What changed in this filing

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

2024-02-20 compared with 2023-02-21 · 317 added, 393 removed, 854 unchanged (45% of the section changed)

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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.

We accept foreign currencies from our international customers and our international revenues were 14%, 15% and 11% of total net revenues during the years ended December 31, 2023, 2022 and 2021, respectively.

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

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Interest Rate Sensitivity

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.

We had cash and cash equivalents totaling $135.8 million and $473.7 million as of December 31, 2023 and 2022, respectively, and investments of $443.8 million and $800.2 million as of December 31, 2023 and 2022, respectively.

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

treasury securities and agency bonds.

Changes in U.S.

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.

interest rates, such as those that have occurred in 2023, affect the interest earned on our cash and cash equivalents and the market value of our investments.

A hypothetical 100 basis point increase or decrease in interest rates would result in a $5.8 million increase or decline in the fair value of our investments as of December 31, 2023.

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

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

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

The fair value of the notes, however,

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

See Note 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.

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

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

For more information, see Note 8, “Convertible Senior Notes,” of our accompanying Notes to Consolidated Financial Statements included in Part II, Item 8, “Consolidated Financial Statements and Supplementary Data” of this Annual Report on Form 10-K.

CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

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

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").

and subsidiaries (the "Company") as of December 31, 2023 and 2022, 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, 2023, and the related notes and the schedules 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, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America.

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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

Goodwill — Refer to Notes 2 and 7 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.

The Company tests goodwill for impairment at least annually or whenever events or changes in circumstances indicate that their carrying values may not be recoverable.

During the year ended December 31, 2023, the Company performed a quantitative assessment of goodwill of its single reporting unit.

This assessment utilized significant estimates and assumptions including but not limited to, discount rate and forecasts of future revenue and operating margin, used to calculate projected future cash flows, as well as the determination of appropriate market comparable companies, metrics and multiples.

Changes in these assumptions could have a significant impact on either the fair value of the Company’s single reporting unit, the amount of goodwill impairment charge, if any, or both.

As of the year ended December 31, 2023 the fair value of the reporting unit exceeded the carrying value, and therefore, no impairment was recorded.

The goodwill balance was $632.0 million as of December 31, 2023.

We identified goodwill for the Company’s single reporting unit as a critical audit matter because of the significant judgments made by management to estimate the fair value of the Company’s single reporting unit.

This required a high degree of auditor

judgment and an increased extent of effort, including the need to involve our fair value specialists, when performing audit procedures to evaluate the reasonableness of management’s estimates and assumptions related to selection of the discount rate and forecasts of future revenue and operating margin.

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.

Our audit procedures related to the discount rate and forecasts of future revenue and operating margin, used by management to estimate the fair value of the Company’s single reporting unit, included the following, among others:

• We tested the effectiveness of controls over management’s goodwill impairment evaluation, including those over the determination of the fair value of the Company’s single reporting unit, such as controls related to management’s selection of the discount rate and forecasts of future revenue and operating margin.

• We evaluated management’s ability to accurately forecast future revenues and operating margins by comparing actual results to management’s historical forecasts.

• We evaluated the reasonableness of management's revenue and operating margin forecasts by comparing the forecasts to:

◦ historical results,

◦ internal communications to management and the Board of Directors, and

◦ forecasted information included in Company press releases as well as in analyst and industry reports for the Company and certain of its peer companies.

• With the assistance of our fair value specialists, we evaluated the reasonableness of the (1) valuation methodology and (2) discount rate by:

◦ Testing the source information underlying the determination of the discount rate and the mathematical accuracy of the calculation.

◦ Developing a range of independent estimates and comparing those to the discount rate selected by management.

Convertible Senior Notes - Refer to Notes 2 and 8 to the financial statements

Critical Audit Matter Description

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).

In May 2023, the Company extinguished $85.8 million and $341.1 million principal amount of the 2026 and 2025 Notes, respectively, which had an aggregate carrying value of $423.5 million for a total reacquisition price of $369.8 million (including $1.2 million in fees).

Further, in August 2023, the Company extinguished an additional $169.7 million principal amount of the 2026 Notes, which had a carrying value of $168.3 million for a total reacquisition price of $136.2 million (including $0.4 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.

This resulted in a total gain on extinguishment of $85.9 million during the year ended December 31, 2023.

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 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.

Our audit procedures related to evaluating the extinguishment of the convertible senior 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 and 2025 convertible senior notes.

• 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 2026 and 2025 convertible senior notes was a debt extinguishment.

• We utilized more experienced professionals on our team when evaluating management’s assessment of the accounting for the extinguishment.

/s/ DELOITTE & TOUCHE LLP

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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, 2023, of the Company and our report dated February 20, 2024, 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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Long-term investments 249,547 216,233

Textbook library, net — 11,241

Property and equipment, net 183,073 204,383

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Accrued liabilities 77,863 70,234

Current portion of convertible senior notes, net 357,079 —

Total current liabilities 518,462 138,874

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Total operating expenses 558,079 560,544 443,254

Income from operations 8,957 78,107 56,753

Interest expense, net and other income, net:

(Loss) income from operations ( 67,725 ) 8,957 78,107

Interest expense, net and other income (expense), net

Interest expense, net ( 3,773 ) ( 6,040 ) ( 6,896 )

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Total interest expense, net and other income (expense), net 118,037 94,989 ( 72,368 )

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 )

Income before (provision for) benefit from income taxes 50,312 103,946 5,739

(Provision for) benefit from income taxes ( 32,132 ) 162,692 ( 7,197 )

Net income (loss) $ 18,180 $ 266,638 $ ( 1,458 )

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Net income (loss) $ 18,180 $ 266,638 $ ( 1,458 )

Other comprehensive (loss) income

Change in net unrealized (loss) gain on investments, net of tax ( 1,348 ) ( 5,729 ) 1,037

Other comprehensive income (loss)

Change in net unrealized gain (loss) on investments, net of tax 5,534 ( 1,348 ) ( 5,729 )

Change in foreign currency translation adjustments, net of tax 17,215 ( 50,806 ) ( 1,135 )

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

Other comprehensive income (loss) 22,749 ( 52,154 ) ( 6,864 )

Total comprehensive income (loss) $ 40,929 $ 214,484 $ ( 8,322 )

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

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 )

Issuance of common stock upon conversion of 2023 convertible senior notes 4,182 4 327,137 — — 327,141

Proceeds from capped call related to conversions of 2023 convertible senior notes — — 77,095 — — 77,095

Issuance of common stock upon exercise of stock options and ESPP 1,154 1 15,480 — — 15,481

Net share settlement of equity awards 2,424 2 ( 80,680 ) — — ( 80,678 )

Share-based compensation expense — — 84,055 — — 84,055

Other comprehensive income — — — 2,626 — 2,626

Net loss — — — — ( 6,221 ) ( 6,221 )

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

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

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

Repurchases of common stock ( 26,506 ) ( 26 ) ( 337,683 ) — — ( 337,709 )

Issuance of common stock upon exercise of stock options and ESPP 512 1 4,162 — — 4,163

Net share settlement of equity awards 2,344 2 ( 16,440 ) — — ( 16,438 )

Share-based compensation expense — — 136,787 — — 136,787

Net proceeds from capped call related to extinguishments of 2025 notes — — 297 — — 297

Other comprehensive income — — — 22,749 — 22,749

Net income — — — — 18,180 18,180

Balances at December 31, 2023 102,824 $ 103 $ 1,031,627 $ ( 34,739 ) $ ( 52,373 ) $ 944,618

See Notes to Consolidated Financial Statements.

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

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

Other depreciation and amortization expense 89,997 63,274 47,018

Share-based compensation expense 133,502 133,456 108,846

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

(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 ) — —

Other depreciation and amortization expense 129,718 89,997 63,274

Deferred tax assets 26,575 ( 168,679 ) ( 1,104 )

(Gain)/loss on early extinguishments of debt ( 85,926 ) ( 93,519 ) 78,152

Loss contingency accrual 7,000 — —

Impairment of intangible asset 3,600 — —

Loss from write-offs of property and equipment 4,137 3,549 2,115

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

Amortization of debt issuance costs 3,156 5,166 5,922

Operating lease expense, net of accretion 6,079 6,327 5,994

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

Realized loss on sale of investments 2,106 9,675 178

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

Print textbook depreciation expense — 1,610 10,859

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

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

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

Other non-cash items ( 1,228 ) 378 ( 47 )

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Acquisition of businesses, net of cash acquired — ( 401,125 ) ( 7,891 )

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

Purchases of strategic equity investments ( 11,853 ) ( 6,000 ) —

Net cash provided by (used in) investing activities 268,673 104,891 ( 365,768 )

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Repurchase of common stock ( 334,806 ) ( 323,528 ) ( 300,000 )

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

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

Net cash (used in) provided by financing activities ( 852,770 ) ( 744,803 ) 466,722

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Accrued purchases of long-lived assets $ 9,650 $ 4,927 $ 2,982

Accrued escrow related to acquisition $ — $ — $ 7,451

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

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Millions of people all around the world learn with Chegg.

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

We support life-long learners 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.

No matter the goal, level, or style, Chegg helps learners learn with confidence.

We provide 24/7 on-demand support, and our personalized learning assistant leverages the power of artificial intelligence (“AI”), more than a hundred million pieces of proprietary content, as well as a decade of learning insights.

Our platform also helps learners build essential life and job skills to accelerate their path from learning to earning, and we work with companies to offer learning programs for their employees.

Basis of Presentation

Our fiscal year ends on December 31 and in this report, we refer to the year ended December 31, 2023, December 31, 2022, and December 31, 2021 as 2023, 2022, and 2021, respectively.

Reclassification of Prior Period Presentation

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

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

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

treasury securities and agency bonds.

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

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

Unrealized losses related to credit loss factors are recorded through an allowance for credit losses in other 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.

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 income (loss) on our consolidated statements of stockholders’ equity.

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 income (loss), 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.

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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, generating a competitive return, 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 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.

We had no customers that represented over 10% of our net accounts receivable balance as of December 31, 2023 and one customer that represented over 10% of our net accounts receivable balance as of December 31, 2022.

No customers represented over 10% of net revenues during the years ended December 31, 2023, 2022 or 2021.

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Classification Useful Life

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

Shorter of the licensed content term or 5 years

Internal-use software and website development 3 years

Leasehold improvements Shorter of the remaining lease term or 5 years

Furniture and fixtures 5 years

Computers and equipment 3 years

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

The cost of maintenance and repairs is expensed as incurred.

When assets are retired or otherwise disposed of, the cost and related accumulated depreciation and amortization are removed from their respective accounts, and any gain or loss on such sale or disposal is reflected in income from operations.

Internal-Use Software and Website Development Costs

We capitalize all costs associated with the development or acquisition of content that is utilized in our products and services.

Content amortization is classified within cost of revenues on our consolidated statements of operations.

We capitalize certain costs associated with software developed or obtained for internal use and website and application development.

We capitalize costs when preliminary development efforts are successfully completed, management has authorized and committed project funding and it is probable that the project will be completed, and the software will be used as intended.

Such costs are amortized on a straight-line basis over a three year estimated useful life of the related asset.

Costs incurred prior to meeting these criteria, together with costs incurred for training and maintenance, are expensed as incurred.

Costs incurred for enhancements that are expected to result in additional material functionality are capitalized and amortized over the estimated useful life of the upgrades.

Depreciation expense is classified within cost of revenues or operating expenses categories on our consolidated statements of operations.

When assets are retired or otherwise disposed of, the cost and related accumulated depreciation and content amortization are removed from their respective accounts, and any gain or loss on such sale or disposal is reflected in (loss) income from operations.

Business Combinations

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

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

corresponding offset to goodwill.

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

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

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Goodwill represents the excess of the fair value of purchase consideration paid over the estimated fair value of assets acquired and liabilities assumed in a business combination.

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, or more frequently if certain events or indicators of impairment occur between annual impairment tests.

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

These assets 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 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.

If our qualitative assessment concludes that it is more likely than not that the fair value is less than the carrying amount, a quantitative assessment of impairment is performed.

In the quantitative test, we compare fair value, estimated utilizing both the income approach, based on present value techniques, and the market approach, based on the guideline transaction method and guideline public company method, to the carrying value.

If the carrying value exceeds the fair value, an impairment loss is recognized in an amount equal to the excess.

Acquired Intangible Assets and Other Long-Lived Assets

Acquired intangible assets with finite useful lives, which include developed technology, content library, customer lists, trade names, domain names, and non-compete agreements, are amortized over their estimated useful lives.

We assess the impairment of acquired intangible assets and other long-lived assets when events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable.

Acquired intangible assets with finite useful lives, which include developed technology, content library, customer lists, and trade and domain names, are amortized over their estimated useful lives.

We assess the impairment of acquired intangible assets and other long-lived assets at least annually, or when events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable.

We determine if an arrangement is a lease at inception.

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Strategic Investments

We have entered into strategic investments that do not have readily determinable fair values and have elected to account for these investments at cost, minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer, if any.

Investments in partnerships where we have the ability to exercise significant influence, but not control, over the investee are accounted for under the equity method of accounting.

Equity method investments are initially recorded at cost and adjusted for our share of the investees' earnings or losses, based on our percentage ownership, recognized on a one-quarter lag basis within other income (expense), net on our consolidated statements of operations.

Investments in entities where we do not have the ability to exercise significant influence and which do not have readily determinable fair values are accounted for at cost, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer, if any.

Strategic investments are included in other assets on our consolidated balance sheets.

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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, 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;

In March/April 2019, we issued $ 800 million in aggregate principal amount of 0.125 % convertible senior notes due in 2025 (2025 notes, together with the 2026 notes, the notes).

The aggregate principal amounts of both the 2026 notes and 2025 notes include $ 100 million from the initial purchasers fully exercising their option to purchase additional notes.

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

The carrying amount of the liability is classified as a current liability if we have committed to settle with current assets or the holders have the option to convert the notes at any time within twelve months after the reporting date;

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

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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 Chegg Skills are recognized over the delivery period, 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 print textbooks and eTextbooks are recognized immediately.

Some of our customer arrangements include multiple performance obligations.

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

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

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

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

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

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

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.

We have concluded that we control our Subscription Services and therefore we recognize revenues and cost of revenues on a gross basis.

For print textbooks and eTextbooks, we have concluded that we do not control the service and therefore 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.

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Deferred revenue related to variable consideration is recognized as revenues during each reporting period based on the estimated amount we believe we will earn over the life of the contract.

We have elected a practical expedient to record incremental costs to obtain or fulfill a contract when the amortization period would have been one year or less as incurred.

These incremental costs primarily relate to sales commissions costs and are recorded in sales and marketing expense on our consolidated statements of operations.

Deferred contract costs are contained within other current assets on our consolidated balance sheets and are recognized if we expect to receive a future benefit from such costs.

Deferred contract cost amortization expense is recognized consistent with the pattern of revenue recognition as cost of revenues on our consolidated statements of operations.

Cost of Revenues

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

Cost of revenues 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

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

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

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

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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.

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.

During the years ended December 31, 2023 and 2021, the net gains from remeasurement of foreign currency transactions were not material.

During the year ended December 31, 2022, net gains from remeasurement of foreign currency transactions were $ 3.7 million.

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).

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

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

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 .

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

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

In December 2023, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2023-09, Improvements to Income Tax Disclosures .

ASU 2023-09 requires disaggregated information about our effective tax rate reconciliation as well as information on income taxes paid that meet a quantitative threshold.

Early adoption is permitted, and the guidance will be applied prospectively with the option to apply retrospectively.

The guidance is effective for annual periods beginning after December 15, 2024.

We 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.

We did not early adopt ASU 2023-09 and we are currently in the process of evaluating the impact of this guidance.

In November 2023, the FASB issued ASU 2023-07, Improvements to Reportable Segment Disclosures .

ASU 2023-07 enhances current interim and annual reportable segment disclosures and requires additional disclosures about significant segment expenses.

Early adoption is permitted, and we are required to adopt the changes on a retrospective basis.

The guidance is effective for annual periods beginning after December 15, 2023 and for interim periods beginning December 15, 2024.

We did not early adopt ASU 2023-07 and we are currently in the process of evaluating the impact of this guidance.

Recently Adopted Accounting Pronouncements

We did not adopt any accounting pronouncements during the year ended December 31, 2023 that had a material impact on our financial statements.

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.

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):

The following table presents 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 2023 Change in 2022

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During the years ended December 31, 2023, 2022, and 2021, we recognized $ 54.5 million, $ 33.9 million and $ 32.6 million, respectively, of revenues that were included in our deferred revenue balance at the beginning of each respective fiscal year.

During the years ended December 31, 2022 and 2020, we recognized an immaterial amount from performance obligations satisfied in previous periods.

During the years ended December 31, 2023, and 2022, we recognized an immaterial amount of revenues 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.”

As of December 31, 2023, the closing balance of deferred contract costs was $ 6.0 million, and we recognized $ 15.8 million of deferred contract cost amortization during the year ended December 31, 2023.

Contract Balances

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During the year ended December 31, 2023, our contract assets balance decreased by $ 3.3 million or 28 %, 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.

During the year ended December 31, 2023, our deferred revenue balance decreased by $ 0.9 million, or 2 %, primarily due to timing of 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):

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

Years Ended December 31,

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For further information, see Note 8, “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):

The following table presents potential weighted-average shares of common stock outstanding that 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, 2022 and 2021 (in thousands):

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

December 31, 2023

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Short-term investments:

Commercial paper Level 2 $ 11,744 $ — $ ( 29 ) $ 11,715

Corporate debt securities Level 2 $ 69,548 $ — $ ( 170 ) $ 69,378

treasury securities Level 1 25,734 — ( 114 ) 25,620

Agency bonds Level 2

99,505 — ( 246 ) 99,259

Total short-term investments $ 194,787 $ — $ ( 530 ) $ 194,257

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Corporate debt securities Level 2 $ 191,467 $ 898 $ ( 213 ) $ 192,152

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

treasury securities Level 1 57,287 165 ( 57 ) 57,395

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

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

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

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Realized (loss)/gain on sale of investments $ ( 2,106 ) $ ( 9,675 ) $ ( 178 )

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

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

December 31, 2023

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Strategic Investments

In May 2023, we entered into a $ 15.0 million commitment to invest in Sound Ventures AI Fund, L.P.

(Sound Ventures), a limited partnership that invests in AI companies, for an approximate 6 % ownership.

We accounted for our investment under the equity method of accounting.

During the year ended December 31, 2023, we funded $ 11.8 million of our investment commitment.

As of December 31, 2023, we had an unfunded investment commitment of $ 3.2 million.

On January 1, 2024, we sold our partnership interest in Sound Ventures, along with all rights, duties and obligations, including the obligation to fund the remaining balance of our capital commitment, for $ 15.5 million.

The initial accounting for the sale is in process as of the issuance date of our financial statements and therefore we are unable to make any additional disclosures.

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

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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 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.

We did not record any impairment charges on our strategic investments during the years ended December 31, 2023, 2022 and 2021, as there were no significant identified events or changes in circumstances that would be considered an indicator for impairment.

There were no observable price changes in orderly transactions for the identical or similar investments of the same issuers during the years ended December 31, 2023, 2022 and 2021.

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Property and Equipment, Net

Property and equipment, net consisted of the following (in thousands):

The following table presents our property and equipment, net balances (in thousands):

Content $ 346,749 $ 339,879

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Property and equipment 417,564 404,434

Less accumulated depreciation and amortization ( 200,051 ) ( 145,413 )

Less accumulated depreciation and content amortization ( 234,491 ) ( 200,051 )

Property and equipment, net $ 183,073 $ 204,383

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.

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.

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

Acquired intangible assets 71,600

Total identifiable assets acquired 100,996

Accounts payable ( 5,174 )

Accrued liabilities (1)

Deferred revenue ( 16,761 )

Long term operating lease liabilities ( 2,038 )

Other long-term liabilities (1)

Net identifiable assets acquired 53,413

Goodwill 368,237

Total fair value of purchase consideration $ 421,650

(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):

Amount Weighted-Average Amortization Period (in months)

Trade name $ 4,600 72

Customer lists 18,000 24

Developed technology 49,000 84

Total acquired intangible assets $ 71,600 68

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.

Depreciation and content amortization expense during the years ended December 31, 2023, 2022, and 2021 was approximately $ 105.3 million, which included the $ 34.2 million accelerated depreciation discussed below, $ 64.1 million, and $ 49.6 million, respectively.

As part of the design and build of our new generative AI experience, in August 2023, we streamlined our product experiences.

As a result, we elected to abandon certain content and software assets and accelerated depreciation over shortened useful lives for completed assets as well as impaired in-progress software assets prior to their completion.

We also recognized other costs associated with abandoning these content and software assets.

Additionally, we impaired our internships.com trade name and adjusted the carrying value to zero.

The total content and related assets charge has been recorded during the year ended December 31, 2023.

The following table presents the consolidated statements of operations classification and total content and related assets charge (in thousands):

Classification

Year Ended December 31, 2023

Accelerated depreciation of content and software

Cost of revenues $ 34,195

Impairment of in-progress software

Cost of revenues 2,616

Cost of revenues 1,431

Total cost of revenues

Impairment of indefinite-lived trade name

General and administrative 3,600

Total content and related assets charge $ 41,842

Goodwill and Intangible Assets

Goodwill consists of the following (in thousands):

The following table presents our goodwill balances (in thousands):

Years Ended December 31,

Beginning balance $ 615,093 $ 289,763

Additions due to acquisitions 367,376 5,782

Additions due to acquisition

Foreign currency translation adjustment 16,902 ( 42,907 )

Measurement period adjustments related to prior acquisitions (1)

Measurement period adjustments related to prior acquisition

Ending balance $ 631,995 $ 615,093

(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):

Based on our evaluation of qualitative factors considered for our goodwill impairment test performed in 2023, we determined a quantitative assessment was necessary and concluded that the fair value of our single reporting unit exceeded the carrying value.

As a result, we did not recognize a goodwill impairment charge during the year ended December 31, 2023.

We have not recognized any goodwill impairment charges since our inception.

The following table presents our intangible assets balances as of December 31, 2023 and December 31, 2022 (in thousands, except weighted-average amortization period):

December 31, 2023

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Trade and domain names 52 16,213 ( 12,817 ) ( 358 ) 3,038

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

Total intangible assets 67 $ 169,336 $ ( 111,493 ) $ ( 5,413 ) $ 52,430

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During the years ended December 31, 2023, 2022 and 2021, amortization expense related to our intangible assets totaled approximately $ 24.4 million, $ 25.9 million and $ 13.7 million, respectively.

As of December 31, 2022, the estimated future amortization expense related to our intangible assets is as follows (in thousands):

During the year ended December 31, 2023, we recognized an impairment charge on our indefinite-lived intangible asset of $ 3.6 million.

For further information, see “Note 6, Property and Equipment, Net.” We did not recognize any impairment charges on any of our other intangible assets during the years ended December 31, 2023, 2022 and 2021.

The following table presents the estimated future amortization expense related to our intangible assets as of December 31, 2023 (in thousands):

December 31, 2023

2024 $ 13,637

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Total $ 52,430

Balance Sheet Details

Other Current Assets

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

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

Other 34,754 16,046

Other current assets $ 34,754 $ 23,846

Accrued Liabilities

Accrued liabilities consist of the following (in thousands):

Taxes payable $ 15,132 $ 11,127

Current operating lease liabilities 7,487 6,663

Acquisition-related compensation 7,741 417

Accrued content related costs 4,736 6,448

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 short term — 785

Loss contingency — 8,000

Other 21,542 19,722

Accrued liabilities $ 70,234 $ 67,209

Convertible Senior Notes

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

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

In March/April 2019, we issued $ 800 million in aggregate principal amount of 0.125 % convertible senior notes due in 2025 (2025 notes, together with the 2026 notes, the notes).

The aggregate principal amounts of both the 2026 notes and 2025 notes include $ 100 million from the initial purchasers fully exercising their option to purchase additional notes.

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

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

The following table presents the total net proceeds from the notes (in thousands):

2026 Notes 2025 Notes

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Net proceeds $ 984,096 $ 780,180

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.

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

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

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

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

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

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

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

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

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

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

Of the $ 149.6 million consideration, we allocated $ 52.6 million and $ 97.0 million to the liability and equity components of the extinguished 2023 notes, respectively.

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

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

During the year ended December 31, 2020, in connection with our issuance of the 2026 notes, we exchanged $ 172.0 million aggregate principal amount of the 2023 notes in privately-negotiated transactions for an aggregate consideration of $ 501.7 million, consisting of $ 174.6 million in cash and 4,182,320 shares of our common stock with a value of $ 327.1 million.

Of the $ 501.7 million consideration, we allocated $ 156.1 million and $ 345.6 million to the liability and equity components of the exchanged 2023 notes, respectively.

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 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 Computershare Trust Company, National Association (as successor to Wells Fargo Bank, National Association), as Trustee (the indentures).

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

In August 2023, in connection with our securities repurchase program, we extinguished $ 169.7 million aggregate principal amount of the 2026 notes in privately-negotiated transactions for a total consideration of $ 135.8 million, which was paid to the holders in cash.

We also incurred approximately $ 0.4 million in fees resulting in a total reacquisition price of $ 136.2 million.

The carrying amount of the extinguished notes was $ 168.3 million resulting in a $ 32.1 million gain on early extinguishment of debt.

We elected to reacquire and not cancel the extinguished 2026 notes.

In May 2023, in connection with our securities repurchase program, we extinguished $ 85.8 million and $ 341.1 million aggregate principal amount of the 2026 notes and 2025 notes, respectively, in privately-negotiated transactions for a total consideration of $ 368.6 million, which was paid to the holders in cash.

We also incurred approximately $ 1.2 million in fees

resulting in a total reacquisition price of $ 369.8 million.

The carrying amount of the extinguished notes was $ 423.5 million resulting in a $ 53.8 million gain on early extinguishment of debt.

We elected to reacquire and not cancel the extinguished 2026 notes and the 2025 notes were canceled with the trustee.

Additionally, we terminated 2025 notes capped call transactions underlying 6,615,161 shares of our common stock and received aggregate cash proceeds of $ 0.3 million.

As of December 31, 2023, we had 9,297,800 and 6,961,352 shares remaining underlying the 2026 notes and 2025 notes, respectively.

During the year ended December 31, 2023, the conditions allowing holders of the 2026 notes and 2025 notes to convert were not met and therefore the 2026 notes and 2025 notes are not convertible.

As of December 31, 2023, holders may convert the 2025 notes at any time within twelve months after the reporting date.

As a result, we have classified the remaining net carrying amount of 2025 notes as a current liability.

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

December 31, 2023 December 31, 2022

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Net carrying amount $ 242,758 $ 357,079 $ 495,163 $ 693,430

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

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

Years Ended December 31,

2022 2021 2020

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

Amortization of issuance costs 2,196 2,635 728

Total 2026 notes interest expense $ 2,196 $ 2,635 $ 15,296

Contractual interest expense

Amortization of debt discount — — 35,561

Amortization of issuance costs 1,035 2,196 2,635

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Contractual interest expense $ 621 $ 874 $ 896

Amortization of debt discount — — 10,073

Amortization of issuance costs 2,121 2,970 3,045

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As of December 31, 2023 and 2022, we had operating lease ROU assets of $ 25.1 million and $ 18.8 million, respectively, and operating lease liabilities of $ 24.9 million and $ 20.9 million, respectively.

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.

As of December 31, 2023 and 2022, our weighted average remaining lease term was 3.9 years and 4.0 years, respectively, and our weighted average discount rate was 5.8 % and 5.2 %, respectively.

During the year ended December 31, 2023, we extended our existing lease agreement related to our corporate headquarters in Santa Clara and reassessed lease terms related to office spaces internationally in India, resulting in the recording of $ 12.4 million of right of use assets in exchange for lease liabilities.

During the years ended December 31, 2023, 2022 and 2021, operating lease expense, net of immaterial sublease income, was approximately $ 7.6 million, $ 7.3 million and $ 7.1 million, respectively.

During the years ended December 31, 2023, 2022 and 2021, 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):

The following table presents the aggregate future minimum lease payments and reconciliation to operating lease liabilities as of December 31, 2023 (in thousands):

December 31, 2023

Thereafter 425

Total future minimum lease payments 28,006

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Total operating lease liabilities $ 24,886

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 March 1, 2023, Plaintiff Shiva Stein, derivatively on behalf of Chegg, filed a stockholder derivative complaint in the Court of Chancery of the State of Delaware (Case No.

2023-0244-NAC) asserting breach of fiduciary duty, unjust enrichment, and waste of corporate asset claims against members of Chegg’s Board and certain Chegg officers.

The matter is stayed.

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

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

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

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

On December 27, 2022, Plaintiff Sheri Moyer, individually and on behalf of all others similarly situated, filed a putative consumer class action in the United States District Court for the Northern District of California (Case No.

22-cv-09123) on behalf of all purchasers of a Chegg product or service as part of an automatic renewal plan or continuous service offer within the past four years.

The Company has filed a motion to dismiss the case, which is pending before the Court.

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

On December 22, 2022, JPMorgan Chase Bank, N.A.

(JPMC) asserted a demand for repayment by the Company of certain investment proceeds received by the Company in its capacity as an investor in TAPD, Inc.

(more commonly known as “Frank”).

JPMC seeks such repayment pursuant to certain provisions in the existing Support Agreement between JPMC and the Company that was entered into in connection with JPMC's acquisition of Frank.

JPMC has alleged fraud on the part of certain former Frank executives regarding the quantity and quality of its customer accounts.

The Company is not at fault, however is pursuing a settlement agreement with JPMC.

As of December 31, 2023, we believe a loss is probable and reasonably estimable, and we have recognized an estimated loss contingency accrual of $ 7.0 million within general and administrative expense on our consolidated statements of operations during the year ended December 31, 2023.

On November 9, 2022, Plaintiff Joshua Keller, individually and on behalf of all others similarly situated, filed a putative class action in the United States District Court for the Northern District of California (Case No.

22-cv-06986) on behalf of individuals whose data was allegedly impacted by past data breaches.

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

On August 15, 2023, the Company received an order granting its motion to compel arbitration, and the case will be stayed and administratively closed pending the conclusion of arbitration.

On March 30, 2022, Joseph Robinson, derivatively on behalf of Chegg, filed a shareholder derivative complaint against Chegg and certain of its current and former directors and officers in the United States District Court for the Northern District of California, alleging violations of securities laws and breaches of fiduciary duties.

On February 22, 2023, Plaintiff filed an Amended Shareholder Derivative Complaint.

This matter has been consolidated with Choi, below, and both matters are stayed.

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

On January 12, 2022, Rak Joon Choi, derivatively on behalf of Chegg, filed a shareholder derivative complaint against Chegg and certain of its current and former directors and officers in the United States District Court for the Northern District of California, alleging violations of securities laws, breaches of fiduciary duties, unjust enrichment, abuse of control, gross

mismanagement, and waste of corporate assets.

On February 22, 2023, Plaintiff filed an Amended Shareholder Derivative Complaint.

This matter has been consolidated with Robinson, above, and both matters are stayed.

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On December 8, 2022, Plaintiff filed his Amended Complaint and seeks unspecified compensatory damages, costs, and expenses, including counsel and expert fees.

The Company has filed a motion to dismiss the case, which is pending before the Court.

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

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The Company filed its answer to the Pearson Complaint on November 19, 2021.

Pearson’s June 29, 2022 Motion for Leave to File Amended Complaint seeking to add Bedford, Freeman & Worth Publishing Group, LLC d/b/a Macmillan Learning as a plaintiff was denied.

Pearson filed an Amended Complaint on May 10, 2023, and the Company filed an amended answer on June 7, 2023.

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

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On October 31, 2022, the FTC published the parties’ agreed-upon consent order regarding Chegg’s privacy and data security practices.

On January 27, 2023, the FTC finalized its order (Final Order) requiring Chegg to implement a comprehensive information security program, limit the data the Company can collect and retain, offer users multifactor authentication to secure their accounts, and allow users to request access to and delete their data.

On January 27, 2023, the FTC finalized its order ("Final Order") requiring Chegg to implement a comprehensive information security program, limit the data the Company can collect and retain, offer users multi factor authentication to secure their accounts, and allow users to request access to and delete their data.

No monetary penalties or fines were included in the Final Order.

Between April 2020 and August 2020, over 16,000 individual arbitration demands were filed against us with each individual claimant claiming to have suffered damages as a result of the unauthorized access of certain items of their user data in April 2018 (the 2018 Data Incident).

Related cases were also filed by the same counsel in Maryland and California.

The company disputed and defended these claims.

On August 22, 2021, Chegg and the claimants' legal counsel, on behalf of its clients, entered into a settlement agreement for these matters.

As of December 2022, all but a de minimis number of these matters have been fully resolved.

We have not recorded any contingent liabilities related to the above matters as we do not believe that a loss is probable and reasonably estimable in these matters.

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

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

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

However, our analysis of whether a claim will proceed to litigation cannot be predicted with certainty, nor can the results of litigation be predicted with certainty.

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

We have not recorded any liabilities for these agreements as of December 31, 2022.

We have not recorded any liabilities for these agreements as of December 31, 2023 and 2022.

We are authorized to issue 400 million shares of our common stock, with a par value per share of $ 0.001 .

As of December 31, 2022, we have reserved the following shares of our common stock for future issuance:

The following table presents the shares of our common stock we have reserved for future issuance as of December 31, 2023:

December 31, 2023

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Outstanding RSUs and PSUs 10,065,783

Shares available for grant under the 2013 Plan 34,699,188

Shares available for issuance under the 2013 ESPP 10,801,299

Shares available for grant under the 2023 Equity Inducement Plan 1,756,098

Shares available for grant under the 2023 Equity Incentive Plan 11,877,920

Shares available for issuance under the Amended and Restated 2013 Employee Stock Purchase Plan 3,866,559

Total common shares reserved for future issuance 27,798,687

2023 Equity Inducement Plan

On October 11, 2023, our Board of Directors approved and adopted our 2023 Equity Inducement Plan (the “2023 EINP”).

On the effective date of the 2023 EINP, 2,000,000 shares of our common stock were reserved for issuance and as of December 31, 2023, there were 1,756,098 shares of common stock available for future issuance.

The 2023 EINP permits the granting of non-qualified stock options and restricted stock unit awards.

The 2023 EINP terminates on the later of (i) October 11, 2033 or (ii) ten years from the last date that additional shares are added to the EINP by the Compensation Committee of our Board of Directors.

2023 Equity Incentive Plan

On June 6, 2013, the Board of Directors adopted our 2013 Equity Incentive Plan (the 2013 Plan), which was subsequently approved by our stockholders on August 29, 2013.

The 2013 Plan became effective on November 11, 2013 and replaced the 2005 Plan.

On the effective date of the 2013 Plan, 12,000,000 shares of our common stock were reserved for issuance, plus an additional 3,838,985 shares reserved but not issued or subject to outstanding awards under our 2005 Plan on the effective date of the 2013 Plan, plus, on and after the effective date of the 2013 Plan, (i) shares that are subject to outstanding awards under the 2005 Plan which cease to be subject to such awards, (ii) shares issued under the 2005 Plan that are forfeited or repurchased at their original issue price and (iii) shares subject to awards under the 2005 Plan that are used to pay the exercise price of an option or withheld to satisfy the tax withholding obligations related to any award.

As of December 31, 2022, there were 34,699,188 shares available for grant under the 2013 Plan.

The 2013 Plan permits the granting of incentive stock options, non-qualified stock options, RSUs, stock appreciation rights, restricted shares of common stock and performance share awards.

The exercise price of stock options may not be less than the 100 % of the fair market value of the common stock on the date of grant.

Options granted pursuant to the 2013 Plan generally expire no later than 10 years from the date of grant.

The 2013 Plan terminates on June 6, 2023.

2013 Employee Stock Purchase Plan

On June 6, 2013, our Board of Directors adopted our 2013 Employee Stock Purchase Plan (the 2013 ESPP) and our stockholders subsequently approved the 2013 ESPP Plan on August 29, 2013.

The 2013 ESPP permits eligible employees to acquire shares of our common stock by accumulating funds through periodic payroll deductions of up to 15 % of base salary.

Our 2013 ESPP is intended to qualify as an ESPP under Section 423 of the Code and employees will receive a 15 % discount to the lesser of the fair market value of our common stock on (i) the first trading day of the applicable offering period or (ii) the last day of each purchase period in the applicable offering period.

Each offering period may run for no more than six months .

We have reserved 4,000,000 shares of our common stock under our 2013 ESPP.

The aggregate number of shares issued over the term of our 2013 ESPP will not exceed 20,000,000 shares of our common stock.

As of December 31, 2022, there were 10,801,299 shares of common stock available for future issuance under the 2013 ESPP.

On April 7, 2023, our Board of Directors adopted our 2023 Equity Incentive Plan (the “2023 EIP”), which was subsequently approved by our stockholders and became effective on June 7, 2023, replacing our 2013 Equity Incentive Plan (the “2013 Plan”).

On the effective date of the 2023 EIP, 12,000,000 shares of our common stock were reserved for issuance.

On June 6, 2023, the date on which the 2013 Plan expired, all remaining shares available for grant under the 2013 Plan were cancelled, and we will not make any additional grants under the 2013 Plan.

In addition, any shares subject to awards, including shares subject to awards granted under the 2013 Plan that were outstanding on June 7, 2023, that are cancelled, forfeited, repurchased, expire by their terms without shares being issued, are used to pay the exercise price of an option or stock appreciation right or withheld to satisfy the tax withholding obligations related to any award, will be returned to the pool of shares available for grant and issuance under the 2023 EIP.

As of December 31, 2023, there were 11,877,920 shares available for grant under the 2023 EIP.

The 2023 EIP permits the granting of incentive stock options, non-qualified stock options, RSUs, restricted stock awards, stock bonus awards, stock appreciation rights and performance awards.

The 2023 EIP terminates on April 7, 2033.

Amended and Restated 2013 Employee Stock Purchase Plan

On April 7, 2023, our Board of Directors adopted our Amended and Restated 2013 Employee Stock Purchase Plan (the “A&R ESPP”), which was subsequently approved by our stockholders and became effective on June 7, 2023.

The A&R ESPP permits eligible employees to purchase shares of our common stock by accumulating funds through periodic payroll deductions.

The A&R ESPP is intended to qualify as an "employee stock purchase plan" under Section 423 of the Code.

Under the A&R ESPP, eligible employees will be granted an option to purchase shares of our common stock at a 15 % discount to the lesser of the fair market value of our common stock on (i) the first trading day of the applicable offering period or (ii) the last day of each purchase period in the applicable offering period.

The Compensation Committee of our Board of Directors shall determine the duration and commencement date of each offering period, provided that an offering period shall in no event be longer than twenty-seven ( 27 ) months, except as otherwise provided by an applicable sub-plan.

Upon approval of the A&R ESPP, the available share pool under our existing 2013 Employee Stock Purchase Plan was reduced, and we have reserved 4,000,000 shares of our common stock under the A&R ESPP.

As of December 31, 2023, there were 3,866,559 shares of common stock available for future issuance under the A&R ESPP.

Stockholders' Equity

Securities Repurchase Program

In June 2022, our board of directors approved a $ 1.0 billion increase to our existing securities repurchase program authorizing the repurchase of up to $ 2.0 billion of our common stock and/or convertible notes, through open market purchases, block trades, and/or privately negotiated transactions or pursuant to Rule 10b5-1 plans, in compliance with applicable securities laws and other legal requirements.

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

During the years ended December 31, 2022, 2021, and 2020, we entered into accelerated share repurchase (ASR) agreements with financial institutions to repurchase 19,965,836 for $ 600.0 million, repurchased 1,146,803 shares of our common stock in open market transactions for $ 23.1 million, and repurchased $ 500.0 million principal amount of the 2026 notes, $ 100.0 million principal amount of the 2025 notes and $ 57.4 million principal amount of the 2023 notes in privately-negotiated transactions for aggregate consideration of $ 734.4 million.

As of December 31, 2022, we had $ 642.6 million remaining under the repurchase program,

which has no expiration date and will continue until otherwise suspended, terminated or modified at any time for any reason by our board of directors.

Accelerated Share Repurchases

On February 22, 2022 and December 3, 2021, we entered into accelerated share repurchase (ASR) agreements with financial institutions.

Share Repurchases

In November 2023 and February 2023, we entered into accelerated share repurchase (ASR) agreements with financial institutions.

Upon execution, we paid a fixed amount of $ 150.0 million for each ASR and received an initial delivery of shares of our common stock that represented 80 percent of the fixed amount for each ASR.

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

During the years ended December 31, 2022 and 2021, we received a total of 11,562,475 and 8,403,361 shares of our common stock, respectively, which were retired immediately.

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

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

Equity Offering

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

Each ASR, along with $ 3.2 million in associated costs, primarily consisting of an estimated 1 % excise tax, was recorded as a reduction to additional paid in capital on our consolidated statements of stockholders’ equity.

The November 2023 ASR did not settle during 2023.

The February 2023 ASR settled, and we were not required to make any additional cash payments or delivery of common stock to the financial institution upon settlement.

During the year ended December 31, 2023, we received a total of 23,072,822 shares of our common stock under the ASR transactions, which were retired immediately.

In June 2023, we repurchased 3,433,157 shares of our common stock in open market transactions for $ 34.5 million.

During the year ended December 31, 2022, we received a total of 12,709,278 shares of our common stock from prior ASR and open market transactions, which were retired immediately.

Securities Repurchase Program

In August 2023, our Board of Directors approved a $ 200.0 million increase to our existing securities repurchase program authorizing the repurchase of up to $ 2.2 billion of our common stock and/or convertible notes, through open market purchases, block trades, and/or privately negotiated transactions or pursuant to Rule 10b5-1 plans, in compliance with applicable securities laws and other legal requirements.

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

As of December 31, 2023, we had $ 3.7 million remaining under the securities repurchase program, which has no expiration date and will continue until otherwise suspended, terminated or modified at any time for any reason by our board of directors.

Share-based Compensation Expense

Total share-based compensation expense recorded for employees and non-employees, is as follows (in thousands):

The following table presents total share-based compensation expense recorded (in thousands):

Years Ended December 31,

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Total share-based compensation expense $ 133,502 $ 133,456 $ 108,846

During the years ended December 31, 2022 and 2021, we capitalized share-based compensation expense of $ 5.3 million and $ 2.6 million, respectively.

During the years ended December 31, 2023, 2022 and 2021, we capitalized share-based compensation expense of $ 3.3 million, $ 5.3 million, and $ 2.6 million, respectively.

As of December 31, 2023, we had a total of approximately $ 141.3 million of unrecognized share-based compensation expense, related to unvested RSUs and PSUs, that is expected to be recognized over the remaining weighted average period of 1.8 years.

PSU Grants with Financial and Strategic Performance Targets

In March 2022, 2021, and 2020, we granted PSUs under the 2013 Plan to certain of our key executives.

The PSUs entitle the executives to receive a certain number of shares of our common stock based on our satisfaction of certain financial and strategic performance targets during years ended December 31, 2022, 2021, and 2020, respectively.

Based on the achievement of the performance conditions for the March 2022 and 2021 grants, the final settlement partially met the target threshold, and for the March 2020 grant, the final settlement met the target threshold, based on a specified objective formula approved by the Compensation Committee of the Board of Directors.

These PSUs vest over a three-year period, with the initial vesting occurring one year after the grant date.

During the years ended December 31, 2022, 2021, and 2020, the number of shares underlying the March 2022, March 2021, and March 2020 PSU grants totaled 614,177 , 278,644 , and 460,976 , respectively, and had a grant date fair value per share of $ 35.82 , $ 99.05 , and $ 39.21 , respectively.

In March 2023, 2022, and 2021, we granted PSUs to certain of our key executives.

The PSUs entitle the executives to receive a certain number of shares of our common stock based on our satisfaction of certain financial and strategic performance targets during the years ended December 31, 2023, 2022, and 2021, respectively.

Based on the achievement of the performance conditions for the March 2023, 2022 and 2021 PSUs, the final settlement partially met the target threshold, based on a specified objective formula approved by the Compensation Committee of the Board of Directors.

The March 2023 PSUs vest over either a one-year or three-year period, with initial vesting occurring one year after the grant date.

The March 2022 and March 2021 PSUs vest over a three-year period, with the initial vesting occurring one year after the grant date.

During the years ended

December 31, 2023, 2022, and 2021, the number of shares underlying the March 2023, March 2022, and March 2021 PSUs totaled 565,341 , 614,177 , and 278,644 , respectively, and each had a grant date fair value per share of $ 15.89 , $ 35.82 , and $ 99.05 , respectively.

2021 PSU Grants with Market-Based Conditions

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

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

In March 2021, we granted PSUs with market-based conditions to certain of our key employees.

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

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

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

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

These PSUs vest over a four-year period, subject to continued service over the requisite period, with the initial vesting of 50 % of the award occurring in March 2024.

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

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

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

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

Expected term (years) 3.00

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Under the ESPP, rights to purchase shares are granted during the second and fourth quarter of each year.

We estimate the fair value of each right to purchase shares under our 2013 ESPP using the Black-Scholes-Merton option-pricing model, which utilizes the fair value of our common stock based on active market and requires input on the following subjective assumptions:

We estimate the fair value of each right to purchase shares using the Black-Scholes-Merton option-pricing model, which utilizes the fair value of our common stock based on active market and requires input on the following subjective assumptions:

Expected Term.

The expected term for rights to purchase shares under the 2013 ESPP is six months .

The expected term for rights to purchase shares is six months .

Expected Volatility.

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The risk-free interest rate used in the valuation method is the implied yield on the United States treasury zero-coupon issues, with a remaining term equal to the expected term.

The following table summarizes the key assumptions used to determine the fair value of rights granted under the 2013 ESPP:

The following table presents the key assumptions used to determine the fair value of rights granted under the ESPP:

Years Ended December 31,

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ESPP Activity

There were 382,392 , 167,890 and 173,992 shares purchased under the 2013 ESPP during the years ended December 31, 2022, 2021 and 2020, respectively, at an average price per share of $ 15.61 , $ 40.35 and $ 38.85 , respectively, with cash proceeds from the issuance of shares of $ 6.0 million, $ 6.8 million and $ 6.8 million, respectively.

Share-based compensation expense related to the 2013 ESPP was $ 3.1 million, $ 3.2 million, and $ 2.6 million during the years ended December 31, 2022, 2021 and 2020, respectively.

There were 454,533 , 382,392 and 167,890 shares purchased during the years ended December 31, 2023, 2022 and 2021, respectively, at an average price per share of $ 8.10 , $ 15.61 and $ 40.35 , respectively, with cash proceeds from the issuance of shares of $ 3.7 million, $ 6.0 million and $ 6.8 million, respectively.

Share-based compensation expense related to ESPP was $ 2.5 million, $ 3.1 million, and $ 3.2 million during the years ended December 31, 2023, 2022 and 2021, respectively.

Stock Option Activity

Options Outstanding

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

Stock Options Outstanding

Number of Stock Options Outstanding

Weighted-Average Exercise Price per Share Weighted-Average Remaining Contractual Term in Years Aggregate Intrinsic Value

Balance at December 31, 2022 326,258 $ 7.02 2.15 $ 5,954,714

Exercised ( 72,049 )

Forfeited ( 21,882 )

Balance at December 31, 2023 232,327 $ 6.02 1.81 $ 1,240,014

We did no t grant any stock option awards during the years ended December 31, 2022, 2021, and 2020.

The total intrinsic value of options exercised during the years ended December 31, 2022, 2021 and 2020, was approximately $ 1.3 million, $ 10.7 million and $ 53.5 million, respectively.

We recorded a benefit from income taxes of $ 162.7 million during the year ended December 31, 2022 and a provision for income taxes of $ 7.2 million and $ 5.4 million during the years ended December 31, 2021 and 2020, respectively.

We did no t grant any stock options during the years ended December 31, 2023, 2022, and 2021.

The total intrinsic value of stock options exercised during the years ended December 31, 2023, 2022 and 2021, was approximately $ 0.2 million, $ 1.3 million and $ 10.7 million, respectively.

We recorded a provision for income taxes of $ 32.1 million during the year ended December 31, 2023, a benefit from income taxes of $ 162.7 million during the year ended December 31, 2022 and a provision for income taxes of $ 7.2 million during the year ended December 31, 2021.

The provision for income taxes during the year ended December 31, 2023 was primarily due to federal and state income taxes in the United States largely driven by a shortfall associated with equity

compensation.

The benefit from income taxes during the year ended December 31, 2022 was primarily due to the release of the valuation allowance on certain U.S.

and state deferred tax assets.

The provision for income taxes during the year ended December 31, 2021 was

primarily due to state and foreign income tax expenses and the withholding taxes related to the sale of our strategic equity investment.

The provision for income taxes during the year ended December 31, 2020 was primarily due to state and foreign income tax expense.

Our benefit from (provision for) income taxes consisted of the following (in thousands):

The provision for income taxes during the year ended December 31, 2021 was primarily due to state and foreign income tax expenses and the withholding taxes related to the sale of our strategic equity investment.

The following table presents our (provision for) benefit from income taxes (in thousands):

Years Ended December 31,

10 unchanged sentences

Total deferred benefit from income taxes ( 26,575 ) 168,679 1,104

Total benefit from (provision for) income taxes $ 162,692 $ ( 7,197 ) $ ( 5,360 )

Income (loss) before benefit from (provision for) income taxes consisted of the following (in thousands):

Total (provision for) benefit from income taxes $ ( 32,132 ) $ 162,692 $ ( 7,197 )

The following table presents our income before (provision for) benefit from income taxes (in thousands):

Years Ended December 31,

2 unchanged sentences

Foreign ( 10,840 ) ( 19,323 ) 11,995

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

The differences between our benefit from (provision for) income taxes as presented in the accompanying consolidated statements of operations and the income tax expense computed at the federal statutory rate consists of the items shown in the following table as a percentage of income (loss) before benefit from (provision for) income taxes (in percentages):

Total income before (provision for) benefit from income taxes $ 50,312 $ 103,946 $ 5,739

The following table presents the differences between our (provision for) benefit from income taxes as presented in the accompanying consolidated statements of operations and the income tax expense computed at the federal statutory rate as a percentage of income before (provision for) benefit from income taxes (in percentages):

Years Ended December 31,

3 unchanged sentences

State, net of federal benefit 11.6 1.6 ( 232 )

Foreign rate differential ( 1.1 ) 35.5 ( 285.9 )

Taxes on foreign earnings 0.7 ( 1.1 ) 35.5

Share-based compensation 39.3 15.3 ( 209.0 )

1 unchanged sentence

Tax credits 0.8 ( 0.7 ) ( 28.3 )

Acquisition related — 17.2 —

Convertible senior notes 15.0 ( 2,435.3 ) ( 5,854.8 )

Other 1.3 0.5 1.2

Change in valuation allowance 4.2 ( 210.5 ) 2,954.3

Settlement of Unrecognized Tax Benefits ( 8.0 ) 0.0 0.0

Foreign-Derived Intangible Income ( 5.2 ) 0.0 0.0

Other 2.0 1.3 0.5

Convertible senior notes 0.0 15.0 ( 2,435.3 )

Acquisition related 0.0 0.0 17.2

Total 63.9 % ( 156.5 ) % 125.4 %

A summary of our deferred tax assets is as follows (in thousands):

As of December 31,

The following table presents a summary of our deferred tax assets (in thousands):

Deferred tax assets:

2 unchanged sentences

Net operating loss and credits carryforwards 92,302 147,465

Property and equipment, textbooks and intangibles assets — 1,849

Convertible senior notes 5,566 16,648

9 unchanged sentences

Net deferred tax asset (liability) $ 139,088 $ 165,719

As of December 31, 2022 and 2021, the deferred tax assets are primarily created by U.S.

net operating loss and credits and the deferred tax liability was primarily created by the tax amortization of acquired indefinite lived intangible assets.

As of December 31, 2022, we intend to permanently reinvest all 2018 and later earnings from our foreign subsidiaries.

As such, we have not provided for any remaining tax effect, if any, of the outside basis difference of our foreign subsidiaries based upon plans of future reinvestment.

As of December 31, 2023, we have determined our earnings in India are not permanently reinvested.

As such, a tax liability of $ 2.8 million has been accrued for taxes that would be incurred upon repatriation of such earnings.

The determination of the future tax consequences of the remittance of these earnings is not practicable.

For our remaining foreign subsidiaries, to the extent we can repatriate cash with no significant tax cost, we have determined those earnings are not permanently reinvested.

All other earnings have been determined to be permanently reinvested.

Realization of the deferred tax assets is dependent upon future taxable income, the amount and timing of which are uncertain.

The valuation allowance decreased by approximately $ 202.2 million during the year ended December 31, 2022 and increased by approximately $ 86.5 million during the year ended December 31, 2021.

The valuation allowance increased by approximately $ 4.0 million during the year ended December 31, 2023 and decreased by approximately $ 202.2 million during the year ended December 31, 2022.

Previously, we maintained a valuation allowance against our deferred tax assets until we expected that it would be more-likely-than not that they would be realized.

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

The release of the valuation allowance in 2022 is the result of our expectation that our domestic operations will continue to be profitable and is based on a detailed evaluation of all available evidence.

The principal indicator leading to the release is the recent cumulative earnings of U.S.

10 unchanged sentences

We recognize interest and penalties related to uncertain tax positions as a component of income tax expense.

During the years ended December 31, 2022, 2021 and 2020, we recognized an increase of $ 26 thousand, $ 0.1 million and $ 0.1 million of interest and penalties, respectively.

Accrued interest and penalties as of December 31, 2022 and 2021 were approximately $ 0.3 million .

During the years ended December 31, 2023, 2022 and 2021, we recognized a decrease of $ 0.3 million and an increase of $ 26 thousand and

$ 0.1 million of interest and penalties, respectively.

As of December 31, 2023, there are no accrued interest and penalties related to uncertain tax positions.

As of December 31, 2022, accrued interest and penalties were approximately $ 0.3 million.

We file tax returns in U.S.

4 unchanged sentences

United Kingdom income tax remains subject to examination by the HM Revenue & Custom for certain tax years due to net operating loss and credits carryforwards.

A reconciliation of the beginning and ending balances of the total amount of unrecognized tax benefits, excluding accrued interest and penalties, is as follows (in thousands):

The following table presents the reconciliation of the beginning and ending balances of the total amount of unrecognized tax benefits, excluding accrued interest and penalties (in thousands):

Years Ended December 31,

13 unchanged sentences

Restructuring Charges

In September 2021, we changed our go-to-market strategy for our Skills product offering which we believe will have the most growth potential to serve learners.

This resulted in a management approved restructuring plan that impacted approximately 60 full-time employees and 100 part-time employees in the United States.

During the year ended December 31, 2021, we recorded restructuring charges of $ 1.9 million related to one-time employee termination benefits classified on our consolidated statements of operations based on the employees' job function.

During the years ended December 31, 2022 and 2021, we made cash payments of $ 0.8 million and $ 1.1 million, respectively, and have no amounts recorded related to this restructuring plan as of December 31, 2022.

The following table summarizes the activity related to the restructuring liability (in thousands):

Years Ended December 31,

Beginning balance $ 785 $ —

Restructuring charges — 1,922

Cash payments ( 785 ) ( 1,137 )

Ending balance $ — $ 785

In June 2023, we announced a reduction in workforce to better position us to execute against our AI strategy and to create long-term, sustainable value for students and investors.

This resulted in a management approved restructuring plan that impacted approximately 90 employees primarily in the United States.

During the year ended December 31, 2023, we recorded restructuring charges of $ 5.7 million related to one-time employee termination benefits, classified on our consolidated statements of operations based on the employees' job function, and made payments of $ 5.2 million.

As of December 31, 2023 the $ 0.5 million liability is included within accrued liabilities on our consolidated balance sheets.

The total cost of the restructuring plan of $ 5.7 million has been recorded and we expect it to be substantially completed by the end of the first quarter 2024.

We expect cost savings from the restructuring plan to be reinvested in future growth opportunities.

Consolidated Statements of Operations Details

Other income (expense), net consists of the following (in thousands):

The following table presents our other income (expense), net (in thousands):

Years Ended December 31,

3 unchanged sentences

Interest income 37,411 12,431 6,700

Realized (loss)/gain on sale of investments (2)

Realized loss on sale of investments (2)

( 2,106 ) ( 9,675 ) ( 178 )

5 unchanged sentences

Total other income (expense), net $ 121,810 $ 101,029 $ ( 65,472 )

_____________________________________________________

(1) For further information, see Note 8, “Convertible Senior Notes.”

(2) For further information, see Note 5, “Cash and Cash Equivalents, and Investments and Fair Value Measurements.”

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

Employee Benefit Plan

9 unchanged sentences

Our Skills and Other product line includes revenues from Skills, advertising services, print textbooks and eTextbooks.

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

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

Years Ended December 31,

3 unchanged sentences

Total net revenues $ 716,295 $ 766,897 $ 776,265

The following table sets forth our total net revenues for the periods shown by geographic area (in thousands):

The following table presents our total net revenues by geographic area (in thousands):

Years Ended December 31,

2023 2022 2021

United States $ 616,359 $ 651,469 $ 690,013

1 unchanged sentence

Total net revenues $ 716,295 $ 766,897 $ 776,265

During the year ended December 31, 2020, substantially all of our revenue was from the United States.

As of December 31, 2022 and 2021, substantially all of our long-lived assets are located in the United States.

The following table presents our long-lived assets by geographic area of December 31, 2023 (in thousands):

December 31, 2023

United States $ 186,142

International 22,060

Total long-lived assets

As of December 31, 2022, substantially all of our long-lived assets were located in the United States.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7A. Quantitative and Qualitative Disclosures About Market Risk