Chegg(CHGG) - 2021 Q2 - Quarterly Report

PART I - FINANCIAL INFORMATION 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) 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 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 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) 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 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 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 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 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] - The company operates in a single segment and its fiscal year ends on December 31[40] - 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][54] - Accumulated deficit decreased by $86.9 million due to reduced non-cash interest expense[42][54] Note 2. Revenues Revenues are recognized based on transfer of control, with Chegg Services showing significant growth and Required Materials experiencing mixed changes in the current periods - The majority of revenues are recognized over time as services are performed, with some recognized at a point in time[57] Net Revenues by Product Line (in thousands, except percentages) | Product Line | Three Months Ended June 30, 2021 | Change ($) | 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 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] 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 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] - The company also made a $2.0 million investment in TAPD, Inc. (Frank) in March 2020[70] Note 5. Fair Value Measurement 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][72] 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] Note 6. Acquisition 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] Note 7. Convertible Senior Notes 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] - 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][84] - These transactions resulted in a $78.2 million loss on early extinguishment of debt[85] - 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] Note 8. Commitments and Contingencies 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][101] - The company received a Civil Investigative Demand from the FTC in July 2020 concerning consumer privacy and data security practices[103] - 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] Note 9. Guarantees and Indemnifications 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][109] Note 10. Stockholders' Equity 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] - 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] 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][119] Note 11. Related-Party Transactions 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][124] - An immaterial amount of services was purchased from Zuora[125] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Discusses Chegg's financial condition and operational results, highlighting strong Chegg Services revenue growth, accounting change impacts, liquidity, seasonality, and factors influencing profitability 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] - 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] 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 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][134] - 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] Required Materials 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][136] - 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] Seasonality of Our Business 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] - Variable expenses for cost of revenues and marketing are highest in the first and third quarters, making sequential quarterly comparisons less insightful[138][139] Results of Operations 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)% | $4,876 | 1% | Net Revenues Net revenues increased by 30% and 39% for the three and six months, respectively, driven by Chegg Services growth from reduced account sharing, global penetration, and enhanced offerings Net Revenues by Product Line (in thousands, except percentages) | Product Line | Three Months Ended June 30, 2021 | Change ($) | 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 | $112,257 | 39% | - Chegg Services revenue growth was primarily due to efforts to reduce account sharing, increased global awareness and penetration, and the introduction of enhanced offerings, including the acquisition of Mathway[143] Cost of Revenues Cost of revenues increased by 39% and 54%, leading to decreased gross margins due to higher depreciation, logistics, web hosting, fulfillment, and employee-related expenses Cost of Revenues (in thousands, except percentages) | Metric | Three Months Ended June 30, 2021 | Change ($) | 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][146] - 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, $7.1 million for 6 months)[144][146] Operating Expenses Total operating expenses increased by 18% and 23%, primarily due to higher sales and marketing and general and administrative expenses from increased employee costs and global marketing Total Operating Expenses (in thousands, except percentages) | Metric | Three Months Ended June 30, 2021 | Change ($) | 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 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] - 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][149] Sales and Marketing 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][152] - 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][152] General and Administrative 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][154] - 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][154] Interest Expense and Other Income (Expense), Net 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] - 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 $5.3 million gain on strategic equity investment sale[156] Provision for Income Taxes Income tax provision increased by 73% and 179% due to higher foreign profits and withholding taxes from a strategic equity investment sale Provision for Income Taxes (in thousands, except percentages) | Metric | Three Months Ended June 30, 2021 | Change ($) | 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] Liquidity and Capital Resources 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] - In February 2021, the company completed an equity offering, raising net proceeds of $1,091.5 million[162] 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 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] - 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] Off-Balance Sheet Arrangements 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] Critical Accounting Policies, Significant Judgments and Estimates 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] - 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][181] - 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] Recent Accounting Pronouncements 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] Item 3. Quantitative and Qualitative Disclosures About Market Risk 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] Item 4. Controls and Procedures 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][191] - 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] PART II - OTHER INFORMATION Provides additional information including legal proceedings, risk factors, equity sales, exhibits, and official signatures Item 1. Legal Proceedings 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] - Further details on legal proceedings are provided in Note 8, 'Commitments and Contingencies,' of the financial statements[194] Item 1A. Risk Factors 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] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds No unregistered sales of equity securities were reported during the period - There were no unregistered sales of equity securities during the period[196] Item 6. Exhibits 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] 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]