What changed in this filing

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Item 1A. Risk Factors

2025-02-24 compared with 2024-02-20 · 161 added, 104 removed, 641 unchanged (29% of the section changed)

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Risks Related to Our Business and Growth

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

• Our revenue has declined and our business depends on our ability to continue to attract new learners to, and retain existing learners on, our learning platform.

• If we fail to innovate and offer new products and services in response to rapidly evolving technological and market developments, including AI, our competitive position and business prospects may be harmed.

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

• Our exploration of strategic alternatives may not be successful and may disrupt our ongoing business, result in increased expenses and present certain other risks.

colleges have faced, and may continue to face, reduced enrollment, which could negatively impact our business and results of operations.

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

• We have undertaken, and may in the future undertake, internal restructuring activities that could result in disruptions to our business or otherwise materially harm our results of operations or financial condition.

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

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

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

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

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

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Risks Related to Our Business and Growth

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

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

Our revenue has declined and our business depends on our ability to continue to attract new learners to, and retain existing learners on, our learning platform.

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

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

The rate at which our student user base expands or declines, the rate at which we retain existing students, and the engagement with our learning platform may fluctuate because of several factors, including, among others:

The rate at which our student user base expands or declines, the rate at which we

retain existing students, and the engagement with our learning platform may fluctuate because of several factors, including, among others:

• our ability to engage students with our suite of Subscription Services and the content contained therein;

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Developing an enduring business model to serve this population is particularly challenging.

Attracting new students depends not only on our investment in our brand and content and our

marketing efforts, but also on the perceived value of our products and services versus alternatives, some of which are free.

Attracting new students depends not only on our investment in our brand and content and our marketing efforts, but also on the perceived value of our products and services versus alternatives, some of which are free.

If our efforts to satisfy our existing student user base are not successful or become less effective, or if the cost of such efforts were to significantly increase, we may not be able to attract new students as successfully or efficiently and we may not be able to retain existing students on our platform.

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

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

These new technologies have resulted in headwinds to our business, and over time, the accuracy of these tools and their ability to handle complex questions is expected to improve, which would be disruptive to education technology businesses, such as ours.

Our success also depends, in part, on our ability to develop and scale a high-performance technology infrastructure to efficiently handle increased usage by students, especially during peak periods each academic term.

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In April 2023, we announced our pivot to AI with a partnership with OpenAI to utilize GPT-4 in our offerings.

and in August 2023, we announced a partnership with Scale AI to develop proprietary LLMs to provide a generative experience through Chegg as a personalized learning assistant.

Beginning in September 2023, we started to roll out the first phase of our new AI-powered user experience, and we are continuing to make significant investments in AI initiatives.

If our new offerings or changes to existing offerings fail to engage students, or if our business plans are unsuccessful, we may fail to attract or retain students or to generate sufficient revenue, operating margin, or other value to justify our investments, and our business may be materially adversely affected.

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

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

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

Our updated user experience and investments in AI have not attracted as many new students as anticipated to our platform and our business has been adversely affected.

If our business plans and product developments are unsuccessful or if we do not attract new students to our platform, we may not generate sufficient revenue, operating margin, or other value to justify our investments, and our business may be materially adversely affected.

Global non-subscriber traffic to Chegg declined year-over-year 8% in Q2 2024, 19% in Q3 2024, 39% in Q4 2024 and we entered 2025 with trends looking even more unfavorable, at a 49% year-over-year decline for the month of January 2025, which has had, and if it persists or worsens, will continue to have a material adverse effect on our business.

While the overall effect of technological changes on our business is difficult to predict, recent technological shifts have created and are expected to continue creating headwinds for our industry and our business.

Failure to keep pace with these

technological developments or otherwise bring to market products that reflect these technologies and are accepted by students would have a material adverse impact on our overall business and results of operations.

Our business has been negatively impacted by these developments, and we may not be successful in anticipating or responding to further developments, on a timely and cost-effective basis or at all.

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

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

Our competitors that are not specifically focused on education and learning services but whose AI offerings may impact education

and learning include companies such as Google, OpenAI, Microsoft, Meta, and Anthropic.

Our competitors that are not specifically focused on education and learning services but whose AI offerings may impact education and learning include companies such as Google, OpenAI, Microsoft, Meta, and Anthropic.

In particular, Google's roll out of Artificial Intelligence Overview (AIO) has created and is expected to continue to create headwinds for our industry and our business, most notably reductions in traffic to our website and customers subscribing to our services.

In August 2024, Google began to significantly expand its AIO search experience, which displays AI-generated content at the top of its search results.

This experience, which includes questions and solutions for education, keeps users on Google search results versus leading them onto our site.

AIO’s prevalence has grown and may continue to increase.

While we continue to study the changes and adjust our SEO strategy, we expect Google may continue its shift from being a search origination point to the destination, which could materially adversely affect our business, operating results and financial condition.

As described in more detail in Part I, Item 3, "Legal Proceedings" of this Annual Report on Form 10-K, on February 24, 2025, we filed a complaint in the U.S.

District Court for the District of Columbia against Google LLC and Alphabet Inc.

("Google"), asserting federal antitrust claims and common-law unjust enrichment claims, in connection with Google's expansion of its AIO search experience.

Given the nature of the case, including that the proceedings are in their early stages, we are unable to predict the ultimate outcome of the case or whether Google will seek to counterclaim, or the likelihood of success should Google do so.

This claim could result in costly litigation, require significant amounts of management time, and divert significant resources.

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

Certain educational institutions, such as the University of Michigan, are also developing AI tools which may compete with our offerings.

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Further, our ability to continue to develop and effectively deploy AI technologies is dependent on access to specific third-party large language models, equipment and other physical infrastructure, such as processing hardware and network capacity, as to which we cannot control the availability or pricing, especially in a highly competitive environment.

Across our industry, there has been a continued increase in the adoption of free and paid generative AI products for academic support, and students are increasingly turning to generative AI for academic support, such as homework and exams, as well as assistance in other areas of daily life.

This shift in student behavior impacts education technology companies broadly, where students see generative AI products like Chat GPT and others as strong alternatives to vertically specialized solutions for

education such as Chegg.

These developments have negatively impacted our industry and our business and may continue to impact our overall traffic and accelerate the decline in the number of new subscribers that sign up for our services.

Some of our competitors have adopted, and may continue to adopt, aggressive pricing policies (including free offerings), less stringent standards for user-uploaded content, and devote substantially more resources to marketing, website, and systems development than we do.

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

New competition may come from companies with greater brand recognition, and have significantly greater financial, marketing, and other resources than we do.

We may, in the future, establish alliances or relationships with other competitors or potential competitors.

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

As a result, we have and could continue to experience a material adverse effect on our operating results, growth and financial condition.

Our exploration of strategic alternatives may not be successful and may disrupt our ongoing business, result in increased expenses and present certain other risks.

On February 24, 2025, we announced that we are undertaking a strategic review process and exploring a range of alternatives to maximize shareholder value, including being acquired, undertaking a go-private transaction, or remaining as a standalone public company.

This review will be ongoing with our continued investment, innovation, and execution.

We have not set a timetable for the completion of this process, and there can be no assurance that it will result in any transaction or outcome.

Whether the process will result in any transactions, and if we decide to pursue one or more transactions, our ability to complete any transaction, will depend on numerous factors, some of which are beyond our control.

Such factors include the interest of potential acquirers or strategic partners in a potential transaction, the value potential acquirers or strategic partners attribute to our businesses and their respective prospects, market conditions, interest rates and industry trends.

The attention of management and our board of directors could be diverted from our core business operations as a result of the process.

We have diverted capital and other resources to the process that otherwise could have been used in our business operations, and we will continue to do so until the process is completed.

Whether or not we complete a transaction, we could incur substantial expenses associated with identifying and evaluating potential strategic alternatives, including those related to employee retention payments, equity compensation, severance pay and legal, accounting and financial advisor fees.

In addition, the process could lead us to lose or fail to attract, retain and motivate key employees, and to lose or fail to attract students on our platform or business partners.

Furthermore, it could expose us to litigation.

The public announcement of a strategic alternative may also yield a negative impact on operating results if prospective or existing service providers are reluctant to commit to new or renewal contracts.

We do not intend to disclose developments or provide updates on the progress or status of the process until we deem further disclosure is appropriate or required.

Accordingly, speculation regarding any developments related to the review of strategic alternatives and perceived uncertainties related to the future of Chegg could cause our stock price to fluctuate significantly.

Our stock price may also be adversely affected if the process does not result in a transaction or if one or more transactions are completed on terms that investors view as unfavorable to us.

Even if one or more transactions are completed, there can be no assurance that any such transactions will be successful or have a positive effect on stockholder value.

Our board of directors may also determine that no transaction is in the best interest of our stockholders.

In addition, our financial results and operations could be adversely affected by the process and by the uncertainty regarding its outcome.

colleges have faced, and may continue to face, reduced enrollment, which could negatively impact our business and results of operations.

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

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

In addition to our employee base in the United States, as of December 31, 2024 we had employees in Canada, Israel, India, the United Kingdom, and Spain, and we have retained professional employer organizations and staffing agencies to engage personnel in certain additional international locations.

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

Further, enrollments of learners from other countries requires us to comply with international data privacy and education regulations of those countries.

Further, enrollments of learners from other countries requires us to comply with international data privacy

and education regulations of those countries.

Failure to comply with international regulations or to adequately adapt to international markets could harm our ability to successfully operate our business and pursue our business goals.

We have a limited operating history in international jurisdictions and our expansion efforts into international markets may not be successful.

We intend to expand our international operations and presence, and to make our products and services available in more international markets.

However, we have a limited operating history in international jurisdictions and expanding our international operations will require considerable management attention and resources to attract talented employees and

We periodically expand our international operations and presence, in order to make our products and services available in more international markets.

Our expansion efforts into international markets may not be successful.

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The uncertainty surrounding the evolving educational landscape, including the impact of AI on learning and education, the state of the student including the amount and the extent to which AI will impact study habits and how students learn and/or complete their assignments, and the demand for our evolving offerings make it difficult to predict our operational trends and results of operations.

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

The uncertainty surrounding the evolving educational landscape, the state of the student, the use by students of free generative AI products for academic support, and the demand and market for our products and services make it difficult to predict our operational trends and results of operations, particularly with respect to our newer offerings, and the ultimate market size for our products and services.

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

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Additionally, we expect our results of operations to fluctuate in the future based on a variety of factors, many of which are outside our control and difficult to predict.

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

As a result, period-to-period comparisons of our results of operations may not be a good indicator of our

future or long-term performance.

The following factors, including the risks more fully described throughout this "Risk Factors" section, may affect us from period-to-period and may affect our long-term performance:

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

• rapidly changing technological developments, such as AI and machine learning, that may disrupt the education landscape and our response to those developments, including our ability to successfully integrate AI technology into our offerings;

• increased competition as a result of advances in AI technology from companies that have not historically competed with us in education services, such as Alphabet, OpenAI, Microsoft, Meta, and Anthropic;

• rapidly changing technological developments, such as AI and machine learning, that have impacted and are expected to continue impacting the education landscape and our response to those developments, including our ability to successfully integrate AI technology into our offerings;

• increased competition as a result of advances in AI technology from companies that have not historically competed with us in education services, such as Google, OpenAI, Microsoft, Meta, and Anthropic, who may offer free generative AI products for academic support or whose general AI offerings are being adopted by students in lieu of our offerings;

• changes to the way students discover our content or a decline in our search engine result page rankings;

• changes to Google’s search experience, including its AI overviews search experience, which displays AI-generated content at the top of its search results, including questions and solutions for education, that keeps users on Google's search results instead of leading them to our site;

• the rate of adoption of our offerings;

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• our ability to integrate acquired businesses, including personnel;

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

• government regulations, in particular regarding privacy, academic integrity, advertising, “click-to-cancel” and taxation;

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

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Their websites may receive a higher search result page ranking than ours, or search engines could revise their methodologies or algorithms in ways that could adversely affect the placement of our search result page ranking or otherwise make it harder for students to find our learning platform.

In mid-August, Google broadly rolled out its AIO search experience, which displays AI-generated content at the top of its search results.

This experience, which includes questions and solutions for education, keeps users on Google search results versus leading them onto Chegg’s site.

AIO’s prevalence will only continue to increase.

While we continue to study the changes and will adjust our SEO strategy, we expect Google to continue its shift from being a search origination point to the destination, which could materially adversely affect our business, operating results and financial condition.

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

Global non-subscriber traffic to Chegg declined year-over-year 8% in Q2 2024, 19% in Q3 2024, 39% in Q4 2024 and we entered 2025 with trends looking even more unfavorable, at negative 49% year-over-year for the month of January 2025.

A continued decline in traffic to our site would materially adversely affect our business, operating results and financial condition.

Similarly, our competitors may achieve higher social media engagement than ours, social media companies may alter their algorithms in ways that disadvantage our content, or the social media platforms we use may become less popular with students, each of which may adversely impact the effectiveness of our campaigns.

If our competitors’ efforts to increase user traffic are more successful than ours, overall growth could slow, including the number of Subscription Services subscribers, student engagement could decrease, and fewer students may use our platform.

If our competitors’ efforts to increase user traffic are more successful than ours, our decline could accelerate, including the number of Subscription Services subscribers, student engagement could decrease, and fewer students may use our platform.

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

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

Adverse economic conditions, including inflation, rising interest rates, market uncertainty, and war (including the war in Ukraine and the Israel-Hamas war), may adversely impact our ability to attract new students to, and retain existing students on, our platform.

Adverse economic conditions, including inflation, fluctuating interest rates, market uncertainty, and war (including the war in Ukraine and the Israel-Hamas war), may adversely impact our ability to attract new students to, and retain existing students on, our platform.

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

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

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

We may incur significant losses in the future for a number of reasons, including slowing or lower demand for our products and services, increasing competition, decreased spending on education,

and other risks described in this Annual Report on Form 10-K.

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

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Although we expect to continue to make significant investments in efforts to attract new, and retain existing, subscribers and increase Subscription Services revenue, we may not succeed in doing so.

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

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

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

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

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

In particular, we rely on the contributions of our President and Chief Executive Officer, Nathan Schultz.

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

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Competition for these employees is intense.

Qualified individuals are in high demand, particularly in the San

Francisco Bay Area where our executive offices are located, and if we cannot attract or retain the personnel we need to succeed, our business may suffer.

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

As of December 31, 2024, there were 10,340,723 shares available for grant under the 2023 Equity Incentive Plan.

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

We have undertaken, and may in the future undertake, internal restructuring activities that could result in disruptions to our business or otherwise materially harm our results of operations or financial condition.

From time to time, we have undertaken and may continue to undertake internal restructuring activities in an effort to better align our resources with our business strategy.

For example, in November 2024 and June 2024, we announced restructuring plans that included reductions of our global workforce of approximately 760 employees, or approximately 22% of our workforce, to better align our cost structure with recent industry challenges that are negatively impacting our business, including increased competition and student adoption of generative AI products.

We incur substantial costs to implement restructuring plans, and our restructuring activities may subject us to reputational risks and litigation risks and expenses.

There can be no assurance that any restructuring activities that we have undertaken or undertake in the future will achieve the cost savings, operating efficiencies, or other benefits that we may initially expect.

In addition, restructuring activities has in the past and may continue to result in loss of institutional knowledge and expertise, attrition beyond our intended reduction in force, or a negative impact on employee morale and productivity or our ability to attract highly skilled employees.

Internal restructurings can also require a significant amount of time and focus from management and other employees, which may divert attention from commercial operations.

If any internal restructuring activities we have undertaken or undertake in the future fail to achieve some or all of the expected benefits, our business, financial condition, and results of operations could be materially and adversely affected.

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

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

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

give preferential treatment or app store placement to competitive products could adversely affect the access and usage of our applications on mobile devices.

Each operating system provider has broad discretion to make changes to its operating systems or payment services or change the manner in which their mobile operating systems function and to change and interpret its terms of service and other policies with respect to us and other developers, and those changes may be unfavorable to us.

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

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

We may experience some loss from fraudulent credit card transactions, including potential liability for not obtaining signatures from students in connection with the use of credit cards.

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

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

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

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

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

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

Further, these third-party software and service providers may experience operational difficulties, including increased

usage of their software and services from time to time.

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

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

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Our business strategy includes increasing our revenues from brand advertising.

Brands may not do business with us, or may reduce their advertising spend with us, if we do not deliver ads, sponsorships, and other commercial content and marketing

programs effectively, or if they do not believe that their investment will generate a competitive return relative to other alternatives.

Brands may not do business with us, or may reduce their advertising spend with us, if we do not deliver ads, sponsorships, and other commercial content and marketing programs effectively, or if they do not believe that their investment will generate a competitive return relative to other alternatives.

Additionally, if platforms such as Google Chrome, Safari, or Firefox, limit our access to or understanding of advertising and marketing audiences, they could reduce our advertising rates and ultimately reduce our revenues from brand advertising.

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In the past, we have forgone, and in the future, we may forgo, short-term revenue opportunities that we do not believe are in the best interests of students, even if our decision negatively impacts our results of operations in the short term.

For example, we offer free services to students that require investment by us, such as our Chegg Internships service, to promote a more comprehensive solution.

Our philosophy of putting students first may cause us to make decisions that could negatively impact our relationships with publishers, colleges, and brands, whose interests may not always be aligned with ours or those of our students.

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Any future expansion will likely place significant demand on our resources, capabilities and systems, and we may need to develop new processes and procedures and expand our infrastructure to respond to these demands.

If we are not able to manage the growth of our business, we may not

be able to maintain or increase our revenues as anticipated or recover any associated acquisition or development costs, and our business could be adversely affected.

If we are not able to manage the growth of our business, we may not be able to maintain or increase our revenues as anticipated or recover any associated acquisition or development costs, and our business could be adversely affected.

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

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These laws and regulations are directed at enterprises selling term papers, theses, dissertations, and the like, which we do not offer, and were not designed for services like ours which are designed to help students understand the relevant subject matter.

and regulations, or the interpretation of the existing or future laws and regulations may impact whether they are cited against us or where we can offer our services.

Although we will continue to work with academic institutions to enforce our honor code and otherwise discourage students from misusing our services, other jurisdictions (including international jurisdictions) may adopt similar or broader versions of these types of laws and regulations, or the interpretation of the existing or future laws and regulations may impact whether they are cited against us or where we can offer our services.

The adoption of any laws or regulations that adversely affect the popularity or growth in the use of the Internet particularly for educational services, including laws limiting the content and learning programs that we can offer, and the audiences that we can offer that content to, may decrease demand for our service offerings and increase our cost of doing business.

Future regulations, or changes in laws and regulations or their existing interpretations or applications, could also hinder our operational flexibility, raise compliance costs, and result in additional historical or future liabilities for us, resulting in adverse impacts on our business and our results of operations.

Similarly, the adoption of any laws or regulations affecting the ability of service providers to periodically charge consumers for, among other things, recurring subscription payments may materially adversely affect our business, financial condition and results of operations.

Similarly, the adoption of any laws or regulations affecting the ability of service providers to periodically charge consumers for, among other things, recurring subscription payments, such as the Restore Online Shoppers’ Confidence Act, may materially adversely affect our business, financial condition and results of operations.

Legislation or regulation regarding the foregoing, or changes to existing legislation or regulation governing subscription payments, are being considered in many U.S.

We have been in the past, and may be in the future, subject to claims under such laws or regulations.

We are and have been in the past, and may be in the future, the subject of investigations, inquiries, and claims under such laws or regulations, including from the Federal Trade Commission (FTC).

As the regulatory framework for machine learning, artificial intelligence, and automated decision making evolves, our business, financial condition, and results of operations may be adversely affected by related laws or regulations.

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Our effective tax rate may fluctuate in the future as a result of new tax laws.

New tax laws could have a meaningful impact on our provision for income taxes once we release our valuation allowance.

Due to the complexities involved in applying the provisions of new tax legislation, we may make reasonable estimates of the effects in our financial statements.

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The accounting standards that we use in preparing our financial statements are often complex and require us to make significant estimates and assumptions in interpreting and applying those standards.

These estimates and assumptions affect the

reported values of assets, liabilities, revenues and expenses, and the disclosure of contingent liabilities.

We make critical estimates and assumptions involving accounting matters including revenue recognition and deferred revenue, impairment of acquired intangible assets and other long-lived assets, goodwill and indefinite lived intangible assets, share-based compensation expense, and (provision for) benefit from income taxes.

These estimates and assumptions affect the reported values of assets, liabilities, revenues and expenses, and the disclosure of contingent liabilities.

expense, and (provision for) benefit from income taxes.

These estimates and assumptions involve matters that are inherently uncertain and require us to make subjective and complex judgments.

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Through such misuse of our platform and content, students may be able to access our offerings for free or at a reduced cost relative to our paid subscription, which has and may continue to negatively impact our ability to attract students to, and retain students on, our platform.

The impact of misuse of our platform and content on our revenues and subscriptions is hard to quantify, but we believe that illegal copying and dissemination of our content, improper sharing and misappropriation of user credentials, and other forms of unauthorized activity have had a substantial

negative impact on our revenues and subscriptions.

Also, despite the potential benefits of AI technology, the advancement of AI may increase certain risks and adverse impacts associated with misuse of our content, including the development of AI applications that may facilitate piracy and new forms of intellectual property infringement through the unauthorized reproduction of copyrighted content to “train” AI applications and to create unauthorized derivative works.

Also, despite the potential benefits of AI technology, the advancement of AI may increase certain risks and adverse impacts associated with misuse of our content, including the development of AI

applications that may facilitate piracy and new forms of intellectual property infringement through the unauthorized reproduction of copyrighted content to “train” AI applications and to create unauthorized derivative works.

If we fail to obtain appropriate relief through the judicial process or the complete enforcement of judicial decisions issued in our favor (or if judicial decisions are not in our favor) or fail to develop effective means of protecting our content and enforcing our intellectual property rights, our business, financial condition, and results of operations may be negatively impacted.

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If we fail to resolve such disputes, litigation may result.

For example, on September 13, 2021, Pearson Education, Inc.

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

(Pearson Complaint) in the United States District Court for the District of New Jersey against the Company (Case 2:21-cv-16866), alleging infringement of Pearson’s registered copyrights and exclusive rights under copyright in violation of the United States Copyright Act.

For example, we have been subject to lawsuits alleging copyright infringement.

Litigation to defend these claims could be costly, divert our technical and management personnel, render us unable to use our current website or to market our service or sell our products and therefore harm our results of operations.

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

From time to time, third parties have alleged and are likely to allege in the future that we or our business infringes, misappropriates, or otherwise violates their intellectual property or proprietary rights beyond those circumstances discussed in other risk factors contained in this Section, “Risks Relating to Our Intellectual Property.” Many companies, including various “non-practicing entities” or “patent trolls,” devote significant resources to developing or acquiring patents that could affect aspects of our business.

other risk factors contained in this Section, “Risks Relating to Our Intellectual Property.” Many companies, including various “non-practicing entities” or “patent trolls,” devote significant resources to developing or acquiring patents that could affect aspects of our business.

Our patent portfolio may provide little or no deterrence in any litigation involving non-practicing entities or other adverse patent owners that have no relevant solution revenue, as we would not be able to assert our patents against such entities or individuals.

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Additionally, nation-state actors are expected to continue to engage in cyber-attacks for geopolitical reasons and in conjunction with military conflicts and defense activities.

During times of war and other major conflicts, we, our service providers and other third parties

upon which we rely, may be vulnerable to a heightened risk of these attacks.

During times of war and other major conflicts, we, our service providers and other third parties upon which we rely, may be vulnerable to a heightened risk of these attacks.

Furthermore, remote work has become more common and has increased risks to our information technology systems and data, as more of our employees, as well as employees of our service providers and other third parties on which we rely, utilize network connections, computers and devices outside our premises or network, including while working at home, while in transit and in public locations.

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We cannot be sure that our insurance coverage will be adequate or sufficient to protect us from or to mitigate liabilities arising out of our privacy and security practices, that such coverage will continue to be available on commercially reasonable terms or at all, or that such coverage will pay future claims.

Any sensitive information (including confidential, competitive, proprietary, or personal data) that we input into a third-party generative AI/machine learning (ML) platform could be leaked or disclosed to others, including if sensitive information is used to train the third parties’ AI/ML model.

Additionally, where an AI/ML model ingests personal data and makes connections using such data, those technologies may reveal other personal or sensitive information generated by the model.

Moreover, AI/ML models may create flawed, incomplete, or inaccurate outputs, some of which may appear correct.

This may happen if the inputs that the model relied on were inaccurate, incomplete or flawed (including if a bad actor “poisons” the AI/ML with bad inputs or logic), or if the logic of the AI/ML is flawed (a so-called “hallucination”).

We may use AI/ML outputs to make certain decisions.

Due to these potential inaccuracies or flaws, the model could be biased and could lead us to make decisions that could bias certain individuals (or classes of individuals), and adversely impact their rights, employment, and ability to obtain certain pricing, products, services, or benefits.

We may expend significant resources or modify our business activities to try to protect against threats to our security or systems.

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For a small percentage of the impacted users who had entered details into our scholarship search service, the incident also exposed information about additional personal characteristics, including dates of birth, parents’ income range, sexual orientation, religious denomination, heritage and information concerning disabilities.

Following the 2018 Data Incident, a purported securities class action captioned Shah v.

3:18-cv-05956-CRB) was filed in the U.S.

District Court for the Northern District of California against us and our CEO.

The complaint was filed by a purported Chegg stockholder and alleged claims under Sections 10(b) and 20(a) of the Exchange Act, as amended, based on allegedly misleading statements regarding our security measures to protect users’ data and related internal controls and procedures, as well as our second quarter 2018 financial results.

This case was voluntarily dismissed without prejudice in March 2019.

Moreover, following the 2018 Data Incident, we received notices that an aggregate of 16,691 arbitration demands were filed against us by individuals alleging that they had suffered damages in connection with the 2018 Data Incident.

All such arbitral demands have been resolved.

We have faced other claims for allegedly misleading statements regarding our security measures to protect users' data and related internal controls and procedures and for failure to take reasonable security measures.

In October 2022, without any admission of liability, we entered into an agreement with the FTC containing a proposed consent order that will significantly impact our data security and privacy practices.

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We have completed our first such independent assessment of our ISP with no material findings.

Any violations of the proposed order could expose us to significant civil penalties, further injunctions and other adverse consequences.

Additionally, after the FTC’s preliminary approval of the consent order was publicly announced, a putative class action captioned Keller v.

22-cv-6986-JD) was filed in November 2022 in the U.S.

District Court for the Northern District of California.

The complaint was filed by a purported Chegg user and alleges various claims based on Chegg’s failure to take reasonable security measures.

The plaintiff asserts claims under negligence;

negligence per se;

the California Consumer Legal Remedies Act, Cal.

Code §§ 1750, et seq.;

the California Consumer Privacy Act, Cal.

Code § 1798.150;

and the Declaratory Judgment Act, 28 U.S.C.

§§ 2201, et seq.

The Plaintiff seeks relief that certifies a class, damages, a declaratory judgment, injunctive relief, and attorneys’ fees and costs.

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.

In addition, we are currently cooperating with the FTC on an investigation as to whether we have violated certain terms of the consent order.

While we are unable to predict the outcome of, or developments following, this investigation, the development and resolution of this matter could negatively impact our business, results of operations, and financial condition.

Actions and investigations such as the foregoing, and any similar or other actions, claims, litigation, investigations or events, whether arising from prior or future incidents, may harm our business and cause us to suffer adverse consequences.

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In the United States, federal, state, and local governments have enacted numerous data privacy and security laws, including data breach notification laws, personal data privacy laws, consumer protection laws (e.g., Section 5 of the Federal Trade Commission Act), and other similar laws (e.g., wiretapping laws).

For example, the California Consumer Privacy Act of 2018 (“CCPA”) requires businesses to provide specific disclosures in privacy notices and honor requests of California residents

to exercise certain privacy rights.

The California Privacy Rights Act of 2020 (“CPRA”), which became operative January 1, 2023, expands the CCPA’s requirements, including applying to personal information of business representatives and employees.

Thirteen other states have now passed comprehensive privacy laws, and similar state laws are being considered, as well as laws at the federal and local levels.

These developments further complicate compliance efforts and may increase legal risk and compliance costs for us and the third parties upon whom we rely.

Numerous U.S.

states have enacted comprehensive privacy laws that impose certain obligations on covered businesses, including providing specific disclosures in privacy notices and affording residents with certain rights concerning their personal data.

As applicable, such rights may include the right to access, correct, or delete certain personal data, and to opt-out of certain data processing activities, such as targeted advertising, profiling, and automated decision-making.

The exercise of these rights may impact our business and ability to provide our products and services.

Certain states also impose stricter requirements for processing certain personal data, including sensitive information, such as conducting data privacy impact assessments.

These state laws allow for statutory fines for noncompliance.

For example, the California Consumer Privacy Act of 2018 (“CCPA”) applies to personal data of consumers, business representatives, and employees who are California residents, and requires businesses to provide specific disclosures in privacy notices and honor requests of such individuals to exercise certain privacy rights.

The CCPA provides for fines of up to $7,988 per intentional violation and allows private litigants affected by certain data breaches to recover significant statutory damages.

Similar laws are being considered in several other states, as well as at the federal and local levels, and we expect more states to pass similar laws in the future.

Additionally, regulators are increasingly scrutinizing companies that process children’s data.

Numerous laws, regulations, and legally binding codes, such as the Children’s Online Privacy Protection Act (“COPPA”), California’s Age Appropriate Design Code, the CCPA, other U.S.

state comprehensive privacy and social media laws, the GDPR, and the UK Age Appropriate Design Code impose various obligations on companies that process children’s data, including requiring certain consents to process such data and extending certain rights to children and their parents with respect that data.

Some of these obligations have wide ranging applications, including for services that do not intentionally target child users (defined in some circumstances as a user under the age of 18 years old).

These laws may be, or in some cases, have already been, subject to legal challenges and changing interpretations, which may further complicate our efforts to comply with these laws.

Students who use some of our services, including high school students who use our Chegg Writing and Chegg Prep services, may be under the age of 18.

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and international laws restrict the distribution of materials considered harmful to minors and impose additional restrictions on the ability of online services to collect information from minors.

Although our policy is to avoid knowingly collecting personal information from children under the age of 13 and we do not believe that our websites or online services are directed to children under the age of 13, regulators or private plaintiffs could disagree with this assessment and challenge our compliance with the federal Children’s Online Privacy Protection Act and its implementing rules (“COPPA”) which impose enhanced notice, verifiable parental consent, data minimization, security and other data privacy requirements on child-directed sites and online services that our services are not designed to support.

Although our policy is to avoid knowingly collecting personal information from children under the age of 13 and we do not believe that our websites or online services are directed to children under the age of 13, regulators or private plaintiffs could disagree with this assessment and challenge our compliance with the COPPA which impose enhanced notice, verifiable parental consent, data minimization, security and other data privacy requirements on child-directed sites and online services that our services are not designed to support.

Additionally, we may be subject to certain marketing laws that govern our use of personal information.

For example, the Controlling the Assault of Non-Solicited Pornography and Marketing Act of 2003 ("CAN-SPAM”) and the Telephone Consumer Protection Act of 1991 (“TCPA”) impose specific requirements on communications with customers.

For example, the CAN-SPAM and the TCPA impose specific requirements on communications with customers.

For example, the TCPA imposes various consumer consent requirements and other restrictions on certain telemarketing activity and other communications with consumers by phone, fax or text message.

TCPA violations can result in significant financial penalties, including penalties or criminal fines imposed by the Federal Communications Commission or fines of up to $1,500 per violation imposed through private litigation or by state authorities.

Furthermore, under various other privacy laws and other obligations, we may be required to obtain certain consents to process personal data.

Foreign privacy, data protection, and other laws and regulations, particularly in Europe, are often at least as restrictive as, if not more restrictive than, those in the United States.

For example, the European Union’s General Data Protection Regulation (“EU GDPR”), the United Kingdom’s GDPR (“UK GDPR”), Brazil’s General Data Protection Law (Lei Geral de Proteção de Dados Pessoais, or “LGPD”) (Law No.

For example, the European Union’s General Data Protection Regulation (“EU GDPR”), the United Kingdom’s GDPR (“UK GDPR” and together with the EU GDPR, the "GDPR"), Brazil’s General Data Protection Law (Lei Geral de Proteção de Dados Pessoais, or “LGPD”) (Law No.

13,709/2018), and China’s Personal Information Protection Law (“PIPL”) impose strict requirements for processing personal data.

For example, under the GDPR, companies may face temporary or definitive bans on data processing and other corrective actions;

fines of up to 20 million Euros under the EU GDPR, 17.5 million pounds sterling under the UK GDPR or, in each case, 4% of annual global revenue, whichever is greater;

or private litigation related to processing of personal data brought by classes of data subjects or consumer protection organizations authorized at law to represent their interests.

In addition, some countries (including Europe) and states are considering or have passed legislation implementing requirements with respect to cross-border transfers of data or requiring local storage and processing of data or similar requirements that could increase the cost and complexity of delivering our services.

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In addition, Switzerland similarly restricts personal data transfers outside of those jurisdictions to countries that do not provide an adequate level of personal data protection.

Furthermore, European legislative proposals and present laws and regulations – other than the EU and UK GDPR – apply to cookies and similar tracking technologies, electronic communications, and marketing and regulators are increasingly focusing on compliance with requirements related to the behavioral, interest-based, or tailored advertising ecosystem.

focusing on compliance with requirements related to the behavioral, interest-based, or tailored advertising ecosystem.

It is anticipated that the ePrivacy Regulation and national implementing laws will replace the current national laws implementing the ePrivacy Directive.

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For example, the CCPA grants California residents the right to opt-out of a company’s sharing of personal data for advertising purposes in exchange for money or other valuable consideration.

purposes, which has negatively impacted our ability to collect certain user data and our advertising partners’ ability to deliver relevant content, and more may do so in the future.

As individuals become increasingly aware of and resistant to the collection, use, and sharing of personal information in connection with advertising, some users have opted out of our processing of personal data for advertising purposes, which has negatively impacted our ability to collect certain user data and our advertising partners’ ability to deliver relevant content, and more may do so in the future.

We use AI, including generative AI, and ML technologies in our products and services (collectively, “AI/ML” technologies).

The development and use of AI/ML present various privacy and security risks that may impact our business.

AI/ML are subject to privacy and data security laws, as well as increasing regulation and scrutiny.

Several jurisdictions around the globe, including Europe and certain U.S.

states, have proposed enacted, or are considering laws governing the development and use of AI/ML, such as the EU’s AI Act.

We expect other jurisdictions will adopt similar laws.

Additionally, certain privacy laws extend rights to consumers (such as the right to delete certain personal data) and regulate automated decision making, which may be incompatible with our use of AI/ML.

These obligations may make it harder for us to conduct our business using AI/ML, lead to regulatory fines or penalties, require us to change our business practices, retrain our AI/ML, or prevent or limit our use of AI/ML.

For example, the FTC has required other companies to turn over (or disgorge) valuable insights or trainings generated through the use of AI/ML where they allege the company has violated privacy and consumer protection laws.

If we cannot use AI/ML or that use is restricted, our business may be less efficient, or we may be at a competitive disadvantage.

In addition to data privacy and security laws, we may be or may become subject to industry standards adopted by industry groups.

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We have in the past and may in the future be subject to regulatory investigations and actions or litigation in connection with any noncompliance with our privacy obligations or a security breach or related issue, and we could also be liable to third parties for these types of incidents.

same, as further described in Note 10, “Commitments and Contingencies,” 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.

For instance, we have been subject to litigation and investigations as a result of past security incidents, as further described in the risk factor titled “ The compromise of our information technology systems or data, including through computer malware, viruses, hacking, phishing attacks, spamming and other security incidents, could harm our business and results of operations ,” and a consent order has been finally approved and entered by the FTC related to the same, as further described in Note 10, “Commitments and Contingencies,” 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.

We could face similar actions, or other actions related to our privacy and data security practices, in the future.

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For example, proposed or recently adopted EU laws could significantly affect our business in the future.

For example, the Digital Services Act or “DSA”, effective in February of 2024, imposes new restrictions and requirements for our products and services, such as a prohibition on targeted advertising to minors in the EEA, and may significantly increase our compliance costs.

The European Commission's proposed Artificial Intelligence (AI) Act could also impose new obligations or limitations affecting our business, if and when it enters into force.

For example, the Digital Services Act or “DSA”, took effect in February of 2024, imposes new restrictions and requirements for our products and services, such as a prohibition on targeted advertising to minors in the EEA, and may significantly increase our compliance costs.

The European Commission's proposed AI Act could also impose new obligations or limitations affecting our business, if and when it enters into force.

The legal landscape with respect to privacy and data security in the U.S.

and elsewhere is similarly in flux with a number of pending legislative and regulatory proposals that could have significant impacts on our business, if effected.

In addition, the Federal Trade Commission recently announced a final “click-to-cancel” rule that will require subscription services like Chegg to make it as easy for consumers to cancel their enrollment as it was to sign up.

jurisdictions and states, such as California, are contemplating similar legislation.

This new legislation and regulation could have a material negative impact on our business, financial condition, and results of operations.

Risks Related to Ownership of Our Common Stock

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Delaware law and provisions in our restated certificate of incorporation and restated bylaws could make a merger, tender offer or proxy contest difficult, thereby depressing the trading price of our common stock.

Our status as a Delaware corporation and the anti-takeover provisions of the Delaware General Corporation Law may discourage, delay or prevent a change in control by prohibiting us from engaging in a business combination with an interested stockholder for a period of three years after the person becomes an interested stockholder, even if a change of control would be beneficial to our existing stockholders.

stockholder for a period of three years after the person becomes an interested stockholder, even if a change of control would be beneficial to our existing stockholders.

In addition, our restated certificate of incorporation and restated bylaws contain provisions that may make the acquisition of our company more difficult, including the following:

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This choice of forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or any of our directors, officers, or other employees, which may discourage lawsuits against us and our directors, officers, and other employees.

This exclusive forum provision will not apply to claims that are vested in the exclusive jurisdiction of a court or forum other than the Court of Chancery of the State of Delaware, or for which the Court of

Chancery of the State of Delaware does not have subject matter jurisdiction.

For instance, the provision would not preclude the filing of claims brought to enforce any liability or duty created by the Exchange Act or Securities Act of 1933, as amended (Securities Act) or the rules and regulations thereunder in federal court.

Our securities repurchase program could affect the price of our common stock and increase volatility and may be suspended or terminated at any time, which may result in a decrease in the trading price of our common stock.

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.

In November 2024, our board of directors approved a $300.0 million increase to our existing securities repurchase program authorizing the repurchase 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, alternative investment opportunities, and other factors.

As of December 31, 2024, we had $207.5 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.

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We may not be able to generate cash flow from operations, in the foreseeable future, sufficient to service our debt and make necessary capital expenditures and may therefore be required to adopt one or more alternatives, such as selling assets, restructuring debt or obtaining additional equity capital on terms that may be onerous or highly dilutive.

Our ability to refinance the notes which, as of September 2023 for the 2026 notes and March 2022 for the 2025 notes, may be redeemable subject to certain conditions related to the price of our common stock, will depend on the capital markets and our financial condition at such time.

Our ability to refinance the notes will depend on the capital markets and our financial condition at such time.

Given the volume of our repurchases of the notes to date, our future repurchases may be restrained by the quantity available for sale on the capital markets.

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

What changed 10-K

Item 1A. Risk Factors