Acquisitions

6 Months Ended

Jun. 30, 2020

On June 4, 2020, we completed our acquisition of Mathway, LLC (Mathway), an online, on-demand math problem solving company that provides a vast range of subject areas in mathematics, including pre-algebra, algebra, trigonometry, pre-calculus, calculus, and linear algebra, and related disciplines. This acquisition helps to strengthen our existing Chegg Math Solver service with the addition of new subjects, languages, and international reach. The total fair value of the purchase consideration was $101.0 million, of which $93.5 million was paid in cash on the acquisition date and $7.5 million, included within other long-term liabilities, was held in escrow as security for general representations and warranties and potential post-closing adjustments. Any remaining escrow amount will be released 15 months after the acquisition date.

The Mathway purchase agreement provides for additional payments of up to $15.0 million subject to the achievement of specified milestones and continued employment of the sellers. These payments are not included in the fair value of the purchase consideration but rather are expensed ratably as acquisition-related compensation costs classified as research and development and general and administrative expenses, based on the seller's job function, on our condensed consolidated statement of operations. We have recorded approximately $0.4 million as of June 30, 2020, included within accrued liabilities on our condensed consolidated balance sheet for these payments.

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


	Mathway
Cash	$	712
Accounts receivable	1,132
Other acquired assets	779
Acquired intangible assets	30,320
Total identifiable assets acquired	32,943
Deferred revenue	(1,423)
Liabilities assumed	(727)
Net identifiable assets acquired	30,793
Goodwill	70,167
Total fair value of purchase consideration	$	100,960

Goodwill is primarily attributable to the potential for enhancing our existing offerings and expanding our reach by providing additional mathematics support for students and helping them through their academic journey. The amounts recorded for intangible assets and goodwill are deductible for tax purposes.

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


	Mathway
	Amount		Weighted-Average Amortization Period (in months)
Domain names	$	220	18
Trade name	520		18
Customer lists	6,220		48
Developed technology	23,360		84
Total acquired intangible assets	$	30,320	75

During the three months ended June 30, 2020, we incurred $3.1 million of acquisition-related expenses associated with our acquisition of Mathway, which have been included in general and administrative expense on our condensed consolidated statement of operations. We have recorded immaterial amounts of revenue and earnings from Mathway since the acquisition date.

The following unaudited supplemental pro forma net income (loss) is for informational purposes only and presents our combined results as if the acquisition of Mathway had occurred on January 1, 2019. 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 acquisition-related 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 three and six months ended June 30, 2020, our supplemental pro forma net income would have been $12.7 million and $4.8 million, respectively. During the three and six months ended June 30, 2019, our supplemental pro forma net loss would have been $12.6 million and $19.2 million, respectively. Revenues from Mathway were immaterial during the three and six months ended June 30, 2020 and 2019 and therefore we have not presented pro forma revenues.