Acquisitions

12 Months Ended

Dec. 31, 2019

2019 Acquisition

On October 1, 2019, we completed our acquisition of Thinkful, Inc. (Thinkful), a skills-based learning platform that offers professional courses in software engineering, data science, data analytics, product design, and product management directly to students across the United States to expand our existing offerings by adding affordable and high-quality courses focused on the most in-demand technology skills. The total fair value of the purchase consideration was $79.2 million, which was paid in cash and included an escrow amount of $9.0 million for general representations and warranties and potential post-closing adjustments. Any remaining escrow amount will be released 18 months after the acquisition date.

Included in the purchase agreement for the acquisition of Thinkful are additional payments of up to $20.0 million subject to the achievement of specified milestones and continued employment of key employees. These payments are not included in the fair value of the purchase consideration and are expensed ratably as acquisition related compensation costs classified as research and development, general and administrative, and sales and marketing expenses, based on the key employee's job function, on our consolidated statement of operations. These payments may be settled by us, at our sole discretion, either in cash or shares of our common stock. We have recorded approximately $3.0 million as of December 31, 2019 included within accrued liabilities on our consolidated balance sheet for these payments.

Goodwill is primarily attributable to the potential for expanding our existing offerings and reach by providing educational services for students and helping them through their professional journey. The amounts recorded for intangible assets and goodwill are not deductible for tax purposes.

The following table presents the preliminary total allocation of purchase consideration recorded in our consolidated balance sheet as of the acquisition date (in thousands):



	Thinkful
Cash	$	51
Accounts receivable	547
Other acquired assets	1,710
Acquired intangible assets	16,360
Total identifiable assets acquired	18,668
Deferred revenue	(3,044		)
Liabilities assumed	(1,605		)
Net identifiable assets acquired	14,019
Goodwill	65,181
Total fair value of purchase consideration	$	79,200

The following table presents the details of the allocation of purchase consideration to the acquired intangible assets (in thousands, except weighted-average amortization period):



	Thinkful
	Amount		Weighted-Average Amortization Period (in months)
Trade name	$	4,430	48
Domain names	330		48
Content library	6,940		60
Developed technology	4,660		36
Acquired intangible assets	$	16,360	50

During the year ended December 31, 2019, we incurred $1.0 million of acquisition-related expenses associated with our acquisition of Thinkful, which have been included in general and administrative expenses in our consolidated statement of operations. During the year ended December 31, 2019, $8.6 million of our consolidated net loss was attributed by Thinkful and we have recorded an immaterial amount of revenues since the acquisition date.

The following unaudited supplemental pro forma net loss is for informational purposes only and presents our combined results as if the acquisition of Thinkful had occurred on January 1, 2018. The unaudited supplemental pro forma information includes the historical combined operating results adjusted for acquisition related compensation costs, amortization of intangible assets, share-based compensation expense and transaction expenses and does not necessarily reflect the actual results that would have been achieved, nor is it necessarily indicative of our future consolidated results. During the years ended December 31, 2019 and 2018, our supplemental pro forma net loss would have been $25.0 million and $38.6 million, respectively. Revenues from Thinkful were immaterial during the years ended December 31, 2019 and 2018.

2018 Acquisitions

On July 2, 2018, we acquired StudyBlue, Inc. (StudyBlue), a privately held online learning company that provides a content library that allows students to create flashcards and their own study materials. This acquisition helps strengthen our existing Chegg Services offerings by adding a substantial number of subject categories and a library of content to our learning platform. The total fair value of the purchase consideration was $20.4 million, which included an escrow amount of $3.3 million for general representations and warranties and post-closing adjustments, which was released in January 2020.

On May 15, 2018, we acquired WriteLab, Inc. (WriteLab), an AI-enhanced writing platform that teaches students grammar, sentence structure, writing style, and offers instant feedback to help students revise, edit, and improve their written work. This acquisition helps to strengthen Chegg Writing with the addition of new tools, features, and functionality. The total fair value of the purchase consideration was $14.5 million, which included an escrow amount of $2.6 million for general representations and warranties and potential post-closing adjustments, which was released in January 2020.

Included in the purchase agreement for the acquisition of WriteLab are additional payments of up to $5.0 million subject to continued employment of the sellers. These payments are not included in the fair value of the purchase consideration and are expensed ratably as research and development expenses on our consolidated statement of operations. These payments may be settled by us, at our sole discretion, either in cash or shares of our common stock. We have recorded approximately $1.0 million as of December 31, 2019 and 2018 included within accrued liabilities on our consolidated balance sheet for these payments.

Goodwill is primarily attributable to the potential for future product offerings as well as our expanded student reach. The amounts recorded for intangible assets and goodwill are not deductible for tax purposes.

The following table presents the total allocation of purchase consideration recorded in our consolidated balance sheets as of the acquisition date (in thousands):



	StudyBlue			WriteLab			Total
Cash	$	152		$	82		$	234
Accounts receivable	288			194			482
Other acquired assets	151			—			151
Acquired intangible assets	7,100			4,450			11,550
Total identifiable assets acquired	7,691			4,726			12,417
Liabilities assumed	(1,309		)	(897		)	(2,206		)
Net identifiable assets acquired	6,382			3,829			10,211
Goodwill	13,996			10,677			24,673
Total fair value of purchase consideration	$	20,378		$	14,506		$	34,884

The following table presents the details of the allocation of purchase consideration to the acquired intangible assets (in thousands, except weighted-average amortization period):



	StudyBlue			WriteLab			Total
	Amount		Weighted-Average Amortization Period (in months)	Amount		Weighted-Average Amortization Period (in months)	Amount		Weighted-Average Amortization Period (in months)
Trade name	$	140	12	$	—	0	$	140	12
Domain names	180		12	—		0	180		12
Non-compete agreements	220		36	—		0	220		36
Developed technology	1,340		60	4,450		96	5,790		88
Content library	5,220		60	—		0	5,220		60
Acquired intangible assets	$	7,100	57	$	4,450	96	$	11,550	72

During the year ended December 31, 2018, we incurred $1.0 million of acquisition-related expenses associated with the above 2018 acquisitions which have been included in general and administrative expenses in our consolidated statement of operations.

We have not presented supplemental pro forma financial information as the revenues and earnings of these 2018 acquisitions were immaterial during the year ended December 31, 2018. Further, we have recorded an immaterial amount of revenues and expenses since the acquisition dates during the year ended December 31, 2018.

2017 Acquisition

In October 2017, we acquired all of the outstanding interests of Cogeon GmbH (Cogeon), a provider of adaptive math technology and developer of the math application, Math 42. The total fair value of the purchase consideration was $15.0 million which included an escrow amount of $2.2 million for general representations and warranties and potential post-closing adjustments, which was released in October 2019.

Included in the purchase agreement for the acquisition of Cogeon are additional payments of up to approximately $9.0 million subject to achievement of specified milestones and continued employment of the sellers. These payments are not included in the fair value of the purchase consideration and are expensed ratably as research and development expense on our consolidated statements of operations. These payments may be settled by us, at our sole discretion, either in cash or shares of our common stock. The terms of the purchase agreement were amended in 2019 such that the payments to the sellers were accelerated and we paid out a total of $7.5 million in cash to the sellers during the year ended December 31, 2019. Additionally, included in the purchase agreement are equity grants of up to approximately $3.8 million subject to achievement of the above specified milestones, continued employment of the sellers, and an adverse tax ruling on the additional payments from the German tax authority. In 2018, the sellers received an adverse tax ruling and during the year ended December 31, 2019, we issued $3.0 million of common stock in connection with the accelerated additional payments.

Goodwill is primarily attributable to the potential for future product offerings as well as our expanded student reach. The amounts recorded for goodwill are expected to be deductible for tax purposes.

The following table presents the total allocation of purchase consideration recorded in our consolidated balance sheets as of the acquisition date (in thousands):



Net tangible assets	$	60
Acquired intangible assets:
Trade name	50
Domain names	230
Non-compete agreements	70
Developed technology	5,510
Content Library	70
Total acquired intangible assets	5,930
Total identifiable assets acquired	5,990
Goodwill	9,024
Total fair value of purchase consideration	$	15,014

During the year ended December 31, 2017, we incurred $0.7 million of acquisition-related expenses associated with the above 2017 acquisition which have been included in general and administrative expenses in our consolidated statements of operations.