerings by adding affordable and high-quality courses focused on the most in-demand technology skills.

On October 1, 2019, we completed our acquisition of 100 % of the outstanding shares of Thinkful, Inc.

(Thinkful), our skills-based learning platform to expand our existing offerings by adding affordable and high-quality courses focused on the most in-demand technology skills.

The total fair value of the purchase consideration was $ 79.2 million, which was paid in cash and included an escrow amount of $ 9.0 million for general representations and warranties and potential post-closing adjustments.

Any remaining escrow amount will be released 18 months after the acquisition date.

The escrow amount was released in April 2021.

Included in the purchase agreement for the acquisition of Thinkful are additional payments of up to $ 20.0 million subject to the achievement of specified milestones and continued employment of key employees.

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These payments may be settled by us, at our sole discretion, either in cash or shares of our common stock.

During the year ended December 31, 2020, the terms of the purchase agreement were amended such that the retention incentive was reduced to $ 12.8 million, half of which remains subject to the achievement of specified milestones and payable in cash and half of which will be settled in equity grants, to adjust for employee departures.

During the year ended December 31, 2020, the terms of the purchase agreement were amended such that the retention incentive was reduced to $ 12.8 million, half of which is subject to the achievement of specified milestones and payable in cash and half of which will be settled in equity grants, to adjust for employee departures.

During the year ended December 31, 2021, the milestones were met and all cash payments were made therefore we have no amounts recorded as of December 31, 2021.

As of December 31, 2020 and 2019 we have recorded approximately $ 5.7 million and $ 3.0 million, respectively, included within accrued liabilities on our consolidated balance sheet for the cash payments.

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Total fair value of purchase consideration $ 79,200

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

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During the year ended December 31, 2019, we incurred $ 1.0 million of acquisition-related expenses associated with our acquisition of Thinkful, which have been included in general and administrative expenses on our consolidated statement of operations.

During the year ended December 31, 2019, $ 8.6 million of our consolidated net loss was attributed to Thinkful and we have recorded an immaterial amount of revenues since the acquisition date.

During the year ended December 31, 2019, $ 8.6 million of our consolidated net loss was attributed to Thinkful and we have recorded an immaterial amount of revenues during the period since the acquisition date through December 31, 2019.

The following unaudited supplemental pro forma net loss is for informational purposes only and presents our combined results as if the acquisition of Thinkful had occurred on January 1, 2018.

The unaudited supplemental pro forma information includes the historical combined operating results adjusted for acquisition related compensation costs, amortization of intangible assets, share-based compensation expense and transaction expenses and does not necessarily reflect the actual results that would have been achieved, nor is it necessarily indicative of our future consolidated results.

During the years ended December 31, 2019 and 2018, our supplemental pro forma net loss would have been $ 25.0 million and $ 38.6 million, respectively.

Revenues from Thinkful were immaterial during the years ended December 31, 2019 and 2018.

2018 Acquisitions

On July 2, 2018, we acquired StudyBlue, Inc.

(StudyBlue), a privately held online learning company that provides a content library that allows students to create flashcards and their own study materials.

This acquisition helps strengthen our existing Chegg Services offerings by adding a substantial number of subject categories and a library of content to our learning platform.

The total fair value of the purchase consideration was $ 20.4 million, which included an escrow amount of $ 3.3 million for general representations and warranties and post-closing adjustments, which was released in January 2020.

On May 15, 2018, we acquired WriteLab, Inc.

(WriteLab), an AI-enhanced writing platform that teaches students grammar, sentence structure, writing style, and offers instant feedback to help students revise, edit, and improve their written work.

This acquisition helps to strengthen Chegg Writing with the addition of new tools, features, and functionality.

The total fair value of the purchase consideration was $ 14.5 million, which included an escrow amount of $ 2.6 million for general representations and warranties and potential post-closing adjustments, which was released in January 2020.

Included in the purchase agreement for the acquisition of WriteLab are additional payments of up to $ 5.0 million subject to continued employment of the sellers.

These payments are not included in the fair value of the purchase consideration and are expensed ratably as research and development expenses on our consolidated statement of operations.

These payments may be settled by us, at our sole discretion, either in cash or shares of our common stock.

We have recorded approximately $ 1.0 million as of December 31, 2020 and 2019 included within accrued liabilities on our consolidated balance sheet for these payments.

Goodwill is primarily attributable to the potential for future product offerings as well as our expanded student reach.

The amounts recorded for intangible assets and goodwill are not deductible for tax purposes.

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The following table presents the total allocation of purchase consideration recorded on our consolidated balance sheets as of the acquisition date (in thousands):

StudyBlue WriteLab Total

Cash $ 152 $ 82 $ 234

Accounts receivable 288 194 482

Other acquired assets 151 — 151

Acquired intangible assets 7,100 4,450 11,550

Total identifiable assets acquired 7,691 4,726 12,417

Liabilities assumed ( 1,309 ) ( 897 ) ( 2,206 )

Net identifiable assets acquired 6,382 3,829 10,211

Goodwill 13,996 10,677 24,673

Total fair value of purchase consideration $ 20,378 $ 14,506 $ 34,884

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

StudyBlue WriteLab Total

Amount Weighted-Average Amortization

(in months) Amount Weighted-Average Amortization

Trade name $ 140 12 $ — 0 $ 140 12

Domain names 180 12 — 0 180 12

Non-compete agreements 220 36 — 0 220 36

Developed technology 1,340 60 4,450 96 5,790 88

Content library 5,220 60 — 0 5,220 60

Acquired intangible assets $ 7,100 57 $ 4,450 96 $ 11,550 72

During the year ended December 31, 2018, we incurred $ 1.0 million of acquisition-related expenses associated with the above 2018 acquisitions which have been included in general and administrative expenses on our consolidated statement of operations.

We have not presented supplemental pro forma financial information as the revenues and earnings of these 2018 acquisitions were immaterial during the year ended December 31, 2018.

Further, we have recorded an immaterial amount of revenues and expenses since the acquisition dates during the year ended December 31, 2018.

During the year ended December 31, 2019, our supplemental pro forma net loss would have been $ 25.0 million.

Revenues from Thinkful were immaterial during the year ended December 31, 2019.

Goodwill and Intangible Assets

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Foreign currency translation adjustment ( 707 ) 822

Measurement period adjustments related to prior acquisition ( 288 ) —

Measurement period adjustments related to prior acquisitions ( 526 ) ( 288 )

Ending balance $ 289,763 $ 285,214

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Intangible assets as of December 31, 2021 and December 31, 2020 consist of the following (in thousands, except weighted-average amortization period):

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Trade and domain names 44 11,613 ( 9,530 ) 2,083

Non-compete agreements 31 2,018 ( 1,981 ) 37

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

Foreign currency translation adjustment — 142 — 142

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

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

Foreign currency translation adjustment — ( 398 ) — ( 398 )

Total intangible assets 64 $ 100,191 $ ( 48,942 ) $ 51,249

The indefinite-lived trade name intangible asset of $ 3.6 million is related to the internships.com trade name.

During the years ended December 31, 2020, 2019 and 2018, amortization expense related to our acquired intangible assets totaled approximately $ 14.3 million, $ 7.5 million and $ 6.5 million, respectively.

As of December 31, 2020, the estimated future amortization expense related to our finite-lived intangible assets is as follows (in thousands):

During the years ended December 31, 2021, 2020 and 2019, amortization expense related to our intangible assets totaled approximately $ 13.7 million, $ 14.3 million and $ 7.5 million, respectively.

As of December 31, 2021, the estimated future amortization expense related to our intangible assets is as follows (in thousands):

2022 $ 11,303

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Total $ 36,966

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Balance Sheet Details

Other Current Assets

Other current assets consist of the following (in thousands):

Insurance recovery related to loss contingency $ 7,800 $ —

Other 16,046 11,846

Other current assets $ 23,846 $ 11,846

Accrued Liabilities

Accrued liabilities consist of the following (in thousands):

Order fulfillment fees $ 11,430 $ 6,939

Acquisition-related compensation 9,611 4,042

Accrued escrow related to acquisition 7,451 —

Accrued content related costs 6,273 1,907

Taxes payable $ 11,127 $ 6,166

Loss contingency 8,000 —

Current operating lease liabilities 6,663 6,603

Accrued content related costs 6,448 6,273

Order fulfillment fees 6,254 11,430

Payment processing fees 3,419 2,130

Accrued purchases of long-lived assets 2,982 1,588

Refund reserve 1,392 1,515

Restructuring liability 785 —

Acquisition-related compensation 417 9,611

Accrued escrow related to acquisition — 7,451

Other 19,722 15,798

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Convertible Senior Notes

Adoption of ASU 2020-06, Accounting for Convertible Instruments and Contracts in an Entity's Own Equity

Instead, these convertible debt instruments will be accounted for as a single liability measured at amortized cost under the traditional convertible debt accounting model.

In August 2020, we issued $ 1.0 billion in aggregate principal amount of 0 % convertible senior notes due in 2026 (2026 notes).

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In March 2019, we issued $ 700 million in aggregate principal amount of 0.125 % convertible senior notes due in 2025 (2025 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.

In April 2018, we issued $ 345 million in aggregate principal amount of 0.25 % convertible senior notes due in 2023 (the 2023 notes and together with the 2026 notes and the 2025 notes, the notes).

The aggregate principal amount of the 2023 notes includes $ 45 million from the initial purchasers fully exercising their option to purchase additional notes.

The notes were issued in private placements to qualified institutional buyers pursuant to Rule 144A of the Securities Act of 1933, as amended.

In April 2018, we issued $ 345 million in aggregate principal amount of 0.25 % convertible senior notes due in 2023 (2023 notes and together with the 2026 notes and the 2025 notes, the notes).

The aggregate principal amount of the 2023 notes included $ 45 million from the initial purchasers fully exercising their option to purchase additional notes.

The notes were issued in private placements to qualified institutional buyers pursuant to Rule 144A of the Securities Act of 1933.

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

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Net proceeds $ 984,096 $ 780,180 $ 335,618

During the year ended December 31, 2021, we settled $ 115.6 million of aggregate principal amount of the 2023 notes, consisting of $ 24.7 million related to requests for conversions and $ 90.9 million pursuant to our election of our option to redeem the remaining outstanding 2023 notes, for a total aggregate consideration of $ 351.1 million, consisting of $ 115.6 million in cash and 2,983,011 shares of our common stock with an aggregate value of $ 235.5 million.

The carrying amount of the 2023 notes was $ 114.2 million, resulting in a $ 236.9 million difference that was recorded in additional paid-in capital on our consolidated balance sheet.

Additionally, we entered into 2023 notes capped call privately-negotiated transactions which terminated capped call transactions underlying 4,288,459 shares of our common stock and received aggregate cash proceeds of $ 45.2 million.

As of December 31, 2021, no amounts of our 2023 notes remain outstanding and no shares remain underlying the 2023 notes capped call transactions.

In March 2021, in connection with our securities repurchase program, we extinguished $ 100.0 million aggregate principal amount of the 2025 notes in privately-negotiated transactions for aggregate consideration of $ 184.9 million, which was paid in cash.

Upon execution, we concluded that the 2025 notes embedded conversion features no longer met the derivative scope exception and, as a result, initially recorded a derivative liability of $ 176.5 million, related to the fair value of extinguished 2025 notes.

We settled the derivative liability for aggregate consideration of $ 184.9 million resulting in a $ 8.4 million loss on change in fair value.

The carrying amount of the 2025 notes subject to the extinguishment was $ 98.3 million resulting in a $ 78.2 million loss on early extinguishment of debt.

Additionally, we entered into 2025 notes capped call privately-negotiated transactions which terminated capped call transactions underlying 1,939,560 shares of our common stock and received aggregate cash proceeds of $ 23.9 million.

Upon execution, we concluded that the capped call transactions no longer met the derivative scope exception and, as a result recorded a derivative liability of $ 22.6 million related to the fair value of terminated 2025 notes capped call transactions.

We settled the capped call transactions for aggregate consideration of $ 23.9 million resulting in a $ 1.3 million gain on change in fair value.

During the year ended December 31, 2020, in connection with our securities repurchase program, we extinguished $ 57.4 million aggregate principal amount of the 2023 notes in privately-negotiated transactions for an aggregate consideration of $ 149.6 million, which was paid in cash.

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The fair value of the liability component was calculated by measuring the fair value of similar debt instruments that do not have an associated convertible feature.

The carrying amount of the liability component of the 2023 notes subject to the extinguishment was $ 51.6 million resulting in a $ 1.0 million loss on early extinguishment which was recorded in other income, net on our consolidated statements of operations.

The carrying amount of the liability component of the 2023 notes subject to the extinguishment was $ 51.6 million resulting in a $ 1.0 million loss on early extinguishment which was recorded in other (expense) income, net on our consolidated statements of operations.

Additionally, we terminated 2023 notes capped call transactions underlying 2,131,354 shares of our common stock and received cash proceeds of $ 19.7 million.

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The fair value of the liability component was calculated by measuring the fair value of similar debt instruments that do not have an associated convertible feature.

The carrying amount of the liability component of the 2023 notes subject to the exchange was $ 152.8 million resulting in a $ 3.3 million loss on early

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extinguishment of debt which was recorded in other income, net on our consolidated statements of operations.

The carrying amount of the liability component of the 2023 notes subject to the exchange was $ 152.8 million resulting in a $ 3.3 million loss on early extinguishment of debt which was recorded in other (expense) income, net on our consolidated statements of operations.

Additionally, we terminated 2023 notes capped call transactions underlying 6,380,815 shares of our common stock and received cash proceeds of $ 57.4 million.

As of December 31, 2020, $ 115.6 million of aggregate principal amount of the 2023 notes remain outstanding and 4,288,459 shares remain underlying the 2023 notes capped call transactions.

The notes are our senior, unsecured obligations and are governed by indenture agreements by and between us and Wells Fargo Bank, National Association, as Trustee (the indentures).

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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.

The 2023 notes bear interest of 0.25 % per year which is payable semi-annually in arrears on May 15 and November 15 of each year, beginning on November 15, 2018.

The 2023 notes will mature on May 15, 2023, unless repurchased, redeemed or converted in accordance with their terms prior to such date.

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.

The 2025 notes will mature on March 15, 2025, unless repurchased, redeemed or converted in accordance

with their terms prior to such date.

The 2023 notes bore interest of 0.25 % per year which was payable semi-annually in arrears on May 15 and November 15 of each year, beginning on November 15, 2018.

Each $1,000 principal amount of the 2026 notes will initially be convertible into 9.2978 shares of our common stock.

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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, December 15, 2024 for the 2025 notes and February 15, 2023 for the 2023 notes, the notes are convertible at the option of holders only upon satisfaction of the following circumstances:

• during any calendar quarter commencing after the calendar quarter ending on December 31, 2020 for the 2026 notes, June 30, 2019 for the 2025 notes, and June 30, 2018 for the 2023 notes, if the last reported sale price of our common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter is greater than or equal to 130 % of the respective conversion price for the notes on each applicable trading day;

Each $1,000 principal amount of the 2023 notes was initially convertible into 37.1051 shares of our common stock.

This was equivalent to an initial conversion price of approximately $ 26.95 per share, which was subject to adjustment in certain circumstances.

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

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

• during the 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;

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

On or after June 1, 2026 for the 2026 notes, December 15, 2024 for the 2025 notes and February 15, 2023 for the 2023 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.

On or after June 1, 2026 for the 2026 notes and December 15, 2024 for the 2025 notes until the close of business on the second scheduled trading day immediately preceding the respective maturity dates, holders may convert their notes at any time, regardless of the foregoing circumstances.

Upon conversion, the notes may be settled in shares of our common stock, cash or a combination of cash and shares of our common stock, at our election.

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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.

The conditions allowing holders of the 2026 notes to convert have not been met and therefore the 2026 notes are not convertible.

The first circumstance allowing holders of the 2025 notes to convert was met during the three months ended December 31, 2020 and September 30, 2020 and therefore, the 2025 notes are convertible starting October 1, 2020 through March 31, 2021.

During the year ended December 31, 2020, we received an immaterial request for conversion of the 2025 notes which we intend to settle in cash during the three months ended March 31, 2021.

The first circumstance allowing holders of the 2023 notes to convert was met during the three months ended December 31, 2020, September 30, 2020, June 30, 2020, March 31, 2020, December 31, 2019, June 30, 2019, and March 31, 2019 and therefore, the 2023 notes were and are convertible starting April 1, 2019 through September 30, 2019 and from January 1, 2020 through March 31, 2021.

During the year ended December 31, 2020, aside from the exchange of $ 172.0 million and extinguishments of $ 57.4 million aggregate principal

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amount of the 2023 notes discussed above, we received immaterial requests for conversion of the 2023 notes which we settled in cash during the year ended December 31, 2020 and intend to settle during the three months ended March 31, 2021.

After December 31, 2020 and through the date of issuance of this Annual Report on Form 10-K, we received $ 24.7 million aggregate principal amount requests for conversion of the 2023 Notes, which we intend to settle through a combination of cash and shares of our common stock during the first half of 2021.

In accounting for their issuance, we separated the notes into liability and equity components.

The carrying amount of the liability components for the 2026 notes, 2025 notes and 2023 notes of approximately $ 758.7 million, $ 588.0 million and $ 280.8 million, respectively, was calculated by measuring the fair value of similar debt instruments that do not have an associated convertible feature.

The carrying amount of the equity components for the 2026 notes, 2025 notes and 2023 notes of approximately $ 241.3 million, $ 212.0 million and $ 64.2 million, respectively, representing the conversion option, was determined by deducting the carrying amount of the liability components from the principal amount of the notes.

This difference between the principal amount of the notes and the liability components represents the debt discount, presented as a reduction to the notes on our consolidated balance sheets, and is amortized to interest expense using the effective interest method over the remaining term of the notes.

The equity components of the notes are included in additional paid-in capital on our consolidated balance sheets and are not remeasured as long as they continue to meet the conditions for equity classification.

We incurred issuance costs related to the 2026 notes, 2025 notes and 2023 notes of approximately $ 15.9 million, $ 19.8 million, and $ 9.4 million, respectively.

In accounting for the issuance costs, we allocated the total amount incurred to the liability and equity components using the same proportions determined above for the notes.

Issuance costs attributable to the liability components for the 2026 notes, 2025 notes and 2023 notes of approximately $ 12.1 million, $ 14.6 million and $ 7.6 million, respectively, were recorded as debt issuance cost, presented as a reduction to the notes on our consolidated balance sheets, and are amortized to interest expense using the effective interest method over the term of the notes.

The issuance costs attributable to the equity components for the 2026 notes, 2025 notes and 2023 notes were approximately $ 3.8 million, $ 5.3 million and $ 1.7 million, respectively, and were recorded as a reduction to the equity component included in additional paid-in capital.

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

The conditions allowing holders of the 2026 notes to convert were not met and therefore the 2026 notes are not convertible.

The conditions allowing holders of the 2025 notes to convert were not met during the three months ended December 31, 2021, therefore the 2025 notes are no longer convertible.

The first circumstance noted above allowing holders of the 2025 notes to convert was met during the three months ended September 30, 2021, June 30, 2021, March 31, 2021, December 31, 2020 and September 30, 2020 and therefore, the 2025 notes were convertible starting October 1, 2020 through December 31, 2021.

Aside from the extinguishment of $ 100.0 million aggregate principal amount of the 2025 notes discussed above, during the year ended December 31, 2021, we received immaterial requests for conversion of the 2025 notes which we settled or intend to settle in cash.

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

December 31, 2021 December 31, 2020 (1)

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Net carrying amount (liability) $ 987,691 $ 690,464 $ 761,930 $ 640,614 $ 104,378

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

December 31, 2020 December 31, 2019

2026 Notes 2025 Notes 2023 Notes 2025 Notes 2023 Notes

Debt discount for conversion option $ 241,300 $ 212,000 $ 21,505 $ 212,000 $ 64,193

Issuance costs ( 3,838 ) ( 5,253 ) ( 586 ) ( 5,253 ) ( 1,749 )

Net carrying amount (equity) $ 237,462 $ 206,747 $ 20,919 $ 206,747 $ 62,444

As of December 31, 2020, the remaining lives of the 2026 notes, 2025 notes and 2023 notes were approximately 5.7 years, 4.2 years and 2.4 years, respectively.

Based on the closing price of our common stock of $ 90.33 on December 31, 2020, the if-converted value of the 2026 notes was approximately $ 839.9 million, which was less than the principal amount of $ 1.0 billion by approximately $ 160.1 million, the if-converted value of the 2025 notes was approximately $ 1,401.6 million, which exceeds the principal amount of $ 800 million by approximately $ 601.6 million, and the if-converted value of the 2023 notes was approximately $ 387.4 million, which exceeds the principal amount of $ 115.6 million by approximately $ 271.8 million.

T a b l e o f C o n t e n t s

The effective interest rates of the liability components for the 2026 notes, 2025 notes and 2023 notes are 4.63 % , 5.40 % and 4.34 %, respectively, and each is based on the interest rate of similar debt instruments, at the time of our offering, that do not have associated convertible features.

(1) As noted above, prior period amounts have not been adjusted due to the adoption of ASU 2020-06 under the modified retrospective method.

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

Years Ended December 31,

2026 Notes 2025 Notes 2023 Notes 2025 Notes 2023 Notes

2021 2020 (1)

Amortization of debt discount $ — $ 14,568 $ —

Amortization of issuance costs 2,635 728 —

Total 2026 notes interest expense $ 2,635 $ 15,296 $ —

Contractual interest expense $ 896 $ 1,001 $ 769

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Amortization of issuance costs 3,045 2,443 1,876

Total interest expense $ 15,296 $ 39,005 $ 11,964 $ 29,947 $ 14,886

Total 2025 notes interest expense $ 3,941 $ 39,005 $ 29,947

Contractual interest expense $ 78 $ 691 $ 862

Amortization of debt discount — 10,073 12,536

Amortization of issuance costs 242 1,200 1,488

Total 2023 notes interest expense $ 320 $ 11,964 $ 14,886

(1) As noted above, prior period amounts have not been adjusted due to the adoption of ASU 2020-06 under the modified retrospective method.

Capped Call Transactions

Concurrently with the offering of the 2026 notes, 2025 notes and 2023 notes, we used $ 103.4 million, $ 97.2 million and $ 39.2 million, respectively, of the net proceeds to enter into privately negotiated capped call transactions which are expected to generally reduce or offset potential dilution to holders of our common stock upon conversion of the notes and/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 cover 9,297,800 , 15,516,480 and 4,288,459 shares of our common stock for the 2026 notes, 2025 notes and 2023 notes, respectively, and are intended to effectively increase the overall conversion price from $ 107.55 to $ 156.44 per share for the 2026 notes, $ 51.56 to $ 79.32 per share for the 2025 notes and $ 26.95 to $ 40.68 per share for the 2023 notes.

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 December 31, 2021, cover 9,297,800 and 13,576,571 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.

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The cost of the capped call is not expected to be deductible for tax purposes.

Impact to Earnings per Share

The shares underlying the notes have no impact to diluted earnings per share until the average price of our common stock during the period exceeds the conversion price for the 2026 notes, 2025 notes and 2023 notes of $ 107.55 , $ 51.56 and $ 26.95 per share, respectively, and the conversion circumstances have been met.

Under the treasury stock method, in periods we report net income, we are required to include the effect of additional shares that may be issued under the notes when the average price of our common stock exceeds each respective conversion price.

However, as a result of the capped call transactions described above, there will be no economic dilution from the 2026 notes, 2025 notes and 2023 notes up to $ 156.44 , $ 79.32 and $ 40.68 , respectively, as exercise of the capped call instruments will reduce any dilution from the notes that would have otherwise occurred when the average price of our common stock exceeds the conversion price.

We have operating leases for corporate offices worldwide, which expire at various dates through 2027.

Our primary operating lease commitments at December 31, 2020 are related to our corporate headquarters in Santa Clara, California.

We have additional offices in California, Oregon, and New York in the United States and internationally in India and Israel.

We have operating leases for our corporate offices worldwide, which expire at various dates through 2027.

Our primary operating lease commitments at December 31, 2021 are related to our corporate headquarters in Santa Clara, California and offices in San Francisco, California and New York City, New York.

As of December 31, 2021 and 2020, we had operating lease ROU assets of $ 18.1 million and $ 24.2 million, respectively, and operating lease liabilities of $ 19.1 million and $ 25.9 million, respectively.

During the year ended December 31, 2020, we obtained $ 13.7 million of ROU assets in exchange for lease liabilities related to commencing leases for additional office space in New York and internationally in India.

During the year ended December 31, 2019, we obtained $ 3.4 million of ROU assets in exchange for lease liabilities related to the reassessment of the lease term for two of our office spaces and commencing a lease for an additional office space internationally in India.

As of December 31, 2020 and 2019, we did not have finance leases recorded on our consolidated balance sheet, our weighted average remaining lease term was 4.6 years and 3.7 years, respectively, and our weighted average discount rate was 4.8 % and 4.7 %, respectively.

Operating lease expense, net of immaterial sublease income, was approximately $ 5.6 million and $ 5.0 million, respectively, during the years ended December 31, 2020 and 2019.

As of December 31, 2021 and 2020, we did not have finance leases recorded on our consolidated balance sheet, our weighted average remaining lease term was 4.0 years and 4.6 years, respectively, and our weighted average discount rate was 4.8 %.

Operating lease expense, net of immaterial sublease income, was approximately $ 7.1 million, $ 5.6 million and $ 5.0 million, respectively, during the years ended December 31, 2021, 2020 and 2019.

Variable lease cost and short term lease cost were immaterial during the years ended December 31, 2021, 2020 and 2019.

T a b l e o f C o n t e n t s

The aggregate future minimum lease payments and reconciliation to operating lease liabilities as of December 31, 2021, are as follows (in thousands):

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Total operating lease liabilities $ 19,110

During the year ended December 31, 2021, we entered into a 5.5 year amendment to expand our office space in Portland, Oregon with future minimum lease payments of approximately $ 3.7 million.

As of December 31, 2021, this lease has not yet commenced and therefore these future minimum lease payments are not included in table above.

Commitments and Contingencies

From time to time, third parties may assert patent infringement claims against us in the form of letters, litigation, or other forms of communication.

In addition, we may from time to time be subject to other legal proceedings and claims in the ordinary course of business, including claims of alleged infringement of trademarks, copyrights, and other intellectual property rights;

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, disputes, or investigations.

We may also, from time to time, be subject to various legal or government claims, demands, disputes, investigations, or requests for information.

Such matters may include, but not be limited to, claims, disputes, or investigations related to warranty, refund, breach of contract, employment, intellectual property, government regulation, or compliance or other matters.

On 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 breaches of fiduciary duties, unjust enrichment, abuse of control, gross mismanagement, and waste of corporate assets, among others.

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.

The plaintiff in this matter seeks unspecified compensatory damages, costs, and expenses, including counsel and expert fees.

The Company disputes these claims and intends to vigorously defend itself in this matter.

On September 13, 2021, Pearson Education, Inc.

(Pearson) filed a complaint captioned Pearson Education, Inc.

(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.

The Company disputes these claims and intends to vigorously defend itself in this matter.

On December 1, 2020, we received notice that a class action lawsuit was filed against Chegg in New York alleging violations of the American with Disabilities Act.

The claim asserted that one of Chegg’s websites is not compatible with software used by vision-impaired individuals.

The claims seek an injunction and monetary relief.

We dispute these claims and filed an answer on January 28, 2021.

During the year ended December 31, 2021, we settled this matter for an immaterial amount, and it is now concluded.

On August 18, 2020, we received notice that a class action lawsuit was filed against Chegg in California alleging violations of the Unruh Civil Rights Act.

The claim asserted that one of Chegg’s websites is not compatible with software used by vision-impaired individuals.

The claims seek an injunction and monetary relief.

We dispute these claims and are working with plaintiffs’ class counsel toward amicably dismissing/settling this claim.

During the year ended December 31, 2021, we settled this matter for an immaterial amount, and it is now concluded.

On July 21, 2020, VitalSource Technologies LLC (VST), which is wholly owned by Ingram Industries Inc., filed a complaint against Chegg alleging that Chegg breached its contract with VST involving the development of an eTextbook reader and eTextbook reader platform.

The suit seeks damages uncertain, but the complaint alleges that they exceed $ 75,000 .

Chegg filed a motion to dismiss for lack of personal jurisdiction on August 11, 2020, which remains pending.

The case is currently in the discovery phase.

The suit sought uncertain damages, but the complaint alleged that they exceeded $ 75 thousand.

During the year ended December 31, 2021, we settled this matter for an immaterial amount, and it is now concluded.

On June 18, 2020, we received a Civil Investigative Demand (CID) from the Federal Trade Commission (FTC) to determine whether we may have violated Section 5 of the FTC Act or the Children's Online Privacy Protection Act (COPPA), as they relate to deceptive or unfair acts or practices related to consumer privacy and/or data security.

Pursuant to the CID, the FTC has requested responses to interrogatories and the production of documents pertaining to data breach incidents and our data security and privacy practices generally.

Efforts are currently underway to collect the documents and information requested after reaching an agreement with the FTC on the order and timing of our responses.

On May 12, 2020, we received notice that 15,107 arbitration demands were filed against us by individuals represented by the same legal counsel, each alleging to have suffered more than $ 25,000 in damages as a result of the 2018 Data Incident.

On July 1, 2020, an additional 1,007 arbitration demands were filed by the same counsel.

On August 12, 2020, an additional 577 arbitration demands were filed by the same counsel;

cases have been filed by the same counsel in Maryland and California.

We have provided the FTC with the requested responses to interrogatories and follow-up questions and have produced documents pertaining to data breach incidents and our data security and privacy practices generally.

On May 12, 2020, we received notice that 15,107 arbitration demands were filed against us on April 30, 2020 by individuals all represented by the same legal counsel.

Each individual claimant claimed to have suffered more than $ 25 thousand in damages as a result of the unauthorized access of certain items of their user data in April 2018 (the 2018 Data Incident).

On July 1, 2020, an additional 1,007 arbitration demands were filed by the same counsel, making identical allegations.

On August 12, 2020, an additional 577 arbitration demands were filed by the same counsel, making identical allegations.

Related cases have been filed by the same counsel in Maryland and California.

We dispute that these claimants have a valid basis for seeking arbitration, assert that they have acted in bad faith and are working with the Maryland and California courts and plaintiffs’ counsel on resolution of these claims.

On March 3, 2020, Ingram Hosting Holdings LLC (IHH) filed a complaint in the U.S.

District Court for the Middle District of Tennessee alleging that Chegg breached its various contracts with IHH and other Ingram group entities, seeking

T a b l e o f C o n t e n t s

damages in the amount of $ 17 million.

An answer was filed on March 31, 2020.

Chegg and Ingram have now dismissed the litigation after reaching an amicable settlement of the dispute which includes an immaterial undisclosed payment from Ingram.

On November 5, 2018, NetSoc, LLC (NetSoc) filed a complaint against us in the U.S.

District Court for the Southern District of New York for patent infringement alleging that the Chegg Tutors service infringes U.S.

9.978,107 and seeking unspecified compensatory damages.

On August 22, 2021, Chegg and the claimants' legal counsel, on behalf of its clients, entered into a settlement agreement, pursuant to which each eligible claimant that signs a release agreement agrees, among other things, to dismiss with prejudice all claims against Chegg that such claimant currently maintains in exchange for such claimant's pro rata portion of the settlement amount.

Claimants had until January 26, 2022 to sign their release agreements.

In March 2021, we recorded a loss contingency accrual and a corresponding insurance loss recovery, the net impact of which did not materially impact our consolidated statements of operations.

On November 5, 2018, NetSoc, LLC (NetSoc) filed a complaint against us captioned NetSoc, LLC v.

Chegg, Inc., (Civil Action No.

1:18-CV-10262-RAC) in the U.S.

District Court for the Southern District of New York (SDNY) for patent infringement alleging that the Chegg Tutors service infringes U.S.

9,978,107 (the NetSoc Patent) and seeking unspecified compensatory damages.

A responsive pleading was filed on February 19, 2019.

On January 13, 2020, the Court issued an order dismissing the case as to Chegg.

On January 30, 2020, NetSoc appealed the dismissal.

On April 21, 2020, the Court granted Chegg's motion to hold the appeal in abeyance pending outcome of an appeal in the litigation above.

On December 2, 2020, the United States Patent and Trademark Office determined that the patent is invalid based on two Inter Partes Review (IPR) proceedings and on January 4, 2021, NetSoc filed a notice of appeals appealing the IPR decision.

We have not recorded any amounts related to the above matters, as we do not believe that a loss is probable in these matters.

On January 13, 2020, the SDNY issued an order dismissing the case as to Chegg.

On January 30, 2020, NetSoc appealed the dismissal to the United States Court of Appeals for the Federal Circuit (the Federal Circuit).

On September 24, 2021, the Federal Circuit dismissed NetSoc's appeal of the SDNY dismissal.

On December 2, 2020, the U.S.

Patent and Trademark Office determined that the NetSoc Patent is invalid based on two Inter Partes Review (IPR) proceedings instituted in part by Chegg, and on January 4, 2021, NetSoc filed a Notice of Appeals at the Federal Circuit appealing the IPR decisions.

On October 18, 2021, Chegg filed a motion to dismiss NetSoc's appeal of the IPR decisions.

On December 7, 2021, the Federal Circuit granted Chegg’s motion to terminate the IPR appeal.

This matter is now concluded.

Aside from the loss contingency accrual for the 2018 Data Incident matter, we have not recorded any additional amounts related to the above matters as we do not believe that a loss is probable in these remaining matters.

We are not aware of any other pending legal matters or claims, individually or in the aggregate, that are expected to have a material adverse impact on our consolidated financial position, results of operations, or cash flows.

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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, results of operations, and financial condition.

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.

Guarantees and Indemnifications

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The maximum amount of potential future indemnification is unlimited.

We believe the fair value of these indemnification agreements is minimal.

We believe the fair value of these indemnification agreements is immaterial.

We have not recorded any liabilities for these agreements as of December 31, 2021.

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Total common shares reserved for future issuance 48,996,458

T a b l e o f C o n t e n t s

2013 Equity Incentive Plan

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Stockholders' Equity

Accelerated Share Repurchase

On December 3, 2021, we entered into an accelerated share repurchase (ASR) agreement with a financial institution (2021 ASR).

We accounted for the 2021 ASR as two separate transactions, a repurchase of our common stock and an equity-linked contract indexed to our common stock that met certain accounting criteria for classification in stockholders' equity.

Upon execution, we paid a fixed amount of $ 300.0 million and received an initial delivery of 8,403,361 shares of our common stock, which were retired immediately.

The initial delivery of shares of our common stock represented approximately 80 percent of the fixed amount paid of $ 300.0 million, which was based on the share price of our common stock on the date of execution.

The 2021 ASR was recorded as a reduction to additional paid in capital on our consolidated statements of stockholders’ equity.

The 2021 ASR settled during the first quarter of 2022 and we received an additional delivery of 2,163,219 shares of our common stock, which were retired immediately.

The 2021 ASR resulted in a total repurchase of 10,566,580 shares of our common stock at a volume-weighted-average price, less an agreed upon discount, of $ 28.3914 per share.

We were not required to make any additional cash payments or delivery of common stock to the financial institutions upon settlement.

Securities Repurchase Program

In June 2020, our board of directors approved a securities repurchase program authorizing our repurchase of up to $ 500.0 million 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.

In November 2021, our board of directors approved a $ 500.0 million increase to our existing securities repurchase program authorizing the repurchase of up to $ 1.0 billion of our common stock and/or convertible notes, through open market purchases, block trades, and/or privately negotiated transactions or pursuant to Rule 10b5-1 plans, in compliance with applicable securities laws and other legal requirements.

The timing, volume, and nature of the repurchases will be determined by management based on the capital needs of the business, market conditions, applicable legal requirements, and other factors.

During the year ended December 31, 2020, we repurchased $ 57.4 million of aggregate principal amount of the 2023 notes in privately-negotiated transactions for an aggregate consideration of $ 149.6 million and have $ 350.4 million remaining under the repurchase program.

The repurchase program will end on December 31, 2021.

During the year ended December 31, 2021, we entered into the 2021 ASR for $ 300.0 million and repurchased $ 100.0 million of aggregate principal amount of the 2025 notes in privately-negotiated transaction for an aggregate consideration of $ 184.9 million.

As of December 31, 2021 $ 365.5 million remains 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.

Equity Offering

In February 2021, we entered into an underwriting agreement pursuant to which we agreed to issue and sell 10,974,600 shares of our common stock at a public offering price of $ 102.00 per share generating aggregate net proceeds of $ 1,091.5 million, after deducting underwriting discounts and commissions of $ 26.9 million and offering expenses of $ 1.1 million.

Share-based Compensation Expense

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Total share-based compensation expense $ 108,846 $ 84,055 $ 64,909

T a b l e o f C o n t e n t s

During the year ended December 31, 2020, the Compensation Committee of the Board of Directors approved a modification accelerating the vesting of 42,982 restricted stock units (RSUs) and performance-based restricted stock units (PSUs) for three key employees resulting in approximately $ 2.4 million of incremental share-based compensation expense.

As of December 31, 2020, we had a total of approximately $ 110.3 million of unrecognized share-based compensation expense related to RSUs and PSUs that is expected to be recognized over the remaining weighted average period of 1.8 years.

During the year ended December 31, 2021 we capitalized share-based compensation expense of $ 2.6 million.

As of December 31, 2021, we had a total of approximately $ 273.0 million of unrecognized share-based compensation expense that is expected to be recognized over the remaining weighted average period of 2.6 years.

2021 PSU Grants with Market-Based Conditions

In March 2021, we granted PSUs under the 2013 Equity Incentive Plan (the 2013 Plan) with market-based conditions to certain of our key employees.

The number of shares of our common stock that may be issued to settle these PSUs range from 50 % at the threshold level to 150 % at the maximum level of the 100 % target level of the award depending on achieving a maximum average market value of the per share price of our common stock, for a period of 60 consecutive trading days, over a three-year performance period ending on the third anniversary of the date of grant.

No payout will be made for performance below the 50 % threshold level.

The market value of the per share price of our common stock must reach $ 123.81 , $ 148.58 , or $ 173.34 at the threshold, target, or maximum levels, respectively, for achievement of the award, which could result in issuance of 244,086 , 488,173 , or 732,260 shares of our common stock at each respective payout level.

These PSUs will vest over a four-year period, with the initial vesting of 50 % of the award occurring in March 2024.

The number of PSUs granted totaled 732,260 shares, which represents the maximum number of shares, and had a grant date fair value of $ 68.55 per share, determined under the Monte Carlo simulation approach described further below.

As of December 31, 2021, the market-based conditions have not been met.

Fair Value of PSUs with Market-Based Conditions

We estimate the fair value of the PSUs using a Monte Carlo simulation approach, which utilizes the fair value of our common stock based on an active market and requires input on the following subjective assumptions:

Expected Term .

The expected term for the awards is the performance period of three years .

Expected Volatility .

The expected volatility is based on the historical average volatility of our stock price over the expected term.

Expected Dividends .

The dividend assumption is based on our historical experience.

To date we have not paid any dividends on our common stock.

Risk-Free Interest Rate .

The risk-free interest rate used in the valuation method is the implied yield currently available on the U.S.

treasury zero-coupon issues, with a remaining term equal to the expected term.

The following table summarizes the key assumptions used to determine the fair value of the awards:

Expected term (years) 3.00

Expected volatility 49.04 %

Expected dividends — %

Risk-free interest rate 0.27 %

2021 PSU Grants with Financial and Strategic Performance Targets

In March 2021, we granted PSUs under the 2013 Plan to certain of our key executives.

The PSUs entitle the executives to receive a certain number of shares of our common stock based on our satisfaction of certain financial and strategic performance targets during 2021.

Based on the achievement of the performance conditions for the March 2021 grants, the final settlement partially met the target threshold based on a specified objective formula approved by the Compensation Committee.

These PSUs will vest over a three-year period, with the initial vesting occurring in March 2022.

The number of shares underlying these March 2021 PSUs granted during the year ended December 31, 2021 totaled 278,644 shares and had a grant date fair value of $ 99.05 per share.

2020 PSU Grants with Financial and Strategic Performance Targets

In March 2020, we granted PSUs under the 2013 Plan to certain of our key executives.

The PSUs entitle the executives to receive a certain number of shares of our common stock based on our satisfaction of certain financial and strategic performance targets during 2020.

Based on the achievement of the performance conditions for the March 2020 grants, the final settlement met the target threshold based on a specified objective formula approved by the Compensation Committee.

These PSUs will vest over a three-year period, with the initial vesting occurring in March 2021.

The number of shares underlying the March 2020 PSUs granted during the year ended December 31, 2020 totaled 460,976 shares and had a grant date fair value of $ 39.21 per share.

2019 PSU Grants with Financial and Strategic Performance Targets

In March 2019, we granted PSUs under the 2013 Plan to certain of our key executives.

The PSUs entitle the executives to receive a certain number of shares of our common stock based on our satisfaction of certain financial and strategic performance targets during 2019.

Based on the achievement of the performance conditions for the March 2019 grants, the final settlement met the target threshold based on a specified objective formula approved by the Compensation Committee.

These PSUs will vest over a three-year period, with the initial vesting occurring in March 2020.

The number of shares underlying the March 2019 PSUs granted during the year ended December 31, 2019 totaled 436,042 shares and had a grant date fair value of $ 40.42 per share.

RSUs and PSUs Activity

RSUs and PSUs Outstanding

Number of RSUs and PSUs Outstanding Weighted Average Grant Date Fair Value

Balance at December 31, 2020 4,816,000 $ 37.82

Granted 6,758,593 47.95

Released ( 2,762,251 ) 34.77

Forfeited ( 640,880 ) 48.97

Balance at December 31, 2021 8,171,462 $ 46.36

The weighted-average grant-date fair value of RSUs and PSUs granted during the years ended December 31, 2021, 2020, and 2019 was $ 47.95 , $ 45.37 , and $ 37.56 , respectively.

The total fair value of RSUs and PSUs vested as of the vesting dates during the years ended December 31, 2021, 2020, and 2019 was $ 232.0 million, $ 200.1 million, and $ 222.3 million, respectively.

Fair Value of 2013 ESPP

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2013 ESPP Activity

There were 173,992 shares purchased under the 2013 ESPP for the year ended December 31, 2020 at an average price per share of $ 38.85 with cash proceeds from the issuance of shares of $ 6.8 million.

There were 201,581 shares purchased under the 2013 ESPP for the year ended December 31, 2019 at an average price per share of $ 25.55 with cash proceeds from the issuance of shares of $ 5.1 million.

There were 253,301 shares purchased under the 2013 ESPP for the year ended December 31, 2018 at an average price per share of $ 15.77 with cash proceeds from the issuance of shares of $ 4.0 million.

Fair Value of RSUs and PSUs

RSUs and PSUs are converted into shares of our common stock upon vesting on a one-for-one basis.

Vesting of RSUs is subject to the employee’s continuing service to us, while vesting of PSUs is subject to our achievement of specified corporate financial performance objectives in addition to the employee's continuing service to us.

RSUs are typically fully vested at the end of three or four years while PSUs vest subject to the achievement of performance objectives and if achieved, typically vest over two to three years .

We assess the achievement of performance objectives on a quarterly basis and adjust our share-based compensation expense as appropriate.

T a b l e o f C o n t e n t s

There were 167,890 , 173,992 and 201,581 shares purchased under the 2013 ESPP during the years ended December 31, 2021, 2020 and 2019, respectively, at an average price per share of $ 40.35 , $ 38.85 and $ 25.55 , respectively, with cash proceeds from the issuance of shares of $ 6.8 million, $ 6.8 million and $ 5.1 million, respectively.

Stock Option Activity

Options Outstanding

Outstanding Weighted-

Share Weighted-Average Remaining Contractual Term in Years Aggregate

Number of Options Outstanding Weighted-Average Exercise Price per Share Weighted-Average Remaining Contractual Term in Years Aggregate Intrinsic Value

Balance at December 31, 2020 627,317 $ 7.86 3.48 $ 51,733,285

Exercised ( 984,068 ) 9.13

Released ( 245,561 ) 8.78

Balance at December 31, 2021 381,756 $ 7.28 2.80 $ 8,942,541

1 unchanged sentence

The total intrinsic value of options exercised during the years ended December 31, 2021, 2020 and 2019, was approximately $ 10.7 million, $ 53.5 million and $ 90.8 million, respectively.

RSU and PSU Activity

RSUs and PSUs Outstanding

Number of RSUs and PSUs

Outstanding Weighted

Average Grant Date

Balance at December 31, 2019 6,909,530 $ 24.04

Granted 2,593,745 45.37

Released ( 4,098,742 ) 20.22

Canceled ( 588,533 ) 31.84

Balance at December 31, 2020 4,816,000 $ 37.82

The weighted-average grant-date fair value of RSUs and PSUs granted during the years ended December 31, 2020, 2019, and 2018 was $ 45.37 , $ 37.56 , and $ 21.67 , respectively.

The total fair value of RSUs and PSUs vested as of the vesting dates during the years ended December 31, 2020, 2019, and 2018 was $ 200.1 million, $ 222.3 million, and $ 120.9 million, respectively.

2020 PSU Grants

In March 2020, we granted PSUs under the 2013 Plan to certain of our key executives.

The PSUs entitle the executives to receive a certain number of shares of our common stock based on our satisfaction of certain financial and strategic performance targets during 2020.

These PSUs will vest over a three-year period, with the initial vesting occurring in March 2021.

The number of shares underlying the March 2020 PSUs granted during the year ended December 31, 2020 totaled 460,976 shares and had a grant date fair value of $ 39.21 per share.

2019 PSU Grants

In March 2019, we granted PSUs under the 2013 Plan to certain of our key executives.

The PSUs entitle the executives to receive a certain number of shares of our common stock based on our satisfaction of certain financial and strategic performance targets during 2019.

These PSUs will vest over a three-year period, with the initial vesting occurring in March 2020.

The number of shares underlying the March 2019 PSUs granted during the year ended December 31, 2019 totaled 436,042 shares and had a grant date fair value of $ 40.42 per share.

T a b l e o f C o n t e n t s

2018 PSU Grants

In August 2018, in conjunction with our acquisition of StudyBlue, we granted PSUs under the 2013 Plan to certain employees.

The PSUs entitle the employees to receive a certain number of shares of our common stock based on our satisfaction of certain strategic performance targets during 2018 and 2019.

Based on the achievement of the performance conditions for the August 2018 grant, the final settlement exceeded the target threshold based on a specified objective formula approved by the Compensation Committee.

These PSUs vest over a three-year period, with the initial vesting occurring in September 2019.

The number of shares underlying the August 2018 PSUs granted during the year ended December 31, 2018 totaled 45,756 shares and had a grant date fair value of $ 28.74 per share.

In March 2018, we granted PSUs under the 2013 Plan to certain of our key executives.

The PSUs entitle the executives to receive a certain number of shares of our common stock based on our satisfaction of certain financial and strategic performance targets during 2018.

Based on the achievement of the performance conditions for the March 2018 grant, the final settlement exceeded the target threshold based on a specified objective formula approved by the Compensation Committee.

These PSUs vest over a three-year period, with the initial vesting occurring in March 2019.

The number of shares underlying the March 2018 PSUs granted during the year ended December 31, 2018 totaled 845,934 shares and had a grant date fair value of $ 19.70 per share.

We recorded an income tax provision of approximately $ 7.2 million, $ 5.4 million and $ 2.6 million for the years ended December 31, 2021, 2020 and 2019, respectively.

The income tax provision for the year ended December 31, 2021 was primarily due to state and foreign income tax expenses and the withholding taxes related to the sale of our strategic equity investment.

The income tax provision for the years ended December 31, 2020 and 2019 was primarily due to state and foreign income tax expense.

19 unchanged sentences

Total $ 5,739 $ ( 861 ) $ ( 6,971 )

T a b l e o f C o n t e n t s

The differences between our income tax provision as presented in the accompanying consolidated statements of operations and the income tax expense computed at the federal statutory rate consists of the items shown in the following table as a percentage of pretax loss (in percentages):

20 unchanged sentences

Net operating loss carryforwards 188,329 190,904

Property and equipment, textbooks and intangibles assets 1,849 —

Convertible senior notes 32,254 —

Other items 7,221 5,734

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Under the accounting guidance this deferred tax liability can be used as a source of income for recognition of deferred tax assets when determining the amount of valuation allowance to be recorded.

As of December 31, 2020, we intend to permanently reinvest all 2020, 2019, and 2018 earnings from our foreign subsidiaries.

As of December 31, 2021, we intend to permanently reinvest all 2018 and later earnings from our foreign subsidiaries.

As such, we have not provided for any remaining tax effect, if any, of the outside basis difference of our foreign subsidiaries based upon plans of future reinvestment.

2 unchanged sentences

Accordingly, the federal and state gross deferred tax assets have been fully offset by a valuation allowance.

T a b l e o f C o n t e n t s

valuation allowance increased by approximately $ 3.3 million during the year ended December 31, 2020 and increased by approximately $ 22.7 million during the year ended December 31, 2019.

The valuation allowance increased by approximately $ 86.5 million during the year ended December 31, 2021 and increased by approximately $ 3.3 million during the year ended December 31, 2020.

As of December 31, 2021, we had net operating loss carryforwards for federal and state income tax purposes of approximately $ 660 million and $ 485 million, respectively, which will begin to expire in years beginning 2028 and 2022, respectively.

5 unchanged sentences

We recognize interest and penalties related to uncertain tax positions as a component of income tax expense.

During the years ended December 31, 2020, 2019 and 2018, we recognized an increase of $ 0.1 million, an increase of $ 45 thousand and a decrease of $ 0.7 million of interest and penalties, respectively.

During the years ended December 31, 2021, 2020 and 2019, we recognized an increase of $ 0.1 million, $ 0.1 million and $ 45 thousand of interest and penalties, respectively.

Accrued interest and penalties as of December 31, 2021 and 2020 were approximately $ 0.3 million and $ 0.2 million, respectively.

19 unchanged sentences

We believe that the amount by which the unrecognized tax benefits may increase or decrease within the next 12 months is not estimable.

T a b l e o f C o n t e n t s

Related-Party Transactions

Our Chief Executive Officer is a member of the Board of Directors of Adobe Systems Incorporated (Adobe).

During the years ended December 31, 2020, 2019, and 2018, we purchased $ 1.7 million, $ 2.1 million and $ 3.3 million, respectively, of services from Adobe.

We had $ 0.1 million, $ 0.2 million, and $ 0.1 million in revenues during the years ended December 31, 2020, 2019, and 2018, respectively, from Adobe.

We had $ 0.1 million and $ 0.2 million in payables as of December 31, 2020 and 2019, respectively, to Adobe.

During the years ended December 31, 2021, 2020, and 2019, we purchased services of $ 2.4 million, $ 1.7 million and $ 2.1 million, respectively, from Adobe.

We had no revenues from Adobe during the year ended December 31, 2021 and $ 0.1 million and $ 0.2 million, in revenues during the years ended December 31, 2020 and 2019, respectively.

We had no payables as of

December 31, 2021 and $ 0.1 million of payables as of December 31, 2020 to Adobe.

We had no outstanding receivables as of December 31, 2021 and 2020 from Adobe.

One of our board members is also a member of the Board of Directors of Synack, Inc.

During the years ended December 31, 2020, 2019, and 2018, we purchased $ 0.1 million, $ 0.4 million, and $ 0.1 million, respectively, of services from Synack.

The immediate family of one of our board members is a member of the Board of Directors of PayPal Holdings, Inc.

During the years ended December 31, 2021, 2020, and 2019, we incurred payment processing fees of $ 2.8 million, $ 2.1 million and $ 1.6 million, respectively, to PayPal.

One of our board members is also a member of the Board of Directors of Zuora, Inc.

During the year ended December 31, 2020, we purchased $ 1.3 million of services from Zuora.

One of our board members is a member of the Board of Directors of Zuora, Inc.

During the years ended December 31, 2021 and 2020 we purchased services of $ 1.9 million and $ 1.3 million, respectively, from Zuora.

We had no payables as December 31, 2021 and 2020 to Zuora.

One of our board members is also the Chief Executive Officer of the San Francisco 49ers (49ers).

During the years ended December 31, 2021, 2020 and 2019, we purchased advertisements of $ 0.2 million, $ 0.1 million, and $ 0.2 million, respectively, from the 49ers.

Restructuring Charges

In September 2021, we changed our go-to-market strategy for our Thinkful product offering which we believe will have the most growth potential to serve learners.

This resulted in a management approved restructuring plan that impacted approximately 60 full-time employees and 100 part-time employees in the United States.

During the year ended December 31, 2021, we recorded restructuring charges of $ 1.9 million related to one-time employee termination benefits classified on our consolidated statements of operations based on the employees' job function and made cash payments of $ 1.1 million.

As of December 31, 2021, we have $ 0.8 million remaining liability which is included within accrued liabilities on our consolidated balance sheets.

The total cost of the restructuring plan has been recorded and we expect it to be completed by the end of the second quarter of fiscal year 2022.

We expect cost savings from the restructuring plan to be reinvested in future growth opportunities.

The following table summarizes the activity related to the restructuring liability (in thousands):

Year Ended December 31, 2021

Beginning balance $ —

Restructuring charges 1,922

Cash payments ( 1,137 )

Ending balance $ 785

Consolidated Statements of Operations Details

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

Years Ended December 31,

2021 2020 2019

Loss on early extinguishment of debt (1)

$ ( 78,152 ) $ ( 4,286 ) $ —

Loss on change in fair value of derivative instruments, net (1)

( 7,148 ) — —

Gain on sale of strategic equity investments (2)

Interest income 6,700 12,783 19,586

Other 632 186 477

Total other (expense) income, net $ ( 65,472 ) $ 8,683 $ 20,063

(1) For further information, see Note 10, “Convertible Senior Notes.”

(2) For further information, see Note 5, “Cash and Cash Equivalents, and Investments and Fair Value Measurements.”

Employee Benefit Plan

We sponsor a 401(k) savings plan for eligible employees and their beneficiaries.

Contributions by us are discretionary.

Participants may contribute, on a pretax basis, a percentage of their annual compensation, but not to exceed a maximum contribution amount pursuant to Section 401(k) of the IRC.

During the years ended December 31, 2020, 2019, and 2018, our matching contributions totaled approximately $ 2.2 million, $ 1.7 million, and $ 1.4 million, respectively.

Contributions by us are discretionary and participants may contribute, on a pretax basis, a percentage of their annual compensation, not to exceed a maximum contribution amount pursuant to Section 401(k) of the IRC.

During the years ended December 31, 2021, 2020, and 2019,

matching contributions totaled approximately $ 2.6 million, $ 2.2 million and $ 1.7 million, respectively.

Segment Information

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We derive our revenues from our Chegg Services and Required Materials product lines.

Our Chegg Services primarily include Chegg Study, Chegg Writing, Chegg Math Solver, Chegg Study Pack, Thinkful, and Mathway.

Our Chegg Services primarily include Chegg Study, Chegg Writing, Chegg Math Solver, Chegg Study Pack, Mathway and Thinkful.

Our Required Materials product line includes revenues from print textbooks and eTextbooks.

5 unchanged sentences

Total net revenues $ 776,265 $ 644,338 $ 410,926

Geographic Information

Our headquarters and most of our operations are located in the United States.

We conduct our sales, marketing and customer service activities primarily in the United States.

Geographic revenues information is based on the location of the customer.

During the years ended December 31, 2020, 2019, and 2018, substantially all of our revenues and long-lived assets are located in the United States.

T a b l e o f C o n t e n t s

Selected Quarterly Financial Data (unaudited)

Three Months Ended

March 31, 2020 June 30, 2020 September 30, 2020 December 31, 2020

Total net revenues $ 131,590 $ 153,009 $ 154,018 $ 205,721

Gross profit 89,200 109,485 91,648 148,588

Income (loss) from operations 3,276 22,061 ( 17,802 ) 49,218

Net (loss) income ( 5,713 ) 10,589 ( 37,140 ) 26,043

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

Basic 122,428 123,842 126,194 128,955

Diluted 122,428 133,851 126,194 141,297

Net (loss) income per share:

Basic $ ( 0.05 ) $ 0.09 $ ( 0.29 ) $ 0.20

Diluted $ ( 0.05 ) $ 0.08 $ ( 0.29 ) $ 0.18

Three Months Ended

March 31, 2019 June 30, 2019 September 30, 2019 December 31, 2019

Total net revenues $ 97,409 $ 93,862 $ 94,151 $ 125,504

Gross profit 74,074 73,344 71,987 99,339

(Loss) income from operations ( 1,027 ) 6,815 ( 5,057 ) 17,086

Net (loss) income ( 4,318 ) ( 2,029 ) ( 11,477 ) 8,219

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

Basic 116,730 118,790 120,085 121,151

Diluted 116,730 118,790 120,085 129,150

Net (loss) income per share:

Basic $ ( 0.04 ) $ ( 0.02 ) $ ( 0.10 ) $ 0.07

Diluted $ ( 0.04 ) $ ( 0.02 ) $ ( 0.10 ) $ 0.06

Subsequent Event

On February 17, 2021, we entered into an underwriting agreement pursuant to which we agreed to issue and sell 9,804,000 shares of our common stock at a public offering price of $ 102.00 per share and on February 18, 2021, the option to purchase up to an additional 1,470,600 shares of our common stock, consisting of 300,000 shares of common stock from the selling stockholder and 1,170,600 shares issued by us, was exercised (the “Offering”).

On February 22, 2021, we closed the Offering and issued the shares for estimated net proceeds of approximately $ 1,091.6 million, after deducting underwriting discounts and commissions and estimated Offering expenses payable by Chegg.

T a b l e o f C o n t e n t s

Our headquarters are located in the United States where we primarily conduct our sales, marketing and customer service activities.

During the year ended December 31, 2021, we had revenues of $ 690.0 million from the United States and $ 86.3 million internationally.

During the years ended December 31, 2020 and 2019, substantially all of our revenue was from the United States.

As of December 31, 2021 and 2020, substantially all of our long-lived assets are located in the United States.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7A. Quantitative and Qualitative Disclosures About Market Risk