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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2024
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 jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification No.)

3990 Freedom Circle
Santa Clara, CA, 95054
(Address of principal executive offices)
(408) 855-5700
(Registrant’s telephone number, including area code)

Title of each class | Trading symbol(s) | Name of each exchange on which registered
Common stock, $0.001 par value per share | CHGG | The New York Stock Exchange

•Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 (Exchange Act) during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨
•Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No ¨
•Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer | x | Accelerated filer | ☐
Non-accelerated filer | ☐ | Smaller reporting company | ☐
Emerging growth company | ☐ |  |

•If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
•Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No x
•As of November 5, 2024, the Registrant had 104,307,327 outstanding shares of Common Stock.

Table of Contents

|  | TABLE OF CONTENTS |  |
|  |  |  | Page
|  | PART I - FINANCIAL INFORMATION |  |
Item 1. |  | Financial Statements (unaudited): |  | 4
|  | Condensed Consolidated Balance Sheets - September 30, 2024 and December 31, 2023 |  | 4
|  | Condensed Consolidated Statements of Operations - for the Three and Nine Months Ended September 30, 2024 and 2023 |  | 5
|  | Condensed Consolidated Statements of Comprehensive (Loss) Income - for the Three and Nine Months Ended September 30, 2024 and 2023 |  | 6
|  | Condensed Consolidated Statements of Stockholders' Equity - for the Three and Nine Months Ended September 30, 2024 and 2023 |  | 7
|  | Condensed Consolidated Statements of Cash Flows - for the Nine Months Ended September 30, 2024 and 2023 |  | 9
|  | Notes to Condensed Consolidated Financial Statements |  | 10
Item 2. |  | Management's Discussion and Analysis of Financial Condition and Results of Operations |  | 24
Item 3. |  | Quantitative and Qualitative Disclosures About Market Risk |  | 34
Item 4. |  | Controls and Procedures |  | 34
|  | PART II - OTHER INFORMATION |  |
Item 1. |  | Legal Proceedings |  | 35
Item 1A. |  | Risk Factors |  | 35
Item 2. |  | Unregistered Sales of Equity Securities and Use of Proceeds |  | 38
Item 5. |  | Other Information |  | 38
Item 6. |  | Exhibits |  | 39
Signatures |  | 40

Unless the context requires otherwise, the words “we,” “us,” “our,” “Company” and “Chegg” refer to Chegg, Inc. and its subsidiaries taken as a whole.
Chegg, Chegg.com, Chegg Study, EasyBib, the Chegg “C” logo, and Busuu are some of our trademarks used in this Quarterly Report on Form 10-Q. Solely for convenience, our trademarks, trade names and service marks referred to in this Quarterly Report on Form 10-Q appear without the ®, ™ and SM symbols, but those references are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights to these trademarks and trade names. Other trademarks appearing in this Quarterly Report on Form 10-Q are the property of their respective holders.
2

Table of Contents
NOTE ABOUT FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements contained in this Quarterly Report on Form 10-Q other than statements of historical fact, including statements regarding our future results of operations and financial position, our business strategy and plans, and our objectives for future operations and results of operations are forward-looking statements. The words “believe,” “may,” “will,” “would,” “could,” “estimate,” “continue,” “anticipate,” “intend,” “project,” “endeavor,” “expect,” “plan to,” “if,” “future,” “likely,” “potentially,” and similar expressions are intended to identify forward-looking statements. We have based these forward-looking statements largely on our current expectations and projections about future events and trends that we believe may affect our financial condition, results of operations, business strategy, short-term and long-term business operations and objectives, and financial needs. These forward-looking statements are subject to a number of risks, uncertainties, and assumptions, including those described in Part I, Item 1A, “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023. Moreover, we operate in a very competitive and rapidly changing environment and new risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties, and assumptions, the future events and trends discussed in this Quarterly Report on Form 10-Q may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements. You should read this Quarterly Report on Form 10-Q completely and with the understanding that our actual future results may be materially different from what we expect.
Our forward-looking statements speak only as of the date of this Quarterly Report on Form 10-Q, and we undertake no obligation to revise or publicly release the results of any revision to these forward-looking statements, except as required by law. Given these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements.
3

Table of Contents
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)
CHEGG, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except for number of shares and par value)
(unaudited)

| September 30, 2024 |  | December 31, 2023
Assets |  |  |
Current assets |  |  |
Cash and cash equivalents | $ | 152,073 |  |  | $ | 135,757 |
Short-term investments | 209,003 |  |  | 194,257 |
Accounts receivable, net of allowance of $208 and $376 at September 30, 2024 and December 31, 2023, respectively | 23,749 |  |  | 31,404 |
Prepaid expenses | 24,706 |  |  | 20,980 |
Other current assets | 86,980 |  |  | 32,437 |
Total current assets | 496,511 |  |  | 414,835 |
Long-term investments | 270,161 |  |  | 249,547 |
Property and equipment, net | 177,882 |  |  | 183,073 |
Goodwill, net | — |  |  | 631,995 |
Intangible assets, net | 11,424 |  |  | 52,430 |
Right of use assets | 29,071 |  |  | 25,130 |
Deferred tax assets, net | 2,308 |  |  | 141,843 |
Other assets | 15,315 |  |  | 28,382 |
Total assets | $ | 1,002,672 |  |  | $ | 1,727,235 |
Liabilities and stockholders' equity |  |  |
Current liabilities |  |  |
Accounts payable | $ | 18,124 |  |  | $ | 28,184 |
Deferred revenue | 44,355 |  |  | 55,336 |
Accrued liabilities | 125,138 |  |  | 77,863 |
Current portion of convertible senior notes, net | 358,222 |  |  | 357,079 |
Total current liabilities | 545,839 |  |  | 518,462 |
Long-term liabilities |  |  |
Convertible senior notes, net | 243,242 |  |  | 242,758 |
Long-term operating lease liabilities | 23,665 |  |  | 18,063 |
Other long-term liabilities | 4,945 |  |  | 3,334 |
Total long-term liabilities | 271,852 |  |  | 264,155 |
Total liabilities | 817,691 |  |  | 782,617 |
Commitments and contingencies (Note 8) |  |  |
Stockholders' equity: |  |  |
Preferred stock, $0.001 par value per share, 10,000,000 shares authorized, no shares issued and outstanding | — |  |  | — |
Common stock, $0.001 par value per share: 400,000,000 shares authorized; 103,967,436 and 102,823,700 shares issued and outstanding at September 30, 2024 and December 31, 2023, respectively | 104 |  |  | 103 |
Additional paid-in capital | 1,098,242 |  |  | 1,031,627 |
Accumulated other comprehensive loss | (30,049) |  |  | (34,739) |
Accumulated deficit | (883,316) |  |  | (52,373) |
Total stockholders' equity | 184,981 |  |  | 944,618 |
Total liabilities and stockholders' equity | $ | 1,002,672 |  |  | $ | 1,727,235 |

See Notes to Condensed Consolidated Financial Statements.
4

Table of Contents
CHEGG, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
(unaudited)

| Three Months Ended September 30, |  | Nine Months Ended September 30,
| 2024 |  | 2023 |  | 2024 |  | 2023
Net revenues | $ | 136,593 |  |  | $ | 157,854 |  |  | $ | 474,090 |  |  | $ | 528,308 |
Cost of revenues | 43,420 |  |  | 83,575 |  |  | 135,328 |  |  | 180,137 |
Gross profit | 93,173 |  |  | 74,279 |  |  | 338,762 |  |  | 348,171 |
Operating expenses: |  |  |  |  |  |  |
Research and development | 41,337 |  |  | 46,202 |  |  | 129,423 |  |  | 145,981 |
Sales and marketing | 26,508 |  |  | 28,872 |  |  | 80,428 |  |  | 96,845 |
General and administrative | 51,910 |  |  | 53,475 |  |  | 161,460 |  |  | 182,757 |
Impairment expense | 195,708 |  |  | 3,600 |  |  | 677,239 |  |  | 3,600 |
Total operating expenses | 315,463 |  |  | 132,149 |  |  | 1,048,550 |  |  | 429,183 |
Loss from operations | (222,290) |  |  | (57,870) |  |  | (709,788) |  |  | (81,012) |
Interest expense and other income, net: |  |  |  |  |  |  |
Interest expense | (658) |  |  | (733) |  |  | (1,959) |  |  | (3,115) |
Other income, net | 7,586 |  |  | 40,492 |  |  | 25,485 |  |  | 116,671 |
Total interest expense and other income, net | 6,928 |  |  | 39,759 |  |  | 23,526 |  |  | 113,556 |
(Loss) income before benefit from (provision for) income taxes | (215,362) |  |  | (18,111) |  |  | (686,262) |  |  | 32,544 |
Benefit from (provision for) income taxes | 2,723 |  |  | (172) |  |  | (144,681) |  |  | (24,029) |
Net (loss) income | $ | (212,639) |  |  | $ | (18,283) |  |  | $ | (830,943) |  |  | $ | 8,515 |
Net (loss) income per share |  |  |  |  |  |  |
Basic | $ | (2.05) |  |  | $ | (0.16) |  |  | $ | (8.08) |  |  | $ | 0.07 |
Diluted | $ | (2.05) |  |  | $ | (0.16) |  |  | $ | (8.08) |  |  | $ | (0.24) |
Weighted average shares used to compute net (loss) income per share |  |  |  |  |  |  |
Basic | 103,723 |  |  | 115,407 |  |  | 102,893 |  |  | 119,001 |
Diluted | 103,723 |  |  | 115,407 |  |  | 102,893 |  |  | 121,876 |

See Notes to Condensed Consolidated Financial Statements.
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CHEGG, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME
(in thousands)
(unaudited)

| Three Months Ended September 30, |  | Nine Months Ended September 30,
| 2024 |  | 2023 |  | 2024 |  | 2023
Net (loss) income | $ | (212,639) |  |  | $ | (18,283) |  |  | $ | (830,943) |  |  | $ | 8,515 |
Other comprehensive income (loss) |  |  |  |  |  |  |
Change in net unrealized gain (loss) on investments | 5,060 |  |  | (322) |  |  | 2,971 |  |  | (930) |
Change in foreign currency translation adjustments | 4,806 |  |  | (12,925) |  |  | 1,719 |  |  | 1,992 |
Other comprehensive income (loss) | 9,866 |  |  | (13,247) |  |  | 4,690 |  |  | 1,062 |
Total comprehensive (loss) income | $ | (202,773) |  |  | $ | (31,530) |  |  | $ | (826,253) |  |  | $ | 9,577 |

See Notes to Condensed Consolidated Financial Statements.
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CHEGG, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(in thousands)
(unaudited)

| Three Months Ended September 30, 2024
| Common Stock |  |  |  |  |  |  |  |
| Shares |  | Par Value |  | Additional Paid-In Capital |  | Accumulated Other Comprehensive Loss |  | Accumulated Deficit |  | Total Stockholders’ Equity
Balances at June 30, 2024 | 103,361 |  |  | $ | 103 |  |  | $ | 1,075,989 |  |  | $ | (39,915) |  |  | $ | (670,677) |  |  | $ | 365,500 |
Net share settlement of equity awards | 607 |  |  | 1 |  |  | (823) |  |  | — |  |  | — |  |  | (822) |
Share-based compensation expense | — |  |  | — |  |  | 23,076 |  |  | — |  |  | — |  |  | 23,076 |
Other comprehensive income | — |  |  | — |  |  | — |  |  | 9,866 |  |  | — |  |  | 9,866 |
Net loss | — |  |  | — |  |  | — |  |  | — |  |  | (212,639) |  |  | (212,639) |
Balances at September 30, 2024 | 103,968 |  |  | $ | 104 |  |  | $ | 1,098,242 |  |  | $ | (30,049) |  |  | $ | (883,316) |  |  | $ | 184,981 |

| Three Months Ended September 30, 2023
| Common Stock |  |  |  |  |  |  |  |
| Shares |  | Par Value |  | Additional Paid-In Capital |  | Accumulated Other Comprehensive Loss |  | Accumulated Deficit |  | Total Stockholders’ Equity
Balances at June 30, 2023 | 115,178 |  |  | $ | 115 |  |  | $ | 1,121,820 |  |  | $ | (43,179) |  |  | $ | (43,755) |  |  | $ | 1,035,001 |
Issuance of common stock upon exercise of stock options | 3 |  |  | — |  |  | 26 |  |  | — |  |  | — |  |  | 26 |
Net share settlement of equity awards | 491 |  |  | 1 |  |  | (2,789) |  |  | — |  |  | — |  |  | (2,788) |
Share-based compensation expense | — |  |  | — |  |  | 32,640 |  |  | — |  |  | — |  |  | 32,640 |
Other comprehensive loss | — |  |  | — |  |  | — |  |  | (13,247) |  |  | — |  |  | (13,247) |
Net loss | — |  |  | — |  |  | — |  |  | — |  |  | (18,283) |  |  | (18,283) |
Balances at September 30, 2023 | 115,672 |  | $ | 116 |  |  | $ | 1,151,697 |  |  | $ | (56,426) |  |  | $ | (62,038) |  |  | $ | 1,033,349 |

See Notes to Condensed Consolidated Financial Statements.
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| Nine Months Ended September 30, 2024
| Common Stock |  |  |  |  |  |  |  |
| Shares |  | Par Value |  | Additional Paid-In Capital |  | Accumulated Other Comprehensive Loss |  | Accumulated Deficit |  | Total Stockholders’ Equity
Balances at December 31, 2023 | 102,824 |  |  | $ | 103 |  |  | $ | 1,031,627 |  |  | $ | (34,739) |  |  | $ | (52,373) |  |  | $ | 944,618 |
Repurchases of common stock | (2,116) |  |  | (2) |  |  | (112) |  |  | — |  |  | — |  |  | (114) |
Issuance of common stock upon issuance of ESPP | 557 |  |  | — |  |  | 2,188 |  |  | — |  |  | — |  |  | 2,188 |
Net share settlement of equity awards | 2,703 |  |  | 3 |  |  | (8,648) |  |  | — |  |  | — |  |  | (8,645) |
Share-based compensation expense | — |  |  | — |  |  | 73,187 |  |  | — |  |  | — |  |  | 73,187 |
Other comprehensive income | — |  |  | — |  |  | — |  |  | 4,690 |  |  | — |  |  | 4,690 |
Net loss | — |  |  | — |  |  | — |  |  | — |  |  | (830,943) |  |  | (830,943) |
Balances at September 30, 2024 | 103,968 |  |  | $ | 104 |  |  | $ | 1,098,242 |  |  | $ | (30,049) |  |  | $ | (883,316) |  |  | $ | 184,981 |

| Nine Months Ended September 30, 2023
| Common Stock |  |  |  |  |  |  |  |
| Shares |  | Par Value |  | Additional Paid-In Capital |  | Accumulated Other Comprehensive Loss |  | Accumulated Deficit |  | Total Stockholders’ Equity
Balances at December 31, 2022 | 126,474 |  |  | $ | 126 |  |  | $ | 1,244,504 |  |  | $ | (57,488) |  |  | $ | (70,553) |  |  | $ | 1,116,589 |
Repurchases of common stock | (13,008) |  |  | (13) |  |  | (186,355) |  |  | — |  |  | — |  |  | (186,368) |
Issuance of common stock upon exercise of stock options and ESPP | 379 |  |  | — |  |  | 3,105 |  |  | — |  |  | — |  |  | 3,105 |
Net share settlement of equity awards | 1,827 |  |  | 3 |  |  | (13,857) |  |  | — |  |  | — |  |  | (13,854) |
Share-based compensation expense | — |  |  | — |  |  | 104,003 |  |  | — |  |  | — |  |  | 104,003 |
Proceeds from capped call related to extinguishment of 2025 notes | — |  |  | — |  |  | 297 |  |  | — |  |  | — |  |  | 297 |
Other comprehensive income | — |  |  | — |  |  | — |  |  | 1,062 |  |  | — |  |  | 1,062 |
Net income | — |  |  | — |  |  | — |  |  | — |  |  | 8,515 |  |  | 8,515 |
Balances at September 30, 2023 | 115,672 |  | $ | 116 |  |  | $ | 1,151,697 |  |  | $ | (56,426) |  |  | $ | (62,038) |  |  | $ | 1,033,349 |

See Notes to Condensed Consolidated Financial Statements.
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CHEGG, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)

| Nine Months Ended September 30, |  |
| 2024 |  | 2023 |  |
Cash flows from operating activities |  |  |  |  |
Net (loss) income | $ | (830,943) |  |  | $ | 8,515 |  |  |
Adjustments to reconcile net (loss) income to net cash provided by operating activities: |  |  |  |  |
Share-based compensation expense | 69,267 |  |  | 101,596 |  |  |
Depreciation and amortization expense | 58,966 |  |  | 108,945 |  |  |
Deferred income taxes | 141,103 |  |  | 20,929 |  |  |
Operating lease expense, net | 4,647 |  |  | 4,535 |  |  |
Amortization of debt issuance costs | 1,628 |  |  | 2,610 |  |  |
Loss from write-off of property and equipment | 2,024 |  |  | 3,578 |  |  |
Impairment expense | 677,239 |  |  | 3,600 |  |  |
Gain on early extinguishment of debt | — |  |  | (85,926) |  |  |
Loss contingency | 5,100 |  |  | 7,000 |  |  |
Impairment on lease related assets | 2,189 |  |  | — |  |  |
Other non-cash items | 222 |  |  | (389) |  |  |
Change in assets and liabilities: |  |  |  |  |
Accounts receivable | 8,019 |  |  | (6,908) |  |  |
Prepaid expenses and other current assets | (55,725) |  |  | 558 |  |  |
Other assets | (469) |  |  | 8,671 |  |  |
Accounts payable | (8,308) |  |  | 4,820 |  |  |
Deferred revenue | (11,763) |  |  | 2,539 |  |  |
Accrued liabilities | 46,849 |  |  | (6,149) |  |  |
Other liabilities | (2,968) |  |  | (9,810) |  |  |
Net cash provided by operating activities | 107,077 |  |  | 168,714 |  |  |
Cash flows from investing activities |  |  |  |  |
Purchases of property and equipment | (61,659) |  |  | (57,298) |  |  |
Proceeds from disposition of textbooks | — |  |  | 9,787 |  |  |
Purchases of investments | (134,213) |  |  | (585,275) |  |  |
Maturities of investments | 96,907 |  |  | 561,197 |  |  |
Proceeds from sale of investments | — |  |  | 238,681 |  |  |
Proceeds from sale of strategic equity investment | 15,500 |  |  | — |  |  |
Purchase of strategic equity investment | — |  |  | (11,853) |  |  |
Net cash (used in) provided by investing activities | (83,465) |  |  | 155,239 |  |  |
Cash flows from financing activities |  |  |  |  |
Proceeds from common stock issued under stock plans, net | 2,191 |  |  | 3,108 |  |  |
Payment of taxes related to the net share settlement of equity awards | (8,648) |  |  | (13,857) |  |  |
Repurchase of common stock | — |  |  | (186,368) |  |  |
Repayment of convertible senior notes | — |  |  | (505,986) |  |  |
Proceeds from exercise of convertible senior notes capped call | — |  |  | 297 |  |  |
Net cash used in financing activities | (6,457) |  |  | (702,806) |  |  |
Effect of exchange rate changes | (149) |  |  | (379) |  |  |
Net increase (decrease) in cash, cash equivalents and restricted cash | 17,006 |  |  | (379,232) |  |  |
Cash, cash equivalents and restricted cash, beginning of period | 137,976 |  |  | 475,854 |  |  |
Cash, cash equivalents and restricted cash, end of period | $ | 154,982 |  |  | $ | 96,622 |  |  |

| Nine Months Ended September 30, |  |
| 2024 |  | 2023 |  |
Supplemental cash flow data: |  |  |  |  |
Cash paid during the period for: |  |  |  |  |
Interest | $ | 449 |  |  | $ | 741 |  |  |
Income taxes, net of refunds | $ | 3,531 |  |  | $ | 8,368 |  |  |
Cash paid for amounts included in the measurement of lease liabilities: |  |  |  |  |
Operating cash flows from operating leases | $ | 6,329 |  |  | $ | 7,037 |  |  |
Right of use assets obtained in exchange for lease obligations: |  |  |  |  |
Operating leases | $ | 9,686 |  |  | $ | 12,407 |  |  |
Non-cash investing and financing activities: |  |  |  |  |
Accrued purchases of long-lived assets | $ | 4,771 |  |  | $ | 5,879 |  |  |

| September 30,
| 2024 |  | 2023 |  |
Reconciliation of cash, cash equivalents and restricted cash: |  |  |  |  |
Cash and cash equivalents | $ | 152,073 |  |  | $ | 94,419 |  |  |
Restricted cash included in other current assets | 454 |  |  | 60 |  |  |
Restricted cash included in other assets | 2,455 |  |  | 2,143 |  |  |
Total cash, cash equivalents and restricted cash | $ | 154,982 |  |  | $ | 96,622 |  |  |

See Notes to Condensed Consolidated Financial Statements.
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CHEGG, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Background and Basis of Presentation
Company and Background
Chegg, Inc. (“we,” “us,” “our,” “Company” or “Chegg”), headquartered in Santa Clara, California, was incorporated as a Delaware corporation in July 2005. Chegg provides individualized learning support to students as they pursue their educational journeys. Available on demand 24/7 and powered by over a decade of learning insights, the Chegg platform offers students AI-powered academic support thoughtfully designed for education coupled with access to a vast network of subject matter experts who ensure quality. No matter the goal, level, or style, Chegg helps millions of students around the world learn with confidence by helping them build essential academic, life, and job skills to achieve success.
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) and applicable rules and regulations of the U.S. Securities and Exchange Commission (“SEC”) regarding interim financial reporting. The condensed consolidated financial statements include the results of Chegg, Inc. and its wholly-owned subsidiaries. Significant intercompany balances and transactions have been eliminated. In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments, including normal recurring adjustments, necessary to present fairly our financial position as of September 30, 2024, our results of operations, results of comprehensive (loss) income and stockholders' equity for the three and nine months ended September 30, 2024 and 2023, and our cash flows for the nine months ended September 30, 2024 and 2023. Our results of operations, results of comprehensive (loss) income, stockholders' equity, and cash flows for the nine months ended September 30, 2024 are not necessarily indicative of the results to be expected for the full year.
We have a single operating and reportable segment and operating unit structure. The condensed consolidated financial statements and related financial information should be read in conjunction with the audited consolidated financial statements and the related notes thereto that are included in our Annual Report on Form 10-K for the year ended December 31, 2023 (the Annual Report on Form 10-K) filed with the SEC.
There have been no material changes to our significant accounting policies as compared to the significant accounting policies described in our Annual Report on Form 10-K.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates, judgments, and assumptions that affect the reported amounts of assets and liabilities; the disclosure of contingent liabilities at the date of the financial statements; and the reported amounts of revenues and expenses during the reporting periods. We base our estimates on historical experience, knowledge of current business conditions, and various other factors we believe to be reasonable under the circumstances. These estimates are based on management’s knowledge about current events and expectations about actions we may undertake in the future. Actual results could differ from these estimates, and such differences could be material to our financial position and results of operations. There have been no material changes in our use of estimates during the nine months ended September 30, 2024 as compared to the use of estimates disclosed in Part II, Item 8 “Consolidated Financial Statements and Supplementary Data” contained in our Annual Report on Form 10-K for the year ended December 31, 2023.
Reclassification of Prior Period Presentation
In order to conform with current period presentation, $3.6 million of impairment of intangible assets has been reclassified from general and administrative expense to impairment expense on our condensed consolidated statements of operations for the three and nine months ended September 30, 2023 as well as from impairment of intangible asset to impairment expense on our condensed consolidated statements of cash flows for the nine months ended September 30, 2023. These changes in presentation do not affect previously reported results.
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Components of Results of Operations
Aside from the addition of impairment expense as a component within our operating expenses on our condensed consolidated statements of operations, there have been no other changes to the components on our consolidated statements of operations described in our Annual Report on Form 10-K.
Operating Expenses
Impairment Expense
Our impairment expense consists of impairments of goodwill, intangible assets, and property and equipment, net. For further information, see “Note 5, Property and Equipment, Net” and “Note 6, Goodwill and Intangible Assets.” The following table presents our impairment expense (in thousands):

| Three Months Ended September 30, |  | Nine Months Ended September 30,
| 2024 |  | 2023 |  | 2024 |  | 2023
Goodwill, net | $ | 195,708 |  |  | $ | — |  |  | $ | 635,391 |  |  | $ | — |
Intangible assets, net | — |  |  | 3,600 |  |  | 31,862 |  |  | 3,600 |
Property and equipment, net | — |  |  | — |  |  | 9,986 |  |  | — |
Total impairment expense | $ | 195,708 |  |  | $ | 3,600 |  |  | $ | 677,239 |  |  | $ | 3,600 |

Securities Repurchase Program
In November 2024, our board of directors approved a $300.0 million increase to our existing securities repurchase program authorizing the repurchase of our common stock and/or convertible notes, through open market purchases, block trades, and/or privately negotiated transactions or pursuant to Rule 10b5-1 plans, in compliance with applicable securities laws and other legal requirements. The timing, volume, and nature of the repurchases will be determined by management based on the capital needs of the business, market conditions, applicable legal requirements, alternative investment opportunities, and other factors. After the November 2024 increase, we had $303.7 million remaining under the securities repurchase program, which has no expiration date and will continue until otherwise suspended, terminated or modified at any time for any reason by our board of directors.
Leases
In July 2024, we entered into an amendment related to our office in India that primarily modifies our existing lease payments, increases the square footage, and extends the lease term, resulting in the recording of $9.0 million of right of use assets in exchange for lease liabilities.
The aggregate future minimum lease payments and reconciliation to operating lease liabilities as of September 30, 2024, are as follows (in thousands):

| September 30, 2024
Remaining three months of 2024 | $ | 1,938 |
2025 | 6,802 |
2026 | 6,388 |
2027 | 6,134 |
2028 | 3,518 |
2029 | 1,946 |
Thereafter | 8,340 |
Total future minimum lease payments | 35,066 |
Less imputed interest | (5,770) |
Total operating lease liabilities | $ | 29,296 |

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In November 2024, we exercised our termination option related to our office in New York that reduces the lease term through November 2025, resulting in a decrease to our future minimum lease payments of approximately $3.8 million. This reduction in minimum lease payments is not reflected in the table above. We expect this decrease to reduce both right of use assets and long-term operating lease liabilities on our condensed consolidated balance sheets. The accounting for the event is in process as of the issuance date of our condensed consolidated financial statements and therefore we are unable to make any additional disclosures.
Recent Accounting Pronouncements
Recently Issued Accounting Pronouncements Not Yet Adopted
In November 2024, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures. ASU 2024-03 requires disclosure of specified information about certain costs and expenses in the notes to financial statements. Early adoption is permitted, and the guidance will be applied prospectively with the option to apply retrospectively. The guidance is effective for annual periods beginning after December 15, 2026 and interim periods beginning after December 15, 2027. We did not early adopt ASU 2024-03 and we are currently in the process of evaluating the impact of this guidance.
In March 2024, the FASB issued ASU 2024-02, Codification Improvements—Amendments to Remove References to the Concepts Statements. ASU 2024-02 removes various references to the FASB’s Concepts Statements from the FASB’s Accounting Standards Codification. Early adoption is permitted, and the guidance will be applied prospectively with the option to apply retrospectively. The guidance is effective for annual periods beginning after December 15, 2024. We did not early adopt ASU 2024-02 and do not believe it will have a significant impact on our financial statements, however, we are currently in the process of evaluating the impact.
In December 2023, the FASB issued ASU 2023-09, Improvements to Income Tax Disclosures. ASU 2023-09 requires disaggregated information about our effective tax rate reconciliation as well as information on income taxes paid that meet a quantitative threshold. Early adoption is permitted, and the guidance will be applied prospectively with the option to apply retrospectively. The guidance is effective for annual periods beginning after December 15, 2024. We did not early adopt ASU 2023-09 and we are currently in the process of evaluating the impact of this guidance.
In November 2023, the FASB issued ASU 2023-07, Improvements to Reportable Segment Disclosures. ASU 2023-07 enhances current interim and annual reportable segment disclosures and requires additional disclosures about significant segment expenses. Public entities with a single reportable segment are required to apply the disclosure requirements in ASU 2023-07, as well as all existing segment disclosures and reconciliation requirements in ASC 280 on an interim and annual basis. Early adoption is permitted, and we are required to adopt the changes on a retrospective basis. The guidance is effective for annual periods beginning after December 15, 2023 and interim periods beginning after December 15, 2024. We did not early adopt ASU 2023-07 and we are currently in the process of evaluating the impact of this guidance.
Recently Adopted Accounting Pronouncements
We did not adopt any accounting pronouncements during the nine months ended September 30, 2024 that had a material impact on our financial statements.
Note 2. Revenues
Revenue Recognition
Revenues are recognized when control of the promised goods or services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services. The majority of our revenues are recognized over time as services are performed, with certain revenues being recognized at a point in time.
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The following tables present our total net revenues for the periods shown disaggregated for our Subscription Services and Skills and Other product lines (in thousands, except percentages):

| Three Months Ended September 30, |  | Change
| 2024 |  | 2023 |  | $ |  | %
Subscription Services | $ | 119,804 |  |  | $ | 139,912 |  |  | $ | (20,108) |  |  | (14) | %
Skills and Other | 16,789 |  |  | 17,942 |  |  | (1,153) |  |  | (6) |
Total net revenues | $ | 136,593 |  |  | $ | 157,854 |  |  | $ | (21,261) |  |  | (13) |

| Nine Months Ended September 30, |  | Change
| 2024 |  | 2023 |  | $ |  | %
Subscription Services | $ | 420,668 |  |  | $ | 474,207 |  |  | $ | (53,539) |  |  | (11) | %
Skills and Other | 53,422 |  |  | 54,101 |  |  | (679) |  |  | (1) |
Total net revenues | $ | 474,090 |  |  | $ | 528,308 |  |  | $ | (54,218) |  |  | (10) |

During the three and nine months ended September 30, 2024, we recognized revenues of $33.3 million and $52.3 million, respectively, that were included in our deferred revenue balance at the beginning of each respective reporting period. During the three and nine months ended September 30, 2023, we recognized revenues of $36.6 million and $53.0 million, respectively, that were included in our deferred revenue balance at the beginning of each respective reporting period. During the three and nine months ended September 30, 2024, we recognized revenues of $0.6 million and $2.0 million, respectively, from performance obligations satisfied in previous periods. During the three and nine months ended September 30, 2023, we recognized an immaterial amount of revenues from performance obligations satisfied in previous periods.
Contract Balances
The following table presents our accounts receivable, net, contract assets and deferred revenue balances (in thousands, except percentages):

|  | Change
| September 30, 2024 |  | December 31, 2023 |  | $ |  | %
Accounts receivable, net | $ | 23,749 |  |  | $ | 31,404 |  |  | $ | (7,655) |  |  | (24) | %
Contract assets | 7,048 |  |  | 8,598 |  |  | (1,550) |  |  | (18) |
Deferred revenue | 44,355 |  |  | 55,336 |  |  | (10,981) |  |  | (20) |

During the nine months ended September 30, 2024 our accounts receivable, net balance decreased by $7.7 million, or 24%, primarily due to lower bookings from Chegg Skills and seasonality of our business. During the nine months ended September 30, 2024, our contract assets balance decreased by $1.6 million, or 18%, primarily due to cash collections from our Chegg Skills service. During the nine months ended September 30, 2024, our deferred revenue balance decreased by $11.0 million, or 20%, primarily due to lower bookings from Chegg Skills and seasonality of our business.
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Note 3. Net (Loss) Income Per Share
The following table presents the computation of basic and diluted net (loss) income per share (in thousands, except per share amounts):

| Three Months Ended September 30, |  | Nine Months Ended September 30,
| 2024 |  | 2023 |  | 2024 |  | 2023
Basic |  |  |  |  |  |  |
Numerator: |  |  |  |  |  |  |
Net (loss) income | $ | (212,639) |  |  | $ | (18,283) |  |  | $ | (830,943) |  |  | $ | 8,515 |
Denominator: |  |  |  |  |  |  |
Weighted average shares used to compute net (loss) income per share, basic | 103,723 |  |  | 115,407 |  |  | 102,893 |  |  | 119,001 |
Net (loss) income per share, basic | $ | (2.05) |  |  | $ | (0.16) |  |  | $ | (8.08) |  |  | $ | 0.07 |
Diluted |  |  |  |  |  |  |
Numerator: |  |  |  |  |  |  |
Net (loss) income | $ | (212,639) |  |  | $ | (18,283) |  |  | $ | (830,943) |  |  | $ | 8,515 |
Convertible senior notes activity, net of tax | — |  |  | — |  |  | — |  |  | (38,079) |
Net (loss) income, diluted | $ | (212,639) |  |  | $ | (18,283) |  |  | $ | (830,943) |  |  | $ | (29,564) |
Denominator: |  |  |  |  |  |  |
Weighted average shares used to compute net (loss) income per share, basic | 103,723 |  |  | 115,407 |  |  | 102,893 |  |  | 119,001 |
Shares related to convertible senior notes | — |  |  | — |  |  | — |  |  | 2,875 |
Weighted average shares used to compute net (loss) income per share, diluted | 103,723 |  |  | 115,407 |  |  | 102,893 |  |  | 121,876 |
Net (loss) income per share, diluted | $ | (2.05) |  |  | $ | (0.16) |  |  | $ | (8.08) |  |  | $ | (0.24) |

The following table presents potential weighted-average shares of common stock outstanding that were excluded from the computation of diluted net (loss) income per share because including them would have been anti-dilutive (in thousands):

| Three Months Ended September 30, |  | Nine Months Ended September 30,
| 2024 |  | 2023 |  | 2024 |  | 2023
Shares related to stock plan activity | 9,262 |  |  | 8,732 |  |  | 7,551 |  |  | 8,349 |
Shares related to convertible senior notes | 9,234 |  |  | 10,280 |  |  | 9,234 |  |  | 10,378 |
Total common stock equivalents | 18,496 |  |  | 19,012 |  |  | 16,785 |  |  | 18,727 |

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Note 4. Cash and Cash Equivalents, Investments and Fair Value Measurements
The following tables present our cash and cash equivalents, and investments’ fair value level classification, adjusted cost, unrealized gain, unrealized loss and fair value as of September 30, 2024 and December 31, 2023 (in thousands):

| September 30, 2024
| Fair Value Level |  | Adjusted Cost |  | Unrealized Gain |  | Unrealized Loss |  | Fair Value
Cash and cash equivalents: |  |  |  |  |  |  |  |  |
Cash |  |  | $ | 52,523 |  |  | $ | — |  |  | $ | — |  |  | $ | 52,523 |
Money market funds | Level 1 |  | 99,550 |  |  | — |  |  | — |  |  | 99,550 |
Total cash and cash equivalents |  |  | $ | 152,073 |  |  | $ | — |  |  | $ | — |  |  | $ | 152,073 |
Short-term investments: |  |  |  |  |  |  |  |  |
Corporate debt securities | Level 2 |  | $ | 118,386 |  |  | $ | 53 |  |  | $ | (47) |  |  | $ | 118,392 |
U.S. treasury securities | Level 1 |  | 65,596 |  |  | 32 |  |  | (13) |  |  | 65,615 |
Agency bonds | Level 2 |  | 25,009 |  |  | — |  |  | (13) |  |  | 24,996 |
Total short-term investments |  |  | $ | 208,991 |  |  | $ | 85 |  |  | $ | (73) |  |  | $ | 209,003 |
Long-term investments: |  |  |  |  |  |  |  |  |
Corporate debt securities | Level 2 |  | $ | 214,391 |  |  | $ | 2,482 |  |  | $ | (8) |  |  | $ | 216,865 |
U.S. treasury securities | Level 1 |  | 52,548 |  |  | 748 |  |  | — |  |  | 53,296 |
Total long-term investments |  |  | $ | 266,939 |  |  | $ | 3,230 |  |  | $ | (8) |  |  | $ | 270,161 |

| December 31, 2023
| Fair Value Level |  | Adjusted Cost |  | Unrealized Gain |  | Unrealized Loss |  | Fair Value
Cash and cash equivalents: |  |  |  |  |  |  |  |  |
Cash |  |  | $ | 45,050 |  |  | $ | — |  |  | $ | — |  |  | $ | 45,050 |
Money market funds | Level 1 |  | 90,707 |  |  | — |  |  | — |  |  | 90,707 |
Total cash and cash equivalents |  |  | $ | 135,757 |  |  | $ | — |  |  | $ | — |  |  | $ | 135,757 |
Short-term investments: |  |  |  |  |  |  |  |  |
Corporate debt securities | Level 2 |  | $ | 69,548 |  |  | $ | — |  |  | $ | (170) |  |  | $ | 69,378 |
U.S. treasury securities | Level 1 |  | 25,734 |  |  | — |  |  | (114) |  |  | 25,620 |
Agency bonds | Level 2 |  | 99,505 |  |  | — |  |  | (246) |  |  | 99,259 |
Total short-term investments |  |  | $ | 194,787 |  |  | $ | — |  |  | $ | (530) |  |  | $ | 194,257 |
Long-term investments: |  |  |  |  |  |  |  |  |
Corporate debt securities | Level 2 |  | $ | 191,467 |  |  | $ | 898 |  |  | $ | (213) |  |  | $ | 192,152 |
U.S. treasury securities | Level 1 |  | 57,287 |  |  | 165 |  |  | (57) |  |  | 57,395 |
Total long-term investments |  |  | $ | 248,754 |  |  | $ | 1,063 |  |  | $ | (270) |  |  | $ | 249,547 |

As of September 30, 2024, we determined that the unrealized losses on our investments were not driven by credit related factors. During the three and nine months ended September 30, 2024 and 2023, we did not recognize any losses on our investments due to credit related factors and our realized gains and losses on investments were not significant.
The following table presents our cash equivalents and investments' adjusted cost and fair value by contractual maturity as of September 30, 2024 (in thousands):

| Adjusted Cost |  | Fair Value
Due within one year | $ | 208,991 |  |  | $ | 209,003 |
Due after one year through three years | 266,939 |  |  | 270,161 |
Investments not due at a single maturity date | 99,550 |  |  | 99,550 |
Total | $ | 575,480 |  |  | $ | 578,714 |

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Investments not due at a single maturity date in the preceding table consisted of money market funds.
Strategic Investments
In May 2023, we entered into a $15.0 million commitment to invest in Sound Ventures AI Fund, L.P. (Sound Ventures), a limited partnership that invests in artificial intelligence companies, for an approximate 6% ownership. We accounted for our investment under the equity method of accounting. As of December 31, 2023, the carrying amount of our investment was $11.7 million. On January 1, 2024, we sold our investment for a total cash consideration of $15.5 million, resulting in a gain of $3.8 million. The cash payment received was included within cash flows from investing activities on our condensed consolidated statements of cash flows and the gain was included within other income, net on our condensed consolidated statements of operations.
In July 2022, we completed an investment of $6.0 million in Knack Technologies, Inc. (Knack), a privately held U.S. based peer-to-peer tutoring platform for higher education institutions. We do not have the ability to exercise significant influence over Knack's operating and financial policies and have elected to account for our investment at cost as it does not have a readily determinable fair value. We did not record any impairment expenses during the three and nine months ended September 30, 2024 and 2023, as there were no significant identified events or changes in circumstances that would be considered an indicator for impairment. There were no observable price changes in orderly transactions for the identical or similar investments of the same issuer during the three and nine months ended September 30, 2024 and 2023.
Financial Instruments Not Recorded at Fair Value on a Recurring Basis
We report our financial instruments at fair value with the exception of the notes (defined below). The estimated fair value of the notes was determined based on the trading price of the notes as of the last day of trading for the period. We consider the fair value of the notes to be a Level 2 measurement due to the limited trading activity. The estimated fair value of the 2026 notes as of September 30, 2024 and December 31, 2023 was $186.4 million and $202.9 million, respectively. The estimated fair value of the 2025 notes as of September 30, 2024 and December 31, 2023 was $343.7 million and $329.5 million, respectively. For further information on the notes, refer to Note 7, “Convertible Senior Notes.”
Note 5. Property and Equipment, Net
Property and equipment, net consisted of the following (in thousands):

| September 30, 2024 |  | December 31, 2023
Content | $ | 371,928 |  |  | $ | 346,749 |
Software | 66,210 |  |  | 51,855 |
Leasehold improvements | 11,160 |  |  | 10,857 |
Furniture and fixtures | 4,258 |  |  | 4,607 |
Computer and equipment | 3,304 |  |  | 3,496 |
Property and equipment | 456,860 |  |  | 417,564 |
Less accumulated depreciation and amortization | (278,978) |  |  | (234,491) |
Property and equipment, net | $ | 177,882 |  |  | $ | 183,073 |

Depreciation and content amortization expense during the three and nine months ended September 30, 2024 was $18.2 million and $50.0 million, respectively. Depreciation and content amortization expense during the three and nine months ended September 30, 2023 was $50.8 million and $90.3 million, respectively, which included $34.2 million of accelerated depreciation of certain abandoned content and software assets.
In connection with the June 2024 restructuring, we announced that we will no longer offer Chegg Skills directly to customers. As a result, we wrote-off and accelerated depreciation over shortened useful lives for certain content assets of $1.1 million during the nine months ended September 30, 2024, which were classified as cost of revenues on our condensed consolidated statements of operations. For further information on the June 2024 restructuring, see “Note 11, Restructuring and Other Related Charges.”
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In connection with the intangibles asset impairment analysis performed in June 2024, we also recorded an impairment expense of $10.0 million related to property and equipment, consisting of $6.6 million of content assets and $3.4 million of software assets, during the nine months ended September 30, 2024, which were classified as impairment expense on our condensed consolidated statements of operations. For further information on the impairment analysis, see “Note 6, Goodwill and Intangible Assets.”
Note 6. Goodwill and Intangible Assets
Goodwill
Goodwill is tested for impairment at least annually or when certain events or indicators of impairment occur between annual impairment tests. In September 2024 and June 2024, in consideration of the sustained decline in our stock price, industry developments, and our financial performance, we evaluated our current operating performance. Accordingly, we determined that there were indicators of impairment and a quantitative assessment was necessary. In the quantitative assessment, we estimated the fair value of our reporting unit utilizing an income approach, based on the present value of future discounted cash flows, which is classified as Level 3 in the fair value hierarchy. Significant estimates used to determine fair value include the weighted average cost of capital, growth rates, and amount and timing of expected future cash flows. As a result of the quantitative assessment, we determined that goodwill was impaired as the fair value of our reporting unit was less than the carrying value. As such, during the three and nine months ended September 30, 2024, we recorded impairment expense of $195.7 million and $635.4 million, respectively, equal to the excess of the carrying value of our reporting unit over the estimated fair value, limited to the remaining balance of goodwill, which was classified as impairment expense on our condensed consolidated statements of operations.
The following table presents our goodwill balances (in thousands):

| Nine Months Ended September 30, 2024 |  | Year Ended December 31, 2023
Beginning balance | $ | 631,995 |  |  | $ | 615,093 |
Impairment expense | (635,391) |  |  | — |
Foreign currency translation adjustment | 3,396 |  |  | 16,902 |
Ending balance | $ | — |  |  | $ | 631,995 |

Intangible Assets
Intangible assets are tested for impairment at the asset group level at least annually or when events or changes in circumstances indicate that the carrying amount of such asset groups may not be recoverable. In conjunction with our goodwill impairment analysis in June 2024, we determined that there were indicators of impairment for our Busuu assets and a recoverability test was necessary. In the recoverability test, we determined that the expected future undiscounted cash flows for the asset group were not sufficient to recover the carrying value. We then proceeded in estimating the fair value of the asset group utilizing the income approach, based on a present value of future discounted cash flows, which is classified as Level 3 in the fair value hierarchy. Significant estimates used to determine fair value include the growth rates and amount and timing of expected future cash flows. As a result of the impairment test, we determined the asset group was impaired and recorded a $31.9 million impairment expense related to the intangible assets during the nine months ended September 30, 2024, which was classified as impairment expense on our condensed consolidated statements of operations. We also recorded an impairment expense for property and equipment, net. For further information, see “Note 5, Property and Equipment, Net.”
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The following tables present our intangible assets balances as of September 30, 2024 and December 31, 2023 (in thousands, except weighted-average amortization period):

| September 30, 2024
| Weighted-Average Amortization Period (in months) |  | Gross Carrying Amount |  | Accumulated Amortization |  | Accumulated Impairment |  | Foreign Currency Translation Adjustment |  | Net Carrying Amount
Developed technologies | 80 |  | $ | 106,703 |  |  | $ | (61,952) |  |  | $ | (29,369) |  |  | $ | (3,958) |  |  | $ | 11,424 |
Content libraries | 60 |  | 12,230 |  |  | (12,230) |  |  | — |  |  | — |  |  | — |
Customer lists | 35 |  | 34,190 |  |  | (32,892) |  |  | — |  |  | (1,298) |  |  | — |
Trade and domain names | 52 |  | 16,213 |  |  | (13,343) |  |  | (2,493) |  |  | (377) |  |  | — |
Total intangible assets | 67 |  | $ | 169,336 |  |  | $ | (120,417) |  |  | $ | (31,862) |  |  | $ | (5,633) |  |  | $ | 11,424 |

| December 31, 2023
| Weighted-Average Amortization Period (in months) |  | Gross Carrying Amount |  | Accumulated Amortization |  | Accumulated Impairment |  | Foreign Currency Translation Adjustment |  | Net Carrying Amount
Developed technologies | 80 |  | $ | 106,703 |  |  | $ | (55,651) |  |  | $ | — |  |  | $ | (3,757) |  |  | $ | 47,295 |
Content libraries | 60 |  | 12,230 |  |  | (11,189) |  |  | — |  |  | — |  |  | 1,041 |
Customer lists | 35 |  | 34,190 |  |  | (31,836) |  |  | — |  |  | (1,298) |  |  | 1,056 |
Trade and domain names | 52 |  | 16,213 |  |  | (12,817) |  |  | — |  |  | (358) |  |  | 3,038 |
Total intangible assets | 67 |  | $ | 169,336 |  |  | $ | (111,493) |  |  | $ | — |  |  | $ | (5,413) |  |  | $ | 52,430 |

During the three and nine months ended September 30, 2024, amortization expense related to our intangible assets totaled $1.4 million and $8.9 million, respectively. During the three and nine months ended September 30, 2023, amortization expense related to our intangible assets totaled $6.1 million and $18.7 million, respectively.
During the three months ended September 30, 2024, we did not recognize any impairment charges on our intangible assets and during the nine months ended September 30, 2024, we recognized a $31.9 million impairment charge on our intangible assets. During the three and nine months ended September 30, 2023, we recognized a $3.6 million impairment charge on our indefinite-lived intangible asset.
The following table presents the estimated future amortization expense related to our intangible assets as of September 30, 2024 (in thousands):

| September 30, 2024
Remaining three months of 2024 | $ | 1,036 |
2025 | 4,240 |
2026 | 3,897 |
2027 | 1,776 |
2028 | 407 |
Thereafter | 68 |
Total | $ | 11,424 |

Note 7. Convertible Senior Notes
In August 2020, we issued $1.0 billion in aggregate principal amount of 0% convertible senior notes due in 2026 (2026 notes). In March/April 2019, we issued $800 million in aggregate principal amount of 0.125% convertible senior notes due in 2025 (2025 notes, together with the 2026 notes, the notes). The 2026 notes bear no interest and will mature on September 1, 2026, unless repurchased, redeemed or converted in accordance with their terms prior to such date. The 2025 notes bear interest of 0.125% per year which is payable semi-annually in arrears on March 15 and September 15 of each year, beginning on
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September 15, 2019. The 2025 notes will mature on March 15, 2025, unless repurchased, redeemed or converted in accordance with their terms prior to such date.
Each $1,000 principal amount of the 2026 notes will initially be convertible into 9.2978 shares of our common stock. This is equivalent to an initial conversion price of approximately $107.55 per share, which is subject to adjustment in certain circumstances. Each $1,000 principal amount of the 2025 notes will initially be convertible into 19.3956 shares of our common stock. This is equivalent to an initial conversion price of approximately $51.56 per share, which is subject to adjustment in certain circumstances.
Prior to the close of business on the business day immediately preceding June 1, 2026 for the 2026 notes and December 15, 2024 for the 2025 notes, the notes are convertible at the option of holders only upon satisfaction of certain circumstances. During the three months ended September 30, 2024, the circumstances allowing holders of the 2026 notes and 2025 notes to convert were not met.
On or after June 1, 2026 for the 2026 notes and December 15, 2024 for the 2025 notes until the close of business on the second scheduled trading day immediately preceding the respective maturity dates, holders may convert their notes at any time, regardless of the circumstances. As of September 30, 2024, the 2025 notes were classified as a current liability on our condensed consolidated balance sheets as they will be convertible at the option of the holder at any time beginning December 15, 2024 and will mature on March 15, 2025, both of which are within the next twelve months.
The following table presents the net carrying amount of the notes (in thousands):

| September 30, 2024 |  |  |  | December 31, 2023
| 2026 Notes |  | 2025 Notes |  |  |  | 2026 Notes |  | 2025 Notes |  |
Principal | $ | 244,479 |  |  | $ | 358,914 |  |  |  |  | $ | 244,479 |  |  | $ | 358,914 |  |  |
Unamortized issuance costs | (1,237) |  |  | (692) |  |  |  |  | (1,721) |  |  | (1,835) |  |  |
Net carrying amount | $ | 243,242 |  |  | $ | 358,222 |  |  |  |  | $ | 242,758 |  |  | $ | 357,079 |  |  |

The following table presents the total interest expense recognized related to the notes (in thousands):

| Three Months Ended September 30, |  | Nine Months Ended September 30,
| 2024 |  | 2023 |  | 2024 |  | 2023
2026 notes: |  |  |  |  |  |  |
Contractual interest expense | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |
Amortization of issuance costs | 163 |  |  | 238 |  |  | 484 |  |  | 873 |
Total 2026 notes interest expense | $ | 163 |  |  | $ | 238 |  |  | $ | 484 |  |  | $ | 873 |
2025 notes: |  |  |  |  |  |  |
Contractual interest expense | $ | 111 |  |  | $ | 112 |  |  | $ | 331 |  |  | $ | 510 |
Amortization of issuance costs | 384 |  |  | 384 |  |  | 1,144 |  |  | 1,737 |
Total 2025 notes interest expense | $ | 495 |  |  | $ | 496 |  |  | $ | 1,475 |  |  | $ | 2,247 |

Capped Call Transactions
Concurrently with the offering of the 2026 notes and 2025 notes, we used $103.4 million and $97.2 million, respectively, of the net proceeds to enter into privately negotiated capped call transactions which are expected to reduce or offset potential dilution to holders of our common stock upon conversion of the notes or offset the potential cash payments we would be required to make in excess of the principal amount of any converted notes. The capped call transactions automatically exercise upon conversion of the notes and as of September 30, 2024, cover 9,297,800 and 6,961,352 shares of our common stock for the 2026 notes and 2025 notes, respectively. These are intended to effectively increase the overall conversion price from $107.55 to $156.44 per share for the 2026 notes and $51.56 to $79.32 per share for the 2025 notes. The effective increase in conversion price as a result of the capped call transactions serves to reduce potential dilution to holders of our common stock and/or offset the cash payments we are required to make in excess of the principal amount of any converted notes. As these transactions meet certain accounting criteria, they are recorded in stockholders’ equity as a reduction of additional paid-in capital on our
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condensed consolidated balance sheets and are not accounted for as derivatives. The fair value of the capped call instrument is not remeasured each reporting period. The cost of the capped call is not expected to be deductible for tax purposes.
Note 8. Commitments and Contingencies
We may from time to time be subject to certain legal proceedings and claims in the ordinary course of business, including claims of alleged infringement of trademarks, patents, copyrights, and other intellectual property rights; employment claims; and general contract or other claims. We may also, from time to time, be subject to various legal or government claims, demands, disputes, investigations, or requests for information. Such matters may include, but not be limited to, claims, disputes, or investigations related to warranty, refund, breach of contract, employment, intellectual property, government regulation, or compliance or other matters.
On March 1, 2023, Plaintiff Shiva Stein, derivatively on behalf of Chegg, filed a stockholder derivative complaint in the Court of Chancery of the State of Delaware (Case No. 2023-0244-NAC) asserting breach of fiduciary duty, unjust enrichment, and waste of corporate asset claims against members of Chegg’s Board and certain Chegg officers. The matter is stayed. The Company disputes these claims and intends to vigorously defend itself in this matter.
On February 14, 2023, Plaintiff Brian Stansell, individually and on behalf of other similarly situated stockholders of Chegg, filed a putative class action complaint in the Court of Chancery of the State of Delaware (Case No. 2023-0180) on behalf of all Chegg stockholders who were eligible to vote at Chegg's 2022 Annual Stockholders' Meeting, asserting breach of fiduciary duty claims against the members of Chegg's Board. The Court dismissed this matter pursuant to the Company's motion to dismiss and the matter is concluded.
On December 22, 2022, JPMorgan Chase Bank, N.A. (JPMC) asserted a demand for repayment by the Company of certain investment proceeds received by the Company in its capacity as an investor in TAPD, Inc. (more commonly known as “Frank”). JPMC seeks such repayment pursuant to certain provisions in the existing Support Agreement between JPMC and the Company that was entered into in connection with JPMC's acquisition of Frank. JPMC has alleged fraud on the part of certain former Frank executives regarding the quantity and quality of its customer accounts. The Company is not at fault, however is pursuing a settlement agreement with JPMC.
On November 9, 2022, Plaintiff Joshua Keller, individually and on behalf of all others similarly situated, filed a putative class action in the United States District Court for the Northern District of California (Case No. 22-cv-06986) on behalf of individuals whose data was allegedly impacted by past data breaches. On August 15, 2023, the Company received an order granting its motion to compel arbitration, and the case was stayed and administratively closed pending the conclusion of arbitration. The parties have since resolved this matter, and the related settlement amount did not have a significant impact on our financial statements.
On March 30, 2022, Joseph Robinson, derivatively on behalf of Chegg, filed a shareholder derivative complaint against Chegg and certain of its current and former directors and officers in the United States District Court for the Northern District of California, alleging violations of securities laws and breaches of fiduciary duties. On February 22, 2023, Plaintiff filed an Amended Shareholder Derivative Complaint. This matter has been consolidated with Choi, below, and both matters are stayed. The Company disputes these claims and intends to vigorously defend itself in this matter.
On January 12, 2022, Rak Joon Choi, derivatively on behalf of Chegg, filed a shareholder derivative complaint against Chegg and certain of its current and former directors and officers in the United States District Court for the Northern District of California, alleging violations of securities laws, breaches of fiduciary duties, unjust enrichment, abuse of control, gross mismanagement, and waste of corporate assets. On February 22, 2023, Plaintiff filed an Amended Shareholder Derivative Complaint. This matter has been consolidated with Robinson, above, and both matters are stayed. The Company disputes these claims and intends to vigorously defend itself in this matter.
On December 22, 2021, Steven Leventhal, individually and on behalf of all others similarly situated, filed a purported securities fraud class action on behalf of all purchasers of Chegg common stock between May 5, 2020 and November 1, 2021, inclusive, against Chegg and certain of its current and former officers in the United States District Court for the Northern District of California (Case No. 5:21-cv-09953), alleging that Chegg and several of its officers made materially false and misleading statements in violation of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 as amended (the Exchange Act). On September 7, 2022, KBC Asset Management and The Pompano Beach Police & Firefighters Retirement System were appointed as lead plaintiff in the case. On December 8, 2022, Plaintiff filed his Amended Complaint seeking unspecified compensatory damages, costs, and expenses, including counsel and expert fees. On September 26, 2024, the parties participated in an in-person mediation and reached a settlement in principle to pay $55.0 million wherein the Company denies
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any and all allegations of fault, liability, wrongdoing, or damages. On November 6, 2024, Plaintiffs filed a motion for preliminary approval of the settlement, which is pending court approval. The estimated contingent liability for the loss contingency recorded was $55.0 million as of September 30, 2024 and was included within accrued liabilities on our condensed consolidated balance sheets. The same amount was recorded for expected insurance loss recoveries, which is included within other current assets on our condensed consolidated balance sheets.
On September 13, 2021, Pearson Education, Inc. (Pearson) filed a complaint captioned Pearson Education, Inc. v. Chegg, Inc. (Pearson Complaint) in the United States District Court for the District of New Jersey against the Company (Case 2:21-cv-16866), alleging infringement of Pearson’s registered copyrights and exclusive rights under copyright in violation of the United States Copyright Act. Pearson is seeking injunctive relief, monetary damages, costs, and attorneys’ fees. The Company filed its answer to the Pearson Complaint on November 19, 2021. Pearson’s June 29, 2022 Motion for Leave to File Amended Complaint seeking to add Bedford, Freeman & Worth Publishing Group, LLC d/b/a Macmillan Learning as a plaintiff was denied. Pearson filed an Amended Complaint on May 10, 2023, and the Company filed an amended answer on June 7, 2023. The Company disputes these claims and intends to vigorously defend itself in this matter.
On June 18, 2020, we received a Civil Investigative Demand (CID) from the Federal Trade Commission (FTC) regarding certain alleged deceptive or unfair acts or practices related to consumer privacy and/or data security. On October 31, 2022, the FTC published the parties’ agreed-upon consent order regarding Chegg’s privacy and data security practices. On January 27, 2023, the FTC finalized its order ("Final Order") requiring Chegg to implement a comprehensive information security program, limit the data the Company can collect and retain, offer users multi factor authentication to secure their accounts, and allow users to request access to and delete their data. No monetary penalties or fines were included in the Final Order. We continue to work with the FTC on the implementation of and compliance with the Final Order.
We record a contingent liability for loss contingencies related to legal matters when a loss is both probable and reasonably estimable. Additionally, we record an insurance loss recovery up to the recognized loss contingency when realization is probable. Related to the above matters, as of September 30, 2024, the net impact of contingent liabilities less the related insurance loss recovery is $12.1 million. For those matters upon which management has sufficient insurance coverage, the Company has recorded contingent liabilities within accrued liabilities and the loss recovery from insurance within other current assets on our condensed consolidated balance sheets. As a result of ongoing legal related expenses during the three months ended September 30, 2024, the Company updated its estimate that $5.1 million that was previously recorded as insurance loss recovery was deemed to no longer be probable and has been recorded as an expense on the condensed consolidated statement of operations as recovery would be in excess of insurance coverage limits. We are not aware of any other pending legal matters or claims, individually or in the aggregate, which are expected to have a material adverse impact on our consolidated financial position, results of operations, or cash flows. Our analysis of whether a claim will proceed to litigation cannot be predicted with certainty, nor can the results of litigation be predicted with certainty. Nevertheless, defending any of these actions, regardless of the outcome, may be costly, time consuming, distract management personnel and have a negative effect on our business. In the ordinary course of business and for certain of the above matters, we are actively pursuing all avenues and strategies to resolve these matters, including available legal remedies, remediation and settlement negotiations with the parties. An adverse outcome in any of these actions, including a judgment or settlement, may cause a material adverse effect on our future business, operating results or financial condition.
Note 9. Guarantees and Indemnifications
We have agreed to indemnify our directors and officers for certain events or occurrences, subject to certain limits, while such persons are or were serving at our request in such capacity. We may terminate the indemnification agreements with these persons upon termination of employment, but termination will not affect claims for indemnification related to events occurring prior to the effective date of termination. We have a directors’ and officers’ insurance policy that limits our potential exposure up to the limits of our insurance coverage. In addition, we also have other indemnification agreements with various vendors against certain claims, liabilities, losses, and damages. The maximum amount of potential future indemnification is unlimited.
We believe the fair value of these indemnification agreements is immaterial. We have not recorded any liabilities for these agreements as of September 30, 2024.
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Note 10. Stockholders' Equity
Share Repurchases
During the nine months ended September 30, 2024, we had no cash repurchases of our common stock. As of September 30, 2024, we had $3.7 million remaining under the securities repurchase program, which has no expiration date and will continue until otherwise suspended, terminated or modified at any time for any reason by our board of directors.
In February 2024, we repurchased 2,115,952 shares of our common stock related to the final delivery of our November 2023 accelerated share repurchase (ASR) agreement. The November 2023 ASR settled, and we were not required to make any additional cash payments or delivery of common stock to the financial institution upon settlement.
During the year ended December 31, 2023, we repurchased a total of 26,505,979 shares of our common stock, which included the initial delivery of 13,498,313 shares from our November 2023 ASR, 3,433,157 shares from open market transactions in June 2023, and the total delivery of 9,574,509 shares from our February 2023 ASR, which were retired immediately.
Share-based Compensation Expense
The following table presents total share-based compensation expense recorded (in thousands):

| Three Months Ended September 30, |  | Nine Months Ended September 30,
| 2024 |  | 2023 |  | 2024 |  | 2023
Cost of revenues | $ | 471 |  |  | $ | 598 |  |  | $ | 1,450 |  |  | $ | 1,685 |
Research and development | 7,492 |  |  | 11,027 |  |  | 23,824 |  |  | 33,909 |
Sales and marketing | 2,100 |  |  | 2,435 |  |  | 5,966 |  |  | 7,116 |
General and administrative | 11,868 |  |  | 17,870 |  |  | 38,027 |  |  | 58,886 |
Total share-based compensation expense | $ | 21,931 |  |  | $ | 31,930 |  |  | $ | 69,267 |  |  | $ | 101,596 |

During the three and nine months ended September 30, 2024, we capitalized share-based compensation expense of $1.2 million and $3.9 million, respectively. During the three and nine months ended September 30, 2023, we capitalized share-based compensation expense of $0.7 million and $2.4 million, respectively. As of September 30, 2024, total unrecognized share-based compensation expense was approximately $72.7 million, which is expected to be recognized over the remaining weighted-average vesting period of approximately 1.4 years.
The following table presents activity for outstanding RSUs and PSUs:

| RSUs and PSUs Outstanding
| Shares Outstanding |  | Weighted Average Grant Date Fair Value
Balance at December 31, 2023 | 10,065,783 |  |  | $ | 23.63 |
Granted | 5,771,165 |  |  | 4.27 |
Released | (4,130,650) |  |  | 21.57 |
Forfeited | (2,097,277) |  |  | 28.86 |
Balance at September 30, 2024 | 9,609,021 |  |  | $ | 11.75 |

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Note 11. Restructuring and Other Related Charges
June 2024 Restructuring Plan
Restructuring Charges
In June 2024, we announced a workforce reduction that resulted in a management approved restructuring plan. During the three and nine months ended September 30, 2024, we recorded $2.1 million and $8.8 million of restructuring charges, respectively, primarily related to one-time employee termination benefits, which was classified on our condensed consolidated statement of operations based on employees' job function. The restructuring liability is included within accrued liabilities on our condensed consolidated balance sheets. We estimate we will incur between $1 million and $2 million of additional restructuring charges over the next fiscal quarter. We expect the plan to be substantially completed by the end of the first quarter of fiscal 2025.
The following table presents a reconciliation of the beginning and ending restructuring liability balance (in thousands):

| Nine Months Ended September 30, 2024
Beginning balance | $ | — |
Restructuring charges | 8,840 |
Restructuring payments | (6,116) |
Ending balance | $ | 2,724 |

Impairment of lease related assets
In connection with the June 2024 restructuring, we announced the closure of two offices outside of the United States. As a result, we recorded a full impairment expense of $2.2 million, consisting of $1.1 million impairment of ROU assets and $1.1 million leasehold improvements during the nine months ended September 30, 2024, which was classified as general and administrative expense on our condensed consolidated statement of operations. Our intent and ability to sublease the office as well as the local market conditions were factored in when measuring the amount of impairment.
November 2024 Restructuring Plan
In November 2024, we announced a restructuring plan that includes a reduction of our global workforce as well as other actions to streamline our operations. We estimate that we will incur charges of approximately $22 million to $26 million in connection with these actions, of which $18 million to $22 million is expected to result in future cash expenditures, primarily consisting of expenditures for one-time employee termination benefits, impairment of lease related assets, and other related costs. The accounting for the November 2024 restructuring plan is in process as of the issuance date of our condensed consolidated financial statements and therefore we are unable to make any additional disclosures.
Note 12. Income Taxes
During the three and nine months ended September 30, 2024, we recorded a benefit from income taxes of $2.7 million and provision for income taxes of $144.7 million, respectively. During the three and nine months ended September 30, 2023, we recorded a provision for income taxes of $0.2 million and $24.0 million, respectively.
During the nine months ended September 30, 2024, the provision for income taxes was primarily from the valuation allowance establishment of $141.6 million as a discrete non-cash income tax expense against our U.S. federal and state deferred tax assets. We regularly assess the need for a valuation allowance against our deferred tax assets. In performing our assessment in June 2024, we considered both positive and negative evidence related to the likelihood of realizing our deferred tax assets. In June 2024, we determined that it is more likely than not that the deferred tax benefit will not be realized due to the available negative evidence outweighing the positive evidence, primarily resulting from the cumulative loss influenced by the impairment expense recorded during the three months ended June 30, 2024.
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You should read the following discussion of our financial condition and results of operations in conjunction with our condensed consolidated financial statements and the related notes included in Part I, Item 1, “Financial Statements (unaudited)” of this Quarterly Report on Form 10-Q. In addition to historical consolidated financial information, the following discussion contains forward-looking statements that reflect our plans, estimates, and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. See the section titled “Note about Forward-Looking Statements” for additional information. Factors that could cause or contribute to these differences include those discussed below and elsewhere in this Quarterly Report on Form 10-Q.
Overview
Chegg provides individualized learning support to students as they pursue their educational journeys. Available on demand 24/7 and powered by over a decade of learning insights, the Chegg platform offers students AI-powered academic support thoughtfully designed for education coupled with access to a vast network of subject matter experts who ensure quality. No matter the goal, level, or style, Chegg helps millions of students around the world learn with confidence by helping them build essential academic, life, and job skills to achieve success.
Our long-term strategy is centered upon our ability to utilize our Subscription Services to increase student engagement with our learning platform. We continue to invest in the expansion of our offerings and technology platform to provide a more compelling and personalized solution and deepen engagement with students. We continue to integrate artificial intelligence into our platform, and it is now conversational, more instructional, and interactive. We remain focused on providing a holistic and differentiated product offering that supports the whole student with 360 degrees of individualized academic and functional support, including the delivery of high-quality and accurate content. We believe the investments we are making will allow us to maintain strong margins and cash flows and enable us to return to revenue growth over time. Our ability to achieve these long-term objectives is subject to numerous risks and uncertainties, which are described in greater detail below and in Part II, Item 1A, “Risk Factors.”
Business Updates and Developments
Recent technological shifts, notably Google's roll out of AI Overviews (AIO) and continued increase in adoption of free and paid generative AI services by students, have created and are expected to continue to create headwinds for our industry and our business, most notably a reduction in traffic to our website and customers subscribing to our services. In mid-August, Google broadly rolled out its AIO search experience, or AIO, which displays AI-generated content at the top of its search results. This experience, which includes questions and solutions for education, keeps users on Google search results versus leading them onto our site. AIO’s prevalence has grown and will only continue to increase. While we continue to study the changes and adjust our SEO strategy, we expect Google to continue its shift from being a search origination point to the destination, which could materially adversely affect our business, operating results and financial condition.
In addition, across our industry, there has been a continued increase in the adoption of free and paid generative AI products for academic support, and students are increasingly turning to generative AI for academic support, such as homework and exams, as well as assistance in other areas of daily life. This issue impacts education technology companies broadly, where students see generative AI products like Chat GPT and others as strong alternatives to vertically specialized solutions for education such as Chegg. These developments have negatively impacted our industry and our business and are expected to continue to impact our overall traffic and accelerate the decline in the number of new subscribers that sign up for our services, resulting in continued negative impacts to our growth, business, operating results and financial condition. See Part II, Item 1A, “Risk Factors” for additional details.
In June 2024, we undertook a strategic restructuring plan based on the environment in which we were operating to realign our expenses with the revenue trends at the time. The June 2024 restructuring plan included a reduction in workforce, the closure of two offices, and a change in our Chegg Skills offering such that we no longer offer Chegg Skills directly to customers. Since then, the factors described above have negatively impacted our business and our outlook. As a result, in November 2024, we announced an additional restructuring plan to further manage costs and align with the market. The November 2024 restructuring plan included a reduction in workforce and the closure of one office. For fiscal year 2025, we expect to realize cost savings as a result of the restructuring plans. See Note 5, “Property and Equipment, Net”, and Note 11, “Restructuring and Other Related Charges” of our accompanying Notes to Condensed Consolidated Financial Statements included in Part I, Item 1, “Financial Statements (unaudited)” of this Quarterly Report on Form 10-Q for additional details.
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In September 2024 and June 2024, in consideration of the sustained decline in our stock price, industry developments, and our financial performance, we determined that impairment tests for our goodwill, intangible assets and property and equipment were necessary. As a result, we recorded $195.7 million and $677.2 million of impairment expense during the three and nine months ended September 30, 2024. See Note 5, “Property and Equipment, Net” and Note 6, “Goodwill and Intangible Assets” of our accompanying Notes to Condensed Consolidated Financial Statements included in Part I, Item 1, “Financial Statements (unaudited)” of this Quarterly Report on Form 10-Q for additional details.
During the three and nine months ended September 30, 2024, we generated net revenues of $136.6 million and $474.1 million, respectively. During the three and nine months ended September 30, 2023, we generated net revenues of $157.9 million and $528.3 million, respectively.
We have presented revenues for our two product lines, Subscription Services and Skills and Other, based on how students view us and the utilization of our products by them. More detail on our two product lines is discussed in the next two sections titled “Subscription Services” and “Skills and Other.”
Subscription Services
Our Subscription Services can be accessed internationally through our websites and on mobile devices and include Chegg Study Pack, Chegg Study, Chegg Writing, Chegg Math, and Busuu. Students typically pay to access our Subscription Services on a monthly basis. Revenues from our Subscription Services are primarily recognized ratably over the monthly subscription period whereas the number of subscribers are determined as those who have paid to access our services at any time during the period. Changes in revenues are primarily related to changes in subscribers. Our Chegg Study subscription service provides access to personalized, step-by-step learning support powered by AI, computational engines, and subject matter experts. When students need writing help, including plagiarism detection scans and creating citations for their papers, they can use our Chegg Writing subscription service. Our Chegg Math subscription service, including Mathway, helps students understand math by providing a step-by-step math solver and calculator. We also offer our Chegg Study Pack as a premium subscription bundle of our Chegg Study, Chegg Writing, and Chegg Math services. Subscribers to Busuu have access to a premium language learning platform that offers comprehensive support through self-paced lessons, live classes with expert tutors and a huge community of members to practice alongside.
In the aggregate, Subscription Services revenues were 88% and 89% of net revenues during the three and nine months ended September 30, 2024, respectively. In the aggregate, Subscription Services revenues were 89% and 90% of net revenues during the three and nine months ended September 30, 2023, respectively.
Skills and Other
Our Skills and Other product line includes revenues from Chegg Skills, advertising services, print textbooks and eTextbooks. Our skills-based learning platform offers professional courses focused on the latest technology skills. We work with leading brands and programmatic partners to deliver advertising across our platforms. We also provide a platform for students to rent or buy print textbooks and eTextbooks, which helps students save money compared to the cost of buying new.
In the aggregate, Skills and Other revenues were 12% and 11% during the three and nine months ended September 30, 2024, respectively. In the aggregate, Skills and Other revenues were 11% and 10% during the three and nine months ended September 30, 2023, respectively.
Seasonality of Our Business
Revenues from Subscription Services are primarily recognized ratably over the subscription term which has generally resulted in our highest revenues and profitability in the fourth quarter as it reflects more days of the academic year. Certain variable expenses, such as marketing expenses, remain highest in the first and third quarters such that our profitability may not provide meaningful insight on a sequential basis. As a result of these factors, the most concentrated periods for our revenues and expenses do not necessarily coincide, and comparisons of our historical quarterly results of operations on a sequential basis may not provide meaningful insight into our overall financial performance.
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Components of Results of Operations
Aside from the addition of impairment expense as a component within our operating expenses on our condensed consolidated statements of operations, there have been no other changes to the components on our consolidated statements of operations described in our Annual Report on Form 10-K.
Operating Expenses
Impairment Expense
Our impairment expense consists of impairments of goodwill, intangible assets, and property and equipment, net. For further information, see “Note 5, Property and Equipment, Net” and “Note 6, Goodwill and Intangible Assets” of our accompanying Notes to Condensed Consolidated Financial Statements included in Part I, Item 1, “Financial Statements (unaudited)” of this Quarterly Report on Form 10-Q.
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Results of Operations
The following table presents our historical condensed consolidated statements of operations (in thousands, except percentage of total net revenues):

| Three Months Ended September 30, |  | Nine Months Ended September 30,
| 2024 |  | 2023 |  | 2024 |  | 2023
Net revenues | $ | 136,593 |  |  | 100 | % |  | $ | 157,854 |  |  | 100 | % |  | $ | 474,090 |  |  | 100 | % |  | $ | 528,308 |  |  | 100 | %
Cost of revenues(1) | 43,420 |  |  | 32 |  |  | 83,575 |  |  | 53 |  |  | 135,328 |  |  | 29 |  |  | 180,137 |  |  | 34 |
Gross profit | 93,173 |  |  | 68 |  |  | 74,279 |  |  | 47 |  |  | 338,762 |  |  | 71 |  |  | 348,171 |  |  | 66 |
Operating expenses: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Research and development(1) | 41,337 |  |  | 30 |  |  | 46,202 |  |  | 30 |  |  | 129,423 |  |  | 27 |  |  | 145,981 |  |  | 27 |
Sales and marketing(1) | 26,508 |  |  | 19 |  |  | 28,872 |  |  | 18 |  |  | 80,428 |  |  | 17 |  |  | 96,845 |  |  | 18 |
General and administrative(1) | 51,910 |  |  | 38 |  |  | 53,475 |  |  | 34 |  |  | 161,460 |  |  | 34 |  |  | 182,757 |  |  | 34 |
Impairment expense | 195,708 |  |  | n/m |  | 3,600 |  |  | 2 |  |  | 677,239 |  |  | n/m |  | 3,600 |  |  | 1 |
Total operating expenses | 315,463 |  |  | n/m |  | 132,149 |  |  | 84 |  |  | 1,048,550 |  |  | n/m |  | 429,183 |  |  | 80 |
Loss from operations | (222,290) |  |  | n/m |  | (57,870) |  |  | (37) |  |  | (709,788) |  |  | n/m |  | (81,012) |  |  | (14) |
Total interest expense and other income, net | 6,928 |  |  | 5 |  |  | 39,759 |  |  | 25 |  |  | 23,526 |  |  | 5 |  |  | 113,556 |  |  | 21 |
(Loss) income before benefit from (provision for) income taxes | (215,362) |  |  | n/m |  | (18,111) |  |  | (12) |  |  | (686,262) |  |  | n/m |  | 32,544 |  |  | 7 |
Benefit from (provision for) income taxes | 2,723 |  |  | 2 |  |  | (172) |  |  | 0 |  |  | (144,681) |  |  | n/m |  | (24,029) |  |  | (5) |
Net (loss) income | $ | (212,639) |  |  | n/m |  | $ | (18,283) |  |  | (12) | % |  | $ | (830,943) |  |  | n/m |  | $ | 8,515 |  |  | 2 | %
(1) Includes share-based compensation expense and restructuring charges as follows: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Share-based compensation expense: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Cost of revenues | $ | 471 |  |  |  |  | $ | 598 |  |  |  |  | $ | 1,450 |  |  |  |  | $ | 1,685 |  |  |
Research and development | 7,492 |  |  |  |  | 11,027 |  |  |  |  | 23,824 |  |  |  |  | 33,909 |  |  |
Sales and marketing | 2,100 |  |  |  |  | 2,435 |  |  |  |  | 5,966 |  |  |  |  | 7,116 |  |  |
General and administrative | 11,868 |  |  |  |  | 17,870 |  |  |  |  | 38,027 |  |  |  |  | 58,886 |  |  |
Total share-based compensation expense | $ | 21,931 |  |  |  |  | $ | 31,930 |  |  |  |  | $ | 69,267 |  |  |  |  | $ | 101,596 |  |  |
Restructuring charges: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Cost of revenues | $ | 12 |  |  |  |  | $ | — |  |  |  |  | $ | 203 |  |  |  |  | $ | 12 |  |  |
Research and development | 827 |  |  |  |  | — |  |  |  |  | 2,909 |  |  |  |  | 1,692 |  |  |
Sales and marketing | — |  |  |  |  | — |  |  |  |  | 906 |  |  |  |  | 1,228 |  |  |
General and administrative | 1,273 |  |  |  |  | — |  |  |  |  | 4,822 |  |  |  |  | 2,772 |  |  |
Total restructuring charges | $ | 2,112 |  |  |  |  | $ | — |  |  |  |  | $ | 8,840 |  |  |  |  | $ | 5,704 |  |  |

____________________________________
*n/m - not meaningful
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Three and Nine Months Ended September 30, 2024 and 2023
Net Revenues
The following tables present our total net revenues for the periods shown for our Subscription Services and Skills and Other product lines (in thousands, except percentages):

| Three Months Ended September 30, |  | Change
| 2024 |  | 2023 |  | $ |  | %
Subscription Services | $ | 119,804 |  |  | $ | 139,912 |  |  | $ | (20,108) |  |  | (14) | %
Skills and Other | 16,789 |  |  | 17,942 |  |  | (1,153) |  |  | (6) |
Total net revenues | $ | 136,593 |  |  | $ | 157,854 |  |  | $ | (21,261) |  |  | (13) |

| Nine Months Ended September 30, |  | Change
| 2024 |  | 2023 |  | $ |  | %
Subscription Services | $ | 420,668 |  |  | $ | 474,207 |  |  | $ | (53,539) |  |  | (11) | %
Skills and Other | 53,422 |  |  | 54,101 |  |  | (679) |  |  | (1) |
Total net revenues | $ | 474,090 |  |  | $ | 528,308 |  |  | $ | (54,218) |  |  | (10) |

Subscription Services revenues decreased $20.1 million, or 14%, and $53.5 million, or 11%, during the three and nine months ended September 30, 2024, respectively, compared to the same periods in 2023. The decrease was primarily due to a 13%, 9%, and 8% decrease in subscribers who have paid to access our services during the three months ended September 30, 2024, June 30, 2024 and March 31, 2024, respectively, compared to the same periods in 2023. Skills and Other revenues decreased $1.2 million, or 6%, during the three months ended September 30, 2024, compared to the same period in 2023, primarily due to lower revenues in Chegg Skills related to enrollments. Skills and Other revenues decreased $0.7 million, or 1%, during the nine months ended September 30, 2024, compared to the same period in 2023, remaining relatively flat.
Cost of Revenues
The following tables present our cost of revenues for the periods shown (in thousands, except percentages):

| Three Months Ended September 30, |  | Change
| 2024 |  | 2023 |  | $ |  | %
Cost of revenues(1) | $ | 43,420 |  |  | $ | 83,575 |  |  | $ | (40,155) |  |  | (48) | %
(1)Includes share-based compensation expense of: | $ | 471 |  |  | $ | 598 |  |  | $ | (127) |  |  | (21) | %
(1)Includes restructuring charges of: | $ | 12 |  |  | $ | — |  |  | $ | 12 |  |  | n/m

| Nine Months Ended September 30, |  | Change
| 2024 |  | 2023 |  | $ |  | %
Cost of revenues(1) | $ | 135,328 |  |  | $ | 180,137 |  |  | $ | (44,809) |  |  | (25) | %
(1)Includes share-based compensation expense of: | $ | 1,450 |  |  | $ | 1,685 |  |  | $ | (235) |  |  | (14) | %
(1)Includes restructuring charges of: | $ | 203 |  |  | $ | 12 |  |  | $ | 191 |  |  | n/m

______________________________________
*n/m - not meaningful
Cost of revenues decreased during the three and nine months ended September 30, 2024, compared to the same periods in 2023, primarily due to the absence of the $38.2 million content and related assets charge, primarily comprised of accelerated depreciation expense.
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Cost of revenues decreased $40.2 million, or 48%, during the three months ended September 30, 2024, compared to the same period in 2023. The decrease was primarily due to the absence of the $38.2 million content and related assets charge, lower payment processing fees of $1.2 million, which is primarily due to the decrease in subscribers who have paid to access our services, and lower contractor spend of $1.2 million. Gross margins increased to 68% during the three months ended September 30, 2024, from 47% during the same period in 2023.
Cost of revenues decreased $44.8 million, or 25%, during the nine months ended September 30, 2024, compared to the same period in 2023. The decrease was primarily due to the absence of the $38.2 million content and related assets charge, lower depreciation and amortization expense of $5.6 million, lower contractor spend of $3.3 million and lower payment processing fees of $1.9 million, which is primarily due to the decrease in subscribers who have paid to access our services, which was partially offset by higher web hosting fees of $2.4 million and the absence of the gain on disposition of textbooks of $1.2 million. Gross margins increased to 71% during the nine months ended September 30, 2024, from 66% during the same period in 2023.
Operating Expenses
The following tables present our total operating expenses for the periods shown (in thousands, except percentages):

| Three Months Ended September 30, |  | Change
| 2024 |  | 2023 |  | $ |  | %
Research and development(1) | $ | 41,337 |  |  | $ | 46,202 |  |  | $ | (4,865) |  |  | (11) | %
Sales and marketing(1) | 26,508 |  |  | 28,872 |  |  | (2,364) |  |  | (8) |
General and administrative(1) | 51,910 |  |  | 53,475 |  |  | (1,565) |  |  | (3) |
Impairment expense | 195,708 |  |  | 3,600 |  |  | 192,108 |  |  | n/m
Total operating expenses | $ | 315,463 |  |  | $ | 132,149 |  |  | $ | 183,314 |  |  | n/m
(1) Includes share-based compensation expense and restructuring charges as follows: |  |  |  |  |  |  |
Share-based compensation expense: |  |  |  |  |  |  |
Research and development | $ | 7,492 |  |  | $ | 11,027 |  |  | $ | (3,535) |  |  | (32) | %
Sales and marketing | 2,100 |  |  | 2,435 |  |  | (335) |  |  | (14) |
General and administrative | 11,868 |  |  | 17,870 |  |  | (6,002) |  |  | (34) |
Share-based compensation expense | $ | 21,460 |  |  | $ | 31,332 |  |  | $ | (9,872) |  |  | (32) |
Restructuring charges: |  |  |  |  |  |  |
Research and development | $ | 827 |  |  | $ | — |  |  | $ | 827 |  |  | n/m
Sales and marketing | — |  |  | — |  |  | — |  |  | n/m
General and administrative | 1,273 |  |  | — |  |  | 1,273 |  |  | n/m
Restructuring charges | $ | 2,100 |  |  | $ | — |  |  | $ | 2,100 |  |  | n/m

______________________________________
*n/m - not meaningful
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| Nine Months Ended September 30, |  | Change
| 2024 |  | 2023 |  | $ |  | %
Research and development(1) | $ | 129,423 |  |  | $ | 145,981 |  |  | $ | (16,558) |  |  | (11) | %
Sales and marketing(1) | 80,428 |  |  | 96,845 |  |  | (16,417) |  |  | (17) |
General and administrative(1) | 161,460 |  |  | 182,757 |  |  | (21,297) |  |  | (12) |
Impairment expense | 677,239 |  |  | 3,600 |  |  | 673,639 |  |  | n/m
Total operating expenses | $ | 1,048,550 |  |  | $ | 429,183 |  |  | $ | 619,367 |  |  | n/m
(1) Includes share-based compensation expense and restructuring charges as follows: |  |  |  |  |  |  |
Share-based compensation expense: |  |  |  |  |  |  |
Research and development | $ | 23,824 |  |  | $ | 33,909 |  |  | $ | (10,085) |  |  | (30) | %
Sales and marketing | 5,966 |  |  | 7,116 |  |  | (1,150) |  |  | (16) |
General and administrative | 38,027 |  |  | 58,886 |  |  | (20,859) |  |  | (35) |
Share-based compensation expense | $ | 67,817 |  |  | $ | 99,911 |  |  | $ | (32,094) |  |  | (32) |
Restructuring charges: |  |  |  |  |  |  |
Research and development | $ | 2,909 |  |  | $ | 1,692 |  |  | $ | 1,217 |  |  | 72 | %
Sales and marketing | 906 |  |  | 1,228 |  |  | (322) |  |  | (26) |
General and administrative | 4,822 |  |  | 2,772 |  |  | 2,050 |  |  | 74 |
Restructuring charges | $ | 8,637 |  |  | $ | 5,692 |  |  | $ | 2,945 |  |  | 52 |

______________________________________
*n/m - not meaningful
Research and Development
Research and development expenses decreased $4.9 million, or 11%, during the three months ended September 30, 2024 compared to the same period in 2023. The decrease was primarily due to lower employee-related expenses, which is primarily due to share-based compensation expense. Research and development expenses as a percentage of net revenues were flat at 30% during the three months ended September 30, 2024 and 2023.
Research and development expenses decreased $16.6 million, or 11%, during the nine months ended September 30, 2024 compared to the same period in 2023. The decrease was primarily due to lower employee-related expenses, which is primarily due to share-based compensation expense. Research and development expenses as a percentage of net revenues were flat at 27% during the nine months ended September 30, 2024 and 2023.
Sales and Marketing
Sales and marketing expenses decreased by $2.4 million, or 8%, during the three months ended September 30, 2024, compared to the same period in 2023. The decrease was primarily attributable to lower depreciation and amortization expense of $3.2 million, which was offset by higher paid marketing expenses of $1.4 million. Sales and marketing expenses as a percentage of net revenues were 19% during the three months ended September 30, 2024 compared to 18% during the same period in 2023.
Sales and marketing expenses decreased by $16.4 million, or 17%, during the nine months ended September 30, 2024, compared to the same period in 2023. The decrease was primarily attributable to lower depreciation and amortization expense of $9.4 million, lower paid marketing expenses of $4.0 million and lower employee-related expenses, including share-based compensation expense, of $2.5 million. Sales and marketing expenses as a percentage of net revenues were 17% during the nine months ended September 30, 2024 compared to 18% during the same period in 2023.
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General and Administrative
General and administrative expenses decreased $1.6 million, or 3%, during the three months ended September 30, 2024 compared to the same period in 2023. The decrease was due to lower employee-related expenses of $6.9 million, which is primarily due to share-based compensation expense, which was partially offset by a loss contingency accrual of $5.1 million. General and administrative expenses as a percentage of net revenues were 38% during the three months ended September 30, 2024 compared to 34% during the same period in 2023.
General and administrative expenses decreased $21.3 million, or 12%, during the nine months ended September 30, 2024 compared to the same period in 2023. The decrease was due to lower employee-related expenses of $27.4 million, which is primarily due to share-based compensation expense, which was partially offset by a loss contingency accrual of $5.1 million. General and administrative expenses as a percentage of net revenues were flat at 34% during the nine months ended September 30, 2024 and 2023.
See Note 8, “Commitments and Contingencies” of our accompanying Notes to Condensed Consolidated Financial Statements included in Part I, Item 1, “Financial Statements (unaudited)” of this Quarterly Report on Form 10-Q for additional information on the loss contingency accrual.
Impairment Expense
Impairment expense was $195.7 million and $677.2 million during the three and nine months ended September 30, 2024, respectively, consisting of impairments of goodwill, intangible assets, and other related property and equipment. Impairment expense was $3.6 million during each the three and nine months ended September 30, 2023 consisting of an impairment charge related to our intangible assets. See Note 5, Property and Equipment, Net” and “Note 6, Goodwill and Intangible Assets of our accompanying Notes to Condensed Consolidated Financial Statements included in Part I, Item 1, “Financial Statements (unaudited)” of this Quarterly Report on Form 10-Q for additional information.
Interest Expense and Other Income, Net
The following tables present our interest expense and other income, net, for the periods shown (in thousands, except percentages):

| Three Months Ended September 30, |  | Change
| 2024 |  | 2023 |  | $ |  | %
Interest expense | $ | (658) |  |  | $ | (733) |  |  | $ | 75 |  |  | (10) | %
Other income, net | 7,586 |  |  | 40,492 |  |  | (32,906) |  |  | (81) |
Total interest expense and other income, net | $ | 6,928 |  |  | $ | 39,759 |  |  | $ | (32,831) |  |  | (83) |

| Nine Months Ended September 30, |  | Change
| 2024 |  | 2023 |  | $ |  | %
Interest expense | $ | (1,959) |  |  | $ | (3,115) |  |  | $ | 1,156 |  |  | (37) | %
Other income, net | 25,485 |  |  | 116,671 |  |  | (91,186) |  |  | (78) |
Total interest expense and other income, net | $ | 23,526 |  |  | $ | 113,556 |  |  | $ | (90,030) |  |  | (79) |

Interest expense decreased $0.1 million, or 10%, and $1.2 million, or 37%, during the three and nine months ended September 30, 2024, respectively, compared to the same periods in 2023, primarily due to the partial early extinguishments of our convertible senior notes in 2023.
Other income, net decreased $32.9 million, or 81%, during the three months ended September 30, 2024 compared to the same period in 2023, primarily due to the absence of the gain on early extinguishment of a portion of the 2026 notes of $32.1 million and a decrease in interest income of $1.2 million. Other income, net decreased $91.2 million, or 78%, during the nine months ended September 30, 2024 compared to the same period in 2023, primarily due to the absence of the gain on early extinguishment of a portion of the 2026 notes and 2025 notes of $85.9 million and a decrease in interest income of $8.9 million.
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Benefit from (provision for) income taxes
The following tables present our benefit from (provision for) income taxes for the periods shown (in thousands, except percentages):

| Three Months Ended September 30, |  | Change
| 2024 |  | 2023 |  | $ |  | %
Benefit from (provision for) income taxes | $ | 2,723 |  |  | $ | (172) |  |  | $ | 2,895 |  |  | n/m

| Nine Months Ended September 30, |  | Change
| 2024 |  | 2023 |  | $ |  | %
Benefit from (provision for) income taxes | $ | (144,681) |  |  | $ | (24,029) |  |  | $ | (120,652) |  |  | n/m

______________________________________
*n/m - not meaningful
The $2.9 million change in benefit from (provision for) income taxes during the three months ended September 30, 2024 compared to the same period in 2023, was primarily due to a decrease in worldwide income taxes, partially offset by the absence of a tax benefit from the accelerated depreciation of content and software in September 2023. The $120.7 million change in benefit from (provision for) income taxes during the nine months ended September 30, 2024 compared to the same period in 2023, was primarily due to the establishment of a valuation allowance against our U.S. federal and state deferred tax assets.
Liquidity and Capital Resources
The following table presents our cash, cash equivalents and investments and convertible senior notes as of the periods shown (in thousands, except percentages):

|  | Change
| September 30, 2024 |  | December 31, 2023 |  | $ |  | %
Cash, cash equivalents and short-term and long-term investments | $ | 631,237 |  |  | $ | 579,561 |  |  | $ | 51,676 |  |  | 9 | %
Convertible senior notes, net(1) | 601,464 |  |  | 599,837 |  |  | 1,627 |  |  | 0 |

______________________________________
(1) Consists of the current and long-term portion of convertible senior notes, net.
Cash, cash equivalents, and investments increased $51.7 million, or 9%, during the nine months ended September 30, 2024 primarily due to the net cash provided by operating activities of $107.1 million, partially offset by the purchases of property and equipment of $61.7 million. Convertible senior notes, net increased $1.6 million during the nine months ended September 30, 2024 primarily due to amortization of issuance costs.
As of September 30, 2024, our principal sources of liquidity were cash, cash equivalents, and investments totaling $631.2 million, which were held for working capital purposes. The substantial majority of our net revenues are from e-commerce transactions with students, which are settled immediately through payment processors, as opposed to our accounts payable, which are settled based on contractual payment terms with our suppliers. We believe that our existing sources of liquidity as well as net cash flows from operations will be sufficient to fund our operations and debt service obligations for at least the next 12 months. Our future capital requirements will depend on many factors, including our rate of revenue growth, our investments in research and development activities, our acquisition of new products and services and our sales and marketing activities. To the extent that existing sources of liquidity are insufficient to fund our future operations, we may need to raise additional funds through public or private equity or debt financing. Additional funds may not be available on terms favorable to us or at all. If adequate funds are not available on acceptable terms, or at all, we may be unable to adequately fund our business plans and it could have a negative effect on our business, operating cash flows and financial condition. As of September 30, 2024, we have incurred cumulative losses of $883.3 million from our operations and we may incur additional losses in the future.
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Most of our cash, cash equivalents, and investments are held in the United States. We plan to repatriate a portion of the earnings from our subsidiary in India and therefore accrued $4.4 million of tax expense related to such future distributions as of September 30, 2024. As a result of the Tax Cuts and Jobs Act, we anticipate the U.S. federal impact for the remaining foreign jurisdictions to be minimal if these funds are repatriated. In addition, based on our current and future needs, we believe our current funding and capital resources for our international operations are adequate.
There were no material changes in our commitments under contractual obligations, as disclosed in Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained in our Annual Report on Form 10-K for the year ended December 31, 2023.
The following table presents our condensed consolidated statements of cash flows data (in thousands):

| Nine Months Ended September 30, |  | Change
| 2024 |  | 2023 |  | $ |  | %
Net cash flows from operating activities | $ | 107,077 |  |  | $ | 168,714 |  |  | $ | (61,637) |  |  | (37) | %
Net cash flows from investing activities | (83,465) |  |  | 155,239 |  |  | (238,704) |  |  | (154) |
Net cash flows from financing activities | (6,457) |  |  | (702,806) |  |  | 696,349 |  |  | (99) |

Net cash flows from operating activities decreased $61.6 million, or 37%, during the nine months ended September 30, 2024 compared to the same period in 2023. The decrease was primarily driven by lower bookings as well as timing of bill payments.
Net cash flows from investing activities decreased $238.7 million, or 154%, during the nine months ended September 30, 2024 compared to the same period in 2023 and was primarily related to lower proceeds from the maturities of our investments of $464.3 million, lower proceeds from sale of investments of $238.7 million, and higher purchases of property and equipment of $4.4 million, partially offset by lower purchases of investments of $451.1 million and proceeds from the sale of our strategic investment of $15.5 million.
Net cash flows from financing activities increased $696.3 million, or 99%, during the nine months ended September 30, 2024 compared to the same period in 2023 and was primarily related to the absences of both repayments of our convertible debt of $506.0 million and repurchases of our common stock of $186.4 million.
Critical Accounting Policies, Significant Judgments and Estimates
Our condensed consolidated financial statements are prepared in accordance with generally accepted accounting principles in the United States. The preparation of these condensed consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, costs and expenses and related disclosures. These estimates form the basis for judgments we make about the carrying values of our assets and liabilities, which are not readily apparent from other sources. We base our estimates and judgments on historical experience and on various other assumptions that we believe are reasonable under the circumstances. On an ongoing basis, we evaluate our estimates and assumptions. Our actual results may differ from these estimates under different assumptions or conditions.
There have been no material changes in our critical accounting policies and estimates during the nine months ended September 30, 2024 as compared to the critical accounting policies and estimates disclosed in Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained in our Annual Report on Form 10-K for the year ended December 31, 2023.
Recent Accounting Pronouncements
For relevant recent accounting pronouncements, see Note 1, “Background and Basis of Presentation,” of our accompanying Notes to Condensed Consolidated Financial Statements included in Part I, Item 1, “Financial Statements (unaudited)” of this Quarterly Report on Form 10-Q.
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There have been no material changes in our market risk during the nine months ended September 30, 2024, compared to the disclosures in Part II, Item 7A, “Quantitative and Qualitative Disclosures about Market Risk” contained in our Annual Report on Form 10-K for the year ended December 31, 2023.
ITEM 4. CONTROLS AND PROCEDURES
(a)Evaluation of Disclosure Controls and Procedures
Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, as of the end of the period covered by this report.
In designing and evaluating our disclosure controls and procedures, management recognizes that any disclosure controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs.
Based on management’s evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures are designed to, and are effective to, provide assurance at a reasonable level that the information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures.
(b)Changes in Internal Control over Financial Reporting
During the three months ended September 30, 2024, there were no changes in our internal control over financial reporting identified in connection with the evaluation required by Rules 13a-15(d) and 15d-15(d) of the Exchange Act that occurred that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
We may from time to time be subject to certain legal proceedings and claims in the ordinary course of business, including claims of alleged infringement of trademarks, patents, copyrights, and other intellectual property rights; employment claims; and general contract or other claims. We may also, from time to time, be subject to various legal or government claims, demands, disputes, investigations, or requests for information. Such matters may include, but not be limited to, claims, disputes, or investigations related to warranty, refund, breach of contract, employment, intellectual property, government regulation, or compliance or other matters. See Note 8, “Commitments and Contingencies,” of our accompanying Notes to Condensed Consolidated Financial Statements included in Part I, Item 1, “Financial Statements (unaudited)” of this Quarterly Report on Form 10-Q for more information on our legal proceedings.
ITEM 1A. RISK FACTORS
Our operations and financial results are subject to various risks and uncertainties, including those described in Part I, Item 1A, “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, which could adversely affect our business, financial condition, results of operations, cash flows, and the trading price of our common stock.
Aside from the risk factors identified below, there have been no material changes in our risk factors from our Annual Report on Form 10-K.
If we fail to innovate and offer new products and services in response to rapidly evolving technological and market developments, including AI, our competitive position and business prospects will be harmed.
Our future success depends, in part, on our ability to anticipate and respond effectively to the threat and opportunity presented by new technology disruption and developments. These include new software applications or related services based on AI and machine learning, among other developments. New technologies, including those based on AI, can provide students with more immediate responses than traditional tools. These new technologies have resulted in headwinds to our business, and over time, the accuracy of these tools and their ability to handle complex questions is expected to improve, which would be disruptive to education technology businesses, such as ours. Our success also depends, in part, on our ability to develop and scale a high-performance technology infrastructure to efficiently handle increased usage by students, especially during peak periods each academic term. We may develop new products, services, and technologies independently, by acquisition, or in conjunction with third parties.
In April 2023, we announced our pivot to AI with a partnership with OpenAI to utilize GPT-4 in our offerings; and in August 2023, we announced a partnership with Scale AI to develop proprietary LLMs to provide a generative experience through Chegg as a personalized learning assistant. Beginning in September 2023, we started to roll out the first phase of our new AI-powered user experience, and we are continuing to make significant investments in AI initiatives. Our updated user experience and investments in AI have not attracted as many new students as anticipated to our platform and our business has been adversely affected. If our business plans and product developments are unsuccessful or if we do not attract new students to our platform, we may not generate sufficient revenue, operating margin, or other value to justify our investments, and our business may be materially adversely affected. Global non-subscriber traffic to Chegg declined year-over-year 8% in Q2 2024, 19% in Q3 2024, and we exited Q3 2024 with trends looking even more unfavorable, at a 37% year-over-year decline for the month of October, which has had, and if it persists or worsens, will continue to have a material adverse effect on our business.
While the overall effect of technological changes on our business is difficult to predict, recent technological shifts have created and are expected to continue creating headwinds for our industry and our business. Failure to keep pace with these technological developments or otherwise bring to market products that reflect these technologies and are accepted by students would have a material adverse impact on our overall business and results of operations. Our business has been negatively impacted by these developments, and we may not be successful in anticipating or responding to further developments, on a timely and cost-effective basis or at all. We may invest in new products, services, and other initiatives, but there is no guarantee these approaches will be successful. The markets for new products and services may be unproven, and these products may include technologies and business models with which we have little or no prior experience or may significantly change our existing products and services. The effort to gain technological expertise and develop new technologies in our business requires us to incur significant expenses. In addition, we may be unable to obtain long-term licenses from third-party providers and/or government regulatory approvals and licenses necessary to allow a new or existing product or service to function. If we cannot offer new technologies as quickly as our competitors, or if our competitors develop more cost-effective technologies or product offerings, we could experience a material adverse effect on our operating results, growth and financial condition.
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We face competition in all aspects of our business, including with respect to AI, and we expect such competition to increase.
Our products and services compete for students, and we expect such competition to increase as our industry evolves rapidly. We face significant competition from education and learning companies, many of which are developing their own AI products and technologies, as well as other companies that are not specifically focused on education and learning services but whose broad AI offerings may nonetheless significantly impact education and learning. Our services face competition from other education and learning companies based on the particular offering. These competitors are using AI technology to build on their historical offerings. For Chegg Study, our competitors primarily include platforms that provide study materials and online instructional systems, such as Course Hero, Quizlet, Khan Academy, and Brainly. For Chegg Writing, we primarily face competition from other citation generating and grammar and plagiarism services, such as Grammarly. For Chegg Math, we face competition from other equation solver services, such as Photomath, Gauthmath, and Symbolab. For Busuu, our competitors primarily include language learning platforms, such as Duolingo and Babbel. For Skills, we face competition from other online learning platforms and online “skills accelerator” courses both in the direct-to-consumer category, including General Assembly, Galvanize, Inc., Flatiron School, Codecademy, DataCamp, and Lambda, Inc., as well as white-label and co-branded providers who compete for adult learners through third party institutions, including 2U, Inc., Simplilearn, and Kenzie Academy.
Our competitors that are not specifically focused on education and learning services but whose AI offerings may impact education and learning include companies such as Google, OpenAI, Microsoft, Meta, and Anthropic. In particular, Google's roll out of AIO has created and is expected to continue to create headwinds for our industry and our business, most notably reductions in traffic to our website and customers subscribing to our services. In August 2024, Google began to significantly expand its AIO search experience, which displays AI-generated content at the top of its search results. This experience, which includes questions and solutions for education, keeps users on Google search results versus leading them onto our site. AIO’s prevalence has grown and we believe will only continue to increase. While we continue to study the changes and adjust our SEO strategy, we expect Google to continue its shift from being a search origination point to the destination, which could materially adversely affect our business, operating results and financial condition.
Certain educational institutions, such as the University of Michigan, are also developing AI tools which may compete with our offerings. AI technologies may also significantly facilitate the entry of new competitors into our industry. Our competition may develop products and technologies that are similar or superior to our technologies or are more cost-effective to develop and deploy. Given the long history of development in the AI sector, other parties may have (or in the future may obtain) patents or other proprietary rights that would prevent, limit, or interfere with our ability to make, use, or sell our own AI products. Further, our ability to continue to develop and effectively deploy AI technologies is dependent on access to specific third-party large language models, equipment and other physical infrastructure, such as processing hardware and network capacity, as to which we cannot control the availability or pricing, especially in a highly competitive environment.
Across our industry, there has been a continued increase in the adoption of free and paid generative AI products for academic support, and students are increasingly turning to generative AI for academic support, such as homework and exams, as well as assistance in other areas of daily life. This shift in student behavior impacts education technology companies broadly, where students see generative AI products like Chat GPT and others as strong alternatives to vertically specialized solutions for education such as Chegg. These developments have negatively impacted our industry and our business and may continue to impact our overall traffic and accelerate the decline in the number of new subscribers that sign up for our services.
Some of our competitors have adopted, and may continue to adopt, aggressive pricing policies (including free offerings), less stringent standards for user-uploaded content, and devote substantially more resources to marketing, website, and systems development than we do. As a result, we could experience a material adverse effect on our operating results, growth and financial condition.
The uncertainty surrounding the evolving educational landscape, including the impact of AI on learning and education, the state of the student, including the amount and the extent to which AI will impact study habits and how students learn and/or complete their assignments, and the demand for our evolving offerings make it difficult to predict our operational trends and results of operations.
The uncertainty surrounding the evolving educational landscape, the state of the student, the use by students of free generative AI products for academic support, and the demand and market for our products and services make it difficult to predict our operational trends and results of operations, particularly with respect to our newer offerings, and the ultimate market size for our products and services. If the market and demand for a comprehensive learning platform does not develop as we expect, or if we fail to address the needs of this market, our business and prospects would be harmed.
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Given the current environment of uncertainty, we may not be able to provide annual financial guidance. Additionally, we expect our results of operations to fluctuate in the future based on a variety of factors, many of which are outside our control and difficult to predict. As a result, period-to-period comparisons of our results of operations may not be a good indicator of our future or long-term performance. The following factors, including the risks more fully described throughout this "Risk Factors" section, may affect us from period-to-period and may affect our long-term performance:
•our ability to attract, retain and engage students with our offerings;
•rapidly changing technological developments, such as AI and machine learning, that have impacted and are expected to continue impacting the education landscape and our response to those developments, including our ability to successfully integrate AI technology into our offerings;
•increased competition as a result of advances in AI technology from companies that have not historically competed with us in education services, such as Alphabet, OpenAI, Microsoft, Meta, and Anthropic, who may offer free generative AI products for academic support or whose general AI offerings are being adopted by students in lieu of our offerings;
•changes to the way students discover our content or a decline in our search engine result page rankings;
•changes to Google’s search experience, including its AI overviews search experience, which displays AI-generated content at the top of its search results, including questions and solutions for education, that keeps users on Google's search results instead of leading them to our site;
•the rate of adoption of our offerings;
•the trend of declining college enrollment;
•changes by our competitors to their product and service offerings, including price and content;
•our ability to accurately forecast financial results for future periods, especially at the time we present our second quarter financial results, which will generally occur midsummer and precede our “fall rush”;
•our ability to integrate acquired businesses, including personnel;
•government regulations, in particular regarding privacy, academic integrity, advertising, “click-to-cancel” and taxation;
•operating costs and capital expenditures relating to content and the expansion of our business; and
•general macroeconomic conditions, including inflation, recession, and global conflicts.
If our efforts to drive user traffic, including search engine optimization, social media campaigns, and other marketing, are not successful, student discovery of, and engagement with, our learning platform could decline, which may harm our business and results of operations.
We have depended in the past on various search engines and free marketing tools to direct a significant amount of traffic to our website, but we are increasingly investing in other channels, including social media campaigns, to drive traffic and make us more discoverable to students. Similarly, we depend on mobile app stores such as the Google Play Store and the Apple App Store to allow students to locate and download Chegg mobile applications that enable our services. Our ability to maintain the number of students directed to our learning platform is not entirely within our control. Our competitors’ efforts to drive student discovery of, and engagement with, their offerings may be more successful than ours. Their websites may receive a higher search result page ranking than ours, or search engines could revise their methodologies or algorithms in ways that could adversely affect the placement of our search result page ranking or otherwise make it harder for students to find our learning platform.
In mid-August, Google broadly rolled out its AI Overviews search experience, or AIO, which displays AI-generated content at the top of its search results. This experience, which includes questions and solutions for education, keeps users on Google search results versus leading them onto Chegg’s site. AIO’s prevalence will only continue to increase. While we continue to study the changes and will adjust our SEO strategy, we expect Google to continue its shift from being a search origination point to the destination, which could materially adversely affect our business, operating results and financial condition.
Our website has experienced fluctuations in search result rankings in the past, and we anticipate similar fluctuations in the future. Global non-subscriber traffic to Chegg declined year-over-year 8% in Q2 2024, 19% in Q3 2024, and we exited Q3 2024 with trends looking even more unfavorable, at negative 37% year-over-year for the month of October. A continued decline in traffic to our site would materially adversely affect our business, operating results and financial condition.
Similarly, our competitors may achieve higher social media engagement than ours, social media companies may alter their algorithms in ways that disadvantage our content, or the social media platforms we use may become less popular with students, each of which may adversely impact the effectiveness of our campaigns. If our competitors’ efforts to increase user traffic are more successful than ours, our decline could accelerate, including the number of Subscription Services subscribers,
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student engagement could decrease, and fewer students may use our platform. Any reduction in the number of students directed to our learning platform could harm our business and results of operations.
Our business, including our ability to operate internationally, could be adversely affected if new legislation or regulations are adopted or due to changes in interpretations or implementations of current legislation and regulations.
Any new or significant change to applicable laws, regulations or industry standards or practices regarding the use, disclosure or other processing of personal data could adversely affect our business, including insofar as it may require us to modify our products and services and limit our ability to develop new products and services.
For example, proposed or recently adopted EU laws could significantly affect our business in the future. For example, the Digital Services Act or “DSA”, effective in February of 2024, imposes new restrictions and requirements for our products and services, such as a prohibition on targeted advertising to minors in the EEA, and may significantly increase our compliance costs. The European Commission's proposed Artificial Intelligence (AI) Act could also impose new obligations or limitations affecting our business, if and when it enters into force. The legal landscape with respect to privacy and data security in the U.S. and elsewhere is similarly in flux with a number of pending legislative and regulatory proposals that could have significant impacts on our business, if effected.
In addition, the Federal Trade Commission recently announced a final “click-to-cancel” rule that will require subscription services like Chegg to make it as easy for consumers to cancel their enrollment as it was to sign up. Other jurisdictions and states, such as California, are contemplating similar legislation. This new legislation and regulation could have a material negative impact on our business, financial condition, and results of operations.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Unregistered Sales of Securities
We had no unregistered sales of our securities during the three months ended September 30, 2024.
Purchases of Securities by the Registrant and Affiliated Purchasers
We did not purchase any of our common stock during the three months ended September 30, 2024.
ITEM 5. OTHER INFORMATION
Rule 10b5-1 Trading Plans
During the three months ended September 30, 2024, none of our Section 16 officers or directors adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement” as defined in Item 408 of Regulation S-K during the covered period.
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ITEM 6. EXHIBITS

|  |  |  | Incorporated by Reference
Exhibit No. |  | Exhibit |  | Form |  | File No |  | Filing Date |  | Exhibit No. |  | Filed Herewith
10.01 |  | Form of Agreement for Change-in-Control Severance Plan |  | 8-K |  | 001-36180 |  | October 21, 2024 |  | 10.1 |  |
31.01 |  | Certification of Nathan Schultz, Chief Executive Officer and President, pursuant to Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |  |  |  |  |  |  |  |  |  | X
31.02 |  | Certification of David Longo, Chief Financial Officer, pursuant to Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |  |  |  |  |  |  |  |  |  | X
32.01** |  | Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |  |  |  |  |  |  |  |  |  | X
101.INS |  | Inline XBRL Instance Document |  |  |  |  |  |  |  |  |  | X
101.SCH |  | Inline XBRL Taxonomy Extension Schema |  |  |  |  |  |  |  |  |  | X
101.CAL |  | Inline XBRL Taxonomy Extension Calculation |  |  |  |  |  |  |  |  |  | X
101.LAB |  | Inline XBRL Taxonomy Extension Labels |  |  |  |  |  |  |  |  |  | X
101.PRE |  | Inline XBRL Taxonomy Extension Presentation |  |  |  |  |  |  |  |  |  | X
101.DEF |  | Inline XBRL Taxonomy Extension Definition |  |  |  |  |  |  |  |  |  | X
104 |  | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). |  |  |  |  |  |  |  |  |  | X

* | Indicates a management contract or compensatory plan.
** | This certification is deemed not filed for purposes of section 18 of the Securities Exchange Act of 1934, as amended (Exchange Act), or otherwise subject to the liability of that section, nor shall it be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act.

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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

| CHEGG, INC.
November 12, 2024 | By: |  | /S/ DAVID LONGO
|  |  | David Longo
|  |  | Chief Financial Officer (Duly Authorized Officer and Principal Financial Officer)

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