Chegg(CHGG) - 2024 Q2 - Quarterly Report

Item 1. Financial Statements (unaudited) Condensed Consolidated Balance Sheets Total assets decreased to $1.11 billion by June 30, 2024, from $1.73 billion, mainly due to goodwill and intangible asset reductions | Metric | June 30, 2024 (in thousands) | December 31, 2023 (in thousands) | | :----------------------------------- | :--------------------------- | :------------------------------- | | Assets | | | | Total current assets | $433,548 | $414,835 | | Long-term investments | $259,925 | $249,547 | | Property and equipment, net | $179,278 | $183,073 | | Goodwill | $189,769 | $631,995 | | Intangible assets, net | $12,848 | $52,430 | | Deferred tax assets | $2,287 | $141,843 | | Total assets | $1,114,330 | $1,727,235 | | Liabilities | | | | Total current liabilities | $485,286 | $518,462 | | Total long-term liabilities | $263,544 | $264,155 | | Total liabilities | $748,830 | $782,617 | | Stockholders' Equity | | | | Total stockholders' equity | $365,500 | $944,618 | - Goodwill decreased by $442,226 thousand (70%) from $631,995 thousand to $189,769 thousand[9] - Intangible assets, net, decreased by $39,582 thousand (75%) from $52,430 thousand to $12,848 thousand[9] - Deferred tax assets decreased by $139,556 thousand (98%) from $141,843 thousand to $2,287 thousand[9] Condensed Consolidated Statements of Operations Significant net loss reported for Q2 2024, driven by substantial impairment expense and declining net revenues | Metric (in thousands, except per share) | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :-------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net revenues | $163,147 | $182,853 | $337,497 | $370,454 | | Gross profit | $117,736 | $135,441 | $245,589 | $273,892 | | Total operating expenses | $602,743 | $154,137 | $733,087 | $297,034 | | Loss from operations | $(485,007) | $(18,696) | $(487,498) | $(23,142) | | Net (loss) income | $(616,884) | $24,612 | $(618,304) | $26,798 | | Basic net (loss) income per share | $(6.01) | $0.21 | $(6.03) | $0.22 | | Diluted net (loss) income per share | $(6.01) | $(0.11) | $(6.03) | $(0.08) | - Impairment expense of $481,531 thousand was recorded for both the three and six months ended June 30, 2024, significantly impacting operating expenses and net income[12] - Net revenues decreased by 11% for the three months and 9% for the six months ended June 30, 2024, compared to the same periods in 2023[12] Condensed Consolidated Statements of Comprehensive (Loss) Income Substantial total comprehensive loss reported for Q2 2024, primarily driven by the net loss | Metric (in thousands) | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :----------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net (loss) income | $(616,884) | $24,612 | $(618,304) | $26,798 | | Other comprehensive income (loss) | $757 | $2,159 | $(5,176) | $14,309 | | Total comprehensive (loss) income | $(616,127) | $26,771 | $(623,480) | $41,107 | Condensed Consolidated Statements of Stockholders' Equity Stockholders' equity significantly decreased to $365.5 million due to a large accumulated deficit from net loss | Metric (in thousands) | Balances at December 31, 2023 | Balances at June 30, 2024 | | :----------------------------------- | :---------------------------- | :------------------------ | | Common Shares | 102,824 | 103,361 | | Additional Paid-In Capital | $1,031,627 | $1,075,989 | | Accumulated Other Comprehensive Loss | $(34,739) | $(39,915) | | Accumulated Deficit | $(52,373) | $(670,677) | | Total Stockholders' Equity | $944,618 | $365,500 | - The accumulated deficit increased substantially from $(52,373) thousand to $(670,677) thousand, reflecting the net loss incurred during the period[20] - Share-based compensation expense contributed $50,111 thousand to additional paid-in capital during the six months ended June 30, 2024[20] Condensed Consolidated Statements of Cash Flows Operating cash flow decreased, investing cash flow increased, and financing cash flow significantly reduced | Cash Flow Activity (in thousands) | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :---------------------------------- | :----------------------------- | :----------------------------- | | Net cash provided by operating activities | $67,545 | $135,907 | | Net cash (used in) provided by investing activities | $(64,096) | $129,453 | | Net cash used in financing activities | $(5,635) | $(563,819) | | Net decrease in cash, cash equivalents and restricted cash | $(2,491) | $(298,262) | | Cash, cash equivalents and restricted cash, end of period | $135,485 | $177,592 | - Net cash provided by operating activities decreased by 50% ($68,362 thousand) primarily due to lower bookings and timing of bill payments[120] - Net cash used in investing activities increased by 150% ($193,549 thousand) mainly due to lower proceeds from maturities and sales of investments, and higher purchases of property and equipment, partially offset by lower purchases of investments[121][122] - Net cash used in financing activities decreased by 99% ($558,184 thousand) primarily due to the absence of common stock repurchases and convertible senior notes repayments in 2024[122] Notes to Condensed Consolidated Financial Statements Note 1. Background and Basis of Presentation Chegg provides AI-powered learning support as a single segment; impairment expense added to operating expenses - Chegg provides AI-powered academic support and access to subject matter experts, helping students build academic, life, and job skills[27] - The company operates as a single operating and reportable segment[29] - Impairment expense, totaling $481,531 thousand, was added as a component within operating expenses, comprising goodwill ($439,683), intangible assets ($31,862), and property and equipment, net ($9,986)[29][30] Note 2. Revenues Net revenues decreased by 11% (Q2) and 9% (H1) due to fewer subscribers and lower Chegg Skills bookings | Revenue Category (in thousands) | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | Change ($) | Change (%) | | :------------------------------ | :------------------------------- | :------------------------------- | :--------- | :--------- | | Subscription Services | $146,813 | $165,855 | $(19,042) | (11)% | | Skills and Other | $16,334 | $16,998 | $(664) | (4)% | | Total net revenues | $163,147 | $182,853 | $(19,706) | (11)% | | Revenue Category (in thousands) | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | Change ($) | Change (%) | | :------------------------------ | :----------------------------- | :----------------------------- | :--------- | :--------- | | Subscription Services | $300,864 | $334,295 | $(33,431) | (10)% | | Skills and Other | $36,633 | $36,159 | $474 | 1% | | Total net revenues | $337,497 | $370,454 | $(32,957) | (9)% | - Accounts receivable, net, decreased by $10.4 million (33%) due to lower bookings from Chegg Skills and seasonality[39] - Deferred revenue decreased by $10.3 million (19%) primarily due to lower bookings from Chegg Skills and seasonality[39] Note 3. Net (Loss) Income Per Share Significant basic and diluted net loss per share reported for Q2 and H1 2024, contrasting with prior year | Metric | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :-------------------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net (loss) income (in thousands) | $(616,884) | $24,612 | $(618,304) | $26,798 | | Weighted average shares, basic (in thousands) | 102,604 | 117,977 | 102,474 | 120,828 | | Net (loss) income per share, basic | $(6.01) | $0.21 | $(6.03) | $0.22 | | Weighted average shares, diluted (in thousands) | 102,604 | 132,944 | 102,474 | 137,416 | | Net (loss) income per share, diluted | $(6.01) | $(0.11) | $(6.03) | $(0.08) | - The significant net loss for the current periods resulted in basic and diluted EPS of $(6.01) and $(6.03) respectively, compared to positive EPS in the prior year[41] Note 4. Cash and Cash Equivalents, Investments and Fair Value Measurements Diversified cash and investment portfolio maintained, with fair values consistent with costs and strategic investments | Category (in thousands) | Fair Value Level | Adjusted Cost (June 30, 2024) | Fair Value (June 30, 2024) | | :---------------------- | :--------------- | :---------------------------- | :------------------------- | | Cash and cash equivalents | | $133,068 | $133,068 | | Short-term investments | Level 1/2 | $213,146 | $212,396 | | Long-term investments | Level 1/2 | $261,001 | $259,925 | | Total | | $607,215 | $605,389 | - The company sold its investment in Sound Ventures AI Fund for $15.5 million on January 1, 2024, realizing a gain of $3.8 million[47] - An investment of $6.0 million in Knack Technologies, Inc. is accounted for at cost, with no impairment recorded[48] Note 5. Property and Equipment, Net Property and equipment, net, decreased to $179.3 million, impacted by $10.0 million impairment and Chegg Skills write-off | Category (in thousands) | December 31, 2023 | | :---------------------- | :---------------- | | Content | $346,749 | | Software | $51,855 | | Leasehold improvements | $10,857 | | Furniture and fixtures | $4,607 | | Computer and equipment | $3,496 | | Property and equipment (gross) | $417,564 | | Less accumulated depreciation and amortization | $(234,491) | | Property and equipment, net | $183,073 | - Depreciation and content amortization expense for the six months ended June 30, 2024, was $31.9 million, down from $39.4 million in the prior year[49] - A $10.0 million impairment expense was recorded for property and equipment ($6.6 million content, $3.4 million software) in Q2 2024, classified as impairment expense[51] - A $1.1 million write-off and accelerated depreciation of content assets were recorded due to discontinuing Chegg Skills, classified as cost of revenues[50] Note 6. Goodwill and Intangible Assets Significant impairment expenses for goodwill ($439.7M) and intangibles ($31.9M) recorded due to stock price decline - A goodwill impairment expense of $439.7 million was recorded during the three months ended June 30, 2024, due to the fair value of the reporting unit being less than its carrying value[51] | Goodwill Balance (in thousands) | Six Months Ended June 30, 2024 | Year Ended December 31, 2023 | | :------------------------------ | :----------------------------- | :--------------------------- | | Beginning balance | $631,995 | $615,093 | | Impairment expense | $(439,683) | — | | Foreign currency translation adjustment | $(2,543) | $16,902 | | Ending balance | $189,769 | $631,995 | - An intangible asset impairment expense of $31.9 million was recorded for Busuu assets during the three months ended June 30, 2024, as expected future undiscounted cash flows were insufficient to recover the carrying value[53] | Intangible Assets (in thousands) | Gross Carrying Amount | Accumulated Amortization | Accumulated Impairment | Net Carrying Amount (June 30, 2024) | | :------------------------------- | :-------------------- | :----------------------- | :--------------------- | :---------------------------------- | | Developed technologies | $106,703 | $(61,167) | $(29,369) | $12,209 | | Content libraries | $12,230 | $(11,883) | — | $347 | | Customer lists | $34,190 | $(32,774) | — | $118 | | Trade and domain names | $16,213 | $(13,169) | $(2,493) | $174 | | Total intangible assets | $169,336 | $(118,993) | $(31,862) | $12,848 | Note 7. Convertible Senior Notes Outstanding convertible senior notes due 2026 ($244.5M) and 2025 ($358.9M), with 2025 notes now a current liability - The 2026 notes have a principal amount of $244.5 million and an initial conversion price of $107.55 per share[58][59] - The 2025 notes have a principal amount of $358.9 million and an initial conversion price of $51.56 per share, and are classified as a current liability as of June 30, 2024[58][59][60] | Interest Expense (in thousands) | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2024 | | :------------------------------ | :------------------------------- | :----------------------------- | | 2026 notes total interest expense | $160 | $321 | | 2025 notes total interest expense | $491 | $980 | - Capped call transactions are in place for both notes, effectively increasing the conversion price and reducing potential dilution[63] Note 8. Commitments and Contingencies Company faces various legal proceedings, including derivative and class actions, with a $7.0 million net contingent liability - The company is facing multiple stockholder derivative and class action lawsuits alleging breach of fiduciary duty and securities fraud[65][68][69][70] - A settlement agreement is being pursued with JPMorgan Chase Bank, N.A. regarding investment proceeds from TAPD, Inc. (Frank), with a probable and reasonably estimable loss contingency accrued[66] - Pearson Education, Inc. filed a copyright infringement complaint against Chegg, which the company intends to vigorously defend[71] - The FTC finalized an order in January 2023 requiring Chegg to implement a comprehensive information security program, with no monetary penalties[72] - A net contingent liability of $7.0 million (contingent liabilities less insurance loss recovery) has been recorded for legal matters[73] Note 9. Guarantees and Indemnifications Company indemnifies directors, officers, and vendors; fair value of agreements is immaterial, with no liabilities recorded - Chegg indemnifies its directors and officers, with potential exposure limited by a directors' and officers' insurance policy[74] - The company also has indemnification agreements with various vendors, with an unlimited maximum potential future indemnification amount[74] - The fair value of these indemnification agreements is believed to be immaterial, and no liabilities were recorded as of June 30, 2024[74] Note 10. Stockholders' Equity Final ASR delivery completed; $3.7 million remains under repurchase program; H1 2024 share-based compensation was $47.3 million - In February 2024, 2,115,952 shares were repurchased related to the final delivery of the November 2023 ASR agreement[75] - As of June 30, 2024, $3.7 million remained authorized under the securities repurchase program, with no cash repurchases during the three and six months ended June 30, 2024[76] | Share-based Compensation Expense (in thousands) | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2024 | | :---------------------------------------------- | :------------------------------- | :----------------------------- | | Cost of revenues | $466 | $979 | | Research and development | $7,123 | $16,332 | | Sales and marketing | $1,726 | $3,866 | | General and administrative | $8,732 | $26,159 | | Total share-based compensation expense | $18,047 | $47,336 | - Total unrecognized share-based compensation expense was approximately $98.9 million as of June 30, 2024, with a weighted-average vesting period of approximately 1.6 years[77] Note 11. Restructuring and Other Related Charges Restructuring plan initiated in June 2024, resulting in $6.7 million in charges and $2.2 million impairment of lease assets - The company recorded $6.7 million in restructuring charges during the three months ended June 30, 2024, primarily for one-time employee termination benefits[79] - An additional $3 million to $4 million in restructuring charges are estimated for the next two fiscal quarters, with the plan expected to be substantially completed by Q1 2025[79] - A $2.2 million impairment expense was recorded for lease-related assets (ROU assets and leasehold improvements) due to the closure of two international offices[81] Note 12. Income Taxes Income tax provision significantly increased by $118.7 million (Q2) and $123.5 million (H1) due to a valuation allowance against deferred tax assets | Provision for Income Taxes (in thousands) | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :---------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Provision for income taxes | $(138,345) | $(19,681) | $(147,404) | $(23,857) | - The increase in tax provision was primarily driven by a $141.6 million valuation allowance established against U.S. federal and state deferred tax assets[83] - The valuation allowance was deemed necessary due to negative evidence, including cumulative losses influenced by impairment expense[83] Note 13. Subsequent Event India office lease amended in July 2024, increasing future minimum lease payments by approximately $12.3 million - An amendment to the India office lease in July 2024 will increase future minimum lease payments by approximately $12.3 million[84] - The accounting for the lease amendment is ongoing as of the financial statement issuance date[84] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Overview Chegg provides AI-powered learning support, recorded $481.5M impairment, and initiated a restructuring plan in June 2024 - Chegg's long-term strategy focuses on utilizing Subscription Services to increase student engagement, expanding offerings with AI integration, and international market expansion[88] - The company recorded $481.5 million in impairment expense during Q2 2024 due to a sustained decline in stock price, industry developments, and financial performance[88] - A restructuring plan in June 2024 included a workforce reduction, closure of two international offices, and discontinuation of direct-to-customer Chegg Skills offerings, with expected cost savings in fiscal year 2025[89] Subscription Services Subscription Services, including various Chegg offerings and Busuu, form the majority of net revenues, recognized ratably - Subscription Services include Chegg Study Pack, Chegg Study, Chegg Writing, Chegg Math, and Busuu, offering AI-powered academic support, writing tools, math solvers, and language learning[91] - Subscription Services accounted for 90% and 89% of net revenues during the three and six months ended June 30, 2024, respectively[92] - Revenues from Subscription Services are primarily recognized ratably over the monthly subscription period[91] Skills and Other Skills and Other, including Chegg Skills and advertising, represented 10-11% of net revenues, with Chegg Skills no longer direct-to-customer - Skills and Other revenues include Chegg Skills (professional courses), advertising services, and print/eTextbooks[93] - This product line constituted 10% and 11% of net revenues for the three and six months ended June 30, 2024, respectively[93] - Chegg Skills will no longer be offered directly to customers following the June 2024 restructuring[89] Seasonality of Our Business Business is seasonal, with highest revenues in Q4 and marketing expenses in Q1/Q3, affecting sequential comparisons - Revenues from Subscription Services are recognized ratably, leading to highest revenues and profitability in the fourth quarter[94] - Marketing expenses are highest in the first and third quarters, causing revenue and expense concentrations to not always coincide[94] - Sequential quarterly comparisons of results may not provide meaningful insight due to these seasonal factors[94] Components of Results of Operations Significant net loss for Q2 and H1 2024, driven by $481.5M impairment, declining revenues, and increased operating expenses | Metric (in thousands) | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net revenues | $163,147 | $182,853 | $337,497 | $370,454 | | Gross profit | $117,736 | $135,441 | $245,589 | $273,892 | | Total operating expenses | $602,743 | $154,137 | $733,087 | $297,034 | | Loss from operations | $(485,007) | $(18,696) | $(487,498) | $(23,142) | | Net (loss) income | $(616,884) | $24,612 | $(618,304) | $26,798 | - Impairment expense of $481,531 thousand was the primary driver of the increased operating expenses and net loss for the current periods[97] - Total share-based compensation expense decreased by 50% for the three months and 32% for the six months ended June 30, 2024, compared to the prior year[98][104][106] Net Revenues Net revenues decreased by 11% (Q2) and 9% (H1) due to fewer Subscription Services subscribers and lower Chegg Skills enrollments | Revenue Category (in thousands) | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | Change ($) | Change (%) | | :------------------------------ | :------------------------------- | :------------------------------- | :--------- | :--------- | | Subscription Services | $146,813 | $165,855 | $(19,042) | (11)% | | Skills and Other | $16,334 | $16,998 | $(664) | (4)% | | Total net revenues | $163,147 | $182,853 | $(19,706) | (11)% | - The decrease in Subscription Services revenues was primarily due to a 9% and 8% decrease in subscribers for the three months ended June 30, 2024, and March 31, 2024, respectively[100] - Skills and Other revenues decreased by 4% for the three months ended June 30, 2024, mainly due to lower direct-to-customer enrollments in Chegg Skills[100] Cost of Revenues Cost of revenues decreased by 4% (Q2) and 5% (H1) due to lower depreciation and contractor spend, despite slight gross margin decline | Metric (in thousands) | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | Change ($) | | :-------------------- | :------------------------------- | :------------------------------- | :--------- | | Cost of revenues | $45,411 | $47,412 | $(2,001) | | Share-based compensation expense | $466 | $560 | $(94) | | Restructuring charges | $191 | $12 | $179 | - The decrease in cost of revenues for the three months was mainly due to lower depreciation and amortization ($3.2 million) and contractor spend ($1.5 million), partially offset by higher web hosting fees ($1.0 million) and the absence of a gain on textbook disposition ($1.2 million)[101] - Gross margins decreased from 74% to 72% for the three months and from 74% to 73% for the six months ended June 30, 2024[101][102] Operating Expenses Total operating expenses significantly increased due to a $481.5 million impairment expense, despite decreases in other expense categories | Operating Expense (in thousands) | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | Change ($) | Change (%) | | :------------------------------- | :------------------------------- | :------------------------------- | :--------- | :--------- | | Research and development | $43,651 | $52,872 | $(9,221) | (17)% | | Sales and marketing | $23,545 | $30,956 | $(7,411) | (24)% | | General and administrative | $54,016 | $70,309 | $(16,293) | (23)% | | Impairment expense | $481,531 | — | $481,531 | n/m | | Total operating expenses | $602,743 | $154,137 | $448,606 | n/m | - Share-based compensation expense within operating expenses decreased by 50% for the three months and 32% for the six months ended June 30, 2024[104][106] - Restructuring charges within operating expenses increased by 15% for the three and six months ended June 30, 2024[104][106] Research and Development R&D expenses decreased by 17% (Q2) and 12% (H1) due to lower employee-related expenses, including share-based compensation - Research and development expenses decreased by $9.2 million (17%) for the three months and $11.7 million (12%) for the six months ended June 30, 2024[107] - The decrease was primarily attributable to lower employee-related expenses, including share-based compensation expense[107] Sales and Marketing Sales and marketing expenses decreased by 24% (Q2) and 21% (H1) due to reductions in depreciation, paid marketing, and employee costs - Sales and marketing expenses decreased by $7.4 million (24%) for the three months and $14.1 million (21%) for the six months ended June 30, 2024[108][109] - Key drivers for the decrease included lower depreciation and amortization ($3.3 million for three months), lower paid marketing expenses ($3.0 million for three months), and reduced employee-related expenses[108][109] General and Administrative G&A expenses decreased by 23% (Q2) and 15% (H1) due to lower employee-related expenses, including share-based compensation - General and administrative expenses decreased by $16.3 million (23%) for the three months and $19.7 million (15%) for the six months ended June 30, 2024[110][111] - The decrease was primarily due to lower employee-related expenses, including share-based compensation expense[110][111] Impairment Expense Significant impairment expense of $481.5 million recorded for Q2 and H1 2024, covering goodwill, intangible, and long-lived assets - Impairment expense totaled $481.5 million for both the three and six months ended June 30, 2024[112] - This expense consisted of impairments of goodwill, intangible assets, and other related long-lived assets[112] Interest Expense and Other Income, Net Interest expense decreased; other income significantly declined due to absence of prior-year gains and lower interest income | Metric (in thousands) | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | Change ($) | | :------------------------------------ | :------------------------------- | :------------------------------- | :--------- | | Interest expense, net | $(651) | $(1,114) | $463 | | Other income, net | $7,119 | $64,103 | $(56,984) | | Total interest expense, net and other income, net | $6,468 | $62,989 | $(56,521) | - Interest expense, net, decreased by $0.5 million (42%) for the three months and $1.1 million (45%) for the six months, primarily due to partial early extinguishments of convertible senior notes in 2023[113] - Other income, net, decreased by $57.0 million (89%) for the three months and $58.3 million (77%) for the six months, mainly due to the absence of a $53.8 million gain on early extinguishment of debt in 2023 and a decrease in interest income[114] Provision for Income Taxes Income tax provision significantly increased by $118.7 million (Q2) and $123.5 million (H1) due to a valuation allowance against deferred tax assets | Provision for Income Taxes (in thousands) | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | Change ($) | | :---------------------------------------- | :------------------------------- | :------------------------------- | :--------- | | Provision for income taxes | $(138,345) | $(19,681) | $(118,664) | - The increase in tax provision was primarily due to the establishment of a valuation allowance against U.S. federal and state deferred tax assets[116] Liquidity and Capital Resources Chegg had $605.4 million in liquidity; operating cash decreased by 50%, investing cash increased by 150%, and financing cash decreased by 99% | Metric (in thousands) | June 30, 2024 | December 31, 2023 | Change ($) | Change (%) | | :---------------------------------------------------- | :------------ | :---------------- | :--------- | :--------- | | Cash, cash equivalents and short-term and long-term investments | $605,389 | $579,561 | $25,828 | 4% | | Convertible senior notes, net | $600,917 | $599,837 | $1,080 | 0% | - Principal sources of liquidity were $605.4 million in cash, cash equivalents, and investments as of June 30, 2024[118] | Cash Flow Activity (in thousands) | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | Change ($) | Change (%) | | :---------------------------------- | :----------------------------- | :----------------------------- | :--------- | :--------- | | Net cash flows from operating activities | $67,545 | $135,907 | $(68,362) | (50)% | | Net cash flows from investing activities | $(64,096) | $129,453 | $(193,549) | (150)% | | Net cash flows from financing activities | $(5,635) | $(563,819) | $558,184 | (99)% | - The company has incurred cumulative losses of $670.7 million from operations as of June 30, 2024[118] Critical Accounting Policies, Significant Judgments and Estimates No material changes in critical accounting policies or estimates occurred during H1 2024 compared to the 2023 Annual Report on Form 10-K - No material changes occurred in critical accounting policies and estimates during the six months ended June 30, 2024[124] - Estimates are based on historical experience, current business conditions, and future expectations, with actual results potentially differing materially[123] Recent Accounting Pronouncements No material impact from adopted pronouncements in H1 2024; company is evaluating FASB ASUs 2024-02, 2023-09, and 2023-07 - No material impact from recently adopted accounting pronouncements during the six months ended June 30, 2024[35] - The company is evaluating the impact of ASU 2024-02 (Codification Improvements), ASU 2023-09 (Income Tax Disclosures), and ASU 2023-07 (Reportable Segment Disclosures), all effective for annual periods beginning after December 15, 2024 (or interim periods for ASU 2023-07)[33][34][35] Item 3. Quantitative and Qualitative Disclosures About Market Risk No material changes in market risk reported for H1 2024 compared to the 2023 Annual Report on Form 10-K - No material changes in market risk were reported for the six months ended June 30, 2024[127] Item 4. Controls and Procedures Disclosure controls and procedures were effective as of June 30, 2024, with no material changes in internal control over financial reporting - Disclosure controls and procedures were evaluated and deemed effective at a reasonable assurance level as of June 30, 2024[129] - No material changes in internal control over financial reporting occurred during the three months ended June 30, 2024[130] Item 1. Legal Proceedings Company is subject to various legal proceedings and claims, including intellectual property and employment disputes, detailed in Note 8 - The company is involved in various legal proceedings and claims, including alleged infringement of intellectual property rights, employment claims, and general contract disputes[132] - Additional information on legal proceedings is available in Note 8, 'Commitments and Contingencies,' of the financial statements[132] Item 1A. Risk Factors No material changes to the company's risk factors were reported from the 2023 Annual Report on Form 10-K - No material changes to risk factors were reported from the Annual Report on Form 10-K[133] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds No unregistered sales of equity securities or common stock repurchases occurred during Q2 2024 - No unregistered sales of securities occurred during the three months ended June 30, 2024[134] - The registrant did not purchase any of its common stock during the three months ended June 30, 2024[134] Item 5. Other Information No Section 16 officers or directors adopted or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during Q2 2024 - No Section 16 officers or directors adopted or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the quarter[135] Item 6. Exhibits This section lists all exhibits filed with the Quarterly Report on Form 10-Q, including certifications and XBRL documents - Exhibits include certifications from the CEO and CFO (31.01, 31.02), a certification pursuant to 18 U.S.C. Section 1350 (32.01), and various Inline XBRL documents (101.INS, 101.SCH, 101.CAL, 101.LAB, 101.PRE, 101.DEF, 104)[137] Signatures The report was signed on August 5, 2024, by David Longo, Chief Financial Officer of Chegg, Inc - The report was signed by David Longo, Chief Financial Officer of Chegg, Inc., on August 5, 2024[139]