UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2021 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _______ to _______ Commission file number 001-36180 CHEGG, INC. (Exact name of registrant as specified in its charter) Delaware 20-3237489 (State or other jurisdic ...

Chegg Q4-21 Investor Presentation Feb 7, 2022 Safe Harbor Statement Forward-Looking Statements This presentation contains forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements relate to expectations, beliefs, projections, future plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts. In some cases, you can identify forward-looking statement ...

Chegg, Inc. (NYSE:CHGG) Q4 2021 Earnings Conference Call February 7, 2022 4:30 PM ET Company Participants Tracey Ford - VP of Investor Relations and ESG Daniel Rosensweig - Co-Chairperson and CEO Andrew Brown - CFO Conference Call Participants Jeffrey Silber - BMO Capital Markets Ryan MacDonald - Needham & Company Douglas Anmuth - JPMorgan Brian Peterson - Raymond James Stephen Sheldon - William Blair Brent Thill - Jefferies Arvind Ramnani - Piper Sandler Joshua Baer - Morgan Stanley Jason Celino - Ke ...

Chegg, Inc. (NYSE:CHGG) Q3 2021 Earnings Conference Call November 1, 2021 4:30 PM ET Company Participants Tracey Ford - Head of IR Daniel Rosensweig - CEO Andrew Brown - CFO Conference Call Participants Jeffrey Silber - BMO Capital Markets Stephen Sheldon - William Blair & Company Douglas Anmuth - JPMorgan Brian Peterson - Raymond James Ryan MacDonald - Needham & Company Brent Thill - Jefferies Michael Grondahl - Northland Capital Markets Joshua Baer - Morgan Stanley Jason Celino - KeyBanc Capital Mar ...

Chegg Q3-21 Investor Presentation Nov 1, 2021 Safe Harbor Statement Forward-Looking Statements This presentation contains forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements relate to expectations, beliefs, projections, future plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts. In some cases, you can identify forward-looking statement ...

PART I - FINANCIAL INFORMATION [Financial Statements (unaudited)](index=4&type=section&id=Item%201.%20Financial%20Statements%20(unaudited)) Unaudited financials show total assets at **$3.19 billion**, net income of **$6.7 million** for Q3 2021, and strong operating cash flow Condensed Consolidated Balance Sheets (in thousands) | | September 30, 2021 | December 31, 2020 | | :--- | :--- | :--- | | **Assets** | | | | Total current assets | $ 1,825,964 | $ 1,182,955 | | Total assets | $ 3,187,495 | $ 2,251,258 | | **Liabilities and Stockholders' Equity** | | | | Total current liabilities | $ 133,821 | $ 109,732 | | Convertible senior notes, net | $ 1,676,749 | $ 1,506,922 | | Total liabilities | $ 1,832,978 | $ 1,641,623 | | Total stockholders' equity | $ 1,354,517 | $ 609,635 | | Total liabilities and stockholders' equity | $ 3,187,495 | $ 2,251,258 | Condensed Consolidated Statements of Operations (in thousands, except per share data) | | Three Months Ended Sep 30, | Nine Months Ended Sep 30, | | :--- | :--- | :--- | :--- | :--- | | | **2021** | **2020** | **2021** | **2020** | | Net revenues | $171,942 | $154,018 | $568,798 | $438,617 | | Gross profit | $104,840 | $91,648 | $369,604 | $290,333 | | Income (loss) from operations | $361 | $(17,802) | $51,910 | $7,535 | | Net income (loss) | $6,651 | $(37,140) | $(25,764) | $(32,264) | | Diluted net income (loss) per share | $0.05 | $(0.29) | $(0.18) | $(0.26) | Condensed Consolidated Statements of Cash Flows Data (in thousands) | | Nine Months Ended September 30, | | :--- | :--- | :--- | | | **2021** | **2020** | | Net cash provided by operating activities | $208,123 | $168,655 | | Net cash used in investing activities | $(742,537) | $(750,942) | | Net cash provided by financing activities | $768,299 | $722,445 | - Financing activities were primarily driven by net proceeds of **$1.09 billion** from an equity offering, partially offset by **$300.8 million** in repayment of convertible senior notes[178](index=178&type=chunk) Notes to Condensed Consolidated Financial Statements Notes detail accounting policy changes, revenue, convertible notes, restructuring, and legal proceedings - The company adopted ASU 2020-06 on January 1, 2021, which simplifies accounting for convertible instruments. This resulted in an increase to convertible senior notes of **$378.1 million**, a decrease to additional paid-in capital of **$465.0 million**, and is expected to decrease interest expense in future periods[53](index=53&type=chunk)[80](index=80&type=chunk) Net Revenues by Product Line (in thousands) | | Three Months Ended Sep 30 | Nine Months Ended Sep 30 | | :--- | :--- | :--- | :--- | :--- | | | **2021** | **2020** | **2021** | **2020** | | Chegg Services | $146,790 | $118,895 | $482,654 | $345,258 | | Required Materials | $25,152 | $35,123 | $86,144 | $93,359 | | **Total net revenues** | **$171,942** | **$154,018** | **$568,798** | **$438,617** | - In February 2021, the company completed an equity offering, selling **10,974,600** shares of common stock and generating net proceeds of **$1.09 billion**[109](index=109&type=chunk) - In September 2021, the company initiated a restructuring plan for its Thinkful product offering, impacting approximately **60** full-time and **120** part-time employees, with expected total costs of around **$2.2 million**[126](index=126&type=chunk) - The company is facing a copyright infringement lawsuit filed by Pearson Education, Inc. on September 13, 2021. Chegg disputes the claims and intends to defend itself vigorously[98](index=98&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=27&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses **30%** revenue growth, market slowdown, strong liquidity, and Thinkful restructuring Overview Chegg's mission is to improve education via Chegg Services and Required Materials, focusing on service expansion - Chegg's business is structured around two main offerings: Chegg Services (subscription-based learning support) and Required Materials (textbooks)[130](index=130&type=chunk)[131](index=131&type=chunk)[134](index=134&type=chunk) - The long-term strategy is centered on expanding Chegg Services to increase student engagement and drive long-term profitability and positive cash flow[133](index=133&type=chunk) Results of Operations Q3 2021 net revenues grew **12%** to **$171.9 million** from Chegg Services, impacted by market slowdown - As students returned to school, a slowdown in the education market led to a decline in traffic to education technology services, resulting in lower growth rates for Chegg's services, which is expected to continue into fiscal year 2022[145](index=145&type=chunk) Revenue Change by Product Line - Q3 2021 vs Q3 2020 (in thousands) | Product Line | Q3 2021 | Q3 2020 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Chegg Services | $146,790 | $118,895 | $27,895 | 23% | | Required Materials | $25,152 | $35,123 | $(9,971) | (28)% | | **Total net revenues** | **$171,942** | **$154,018** | **$17,924** | **12%** | - Sales and marketing expenses increased **24%** for the nine-month period, driven by increased marketing spend, including expansion into international markets[155](index=155&type=chunk) - General and administrative expenses decreased **17%** in Q3 2021 compared to Q3 2020, primarily because the prior-year period included a **$10.0 million** impairment charge on an an investment in WayUp[156](index=156&type=chunk) - Interest expense decreased significantly due to the adoption of ASU 2020-06, which eliminated the requirement to account for the debt discount on convertible notes as non-cash interest expense[158](index=158&type=chunk) Liquidity and Capital Resources Liquidity is strong at **$2.6 billion** in cash and investments, bolstered by a **$1.09 billion** equity offering - Principal sources of liquidity as of September 30, 2021, were cash, cash equivalents, and investments totaling **$2.6 billion**[164](index=164&type=chunk) - In November 2021, the board of directors increased the securities repurchase program by **$500.0 million**, authorizing up to **$1.0 billion** for repurchasing common stock and/or convertible notes[165](index=165&type=chunk) - A February 2021 equity offering raised net proceeds of **$1.09 billion**[166](index=166&type=chunk) Critical Accounting Policies, Significant Judgments and Estimates Critical accounting policies are unchanged except for share-based compensation, requiring judgment for PSUs - There have been no material changes to critical accounting policies, except for share-based compensation expense[184](index=184&type=chunk) - Management exercises significant judgment in assessing the achievement of performance targets for PSU awards, which can lead to volatility in share-based compensation expense period-to-period[188](index=188&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=39&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) No material changes in the company's market risk profile were observed during the reporting period - There were no material changes in the company's market risk profile during the reporting period[192](index=192&type=chunk) [Controls and Procedures](index=39&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded disclosure controls and procedures are effective, with no material changes to internal controls - Management concluded that disclosure controls and procedures are effective at a reasonable assurance level[195](index=195&type=chunk) - No material changes to internal control over financial reporting were identified during the quarter[196](index=196&type=chunk) PART II - OTHER INFORMATION [Legal Proceedings](index=40&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in various legal proceedings, with details in Note 8 of the financial statements - The company is involved in various legal proceedings. For detailed information, refer to Note 8, "Commitments and Contingencies," in the financial statements[198](index=198&type=chunk) [Risk Factors](index=40&type=page&id=Item%201A.%20Risk%20Factors) No material changes have occurred in the company's risk factors since the last Annual Report on Form 10-K - No material changes have occurred in the company's risk factors since the last Annual Report on Form 10-K[199](index=199&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=40&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company reported no unregistered sales of equity securities during the period - There were no unregistered sales of equity securities in the period[200](index=200&type=chunk) [Exhibits](index=41&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with Form 10-Q, including CEO/CFO certifications and Inline XBRL documents

Q2-21 Investor Presentation Aug 9, 2021 Chegg 1 Chegg Inc. © 2005 - 2021. All Rights Reserved. Confidential Material / © 2021 Chegg, Inc. / All Rights Reserved Confidential Material / © 2021 Chegg, Inc. / All Rights Reserved Safe Harbor Statement Forward-Looking Statements This presentation contains forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements relate to expectations, beliefs, projections, future pla ...

Financial Data and Key Metrics Changes - Total revenue grew by 30% in Q2 2021, reaching $198 million, driven by a 38% increase in Chegg Services revenue to $174 million [22][27] - Adjusted EBITDA increased by 52% year-over-year to $84 million, nearly three times the amount achieved two years ago [23][27] - The company ended the quarter with cash and investments of approximately $2.5 billion, having redeemed $91 million in convertible notes, reducing total debt [25] Business Line Data and Key Metrics Changes - Chegg Services subscribers grew to 4.9 million in Q2 2021, with both revenue and subscribers more than doubling over the past two years [22][27] - The company added 7 million new solutions in Q2, with over 37% of questions asked by international subscribers [13] - The average revenue per user (ARPU) has substantially increased due to the successful launch of the bundle [46][49] Market Data and Key Metrics Changes - International growth is strong, with expectations to exceed 1 million international subscribers for the year [8][27] - The company is seeing similar behavior patterns between international and U.S. subscribers, indicating strong engagement across markets [68] Company Strategy and Development Direction - Chegg is focused on reducing account sharing and enhancing the student experience through new content and services [9][12] - The company is investing in both academic and professional skills-based content to help students transition from learning to earning [16] - Initiatives like Honor Shield and Uversity aim to protect academic integrity and expand content offerings [11][18] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in exceeding initial revenue and adjusted EBITDA guidance for the remainder of 2021 due to strong performance and engagement [21][26] - The company is optimistic about the upcoming academic year, with expectations of continued growth and improved margins [27][29] - Management noted that the Delta variant has not negatively impacted business, as student engagement remains strong regardless of study location [39] Other Important Information - Chegg serves over 30 million students monthly, emphasizing the importance of sustainability and community contributions [10][19] - The company has invested nearly $1 million towards paying off employees' student debt through its Equity for Education program [19] Q&A Session Summary Question: What is the traction of Uversity with faculty? - Management indicated strong demand from professors, with $700,000 earned so far, and noted that the platform has not yet been launched to students [30][31] Question: How is the Delta variant affecting fall enrollment? - Management stated that the variant does not negatively impact business, as students are performing similarly regardless of study mode [37][39] Question: How is the bundle performing against expectations? - Management reported that the bundle has exceeded expectations, with higher adoption rates and increased ARPU [46][48] Question: Can you provide more details on international business metrics? - Management refrained from breaking out specific metrics but confirmed that international subscribers exhibit similar behaviors to U.S. subscribers [66][68] Question: What are the new personalization efforts being implemented? - Management explained that the company is evolving the user experience to focus on course-specific content rather than just textbooks [71][89] Question: What has been learned from the Mathway acquisition? - Management expressed satisfaction with the acquisition, noting that it has exceeded expectations and integrated well with Chegg's existing systems [92][96]

[PART I - FINANCIAL INFORMATION](index=4&type=section&id=PART%20I%20-%20FINANCIAL%20INFORMATION) Provides Chegg's unaudited condensed consolidated financial statements and management's discussion and analysis for the periods ended June 30, 2021, and December 31, 2020 [Item 1. Financial Statements (unaudited)](index=4&type=section&id=Item%201.%20Financial%20Statements%20%28unaudited%29) Presents Chegg's unaudited condensed consolidated financial statements, including balance sheets, income statements, cash flows, and detailed notes for the periods ended June 30, 2021, and December 31, 2020 [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Condensed Consolidated Balance Sheets (in thousands) | Assets/Liabilities & Equity | June 30, 2021 | December 31, 2020 | | :-------------------------- | :------------ | :---------------- | | **Assets** | | | | Cash and cash equivalents | $840,056 | $479,853 | | Short-term investments | $1,221,666 | $665,567 | | Total current assets | $2,116,267 | $1,182,955 | | Total assets | $3,150,947 | $2,251,258 | | **Liabilities** | | | | Total current liabilities | $113,537 | $109,732 | | Convertible senior notes, net | $1,675,340 | $1,506,922 | | Total liabilities | $1,813,065 | $1,641,623 | | **Stockholders' Equity** | | | | Total stockholders' equity | $1,337,882 | $609,635 | [Condensed Consolidated Statements of Operations](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Condensed Consolidated Statements of Operations (in thousands, except per share amounts) | Metric | Three Months Ended June 30, 2021 | Three Months Ended June 30, 2020 | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | | :---------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net revenues | $198,478 | $153,009 | $396,856 | $284,599 | | Gross profit | $137,770 | $109,485 | $264,764 | $198,685 | | Income from operations | $34,770 | $22,061 | $51,549 | $25,337 | | Net income (loss) | $32,764 | $10,589 | $(32,415) | $4,876 | | Basic EPS | $0.23 | $0.09 | $(0.23) | $0.04 | | Diluted EPS | $0.20 | $0.08 | $(0.23) | $0.04 | [Condensed Consolidated Statements of Comprehensive Income (Loss)](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income%20%28Loss%29) Condensed Consolidated Statements of Comprehensive Income (Loss) (in thousands) | Metric | Three Months Ended June 30, 2021 | Three Months Ended June 30, 2020 | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | | :---------------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income (loss) | $32,764 | $10,589 | $(32,415) | $4,876 | | Other comprehensive income (loss) | $268 | $7,212 | $(2,500) | $2,946 | | Total comprehensive income (loss) | $33,032 | $17,801 | $(34,915) | $7,822 | [Condensed Consolidated Statements of Stockholder's Equity](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholder%27s%20Equity) Condensed Consolidated Statements of Stockholders' Equity (in thousands) - Six Months Ended June 30, 2021 | Metric | Common Shares | Stock Par Value | Additional Paid-In Capital | Accumulated Other Comprehensive (Loss) Income | Accumulated Deficit | Total Stockholders' Equity | | :------------------------------------------------------------------ | :------------ | :-------------- | :------------------------- | :-------------------------------------------- | :------------------ | :------------------------- | | Balances at December 31, 2020 | 129,344 | $129 | $1,030,577 | $1,530 | $(422,601) | $609,635 | | Cumulative-effect adjustment related to adoption of ASU 2020-06 | — | — | $(465,006) | — | $86,868 | $(378,138) | | Issuance of common stock in connection with equity offering, net | 10,975 | 11 | 1,091,455 | — | — | 1,091,466 | | Equity component on conversions of 2023 notes and 2025 notes | — | — | $(236,920) | — | — | $(236,920) | | Issuance of common stock upon conversion of 2023 notes | 2,983 | 3 | 235,518 | — | — | 235,521 | | Net proceeds from capped call related to conversions and extinguishments | — | — | 67,769 | — | — | 67,769 | | Issuance of common stock upon exercise of stock options and ESPP | 164 | — | 5,265 | — | — | 5,265 | | Net share settlement of equity awards | 1,155 | 2 | $(74,642) | — | — | $(74,640) | | Share-based compensation expense | — | — | 52,839 | — | — | 52,839 | | Other comprehensive loss | — | — | — | $(2,500) | — | $(2,500) | | Net loss | — | — | — | — | $(32,415) | $(32,415) | | Balances at June 30, 2021 | 144,621 | $145 | $1,706,855 | $(970) | $(368,148) | $1,337,882 | [Condensed Consolidated Statements of Cash Flows](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Condensed Consolidated Statements of Cash Flows (in thousands) | Cash Flow Activity | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | | :---------------------------------- | :----------------------------- | :----------------------------- | | Net cash provided by operating activities | $144,501 | $122,205 | | Net cash used in investing activities | $(574,784) | $(178,482) | | Net cash provided by (used in) financing activities | $790,344 | $(46,065) | | Net increase (decrease) in cash, cash equivalents and restricted cash | $360,061 | $(102,342) | | Cash, cash equivalents and restricted cash, end of period | $841,776 | $287,090 | [Notes to Condensed Consolidated Financial Statements](index=11&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) Provides detailed explanations and disclosures for the condensed consolidated financial statements, covering accounting policies, revenue, debt, equity, and legal matters [Note 1. Background and Basis of Presentation](index=11&type=section&id=Note%201.%20Background%20and%20Basis%20of%20Presentation) Chegg, an education technology company, adopted ASU 2020-06 for convertible instruments, impacting financial statement presentation and EPS calculations, and operates as a single segment - Chegg, Inc. was incorporated in Delaware in July 2005 and is headquartered in Santa Clara, California, aiming to improve educational outcomes by supporting students with online learning tools[38](index=38&type=chunk) - The company operates in a single segment and its fiscal year ends on December 31[40](index=40&type=chunk) - The company adopted ASU 2020-06 on January 1, 2021, under the modified retrospective method, resulting in a **$378.1 million increase to convertible senior notes** and a **$465.0 million decrease to additional paid-in capital**, eliminating the separation of embedded conversion features[42](index=42&type=chunk)[54](index=54&type=chunk) - Accumulated deficit decreased by **$86.9 million** due to reduced non-cash interest expense[42](index=42&type=chunk)[54](index=54&type=chunk) [Note 2. Revenues](index=14&type=section&id=Note%202.%20Revenues) Revenues are recognized based on transfer of control, with Chegg Services showing significant growth and Required Materials experiencing mixed changes in the current periods - The majority of revenues are recognized over time as services are performed, with some recognized at a point in time[57](index=57&type=chunk) Net Revenues by Product Line (in thousands, except percentages) | Product Line | Three Months Ended June 30, 2021 | Change ($) | Change (%) | Six Months Ended June 30, 2021 | Change ($) | Change (%) | | :----------------- | :------------------------------- | :--------- | :--------- | :----------------------------- | :--------- | :--------- | | Chegg Services | $173,513 | $47,509 | 38% | $335,864 | $109,501 | 48% | | Required Materials | $24,965 | $(2,040) | (8)% | $60,992 | $2,756 | 5% | | Total Net Revenues | $198,478 | $45,469 | 30% | $396,856 | $112,257 | 39% | Contract Balances (in thousands) | Balance | June 30, 2021 | December 31, 2020 | Change ($) | Change (%) | | :------------------------ | :------------ | :---------------- | :--------- | :--------- | | Accounts receivable, net | $10,091 | $12,913 | $(2,822) | (22)% | | Deferred revenue | $34,682 | $32,620 | $2,062 | 6% | | Contract assets | $16,398 | $13,243 | $3,155 | 24% | [Note 3. Net Income (Loss) Per Share](index=15&type=section&id=Note%203.%20Net%20Income%20%28Loss%29%20Per%20Share) Adoption of ASU 2020-06 mandates the if-converted method for diluted EPS, impacting weighted-average shares for convertible instruments - ASU 2020-06, adopted on January 1, 2021, mandates the if-converted method for calculating diluted earnings per share for all convertible instruments, assuming conversion at the beginning of the period[63](index=63&type=chunk) Net Income (Loss) Per Share (in thousands, except per share amounts) | Metric | Three Months Ended June 30, 2021 | Three Months Ended June 30, 2020 | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | | :---------------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income (loss), basic | $32,764 | $10,589 | $(32,415) | $4,876 | | Weighted average shares, basic | 143,112 | 123,842 | 138,756 | 123,135 | | Net income (loss) per share, basic | $0.23 | $0.09 | $(0.23) | $0.04 | | Net income (loss), diluted | $33,976 | $10,589 | $(32,415) | $4,876 | | Weighted average shares, diluted | 168,282 | 133,851 | 138,756 | 132,674 | | Net income (loss) per share, diluted | $0.20 | $0.08 | $(0.23) | $0.04 | [Note 4. Cash and Cash Equivalents, and Investments](index=16&type=section&id=Note%204.%20Cash%20and%20Cash%20Equivalents%2C%20and%20Investments) Cash, cash equivalents, and investments significantly increased, with a strategic equity investment sale generating a $5.3 million gain, while maintaining a highly rated portfolio for capital preservation Cash, Cash Equivalents, and Investments (in thousands) | Category | June 30, 2021 Fair Value | December 31, 2020 Fair Value | | :------------------------ | :----------------------- | :--------------------------- | | Cash and cash equivalents | $840,056 | $479,853 | | Short-term investments | $1,221,666 | $665,567 | | Long-term investments | $484,853 | $523,628 | | Total | $2,546,575 | $1,669,048 | - In March 2021, Chegg sold its strategic equity investment in a foreign entity for **$8.3 million**, realizing a **$5.3 million gain**[70](index=70&type=chunk) - The company also made a **$2.0 million investment** in TAPD, Inc. (Frank) in March 2020[70](index=70&type=chunk) [Note 5. Fair Value Measurement](index=17&type=section&id=Note%205.%20Fair%20Value%20Measurement) Financial instruments are classified using a fair value hierarchy, with most investments and convertible senior notes valued using Level 2 inputs - The fair value hierarchy categorizes inputs as Level 1 (unadjusted quoted prices in active markets), Level 2 (observable inputs for similar assets/liabilities), and Level 3 (unobservable inputs requiring significant management judgment)[71](index=71&type=chunk)[72](index=72&type=chunk) Assets Measured at Fair Value (in thousands) as of June 30, 2021 | Asset Category | Total Fair Value | Level 1 | Level 2 | | :------------------------ | :--------------- | :-------- | :---------- | | Money market funds | $807,034 | $807,034 | — | | Commercial paper | $514,835 | — | $514,835 | | Corporate debt securities | $691,309 | — | $691,309 | | Agency bonds | $15,522 | — | $15,522 | | Long-term investments | $484,853 | — | $484,853 | | Total | $2,513,553 | $807,034 | $1,706,519 | - The estimated fair value of convertible senior notes is a Level 2 measurement due to limited trading activity[78](index=78&type=chunk) [Note 6. Acquisition](index=19&type=section&id=Note%206.%20Acquisition) Chegg acquired a company for $8.0 million in cash to enhance content creation, resulting in $3.3 million in developed technology and $5.8 million in goodwill - On February 22, 2021, Chegg acquired a company for **$8.0 million** in cash to enhance content creation, including **$3.3 million** in developed technology intangible assets and **$5.8 million** in goodwill[79](index=79&type=chunk) [Note 7. Convertible Senior Notes](index=19&type=section&id=Note%207.%20Convertible%20Senior%20Notes) Convertible senior notes are now a single liability under ASU 2020-06, with significant settlements and extinguishments of 2023 and 2025 notes resulting in a loss on early extinguishment - The company issued **$1.0 billion** of 0% convertible senior notes due 2026, **$800 million** of 0.125% notes due 2025, and **$345 million** of 0.25% notes due 2023[81](index=81&type=chunk) - During the six months ended June 30, 2021, Chegg settled **$115.6 million** of 2023 notes for **$351.1 million** (cash and common stock), and extinguished **$100.0 million** of 2025 notes for **$184.9 million** in cash[83](index=83&type=chunk)[84](index=84&type=chunk) - These transactions resulted in a **$78.2 million loss** on early extinguishment of debt[85](index=85&type=chunk) - Capped call transactions related to the 2026 and 2025 notes are expected to reduce or offset potential dilution, effectively increasing the conversion price, and are recorded in stockholders' equity[98](index=98&type=chunk) [Note 8. Commitments and Contingencies](index=22&type=section&id=Note%208.%20Commitments%20and%20Contingencies) Chegg faces various legal proceedings, including class action lawsuits, a contract dispute, an FTC inquiry, and 16,114 arbitration demands related to a 2018 data incident - Chegg settled class action lawsuits related to ADA and Unruh Civil Rights Act violations for immaterial amounts during the six months ended June 30, 2021[100](index=100&type=chunk)[101](index=101&type=chunk) - The company received a Civil Investigative Demand from the FTC in July 2020 concerning consumer privacy and data security practices[103](index=103&type=chunk) - Chegg faces **16,114 arbitration demands** related to a 2018 data incident, for which a loss contingency accrual was recorded in March 2021, with a corresponding insurance loss recovery[105](index=105&type=chunk) [Note 9. Guarantees and Indemnifications](index=23&type=section&id=Note%209.%20Guarantees%20and%20Indemnifications) Chegg indemnifies directors, officers, and vendors, with the fair value of these agreements deemed immaterial and no liabilities recorded - Chegg indemnifies its directors and officers, and has other indemnification agreements with vendors, with the maximum potential future indemnification being unlimited, but the fair value is deemed immaterial[108](index=108&type=chunk)[109](index=109&type=chunk) [Note 10. Stockholders' Equity](index=24&type=section&id=Note%2010.%20Stockholders%27%20Equity) Chegg completed a $1,091.5 million equity offering, repurchased $100.0 million of 2025 notes, and saw increased share-based compensation from RSU and PSU grants - In February 2021, Chegg issued **10,974,600 shares** of common stock at **$102.00 per share**, generating net proceeds of **$1,091.5 million**[111](index=111&type=chunk) - The board approved a **$500.0 million** securities repurchase program in June 2020, under which **$100.0 million** of 2025 notes were repurchased for **$184.9 million** through June 30, 2021, with **$165.5 million** remaining[112](index=112&type=chunk) Total Share-based Compensation Expense (in thousands) | Category | Three Months Ended June 30, 2021 | Three Months Ended June 30, 2020 | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | | :--------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Cost of revenues | $419 | $213 | $781 | $382 | | Research and development | $9,100 | $7,620 | $17,059 | $14,611 | | Sales and marketing | $3,655 | $2,436 | $6,574 | $4,622 | | General and administrative | $15,371 | $9,277 | $27,231 | $18,265 | | Total | $28,545 | $19,546 | $51,645 | $37,880 | - In March 2021, PSUs with market-based conditions (up to **732,260 shares**) and PSUs with financial/strategic performance targets (**278,644 shares**) were granted to key employees and executives[115](index=115&type=chunk)[119](index=119&type=chunk) [Note 11. Related-Party Transactions](index=26&type=section&id=Note%2011.%20Related-Party%20Transactions) Chegg engaged in transactions with Adobe, PayPal, and Zuora, involving service purchases and payment processing fees, where board members have affiliations - Chegg purchased **$1.0 million** in services from Adobe and incurred **$1.4 million** in payment processing fees to PayPal during the six months ended June 30, 2021[123](index=123&type=chunk)[124](index=124&type=chunk) - An immaterial amount of services was purchased from Zuora[125](index=125&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=27&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Discusses Chegg's financial condition and operational results, highlighting strong Chegg Services revenue growth, accounting change impacts, liquidity, seasonality, and factors influencing profitability [Overview](index=27&type=section&id=Overview) Chegg provides online learning tools, focusing on expanding Chegg Services for student engagement and operating margins, while navigating competition and COVID-19 risks - Chegg supports students with tools to learn course materials, succeed in classes, save money on materials, and acquire in-demand skills through online services[128](index=128&type=chunk) - The long-term strategy is centered on increasing student engagement with Chegg Services, investing in expansion, and driving increased operating margins to sustain profitability and positive cash flow[132](index=132&type=chunk) Net Revenues and Net Income (Loss) (in millions) | Metric | Three Months Ended June 30, 2021 | Six Months Ended June 30, 2021 | Three Months Ended June 30, 2020 | Six Months Ended June 30, 2020 | | :-------------- | :------------------------------- | :----------------------------- | :------------------------------- | :----------------------------- | | Net Revenues | $198.5 | $396.9 | $153.0 | $284.6 | | Net Income (Loss)| $32.8 | $(32.4) | $10.6 | $4.9 | [Chegg Services](index=28&type=section&id=Chegg%20Services) Subscription-based Chegg Services, including Chegg Study and Mathway, comprised 87% and 85% of net revenues for the three and six months ended June 30, 2021, respectively - Chegg Services include Chegg Study, Chegg Writing, Chegg Math Solver, Chegg Study Pack, Mathway, and Thinkful, primarily accessed on a monthly subscription basis[129](index=129&type=chunk)[134](index=134&type=chunk) - Chegg Services revenues accounted for **87%** and **85%** of total net revenues during the three and six months ended June 30, 2021, respectively, up from 82% and 80% in the prior year periods[135](index=135&type=chunk) [Required Materials](index=28&type=section&id=Required%20Materials) Required Materials, including print and eTextbooks, recognizes revenue ratably or upon shipment, with its revenue contribution decreasing to 13% and 15% of net revenues - Required Materials includes print textbooks (primarily for rent, also for sale) and eTextbooks, with revenues recognized ratably over the rental term or contractual period, or immediately for partner-owned textbooks[130](index=130&type=chunk)[136](index=136&type=chunk) - Required Materials revenues represented **13%** and **15%** of net revenues during the three and six months ended June 30, 2021, respectively, a decrease from 18% and 20% in the prior year periods[137](index=137&type=chunk) [Seasonality of Our Business](index=28&type=section&id=Seasonality%20of%20Our%20Business) Chegg's business is seasonal, with highest revenues and profitability in Q4, and variable expenses peaking in Q1 and Q3, affecting sequential comparisons - Revenues from Chegg Services, print textbooks, and eTextbooks are recognized ratably over the term, resulting in highest revenues and profitability in the fourth quarter[138](index=138&type=chunk) - Variable expenses for cost of revenues and marketing are highest in the first and third quarters, making sequential quarterly comparisons less insightful[138](index=138&type=chunk)[139](index=139&type=chunk) [Results of Operations](index=29&type=section&id=Results%20of%20Operations) Chegg saw significant revenue growth driven by Chegg Services, but gross margins decreased, operating expenses rose, and a six-month net loss resulted from debt extinguishment and derivative instrument charges Summary of Condensed Consolidated Statements of Operations (in thousands, except percentages) | Metric | Three Months Ended June 30, 2021 | % of Net Rev | Three Months Ended June 30, 2020 | % of Net Rev | Six Months Ended June 30, 2021 | % of Net Rev | Six Months Ended June 30, 2020 | % of Net Rev | | :------------------------------------ | :------------------------------- | :----------- | :------------------------------- | :----------- | :----------------------------- | :----------- | :----------------------------- | :----------- | | Net revenues | $198,478 | 100% | $153,009 | 100% | $396,856 | 100% | $284,599 | 100% |\ | Cost of revenues | $60,708 | 31% | $43,524 | 28% | $132,092 | 33% | $85,914 | 30% |\ | Gross profit | $137,770 | 69% | $109,485 | 72% | $264,764 | 67% | $198,685 | 70% |\ | Total operating expenses | $103,000 | 51% | $87,424 | 57% | $213,215 | 54% | $173,348 | 61% |\ | Income from operations | $34,770 | 18% | $22,061 | 15% | $51,549 | 13% | $25,337 | 9% |\ | Total interest expense, net and other income (expense), net | $219 | 0% | $(10,185) | (7)% | $(78,918) | (20)% | $(18,652) | (7)% |\ | Net income (loss) | $32,764 | 17% | $10,589 | 7% | $(32,415) | (8)% | $4,876 | 1% | [Net Revenues](index=30&type=section&id=Net%20Revenues) Net revenues increased by 30% and 39% for the three and six months, respectively, driven by Chegg Services growth from reduced account sharing, global penetration, and enhanced offerings Net Revenues by Product Line (in thousands, except percentages) | Product Line | Three Months Ended June 30, 2021 | Change ($) | Change (%) | Six Months Ended June 30, 2021 | Change ($) | Change (%) | | :----------------- | :------------------------------- | :--------- | :--------- | :----------------------------- | :--------- | :--------- | | Chegg Services | $173,513 | $47,509 | 38% | $335,864 | $109,501 | 48% | | Required Materials | $24,965 | $(2,040) | (8)% | $60,992 | $2,756 | 5% | | Total Net Revenues | $198,478 | $45,469 | 30% | $396,856 | $112,257 | 39% | - Chegg Services revenue growth was primarily due to efforts to reduce account sharing, increased global awareness and penetration, and the introduction of enhanced offerings, including the acquisition of Mathway[143](index=143&type=chunk) [Cost of Revenues](index=30&type=section&id=Cost%20of%20Revenues) Cost of revenues increased by 39% and 54%, leading to decreased gross margins due to higher depreciation, logistics, web hosting, fulfillment, and employee-related expenses Cost of Revenues (in thousands, except percentages) | Metric | Three Months Ended June 30, 2021 | Change ($) | Change (%) | Six Months Ended June 30, 2021 | Change ($) | Change (%) | | :--------------- | :------------------------------- | :--------- | :--------- | :----------------------------- | :--------- | :--------- | | Cost of revenues | $60,708 | $17,184 | 39% | $132,092 | $46,178 | 54% | | Share-based comp | $419 | $206 | 97% | $781 | $399 | 104% | - Gross margins decreased to **69%** (3 months) and **67%** (6 months) in 2021, from 72% and 70% in 2020, respectively[144](index=144&type=chunk)[146](index=146&type=chunk) - Key drivers for increased cost of revenues include higher depreciation and amortization (**$5.9 million** for 3 months, **$11.0 million** for 6 months), transitional logistics charges (**$4.2 million**), web hosting fees (**$2.5 million** for 3 months, **$2.7 million** for 6 months), and order fulfillment fees (**$1.8 million** for 3 months, **$7.1 million** for 6 months)[144](index=144&type=chunk)[146](index=146&type=chunk) [Operating Expenses](index=31&type=section&id=Operating%20Expenses) Total operating expenses increased by 18% and 23%, primarily due to higher sales and marketing and general and administrative expenses from increased employee costs and global marketing Total Operating Expenses (in thousands, except percentages) | Metric | Three Months Ended June 30, 2021 | Change ($) | Change (%) | Six Months Ended June 30, 2021 | Change ($) | Change (%) | | :------------------------- | :------------------------------- | :--------- | :--------- | :----------------------------- | :--------- | :--------- | | Research and development | $41,595 | $1,221 | 3% | $87,726 | $7,811 | 10% | | Sales and marketing | $21,686 | $5,928 | 38% | $47,900 | $11,904 | 33% | | General and administrative | $39,719 | $8,427 | 27% | $77,589 | $20,152 | 35% | | Total operating expenses | $103,000 | $15,576 | 18% | $213,215 | $39,867 | 23% | [Research and Development](index=31&type=section&id=Research%20and%20Development) R&D expenses were flat for three months but increased 10% for six months due to higher employee-related costs, decreasing as a percentage of net revenues - R&D expenses increased by **$7.8 million (10%)** for the six months ended June 30, 2021, primarily due to higher employee-related expenses, including share-based compensation[149](index=149&type=chunk) - R&D expenses as a percentage of net revenues decreased to **20%** (3 months) and **22%** (6 months) in 2021, from 26% and 28% in 2020, respectively[148](index=148&type=chunk)[149](index=149&type=chunk) [Sales and Marketing](index=32&type=section&id=Sales%20and%20Marketing) Sales and marketing expenses increased by 38% and 33% due to higher global marketing and employee-related costs, remaining stable as a percentage of net revenues - Sales and marketing expenses increased by **$5.9 million (38%)** for the three months and **$11.9 million (33%)** for the six months ended June 30, 2021[151](index=151&type=chunk)[152](index=152&type=chunk) - The increase was primarily attributable to increased global marketing spend (**$3.5 million** for 3 months, **$5.9 million** for 6 months) and higher employee-related expenses, including share-based compensation (**$2.2 million** for 3 months, **$4.1 million** for 6 months)[151](index=151&type=chunk)[152](index=152&type=chunk) [General and Administrative](index=32&type=section&id=General%20and%20Administrative) General and administrative expenses increased by 27% and 35% due to higher employee-related costs and professional fees, remaining consistent as a percentage of net revenues - General and administrative expenses increased by **$8.4 million (27%)** for the three months and **$20.2 million (35%)** for the six months ended June 30, 2021[153](index=153&type=chunk)[154](index=154&type=chunk) - The increase was primarily due to higher employee-related expenses, including share-based compensation (**$6.5 million** for 3 months, **$11.9 million** for 6 months), and higher professional fees (**$3.2 million** for 6 months)[153](index=153&type=chunk)[154](index=154&type=chunk) [Interest Expense and Other Income (Expense), Net](index=32&type=section&id=Interest%20Expense%20and%20Other%20Income%20%28Expense%29%2C%20Net) Interest expense decreased due to ASU 2020-06, but other income (expense) declined significantly from a $78.2 million debt extinguishment loss and derivative losses Interest Expense and Other Income (Expense), Net (in thousands) | Metric | Three Months Ended June 30, 2021 | Three Months Ended June 30, 2020 | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | | :------------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Interest expense, net | $(1,701) | $(13,425) | $(3,630) | $(26,852) | | Other income (expense), net | $1,920 | $3,240 | $(75,288) | $8,200 | | Total interest expense, net and other income (expense), net | $219 | $(10,185) | $(78,918) | $(18,652) | - Interest expense, net, decreased by **$11.7 million** (3 months) and **$23.2 million** (6 months) due to the reduction in non-cash interest expense from ASU 2020-06 adoption[155](index=155&type=chunk) - Other income (expense), net, decreased by **$83.5 million** for the six months, primarily due to a **$78.2 million loss** on early extinguishment of debt, **$7.1 million net loss** on derivative instruments, and lower interest income, partially offset by a **$5.3 million gain** on strategic equity investment sale[156](index=156&type=chunk) [Provision for Income Taxes](index=33&type=section&id=Provision%20for%20Income%20Taxes) Income tax provision increased by 73% and 179% due to higher foreign profits and withholding taxes from a strategic equity investment sale Provision for Income Taxes (in thousands, except percentages) | Metric | Three Months Ended June 30, 2021 | Change ($) | Change (%) | Six Months Ended June 30, 2021 | Change ($) | Change (%) | | :----------------------- | :------------------------------- | :--------- | :--------- | :----------------------------- | :--------- | :--------- | | Provision for income taxes | $2,225 | $938 | 73% | $5,046 | $3,237 | 179% | - The increase in tax provision was primarily due to an increase in foreign profits and withholding taxes related to the March 2021 sale of a strategic equity investment[159](index=159&type=chunk) [Liquidity and Capital Resources](index=33&type=section&id=Liquidity%20and%20Capital%20Resources) Chegg holds $2.5 billion in liquidity, raised $1,091.5 million from an equity offering, and generated $144.5 million from operations, while using $574.8 million in investing and providing $790.3 million in financing - As of June 30, 2021, Chegg's principal sources of liquidity were cash, cash equivalents, and investments totaling **$2.5 billion**[160](index=160&type=chunk) - In February 2021, the company completed an equity offering, raising net proceeds of **$1,091.5 million**[162](index=162&type=chunk) Cash Flows (in thousands) | Cash Flow Activity | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | | :---------------------------------- | :----------------------------- | :----------------------------- | | Net cash provided by operating activities | $144,501 | $122,205 | | Net cash used in investing activities | $(574,784) | $(178,482) | | Net cash provided by (used in) financing activities | $790,344 | $(46,065) | [Contractual Obligations and Other Commitments](index=35&type=section&id=Contractual%20Obligations%20and%20Other%20Commitments) Chegg extinguished $100.0 million of 2025 notes and settled $115.6 million of 2023 notes, with no other material changes to contractual obligations - During the six months ended June 30, 2021, Chegg extinguished **$100.0 million** aggregate principal amount of 2025 notes and settled **$115.6 million** of 2023 notes[175](index=175&type=chunk) - There were no other material changes in contractual obligations compared to the Annual Report on Form 10-K for the year ended December 31, 2020[176](index=176&type=chunk) [Off-Balance Sheet Arrangements](index=35&type=section&id=Off-Balance%20Sheet%20Arrangements) As of June 30, 2021, Chegg had no off-balance sheet arrangements with unconsolidated organizations or financial partnerships - As of June 30, 2021, Chegg had no relationships with unconsolidated organizations or financial partnerships for off-balance sheet arrangements[177](index=177&type=chunk) [Critical Accounting Policies, Significant Judgments and Estimates](index=35&type=section&id=Critical%20Accounting%20Policies%2C%20Significant%20Judgments%20and%20Estimates) Financial statement preparation requires significant management estimates and judgments, particularly for share-based compensation expense, which can materially impact reported figures - The preparation of financial statements requires management to make estimates and assumptions, which are evaluated on an ongoing basis, and actual results may differ materially from these estimates[178](index=178&type=chunk) - Share-based compensation expense is measured and recognized for all awards based on estimated fair values, with forfeiture rates estimated based on historical data and management expectations[180](index=180&type=chunk)[181](index=181&type=chunk) - Share-based compensation for PSUs with financial and strategic performance targets requires significant management judgment in determining the current level of attainment, which can lead to volatility in recognized expense[184](index=184&type=chunk) [Recent Accounting Pronouncements](index=37&type=section&id=Recent%20Accounting%20Pronouncements) Information on recent accounting pronouncements is available in Note 1, 'Background and Basis of Presentation,' within the financial statements - Refer to Note 1, 'Background and Basis of Presentation,' for information on recent accounting pronouncements[186](index=186&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=38&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) No material changes in Chegg's market risk occurred during the six months ended June 30, 2021, compared to the Annual Report on Form 10-K disclosures - No material changes in market risk occurred during the six months ended June 30, 2021, compared to the Annual Report on Form 10-K[188](index=188&type=chunk) [Item 4. Controls and Procedures](index=38&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded Chegg's disclosure controls and procedures were effective as of June 30, 2021, with no material changes in internal control over financial reporting despite remote work - Management concluded that disclosure controls and procedures were effective as of June 30, 2021, providing reasonable assurance for timely and accurate reporting[189](index=189&type=chunk)[191](index=191&type=chunk) - No material changes in internal control over financial reporting were identified during the three and six months ended June 30, 2021, despite remote work due to the COVID-19 pandemic[192](index=192&type=chunk) [PART II - OTHER INFORMATION](index=39&type=section&id=PART%20II%20-%20OTHER%20INFORMATION) Provides additional information including legal proceedings, risk factors, equity sales, exhibits, and official signatures [Item 1. Legal Proceedings](index=39&type=section&id=Item%201.%20Legal%20Proceedings) Chegg is involved in various legal proceedings and claims, with further details provided in Note 8, 'Commitments and Contingencies,' of the financial statements - Chegg is subject to various legal proceedings, including patent infringement, intellectual property, employment, and contract claims[194](index=194&type=chunk) - Further details on legal proceedings are provided in Note 8, 'Commitments and Contingencies,' of the financial statements[194](index=194&type=chunk) [Item 1A. Risk Factors](index=39&type=section&id=Item%201A.%20Risk%20Factors) No material changes in Chegg's risk factors were identified from the Annual Report on Form 10-K for the fiscal year ended December 31, 2020 - No material changes in risk factors were identified from the Annual Report on Form 10-K for the fiscal year ended December 31, 2020[195](index=195&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=39&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) No unregistered sales of equity securities were reported during the period - There were no unregistered sales of equity securities during the period[196](index=196&type=chunk) [Item 6. Exhibits](index=40&type=section&id=Item%206.%20Exhibits) Lists exhibits filed with Form 10-Q, including CEO and CFO certifications and Inline XBRL documents - Exhibits include certifications from the CEO and CFO (31.01, 31.02, 32.01) and Inline XBRL documents (101.INS, 101.SCH, 101.CAL, 101.LAB, 101.PRE, 101.DEF, 104)[198](index=198&type=chunk) [Signatures](index=41&type=section&id=Signatures) The Form 10-Q was signed by Andrew Brown, Chief Financial Officer, on August 9, 2021 - The report was signed by Andrew Brown, Chief Financial Officer, on August 9, 2021[201](index=201&type=chunk)

Q1-21 Investor Presentation May 3, 2021 Chegg A Smarter Way to Student 1 Chegg Inc. © 2005 - 2021. All Rights Reserved. Confidential Material / © 2021 Chegg, Inc. / All Rights Reserved Confidential Material / © 2021 Chegg, Inc. / All Rights Reserved Safe Harbor Statement Forward-Looking Statements This presentation contains forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements relate to expectations, beliefs ...