Chegg 2014 Annual Report Download - page 70

Table of Contents
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We may not be able to utilize a significant portion of our net operating loss or tax credit carryforwards, which could
adversely affect our profitability.
At December 31, 2014, we had federal and state net operating loss carryforwards due to prior period losses of
approximately $96.9 million and $56.5 million, respectively, which if not utilized will begin to expire in 2028 and 2015 for
federal and state purposes, respectively. At December 31, 2014, we also had federal tax credit carryforwards of approximately
$2.5 million, which if not utilized will begin to expire in 2030, and state tax credit carryforwards of approximately $2.7 million,
which do not expire. These net operating loss and tax credit carryforwards could expire unused and be unavailable to offset
future income tax liabilities, which could adversely affect our profitability.
In addition, under Section 382 of the Internal Revenue Code of 1986, as amended (the Code), our ability to utilize net
operating loss carryforwards or other tax attributes, such as tax credits, in any taxable year may be limited if we experience an
“ownership change.” A Section 382 “ownership change” generally occurs if one or more stockholders or groups of stockholders
who own at least 5% of our stock increase their ownership by more than 50 percentage points over their lowest ownership
percentage within a rolling three-year period. Similar rules may apply under state tax laws. As a result of prior equity issuances
and other transactions in our stock, we have previously experienced “ownership changes” under Section 382 of the Code and
comparable state tax laws. We may experience ownership changes in the future as a result of future issuances and other
transactions of our stock. It is possible that any future ownership change could have a material effect on the use of our net
operating loss carryforwards or other tax attributes, which could adversely affect our profitability.
Risks Related to Ownership of Our Common Stock
Our stock price has been and will likely continue to be volatile.
The trading price of our common stock has been, and is likely to continue to be, volatile. Since shares of our common
stock were sold in our IPO in November 2013 at a price of $12.50 per share, our stock price has ranged from $4.82 to $11.25
through February 27, 2015. In addition to the factors discussed in this Annual Report on Form 10-K, the trading price of our
common stock may fluctuate significantly in response to numerous factors, many of which are beyond our control, including:
• actual or anticipated fluctuations in our financial condition and operating results, including as a result of the
seasonality in our business that results from the academic calendar;
• our announcement of actual results for a fiscal period that are higher or lower than projected results or our
announcement of revenue or earnings guidance that is higher or lower than expected, including as a result of
difficulty forecasting seasonal variations in our financial condition and operating results or the revenue generated
by our digital offerings;
• issuance of new or updated research or reports by securities analysts, including the publication of unfavorable
reports or change in recommendation or downgrading of our common stock;
• announcements by us or our competitors of significant products or features, technical innovations, acquisitions,
strategic partnerships, joint ventures or capital commitments, such as our recent announcement of our plans to
expand our strategic partnership with Ingram;
• actual or anticipated changes in our growth rate relative to our competitors;
• changes in the economic performance or market valuations of companies perceived by investors to be
comparable to us;
• additional shares of our common stock being sold into the market by us or our existing stockholders or the
anticipation of such sales;
• share price and volume fluctuations attributable to inconsistent trading volume levels of our shares;
• lawsuits threatened or filed against us;
• regulatory developments in our target markets affecting us, students, colleges or brands, publishers or our
competitors;
• terrorist attacks or natural disasters or other such events impacting countries where we have operations; and
• general economic, political and market conditions, such as recessions, unemployment rates, the limited
availability of consumer credit, interest rate changes and currency fluctuations.
Furthermore, the stock markets have experienced extreme price and volume fluctuations that have affected and
continue to affect the market prices of equity securities of companies in general and technology companies in particular. These
fluctuations often have been unrelated or disproportionate to the operating performance of those companies. We believe our
stock price may be particularly susceptible to volatility as the stock prices of technology and Internet companies have often
been subject to wide fluctuations. In the past, companies that have experienced volatility in the market price of their stock have
been subject to securities class action litigation. We may be the target of this type of litigation in the future. Securities litigation