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Item 1A. Risk Factors

2023-02-21 compared with 2022-02-22 · 406 added, 330 removed, 319 unchanged (70% of the section changed)

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This summary does not address all of the risks that we face.

Additional discussion of the risks summarized in this risk factor summary, and other risks that we face, can be found below under the heading “Risk Factors” and should be carefully considered, together with other information in this Form 10-K and our other filings with the SEC, before making an investment decision regarding our common stock.

• The uncertainty surrounding the evolving educational landscape, the COVID-19 pandemic, the state of the student, and the demand for our evolving offerings make it difficult to predict our operational trends and results of operations.

Additional discussion of the risks summarized in this risk factor summary, and other risks that we face, can be found below under the heading “Risk Factors” and should be carefully

considered, together with other information in this Form 10-K and our other filings with the SEC, before making an investment decision regarding our common stock.

Risks Related to Our Business and Growth

• Our future revenue and growth depend on our ability to continue to attract new students to, and retain existing students on, our learning platform.

• If our efforts to build and maintain strong brands are not successful, we may not be able to grow our student user base, which could adversely affect our results of operations.

• The COVID-19 pandemic has impacted, and may continue to impact, our business, key metrics, and results of operations in volatile and unpredictable ways.

• The uncertainty surrounding the evolving educational landscape, the state of the student, the demand for our evolving offerings, and the lingering impact of the COVID-19 pandemic make it difficult to predict our operational trends and results of operations.

colleges may continue to face reduced enrollment and students may continue to take fewer and less rigorous classes, which could negatively impact our business and results of operations.

• Our international operations, and the expansion thereof, subject us to increased challenges, risks, and costs, which could adversely affect our business, financial condition, and results of operations.

• If search engines’ methodologies are modified or our search result page rankings decline for other reasons, student discovery of, and engagement with, our website could decline, which may harm our business and results of operations.

• We intend to offer new products and services to students to grow our business.

If our efforts are not successful, our business, results of operations, and financial condition could be adversely affected.

• Our current operations are international in scope and we plan to expand our international operations, which exposes us to risks inherent in international operations.

• Our historical growth may not be indicative of our future growth, and we expect our revenue growth rate to decline compared to prior years.

• We face competition in all aspects of our business, and we expect such competition to increase.

• If we fail to innovate in response to rapidly evolving technological and market developments, including artificial intelligence, our competitive position and business prospects may be harmed.

• We have a history of losses and we may not achieve or sustain profitability in the future.

• Our business depends on general economic conditions and their effect on spending behavior by students and advertising budgets.

• If we do not retain our senior management team and key employees, we may not be able to sustain our growth or achieve our business objectives.

• We depend on mobile app stores and operating systems to grow our student user base and their engagement with our learning platform.

• Our wide variety of accepted payment methods subjects us to third-party payment processing-related risks, including risks associated with credit card fraud.

• We rely on AWS and other third-party software and service providers to provide systems, storage, and services for our website and any disruption of such services or a material change to our arrangements could adversely affect our business.

• Our growth strategy includes acquisitions, and we may not be able to execute on our acquisition strategy or integrate acquisitions successfully.

• If we fail to convince brands of the benefits of advertising on our learning platform, or if platforms such as Google Chrome, Safari, or Firefox limit our access to advertising and marketing audiences, or the data required to effectively reach those audiences, our business could be harmed.

• We may need additional capital, and we cannot be sure that additional financing will be available on favorable terms, if at all.

• Our core value of putting students first may conflict with the short-term interests of our business.

• Adverse litigation judgments or settlements resulting from legal proceedings in which we are or may be involved could expose us to monetary damages or limit our ability to operate our business.

• If we are not able to manage the growth of our business both in terms of scale and complexity, our business could be adversely affected.

• Our business is seasonal, and disruptions during peak periods can make, and have made, our operating results difficult to predict.

Risks Related to Our Industry

• Government regulation of education and student information is evolving, and unfavorable developments could have an adverse effect on our business, results of operations, and financial condition.

• Colleges and certain governments may restrict online access or access to our website, which could lead to the loss of or slowing of growth in our student user base and their level of engagement with our platform.

• If we become subject to liability for the Internet content that we publish or that is uploaded to our websites by students, our results of operations could be adversely affected.

• Computer malware, viruses, hacking, phishing attacks, and spamming could harm our business and results of operations.

• If we are required to discontinue certain of our current marketing activities, our ability to attract new students may be adversely affected.

• We are subject to U.S.

trade control laws that may restrict growth prospects and impose liability if we are non-compliant.

Risks Related to Taxes and Accounting Matters

• We may be subject to greater than anticipated liabilities for income, property, sales, and other taxes, and any successful action by federal, state, foreign, or other authorities to collect additional taxes could adversely harm our business.

• Our effective tax rate may fluctuate as a result of new U.S.

and worldwide tax laws and our interpretations of those new tax laws, which are subject to significant judgments and estimates.

The ongoing effects of the new tax laws and the refinement of provisional estimates could make our results difficult to predict.

• Our earnings are affected by the application of accounting standards and our critical accounting policies, which involve subjective judgments and estimates by our management.

Our actual results could differ from the estimates and assumptions used to prepare our consolidated financial statements.

Risks Related to Intellectual Property

• If we become subject to liability for the Internet content that we publish or that is uploaded to our websites by students or other users, our results of operations could be adversely affected.

• Changes in or our failure to comply with the requirements for eligibility for the Digital Millennium Copyright Act (DMCA) safe harbors could harm our business.

• Failure to protect or enforce our intellectual property and other proprietary rights could adversely affect our business, financial condition, and results of operations.

• We are, and may in the future be, subject to intellectual property claims, which are costly to defend and could harm our business, financial condition, and results of operations.

• Some aspects of our technology include open source software, and any failure to comply with the terms of one or more of these open source licenses could harm our business.

Risks Related to Data Privacy

• The compromise of our information technology systems or data, including through computer malware, viruses, hacking, phishing attacks, spamming and other security incidents, could harm our business and results of operations.

• We collect, process, store and use personal information and other sensitive data, which subjects us to stringent and evolving U.S.

and foreign laws, governmental regulation, contractual obligations, policies and other legal obligations.

• Public scrutiny of Internet privacy issues and actual or perceived failure to comply with our obligations with respect to privacy and data security could harm our business, including by damaging our reputation and relationships with students and educators.

• We are subject to privacy and cybersecurity laws across multiple jurisdictions which are highly complex, overlapping, and which create compliance challenges that may expose us to substantial costs, liabilities, or loss of customer trust.

Our actual or perceived failure to comply with these laws could harm our business.

• Our business, including our ability to operate internationally, could be adversely affected if new legislation or regulations are adopted or due to changes in interpretations or implementations of current legislation and regulations.

Risks Related to Ownership of Our Common Stock

• Our stock price has been and will likely continue to be volatile.

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Risks Related to Our Business and Growth

The uncertainty surrounding the evolving educational landscape, the COVID-19 pandemic, the state of the student, and the demand for our evolving offerings make it difficult to predict our operational trends and results of operations.

The uncertainty surrounding the evolving educational landscape, the COVID-19 pandemic, employment opportunities for students, the number of classes and the difficulty of the classes that the students take, and the demand and market for our products and services make it difficult to predict our operational trends and results of operations, particularly with respect to our newer offerings, and the ultimate market size for our products and services.

If the market and demand for a comprehensive learning platform does not develop as we expect, or if we fail to address the needs of this market, our business and prospects would be harmed.

We face risks, expenses, and difficulties related to our specific business model, including the risks more fully described throughout this “Risk Factors” section, which impede our ability to successfully accomplish the following, among other items:

• enhance and expand our Chegg Services offerings including developing new products and services;

• develop and pursue a profitable business model and pricing strategy;

• acquire complementary products and services to expand and enhance our offerings;

• attract and retain students and increase their engagement with both Chegg Services and Required Materials;

• expand our offerings internationally;

• prevent students from sharing accounts with other students;

• prevent students from misusing our products and services in ways that violate our terms of services, applicable laws, or the code of conduct at their educational institutions;

• develop and scale a high-performance technology infrastructure to efficiently handle increased usage by students, especially during peak periods prior to each academic term.

We anticipate that our ability to accurately forecast financial results for future periods will be most limited at the time we present our second quarter financial results, which will generally occur midsummer and precede the “fall rush.” Additionally, we expect our results of operations to fluctuate in the future based on a variety of factors, many of which are outside our control and difficult to predict.

As a result, period-to-period comparisons of our results of operations may not be a good indicator of our future or long-term performance.

The following factors may affect us from period-to-period and may affect our long-term performance:

• our ability to attract, retain and engage students with our offerings;

• changes to search engines and application marketplaces that drive traffic to our platform;

• the rate of adoption of our offerings;

• price competition and our ability to react appropriately to such competition;

• the strength of the economy and the availability of attractive employment opportunities for our students;

• the trend of declining college enrollment;

• the types of classes our students are taking and whether they choose to take those classes pass/fail;

• the number and difficulty of assignments that professors are assigning and the number of assessments that professors are administering;

• changes by our competitors to their product and service offerings, including price and materials;

• our ability to integrate acquired businesses, including personnel;

• our ability to identify and target sales of complementary products and services to our students;

• changes in demand and pricing for print textbooks and eTextbooks;

• the ability of our logistics partner to efficiently manage and operate fulfillment;

• disruptions to our and our fulfillment partner’s informational technology systems, particularly during peak periods;

• government regulations, in particular regarding privacy, academic integrity, advertising and taxation policies;

• operating costs and capital expenditures relating to expansion of our business;

• general macroeconomic conditions, including as a result of COVID-19.

We have focused in the past, and expect to continue to focus in the future, on expanding our offerings, in many instances through the acquisition of other companies, such as Busuu, Mathway and Thinkful.

Our newer products and services, such as skills-based learning and language learning, may not be integrated effectively into our business, achieve or sustain profitability, or achieve market acceptance at levels sufficient to justify our investment.

We have encountered and will continue to encounter these risks and if we do not manage them successfully, our business, financial condition, results of operations, and prospects may be materially and adversely affected.

Our future revenue and growth depend on our ability to continue to attract new students to, and retain existing students on, our learning platform.

The growth of our business depends on our ability to attract new students to use our products and services and to increase the level of engagement by existing students with our learning platform.

The growth of our business depends on our ability to attract new students to use our products and services and to increase retention and the level of engagement by existing students with our learning platform.

The substantial majority of our revenues depends on small transactions made by a widely dispersed student population with an inherently high rate of turnover primarily as a result of graduation.

The rate at which we expand our student user base and increase student engagement with our learning platform may decline or fluctuate because of several factors, including, among others:

The rate at which we expand our student user base, including retaining existing students, and increase student engagement with our learning platform may decline or fluctuate because of several factors, including, among others:

• our ability to engage students with our suite of Chegg Services and to introduce new products and services that are favorably received by students;

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• the efficacy of our “Learn with Chegg” initiative and the ability of the enhanced personalization of our content to further retain and engage students on our learning platform;

• our ability and our fulfillment partner’s ability to consistently provide students with a convenient, high- quality experience for selecting, receiving, and returning print textbooks;

• our ability to localize our content, localize our pricing, localize our payment and commerce tools, and create new apps in different languages and for different geographies to further our international expansion through increased conversion and retention;

• our ability to grow our skills partnerships with providers who link us to employers and their learners;

• our ability to accurately forecast and respond to student demand for print textbooks;

• the pricing of our physical textbooks and eTextbooks for rental or sale in relation to other alternatives;

• the rate of adoption of eTextbooks and our ability to capture a significant share of that market;

• changes in student spending levels or the number of students attending college;

• changes in student spending levels and habits;

• the decreasing number of students attending U.S.

• the effectiveness of our sales and marketing efforts, including generating word-of-mouth referrals.

If we do not attract more students or if students do not increase their level of engagement with our platform, our revenues may grow more slowly than expected or decline.

If we do not attract more students, retain our existing students, or if students do not increase their level of engagement with our platform, our revenues may grow more slowly than expected or decline.

The student demographic is characterized by rapidly changing tastes, preferences, behavior, brand loyalty, and price sensitivity.

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Developing, protecting, and enhancing our “Chegg” brands are critical to expanding our student user base and increasing student engagement.

Strong brands also help to counteract the significant student turnover we experience from year to year as students graduate, and differentiate us from our competitors.

Having a strong brand can counteract the significant student turnover we experience from year to year as students graduate, and differentiate us from our competitors.

To succeed in our efforts to strengthen our brands’ identities, we must, among other activities:

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• introduce compelling products and services;

• adapt to changing technologies and changes in the learning environment;

• adapt to changing technologies, including artificial intelligence and machine learning, and changes in the learning environment;

• protect user data, such as passwords and personally identifiable information;

• adapt to students’ rapidly changing tastes, preferences, behavior, and brand loyalties;

• continue to expand our reach to students in high school, graduate school, and internationally;

• continue to expand our reach to students in high school, college, graduate school, lifelong learners throughout their careers, and internationally;

• ensure that the student-posted content to our website is reliable and does not infringe on third-party copyrights or violate other applicable laws, our terms of use, or the ethical codes of those students’ colleges;

• ensure that our experts' content is reliable and helpful;

• protect our trademarks and other intellectual property rights;

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• technical or other problems that prevent us from providing our products and services reliably or otherwise negatively affect the student experience with our products and services;

• concern from colleges about how students use our content offerings, such as our Expert Questions and Answers service;

• brand conflict between acquired brands and the Chegg brand;

• concern from colleges and regulatory agencies regarding how students use our content offerings, such as our Expert Questions and Answers service;

• student concerns related to privacy and use of data in our products and services;

• the reputation or products and services of competitive companies;

• the reputation of the products and services of competitive companies;

• students’ misuse of our products and services in ways that violate our terms of services, applicable laws, or the code of conduct at their colleges.

The COVID-19 pandemic has impacted, and may continue to impact, our business, key metrics, and results of operations in volatile and unpredictable ways.

The full effects of the COVID-19 pandemic cannot be predicted because of many uncertainties, including the deployment and long-term efficacy of vaccines and ongoing infection rate surges.

Governments and businesses have taken mitigation actions, including school and business closures, travel restrictions, and quarantines.

These actions could continue to cause a general slowdown in the U.S.

and global economy, adversely impact our customers and partners, disrupt our operations, and cause significant volatility in financial markets.

While our overall business was not materially and adversely affected by the COVID-19 pandemic during the year ended December 31, 2021, the COVID-19 pandemic may still have a material adverse impact on our business and result of operations in the near-term.

We are continuously monitoring our business and operations to take appropriate actions to mitigate risks arising from the COVID-19 pandemic, but there can be no guarantee that the actions we take will be successful.

Should the situation worsen or not improve, or our steps or risk mitigation fail, our business, liquidity, financial condition, results of operations, stock price and prospects may be materially and adversely affected.

Most employees are currently working remotely because of the COVID-19 pandemic.

The health of our employees is of primary concern and at this time and we cannot reasonably predict when our employees can return to our offices.

We may need to take further precautionary measures to protect the health of our employees.

Additionally, our management team is focused on ongoing planning for and mitigating the risks of COVID-19, which may reduce their time for other initiatives.

The COVID-19 pandemic may lead to employee inefficiencies, operational and cybersecurity risks, logistics disruptions, and other circumstances which could have an adverse impact on our business and results of operations.

A significant number of U.S.

and international colleges ceased in-person classes during 2021 in an attempt to ensure the safety of their students.

Additionally, according to The New York Times, total undergraduate college enrollment decreased 3.1% from the fall of 2020 to the fall of 2021, bringing the total decline since the fall of 2019 to 6.6% or approximately 1.2 million fewer students.

Should the COVID-19 pandemic continue, college enrollment may continue to decline.

Our business, growth, results of operations, and financial condition could be adversely affected as a result of a continued decrease in college enrollment.

As students returned to school in the fall of 2021, we started to see a slowdown in the education industry as a result of the COVID-19 pandemic, which resulted in a decline in traffic to education technology services, such as the ones we provide.

A combination of variants, increased employment opportunities and compensation, along with fatigue, all led to significantly fewer enrollments than expected.

Moreover, those students who have enrolled are taking fewer and less rigorous classes and are receiving less graded assignments.

As a result, we experienced a deceleration in the growth rates of our services and revenues that may continue.

Any reduction in the number of students accessing our learning platform could harm our business and results of operations.

Additionally, uncertainties surrounding the COVID-19 pandemic have forced colleges to pay heightened attention to alternative methods of instruction, including online learning and related concerns, such as proctoring exams.

This increase in attention and demand may lead to additional scrutiny from the faculty of more traditional institutions, such as colleges or universities.

We intend to offer new products and services to students to grow our business.

If our efforts are not successful, our business, results of operations, and financial condition could be adversely affected.

Our ability to attract and retain students and increase their engagement with our learning platform depends on our ability to connect them with appropriate products, people, or services.

Part of our strategy is to offer students new products and services in an increasingly relevant and personalized way.

We may develop such products and services independently, by acquisition, or in conjunction with third parties.

In the future, we may invest in new products and services and other initiatives, but there is no guarantee these approaches will be successful.

The markets for new products and services may be unproven, and these products may include technologies and business models with which we have little or no prior experience or may significantly change our existing products and services.

In addition, we may be unable to obtain long-term licenses from third-party content providers and/or government regulatory approvals and licenses necessary to allow a new or existing product or service to function.

If our new or enhanced products and services do not engage our students or attract new students, or if we cannot obtain desirable third party content, we may not grow our student base or generate sufficient revenues, operating margin, or other value to justify our investments, and our business could be adversely affected.

If search engines’ methodologies are modified or our search result page rankings decline for other reasons, student engagement with our website could decline, which may harm our business and results of operations.

We depend in part on various search engines to direct a significant amount of traffic to our website.

Similarly, we depend on mobile app stores such as Google Play Store and the Apple App Store to allow students to locate and download Chegg mobile applications that enable our services.

Our ability to maintain the number of students directed to our website is not entirely within our control.

Our competitors’ SEO efforts may result in their websites receiving a higher search result page ranking than ours, or search engines could revise their methodologies to improve their search results, which could adversely affect the placement of our search result page ranking.

If search engine companies modify their search algorithms in ways that are detrimental to our search result page ranking or in ways that make it harder for students to find our website, or if our competitors’ SEO efforts are more successful than ours, overall growth could slow, including the number of subscribers to Chegg Services, student engagement could decrease, and fewer students may use our platform.

Our website has experienced fluctuations in search result rankings in the past, and we anticipate similar fluctuations in the future.

Any reduction in the number of students directed to our website could harm our business and results of operations.

Our current operations are international in scope and we plan to expand our international operations, which exposes us to risks inherent in international operations.

The uncertainty surrounding the evolving educational landscape, the state of the student, the demand for our evolving offerings, and the lingering impact of the COVID-19 pandemic make it difficult to predict our operational trends and results of operations.

The uncertainty surrounding the evolving educational landscape, the demand and market for our products and services, and the lingering impact of the COVID-19 pandemic make it difficult to predict our operational trends and results of operations, particularly with respect to our newer offerings, and the ultimate market size for our products and services.

If the market and demand for a comprehensive learning platform does not develop as we expect, or if we fail to address the needs of this market, our business and prospects would be harmed.

• enhance and expand our Chegg Services offerings including developing new products and services;

• develop and pursue a profitable business model and pricing strategy;

• acquire complementary products and services to expand and enhance our offerings;

• attract and retain students and increase their engagement with our content;

• expand our offerings internationally;

• prevent students from sharing accounts with other students;

• prevent students from misusing our products and services in ways that violate our terms of services, applicable laws, or the code of conduct at their educational institutions;

• develop and scale a high-performance technology infrastructure to efficiently handle increased usage by students, especially during peak periods each academic term.

As a result, period-to-period comparisons of our results of operations may not be a good indicator of our future or long-term performance.

The following factors may affect us from period-to-period and may affect our long-term performance:

• our ability to attract, retain and engage students with our offerings;

• changes to search engines and application marketplaces that drive traffic to our platform;

• the rate of adoption of our offerings;

• the strength of the economy and the availability of attractive employment opportunities for our students;

• the trend of declining college enrollment;

• rapidly changing technological developments, such as artificial intelligence and machine learning, that may disrupt the education landscape;

• the number and types of classes our students are taking and whether they choose to take those classes pass/fail;

• the number and difficulty of assignments that professors are assigning and the number of assessments that professors are administering;

• changes by our competitors to their product and service offerings, including price and materials;

• our ability to integrate acquired businesses, including personnel;

• our ability to identify and target sales of complementary products and services to our students;

• government regulations, in particular regarding privacy, academic integrity, advertising and taxation policies;

• operating costs and capital expenditures relating to content and the expansion of our business;

• general macroeconomic conditions, including inflation, recession, and the war in Ukraine.

We have encountered and will continue to encounter

these risks, and if we do not manage them successfully, our business, financial condition, results of operations, and prospects may be materially and adversely affected.

colleges may continue to face reduced enrollment and students may continue to take fewer and less rigorous classes, which could negatively impact our business and results of operations.

According to the National Student Clearinghouse, total undergraduate college enrollment in the United States has decreased by over 7%, or a loss of over 1 million students, since the beginning of the COVID-19 pandemic.

Chegg derives a significant portion of its revenue from students attending U.S.

and as such, a continued decrease in the number of students enrolled in U.S.

colleges could materially negatively impact our business, growth, results of operations, and financial condition.

Our international operations, and the expansion thereof, subject us to increased challenges, risks, and costs, which could adversely affect our business, financial condition, and results of operations.

Operating in international markets requires significant resources and management attention and subjects us to regulatory, economic, and political risks that are different from those in the United States.

In addition to our employee base in the United States, we have employees in Germany, Israel, India, the United Kingdom and Spain, and we have retained professional employer organizations and staffing agencies to engage personnel in certain additional international locations.

In addition to our employee base in the United States, we have employees in Germany, Canada, Israel, India, the United Kingdom and Spain, and we have retained professional employer organizations and staffing agencies to engage personnel in certain additional international locations.

Our international operations subject us to the compensation and benefits regulations of those jurisdictions, as well as other employer duties and obligations, that differ from the compensation and benefits regulations and duties and obligations in the United States.

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• difficulties in staffing and managing foreign operations, including in countries in which foreign employees may become part of labor unions, employee representative bodies, workers’ councils or collective bargaining agreements, and challenges relating to work stoppages or slowdowns;

• different pricing environments, longer sales cycles, longer accounts receivable payment cycles, difficulties in adopting and supporting new and different payment preferences, and collections issues;

• different pricing environments, difficulties in adopting and supporting new and different payment preferences, and collections issues;

• new and different sources of competition and practices which may favor local competitors;

• the ability to protect and enforce intellectual property rights abroad;

• compliance challenges related to the complexity of multiple, conflicting and changing governmental laws and regulations, legal systems, alternative dispute systems, including, but not limited to, employment, tax, privacy and data protection, economic sanctions and export controls, U.S.

• the educational regulatory regime in certain countries and their ability to levy civil and criminal penalties on, or completely block students from accessing, services like Chegg;

• compliance challenges related to the complexity of multiple, conflicting and changing governmental laws and regulations, legal systems, and alternative dispute systems, including, but not limited to, employment, tax, privacy and data protection, economic sanctions and export controls, U.S.

and other anti-boycott authorities, anti-money laundering laws, and anti-bribery laws and regulations such as the U.S.

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• increased financial accounting and reporting burdens, complexities, and commercial infrastructures;

• risks associated with international payment methods, including risks associated with fraudulent payments;

• risks associated with foreign tax regimes, trade tariffs, or similar issues, which could negatively impact international adoption of our offerings;

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• regional and economic political conditions.

If we cannot address these challenges, it could have an adverse effect on our business, results of operations, and financial conditions.

If we cannot address these challenges, it could have an adverse effect on our business, results of operations, and financial condition.

Our ability to gain market acceptance in any particular market is uncertain and the distraction of our senior management team could have an adverse effect on our business, results of operations, and financial condition.

Our business is seasonal, and increased risk from disruption during peak periods makes our operating results difficult to predict.

We derive a portion of our net revenues from print textbook rentals and, to a lesser extent, sale transactions, which occur in large part during short periods of time around the commencement of the fall, winter, and spring academic terms.

In particular, we and our partners experience the largest increase in rental and sales volumes during the last two weeks of August and first two weeks of September and to a lesser degree in December and January.

The increased volume of orders that we process during these limited periods of time means that any shortfalls or disruptions in our operations during these peak periods will have a disproportionately large impact on our Required Materials revenues.

If our distribution partners limited their service or otherwise suffer from business disruptions during these peak periods, we may be required to find alternatives for delivery, which may be more expensive, or we may be unable to deliver textbooks timely.

If there are delays in the delivery of our textbooks to students, we recognize less revenue from such transactions.

Additionally, our students could become dissatisfied with such delays and discontinue their use of our service, which could adversely affect our results of operations.

Revenues from Chegg Services, print textbooks that we own, and eTextbooks are primarily recognized ratably over the term a student subscribes to our Chegg Services, rents a print textbook or has access to an eTextbook.

This has generally resulted in our highest revenues and profitability in the fourth quarter as it reflects more days of the academic year.

As a result of this seasonality, which corresponds to the academic calendar, our revenues may fluctuate significantly quarter to quarter depending upon the timing of where we are in our “rush” cycle and sequential quarter-over-quarter comparisons of our net revenues and operating results are not likely to be meaningful.

In addition, should the current COVID-19 pandemic continue to worsen and colleges cannot withstand a prolonged shutdown, we may experience a shift or reduction in enrollments that could impact the seasonality of our business and further make our results of operations difficult to predict.

If search engines’ methodologies are modified or our search result page rankings decline for other reasons, student discovery of, and engagement with, our website could decline, which may harm our business and results of operations.

We depend in part on various search engines to direct a significant amount of traffic to our website.

Similarly, we depend on mobile app stores such as Google Play Store and the Apple App Store to allow students to locate and download Chegg mobile applications that enable our services.

Our ability to maintain the number of students directed to our website is not entirely within our control.

Our website has experienced fluctuations in search result rankings in the past, and we anticipate similar fluctuations in the future.

Any reduction in the number of students directed to our website could harm our business and results of operations.

We intend to offer new products and services to students to grow our business.

If our efforts are not successful, our business, results of operations, and financial condition could be adversely affected.

Our ability to attract and retain students and increase their engagement with our learning platform depends on our ability to connect them with appropriate products, content, people, or services.

Part of our strategy is to offer students new products and services in an increasingly relevant and personalized way.

We may develop such products and services independently, by acquisition, or in conjunction with third parties.

In the future, we may invest in new products and services and other initiatives, but there is no guarantee these approaches will be successful.

Our historical growth may not be indicative of our future growth, and we expect our revenue growth rate to decline compared to prior years.

We experienced volatile revenue growth in recent periods with revenues of $766.9 million and $776.3 million during the years ended December 31, 2022 and 2021, respectively.

You should not rely on our revenue for any previous quarterly or annual period as any indication of our revenue or revenue growth in future periods.

As we grow our business, we expect our revenue growth rates to decline compared to prior years or turn negative for a number of reasons, which may include more challenging comparisons to prior periods as our revenue grows, lower revenues from print textbooks as a result of our partnership with GT Marketplace, LLC (GT) beginning in April 2022, slowing demand for our platform or offerings, increasing competition, increasing regulation, lower enrollment in higher education, a decrease in the growth of our overall market or market saturation, and our failure to capitalize on growth opportunities.

In addition, our growth rates are likely to experience increased volatility, and may decline or turn negative, as the world recovers from the COVID-19 pandemic and societal and economic circumstances shift.

We face competition in all aspects of our business, and we expect such competition to increase.

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For Chegg Writing, we primarily face competition from other citation generating and grammar and plagiarism services, such as Grammarly.

For Chegg Math Solver and Mathway, we face competition from other equation solver services, such as Photomath and Symbolab.

For Chegg Math, we face competition from other equation solver services, such as Photomath, Gauthmath, and Symbolab.

For Busuu, our competitors primarily include language learning platforms, such as Duolingo and Babbel.

For Thinkful, we face competition from other online learning platforms and online “skills accelerator” courses both in the direct-to-consumer category, including General Assembly, Galvanize, Inc., Flatiron School, Codecademy, DataCamp, and Lambda, Inc., as well as white-label and co-branded providers who compete for adult learners through third party institutions, including 2U, Inc., Simplilearn, and Kenzie Academy.

Additionally, the market for textbooks is intensely competitive and subject to rapid change.

We face competition from college bookstores, some of which are operated by Follett and Barnes & Noble Education, online marketplaces such as Amazon.com, providers of eTextbooks, as well as various private textbook rental websites.

For Skills, we face competition from other online learning platforms and online “skills accelerator” courses both in the direct-to-consumer category, including General Assembly, Galvanize, Inc., Flatiron School, Codecademy, DataCamp, and Lambda, Inc., as well as

white-label and co-branded providers who compete for adult learners through third party institutions, including 2U, Inc., Simplilearn, and Kenzie Academy.

Our industry is evolving rapidly and some of our competitors have adopted, and may continue to adopt, aggressive pricing policies, less stringent standards for user-uploaded content, and devote substantially more resources to marketing, website, and systems development than we do.

In addition, a variety of business models are being pursued for the provision of print textbooks, some of which may be more profitable or successful than ours.

We also face risks from strategic alliances by other education ecosystem participants.

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To the extent such alliances are terminated or new alliances and relationships are established, our business could be harmed.

If we fail to innovate in response to rapidly evolving technological and market developments, including artificial intelligence, our competitive position and business prospects may be harmed.

Our future success depends, in part, on our ability to anticipate and respond effectively to the threat and opportunity presented by new technology disruption and developments.

These may include new software applications or related services based on artificial intelligence, machine learning, or robotics.

We may be exposed to competitive risks related to the adoption and application of new technologies by established market participants or new entrants, start-up companies and others.

New technologies, including those based on artificial intelligence, can provide students with more immediate responses than traditional tools.

Over time, the accuracy of these tools and their ability to handle complex questions may improve, which may be disruptive to education technology businesses, such as ours.

We cannot predict the effect of technological changes on our business.

Failure to keep pace with these technological developments or otherwise bring to market products that reflect these technologies could have a material adverse impact on our overall business and results of operations.

We may not be successful in anticipating or responding to these developments on a timely and cost-effective basis.

Additionally, the effort to gain technological expertise and develop new technologies in our business requires us to incur significant expenses.

If we cannot offer new technologies as quickly as our competitors, or if our competitors develop more cost-effective technologies or product offerings, we could experience a material adverse effect on our operating results, growth and financial condition.

We have a history of losses and we may not achieve or sustain profitability in the future.

We have experienced significant net losses since our incorporation in July 2005, and we may continue to experience net losses in the future.

As of December 31, 2022, we had an accumulated deficit of $70.6 million.

We expect to make significant investments in the development and expansion of our business and, as a result, our cost of revenues and operating expenses may increase.

We may not succeed in increasing our revenues sufficiently to offset these higher expenses, and our efforts to grow the business may be more expensive than we anticipate.

We may incur significant losses in the future for a number of reasons, including slowing or lower demand for our products and services, increasing competition, decreased spending on education, and other risks described in this Annual Report on Form 10-K.

We may encounter unforeseen expenses, challenges, complications, delays, and other unknown factors, as we pursue our business plan.

While our Subscription Services revenues have grown in recent periods, this growth may not be sustainable and we may not be able to achieve or maintain profitability.

To sustain profitability, we may need to change our operating infrastructure, scale our operations more efficiently, reduce our costs, or implement changes in our product and services offerings.

If we fail to timely implement these changes or we cannot implement them for any reason, including due to factors beyond our control, our business may suffer, which may hinder our ability to sustain or increase such profitability.

Our business depends on general economic conditions and their effect on spending behavior by students and advertising budgets.

Our business is dependent on, among other factors, general economic conditions, which affect student spending and brand advertising.

Prior to the COVID-19 pandemic, state and federal funding levels at colleges across the United States remained below historic levels, which led to increased tuition and decreased amounts of financial aid offered to students.

The COVID-19 pandemic adversely affected federal and state budgets for education and caused significant economic volatility.

To the extent that these trends continue, students may elect to not attend colleges and universities and reduce the amount they spend on educational content and textbooks.

In addition to decreased spending by students, brands may reduce their spend on our advertising services.

Any of the foregoing may have an adverse effect on our business.

If we do not retain our senior management team and key employees, we may not be able to sustain our growth or achieve our business objectives.

We depend on the continued contributions of our senior management and other key personnel.

In particular, we rely on the contributions of our President, Chief Executive Officer, and Co-Chairperson, Dan Rosensweig.

All of our executive officers and key employees are at-will employees, meaning they may terminate their employment relationship at any time.

If we lose the services of one or more members of our senior management team or other key personnel, or if one or more of them decides to join a competitor or otherwise compete directly or indirectly with us, we may not be able to successfully manage our business or achieve our business objectives.

Our future success also depends on our ability to identify, attract, and retain highly skilled personnel.

Competition for these employees is intense.

Qualified individuals are in high demand, particularly in the San Francisco Bay Area where our executive offices are located, and if we cannot attract or retain the personnel we need to succeed, our business may suffer.

Our 2013 Equity Incentive Plan terminates on June 6, 2023.

We expect that our shareholders will vote on a new equity incentive plan at our upcoming annual shareholders meeting for 2023.

If our shareholders do not approve our new equity incentive plan, we may not be able to compensate our key employees commensurate with other companies in the San Francisco Bay Area with whom we compete for talent, and we may lose their services.

In addition, we may not be able to attract their replacements.

If we cannot retain our key employees, we may not be able to achieve our business objectives and our financial condition could be materially negatively impacted.

We depend on mobile app stores and operating systems to grow our student user base and their engagement with our learning platform.

There is no guarantee that students will use our mobile apps, such as the mobile version of our website, m.chegg.com, and Chegg Study, rather than competing products.

We are dependent on the interoperability of our mobile apps with popular third-party mobile operating systems such as Google's Android and Apple's iOS, and their placement in popular app stores like the Google Play Store and the Apple App Store, and any changes in such systems that degrade our products’ functionality or give preferential treatment or app store placement to competitive products could adversely affect the access and usage of our applications on mobile devices.

If it is more difficult for students to access and use our apps on their mobile devices, our student growth and engagement levels could be harmed.

Our wide variety of accepted payment methods subjects us to third-party payment processing-related risks, including risks associated with credit card fraud.

We accept payments from students using a variety of methods, including credit cards, debit cards, and PayPal.

As we offer new payment options to students, we may be subject to additional regulations, compliance requirements and incidents of fraud.

For certain payment methods, including credit and debit cards, we pay interchange and other fees, which may increase over time and raise our operating costs and lower our profit margins.

For example, we have in the past experienced higher transaction fees from our third-party processors as a result of chargebacks on credit card transactions.

We rely on third parties to provide payment processing services, including the processing and information storage of credit cards and debit cards.

If these companies become unwilling or unable to provide these services to us, our business could be disrupted.

We are also subject to payment card association operating rules, certification requirements, and rules governing electronic funds transfers, which could change or be reinterpreted to make it difficult or impossible for us to comply.

If we fail to comply with these rules or requirements, we may be subject to additional fines and higher transaction fees;

lose our ability to accept credit and debit card payments from our students or process electronic funds transfers;

or facilitate other types of online payments, and our business and results of operations could be adversely affected.

We may experience some loss from fraudulent credit card transactions, including potential liability for not obtaining signatures from students in connection with the use of credit cards or fraudulent payments to educators as part of Uversity.

While we do have safeguards in place, we cannot be certain that other fraudulent schemes will not be successful.

A failure to adequately control fraudulent transactions could harm our business and results of operations.

We rely on AWS and other third-party software and service providers to provide systems, storage, and services for our website and any disruption of such services or a material change to our arrangements could adversely affect our business.

We rely on AWS and other third-party software and service providers to provide systems, storage, and services, including user login authentication, for our website.

Our reliance makes us vulnerable to any errors, interruptions, or delays in their operations.

Any disruption in the services provided by third-party providers, including AWS, could harm our reputation or

brand, cause us to lose subscribers or revenues or incur substantial recovery costs and distract management from operating our business.

Further, these third-party software and service providers may experience operational difficulties, including increased usage of their software and services from time to time.

If they cannot adapt to the increase in demand or fail to ensure availability of their software and services, our ability to service users’ requests may be impacted, which could have an adverse impact on our result of operations.

AWS may terminate its agreement with us upon 30 days’ notice.

Upon expiration or termination of our agreement with AWS, we may not be able to replace the services provided to us in a timely manner or on terms and conditions, including service levels and cost, that are favorable to us, and a transition from one vendor to another vendor could subject us to operational delays and inefficiencies until the transition is complete.

Our growth strategy includes acquisitions, and we may not be able to execute on our acquisition strategy or integrate acquisitions successfully.

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If we fail to successfully complete any acquisitions or integrate them into our company, or identify and address liabilities associated with the acquisition, our business, results of operations, and financial condition could be adversely affected.

If we do not retain our senior management team and key employees, we may not be able to sustain our growth or achieve our business objectives.

We depend on the continued contributions of our senior management and other key personnel.

In particular, we rely on the contributions of our President, Chief Executive Officer, and Co-Chairperson, Dan Rosensweig.

All of our executive officers and key employees are at-will employees, meaning they may terminate their employment relationship at any time.

Our future success also depends on our ability to identify, attract, and retain highly skilled personnel.

Competition for these employees is intense.

We have a history of losses and we may not achieve or sustain profitability in the future.

We have experienced significant net losses since our incorporation in July 2005, and we may continue to experience net losses in the future.

Our net losses for the years ended December 31, 2021, 2020, and 2019 were $1.5 million, $6.2 million, and $9.6 million, respectively.

As of December 31, 2021, we had an accumulated deficit of $337.2 million.

We expect to make significant investments in the development and expansion of our business and, as a result, our cost of revenues and operating

expenses may increase.

We may not succeed in increasing our revenues sufficiently to offset these higher expenses, and our efforts to grow the business may be more expensive than we anticipate.

We may encounter unforeseen expenses, challenges, complications, delays, and other unknown factors, many of which are exacerbated by the effects of the COVID-19 pandemic, as we pursue our business plan.

While Chegg Services revenues have grown in recent periods, this growth may not be sustainable and we may not be able to achieve profitability.

To achieve profitability, we may need to change our operating infrastructure, scale our operations more efficiently, reduce our costs, or implement changes in our product and services offerings.

If we fail to timely implement these changes or we cannot implement them for any reason, including due to factors beyond our control, our business may suffer.

If we do achieve profitability, we may not be able to sustain or increase such profitability.

We rely on AWS and other third-party software and service providers to provide systems, storage, and services, including user login authentication, for our website.

Our reliance makes us vulnerable to any errors, interruptions, or delays in their operations.

Any disruption in the services provided by third-party providers, including AWS, could harm our reputation or brand, cause us to lose subscribers or revenues or incur substantial recovery costs and distract management from operating our business.

Further, these third-party software and service providers may experience operational difficulties due to the current COVID-19 pandemic, including increased usage of their software and services.