Chegg 2013 Annual Report Download - page 118

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CHEGG, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Background and Basis of Presentation
Chegg, Inc. (Chegg, the Company, we, us, or our), headquartered in Santa Clara, California, was
incorporated as a Delaware corporation on July 29, 2005. Chegg is the leading student-first connected learning
platform, empowering students to take control of their education to save time, save money and get smarter. We
are driven by our passion to help students become active consumers in the educational process. Our integrated
platform, which we call the Student Hub, offers products and services that students need throughout the college
lifecycle, from choosing a college through graduation and beyond. Our Student Graph builds on the information
generated through students’ and other participants’ use of our platform to increasingly enrich the experience for
participants as it grows in scale and power the Student Hub. By helping students learn more in less time and at a
lower cost, we help them improve the overall return on investment in education. In 2013, we had nearly seven
million members that used our platform.
We operate in a single segment. We refer to the years ended December 31, 2013, 2012 and 2011 as 2013,
2012 and 2011, respectively.
In August 2013, our board of directors and stockholders approved an amendment to our certificate of
incorporation to effect a two-for-three reverse split of our common stock. The record date of the reverse stock
split was September 3, 2013, the date the amendment to our certificate of incorporation was filed with the
Delaware Secretary of State. In accordance with our certificate of incorporation, the conversion ratios of the
convertible preferred stock were adjusted to reflect the reverse stock split. The number of outstanding shares of
convertible preferred stock was not adjusted. Additionally, the par value and the authorized shares of common
stock and convertible preferred stock were not adjusted as a result of the reverse stock split. The reverse stock
split has been reflected in the accompanying consolidated financial statements and related notes on a retroactive
basis for all periods presented.
In November 2013, we completed our initial public offering (IPO), whereby 14,400,000 share of common
stock were sold to the public at a price of $12.50 per share.
Note 2. Significant Accounting Policies
Use of Estimates in the Preparation of Consolidated Financial Statements
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 assets and liabilities at the date of the
financial statements; and the reported amounts of revenue and expenses during the reporting periods. Significant
estimates, assumptions and judgments are used for, but not limited to: revenue recognition, recoverability of
accounts receivable, determination of the useful lives and salvage value related to our textbook library, valuation
of preferred stock warrants, and stock-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, and the valuation of acquired intangible assets. 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.
Principles of Consolidation
The consolidated financial statements include the accounts of Chegg and our wholly owned subsidiaries. All
significant intercompany accounts and transactions have been eliminated in consolidation. The consolidated
financial statements have been prepared in accordance with U.S. GAAP.
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