10-Q 1 chgg-20220930.htm 10-Q chgg-20220930
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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, 2022
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
chgg-20220930_g1.jpg
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 classTrading symbol(s)Name of each exchange on which registered
Common stock, $0.001 par value per shareCHGGThe 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 filerxAccelerated 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 October 25, 2022, the Registrant had 125,477,315 outstanding shares of Common Stock.





TABLE OF CONTENTS
     Page
   
   
    
   
   
  

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, internships.com, Research Ready, EasyBib, the Chegg “C” logo, Busuu and Thinkful, 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


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, our objectives for future operations, and the impact of the coronavirus (COVID-19) pandemic on our financial condition and results of operations are forward-looking statements. The words “believe,” “may,” “will,” “would,” “could,” “estimate,” “continue,” “anticipate,” “intend,” “project,” “endeavor,” “expect,” “plans 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, 2021. Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time, such as the COVID-19 global pandemic. Many of the risks and uncertainties are elevated by, and may or will continue to be elevated by, the COVID-19 pandemic. 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. We qualify all of our forward-looking statements by these cautionary statements.

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

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,
2022
December 31,
2021
Assets
Current assets  
Cash and cash equivalents$69,349 $854,078 
Short-term investments871,408 691,781 
Accounts receivable, net of allowance of $298 and $153 at September 30, 2022 and December 31, 2021, respectively
22,187 17,850 
Prepaid expenses33,441 35,093 
Other current assets35,196 23,846 
Total current assets1,031,581 1,622,648 
Long-term investments286,781 745,993 
Textbook library, net 11,241 
Property and equipment, net202,362 169,938 
Goodwill589,702 289,763 
Intangible assets, net80,646 40,566 
Right of use assets18,144 18,062 
Deferred tax assets166,965 1,365 
Other assets21,680 19,670 
Total assets$2,397,861 $2,919,246 
Liabilities and stockholders' equity  
Current liabilities  
Accounts payable$14,902 $11,992 
Deferred revenue60,475 35,143 
Accrued liabilities68,096 67,209 
Total current liabilities143,473 114,344 
Long-term liabilities  
Convertible senior notes, net1,187,513 1,678,155 
Long-term operating lease liabilities12,347 12,447 
Other long-term liabilities7,996 7,383 
Total long-term liabilities1,207,856 1,697,985 
Total liabilities1,351,329 1,812,329 
Commitments and contingencies (Note 9)
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; 125,423,860 and 136,951,956 shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively
125 137 
Additional paid-in capital1,220,688 1,449,305 
Accumulated other comprehensive loss(101,870)(5,334)
Accumulated deficit(72,411)(337,191)
Total stockholders' equity1,046,532 1,106,917 
Total liabilities and stockholders' equity$2,397,861 $2,919,246 
See Notes to Condensed Consolidated Financial Statements.
4

CHEGG, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
(unaudited)
 Three Months Ended
September 30,
Nine Months Ended
September 30,
 2022202120222021
Net revenues$164,739 $171,942 $561,704 $568,798 
Cost of revenues45,203 67,102 145,972 199,194 
Gross profit119,536 104,840 415,732 369,604 
Operating expenses:
Research and development45,426 43,269 150,321 130,995 
Sales and marketing31,803 27,239 109,580 75,139 
General and administrative53,742 33,971 154,547 111,560 
Total operating expenses130,971 104,479 414,448 317,694 
(Loss) income from operations(11,435)361 1,284 51,910 
Interest expense, net and other income (expense), net:
Interest expense, net(1,525)(1,633)(4,738)(5,263)
Other income (expense), net97,258 8,670 105,247 (66,618)
Total interest expense, net and other income (expense), net95,733 7,037 100,509 (71,881)
Income (loss) before benefit from (provision for) income taxes84,298 7,398 101,793 (19,971)
Benefit from (provision for) income taxes167,264 (747)162,987 (5,793)
Net income (loss)$251,562 $6,651 $264,780 $(25,764)
Net income (loss) per share
Basic$1.99 $0.05 $2.07 $(0.18)
Diluted$1.23 $0.05 $1.31 $(0.18)
Weighted average shares used to compute net income (loss) per share
Basic126,132 144,746 128,166 140,775 
Diluted148,045 146,699 151,221 140,775 
See Notes to Condensed Consolidated Financial Statements.

5

CHEGG, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(in thousands)
(unaudited)
Three Months Ended
September 30,
Nine Months Ended
September 30,
2022202120222021
Net income (loss)$251,562 $6,651 $264,780 $(25,764)
Other comprehensive loss
Change in net unrealized loss on investments, net of tax(1,946)(455)(17,196)(1,974)
Change in foreign currency translation adjustments, net of tax(31,056)(127)(79,340)(1,108)
Other comprehensive loss(33,002)(582)(96,536)(3,082)
Total comprehensive income (loss)$218,560 $6,069 $168,244 $(28,846)
See Notes to Condensed Consolidated Financial Statements.

6

CHEGG, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(in thousands)
(unaudited)

Three Months Ended September 30, 2022
Common Stock 
SharesPar 
Value
Additional Paid-In
Capital
 Accumulated Other Comprehensive Loss Accumulated
Deficit
 Total Stockholders’ Equity
Balances at June 30, 2022
126,344 $126 $1,211,506 $(68,868)$(323,973)$818,791 
Repurchases of common stock(1,147)(1)(23,077)— — (23,078)
Net share settlement of equity awards227 — (2,555)— — (2,555)
Share-based compensation expense— — 34,814 — — 34,814 
Other comprehensive loss— — — (33,002)— (33,002)
Net income— — — — 251,562 251,562 
Balances at September 30, 2022
125,424 $125 $1,220,688 $(101,870)$(72,411)$1,046,532 

Three Months Ended September 30, 2021
Common Stock 
SharesPar 
Value
Additional Paid-In
Capital
 Accumulated Other Comprehensive Loss Accumulated
Deficit
 Total Stockholders’ Equity
Balances at June 30, 2021
144,621 $145 $1,706,855 $(970)$(368,148)$1,337,882 
Issuance of common stock upon exercise of stock options and ESPP14 — 106 — — 106 
Net share settlement of equity awards266 — (14,697)— — (14,697)
Share-based compensation expense— — 25,157 — — 25,157 
Other comprehensive loss— — — (582)— (582)
Net income— — — — 6,651 6,651 
Balances at September 30, 2021
144,901$145 $1,717,421 $(1,552)$(361,497)$1,354,517 


Nine Months Ended September 30, 2022
Common Stock
SharesPar 
Value
Additional Paid-In
Capital
Accumulated Other Comprehensive LossAccumulated
Deficit
Total Stockholders’ Equity
Balances at December 31, 2021
136,952 $137 $1,449,305 $(5,334)$(337,191)$1,106,917 
Repurchases of common stock(12,709)(13)(323,515)— — (323,528)
Issuance of common stock upon exercise of stock options and ESPP319 — 4,557 — — 4,557 
Net share settlement of equity awards862 1 (12,776)— — (12,775)
Share-based compensation expense— — 103,117 — — 103,117 
Other comprehensive loss— — — (96,536)— (96,536)
Net income— — — — 264,780 264,780 
Balances at September 30, 2022
125,424 $125 $1,220,688 $(101,870)$(72,411)$1,046,532 

7

Nine Months Ended September 30, 2021
Common Stock
SharesPar 
Value
Additional Paid-In
Capital
Accumulated Other Comprehensive LossAccumulated
Deficit
Total Stockholders’ Equity
Balances at December 31, 2020
129,344 $129 $1,030,577 $1,530 $(422,601)$609,635 
Cumulative-effect adjustment related to adoption of ASU 2020-06— — (465,006)— 86,868 (378,138)
Issuance of common stock in connection with equity offering, net of offering costs10,975 11 1,091,455 — — 1,091,466 
Equity component on conversions of 2023 notes and 2025 notes— — (236,920)— — (236,920)
Issuance of common stock upon conversions of 2023 notes2,983 3 235,518 — — 235,521 
Net proceeds from capped call related to conversions of 2023 notes and 2025 notes— — 67,769 — — 67,769 
Issuance of common stock upon exercise of stock options and ESPP178 — 5,371 — — 5,371 
Net share settlement of equity awards1,421 2 (89,339)— — (89,337)
Share-based compensation expense— — 77,996 — — 77,996 
Other comprehensive loss— — — (3,082)— (3,082)
Net loss— — — — (25,764)(25,764)
Balances at September 30, 2021
144,901$145 $1,717,421 $(1,552)$(361,497)$1,354,517 
See Notes to Condensed Consolidated Financial Statements.

8

CHEGG, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
 Nine Months Ended
September 30,
 20222021
Cash flows from operating activities 
Net income (loss)$264,780 $(25,764)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Print textbook depreciation expense1,610 9,024 
Other depreciation and amortization expense64,295 46,273 
Share-based compensation expense98,341 76,157 
Amortization of debt issuance costs4,084 4,509 
Gain on foreign currency remeasurement of purchase consideration(4,628) 
Impairment on lease related assets3,411  
(Gain) loss on early extinguishment of debt(93,519)78,152 
Loss on change in fair value of derivative instruments, net 7,148 
Loss from write-off of property and equipment3,117 1,857 
Tax benefit related to release of valuation allowance (174,601) 
Deferred income taxes6,376 563 
Gain on sale of strategic equity investment (12,496)
(Gain) loss on textbook library, net(4,976)8,765 
Operating lease expense, net of accretion4,746 4,527 
Restructuring charges 1,851 
Other non-cash items619 (65)
Change in assets and liabilities, net of effect of acquisition of businesses:  
Accounts receivable(2,259)3,593 
Prepaid expenses and other current assets13,251 (31,070)
Other assets15,926 9,472 
Accounts payable(1,728)1,820 
Deferred revenue11,434 17,363 
Accrued liabilities(23,323)10,552 
Other liabilities(5,240)(4,108)
Net cash provided by operating activities181,716 208,123 
Cash flows from investing activities  
Purchases of property and equipment(79,242)(67,126)
Purchases of textbooks(3,815)(10,666)
Proceeds from disposition of textbooks2,503 7,815 
Purchases of investments(534,008)(1,574,060)
Maturities of investments783,912 893,315 
Purchase of strategic equity investment(6,000) 
Proceeds from sale of strategic equity investment 16,076 
Acquisition of businesses, net of cash acquired(401,125)(7,891)
Net cash used in investing activities(237,775)(742,537)
Cash flows from financing activities  
Proceeds from common stock issued under stock plans, net4,558 5,373 
Payment of taxes related to the net share settlement of equity awards(12,776)(89,339)
Proceeds from equity offering, net of offering costs 1,091,466 
Repayment of convertible senior notes(401,203)(300,755)
Proceeds from exercise of convertible senior notes capped call 69,005 
Repurchases of common stock(323,528) 
Payment of escrow related to acquisition (7,451)
Net cash (used in) provided by financing activities(732,949)768,299 
Effect of exchange rate changes4,628  
Net (decrease) increase in cash, cash equivalents and restricted cash(784,380)233,885 
Cash, cash equivalents and restricted cash, beginning of period855,893 481,715 
Cash, cash equivalents and restricted cash, end of period$71,513 $715,600 
 Nine Months Ended
September 30,
 20222021
Supplemental cash flow data:
Cash paid during the period for:  
Interest$875 $1,053 
Income taxes, net of refunds$5,530 $5,610 
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases$6,908 $5,934 
Right of use assets obtained in exchange for lease obligations:
Operating leases$7,603 $ 
Non-cash investing and financing activities:  
Accrued purchases of long-lived assets$4,101 $1,837 
Issuance of common stock related to repayment of convertible senior notes$ $235,521 

September 30,
20222021
Reconciliation of cash, cash equivalents and restricted cash:
Cash and cash equivalents$69,349 $713,837 
Restricted cash included in other current assets63  
Restricted cash included in other assets2,101 1,763 
Total cash, cash equivalents and restricted cash$71,513 $715,600 
See Notes to Condensed Consolidated Financial Statements.
9

CHEGG, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 1. Background and Basis of Presentation

Company and Background

Chegg, Inc. (Chegg, the Company, we, us, or our), headquartered in Santa Clara, California, was incorporated as a Delaware corporation in July 2005. Millions of people all around the world Learn with Chegg. Our mission is to improve learning and learning outcomes by putting students first. We support life-long learners starting with their academic journey and extending into their careers. The Chegg platform provides products and services to support learners to help them better understand their academic course materials, and also provides personal and professional development skills training, to help them achieve their learning goals.

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, 2022, our results of operations, results of comprehensive income (loss), and stockholders' equity for the three and nine months ended September 30, 2022 and 2021 and cash flows for the nine months ended September 30, 2022 and 2021. Our results of operations, results of comprehensive income (loss), stockholders' equity, and cash flows for the nine months ended September 30, 2022 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, 2021 (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, 2022 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, 2021.

10

Condensed Consolidated Statements of Operations Details

Other income (expense), net consists of the following (in thousands):
Three Months Ended
September 30,
Nine Months Ended
September 30,
2022202120222021
Gain (loss) on early extinguishment of debt(1)
$93,519 $ $93,519 $(78,152)
Loss on change in fair value of derivative instruments, net   (7,148)
Gain on sale of strategic equity investments 7,158  12,496 
Gain on foreign currency remeasurement of purchase consideration(2)
  4,628  
Interest income3,737 1,485 7,246 5,385 
Other2 27 (146)801 
Total other income (expense), net
$97,258 $8,670 $105,247 $(66,618)
(1) For further information, see Note 8, “Convertible Senior Notes.”
(2) For further information, see Note 5, “Acquisition.”

Impairment of Lease Related Assets

Right of use (ROU) assets are evaluated for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. During the nine months ended September 30, 2022, we announced the closure of our San Francisco office and determined that the carrying amount of the ROU asset was not recoverable. As a result, we recorded an impairment charge of $3.4 million, consisting of a $2.0 million impairment of a ROU asset and $1.4 million write-off of leasehold improvements, included in 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.

Recent Accounting Pronouncements

Recently Issued Accounting Pronouncements Not Yet Adopted

There were no accounting pronouncements issued during the nine months ended September 30, 2022 that would have an impact on our financial statements.

Recently Adopted Accounting Pronouncements

In October 2021, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2021-08, Business Combinations-Accounting for Contract Assets and Contract Liabilities from Contracts with Customers (Topic 805). The new guidance requires contract assets and contract liabilities acquired in a business combination to be recognized in accordance with Accounting Standards Codification (ASC) Topic 606 as if the acquirer had originated the contracts. The standard is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years, and early adoption is permitted. We early adopted ASU 2021-08 on January 1, 2022 and applied it to our acquisition of Busuu. The most significant impacts were an increase in contract liabilities, contained within deferred revenue, and goodwill.

In May 2021, the FASB issued ASU 2021-04, Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options. ASU 2021-04 aims to clarify and reduce diversity in an issuer’s accounting for modifications or exchanges of freestanding equity-classified written call options that remain equity classified after modification or exchange based on the economic substance of the modification or exchange. Early adoption is permitted and the guidance must be applied prospectively to all modifications or exchanges that occur on or after the date of adoption. The guidance is effective for annual periods beginning after December 15, 2021. We adopted ASU 2021-04 on January 1, 2022 under the prospective method of adoption and there was no impact to our results of operations as we did not modify or exchange any freestanding equity-classified written call options.

11

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.

The following tables set forth our total net revenues for the periods shown disaggregated for our Chegg Services and Required Materials product lines (in thousands, except percentages):
 Three Months Ended
September 30,
Change
 20222021$%
Chegg Services$159,264 $146,790 $12,474 8 %
Required Materials5,475 25,152 (19,677)(78)
Total net revenues$164,739 $171,942 $(7,203)(4)

 Nine Months Ended September 30,Change
 20222021$%
Chegg Services$533,152 $482,654 $50,498 10 %
Required Materials28,552 86,144 (57,592)(67)
Total net revenues$561,704 $568,798 $(7,094)(1)

During the three and nine months ended September 30, 2022, we recognized $35.2 million and $33.8 million, respectively, of revenues 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, 2021 we recognized $31.3 million and $32.6 million, respectively, of revenues 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, 2022, we recognized no operating lease income and $5.1 million of operating lease income, respectively, from print textbook rentals that we owned. During the three and nine months ended September 30, 2021, we recognized $6.2 million and $26.9 million, respectively, of operating lease income from print textbook rentals that we owned. The decreases in operating lease income are primarily due to the transition of our Required Materials product line. For further information, refer to Note 7, “Required Materials Transition.”

Contract Balances

The following table presents our accounts receivable, net, contract assets and deferred revenue balances (in thousands, except percentages):
 Change
 September 30,
2022
December 31, 2021$%
Accounts receivable, net$22,187 $17,850 $4,337 24 %
Contract assets12,710 14,231 (1,521)(11)
Deferred revenue60,475 35,143 25,332 72 

During the nine months ended September 30, 2022 our accounts receivable, net balance increased by $4.3 million, or 24%, primarily due to timing of billings and seasonality of our business. During the nine months ended September 30, 2022, our contract assets balance decreased by $1.5 million, or 11%, primarily due to our Thinkful service. During the nine months ended September 30, 2022, our deferred revenue balance increased by $25.3 million, or 72%, primarily due to acquired deferred revenue in conjunction with our acquisition of Busuu, increased bookings, and seasonality of our business.

12

Note 3. Net Income (Loss) Per Share

The following table sets forth the computation of basic and diluted net income (loss) per share (in thousands, except per share amounts):
Three Months Ended
September 30,
Nine Months Ended
September 30,
2022202120222021
Basic
Numerator:
Net income (loss)
$251,562 $6,651 $264,780 $(25,764)
Denominator:
Weighted average shares used to compute net income (loss) per share, basic
126,132 144,746 128,166 140,775 
Net income (loss) per share, basic
$1.99 $0.05 $2.07 $(0.18)
Diluted
Numerator:
Net income (loss)$251,562 $6,651 $264,780 $(25,764)
Convertible senior notes activity, net of tax(1)
(69,042) (66,630) 
Net income (loss), diluted
$182,520 $6,651 $198,150 $(25,764)
Denominator:
Weighted average shares used to compute net income (loss) per share, basic
126,132 144,746 128,166 140,775 
Shares related to stock plan activity504 1,953 674  
Shares related to convertible senior notes21,409  22,381  
Weighted average shares used to compute net income (loss) per share, diluted
148,045 146,699 151,221 140,775 
Net income (loss) per share, diluted
$1.23 $0.05 $1.31 $(0.18)
(1)
Includes the gain on early extinguishment on our 2026 notes and interest expense on our notes, net of tax. For further information, see Note 8, “Convertible Senior Notes.”

The following potential weighted-average shares of common stock outstanding were excluded from the computation of diluted net income (loss) per share because including them would have been anti-dilutive (in thousands):
Three Months Ended
September 30,
Nine Months Ended
September 30,
2022202120222021
Shares related to stock plan activity7,534 849 4,148 2,727 
Shares related to convertible senior notes 22,875  23,876 
Total common stock equivalents7,534 23,724 4,148 26,603 

13

Note 4. Cash and Cash Equivalents, and Investments and Fair Value Measurements

The following tables show our cash and cash equivalents, and investments’ fair value level classification, adjusted cost, unrealized gain, unrealized loss and fair value as of September 30, 2022 and December 31, 2021 (in thousands except for fair value levels):
 September 30, 2022
 Fair Value LevelAdjusted CostUnrealized GainUnrealized LossFair Value
Cash and cash equivalents:   
Cash$35,131 $ $ $35,131 
Money market fundsLevel 134,218   34,218 
Total cash and cash equivalents$69,349 $ $ $69,349 
Short-term investments:   
Commercial paperLevel 2$11,720 $ $(114)$11,606 
Corporate debt securitiesLevel 2770,221 (12,945)757,276 
U.S. treasury securitiesLevel 1104,671  (2,145)102,526 
Total short-term investments$886,612 $ $(15,204)$871,408 
Long-term investments:   
Corporate debt securitiesLevel 2$156,687 $ $(4,065)$152,622 
U.S. treasury securitiesLevel 1101,890  (1,907)99,983 
Agency bondsLevel 234,119 57  34,176 
Total long-term investments$292,696 $57 $(5,972)$286,781 

 December 31, 2021
 Fair Value LevelAdjusted CostUnrealized GainUnrealized LossFair Value
Cash and cash equivalents:   
Cash$30,324 $ $ $30,324 
Money market fundsLevel 1823,754   823,754 
Total cash and cash equivalents$854,078 $ $ $854,078 
Short-term investments:   
Commercial paperLevel 2$124,211 $2 $(