What changed in this filing

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

2023-02-21 compared with 2022-02-22 · 392 added, 454 removed, 855 unchanged (50% of the section changed)

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Foreign Currency Exchange Risk

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.

There were no significant foreign exchange gains or losses in the years ended December 31, 2021, 2020 and 2019.

Our results of operations and cash flows are subject to fluctuations due to changes in foreign currency exchange rates, particularly changes in the Indian Rupee, Euro, and British Pound Sterling, and changes in the relative value of the U.S.

dollar to these currencies may have an impact.

We have experienced and will continue to experience fluctuations in net income (loss) as a result of transaction gains or losses related to remeasuring certain amounts that are denominated in foreign currencies.

We accept foreign currencies from our international customers and our international revenues have grown to 15% and 11% of total net revenues during the years ended December 31, 2022 and 2021, respectively.

Additionally, a portion of our operating expenses are incurred outside of the United States and are denominated in foreign currencies.

Unfavorable fluctuations in foreign currency exchange rates may have an adverse impact on our total net revenues or total operating expenses, however, we do not believe a hypothetical 10% strengthening or weakening of the U.S.

dollar against foreign currencies would have a material impact on our results of operations.

To date, we have not entered into derivatives or hedging strategies to mitigate risk related to changes in foreign currency exchange rates and continually monitor our foreign currency exchange exposure.

Interest Rate Sensitivity

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.

We had cash and cash equivalents totaling $473.7 million and $854.1 million as of December 31, 2022 and 2021, respectively, and investments of $800.2 million and $1.4 billion as of December 31, 2022 and 2021, respectively.

Our cash and cash equivalents consist of cash and money market funds 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.

Changes in U.S.

interest rates affect the interest earned on our cash and cash equivalents and investments and the market value of those securities.

A hypothetical 100 basis point increase or decrease in interest rates would result in a $14.2 million and $11.7 million increase or decline in the fair value of our investments as of December 31, 2021 and 2020, respectively.

Any realized gains or losses resulting from such hypothetical interest rate changes would only occur if we sold the investments prior to maturity.

interest rates, such as those that have occurred in 2022, affect the interest earned on our cash and cash equivalents and investments and the market value of those securities.

A hypothetical 100 basis point increase or decrease in interest rates would result in a $6.0 million increase or decline in the fair value of our investments as of December 31, 2022.

Any realized gains or losses resulting from interest rate changes would only occur if we sold the investments prior to maturity.

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.

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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.

The fair value of the notes, however,

may fluctuate when interest rates and the market price of our stock changes.

See Note 11, “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 Statements of Operations

Consolidated Statements of Comprehensive Loss

Consolidated Statements of Comprehensive Income (Loss)

Consolidated Statements of Stockholders’ Equity

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We have audited the accompanying consolidated balance sheets of Chegg, Inc.

and subsidiaries (the "Company") as of December 31, 2021 and 2020, the related consolidated statements of operations, comprehensive loss, stockholders' equity, and cash flows for each of the three years in the period ended December 31, 2021, and the related notes and the schedule listed in the Index at Item 15.2 (collectively, referred to as the "financial statements").

and subsidiaries (the "Company") as of December 31, 2022 and 2021, the related consolidated statements of operations, comprehensive income (loss), stockholders' equity, and cash flows, for each of the three years in the period ended December 31, 2022, and the related notes and the schedule listed in the Index at Item 15.2 (collectively referred to as the "financial statements").

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of America.

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, 2022, 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 21, 2023, 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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Our responsibility is to express an opinion on the Company's financial statements based on our audits.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the US federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

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We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current-period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Accounting for income taxes - Deferred Tax Assets — Refer to Notes 2 and 17 to the financial statements

Critical Audit Matter Description

The Company accounts for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the Company’s consolidated financial statements or tax returns.

In assessing the realization of deferred tax assets, the Company considers whether it is more likely than not that all or some portion of deferred tax assets will not be realized.

The realization of the deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible.

During the year ended December 31, 2022, the Company recorded a benefit from income taxes primarily due to partial release of the valuation allowance resulting in a net deferred tax asset of $165.7 million as of December 31, 2022.

The valuation allowance decreased by $202.2 million in the year end December 31, 2022.

The release of the valuation allowance is the result of the Company’s expectation that their domestic operations will continue to be profitable and is based on a detailed evaluation of all available evidence.

We identified management’s determination that it is more likely than not that sufficient taxable income will be generated in the future to realize deferred tax assets as a critical audit matter because of the judgments and estimates management makes related to taxable income.

This required a high degree of auditor judgment and an increased extent of effort, including the need to involve our income tax specialists, when performing audit procedures to evaluate the reasonableness of management’s estimates of taxable income and assumptions related to the partial release of the valuation allowance.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to deferred tax assets included the following, among others:

• We tested the effectiveness of controls over deferred tax assets, including management’s controls over the estimates of taxable income and the determination of whether it is more likely than not that the deferred tax assets will be realized.

• We utilized income tax specialists to assist in:

◦ Evaluating the reasonableness of the methods, assumptions, and judgments used by management to determine the deferred tax assets and valuation allowance was necessary.

◦ Testing the projected future reversal of temporary differences by jurisdiction, including underlying management assumptions.

◦ Evaluating the timing of the valuation release and whether the taxable income in prior carryback years was of the appropriate character and available under the tax law.

• We evaluated whether the estimates of future taxable income were consistent with evidence obtained in other areas of the audit and evaluated the reasonableness of management’s ability to accurately estimate future taxable income by comparing to historical results, internal budgets, and other publicly available information.

Convertible Senior Notes - Refer to Notes 2 and 11 to the financial statements

Critical Audit Matter Description

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.

During the year ended December 31, 2022, the Company extinguished $500 million principal amount of the convertible senior notes due in 2026 (“2026 Notes”) which had a carrying value of $494.7 million for total consideration of $401.2 million (including $1.3 million in fees).

The Company elected to reacquire and not cancel the extinguished 2026 notes and left the associated capped call transactions outstanding.

This resulted in a gain on extinguishment of $93.5 million.

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 the Company’s accounting assessment of the settlement including the conclusion that the settlement should be accounted for as an extinguishment.

How the Critical Audit Matter Was Addressed in the Audit

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.

Our audit procedures related to evaluating the extinguishment of the 2026 Notes included the following, among others:

• We tested the operating effectiveness of the controls over the Company’s accounting for the extinguishment of the 2026 Notes.

• Our testing included reading the underlying agreements and evaluating the Company’s accounting analysis underlying the accounting of the 2026 Notes, including the determination of the balance sheet classification of each transaction, identification of any derivatives included in the arrangements, and determination that the 2026 Notes was a debt extinguishment.

• We utilized the assistance of professionals within our firm having experience in accounting for convertible debt instruments, and we evaluated management’s assessment of the accounting for the extinguishment.

/S/ DELOITTE & TOUCHE LLP

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In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2022, 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, 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.

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, 2022, of the Company and our report dated February 21, 2023, 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 Busuu Online S.L., which was acquired on January 13, 2022, and whose financial statements constitute less than 1% of total assets and 5% of total net revenues of the consolidated financial statement amounts as of and for the year ended December 31, 2022.

Accordingly, our audit did not include the internal control over financial reporting at Busuu Online S.L.

Basis for Opinion

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Short-term investments 583,973 691,781

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

Accounts receivable, net of allowance of $ 394 and $ 153 at December 31, 2022 and December 31, 2021, respectively

23,515 17,850

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Right of use assets 18,838 18,062

Deferred tax assets 167,524 1,365

Other assets 20,612 19,670

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Additional paid-in capital 1,244,504 1,449,305

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

Accumulated other comprehensive loss ( 57,488 ) ( 5,334 )

Accumulated deficit ( 70,553 ) ( 337,191 )

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Interest expense, net ( 6,040 ) ( 6,896 ) ( 66,297 )

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

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

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

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

Other income (expense), net 101,029 ( 65,472 ) 8,683

Total interest expense, net and other income (expense), net 94,989 ( 72,368 ) ( 57,614 )

Income (loss) before benefit from (provision for) income taxes 103,946 5,739 ( 861 )

Benefit from (provision for) income taxes 162,692 ( 7,197 ) ( 5,360 )

Net income (loss) $ 266,638 $ ( 1,458 ) $ ( 6,221 )

Net income (loss) per share

Basic $ 2.09 $ ( 0.01 ) $ ( 0.05 )

Diluted $ 1.34 $ ( 0.01 ) $ ( 0.05 )

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

Basic 127,557 141,262 125,367

Diluted 149,859 141,262 125,367

See Notes to Consolidated Financial Statements.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(in thousands)

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2022 2021 2020

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

Net income (loss) $ 266,638 $ ( 1,458 ) $ ( 6,221 )

Other comprehensive (loss) income

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Other comprehensive (loss) income ( 52,154 ) ( 6,864 ) 2,626

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

Total comprehensive income (loss) $ 214,484 $ ( 8,322 ) $ ( 3,595 )

See Notes to Consolidated Financial Statements.

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Value Additional Paid-In

Capital Accumulated Other Comprehensive (Loss) Income Accumulated

Capital Accumulated Other Comprehensive Loss Accumulated

Deficit Total Stockholders’ Equity

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Purchase of 2026 convertible senior notes capped call — — ( 103,400 ) — — ( 103,400 )

Repurchase of common stock ( 504 ) ( 1 ) ( 19,999 ) — — ( 20,000 )

Issuance of common stock upon exercise of stock options and ESPP 3,276 4 35,093 — — 35,097

Net share settlement of equity awards 3,248 3 ( 94,571 ) — — ( 94,568 )

Issuance of common stock in connection with prior acquisition 64 — 3,003 — — 3,003

Share-based compensation expense — — 64,909 — — 64,909

Other comprehensive loss — — — ( 77 ) — ( 77 )

Net loss — — — — ( 9,605 ) ( 9,605 )

Balances at December 31, 2019 121,584 122 916,095 ( 1,096 ) ( 416,292 ) 498,829

Cumulative-effect adjustment to accumulated deficit related to adoption of ASU 2016-13 — — — — ( 88 ) ( 88 )

Equity component of 2026 convertible senior notes, net of issuance costs — — 237,462 — — 237,462

Purchase of 2026 convertible senior notes capped call — — ( 103,400 ) — — ( 103,400 )

Equity component related to conversions of 2023 convertible senior notes — — ( 442,667 ) — — ( 442,667 )

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

Repurchases of common stock ( 12,709 ) ( 13 ) ( 323,515 ) — — ( 323,528 )

Issuance of common stock upon exercise of stock options and ESPP 437 — 6,475 — — 6,475

Net share settlement of equity awards 1,794 2 ( 26,549 ) — — ( 26,547 )

Share-based compensation expense — — 138,788 — — 138,788

Other comprehensive loss — — — ( 52,154 ) — ( 52,154 )

Net income — — — — 266,638 266,638

Balances at December 31, 2022 126,474 $ 126 $ 1,244,504 $ ( 57,488 ) $ ( 70,553 ) $ 1,116,589

See Notes to Consolidated Financial Statements.

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Cash flows from operating activities

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

Adjustments to reconcile net loss to net cash provided by operating activities:

Net income (loss) $ 266,638 $ ( 1,458 ) $ ( 6,221 )

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

Print textbook depreciation expense 1,610 10,859 15,397

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Amortization of debt discount and issuance costs 5,166 5,922 64,573

Repayment of convertible senior notes attributable to debt discount — ( 20,433 ) —

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

(Gain)/loss on early extinguishments of debt ( 93,519 ) 78,152 4,286

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

Repayment of convertible senior notes attributable to debt discount — — ( 20,433 )

Gain on foreign currency remeasurement of purchase consideration ( 4,628 ) — —

Deferred tax assets ( 168,679 ) ( 1,104 ) ( 109 )

Loss from write-offs of property and equipment 3,549 2,115 1,211

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

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

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

(Gain)/loss on textbook library, net ( 4,976 ) 10,956 ( 1,453 )

Operating lease expense, net of accretion 6,327 5,994 4,901

Realized loss/(gain) on sale of investments 9,675 178 ( 308 )

Impairment on lease related assets 5,225 — —

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

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

Other non-cash items 378 ( 47 ) 190

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Purchase of strategic equity investment ( 6,000 ) — ( 2,000 )

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

Net cash provided by (used in) investing activities 104,891 ( 365,768 ) ( 732,786 )

Cash flows from financing activities

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

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

Net increase in cash, cash equivalents and restricted cash 374,178 92,283 13,487

Net cash (used in) provided by financing activities ( 744,803 ) 466,722 588,627

Effect of exchange rate changes 4,137 — —

Net (decrease) increase in cash, cash equivalents and restricted cash ( 380,039 ) 374,178 92,283

Cash, cash equivalents and restricted cash, beginning of period 855,893 481,715 389,432

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Issuance of common stock related to repayment of convertible senior notes $ — $ 235,521 $ 327,141

Issuance of common stock related to prior acquisition $ — $ — $ 3,003

2022 2021 2020

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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.

We support life-long learners all over the world, starting with their academic journey and extending through their careers.

The Chegg platform provides products and services to support learners with their academic course materials, as well as their career and personal skills developments.

Basis of Presentation

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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.

In order to conform with current period presentation, $ 1.4 million of deferred tax assets have been reclassified from other assets on our consolidated balance sheet as of December 31, 2021.

Additionally $ 1.1 million and $ 0.1 million of deferred tax assets during the years ended December 31, 2021 and 2020, respectively, and $ 0.2 million and $ 0.3 million realized loss/(gain) on sale of investments during the years ended December 31, 2021 and 2020, respectively, have been reclassified from other non-cash items on our consolidated statements of cash flows.

These changes in presentation do 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, 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.

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 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 consider all highly liquid investments with an original maturity date of three months or less from the date of purchase to be cash equivalents.

Our cash and cash equivalents consist of cash and money market accounts at financial institutions, and are stated at cost, which approximates fair value.

Our cash and cash equivalents consist of cash and money market funds at financial institutions, and are stated at cost, which approximates fair value.

We classify certain restricted cash balances within other current assets and other assets on the accompanying consolidated balance sheets based upon the term of the remaining restrictions.

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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.

Unrealized losses related to credit loss factors are recorded through an allowance for credit losses in other income (expense), 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.

We invest in highly rated securities with a weighted average maturity of eighteen 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.

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 (expense), 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.

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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.

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Accounts receivable are recorded at the invoiced amount and are non-interest bearing.

We generally grant uncollateralized credit terms to our customers, which include textbook wholesalers and advertising customers.

We generally grant uncollateralized credit terms to our customers, which include partners and advertising customers.

We maintain an allowance to account for potentially uncollectible receivables.

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Our investment portfolio consists of investments diversified among security types, industries and issuers.

Our investments were held and managed by recognized financial institutions that followed our investment policy with the main objective of preserving capital and maintaining liquidity.

Our investments were held and managed by recognized financial institutions that followed our investment policy with the main objective of preserving capital, generating a competitive return, and maintaining liquidity.

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

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.

We had one customer that represented over 10 % of our net accounts receivable balance as of December 31, 2022 and no customers that represented over 10 % of our net accounts receivable balance as of December 31, 2021.

No customers represented over 10 % of net revenues during the years ended December 31, 2022, 2021 or 2020.

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Classification Useful Life

Content Shorter of the licensed content term or the estimated useful life of 5 years

Leasehold improvements Shorter of the remaining lease term or the estimated useful life of 5 years

Content - Textbook Solutions and Questions and Answers Shorter of the licensed content term or 5 years

Content - Other Shorter of the licensed content term or 2.5 years

Leasehold improvements Shorter of the remaining lease term or 5 years

Internal-use software and website development 3 years

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Our indefinite-lived intangible asset represents the internships.com trade name.

Goodwill and our indefinite-lived intangible asset are not amortized but rather tested for impairment at least annually on October 1, or more frequently if certain events or indicators of impairment occur between annual impairment tests.

Goodwill and our indefinite-lived intangible asset are not amortized but rather tested for impairment at least annually, or more frequently if certain events or indicators of impairment occur between annual impairment tests.

We first assess qualitative factors to determine whether it is necessary to perform the quantitative impairment test.

In our qualitative assessment, we consider factors including economic conditions, industry and market conditions and developments, overall financial performance and other relevant entity-specific events in determining whether it is more likely than not that the fair value of our reporting unit is less than the carrying amount.

We completed our annual impairment test on October 1st of 2021 and 2020, each of which did not result in any impairment as our qualitative assessment did not indicate that it is more likely than not that the fair value of our reporting unit is less than the carrying amount.

We completed our annual impairment test in 2022 and 2021, each of which did not result in any impairment as our qualitative assessment did not indicate that it is more likely than not that the fair value of our reporting unit is less than the carrying amount.

Acquired Intangible Assets and Other Long-Lived Assets

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We determine if an arrangement is a lease at inception.

Operating leases are included in operating lease ROU assets and operating lease liabilities within current liabilities and long-term liabilities on our consolidated balance sheets.

Operating leases are included in operating lease right of use (ROU) assets and operating lease liabilities within current liabilities and long-term liabilities on our consolidated balance sheets.

Operating lease ROU assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement date.

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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.

ROU assets are evaluated for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.

Strategic Investments

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

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 gross proceeds of $ 800 million.

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.” 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.

In March 2019, we issued $ 700 million in aggregate principal amount of 0.125 % convertible senior notes due in 2025 (2025 notes, together with the 2026 notes, the notes) and in April 2019, the initial purchasers fully exercised their option to purchase $ 100 million of additional 2025 notes for aggregate total gross proceeds of $ 800 million.

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;

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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.

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

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

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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

Beginning in January 2020, we began our transition back to print textbook ownership by purchasing print textbooks to establish our textbook library.

We consider our print textbook library to be a long-term productive asset and, as such, classify it as a non-current asset on our consolidated balance sheets.

All print textbooks in our textbook library are stated at cost, which includes the purchase price less accumulated depreciation.

We write down textbooks on a book-by-book basis for lost, damaged, or excess print textbooks.

We depreciate our print textbooks, less an estimated salvage value, over an estimated useful life of four years using an accelerated method of depreciation, as we estimate this method most accurately reflects the actual pattern of decline in their economic value.

The salvage value considers the historical trend and projected proceeds for print textbooks.

The useful life is determined based on the estimated time period in which the print textbooks are held and rented.

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

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.

Cash outflows for the acquisition of print textbooks net of changes in related accounts payable and accrued liabilities, and cash inflows received from the proceeds from the disposition of print textbooks net of changes in related accounts receivable, are classified as cash flows from investing activities on our consolidated statements of cash flows.

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 income (expense), net on our consolidated statements of operations.

Revenue Recognition and Deferred Revenue

We recognize revenues when the control of goods or services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services.

Revenues are presented net of sales tax collected from customers to be remitted to governmental authorities and net of allowances for estimated cancellations and customer returns, which are based on historical data.

Customer refunds from cancellations and returns are recorded as a reduction to revenues.

We determine revenue recognition through the following steps:

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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, 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.

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.

Students generally have the option to extend the term of their rental or purchase the print textbook at the end of the term otherwise the print textbook is returned to our print textbook library for future rental.

If a student chooses to purchase or not return the print textbook at the end of their rental term, we charge the student for the book and recognize the revenues immediately.

Additionally, we provide students the ability to purchase print textbooks on a just-in-time basis and recognize revenues immediately upon shipment.

Revenues are presented net of sales tax collected from customers to be remitted to governmental authorities and net of allowances for estimated and actual refunds, which are based on historical data.

Revenues from our Chegg Study Pack, Chegg Study, Chegg Writing, Chegg Math, and Busuu offerings are primarily recognized ratably over the monthly subscription period.

Revenues from Skills are recognized either ratably over a six month course offering depending on the instruction type of the course, adjusted for an estimate of non-redemption.

Revenues from advertising services are recognized upon fulfillment.

Beginning in April 2022, revenues from print textbooks owned by GT are recognized immediately on a net basis based on our role in the transaction as an agent.

Prior to April 2022, revenues from our print textbooks offering included operating lease income from print textbooks that we owned 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.

Students generally had the option to purchase the print textbook at the end of the term or on a just-in-time basis and we would charge them for the book and recognize the revenues immediately.

Beginning in December 2022, revenues from eTextbooks fulfilled by GT are recognized immediately on a net basis based on our role in the transaction as an agent.

Prior to December 2022, eTextbooks revenues were recognized ratably over the contractual period, generally a two - to five-month period.

Revenues from print textbooks owned by a partner are recognized as a revenue share on the total transaction amount of a rental or sale transaction immediately when a print textbook ships to a student.

Shipping and handling activities are expensed as incurred.

Revenues from eTextbooks are recognized ratably over the contractual period, generally a two - to five-month period.

Some of our customer arrangements include multiple performance obligations.

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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.

We have concluded that we control our Chegg Services, print textbooks that we own for rental, purchase at the end of the rental term, or sale on a just-in-time basis, and eTextbook service and therefore we recognize revenues and cost of revenues on a gross basis.

We have concluded that we control our Subscription Services, print textbooks that we own for rental or purchase until April 2022, and eTextbook service until December 2022 and therefore we recognize revenues and cost of revenues on a gross basis.

Beginning in April 2022 for print textbooks and December 2022 for eTextbooks, we have concluded that GT controls the service and we recognize revenues on a net basis based on our role in the transaction as an agent.

Contract assets are contained within other current assets and other assets on our consolidated balance sheets.

Contract assets represent the goods or services that we have transferred to a customer before invoicing the customer and primarily consist of the income sharing payment arrangements we offer to students for our Thinkful service.

Contract receivables are contained within accounts receivable, net on our consolidated balance sheets and represent unconditional consideration that will be received solely due to the passage of time.

Contract liabilities are contained within deferred revenue on our consolidated balance sheets.

Deferred revenue primarily consists of advanced payments from students related to rental and subscription performance obligations that have not been satisfied and estimated variable consideration.

Deferred revenue primarily consists of advanced payments from students related to subscription performance obligations that have not been satisfied and estimated variable consideration.

Deferred revenue related to rental and subscription performance obligations is recognized as revenues ratably over the term for subscriptions or when the services are provided and all other revenue recognition criteria have been met.

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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, 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.

Cost of revenues primarily consists of content amortization expense related to content that we develop, license from publishers, 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.

As a result of our partnership with GT, we no longer incur costs associated with order fulfillment fees related to outbound shipping and fulfillment, 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, and print textbook depreciation expense,

Research and Development Costs

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Our policy is to include interest and penalties related to unrecognized tax benefits as a component of income tax expense.

Net Loss Per Share

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 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.

Net Income (Loss) Per Share

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

Diluted net income (loss) per share is computed by adjusting net income (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.

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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

The functional currency of our foreign subsidiaries is the local currency.

Foreign Currency Translation and Remeasurement

The functional currency of our foreign subsidiaries is the local currency and our reporting currency is the U.S.

Adjustments resulting from the translation of foreign currencies into U.S.

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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 (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.

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

During the year ended December 31, 2022, the net gains from remeasurement of foreign currency transactions were $ 3.7 million, largely driven by our acquisition of Busuu, and were not material during the years ended December 31, 2021 and 2020.

Recent Accounting Pronouncements

Recently Issued Accounting Pronouncements Not Yet Adopted

There were no accounting pronouncements issued during the year ended December 31, 2022 that would have an impact on our financial statements.

Recently Adopted Accounting Pronouncements

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).

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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.

We early adopted ASU 2021-08 on January 1, 2022 and applied it to our acquisition of Busuu.

The most significant impacts were an increase in contract liabilities, contained within deferred revenue, and goodwill 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 .

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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 .

ASU 2020-04 provides temporary optional expedients and exceptions for applying reference rate reform to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met.

The guidance is required to be applied immediately and only applies to contract modifications made or hedging relationships entered into or evaluated before December 31, 2022.

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.

We adopted ASU 2021-04 on January 1, 2022 under the prospective method of adoption and there was no impact to our results of operations as we did not modify or exchange any freestanding equity-classified written call options.

Revenue Recognition

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The majority of our revenues are recognized over time as services are performed, with certain revenues being recognized at a point in time.

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

We have changed our revenue disaggregation to Subscription Services and Skills and Other to better reflect the nature and timing of revenue and cash flows.

Subscription Services includes revenues from our Chegg Study Pack, Chegg Study, Chegg Writing, Chegg Math, and Busuu offerings.

Skills and Other includes revenues from our Skills, advertising services, print textbooks and eTextbooks offerings.

We no longer present our Required Materials product line separately as we no longer expect to have significant revenue from our print textbook and eTextbooks offerings due to recognizing a revenue share as a result of our partnership with GT.

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

Years Ended December 31, Change in 2022 Change in 2021

2022 2021 2020 $ % $ %

Chegg Services $ 669,894 $ 521,228 $ 332,221 $ 148,666 29 % $ 189,007 57 %

Required Materials 106,371 123,110 78,705 ( 16,739 ) ( 14 ) 44,405 56

Subscription Services $ 671,968 $ 616,817 $ 460,612 $ 55,151 9 % $ 156,205 34 %

Skills and Other 94,929 159,448 183,726 ( 64,519 ) ( 40 ) ( 24,278 ) ( 13 )

Total net revenues $ 766,897 $ 776,265 $ 644,338 $ ( 9,368 ) ( 1 ) $ 131,927 20

During the years ended December 31, 2022, 2021, and 2020, we recognized $ 33.9 million, $ 32.6 million and $ 18.3 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, 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 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.

During the years ended December 31, 2022 and 2020, we recognized an immaterial amount from performance obligations 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 related to our Skills offering.

During the years ended December 31, 2022, 2021 and 2020, we recognized $ 5.1 million, $ 34.6 million and $ 50.8 million, respectively, of operating lease income from print textbook rentals that we own.

The decreases in operating lease income are primarily due to the transition of our print textbook and eTextbook offerings.

For further information, refer to Note 7, “Required Materials Transition.”

Contract Balances

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During the year ended December 31, 2022, our accounts receivable, net balance increased by $ 5.7 million, or 32 %, 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):

During the year ended December 31, 2022, our contract assets balance decreased by $ 2.3 million or 16 %, primarily due to our Skills offering.

During the year ended December 31, 2022, our deferred revenue balance increased by $ 21.1 million, or 60 %, primarily due to acquired deferred revenue in conjunction with our acquisition of Busuu, increased bookings and seasonality of our business.

Net Income (Loss) Per Share

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

Years Ended December 31,

2022 2021 2020

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 .

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):

Net income (loss) $ 266,638 $ ( 1,458 ) $ ( 6,221 )

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

127,557 141,262 125,367

Net income (loss) per share, basic

$ 2.09 $ ( 0.01 ) $ ( 0.05 )

Net income (loss) $ 266,638 $ ( 1,458 ) $ ( 6,221 )

Convertible senior notes activity, net of tax (1)

( 65,444 ) — —

Net income (loss), diluted

$ 201,194 $ ( 1,458 ) $ ( 6,221 )

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

127,557 141,262 125,367

Shares related to stock plan activity 968 — —

Shares related to convertible senior notes 21,334 — —

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

149,859 141,262 125,367

Net income (loss) per share, diluted

$ 1.34 $ ( 0.01 ) $ ( 0.05 )

(1) Primarily includes the gain on early extinguishment on our 2026 notes, net of tax.

For further information, see Note 11, “Convertible Senior Notes.”

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

Years Ended December 31,

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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, 2022

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Corporate debt securities Level 2 491,459 — ( 4,130 ) 487,329

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

treasury securities Level 1 85,271 — ( 342 ) 84,929

Total short-term investments $ 588,474 $ — $ ( 4,501 ) $ 583,973

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Corporate debt securities Level 2 $ 125,735 $ 158 $ ( 909 ) $ 124,984

Agency bonds Level 2 60,635 — ( 141 ) 60,494

treasury securities Level 1 30,633 122 — 30,755

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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

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

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

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

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

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During the years ended December 31, 2022, 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 presents the gross realized gain and loss related to our investments (in thousands):

Years Ended December 31,

2022 2021 2020

Realized gain $ 64 $ 84 $ 308

Realized loss ( 9,739 ) ( 262 ) —

Realized (loss)/gain on sale of investments $ ( 9,675 ) $ ( 178 ) $ 308

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

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Cost Fair Value

Due in 1 year or less $ 692,320 $ 691,781

Due in 1-2 years 749,377 745,993

Due within one year $ 588,474 $ 583,973

Due after one year through three years 217,003 216,233

Investments not due at a single maturity date 440,145 440,145

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Strategic Investments

In July 2022, we completed an investment of $ 6.0 million in Knack Technologies, Inc.

(Knack), a privately held U.S.

based peer-to-peer tutoring platform for higher education institutions.

We do not have the ability to exercise significant influence over Knack's operating and financial policies and have elected to account for our investment at cost as it does not have a readily determinable fair value.

We 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.

a U.S.-based service that helps students access financial aid and $ 3.0 million in a foreign entity to explore expanding our reach internationally.

In 2021, we sold our investments for total consideration of $ 17.5 million, resulting in a $ 12.5 million gain included within other income (expense), net on our consolidated statements of operations.

We received cash payments of $ 16.1 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, 2022, 2021 and 2020, there were no significant identified events or changes in circumstances that would be considered an indicator for impairment.

There were no observable price changes in orderly transactions for the identical or similar investments of the same issuers during the years ended December 31, 2022, 2021 and 2020.

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.

The estimated fair value of the 2026 notes as of December 31, 2022 and 2021 was $ 385.0 million and $ 840.0 million, respectively.

The estimated fair value of the 2025 notes as of December 31, 2022 and 2021 was $ 640.5 million and $ 682.2 million, respectively.

For further information on the notes refer to Note 11, “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):

December 31, 2021 December 31, 2020 (1)

Carrying Amount Estimated Fair Value Carrying Amount Estimated Fair Value

2026 notes $ 987,691 $ 840,000 $ 761,930 $ 1,129,370

2025 notes 690,464 682,202 640,614 1,456,800

2023 notes — — 104,378 376,949

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

(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

Textbook Library, Net

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

Textbook library $ 27,569 $ 47,293

Less accumulated depreciation ( 16,328 ) ( 13,144 )

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

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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Depreciation and content amortization expense during the years ended December 31, 2022, 2021, and 2020 were approximately $ 64.1 million, $ 49.6 million, and $ 32.6 million, respectively.

2022 Acquisition

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.

Required Materials Transition

In April 2022, we entered into definitive agreements regarding the sale of our print textbook library and partnership with GT Marketplace, LLC (GT) for our print textbook and eTextbook offerings, previously presented as our Required Materials product line.

We will continue to offer these products services on our website and maintain relationships with the students, however, GT has purchased our existing print textbook library for $ 14 million, subject to payment terms and certain adjustments, and will continue to make print textbook investments and provide fulfillment logistics for print textbook transactions.

Beginning December 2022, GT also began fulfilling eTextbook transactions.

Upon board of directors approval of the transaction with GT in April 2022, our net textbook library and unrecognized deferred revenue related to print textbook transactions met the criteria to be classified as a held for sale asset group which had a carrying amount of $ 7.7 million.

During the year ended December 31, 2022, we subsequently sold the held for sale asset group to GT at a gain of $ 4.4 million, subject to certain adjustments, included in cost of revenues on our consolidated statement of operations.

As of December 31, 2022, we had no amounts related to textbook library, net recorded on our consolidated balance sheets.

Beginning in April 2022, we no longer recognize operating lease income from print textbooks that we own ratable on a gross basis.

Beginning in December 2022, we no longer recognize revenues from eTextbooks ratable over the customer's contractual period.

In relation to print textbooks owned by GT and eTextbooks fulfilled by GT, we recognize revenues immediately on a net basis, representing the margin earned, 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.

During the years ended December 31, 2022, 2021, and 2020, print textbook depreciation expense was $ 1.6 million, $ 10.9 million and $ 15.4 million, respectively.

During the years ended December 31, 2022 and 2020, net gain on textbook library was $ 5.0 million and $ 1.5 million, respectively, and during the year ended December 31, 2021, net loss on textbook library was $ 11.0 million.

On January 13, 2022, we completed our acquisition of 100 % of the outstanding shares of Busuu Online S.L (Busuu) in cash, an online language learning company that offers a comprehensive solution through a combination of self-paced lessons, live classes with expert tutors and the ability to learn and practice with members of the Busuu language learning community.

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

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.

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):

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

Cash and cash equivalents $ 20,525

Accounts receivable 2,446

Right of use assets 2,715

Other acquired assets 3,710

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Total identifiable assets acquired 100,996

Accounts payable ( 5,174 )

Accrued liabilities (1)

Deferred revenue ( 16,761 )

Liabilities assumed ( 727 )

Long term operating lease liabilities ( 2,038 )

Other long-term liabilities (1)

Net identifiable assets acquired 53,413

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Total fair value of purchase consideration $ 421,650

Goodwill is primarily attributable to the potential for enhancing our existing offerings and expanding our reach by providing additional mathematics support for students and helping them through their academic journey.

The amounts recorded for intangible assets and goodwill are deductible for tax purposes.

(1) During the year ended December 31, 2022, we recorded a $ 0.8 million decrease to accrued liabilities and a $ 1.7 million increase to other long-term liabilities as a result of measurement period adjustments to the fair value of the initial liabilities related to taxes.

Goodwill is primarily attributable to the potential for expanding our offerings to include an online language learning platform and global reach allowing us to drive further into international markets.

Substantially all of the amounts recorded for intangible assets and goodwill are deductible for tax purposes.

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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Trade name $ 4,600 72

Domain names 220 18

Customer lists 18,000 24

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Total acquired intangible assets $ 71,600 68

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 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.

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 acquisition-related expenses and does not necessarily reflect the actual results that would have been achieved, nor is it necessarily indicative of our future consolidated results.

During the years ended December 31, 2020 and 2019, our supplemental pro forma net loss would have been $ 6.1 million and $ 27.3 million, respectively.

Revenues from Mathway were immaterial during the years ended December 31, 2020 and 2019.

2019 Acquisition

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.

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.

These payments are not included in the fair value of the purchase consideration and are expensed ratably as acquisition related compensation costs classified as research and development, general and administrative, and sales and marketing expenses, based on the key employee's job function, 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.

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.

Goodwill is primarily attributable to the potential for expanding our existing offerings and reach by providing educational services for students and helping them through their professional journey.

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

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 547

Other acquired assets 1,710

Acquired intangible assets 16,360

Total identifiable assets acquired 18,668

Deferred revenue ( 2,455 )

Liabilities assumed ( 1,906 )

Net identifiable assets acquired 14,307

Goodwill 64,893

Total fair value of purchase consideration $ 79,200

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

Amount Weighted-Average Amortization

Trade name $ 4,430 48

Domain names 330 48

Content library 6,940 60

Developed technology 4,660 36

Acquired intangible assets $ 16,360 50

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 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 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.

During the years ended December 31, 2022 and 2021, we incurred acquisition-related expenses of $ 0.6 million and $ 5.3 million, respectively, associated with our acquisition of Busuu, which have been included in general and administrative expense on our consolidated statement of operations.

The purchase consideration was paid in Euros, which is different from our functional currency of United States Dollars.

We initially funded an equivalent of $ 417.0 million that was remeasured at $ 421.7 million at closing, which is included in our statement of cash flows as a cash outflow from investing activities net of cash acquired, resulting in a $ 4.6 million gain included in other income (expense), net on our consolidated statement of operations.

The Busuu purchase agreement provides for additional payments of up to approximately $ 25.5 million, subject to the continued employment of certain key employees.

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

As of December 31, 2022, we have recorded approximately $ 7.3 million within accrued liabilities on our consolidated balance sheets for these payments.

Since the acquisition date, we have recorded revenues and net loss from Busuu of $ 38.1 million and $ 38.9 million, respectively.

These results should not be taken as representative of future results of operations of the combined company.

The following unaudited supplemental pro forma revenues and earnings is for informational purposes only and presents our

combined results as if the acquisition of Busuu had occurred on January 1, 2021.

During the years ended December 31, 2022 and 2021, our unaudited supplemental pro forma revenues would have been $ 767.6 million and $ 820.2 million, respectively.

During the years ended December 31, 2022 and 2021, our unaudited supplemental pro forma earnings would have been a net income of $ 268.0 million, and net loss of $ 44.7 million, respectively.

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

Goodwill and Intangible Assets

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Ending balance $ 615,093 $ 289,763

(1) For further information, see Note 8, “Acquisition.”

Intangible assets as of December 31, 2022 and December 31, 2021 consist of the following (in thousands, except weighted-average amortization period):

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Amount Accumulated

Amortization Net

Amortization Foreign Currency Translation Adjustment Net Carrying Amount

Developed technologies 80 $ 106,703 $ ( 44,410 ) $ ( 5,751 ) $ 56,542

Content library 60 12,230 ( 6,836 ) 5,394

Content libraries 60 12,230 ( 9,279 ) — 2,951

Customer lists 35 34,190 ( 22,074 ) ( 1,318 ) 10,798

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Amount Accumulated

Amortization Net

Amortization Foreign Currency Translation Adjustment Net

Developed technologies 76 $ 57,521 $ ( 31,790 ) $ — $ 25,731

Content library 60 12,230 ( 4,390 ) 7,840

Content libraries 60 12,230 ( 6,836 ) — 5,394

Customer lists 47 16,190 ( 12,432 ) — 3,758

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

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

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

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Taxes payable $ 15,132 $ 11,127

Loss contingency 8,000 —

Current operating lease liabilities 7,487 6,663

Acquisition-related compensation 7,741 417

Accrued content related costs 4,736 6,448

Order fulfillment fees 6,254 11,430

Payment processing fees 3,419 2,130

Accrued purchases of long-lived assets 4,927 2,982

Payment processing fees 4,253 3,419

Order fulfillment fees 2,917 6,254

Refund reserve 1,499 1,392

Restructuring liability 785 —

Acquisition-related compensation 417 9,611

Accrued escrow related to acquisition — 7,451

Restructuring short term — 785

Loss contingency — 8,000

Other 21,542 19,722

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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).

The aggregate principal amount of the 2026 notes includes $ 100 million from the initial purchasers fully exercising their option to purchase additional notes.

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

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

2026 Notes 2025 Notes 2023 Notes

2026 Notes 2025 Notes

Principal amount $ 1,000,000 $ 800,000

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Net proceeds $ 984,096 $ 780,180

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.

During the year ended December 31, 2022, in connection with our securities repurchase program, we extinguished $ 500.0 million aggregate principal amount of the 2026 notes in privately-negotiated transactions for $ 399.9 million, which was paid to the holders in cash.

We also incurred approximately $ 1.3 million in fees resulting in total consideration of $ 401.2 million.

The carrying amount of the extinguished 2026 notes was $ 494.7 million resulting in a $ 93.5 million gain on early extinguishment of debt.

We elected to reacquire and not cancel the extinguished 2026 notes and left the associated capped call transactions outstanding.

As of December 31, 2022, we had 9,297,800 shares remaining underlying the 2026 notes capped call transactions.

During the year ended December 31, 2021, we settled $ 115.6 million of aggregate principal amount of the 0.25 % convertible senior notes due in 2023 (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.

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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 (expense) 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 income (expense), 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 extinguishment of debt which was recorded in other (expense) 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 income (expense), 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.

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).

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

The 2026 notes bear no interest and will mature on September 1, 2026, unless repurchased, redeemed or converted in accordance with their terms prior to such date.

The 2025 notes bear interest of 0.125 % per year which is payable semi-annually in arrears on March 15 and September 15 of each year, beginning on September 15, 2019.

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

with their terms prior to such date.

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.

The 2025 notes will mature on March 15, 2025, 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.

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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.

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:

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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.

During the year ended December 31, 2022, the conditions allowing holders of the 2026 notes and 2025 notes to convert were not met and therefore the 2026 notes and 2025 notes are not convertible.

If we undergo a fundamental change, as defined in the indentures, prior to the respective maturity dates, subject to certain conditions, holders of the notes may require us to repurchase for cash all or any portion of their notes at a repurchase price equal to 100 % of the principal amount of the notes to be repurchased, plus accrued and unpaid interest to, but excluding, the fundamental change repurchase date.

In addition, if specific corporate events, described in the indentures, occur prior to the respective maturity dates, we will also increase the conversion rate for a holder who elects to convert their notes in connection with such specified corporate events.

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, 2022 December 31, 2021

2026 Notes 2025 Notes 2026 Notes 2025 Notes 2023 Notes

2026 Notes 2025 Notes 2026 Notes 2025 Notes

Principal amount $ 500,000 $ 699,979 $ 1,000,000 $ 699,982

Unamortized debt discount — — ( 226,732 ) ( 149,138 ) ( 9,953 )

Unamortized issuance costs ( 4,837 ) ( 6,549 ) ( 12,309 ) ( 9,518 )

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

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

Net carrying amount $ 495,163 $ 693,430 $ 987,691 $ 690,464

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

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Total 2023 notes interest expense $ — $ 320 $ 11,964

(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

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

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.

Our primary operating lease commitments at December 31, 2022 are related to our corporate headquarters and offices in the United States and internationally.

As of December 31, 2022 and 2021, we had operating lease ROU assets of $ 18.8 million and $ 18.1 million, respectively, and operating lease liabilities of $ 20.9 million and $ 19.1 million, respectively.

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.

As of December 31, 2022 and 2021, our weighted average remaining lease term was 4.0 years and our weighted average discount rate was 5.2 % and 4.8 %, respectively.

During the year ended December 31, 2022, we obtained $ 10.2 million of ROU assets in exchange for lease liabilities related to office spaces in Oregon and internationally in India, Israel, and the United Kingdom.

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

During the years ended December 31, 2022, 2021 and 2020, operating lease expense, net of immaterial sublease income, was approximately $ 7.3 million, $ 7.1 million and $ 5.6 million, respectively.

During the years ended December 31, 2022, 2021 and 2020, variable lease cost and short term lease cost were immaterial.

During the year ended December 31, 2022, we consolidated our Santa Clara headquarters into one building and announced the closure of our San Francisco office.

Upon both events, we determined that the carrying amount of the ROU asset was not recoverable.

As a result, we recorded an impairment charge of $ 5.2 million, consisting of a $ 2.6 million impairment of a ROU asset and $ 2.6 million write-off of leasehold improvements, included in general and administrative expense on our

consolidated statement of operations.

Our intent and ability to sublease the office as well as the local market conditions were factored in when measuring the amount of impairment.

The aggregate future minimum lease payments and reconciliation to operating lease liabilities as of December 31, 2022, are as follows (in thousands):

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Total operating lease liabilities $ 20,862

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.

In February 2023, we entered into an amendment to extend the term of the lease for our corporate headquarters in Santa Clara, California through November 2028 with additional future minimum lease payments of $ 7.6 million.

As of December 31, 2022, this extended term had not yet commenced and therefore the additional future minimum lease payments are not included in the table above.

Commitments and Contingencies

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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.

On February 14, 2023, Plaintiff Brian Stansell, individually and on behalf of other similarly situated stockholders of Chegg, filed a putative class action complaint in the Court of Chancery of the State of Delaware (Case No.

2023-0180) on behalf of all Chegg stockholders who were eligible to vote at Chegg's 2022 Annual Stockholders' Meeting, asserting breach of fiduciary duty claims against the members of Chegg's Board.