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Table of Contents
63
CHEGG, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Background and Basis of Presentation
Company and Background
Chegg, Inc. (Chegg, the Company, we, us, or our), headquartered in Santa Clara, California, was incorporated as a
Delaware corporation 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 offers products and services that students need throughout
the college lifecycle, from choosing a college through graduation and beyond. 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 2014, nearly 7.5 million students used
our platform.
Basis of Presentation
Our fiscal year ends on December 31 and in this report we refer to the year ended December 31, 2014, 2013 and 2012 as
2014, 2013 and 2012, respectively.
Beginning in 2014, we have presented revenue and cost of revenues separately for rental, service and sale. Rental
revenue includes the rental of print textbooks; service revenue includes Chegg Study, brand advertising, eTextbooks, tutoring,
enrollment marketing, and commerce; sale revenue includes just-in-time sale of print textbooks and the sale of other required
materials. The Company has reclassified amounts in the prior years to conform to the current year presentation. None of the
changes impacts previously reported consolidated revenue, cost of revenue, operating income, or earnings per share.
Reverse Stock Split
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.
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 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 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, 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.