Document and Entity Information - shares |
3 Months Ended | |
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Mar. 31, 2019 |
Apr. 26, 2019 |
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Document And Entity Information [Abstract] | ||
Entity Registrant Name | CHEGG, INC | |
Entity Central Index Key | 0001364954 | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Large Accelerated Filer | |
Document Type | 10-Q | |
Document Period End Date | Mar. 31, 2019 | |
Document Fiscal Year Focus | 2019 | |
Document Fiscal Period Focus | Q1 | |
Amendment Flag | false | |
Entity Emerging Growth Company | false | |
Entity Small Business | false | |
Entity Common Stock, Shares Outstanding | 118,548,013 |
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Thousands |
Mar. 31, 2019 |
Dec. 31, 2018 |
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Statement of Financial Position [Abstract] | ||
Allowance for doubtful accounts receivable, current | $ 27 | $ 229 |
Preferred stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Preferred stock, shares authorized | 10,000,000 | 10,000,000 |
Preferred stock, shares issued | 0 | 0 |
Preferred stock, shares outstanding | 0 | 0 |
Common stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Common stock, shares authorized | 400,000,000 | 400,000,000 |
Common stock, shares issued | 118,196,707 | 115,500,418 |
Common stock, shares outstanding | 118,196,707 | 115,500,418 |
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) - USD ($) shares in Thousands, $ in Thousands |
3 Months Ended | |
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Mar. 31, 2019 |
Mar. 31, 2018 |
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Income Statement [Abstract] | ||
Net revenues | $ 97,409 | $ 76,949 |
Cost of revenues | 23,335 | 20,224 |
Gross profit | 74,074 | 56,725 |
Operating expenses: | ||
Research and development | 32,692 | 25,533 |
Sales and marketing | 18,717 | 15,336 |
General and administrative | 23,670 | 18,256 |
Restructuring charges | 22 | 220 |
Total operating expenses | 75,101 | 59,345 |
Loss from operations | (1,027) | (2,620) |
Interest expense and other income, net: | ||
Interest expense, net | (4,232) | (20) |
Other income, net | 1,567 | 564 |
Total interest expense and other income, net | (2,665) | 544 |
Loss before provision for income taxes | (3,692) | (2,076) |
Provision for income taxes | 626 | 541 |
Net loss | $ (4,318) | $ (2,617) |
Net loss per share, basic and diluted (in dollars per share) | $ (0.04) | $ (0.02) |
Weighted average shares used to compute net loss per share, basic and diluted (in shares) | 116,730 | 110,904 |
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (Unaudited) - USD ($) $ in Thousands |
3 Months Ended | |
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Mar. 31, 2019 |
Mar. 31, 2018 |
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Statement of Comprehensive Income [Abstract] | ||
Net loss | $ (4,318) | $ (2,617) |
Other comprehensive income: | ||
Change in net unrealized gain (loss) on available for sale investments, net of tax | 119 | (91) |
Change in foreign currency translation adjustments, net of tax | 0 | 511 |
Other comprehensive income | 119 | 420 |
Total comprehensive loss | $ (4,199) | $ (2,197) |
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - Reconciliation of cash, cash equivalents and restricted cash - USD ($) $ in Thousands |
Mar. 31, 2019 |
Mar. 31, 2018 |
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Statement of Cash Flows [Abstract] | ||
Cash and cash equivalents | $ 914,500 | $ 106,827 |
Cash and cash equivalents | 121 | 84 |
Restricted cash included in other assets | 920 | 423 |
Total cash, cash equivalents and restricted cash | $ 915,541 | $ 107,334 |
Background and Basis of Presentation |
3 Months Ended |
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Mar. 31, 2019 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Background and Basis of Presentation | 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. Chegg is a smarter way to student. As the leading direct-to-student learning platform, we strive to improve educational outcomes by putting the student first in all our decisions. We support students on their journey from high school to college and into their career with tools designed to help them pass their test, pass their class, and save money on required materials. Our services are available online, anytime and anywhere, so we can reach students when they need us most. Basis of Presentation The accompanying condensed consolidated balance sheet as of March 31, 2019, the condensed consolidated statements of operations, the condensed consolidated statements of comprehensive loss, the condensed consolidated statements of stockholder's equity, and the condensed consolidated statements of cash flows for the three months ended March 31, 2019 and 2018 and the related footnote disclosures are unaudited. 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 March 31, 2019, our results of operations, stockholder's equity, and cash flows for the three months ended March 31, 2019 and 2018. Our results of operations, stockholder's equity, and cash flows for the three months ended March 31, 2019 are not necessarily indicative of the results to be expected for the full year. We operate in a single segment. Our fiscal year ends on December 31 and in this report we refer to the year ended December 31, 2018 as 2018. 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, 2018 (the Annual Report on Form 10-K) filed with the U.S. Securities and Exchange Commission (SEC). Except for our policies on leases and convertible senior notes, 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. Leases We determine if an arrangement is a lease at inception. Operating leases are included in operating lease right of use (ROU) assets, operating lease liabilities within current liabilities, and operating lease liabilities within long-term liabilities on our condensed consolidated balance sheet. Operating lease ROU assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement date. Our leases do not provide an implicit rate and therefore we use our incremental borrowing rate based on the information available at commencement date in determining the present value of future minimum lease payments. Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise such options. We do not record leases on our condensed consolidated balance sheet with a term of one year or less. We do not separate lease and non-lease components but rather account for each separate component as a single lease component for all underlying classes of assets. Some of our leases include payments that are dependent on an index, such as the Consumer Price Index (CPI), and our minimum lease payments include payments based on the index at inception with any future changes in such indices recognized as an expense in the period of change. Where leases contain escalation clauses, rent abatements, or concessions, such as rent holidays and landlord or tenant incentives or allowances, we apply them in the determination of straight-line operating lease cost over the lease term. Operating lease cost for minimum lease payments is recognized on a straight-line basis over the lease term. Convertible Senior Notes, net In March 2019, we issued $700 million in aggregate principal amount of 0.125% convertible senior notes due in 2025 (2025 notes) and in April 2018, we issued $345 million in aggregate principal amount of 0.25% convertible senior notes due in 2023 (2023 notes). Collectively, the 2025 notes and 2023 notes are referred to as the “notes.” In accounting for their issuance, we separated the notes into liability and equity components. The carrying amount of the liability component was calculated by measuring the fair value of similar liabilities that do not have an associated convertible feature. The carrying amount of the equity component representing the conversion option was determined by deducting the carrying amount of the liability component from the par value of the notes. The difference represents the debt discount, recorded as a reduction of the convertible senior notes on our condensed consolidated balance sheet, and is amortized to interest expense over the term of the notes using the effective interest rate method. The equity component is not remeasured as long as it continues to meet the conditions for equity classification. In accounting for the issuance costs related to the notes, we allocated the total amount of issuance costs incurred to liability and equity components based on their relative values. Issuance costs attributable to the liability component are being amortized on a straight-line basis, which approximates the effective interest rate method, to interest expense over the term of the notes. The issuance costs attributable to the equity component are recorded as a reduction of the equity component within additional paid-in capital. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles in the United States (U.S. 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. Significant estimates, assumptions, and judgments are used for, but not limited to: revenue recognition, recoverability of accounts receivable, restructuring charges (credits), share-based compensation expense including estimated forfeitures, accounting for income taxes, useful lives assigned to long-lived assets for depreciation and amortization, impairment of goodwill and long-lived assets, the valuation of acquired intangible assets, the valuation of our convertible senior notes, and operating lease ROU assets and operating lease liabilities. 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. Recent Accounting Pronouncements Recently Issued Accounting Pronouncements Not Yet Adopted In August 2018, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2018-15, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract. ASU 2018-15 aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with existing guidance contained within subtopic 350-40 to develop or obtain internal-use software. Early adoption is permitted and the guidance allows for a retrospective or prospective application. The guidance is effective for annual periods beginning after December 15, 2019, and we are currently in the process of evaluating the impact of this guidance. In July 2018, the FASB issued ASU 2018-09, Codification Improvements. ASU 2018-09 provides updates for technical corrections, clarifications, and other minor improvements to a wide variety of topics in the ASC. The transition method of adoption is dependent on the ASC topic impacted by this guidance. Additionally, some of the ASC topic updates are effective upon issuance of ASU 2018-09 and some of the ASC topic updates are effective at a future date. The ASC topic updates effective upon issuance of ASU 2018-09 do not impact our accounting for the respective ASC topics. For those ASC topic updates effective at a future date, we are currently in the process of evaluating the impact of this guidance update. Recently Adopted Accounting Pronouncements The FASB has issued four ASUs related to Accounting Standards Codification (ASC) 842. In March 2019, the FASB issued ASU 2019-01, Leases (Topic 842): Codification Improvements. In July 2018, the FASB issued ASU 2018-11, Leases (Topic 842): Targeted Improvements and ASU 2018-10, Codification Improvements to Topic 842, Leases. In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). ASC 842 requires an entity to recognize a ROU asset and lease liability for all leases with terms of more than 12 months. Recognition, measurement, and presentation of expenses will depend on classification as a finance or operating lease. The amendments in this update also require certain quantitative and qualitative disclosures about leasing arrangements. We have adopted ASC 842 on January 1, 2019 and have elected the transition method of adoption that allows for a modified retrospective adoption with a cumulative-effect adjustment to the opening balance of accumulated deficit and recorded an immaterial decrease to our opening balance of accumulated deficit. As a result, we have not changed previously disclosed amounts or provided additional disclosures for comparative periods. We initially recorded ROU assets of $17.2 million and lease liabilities of $21.1 million on our condensed consolidated balance sheet. ASC 842 does not have a material impact to our condensed consolidated statement of operations. We have elected a package of transition practical expedients which include not reassessing whether any expired or existing contracts are or contain leases, not reassessing the lease classification of expired or existing leases, and not reassessing initial direct costs for existing leases. We have also elected a practical expedient to not separate lease and non-lease components. We did not elect the practical expedient to use hindsight in determining our lease terms or assessing impairment of our ROU assets. See Note 8. Leases for more information. |
Revenues |
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Revenue from Contract with Customer [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Revenues | 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, most significantly the revenue share we earn from our print textbook partners, being recognized at the point in time when print textbooks are shipped to students. The following table sets forth our total net revenues for the periods shown disaggregated for our Chegg Services and Required Materials product lines (in thousands, except percentages):
During the three months ended March 31, 2019, we recognized $12.4 million of revenues that were included in our deferred revenue balance as of December 31, 2018. During the three months ended March 31, 2019, there was an immaterial amount of revenues recognized from performance obligations satisfied in previous periods. The aggregate amount of unsatisfied performance obligations is approximately $29.0 million as of March 31, 2019, of which substantially all is expected to be recognized into revenues over the next year and the remainder within three years. Contract Balances The following table presents our accounts receivable, net and deferred revenue balances (in thousands, except percentages):
During the three months ended March 31, 2019, our accounts receivable, net balance decreased by $3.9 million, or 30%, primarily due to an improvement in cash collections. During the three months ended March 31, 2019, our deferred revenue balance increased by $8.9 million, or 51%, primarily due to increased bookings for our Chegg Study service and eTextbook rentals driven by the seasonality of our business as well as the deferred variable consideration. Our contract assets balance was immaterial as of March 31, 2019 and December 31, 2018. |
Net Loss Per Share |
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Net Loss Per Share | Net Loss Per Share Basic net loss per share is computed by dividing the net loss by the weighted-average number of shares of common stock outstanding during the period. Diluted net loss per share is computed by giving effect to all potential shares of common stock, including stock options, warrants, restricted stock units (RSUs), performance-based restricted stock units (PSUs), and shares related to convertible senior notes, to the extent dilutive. Basic and diluted net loss per share was the same for each period presented as the inclusion of all potential common shares outstanding would have been anti-dilutive. The following table sets forth the computation of historical basic and diluted net loss per share (in thousands, except per share amounts):
The following potential weighted-average shares of common stock outstanding were excluded from the computation of diluted net loss per share because including them would have been anti-dilutive (in thousands):
Shares related to convertible senior notes represents the anti-dilutive impact of our issuance of $345 million in aggregate principal amount of our 0.25% convertible senior notes due in 2023 (2023 notes) as the average price of our common stock during the three months ended March 31, 2019 was higher than the conversion price of $26.95. While these shares are anti-dilutive during the three months ended March 31, 2019, they may be dilutive in periods we report net income. However, as a result of the capped call transactions described in Note 7, there will be no economic dilution from the 2023 notes up to $40.68, as exercise of the capped call instruments will reduce any dilution from the notes that would have otherwise occurred when the average price of our common stock exceeds the conversion price. None of the shares related to our issuance of $700 million in aggregate principal amount of our 0.125% convertible senior notes due in 2025 (2025 notes) were anti-dilutive during the three months ended March 31, 2019. |
Cash and Cash Equivalents, and Investment |
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Cash and Cash Equivalents, and Investment | Cash and Cash Equivalents, and Investments The following table shows our cash and cash equivalents, and investments’ adjusted cost, net unrealized gain/(loss) and fair value as of March 31, 2019 and December 31, 2018 (in thousands):
The adjusted cost and fair value of available-for-sale investments as of March 31, 2019 by contractual maturity were as follows (in thousands):
Investments not due at a single maturity date in the preceding table consist of money market fund deposits. As of March 31, 2019, we considered the declines in market value of our investment portfolio to be temporary in nature and did not consider any of our investments to be other-than-temporarily impaired. We typically invest in highly-rated securities with a minimum credit rating of A- and a weighted average maturity of one month, and our investment policy generally limits the amount of credit exposure to any one issuer. The policy requires investments generally to be investment grade, with the primary objective of preserving capital and maintaining liquidity. Fair values were determined for each individual security in the investment portfolio. When evaluating an investment for other-than-temporary impairment, we review factors such as the length of time and extent to which fair value has been below its cost basis, the financial condition of the issuer and any changes thereto, changes in market interest rates and our intent to sell, or whether it is more likely than not it will be required to sell, the investment before recovery of the investment’s cost basis. During the three months ended March 31, 2019 and 2018, we did not recognize any impairment charges. Restricted Cash As of March 31, 2019 and December 31, 2018, we had approximately $1.0 million and $1.3 million, respectively, of restricted cash that consists of security deposits for our corporate offices. These amounts are classified in either other current assets or other assets on our condensed consolidated balance sheets based on the remaining term of the lease from the balance sheet dates. Strategic Investments In October 2018, we completed an investment of $10.0 million in WayUp, Inc., a U.S.-based job site and mobile application for college students and recent graduates. Additionally, we previously invested $3.0 million in a foreign entity to explore expanding our reach internationally. We did not record other-than-temporary impairment charges on our investments during the three months ended March 31, 2019 and 2018, 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 a similar investment of the same issuer during the three months ended March 31, 2019 and 2018. |
Fair Value Measurement |
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Measurement | Fair Value Measurement We have established a fair value hierarchy used to determine the fair value of our financial instruments as follows: Level 1—Inputs are unadjusted quoted prices in active markets for identical assets or liabilities. Level 2—Inputs are quoted prices for similar assets and liabilities in active markets or inputs that are observable for the assets or liabilities, either directly or indirectly through market corroboration, for substantially the full term of the financial instruments. Level 3—Inputs are unobservable inputs based on our own assumptions used to measure assets and liabilities at fair value; the inputs require significant management judgment or estimation. A financial instrument’s classification within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Financial instruments measured and recorded at fair value on a recurring basis as of March 31, 2019 and December 31, 2018 are classified based on the valuation technique level in the tables below (in thousands):
We value our marketable securities based on quoted prices in active markets for identical assets (Level 1 inputs) or inputs other than quoted prices that are observable either directly or indirectly (Level 2 inputs) in determining fair value. Other than our money market funds and U.S. treasury securities, we classify our fixed income available-for-sale securities as having Level 2 inputs. The valuation techniques used to measure the fair value of our financial instruments having Level 2 inputs were derived from non-binding market consensus prices that are corroborated by observable market data, quoted market prices for similar instruments, or pricing models such as discounted cash flow techniques. We do not hold any marketable securities valued with a Level 3 input. The methods described above may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Furthermore, while we believe our valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date. Financial Instruments Not Recorded at Fair Value on a Recurring Basis We report our financial instruments at fair value with the exception of the 2023 notes and 2025 notes. Collectively, the 2025 notes and 2023 notes are referred to as the “notes.” 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. For further information on the notes see Note 7. The carrying amounts and estimated fair values of the notes as of March 31, 2019 and December 31, 2018 are as follows (in thousands):
The carrying amount of the 2025 notes and 2023 notes as of March 31, 2019 was net of unamortized debt discount of $185.0 million and $51.7 million, respectively, and unamortized issuance costs of $12.8 million and $6.1 million, respectively. The carrying amount of the 2023 notes as of December 31, 2018 was net of unamortized debt discount of $54.8 million and unamortized issuance costs of $6.5 million. |
Goodwill and Intangible Assets |
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Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Goodwill and Intangible Assets | Goodwill and Intangible Assets Goodwill consists of the following (in thousands):
Intangible assets as of March 31, 2019 and December 31, 2018 consist of the following (in thousands, except weighted-average amortization period):
During the three months ended March 31, 2019 and 2018, amortization expense related to our acquired intangible assets totaled approximately $1.8 million and $1.4 million, respectively. As of March 31, 2019, the estimated future amortization expense related to our finite-lived intangible assets is as follows (in thousands):
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Convertible Senior Notes |
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Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Convertible Senior Notes | Convertible Senior Notes In March 2019, we issued $700 million in aggregate principal amount of 0.125% convertible senior notes due in 2025 (2025 notes). In April 2018, we issued $345 million in aggregate principal amount of 0.25% convertible senior notes due in 2023 (2023 notes). The aggregate principal amount of the 2023 notes includes $45 million from the initial purchasers fully exercising their option to purchase additional notes. Collectively, the 2025 notes and 2023 notes are referred to as the “notes.” The notes were issued in private placements to qualified institutional buyers pursuant to Rule 144A of the Securities Act of 1933, as amended. The total net proceeds from the notes are as follows (in thousands):
The notes are our senior, unsecured obligations and are governed by indenture agreements by and between us and Wells Fargo Bank, National Association, as Trustee (the indentures). 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 September 15, 2019. The 2025 notes will mature on March 15, 2025 (the 2025 notes maturity date), unless repurchased, redeemed or converted in accordance with their terms prior to such date. The 2023 notes bear interest of 0.25% per year which is payable semi-annually in arrears on May 15 and November 15 of each year, beginning on November 15, 2018. The 2023 notes will mature on May 15, 2023 (the 2023 notes maturity date), unless repurchased, redeemed or converted in accordance with their terms prior to such date. 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. Each $1,000 principal amount of the 2023 notes will initially be convertible into 37.1051 shares of our common stock. This is equivalent to an initial conversion price of approximately $26.95 per share, which is subject to adjustment in certain circumstances. Prior to the close of business on the business day immediately preceding December 15, 2024 for the 2025 notes and February 15, 2023 for the 2023 notes, the notes are convertible at the option of holders only upon satisfaction of the following circumstances:
On or after December 15, 2024 for the 2025 notes and February 15, 2023 for the 2023 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 foregoing circumstances. Upon conversion, the notes may be settled in shares of our common stock, cash or a combination of cash and shares of our common stock, at our election. If we undergo a fundamental change, as defined in the indentures, prior to the respective maturity dates, subject to certain conditions, holders of the notes may require us to repurchase for cash all or any portion of their notes at a repurchase price equal to 100% of the principal amount of the notes to be repurchased, plus accrued and unpaid interest to, but excluding, the fundamental change repurchase date. In addition, if specific corporate events, described in the indentures, occur prior to the respective maturity dates, we will also increase the conversion rate for a holder who elects to convert their notes in connection with such specified corporate events. During the three months ended March 31, 2019, the conditions allowing holders of the 2025 notes to convert have not been met and are therefore not convertible during the three months ended March 31, 2019. During the three months ended March 31, 2019, the conditions allowing holders of the 2023 notes to convert have been met and are therefore convertible during the three months ended March 31, 2019. None of the holders of the 2023 notes elected to convert their notes into shares of our common stock during the three months ended March 31, 2019. In accounting for the issuance of the notes, we separated the notes into liability and equity components. The carrying amount of the liability components for the 2025 notes and 2023 notes of approximately $514.5 million and $280.8 million, respectively, was calculated by measuring the fair value of similar debt instruments that do not have an associated convertible feature. The carrying amount of the equity components for the 2025 notes and 2023 notes of approximately $185.5 million and $64.2 million, respectively, representing the conversion option, was determined by deducting the carrying amount of the liability components from the principal amount of the notes. This difference between the principal amount of the notes and the liability components represents the debt discount, presented as a reduction to the notes on our condensed consolidated balance sheet, and is amortized to interest expense using the effective interest method over the remaining term of the notes. The equity components of the notes are included in additional paid-in capital on our condensed consolidated balance sheet and is not remeasured as long as it continues to meet the conditions for equity classification. We incurred issuance costs related to the 2025 notes of approximately $17.4 million, consisting of the initial purchasers' discount of $16.6 million and other issuance costs of approximately $0.8 million. We incurred issuance costs related to the 2023 notes of approximately $9.4 million, consisting of the initial purchasers' discount of $8.6 million and other issuance costs of approximately $0.8 million. In accounting for the issuance costs, we allocated the total amount incurred to the liability and equity components using the same proportions determined above for the notes. Transaction costs attributable to the liability components for the 2025 notes and 2023 notes of approximately $12.8 million and $7.6 million, respectively, were recorded as debt issuance cost, presented as a reduction to the notes on our condensed consolidated balance sheet, and are amortized to interest expense using the effective interest method over the term of the notes. The issuance costs attributable to the equity components for the 2025 notes and 2023 notes were approximately $4.6 million and $1.7 million, respectively, and were recorded as a reduction to the equity component included in additional paid-in capital. The net carrying amount of the liability component of the notes is as follows (in thousands):
The net carrying amount of the equity component of the notes is as follows (in thousands):
As of March 31, 2019, the remaining lives of the 2025 notes and 2023 notes are approximately 6.0 and 4.1 years, respectively, and are classified as long-term debt. Based on the closing price of our common stock of $38.12 on March 31, 2019, the if-converted value of the 2025 notes was approximately $517.6 million which is less than the principal amount of $700 million by approximately $182.4 million and the if-converted value of the 2023 notes was approximately $488.0 million which exceeds the principal amount of $345 million by approximately $143.0 million. The effective interest rate of the liability components for the 2025 notes and 2023 notes are 5.4% and 4.34%, respectively, and is based on the interest rate of similar debt instruments, at the time of our offering, that do not have associated convertible features. The following table sets forth the total interest expense recognized related to the notes (in thousands):
Capped Call Transactions Concurrently with the offering of the 2025 notes and 2023 notes, we used $85.1 million and $39.2 million, respectively, of the net proceeds to enter into privately negotiated capped call transactions which are expected to generally reduce or offset potential dilution to holders of our common stock upon conversion of the notes and/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 cover 13,576,920 and 12,801,260 shares of our common stock for the 2025 notes and 2023 notes, respectively, and are intended to effectively increase the overall conversion price from $51.56 to $79.32 per share for the 2025 notes and $26.95 to $40.68 per share for the 2023 notes. As these transactions meet certain accounting criteria, they are recorded in stockholders’ equity as a reduction of additional paid-in capital on our condensed consolidated balance sheet 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. Impact to Earnings per Share The notes will have no impact to diluted earnings per share until the average price of Chegg’s common stock exceeds the conversion price for the 2025 notes and 2023 notes of $51.56 and $26.95 per share, respectively, because we intend to settle the principal amount of the notes in cash upon conversion. Under the treasury stock method, in periods we report net income, we are required to include the effect of additional shares that may be issued under the notes when the average price of our common stock exceeds the conversion price. However, as a result of the capped call transactions described above, there will be no economic dilution from the 2025 notes and 2023 notes up to $79.32 and $40.68, respectively, as exercise of the capped call instruments will reduce any dilution from the notes that would have otherwise occurred when the average price of our common stock exceeds the conversion price. |
Leases |
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Leases [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Leases | Leases We have operating leases for corporate offices worldwide, which expire at various dates through 2024. Our primary operating lease commitments at March 31, 2019 are related to our corporate headquarters in Santa Clara, California. We have additional offices in California, Oregon, Georgia and New York in the United States and internationally in India, Israel and Germany. As of March 31, 2019, we had operating lease ROU assets of $15.9 million and operating lease liabilities of $20.1 million. As of March 31, 2019, we do not have finance leases recorded on our condensed consolidated balance sheet. As of March 31, 2019, our weighted average remaining lease term was 4.3 years. During the three months ended March 31, 2019, our weighted average discount rate was 4.7%. Operating lease expense was approximately $1.3 million during the three months ended March 31, 2019. Variable lease cost was immaterial during the three months ended March 31, 2019. We did not record any sublease income or short term lease cost during the three months ended March 31, 2019. The aggregate future minimum lease payments and reconciliation to lease liabilities as of March 31, 2019, are as follows (in thousands):
The aggregate future minimum lease payments as of December 31, 2018, are as follows (in thousands):
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Commitments and Contingencies |
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Mar. 31, 2019 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Commitments and Contingencies From time to time, third parties may assert patent infringement claims against us in the form of letters, litigation, or other forms of communication. In addition, we may from time to time be subject to other legal proceedings and claims in the ordinary course of business, including claims of alleged infringement of trademarks, 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, disputes, or investigations. 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 September 27, 2018 a purported securities class action captioned Shah v. Chegg, Inc. et. al. (Case No. 3:18-cv-05956-CRB) was filed in the U.S. District Court for the Northern District of California against us and our CEO. The complaint was filed by a purported Company shareholder and alleges claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended, and SEC Rule 10b-5, based on allegedly misleading statements regarding the Company’s security measures to protect users’ data and related internal controls and procedures, as well as our second quarter 2018 financial results. The suit is purportedly brought on behalf of purchasers of our securities between July 30, 2018 and September 25, 2018. The complaint seeks unspecified compensatory damages, as well as interest, costs and attorneys’ fees. On November 15, 2018, a second purported securities class action captioned Kurland v. Chegg, Inc. et al. (Case No. 3:18-cv-06714-CRB) was filed in the U.S. District Court for the Northern District of California against us, our CEO, and our CFO. The Shah and Kurland actions contain similar allegations, assert similar claims, and seek similar relief, and on January 24, 2019, the Court consolidated the two actions. On March 29, 2019, the Plaintiffs filed a Lead Plaintiff's notice of Voluntary Dismissal Without Prejudice. NetSoc, LLC (“NetSoc”) filed a complaint for patent infringement against us in the U.S. District Court for the Southern District of New York on November 5, 2018. NetSoc alleges that our Chegg Tutors service infringes U.S. Patent No. 9,978,107 (“the ’107 Patent”). A responsive pleading was filed on February 19, 2019 and an initial status conference was held on March 1, 2019. The parties have been ordered to schedule mediation. The complaint seeks unspecified compensatory damages. We have not recorded any amounts related to the above matters, as we do not believe that a loss is probable in either matter. We are not aware of any other pending legal matters or claims, individually or in the aggregate, that are expected to have a material adverse impact on our consolidated financial position, results of operations or cash flows. However, our analysis of whether a claim may 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. 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 and/or financial condition. |
Guarantees and Indemnifications |
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Mar. 31, 2019 | |
Guarantees And Indemnifications [Abstract] | |
Guarantees and Indemnifications | 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 minimal. We have not recorded any liabilities for these agreements as of March 31, 2019. |
Stockholders' Equity |
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Stockholders' Equity | Stockholders' Equity In conjunction with our 2025 notes offering in March 2019, we repurchased 504,286 shares of our common stock at an average price per share of $39.66. Share-based Compensation Expense Total share-based compensation expense recorded for employees and non-employees, is as follows (in thousands):
RSU and PSU Activity Activity for RSUs and PSUs is as follows:
As of March 31, 2019, our total unrecognized share-based compensation expense related to RSUs and PSUs was approximately $98.1 million, which will be recognized over the remaining weighted-average vesting period of approximately 1.9 years. |
Income Taxes |
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Mar. 31, 2019 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | Income Taxes We recorded an income tax provision of approximately $0.6 million and $0.5 million during the three months ended March 31, 2019 and 2018, respectively, primarily due to state and foreign income tax expense. |
Restructuring Charges |
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Restructuring Charges | Restructuring Charges 2017 Restructuring Plan In January 2017, we entered into a strategic partnership with the National Research Center for College & University Admissions (NRCCUA) where they will assume responsibility for managing, renewing, and maintaining our existing university contracts and become the exclusive reseller of our digital marketing services for colleges and universities. As a result of this strategic partnership, approximately 55 employees in China and the United States supporting the sales and account support functions of our marketing services offerings were terminated. Costs incurred to date are expected to be fully paid within 1 month. 2015 Restructuring Plan We recorded a reduction of $0.3 million to our 2015 Restructuring Plan liability related to our adoption of ASU 2016-02, Leases (Topic 842) during the three months ended March 31, 2019. Our 2015 Restructuring Plan is now complete. The following table summarizes the activity related to the accrual for restructuring charges (in thousands):
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Related-Party Transactions |
3 Months Ended |
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Mar. 31, 2019 | |
Related Party Transactions [Abstract] | |
Related-Party Transactions | Related-Party Transactions Our Chief Executive Officer is a member of the Board of Directors of Adobe Systems Incorporated (Adobe). During the three months ended March 31, 2019 and 2018, we had purchases of $1.0 million and $1.7 million, respectively, from Adobe. We had no revenues during the three months ended March 31, 2019 and $0.1 million of revenues during the three months ended March 31, 2018 from Adobe. We had an immaterial amount in payables as of March 31, 2019 and December 31, 2018 to Adobe. We had no outstanding receivables as of March 31, 2019 and December 31, 2018 from Adobe. One of our board members is also a member of the Board of Directors of Cengage Learning, Inc. (Cengage). During the three months ended March 31, 2019 and 2018, we had purchases of $9.1 million and $5.1 million, respectively, from Cengage. We had $1.2 million and $1.9 million of revenues during the three months ended March 31, 2019, respectively, from Cengage. We had $0.5 million and $0.1 million in payables as of March 31, 2019 and December 31, 2018, respectively, to Cengage. We had an immaterial amount of outstanding receivables as of March 31, 2019 and December 31, 2018 from Cengage. The immediate family of one of our board members is also a member of the Board of Directors of PayPal Holdings, Inc. (PayPal). During the three months ended March 31, 2019 and 2018, we incurred payment processing fees of $0.4 million to PayPal. One of our board members is also a member of the Board of Directors of Synack, Inc. (Synack). During the three months ended March 31, 2019, we had purchases of $0.3 million of services from Synack. |
Subsequent Event |
3 Months Ended |
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Mar. 31, 2019 | |
Subsequent Events [Abstract] | |
Subsequent Event | Subsequent Event On April 3, 2019, in conjunction with our March 2019 issuance of the 2025 notes, we issued an additional $100 million of the 2025 notes from the initial purchasers fully exercising their option to purchase additional notes. We used approximately $12.2 million of the additional proceeds to pay for the cost of additional privately negotiated capped call transactions. The notes from this additional issuance and additional capped call transactions follow the same terms as disclosed in Note 7. Convertible Senior Notes. |
Background and Basis of Presentation (Policies) |
3 Months Ended |
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Mar. 31, 2019 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Basis of Presentation | Basis of Presentation The accompanying condensed consolidated balance sheet as of March 31, 2019, the condensed consolidated statements of operations, the condensed consolidated statements of comprehensive loss, the condensed consolidated statements of stockholder's equity, and the condensed consolidated statements of cash flows for the three months ended March 31, 2019 and 2018 and the related footnote disclosures are unaudited. 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 March 31, 2019, our results of operations, stockholder's equity, and cash flows for the three months ended March 31, 2019 and 2018. Our results of operations, stockholder's equity, and cash flows for the three months ended March 31, 2019 are not necessarily indicative of the results to be expected for the full year. We operate in a single segment. Our fiscal year ends on December 31 and in this report we refer to the year ended December 31, 2018 as 2018. 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, 2018 (the Annual Report on Form 10-K) filed with the U.S. Securities and Exchange Commission (SEC). Except for our policies on leases and convertible senior notes, 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. |
Leases | Leases We determine if an arrangement is a lease at inception. Operating leases are included in operating lease right of use (ROU) assets, operating lease liabilities within current liabilities, and operating lease liabilities within long-term liabilities on our condensed consolidated balance sheet. Operating lease ROU assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement date. Our leases do not provide an implicit rate and therefore we use our incremental borrowing rate based on the information available at commencement date in determining the present value of future minimum lease payments. Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise such options. We do not record leases on our condensed consolidated balance sheet with a term of one year or less. We do not separate lease and non-lease components but rather account for each separate component as a single lease component for all underlying classes of assets. Some of our leases include payments that are dependent on an index, such as the Consumer Price Index (CPI), and our minimum lease payments include payments based on the index at inception with any future changes in such indices recognized as an expense in the period of change. Where leases contain escalation clauses, rent abatements, or concessions, such as rent holidays and landlord or tenant incentives or allowances, we apply them in the determination of straight-line operating lease cost over the lease term. Operating lease cost for minimum lease payments is recognized on a straight-line basis over the lease term. |
Convertible Senior Notes, net | Convertible Senior Notes, net In March 2019, we issued $700 million in aggregate principal amount of 0.125% convertible senior notes due in 2025 (2025 notes) and in April 2018, we issued $345 million in aggregate principal amount of 0.25% convertible senior notes due in 2023 (2023 notes). Collectively, the 2025 notes and 2023 notes are referred to as the “notes.” In accounting for their issuance, we separated the notes into liability and equity components. The carrying amount of the liability component was calculated by measuring the fair value of similar liabilities that do not have an associated convertible feature. The carrying amount of the equity component representing the conversion option was determined by deducting the carrying amount of the liability component from the par value of the notes. The difference represents the debt discount, recorded as a reduction of the convertible senior notes on our condensed consolidated balance sheet, and is amortized to interest expense over the term of the notes using the effective interest rate method. The equity component is not remeasured as long as it continues to meet the conditions for equity classification. In accounting for the issuance costs related to the notes, we allocated the total amount of issuance costs incurred to liability and equity components based on their relative values. Issuance costs attributable to the liability component are being amortized on a straight-line basis, which approximates the effective interest rate method, to interest expense over the term of the notes. The issuance costs attributable to the equity component are recorded as a reduction of the equity component within additional paid-in capital. |
Use of Estimates | Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles in the United States (U.S. 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. Significant estimates, assumptions, and judgments are used for, but not limited to: revenue recognition, recoverability of accounts receivable, restructuring charges (credits), share-based compensation expense including estimated forfeitures, accounting for income taxes, useful lives assigned to long-lived assets for depreciation and amortization, impairment of goodwill and long-lived assets, the valuation of acquired intangible assets, the valuation of our convertible senior notes, and operating lease ROU assets and operating lease liabilities. 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. |
Recent Accounting Pronouncements | Recent Accounting Pronouncements Recently Issued Accounting Pronouncements Not Yet Adopted In August 2018, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2018-15, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract. ASU 2018-15 aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with existing guidance contained within subtopic 350-40 to develop or obtain internal-use software. Early adoption is permitted and the guidance allows for a retrospective or prospective application. The guidance is effective for annual periods beginning after December 15, 2019, and we are currently in the process of evaluating the impact of this guidance. In July 2018, the FASB issued ASU 2018-09, Codification Improvements. ASU 2018-09 provides updates for technical corrections, clarifications, and other minor improvements to a wide variety of topics in the ASC. The transition method of adoption is dependent on the ASC topic impacted by this guidance. Additionally, some of the ASC topic updates are effective upon issuance of ASU 2018-09 and some of the ASC topic updates are effective at a future date. The ASC topic updates effective upon issuance of ASU 2018-09 do not impact our accounting for the respective ASC topics. For those ASC topic updates effective at a future date, we are currently in the process of evaluating the impact of this guidance update. Recently Adopted Accounting Pronouncements The FASB has issued four ASUs related to Accounting Standards Codification (ASC) 842. In March 2019, the FASB issued ASU 2019-01, Leases (Topic 842): Codification Improvements. In July 2018, the FASB issued ASU 2018-11, Leases (Topic 842): Targeted Improvements and ASU 2018-10, Codification Improvements to Topic 842, Leases. In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). ASC 842 requires an entity to recognize a ROU asset and lease liability for all leases with terms of more than 12 months. Recognition, measurement, and presentation of expenses will depend on classification as a finance or operating lease. The amendments in this update also require certain quantitative and qualitative disclosures about leasing arrangements. We have adopted ASC 842 on January 1, 2019 and have elected the transition method of adoption that allows for a modified retrospective adoption with a cumulative-effect adjustment to the opening balance of accumulated deficit and recorded an immaterial decrease to our opening balance of accumulated deficit. As a result, we have not changed previously disclosed amounts or provided additional disclosures for comparative periods. We initially recorded ROU assets of $17.2 million and lease liabilities of $21.1 million on our condensed consolidated balance sheet. ASC 842 does not have a material impact to our condensed consolidated statement of operations. We have elected a package of transition practical expedients which include not reassessing whether any expired or existing contracts are or contain leases, not reassessing the lease classification of expired or existing leases, and not reassessing initial direct costs for existing leases. We have also elected a practical expedient to not separate lease and non-lease components. We did not elect the practical expedient to use hindsight in determining our lease terms or assessing impairment of our ROU assets. See Note 8. Leases for more information. |
Revenue Recognition | 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, most significantly the revenue share we earn from our print textbook partners, being recognized at the point in time when print textbooks are shipped to students. |
Net Loss Per Share | Net Loss Per Share Basic net loss per share is computed by dividing the net loss by the weighted-average number of shares of common stock outstanding during the period. Diluted net loss per share is computed by giving effect to all potential shares of common stock, including stock options, warrants, restricted stock units (RSUs), performance-based restricted stock units (PSUs), and shares related to convertible senior notes, to the extent dilutive. Basic and diluted net loss per share was the same for each period presented as the inclusion of all potential common shares outstanding would have been anti-dilutive. |
Revenues (Tables) |
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Revenue from Contract with Customer [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Disaggregation of Revenue | The following table sets forth our total net revenues for the periods shown disaggregated for our Chegg Services and Required Materials product lines (in thousands, except percentages):
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Schedule of Accounts Receivable | The following table presents our accounts receivable, net and deferred revenue balances (in thousands, except percentages):
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Net Loss Per Share (Tables) |
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Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Earnings Per Share, Basic and Diluted | The following table sets forth the computation of historical basic and diluted net loss per share (in thousands, except per share amounts):
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Schedule of Antidilutive Securities Excluded from Computation of Earnings Per Share | The following potential weighted-average shares of common stock outstanding were excluded from the computation of diluted net loss per share because including them would have been anti-dilutive (in thousands):
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Cash and Cash Equivalents, and Investment (Tables) |
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Cash and Cash Equivalents [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Cash, Cash Equivalents and Investments | The following table shows our cash and cash equivalents, and investments’ adjusted cost, net unrealized gain/(loss) and fair value as of March 31, 2019 and December 31, 2018 (in thousands):
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Schedule of Available-for-sale Securities Reconciliation | The adjusted cost and fair value of available-for-sale investments as of March 31, 2019 by contractual maturity were as follows (in thousands):
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Fair Value Measurement (Tables) |
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis | Financial instruments measured and recorded at fair value on a recurring basis as of March 31, 2019 and December 31, 2018 are classified based on the valuation technique level in the tables below (in thousands):
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Fair Value Measurements, Nonrecurring | The carrying amounts and estimated fair values of the notes as of March 31, 2019 and December 31, 2018 are as follows (in thousands):
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Goodwill and Intangible Assets (Tables) |
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Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Goodwill | Goodwill consists of the following (in thousands):
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Finite-Lived Intangible Assets | Intangible assets as of March 31, 2019 and December 31, 2018 consist of the following (in thousands, except weighted-average amortization period):
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Indefinite-lived Intangible Assets | Intangible assets as of March 31, 2019 and December 31, 2018 consist of the following (in thousands, except weighted-average amortization period):
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Estimated Future Amortization Expense Related to Intangible Assets | As of March 31, 2019, the estimated future amortization expense related to our finite-lived intangible assets is as follows (in thousands):
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Convertible Senior Notes (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule Of Net Proceeds From Debt Issuance | The total net proceeds from the notes are as follows (in thousands):
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Schedule of Debt | The net carrying amount of the liability component of the notes is as follows (in thousands):
The net carrying amount of the equity component of the notes is as follows (in thousands):
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Schedule Of Interest Expense Recognized | The following table sets forth the total interest expense recognized related to the notes (in thousands):
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Leases (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Leases [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Lessee, Operating Lease, Liability, Maturity | The aggregate future minimum lease payments and reconciliation to lease liabilities as of March 31, 2019, are as follows (in thousands):
The aggregate future minimum lease payments as of December 31, 2018, are as follows (in thousands):
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Stockholders' Equity (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock-Based Compensation Expense for Employees and Non-Employees | Total share-based compensation expense recorded for employees and non-employees, is as follows (in thousands):
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Summary of Restricted Stock Unit Activity | Activity for RSUs and PSUs is as follows:
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Restructuring Charges (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Restructuring and Related Activities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Restructuring Reserve by Type of Cost | The following table summarizes the activity related to the accrual for restructuring charges (in thousands):
|
Background and Basis of Presentation (Details) - USD ($) |
Mar. 31, 2019 |
Jan. 01, 2019 |
Dec. 31, 2018 |
Apr. 30, 2018 |
---|---|---|---|---|
Error Corrections and Prior Period Adjustments Restatement [Line Items] | ||||
Right of use assets | $ 15,875,000 | $ 0 | ||
Operating lease liability | 20,064,000 | |||
Senior Notes | 0.125% Convertible Senior Notes Due 2025 | ||||
Error Corrections and Prior Period Adjustments Restatement [Line Items] | ||||
Face value | $ 700,000,000 | |||
Interest rate, stated percentage | 0.125% | |||
Senior Notes | 0.25% Convertible Senior Notes Due 2023 | ||||
Error Corrections and Prior Period Adjustments Restatement [Line Items] | ||||
Face value | $ 345,000,000 | $ 345,000,000 | $ 345,000,000 | |
Interest rate, stated percentage | 0.25% | |||
Accounting Standards Update 2016-02 | ||||
Error Corrections and Prior Period Adjustments Restatement [Line Items] | ||||
Right of use assets | $ 17,200,000 | |||
Operating lease liability | $ 21,100,000 |
Revenues (Details) - USD ($) $ in Thousands |
3 Months Ended | ||
---|---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
Dec. 31, 2018 |
|
Disaggregation of Revenue [Line Items] | |||
Total net revenues | $ 97,409 | $ 76,949 | |
Change in total net revenues | $ 20,460 | ||
Change in total net revenues, percent | 27.00% | ||
Contract with customer, liability, revenue recognized | $ 12,400 | ||
Aggregate amount of unsatisfied performance obligations | 29,000 | ||
Accounts receivable, net | 8,870 | $ 12,733 | |
Change in accounts receivable | $ (3,863) | ||
Change in accounts receivable, percent | (30.00%) | ||
Deferred revenue | $ 26,276 | $ 17,418 | |
Change in deferred revenue | $ 8,858 | ||
Change in deferred revenue, percent | 51.00% | ||
Chegg Services | |||
Disaggregation of Revenue [Line Items] | |||
Total net revenues | $ 75,292 | 56,277 | |
Change in total net revenues | $ 19,015 | ||
Change in total net revenues, percent | 34.00% | ||
Required Materials | |||
Disaggregation of Revenue [Line Items] | |||
Total net revenues | $ 22,117 | $ 20,672 | |
Change in total net revenues | $ 1,445 | ||
Change in total net revenues, percent | 7.00% |
Net Loss Per Share - Computation of Basic and Diluted Net Loss Per Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
|
Numerator: | ||
Net loss | $ (4,318) | $ (2,617) |
Denominator: | ||
Weighted average shares used to compute net loss per share, basic and diluted (in shares) | 116,730 | 110,904 |
Net loss per share, basic and diluted (in dollars per share) | $ (0.04) | $ (0.02) |
Cash and Cash Equivalents, and Investment - Additional Information (Details) - USD ($) $ in Millions |
Mar. 31, 2019 |
Dec. 31, 2018 |
Oct. 31, 2018 |
---|---|---|---|
Schedule of Investments [Line Items] | |||
Restricted cash | $ 1.0 | $ 1.3 | |
Cost method investment | $ 10.0 | ||
Other Assets | Equity Investments | |||
Schedule of Investments [Line Items] | |||
Investments | $ 3.0 |
Cash and Cash Equivalents, and Investment - Contractual Maturity (Details) $ in Thousands |
3 Months Ended |
---|---|
Mar. 31, 2019
USD ($)
| |
Cash and Cash Equivalents [Abstract] | |
Due in 1 year or less, Cost | $ 91,452 |
Due in 1-2 years, Cost | 12,475 |
Investments not due at a single maturity date, Cost | 613,210 |
Cost | 717,137 |
Due in 1 year or less, Fair Value | 91,442 |
Due in 1-2 years, Fair Value | 12,533 |
Investments not due at a single maturity date, Fair Value | 613,210 |
Total, Fair Value | $ 717,185 |
Weighted average maturity | 1 month |
Goodwill and Intangible Assets - Goodwill (Details) - USD ($) $ in Thousands |
3 Months Ended | 12 Months Ended |
---|---|---|
Mar. 31, 2019 |
Dec. 31, 2018 |
|
Goodwill [Roll Forward] | ||
Beginning balance | $ 149,524 | $ 125,272 |
Additions due to acquisitions | 0 | 24,673 |
Foreign currency translation adjustment | (43) | (421) |
Ending balance | $ 149,481 | $ 149,524 |
Goodwill and Intangible Assets - Additional Information (Details) - USD ($) $ in Millions |
3 Months Ended | |
---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
|
Acquisition-Related Intangible Assets | ||
Finite Lived Intangible Assets [Line Items] | ||
Amortization expense of acquisition related to acquired intangible assets | $ 1.8 | $ 1.4 |
Goodwill and Intangible Assets - Estimated Future Amortization Expense Related to Intangible Assets (Details) $ in Thousands |
Mar. 31, 2019
USD ($)
|
---|---|
Goodwill and Intangible Assets Disclosure [Abstract] | |
Remaining nine months of 2019 | $ 4,658 |
2020 | 4,816 |
2021 | 3,423 |
2022 | 2,943 |
2023 | 2,276 |
Thereafter | 2,381 |
Net Carrying Amount | $ 20,497 |
Convertible Senior Notes - Interest Expense Recognized (Details) - Senior Notes - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
|
0.125% Convertible Senior Notes Due 2025 | ||
Debt Instrument [Line Items] | ||
Contractual interest expense | $ 14 | |
Amortization of debt discount | 510 | |
Amortization of issuance costs | 35 | |
Total interest expense | $ 559 | |
0.25% Convertible Senior Notes Due 2023 | ||
Debt Instrument [Line Items] | ||
Contractual interest expense | $ 213 | |
Amortization of debt discount | 3,091 | |
Amortization of issuance costs | 369 | |
Total interest expense | $ 3,673 |
Leases - Additional Information (Details) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2019 |
Dec. 31, 2018 |
|
Leases [Abstract] | ||
Right of use assets | $ 15,875 | $ 0 |
Operating lease liability | $ 20,064 | |
Weighted average remaining lease term for operating lease | 4 years 3 months 11 days | |
Weighted average discount rate used to determine the operating lease liability | 4.70% | |
Operating lease expense, net of accretion | $ 1,300 |
Leases - Maturities of Operating Lease Liabilities (Details) - USD ($) $ in Thousands |
Mar. 31, 2019 |
Dec. 31, 2018 |
---|---|---|
Leases [Abstract] | ||
Remaining nine months of 2019 | $ 4,101 | |
2020 | 5,200 | |
2021 | 4,724 | |
2022 | 3,948 | |
2023 | 3,424 | |
2024 | 788 | |
Total future minimum lease payments | 22,185 | |
Less imputed interest | (2,121) | |
Total lease liabilities | $ 20,064 | |
2019 | $ 5,222 | |
2020 | 5,251 | |
2021 | 4,775 | |
2022 | 3,999 | |
2023 | 3,421 | |
Thereafter | 788 | |
Total | $ 23,456 |
Stockholders' Equity - Share-based Compensation Expense (Details) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
|
Employee Service Share Based Compensation Allocation Of Recognized Period Costs [Line Items] | ||
Share-based compensation expense | $ 15,038 | $ 11,642 |
Cost of revenues | ||
Employee Service Share Based Compensation Allocation Of Recognized Period Costs [Line Items] | ||
Share-based compensation expense | 125 | 94 |
Research and development | ||
Employee Service Share Based Compensation Allocation Of Recognized Period Costs [Line Items] | ||
Share-based compensation expense | 4,917 | 4,133 |
Sales and marketing | ||
Employee Service Share Based Compensation Allocation Of Recognized Period Costs [Line Items] | ||
Share-based compensation expense | 1,808 | 1,589 |
General and administrative | ||
Employee Service Share Based Compensation Allocation Of Recognized Period Costs [Line Items] | ||
Share-based compensation expense | $ 8,188 | $ 5,826 |
Stockholders' Equity - Additional Information (Details) $ / shares in Units, $ in Millions |
1 Months Ended | 3 Months Ended |
---|---|---|
Mar. 31, 2019
USD ($)
$ / shares
shares
|
Mar. 31, 2019
USD ($)
$ / shares
|
|
RSUs and PSUs | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Unrecognized compensation costs related to restricted stock units | $ | $ 98.1 | $ 98.1 |
Weighted average vesting period for recognition of compensation expense | 1 year 10 months 21 days | |
Common Stock | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Shares repurchased (in shares) | shares | 504,286 | |
Share price (in dollars per share) | $ / shares | $ 39.66 | $ 39.66 |
Income Taxes (Details) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
|
Income Tax Disclosure [Abstract] | ||
Provision for income taxes | $ 626 | $ 541 |
Restructuring Charges - Narrative (Details) |
3 Months Ended |
---|---|
Mar. 31, 2019
position
| |
2017 Restructuring Plan | Workforce Reduction Costs | |
Restructuring Cost and Reserve [Line Items] | |
Number of positions eliminated | 55 |
Subsequent Event (Details) - 0.125% Convertible Senior Notes Due 2025 - Senior Notes - Subsequent Event |
Apr. 03, 2019
USD ($)
|
---|---|
Subsequent Event [Line Items] | |
Face value | $ 100,000,000 |
Payments for additional privately negotiated capped call transactions | $ 12,200,000 |
Label | Element | Value |
---|---|---|
Accounting Standards Update 2018-02 And 2014-09 [Member] | ||
Cumulative Effect of New Accounting Principle in Period of Adoption | us-gaap_CumulativeEffectOfNewAccountingPrincipleInPeriodOfAdoption | $ (77,000) |
Cumulative Effect of New Accounting Principle in Period of Adoption | us-gaap_CumulativeEffectOfNewAccountingPrincipleInPeriodOfAdoption | (111,000) |
Accounting Standards Update 2018-02 And 2014-09 [Member] | Retained Earnings [Member] | ||
Cumulative Effect of New Accounting Principle in Period of Adoption | us-gaap_CumulativeEffectOfNewAccountingPrincipleInPeriodOfAdoption | (77,000) |
Cumulative Effect of New Accounting Principle in Period of Adoption | us-gaap_CumulativeEffectOfNewAccountingPrincipleInPeriodOfAdoption | $ (111,000) |