CHEGG, INC 10-K

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK We are exposed to market risk, including changes to foreign currency exchange rates and interest rates. Foreign Currency Exchange Risk Our results of operations and cash flows are subject to fluctuations due to changes in foreign currency exchange rates, particularly changes in the Indian Rupee, Euro, and British Pound Sterling, and changes in the relative value of the U.S. dollar to these currencies may have an impact. We have experienced and will continue to experience fluctuations in net income (loss) as a result of transaction gains or losses related to remeasuring certain amounts that are denominated in foreign currencies. We accept foreign currencies from our international customers and our international revenues 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. Unfavorable fluctuations in foreign currency exchange rates may have an adverse impact on our total net revenues or total operating expenses, however, we do not believe a hypothetical 10% strengthening or weakening of the U.S. dollar against foreign currencies would have a material impact on our results of operations. To date, we have not entered into derivatives or hedging strategies to mitigate risk related to changes in foreign currency exchange rates and continually monitor our foreign currency exchange exposure. Interest Rate Sensitivity We had cash and cash equivalents totaling $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 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. Any realized gains or losses resulting from interest rate changes would only occur if we sold the investments prior to maturity. We were not exposed to material risks due to changes in market interest rates given the liquidity of the cash, cash equivalents, and investments in which we invested our cash. 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. 50 Table of Contents ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Index to Consolidated Financial Statements Page Report of Independent Registered Public Accounting Firm (PCAOB ID No. 34 ) 52 Consolidated Balance Sheets 56 Consolidated Statements of Operations 57 Consolidated Statements of Comprehensive Income (Loss) 58 Consolidated Statements of Stockholders’ Equity 59 Consolidated Statements of Cash Flows 60 Notes to Consolidated Financial Statements 61 51 Table of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Stockholders and the Board of Directors of Chegg, Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Chegg, Inc. 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. We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 20, 2024, expressed an unqualified opinion on the Company's internal control over financial reporting. Basis for Opinion These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matters The critical audit matters communicated below are matters arising from the current-period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. Goodwill — Refer to Notes 2 and 7 to the financial statements Critical Audit Matter Description 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 52 Table of Contents 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 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 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 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 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. 53 Table of Contents /s/ DELOITTE & TOUCHE LLP San Jose, California February 20, 2024 We have served as the Company’s auditor since 2018. 54 Table of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Stockholders and the Board of Directors of Chegg, Inc. Opinion on Internal Control over Financial Reporting We have audited the internal control over financial reporting of Chegg, Inc. and subsidiaries (the “Company”) as of December 31, 2023, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control — Integrated Framework (2013) issued by COSO. We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended December 31, 2023, of the Company and our report dated February 20, 2024, expressed an unqualified opinion on those financial statements. Basis for Opinion The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Annual Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and Limitations of Internal Control over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. /s/ DELOITTE & TOUCHE LLP San Jose, California February 20, 2024 55 Table of Contents CHEGG, INC. CONSOLIDATED BALANCE SHEETS (in thousands, except for number of shares and par value) December 31, 2023 2022 Assets Current assets Cash and cash equivalents $ 135,757 $ 473,677 Short-term investments 194,257 583,973 Accounts receivable, net of allowance of $ 376 and $ 394 at December 31, 2023 and December 31, 2022, respectively 31,404 23,515 Prepaid expenses 20,980 28,481 Other current assets 32,437 34,754 Total current assets 414,835 1,144,400 Long-term investments 249,547 216,233 Property and equipment, net 183,073 204,383 Goodwill 631,995 615,093 Intangible assets, net 52,430 78,333 Right of use assets 25,130 18,838 Deferred tax assets 141,843 167,524 Other assets 28,382 20,612 Total assets $ 1,727,235 $ 2,465,416 Liabilities and stockholders’ equity Current liabilities Accounts payable $ 28,184 $ 12,367 Deferred revenue 55,336 56,273 Accrued liabilities 77,863 70,234 Current portion of convertible senior notes, net 357,079 — Total current liabilities 518,462 138,874 Long-term liabilities Convertible senior notes, net 242,758 1,188,593 Long-term operating lease liabilities 18,063 13,375 Other long-term liabilities 3,334 7,985 Total long-term liabilities 264,155 1,209,953 Total liabilities 782,617 1,348,827 Commitments and contingencies Stockholders’ equity: Preferred stock, $ 0.001 par value – 10,000,000 shares authorized, no shares issued and outstanding at December 31, 2023 and December 31, 2022 — — Common stock, $ 0.001 par value – 400,000,000 shares authorized; 102,823,700 and 126,473,827 shares issued and outstanding at December 31, 2023 and December 31, 2022, respectively 103 126 Additional paid-in capital 1,031,627 1,244,504 Accumulated other comprehensive loss ( 34,739 ) ( 57,488 ) Accumulated deficit ( 52,373 ) ( 70,553 ) Total stockholders’ equity 944,618 1,116,589 Total liabilities and stockholders’ equity $ 1,727,235 $ 2,465,416 See Notes to Consolidated Financial Statements. 56 Table of Contents CHEGG, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share amounts) Years Ended December 31, 2023 2022 2021 Net revenues $ 716,295 $ 766,897 $ 776,265 Cost of revenues 225,941 197,396 254,904 Gross profit 490,354 569,501 521,361 Operating expenses: Research and development 191,705 196,637 178,821 Sales and marketing 126,591 147,660 105,414 General and administrative 239,783 216,247 159,019 Total operating expenses 558,079 560,544 443,254 (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 ) Other income (expense), net 121,810 101,029 ( 65,472 ) Total interest expense, net and other income (expense), net 118,037 94,989 ( 72,368 ) 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 ) Net income (loss) per share Basic $ 0.16 $ 2.09 $ ( 0.01 ) Diluted $ ( 0.34 ) $ 1.34 $ ( 0.01 ) Weighted average shares used to compute net income (loss) per share Basic 116,504 127,557 141,262 Diluted 128,569 149,859 141,262 See Notes to Consolidated Financial Statements. 57 Table of Contents CHEGG, INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (in thousands) Years Ended December 31, 2023 2022 2021 Net income (loss) $ 18,180 $ 266,638 $ ( 1,458 ) 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 income (loss) 22,749 ( 52,154 ) ( 6,864 ) Total comprehensive income (loss) $ 40,929 $ 214,484 $ ( 8,322 ) See Notes to Consolidated Financial Statements. 58 Table of Contents CHEGG, INC. CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (in thousands) Common Stock Shares Par Value Additional Paid-In Capital Accumulated Other Comprehensive Loss Accumulated Deficit Total Stockholders’ Equity Balances at December 31, 2020 129,344 $ 129 $ 1,030,577 $ 1,530 $ ( 422,601 ) $ 609,635 Cumulative-effect adjustment related to adoption of ASU 2020-06 — — ( 465,006 ) — 86,868 ( 378,138 ) Issuance of common stock in connection with equity offering, net of offering costs 10,975 11 1,091,455 — — 1,091,466 Equity component on conversions of 2023 notes and 2025 notes — — ( 236,921 ) — — ( 236,921 ) Issuance of common stock upon conversion of 2023 notes 2,983 3 235,518 — — 235,521 Net proceeds from capped call related to conversions and extinguishments of 2023 notes and 2025 notes — — 67,770 — — 67,770 Issuance of common stock upon exercise of stock options and ESPP 413 — 8,885 — — 8,885 Net share settlement of equity awards 1,640 2 ( 94,423 ) — — ( 94,421 ) Repurchase of common stock ( 8,403 ) ( 8 ) ( 299,992 ) — — ( 300,000 ) Share-based compensation expense — — 111,442 — — 111,442 Other comprehensive loss — — — ( 6,864 ) — ( 6,864 ) Net loss — — — — ( 1,458 ) ( 1,458 ) Balances at December 31, 2021 136,952 137 1,449,305 ( 5,334 ) ( 337,191 ) 1,106,917 Repurchases of common stock ( 12,709 ) ( 13 ) ( 323,515 ) — — ( 323,528 ) Issuance of common stock upon exercise of stock options and ESPP 437 — 6,475 — — 6,475 Net share settlement of equity awards 1,794 2 ( 26,549 ) — — ( 26,547 ) Share-based compensation expense — — 138,788 — — 138,788 Other comprehensive loss — — — ( 52,154 ) — ( 52,154 ) Net income — — — — 266,638 266,638 Balances at December 31, 2022 126,474 126 1,244,504 ( 57,488 ) ( 70,553 ) 1,116,589 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. 59 Table of Contents CHEGG, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) Years Ended December 31, 2023 2022 2021 Cash flows from operating activities Net income (loss) $ 18,180 $ 266,638 $ ( 1,458 ) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Share-based compensation expense 133,502 133,456 108,846 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 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 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 on change in fair value of derivative instruments, net — — 7,148 Other non-cash items ( 1,228 ) 378 ( 47 ) Change in assets and liabilities, net of effect of acquisition of businesses: Accounts receivable ( 7,799 ) ( 3,752 ) ( 5,004 ) Prepaid expenses and other current assets 3,476 17,191 ( 21,854 ) Other assets 10,829 14,563 16,387 Accounts payable 13,057 ( 4,144 ) 3,241 Deferred revenue ( 1,585 ) 7,538 2,523 Accrued liabilities ( 7,342 ) ( 20,111 ) 5,199 Other liabilities ( 11,337 ) ( 5,768 ) ( 5,607 ) Net cash provided by operating activities 246,198 255,736 273,224 Cash flows from investing activities Purchases of property and equipment ( 83,052 ) ( 103,092 ) ( 94,180 ) Purchases of textbooks — ( 3,815 ) ( 10,931 ) Proceeds from disposition of textbooks 9,787 6,003 8,714 Purchases of investments ( 637,939 ) ( 730,509 ) ( 1,688,384 ) Proceeds from sale of investments 394,533 458,489 206,041 Maturities of investments 597,197 884,940 1,204,787 Proceeds from sale of strategic equity investments — — 16,076 Acquisition of businesses, net of cash acquired — ( 401,125 ) ( 7,891 ) Purchases of strategic equity investments ( 11,853 ) ( 6,000 ) — Net cash provided by (used in) investing activities 268,673 104,891 ( 365,768 ) Cash flows from financing activities Proceeds from common stock issued under stock plans, net 4,165 6,477 8,887 Payment of taxes related to the net share settlement of equity awards ( 16,440 ) ( 26,549 ) ( 94,423 ) Proceeds from equity offering, net of offering costs — — 1,091,466 Repayment of convertible senior notes ( 505,986 ) ( 401,203 ) ( 300,762 ) Proceeds from exercise of convertible senior notes capped call 297 — 69,005 Payment of escrow related to acquisition — — ( 7,451 ) Repurchase of common stock ( 334,806 ) ( 323,528 ) ( 300,000 ) Net cash (used in) provided by financing activities ( 852,770 ) ( 744,803 ) 466,722 Effect of exchange rate changes 21 4,137 — Net (decrease) increase in cash, cash equivalents and restricted cash ( 337,878 ) ( 380,039 ) 374,178 Cash, cash equivalents and restricted cash, beginning of period 475,854 855,893 481,715 Cash, cash equivalents and restricted cash, end of period $ 137,976 $ 475,854 $ 855,893 See Notes to Consolidated Financial Statements. Years Ended December 31, 2023 2022 2021 Supplemental cash flow data: Cash paid during the period for: Interest $ 741 $ 875 $ 1,053 Income taxes, net of refunds $ 11,074 $ 6,841 $ 7,388 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from operating leases $ 9,042 $ 8,863 $ 7,772 Right of use assets obtained in exchange for lease obligations: Operating leases $ 12,407 $ 10,232 $ — Non-cash investing and financing activities: Accrued purchases of long-lived assets $ 9,650 $ 4,927 $ 2,982 Issuance of common stock related to repayment of convertible senior notes $ — $ — $ 235,521 December 31, 2023 2022 2021 Reconciliation of cash, cash equivalents and restricted cash: Cash and cash equivalents $ 135,757 $ 473,677 $ 854,078 Restricted cash included in other current assets — 63 — Restricted cash included in other assets 2,219 2,114 1,815 Total cash, cash equivalents and restricted cash $ 137,976 $ 475,854 $ 855,893 See Notes to Consolidated Financial Statements. 60 Table of Contents CHEGG, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 1. Background and Basis of Presentation Company and Background Chegg, Inc. (“we,” “us,” “our,” “Company” or “Chegg”), headquartered in Santa Clara, California, was incorporated as a Delaware corporation in July 2005. Millions of people all around the world learn with Chegg. 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. Note 2. Significant Accounting Policies Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles in the United States requires management to make estimates, judgments, and assumptions that affect the reported amounts of assets and liabilities; the disclosure of contingent liabilities at the date of the financial statements; and the reported amounts of revenues and expenses during the reporting periods. Significant estimates, assumptions, and judgments are used for, but not limited to: revenue recognition, share-based compensation expense including grant-date fair value of PSUs with a market-based condition and estimated forfeitures, accounting for income taxes, useful lives assigned to long-lived assets for depreciation and amortization, impairment of goodwill and long-lived assets, the valuation of acquired intangible assets, and internal-use software and website development costs. We base our estimates on historical experience, knowledge of current business conditions, and various other factors we believe to be reasonable under the circumstances. These estimates are based on management’s knowledge about current events and expectations about actions we may undertake in the future. Actual results could differ from these estimates, and such differences could be material to our financial position and results of operations. Principles of Consolidation The consolidated financial statements include the accounts of Chegg and our wholly owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation. The consolidated financial statements have been prepared in accordance with U.S. GAAP. Cash and Cash Equivalents and Restricted Cash We consider all highly liquid investments with an original maturity date of three months or less from the date of purchase to be cash equivalents. Our cash and cash equivalents consist of cash and money market funds at financial institutions, and are stated at cost, which approximates fair value. We classify certain restricted cash balances within other current assets and other assets on the accompanying consolidated balance sheets based upon the term of the remaining restrictions. Fair Value Measurements We account for certain assets and liabilities at fair value. We have established a fair value hierarchy used to determine the fair value of our financial instruments as follows: Level 1—Inputs are unadjusted quoted prices in active markets for identical assets or liabilities. Level 2—Inputs are quoted prices for similar assets and liabilities in active markets or inputs that are observable for the assets or liabilities, either directly or indirectly through market corroboration, for substantially the full term of the financial instruments. 61 Table of Contents Level 3—Inputs are unobservable inputs based on our own assumptions used to measure assets and liabilities at fair value; the inputs require significant management judgment or estimation. A financial instrument’s classification within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. The methods described above may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Furthermore, while we believe our valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date. Investments 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 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. We invest in highly rated securities with a weighted average maturity of eighteen months or less. In addition, our investment policy limits the amount of our credit exposure to any one issuer or industry sector and requires investments to be investment grade, with the primary objective of preserving capital and maintaining liquidity. Fair values were determined for each individual security in the investment portfolio. We determine realized gains or losses on the sale of investments on a specific identification method and record such gains or losses as other income (expense), net. The estimated fair value of our investments are based on quoted prices in active markets for identical assets (Level 1 inputs) or inputs other than quoted prices that are observable either directly or indirectly (Level 2 inputs) in determining fair value. Other than our money market funds and U.S. treasury securities, we classify our fixed income available-for-sale investments as having Level 2 inputs. The valuation techniques used to measure the fair value of our investments having Level 2 inputs were derived from non-binding market consensus prices that are corroborated by observable market data or quoted market prices for similar instruments. We do not hold any investments valued with a Level 3 input. Accounts Receivable, Net of Allowance Accounts receivable are recorded at the invoiced amount and are non-interest bearing. We generally grant uncollateralized credit terms to our customers, which include partners and advertising customers. We maintain an allowance to account for potentially uncollectible receivables. We assess the creditworthiness of our customers based on multiple sources of information and analyze such factors as our historical bad debt experience, industry and geographic concentrations of credit risk, economic trends, and customer payment history. This assessment requires significant judgment. Because of this assessment, we maintain an allowance for estimated losses resulting from the inability of certain customers to make all of their required payments. In making this estimate, we analyze historical payment performance and current economic trends when evaluating the adequacy of the allowance for doubtful accounts. Accounts receivable are written off as a decrease to the allowance when all collection efforts have been exhausted and an account is deemed uncollectible. Concentration of Credit Risk Financial instruments that potentially subject us to concentrations of credit risk consist primarily of cash and cash equivalents, restricted cash, and investments in highly liquid instruments in accordance with our investment policy. We place the majority of our cash and cash equivalents and restricted cash with financial institutions in the United States that we believe to be of high credit quality, and accordingly minimal credit risk exists with respect to these instruments. Certain of our cash balances held with a financial institution are in excess of Federal Deposit Insurance Corporation limits. 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, 62 Table of Contents generating a competitive return, and maintaining liquidity. Concentrations of credit risk with respect to accounts receivables exist to the full extent of amounts presented in the financial statements. We had no customers that represented over 10% of our net accounts receivable balance as of December 31, 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. Property and Equipment Property and equipment are recorded at cost less accumulated depreciation and content amortization. Depreciation and content amortization are computed using the straight-line method over the following estimated useful lives of the assets: Classification Useful Life Content 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 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. 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 We allocate the fair value of purchase consideration to the tangible assets acquired, liabilities assumed, and intangible assets acquired through a business combination based on their estimated fair values. The excess of the fair value of purchase consideration over the fair values of these identifiable assets acquired and liabilities assumed is recorded as goodwill. Such valuations require management to make significant estimates and assumptions, especially with respect to intangible assets. Significant estimates in valuing certain intangible assets include, but are not limited to, future expected cash flows from acquired users, acquired technology, and trade names from a market participant perspective, useful lives and discount rates. 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. Upon the conclusion of the measurement period, any subsequent adjustments are recorded to earnings. 63 Table of Contents Goodwill and Indefinite-Lived Intangible Asset 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 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. 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, 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. Leases We determine if an arrangement is a lease at inception. Operating leases are included in operating lease right of use (ROU) assets and operating lease liabilities within current liabilities and long-term liabilities on our consolidated balance sheets. Operating lease ROU assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement date. Our leases do not provide an implicit rate and therefore we use our incremental borrowing rate based on the information available at commencement date in determining the present value of future minimum lease payments. Our incremental borrowing rate is estimated based on the estimated rate incurred to borrow, on a collateralized basis over a similar term as our leases, an amount equal to the lease payments in a similar economic environment. Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise such options. We do not record leases on our consolidated balance sheet with a term of one year or less. We do not separate lease and non-lease components but rather account for each separate component as a single lease component for all underlying classes of assets. Some of our leases include payments that are dependent on an index, such as the Consumer Price Index (CPI), and our minimum lease payments include payments based on the index at inception with any future changes in such indices recognized as an expense in the period of change. Where leases contain escalation clauses, rent abatement, or concessions, such as rent holidays and landlord or tenant incentives or allowances, we apply them in the determination of straight-line operating lease cost over the lease term. ROU assets are evaluated for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Strategic Investments 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. We assess our strategic investments for impairment whenever events or changes in circumstances indicate that they may be impaired. The factors we consider in our evaluation include, but are not limited to, a significant deterioration in the earnings performance or business prospects of the investee or factors that raise significant concerns about the investee’s ability to continue as a going concern, such as negative cash flows from operations or working capital deficiencies. 64 Table of Contents Convertible Senior Notes, net In August 2020, we issued $ 1.0 billion in aggregate principal amount of 0 % convertible senior notes due in 2026 (2026 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, 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. The embedded conversion features are not remeasured as long as they do not meet the separation requirement of a derivative; otherwise, they are classified as derivative instruments and recorded at fair value with changes in fair value recorded in other income (expense), net on our consolidated statements of operations. The fair value of any derivative instruments related to the notes are determined utilizing Level 2 inputs. Issuance costs are amortized on a straight-line basis, which approximates the effective interest rate method, to interest expense over the term of the notes. In accounting for conversions of the notes, the carrying amount of the converted notes is reduced by the total consideration paid or issued for the respective converted notes and the difference is recorded to additional paid-in capital on our consolidated balance sheets. In accounting for extinguishments of the notes, the reacquisition price of the extinguished notes is compared to the carrying amount of the respective extinguished notes and a gain or loss is recorded in other income (expense), net on our consolidated statements of operations. Revenue Recognition and Deferred Revenue We recognize revenues when the control of goods or services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services. We determine revenue recognition through the following steps: • Identification of the contract, or contracts, with a customer • Identification of the performance obligations in the contract • Determination of the transaction price • Allocation of the transaction price to the performance obligations in the contract • Recognition of revenue when, or as, we satisfy a performance obligation Revenues are presented net of sales tax collected from customers to be remitted to governmental authorities and net of allowances for estimated and actual refunds, which are based on historical data. Revenues from our Chegg Study Pack, Chegg Study, Chegg Writing, Chegg Math, and Busuu offerings are primarily recognized ratably over the monthly subscription period. Revenues from Chegg Skills are recognized over the delivery period, adjusted for an estimate of non-redemption. Revenues from advertising services are recognized upon fulfillment. Revenues from print textbooks and eTextbooks are recognized immediately. Some of our customer arrangements include multiple performance obligations. We have determined these performance obligations qualify as distinct performance obligations, as the customer can benefit from the service on its own or together with other resources that are readily available to the customer, and our promise to transfer the service is separately identifiable from other promises in the contract. For these arrangements that contain multiple performance obligations, we allocate the transaction price based on the relative standalone selling price (SSP) method by comparing the SSP of each distinct performance obligation to the total value of the contract. We determine the SSP based on our historical pricing and discounting practices for the distinct performance obligation when sold separately. If the SSP is not directly observable, we estimate the SSP by considering information such as market conditions, and information about the customer. Additionally, we limit the amount of revenues recognized for delivered promises to the amount that is not contingent on future delivery of services or other future performance obligations. Some of our customer arrangements may include an amount of variable consideration in addition to a fixed revenue share that we earn. This variable consideration can either increase or decrease the total transaction price depending on the nature of the variable consideration. We estimate the amount of variable consideration that we will earn at the inception of the contract, adjusted during each period, and include an estimated amount each period. For sales of third-party products, we evaluate whether we are acting as a principal or an agent. Where our role in a transaction is that of principal, revenues are recognized on a gross basis. This requires revenue to comprise the gross value of the transaction billed to the customer, after trade discounts, with any related expenditure charged as a cost of revenues. Where 65 Table of Contents 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. 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. Contract assets represent the goods or services that we have transferred to a customer before invoicing the customer and primarily consist of the income sharing payment arrangements we offer to students for our Skills service. Contract receivables are contained within accounts receivable, net on our consolidated balance sheets and represent unconditional consideration that will be received solely due to the passage of time. Contract liabilities are contained within deferred revenue on our consolidated balance sheets. Deferred revenue primarily consists of advanced payments from students related to subscription performance obligations that have not been satisfied and estimated variable consideration. Deferred revenue related to rental and subscription performance obligations is recognized as revenues ratably over the term for subscriptions or when the services are provided, and all other revenue recognition criteria have been met. 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. 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, employee-related expenses, which includes salaries, benefits and share-based compensation expense, and other direct costs related to providing content or services. In addition, cost of revenues includes allocated information technology and facilities costs. Research and Development Costs 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. We expense substantially all of our research and development expenses as they are incurred. Advertising Costs Advertising costs are expensed as incurred and consist primarily of online advertising and marketing promotional expenditures. During the years ended December 31, 2023, 2022, and 2021, advertising costs were approximately $ 57.4 million, $ 62.0 million and $ 45.1 million, respectively. 66 Table of Contents Share-based Compensation Expense Share-based compensation expense for restricted stock units (RSUs), performance-based restricted stock units (PSUs) with either a market-based condition or financial and strategic performance targets, and the employee stock purchase plan (ESPP) is accounted for under the fair value method based on the grant-date fair value of the award. Share-based compensation expense for RSUs and PSUs with financial and strategic performance targets is measured based on the closing fair market value of our common stock, PSUs with a market-based condition are estimated using a Monte Carlo simulation model, and ESPP is estimated using the Black-Scholes-Merton option pricing model. We recognize share-based compensation expense on a straight-line basis for RSUs and ESPP and on a graded basis for PSUs. Vesting for all awards is subject to continued service over the requisite service period, which is generally the vesting period. Vesting of PSUs with a market-based condition is also subject to the achievement of certain per share price of our common stock targets and vesting of PSUs with financial and strategic performance targets is also subject to our achievement of specified financial and strategic performance targets. RSUs and PSUs are converted into shares of our common stock upon vesting on a one -for-one basis. RSUs typically vest over three or four years , while PSUs with a market-based condition typically vest over a four-year period and PSUs with financial and strategic performance targets typically vest over a three-year period. Share-based compensation expense for PSUs with a market-based condition is recognized regardless of whether the market condition is satisfied whereas share-based compensation expense for PSUs with financial performance targets is recognized upon estimated or actual achievement of such targets. We assess the achievement of financial and strategic performance targets on a quarterly basis and adjust our share-based compensation expense as appropriate. These amounts are reduced by estimated forfeitures, which are estimated at the time of the grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. Income Taxes We account for income taxes under an asset and liability method whereby deferred tax asset and liability account balances are determined based on differences between the financial reporting and the tax basis of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. Valuation allowances are established, when necessary, to reduce deferred tax assets to an amount that is more likely than not to be realized. We record uncertain tax positions on the basis of a two-step process in which (1) we determine whether it is more likely than not that the tax positions will be sustained on the basis of technical merits of the position and (2) for those tax positions that meet the more likely than not recognition threshold, we recognize the tax benefit as the largest amount that is cumulative more than 50% likely to be realized upon ultimate settlement with the related tax authority. Our policy is to include interest and penalties related to unrecognized tax benefits as a component of income tax expense. Net Income (Loss) Per Share Basic net income (loss) per share is computed by dividing net income (loss) by the weighted-average number of shares of common stock outstanding during the period. Diluted net income (loss) per share is computed by adjusting net income (loss) for all related interest expense and gains and losses recognized during the period, net of tax, and giving effect to all potential shares of common stock, including stock options, PSUs, RSUs, and shares related to convertible senior notes, to the extent dilutive. This assumes that all stock options and dilutive convertible shares were exercised or converted and is computed by applying the treasury stock method for outstanding stock options, PSUs, and RSUs, and the if-converted method for outstanding convertible senior notes. Under the treasury stock method, options, PSUs, and RSUs are assumed to be exercised or vested at the beginning of the period (or at the time of issuance, if later) and as if funds obtained thereby were used to purchase common stock at the average market price during the period. Under the if-converted method, outstanding convertible senior notes are assumed to be converted into common stock at the beginning of the period (or at the time of issuance, if later). Foreign Currency Translation and Remeasurement The functional currency of our foreign subsidiaries is the local currency, and our reporting currency is the U.S. Dollar. Adjustments resulting from the translation of foreign currencies into U.S. Dollars for balance sheet amounts are based on the exchange rates as of the consolidated balance sheet date. Revenues and expenses are translated at average exchange rates during the period. Foreign currency translation gains or losses are included in accumulated other comprehensive loss as a component of stockholders’ equity on the consolidated balance sheets. Gains or losses resulting from 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 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. 67 Table of Contents Recent Accounting Pronouncements Recently Issued Accounting Pronouncements Not Yet Adopted 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 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. Note 3. Revenues Revenue Recognition Revenues are recognized when control of the promised goods or services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services. The majority of our revenues are recognized over time as services are performed, with certain revenues being recognized at a point in time. The following table 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 2023 2022 2021 $ % $ % Subscription Services $ 640,520 $ 671,968 $ 616,817 $ ( 31,448 ) ( 5 ) % $ 55,151 9 % Skills and Other 75,775 94,929 159,448 ( 19,154 ) ( 20 ) ( 64,519 ) ( 40 ) Total net revenues $ 716,295 $ 766,897 $ 776,265 $ ( 50,602 ) ( 7 ) $ ( 9,368 ) ( 1 ) 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, 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. 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. 68 Table of Contents Contract Balances The following table presents our accounts receivable, net, contract assets, and deferred revenue balances (in thousands, except percentages): December 31, Change 2023 2022 $ % Accounts receivable, net $ 31,404 $ 23,515 $ 7,889 34 % Contract assets 8,598 11,946 ( 3,348 ) ( 28 ) Deferred revenue 55,336 56,273 ( 937 ) ( 2 ) During the year ended December 31, 2023, our accounts receivable, net balance increased by $ 7.9 million, or 34 %, primarily due to timing of billings and seasonality of our business. 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, 2023, our deferred revenue balance decreased by $ 0.9 million, or 2 %, primarily due to timing of bookings and seasonality of our business. Note 4. Net Income (Loss) Per Share 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, 2023 2022 2021 Basic Numerator: Net income (loss) $ 18,180 $ 266,638 $ ( 1,458 ) Denominator: Weighted average shares used to compute net income (loss) per share, basic 116,504 127,557 141,262 Net income (loss) per share, basic $ 0.16 $ 2.09 $ ( 0.01 ) Diluted Numerator: Net income (loss) $ 18,180 $ 266,638 $ ( 1,458 ) Convertible senior notes activity, net of tax (1) ( 61,694 ) ( 65,444 ) — Net income (loss), diluted $ ( 43,514 ) $ 201,194 $ ( 1,458 ) Denominator: Weighted average shares used to compute net income (loss) per share, basic 116,504 127,557 141,262 Shares related to stock plan activity — 968 — Shares related to convertible senior notes 12,065 21,334 — Weighted average shares used to compute net income (loss) per share, diluted 128,569 149,859 141,262 Net income (loss) per share, diluted $ ( 0.34 ) $ 1.34 $ ( 0.01 ) (1) Primarily includes the gain on early extinguishment on our notes, net of tax. For further information, see Note 8, “Convertible Senior Notes.” 69 Table of Contents 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, 2023 2022 2021 Shares related to stock plan activity 8,442 3,556 2,545 Shares related to convertible senior notes — — 23,300 Total common stock equivalents 8,442 3,556 25,845 Note 5. Cash and Cash Equivalents, and Investments and Fair Value Measurements 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 Fair Value Level Adjusted Cost Unrealized Gain Unrealized Loss Fair Value Cash and cash equivalents: Cash $ 45,050 $ — $ — $ 45,050 Money market funds Level 1 90,707 — — 90,707 Total cash and cash equivalents $ 135,757 $ — $ — $ 135,757 Short-term investments: Corporate debt securities Level 2 $ 69,548 $ — $ ( 170 ) $ 69,378 U.S. 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 Long-term investments: Corporate debt securities Level 2 $ 191,467 $ 898 $ ( 213 ) $ 192,152 U.S. treasury securities Level 1 57,287 165 ( 57 ) 57,395 Total long-term investments $ 248,754 $ 1,063 $ ( 270 ) $ 249,547 December 31, 2022 Fair Value Level Adjusted Cost Unrealized Gain Unrealized Loss Fair Value Cash and cash equivalents: Cash $ 33,532 $ — $ — $ 33,532 Money market funds Level 1 440,145 — — 440,145 Total cash and cash equivalents $ 473,677 $ — $ — $ 473,677 Short-term investments: Commercial paper Level 2 $ 11,744 $ — $ ( 29 ) $ 11,715 Corporate debt securities Level 2 491,459 — ( 4,130 ) 487,329 U.S. treasury securities Level 1 85,271 — ( 342 ) 84,929 Total short-term investments $ 588,474 $ — $ ( 4,501 ) $ 583,973 Long-term investments: Corporate debt securities Level 2 $ 125,735 $ 158 $ ( 909 ) $ 124,984 U.S. 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 70 Table of Contents As of December 31, 2023, we determined that the declines in the market value of our investment portfolio were not driven by credit related factors. During the years ended December 31, 2023, 2022 and 2021, we did not recognize any losses on our investments due to credit related factors. The following table presents the gross realized gain and loss related to our investments (in thousands): Years Ended December 31, 2023 2022 2021 Realized gain $ 346 $ 64 $ 84 Realized loss ( 2,452 ) ( 9,739 ) ( 262 ) Realized (loss)/gain on sale of investments $ ( 2,106 ) $ ( 9,675 ) $ ( 178 ) 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 Cost Fair Value Due within one year $ 194,787 $ 194,257 Due after one year through three years 248,754 249,547 Investments not due at a single maturity date 90,707 90,707 Total $ 534,248 $ 534,511 Investments not due at a single maturity date in the preceding table consisted of money market funds. 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. (Knack), a privately held U.S. based peer-to-peer tutoring platform for higher education institutions. We do not have the ability to exercise significant influence over Knack's operating and financial policies and have elected to account for our investment at cost as it does not have a readily determinable fair value. We 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. Financial Instruments Not Recorded at Fair Value on a Recurring Basis We report our financial instruments at fair value with the exception of the notes. The estimated fair value of the notes was determined based on the trading price of the notes as of the last day of trading for the period. We consider the fair value of the notes to be a Level 2 measurement due to the limited trading activity. The estimated fair value of the 2026 notes as of December 31, 2023 and 2022 was $ 202.9 million and $ 385.0 million, respectively. The estimated fair value of the 2025 notes as of December 31, 2023 and 2022 was $ 329.5 million and $ 640.5 million, respectively. For further information on the notes refer to Note 8, “Convertible Senior Notes.” 71 Table of Contents Note 6. Property and Equipment, Net The following table presents our property and equipment, net balances (in thousands): December 31, 2023 2022 Content $ 346,749 $ 339,879 Internal-use software and website development 51,855 45,422 Leasehold improvements 10,857 10,860 Furniture and fixtures 4,607 4,952 Computer and equipment 3,496 3,321 Property and equipment 417,564 404,434 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, 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 Other costs Cost of revenues 1,431 Total cost of revenues 38,242 Impairment of indefinite-lived trade name General and administrative 3,600 Total content and related assets charge $ 41,842 Note 7. Goodwill and Intangible Assets The following table presents our goodwill balances (in thousands): Years Ended December 31, 2023 2022 Beginning balance $ 615,093 $ 289,763 Additions due to acquisition — 367,376 Foreign currency translation adjustment 16,902 ( 42,907 ) Measurement period adjustments related to prior acquisition — 861 Ending balance $ 631,995 $ 615,093 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. 72 Table of Contents 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 Weighted-Average Amortization Period (in months) Gross Carrying Amount Accumulated Amortization Foreign Currency Translation Adjustment Net Carrying Amount Developed technologies 80 $ 106,703 $ ( 55,651 ) $ ( 3,757 ) $ 47,295 Content libraries 60 12,230 ( 11,189 ) — 1,041 Customer lists 35 34,190 ( 31,836 ) ( 1,298 ) 1,056 Trade and domain names 52 16,213 ( 12,817 ) ( 358 ) 3,038 Total intangible assets 67 $ 169,336 $ ( 111,493 ) $ ( 5,413 ) $ 52,430 December 31, 2022 Weighted-Average Amortization Period (in months) Gross Carrying Amount Accumulated Amortization Foreign Currency Translation Adjustment Net Carrying Amount Developed technologies 80 $ 106,703 $ ( 44,410 ) $ ( 5,751 ) $ 56,542 Content libraries 60 12,230 ( 9,279 ) — 2,951 Customer lists 35 34,190 ( 22,074 ) ( 1,318 ) 10,798 Trade and domain names 52 16,213 ( 11,225 ) ( 546 ) 4,442 Indefinite-lived trade name — 3,600 — — 3,600 Total intangible assets 67 $ 172,936 $ ( 86,988 ) $ ( 7,615 ) $ 78,333 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. 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 2025 11,532 2026 11,185 2027 9,029 2028 6,954 Thereafter 93 Total $ 52,430 Note 8. 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). 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. 73 Table of Contents The following table presents the total net proceeds from the notes (in thousands): 2026 Notes 2025 Notes Principal amount $ 1,000,000 $ 800,000 Less initial purchasers’ discount ( 15,000 ) ( 18,998 ) Less other issuance costs ( 904 ) ( 822 ) Net proceeds $ 984,096 $ 780,180 The notes are our senior, unsecured obligations and are governed by indenture agreements by and between us and Computershare Trust Company, National Association (as successor to Wells Fargo Bank, National Association), as Trustee (the indentures). The 2026 notes bear no interest and will mature on September 1, 2026, unless repurchased, redeemed or converted in accordance with their terms prior to such date. The 2025 notes bear interest of 0.125 % per year which is payable semi-annually in arrears on March 15 and September 15 of each year, beginning on September 15, 2019. The 2025 notes will mature on March 15, 2025, unless repurchased, redeemed or converted in accordance with their terms prior to such date. Each $1,000 principal amount of the 2026 notes will initially be convertible into 9.2978 shares of our common stock. This is equivalent to an initial conversion price of approximately $ 107.55 per share, which is subject to adjustment in certain circumstances. Each $1,000 principal amount of the 2025 notes will initially be convertible into 19.3956 shares of our common stock. This is equivalent to an initial conversion price of approximately $ 51.56 per share, which is subject to adjustment in certain circumstances. Prior to the close of business on the business day immediately preceding June 1, 2026 for the 2026 notes and December 15, 2024 for the 2025 notes, the notes are convertible at the option of holders only upon satisfaction of the following circumstances: • during any calendar quarter commencing after the calendar quarter ending on December 31, 2020 for the 2026 notes and June 30, 2019 for the 2025 notes, if the last reported sale price of our common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter is greater than or equal to 130 % of the respective conversion price for the notes on each applicable trading day; • during the five -business day period after any 10 consecutive trading day period (the measurement period) in which the trading price per $1,000 principal amount of notes for each trading day of the measurement period was less than 98 % of the product of the last reported sale price of our common stock and the conversion rate on each such trading day; • if we call any or all of the notes for redemption, at any time prior to the close of business on the second scheduled trading day immediately preceding the redemption date; or • upon the occurrence of certain specified corporate events described in the indentures. On or after June 1, 2026 for the 2026 notes and December 15, 2024 for the 2025 notes until the close of business on the second scheduled trading day immediately preceding the respective maturity dates, holders may convert their notes at any time, regardless of the foregoing circumstances. Upon conversion, the notes may be settled in shares of our common stock, cash or a combination of cash and shares of our common stock, at our election. 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. 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 74 Table of Contents 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 2026 Notes 2025 Notes 2026 Notes 2025 Notes Principal amount $ 244,479 $ 358,914 $ 500,000 $ 699,979 Unamortized issuance costs ( 1,721 ) ( 1,835 ) ( 4,837 ) ( 6,549 ) Net carrying amount $ 242,758 $ 357,079 $ 495,163 $ 693,430 The following table presents the total interest expense recognized related to the notes (in thousands): Years Ended December 31, 2023 2022 2021 2026 notes: Contractual interest expense $ — $ — $ — Amortization of issuance costs 1,035 2,196 2,635 Total 2026 notes interest expense $ 1,035 $ 2,196 $ 2,635 2025 notes: Contractual interest expense $ 621 $ 874 $ 896 Amortization of issuance costs 2,121 2,970 3,045 Total 2025 notes interest expense $ 2,742 $ 3,844 $ 3,941 Capped Call Transactions Concurrently with the offering of the 2026 notes and 2025 notes, we used $ 103.4 million and $ 97.2 million, respectively, of the net proceeds to enter into privately negotiated capped call transactions which are expected to reduce or offset potential dilution to holders of our common stock upon conversion of the notes or offset the potential cash payments we would be required to make in excess of the principal amount of any converted notes. The capped call transactions automatically exercise upon conversion of the notes and as of December 31, 2023, cover 9,297,800 and 6,961,352 shares of our common stock for the 2026 notes and 2025 notes, respectively. These are intended to effectively increase the overall conversion price from $ 107.55 to $ 156.44 per share for the 2026 notes and $ 51.56 to $ 79.32 per share for the 2025 notes. The effective increase in conversion price as a result of the capped call transactions serves to reduce potential dilution to holders of our common stock and/or offset the cash payments we are required to make in excess of the principal amount of any converted notes. As these transactions meet certain accounting criteria, they are recorded in stockholders’ equity as a reduction of additional paid-in capital on our consolidated balance sheets and are not accounted for as derivatives. The fair value of the capped call instrument is not remeasured each reporting period. The cost of the capped call is not expected to be deductible for tax purposes. Note 9. Leases Our primary operating lease commitments at December 31, 2023 are related to our corporate headquarters and offices in the United States and internationally. 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, 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. 75 Table of Contents 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. 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 2024 $ 8,084 2025 6,605 2026 5,922 2027 5,497 2028 1,898 Thereafter — Total future minimum lease payments 28,006 Less imputed interest ( 3,120 ) Total operating lease liabilities $ 24,886 Note 10. Commitments and Contingencies We may from time to time be subject to certain legal proceedings and claims in the ordinary course of business, including claims of alleged infringement of trademarks, patents, copyrights, and other intellectual property rights; employment claims; and general contract or other claims. We may also, from time to time, be subject to various legal or government claims, demands, disputes, investigations, or requests for information. Such matters may include, but not be limited to, claims, disputes, or investigations related to warranty, refund, breach of contract, employment, intellectual property, government regulation, or compliance or other matters. On 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 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. 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. 76 Table of Contents 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. The Company disputes these claims and intends to vigorously defend itself in this matter. On December 22, 2021, Steven Leventhal, individually and on behalf of all others similarly situated, filed a purported securities fraud class action on behalf of all purchasers of Chegg common stock between May 5, 2020 and November 1, 2021, inclusive, against Chegg and certain of its current and former officers in the United States District Court for the Northern District of California (Case No. 5:21-cv-09953), alleging that Chegg and several of its officers made materially false and misleading statements in violation of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934. On September 7, 2022, KBC Asset Management and The Pompano Beach Police & Firefighters Retirement System were appointed as lead plaintiff in the case. 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. On September 13, 2021, Pearson Education, Inc. (Pearson) filed a complaint captioned Pearson Education, Inc. v. Chegg, Inc. (Pearson Complaint) in the United States District Court for the District of New Jersey against the Company (Case 2:21-cv-16866), alleging infringement of Pearson’s registered copyrights and exclusive rights under copyright in violation of the United States Copyright Act. Pearson is seeking injunctive relief, monetary damages, costs, and attorneys’ fees. The Company filed its answer to the Pearson Complaint on November 19, 2021. 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. On June 18, 2020, we received a Civil Investigative Demand (CID) from the Federal Trade Commission (FTC) regarding certain alleged deceptive or unfair acts or practices related to consumer privacy and/or data security. 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 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. 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. Nevertheless, defending any of these actions, regardless of the outcome, may be costly, time consuming, distract management personnel and have a negative effect on our business. An adverse outcome in any of these actions, including a judgment or settlement, may cause a material adverse effect on our future business, operating results or financial condition. Note 11. Guarantees and Indemnifications We have agreed to indemnify our directors and officers for certain events or occurrences, subject to certain limits, while such persons are or were serving at our request in such capacity. We may terminate the indemnification agreements with these persons upon termination of employment, but termination will not affect claims for indemnification related to events occurring prior to the effective date of termination. We have a directors’ and officers’ insurance policy that covers our potential exposure up to the limits of our insurance coverage. In addition, we also have other indemnification agreements with various vendors against certain claims, liabilities, losses, and damages. The maximum amount of potential future indemnification is unlimited. 77 Table of Contents We believe the fair value of these indemnification agreements is immaterial. We have not recorded any liabilities for these agreements as of December 31, 2023 and 2022. Note 12. Common Stock We are authorized to issue 400 million shares of our common stock, with a par value per share of $ 0.001 . The following table presents the shares of our common stock we have reserved for future issuance as of December 31, 2023: December 31, 2023 Outstanding stock options 232,327 Outstanding RSUs and PSUs 10,065,783 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 Stock Plans 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 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. 78 Table of Contents Note 13. Stockholders' Equity 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. 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 The following table presents total share-based compensation expense recorded (in thousands): Years Ended December 31, 2023 2022 2021 Cost of revenues $ 2,256 $ 2,484 $ 1,621 Research and development 44,103 41,335 37,131 Sales and marketing 9,524 13,857 13,887 General and administrative 77,619 75,780 56,207 Total share-based compensation expense $ 133,502 $ 133,456 $ 108,846 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 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 79 Table of Contents 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 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 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. As of December 31, 2023, the market-based conditions have not been met. Fair Value of PSUs with Market-Based Conditions We estimate the fair value of the PSUs using a Monte Carlo simulation approach, which utilizes the fair value of our common stock based on an active market and requires input on the following subjective assumptions: Expected Term . The expected term for the awards is the performance period of three years . Expected Volatility . The expected volatility is based on the historical average volatility of our stock price over the expected term. Expected Dividends . The dividend assumption is based on our historical experience. To date we have not paid any dividends on our common stock. Risk-Free Interest Rate . The risk-free interest rate used in the valuation method is the implied yield on the U.S. treasury zero-coupon issues, with a remaining term equal to the expected term. The following table presents the key assumptions used to determine the fair value of the awards: Expected term (years) 3.00 Expected volatility 49.04 % Expected dividends — % Risk-free interest rate 0.27 % RSUs and PSUs Activity RSUs and PSUs Outstanding Number of RSUs and PSUs Outstanding Weighted Average Grant Date Fair Value Balance at December 31, 2022 9,155,680 $ 36.03 Granted 6,283,841 14.58 Released ( 3,637,801 ) 35.32 Forfeited ( 1,735,937 ) 31.79 Balance at December 31, 2023 10,065,783 $ 23.63 The weighted-average grant-date fair value of RSUs and PSUs granted during the years ended December 31, 2023, 2022, and 2021 was $ 14.58 , $ 27.68 , and $ 47.95 , respectively. The total fair value of RSUs and PSUs vested as of the vesting dates during the years ended December 31, 2023, 2022, and 2021 was $ 45.3 million, $ 74.2 million, and $ 232.0 million, respectively. 80 Table of Contents Fair Value of ESPP 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 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 is six months . Expected Volatility. The expected volatility is based on the average volatility of our stock price over the expected term. Expected Dividends. The dividend assumption is based on our historical experience. To date we have not paid any dividends on our common stock. Risk-Free Interest Rate. The risk-free interest rate used in the valuation method is the implied yield on the United States treasury zero-coupon issues, with a remaining term equal to the expected term. The following table presents the key assumptions used to determine the fair value of rights granted under the ESPP: Years Ended December 31, 2023 2022 2021 Expected term (years) 0.50 0.50 0.50 Expected volatility 55.79 %- 109.39 % 70.37 %- 78.74 % 47.02 %- 99.96 % Dividend yield 0.00 % 0.00 % 0.00 % Risk-free interest rate 5.24 %- 5.41 % 1.54 %- 4.54 % 0.04 %- 0.07 % Weighted-average grant-date fair value per share $ 3.62 $ 8.71 $ 14.70 ESPP Activity 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 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 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. Note 14. Income Taxes 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 81 Table of Contents 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 following table presents our (provision for) benefit from income taxes (in thousands): Years Ended December 31, 2023 2022 2021 Current income taxes: Federal $ ( 2,460 ) $ ( 113 ) $ — State ( 3,064 ) ( 2,172 ) ( 852 ) Foreign ( 33 ) ( 3,702 ) ( 7,449 ) Total current provision for income taxes ( 5,557 ) ( 5,987 ) ( 8,301 ) Deferred income taxes: Federal ( 26,210 ) 147,236 ( 250 ) State ( 1,634 ) 19,995 ( 218 ) Foreign 1,269 1,448 1,572 Total deferred benefit from income taxes ( 26,575 ) 168,679 1,104 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, 2023 2022 2021 United States $ 61,152 $ 123,269 $ ( 6,256 ) Foreign ( 10,840 ) ( 19,323 ) 11,995 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, 2023 2022 2021 Income tax at U.S. statutory rate 21.0 % 21.0 % 21.0 % State, net of federal benefit 11.6 1.6 ( 232 ) Taxes on foreign earnings 0.7 ( 1.1 ) 35.5 Share-based compensation 39.3 15.3 ( 209.0 ) Non-deductible expenses ( 2.5 ) 1.6 1.5 Tax credits 0.8 ( 0.7 ) ( 28.3 ) 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 % 82 Table of Contents The following table presents a summary of our deferred tax assets (in thousands): December 31, 2023 2022 Deferred tax assets: Accrued expenses and reserves $ 10,442 $ 7,990 Share-based compensation 11,200 10,078 Net operating loss and credits carryforwards 92,302 147,465 Convertible senior notes 5,566 16,648 Research and experimental expenditures capitalization 69,362 37,719 Other items 6,133 6,777 Gross deferred tax assets 195,005 226,677 Valuation allowance ( 40,162 ) ( 36,122 ) Total deferred tax assets $ 154,843 $ 190,555 Deferred tax liabilities: Property and equipment, textbooks and intangibles assets $ ( 2,621 ) $ ( 14,766 ) Other ( 13,134 ) ( 10,070 ) Total deferred tax liabilities $ ( 15,755 ) $ ( 24,836 ) Net deferred tax asset (liability) $ 139,088 $ 165,719 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 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 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. and certain state jurisdictions and the forecasted earnings in these jurisdictions. We continue to maintain a valuation allowance against our California deferred tax assets and our anticipated capital loss temporary differences. We will continue to quarterly assess the need for such valuation allowance. As of December 31, 2023, we had net operating loss carryforwards for federal and state income tax purposes of approximately $ 169 million and $ 218 million, respectively, which will begin to expire in years beginning 2030 and 2024, respectively. We also had net operating loss carryforwards for United Kingdom income tax purposes of approximately $ 109 million, which do not expire. As of December 31, 2023, we had tax credit carryforwards for federal and state income tax purposes of approximately $ 13.9 million and $ 17.0 million, respectively. The federal credits expire in various years beginning in 2038. The state credits do not expire. Utilization of our net operating losses and tax credit carryforwards may be subject to substantial annual limitations due to ownership change limitations provided by the Internal Revenue Code of 1986, as amended (IRC), and similar state provisions. Such annual limitations could result in the expiration of the net operating losses and tax credit carryforwards before utilization. We recognize interest and penalties related to uncertain tax positions as a component of income tax expense. 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 83 Table of Contents $ 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. federal, state, and certain foreign jurisdictions with varying statutes of limitations. Due to net operating loss and credit carryforwards, all of the tax years since inception through tax year 2023 remain subject to examination by the U.S. federal and some state authorities. Foreign jurisdictions remain subject to examination up to approximately seven years from the filing date, depending on the jurisdiction. 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. 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, 2023 2022 2021 Beginning balance $ 16,953 $ 16,805 $ 14,654 Increase in tax positions for prior years — 333 305 Decrease in tax positions for prior years ( 131 ) ( 876 ) ( 952 ) Decrease in tax positions for prior year settlement ( 4,703 ) ( 386 ) ( 22 ) Decrease in tax positions for prior years due to statutes lapsing — — ( 426 ) Increase in tax positions for current year 281 1,520 3,309 Change due to translation of foreign currencies — ( 443 ) ( 63 ) Ending balance $ 12,400 $ 16,953 $ 16,805 The amount of unrecognized tax benefits, if recognized, that would affect the effective tax rate is $ 6.8 million for the year ended December 31, 2023. One or more of these unrecognized tax benefits could be subject to a valuation allowance if, and when recognized in a future period, which could impact the timing of any related effective tax rate benefit. The actual amount of any taxes due could vary significantly depending on the ultimate timing and nature of any settlement. We believe that the amount by which the unrecognized tax benefits may increase or decrease within the next 12 months is not estimable. Note 15. Restructuring Charges 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. 84 Table of Contents Note 16. Consolidated Statements of Operations Details The following table presents our other income (expense), net (in thousands): Years Ended December 31, 2023 2022 2021 Gain/(loss) on early extinguishment of debt (1) $ 85,926 $ 93,519 $ ( 78,152 ) Interest income 37,411 12,431 6,700 Realized loss on sale of investments (2) ( 2,106 ) ( 9,675 ) ( 178 ) Foreign currency impact on purchase consideration — 4,628 — Loss on change in fair value of derivative instruments, net — — ( 7,148 ) Gain on sale of strategic equity investments — — 12,496 Other 579 126 810 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.” Note 17. Employee Benefit Plan We sponsor a 401(k) savings plan for eligible employees and their beneficiaries. Contributions by us are discretionary and participants may contribute, on a pretax basis, a percentage of their annual compensation, not to exceed a maximum contribution amount pursuant to Section 401(k) of the IRC. During the years ended December 31, 2023, 2022, and 2021, matching contributions totaled approximately $ 4.9 million, $ 4.4 million and $ 2.6 million, respectively. Note 18. Segment Information Our chief operating decision-maker is our Chief Executive Officer who makes resource allocation decisions and reviews financial information presented on a consolidated basis. Accordingly, we have determined that we have a single operating and reportable segment and operating unit structure. Product Information We derive our revenues from our Subscription Services and Skills and Other product lines. Our Subscription Services include Chegg Study Pack, Chegg Study, Chegg Writing, Chegg Math, and Busuu. Our Skills and Other product line includes revenues from Skills, advertising services, print textbooks and eTextbooks. 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, 2023 2022 2021 Subscription Services $ 640,520 $ 671,968 $ 616,817 Skills and Other 75,775 94,929 159,448 Total net revenues $ 716,295 $ 766,897 $ 776,265 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 International 99,936 115,428 86,252 Total net revenues $ 716,295 $ 766,897 $ 776,265 85 Table of Contents 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 $ 208,202 As of December 31, 2022, substantially all of our long-lived assets were located in the United States. 86 Table of Contents ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None.