CHEGG, INC

Previous wording

On February 24, 2025, we announced that we are undertaking a strategic review process and exploring a range of alternatives to maximize shareholder value, including being acquired, undertaking a go-private transaction, or remaining as a standalone public company. This review will be ongoing with our continued investment, innovation, and execution. We have not set a timetable for the completion of this process, and there can be no assurance that it will result in any transaction or outcome.

Current wording

On February 24, 2025, we announced that we are undertaking a strategic review process and exploring a range of alternatives to maximize shareholder value, including being acquired, undertaking a go-private transaction, or remaining as a standalone public company. This review is ongoing with our continued investment, innovation, and execution. We have not set a timetable for the completion of this process, and there can be no assurance that it will result in any transaction or outcome.

Previous wording

Recent technological shifts, notably Google's roll out of AI Overviews (AIO) and continued increase in adoption of free and paid generative AI services by students, have created and are expected to continue to create headwinds for our industry and our business, most notably a reduction in traffic to our website and customers subscribing to our services. In mid-August, Google broadly rolled out its AIO search experience, or AIO, which displays AI-generated content at the top of its search results. This experience, which includes questions and solutions for education, keeps users on Google search results versus leading them onto our site. AIO’s prevalence has grown and will only continue to increase. While we continue to study the changes and adjust our SEO strategy, we expect Google to continue its shift from being a search origination point to the destination, which could materially adversely affect our business, operating results and financial condition.

Current wording

Recent technological shifts, notably Google's roll out of its AI Overviews search experience, or AIO, and continued increase in adoption of free and paid generative AI services by students, have created and are expected to continue to create headwinds for our industry and our business, most notably a reduction in traffic to our website and customers subscribing to our services. In August 2024, Google broadly rolled out AIO, which displays AI-generated content at the top of its search results. This experience, which includes questions and solutions for education, keeps users on Google search results versus leading them onto our site. AIO’s prevalence has grown and will only continue to increase. While we continue to study the changes and adjust our SEO strategy, we expect Google to continue its shift from being a search origination point to the destination, which could materially adversely affect our business, operating results and financial condition.

Previous wording

In May 2025, we announced an additional restructuring plan to further manage costs and align with the market. The May 2025 restructuring plan included a reduction in workforce and the closure of two offices. For fiscal year 2025 and 2026, we expect to realize cost savings as a result of the May 2025 restructuring plan. See Note 11, “Restructuring Charges” of our accompanying Notes to Condensed Consolidated Financial Statements included in Part I, Item 1, “Financial Statements (unaudited)” of this Quarterly Report on Form 10-Q for additional details.

Current wording

In May 2025, we announced an additional restructuring plan to further manage costs and align with the market. The May 2025 restructuring plan included a reduction in workforce and the closure of one office. We estimate we will incur between $11 million and $13 million of additional restructuring charges over the next two fiscal quarters and we expect the plan to be substantially completed by the first quarter of the fiscal year 2026. For fiscal years 2025 and 2026, we expect to realize cost savings as a result of the May 2025 restructuring plan. See Note 12, “Restructuring Charges” of our accompanying Notes to Condensed Consolidated Financial Statements included in Part I, Item 1, “Financial Statements (unaudited)” of this Quarterly Report on Form 10-Q for additional details.

Previous wording

Subscription Services revenues decreased $46.5 million, or 30%, during the three months ended March 31, 2025, compared to the same period in 2024. The decrease was primarily due to a 31% decrease in subscribers who have paid to access our services during the three months ended March 31, 2025, compared to the same period in 2024.

Current wording

Subscription Services revenues decreased $57.1 million, or 39%, and $103.6 million, or 34%, during the three and six months ended June 30, 2025, respectively, compared to the same period in 2024. The decrease was primarily due to a 40% and 31% decrease in subscribers who have paid to access our services during the three months ended June 30, 2025 and March 31, 2025, respectively, compared to the same periods in 2024.

Previous wording

Skills and Other revenues decreased $6.5 million, or 32%, during the three months ended March 31, 2025, compared to the same period in 2024, primarily due to a decrease in Chegg Skills of $5.0 million related to lower enrollments and a decrease in advertising services revenues of $3.8 million due to lower fulfillment partially offset by content licensing revenue of $4.0 million.

Current wording

Skills and Other revenues decreased $0.9 million, or 6%, during the three months ended June 30, 2025, compared to the same period in 2024, primarily due to a decrease in Chegg Skills of $3.3 million related to lower enrollments and a decrease in advertising services revenue of $3.9 million due to lower fulfillment partially offset by content licensing revenue of $6.6 million. Skills and Other revenues decreased $7.4 million, or 20%, during the six months ended June 30, 2025, compared to the same period in 2024, primarily due to a decrease in Chegg Skills of $8.3 million related to lower enrollments and a decrease in advertising services revenues of $7.7 million due to lower fulfillment partially offset by content licensing revenue of $10.6 million.

Previous wording

Cost of revenues increased $7.5 million, or 16%, during the three months ended March 31, 2025, compared to the same period in 2024. The increase was primarily due to higher depreciation expense of $13.8 million, primarily due to the accelerated depreciation recorded as we streamlined our product experiences, partially offset by lower payment processing and other order fees of $3.7 million, primarily due to the decrease in subscribers who have paid to access our services, and lower contractor spend of $1.0 million. Gross margins decreased to 56% during the three months ended March 31, 2025, from 73% during the same period in 2024.

Current wording

Cost of revenues decreased $2.5 million, or 3%, during the six months ended June 30, 2025, compared to the same period in 2024. The decrease was primarily due to lower contractor spend of $1.5 million, lower employee-related expenses of $2.2 million, lower payment processing and other order fees of $8.5 million, which is primarily due to the decrease in subscribers who have paid to access our services, which was partially offset by higher depreciation and amortization expense of $10.5 million primarily due to the accelerated depreciation recorded as we streamlined our product experiences. Gross margins decreased to 61% during the six months ended June 30, 2025, from 73% during the same period in 2024.

Previous wording

Operating expenses decreased $33.9 million, or 26%, during the three months ended March 31, 2025, compared to the same period in 2024, primarily due to lower employee-related expenses and contractor spend as a result of prior year restructuring actions. See Note 11, “Restructuring Charges” of our accompanying Notes to Condensed Consolidated Financial Statements included in Part I, Item 1, “Financial Statements (unaudited)” of this Quarterly Report on Form 10-Q for additional information regarding the prior year restructuring actions.

Current wording

Operating expenses decreased $496.6 million, or 82%, and $530.6 million, or 72%, during the three and six months ended June 30, 2025, respectively, compared to the same periods in 2024, primarily due to the absence of impairment expenses of $481.5 million recognized fiscal year 2024. The remaining decrease was primarily related to lower employee-related expenses and contractor spend as a result of restructuring actions. See "Note 1, “Background and Basis of Presentation” and Note 12, “Restructuring Charges” of our accompanying Notes to Condensed Consolidated Financial Statements included in Part I, Item 1, “Financial Statements (unaudited)” of this Quarterly Report on Form 10-Q for additional information regarding impairment expense and the restructuring actions, respectively.

Previous wording

Research and development expenses decreased $15.0 million, or 34%, during the three months ended March 31, 2025 compared to the same period in 2024. The decrease was primarily due to lower employee-related expenses of $12.7 million, including share-based compensation expense, and lower contractor spend of $1.9 million. Research and development expenses as a percentage of net revenues were 24% during the three months ended March 31, 2025 compared to 26% during the same period in 2024.

Current wording

Research and development expenses decreased $14.9 million, or 34%, during the three months ended June 30, 2025 compared to the same period in 2024. The decrease was primarily due to lower employee-related expenses of $16.7 million, including share-based compensation expense, and lower contractor spend of $1.6 million, partially offset by higher restructuring charges of $4.8 million. Research and development expenses as a percentage of net revenues were flat at 27% during the three months ended June 30, 2025 and 2024.

Previous wording

Sales and marketing expenses decreased by $4.8 million, or 16%, during the three months ended March 31, 2025, compared to the same period in 2024. The decrease was primarily attributable to lower employee-related expenses of $1.8 million, including share-based compensation expense, and lower depreciation and amortization expense of $0.9 million. Sales and marketing expenses as a percentage of net revenues were 21% during the three months ended March 31, 2025 compared to 17% during the same period in 2024.

Current wording

Sales and marketing expenses decreased by $6.1 million, or 26%, during the three months ended June 30, 2025, compared to the same period in 2024. The decrease was primarily attributable to lower employee-related expenses of $3.6 million, including share-based compensation expense, lower paid marketing expenses of $1.1 million, lower indirect marketing expenses of $1.8 million, and lower amortization expense of $0.5 million, partially offset by higher restructuring charges of $1.1 million. Sales and marketing expenses as a percentage of net revenues were 17% during the three months ended June 30, 2025 compared to 14% during the same period in 2024.

Previous wording

General and administrative expenses decreased $16.2 million, or 29%, during the three months ended March 31, 2025 compared to the same period in 2024. The decrease was due to lower employee-related expenses of $12.9 million, which is primarily due to share-based compensation expense, and lower professional fees of $3.0 million partially offset by restructuring charges of $1.8 million. General and administrative expenses as a percentage of net revenues were 33% during the three months ended March 31, 2025 compared to 32% during the same period in 2024.

Current wording

General and administrative expenses decreased $10.2 million, or 9%, during the six months ended June 30, 2025 compared to the same period in 2024. The decrease was due to lower employee-related expenses of $22.8 million, which is primarily due to share-based compensation expense, lower professional fees of $6.8 million, and lower contractor spend of $1.9 million, partially offset by higher restructuring charges of $7.6 million, a $6.0 million impairment loss on a strategic equity investment, and a $7.5 million loss contingency accrual. General and administrative expenses as a percentage of net revenues were 44% during the three months ended June 30, 2025 compared to 32% during the same period in 2024.

Previous wording

Impairment expense was $2.0 million during the three months ended March 31, 2025, consisting of impairment of property and equipment. See Note 5, Property and Equipment, Net” of our accompanying Notes to Condensed Consolidated Financial Statements included in Part I, Item 1, “Financial Statements (unaudited)” of this Quarterly Report on Form 10-Q for additional information.

Current wording

Impairment expense was $2.0 million during the six months ended June 30, 2025, consisting of impairment of property and equipment. See Note 5, Property and Equipment, Net” of our accompanying Notes to Condensed Consolidated Financial Statements included in Part I, Item 1, “Financial Statements (unaudited)” of this Quarterly Report on Form 10-Q for additional information. Impairment expense was $481.5 million during the three and six months ended June 30, 2024, consisting of impairments of goodwill, intangible assets, and other related long-lived assets. See "Note 1, Background and Basis of Presentation" and "Note 5, Property and Equipment" of our accompanying Notes to Condensed Consolidated Financial Statements included in Part I, Item 1, “Financial Statements (unaudited)” of this Quarterly Report on Form 10-Q for additional information.

Previous wording

The following tables present our interest expense and other income, net, for the periods shown (in thousands, except percentages):

Current wording

The following tables present our interest expense, net and other income, net, for the periods shown (in thousands, except percentages):

Previous wording

Other income, net increased $2.2 million, or 21%, during the three months ended March 31, 2025 compared to the same period in 2024, primarily due to the gain on early extinguishment of a portion of the 2026 notes of $7.4 million partially offset primarily due to the absence of the gain on sale of the strategic equity investment in Sound Ventures of $3.8 million and a decrease in interest income of $2.1 million.

Current wording

Other income, net decreased $2.8 million, or 16%, during the six months ended June 30, 2025 compared to the same period in 2024, primarily due to a decrease in interest income of $7.8 million due to lower investment balances and the absence of the gain on sale of the strategic equity investment in Sound Ventures of $3.8 million, partially offset by the $7.4 million gain on early extinguishment of a portion of the 2026 notes.

Previous wording

Provision for income taxes decreased $8.0 million, or 89% during the three months ended March 31, 2025 compared to the same period in 2024, primarily due to a decrease in worldwide forecasted income and the valuation allowance against our U.S. federal and state deferred tax assets.

Current wording

Provision for income taxes decreased $137.1 million and $145.2 million during the three and six months ended June 30, 2025, compared to the same periods in 2024, primarily due to the valuation allowance established in fiscal year 2024 against our U.S. federal and state deferred tax assets.

Previous wording

Cash, cash equivalents, and investments decreased $402.0 million, or 76%, and convertible senior notes decreased $423.5 million, or 87% during the three months ended March 31, 2025. The decreases were primarily due to the net cash used for the repayment of the 2025 notes early extinguishment of a portion of the 2026 notes.

Current wording

Cash, cash equivalents, and investments decreased $414.3 million, or 78%, and convertible senior notes, net decreased $423.4 million, or 87% during the six months ended June 30, 2025. The decreases were primarily due to the net cash used for the maturity of the 2025 notes and the early extinguishment of a portion of the 2026 notes.

Previous wording

As of March 31, 2025, our principal sources of liquidity were cash, cash equivalents, and investments totaling $126.4 million, which were held for working capital purposes. We believe that our existing sources of liquidity as well as net cash flows from operations will be sufficient to fund our operations and debt service obligations for at least the next 12 months. Our future capital requirements will depend on many factors, including our rate of revenue growth, our investments in research and development activities, our acquisition of new products and services and our sales and marketing activities. To the extent that existing sources of liquidity are insufficient to fund our future operations, we may need to raise additional funds through public or private equity or debt financing. Additional funds may not be available on terms favorable to us or at all. If adequate funds are not available on acceptable terms, or at all, we may be unable to adequately fund our business plans and it could have a negative effect on our business, operating cash flows and financial condition. As of March 31, 2025, we have incurred cumulative losses of $906.9 million from our operations and we may incur additional losses in the future.

Current wording

As of June 30, 2025, our principal sources of liquidity were cash, cash equivalents, and investments totaling $114.1 million, which were held for working capital purposes. We believe that our existing sources of liquidity as well as net cash flows from operations will be sufficient to fund our operations and debt service obligations for at least the next 12 months. Our future capital requirements will depend on many factors, including our rate of revenue growth, our investments in research and development activities, our acquisition of new products and services and our sales and marketing activities. To the extent that existing sources of liquidity are insufficient to fund our future operations, we may need to raise additional funds through public or private equity or debt financing. Additional funds may not be available on terms favorable to us or at all. If adequate funds are not available on acceptable terms, or at all, we may be unable to adequately fund our business plans and it could have a negative effect on our business, operating cash flows and financial condition. As of June 30, 2025, we have incurred cumulative losses of $942.6 million from our operations and we may incur additional losses in the future.

Previous wording

Most of our cash, cash equivalents, and investments are held in the United States. While there is no formal plan in place to repatriate earnings from our subsidiary in India, we recorded $1.8 million of tax expense as of March 31, 2025, related to a potential future distribution of such earnings. This reflects our continued assessment of cash needs and the absence of an indefinite reinvestment assertion for India. As a result of the Tax Cuts and Jobs Act, we anticipate the U.S. federal impact for the remaining foreign jurisdictions to be minimal if these funds are repatriated. In addition, based on our current and future needs, we believe our current funding and capital resources for our international operations are adequate.

Current wording

Most of our cash, cash equivalents, and investments are held in the United States. As part of our ongoing cash management, we intend to repatriate a portion of earnings from our subsidiary in India by the end of fiscal year 2025. Accordingly, we do not assert an indefinite reinvestment of earnings and accrued a withholding tax of $2.0 million as of June 30, 2025, related to a potential future distribution of such earnings. This reflects our continued assessment of cash needs and the absence of an indefinite reinvestment assertion for our subsidiary in India. As a result of the Tax Cuts and Jobs Act, we anticipate the U.S. federal impact for the remaining foreign jurisdictions to be minimal if these funds are repatriated. In addition, based on our current and future needs, we believe our current funding and capital resources for our international operations are adequate.

Previous wording

Net cash flows from operating activities decreased $28.8 million, or 54%, during the three months ended March 31, 2025 compared to the same period in 2024 and was primarily related to an increase in net loss of $16.1 million as well as non-cash adjustments including a decrease in share-based compensation expense of $18.0 million, a gain on early extinguishment of debt of $7.4 million, and higher depreciation and amortization of $12.4 million.

Current wording

Net cash flows from operating activities decreased $47.9 million, or 71%, during the six months ended June 30, 2025 compared to the same period in 2024 and was primarily related to a decrease in impairment expense of $480.0 million, as well as a decrease in deferred tax assets of $140.9 million, partially offset by a decrease in net loss of $565.2 million.

Previous wording

Net cash flows from investing activities increased $315.7 million during the three months ended March 31, 2025 compared to the same period in 2024 and was primarily related to higher proceeds from the sale of investments of $181.2 million, fewer purchases of investments of $78.2 million, higher proceeds from the maturities of our investments of $52.5 million, fewer purchases of property and equipment of $19.4 million and partially offset by the absence of proceeds from the sale of our strategic investment of $15.5 million that occurred in the three months ended March 31, 2024.

Current wording

Net cash flows from investing activities increased $336.3 million during the six months ended June 30, 2025 compared to the same period in 2024 and was primarily related to higher proceeds from the sale of investments of $181.2 million, fewer purchases of investments of $122.9 million, higher proceeds from the maturities of our investments of $17.8 million, fewer purchases of property and equipment of $29.9 million partially offset by the absence of proceeds from the sale of our strategic investment of $15.5 million that occurred in the six months ended June 30, 2024.

Previous wording

Net cash flows from financing activities decreased $412.7 million during the three months ended March 31, 2025 compared to the same period in 2024 and was primarily related to the repayment of our convertible debt of $416.5 million.

Current wording

Net cash flows from financing activities decreased $411.5 million during the six months ended June 30, 2025 compared to the same period in 2024 and was primarily related to the repayment of our convertible debt of $416.5 million.

Previous wording

There have been no material changes in our critical accounting policies and estimates during the three months ended March 31, 2025 as compared to the critical accounting policies and estimates disclosed in Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained in our Annual Report on Form 10-K for the year ended December 31, 2024.

Current wording

There have been no material changes in our critical accounting policies and estimates during the six months ended June 30, 2025 as compared to the critical accounting policies and estimates disclosed in Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained in our Annual Report on Form 10-K for the year ended December 31, 2024.