chgg-202206300001364954--12-312022Q2FALSEhttp://fasb.org/us-gaap/2022#AccountingStandardsUpdate202006Member110.00929780.019395600013649542022-01-012022-06-3000013649542022-07-28xbrli:shares00013649542022-06-30iso4217:USD00013649542021-12-31iso4217:USDxbrli:shares00013649542022-04-012022-06-3000013649542021-04-012021-06-3000013649542021-01-012021-06-300001364954us-gaap:CommonStockMember2022-03-310001364954us-gaap:AdditionalPaidInCapitalMember2022-03-310001364954us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-03-310001364954us-gaap:RetainedEarningsMember2022-03-3100013649542022-03-310001364954us-gaap:CommonStockMember2022-04-012022-06-300001364954us-gaap:AdditionalPaidInCapitalMember2022-04-012022-06-300001364954us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-04-012022-06-300001364954us-gaap:RetainedEarningsMember2022-04-012022-06-300001364954us-gaap:CommonStockMember2022-06-300001364954us-gaap:AdditionalPaidInCapitalMember2022-06-300001364954us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-06-300001364954us-gaap:RetainedEarningsMember2022-06-300001364954us-gaap:CommonStockMember2021-03-310001364954us-gaap:AdditionalPaidInCapitalMember2021-03-310001364954us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-03-310001364954us-gaap:RetainedEarningsMember2021-03-3100013649542021-03-310001364954us-gaap:AdditionalPaidInCapitalMember2021-04-012021-06-300001364954us-gaap:CommonStockMember2021-04-012021-06-300001364954us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-04-012021-06-300001364954us-gaap:RetainedEarningsMember2021-04-012021-06-300001364954us-gaap:CommonStockMember2021-06-300001364954us-gaap:AdditionalPaidInCapitalMember2021-06-300001364954us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-06-300001364954us-gaap:RetainedEarningsMember2021-06-3000013649542021-06-300001364954us-gaap:CommonStockMember2021-12-310001364954us-gaap:AdditionalPaidInCapitalMember2021-12-310001364954us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-12-310001364954us-gaap:RetainedEarningsMember2021-12-310001364954us-gaap:CommonStockMember2022-01-012022-06-300001364954us-gaap:AdditionalPaidInCapitalMember2022-01-012022-06-300001364954us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-01-012022-06-300001364954us-gaap:RetainedEarningsMember2022-01-012022-06-300001364954us-gaap:CommonStockMember2020-12-310001364954us-gaap:AdditionalPaidInCapitalMember2020-12-310001364954us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-12-310001364954us-gaap:RetainedEarningsMember2020-12-3100013649542020-12-3100013649542020-01-012020-12-310001364954us-gaap:AdditionalPaidInCapitalMembersrt:CumulativeEffectPeriodOfAdoptionAdjustmentMember2020-12-310001364954us-gaap:RetainedEarningsMembersrt:CumulativeEffectPeriodOfAdoptionAdjustmentMember2020-12-310001364954srt:CumulativeEffectPeriodOfAdoptionAdjustmentMember2020-12-310001364954us-gaap:CommonStockMember2021-01-012021-06-300001364954us-gaap:AdditionalPaidInCapitalMember2021-01-012021-06-300001364954us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-01-012021-06-300001364954us-gaap:RetainedEarningsMember2021-01-012021-06-30chgg:segment0001364954chgg:CheggServicesMember2022-04-012022-06-300001364954chgg:CheggServicesMember2021-04-012021-06-30xbrli:pure0001364954chgg:RequiredMaterialsMember2022-04-012022-06-300001364954chgg:RequiredMaterialsMember2021-04-012021-06-300001364954chgg:CheggServicesMember2022-01-012022-06-300001364954chgg:CheggServicesMember2021-01-012021-06-300001364954chgg:RequiredMaterialsMember2022-01-012022-06-300001364954chgg:RequiredMaterialsMember2021-01-012021-06-300001364954chgg:TextbookLibraryMember2022-04-012022-06-300001364954chgg:TextbookLibraryMember2022-01-012022-06-300001364954chgg:TextbookLibraryMember2021-04-012021-06-300001364954chgg:TextbookLibraryMember2021-01-012021-06-300001364954us-gaap:StockCompensationPlanMember2022-04-012022-06-300001364954us-gaap:StockCompensationPlanMember2021-04-012021-06-300001364954us-gaap:StockCompensationPlanMember2022-01-012022-06-300001364954us-gaap:StockCompensationPlanMember2021-01-012021-06-300001364954us-gaap:ConvertibleDebtSecuritiesMember2022-04-012022-06-300001364954us-gaap:ConvertibleDebtSecuritiesMember2021-04-012021-06-300001364954us-gaap:ConvertibleDebtSecuritiesMember2022-01-012022-06-300001364954us-gaap:ConvertibleDebtSecuritiesMember2021-01-012021-06-300001364954us-gaap:CashMemberus-gaap:CashAndCashEquivalentsMember2022-06-300001364954us-gaap:FairValueInputsLevel1Memberus-gaap:CashAndCashEquivalentsMemberus-gaap:MoneyMarketFundsMember2022-06-300001364954us-gaap:CommercialPaperMemberus-gaap:FairValueInputsLevel2Memberus-gaap:CashAndCashEquivalentsMember2022-06-300001364954us-gaap:CashAndCashEquivalentsMember2022-06-300001364954us-gaap:ShortTermInvestmentsMemberus-gaap:FairValueInputsLevel2Memberus-gaap:CommercialPaperMember2022-06-300001364954us-gaap:ShortTermInvestmentsMemberus-gaap:FairValueInputsLevel2Memberus-gaap:CorporateBondSecuritiesMember2022-06-300001364954us-gaap:USTreasurySecuritiesMemberus-gaap:ShortTermInvestmentsMemberus-gaap:FairValueInputsLevel1Member2022-06-300001364954us-gaap:ShortTermInvestmentsMember2022-06-300001364954us-gaap:OtherLongTermInvestmentsMemberus-gaap:FairValueInputsLevel2Memberus-gaap:CorporateBondSecuritiesMember2022-06-300001364954us-gaap:USTreasurySecuritiesMemberus-gaap:OtherLongTermInvestmentsMemberus-gaap:FairValueInputsLevel1Member2022-06-300001364954us-gaap:OtherLongTermInvestmentsMember2022-06-300001364954us-gaap:CashMemberus-gaap:CashAndCashEquivalentsMember2021-12-310001364954us-gaap:FairValueInputsLevel1Memberus-gaap:CashAndCashEquivalentsMemberus-gaap:MoneyMarketFundsMember2021-12-310001364954us-gaap:CashAndCashEquivalentsMember2021-12-310001364954us-gaap:ShortTermInvestmentsMemberus-gaap:FairValueInputsLevel2Memberus-gaap:CommercialPaperMember2021-12-310001364954us-gaap:ShortTermInvestmentsMemberus-gaap:FairValueInputsLevel2Memberus-gaap:CorporateBondSecuritiesMember2021-12-310001364954us-gaap:ShortTermInvestmentsMemberus-gaap:FairValueInputsLevel2Memberus-gaap:AgencySecuritiesMember2021-12-310001364954us-gaap:ShortTermInvestmentsMember2021-12-310001364954us-gaap:OtherLongTermInvestmentsMemberus-gaap:FairValueInputsLevel2Memberus-gaap:CorporateBondSecuritiesMember2021-12-310001364954us-gaap:USTreasurySecuritiesMemberus-gaap:OtherLongTermInvestmentsMemberus-gaap:FairValueInputsLevel1Member2021-12-310001364954us-gaap:OtherLongTermInvestmentsMember2021-12-310001364954us-gaap:EstimateOfFairValueFairValueDisclosureMemberchgg:A0ConvertibleSeniorNotesDue2026Memberus-gaap:FairValueMeasurementsNonrecurringMemberus-gaap:SeniorNotesMember2022-06-300001364954us-gaap:EstimateOfFairValueFairValueDisclosureMemberchgg:A0ConvertibleSeniorNotesDue2026Memberus-gaap:FairValueMeasurementsNonrecurringMemberus-gaap:SeniorNotesMember2021-12-310001364954us-gaap:EstimateOfFairValueFairValueDisclosureMemberchgg:A0.125PercentConvertibleSeniorNotesDue2025Memberus-gaap:FairValueMeasurementsNonrecurringMemberus-gaap:SeniorNotesMember2022-06-300001364954us-gaap:EstimateOfFairValueFairValueDisclosureMemberchgg:A0.125PercentConvertibleSeniorNotesDue2025Memberus-gaap:FairValueMeasurementsNonrecurringMemberus-gaap:SeniorNotesMember2021-12-310001364954chgg:BusuuOnlineSLMember2022-01-1300013649542022-01-130001364954chgg:BusuuOnlineSLMember2022-04-012022-06-300001364954us-gaap:TradeNamesMemberchgg:BusuuOnlineSLMember2022-01-130001364954us-gaap:TradeNamesMemberchgg:BusuuOnlineSLMember2022-01-132022-01-130001364954us-gaap:CustomerListsMemberchgg:BusuuOnlineSLMember2022-01-130001364954us-gaap:CustomerListsMemberchgg:BusuuOnlineSLMember2022-01-132022-01-130001364954us-gaap:DevelopedTechnologyRightsMemberchgg:BusuuOnlineSLMember2022-01-130001364954us-gaap:DevelopedTechnologyRightsMemberchgg:BusuuOnlineSLMember2022-01-132022-01-130001364954chgg:BusuuOnlineSLMember2022-01-132022-01-130001364954chgg:BusuuOnlineSLMember2022-01-012022-06-300001364954chgg:BusuuOnlineSLMember2021-01-012021-12-310001364954chgg:BusuuOnlineSLMember2022-06-300001364954chgg:BusuuOnlineSLMember2022-01-142022-06-300001364954chgg:BusuuOnlineSLMember2021-04-012021-06-300001364954chgg:BusuuOnlineSLMember2021-01-012021-06-300001364954us-gaap:DevelopedTechnologyRightsMember2022-01-012022-06-300001364954us-gaap:DevelopedTechnologyRightsMember2022-06-300001364954us-gaap:CustomerListsMember2022-01-012022-06-300001364954us-gaap:CustomerListsMember2022-06-300001364954us-gaap:TradeNamesMember2022-01-012022-06-300001364954us-gaap:TradeNamesMember2022-06-300001364954us-gaap:NoncompeteAgreementsMember2022-01-012022-06-300001364954us-gaap:NoncompeteAgreementsMember2022-06-300001364954us-gaap:DevelopedTechnologyRightsMember2021-01-012021-12-310001364954us-gaap:DevelopedTechnologyRightsMember2021-12-310001364954us-gaap:CustomerListsMember2021-01-012021-12-310001364954us-gaap:CustomerListsMember2021-12-310001364954us-gaap:TradeNamesMember2021-01-012021-12-310001364954us-gaap:TradeNamesMember2021-12-310001364954us-gaap:NoncompeteAgreementsMember2021-01-012021-12-310001364954us-gaap:NoncompeteAgreementsMember2021-12-3100013649542021-01-012021-12-310001364954chgg:AcquisitionRelatedIntangibleAssetsMember2022-04-012022-06-300001364954chgg:AcquisitionRelatedIntangibleAssetsMember2022-01-012022-06-300001364954chgg:AcquisitionRelatedIntangibleAssetsMember2021-04-012021-06-300001364954chgg:AcquisitionRelatedIntangibleAssetsMember2021-01-012021-06-300001364954chgg:GTMarketplaceLLCMemberus-gaap:DisposalGroupDisposedOfBySaleNotDiscontinuedOperationsMember2022-04-300001364954chgg:GTMarketplaceLLCMemberus-gaap:DisposalGroupHeldforsaleNotDiscontinuedOperationsMember2022-04-300001364954chgg:GTMarketplaceLLCMemberus-gaap:DisposalGroupDisposedOfBySaleNotDiscontinuedOperationsMember2022-04-012022-06-300001364954chgg:A0ConvertibleSeniorNotesDue2026Memberus-gaap:SeniorNotesMember2020-08-310001364954chgg:A0ConvertibleSeniorNotesDue2026AdditionalNotesMemberus-gaap:SeniorNotesMember2020-08-310001364954chgg:A0.125PercentConvertibleSeniorNotesDue2025Memberus-gaap:SeniorNotesMember2019-03-310001364954chgg:A0.125PercentConvertibleSeniorNotesDue2025Memberus-gaap:SeniorNotesMember2019-04-300001364954chgg:A0.125PercentConvertibleSeniorNotesDue2025Memberus-gaap:SeniorNotesMember2019-04-012019-04-300001364954chgg:A0ConvertibleSeniorNotesDue2026Memberus-gaap:SeniorNotesMember2020-08-012020-08-310001364954chgg:A0ConvertibleSeniorNotesDue2026Memberus-gaap:SeniorNotesMember2022-06-300001364954chgg:A0.125PercentConvertibleSeniorNotesDue2025Memberus-gaap:SeniorNotesMember2022-06-300001364954chgg:SalePriceIsGreaterOrEqual130PercentMemberus-gaap:SeniorNotesMember2018-04-012018-04-30chgg:day0001364954chgg:TradingPricePer1000DollarPrincipalAmountLessThan98PercentMemberus-gaap:SeniorNotesMember2018-04-012018-04-300001364954srt:MaximumMemberchgg:TradingPricePer1000DollarPrincipalAmountLessThan98PercentMemberus-gaap:SeniorNotesMember2018-04-012018-04-300001364954chgg:FundamentalChangeScenarioMemberus-gaap:SeniorNotesMember2018-04-012018-04-300001364954chgg:A0.25PercentConvertibleSeniorNotesDue2023Memberus-gaap:SeniorNotesMember2021-01-012021-12-310001364954chgg:A0ConvertibleSeniorNotesDue2026Memberus-gaap:SeniorNotesMember2021-12-310001364954chgg:A0.125PercentConvertibleSeniorNotesDue2025Memberus-gaap:SeniorNotesMember2021-12-310001364954chgg:A0ConvertibleSeniorNotesDue2026Memberus-gaap:FairValueMeasurementsNonrecurringMemberus-gaap:CarryingReportedAmountFairValueDisclosureMemberus-gaap:SeniorNotesMember2022-06-300001364954chgg:A0.125PercentConvertibleSeniorNotesDue2025Memberus-gaap:FairValueMeasurementsNonrecurringMemberus-gaap:CarryingReportedAmountFairValueDisclosureMemberus-gaap:SeniorNotesMember2022-06-300001364954chgg:A0ConvertibleSeniorNotesDue2026Memberus-gaap:FairValueMeasurementsNonrecurringMemberus-gaap:CarryingReportedAmountFairValueDisclosureMemberus-gaap:SeniorNotesMember2021-12-310001364954chgg:A0.125PercentConvertibleSeniorNotesDue2025Memberus-gaap:FairValueMeasurementsNonrecurringMemberus-gaap:CarryingReportedAmountFairValueDisclosureMemberus-gaap:SeniorNotesMember2021-12-310001364954chgg:A0ConvertibleSeniorNotesDue2026Memberus-gaap:SeniorNotesMember2022-04-012022-06-300001364954chgg:A0ConvertibleSeniorNotesDue2026Memberus-gaap:SeniorNotesMember2021-04-012021-06-300001364954chgg:A0ConvertibleSeniorNotesDue2026Memberus-gaap:SeniorNotesMember2022-01-012022-06-300001364954chgg:A0ConvertibleSeniorNotesDue2026Memberus-gaap:SeniorNotesMember2021-01-012021-06-300001364954chgg:A0.125PercentConvertibleSeniorNotesDue2025Memberus-gaap:SeniorNotesMember2022-04-012022-06-300001364954chgg:A0.125PercentConvertibleSeniorNotesDue2025Memberus-gaap:SeniorNotesMember2021-04-012021-06-300001364954chgg:A0.125PercentConvertibleSeniorNotesDue2025Memberus-gaap:SeniorNotesMember2022-01-012022-06-300001364954chgg:A0.125PercentConvertibleSeniorNotesDue2025Memberus-gaap:SeniorNotesMember2021-01-012021-06-300001364954chgg:A0.25PercentConvertibleSeniorNotesDue2023Memberus-gaap:SeniorNotesMember2022-04-012022-06-300001364954chgg:A0.25PercentConvertibleSeniorNotesDue2023Memberus-gaap:SeniorNotesMember2021-04-012021-06-300001364954chgg:A0.25PercentConvertibleSeniorNotesDue2023Memberus-gaap:SeniorNotesMember2022-01-012022-06-300001364954chgg:A0.25PercentConvertibleSeniorNotesDue2023Memberus-gaap:SeniorNotesMember2021-01-012021-06-300001364954chgg:A0ConvertibleSeniorNotesDue2026Memberchgg:CappedCallMemberus-gaap:SeniorNotesMember2020-08-012020-08-310001364954chgg:A0.125PercentConvertibleSeniorNotesDue2025Memberchgg:CappedCallMemberus-gaap:SeniorNotesMember2019-04-012019-04-300001364954chgg:A0ConvertibleSeniorNotesDue2026Memberchgg:CappedCallMemberus-gaap:SeniorNotesMember2022-06-300001364954chgg:A0.125PercentConvertibleSeniorNotesDue2025Memberchgg:CappedCallMemberus-gaap:SeniorNotesMember2022-06-300001364954us-gaap:PendingLitigationMemberchgg:A2018DataIncidentArbitrationDemandsMember2020-05-122020-05-12chgg:claim0001364954us-gaap:PendingLitigationMemberchgg:A2018DataIncidentArbitrationDemandsMember2020-07-012020-07-010001364954chgg:A2018DataIncidentArbitrationDemandsMember2020-08-122020-08-1200013649542022-01-2600013649542022-06-012022-06-300001364954chgg:A2022ASRMember2022-02-222022-02-22chgg:transaction0001364954chgg:A2022ASRMember2022-04-012022-06-300001364954chgg:A2022ASRMember2022-02-222022-06-300001364954chgg:A2021ASRMember2021-12-032021-12-030001364954chgg:A2021ASRMember2022-01-012022-06-300001364954us-gaap:CostOfSalesMember2022-04-012022-06-300001364954us-gaap:CostOfSalesMember2021-04-012021-06-300001364954us-gaap:CostOfSalesMember2022-01-012022-06-300001364954us-gaap:CostOfSalesMember2021-01-012021-06-300001364954us-gaap:ResearchAndDevelopmentExpenseMember2022-04-012022-06-300001364954us-gaap:ResearchAndDevelopmentExpenseMember2021-04-012021-06-300001364954us-gaap:ResearchAndDevelopmentExpenseMember2022-01-012022-06-300001364954us-gaap:ResearchAndDevelopmentExpenseMember2021-01-012021-06-300001364954us-gaap:SellingAndMarketingExpenseMember2022-04-012022-06-300001364954us-gaap:SellingAndMarketingExpenseMember2021-04-012021-06-300001364954us-gaap:SellingAndMarketingExpenseMember2022-01-012022-06-300001364954us-gaap:SellingAndMarketingExpenseMember2021-01-012021-06-300001364954us-gaap:GeneralAndAdministrativeExpenseMember2022-04-012022-06-300001364954us-gaap:GeneralAndAdministrativeExpenseMember2021-04-012021-06-300001364954us-gaap:GeneralAndAdministrativeExpenseMember2022-01-012022-06-300001364954us-gaap:GeneralAndAdministrativeExpenseMember2021-01-012021-06-300001364954chgg:RestrictedStockUnitsRSUsAndPerformanceShareUnitsPSUsMember2021-12-310001364954chgg:RestrictedStockUnitsRSUsAndPerformanceShareUnitsPSUsMember2022-01-012022-06-300001364954chgg:RestrictedStockUnitsRSUsAndPerformanceShareUnitsPSUsMember2022-06-300001364954us-gaap:SubsequentEventMemberchgg:KnackTechnologiesIncMember2022-07-012022-07-31
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 June 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
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 July 28, 2022, the Registrant had 126,398,679 outstanding shares of Common Stock.
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.
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 ongoing 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 currently elevated by, and may or will continue to be elevated by, the current 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.
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) | | | | | | | | | | | |
| June 30, 2022 | | December 31, 2021 |
Assets | | | |
Current assets | | | |
Cash and cash equivalents | $ | 402,089 | | | $ | 854,078 | |
Short-term investments | 981,288 | | | 691,781 | |
Accounts receivable, net of allowance of $234 and $153 at June 30, 2022 and December 31, 2021, respectively | 16,815 | | | 17,850 | |
Prepaid expenses | 20,115 | | | 35,093 | |
Other current assets | 31,559 | | | 23,846 | |
Total current assets | 1,451,866 | | | 1,622,648 | |
Long-term investments | 265,729 | | | 745,993 | |
Textbook library, net | — | | | 11,241 | |
Property and equipment, net | 195,370 | | | 169,938 | |
Goodwill | 616,649 | | | 289,763 | |
Intangible assets, net | 91,469 | | | 40,566 | |
Right of use assets | 15,485 | | | 18,062 | |
Other assets | 17,951 | | | 21,035 | |
Total assets | $ | 2,654,519 | | | $ | 2,919,246 | |
Liabilities and stockholders' equity | | | |
Current liabilities | | | |
Accounts payable | $ | 11,910 | | | $ | 11,992 | |
Deferred revenue | 53,297 | | | 35,143 | |
Accrued liabilities | 69,160 | | | 67,209 | |
| | | |
Total current liabilities | 134,367 | | | 114,344 | |
Long-term liabilities | | | |
Convertible senior notes, net | 1,680,931 | | | 1,678,155 | |
Long-term operating lease liabilities | 11,281 | | | 12,447 | |
Other long-term liabilities | 9,149 | | | 7,383 | |
Total long-term liabilities | 1,701,361 | | | 1,697,985 | |
Total liabilities | 1,835,728 | | | 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; 126,343,933 and 136,951,956 shares issued and outstanding at June 30, 2022 and December 31, 2021, respectively | 126 | | | 137 | |
Additional paid-in capital | 1,211,506 | | | 1,449,305 | |
Accumulated other comprehensive loss | (68,868) | | | (5,334) | |
Accumulated deficit | (323,973) | | | (337,191) | |
Total stockholders' equity | 818,791 | | | 1,106,917 | |
Total liabilities and stockholders' equity | $ | 2,654,519 | | | $ | 2,919,246 | |
See Notes to Condensed Consolidated Financial Statements.
CHEGG, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
(unaudited)
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
| 2022 | | 2021 | | 2022 | | 2021 |
Net revenues | $ | 194,721 | | | $ | 198,478 | | | $ | 396,965 | | | $ | 396,856 | |
Cost of revenues | 45,684 | | | 60,708 | | | 100,769 | | | 132,092 | |
Gross profit | 149,037 | | | 137,770 | | | 296,196 | | | 264,764 | |
Operating expenses: | | | | | | | |
Research and development | 52,480 | | | 41,595 | | | 104,895 | | | 87,726 | |
Sales and marketing | 35,279 | | | 21,686 | | | 77,777 | | | 47,900 | |
General and administrative | 53,935 | | | 39,719 | | | 100,805 | | | 77,589 | |
| | | | | | | |
Total operating expenses | 141,694 | | | 103,000 | | | 283,477 | | | 213,215 | |
Income from operations | 7,343 | | | 34,770 | | | 12,719 | | | 51,549 | |
Interest expense, net and other income (expense), net: | | | | | | | |
Interest expense, net | (1,616) | | | (1,701) | | | (3,213) | | | (3,630) | |
Other income (expense), net | 1,809 | | | 1,920 | | | 7,989 | | | (75,288) | |
Total interest expense, net and other income (expense), net | 193 | | | 219 | | | 4,776 | | | (78,918) | |
Income (loss) before provision for income taxes | 7,536 | | | 34,989 | | | 17,495 | | | (27,369) | |
Provision for income taxes | (60) | | | (2,225) | | | (4,277) | | | (5,046) | |
Net income (loss) | $ | 7,476 | | | $ | 32,764 | | | $ | 13,218 | | | $ | (32,415) | |
Net income (loss) per share | | | | | | | |
Basic | $ | 0.06 | | | $ | 0.23 | | | $ | 0.10 | | | $ | (0.23) | |
Diluted | $ | 0.06 | | | $ | 0.20 | | | $ | 0.10 | | | $ | (0.23) | |
Weighted average shares used to compute net income (loss) per share | | | | | | | |
Basic | 126,272 | | | 143,112 | | | 129,201 | | | 138,756 | |
Diluted | 149,574 | | | 168,282 | | | 129,934 | | | 138,756 | |
See Notes to Condensed Consolidated Financial Statements.
CHEGG, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME
(in thousands)
(unaudited)
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
| 2022 | | 2021 | | 2022 | | 2021 |
Net income (loss) | $ | 7,476 | | | $ | 32,764 | | | $ | 13,218 | | | $ | (32,415) | |
Other comprehensive (loss) income | | | | | | | |
Change in net unrealized (loss) gain on investments, net of tax | (2,333) | | | 375 | | | (15,250) | | | (1,519) | |
Change in foreign currency translation adjustments, net of tax | (29,613) | | | (107) | | | (48,284) | | | (981) | |
Other comprehensive (loss) income | (31,946) | | | 268 | | | (63,534) | | | (2,500) | |
Total comprehensive (loss) income | $ | (24,470) | | | $ | 33,032 | | | $ | (50,316) | | | $ | (34,915) | |
See Notes to Condensed Consolidated Financial Statements.
CHEGG, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(in thousands)
(unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, 2022 |
| Common Stock | | | | | | | | |
| Shares | | Par Value | | Additional Paid-In Capital | | Accumulated Other Comprehensive Loss | | Accumulated Deficit | | Total Stockholders’ Equity |
Balances at March 31, 2022 | 126,682 | | | $ | 127 | | | $ | 1,176,765 | | | $ | (36,922) | | | $ | (331,449) | | | $ | 808,521 | |
Repurchases of common stock | (837) | | | (1) | | | 1 | | | — | | | — | | | — | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
Issuance of common stock upon exercise of stock options and ESPP | 265 | | | — | | | 4,102 | | | — | | | — | | | 4,102 | |
Net share settlement of equity awards | 234 | | | — | | | (2,754) | | | — | | | — | | | (2,754) | |
Share-based compensation expense | — | | | — | | | 33,392 | | | — | | | — | | | 33,392 | |
Other comprehensive loss | — | | | — | | | — | | | (31,946) | | | — | | | (31,946) | |
Net income | — | | | — | | | — | | | — | | | 7,476 | | | 7,476 | |
Balances at June 30, 2022 | 126,344 | | | $ | 126 | | | $ | 1,211,506 | | | $ | (68,868) | | | $ | (323,973) | | | $ | 818,791 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, 2021 |
| Common Stock | | | | | | | | |
| Shares | | Par Value | | Additional Paid-In Capital | | Accumulated Other Comprehensive Loss | | Accumulated Deficit | | Total Stockholders’ Equity |
Balances at March 31, 2021 | 141,317 | | | $ | 141 | | | $ | 1,645,352 | | | $ | (1,238) | | | $ | (400,912) | | | $ | 1,243,343 | |
Equity component on conversions of 2023 notes and 2025 notes | — | | | — | | | (225,615) | | | — | | | — | | | (225,615) | |
Issuance of common stock upon conversions of 2023 notes | 2,857 | | | 3 | | | 224,281 | | | — | | | — | | | 224,284 | |
Net proceeds from capped call related to conversions of 2023 notes and 2025 notes | — | | | — | | | 44,192 | | | — | | | — | | | 44,192 | |
Issuance of common stock upon exercise of stock options and ESPP | 120 | | | — | | | 4,919 | | | — | | | — | | | 4,919 | |
Net share settlement of equity awards | 327 | | | 1 | | | (15,466) | | | — | | | — | | | (15,465) | |
Share-based compensation expense | — | | | — | | | 29,192 | | | — | | | — | | | 29,192 | |
Other comprehensive income | — | | | — | | | — | | | 268 | | | — | | | 268 | |
Net income | — | | | — | | | — | | | — | | | 32,764 | | | 32,764 | |
Balances at June 30, 2021 | 144,621 | | $ | 145 | | | $ | 1,706,855 | | | $ | (970) | | | $ | (368,148) | | | $ | 1,337,882 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Six Months Ended June 30, 2022 |
| Common Stock | | | | | | | | |
| Shares | | Par Value | | Additional Paid-In Capital | | Accumulated Other Comprehensive Loss | | Accumulated 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 | (11,562) | | | (12) | | | (300,438) | | | — | | | — | | | (300,450) | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
Issuance of common stock upon exercise of stock options and ESPP | 319 | | | — | | | 4,557 | | | — | | | — | | | 4,557 | |
Net share settlement of equity awards | 635 | | | 1 | | | (10,221) | | | — | | | — | | | (10,220) | |
Share-based compensation expense | — | | | — | | | 68,303 | | | — | | | — | | | 68,303 | |
Other comprehensive loss | — | | | — | | | — | | | (63,534) | | | — | | | (63,534) | |
Net income | — | | | — | | | — | | | — | | | 13,218 | | | 13,218 | |
Balances at June 30, 2022 | 126,344 | | | $ | 126 | | | $ | 1,211,506 | | | $ | (68,868) | | | $ | (323,973) | | | $ | 818,791 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Six Months Ended June 30, 2021 |
| Common Stock | | | | | | | | |
| Shares | | Par Value | | Additional Paid-In Capital | | Accumulated Other Comprehensive Loss | | Accumulated Deficit | | Total Stockholders’ Equity |
Balances at December 31, 2020 | 129,344 | | | $ | 129 | | | $ | 1,030,577 | | | $ | 1,530 | | | $ | (422,601) | | | $ | 609,635 | |
Cumulative-effect adjustment related to adoption of ASU 2020-06 | — | | | — | | | (465,006) | | | — | | | 86,868 | | | (378,138) | |
Issuance of common stock in connection with equity offering, net of offering costs | 10,975 | | | 11 | | | 1,091,455 | | | — | | | — | | | 1,091,466 | |
Equity component on conversions of 2023 notes and 2025 notes | — | | | — | | | (236,920) | | | — | | | — | | | (236,920) | |
Issuance of common stock upon conversions of 2023 notes | 2,983 | | | 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 ESPP | 164 | | | — | | | 5,265 | | | — | | | — | | | 5,265 | |
Net share settlement of equity awards | 1,155 | | | 2 | | | (74,642) | | | — | | | — | | | (74,640) | |
Share-based compensation expense | — | | | — | | | 52,839 | | | — | | | — | | | 52,839 | |
Other comprehensive loss | — | | | — | | | — | | | (2,500) | | | — | | | (2,500) | |
Net loss | — | | | — | | | — | | | — | | | (32,415) | | | (32,415) | |
Balances at June 30, 2021 | 144,621 | | $ | 145 | | | $ | 1,706,855 | | | $ | (970) | | | $ | (368,148) | | | $ | 1,337,882 | |
See Notes to Condensed Consolidated Financial Statements.
CHEGG, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
| | | | | | | | | | | | | |
| Six Months Ended June 30, | | |
| 2022 | | 2021 | | |
Cash flows from operating activities | | | | | |
Net income (loss) | $ | 13,218 | | | $ | (32,415) | | | |
Adjustments to reconcile net income (loss) to net cash provided by operating activities: | | | | | |
Print textbook depreciation expense | 1,610 | | | 6,581 | | | |
Other depreciation and amortization expense | 41,921 | | | 30,187 | | | |
Share-based compensation expense | 64,171 | | | 51,645 | | | |
Amortization of debt issuance costs | 2,779 | | | 3,097 | | | |
Gain on foreign currency remeasurement of purchase consideration | (4,628) | | | — | | | |
Impairment on lease related assets | 3,411 | | | — | | | |
Loss on early extinguishment of debt | — | | | 78,152 | | | |
Loss on change in fair value of derivative instruments, net | — | | | 7,148 | | | |
Loss from write-off of property and equipment | 2,767 | | | 1,042 | | | |
| | | | | |
Gain on sale of strategic equity investment | — | | | (5,338) | | | |
(Gain) loss on textbook library, net | (4,967) | | | 4,230 | | | |
Operating lease expense, net of accretion | 3,242 | | | 3,064 | | | |
| | | | | |
Other non-cash items | 167 | | | 298 | | | |
Change in assets and liabilities, net of effect of acquisition of businesses: | | | | | |
Accounts receivable | 3,227 | | | 3,462 | | | |
Prepaid expenses and other current assets | 28,768 | | | (14,715) | | | |
Other assets | 13,058 | | | 7,220 | | | |
Accounts payable | (5,246) | | | (3,139) | | | |
Deferred revenue | 4,256 | | | 2,062 | | | |
Accrued liabilities | (21,034) | | | 4,197 | | | |
Other liabilities | (2,965) | | | (2,277) | | | |
Net cash provided by operating activities | 143,755 | | | 144,501 | | | |
Cash flows from investing activities | | | | | |
Purchases of property and equipment | (57,286) | | | (46,595) | | | |
Purchases of textbooks | (3,815) | | | (5,018) | | | |
Proceeds from disposition of textbooks | 2,494 | | | 6,709 | | | |
Purchases of investments | (356,553) | | | (984,606) | | | |
Maturities of investments | 522,466 | | | 455,536 | | | |
| | | | | |
Proceeds from sale of strategic equity investment | — | | | 7,081 | | | |
Acquisition of businesses, net of cash acquired | (401,125) | | | (7,891) | | | |
Net cash used in investing activities | (293,819) | | | (574,784) | | | |
Cash flows from financing activities | | | | | |
Proceeds from common stock issued under stock plans, net | 4,558 | | | 5,267 | | | |
Payment of taxes related to the net share settlement of equity awards | (10,221) | | | (74,642) | | | |
| | | | | |
| | | | | |
Proceeds from equity offering, net of offering costs | — | | | 1,091,466 | | | |
Repayment of convertible senior notes | — | | | (300,751) | | | |
Proceeds from exercise of convertible senior notes capped call | — | | | 69,004 | | | |
Repurchases of common stock | (300,450) | | | — | | | |
Net cash (used in) provided by financing activities | (306,113) | | | 790,344 | | | |
Effect of exchange rate changes | 4,628 | | | — | | | |
Net (decrease) increase in cash, cash equivalents and restricted cash | (451,549) | | | 360,061 | | | |
Cash, cash equivalents and restricted cash, beginning of period | 855,893 | | | 481,715 | | | |
Cash, cash equivalents and restricted cash, end of period | $ | 404,344 | | | $ | 841,776 | | | |
| | | | | | | | | | | | | |
| Six Months Ended June 30, | | |
| 2022 | | 2021 | | |
Supplemental cash flow data: | | | | | |
Cash paid during the period for: | | | | | |
Interest | $ | 437 | | | $ | 615 | | | |
Income taxes, net of refunds | $ | 3,915 | | | $ | 4,268 | | | |
Cash paid for amounts included in the measurement of lease liabilities: | | | | | |
Operating cash flows from operating leases | $ | 3,869 | | | $ | 4,030 | | | |
Right of use assets obtained in exchange for lease obligations: | | | | | |
Operating leases | $ | 3,244 | | | $ | — | | | |
Non-cash investing and financing activities: | | | | | |
Accrued purchases of long-lived assets | $ | 4,057 | | | $ | 2,341 | | | |
Issuance of common stock related to repayment of convertible senior notes | $ | — | | | $ | 235,521 | | | |
| | | | | |
| | | | | |
| | | | | | | | | | | | | |
| June 30, |
| 2022 | | 2021 | | |
Reconciliation of cash, cash equivalents and restricted cash: | | | | | |
Cash and cash equivalents | $ | 402,089 | | | $ | 840,056 | | | |
Restricted cash included in other current assets | 64 | | | — | | | |
Restricted cash included in other assets | 2,191 | | | 1,720 | | | |
Total cash, cash equivalents and restricted cash | $ | 404,344 | | | $ | 841,776 | | | |
See Notes to Condensed Consolidated Financial Statements.
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 June 30, 2022, our results of operations, results of comprehensive (loss) income, and stockholders' equity for the three and six months ended June 30, 2022 and 2021 and cash flows for the six months ended June 30, 2022 and 2021. Our results of operations, results of comprehensive (loss) income, stockholders' equity, and cash flows for the six months ended June 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 six months ended June 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.
Condensed Consolidated Statements of Operations Details
Other income (expense), net consists of the following (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
| 2022 | | 2021 | | 2022 | | 2021 |
Loss on early extinguishment of debt | $ | — | | | $ | — | | | $ | — | | | $ | (78,152) | |
Loss on change in fair value of derivative instruments, net | — | | | — | | | — | | | (7,148) | |
Gain on sale of strategic equity investments | — | | | — | | | — | | | 5,338 | |
Gain on foreign currency remeasurement of purchase consideration(1) | — | | | — | | | 4,628 | | | — | |
Interest income | 2,032 | | | 1,851 | | | 3,509 | | | 3,900 | |
Other | (223) | | | 69 | | | (148) | | | 774 | |
Total other income (expense), net | $ | 1,809 | | | $ | 1,920 | | | $ | 7,989 | | | $ | (75,288) | |
(1) 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 three months ended June 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 six months ended June 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.
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 June 30, | | | | Change |
| 2022 | | 2021 | | | | $ | | % |
Chegg Services | $ | 189,076 | | | $ | 173,513 | | | | | $ | 15,563 | | | 9 | % |
Required Materials | 5,645 | | | 24,965 | | | | | (19,320) | | | (77) | |
Total net revenues | $ | 194,721 | | | $ | 198,478 | | | | | $ | (3,757) | | | (2) | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Six Months Ended June 30, | | | | Change |
| 2022 | | 2021 | | | | $ | | % |
Chegg Services | $ | 373,888 | | | $ | 335,864 | | | | | $ | 38,024 | | | 11 | % |
Required Materials | 23,077 | | | 60,992 | | | | | (37,915) | | | (62) | |
Total net revenues | $ | 396,965 | | | $ | 396,856 | | | | | $ | 109 | | | 0 | |
During the three and six months ended June 30, 2022, we recognized $42.2 million and $32.9 million, respectively, of revenues that were included in our deferred revenue balance at the beginning of each respective reporting period. During the three and six months ended June 30, 2021 we recognized $44.1 million and $32.0 million, respectively, of revenues that were included in our deferred revenue balance at the beginning of each respective reporting period. During the three and six months ended June 30, 2022, we recognized $0.3 million and $5.1 million, respectively, of operating lease income from print textbook rentals that we owned. During the three and six months ended June 30, 2021, we recognized $10.0 million and $20.7 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 | | |
| June 30, 2022 | | December 31, 2021 | | | | $ | | % | | | | |
| | | | | | | | | | | | | |
Accounts receivable, net | $ | 16,815 | | | $ | 17,850 | | | | | $ | (1,035) | | | (6) | % | | | | |
Contract assets | 12,988 | | | 14,231 | | | | | (1,243) | | | (9) | | | | | |
Deferred revenue | 53,297 | | | 35,143 | | | | | 18,154 | | | 52 | | | | | |
During the six months ended June 30, 2022 our accounts receivable, net balance decreased by $1.0 million, or 6%, primarily due to timing of billings and seasonality of our business. During the six months ended June 30, 2022, our contract assets balance decreased by $1.2 million, or 9%, primarily due to our Thinkful service. During the six months ended June 30, 2022, our deferred revenue balance increased by $18.2 million, or 52%, primarily due to acquired deferred revenue in conjunction with our acquisition of Busuu, increased bookings, and seasonality of our business.
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 June 30, | | Six Months Ended June 30, |
| 2022 | | 2021 | | 2022 | | 2021 |
Basic | | | | | | | |
Numerator: | | | | | | | |
Net income (loss) | $ | 7,476 | | | $ | 32,764 | | | $ | 13,218 | | | $ | (32,415) | |
Denominator: | | | | | | | |
Weighted average shares used to compute net income (loss) per share, basic | 126,272 | | | 143,112 | | | 129,201 | | | 138,756 | |
| | | | | | | |
Net income (loss) per share, basic | $ | 0.06 | | | $ | 0.23 | | | $ | 0.10 | | | $ | (0.23) | |
| | | | | | | |
Diluted | | | | | | | |
Numerator: | | | | | | | |
Net income (loss) | $ | 7,476 | | | $ | 32,764 | | | $ | 13,218 | | | $ | (32,415) | |
Convertible senior notes interest expense, net of tax | 1,212 | | | 1,212 | | | — | | | — | |
Net income (loss), diluted | $ | 8,688 | | | $ | 33,976 | | | $ | 13,218 | | | $ | (32,415) | |
Denominator: | | | | | | | |
Weighted average shares used to compute net income (loss) per share, basic | 126,272 | | | 143,112 | | | 129,201 | | | 138,756 | |
Shares related to stock plan activity | 427 | | | 2,295 | | | 733 | | | — | |
Shares related to convertible senior notes | 22,875 | | | 22,875 | | | — | | | — | |
Weighted average shares used to compute net income (loss) per share, diluted | 149,574 | | | 168,282 | | | 129,934 | | | 138,756 | |
| | | | | | | |
Net income (loss) per share, diluted | $ | 0.06 | | | $ | 0.20 | | | $ | 0.10 | | | $ | (0.23) | |
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 June 30, | | Six Months Ended June 30, |
| 2022 | | 2021 | | 2022 | | 2021 |
Shares related to stock plan activity | 8,041 | | | 1,142 | | | 3,645 | | | 2,999 | |
Shares related to convertible senior notes | — | | | 268 | | | 22,875 | | | 25,901 | |
Total common stock equivalents | 8,041 | | | 1,410 | | | 26,520 | | | 28,900 | |
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 June 30, 2022 and December 31, 2021 (in thousands except for fair value levels):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| June 30, 2022 |
| Fair Value Level | | Adjusted Cost | | Unrealized Gain | | Unrealized Loss | | Fair Value |
Cash and cash equivalents: | | | | | | | | | |
Cash | | | $ | 45,885 | | | $ | — | | | $ | — | | | $ | 45,885 | |
| | | | | | | | | |
Money market funds | Level 1 | | 199,003 | | | — | | | — | | | 199,003 | |
Commercial paper | Level 2 | | 157,234 | | | — | | | (33) | | | 157,201 | |
Total cash and cash equivalents | | | $ | 402,122 | | | $ | — | | | $ | (33) | | | $ | 402,089 | |
Short-term investments: | | | | | | | | | |
Commercial paper | Level 2 | | $ | 81,649 | | | $ | — | | | $ | (382) | | | $ | 81,267 | |
Corporate debt securities | Level 2 | | 831,482 | | | 10 | | | (9,889) | | | 821,603 | |
U.S. treasury securities | Level 1 | | 79,675 | | | — | | | (1,257) | | | 78,418 | |
| | | | | | | | | |
Total short-term investments | | | $ | 992,806 | | | $ | 10 | | | $ | (11,528) | | | $ | 981,288 | |
Long-term investments: | | | | | | | | | |
Corporate debt securities | Level 2 | | $ | 198,816 | | | $ | 8 | | | $ | (5,582) | | | $ | 193,242 | |
U.S. treasury securities | Level 1 | | 74,535 | | | — | | | (2,048) | | | 72,487 | |
| | | | | | | | | |
Total long-term investments | | | $ | 273,351 | | | $ | 8 | | | $ | (7,630) | | | $ | 265,729 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2021 |
| Fair Value Level | | Adjusted Cost | | Unrealized Gain | | Unrealized Loss | | Fair Value |
Cash and cash equivalents: | | | | | | | | | |
Cash | | | $ | 30,324 | | | $ | — | | | $ | — | | | $ | 30,324 | |
Money market funds | Level 1 | | 823,754 | | | — | | | — | | | 823,754 | |
| | | | | | | | | |
Total cash and cash equivalents | | | $ | 854,078 | | | $ | — | | | $ | — | | | $ | 854,078 | |
Short-term investments: | | | | | | | | | |
Commercial paper | Level 2 | | $ | 124,211 | | | $ | 2 | | | $ | ( |