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 (loss) income 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 13%, 14% and 15% of total net revenues during the years ended December 31, 2024, 2023 and 2022, 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 As of December 31, 2024 and 2023, we had cash and cash equivalents totaling $161.5 million and $135.8 million, respectively, and investments of $366.9 million and $443.8 million, respectively. Our cash and cash equivalents consist of cash and money market funds and investments consist of corporate debt securities and U.S. treasury securities. Changes in U.S. interest rates, 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 $4.3 million increase or decline in the fair value of our investments as of December 31, 2024. 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. 53 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 ) 55 Consolidated Balance Sheets 58 Consolidated Statements of Operations 59 Consolidated Statements of Comprehensive (Loss) Income 60 Consolidated Statements of Stockholders’ Equity 61 Consolidated Statements of Cash Flows 62 Notes to Consolidated Financial Statements 63 54 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, 2024 and 2023, the related consolidated statements of operations, comprehensive (loss) income, stockholders’ equity, and cash flows, for each of the three years in the period ended December 31, 2024, 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, 2024 and 2023, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2024, 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, 2024, 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 24, 2025, 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 Matter The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. Convertible Senior Notes — Refer to Notes 2 and 8 to the financial statements Critical Audit Matter Description In November 2024, the Company extinguished $116.6 million principal amount of the 2026 Notes, for a total reacquisition price of $96.5 million (including $0.3 million in fees). The Company elected to reacquire and not cancel the partially extinguished 2026 notes and left the associated capped call transactions outstanding. This resulted in a gain on extinguishment of $19.5 million during the year ended December 31, 2024. 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. 55 Table of Contents How the Critical Audit Matter Was Addressed in the Audit Our audit procedures related to evaluating the partial extinguishment of the 2026 convertible senior notes included the following, among others: • We tested the operating effectiveness of the internal controls over the Company’s accounting for the partial extinguishment of the 2026 convertible senior notes. • Our testing included reading the underlying repurchase agreements and evaluating the Company’s accounting analysis underlying the accounting of the convertible senior notes, evaluating the determination that the partial repurchase of the 2026 convertible senior notes was a debt extinguishment, obtaining audit evidence of the repurchases and recalculating the gain on extinguishment. • We utilized more experienced professionals on our team when evaluating management’s assessment of the accounting for the partial extinguishment. /s/ DELOITTE & TOUCHE LLP San Jose, California February 24, 2025 We have served as the Company’s auditor since 2018. 56 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, 2024, 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, 2024, 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, 2024, of the Company and our report dated February 24, 2025, 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 24, 2025 57 Table of Contents CHEGG, INC. CONSOLIDATED BALANCE SHEETS (in thousands, except for number of shares and par value) December 31, 2024 2023 Assets Current assets Cash and cash equivalents $ 161,475 $ 135,757 Short-term investments 154,249 194,257 Accounts receivable, net of allowance of $ 190 and $ 376 at December 31, 2024 and December 31, 2023, respectively 23,641 31,404 Prepaid expenses 17,100 20,980 Other current assets 81,094 32,437 Total current assets 437,559 414,835 Long-term investments 212,650 249,547 Property and equipment, net 170,648 183,073 Goodwill, net — 631,995 Intangible assets, net 10,347 52,430 Right of use assets 22,256 25,130 Deferred tax assets, net 964 141,843 Other assets 14,527 28,382 Total assets $ 868,951 $ 1,727,235 Liabilities and stockholders’ equity Current liabilities Accounts payable $ 15,159 $ 28,184 Deferred revenue 39,217 55,336 Accrued liabilities 115,360 77,863 Current portion of convertible senior notes, net 358,605 357,079 Total current liabilities 528,341 518,462 Long-term liabilities Convertible senior notes, net 127,344 242,758 Long-term operating lease liabilities 18,509 18,063 Other long-term liabilities 1,776 3,334 Total long-term liabilities 147,629 264,155 Total liabilities 675,970 782,617 Commitments and contingencies (Note 10) Stockholders’ equity: Preferred stock, $ 0.001 par value – 10,000,000 shares authorized, no shares issued and outstanding at December 31, 2024 and December 31, 2023 — — Common stock, $ 0.001 par value – 400,000,000 shares authorized; 104,880,048 and 102,823,700 shares issued and outstanding at December 31, 2024 and December 31, 2023, respectively 105 103 Additional paid-in capital 1,114,550 1,031,627 Accumulated other comprehensive loss ( 32,233 ) ( 34,739 ) Accumulated deficit ( 889,441 ) ( 52,373 ) Total stockholders’ equity 192,981 944,618 Total liabilities and stockholders’ equity $ 868,951 $ 1,727,235 See Notes to Consolidated Financial Statements. 58 Table of Contents CHEGG, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share amounts) Years Ended December 31, 2024 2023 2022 Net revenues $ 617,574 $ 716,295 $ 766,897 Cost of revenues 180,927 225,941 197,396 Gross profit 436,647 490,354 569,501 Operating expenses: Research and development 170,431 191,705 196,637 Sales and marketing 108,329 126,591 147,660 General and administrative 217,756 236,183 216,247 Impairment expense 677,239 3,600 — Total operating expenses 1,173,755 558,079 560,544 (Loss) income from operations ( 737,108 ) ( 67,725 ) 8,957 Interest expense, net and other income, net Interest expense, net ( 2,590 ) ( 3,773 ) ( 6,040 ) Other income, net 51,332 121,810 101,029 Total interest expense, net and other income, net 48,742 118,037 94,989 (Loss) income before (provision for) benefit from income taxes ( 688,366 ) 50,312 103,946 (Provision for) benefit from income taxes ( 148,702 ) ( 32,132 ) 162,692 Net (loss) income $ ( 837,068 ) $ 18,180 $ 266,638 Net (loss) income per share Basic $ ( 8.10 ) $ 0.16 $ 2.09 Diluted $ ( 8.10 ) $ ( 0.34 ) $ 1.34 Weighted average shares used to compute net (loss) income per share Basic 103,300 116,504 127,557 Diluted 103,300 128,569 149,859 See Notes to Consolidated Financial Statements. 59 Table of Contents CHEGG, INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME (in thousands) Years Ended December 31, 2024 2023 2022 Net (loss) income $ ( 837,068 ) $ 18,180 $ 266,638 Other comprehensive income (loss) Change in net unrealized gain (loss) on investments, net of tax 585 5,534 ( 1,348 ) Change in foreign currency translation adjustments, net of tax 1,921 17,215 ( 50,806 ) Other comprehensive income (loss) 2,506 22,749 ( 52,154 ) Total comprehensive (loss) income $ ( 834,562 ) $ 40,929 $ 214,484 See Notes to Consolidated Financial Statements. 60 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, 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 Repurchases of common stock ( 2,116 ) ( 2 ) ( 16 ) — — ( 18 ) Issuance of common stock upon exercise of ESPP 859 1 2,632 — — 2,633 Net share settlement of equity awards 3,313 3 ( 9,239 ) — — ( 9,236 ) Share-based compensation expense — — 89,546 — — 89,546 Other comprehensive income — — — 2,506 — 2,506 Net loss — — — — ( 837,068 ) ( 837,068 ) Balances at December 31, 2024 104,880 $ 105 $ 1,114,550 $ ( 32,233 ) $ ( 889,441 ) $ 192,981 See Notes to Consolidated Financial Statements. 61 Table of Contents CHEGG, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) Years Ended December 31, 2024 2023 2022 Cash flows from operating activities Net (loss) income $ ( 837,068 ) $ 18,180 $ 266,638 Adjustments to reconcile net (loss) income to net cash provided by operating activities: Share-based compensation expense 84,614 133,502 133,456 Depreciation and amortization expense 78,344 129,718 89,997 Deferred tax assets 143,319 26,575 ( 168,679 ) (Gain)/loss on early extinguishments of debt ( 19,515 ) ( 85,926 ) ( 93,519 ) Loss contingency accrual — 7,000 — Impairment expense 677,239 3,600 — Loss from write-offs of property and equipment 5,795 4,137 3,549 Amortization of debt issuance costs 2,147 3,156 5,166 Operating lease expense, net of accretion 5,864 6,079 6,327 Realized loss on sale of investments 27 2,106 9,675 Gain on textbook library, net — — ( 4,976 ) Print textbook depreciation expense — — 1,610 Gain on foreign currency remeasurement of purchase consideration — — ( 4,628 ) Impairment on lease related assets 5,557 — 5,225 Other non-cash items 656 ( 1,228 ) 378 Change in assets and liabilities, net of effect of acquisition of business: Accounts receivable 7,771 ( 7,799 ) ( 3,752 ) Prepaid expenses and other current assets ( 41,732 ) 3,476 17,191 Other assets 1,130 10,829 14,563 Accounts payable ( 12,376 ) 13,057 ( 4,144 ) Deferred revenue ( 15,885 ) ( 1,585 ) 7,538 Accrued liabilities 47,103 ( 7,342 ) ( 20,111 ) Other liabilities ( 7,785 ) ( 11,337 ) ( 5,768 ) Net cash provided by operating activities 125,205 246,198 255,736 Cash flows from investing activities Purchases of property and equipment ( 74,953 ) ( 83,052 ) ( 103,092 ) Purchases of textbooks — — ( 3,815 ) Proceeds from disposition of textbooks — 9,787 6,003 Purchases of investments ( 170,950 ) ( 637,939 ) ( 730,509 ) Proceeds from sale of investments 70,077 394,533 458,489 Maturities of investments 171,671 597,197 884,940 Proceeds from sale of strategic equity investments 15,500 — — Acquisition of business, net of cash acquired — — ( 401,125 ) Purchases of strategic equity investments — ( 11,853 ) ( 6,000 ) Net cash provided by investing activities 11,345 268,673 104,891 Cash flows from financing activities Proceeds from common stock issued under stock plans, net 2,636 4,165 6,477 Payment of taxes related to the net share settlement of equity awards ( 9,239 ) ( 16,440 ) ( 26,549 ) Repayment of convertible senior notes ( 96,520 ) ( 505,986 ) ( 401,203 ) Proceeds from exercise of convertible senior notes capped call — 297 — Payment of withholding tax ( 3,450 ) — — Repurchase of common stock ( 2,569 ) ( 334,806 ) ( 323,528 ) Net cash used in financing activities ( 109,142 ) ( 852,770 ) ( 744,803 ) Effect of exchange rate changes ( 1,025 ) 21 4,137 Net increase (decrease) in cash, cash equivalents and restricted ca 26,383 ( 337,878 ) ( 380,039 ) Cash, cash equivalents and restricted cash, beginning of period 137,976 475,854 855,893 Cash, cash equivalents and restricted cash, end of period $ 164,359 $ 137,976 $ 475,854 See Notes to Consolidated Financial Statements. Years Ended December 31, 2024 2023 2022 Supplemental cash flow data: Cash paid during the period for: Interest $ 449 $ 741 $ 875 Income taxes, net of refunds $ 8,085 $ 11,074 $ 6,841 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from operating leases $ 7,243 $ 9,042 $ 8,863 Right of use assets obtained in exchange for lease obligations: Operating leases $ 10,108 $ 12,407 $ 10,232 Non-cash investing and financing activities: Accrued purchases of long-lived assets $ 5,850 $ 9,650 $ 4,927 December 31, 2024 2023 2022 Reconciliation of cash, cash equivalents and restricted cash: Cash and cash equivalents $ 161,475 $ 135,757 $ 473,677 Restricted cash included in other current assets 956 — 63 Restricted cash included in other assets 1,928 2,219 2,114 Total cash, cash equivalents and restricted cash $ 164,359 $ 137,976 $ 475,854 See Notes to Consolidated Financial Statements. 62 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. Chegg provides individualized learning support to students as they pursue their educational journeys. Available on demand 24/7 and powered by over a decade of learning insights, the Chegg platform offers students artificial intelligence (“AI”)-powered academic support thoughtfully designed for education coupled with access to a vast network of subject matter experts who help ensure quality and accuracy. No matter the goal, level, or style, Chegg helps millions of students around the world learn with confidence by helping them build essential academic, life, and job skills to achieve success. Basis of Presentation Our fiscal year ends on December 31 and in this report, we refer to the year ended December 31, 2024, December 31, 2023, and December 31, 2022 as 2024, 2023, and 2022, respectively. Reclassification of Prior Period Presentation In order to conform with current period presentation, $ 3.6 million of impairment of intangible assets has been reclassified from general and administrative expense to impairment expense on our consolidated statements of operations during the year ended December 31, 2023 as well as from impairment of intangible asset to impairment expense on our consolidated statements of cash flows during the year ended December 31, 2023. These changes in presentation do not affect previously reported results. Note 2. Significant Accounting Policies Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles in the United States (U.S. GAAP) 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 estimated forfeitures, accounting for income taxes, useful lives assigned to long-lived assets for depreciation and amortization, impairment of goodwill, intangible assets and long-lived 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 a 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. 63 Table of Contents 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. 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 and U.S. treasury securities. 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, 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, net. The estimated fair value of our investments is 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 is 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 estimated allowance provision to account for potentially uncollectible accounts receivable based upon expected credit losses for outstanding receivables. Our estimate is derived using a variety of factors including historical collection and loss patterns, the current aging of accounts receivable, geographic and other customer-specific credit risk factors, and reasonable and supportable forecasts of future economic conditions which inform adjustments to historical loss patterns. The estimated allowance provision is classified as general and administrative operating expenses on our consolidated statements of operations. Accounts receivable that are deemed to be uncollectible are written off, net of expected or actual recoveries. 64 Table of Contents Concentration of Credit Risk Financial instruments that potentially subject us to concentrations of credit risk consist primarily of cash and cash equivalents, and investments in accordance with our investment policy. We place the majority of our cash and cash equivalents 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, 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. No customers represented over 10% of our net accounts receivable balance as of December 31, 2024 and December 31, 2023. No customers represented over 10% of net revenues during the years ended December 31, 2024, 2023 or 2022. 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 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. 65 Table of Contents Goodwill 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. Goodwill is 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 the income approach, based on present value techniques, to the carrying value. If the carrying value exceeds the fair value, an impairment loss is recognized in an amount equal to the excess, limited to the remaining balance of goodwill. Intangible Assets Intangible assets are amortized over their estimated useful lives. Intangible assets are tested for impairment at the asset group level at least annually or when events or changes in circumstances indicate that the carrying amount of such asset groups 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. Lease agreements typically 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 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. Convertible Senior Notes, net Convertible senior 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, net on our consolidated statements of operations. The fair value 66 Table of Contents 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, 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 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 67 Table of Contents 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 Expense 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 expenses 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. Paid Marketing Expense Paid marketing expenses are expensed as incurred and consist primarily of online advertising and marketing promotional expenditures. During the years ended December 31, 2024, 2023, and 2022, paid marketing expenses were approximately $ 55.4 million, $ 57.4 million and $ 62.0 million, respectively. 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 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. Share-based compensation expense is 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. 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 one or three 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. 68 Table of Contents 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 (Loss) Income Per Share Basic net (loss) income per share is computed by dividing net (loss) income by the weighted-average number of shares of common stock outstanding during the period. Diluted net (loss) income per share is computed by adjusting net (loss) income for all related convertible senior notes activity, net of tax, and adjusting the weighted-average number of shares of common stock outstanding for 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, 2024 and 2023, the gains and losses from remeasurement of foreign currency transactions were not material. During the year ended December 31, 2022, net gains from remeasurement of foreign currency transactions were $ 3.7 million. Recent Accounting Pronouncements Recently Issued Accounting Pronouncements Not Yet Adopted In November 2024, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2024-04, Debt—Debt with Conversion and Other Options . ASU 2024-04 improves the relevance and consistency in application of the induced conversion guidance requirements in Accounting Standards Codification (ASC) 470-20—Debt. Early adoption is permitted, and the guidance can be applied on either a prospective or retrospective basis. The guidance is effective for annual periods beginning after December 15, 2025 and interim periods within those annual periods. We did not early adopt ASU 2024-04 and we are currently in the process of evaluating the impact of this guidance. In November 2024, the Financial Accounting Standards Board (FASB) issued ASU 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures . ASU 2024-03 requires disclosure of specified information about certain costs and expenses in the notes to financial statements. 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, 2026 and interim periods beginning after December 15, 2027. We did not early adopt ASU 2024-03 and we are currently in the process of evaluating the impact of this guidance. In March 2024, the FASB issued ASU 2024-02, Codification Improvements—Amendments to Remove References to the Concepts Statements . ASU 2024-02 removes various references to the FASB’s Concepts Statements from the FASB’s Accounting Standards Codification. Early adoption is permitted, and the guidance will be applied prospectively with the option 69 Table of Contents to apply retrospectively. The guidance is effective for annual periods beginning after December 15, 2024. We did not early adopt ASU 2024-02 and do not believe it will have a significant impact on our financial statements. In December 2023, the FASB issued 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. Recently Adopted Accounting Pronouncements 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. Public entities with a single reportable segment are required to apply the disclosure requirements in ASU 2023-07, as well as all existing segment disclosures and reconciliation requirements in ASC 280—Segment Reporting on an interim and annual basis. In 2024, we adopted ASU 2023-07 on a retrospective basis for annual periods starting with this Annual Report on Form 10-K. For further information on the additional reportable segment disclosures, refer to “Note 18, Segment Information.” 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 2024 Change in 2023 2024 2023 2022 $ % $ % Subscription Services $ 549,211 $ 640,520 $ 671,968 $ ( 91,309 ) ( 14 ) % $ ( 31,448 ) ( 5 ) % Skills and Other 68,363 75,775 94,929 ( 7,412 ) ( 10 ) ( 19,154 ) ( 20 ) Total net revenues $ 617,574 $ 716,295 $ 766,897 $ ( 98,721 ) ( 14 ) $ ( 50,602 ) ( 7 ) During the years ended December 31, 2024, 2023, and 2022, we recognized $ 53.5 million, $ 54.5 million and $ 33.9 million, respectively, of revenues that were included in our deferred revenue balance at the beginning of each respective fiscal year. During the year ended December 31, 2024, we recognized revenues of $ 2.8 million from performance obligations satisfied in previous periods and during the years ended December 31, 2023, and 2022, we recognized an immaterial amount of revenues from performance obligations satisfied in previous periods. As of December 31, 2024 and 2023, the closing balance of deferred contract costs was $ 2.8 million and $ 6.0 million, respectively, and we recognized $ 16.1 million and $ 15.8 million of deferred contract cost amortization during the years ended December 31, 2024 and 2023, respectively. Contract Balances The following table presents our accounts receivable, net, contract assets, and deferred revenue balances (in thousands, except percentages): December 31, Change 2024 2023 $ % Accounts receivable, net $ 23,641 $ 31,404 $ ( 7,763 ) ( 25 ) % Contract assets 7,027 8,598 ( 1,571 ) ( 18 ) Deferred revenue 39,217 55,336 ( 16,119 ) ( 29 ) 70 Table of Contents During the year ended December 31, 2024, our accounts receivable, net balance decreased by $ 7.8 million, or 25 %, primarily due to lower bookings from Chegg Skills. During the year ended December 31, 2024, our contract assets balance decreased by $ 1.6 million or 18 %, primarily due to our Skills offering. During the year ended December 31, 2024, our deferred revenue balance decreased by $ 16.1 million, or 29 %, primarily due to lower bookings from Subscription Services and Chegg Skills. Note 4. Net (Loss) Income Per Share The following table presents the computation of basic and diluted net (loss) income per share (in thousands, except per share amounts): Years Ended December 31, 2024 2023 2022 Basic Numerator: Net (loss) income $ ( 837,068 ) $ 18,180 $ 266,638 Denominator: Weighted average shares used to compute net (loss) income per share, basic 103,300 116,504 127,557 Net (loss) income per share, basic $ ( 8.10 ) $ 0.16 $ 2.09 Diluted Numerator: Net (loss) income $ ( 837,068 ) $ 18,180 $ 266,638 Convertible senior notes activity, net of tax — ( 61,694 ) ( 65,444 ) Net (loss) income, diluted $ ( 837,068 ) $ ( 43,514 ) $ 201,194 Denominator: Weighted average shares used to compute net (loss) income per share, basic 103,300 116,504 127,557 Shares related to stock plan activity — — 968 Shares related to convertible senior notes — 12,065 21,334 Weighted average shares used to compute net (loss) income per share, diluted 103,300 128,569 149,859 Net (loss) income per share, diluted $ ( 8.10 ) $ ( 0.34 ) $ 1.34 The following table presents potential weighted-average shares of common stock outstanding that were excluded from the computation of diluted net (loss) income per share because including them would have been anti-dilutive (in thousands): Years Ended December 31, 2024 2023 2022 Shares related to stock plan activity 7,206 8,442 3,556 Shares related to convertible senior notes 9,234 — — Total common stock equivalents 16,440 8,442 3,556 71 Table of Contents 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, 2024 and 2023 (in thousands): December 31, 2024 Fair Value Level Adjusted Cost Unrealized Gain Unrealized Loss Fair Value Cash and cash equivalents: Cash $ 28,716 $ — $ — $ 28,716 Money market funds Level 1 132,759 — — 132,759 Total cash and cash equivalents $ 161,475 $ — $ — $ 161,475 Short-term investments: Corporate debt securities Level 2 $ 113,968 $ 157 $ ( 29 ) $ 114,096 U.S. treasury securities Level 1 40,162 — ( 9 ) 40,153 Total short-term investments $ 154,130 $ 157 $ ( 38 ) $ 154,249 Long-term investments: Corporate debt securities Level 2 $ 133,516 $ 736 $ ( 78 ) $ 134,174 U.S. treasury securities Level 1 78,405 97 ( 26 ) 78,476 Total long-term investments $ 211,921 $ 833 $ ( 104 ) $ 212,650 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 As of December 31, 2024, 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, 2024, 2023 and 2022, we did not recognize any losses on our investments due to credit related factors. The following table presents the realized gain and loss related to our investments (in thousands): Years Ended December 31, 2024 2023 2022 Realized gain $ 16 $ 346 $ 64 Realized loss ( 43 ) ( 2,452 ) ( 9,739 ) Realized loss on sale of investments $ ( 27 ) $ ( 2,106 ) $ ( 9,675 ) 72 Table of Contents The following table presents our cash equivalents and investments' adjusted cost and fair value by contractual maturity as of December 31, 2024 (in thousands): December 31, 2024 Adjusted Cost Fair Value Due within one year $ 154,130 $ 154,249 Due after one year through three years 211,921 212,650 Investments not due at a single maturity date 132,759 132,759 Total $ 498,810 $ 499,658 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 artificial intelligence companies, for an approximate 6 % ownership. We accounted for our investment under the equity method of accounting. As of December 31, 2023, the carrying amount of our investment was $ 11.7 million. On January 1, 2024, we sold our investment for a total cash consideration of $ 15.5 million, resulting in a gain of $ 3.8 million. The cash payment received was included within cash flows from investing activities on our consolidated statements of cash flows and the gain was included within other income, net on our consolidated statements of operations. 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, 2024, 2023 and 2022, 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, 2024, 2023 and 2022. 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, 2024 and 2023 was $ 105.8 million and $ 202.9 million, respectively. The estimated fair value of the 2025 notes as of December 31, 2024 and 2023 was $ 350.4 million and $ 329.5 million, respectively. For further information on the notes refer to Note 8, “Convertible Senior Notes.” 73 Table of Contents Note 6. Property and Equipment, Net The following table presents our property and equipment, net balances (in thousands): December 31, 2024 2023 Content $ 381,629 $ 346,749 Internal-use software and website development 67,612 51,855 Leasehold improvements 8,207 10,857 Furniture and fixtures 3,346 4,607 Computer and equipment 2,953 3,496 Property and equipment 463,747 417,564 Less accumulated depreciation ( 293,099 ) ( 234,491 ) Property and equipment, net $ 170,648 $ 183,073 Depreciation expense during the years ended December 31, 2024, 2023, and 2022 was $ 68.3 million, $ 105.3 million, which included the $ 34.2 million accelerated depreciation discussed below, and $ 64.1 million, respectively. In connection with the November 2024 restructuring, we streamlined our product experiences and in connection with the June 2024 restructuring, we announced that we will no longer offer Chegg Skills directly to customers. As a result, we impaired internal-use software and content assets and accelerated depreciation of certain content assets of $ 6.1 million during the year ended December 31, 2024, which were classified as cost of revenues on our consolidated statements of operations. For further information on the November 2024 and June 2024 restructurings, see Note 15, “Restructuring Charges.” In connection with the intangible assets impairment analysis performed in June 2024, we also recorded an impairment of $ 10.0 million related to property and equipment, consisting of $ 6.6 million of content assets and $ 3.4 million of internal-use software assets, during the year ended December 31, 2024, which was classified as impairment expense on our consolidated statements of operations. For further information on the intangible assets impairment analysis, see Note 7, “Goodwill and Intangible Assets.” In connection with the design and build of our new generative AI experience in August 2023, we streamlined our product experiences. As a result, during the year ended December 31, 2023, we elected to abandon certain content and internal-use software assets and recorded charges of $ 38.2 million, consisting of $ 34.2 million of accelerated depreciation over shortened useful lives for completed assets, impaired internal-use software assets of $ 2.6 million, and $ 1.4 million in other costs recognized in association with abandoning these assets. All of which were classified as cost of revenues on our consolidated statements of operations. Note 7. Goodwill and Intangible Assets Goodwill The following table presents the changes in the carrying amount of our goodwill balances (in thousands): December 31, 2024 2023 Beginning balance $ 631,995 $ 615,093 Impairment expense ( 635,391 ) — Foreign currency translation adjustment 3,396 16,902 Ending balance $ — $ 631,995 74 Table of Contents In September 2024 and June 2024, in consideration of the sustained decline in our stock price, industry developments, and our financial performance, we evaluated our current operating performance. Accordingly, we determined that there were indicators of impairment and a quantitative assessment was necessary. In the quantitative assessment, we estimated the fair value of our reporting unit utilizing an income approach, based on the present value of future discounted cash flows, which is classified as Level 3 in the fair value hierarchy. Significant estimates used to determine fair value include the weighted average cost of capital, growth rates, and amount and timing of expected future cash flows. As a result of the quantitative assessment, we determined that goodwill was impaired as the fair value of our reporting unit was less than the carrying value. As such, during the year ended December 31, 2024, we recorded impairment expense of $ 635.4 million equal to the excess of the carrying value of our reporting unit over the estimated fair value, limited to the remaining balance of goodwill, which was classified as impairment expense on our consolidated statements of operations. We did not record goodwill impairment expense during the years ended December 31, 2023, and 2022. Intangible Assets The following table presents our intangible assets balances (in thousands, except weighted-average amortization period): December 31, 2024 Weighted-Average Amortization Period (in months) Gross Carrying Amount Accumulated Amortization Accumulated Impairment Foreign Currency Translation Adjustment Net Carrying Amount Developed technologies 80 $ 106,703 $ ( 63,029 ) $ ( 29,369 ) $ ( 3,958 ) $ 10,347 Content libraries 60 12,230 ( 12,230 ) — — — Customer lists 35 34,190 ( 32,892 ) — ( 1,298 ) — Trade and domain names 52 16,213 ( 13,343 ) ( 2,493 ) ( 377 ) — Total intangible assets 67 $ 169,336 $ ( 121,494 ) $ ( 31,862 ) $ ( 5,633 ) $ 10,347 December 31, 2023 Weighted-Average Amortization Period (in months) Gross Carrying Amount Accumulated Amortization Accumulated Impairment 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 During the years ended December 31, 2024, 2023 and 2022, intangible assets amortization expense was $ 10.0 million, $ 24.4 million and $ 25.9 million, respectively. In conjunction with our goodwill impairment analysis in June 2024, we determined that there were indicators of impairment for our Busuu assets and a recoverability test was necessary. In the recoverability test, we determined that the expected future undiscounted cash flows for the asset group were not sufficient to recover the carrying value. We then proceeded in estimating the fair value of the asset group utilizing the income approach, based on a present value of future discounted cash flows, which is classified as Level 3 in the fair value hierarchy. Significant estimates used to determine fair value include the growth rates and amount and timing of expected future cash flows. As a result of the impairment test, we determined the asset group was impaired and recorded a $ 31.9 million impairment expense related to the intangible assets during the year ended December 31, 2024, which was classified as impairment expense on our consolidated statements of operations. In connection with the design and build of our new generative AI experience in August 2023, we streamlined our product experiences. During the year ended December 31, 2023, we recognized an impairment charge on our indefinite-lived intangible asset of $ 3.6 million. 75 Table of Contents The following table presents the estimated future intangible assets amortization expense (in thousands): December 31, 2024 2025 $ 4,240 2026 3,897 2027 1,776 2028 407 2029 27 Total $ 10,347 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 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. As of December 31, 2024, 9,297,800 and 6,961,352 shares remained underlying the 2026 notes and 2025 notes, respectively. 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 certain circumstances. 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. As of December 31, 2024, the 2026 notes are not convertible and have been classified as a long-term liability. As of December 31, 2024, the 2025 notes are convertible at any time until the close of business on the second scheduled trading day immediately preceding their maturity date and have been classified as a current liability. We expect to settle any 2025 Notes conversion requests in shares of our common stock. In November 2024, in connection with our securities repurchase program, we extinguished $ 116.6 million aggregate principal amount of the 2026 notes in privately-negotiated transactions for a total consideration of $ 96.2 million, which was paid to the holders in cash. We also incurred approximately $ 0.3 million in fees resulting in a total reacquisition price of $ 96.5 million. The carrying amount of the extinguished notes was $ 116.0 million resulting in a $ 19.5 million gain on early extinguishment of debt. We elected to reacquire and not cancel the extinguished 2026 notes and left the associated capped call transactions outstanding. The following table presents the net carrying amount of the notes (in thousands): December 31, 2024 December 31, 2023 2026 Notes 2025 Notes 2026 Notes 2025 Notes Principal amount $ 127,906 $ 358,914 $ 244,479 $ 358,914 Unamortized issuance costs ( 562 ) ( 309 ) ( 1,721 ) ( 1,835 ) Net carrying amount $ 127,344 $ 358,605 $ 242,758 $ 357,079 76 Table of Contents The following table presents the total interest expense recognized related to the notes (in thousands): Years Ended December 31, 2024 2023 2022 2026 notes: Contractual interest expense $ — $ — $ — Amortization of issuance costs 620 1,035 2,196 Total 2026 notes interest expense $ 620 $ 1,035 $ 2,196 2025 notes: Contractual interest expense $ 443 $ 621 $ 874 Amortization of issuance costs 1,527 2,121 2,970 Total 2025 notes interest expense $ 1,970 $ 2,742 $ 3,844 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, 2024, 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 as of December 31, 2024 are related to our corporate headquarters and offices in the United States and internationally. As of December 31, 2024 and 2023, we had operating lease ROU assets of $ 22.3 million and $ 25.1 million, respectively, and operating lease liabilities of $ 24.1 million and $ 24.9 million, respectively. As of December 31, 2024 and 2023, our weighted average remaining lease term in years was 6.3 and 3.9 , respectively, and our weighted average discount rate was 5.6 % and 5.8 %, respectively. In connection with the November 2024 and June 2024 restructuring actions, we announced the closure of our New York office and two international offices. As a result, during the year ended December 31, 2024, we recorded a full impairment of $ 5.6 million, consisting of $ 4.1 million impairment of ROU assets and $ 1.5 million impairment of leasehold improvements, which was classified as general and administrative expense on our consolidated statement of operations. Our intent and ability to sublease the office as well as the local market conditions were factored in when measuring the amount of impairment. For further information on the November 2024 and June 2024 restructuring actions, see Note 15, “Restructuring Charges.” During the year ended December 31, 2024, we obtained $ 10.1 million of ROU assets in exchange for lease liabilities primarily as we entered into an amendment related to our offices in India that modifies our existing lease payments, increases the square footage, and extends the lease term. During the years ended December 31, 2024, 2023 and 2022, operating lease expense, net of immaterial sublease income, was approximately $ 7.5 million, $ 7.6 million and $ 7.3 million, respectively. During the years ended December 31, 2024, 2023 and 2022, variable lease cost and short-term lease cost were immaterial. 77 Table of Contents The following table presents the future minimum lease payments and reconciliation to total operating lease liabilities (in thousands): December 31, 2024 2025 $ 6,822 2026 4,141 2027 4,298 2028 3,531 2029 1,959 Thereafter 8,414 Total future minimum lease payments 29,165 Less imputed interest ( 5,031 ) Total operating lease liabilities $ 24,134 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 Court dismissed this matter pursuant to the Company's motion to dismiss and the matter is concluded. 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. 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, 78 Table of Contents 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 as amended (the Exchange Act). 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 seeking unspecified compensatory damages, costs, and expenses, including counsel and expert fees. On September 26, 2024, the parties participated in an in-person mediation and reached a settlement in principle to pay $ 55.0 million wherein the Company denies any and all allegations of fault, liability, wrongdoing, or damages. On November 6, 2024, Plaintiffs filed a motion for preliminary approval of the settlement. The Court preliminarily approved the settlement on December 19, 2024. The estimated contingent liability for the loss contingency recorded was $ 55.0 million as of September 30, 2024 and was included within accrued liabilities on our consolidated balance sheets. The same amount was recorded for expected insurance loss recoveries, which is included within other current assets on our consolidated balance sheets. 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. Chegg and Pearson have resolved this litigation. Pursuant to the terms of the parties' confidential settlement, the Court dismissed the case with prejudice on December 20, 2024. While the terms of the settlement are confidential, Chegg’s decision to settle the lawsuit was driven by the expense, burden and uncertainty of ongoing protracted litigation. 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. We are currently cooperating with the FTC on an investigation as to whether we have violated certain terms of the Final Order. We record a contingent liability for loss contingencies related to legal matters when a loss is both probable and reasonably estimable. Additionally, we record an insurance loss recovery up to the recognized loss contingency when realization is probable. Related to the above matters, as of December 31, 2024, the net impact of contingent liabilities less the related insurance loss recovery is $ 7.0 million. For those matters upon which we have sufficient insurance coverage, we have recorded contingent liabilities within accrued liabilities and the loss recovery from insurance within other current assets on our consolidated balance sheets. 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. 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. In the ordinary course of business and for certain of the above matters, we are actively pursuing all avenues and strategies to resolve these matters, including available legal remedies, remediation and settlement negotiations with the parties. 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. We believe the fair value of these indemnification agreements is immaterial. We have not recorded any liabilities for these agreements as of December 31, 2024 and 2023. 79 Table of Contents 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: December 31, 2024 Shares available for grant under the 2023 Equity Incentive Plan 10,340,723 Outstanding RSUs and PSUs 7,386,965 Shares available for issuance under the Amended and Restated 2013 Employee Stock Purchase Plan 3,007,257 Shares available for grant under the 2023 Equity Inducement Plan 1,171,016 Outstanding stock options 182,076 Total common shares reserved for future issuance 22,088,037 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, 2024, there were 1,171,016 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, 2024, there were 10,340,723 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, 2024, there were 3,007,257 shares of common stock available for future issuance under the A&R ESPP. 80 Table of Contents Note 13. Stockholders' Equity Share Repurchases During the year ended December 31, 2024, we received a total of 2,115,952 shares of our common stock related to the final delivery of our November 2023 accelerated share repurchase (ASR) agreement, which were retired immediately. The November 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 repurchased a total of 26,505,979 shares of our common stock, which included the initial delivery of 13,498,313 shares from our November 2023 ASR, 3,433,157 shares from open market transactions in June 2023, and the total delivery of 9,574,509 shares from our February 2023 ASR, which were retired immediately. 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. Share-based Compensation Expense The following table presents total share-based compensation expense recorded (in thousands): Years Ended December 31, 2024 2023 2022 Cost of revenues $ 1,786 $ 2,256 $ 2,484 Research and development 28,044 44,103 41,335 Sales and marketing 7,466 9,524 13,857 General and administrative 47,318 77,619 75,780 Total share-based compensation expense $ 84,614 $ 133,502 $ 133,456 During the years ended December 31, 2024, 2023 and 2022, we capitalized share-based compensation expense of $ 4.9 million, $ 3.3 million, and $ 5.3 million, respectively, which is included within property and equipment, net on our consolidated balance sheets. As of December 31, 2024, we had a total of approximately $ 40.7 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 1.2 years. PSU Grants with Financial and Strategic Performance Targets In June 2024, March 2023, and March 2022, 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. Based on the achievement of the performance conditions for the June 2024, March 2023, and March 2022 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 June 2024 and March 2023 PSUs vest over either a one-year or three-year period and the March 2022 PSUs vest over a three-year period. During the years ended December 31, 2024, 2023, and 2022, the number of shares underlying the June 2024, March 2023, and March 2022 PSUs totaled 693,750 , 565,341 , and 614,177 , respectively, and each had a grant date fair value per share of $ 3.61 , $ 15.89 , and $ 35.82 , respectively. 81 Table of Contents 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, 2024, 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 % 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. 82 Table of Contents The following table presents the key assumptions used to determine the fair value of rights granted under the ESPP: Years Ended December 31, 2024 2023 2022 Expected term (years) 0.50 0.50 0.50 Expected volatility 60.95 %- 85.39 % 55.79 %- 109.39 % 70.37 %- 78.74 % Dividend yield 0.00 % 0.00 % 0.00 % Risk-free interest rate 4.44 %- 5.40 % 5.24 %- 5.41 % 1.54 %- 4.54 % Weighted-average grant-date fair value per share $ 0.90 $ 3.62 $ 8.71 Stockholder's Equity Activity RSUs and PSUs Activity Number of RSUs and PSUs Outstanding Weighted Average Grant Date Fair Value Balance at December 31, 2023 10,065,783 $ 23.63 Granted 5,853,240 4.24 Released ( 5,069,408 ) 21.02 Forfeited ( 3,462,650 ) 22.50 Balance at December 31, 2024 7,386,965 $ 10.58 The weighted-average grant-date fair value of RSUs and PSUs granted during the years ended December 31, 2024, 2023, and 2022 was $ 4.24 , $ 14.58 , and $ 27.68 , respectively. The total fair value of RSUs and PSUs vested as of the vesting dates during the years ended December 31, 2024, 2023, and 2022 was $ 26.1 million, $ 45.3 million, and $ 74.2 million, respectively. ESPP Activity There were 859,302 , 454,533 and 382,392 shares purchased during the years ended December 31, 2024, 2023 and 2022, respectively, at an average price per share of $ 3.05 , $ 8.10 and $ 15.61 , respectively, with cash proceeds from the issuance of shares of $ 2.6 million, $ 3.7 million and $ 6.0 million, respectively. Share-based compensation expense related to ESPP was $ 1.5 million, $ 2.5 million, and $ 3.1 million during the years ended December 31, 2024, 2023 and 2022, respectively. Stock Option Activity 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, 2023 232,327 $ 6.02 1.81 $ 1,240,014 Forfeited ( 50,251 ) Balance at December 31, 2024 182,076 $ 5.74 1.17 $ — We did no t grant any stock options during the years ended December 31, 2024, 2023, and 2022. There were no stock options exercised during the year ended December 31, 2024 and the total intrinsic value of stock options exercised during the years ended December 31, 2023 and 2022, was $ 0.2 million and $ 1.3 million, respectively. Note 14. Income Taxes We recorded a provision for income taxes of $ 148.7 million during the year ended December 31, 2024, a provision for income taxes of $ 32.1 million during the year ended December 31, 2023 and a benefit from income taxes of $ 162.7 million during the year ended December 31, 2022. The provision for income taxes during the year ended December 31, 2024 was primarily due to the establishment of a valuation allowance against our U.S. federal and state deferred tax assets. The provision for income taxes during the year ended December 31, 2023 was primarily due to the federal and state income taxes in the United States largely driven by shortfall associated with equity compensation. The benefit from income taxes during the year 83 Table of Contents ended December 31, 2022 was primarily due to the release of the valuation allowance on certain U.S. and state deferred tax assets. The following table presents our (provision for) benefit from income taxes (in thousands): Years Ended December 31, 2024 2023 2022 Current income taxes: Federal $ ( 234 ) $ ( 2,460 ) $ ( 113 ) State ( 1,128 ) ( 3,064 ) ( 2,172 ) Foreign ( 4,021 ) ( 33 ) ( 3,702 ) Total current provision for income taxes ( 5,383 ) ( 5,557 ) ( 5,987 ) Deferred income taxes: Federal ( 122,057 ) ( 26,210 ) 147,236 State ( 17,558 ) ( 1,634 ) 19,995 Foreign ( 3,704 ) 1,269 1,448 Total deferred benefit from income taxes ( 143,319 ) ( 26,575 ) 168,679 Total (provision for) benefit from income taxes $ ( 148,702 ) $ ( 32,132 ) $ 162,692 The following table presents our (loss) income before (provision for) benefit from income taxes (in thousands): Years Ended December 31, 2024 2023 2022 United States $ ( 297,183 ) $ 61,152 $ 123,269 Foreign ( 391,183 ) ( 10,840 ) ( 19,323 ) Total (loss) income before (provision for) benefit from income taxes $ ( 688,366 ) $ 50,312 $ 103,946 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 (loss) income before (provision for) benefit from income taxes (in percentages): Years Ended December 31, 2024 2023 2022 Income tax at U.S. statutory rate 21.0 % 21.0 % 21.0 % State, net of federal benefit 2.9 11.6 1.6 Taxes on foreign earnings 1.7 0.7 ( 1.1 ) Share-based compensation ( 2.5 ) 39.3 15.3 Non-deductible expenses — ( 2.5 ) 1.6 Effect of flow-through entities 12.5 — — Goodwill impairment ( 17.1 ) — — Tax credits — 0.8 ( 0.7 ) Change in valuation allowance ( 40.1 ) 4.2 ( 210.5 ) Settlement of unrecognized tax benefits — ( 8.0 ) — Foreign-derived intangible income 0.1 ( 5.2 ) — Convertible senior notes — — 15.0 Other ( 0.1 ) 2.0 1.3 Total ( 21.6 ) % 63.9 % ( 156.5 ) % 84 Table of Contents The following table presents a summary of our deferred tax assets (in thousands): December 31, 2024 2023 Deferred tax assets: Research and experimental expenditures capitalization $ 102,382 $ 69,362 Net operating loss and credits carryforwards 80,413 92,302 Accrued expenses and reserves 25,039 10,442 Share-based compensation 3,414 11,200 Convertible senior notes 1,790 5,566 Goodwill 89,583 — Property and equipment and intangible assets 15,947 — Other items — 6,133 Gross deferred tax assets 318,568 195,005 Valuation allowance ( 307,985 ) ( 40,162 ) Total deferred tax assets $ 10,583 $ 154,843 Deferred tax liabilities: Property and equipment and intangibles assets $ — $ ( 2,621 ) Other ( 11,396 ) ( 13,134 ) Total deferred tax liabilities $ ( 11,396 ) $ ( 15,755 ) Net deferred tax (liability) asset $ ( 812 ) $ 139,088 As of December 31, 2024, we have determined our earnings in India are not permanently reinvested. As such, a cumulative net tax liability of $ 1.7 million has been accrued for taxes that would be incurred upon future repatriation of such earnings. During the year ended December 31, 2024, our subsidiary in India distributed $ 23.0 million to the United States, resulting in a remittance of $ 3.5 million in withholding tax, which was included within cash flows from financing activities on our consolidated statements of cash flows. 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 $ 267.8 million during the year ended December 31, 2024 and increased by approximately $ 4.0 million during the year ended December 31, 2023. We regularly assess the need for a valuation allowance against our deferred tax assets. In performing our assessment, we consider both positive and negative evidence related to the likelihood of realizing our deferred tax assets. During the second quarter of 2024, we determined that it is more likely than not that the deferred tax benefit will not be realized due to the available negative evidence outweighing the positive evidence, primarily resulting from the cumulative loss influenced by the impairment expense recorded. As of December 31, 2024, we had net operating loss carryforwards for federal and state income tax purposes of approximately $ 125 million and $ 207 million, respectively, which will begin to expire in years beginning 2030 and 2025, 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, 2024, we had tax credit carryforwards for federal and state income tax purposes of approximately $ 12.7 million and $ 17.8 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. 85 Table of Contents We recognize interest and penalties related to uncertain tax positions as a component of income tax expense. As of December 31, 2024, there are no accrued interest and penalties related to uncertain tax positions. 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 2024 remain subject to examination by the U.S. federal and some state authorities. Foreign jurisdictions remain subject to examination up to approximately five years from the filing date, depending on the jurisdiction. United Kingdom income tax remains subject to examination by the HM Revenue & Custom for all 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, 2024 2023 2022 Beginning balance $ 12,400 $ 16,953 $ 16,805 Increase in tax positions for prior years 13 — 333 Decrease in tax positions for prior years — ( 131 ) ( 876 ) Decrease in tax positions for prior year settlement — ( 4,703 ) ( 386 ) Decrease in tax positions for prior years due to statutes lapsing — — — Increase in tax positions for current year 295 281 1,520 Change due to translation of foreign currencies — — ( 443 ) Ending balance $ 12,708 $ 12,400 $ 16,953 As of December 31, 2024, the unrecognized tax benefits of $ 12.7 million would not affect the effective tax rate, if recognized. 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 November 2024 Restructuring Plan In November 2024, we announced a workforce reduction that resulted in a management approved restructuring plan. During the year ended December 31, 2024, we recorded $ 14.6 million of restructuring charges , primarily related to one-time employee termination benefits, which were classified on our consolidated statement of operations based on employees' job function. The restructuring liability is included within accrued liabilities on our consolidated balance sheets. We estimate we will incur between $ 3 million and $ 4 million of additional restructuring charges over the next two fiscal quarters and we expect the plan to be substantially completed by the end of the third quarter of fiscal 2025. The following table presents a reconciliation of the beginning and ending restructuring liability balance (in thousands): Year Ended December 31, 2024 Beginning balance $ — Restructuring charges 14,632 Restructuring payments ( 10,717 ) Ending balance $ 3,915 86 Table of Contents June 2024 Restructuring Plan In June 2024, we announced a workforce reduction that resulted in a management approved restructuring plan. During the year ended December 31, 2024, we recorded $ 10.0 million of restructuring charges, primarily related to one-time employee termination benefits, which was classified on our consolidated statement of operations based on employees' job function. The restructuring liability is included within accrued liabilities on our consolidated balance sheets. The total amount of restructuring charges have been recorded and we expect the plan to be substantially completed by the end of the first quarter of fiscal 2025. The following table presents a reconciliation of the beginning and ending restructuring liability balance (in thousands): Year Ended December 31, 2024 Beginning balance $ — Restructuring charges 9,971 Restructuring payments ( 6,576 ) Ending balance $ 3,395 Note 16. Consolidated Statements of Operations Details The following table presents the details of other income, net (in thousands): Years Ended December 31, 2024 2023 2022 Gain on early extinguishment of debt (1) $ 19,515 $ 85,926 $ 93,519 Interest income 28,050 37,411 12,431 Realized loss on sale of investments (2) ( 27 ) ( 2,106 ) ( 9,675 ) Gain on sale of strategic equity investment (2) 3,783 — — Foreign currency impact on purchase consideration — — 4,628 Other 11 579 126 Total other income, net $ 51,332 $ 121,810 $ 101,029 _____________________________________________________ (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, 2024, 2023, and 2022, matching contributions totaled $ 4.6 million, $ 4.9 million and $ 4.4 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. Our chief operating decision maker uses net (loss) income in assessing performance and determining how to allocate resources and is regularly provided with cost of revenues, paid marketing expenses, and consolidated operating expenses when reviewing financial information as part of the annual budgeting and forecasting process as well as the review over quarterly budget to actual variances. 87 Table of Contents The following table presents information about our significant segment expenses and includes a reconciliation to net (loss) income (in thousands): Years Ended December 31, 2024 2023 2022 Net revenues $ 617,574 $ 716,295 $ 766,897 Less: Cost of revenues 180,927 225,941 197,396 Research and development 170,431 191,705 196,637 Paid marketing expenses (1) 55,381 57,351 62,008 Other sales and marketing (2) 52,948 69,240 85,652 General and administrative 217,756 236,183 216,247 Impairment expense 677,239 3,600 — Total segment expenses 1,354,682 784,020 757,940 Other segment items (3) ( 99,960 ) 85,905 257,681 Net (loss) income $ ( 837,068 ) $ 18,180 $ 266,638 _____________________________________________________ (1) Paid marketing expenses consist primarily of online advertising and marketing promotional expenditures. (2) Other sales and marketing primarily consists of employee related expenses, including share-based compensation expense, and depreciation and amortization expenses. (3) Other segment items consist of all interest expense, other income, and (provision for) benefit from income taxes. 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 Chegg Skills, advertising services, print textbooks and eTextbooks. The following table presents our total net revenues for our Subscription Services and Skills and Other product lines (in thousands): Years Ended December 31, 2024 2023 2022 Subscription Services $ 549,211 $ 640,520 $ 671,968 Skills and Other 68,363 75,775 94,929 Total net revenues $ 617,574 $ 716,295 $ 766,897 The following table presents our total net revenues by geographic area (in thousands): Years Ended December 31, 2024 2023 2022 United States $ 537,605 $ 616,359 $ 651,469 International 79,969 99,936 115,428 Total net revenues $ 617,574 $ 716,295 $ 766,897 The following table presents our long-lived assets by geographic area (in thousands): December 31, 2024 2023 United States $ 172,483 $ 186,143 International 20,421 22,060 Total long-lived assets $ 192,904 $ 208,203 88 Table of Contents ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None.