Document and Entity Information

3 Months Ended

Mar. 31, 2015

Nov. 30, 2015

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

Non-accelerated Filer

Document Type

10-Q/A

Document Period End Date

Mar. 31, 2015

Document Fiscal Year Focus

2015

Document Fiscal Period Focus

Q1

Amendment Flag

false

Entity Common Stock, Shares Outstanding

88,085,295

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (USD $)

In Thousands, unless otherwise specified

Mar. 31, 2015

Dec. 31, 2014

Current assets:

Cash and cash equivalents

$ 50,028

$ 56,117 ¹

Short-term investments

28,867

33,346 ¹

Accounts receivable, net of allowance for doubtful accounts of $326 and $559 at March 31, 2015 and December 31, 2014, respectively

10,674

14,396 ¹

Prepaid expenses

8,611

3,091 ¹

Other current assets

3,986

3,864 ¹

Total current assets

102,166

110,814 ¹

Long-term investments

0

1,451 ¹

Textbook library, net

84,571

80,762 ¹

Property and equipment, net

17,892

18,369 ¹

Goodwill

91,301

91,301 ¹

Intangible assets, net

12,066

13,626 ¹

Other assets

1,732

1,804 ¹

Total assets

309,728

318,127 ¹

Current liabilities:

Accounts payable

4,846

10,945 ¹

Deferred revenue

44,969

24,591 ¹

Accrued liabilities

20,187

31,183 ¹

Total current liabilities

70,002

66,719 ¹

Long-term liabilities:

Other liabilities

4,285

4,365 ¹

Total long-term liabilities

4,285

4,365 ¹

Total liabilities

74,287

71,084 ¹

Commitments and contingencies (Note 7)

¹

Stockholders' equity:

Preferred stock, $0.001 par value – 10,000,000 shares authorized, no shares issued and outstanding at March 31, 2015 and December 31, 2014, respectively

0

0 ¹

Common stock, $0.001 par value 400,000,000 shares authorized at March 31, 2015 and December 31, 2014, respectively; 85,849,349 and 84,008,043 shares issued and outstanding at March 31, 2015 and December 31, 2014, respectively

86

84 ¹

Additional paid-in capital

533,739

516,845 ¹

Accumulated other comprehensive gain (loss)

31

(13)¹

Accumulated deficit

(298,415)

(269,873)¹

Total stockholders' equity

235,441

247,043 ¹

Total liabilities and stockholders' equity

$ 309,728

$ 318,127 ¹

[1] Derived from audited consolidated financial statements as of and for the year ended December 31, 2014.

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (Parenthetical) (USD $)

In Thousands, except Share data, unless otherwise specified

Mar. 31, 2015

Dec. 31, 2014

Statement of Financial Position [Abstract]

Allowance for doubtful accounts receivable, current

$ 326

$ 559

Preferred stock, par value

$ 0.001

Preferred stock, shares authorized

10,000,000

Preferred stock, shares issued

0

Preferred stock, shares outstanding

0

Common stock, par value

$ 0.001

Common stock, shares authorized

400,000,000

Common stock, shares issued

85,849,349

84,008,043

Common stock, shares outstanding

85,849,349

84,008,043

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (USD $)

In Thousands, except Per Share data, unless otherwise specified

3 Months Ended

Mar. 31, 2015

Mar. 31, 2014

Net revenues

Rental

$ 37,714

$ 46,856

Services

31,367

17,246

Sales

15,791

10,291

Net revenues

84,872

74,393

Cost of revenues

Rental

38,555

47,697

Services

11,837

7,656

Sales

15,101

10,132

Cost of revenues

65,493

65,485

Gross profit

19,379

8,908

Operating expenses:

Technology and development

16,144

11,320

Sales and marketing

21,392

15,027

General and administrative

11,777

9,840

Restructuring charges

2,514

0

Gain on liquidation of textbooks

(4,185)

(1,678)

Total operating expenses

47,642

34,509

Loss from operations

(28,263)

(25,601)

Interest expense and other income, net:

Interest expense, net

(61)

Other income, net

76

120

Total interest expense and other income, net

15

59

Loss before provision for income taxes

(28,248)

(25,542)

Provision for income taxes

294

217

Net loss

$ (28,542)

$ (25,759)

Net loss per share, attributable to common stockholders, basic and diluted (in dollars per share)

$ (0.34)

$ (0.31)

Weighted average shares used to compute net loss per share attributable to common stockholders, basic and diluted (in shares)

84,794

82,181

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (Unaudited) (USD $)

In Thousands, unless otherwise specified

3 Months Ended

Mar. 31, 2015

Mar. 31, 2014

Statement of Comprehensive Income [Abstract]

Net loss

$ (28,542)

$ (25,759)

Other comprehensive (loss) income:

Net change in unrealized gain (loss) on available for sale investments

22

(16)

Change in foreign currency translation adjustments

22

23

Other comprehensive income

44

7

Total comprehensive loss

$ (28,498)

$ (25,752)

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (USD $)

In Thousands, unless otherwise specified

3 Months Ended

Mar. 31, 2015

Mar. 31, 2014

Cash flows from operating activities

Net loss

$ (28,542)

$ (25,759)

Adjustments to reconcile net loss to net cash provided by operating activities:

Textbook library depreciation expense

14,674

20,095

Amortization of warrants and deferred loan costs

35

29

Other depreciation and amortization expense

3,172

2,035

Share-based compensation expense

15,020

6,930

Provision for bad debts

(224)

(41)

Gain on liquidation of textbooks

(4,185)

(1,678)

Loss from write-offs of textbooks

2,544

4,402

Loss from disposal of property and equipment

202

0

Change in assets and liabilities net of effect of acquisition of business:

Accounts receivable

2,434

(2,227)

Prepaid expenses and other current assets

(5,598)

(1,902)

Other assets

47

(241)

Accounts payable

(4,938)

(786)

Deferred revenue

20,378

29,312

Accrued liabilities

(8,270)

(1,098)

Other liabilities

(58)

71

Net cash provided by operating activities

6,691

29,142

Cash flows from investing activities

Purchases of textbooks

(29,142)

(42,963)

Proceeds from liquidations of textbooks

11,979

11,276

Purchases of marketable securities

(6,243)

(42,829)

Maturities of marketable securities

12,140

13,100

Purchases of property and equipment

(1,486)

(1,285)

Acquisition of business

0

(500)

Net cash used in investing activities

(12,752)

(63,201)

Cash flows from financing activities

Proceeds from exercise of common stock under employee stock plans

6,626

89

Payment of taxes related to the net share settlement of RSUs

(4,391)

(3,454)

Repurchase of common stock

(2,263)

0

Net cash used in financing activities

(28)

(3,365)

Net decrease in cash and cash equivalents

(6,089)

(37,424)

Cash and cash equivalents, beginning of period

56,117 ¹

76,864

Cash and cash equivalents, end of period

50,028

39,440

Cash paid during the period for:

Interest

25

31

Income taxes

423

360

Non-cash investing and financing activities:

Accrued purchases of long-lived assets

2,759

2,661

Issuance of common stock related to prior acquisition

$ 825

$ 0

[1] Derived from audited consolidated financial statements as of and for the year ended December 31, 2014.

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

The accompanying condensed consolidated balance sheet as of March 31, 2015, the condensed consolidated statements of operations, the condensed consolidated statements of comprehensive loss and the condensed consolidated statements of cash flows for the three months ended March 31, 2015 and 2014, 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, 2015 and our results of operations and cash flows for the three months ended March 31, 2015 and 2014. The results of operations for the three months ended March 31, 2015 and cash flows for the three months ended March 31, 2015 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, 2014 as 2014.

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, included in our Annual Report on Form 10-K for the year ended December 31, 2014 (the Annual Report on Form 10-K) filed with the U.S. Securities and Exchange Commission (SEC).

Except for Restructuring charges, which is discussed below, 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.

We have presented revenue and cost of revenues separately for rental, service and sale beginning with our Annual Report on Form 10-K. 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. We have reclassified amounts in the prior periods to conform to the current period presentation. None of the changes impacts previously reported condensed consolidated revenue, cost of revenue, operating income, or earnings per share.

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 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, restructuring charges, 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.

Restructuring Charges

Restructuring charges are primarily comprised of severance costs, contract and program termination costs, asset impairments and costs of facility consolidation and closure. Restructuring charges are recorded upon approval of a formal management plan and are included in the operating results of the period in which such plan is approved and the expense becomes estimable. To estimate restructuring charges, management utilizes assumptions of the number of employees that would be involuntarily terminated and of future costs to operate and eventually vacate duplicate facilities. Severance and other employee separation costs are accrued when it is probable that benefits will be paid and the amount is reasonably estimable. The rates used in determining severance accruals are based on our policies and practices and negotiated settlements. Restructuring charges for employee workforce reductions are recorded upon employee notification for employees whose required continuing service period is 60 days or less and ratably over the employee’s continuing service period for employees whose required continuing service period is greater than 60 days.

Recent Accounting Pronouncements

There have been no material changes to recent accounting pronouncements as compared to recent accounting pronouncements described in our Annual Report on Form 10-K.

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, less the weighted-average unvested common stock subject to repurchase or forfeiture. Diluted net loss per share is computed by giving effect to all potential shares of common stock, including stock options, warrants and RSUs, 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):



	Three Months Ended March 31,
	2015			2014
Numerator:
Net loss	$	(28,542	)	$	(25,759	)
Denominator:
Weighted-average common shares outstanding	84,794			82,259
Less: Weighted-average unvested common shares subject to repurchase or forfeiture	—			(78		)
Weighted-average common shares used in computing basic and diluted net loss per share	84,794			82,181

Net loss per share, basic and diluted.	$	(0.34	)	$	(0.31	)

The following potential shares of common stock outstanding were excluded from the computation of diluted net loss per share attributable to common stockholders because including them would have been anti-dilutive (in thousands):



	Three Months Ended March 31,
	2015	2014
Options to purchase common stock	12,398	17,598
Restricted stock units	54	3,991
Employee stock purchase plan	26	23
Common stock subject to repurchase or forfeiture	—	70
Warrants to purchase common stock	634	1,118
Total common stock equivalents	13,112	22,800

Cash and Cash Equivalents, Investments and Restricted Cash

The following table shows our cash and cash equivalents, restricted cash and investments’ adjusted cost, unrealized gain (loss) and fair value (in thousands) as of March 31, 2015 and December 31, 2014:



	March 31, 2015						December 31, 2014
	Cost		Net Unrealized Gain/(Loss)		Fair Value		Cost		Net Unrealized Gain/(Loss)			Fair Value
Cash and cash equivalents:
Cash	$	37,780	$	—	$	37,780	$	49,836	$	—		$	49,836
Money market funds	7,299		—		7,299		5,828		—			5,828
Commercial paper	4,949		—		4,949		453		—			453
Total cash and cash equivalents	$	50,028	$	—	$	50,028	$	56,117	$	—		$	56,117
Short-term investments:
Commercial paper	$	10,744	$	—	$	10,744	$	13,435	$	—		$	13,435
Corporate securities	18,117		6		18,123		18,426		(15		)	18,411
Certificate of deposit	—		—		—		1,499		1			1,500
Total short-term investments	$	28,861	$	6	$	28,867	$	33,360	$	(14	)	$	33,346

Long-term corporate securities	$	—	$	—	$	—	$	1,453	$	(2	)	$	1,451

Short-term restricted cash	$	300	$	—	$	300	$	300	$	—		$	300
Long-term restricted cash	1,480		—		1,480		1,480		—			1,480
Total restricted cash	$	1,780	$	—	$	1,780	$	1,780	$	—		$	1,780

The amortized cost and fair value of available-for-sale investments as of March 31, 2015 by contractual maturity were as follows (in thousands):



	Cost		Fair Value
Due in 1 year or less	$	33,810	$	33,816
Investments not due at a single maturity date	7,299		7,299
Total	$	41,109	$	41,115

Investments not due at a single maturity date in the preceding table consist of money market fund deposits.

As of March 31, 2015, 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 four months, 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, 2015, we did not recognize any impairment charges.

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, 2015 and December 31, 2014 are classified based on the valuation technique level in the tables below (in thousands):



	March 31, 2015
	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)
Assets:
Cash equivalents:
Money market funds	$	7,299	$	7,299	$	—
Commercial paper	4,949		—		4,949
Short-term investments:
Commercial paper	10,744		—		10,744
Corporate securities	18,123		—		18,123
Total assets measured and recorded at fair value	$	41,115	$	7,299	$	33,816



	December 31, 2014
	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Cash equivalents:
Money market funds	$	5,828	$	5,828	$	—	$	—
Commercial paper	453		—		453		—
Short-term investments:
Commercial paper	13,435		—		13,435		—
Corporate securities	18,411		—		18,411
Certificate of deposit	1,500		—		1,500		—
Long-term investments, corporate securities	1,451		—		1,451
Total assets measured and recorded at fair value	$	41,078	$	5,828	$	35,250	$	—
Liabilities:
Put option liability	$	1,079	$	—	$	—	$	1,079

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. We classify all of 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.

As of March 31, 2015, the put option liability (Level 3) which relates to a previous acquisition and provides certain employees of the acquired company the right to require us to acquire vested common shares at a stated contractual price were fully exercised and shares were repurchased from employees, with cash payment being made in the first quarter of 2015. We no longer hold any Level 3 assets or liabilities as of March 31, 2015.

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.

Intangible Assets

Intangible assets as of March 31, 2015 and December 31, 2014 consist of the following (in thousands):



	March 31, 2015
	Weighted-Average Amortization Period (in months)	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
Developed technologies	52	$	9,418	$	(5,369	)	$	4,049
Customer lists	20	2,820		(1,638		)	1,182
Trade names	48	2,343		(481		)	1,862
Non-compete agreements	28	1,220		(420		)	800
Master service agreements	21	1,030		(457		)	573
Indefinite-lived trade name	—	3,600		—			3,600
Total intangible assets		$	20,431	$	(8,365	)	$	12,066



	December 31, 2014
	Weighted-Average Amortization Period (in months)	Gross Carrying Amount		Accumulated Amortization			Impairment			Net Carrying Amount
Developed technologies	50	$	9,792	$	(5,000	)	$	(194	)	$	4,598
Customer lists	15	4,363		(1,816		)	(829		)	1,718
Trade names	44	3,132		(1,085		)	(39		)	2,008
Non-compete agreements	21	1,637		(421		)	(278		)	938
Master service agreements	21	1,030		(266		)	—			764
Corporate partnerships	0	243		(31		)	(212		)	—
Indefinite-lived trade name	—	3,600		—			—			3,600
Total intangible assets		$	23,797	$	(8,619	)	$	(1,552	)	$	13,626

During the three months ended March 31, 2015 and 2014, amortization expense related to our acquired intangible assets totaled approximately $1.6 million and $0.6 million, respectively.

As of March 31, 2015, the estimated future amortization expense related to our finite-lived intangible assets is as follows (in thousands):



Remaining nine months of 2015	$	3,202
2016	2,238
2017	1,701
2018	1,018
2019	307
Total	$	8,466

Debt Obligations

In August 2013, we entered into a revolving credit facility with an aggregate principal amount of $50.0 million (the Revolving Credit Facility). In June 2014 we amended the Revolving Credit Facility to reduce the aggregate principal amount to $40.0 million with an accordion feature subject to certain financial criteria that would allow us to draw down to $75.0 million in total. The Revolving Credit Facility carries, at our election, a base interest rate of the greater of the Federal Funds Rate plus 0.5% or one-month LIBOR plus 1% or a LIBOR based interest rate plus additional interest of up to 4.5% depending on our leverage ratio. The Revolving Credit Facility will expire in August 2016. The Revolving Credit Facility requires us to repay the outstanding balance at expiration, or to prepay the outstanding balance, if certain reporting and financial covenants are not maintained. These financial covenants are as follows: (1) maintain specified quarterly levels of consolidated EBITDA, which is defined as net income (loss) before tax plus interest expense, provision for (benefit from) income taxes, depreciation and amortization expense, non-cash share-based compensation expense and costs and expenses not to exceed $2.0 million in closing fees related to the revolving credit facility; and (2) maintain a leverage ratio greater than 1.5 to 1.0 as of the end of each quarter, based on the ratio of the consolidated outstanding debt balance to consolidated EBITDA for the period of the four fiscal quarters most recently ended. As of March 31, 2015, we were in compliance with these financial covenants.

Commitments and Contingencies

We lease our office and warehouse facilities under operating leases, which expire at various dates through 2021. Our primary operating lease commitments at March 31, 2015, related to our headquarters in Santa Clara, California and our warehouse in Shepherdsville, Kentucky. We recognize rent expense on a straight-line basis over the lease period. 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 rent expense over the lease term. Rental expense, net of sublease income, was approximately $0.9 million and $0.8 million in the three months ended March 31, 2015 and 2014, respectively.

On April 10, 2015, we signed an agreement to sublease effectively one half of our warehouse in Kentucky. We expect this sublease agreement to generate $0.1 million of sublease income per month through the end of November 2016.

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, from time to time, we may 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, from time to time, also 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.

In July 2010, the Kentucky Tax Authority issued a property tax assessment of approximately $1.0 million related to our textbook library located in our Kentucky warehouse for the 2009 and 2010 tax years under audit. In March 2011, we filed a protest with the Kentucky Board of Tax Appeals that was rejected in March 2012. In September 2012, we filed a complaint seeking declaratory rights against the Commonwealth of Kentucky in the Bullitt Circuit Court of Kentucky, and that case was subsequently dismissed in favor of administration remedies with the Kentucky Tax Authority. We received a final Notice of Tax due in October 2012 from the Kentucky Tax Authority and we appealed this notice in November 2012 with the Kentucky Board of Tax Appeals. In May 2013, we presented an Offer in Judgment to the Tax Authority of approximately $150,000, excluding tax and penalties, an amount that we have accrued for the two years under audit. We accrued this amount as of December 31, 2012. We appealed to the Kentucky Board of Tax Appeals in July 2013 and the Board issued a ruling in favor of the Department of Revenue in January 2014 maintaining the property tax assessment. In February 2014, we filed an appeal to the Franklin Circuit Court in Kentucky and in June 2014 the Circuit Court held in abeyance our motion to appeal. In October 2014 the Franklin Circuit Court in Kentucky issued its opinion and order reversing the Board of Tax Appeal's decision, setting aside the Kentucky Department of Revenue's tax assessments against Chegg and further vacating all penalties and interest. The Kentucky Department of Revenue has appealed the Circuit Court ruling. Due to the preliminary status of the appeal by the Kentucky Department of Revenue and the uncertainties related to the appeal, we are unable to evaluate the likelihood of either a favorable or unfavorable outcome. We believe that it is reasonably possible that we will incur a loss; however, we cannot currently estimate a range of any possible losses we may experience in connection with this case. Accordingly, we are unable at this time to estimate the effects of this matter on our financial condition, results of operations, or cash flows.

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 determination of whether a claim will proceed to litigation cannot be made 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

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, 2015.

Stockholders' Equity

Share-Based Compensation

Total share-based compensation expense recorded for employees and non-employees, is as follows (in thousands):



	Three Months Ended March 31,
	2015		2014
Cost of revenues	$	134	$	178
Technology and development	4,707		2,382
Sales and marketing	5,054		1,332
General and administrative	5,125		3,038
Total share-based compensation expense	$	15,020	$	6,930

Fair Value of Stock Options

We estimate the fair value of each stock option award using the Black-Scholes-Merton option-pricing model, which utilizes the estimated fair value of our common stock and requires input on the following subjective assumptions:

Expected Term — The expected term for options granted to employees, officers, and directors is calculated as the midpoint between the vesting date and the end of the contractual term of the options. The expected term for options granted to consultants is determined using the remaining contractual life.

Expected Volatility — The expected volatility is based on the average volatility of similar public entities within our peer group as our common stock has not been publicly trading for a long enough period to rely on our own expected volatility.

Expected Dividends — The dividend assumption is based on our historical experience. To date we have not paid any dividends on our common stock.

Risk-Free Interest Rate — The risk-free interest rate used in the valuation method is the implied yield currently available on the United States treasury zero-coupon issues, with a remaining term equal to the expected life term of our options.

The following table summarizes the key assumptions used to determine the fair value of our stock options granted to employees, officers and directors:



	Three Months Ended March 31,
	2014
Expected term (years)	6.07
Expected volatility	56.83		%
Dividend yield	—		%
Risk-free interest rate	2.02		%
Weighted-average grant-date fair value per share	$	4.23

No option awards were granted to employees during the three months ended March 31, 2015.

Fair Value of Restricted Stock Units (RSUs) and of Performance-Based Restricted Stock Units (PSUs)

RSUs and PSUs are converted into shares of Chegg common stock upon vesting on a one-for-one basis. Vesting of RSUs is subject to the employee’s continuing service to us, while vesting of PSUs is subject to our achievement of specified corporate financial performance objectives and also the employee's continuing service to us. The compensation expense related to RSUs and PSUs is determined using the fair value of our common stock on the date of grant and the expense is recognized on a straight-line basis over the vesting period. RSUs are typically fully vested at the end of four years while PSUs vest subject to the achievement of corporate financial performance objectives and if achieved, typically vest over two to three years.

Fair Value of Employee Stock Purchase Plan

Under the 2013 Employee Stock Purchase Plan (the 2013 ESPP), rights to purchase shares are generally granted during the second and fourth quarter of each year. The fair value of rights granted under the 2013 ESPP was estimated at the date of grant using the Black-Scholes-Merton option-pricing model.

Stock Option Activity

Option activity under our equity incentive plans was as follows:



	Options Outstanding
	Number of Options Outstanding		Weighted- Average Exercise Price per Share		Weighted-Average Remaining Contractual Term in Years	Aggregate Intrinsic Value
Balance at December 31, 2014	14,962,099		$	8.53	7.11	$	6,646,629
Exercised	(959,997	)	$	6.90
Canceled	(344,420	)	$	8.72
Balance at March 31, 2015	13,657,682		$	8.64	6.77	$	10,356,198

As of March 31, 2015, our total unrecognized compensation expense for stock options granted to employees, officers, directors and consultants was approximately $19.9 million, which will be recognized over a weighted-average vesting period of approximately 1.6 years.

We recognize only the portion of the option award granted to employees that is ultimately expected to vest as compensation expense. Estimated forfeitures are determined based on historical data and management’s expectation of exercise behaviors. Forfeiture rates and the resulting compensation expense are revised in subsequent periods if actual forfeitures differ from the estimate.

No option awards were granted to consultants during the three months ended March 31, 2015 and 2014. Total share-based compensation expense for consultants was not significant for the three months ended March 31, 2015 and 2014.

There was no capitalized share-based compensation expense as of March 31, 2015 or 2014.

RSU and PSU Activity



	RSUs and PSUs Outstanding
	Number of RSUs and PSUs Outstanding		Weighted Average Grant Date Fair Value
Balance at December 31, 2014	9,125,190		$	6.25
Granted	6,225,055		6.64
Released	(1,404,733	)	7.73
Canceled	(294,760	)	6.34
Balance at March 31, 2015	13,650,752		$	6.28

During the three months ended March 31, 2014, 1,256,209 RSUs granted prior to our IPO vested and were settled for shares of our common stock. Of those shares, we withheld 516,919 shares valued at approximately $3.5 million in satisfaction of tax withholding obligations for employees who elected to net settle, i.e., surrender shares of common stock to satisfy their tax obligations. Payment of taxes related to this net share settlement of RSUs is reflected as a financing activity in our consolidated statements of cash flows. The shares withheld by us as a result of the net settlement are no longer considered issued and outstanding, thereby reducing our shares outstanding used to calculate earnings per share. These shares are returned to the reserves and are available for future issuance under the 2013 Equity Incentive Plan (the 2013 Plan).

In February 2015, we granted PSUs under the 2013 Plan to certain of our key employees. The PSUs entitle the employees to receive a certain number of shares of our common stock based on our satisfaction of certain financial and strategic performance targets during 2015 (the Performance Period). Based on the achievement of the performance conditions during the Performance Period for the February grants, the final settlement will range between zero and 100% of the target shares underlying the PSU awards based on a specified objective formula approved by the Compensation Committee. If earned, these PSUs will vest annually over a two or three year period depending on the employee, with the initial vesting in February 2016.

The target number of shares underlying the PSUs that were granted to certain key employees during the three months ended March 31, 2015 totaled 2,300,824 shares and had a weighted average grant date fair value of $6.59 per share. As of March 31, 2015, 100% of the PSUs are expected to vest.

As of March 31, 2015, we had a total of approximately $59.0 million of unrecognized compensation costs related to RSUs and PSUs that is expected to be recognized over the remaining weighted average period of 2.0 years.

Income Taxes

We recorded an income tax provision of approximately $0.3 million and $0.2 million for the three months ended March 31, 2015 and 2014, respectively. The income tax provision for the three months ended March 31, 2015, was primarily due to state and foreign income taxes offset by the release of valuation allowance resulting from our acquisition of InstaEDU. The income tax provision for the three months ended March 31, 2014 was primarily due to state and foreign income tax expense.

Restructuring Charges

2015 Restructuring Plan

For the three months ended March 31, 2015, we recorded restructuring charges of $2.5 million related to the closure of our print coupon business and our Kentucky warehouse. The charges include one-time employee termination benefits of $0.8 million for approximately 71 employees and lease termination and other costs of $1.7 million. As a result of the expanded partnership with Ingram, we expect to exit our warehouse facilities by the end of 2015 and to incur additional charges in 2015 under the restructuring plan related to these exit activities and related severance costs of approximately $6.0 million. Costs incurred to date related to employee termination benefits are expected to be paid within the next twelve months. Costs incurred to date related to the lease termination and other costs are expected to be fully paid by 2021.

The following table summarizes the activity related to the accrual for restructuring charges detailed by event (in thousands):



	Workforce Reduction Costs			Lease Termination and Other Costs			Total
Balances at January 1, 2015	$	—		$	—		$	—
Restructuring charges	834			1,680			2,514
Cash payments	(439		)	—			(439		)
Write-offs	—			(350		)	(350		)
Balances at March 31, 2015	$	395		$	1,330		$	1,725

As of March 31, 2015, the $1.7 million liability was comprised of a short term accrual of $0.8 million included within Accrued liabilities and a long term accrual of $0.9 million included within Other liabilities on the condensed consolidated balance sheet.

Related-Party Transactions

Our Chief Executive Officer is a member of the Board of Directors of Adobe Systems (Adobe). During the three months ended March 31, 2015 and 2014 we purchased products totaling $0.1 million and $0.2 million, respectively from Adobe. We had $0.8 million in revenues in the three months ended March 31, 2014 from Adobe. We had $22,000 and $0.1 million in payables as of March 31, 2015 and December 31, 2014, respectively, to Adobe.

One of our board members is also a member of the Board of Directors of Cengage Learning (Cengage). During the three months ended March 31, 2015 and 2014, we had purchases of $4.3 million and $5.9 million, respectively, of products from Cengage. We had $0.2 million and $0.1 million in payables as of March 31, 2015 and December 31, 2014, respectively, to Cengage. We had $0.1 million in outstanding accounts receivables to Cengage as of December 31, 2014.

One of our board members is the Chief Executive Officer of Shutterfly Inc. (Shutterfly). During the three months ended March 31, 2015, we had purchases of $1.1 million of products from Shutterfly. There were no outstanding accounts receivables or payables to Shutterfly as of March 31, 2015.

The terms of our contracts with the above related parties are consistent with our contracts with other independent parties.

Background and Basis of Presentation Background and Basis of Presentation (Policies)

Basis of Presentation

The accompanying condensed consolidated balance sheet as of March 31, 2015, the condensed consolidated statements of operations, the condensed consolidated statements of comprehensive loss and the condensed consolidated statements of cash flows for the three months ended March 31, 2015 and 2014, 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, 2015 and our results of operations and cash flows for the three months ended March 31, 2015 and 2014. The results of operations for the three months ended March 31, 2015 and cash flows for the three months ended March 31, 2015 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, 2014 as 2014.

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 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, restructuring charges, 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.

Restructuring Charges

Restructuring charges are primarily comprised of severance costs, contract and program termination costs, asset impairments and costs of facility consolidation and closure. Restructuring charges are recorded upon approval of a formal management plan and are included in the operating results of the period in which such plan is approved and the expense becomes estimable. To estimate restructuring charges, management utilizes assumptions of the number of employees that would be involuntarily terminated and of future costs to operate and eventually vacate duplicate facilities. Severance and other employee separation costs are accrued when it is probable that benefits will be paid and the amount is reasonably estimable. The rates used in determining severance accruals are based on our policies and practices and negotiated settlements. Restructuring charges for employee workforce reductions are recorded upon employee notification for employees whose required continuing service period is 60 days or less and ratably over the employee’s continuing service period for employees whose required continuing service period is greater than 60 days.

Net Loss Per Share (Tables)

Computation of Basic and Diluted Net Loss Per Share

The following table sets forth the computation of historical basic and diluted net loss per share (in thousands, except per share amounts):



	Three Months Ended March 31,
	2015			2014
Numerator:
Net loss	$	(28,542	)	$	(25,759	)
Denominator:
Weighted-average common shares outstanding	84,794			82,259
Less: Weighted-average unvested common shares subject to repurchase or forfeiture	—			(78		)
Weighted-average common shares used in computing basic and diluted net loss per share	84,794			82,181

Net loss per share, basic and diluted.	$	(0.34	)	$	(0.31	)

Common Shares Outstanding Excluded from Computation of Diluted Net Loss Per Share

The following potential shares of common stock outstanding were excluded from the computation of diluted net loss per share attributable to common stockholders because including them would have been anti-dilutive (in thousands):



	Three Months Ended March 31,
	2015	2014
Options to purchase common stock	12,398	17,598
Restricted stock units	54	3,991
Employee stock purchase plan	26	23
Common stock subject to repurchase or forfeiture	—	70
Warrants to purchase common stock	634	1,118
Total common stock equivalents	13,112	22,800

Cash and Cash Equivalents, Investments and Restricted Cash (Tables)

Cash and Cash Equivalents, Restricted Cash and Investments

The following table shows our cash and cash equivalents, restricted cash and investments’ adjusted cost, unrealized gain (loss) and fair value (in thousands) as of March 31, 2015 and December 31, 2014:



	March 31, 2015						December 31, 2014
	Cost		Net Unrealized Gain/(Loss)		Fair Value		Cost		Net Unrealized Gain/(Loss)			Fair Value
Cash and cash equivalents:
Cash	$	37,780	$	—	$	37,780	$	49,836	$	—		$	49,836
Money market funds	7,299		—		7,299		5,828		—			5,828
Commercial paper	4,949		—		4,949		453		—			453
Total cash and cash equivalents	$	50,028	$	—	$	50,028	$	56,117	$	—		$	56,117
Short-term investments:
Commercial paper	$	10,744	$	—	$	10,744	$	13,435	$	—		$	13,435
Corporate securities	18,117		6		18,123		18,426		(15		)	18,411
Certificate of deposit	—		—		—		1,499		1			1,500
Total short-term investments	$	28,861	$	6	$	28,867	$	33,360	$	(14	)	$	33,346

Long-term corporate securities	$	—	$	—	$	—	$	1,453	$	(2	)	$	1,451

Short-term restricted cash	$	300	$	—	$	300	$	300	$	—		$	300
Long-term restricted cash	1,480		—		1,480		1,480		—			1,480
Total restricted cash	$	1,780	$	—	$	1,780	$	1,780	$	—		$	1,780

Contractual Maturity of Available-for-Sale Investments

The amortized cost and fair value of available-for-sale investments as of March 31, 2015 by contractual maturity were as follows (in thousands):



	Cost		Fair Value
Due in 1 year or less	$	33,810	$	33,816
Investments not due at a single maturity date	7,299		7,299
Total	$	41,109	$	41,115

Fair Value Measurement (Tables)

Financial Instruments Measured and Recorded at Fair Value on Recurring Basis

Financial instruments measured and recorded at fair value on a recurring basis as of March 31, 2015 and December 31, 2014 are classified based on the valuation technique level in the tables below (in thousands):



	March 31, 2015
	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)
Assets:
Cash equivalents:
Money market funds	$	7,299	$	7,299	$	—
Commercial paper	4,949		—		4,949
Short-term investments:
Commercial paper	10,744		—		10,744
Corporate securities	18,123		—		18,123
Total assets measured and recorded at fair value	$	41,115	$	7,299	$	33,816



	December 31, 2014
	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Cash equivalents:
Money market funds	$	5,828	$	5,828	$	—	$	—
Commercial paper	453		—		453		—
Short-term investments:
Commercial paper	13,435		—		13,435		—
Corporate securities	18,411		—		18,411
Certificate of deposit	1,500		—		1,500		—
Long-term investments, corporate securities	1,451		—		1,451
Total assets measured and recorded at fair value	$	41,078	$	5,828	$	35,250	$	—
Liabilities:
Put option liability	$	1,079	$	—	$	—	$	1,079

Intangible Assets (Tables)

Intangible Assets

Intangible assets as of March 31, 2015 and December 31, 2014 consist of the following (in thousands):



	March 31, 2015
	Weighted-Average Amortization Period (in months)	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
Developed technologies	52	$	9,418	$	(5,369	)	$	4,049
Customer lists	20	2,820		(1,638		)	1,182
Trade names	48	2,343		(481		)	1,862
Non-compete agreements	28	1,220		(420		)	800
Master service agreements	21	1,030		(457		)	573
Indefinite-lived trade name	—	3,600		—			3,600
Total intangible assets		$	20,431	$	(8,365	)	$	12,066



	December 31, 2014
	Weighted-Average Amortization Period (in months)	Gross Carrying Amount		Accumulated Amortization			Impairment			Net Carrying Amount
Developed technologies	50	$	9,792	$	(5,000	)	$	(194	)	$	4,598
Customer lists	15	4,363		(1,816		)	(829		)	1,718
Trade names	44	3,132		(1,085		)	(39		)	2,008
Non-compete agreements	21	1,637		(421		)	(278		)	938
Master service agreements	21	1,030		(266		)	—			764
Corporate partnerships	0	243		(31		)	(212		)	—
Indefinite-lived trade name	—	3,600		—			—			3,600
Total intangible assets		$	23,797	$	(8,619	)	$	(1,552	)	$	13,626

Estimated Future Amortization Expense Related to Intangible Assets

As of March 31, 2015, the estimated future amortization expense related to our finite-lived intangible assets is as follows (in thousands):



Remaining nine months of 2015	$	3,202
2016	2,238
2017	1,701
2018	1,018
2019	307
Total	$	8,466

Stockholders' Equity (Tables)

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):



	Three Months Ended March 31,
	2015		2014
Cost of revenues	$	134	$	178
Technology and development	4,707		2,382
Sales and marketing	5,054		1,332
General and administrative	5,125		3,038
Total share-based compensation expense	$	15,020	$	6,930

Summary of Assumptions Used to Determine Fair Value of Stock Options Granted

The following table summarizes the key assumptions used to determine the fair value of our stock options granted to employees, officers and directors:



	Three Months Ended March 31,
	2014
Expected term (years)	6.07
Expected volatility	56.83		%
Dividend yield	—		%
Risk-free interest rate	2.02		%
Weighted-average grant-date fair value per share	$	4.23

Summary of Stock Option Activity

Option activity under our equity incentive plans was as follows:



	Options Outstanding
	Number of Options Outstanding		Weighted- Average Exercise Price per Share		Weighted-Average Remaining Contractual Term in Years	Aggregate Intrinsic Value
Balance at December 31, 2014	14,962,099		$	8.53	7.11	$	6,646,629
Exercised	(959,997	)	$	6.90
Canceled	(344,420	)	$	8.72
Balance at March 31, 2015	13,657,682		$	8.64	6.77	$	10,356,198

Summary of Restricted Stock Unit Activity

RSU and PSU Activity



	RSUs and PSUs Outstanding
	Number of RSUs and PSUs Outstanding		Weighted Average Grant Date Fair Value
Balance at December 31, 2014	9,125,190		$	6.25
Granted	6,225,055		6.64
Released	(1,404,733	)	7.73
Canceled	(294,760	)	6.34
Balance at March 31, 2015	13,650,752		$	6.28

Restructuring Charges (Tables)

Schedule of Restructuring Reserve by Type of Cost

The following table summarizes the activity related to the accrual for restructuring charges detailed by event (in thousands):



	Workforce Reduction Costs			Lease Termination and Other Costs			Total
Balances at January 1, 2015	$	—		$	—		$	—
Restructuring charges	834			1,680			2,514
Cash payments	(439		)	—			(439		)
Write-offs	—			(350		)	(350		)
Balances at March 31, 2015	$	395		$	1,330		$	1,725

Background and Basis of Presentation - Additional Information (Details)

12 Months Ended

Dec. 31, 2014

student

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Number of students who have used our learning platform

7,500,000

Net Loss Per Share - Computation of Basic and Diluted Net Loss Per Share (Details) (USD $)

In Thousands, except Per Share data, unless otherwise specified

3 Months Ended

Mar. 31, 2015

Mar. 31, 2014

Numerator:

Net loss

$ (28,542)

$ (25,759)

Denominator:

Weighted-average common shares outstanding

84,794

82,259

Less: Weighted-average unvested common shares subject to repurchase or forfeiture

0

(78)

Weighted-average common shares used in computing basic and diluted net loss per share

84,794

82,181

Net loss per share, basic and diluted.

$ (0.34)

$ (0.31)

Net Loss Per Share - Common Shares Outstanding Excluded From Computation Of Diluted Net Loss Per Share (Details)

In Thousands, unless otherwise specified

3 Months Ended

Mar. 31, 2015

Mar. 31, 2014

Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]

Total common stock equivalents

13,112

22,800

Options to purchase common stock

Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]

Total common stock equivalents

12,398

17,598

Restricted stock units

Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]

Total common stock equivalents

54

3,991

Employee stock purchase plan

Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]

Total common stock equivalents

26

23

Common stock subject to repurchase or forfeiture

Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]

Total common stock equivalents

0

70

Warrants |
Common Stock

Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]

Total common stock equivalents

634

1,118

Cash and Cash Equivalents, Investments and Restricted Cash - Cash and Cash Equivalents, Restricted Cash and Investments (Details) (USD $)

In Thousands, unless otherwise specified

Mar. 31, 2015

Dec. 31, 2014

Cash and Cash Equivalents

Schedule Of Available For Sale Securities [Line Items]

Cost

$ 50,028

$ 56,117

Net Unrealized Gain/(Loss)

0

Fair Value

50,028

56,117

Short-term Investments

Schedule Of Available For Sale Securities [Line Items]

Cost

28,861

33,360

Net Unrealized Gain/(Loss)

6

(14)

Fair Value

28,867

33,346

Short-term Investments |
Corporate Securities

Schedule Of Available For Sale Securities [Line Items]

Cost

18,117

18,426

Net Unrealized Gain/(Loss)

6

(15)

Fair Value

18,123

18,411

Long-term Investments |
Corporate Securities

Schedule Of Available For Sale Securities [Line Items]

Cost

0

1,453

Net Unrealized Gain/(Loss)

0

(2)

Fair Value

0

1,451

Cash |
Cash and Cash Equivalents

Schedule Of Available For Sale Securities [Line Items]

Cost

37,780

49,836

Net Unrealized Gain/(Loss)

0

Fair Value

37,780

49,836

Money Market Funds |
Cash and Cash Equivalents

Schedule Of Available For Sale Securities [Line Items]

Cost

7,299

5,828

Net Unrealized Gain/(Loss)

0

Fair Value

7,299

5,828

Commercial Paper |
Cash and Cash Equivalents

Schedule Of Available For Sale Securities [Line Items]

Cost

4,949

453

Net Unrealized Gain/(Loss)

0

Fair Value

4,949

453

Commercial Paper |
Short-term Investments

Schedule Of Available For Sale Securities [Line Items]

Cost

10,744

13,435

Net Unrealized Gain/(Loss)

0

Fair Value

10,744

13,435

Certificate of Deposit |
Short-term Investments

Schedule Of Available For Sale Securities [Line Items]

Cost

0

1,499

Net Unrealized Gain/(Loss)

0

1

Fair Value

0

1,500

Short-term Restricted Cash

Schedule Of Available For Sale Securities [Line Items]

Cost

300

Net Unrealized Gain/(Loss)

0

Fair Value

300

Long-term Restricted Cash

Schedule Of Available For Sale Securities [Line Items]

Cost

1,480

Net Unrealized Gain/(Loss)

0

Fair Value

1,480

Restricted Cash

Schedule Of Available For Sale Securities [Line Items]

Cost

1,780

Net Unrealized Gain/(Loss)

0

Fair Value

$ 1,780

Cash and Cash Equivalents, Investments and Restricted Cash - Contractual Maturity of Available-for-Sale Investments (Details) (USD $)

In Thousands, unless otherwise specified

3 Months Ended

Mar. 31, 2015

Amortized Cost

Due in 1 year or less

$ 33,810

Investments not due at a single maturity date

7,299

Total

41,109

Fair Value

Due in 1 year or less

33,816

Investments not due at a single maturity date

7,299

Total

$ 41,115

Weighted average maturity of investment securities

4 months

Fair Value Measurement - Financial Instruments Measured and Recorded at Fair Value on Recurring Basis (Details) (USD $)

In Thousands, unless otherwise specified

Mar. 31, 2015

Dec. 31, 2014

Assets:

Short-term investments

$ 28,867

$ 33,346 ¹

Fair Value on Recurring Basis

Assets:

Long-term investments

1,451

Total assets measured and recorded at fair value

41,115

41,078

Liabilities:

Put option liability

1,079

Fair Value on Recurring Basis |
Corporate Securities

Assets:

Short-term investments

18,123

18,411

Fair Value on Recurring Basis |
Money Market Funds

Assets:

Cash equivalents

7,299

5,828

Fair Value on Recurring Basis |
Commercial Paper

Assets:

Cash equivalents

4,949

1,500

Short-term investments

10,744

13,435

Fair Value on Recurring Basis |
Certificate of Deposit

Assets:

Short-term investments

453

Fair Value on Recurring Basis |
Quoted Prices in Active Markets for Identical Assets (Level 1)

Assets:

Total assets measured and recorded at fair value

7,299

5,828

Fair Value on Recurring Basis |
Quoted Prices in Active Markets for Identical Assets (Level 1) |
Money Market Funds

Assets:

Cash equivalents

7,299

5,828

Fair Value on Recurring Basis |
Significant Other Observable Inputs (Level 2)

Assets:

Long-term investments

1,451

Total assets measured and recorded at fair value

33,816

35,250

Fair Value on Recurring Basis |
Significant Other Observable Inputs (Level 2) |
Corporate Securities

Assets:

Short-term investments

18,123

18,411

Fair Value on Recurring Basis |
Significant Other Observable Inputs (Level 2) |
Commercial Paper

Assets:

Cash equivalents

4,949

1,500

Short-term investments

10,744

13,435

Fair Value on Recurring Basis |
Significant Other Observable Inputs (Level 2) |
Certificate of Deposit

Assets:

Short-term investments

453

Fair Value on Recurring Basis |
Significant Unobservable Inputs (Level 3)

Liabilities:

Put option liability

$ 1,079

[1] Derived from audited consolidated financial statements as of and for the year ended December 31, 2014.

Intangible Assets (Details) (USD $)

In Thousands, unless otherwise specified

3 Months Ended

12 Months Ended

Mar. 31, 2015

Dec. 31, 2014

Finite Lived Intangible Assets [Line Items]

Accumulated Amortization

$ (8,365)

$ (8,619)

Impairment

(1,552)

Net Carrying Amount

8,466

Indefinite-lived trade name

3,600

Total intangible assets, gross carrying amount

20,431

23,797

Intangible assets, net

12,066

13,626 ¹

Developed technologies

Finite Lived Intangible Assets [Line Items]

Weighted-Average Amortization Period (in months)

52 months

50 months

Gross Carrying Amount

9,418

9,792

Accumulated Amortization

(5,369)

(5,000)

Impairment

(194)

Net Carrying Amount

4,049

4,598

Customer lists

Finite Lived Intangible Assets [Line Items]

Weighted-Average Amortization Period (in months)

20 months

15 months

Gross Carrying Amount

2,820

4,363

Accumulated Amortization

(1,638)

(1,816)

Impairment

(829)

Net Carrying Amount

1,182

1,718

Trade names

Finite Lived Intangible Assets [Line Items]

Weighted-Average Amortization Period (in months)

48 months

44 months

Gross Carrying Amount

2,343

3,132

Accumulated Amortization

(481)

(1,085)

Impairment

(39)

Net Carrying Amount

1,862

2,008

Non-compete agreements

Finite Lived Intangible Assets [Line Items]

Weighted-Average Amortization Period (in months)

28 months

21 months

Gross Carrying Amount

1,220

1,637

Accumulated Amortization

(420)

(421)

Impairment

(278)

Net Carrying Amount

800

938

Master service agreements

Finite Lived Intangible Assets [Line Items]

Weighted-Average Amortization Period (in months)

21 months

Gross Carrying Amount

1,030

Accumulated Amortization

(457)

(266)

Impairment

0

Net Carrying Amount

573

764

Corporate partnerships

Finite Lived Intangible Assets [Line Items]

Weighted-Average Amortization Period (in months)

0 years

Gross Carrying Amount

243

Accumulated Amortization

(31)

Impairment

(212)

Net Carrying Amount

$ 0

[1] Derived from audited consolidated financial statements as of and for the year ended December 31, 2014.

Intangible Assets - Additional Information (Details) (Acquisition-Related Intangible Assets, USD $)

In Millions, unless otherwise specified

3 Months Ended

Mar. 31, 2015

Mar. 31, 2014

Acquisition-Related Intangible Assets

Finite Lived Intangible Assets [Line Items]

Amortization expense of acquisition related to acquired intangible assets

$ 1.6

$ 0.6

Intangible Assets - Estimated Future Amortization Expense Related to Intangible Assets (Details) (USD $)

In Thousands, unless otherwise specified

Mar. 31, 2015

Intangible Assets, Net (Excluding Goodwill) [Abstract]

Remaining nine months of 2015

$ 3,202

2016

2,238

2017

1,701

2018

1,018

2019

307

Net Carrying Amount

$ 8,466

Debt Obligations - Additional Information (Details) (Revolving Credit Facility, USD $)

3 Months Ended

Mar. 31, 2015

Jun. 30, 2014

Aug. 31, 2013

Debt Instrument [Line Items]

Line of credit facility, current borrowing capacity

$ 40,000,000.0

$ 50,000,000.0

Credit facility, maximum borrowing capacity

75,000,000.0

Consolidated EBITDA

$ 2,000,000.0

Ratio of total debt outstanding to EBITDA

1.50%

Base Interest Rate

Debt Instrument [Line Items]

Marginal interest rate

0.50%

One-Month LIBOR

Debt Instrument [Line Items]

Marginal interest rate

1.00%

LIBOR Rate

Debt Instrument [Line Items]

Marginal interest rate

4.50%

Commitments and Contingencies - Additional Information (Details) (USD $)

3 Months Ended

Mar. 31, 2015

Mar. 31, 2014

Dec. 31, 2012

Jul. 31, 2010

Apr. 10, 2015

Subsequent Event

Other Commitments [Line Items]

Rental expense

$ 900,000

$ 800,000

Future sublease income per month (through November 2016)

100,000

Property tax assessment

1,000,000

Offer to the tax authority excluding tax and penalties

$ 150,000

Stockholders' Equity - Additional Information (Details) (USD $)

3 Months Ended

1 Months Ended

3 Months Ended

1 Months Ended

3 Months Ended

Mar. 31, 2015

Mar. 31, 2014

Mar. 31, 2015

Maximum

Mar. 31, 2015

Restricted Stock Units (RSUs)

Mar. 31, 2014

Restricted Stock Units (RSUs)

Mar. 31, 2015

Stock Options

Mar. 31, 2015

Performance-based restricted stock units

Feb. 28, 2014

Performance-based restricted stock units

Minimum

Mar. 31, 2015

Performance-based restricted stock units

Minimum

Feb. 28, 2014

Performance-based restricted stock units

Maximum

Mar. 31, 2015

Performance-based restricted stock units

Maximum

Mar. 31, 2015

Restricted Stock Units (RSUs) and Performance Share Units (PSUs)

Share-based Compensation Arrangement by Share-based Payment Award [Line Items]

Vesting period of stock awards

4 years

2 years

3 years

Unrecognized compensation expense for stock options granted to employees, officers, directors, and consultants

$ 19,900,000

Weighted average vesting period for recognition of compensation expense

1 year 7 months 6 days

2 years

Share-based compensation expense

15,020,000

6,930,000

Pre-IPO shares settled

1,256,209

Shares withheld

516,919

Cash remitted to tax authorities related to RSU settlement

4,391,000

3,454,000

3,500,000

Settlement of performance based restricted stock unit awards percentage

100.00%

0.00%

100.00%

Performance based restricted stock unit award granted to executive officers

2,300,824

6,225,055

Performance based restricted stock unit award granted weighted average grant date fair value

$ 6.59

$ 6.64

Awards forfeited

294,760

Unrecognized compensation costs related to restricted stock units

$ 59,000,000

Stockholders' Equity - Share-based Compensation Expense (Details) (USD $)

In Thousands, unless otherwise specified

3 Months Ended

Mar. 31, 2015

Mar. 31, 2014

Employee Service Share Based Compensation Allocation Of Recognized Period Costs [Line Items]

Share-based compensation expense

$ 15,020

$ 6,930

Cost of revenues

Employee Service Share Based Compensation Allocation Of Recognized Period Costs [Line Items]

Share-based compensation expense

134

178

Technology and development

Employee Service Share Based Compensation Allocation Of Recognized Period Costs [Line Items]

Share-based compensation expense

4,707

2,382

Sales and marketing

Employee Service Share Based Compensation Allocation Of Recognized Period Costs [Line Items]

Share-based compensation expense

5,054

1,332

General and administrative

Employee Service Share Based Compensation Allocation Of Recognized Period Costs [Line Items]

Share-based compensation expense

$ 5,125

$ 3,038

Stockholders' Equity - Summary of Assumptions (Details) (Stock Options, USD $)

3 Months Ended

Mar. 31, 2015

Stock Options

Share-based Compensation Arrangement by Share-based Payment Award [Line Items]

Expected term (years)

6 years 0 months 26 days

Expected volatility

56.83%

Dividend yield

0.00%

Risk-free interest rate

2.02%

Weighted-average grant-date fair value per share (in dollars per share)

$ 4.23

Stockholders' Equity - Summary of Stock Option Activity (Details) (USD $)

3 Months Ended

12 Months Ended

Mar. 31, 2015

Dec. 31, 2014

Number of Options Outstanding

Number of Options Outstanding, Beginning

14,962,099

Number of Options, Exercised

(959,997.0000)

Number of Options, Canceled

(344,420.0000)

Number of Options Outstanding, Ending

13,657,682

14,962,099

Weighted-Average Exercise Price per Share

Weighted Average Exercise Price per Share, Outstanding, Beginning

$ 8.53

Weighted-Average Exercise Price per Share, Exercised

$ 6.90

Weighted-Average Exercise Price per Share, Canceled

$ 8.72

Weighted Average Exercise Price per Share, Outstanding, Ending

$ 8.64

$ 8.53

Options outstanding, weighted-average remaining contractual term in years

6 years 9 months 7 days

7 years 1 month 10 days

Options outstanding, aggregate intrinsic value

$ 10,356,198

$ 6,646,629

Stockholders' Equity - Summary of Restricted Stock Unit Activity (Details) (Restricted Stock Units (RSUs) and Performance Share Units (PSUs), USD $)

3 Months Ended

Mar. 31, 2015

Restricted Stock Units (RSUs) and Performance Share Units (PSUs)

Restricted Stock Units Outstanding

Number of Restricted Stock Units Outstanding, Beginning

9,125,190

Number of RSUs granted

6,225,055

Number of Restricted Stock Units, Released

(1,404,733)

Number of Restricted Stock Units, Canceled

(294,760)

Number of Restricted Stock Units Outstanding, Ending

13,650,752

Weighted Average Grant Date Fair Value [Abstract]

Weighted Average Grant Date Fair Value, Beginning balance

$ 6.25

Weighted Average Grant Date Fair Value, Granted

$ 6.64

Weighted Average Grant Date Fair Value, Released

$ 7.73

Weighted Average Grant Date Fair Value, Canceled

$ 6.34

Weighted Average Grant Date Fair Value, Ending balance

$ 6.28

Income Taxes - Additional Information (Details) (USD $)

In Thousands, unless otherwise specified

3 Months Ended

Mar. 31, 2015

Mar. 31, 2014

Income Tax Disclosure [Abstract]

Provision for income taxes

$ 294

$ 217

Restructuring Charges (Details) (USD $)

In Thousands, unless otherwise specified

3 Months Ended

Mar. 31, 2015

Mar. 31, 2014

Restructuring Reserve [Roll Forward]

Restructuring charges

$ 2,514

$ 0

2015 Restructuring Plan

Restructuring Reserve [Roll Forward]

Balances at January 1, 2015

0

Restructuring charges

2,514

Cash payments

(439)

Write-offs

(350)

Balances at March 31, 2015

1,725

2015 Restructuring Plan |
Workforce Reduction Costs

Restructuring Reserve [Roll Forward]

Balances at January 1, 2015

0

Restructuring charges

834

Cash payments

(439)

Write-offs

0

Balances at March 31, 2015

395

2015 Restructuring Plan |
Lease Termination and Other Costs

Restructuring Reserve [Roll Forward]

Balances at January 1, 2015

0

Restructuring charges

1,680

Cash payments

0

Write-offs

(350)

Balances at March 31, 2015

$ 1,330

Restructuring Charges - Narrative (Details) (USD $)

3 Months Ended

Mar. 31, 2015

Mar. 31, 2014

Mar. 31, 2015

2015 Restructuring Plan

Dec. 31, 2014

2015 Restructuring Plan

Mar. 31, 2015

Workforce Reduction Costs

2015 Restructuring Plan

position

Dec. 31, 2014

Workforce Reduction Costs

2015 Restructuring Plan

Mar. 31, 2015

Minimum

Employee Severance

2015 Restructuring Plan

Restructuring Cost and Reserve [Line Items]

Restructuring charges

$ 2,514,000

$ 0

$ 2,514,000

$ 834,000

Number of positions eliminated

71

Expected cost remaining

6,000,000

Restructuring reserve

1,725,000

0

395,000

0

Restructuring reserve, current

800,000

Restructuring reserve, noncurrent

$ 900,000

Related-Party Transactions - Additional Information (Details) (USD $)

3 Months Ended

Mar. 31, 2015

Mar. 31, 2014

Dec. 31, 2014

Adobe Systems

Related Party Transaction [Line Items]

Purchases from related party

$ 100,000

$ 200,000

Revenue from related parties

800,000

Due to related parties

22,000

100,000

Board of Directors of Cengage Learning, or Cengage

Related Party Transaction [Line Items]

Purchases from related party

4,300,000

5,900,000

Due from related parties

100,000

Due to related parties

200,000

100,000

Number of board members appointed to Board of Directors of related party

1

Shutterfly Inc (Shutterfly)

Related Party Transaction [Line Items]

Purchases from related party

1,100,000

Due from related parties

$ 0

Number of board members appointed to chief executive officer of related party

1