CHEGG, INC, 10-K filed on 3/6/2015
Annual Report
Document and Entity Information (USD $)
12 Months Ended
Dec. 31, 2014
Feb. 27, 2015
Jun. 30, 2014
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-K 
 
 
Document Period End Date
Dec. 31, 2014 
 
 
Document Fiscal Year Focus
2014 
 
 
Document Fiscal Period Focus
FY 
 
 
Amendment Flag
false 
 
 
Entity Common Stock, Shares Outstanding
 
84,501,198 
 
Entity Public Float
 
 
$ 523,548,622 
Entity Well-known Seasoned Issuer
Yes 
 
 
Entity Current Reporting Status
Yes 
 
 
Entity Voluntary Filers
No 
 
 
CONDENSED CONSOLIDATED BALANCE SHEETS (USD $)
In Thousands, unless otherwise specified
Dec. 31, 2014
Dec. 31, 2013
Current assets:
 
 
Cash and cash equivalents
$ 56,117 
$ 76,864 
Short-term investments
33,346 
37,071 
Accounts receivable, net of allowance for doubtful accounts of $559 and $317 at December 31, 2014 and 2013, respectively
14,396 
7,091 
Prepaid expenses
3,091 
2,134 
Other current assets
3,864 
1,149 
Total current assets
110,814 
124,309 
Long-term investments
1,451 
24,320 
Textbook library, net
80,762 
105,108 
Property and equipment, net
18,369 
18,964 
Goodwill
91,301 
49,545 
Intangible assets, net
13,626 
3,311 
Other assets
1,804 
1,814 
Total assets
318,127 
327,371 
Current liabilities:
 
 
Accounts payable
10,945 
4,078 
Deferred revenue
24,591 
22,804 
Accrued liabilities
31,183 
21,270 
Total current liabilities
66,719 
48,152 
Long-term liabilities
 
 
Other liabilities
4,365 
4,979 
Total long-term liabilities
4,365 
4,979 
Total liabilities
71,084 
53,131 
Commitments and contingencies (Note 11)
   
   
Stockholders' equity:
 
 
Preferred stock, $0.001 par value –10,000,000 shares authorized, no shares issued and outstanding at December 31, 2014 and 2013, respectively
0 
0 
Common stock, $0.001 par value – 400,000,000 shares authorized at December 31, 2014 and 2013, respectively; 84,008,043 and 81,708,202 shares issued and outstanding at December 31, 2014 and 2013, respectively
84 
82 
Additional paid-in capital
516,845 
479,279 
Accumulated other comprehensive loss
(13)
(6)
Accumulated deficit
(269,873)
(205,115)
Total stockholders' equity
247,043 
274,240 
Total liabilities and stockholders' equity
$ 318,127 
$ 327,371 
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $)
In Thousands, except Share data, unless otherwise specified
Dec. 31, 2014
Dec. 31, 2013
Statement of Financial Position [Abstract]
 
 
Allowance for doubtful accounts receivable, current
$ 559 
$ 317 
Preferred stock, par value
$ 0.001 
$ 0.001 
Preferred stock, shares authorized
10,000,000 
10,000,000 
Preferred stock, shares issued
0 
0 
Preferred stock, shares outstanding
0 
0 
Common stock, par value
$ 0.001 
$ 0.001 
Common stock, shares authorized
400,000,000 
400,000,000 
Common stock, shares issued
84,008,043 
81,708,202 
Common stock, shares outstanding
84,008,043 
81,708,202 
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (USD $)
In Thousands, except Per Share data, unless otherwise specified
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Net revenues
 
 
 
Rental
$ 181,570 
$ 189,004 
$ 177,410 
Services
87,460 
51,958 
28,074 
Sales
35,804 
14,613 
7,850 
Net revenues
304,834 
255,575 
213,334 
Cost of revenues
 
 
 
Rental
145,760 
140,033 
124,013 
Services
31,158 
18,522 
10,836 
Sales
34,067 
16,505 
10,820 
Cost of revenues
210,985 
175,060 
145,669 
Gross profit
93,849 
80,515 
67,665 
Operating expenses:
 
 
 
Technology and development
49,386 
41,944 
39,315 
Sales and marketing
72,315 
50,302 
51,082 
General and administrative
41,837 
40,486 
25,117 
Gain on liquidation of textbooks
(4,555)
(1,186)
(2,594)
Total operating expenses
158,983 
131,546 
112,920 
Loss from operations
(65,134)
(51,031)
(45,255)
Interest and other income (expense), net:
 
 
 
Interest expense, net
(317)
(3,818)
(4,393)
Other income (expense), net
879 
(359)
634 
Total interest and other income (expense), net
562 
(4,177)
(3,759)
Loss before provision for income taxes
(64,572)
(55,208)
(49,014)
Provision for income taxes
186 
642 
29 
Net loss
(64,758)
(55,850)
(49,043)
Deemed dividend to preferred stockholders
0 
(102,557)
0 
Net loss attributable to common stockholders
$ (64,758)
$ (158,407)
$ (49,043)
Net loss per share, attributable to common stockholders, basic and diluted (in dollars per share)
$ (0.78)
$ (7.58)
$ (4.39)
Weighted average shares used to compute net loss per share attributable to common stockholders, basic and diluted (in shares)
83,205 
20,902 
11,183 
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Statement of Comprehensive Income [Abstract]
 
 
 
Net loss
$ (64,758)
$ (55,850)
$ (49,043)
Other comprehensive (loss) income:
 
 
 
Net change in unrealized gain (loss) on available for sale investments
2 
(18)
0 
Change in foreign currency translation adjustments
(9)
(38)
50 
Other comprehensive (loss) income
(7)
(56)
50 
Total comprehensive loss
$ (64,765)
$ (55,906)
$ (48,993)
CONSOLIDATED STATEMENTS OF CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY (DEFICIT) (USD $)
In Thousands, except Share data, unless otherwise specified
Total
Convertible Preferred Stock
Common Stock
Additional Paid-In Capital
Accumulated Other Comprehensive Income (Loss)
Accumulated Deficit
Beginning balance at Dec. 31, 2011
$ (51,894)
$ 182,218 
$ 12 
$ 48,316 
 
$ (100,222)
Preferred stock, beginning balance, shares at Dec. 31, 2011
 
59,692,000 
 
 
 
 
Common stock, beginning balance, shares at Dec. 31, 2011
 
 
12,201,000 
 
 
 
Increase (Decrease) in Stockholders' Equity [Roll Forward]
 
 
 
 
 
 
Stock issued during period, shares
 
3,123,000 
 
 
 
 
Stock issued during period
 
24,983 
 
 
 
 
Cancellation of shares held in escrow from acquisitions, shares
 
 
(18,000)
 
 
 
Cancellation of shares held in escrow from acquisitions
(146)
 
 
(146)
 
 
Issuance of common stock warrants
73 
 
 
73 
 
 
Issuance of restricted shares, shares
 
 
15,000 
 
 
 
Issuance of common stock upon exercise of stock options and ESPP, shares
 
 
368,000 
 
 
 
Issuance of common stock upon exercise of stock options
552 
 
 
552 
 
 
Repurchase of common stock, shares
 
 
(319,000)
 
 
 
Repurchase of common stock
(3,335)
 
 
(3,335)
 
 
Conversion of preferred stock warrants to common stock warrants
0 
 
 
 
 
 
Share-based compensation expense
17,616 
 
 
17,616 
 
 
Other comprehensive income (loss)
50 
 
 
 
50 
 
Net (loss) income
(49,043)
 
 
 
 
(49,043)
Ending balance at Dec. 31, 2012
(86,127)
207,201 
12 
63,076 
50 
(149,265)
Preferred stock, ending balance, shares at Dec. 31, 2012
 
62,815,000 
 
 
 
 
Common stock, ending balance, shares at Dec. 31, 2012
 
 
12,247,000 
 
 
 
Increase (Decrease) in Stockholders' Equity [Roll Forward]
 
 
 
 
 
 
Stock issued during period, shares
 
 
14,400,000 
 
 
 
Stock issued during period
162,883 
 
15 
162,868 
 
 
Issuance of preferred stock and common stock upon exercise of stock warrants, shares
 
5,000 
10,000 
 
 
 
Issuance of preferred stock and common stock upon exercise of stock warrants
118 
37 
 
118 
 
 
Conversion of preferred stock to common stock, shares
 
(62,820,000)
53,912,000 
 
 
 
Conversion of preferred stock to common stock
207,238 
(207,238)
54 
207,184 
 
 
Cancellation of shares held in escrow from acquisitions
0 
 
 
 
 
 
Issuance of restricted shares, shares
 
 
307,000 
 
 
 
Shares withheld related to net share settlement of RSUs, shares
 
 
(115,000)
 
 
 
Shares withheld related to net share settlement of RSUs
(1,034)
 
 
(1,034)
 
 
Issuance of common stock upon exercise of stock options and ESPP, shares
 
 
931,000 
 
 
 
Issuance of common stock upon exercise of stock options
3,366 
 
1 
3,365 
 
 
Deemed dividend to preferred stockholders
102,557 
 
 
102,557 
 
 
Accretion of deemed dividend to preferred stockholders
(102,557)
 
 
(102,557)
 
 
Vesting of common stock warrants
130 
 
 
130 
 
 
Issuance of common stock upon exercise of common stock warrants, shares
 
 
16,000 
 
 
 
Conversion of preferred stock warrants to common stock warrants
7,097 
 
 
7,097 
 
 
Share-based compensation expense
36,475 
 
 
36,475 
 
 
Other comprehensive income (loss)
(56)
 
 
 
(56)
 
Net (loss) income
(55,850)
 
 
 
 
(55,850)
Ending balance at Dec. 31, 2013
274,240 
0 
82 
479,279 
(6)
(205,115)
Preferred stock, ending balance, shares at Dec. 31, 2013
0 
0 
 
 
 
 
Common stock, ending balance, shares at Dec. 31, 2013
81,708,202 
 
81,708,000 
 
 
 
Increase (Decrease) in Stockholders' Equity [Roll Forward]
 
 
 
 
 
 
Cancellation of shares held in escrow from acquisitions
0 
 
 
 
 
 
Issuance of restricted shares, shares
 
 
873,000 
 
 
 
Net issuance of common stock for settlement of RSUs
(3,979)
 
1 
(3,980)
 
 
Issuance of common stock upon exercise of stock options and ESPP, shares
663,333 
 
1,004,000 
 
 
 
Issuance of common stock upon exercise of stock options
2,713 
 
1 
2,712 
 
 
Repurchase of common stock, shares
 
 
(89,000)
 
 
 
Repurchase of common stock
(604)
 
 
(604)
 
 
Issuance of common stock in connection with acquisition, shares
 
 
408,000 
 
 
 
Issuance of common stock in connection with acquisition
2,585 
 
 
2,585 
 
 
Issuance of common stock upon exercise of common stock warrants, shares
 
 
104,000 
 
 
 
Issuance of common stock upon exercise of common stock warrants
0 
 
 
0 
 
 
Conversion of preferred stock warrants to common stock warrants
0 
 
 
 
 
 
Share-based compensation expense
36,853 
 
 
36,853 
 
 
Other comprehensive income (loss)
(7)
 
 
 
(7)
 
Net (loss) income
(64,758)
 
 
 
 
(64,758)
Ending balance at Dec. 31, 2014
$ 247,043 
$ 0 
$ 84 
$ 516,845 
$ (13)
$ (269,873)
Preferred stock, ending balance, shares at Dec. 31, 2014
0 
0 
 
 
 
 
Common stock, ending balance, shares at Dec. 31, 2014
84,008,043 
 
84,008,000 
 
 
 
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Cash flows from operating activities
 
 
 
Net loss
$ (64,758)
$ (55,850)
$ (49,043)
Adjustments to reconcile net loss to net cash provided by operating activities:
 
 
 
Textbook library depreciation expense
70,147 
64,759 
57,177 
Amortization of warrants and deferred loan costs
187 
1,545 
1,790 
Other depreciation and amortization expense
11,159 
10,078 
10,796 
Share-based compensation expense
36,888 
36,958 
18,045 
Provision for bad debts
234 
206 
485 
Gain on liquidation of textbooks
(4,555)
(1,186)
(2,594)
Loss from write-offs of textbooks
10,534 
5,874 
4,597 
Deferred income taxes
(1,291)
0 
0 
Realized gain on sale of securities
(21)
0 
0 
Loss from disposal of property and equipment
0 
0 
280 
Revaluation of preferred stock warrants
0 
622 
(380)
Impairment of intangibles
1,552 
0 
611 
Change in assets and liabilities net of effect of acquisition of businesses:
 
 
 
Accounts receivable
(1,709)
(1,474)
(4,951)
Prepaid expenses and other current assets
(2,981)
(1,661)
3,387 
Other assets
(155)
209 
1,158 
Accounts payable
5,037 
(30)
2,680 
Deferred revenue
1,657 
2,772 
7,519 
Accrued liabilities
7,448 
771 
2,789 
Other liabilities
(898)
113 
335 
Net cash provided by operating activities
68,475 
63,706 
54,681 
Cash flows from investing activities
 
 
 
Purchases of textbooks
(112,814)
(122,247)
(104,518)
Proceeds from liquidations of textbooks
58,119 
37,946 
34,076 
Purchases of marketable securities
(70,706)
(61,420)
0 
Proceeds from sale of marketable securities
46,358 
0 
0 
Maturities of marketable securities
50,700 
0 
0 
Purchases of property and equipment
(5,083)
(7,369)
(15,148)
Acquisition of businesses, net of cash acquired
(53,872)
0 
0 
Release of cash from escrow
(52)
0 
(2,513)
Net cash used in investing activities
(87,350)
(153,090)
(88,103)
Cash flows from financing activities
 
 
 
Proceeds from debt obligations
0 
31,000 
20,000 
Payments of debt obligations
0 
(51,000)
(20,500)
Proceeds from issuance of common stock under employee stock plans
0 
0 
0 
Proceeds from issuance of convertible preferred stock, net
0 
0 
24,983 
Proceeds from exercise of common stock under employee stock plans and preferred stock warrants
2,712 
3,369 
552 
Payment of taxes related to the net share settlement of RSUs
(3,980)
(1,034)
0 
Proceeds from initial public offering, net of issuance costs
0 
162,883 
0 
Repurchase of common stock and vested stock options
(604)
0 
(5,190)
Net cash (used in) provided by financing activities
(1,872)
145,218 
19,845 
Net (decrease) increase in cash and cash equivalents
(20,747)
55,834 
(13,577)
Cash and cash equivalents, beginning of period
76,864 
21,030 
34,607 
Cash and cash equivalents, end of period
56,117 
76,864 
21,030 
Cash paid during the period for:
 
 
 
Interest
114 
2,541 
2,313 
Income taxes
625 
429 
362 
Non-cash investing and financing activities:
 
 
 
Accrued purchases of long-lived assets
5,132 
3,215 
5,932 
Issuance of preferred stock warrants
0 
0 
1,094 
Conversion of preferred stock warrants to common stock warrants
0 
7,097 
0 
Conversion of preferred stock warrants into common stock
0 
207,238 
0 
Issuance of common stock upon exercise of stock warrants
0 
118 
0 
Deemed dividend to preferred stockholders
0 
102,557 
0 
Issuance of common stock warrants in connection with consulting services
0 
130 
73 
Issuance of common stock related to acquisition
2,585 
0 
0 
Cancellation of shares held in escrow from acquisitions
0 
0 
(146)
Common stock offering costs not yet paid
$ 0 
$ 769 
$ 0 
Background and Basis of Presentation
Background and Basis of Presentation
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.
Significant Accounting Policies
Significant Accounting Policies
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.

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.

Cash and Cash Equivalents and Restricted Cash

We consider all highly liquid investments with an original maturity date of three months or less from the date of purchase to be cash equivalents. Cash and cash equivalents, which consist of cash and money market accounts at financial institutions, are stated at cost, which approximates fair value.

We classify certain restricted cash balances within other current assets and other assets on the accompanying consolidated balance sheets based upon the term of the remaining restrictions.

At December 31, 2014 and 2013, we had approximately $1.8 million and $1.7 million, respectively, of restricted cash that consisted in part of escrow funds held in conjunction with our acquisitions prior to 2013, a deposit pledged as security for our corporate credit cards and a letter of credit pledged as a security deposit for our headquarters, a sales office and warehouse facilities leases. The certificate of deposit and escrow funds of approximately $0.3 million and $0.4 million as of December 31, 2014 and 2013, respectively, are classified in other current assets in our consolidated balance sheets due to the short-term nature of the restriction. The amount related to the security deposit of approximately $1.5 million and $1.3 million as of December 31, 2014 and 2013, respectively, is classified in other assets in our consolidated balance sheets as these amounts are restricted for periods that exceed one year from the balance sheet dates.

Investments

We hold investments in marketable securities, consisting of corporate securities and commercial paper. We classify our marketable securities as available-for-sale investments that are either short or long-term based on the nature of each security based on the contractual maturity of the investment when purchased. Our available-for-sale investments are carried at estimated fair value with any unrealized gains and losses, net of taxes, included in accumulated other comprehensive loss in stockholders’ equity. Unrealized losses are charged against other income (expense), net when a decline in fair value is determined to be other-than-temporary. We have not recorded any such impairment charge in the periods presented. We determine realized gains or losses on sale of marketable securities on a specific identification method, and record such gains or losses as other income (expense), net. For the years ended December 31, 2014 and 2013, the Company's gross realized gains and losses on short-term investments were not significant.

Accounts Receivable
    
Accounts receivable are recorded at the invoiced amount and are non-interest bearing. We generally grant uncollateralized credit terms to our customers, which include textbook wholesalers and marketing services customers, and maintain an allowance for doubtful accounts to account for potentially uncollectible receivables.

Allowance for Doubtful Accounts
    
We assess the creditworthiness of our customers based on multiple sources of information, and analyze such factors as our historical bad debt experience, industry and geographic concentrations of credit risk, economic trends, and customer payment history. This assessment requires significant judgment. Because of this assessment, which covers the sale of our brand advertising and enrollment marketing services, we maintain an allowance for doubtful accounts for estimated losses resulting from the inability of certain customers to make all of their required payments. In making this estimate, we analyze historical payment performance and current economic trends when evaluating the adequacy of the allowance for doubtful accounts. Accounts receivable are written off as a decrease to the allowance for doubtful accounts when all collection efforts have been exhausted and an account is deemed uncollectible.

Concentration of Credit Risk

Financial instruments that potentially subject us to concentrations of credit risk consist primarily of cash and cash equivalents, restricted cash, and marketable securities invested in highly liquid instruments in accordance with our investment policy. We place the majority of our cash and cash equivalents and restricted cash with financial institutions in the United States that we believe to be of high credit quality, and accordingly minimal credit risk exists with respect to these instruments. Certain of our cash balances held with financial institutions are in excess of Federal Deposit Insurance Corporation, or FDIC, limits. Our investment portfolio consists of investment-grade securities diversified among security types, industries and issuers. Our investments are held and managed by recognized financial institutions that follow our investment policy with the main objective of preserving capital and maintaining liquidity.

Concentrations of credit risk with respect to trade receivables exist to the full extent of amounts presented in the financial statements. We had two textbook wholesalers that represented 16% and 12% of our net accounts receivable balance as of December 31, 2014 and one textbook wholesaler that represented 11% of our net accounts receivable balance as of December 31, 2013, respectively. No customers represented over 10% of net revenues in 2014, 2013 or 2012.

Textbook Library

We consider our textbook library to be a long-term productive asset and, as such, classify it as a non-current asset in our consolidated balance sheets. Additionally, cash outflows for the acquisition of the textbook library, net of changes in related accounts payable and accrued liabilities, as well as cash inflows received from the liquidation of textbooks, are classified as cash flows from investing activities in our consolidated statements of cash flows, consistent with other long-term asset activity. The gain or loss from the liquidation of textbooks previously rented is recorded as a component of operating expenses in our consolidated statement of operations and is classified as cash flow from operating activities.

All textbooks in our textbook library are stated at cost, which includes the purchase price less accumulated depreciation.

We record allowances for lost or damaged textbooks in cost of revenues in our consolidated statements of operations based on our assessment of our textbook library on a book-by-book basis. Factors considered in the determination of textbook allowances include historical experience, management’s knowledge of current business conditions and expectations of future demand. Write-offs result from lost or damaged books, books no longer considered to be rentable, or when books are not returned to us after the rental period by our customers.

We depreciate our textbooks, less an estimated salvage value, over an estimated useful life of three years using an accelerated method of depreciation, as we estimate this method most accurately reflects the actual pattern of decline in the economic value of the assets. The salvage value considers the historical trend and projected liquidation proceeds for textbooks. The useful life is determined based on the time period in which the textbooks are held and rented before liquidation. In accordance with our policy, we review the estimated useful lives of our textbook library on an ongoing basis.

Depreciation expense and write-offs of textbooks are recorded in cost of revenues in our consolidated statements of operations. During 2014, 2013 and 2012, textbook depreciation expense was approximately $70.1 million, $64.8 million and $57.2 million, respectively, and write-offs were approximately $10.5 million, $5.9 million and $4.6 million, respectively.

Property and Equipment

Property and equipment are recorded at cost less accumulated depreciation and amortization. Depreciation and amortization are computed using the straight-line method over the following estimated useful lives of the assets:
Classification
 
Useful Life
Computers and equipment
 
3 years
Software
 
2-3 years
Furniture and fixtures
 
5 years
Leasehold improvements
 
Shorter of the remaining lease term or the estimated useful life of 5 years
Content
 
5 years


We capitalize costs related to the purchase or development of Chegg Study content and amortize these costs over a period of five years.

Depreciation and amortization expense are generally classified within the corresponding cost of revenues and operating expense categories in our consolidated statement of operations. Depreciation and amortization expense for 2014, 2013 and 2012 were approximately $6.2 million, $5.7 million and $3.9 million, respectively.

The cost of maintenance and repairs is expensed as incurred. When assets are retired or otherwise disposed of, the cost and related accumulated depreciation and amortization are removed from their respective accounts, and any gain or loss on such sale or disposal is reflected in loss from operations.

Software Development Costs

We capitalize costs related to software developed or obtained for internal use when certain criteria have been met. Costs incurred during the application development stage for internal-use software are capitalized in property and equipment and amortized over the estimated useful life of the software, generally up to three years.

As of December 31, 2014 and 2013, software development costs, net were approximately $0.5 million and $2.6 million, respectively, which were recorded as software in property and equipment. In 2014, 2013 and 2012, the amortization of software development costs capitalized totaled approximately $0.5 million, $1.0 million and $1.2 million, respectively.

Goodwill

Goodwill represents the excess of the fair value of consideration paid over the estimated fair value of assets acquired and liabilities assumed in a business acquisition. We test goodwill for impairment at least annually, or more frequently if certain events or indicators of impairment occur between annual impairment tests. We completed our annual impairment test in our fourth quarter of 2014, which did not result in any impairment. For our annual goodwill impairment test, we perform a quantitative test of our single reporting unit. In the first step of this test, goodwill is tested for impairment at the reporting unit level by comparing the reporting unit’s carrying amount, including goodwill, to the fair value of the reporting unit. The fair value of the reporting unit was estimated using a market approach. If the carrying amount of the reporting unit exceeds its fair value, a second step is performed to measure the amount of impairment loss, if any. In step two, the implied fair value of goodwill is calculated as the excess of the fair value of a reporting unit over the fair values assigned to its assets and liabilities. In the event we determine that the fair value of our single reporting unit is less than the reporting unit’s carrying value, we will record an impairment charge for the amount of the impairment in the period in which the determination is made.

Acquired Intangible Assets, and Other Long-Lived Assets

Acquired intangible assets with finite useful lives, which include developed technology, customer lists, trade names and non-compete agreements, are amortized over their estimated useful lives.

We assess the impairment of acquired intangible assets and other long-lived assets when events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. Factors that we consider in determining when to perform an impairment review include significant negative industry or economic trends or significant changes or planned changes in the use of the assets. We measure the recoverability of assets that will continue to be used in operations by comparing the carrying value of the asset grouping to the estimate of the related total future undiscounted net cash flows. If an asset grouping’s carrying value is not recoverable through the related undiscounted cash flows, the asset grouping is measured for impairment. The impairment is measured by comparing the difference between the asset grouping’s carrying value and its fair value.

Indefinite-Lived Intangibles

We make judgments about the recoverability of purchased indefinite-lived intangible assets whenever events or changes in circumstances indicate that an impairment may exist. Recoverability of indefinite-lived intangible assets is measured by comparing the carrying amount of the asset to the future undiscounted cash flows that the asset is expected to generate. We perform an annual impairment assessment on October 1 of each year for indefinite-lived intangible assets, or more frequently if indicators of potential impairment exist, to determine whether it is more likely than not that the carrying value of the assets may not be recoverable. Recoverability of indefinite-lived intangible assets is measured by comparing the carrying amount of the asset to the future discounted cash flows that the asset is expected to generate. If we determine that an individual asset is impaired, the amount of any impairment is measured as the difference between the carrying value and the fair value of the impaired asset.

The assumptions and estimates used to determine future values and remaining useful lives of our intangible and other long-lived assets are complex and subjective. They can be affected by various factors, including external factors such as industry and economic trends, and internal factors such as changes in our business strategy and our forecasts for specific product lines.

Revenue Recognition and Deferred Revenue

We derive our revenue from the rental or sale of print textbooks and from digital offerings, net of allowances for refunds or charge backs from our payment processors who process payments from credit cards, debit cards and PayPal. Revenue is recognized when the four basic criteria for revenue recognition have been met as follows: persuasive evidence of an arrangement exists, delivery has occurred and title has transferred, the sale price is fixed or determinable, and collection is reasonably assured.

We primarily generate revenue from the rental of print textbooks and, to a lesser extent, through the sales of print textbooks through our website purchased by us on a just-in-time basis. Rental revenue is recognized ratably over the term of the rental period, generally two to five months. Revenue from selling textbooks on a just-in-time basis is recognized upon shipment. We do not hold an inventory of textbooks for sale. Our customers pay for the rental and sale of print textbooks on our website primarily by credit card, resulting in immediate settlement of our accounts receivable.

We evaluate whether we are acting as a principal or an agent, and therefore would record the gross sales amount and related costs as revenue or the net amount earned as commissions from the sale of third party products. Our determination is based on our evaluation of certain indicators including whether we are the principal in the transaction, are subject to inventory risk, have latitude in establishing prices and selecting suppliers, none of which is presumptive or determinative. We generally operate as the principal and so in those instances revenue is recorded at the gross sale price. We generally record the net amounts as commissions earned when such amounts are determined using a fixed percentage of the transaction price, we are not subject to inventory risk or responsible for the fulfillment of the textbooks.

We also generate revenue from digital offerings that include eTextbooks, supplemental materials and our Chegg Study service that we offer to students, enrollment marketing services that we offer to colleges and advertising services that we offer to brands. Digital offerings are offered to students through monthly or annual subscriptions and we recognize revenue ratably over the subscription period. As with revenue from print textbooks, revenue from eTextbooks is recognized ratably over the contractual period, generally two to five months, or at time of the sale, and our customers pay for these services through payment processors, resulting in immediate settlement of our accounts receivable.

Marketing services include enrollment marketing services and brand advertising, which we offer either on a subscription or on an a la carte basis. Enrollment marketing services connect colleges and graduate schools with students seeking admission or scholarship opportunities at these institutions. Brand advertising offers brands unique ways to connect with students. Revenue is recognized ratably or as earned over the subscription service, generally one year. Revenue from enrollment marketing services or brand advertising delivered on an a la carte basis, without a subscription, is recognized when delivery of the respective lead or service has occurred. For these services, we bill the customer at the inception, over the term of the customer arrangement or as the services are performed. Upon satisfactory assessment of creditworthiness, we generally grant credit to our enrollment marketing services and brand advertising customers with normal credit terms, typically 30 days.

Shipping costs charged to customers in the sale or rental of textbooks are recorded in revenue and the related expenses are recorded as cost of revenues.

Some of our customer arrangements for enrollment marketing services include multiple deliverables, which include the delivery of student leads as well as other services to the end customer. We have determined these deliverables qualify as separate units of accounting, as they have value to the customer on a standalone basis and our arrangements do not contain a right of return. For these arrangements that contain multiple deliverables, we allocate the arrangement consideration based on the relative selling price method in accordance with the selling price hierarchy, which includes: (1) vendor-specific objective evidence of fair value, or VSOE, when available; (2) third-party evidence of selling price, or TPE, if VSOE does not exist; and (3) estimated selling price, or ESP, if neither VSOE nor TPE is available.

We determine VSOE based on our historical pricing and discounting practices for the specific solution when sold separately and when a substantial majority of the selling prices for these services fall within a narrow range. TPE is determined based on competitor prices for similar deliverables when sold separately. Generally our go-to-market strategy differs from that of our peers, and our offerings contain a significant level of differentiation such that the comparable pricing of services with similar functionality cannot be obtained. As we have not established VSOE or TPE for our enrollment marketing services, we have used ESP in our allocation of arrangement consideration. We have determined ESP by considering multiple factors including, but not limited to, prices charged for similar offerings, sales volume, geographies, market conditions, the competitive landscape, and pricing practices. We believe this best represents the price at which we would transact a sale if the services were sold on a standalone basis, and we regularly assess the method used to determine ESP. Additionally, we limit the amount of revenue recognized for delivered elements to the amount that is not contingent on future delivery of services or other future performance obligations.

Revenue is presented net of sales tax collected from customers to be remitted to governmental authorities and net of allowances for estimated cancellations and customer returns, which are based on historical data. Customer refunds from cancellations and returns are recorded as a reduction to revenue. Deferred revenue primarily consists of advanced payments from students related to rentals and subscriptions that have not been recognized, and marketing services that have yet to be performed. Deferred revenue is recognized as revenue ratably over the term or when the services are provided and all other revenue recognition criteria have been met.

Cost of Revenues

Our cost of revenues consists primarily of expenses associated with the delivery and distribution of our products and services. Cost of revenues related to print textbooks include textbook depreciation expense, shipping and other fulfillment costs, the cost of textbooks sold, payment processing costs, write-offs and allowances related to the textbook library, and all expenses associated with our distribution and customer service centers, including personnel and warehousing costs. The cost of textbooks sold, shipping and other fulfillment costs and payment processing expenses are recognized upon shipment, while textbook depreciation is recognized under an accelerated method over the life of the textbook. We believe this method most accurately reflects the actual pattern of decline in the economic value of the assets, resulting in higher costs earlier in the textbook lifecycle. Cost of revenues related to digital offerings, in which we also group eTextbooks, consist primarily of the depreciation of our eTextbook Reader software, publisher content fees for eTextbooks, content amortization expense related to content that we develop or license, including publisher agreements for which we pay one-time license fees for published content, enrollment marketing services leads purchased from third-party suppliers to fulfill leads that we are unable to fulfill through our internal database, personnel costs and other direct costs related to providing the content or services. In addition, cost of revenues includes allocated information technology and facilities costs.

Technology and Development Costs

Technology and development expenses consist primarily of salaries, benefits and share-based compensation expense for employees on our product and web design, engineering and technical teams who are maintaining our website, developing new products and improving existing products. Technology and development costs also include web hosting costs, third-party development costs and allocated information technology and facilities costs. We expense substantially all of our technology and development costs as they are incurred.

Advertising Costs

Advertising costs are expensed as incurred and consist primarily of online advertising and marketing promotional expenditures. During 2014, 2013 and 2012, advertising costs were approximately $22.4 million, $16.4 million, and $21.1 million, respectively.

Share-based Compensation

Share-based compensation expense for stock options and employee stock purchase plan, or ESPP, rights are accounted for under the fair value method, which requires us to measure the cost of employee share-based compensation awards based on the grant-date fair value of the award. share-based compensation expense for RSUs is measured based on the closing fair market value of the Company’s common stock on the date of grant. We recognize compensation cost for all employee share-based compensation awards that are expected to vest on a straight-line basis over the requisite service period of the awards, which is generally the option vesting period. These amounts are reduced by estimated forfeitures, which are estimated at the time of the grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates.

Equity awards issued to non-employees are recorded at their fair value on the measurement date and are subject to adjustment each period as the underlying awards vest or consulting services are performed.

Income Taxes

We account for income taxes under an asset and liability method whereby deferred tax asset and liability account balances are determined based on differences between the financial reporting and the tax basis of assets and liabilities, and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. Valuation allowances are established, when necessary, to reduce deferred tax assets to an amount that is more-likely-than-not to be realized. We recognize the benefit from a tax position only if it is more-likely-than-not that the position would be sustained upon audit based solely on the technical merits of the tax position. Our policy is to include interest and penalties related to unrecognized tax benefits as a component of income tax expense.

Net Loss Per Share

Basic net loss per share is computed by dividing the net loss attributable to common stockholders 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. Net loss attributable to common stockholders includes the issuance of 11,667,254 shares of our common stock in the form of a deemed stock dividend to the holders of our Series D and Series E convertible preferred stock of approximately $102.6 million. Diluted net loss per share attributable to common stockholders is computed by giving effect to all potential shares of common stock, including stock options, warrants, RSUs and convertible preferred stock prior to its conversion in our IPO, 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 attributable to common stockholders (in thousands, except per share amounts):
 
 
Year Ended December 31,
 
 
2014
 
2013
 
2012
Numerator:
 
 
 
 
 
 
Net loss
 
$
(64,758
)
 
$
(55,850
)
 
$
(49,043
)
Deemed dividend to preferred stockholders
 
—

 
(102,557
)
 
—

 
 
$
(64,758
)
 
$
(158,407
)
 
$
(49,043
)
Denominator:
 
 
 
 
 
 
Weighted-average common shares outstanding
 
83,241

 
21,121

 
12,132

Less: Weighted-average unvested common shares subject to repurchase of forfeiture
 
(36
)
 
(219
)
 
(949
)
Weighted-average common shares used in computing basic and diluted net loss per share
 
83,205

 
20,902

 
11,183

 
 
 
 
 
 
 
Net loss per share attributable to common stockholders, basic and diluted.
 
$
(0.78
)
 
$
(7.58
)
 
$
(4.39
)


The following potential common shares 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):
 
 
Year Ended December 31,
 
 
2014
 
2013
 
2012
Options to purchase common stock
 
14,253

 
17,972

 
12,860

Restricted stock units
 
289

 
1,480

 
1,328

Common stock subject to repurchase or forfeiture
 
—

 
100

 
398

Warrants to purchase common stock
 
996

 
1,118

 
36

Warrants to purchase convertible preferred stock
 
—

 
—

 
1,132

Convertible preferred stock
 
—

 
—

 
42,242

Total common stock equivalents
 
15,538

 
20,670

 
57,996



Foreign Currency Translation

The functional currency of our foreign subsidiaries is the local currency. Adjustments resulting from the translation of foreign currencies into U.S. dollars for balance sheet amounts are based on the exchange rates as of the consolidated balance sheet date. Non-monetary balance sheet items denominated in a currency other than the applicable functional currency are translated using the historical rate. Revenue and expenses are translated at average exchange rates during the period. Foreign currency translation gains or losses are included in accumulated other comprehensive loss as a component of stockholders’ equity (deficit) on the consolidated balance sheets. Gains or losses resulting from foreign currency transactions, which are denominated in currencies other than the entity’s functional currency, are included in other income (expense) in the consolidated statements of operations and were not material during 2014, 2013 or 2012.

Recent Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board issued Accounting Standards Update 2014-9, Revenue from Contracts with Customers (ASU 2014-9). This standard outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. ASU 2014-9 provides companies with two implementation methods. Companies can choose to apply the standard retrospectively to each prior reporting period presented (full retrospective application) or retrospectively with the cumulative effect of initially applying the standard as an adjustment to the opening balance of retained earnings of the annual reporting period that includes the date of initial application (modified retrospective application). This guidance is effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period, and early application is not permitted. We are currently in the process of evaluating this new guidance.
Cash and Cash Equivalents, Investments and Restricted Cash
Cash and Cash Equivalents, Investments and Restricted Cash
Cash and Cash Equivalents, Investments and Restricted Cash

The following tables show our cash and cash equivalents, restricted cash and investments’ adjusted cost, unrealized gain (loss) and fair value (in thousands):
 
 
December 31, 2014
 
December 31, 2013
 
Cost
 
Net Unrealized Gain/(Loss)
 
Fair Value
 
Cost
 
Net Unrealized Gain/(Loss)
 
Fair Value
Cash and cash equivalents:
 
 
 
 
 
 
 
 
 
 
 
Cash
$
49,836

 
$
—

 
$
49,836

 
$
33,322

 
$
—

 
$
33,322

Money market funds
5,828

 
—

 
5,828

 
42,042

 
—

 
42,042

Commercial paper
453

 
—

 
453

 
1,500

 
—

 
1,500

Total cash and cash equivalents
$
56,117

 
$
—

 
$
56,117

 
$
76,864

 
$
—

 
$
76,864

Short-term investments:
 
 
 
 
 
 
 
 
 
 
 
Commercial paper
$
13,435

 
$
—

 
$
13,435

 
$
35,571

 
$
—

 
$
35,571

Corporate securities
18,426

 
(15
)
 
18,411

 
—

 
—

 
—

Certificate of deposit
1,499

 
1

 
1,500

 
1,500

 
—

 
1,500

Total short-term investments
$
33,360

 
$
(14
)
 
$
33,346

 
$
37,071

 
$
—

 
$
37,071

 
 
 
 
 
 
 
 
 
 
 
 
Long-term corporate securities
$
1,453

 
$
(2
)
 
$
1,451

 
$
24,338

 
$
(18
)
 
$
24,320

 
 
 
 
 
 
 
 
 
 
 
 
Short-term restricted cash
$
300

 
$
—

 
$
300

 
$
352

 
$
—

 
$
352

Long-term restricted cash
1,480

 
—

 
1,480

 
1,350

 
—

 
1,350

Total restricted cash
$
1,780

 
$
—

 
$
1,780

 
$
1,702

 
$
—

 
$
1,702


 
The amortized cost and fair value of available-for-sale investments as of December 31, 2014 by contractual maturity were as follows (in thousands):

 
Cost
 
Fair Value
Due in 1 year or less
$
33,813

 
$
33,799

Due in 1-2 years
1,453

 
1,451

Investments not due at a single maturity date
5,828

 
5,828

Total
$
41,094

 
$
41,078


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

As of December 31, 2014, 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 nine 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 year ended December 31, 2014, we did not recognize any impairment charges.
Fair Value Measurement
Fair Value Measurement
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 December 31, 2014 and December 31, 2013 are classified based on the valuation technique level in the tables below (in thousands):
 
 
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


 
December 31, 2013
 
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
$
42,042

 
$
42,042

 
$
—

 
$
—

Commercial paper
1,500

 
—

 
1,500

 
—

Short-term investments:
 
 
 
 
 
 
 
Commercial paper
35,571

 
—

 
35,571

 
—

Certificate of deposit
1,500

 
—

 
1,500

 
—

Long-term investments, corporate securities
24,320

 
—

 
24,320

 
—

Total assets measured and recorded at fair value
$
104,933

 
$
42,042

 
$
62,891

 
$
—

Liabilities:
 
 
 
 
 
 
 
Put option liability
$
1,521

 
$
—

 
$
—

 
$
1,521


 
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.

The following table summarizes the change in the fair value of our Level 3 liabilities (in thousands):
 
Level 3
 
December 31, 2014
Beginning balance
$
1,521

Vesting of put options
271

Exercise of put options
(460
)
Fair value adjustment related to put options
(253
)
Total financial liabilities
$
1,079


 
As of December 31, 2014, we did not have observable inputs for the valuation of our put option liability, 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. As shares associated with these put options vest, the liability is recognized as share-based compensation expense in our consolidated statements of operations and results in a change in our Level 3 liabilities.

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.
Long-Lived Assets
Long-Lived Assets
Long-Lived Assets

Textbook Library, Net

Textbook library, net consisted of the following (in thousands):

 
December 31,
 
2014
 
2013
Textbook library
$
169,463

 
$
196,742

Less accumulated depreciation
(88,701
)
 
(91,634
)
Textbook library, net
$
80,762

 
$
105,108



Property and Equipment, Net

Property and equipment, net consisted of the following (in thousands):
 
December 31,
 
2014
 
2013
Computer and equipment
$
1,083

 
$
1,594

Software
3,842

 
5,088

Furniture and fixtures
2,259

 
2,207

Leasehold improvements
5,153

 
4,407

Content
21,262

 
17,725

 
33,599

 
31,021

Less accumulated depreciation and amortization
(15,230
)
 
(12,057
)
Property and equipment, net
$
18,369

 
$
18,964

Acquisitions
Acquisitions
Acquisitions

On October 1, 2014, we acquired 100% of the business of internships.com, a division of CareerArc Group, headquartered in Burbank, California. With this acquisition, we aimed to expand our user base and expose new users to our different services. We see the acquisition of internships.com as a method to connect the ending of a student life cycle to the beginning of their career. The total fair value of the purchase consideration was $10.0 million in cash, and $1.0 million in stock that was placed into escrow, for indemnification against breaches of general representations and warranties, and will be released 18 months from the closing date of the acquisition.

On June 5, 2014, we acquired 100% of the outstanding shares and voting interest of InstaEDU, Inc. (InstaEDU), headquartered in San Francisco, California. With this acquisition, we aimed to expand our digital offerings to help students excel in school by including real time tutoring services. We see the acquisition of InstaEDU as a method to connect the book offering and service offerings of Chegg together. The total fair value of the purchase consideration was $31.1 million in cash, which included $4.5 million that was placed into escrow, for indemnification against breaches of general representations and warranties, and will be released 18 months from the closing date of the acquisition.

On April 9, 2014, we acquired 100% of the outstanding shares and voting interest of The Campus Special, LLC and The Campus Special Food, LLC (together, the Campus Special), headquartered in Duluth, Georgia for a total fair value purchase consideration of $16.0 million, consisting of $14.0 million in cash and 250,000 shares of our common stock, and all of such shares of our common stock were placed in escrow for indemnification against breaches of general representations and warranties and will be released one year from closing date, and a fair value contingent consideration of additional shares of common stock, which is payable on the attainment of certain performance metrics in 2014 and 2015. The metrics related to 2014 were not met and as such those shares were not released. With the Campus Special acquisition, we aimed to expand our offerings to students to include coupon specials on consumer goods and services. The probability-weighted fair value contingent consideration was recorded in other accrued liabilities in our consolidated balance sheet as of the date of acquisition.

On March 7, 2014, we acquired certain assets from Bookstep LLC, (Bookstep) to expand our technical resources and research and development capabilities. The total fair value of the purchase consideration was $0.5 million. The acquisition agreement requires us to pay approximately $2.5 million in cash, payable over two years, contingent upon the continuation of services by a certain number of consultants during the period after acquisition. The fair value of these subsequent payments was $2.5 million, which is being accounted for as post-combination compensation expense.

The acquisition date fair value of the consideration for the above four transactions consisted of the following as of December 31, 2014 (in thousands):
Cash consideration
$
55,537

Fair value of stock escrow consideration
2,585

Fair value of stock contingent consideration
193

Fair value of purchase consideration
$
58,315


 
The fair value of the intangible assets acquired was determined under the acquisition method of accounting for business combinations. The excess of purchase consideration paid over the fair value of identifiable intangible assets acquired was recorded as goodwill.  
The following table summarizes the fair value of the net identifiable assets acquired in the year ended December 31, 2014 (in thousands):
 
2014
Cash
$
1,665

Other acquired assets
595

Acquired intangible assets:
 
Developed technology
4,174

Customer list
3,770

Trade name
5,990

Non-compete agreements
1,630

Corporate partnerships
243

Master services agreement
1,030

Total acquired intangible assets
16,837

Total identifiable assets acquired
19,097

Liabilities assumed
(2,538
)
Net identifiable assets acquired
16,559

Goodwill
41,756

Net assets acquired
$
58,315



For the year ended December 31, 2014, we incurred $0.7 million of acquisition-related expenses associated with the four acquisitions which have been included in general and administrative expenses in the consolidated statements of operations.

The results of operations of the above acquisitions have been included in our consolidated statement of operations from the date of acquisition and were not material to our results of operations.

The amounts recorded for goodwill related to the Bookstep, Campus Special and internships.com transactions are expected to be deductible for tax purposes. The amount recorded for goodwill related to the InstaEDU transaction is not deductible for tax purposes.
Goodwill and Intangible Assets
Goodwill and Intangible Assets
Goodwill and Intangible Assets

Goodwill consists of the following (in thousands):
 
December 31, 2014
Beginning balance
$
49,545

Additions due to acquisition
41,756

Ending balance
$
91,301




Intangible assets consist of the following (in thousands):
 
December 31, 2014
 
Weighted-Average Amortization
Period
(in months)
 
Gross
Carrying
Amount
 
Accumulated
Amortization
 
Impairment
 
Net
Carrying
Amount
Developed technology
49

 
$
9,792

 
$
(5,000
)
 
$
(194
)
 
$
4,598

Customer list
6

 
4,363

 
(1,816
)
 
(829
)
 
1,718

Trade name
44

 
3,132

 
(1,085
)
 
(39
)
 
2,008

Non-compete agreements
14

 
1,637

 
(421
)
 
(278
)
 
938

Master service agreement
14

 
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

 
 
December 31, 2013
 
Weighted-Average
Amortization
Period
(in months)
 
Gross
Carrying
Amount
 
Accumulated
Amortization
 
Net
Carrying
Amount
Developed technology
46
 
$
8,008

 
$
(5,386
)
 
$
2,622

Customer list
24
 
5,472

 
(5,029
)
 
443

Trade name
33
 
1,182

 
(942
)
 
240

Non-compete agreements
34
 
1,068

 
(1,062
)
 
6

Total intangible assets
 
 
$
15,730

 
$
(12,419
)
 
$
3,311


 
During the year ended December 31, 2014, 2013 and 2012, amortization expense related to our acquired intangible assets totaled approximately $5.0 million, $4.4 million, and $6.8 million, respectively.

During the fourth quarter of 2014, we determined that we would not continue to support or look to expand our print coupon business, resulting in a significant decrease in the expected future cash flows. As a result an impairment analysis was performed based on a discounted cash flow analysis with key assumptions based on the future revenues expected until the services were removed from our website. The analysis indicated that the carrying amounts of the intangible assets acquired will not be fully recoverable, resulting in an impairment charge totaling $1.6 million, which is included in sales and marketing on our consolidated statements of operations.

As of December 31, 2014, the estimated future amortization expense related to our finite-lived intangible assets is as follows (in thousands):
2015
$
4,761

2016
2,238

2017
1,701

2018
1,018

2019
308

Total
$
10,026

Balance Sheet Details
Balance Sheet Details
Balance Sheet Details

Accrued liabilities consist of the following (in thousands):
 
December 31,
 
2014
 
2013
Accrued book purchases
$
1,812

 
$
1,905

Accrued shipping for cycle returns
539

 
2,929

Chegg credit
2,264

 
3,124

Refund reserve
6,174

 
330

Taxes payable
4,851

 
3,067

Other
15,543

 
9,915

 
$
31,183

 
$
21,270



Other liabilities consist of the following (in thousands):
 
December 31,
 
2014
 
2013
Put option liability
$
—

 
$
1,521

Deferred rent, non-current
1,233

 
1,803

Long term tax liability
2,088

 
1,281

Other
1,044

 
374

 
$
4,365

 
$
4,979

Debt Obligations
Debt Obligations
Debt Obligations

In May 2012, we entered into a term loan facility with the aggregate principal of $20.0 million, (“the Term Loan”), with interest payable on a monthly basis at the rate of 11.5%. In connection with the Term Loan, we issued preferred stock warrants to the lender. In August 2013, we repaid the loan in full, including the outstanding principal balance of $20.0 million and an end-of-term fee of $850,000.

In August 2013, we entered into a revolving credit facility with an aggregate principal amount of $50.0 million (the Revolving Credit Facility).  On June 30, 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 on August 12, 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 December 31, 2014, we were in compliance with these financial covenants. In August 2013, we drew down $21.0 million in proceeds from the Revolving Credit Facility and with these proceeds we repaid in full our Term Loan outstanding principal balance of $20.0 million. In October 2013, we drew down an additional $10.0 million in proceeds from the Revolving Credit Facility. In November 2013, we repaid in full our $31.0 million outstanding balance of the Revolving Credit Facility.
Stock Warrants
Stock Warrants
Stock Warrants

In connection with our IPO in November 2013, our previously outstanding convertible preferred stock warrants were converted into 1,118,282 common stock warrants at a weighted average exercise price of $5.16 per share.

At the time of conversion, the common stock warrants were valued using the Black-Scholes Merton option-pricing valuation model using the following weighted average key assumptions:

Expected term
5.9 years

Expected volatility
55.5
%
Dividend yield
0.00
%
Risk-free interest rate
1.61

Weighted-average fair value per share
$
6.35



The conversion of the preferred stock warrants into common stock warrants resulted in a gain of $3.3 million and is included in other income (expense), net in our consolidated statements of operations.

In April 2014, 122,733 common stock warrants were exercised at an exercise price of $0.82. The remaining 995,549 common stock warrants are exercisable at a weighted average exercise price of $5.70
Commitments and Contingencies
Commitments and Contingencies
Commitments and Contingencies

We lease our office and warehouse facilities under operating leases, which expire at various dates through 2019. Our primary operating lease commitments at December 31, 2014, related to our headquarters in Santa Clara, California and our warehouse in Shepardsville, 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 $3.3 million, $2.9 million and $3.9 million in the year ended December 31, 2014, 2013 and 2012, respectively.     

The aggregate future minimum lease payments as of December 31, 2014, are as follows (in thousands):
2015
$
4,157

2016
4,061

2017
1,609

2018
1,541

2019
880

Thereafter
612

Total
$
12,860



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 on July 23, 2013 and the Board issued a ruling in favor of the Department of Revenue on January 13, 2014. On February 7, 2014, we filed an appeal to the Franklin Circuit Court in Kentucky and on June 17, 2014 the court held in abeyance our motion to appeal. On October 29, 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 and uncertainties related to this matter, 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 analysis of whether a claim may proceed to litigation cannot be predicted 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
Guarantees and Indemnifications
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 December 31, 2014.
Convertible Preferred Stock and Common Stock
Convertible Preferred Stock and Common Stock
Convertible Preferred Stock and Common Stock

In November 2013, we completed our IPO, whereby 14,400,000 share of common stock were sold to the public at a price of $12.50 per share. We received net proceeds of $162.9 million after deducting underwriting discounts and commissions of $12.6 million and incurred offering costs of $4.5 million. In connection with our IPO:

•
All of our outstanding shares of convertible preferred stock were automatically converted into 53,912,261 shares of our common stock;
•
All of our outstanding convertible preferred stock warrants were automatically converted into warrants to purchase 1,118,282 shares of our common stock (see Note 10);
•
We reclassified our outstanding preferred stock warrant liability to additional paid-in capital and recorded a gain of $3.3 million, which occurred on the closing of our IPO (see Note 10);
•
We recognized share-based compensation expense related to the vesting of RSUs granted prior to the IPO that were outstanding as of the IPO date (see Note 14); and
•
We granted 931,791 options and 472,644 RSUs under our Designated IPO Equity Incentive Program (see Note 14).

Upon conversion of our preferred stock outstanding we issued 11,667,254 shares of our common stock in the form of a deemed stock dividend to the holders of our Series D and Series E convertible preferred stock, valued at approximately $102.6 million. The terms of our Series D and Series E convertible preferred stock provided that the ratio at which shares of such series of preferred stock would automatically convert into shares of common stock upon the completion of our IPO would increase if the IPO was below approximately $26 per share. Because the offering price was below the indicated conversion threshold price for the Series D and Series E convertible preferred stock, the conversion ratio for such series of preferred stock was adjusted, which resulted in additional shares of our common stock being issued in the form of a deemed stock dividend upon conversion of our Series D and Series E preferred stock.

During 2012, we repurchased and retired 318,793 shares of common stock from certain current and former employees related to our acquisitions at purchase prices ranging between $0.001 and $12.00 per share. The aggregate purchase price was approximately $3.4 million.

We are authorized to issue 400.0 million shares of common stock, with a par value per share of $0.001. As of December 31, 2014, we have reserved the following shares of common stock for future issuance (in thousands):

 
December 31, 2014
Warrants to purchase common stock
996

Outstanding stock options
14,962

Outstanding RSUs
9,125

Shares available for grant under the stock plans
8,821

Shares available for issuance under employee stock purchase plan
4,476

Total common shares reserved for future issuance
38,380



Stock Plans

2005 Stock Incentive Plan
    
On August 22, 2005, the Board of Directors and our stockholders approved the 2005 Stock Incentive Plan (the 2005 Plan). Under the 2005 Plan, the Company issued shares of common stock and options to purchase stock to employees, directors and consultants. Awards granted under the 2005 Plan were either incentive stock options, non-qualified stock options or RSUs to officers, employees, directors, consultants and other key persons. Incentive stock options were only granted to employees with exercise prices of no less than the fair market value of the common stock on the date of grant, and non-qualified stock options were granted to employees, and consultants at exercise prices of not less than 85% of the fair market value of the common stock on the grant date, as determined by the Board of Directors, provided however, that (i) the exercise price of an incentive stock option and non-qualified stock (option was not less than 100% and 85% of the deemed fair value of the common stock on the grant date, respectively, and (ii) the exercise price of an incentive stock option or non-qualified stock option granted to a 10% stockholder was not less than 110% of the fair market value of a common stock on the date of grant. Options granted under the 2005 Plan generally expire no later than ten years and in general vest over four years from the date of grant. However, an incentive stock option granted to a 10% stockholder may have only a maximum term of five years from the date of grant. The Board of Directors determined that no further grants of awards under the 2005 Plan would be made effective as of November 10, 2013.

Designated IPO Equity Incentive Program

On February 15, 2012, the Board of Directors approved the Designated IPO Equity Incentive Program, or the IPO Equity Incentive Program. The purpose of the IPO Equity Incentive Program was to provide incentives to certain individuals who provided services to the Company or any Company subsidiary to (i) incentivize and motivate them, including in the event of our IPO, and (ii) continue in the employment of the Company through and after the closing of our IPO. In connection with our IPO, on November 12, 2013, we granted 931,791 options and 472,644 RSUs under the IPO Equity Incentive Program at the IPO price of our common stock under the 2005 Stock Incentive Plan. No further grants of awards may be made under the IPO Equity Incentive Program.

2013 Equity Incentive Plan

On June 6, 2013, the Board of Directors adopted our 2013 Equity Incentive Plan (the 2013 Plan), which was subsequently approved by our stockholders on August 29, 2013. The 2013 Plan became effective on November 11, 2013 and replaced the 2005 Plan. On the effective date of the 2013 Plan, 12,000,000 shares of our common stock were reserved for issuance, plus an additional 3,838,985 shares reserved but not issued or subject to outstanding awards under our 2005 Plan on the effective date of the 2013 Plan, plus, on and after the effective date of the 2013 Plan, (i) shares that are subject to outstanding awards under the 2005 Plan which cease to be subject to such awards, (ii) shares issued under the 2005 Plan that are forfeited or repurchased at their original issue price and (iii) shares subject to awards under the 2005 Plan that are used to pay the exercise price of an option or withheld to satisfy the tax withholding obligations related to any award. As of December 31, 2014 there were 8,821,057 available for grant under the 2013 Plan. The 2013 Plan permits the granting of incentive stock options, non-qualified stock options, RSUs, stock appreciation rights, restricted shares of common stock and performance share awards. The exercise price of stock options may not be less than the 100% of the fair market value of the common stock on the date of grant. Options granted pursuant to the 2013 Plan generally expire no later than ten years.

2013 Employee Stock Purchase Plan

On June 6, 2013, our board of directors adopted our 2013 Employee Stock Purchase Plan (the 2013 ESPP) and our stockholders subsequently approved the 2013 ESPP Plan on August 29, 2013 in order to enable eligible employees to purchase shares of our common stock at a discount following the date of our IPO. The 2013 ESPP permits eligible employees to acquire shares of our common stock by accumulating funds through periodic payroll deductions of up to 15% of base salary. Our 2013 ESPP is intended to qualify as an ESPP under Section 423 of the Code and employees will receive a 15% discount to the lesser of the fair market value of our common stock on (i) the first trading day of the applicable offering period or (ii) the last day of each purchase period in the applicable offering period. Each offering period may run for no more than six months. We have reserved 4,000,000 shares of our common stock under our 2013 ESPP. The aggregate number of shares issued over the term of our 2013 ESPP will not exceed 20,000,000 shares of our common stock. As of December 31, 2014, there were 4,476,465 shares of common stock available for future issuance under the 2013 ESPP
Stockholders' Equity
Stockholders' Equity
Stockholders' Equity

Share-Based Compensation

Total share-based compensation expense recorded for employees and non-employees, is as follows (in thousands):
 
Year Ended December 31,
 
2014
 
2013
 
2012
Cost of revenues
$
617

 
$
1,185

 
$
542

Technology and development
10,451

 
9,414

 
7,657

Sales and marketing
11,300

 
7,107

 
5,164

General and administrative
14,520

 
19,252

 
4,682

Total share-based compensation expense
$
36,888

 
$
36,958

 
$
18,045


 
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 the input of 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 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:
 
 
Year Ended December 31,
 
2014
 
2013
 
2012
Expected term (years)
6.07

 
5.08-6.63

 
5.09-6.08

Expected volatility
55.91%-56.83%

 
55.72%-73.18%

 
55.10%-58.77%

Dividend yield
0.00
%
 
0.00
%
 
0.00
%
Risk-free interest rate
1.88%-2.02%

 
0.81%-1.92%

 
0.65%-1.16%

Weighted-average grant-date fair value per share
$
3.82

 
$
6.20

 
$
3.86


 
Fair Value of Restricted Stock Units (RSUs)
 
Restricted stock units are converted into shares of Chegg common stock upon vesting on a one-for-one basis. Vesting of restricted stock units is subject to the employee’s continuing service to the Company. The compensation expense related to these awards 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. Restricted stock units are typically fully vested at the end of four years.

Fair Value of Employee Stock Purchase Plan
 
Under 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.

The following table summarizes the key assumptions used to determine the fair value of our ESPP:
 
Year Ended December 31,
 
2014
 
2013
Expected term (years)
0.50

 
0.50

Expected volatility
41.89
%
 
45.00
%
Dividend yield
0.00
%
 
0.00
%
Risk-free interest rate
0.06
%
 
0.10
%
Weighted-average grant-date fair value per share
$
1.68

 
$
3.44


    
There were 340,617 shares purchased under the 2013 ESPP for the year ended December 31, 2014 at an average price per share of $4.46 with cash proceeds from the issuance of shares under the Company’s ESPPs of $1.5 million.

Stock Option Activity

Option activity under our option 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, 2013
17,971,969

 
$
8.35

 
8.15
 
$
22,253,373

Granted
640,138

 
$
7.09

 
 
 
 
Exercised
(663,333
)
 
$
1.80

 
 
 
 
Canceled
(2,986,675
)
 
$
8.61

 
 
 
 
Balance at December 31, 2014
14,962,099

 
$
8.53

 
7.11
 
$
6,646,629

 
 
 
 
 
 
 
 
As of December 31, 2014
 
 
 
 
 
 
 
Options exercisable
9,773,822

 
$
7.86

 
6.42
 
$
6,567,295

Options vested and expected to vest
14,308,608

 
$
8.46

 
7.04
 
$
6,631,775



The total intrinsic value of options exercised during 2014, 2013 and 2012, was approximately $3.1 million, $4.9 million and $3.3 million, respectively.

As of December 31, 2014, our total unrecognized compensation expense for stock options granted to employees, officers, directors, and consultants was approximately $22.7 million, which will be recognized over a weighted-average vesting period of approximately 1.9 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 in the year ended December 31, 2014 and we granted 110,886 option awards to consultants in the year ended December 31, 2013. No option awards were granted to consultants in 2012. Total share-based compensation expense for consultants was $0.7 million, $0.9 million and $0.2 million in the years ended December 31, 2014, 2013 and 2012.

There was no capitalized share-based compensation expense as of December 31, 2014, 2013 or 2012.

Restricted Stock Units (RSUs) Activity
 
 
Restricted Stock Units Outstanding
 
Number of
RSUs
Outstanding
 
Weighted Average
Grant Date Fair Value
Balance at December 31, 2013
1,479,898

 
$
10.01

Granted
10,427,253

 
6.21

Released
(1,483,623
)
 
9.68

Canceled
(1,298,338
)
 
6.28

Balance at December 31, 2014
9,125,190

 
$
6.25


 
During the year ended December 31, 2014, 1,305,377 RSUs granted prior to our IPO vested, and were settled for shares of our common stock.  Of those shares, we withheld 535,348 shares valued at approximately $3.6 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 Plan.

In February 2014, we granted performance-based restricted stock units (PSUs) under the 2013 Plan to certain of our executive officers. The PSUs entitle the executives to receive a certain number of shares of our common stock based on our satisfaction of certain financial and strategic performance targets during 2014 (the Performance Period). Based on the achievement of the performance conditions during the Performance Period for the February grants, the final settlement of the PSU awards was 120% of the target shares underlying the PSU awards based on a specified objective formula approved by the Compensation Committee. These PSUs will vest annually over a three year period, with the first year vesting in February 2015. In June 2014, we granted PSUs under the 2013 Plan to the employees of InstaEDU, which are based on achieving certain revenue targets in years 2014 and 2015.

The target number of shares underlying the PSUs that were granted to certain executive officers during the year ended December 31, 2014 totaled 1,208,560 shares and had a weighted average grant date fair value of $6.37 per share. As of December 31, 2014, 120% of the PSUs will vest. The target number of shares underlying the PSUs that were granted to certain employees of our InstaEDU acquisition during the year ended December 31, 2014 totaled 2,280,081 and had a weighted average grant date fair value of $6.00 per share. As of December 31, 2014, metrics related to the 2014 period were not met and 516,059 were subsequently forfeited.
 
As of December 31, 2014, we had a total of approximately $34.0 million of unrecognized compensation costs related to RSUs and PSUs that is expected to be recognized over the remaining weighted average period of 2.3 years.

Acquisition-Related Stock Awards

In connection with an acquisition in 2010, acquired employees will have the option to sell any vested shares back to us at a fixed price of $11.94 per share prior to or 90 days after termination. The vested portion of the 189,516 restricted shares has been classified as a liability in accrued liabilities on the consolidated balance sheets, as our obligation to purchase the shares from the employees is outside our control. During 2014, 2013 and 2012, we recorded compensation expense of approximately $0.4 million, $0.5 million, and $1.1 million, respectively, due to the vesting of the restricted stock and a resulting liability of approximately $1.1 million and $1.5 million, as of December 31, 2014 and 2013, respectively, related to the employees’ option to sell the vested shares back to the Company. As of December 31, 2014, all employees had exercised their right to sell the vested shares back to the Company.
Income Taxes
Income Taxes
Income Taxes

We recorded an income tax provision of approximately $0.2 million, $0.6 million and $29,000 for the year ended December 31, 2014, 2013 and 2012, respectively. The income tax provision for year ended December 31, 2014 was primarily the result of foreign and state income taxes offset by the release of valuation allowance resulting from our acquisition of InstaEDU. The income tax provision for the years ended December 31, 2013 and 2012 was due to state and foreign income tax expense offset by the release of certain income tax benefits. Our income tax provision consisted of the following (in thousands):
 
Year Ended December 31,
 
2014
 
2013
 
2012
Current income taxes:
 
 
 
 
 
Federal
$
—

 
$
—

 
$
(341
)
State
304

 
282

 
342

Foreign
871

 
358

 
17

Total current income taxes
1,175

 
640

 
18

 
 
 
 
 
 
Deferred income taxes:
 
 
 
 
 
Federal
(1,003
)
 
—

 
—

State
33

 
—

 
—

Foreign
(19
)
 
2

 
11

Total deferred income taxes
(989
)
 
2

 
11

Total income tax provision
$
186

 
$
642

 
$
29



Loss before provision for income taxes consisted of (in thousands):
 
Year Ended December 31,
 
2014
 
2013
 
2012
United States
$
(65,930
)
 
$
(55,974
)
 
$
(49,701
)
Foreign
1,358

 
766

 
687

Total
$
(64,572
)
 
$
(55,208
)
 
$
(49,014
)


The differences between our income tax provision as presented in the accompanying consolidated statements of operations and the income tax expense computed at the federal statutory rate consists of the items shown in the following table as a percentage of pretax loss (in thousands):
 
Year Ended December 31,
 
2014
 
2013
 
2012
Tax at U.S. statutory rate
34.0
 %
 
34.0
 %
 
34.0
 %
State, net of federal benefit
5.1

 
2.7

 
2.9

Share-based compensation
(6.5
)
 
(7.7
)
 
(8.5
)
Non-deductible expenses
(0.4
)
 
(0.1
)
 
(0.7
)
Other
(0.5
)
 
0.9

 
2.5

Change in valuation allowance
(32.0
)
 
(31.0
)
 
(30.3
)
Total
(0.3
)%
 
(1.2
)%
 
(0.1
)%


A summary of our deferred tax assets is as follows (in thousands):
 
Year Ended December 31,
 
2014
 
2013
Deferred tax assets:
 
 
 
Accrued expenses and reserves
$
6,291

 
$
2,405

Share-based compensation
18,391

 
13,261

Deferred revenue
4,589

 
3,373

Net operating loss carryforwards
36,847

 
34,919

Fixed assets, textbooks and intangibles assets
10,754

 
1,862

Other items
2,277

 
2,628

Gross deferred tax assets
79,149

 
58,448

Valuation allowance
(79,093
)
 
(58,411
)
Total deferred tax assets
56

 
37

 
 
 
 
Deferred tax liabilities:
 
 
 
Intangible asset
321

 
—

Total deferred tax liabilities
321

 
—

 
 
 
 
Net deferred tax (liabilities) assets
$
(265
)
 
$
37



At December 31, 2014 the deferred tax liability is created by the tax amortization of acquired indefinite lived intangible assets. Under the accounting guidance this deferred tax liability cannot be used as a source of income for recognition of deferred tax assets when determining the amount of valuation allowance to be recorded. We had no deferred tax liabilities at December 31, 2013.

Realization of the deferred tax assets is dependent upon future taxable income, the amount and timing of which are uncertain. Accordingly, the federal and state gross deferred tax assets have been fully offset by a valuation allowance. The net valuation allowance increased approximately $20.7 million and $17.1 million during 2014 and 2013, respectively.

     As of December 31, 2014, we have net operating loss carryforwards for federal and state income tax purposes of approximately $96.9 million and $56.5 million, respectively, which will begin to expire in years beginning 2028 and 2015, respectively. As of December 31, 2013, we have net operating loss carryforwards for federal and state income tax purposes of approximately $98.3 million and $37.5 million, respectively.
    
As of December 31, 2014, we have tax credit carryforwards for federal and state income tax purposes of approximately $2.5 million and $2.7 million, respectively. The federal credits expire in various years beginning in 2030. The state credits do not expire. As of December 31, 2013, we had tax credit carryforwards for federal and state income tax purposes of approximately $1.7 million and $2.0 million, respectively.

Utilization of our net operating losses and tax credit carryforwards may be subject to substantial annual limitations due to ownership change limitations provided by the Internal Revenue Code and similar state provisions. Such annual limitations could result in the expiration of the net operating losses and tax credit carryforwards before utilization.

As of December 31, 2014 and 2013, we have permanently reinvested approximately $3.4 million and $2.3 million of earnings from our international subsidiaries, respectively, and have not provided for U.S. federal income and foreign withholding taxes. If we were to distribute these earnings, such earnings could be subject to income or other taxes upon repatriation. Determination of the amount of unrecognized deferred tax liability related to these earnings is not practicable.

We recorded unrecognized tax benefits of approximately $1.3 million during 2014, and had a cumulative unrecognized tax benefit balance of approximately $4.3 million as of December 31, 2014. The actual amount of any change could vary significantly depending on the ultimate timing and nature of any settlement. The amount of unrecognized tax benefits, if recognized, that would affect the effective tax rate is $1.3 million. One or more of these unrecognized tax benefits could be subject to a valuation allowance if and when recognized in a future period, which could impact the timing of any related effective tax rate benefit.

We are under examination by the tax authorities in India for the fiscal filing period 2010/11 for which we have received a notice of proposed adjustment relating to our transfer pricing between the US and our Indian subsidiary. It is reasonably possible that we will reach resolution of this audit within the next 12 months. This settlement may or may not result in changes to our contingencies related to position on tax filings in years through 2014. The range of possible outcomes for the Indian tax audit is zero to $0.1 million for the year assessed excluding interest and penalties.

We recognize interest and penalties related to uncertain tax positions as a component of income tax expense. During 2014, 2013 and 2012, we recognized $0.1 million, $0.1 million and $0.1 million of interest and penalties, respectively. Accrued interest and penalties as of December 31, 2014 and 2013 were approximately $0.5 million and $0.4 million, respectively.

We file tax returns in U.S. federal, state, and certain foreign jurisdictions with varying statutes of limitations. Due to net operating loss and credit carryforwards, all of the years since inception through the 2014 tax year remain subject to examination by the federal, state, and foreign tax authorities.

A reconciliation of the beginning and ending balances of the total amount of unrecognized tax benefits, excluding accrued interest and penalties, is as follows (in thousands):
 
Year Ended December 31,
 
2014
 
2013
 
2012
Balance at December 31, 2013
$
2,994

 
$
1,942

 
$
565

Increase in tax positions for prior years
406

 
318

 
1,090

Decrease in tax positions for prior years
(284
)
 
(2
)
 
(258
)
Decrease in tax positions for prior year settlement
—

 
(16
)
 
—

Increase in tax positions for current year
1,172

 
742

 
495

Change due to translation of foreign currencies
(16
)
 
10

 
50

Balance at December 31, 2014
$
4,272

 
$
2,994

 
$
1,942

Related-Party Transactions
Related-Party Transactions
Related-Party Transactions

During the year ended December 31, 2014 and 2013 we purchased products totaling $0.9 million and $0.4 million, respectively from Adobe Systems (Adobe). Our Chief Executive Officer is a member of the Board of Directors of Adobe. We also had $1.0 million and $0.2 million in revenues in the years ended December 31, 2014 and 2012, respectively from Adobe. As of December 31, 2014, we had $0.1 million in payables to Adobe.

During the year ended December 31, 2014, one of our board members was appointed to the Board of Directors of Cengage Learning (Cengage). During the year ended December 31, 2014, we had purchases of $12.4 million of products from Cengage.  As of December 31, 2014, we had $0.1 million in outstanding accounting receivable and accounts payable of $0.1 million to Cengage.

In addition, during 2012, we purchased $0.1 million of products and services from Jive Software. One of our directors is also a member of the Board of Directors of Jive Software.

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

We sponsor a 401(k) savings plan for eligible employees and their beneficiaries. Contributions by us are discretionary. Participants may contribute, on a pretax basis, a percentage of their annual compensation, but not to exceed a maximum contribution amount pursuant to Section 401(k) of the Internal Revenue Code. During 2014, 2013 and 2012, our matching contributions totaled approximately $0.8 million, $0.3 million and $0.3 million, respectively.
Segment Information
Segment Information
Segment Information

Our chief operating decision-maker is our Chief Executive Officer who reviews financial information presented on a consolidated basis. There are no segment managers who are held accountable by the chief operating decision-maker, or anyone else, for operations, operating results, and planning for levels or components below the consolidated unit level. Accordingly, we have determined that we have a single reporting segment and operating unit structure.

Product Information

We derive our revenue from the rental or sale of print textbooks and from digital offerings. Digital offerings primarily include our connected learning platform, our web-based, multiplatform eTextbook Reader, eTextbooks and supplemental materials from approximately 120 publishers, online tutoring, our Chegg Study service, College Admissions, Scholarship Services, and internship services. Commissions earned through our Ingram partnership are included within the digital offering business. Revenue by product line as follows (in thousands):
 
December 31,
 
2014
 
2013
 
2012
Print textbooks
$
213,657

 
$
203,077

 
$
185,169

Digital offerings
91,177

 
52,498

 
28,165

Total Revenue
304,834

 
255,575

 
213,334



Geographic Information

Our headquarters and most of our operations are located in the United States. We conduct our sales, marketing and customer service activities primarily in the United States. Geographic revenue information is based on the location of the customer. In 2014, 2013 and 2012, substantially all of our revenue and long-lived assets are located in the United States.
Selected Quarterly Financial Data (unaudited)
Selected Quarterly Financial Data (unaudited)
Selected Quarterly Financial Data (unaudited)

 
Three Months Ended
 
March 31, 2014
 
June 30, 2014
 
September 30, 2014
 
December 31, 2014
Net revenues
$
74,393

 
$
64,492

 
$
81,532

 
$
84,417

Gross profit
8,908

 
25,896

 
13,251

 
45,794

Net (loss) income
$
(25,759
)
 
$
(8,246
)
 
$
(32,441
)
 
$
1,688

Weighted average shares used to compute net (loss) income per share:
 
 
 
 
 
 
 
Basic
82,181

 
83,209

 
83,688

 
83,925

Diluted
82,181

 
83,209

 
83,688

 
86,543

Net (loss) income per share:
 
 
 
 
 
 
 
Basic
$
(0.31
)
 
$
(0.10
)
 
$
(0.39
)
 
$
0.02

Diluted
$
(0.31
)
 
$
(0.10
)
 
$
(0.39
)
 
$
0.02

 
 
 
 
 
 
 
 
 
Three Months Ended
 
March 31, 2013
 
June 30, 2013
 
September 30, 2013
 
December 31, 2013
Net revenues
$
61,015

 
$
55,857

 
$
61,587

 
$
77,116

Gross profit
11,561

 
26,250

 
3,162

 
39,542

Net loss
(17,825
)
 
(3,353
)
 
(29,255
)
 
(5,417
)
Deemed dividend to preferred stockholders
—

 
—

 
—

 
(102,557
)
Net loss attributable to common stockholders
$
(17,825
)
 
$
(3,353
)
 
$
(29,255
)
 
$
(107,974
)
Weighted average shares used to compute net loss attributable to common stockholders per share:
 
 
 
 
 
 
 
Basic
12,031

 
12,558

 
12,873

 
45,825

Diluted
12,031

 
12,558

 
12,873

 
45,825

Net loss attributable to common stockholders per share:
 
 
 
 
 
 
 
Basic
$
(1.48
)
 
$
(0.27
)
 
$
(2.27
)
 
$
(2.36
)
Diluted
$
(1.48
)
 
$
(0.27
)
 
$
(2.27
)
 
$
(2.36
)
Schedule II - Valuation and Qualifying Accounts
Schedule II - Valuation and Qualifying Accounts
Schedule II-Valuation and Qualifying Accounts (in thousands)
 
Years Ended December 31, 2014, 2013 and 2012
 
Balance at
Beginning of
Year 
 
Additions
Charged to
Expenses/
Other
Accounts 
 
Net
(Deductions)
Recoveries  
 
Balance at
End of Year 
Allowance for doubtful accounts
 
 
 
 
 
 
 
2014
$
317

 
$
234

 
$
8

 
$
559

2013
$
502

 
$
206

 
$
(391
)
 
$
317

2012
$
241

 
$
502

 
$
(241
)
 
$
502

Significant Accounting Policies (Policies)
Use of Estimates in Preparation of Consolidated Financial Statements 
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.
Principles of Consolidation 
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.
Cash and Cash Equivalents and Restricted Cash 
Cash and Cash Equivalents and Restricted Cash

We consider all highly liquid investments with an original maturity date of three months or less from the date of purchase to be cash equivalents. Cash and cash equivalents, which consist of cash and money market accounts at financial institutions, are stated at cost, which approximates fair value.

We classify certain restricted cash balances within other current assets and other assets on the accompanying consolidated balance sheets based upon the term of the remaining restrictions.
Investments 
Investments

We hold investments in marketable securities, consisting of corporate securities and commercial paper. We classify our marketable securities as available-for-sale investments that are either short or long-term based on the nature of each security based on the contractual maturity of the investment when purchased. Our available-for-sale investments are carried at estimated fair value with any unrealized gains and losses, net of taxes, included in accumulated other comprehensive loss in stockholders’ equity. Unrealized losses are charged against other income (expense), net when a decline in fair value is determined to be other-than-temporary. We have not recorded any such impairment charge in the periods presented. We determine realized gains or losses on sale of marketable securities on a specific identification method, and record such gains or losses as other income (expense), net.
Accounts Receivable and Allowance for Doubtful Accounts 
Accounts Receivable
    
Accounts receivable are recorded at the invoiced amount and are non-interest bearing. We generally grant uncollateralized credit terms to our customers, which include textbook wholesalers and marketing services customers, and maintain an allowance for doubtful accounts to account for potentially uncollectible receivables.

Allowance for Doubtful Accounts
    
We assess the creditworthiness of our customers based on multiple sources of information, and analyze such factors as our historical bad debt experience, industry and geographic concentrations of credit risk, economic trends, and customer payment history. This assessment requires significant judgment. Because of this assessment, which covers the sale of our brand advertising and enrollment marketing services, we maintain an allowance for doubtful accounts for estimated losses resulting from the inability of certain customers to make all of their required payments. In making this estimate, we analyze historical payment performance and current economic trends when evaluating the adequacy of the allowance for doubtful accounts. Accounts receivable are written off as a decrease to the allowance for doubtful accounts when all collection efforts have been exhausted and an account is deemed uncollectible.

Concentration of Credit Risk 
Concentration of Credit Risk

Financial instruments that potentially subject us to concentrations of credit risk consist primarily of cash and cash equivalents, restricted cash, and marketable securities invested in highly liquid instruments in accordance with our investment policy. We place the majority of our cash and cash equivalents and restricted cash with financial institutions in the United States that we believe to be of high credit quality, and accordingly minimal credit risk exists with respect to these instruments. Certain of our cash balances held with financial institutions are in excess of Federal Deposit Insurance Corporation, or FDIC, limits. Our investment portfolio consists of investment-grade securities diversified among security types, industries and issuers. Our investments are held and managed by recognized financial institutions that follow our investment policy with the main objective of preserving capital and maintaining liquidity.
Textbook Library 
Textbook Library

We consider our textbook library to be a long-term productive asset and, as such, classify it as a non-current asset in our consolidated balance sheets. Additionally, cash outflows for the acquisition of the textbook library, net of changes in related accounts payable and accrued liabilities, as well as cash inflows received from the liquidation of textbooks, are classified as cash flows from investing activities in our consolidated statements of cash flows, consistent with other long-term asset activity. The gain or loss from the liquidation of textbooks previously rented is recorded as a component of operating expenses in our consolidated statement of operations and is classified as cash flow from operating activities.

All textbooks in our textbook library are stated at cost, which includes the purchase price less accumulated depreciation.

We record allowances for lost or damaged textbooks in cost of revenues in our consolidated statements of operations based on our assessment of our textbook library on a book-by-book basis. Factors considered in the determination of textbook allowances include historical experience, management’s knowledge of current business conditions and expectations of future demand. Write-offs result from lost or damaged books, books no longer considered to be rentable, or when books are not returned to us after the rental period by our customers.

We depreciate our textbooks, less an estimated salvage value, over an estimated useful life of three years using an accelerated method of depreciation, as we estimate this method most accurately reflects the actual pattern of decline in the economic value of the assets. The salvage value considers the historical trend and projected liquidation proceeds for textbooks. The useful life is determined based on the time period in which the textbooks are held and rented before liquidation. In accordance with our policy, we review the estimated useful lives of our textbook library on an ongoing basis.

Depreciation expense and write-offs of textbooks are recorded in cost of revenues in our consolidated statements of operations.
Property and Equipment 
Property and Equipment

Property and equipment are recorded at cost less accumulated depreciation and amortization. Depreciation and amortization are computed using the straight-line method over the following estimated useful lives of the assets:
Classification
 
Useful Life
Computers and equipment
 
3 years
Software
 
2-3 years
Furniture and fixtures
 
5 years
Leasehold improvements
 
Shorter of the remaining lease term or the estimated useful life of 5 years
Content
 
5 years


We capitalize costs related to the purchase or development of Chegg Study content and amortize these costs over a period of five years.

Depreciation and amortization expense are generally classified within the corresponding cost of revenues and operating expense categories in our consolidated statement of operations. Depreciation and amortization expense for 2014, 2013 and 2012 were approximately $6.2 million, $5.7 million and $3.9 million, respectively.

The cost of maintenance and repairs is expensed as incurred. When assets are retired or otherwise disposed of, the cost and related accumulated depreciation and amortization are removed from their respective accounts, and any gain or loss on such sale or disposal is reflected in loss from operations.
Software Development Costs 
Software Development Costs

We capitalize costs related to software developed or obtained for internal use when certain criteria have been met. Costs incurred during the application development stage for internal-use software are capitalized in property and equipment and amortized over the estimated useful life of the software, generally up to three years.
Goodwill 
Goodwill

Goodwill represents the excess of the fair value of consideration paid over the estimated fair value of assets acquired and liabilities assumed in a business acquisition. We test goodwill for impairment at least annually, or more frequently if certain events or indicators of impairment occur between annual impairment tests. We completed our annual impairment test in our fourth quarter of 2014, which did not result in any impairment. For our annual goodwill impairment test, we perform a quantitative test of our single reporting unit. In the first step of this test, goodwill is tested for impairment at the reporting unit level by comparing the reporting unit’s carrying amount, including goodwill, to the fair value of the reporting unit. The fair value of the reporting unit was estimated using a market approach. If the carrying amount of the reporting unit exceeds its fair value, a second step is performed to measure the amount of impairment loss, if any. In step two, the implied fair value of goodwill is calculated as the excess of the fair value of a reporting unit over the fair values assigned to its assets and liabilities. In the event we determine that the fair value of our single reporting unit is less than the reporting unit’s carrying value, we will record an impairment charge for the amount of the impairment in the period in which the determination is made.
Acquired Intangible Assets, and Other Long-Lived Assets 
Acquired Intangible Assets, and Other Long-Lived Assets

Acquired intangible assets with finite useful lives, which include developed technology, customer lists, trade names and non-compete agreements, are amortized over their estimated useful lives.

We assess the impairment of acquired intangible assets and other long-lived assets when events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. Factors that we consider in determining when to perform an impairment review include significant negative industry or economic trends or significant changes or planned changes in the use of the assets. We measure the recoverability of assets that will continue to be used in operations by comparing the carrying value of the asset grouping to the estimate of the related total future undiscounted net cash flows. If an asset grouping’s carrying value is not recoverable through the related undiscounted cash flows, the asset grouping is measured for impairment. The impairment is measured by comparing the difference between the asset grouping’s carrying value and its fair value.
Indefinite-Lived Intangibles 
Indefinite-Lived Intangibles

We make judgments about the recoverability of purchased indefinite-lived intangible assets whenever events or changes in circumstances indicate that an impairment may exist. Recoverability of indefinite-lived intangible assets is measured by comparing the carrying amount of the asset to the future undiscounted cash flows that the asset is expected to generate. We perform an annual impairment assessment on October 1 of each year for indefinite-lived intangible assets, or more frequently if indicators of potential impairment exist, to determine whether it is more likely than not that the carrying value of the assets may not be recoverable. Recoverability of indefinite-lived intangible assets is measured by comparing the carrying amount of the asset to the future discounted cash flows that the asset is expected to generate. If we determine that an individual asset is impaired, the amount of any impairment is measured as the difference between the carrying value and the fair value of the impaired asset.

The assumptions and estimates used to determine future values and remaining useful lives of our intangible and other long-lived assets are complex and subjective. They can be affected by various factors, including external factors such as industry and economic trends, and internal factors such as changes in our business strategy and our forecasts for specific product lines.
Revenue Recognition and Deferred Revenue 
Revenue Recognition and Deferred Revenue

We derive our revenue from the rental or sale of print textbooks and from digital offerings, net of allowances for refunds or charge backs from our payment processors who process payments from credit cards, debit cards and PayPal. Revenue is recognized when the four basic criteria for revenue recognition have been met as follows: persuasive evidence of an arrangement exists, delivery has occurred and title has transferred, the sale price is fixed or determinable, and collection is reasonably assured.

We primarily generate revenue from the rental of print textbooks and, to a lesser extent, through the sales of print textbooks through our website purchased by us on a just-in-time basis. Rental revenue is recognized ratably over the term of the rental period, generally two to five months. Revenue from selling textbooks on a just-in-time basis is recognized upon shipment. We do not hold an inventory of textbooks for sale. Our customers pay for the rental and sale of print textbooks on our website primarily by credit card, resulting in immediate settlement of our accounts receivable.

We evaluate whether we are acting as a principal or an agent, and therefore would record the gross sales amount and related costs as revenue or the net amount earned as commissions from the sale of third party products. Our determination is based on our evaluation of certain indicators including whether we are the principal in the transaction, are subject to inventory risk, have latitude in establishing prices and selecting suppliers, none of which is presumptive or determinative. We generally operate as the principal and so in those instances revenue is recorded at the gross sale price. We generally record the net amounts as commissions earned when such amounts are determined using a fixed percentage of the transaction price, we are not subject to inventory risk or responsible for the fulfillment of the textbooks.

We also generate revenue from digital offerings that include eTextbooks, supplemental materials and our Chegg Study service that we offer to students, enrollment marketing services that we offer to colleges and advertising services that we offer to brands. Digital offerings are offered to students through monthly or annual subscriptions and we recognize revenue ratably over the subscription period. As with revenue from print textbooks, revenue from eTextbooks is recognized ratably over the contractual period, generally two to five months, or at time of the sale, and our customers pay for these services through payment processors, resulting in immediate settlement of our accounts receivable.

Marketing services include enrollment marketing services and brand advertising, which we offer either on a subscription or on an a la carte basis. Enrollment marketing services connect colleges and graduate schools with students seeking admission or scholarship opportunities at these institutions. Brand advertising offers brands unique ways to connect with students. Revenue is recognized ratably or as earned over the subscription service, generally one year. Revenue from enrollment marketing services or brand advertising delivered on an a la carte basis, without a subscription, is recognized when delivery of the respective lead or service has occurred. For these services, we bill the customer at the inception, over the term of the customer arrangement or as the services are performed. Upon satisfactory assessment of creditworthiness, we generally grant credit to our enrollment marketing services and brand advertising customers with normal credit terms, typically 30 days.

Shipping costs charged to customers in the sale or rental of textbooks are recorded in revenue and the related expenses are recorded as cost of revenues.

Some of our customer arrangements for enrollment marketing services include multiple deliverables, which include the delivery of student leads as well as other services to the end customer. We have determined these deliverables qualify as separate units of accounting, as they have value to the customer on a standalone basis and our arrangements do not contain a right of return. For these arrangements that contain multiple deliverables, we allocate the arrangement consideration based on the relative selling price method in accordance with the selling price hierarchy, which includes: (1) vendor-specific objective evidence of fair value, or VSOE, when available; (2) third-party evidence of selling price, or TPE, if VSOE does not exist; and (3) estimated selling price, or ESP, if neither VSOE nor TPE is available.

We determine VSOE based on our historical pricing and discounting practices for the specific solution when sold separately and when a substantial majority of the selling prices for these services fall within a narrow range. TPE is determined based on competitor prices for similar deliverables when sold separately. Generally our go-to-market strategy differs from that of our peers, and our offerings contain a significant level of differentiation such that the comparable pricing of services with similar functionality cannot be obtained. As we have not established VSOE or TPE for our enrollment marketing services, we have used ESP in our allocation of arrangement consideration. We have determined ESP by considering multiple factors including, but not limited to, prices charged for similar offerings, sales volume, geographies, market conditions, the competitive landscape, and pricing practices. We believe this best represents the price at which we would transact a sale if the services were sold on a standalone basis, and we regularly assess the method used to determine ESP. Additionally, we limit the amount of revenue recognized for delivered elements to the amount that is not contingent on future delivery of services or other future performance obligations.

Revenue is presented net of sales tax collected from customers to be remitted to governmental authorities and net of allowances for estimated cancellations and customer returns, which are based on historical data. Customer refunds from cancellations and returns are recorded as a reduction to revenue. Deferred revenue primarily consists of advanced payments from students related to rentals and subscriptions that have not been recognized, and marketing services that have yet to be performed. Deferred revenue is recognized as revenue ratably over the term or when the services are provided and all other revenue recognition criteria have been met.
Cost of Revenues 
Cost of Revenues

Our cost of revenues consists primarily of expenses associated with the delivery and distribution of our products and services. Cost of revenues related to print textbooks include textbook depreciation expense, shipping and other fulfillment costs, the cost of textbooks sold, payment processing costs, write-offs and allowances related to the textbook library, and all expenses associated with our distribution and customer service centers, including personnel and warehousing costs. The cost of textbooks sold, shipping and other fulfillment costs and payment processing expenses are recognized upon shipment, while textbook depreciation is recognized under an accelerated method over the life of the textbook. We believe this method most accurately reflects the actual pattern of decline in the economic value of the assets, resulting in higher costs earlier in the textbook lifecycle. Cost of revenues related to digital offerings, in which we also group eTextbooks, consist primarily of the depreciation of our eTextbook Reader software, publisher content fees for eTextbooks, content amortization expense related to content that we develop or license, including publisher agreements for which we pay one-time license fees for published content, enrollment marketing services leads purchased from third-party suppliers to fulfill leads that we are unable to fulfill through our internal database, personnel costs and other direct costs related to providing the content or services. In addition, cost of revenues includes allocated information technology and facilities costs.
Technology and Development Costs 
Technology and Development Costs

Technology and development expenses consist primarily of salaries, benefits and share-based compensation expense for employees on our product and web design, engineering and technical teams who are maintaining our website, developing new products and improving existing products. Technology and development costs also include web hosting costs, third-party development costs and allocated information technology and facilities costs. We expense substantially all of our technology and development costs as they are incurred.
Advertising Costs 
Advertising Costs

Advertising costs are expensed as incurred and consist primarily of online advertising and marketing promotional expenditures.
Share-based Compensation 
Share-based Compensation

Share-based compensation expense for stock options and employee stock purchase plan, or ESPP, rights are accounted for under the fair value method, which requires us to measure the cost of employee share-based compensation awards based on the grant-date fair value of the award. share-based compensation expense for RSUs is measured based on the closing fair market value of the Company’s common stock on the date of grant. We recognize compensation cost for all employee share-based compensation awards that are expected to vest on a straight-line basis over the requisite service period of the awards, which is generally the option vesting period. These amounts are reduced by estimated forfeitures, which are estimated at the time of the grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates.

Equity awards issued to non-employees are recorded at their fair value on the measurement date and are subject to adjustment each period as the underlying awards vest or consulting services are performed.

Income Taxes 
Income Taxes

We account for income taxes under an asset and liability method whereby deferred tax asset and liability account balances are determined based on differences between the financial reporting and the tax basis of assets and liabilities, and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. Valuation allowances are established, when necessary, to reduce deferred tax assets to an amount that is more-likely-than-not to be realized. We recognize the benefit from a tax position only if it is more-likely-than-not that the position would be sustained upon audit based solely on the technical merits of the tax position. Our policy is to include interest and penalties related to unrecognized tax benefits as a component of income tax expense.
Net Loss Per Share 
Net Loss Per Share

Basic net loss per share is computed by dividing the net loss attributable to common stockholders 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. Net loss attributable to common stockholders includes the issuance of 11,667,254 shares of our common stock in the form of a deemed stock dividend to the holders of our Series D and Series E convertible preferred stock of approximately $102.6 million. Diluted net loss per share attributable to common stockholders is computed by giving effect to all potential shares of common stock, including stock options, warrants, RSUs and convertible preferred stock prior to its conversion in our IPO, 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.
Foreign Currency Translations 
Foreign Currency Translation

The functional currency of our foreign subsidiaries is the local currency. Adjustments resulting from the translation of foreign currencies into U.S. dollars for balance sheet amounts are based on the exchange rates as of the consolidated balance sheet date. Non-monetary balance sheet items denominated in a currency other than the applicable functional currency are translated using the historical rate. Revenue and expenses are translated at average exchange rates during the period. Foreign currency translation gains or losses are included in accumulated other comprehensive loss as a component of stockholders’ equity (deficit) on the consolidated balance sheets.
Recent Accounting Pronouncements 
Recent Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board issued Accounting Standards Update 2014-9, Revenue from Contracts with Customers (ASU 2014-9). This standard outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. ASU 2014-9 provides companies with two implementation methods. Companies can choose to apply the standard retrospectively to each prior reporting period presented (full retrospective application) or retrospectively with the cumulative effect of initially applying the standard as an adjustment to the opening balance of retained earnings of the annual reporting period that includes the date of initial application (modified retrospective application). This guidance is effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period, and early application is not permitted. We are currently in the process of evaluating this new guidance.
Significant Accounting Policies (Tables)
Schedule of Useful Lives For Property And Equipment 
Depreciation and amortization are computed using the straight-line method over the following estimated useful lives of the assets:
Classification
 
Useful Life
Computers and equipment
 
3 years
Software
 
2-3 years
Furniture and fixtures
 
5 years
Leasehold improvements
 
Shorter of the remaining lease term or the estimated useful life of 5 years
Content
 
5 years
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 attributable to common stockholders (in thousands, except per share amounts):
 
 
Year Ended December 31,
 
 
2014
 
2013
 
2012
Numerator:
 
 
 
 
 
 
Net loss
 
$
(64,758
)
 
$
(55,850
)
 
$
(49,043
)
Deemed dividend to preferred stockholders
 
—

 
(102,557
)
 
—

 
 
$
(64,758
)
 
$
(158,407
)
 
$
(49,043
)
Denominator:
 
 
 
 
 
 
Weighted-average common shares outstanding
 
83,241

 
21,121

 
12,132

Less: Weighted-average unvested common shares subject to repurchase of forfeiture
 
(36
)
 
(219
)
 
(949
)
Weighted-average common shares used in computing basic and diluted net loss per share
 
83,205

 
20,902

 
11,183

 
 
 
 
 
 
 
Net loss per share attributable to common stockholders, basic and diluted.
 
$
(0.78
)
 
$
(7.58
)
 
$
(4.39
)
Common Shares Outstanding Excluded from Computation of Diluted Net Loss Per Share 
The following potential common shares 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):
 
 
Year Ended December 31,
 
 
2014
 
2013
 
2012
Options to purchase common stock
 
14,253

 
17,972

 
12,860

Restricted stock units
 
289

 
1,480

 
1,328

Common stock subject to repurchase or forfeiture
 
—

 
100

 
398

Warrants to purchase common stock
 
996

 
1,118

 
36

Warrants to purchase convertible preferred stock
 
—

 
—

 
1,132

Convertible preferred stock
 
—

 
—

 
42,242

Total common stock equivalents
 
15,538

 
20,670

 
57,996

Cash and Cash Equivalents, Investments and Restricted Cash (Tables)
Cash and Cash Equivalents, Restricted Cash and Investments 
The following tables show our cash and cash equivalents, restricted cash and investments’ adjusted cost, unrealized gain (loss) and fair value (in thousands):
 
 
December 31, 2014
 
December 31, 2013
 
Cost
 
Net Unrealized Gain/(Loss)
 
Fair Value
 
Cost
 
Net Unrealized Gain/(Loss)
 
Fair Value
Cash and cash equivalents:
 
 
 
 
 
 
 
 
 
 
 
Cash
$
49,836

 
$
—

 
$
49,836

 
$
33,322

 
$
—

 
$
33,322

Money market funds
5,828

 
—

 
5,828

 
42,042

 
—

 
42,042

Commercial paper
453

 
—

 
453

 
1,500

 
—

 
1,500

Total cash and cash equivalents
$
56,117

 
$
—

 
$
56,117

 
$
76,864

 
$
—

 
$
76,864

Short-term investments:
 
 
 
 
 
 
 
 
 
 
 
Commercial paper
$
13,435

 
$
—

 
$
13,435

 
$
35,571

 
$
—

 
$
35,571

Corporate securities
18,426

 
(15
)
 
18,411

 
—

 
—

 
—

Certificate of deposit
1,499

 
1

 
1,500

 
1,500

 
—

 
1,500

Total short-term investments
$
33,360

 
$
(14
)
 
$
33,346

 
$
37,071

 
$
—

 
$
37,071

 
 
 
 
 
 
 
 
 
 
 
 
Long-term corporate securities
$
1,453

 
$
(2
)
 
$
1,451

 
$
24,338

 
$
(18
)
 
$
24,320

 
 
 
 
 
 
 
 
 
 
 
 
Short-term restricted cash
$
300

 
$
—

 
$
300

 
$
352

 
$
—

 
$
352

Long-term restricted cash
1,480

 
—

 
1,480

 
1,350

 
—

 
1,350

Total restricted cash
$
1,780

 
$
—

 
$
1,780

 
$
1,702

 
$
—

 
$
1,702

Contractual Maturity of Available-for-Sale Investments 
The amortized cost and fair value of available-for-sale investments as of December 31, 2014 by contractual maturity were as follows (in thousands):

 
Cost
 
Fair Value
Due in 1 year or less
$
33,813

 
$
33,799

Due in 1-2 years
1,453

 
1,451

Investments not due at a single maturity date
5,828

 
5,828

Total
$
41,094

 
$
41,078

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 December 31, 2014 and December 31, 2013 are classified based on the valuation technique level in the tables below (in thousands):
 
 
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


 
December 31, 2013
 
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
$
42,042

 
$
42,042

 
$
—

 
$
—

Commercial paper
1,500

 
—

 
1,500

 
—

Short-term investments:
 
 
 
 
 
 
 
Commercial paper
35,571

 
—

 
35,571

 
—

Certificate of deposit
1,500

 
—

 
1,500

 
—

Long-term investments, corporate securities
24,320

 
—

 
24,320

 
—

Total assets measured and recorded at fair value
$
104,933

 
$
42,042

 
$
62,891

 
$
—

Liabilities:
 
 
 
 
 
 
 
Put option liability
$
1,521

 
$
—

 
$
—

 
$
1,521

Summarizes the Change in the Fair Value of our Level 3 Liabilities 
The following table summarizes the change in the fair value of our Level 3 liabilities (in thousands):
 
Level 3
 
December 31, 2014
Beginning balance
$
1,521

Vesting of put options
271

Exercise of put options
(460
)
Fair value adjustment related to put options
(253
)
Total financial liabilities
$
1,079

Long-Lived Assets (Tables)
Schedule of textbook library 
Textbook library, net consisted of the following (in thousands):

 
December 31,
 
2014
 
2013
Textbook library
$
169,463

 
$
196,742

Less accumulated depreciation
(88,701
)
 
(91,634
)
Textbook library, net
$
80,762

 
$
105,108

Property, plant and equipment 
Property and equipment, net consisted of the following (in thousands):
 
December 31,
 
2014
 
2013
Computer and equipment
$
1,083

 
$
1,594

Software
3,842

 
5,088

Furniture and fixtures
2,259

 
2,207

Leasehold improvements
5,153

 
4,407

Content
21,262

 
17,725

 
33,599

 
31,021

Less accumulated depreciation and amortization
(15,230
)
 
(12,057
)
Property and equipment, net
$
18,369

 
$
18,964

Acquisitions (Tables)
Schedule of Fair Value of Consideration 
The acquisition date fair value of the consideration for the above four transactions consisted of the following as of December 31, 2014 (in thousands):
Cash consideration
$
55,537

Fair value of stock escrow consideration
2,585

Fair value of stock contingent consideration
193

Fair value of purchase consideration
$
58,315

Summary of Fair Value of Identifiable Intangible Assets Acquired 
The following table summarizes the fair value of the net identifiable assets acquired in the year ended December 31, 2014 (in thousands):
 
2014
Cash
$
1,665

Other acquired assets
595

Acquired intangible assets:
 
Developed technology
4,174

Customer list
3,770

Trade name
5,990

Non-compete agreements
1,630

Corporate partnerships
243

Master services agreement
1,030

Total acquired intangible assets
16,837

Total identifiable assets acquired
19,097

Liabilities assumed
(2,538
)
Net identifiable assets acquired
16,559

Goodwill
41,756

Net assets acquired
$
58,315

Goodwill and Intangible Assets (Tables)
Goodwill 
Goodwill consists of the following (in thousands):
 
December 31, 2014
Beginning balance
$
49,545

Additions due to acquisition
41,756

Ending balance
$
91,301

Intangible Assets 
Intangible assets consist of the following (in thousands):
 
December 31, 2014
 
Weighted-Average Amortization
Period
(in months)
 
Gross
Carrying
Amount
 
Accumulated
Amortization
 
Impairment
 
Net
Carrying
Amount
Developed technology
49

 
$
9,792

 
$
(5,000
)
 
$
(194
)
 
$
4,598

Customer list
6

 
4,363

 
(1,816
)
 
(829
)
 
1,718

Trade name
44

 
3,132

 
(1,085
)
 
(39
)
 
2,008

Non-compete agreements
14

 
1,637

 
(421
)
 
(278
)
 
938

Master service agreement
14

 
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

 
 
December 31, 2013
 
Weighted-Average
Amortization
Period
(in months)
 
Gross
Carrying
Amount
 
Accumulated
Amortization
 
Net
Carrying
Amount
Developed technology
46
 
$
8,008

 
$
(5,386
)
 
$
2,622

Customer list
24
 
5,472

 
(5,029
)
 
443

Trade name
33
 
1,182

 
(942
)
 
240

Non-compete agreements
34
 
1,068

 
(1,062
)
 
6

Total intangible assets
 
 
$
15,730

 
$
(12,419
)
 
$
3,311

Estimated Future Amortization Expense Related to Intangible Assets 
As of December 31, 2014, the estimated future amortization expense related to our finite-lived intangible assets is as follows (in thousands):
2015
$
4,761

2016
2,238

2017
1,701

2018
1,018

2019
308

Total
$
10,026

Balance Sheet Details (Tables)
Schedule of Accrued Liabilities 
Accrued liabilities consist of the following (in thousands):
 
December 31,
 
2014
 
2013
Accrued book purchases
$
1,812

 
$
1,905

Accrued shipping for cycle returns
539

 
2,929

Chegg credit
2,264

 
3,124

Refund reserve
6,174

 
330

Taxes payable
4,851

 
3,067

Other
15,543

 
9,915

 
$
31,183

 
$
21,270

Other Liabilities 
Other liabilities consist of the following (in thousands):
 
December 31,
 
2014
 
2013
Put option liability
$
—

 
$
1,521

Deferred rent, non-current
1,233

 
1,803

Long term tax liability
2,088

 
1,281

Other
1,044

 
374

 
$
4,365

 
$
4,979

Stock Warrants (Tables)
Summary of Assumptions Used to Determine Fair Value of Stock Warrants
At the time of conversion, the common stock warrants were valued using the Black-Scholes Merton option-pricing valuation model using the following weighted average key assumptions:

Expected term
5.9 years

Expected volatility
55.5
%
Dividend yield
0.00
%
Risk-free interest rate
1.61

Weighted-average fair value per share
$
6.35

The following table summarizes the key assumptions used to determine the fair value of our stock options granted to employees, officers, and directors:
 
 
Year Ended December 31,
 
2014
 
2013
 
2012
Expected term (years)
6.07

 
5.08-6.63

 
5.09-6.08

Expected volatility
55.91%-56.83%

 
55.72%-73.18%

 
55.10%-58.77%

Dividend yield
0.00
%
 
0.00
%
 
0.00
%
Risk-free interest rate
1.88%-2.02%

 
0.81%-1.92%

 
0.65%-1.16%

Weighted-average grant-date fair value per share
$
3.82

 
$
6.20

 
$
3.86

Commitments and Contingencies (Tables)
Schedule of Future Minimum Rental Payments for Operating Leases
The aggregate future minimum lease payments as of December 31, 2014, are as follows (in thousands):
2015
$
4,157

2016
4,061

2017
1,609

2018
1,541

2019
880

Thereafter
612

Total
$
12,860

Convertible Preferred Stock and Common Stock (Tables)
Schedule Of Common Stock Reserved For Future Issuance
As of December 31, 2014, we have reserved the following shares of common stock for future issuance (in thousands):

 
December 31, 2014
Warrants to purchase common stock
996

Outstanding stock options
14,962

Outstanding RSUs
9,125

Shares available for grant under the stock plans
8,821

Shares available for issuance under employee stock purchase plan
4,476

Total common shares reserved for future issuance
38,380

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):
 
Year Ended December 31,
 
2014
 
2013
 
2012
Cost of revenues
$
617

 
$
1,185

 
$
542

Technology and development
10,451

 
9,414

 
7,657

Sales and marketing
11,300

 
7,107

 
5,164

General and administrative
14,520

 
19,252

 
4,682

Total share-based compensation expense
$
36,888

 
$
36,958

 
$
18,045

Summary of Assumptions Used to Determine Fair Value of Stock Options Granted 
At the time of conversion, the common stock warrants were valued using the Black-Scholes Merton option-pricing valuation model using the following weighted average key assumptions:

Expected term
5.9 years

Expected volatility
55.5
%
Dividend yield
0.00
%
Risk-free interest rate
1.61

Weighted-average fair value per share
$
6.35

The following table summarizes the key assumptions used to determine the fair value of our stock options granted to employees, officers, and directors:
 
 
Year Ended December 31,
 
2014
 
2013
 
2012
Expected term (years)
6.07

 
5.08-6.63

 
5.09-6.08

Expected volatility
55.91%-56.83%

 
55.72%-73.18%

 
55.10%-58.77%

Dividend yield
0.00
%
 
0.00
%
 
0.00
%
Risk-free interest rate
1.88%-2.02%

 
0.81%-1.92%

 
0.65%-1.16%

Weighted-average grant-date fair value per share
$
3.82

 
$
6.20

 
$
3.86

Schedule of Key Assumptions to Determine Fair Value of ESPPs 
The following table summarizes the key assumptions used to determine the fair value of our ESPP:
 
Year Ended December 31,
 
2014
 
2013
Expected term (years)
0.50

 
0.50

Expected volatility
41.89
%
 
45.00
%
Dividend yield
0.00
%
 
0.00
%
Risk-free interest rate
0.06
%
 
0.10
%
Weighted-average grant-date fair value per share
$
1.68

 
$
3.44

Summary of Stock Option Activity 
Option activity under our option 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, 2013
17,971,969

 
$
8.35

 
8.15
 
$
22,253,373

Granted
640,138

 
$
7.09

 
 
 
 
Exercised
(663,333
)
 
$
1.80

 
 
 
 
Canceled
(2,986,675
)
 
$
8.61

 
 
 
 
Balance at December 31, 2014
14,962,099

 
$
8.53

 
7.11
 
$
6,646,629

 
 
 
 
 
 
 
 
As of December 31, 2014
 
 
 
 
 
 
 
Options exercisable
9,773,822

 
$
7.86

 
6.42
 
$
6,567,295

Options vested and expected to vest
14,308,608

 
$
8.46

 
7.04
 
$
6,631,775

Summary of Restricted Stock Unit Activity 
 
Restricted Stock Units Outstanding
 
Number of
RSUs
Outstanding
 
Weighted Average
Grant Date Fair Value
Balance at December 31, 2013
1,479,898

 
$
10.01

Granted
10,427,253

 
6.21

Released
(1,483,623
)
 
9.68

Canceled
(1,298,338
)
 
6.28

Balance at December 31, 2014
9,125,190

 
$
6.25

Income Taxes (Tables)
Schedule of Income Tax Provision 
Our income tax provision consisted of the following (in thousands):
 
Year Ended December 31,
 
2014
 
2013
 
2012
Current income taxes:
 
 
 
 
 
Federal
$
—

 
$
—

 
$
(341
)
State
304

 
282

 
342

Foreign
871

 
358

 
17

Total current income taxes
1,175

 
640

 
18

 
 
 
 
 
 
Deferred income taxes:
 
 
 
 
 
Federal
(1,003
)
 
—

 
—

State
33

 
—

 
—

Foreign
(19
)
 
2

 
11

Total deferred income taxes
(989
)
 
2

 
11

Total income tax provision
$
186

 
$
642

 
$
29

Schedule of Loss before Provision for Income Taxes 
Loss before provision for income taxes consisted of (in thousands):
 
Year Ended December 31,
 
2014
 
2013
 
2012
United States
$
(65,930
)
 
$
(55,974
)
 
$
(49,701
)
Foreign
1,358

 
766

 
687

Total
$
(64,572
)
 
$
(55,208
)
 
$
(49,014
)
Schedule of Effective Income Tax Rate Reconciliation 
The differences between our income tax provision as presented in the accompanying consolidated statements of operations and the income tax expense computed at the federal statutory rate consists of the items shown in the following table as a percentage of pretax loss (in thousands):
 
Year Ended December 31,
 
2014
 
2013
 
2012
Tax at U.S. statutory rate
34.0
 %
 
34.0
 %
 
34.0
 %
State, net of federal benefit
5.1

 
2.7

 
2.9

Share-based compensation
(6.5
)
 
(7.7
)
 
(8.5
)
Non-deductible expenses
(0.4
)
 
(0.1
)
 
(0.7
)
Other
(0.5
)
 
0.9

 
2.5

Change in valuation allowance
(32.0
)
 
(31.0
)
 
(30.3
)
Total
(0.3
)%
 
(1.2
)%
 
(0.1
)%
Schedule of Deferred Tax Assets and Liabilities 
A summary of our deferred tax assets is as follows (in thousands):
 
Year Ended December 31,
 
2014
 
2013
Deferred tax assets:
 
 
 
Accrued expenses and reserves
$
6,291

 
$
2,405

Share-based compensation
18,391

 
13,261

Deferred revenue
4,589

 
3,373

Net operating loss carryforwards
36,847

 
34,919

Fixed assets, textbooks and intangibles assets
10,754

 
1,862

Other items
2,277

 
2,628

Gross deferred tax assets
79,149

 
58,448

Valuation allowance
(79,093
)
 
(58,411
)
Total deferred tax assets
56

 
37

 
 
 
 
Deferred tax liabilities:
 
 
 
Intangible asset
321

 
—

Total deferred tax liabilities
321

 
—

 
 
 
 
Net deferred tax (liabilities) assets
$
(265
)
 
$
37

Schedule of Reconciliation of Unrecognized Tax Benefits 
A reconciliation of the beginning and ending balances of the total amount of unrecognized tax benefits, excluding accrued interest and penalties, is as follows (in thousands):
 
Year Ended December 31,
 
2014
 
2013
 
2012
Balance at December 31, 2013
$
2,994

 
$
1,942

 
$
565

Increase in tax positions for prior years
406

 
318

 
1,090

Decrease in tax positions for prior years
(284
)
 
(2
)
 
(258
)
Decrease in tax positions for prior year settlement
—

 
(16
)
 
—

Increase in tax positions for current year
1,172

 
742

 
495

Change due to translation of foreign currencies
(16
)
 
10

 
50

Balance at December 31, 2014
$
4,272

 
$
2,994

 
$
1,942

Segment Information (Tables)
Schedule of Revenue by Product Line
Revenue by product line as follows (in thousands):
 
December 31,
 
2014
 
2013
 
2012
Print textbooks
$
213,657

 
$
203,077

 
$
185,169

Digital offerings
91,177

 
52,498

 
28,165

Total Revenue
304,834

 
255,575

 
213,334

Selected Quarterly Financial Data (unaudited) (Tables)
Schedule of Quarterly Financial Information
 
Three Months Ended
 
March 31, 2014
 
June 30, 2014
 
September 30, 2014
 
December 31, 2014
Net revenues
$
74,393

 
$
64,492

 
$
81,532

 
$
84,417

Gross profit
8,908

 
25,896

 
13,251

 
45,794

Net (loss) income
$
(25,759
)
 
$
(8,246
)
 
$
(32,441
)
 
$
1,688

Weighted average shares used to compute net (loss) income per share:
 
 
 
 
 
 
 
Basic
82,181

 
83,209

 
83,688

 
83,925

Diluted
82,181

 
83,209

 
83,688

 
86,543

Net (loss) income per share:
 
 
 
 
 
 
 
Basic
$
(0.31
)
 
$
(0.10
)
 
$
(0.39
)
 
$
0.02

Diluted
$
(0.31
)
 
$
(0.10
)
 
$
(0.39
)
 
$
0.02

 
 
 
 
 
 
 
 
 
Three Months Ended
 
March 31, 2013
 
June 30, 2013
 
September 30, 2013
 
December 31, 2013
Net revenues
$
61,015

 
$
55,857

 
$
61,587

 
$
77,116

Gross profit
11,561

 
26,250

 
3,162

 
39,542

Net loss
(17,825
)
 
(3,353
)
 
(29,255
)
 
(5,417
)
Deemed dividend to preferred stockholders
—

 
—

 
—

 
(102,557
)
Net loss attributable to common stockholders
$
(17,825
)
 
$
(3,353
)
 
$
(29,255
)
 
$
(107,974
)
Weighted average shares used to compute net loss attributable to common stockholders per share:
 
 
 
 
 
 
 
Basic
12,031

 
12,558

 
12,873

 
45,825

Diluted
12,031

 
12,558

 
12,873

 
45,825

Net loss attributable to common stockholders per share:
 
 
 
 
 
 
 
Basic
$
(1.48
)
 
$
(0.27
)
 
$
(2.27
)
 
$
(2.36
)
Diluted
$
(1.48
)
 
$
(0.27
)
 
$
(2.27
)
 
$
(2.36
)
Background and Basis of Presentation - Additional Information (Details)
0 Months Ended 12 Months Ended
Sep. 3, 2013
Dec. 31, 2014
student
Organization, Consolidation and Presentation of Financial Statements [Abstract]
 
 
Number of students who have used our learning platform
 
7,500,000 
Stock split, conversion ratio
0.667 
 
Significant Accounting Policies - Additional Information (Details) (USD $)
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Accounting Policies [Abstract]
 
 
 
Textbook library depreciation expense
$ 70,147,000 
$ 64,759,000 
$ 57,177,000 
Loss from write-offs of textbooks
10,534,000 
5,874,000 
4,597,000 
Advertising costs
$ 22,400,000 
$ 16,400,000 
$ 21,100,000 
Significant Accounting Policies - Restricted Cash (Details) (USD $)
In Millions, unless otherwise specified
Dec. 31, 2014
Dec. 31, 2013
Restricted Cash and Cash Equivalents Items [Line Items]
 
 
Restricted cash
$ 1.8 
$ 1.7 
Other current assets |
Certificate of Deposit and Escrow Funds
 
 
Restricted Cash and Cash Equivalents Items [Line Items]
 
 
Restricted cash
0.3 
0.4 
Other noncurrent assets |
Security Deposit
 
 
Restricted Cash and Cash Equivalents Items [Line Items]
 
 
Restricted cash
$ 1.5 
$ 1.3 
Significant Accounting Policies - Concentration Risk (Details) (Customer Concentration Risk, Accounts Receivable)
12 Months Ended
Dec. 31, 2014
Largest Wholesaler One
Dec. 31, 2014
Largest Wholesaler Two
Dec. 31, 2013
Largest Wholesaler
Restricted Cash and Cash Equivalents Items [Line Items]
 
 
 
Concentration risk, percentage
16.00% 
12.00% 
11.00% 
Significant Accounting Policies - Property Plant and Equipment (Details) (USD $)
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Property, Plant and Equipment [Line Items]
 
 
 
Depreciation and amortization
$ 6,200,000 
$ 5,700,000 
$ 3,900,000 
Software development costs
18,369,000 
18,964,000 
 
Amortization of software development costs capitalized
15,230,000 
12,057,000 
 
Computer and equipment
 
 
 
Property, Plant and Equipment [Line Items]
 
 
 
Useful life
3 years 
 
 
Software
 
 
 
Property, Plant and Equipment [Line Items]
 
 
 
Software development costs
500,000 
2,600,000 
 
Amortization of software development costs capitalized
$ 500,000 
$ 1,000,000 
$ 1,200,000 
Software |
Minimum
 
 
 
Property, Plant and Equipment [Line Items]
 
 
 
Useful life
2 years 
 
 
Software |
Maximum
 
 
 
Property, Plant and Equipment [Line Items]
 
 
 
Useful life
3 years 
 
 
Furniture and fixtures
 
 
 
Property, Plant and Equipment [Line Items]
 
 
 
Useful life
5 years 
 
 
Leasehold improvements
 
 
 
Property, Plant and Equipment [Line Items]
 
 
 
Useful life
5 years 
 
 
Content
 
 
 
Property, Plant and Equipment [Line Items]
 
 
 
Useful life
5 years 
 
 
Significant Accounting Policies - Computation of Basic and Diluted Net Loss Per Share (Details) (USD $)
3 Months Ended 12 Months Ended 1 Months Ended
Dec. 31, 2014
Sep. 30, 2014
Jun. 30, 2014
Mar. 31, 2014
Dec. 31, 2013
Sep. 30, 2013
Jun. 30, 2013
Mar. 31, 2013
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Nov. 30, 2013
Common Stock
Earnings Per Share, Diluted, by Common Class, Including Two Class Method [Line Items]
 
 
 
 
 
 
 
 
 
 
 
 
Deemed stock dividend, stock
 
 
 
 
 
 
 
 
 
 
 
11,667,254 
Deemed stock dividend, value
 
 
 
 
 
 
 
 
 
 
 
$ 102,600,000 
Numerator:
 
 
 
 
 
 
 
 
 
 
 
 
Net loss
1,688,000 
(32,441,000)
(8,246,000)
(25,759,000)
(5,417,000)
(29,255,000)
(3,353,000)
(17,825,000)
(64,758,000)
(55,850,000)
(49,043,000)
 
Deemed dividend to preferred stockholders
 
 
 
 
(102,557,000)
0 
0 
0 
0 
(102,557,000)
0 
 
Net loss attributable to common stockholders
 
 
 
 
$ (107,974,000)
$ (29,255,000)
$ (3,353,000)
$ (17,825,000)
$ (64,758,000)
$ (158,407,000)
$ (49,043,000)
 
Denominator:
 
 
 
 
 
 
 
 
 
 
 
 
Weighted-average common shares outstanding
83,925,000 
83,688,000 
83,209,000 
82,181,000 
45,825,000 
12,873,000 
12,558,000 
12,031,000 
83,241,000 
21,121,000 
12,132,000 
 
Less: Weighted-average unvested common shares subject to repurchase of forfeiture
 
 
 
 
 
 
 
 
(36,000)
(219,000)
(949,000)
 
Weighted-average common shares used in computing basic and diluted net loss per share
 
 
 
 
 
 
 
 
83,205,000 
20,902,000 
11,183,000 
 
Net loss per share attributable to common stockholders, basic and diluted.
 
 
 
 
 
 
 
 
$ (0.78)
$ (7.58)
$ (4.39)
 
Significant Accounting Policies - Common Shares Outstanding Excluded From Computation Of Diluted Net Loss Per Share (Details)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
 
 
 
Total common stock equivalents
15,538 
20,670 
57,996 
Convertible Preferred Stock
 
 
 
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
 
 
 
Total common stock equivalents
0 
0 
42,242 
Options to purchase common stock
 
 
 
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
 
 
 
Total common stock equivalents
14,253 
17,972 
12,860 
Restricted stock units
 
 
 
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
 
 
 
Total common stock equivalents
289 
1,480 
1,328 
Common stock subject to repurchase or forfeiture
 
 
 
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
 
 
 
Total common stock equivalents
0 
100 
398 
Warrants |
Common Stock
 
 
 
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
 
 
 
Total common stock equivalents
996 
1,118 
36 
Warrants |
Convertible Preferred Stock
 
 
 
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
 
 
 
Total common stock equivalents
0 
0 
1,132 
Cash and Cash Equivalents, Investments and Restricted Cash - Cash and Cash Equivalents, Restricted Cash and Investments (Details) (USD $)
In Thousands, unless otherwise specified
Dec. 31, 2014
Dec. 31, 2013
Cash and Cash Equivalents
 
 
Schedule Of Available For Sale Securities [Line Items]
 
 
Cost
$ 56,117 
$ 76,864 
Net Unrealized Gain/(Loss)
0 
0 
Fair Value
56,117 
76,864 
Short-term Investments
 
 
Schedule Of Available For Sale Securities [Line Items]
 
 
Cost
33,360 
37,071 
Net Unrealized Gain/(Loss)
(14)
0 
Fair Value
33,346 
37,071 
Short-term Investments |
Corporate Securities
 
 
Schedule Of Available For Sale Securities [Line Items]
 
 
Cost
18,426 
0 
Net Unrealized Gain/(Loss)
(15)
0 
Fair Value
18,411 
0 
Long-term Investments |
Corporate Securities
 
 
Schedule Of Available For Sale Securities [Line Items]
 
 
Cost
1,453 
24,338 
Net Unrealized Gain/(Loss)
(2)
(18)
Fair Value
1,451 
24,320 
Cash |
Cash and Cash Equivalents
 
 
Schedule Of Available For Sale Securities [Line Items]
 
 
Cost
49,836 
33,322 
Net Unrealized Gain/(Loss)
0 
0 
Fair Value
49,836 
33,322 
Money Market Funds |
Cash and Cash Equivalents
 
 
Schedule Of Available For Sale Securities [Line Items]
 
 
Cost
5,828 
42,042 
Net Unrealized Gain/(Loss)
0 
0 
Fair Value
5,828 
42,042 
Commercial Paper |
Cash and Cash Equivalents
 
 
Schedule Of Available For Sale Securities [Line Items]
 
 
Cost
453 
1,500 
Net Unrealized Gain/(Loss)
0 
0 
Fair Value
453 
1,500 
Commercial Paper |
Short-term Investments
 
 
Schedule Of Available For Sale Securities [Line Items]
 
 
Cost
13,435 
35,571 
Net Unrealized Gain/(Loss)
0 
0 
Fair Value
13,435 
35,571 
Certificate of Deposit |
Short-term Investments
 
 
Schedule Of Available For Sale Securities [Line Items]
 
 
Cost
1,499 
1,500 
Net Unrealized Gain/(Loss)
1 
0 
Fair Value
1,500 
1,500 
Short-term Restricted Cash
 
 
Schedule Of Available For Sale Securities [Line Items]
 
 
Cost
300 
352 
Net Unrealized Gain/(Loss)
0 
0 
Fair Value
300 
352 
Long-term Restricted Cash
 
 
Schedule Of Available For Sale Securities [Line Items]
 
 
Cost
1,480 
1,350 
Net Unrealized Gain/(Loss)
0 
0 
Fair Value
1,480 
1,350 
Restricted Cash
 
 
Schedule Of Available For Sale Securities [Line Items]
 
 
Cost
1,780 
1,702 
Net Unrealized Gain/(Loss)
0 
0 
Fair Value
$ 1,780 
$ 1,702 
Cash and Cash Equivalents, Investments and Restricted Cash - Contractual Maturity of Available-for-Sale Investments (Details) (USD $)
In Thousands, unless otherwise specified
Dec. 31, 2014
Amortized Cost
 
Due in 1 year or less
$ 33,813 
Due in 1-2 years
1,453 
Investments not due at a single maturity date
5,828 
Total
41,094 
Fair Value
 
Due in 1 year or less
33,799 
Due in 1-2 years
1,451 
Investments not due at a single maturity date
5,828 
Total
$ 41,078 
Fair Value Measurement - Financial Instruments Measured and Recorded at Fair Value on Recurring Basis (Details) (USD $)
In Thousands, unless otherwise specified
Dec. 31, 2014
Dec. 31, 2013
Assets:
 
 
Short-term investments
$ 33,346 
$ 37,071 
Fair Value on Recurring Basis
 
 
Assets:
 
 
Long-term investments
 
24,320 
Total assets measured and recorded at fair value
41,078 
104,933 
Liabilities:
 
 
Put option liability
1,079 
1,521 
Fair Value on Recurring Basis |
Corporate Securities
 
 
Assets:
 
 
Short-term investments
18,411 
 
Long-term investments
1,451 
 
Fair Value on Recurring Basis |
Money Market Funds
 
 
Assets:
 
 
Cash equivalents
5,828 
42,042 
Fair Value on Recurring Basis |
Commercial Paper
 
 
Assets:
 
 
Cash equivalents
453 
1,500 
Short-term investments
13,435 
35,571 
Fair Value on Recurring Basis |
Certificate of Deposit
 
 
Assets:
 
 
Short-term investments
1,500 
1,500 
Fair Value on Recurring Basis |
Quoted Prices in Active Markets for Identical Assets (Level 1)
 
 
Assets:
 
 
Total assets measured and recorded at fair value
5,828 
42,042 
Fair Value on Recurring Basis |
Quoted Prices in Active Markets for Identical Assets (Level 1) |
Money Market Funds
 
 
Assets:
 
 
Cash equivalents
5,828 
42,042 
Fair Value on Recurring Basis |
Significant Other Observable Inputs (Level 2)
 
 
Assets:
 
 
Long-term investments
 
24,320 
Total assets measured and recorded at fair value
35,250 
62,891 
Fair Value on Recurring Basis |
Significant Other Observable Inputs (Level 2) |
Corporate Securities
 
 
Assets:
 
 
Short-term investments
18,411 
 
Long-term investments
1,451 
 
Fair Value on Recurring Basis |
Significant Other Observable Inputs (Level 2) |
Commercial Paper
 
 
Assets:
 
 
Cash equivalents
453 
1,500 
Short-term investments
13,435 
35,571 
Fair Value on Recurring Basis |
Significant Other Observable Inputs (Level 2) |
Certificate of Deposit
 
 
Assets:
 
 
Short-term investments
1,500 
1,500 
Fair Value on Recurring Basis |
Significant Unobservable Inputs (Level 3)
 
 
Liabilities:
 
 
Put option liability
$ 1,079 
$ 1,521 
Fair Value Measurement - Summarizes the Change in the Fair Value of our Level 3 Liabilities (Details) (Significant Unobservable Inputs (Level 3), USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2014
Significant Unobservable Inputs (Level 3)
 
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]
 
Beginning balance
$ 1,521 
Vesting of put options
271 
Exercise of put options
(460)
Fair value adjustment related to put options
(253)
Total financial liabilities
$ 1,079 
Long-Lived Assets - Textbook Library, Net (Details) (USD $)
In Thousands, unless otherwise specified
Dec. 31, 2014
Dec. 31, 2013
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]
 
 
Textbook library
$ 169,463 
$ 196,742 
Less accumulated depreciation
(88,701)
(91,634)
Textbook library, net
$ 80,762 
$ 105,108 
Long-Lived Assets - Property, Plant and Equipment (Details) (USD $)
In Thousands, unless otherwise specified
Dec. 31, 2014
Dec. 31, 2013
Property, Plant and Equipment [Line Items]
 
 
Property and equipment, gross
$ 33,599 
$ 31,021 
Less accumulated depreciation and amortization
(15,230)
(12,057)
Property and equipment, net
18,369 
18,964 
Computer and equipment
 
 
Property, Plant and Equipment [Line Items]
 
 
Property and equipment, gross
1,083 
1,594 
Software
 
 
Property, Plant and Equipment [Line Items]
 
 
Property and equipment, gross
3,842 
5,088 
Furniture and fixtures
 
 
Property, Plant and Equipment [Line Items]
 
 
Property and equipment, gross
2,259 
2,207 
Leasehold improvements
 
 
Property, Plant and Equipment [Line Items]
 
 
Property and equipment, gross
5,153 
4,407 
Content
 
 
Property, Plant and Equipment [Line Items]
 
 
Property and equipment, gross
$ 21,262 
$ 17,725 
Acquisitions - Additional Information (Details) (USD $)
12 Months Ended 0 Months Ended 0 Months Ended
Dec. 31, 2014
Oct. 1, 2014
Internships.Com
Oct. 1, 2014
Internships.Com
Jun. 5, 2014
InstaEDU
Apr. 9, 2014
Campus Special
Mar. 7, 2014
Bookstep L L C
Business Acquisition [Line Items]
 
 
 
 
 
 
Outstanding shares and voting interest
 
 
100.00% 
100.00% 
100.00% 
 
Fair value of purchase consideration
 
$ 10,000,000 
 
$ 31,100,000 
$ 16,000,000 
$ 500,000 
Portion of purchase price held as an escrow deposit
 
 
1,000,000 
4,500,000 
 
 
Business acquisition payment period
 
18 months 
 
18 months 
1 year 
2 years 
Purchase consideration, cash
 
 
 
 
14,000,000 
 
Purchase consideration, shares
 
 
 
 
250,000 
 
Contingent purchase consideration, cash
 
 
 
 
 
2,500,000 
Fair value of subsequent payments
 
 
 
 
 
2,500,000 
Acquisition related expenses
$ 700,000 
 
 
 
 
 
Acquisitions - Summary of Fair Value of the Consideration (Details) (Internships.com, Campus Special, InstaEDU and Bookstep, USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2014
Internships.com, Campus Special, InstaEDU and Bookstep
 
Business Acquisition [Line Items]
 
Cash consideration
$ 55,537 
Fair value of stock escrow consideration
2,585 
Fair value of stock contingent consideration
193 
Fair value of purchase consideration
$ 58,315 
Acquisitions - Summary of Fair Value of Identifiable Intangible Assets Acquired (Details) (USD $)
In Thousands, unless otherwise specified
Dec. 31, 2014
Dec. 31, 2013
Business Acquisition [Line Items]
 
 
Goodwill
$ 91,301 
$ 49,545 
Internships.com, Campus Special, InstaEDU and Bookstep
 
 
Business Acquisition [Line Items]
 
 
Cash
1,665 
 
Other acquired assets
595 
 
Intangible asset
16,837 
 
Total identifiable assets acquired
19,097 
 
Liabilities assumed
(2,538)
 
Net identifiable assets acquired
16,559 
 
Goodwill
41,756 
 
Net assets acquired
58,315 
 
Internships.com, Campus Special, InstaEDU and Bookstep |
Developed technology
 
 
Business Acquisition [Line Items]
 
 
Intangible asset
4,174 
 
Internships.com, Campus Special, InstaEDU and Bookstep |
Customer list
 
 
Business Acquisition [Line Items]
 
 
Intangible asset
3,770 
 
Internships.com, Campus Special, InstaEDU and Bookstep |
Trade name
 
 
Business Acquisition [Line Items]
 
 
Intangible asset
5,990 
 
Internships.com, Campus Special, InstaEDU and Bookstep |
Non-compete agreements
 
 
Business Acquisition [Line Items]
 
 
Intangible asset
1,630 
 
Internships.com, Campus Special, InstaEDU and Bookstep |
Corporate partnerships
 
 
Business Acquisition [Line Items]
 
 
Intangible asset
243 
 
Internships.com, Campus Special, InstaEDU and Bookstep |
Master services agreement
 
 
Business Acquisition [Line Items]
 
 
Intangible asset
$ 1,030 
 
Goodwill and Intangible Assets - Goodwill (Details) (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2014
Goodwill [Roll Forward]
 
Beginning balance
$ 49,545 
Additions due to acquisition
41,756 
Ending balance
$ 91,301 
Goodwill and Intangible Assets - Intangible Assets (Details) (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Finite Lived Intangible Assets [Line Items]
 
 
Gross Carrying Amount
 
$ 15,730 
Accumulated Amortization
(8,619)
(12,419)
Impairment
(1,552)
 
Net Carrying Amount
10,026 
3,311 
Indefinite-lived trade name
3,600 
 
Total intangible assets, gross carrying amount
23,797 
 
Intangible assets, net
13,626 
3,311 
Developed technology
 
 
Finite Lived Intangible Assets [Line Items]
 
 
Weighted-Average Amortization Period (in months)
49 months 
46 months 
Gross Carrying Amount
9,792 
8,008 
Accumulated Amortization
(5,000)
(5,386)
Impairment
(194)
 
Net Carrying Amount
4,598 
2,622 
Customer list
 
 
Finite Lived Intangible Assets [Line Items]
 
 
Weighted-Average Amortization Period (in months)
6 months 
24 months 
Gross Carrying Amount
4,363 
5,472 
Accumulated Amortization
(1,816)
(5,029)
Impairment
(829)
 
Net Carrying Amount
1,718 
443 
Trade name
 
 
Finite Lived Intangible Assets [Line Items]
 
 
Weighted-Average Amortization Period (in months)
44 months 
33 months 
Gross Carrying Amount
3,132 
1,182 
Accumulated Amortization
(1,085)
(942)
Impairment
(39)
 
Net Carrying Amount
2,008 
240 
Non-compete agreements
 
 
Finite Lived Intangible Assets [Line Items]
 
 
Weighted-Average Amortization Period (in months)
14 months 
34 months 
Gross Carrying Amount
1,637 
1,068 
Accumulated Amortization
(421)
(1,062)
Impairment
(278)
 
Net Carrying Amount
938 
6 
Master service agreement
 
 
Finite Lived Intangible Assets [Line Items]
 
 
Weighted-Average Amortization Period (in months)
14 months 
 
Gross Carrying Amount
1,030 
 
Accumulated Amortization
(266)
 
Impairment
0 
 
Net Carrying Amount
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 
 
Goodwill and Intangible Assets - Additional Information (Details) (USD $)
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Finite Lived Intangible Assets [Line Items]
 
 
 
Impairment
$ 1,552,000 
$ 0 
$ 611,000 
Indefinite-lived trade name
3,600,000 
 
 
Intangible Assets (Excluding Goodwill), Impaired, Accumulated Impairment Loss
1,552,000 
 
 
Acquisition-Related Intangible Assets
 
 
 
Finite Lived Intangible Assets [Line Items]
 
 
 
Amortization expense of acquisition related to acquired intangible assets
5,000,000 
4,400,000 
6,800,000 
Internships.Com
 
 
 
Finite Lived Intangible Assets [Line Items]
 
 
 
Indefinite-lived trade name
$ 3,600,000 
 
 
Goodwill and Intangible Assets - Estimated Future Amortization Expense Related to Intangible Assets (Details) (USD $)
In Thousands, unless otherwise specified
Dec. 31, 2014
Dec. 31, 2013
Goodwill and Intangible Assets Disclosure [Abstract]
 
 
2015
$ 4,761 
 
2016
2,238 
 
2017
1,701 
 
2018
1,018 
 
2019
308 
 
Net Carrying Amount
$ 10,026 
$ 3,311 
Debt Obligations - Additional Information (Details) (USD $)
12 Months Ended 1 Months Ended 12 Months Ended 1 Months Ended 12 Months Ended 12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Aug. 31, 2013
Term Loan Facility
Dec. 31, 2014
Term Loan Facility
May 31, 2012
Term Loan Facility
Nov. 30, 2013
Revolving Credit Facility
Oct. 31, 2013
Revolving Credit Facility
Aug. 31, 2013
Revolving Credit Facility
Dec. 31, 2014
Revolving Credit Facility
Jun. 30, 2014
Revolving Credit Facility
Dec. 31, 2014
Revolving Credit Facility
Base Interest Rate
Dec. 31, 2014
Revolving Credit Facility
One-Month LIBOR
Dec. 31, 2014
Revolving Credit Facility
LIBOR Rate
Debt Instrument [Line Items]
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Credit facility, maximum borrowing capacity
 
 
 
 
 
$ 20,000,000.0 
 
 
 
$ 75,000,000.0 
 
 
 
 
Term loan facility, interest rate term
 
 
 
 
monthly 
 
 
 
 
 
 
 
 
 
Term loan facility, interest rate
 
 
 
 
11.50% 
 
 
 
 
 
 
 
 
 
Amount of loan principal repaid
 
 
 
20,000,000 
 
 
 
 
 
 
 
 
 
 
End-of-term fee payable
 
 
 
850,000 
 
 
 
 
 
 
 
 
 
 
Line of credit facility, current borrowing capacity
 
 
 
 
 
 
 
 
50,000,000 
 
40,000,000.0 
 
 
 
Revolving credit facility, initiation date
 
 
 
 
 
 
 
 
 
2013-08 
 
 
 
 
Marginal interest rate
 
 
 
 
 
 
 
 
 
 
 
0.50% 
1.00% 
4.50% 
Revolving credit facility, expiration date
 
 
 
 
 
 
 
 
 
Aug. 12, 2016 
 
 
 
 
Consolidated EBITDA
 
 
 
 
 
 
 
 
 
2,000,000.0 
 
 
 
 
Ratio of total debt outstanding to EBITDA
 
 
 
 
 
 
 
 
 
1.50% 
 
 
 
 
Proceeds from revolving credit facility
0 
31,000,000 
20,000,000 
 
 
 
 
10,000,000 
21,000,000 
 
 
 
 
 
Repayments of revolving credit facility
$ 0 
$ 51,000,000 
$ 20,500,000 
 
 
 
$ 31,000,000 
 
$ 20,000,000 
 
 
 
 
 
Balance Sheet Details (Details) (USD $)
In Thousands, unless otherwise specified
Dec. 31, 2014
Dec. 31, 2013
Liabilities, Current [Abstract]
 
 
Accrued book purchases
$ 1,812 
$ 1,905 
Accrued shipping for cycle returns
539 
2,929 
Chegg credit
2,264 
3,124 
Refund reserve
6,174 
330 
Taxes payable
4,851 
3,067 
Other
15,543 
9,915 
Total accrued liabilities
31,183 
21,270 
Long-term liabilities
 
 
Put option liability
0 
1,521 
Deferred rent, non-current
1,233 
1,803 
Long term tax liability
2,088 
1,281 
Other
1,044 
374 
Other liabilities
$ 4,365 
$ 4,979 
Stock Warrants - Black-Scholes Merton Option-Pricing Valuation Model (Details) (Common Stock Warrant, USD $)
12 Months Ended
Dec. 31, 2014
Common Stock Warrant
 
Class of Warrant or Right [Line Items]
 
Expected term
5 years 10 months 24 days 
Expected volatility
55.50% 
Dividend yield
0.00% 
Risk-free interest rate
1.61% 
Weighted-average fair value per share
$ 6.35 
Stock Warrants - Additional Information (Details) (USD $)
In Millions, except Share data, unless otherwise specified
1 Months Ended 12 Months Ended
Dec. 31, 2014
Apr. 30, 2014
Common Stock Warrant
Dec. 31, 2014
Common Stock Warrant
Nov. 30, 2014
Common Stock Warrant
Dec. 31, 2014
Other Income (Expense)
Common Stock Warrant
Class of Warrant or Right [Line Items]
 
 
 
 
 
Number of common stock warrants converted from preferred stock warrants
996,000 
 
 
1,118,282 
 
Weighted average exercise price
 
$ 0.82 
$ 5.70 
$ 5.16 
 
Gain on conversion of preferred stock warrants into common stock warrants
 
 
 
 
$ 3.3 
Common stock warrants exercised
 
122,733 
 
 
 
Common stock warrants remaining
 
 
995,549 
 
 
Commitments and Contingencies - Additional Information (Details) (USD $)
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Jul. 31, 2010
Commitments and Contingencies Disclosure [Abstract]
 
 
 
 
Rental expense
$ 3,300,000 
$ 2,900,000 
$ 3,900,000 
 
Property tax assessment
 
 
 
1,000,000 
Offer to the tax authority excluding tax and penalties
 
 
150,000 
 
Aggregate Future Minimum Lease Payments [Abstract]
 
 
 
 
2015
4,157,000 
 
 
 
2016
4,061,000 
 
 
 
2017
1,609,000 
 
 
 
2018
1,541,000 
 
 
 
2019
880,000 
 
 
 
Thereafter
612,000 
 
 
 
Total
$ 12,860,000 
 
 
 
Convertible Preferred Stock and Common Stock (Details) (USD $)
12 Months Ended 12 Months Ended 12 Months Ended 1 Months Ended 12 Months Ended 0 Months Ended 1 Months Ended 12 Months Ended 0 Months Ended 12 Months Ended 12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2014
2005 Stock Incentive Plan
Nov. 11, 2013
2005 Stock Incentive Plan
Dec. 31, 2014
2013 Equity Incentive Plan
Nov. 11, 2013
2013 Equity Incentive Plan
Dec. 31, 2014
2013 Employee Stock Purchase Plan
Nov. 30, 2014
Common Stock Warrant
Nov. 30, 2013
Common Stock
Dec. 31, 2012
Common Stock
Nov. 12, 2013
IPO
Designated IPO Equity Incentive Program
Nov. 30, 2013
IPO
Common Stock Warrant
Nov. 30, 2013
IPO
Common Stock
Nov. 30, 2014
IPO
Common Stock
Nov. 30, 2013
IPO
Series D and Series E Preferred Stock
Dec. 31, 2014
Restricted Stock Units (RSUs)
Dec. 31, 2013
Restricted Stock Units (RSUs)
Nov. 12, 2013
Restricted Stock Units (RSUs)
IPO
Designated IPO Equity Incentive Program
Dec. 31, 2014
Stock Options
2005 Stock Incentive Plan
Dec. 31, 2012
Minimum
Common Stock
Dec. 31, 2012
Maximum
Common Stock
Dec. 31, 2014
Employees and Consultants
Stock Options
2005 Stock Incentive Plan
Dec. 31, 2014
Employees and Consultants
Non-qualified stock
2005 Stock Incentive Plan
Dec. 31, 2014
Employees and Consultants
Incentive stock options or Non-qualified stock
2005 Stock Incentive Plan
Dec. 31, 2014
10% stockholder
Stock Options
2005 Stock Incentive Plan
Dec. 31, 2014
10% stockholder
Incentive stock options or Non-qualified stock
2005 Stock Incentive Plan
Class of Stock [Line Items]
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Stock issued during period, shares
 
 
 
 
 
 
 
 
 
 
 
 
14,400,000 
 
 
1,305,377 
 
 
 
 
 
 
 
 
 
 
Price per share
 
 
 
 
 
 
 
 
 
 
 
 
$ 12.50 
 
 
 
 
 
 
 
 
 
 
 
 
 
Stock issued during period
 
$ 162,883,000 
 
 
 
 
 
 
 
 
 
 
$ 162,900,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
Underwriting discount and commissions
 
 
 
 
 
 
 
 
 
 
 
 
12,600,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
Incurred offering costs
 
 
 
 
 
 
 
 
 
 
 
 
 
4,500,000 
 
 
 
 
 
 
 
 
 
 
 
 
Shares issued upon conversion of preferred stock
 
 
 
 
 
 
 
 
 
 
 
 
53,912,261 
 
 
 
 
 
 
 
 
 
 
 
 
 
Number of common stock warrants converted from preferred stock warrants
996,000 
 
 
 
 
 
 
1,118,282 
 
 
 
1,118,282 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Gain on conversion of preferred stock warrants into common stock warrants
 
 
 
 
 
 
 
 
 
 
 
3,300,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Number of options, granted
640,138 
 
 
 
 
 
 
 
 
 
931,791 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Number of RSUs granted
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
10,427,253 
 
472,644 
 
 
 
 
 
 
 
 
Deemed stock dividend, stock
 
 
 
 
 
 
 
 
11,667,254 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Deemed stock dividend, value
 
 
 
 
 
 
 
 
102,600,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Maximum IPO price threshold for conversion
 
 
 
 
 
 
 
 
 
 
 
 
 
 
$ 26 
 
 
 
 
 
 
 
 
 
 
 
Stock repurchased and retired during period, shares
 
 
 
 
 
 
 
 
 
318,793 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Stock repurchased and retired during period, shares, price per share
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
$ 0.001 
$ 12.00 
 
 
 
 
 
Stock repurchased and retired during period, value
 
 
 
 
 
 
 
 
 
$ 3,400,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Common stock, shares authorized
400,000,000 
400,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Common stock, par value
$ 0.001 
$ 0.001 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Outstanding stock options
14,962,099 
17,971,969 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Outstanding RSUs
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
9,125,190 
1,479,898 
 
 
 
 
 
 
 
 
 
Shares available for grant under the stock plans
8,821,000 
 
 
 
8,821,057 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Shares available for issuance under employee stock purchase plan
4,476,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total common shares reserved for future issuance
38,380,000 
 
 
3,838,985 
 
12,000,000 
4,476,465 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Award exercise price as a percent of FMV of common stock on grant date, minimum threshold
 
 
 
 
100.00% 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
100.00% 
85.00% 
85.00% 
 
110.00% 
Stockholders ownership percentage
 
 
10.00% 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Award expiration period
 
 
 
 
10 years 
 
 
 
 
 
 
 
 
 
 
 
 
 
10 years 
 
 
 
 
 
5 years 
 
Vesting period of stock awards
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
4 years 
 
 
4 years 
 
 
 
 
 
 
 
Maximum employee subscription rate
 
 
 
 
 
 
15.00% 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Employee discount on applicable offering period
 
 
 
 
 
 
15.00% 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Offering period (no more than 6 months)
 
 
 
 
 
 
6 months 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Shares reserved
 
 
 
 
 
 
4,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Maximum aggregate number of shares to be issued
 
 
 
 
 
 
20,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Stockholders' Equity - Additional Information (Details) (USD $)
1 Months Ended 12 Months Ended
Feb. 28, 2014
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
 
 
 
 
Conversion ratio of restricted stock units in to common stock
 
1 
 
 
Shares issued under 2013 ESPP
 
340,617 
 
 
Average price per share purchased under ESPP (in dollars per share)
 
$ 4.46 
 
 
Total intrinsic value of options exercised
 
$ 3,100,000 
$ 4,900,000 
$ 3,300,000 
Unrecognized compensation expense for stock options granted to employees, officers, directors, and consultants
 
22,700,000 
 
 
Share-based compensation expense
 
36,888,000 
36,958,000 
18,045,000 
Capitalized stock-based compensation expense
 
0 
0 
0 
Cash remitted to tax authorities related to RSU settlement
 
3,980,000 
1,034,000 
0 
Performance based restricted stock unit award vesting period
3 years 
 
 
 
InstaEDU
 
 
 
 
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
 
 
 
 
Performance based restricted stock unit award granted to executive officers
 
2,280,081 
 
 
Performance based restricted stock unit award granted weighted average grant date fair value
 
$ 6.00 
 
 
Maximum
 
 
 
 
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
 
 
 
 
Settlement of performance based restricted stock unit awards percentage
120.00% 
 
 
 
Consultants
 
 
 
 
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
 
 
 
 
Options granted
 
0 
110,886 
0 
Share-based compensation expense
 
700,000 
900,000 
200,000 
Restricted Stock Units (RSUs)
 
 
 
 
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
 
 
 
 
Vesting period of stock awards
 
4 years 
 
 
Weighted average vesting period for recognition of compensation expense
 
2 years 2 months 31 days 
 
 
Pre-IPO shares settled
 
1,305,377 
 
 
Shares withheld
 
535,348 
 
 
Cash remitted to tax authorities related to RSU settlement
 
3,600,000 
 
 
Performance based restricted stock unit award granted to executive officers
 
10,427,253 
 
 
Performance based restricted stock unit award granted weighted average grant date fair value
 
$ 6.21 
 
 
Awards forfeited
 
1,298,338 
 
 
Unrecognized compensation costs related to restricted stock units
 
34,000,000 
 
 
ESPP
 
 
 
 
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
 
 
 
 
Cash proceeds from the issuance of shares under ESPPs
 
$ 1,500,000 
 
 
Stock Options
 
 
 
 
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
 
 
 
 
Weighted average vesting period for recognition of compensation expense
 
1 year 10 months 9 days 
 
 
Performance-based restricted stock units
 
 
 
 
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
 
 
 
 
Performance based restricted stock unit award granted to executive officers
 
1,208,560 
 
 
Performance based restricted stock unit award granted weighted average grant date fair value
 
$ 6.37 
 
 
Awards forfeited
 
516,059 
 
 
Stockholders' Equity - Share-based Compensation Expense (Details) (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Employee Service Share Based Compensation Allocation Of Recognized Period Costs [Line Items]
 
 
 
Share-based compensation expense
$ 36,888 
$ 36,958 
$ 18,045 
Cost of revenues
 
 
 
Employee Service Share Based Compensation Allocation Of Recognized Period Costs [Line Items]
 
 
 
Share-based compensation expense
617 
1,185 
542 
Technology and development
 
 
 
Employee Service Share Based Compensation Allocation Of Recognized Period Costs [Line Items]
 
 
 
Share-based compensation expense
10,451 
9,414 
7,657 
Sales and marketing
 
 
 
Employee Service Share Based Compensation Allocation Of Recognized Period Costs [Line Items]
 
 
 
Share-based compensation expense
11,300 
7,107 
5,164 
General and administrative
 
 
 
Employee Service Share Based Compensation Allocation Of Recognized Period Costs [Line Items]
 
 
 
Share-based compensation expense
$ 14,520 
$ 19,252 
$ 4,682 
Stockholders' Equity - Summary of Assumptions (Details)
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Stock Options
 
 
 
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
 
 
 
Expected term (years)
6 years 25 days 
 
 
Dividend yield
0.00% 
0.00% 
0.00% 
Weighted-average grant-date fair value per share (in dollars per share)
$ 3.82 
$ 6.20 
$ 3.86 
Stock Options |
Minimum
 
 
 
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
 
 
 
Expected term (years)
 
5 years 30 days 
5 years 1 month 3 days 
Expected volatility
55.91% 
55.72% 
55.10% 
Risk-free interest rate
1.88% 
0.81% 
0.65% 
Stock Options |
Maximum
 
 
 
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
 
 
 
Expected term (years)
 
6 years 7 months 18 days 
6 years 30 days 
Expected volatility
56.83% 
73.18% 
58.77% 
Risk-free interest rate
2.02% 
1.92% 
1.16% 
ESPP
 
 
 
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
 
 
 
Expected term (years)
6 months 
6 months 
 
Expected volatility
41.89% 
45.00% 
 
Dividend yield
0.00% 
0.00% 
 
Risk-free interest rate
0.06% 
0.10% 
 
Weighted-average grant-date fair value per share (in dollars per share)
$ 1.68 
$ 3.44 
 
Stockholders' Equity - Summary of Stock Option Activity (Details) (USD $)
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Number of Options Outstanding
 
 
Number of Options Outstanding, Beginning
17,971,969 
 
Number of options, granted
640,138 
 
Number of Options, Exercised
(663,333)
 
Number of Options, Canceled
(2,986,675)
 
Number of Options Outstanding, Ending
14,962,099 
17,971,969 
Number of operations exercisable
9,773,822 
 
Number of operations vested and expected to vest
14,308,607.6915 
 
Weighted-Average Exercise Price per Share
 
 
Weighted Average Exercise Price per Share, Outstanding, Beginning
$ 8.35 
 
Weighted-Average Exercise Price per Share, Granted
$ 7.09 
 
Weighted-Average Exercise Price per Share, Exercised
$ 1.80 
 
Weighted-Average Exercise Price per Share, Canceled
$ 8.61 
 
Weighted Average Exercise Price per Share, Outstanding, Ending
$ 8.53 
$ 8.35 
Weighted average exercise price per share, options exercisable
$ 7.86 
 
Weighted average exercise price per share, options vested and expected to vest
$ 8.46 
 
Options outstanding, weighted-average remaining contractual term in years
7 years 1 month 10 days 
8 years 1 month 24 days 
Options exercisable, weighted-average remaining contractual term in years
6 years 5 months 1 day 
 
Options vested and expected to vest, weighted-average remaining contractual term in years
7 years 0 months 15 days 
 
Options outstanding, aggregate intrinsic value
$ 6,646,629 
$ 22,253,373 
Options exercisable, aggregate intrinsic value
6,567,295 
 
Options vested and expected to vest, aggregate intrinsic value
$ 6,631,775 
 
Stockholders' Equity - Summary of Restricted Stock Unit Activity (Details) (Restricted Stock Units (RSUs), USD $)
12 Months Ended
Dec. 31, 2014
Restricted Stock Units (RSUs)
 
Restricted Stock Units Outstanding
 
Number of Restricted Stock Units Outstanding, Beginning
1,479,898 
Number of RSUs granted
10,427,253 
Number of Restricted Stock Units, Released
(1,483,623)
Number of Restricted Stock Units, Canceled
(1,298,338)
Number of Restricted Stock Units Outstanding, Ending
9,125,190 
Weighted Average Grant Date Fair Value [Abstract]
 
Weighted Average Grant Date Fair Value, Beginning balance
$ 10.01 
Weighted Average Grant Date Fair Value, Granted
$ 6.21 
Weighted Average Grant Date Fair Value, Released
$ 9.68 
Weighted Average Grant Date Fair Value, Canceled
$ 6.28 
Weighted Average Grant Date Fair Value, Ending balance
$ 6.25 
Stockholders' Equity - Acquisition-Related Stock Awards (Details) (USD $)
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
 
 
 
Share-based compensation expense
$ 36,888,000 
$ 36,958,000 
$ 18,045,000 
Acquisition-Related Restricted Shares
 
 
 
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
 
 
 
Employee option to sell vested shares, price per share (in dollars per share)
$ 11.94 
 
 
Employee option to sell vested shares, selling period before or after termination
90 days 
 
 
Employee option to sell vested shares, number of shares
189,516 
 
 
Share-based compensation expense
400,000 
500,000 
1,100,000 
Acquisition-Related Restricted Shares |
Accrued Liabilities
 
 
 
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
 
 
 
Liability on acquisition-related stock awards
$ 1,100,000 
$ 1,500,000 
 
Income Taxes - Additional Information (Details) (USD $)
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Dec. 31, 2011
Operating Loss Carryforwards [Line Items]
 
 
 
 
Provision for income taxes
$ 186,000 
$ 642,000 
$ 29,000 
 
Increase in valuation allowance
20,700,000 
17,100,000 
 
 
Undistributed earnings of international subsidiaries
3,400,000 
2,300,000 
 
 
Increase in unrecognized tax benefits
1,300,000 
 
 
 
Unrecognized tax benefits
4,272,000 
2,994,000 
1,942,000 
565,000 
Unrecognized tax benefits that would impact the effective tax rate
1,300,000 
 
 
 
Interest and penalties related to uncertain tax positions
100,000 
100,000 
100,000 
 
Interest and penalties accrued related to uncertain tax positions
500,000 
400,000 
 
 
Federal [Member]
 
 
 
 
Operating Loss Carryforwards [Line Items]
 
 
 
 
Net operating loss carryforwards
96,900,000 
98,300,000 
 
 
Tax credit carryforwards
2,500,000 
1,700,000 
 
 
State [Member]
 
 
 
 
Operating Loss Carryforwards [Line Items]
 
 
 
 
Net operating loss carryforwards
56,500,000 
37,500,000 
 
 
Tax credit carryforwards
2,700,000 
2,000,000 
 
 
Tax Authorities in India [Member] |
Foreign [Member] |
Minimum
 
 
 
 
Operating Loss Carryforwards [Line Items]
 
 
 
 
Range of possible outcomes
0 
 
 
 
Tax Authorities in India [Member] |
Foreign [Member] |
Maximum
 
 
 
 
Operating Loss Carryforwards [Line Items]
 
 
 
 
Range of possible outcomes
$ 100,000 
 
 
 
Income Taxes - Provision for Income Taxes (Details) (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Current income taxes:
 
 
 
Federal
$ 0 
$ 0 
$ (341)
State
304 
282 
342 
Foreign
871 
358 
17 
Total current income taxes
1,175 
640 
18 
Deferred income taxes:
 
 
 
Federal
(1,003)
0 
0 
State
33 
0 
0 
Foreign
(19)
2 
11 
Total deferred income taxes
(989)
2 
11 
Total income tax provision
$ 186 
$ 642 
$ 29 
Income Taxes - Loss before Provision for Income Taxes (Details) (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Income Tax Disclosure [Abstract]
 
 
 
United States
$ (65,930)
$ (55,974)
$ (49,701)
Foreign
1,358 
766 
687 
Loss before provision for income taxes
$ (64,572)
$ (55,208)
$ (49,014)
Income Taxes - Effective Income Tax Reconciliation (Details)
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Income Tax Disclosure [Abstract]
 
 
 
Tax at U.S. statutory rate
34.00% 
34.00% 
34.00% 
State, net of federal benefit
5.10% 
2.70% 
2.90% 
Share-based compensation
(6.50%)
(7.70%)
(8.50%)
Non-deductible expenses
(0.40%)
(0.10%)
(0.70%)
Other
(0.50%)
0.90% 
2.50% 
Change in valuation allowance
(32.00%)
(31.00%)
(30.30%)
Effective income tax rate
(0.30%)
(1.20%)
(0.10%)
Income Taxes - Deferred Tax Assets and Liabilities (Details) (USD $)
In Thousands, unless otherwise specified
Dec. 31, 2014
Dec. 31, 2013
Deferred tax assets:
 
 
Accrued expenses and reserves
$ 6,291 
$ 2,405 
Share-based compensation
18,391 
13,261 
Deferred revenue
4,589 
3,373 
Net operating loss carryforwards
36,847 
34,919 
Fixed assets, textbooks and intangibles assets
10,754 
1,862 
Other items
2,277 
2,628 
Gross deferred tax assets
79,149 
58,448 
Valuation allowance
(79,093)
(58,411)
Total deferred tax assets
56 
37 
Deferred tax liabilities:
 
 
Intangible asset
321 
0 
Total deferred tax liabilities
321 
0 
Net deferred tax (liabilities) assets
$ (265)
$ 37 
Income Taxes - Unrecognized Tax Benefits (Details) (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Reconciliation of Unrecognized Tax Benefits, Excluding Amounts Pertaining to Examined Tax Returns [Roll Forward]
 
 
 
Beginning balance
$ 2,994 
$ 1,942 
$ 565 
Increase in tax positions for prior years
406 
318 
1,090 
Decrease in tax positions for prior years
(284)
(2)
(258)
Decrease in tax positions for prior year settlement
0 
(16)
0 
Increase in tax positions for current year
1,172 
742 
495 
Change due to translation of foreign currencies
(16)
10 
50 
Ending balance
$ 4,272 
$ 2,994 
$ 1,942 
Related-Party Transactions - Additional Information (Details) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Adobe Systems
 
 
 
Related Party Transaction [Line Items]
 
 
 
Purchases from related party
$ 0.9 
$ 0.4 
 
Revenue from related parties
1.0 
 
0.2 
Due to related parties
0.1 
 
 
Board of Directors of Cengage Learning, or Cengage
 
 
 
Related Party Transaction [Line Items]
 
 
 
Purchases from related party
12.4 
 
 
Due from related parties
0.1 
 
 
Due to related parties
0.1 
 
 
Number of board members appointed to Board of Directors of related party
1 
 
 
Jive Software
 
 
 
Related Party Transaction [Line Items]
 
 
 
Purchases from related party
 
 
$ 0.1 
Number of directors serving on Board of Directors of related party
 
 
1 
Employee Benefit Plan (Details) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Compensation and Retirement Disclosure [Abstract]
 
 
 
Matching contributions
$ 0.8 
$ 0.3 
$ 0.3 
Segment Information - Additional Information (Details)
12 Months Ended
Dec. 31, 2014
segment
Segment Reporting [Abstract]
 
Number of reportable segments
1 
Number of operating units
1 
Segment Information - Revenue by Product Line (Details) (USD $)
In Thousands, unless otherwise specified
3 Months Ended 12 Months Ended
Dec. 31, 2014
Sep. 30, 2014
Jun. 30, 2014
Mar. 31, 2014
Dec. 31, 2013
Sep. 30, 2013
Jun. 30, 2013
Mar. 31, 2013
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Revenue from External Customer [Line Items]
 
 
 
 
 
 
 
 
 
 
 
Total Revenue
$ 84,417 
$ 81,532 
$ 64,492 
$ 74,393 
$ 77,116 
$ 61,587 
$ 55,857 
$ 61,015 
$ 304,834 
$ 255,575 
$ 213,334 
Print textbooks
 
 
 
 
 
 
 
 
 
 
 
Revenue from External Customer [Line Items]
 
 
 
 
 
 
 
 
 
 
 
Total Revenue
 
 
 
 
 
 
 
 
213,657 
203,077 
185,169 
Digital offerings
 
 
 
 
 
 
 
 
 
 
 
Revenue from External Customer [Line Items]
 
 
 
 
 
 
 
 
 
 
 
Number of publishers providing supplemental materials
 
 
 
 
 
 
 
 
120 
 
 
Total Revenue
 
 
 
 
 
 
 
 
$ 91,177 
$ 52,498 
$ 28,165 
Selected Quarterly Financial Data (unaudited) (Details) (USD $)
In Thousands, except Per Share data, unless otherwise specified
3 Months Ended 12 Months Ended
Dec. 31, 2014
Sep. 30, 2014
Jun. 30, 2014
Mar. 31, 2014
Dec. 31, 2013
Sep. 30, 2013
Jun. 30, 2013
Mar. 31, 2013
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Quarterly Financial Information Disclosure [Abstract]
 
 
 
 
 
 
 
 
 
 
 
Net revenues
$ 84,417 
$ 81,532 
$ 64,492 
$ 74,393 
$ 77,116 
$ 61,587 
$ 55,857 
$ 61,015 
$ 304,834 
$ 255,575 
$ 213,334 
Gross profit
45,794 
13,251 
25,896 
8,908 
39,542 
3,162 
26,250 
11,561 
93,849 
80,515 
67,665 
Net (loss) income
1,688 
(32,441)
(8,246)
(25,759)
(5,417)
(29,255)
(3,353)
(17,825)
(64,758)
(55,850)
(49,043)
Deemed dividend to preferred stockholders
 
 
 
 
(102,557)
0 
0 
0 
0 
(102,557)
0 
Net loss attributable to common stockholders
 
 
 
 
$ (107,974)
$ (29,255)
$ (3,353)
$ (17,825)
$ (64,758)
$ (158,407)
$ (49,043)
Weighted average shares used to compute net (loss) income per share:
 
 
 
 
 
 
 
 
 
 
 
Basic (in shares)
83,925 
83,688 
83,209 
82,181 
45,825 
12,873 
12,558 
12,031 
83,241 
21,121 
12,132 
Diluted (in shares)
86,543 
83,688 
83,209 
82,181 
45,825 
12,873 
12,558 
12,031 
 
 
 
Net (loss) income per share:
 
 
 
 
 
 
 
 
 
 
 
Basic (in dollars per share)
$ 0.02 
$ (0.39)
$ (0.10)
$ (0.31)
$ (2.36)
$ (2.27)
$ (0.27)
$ (1.48)
 
 
 
Diluted (in dollars per share)
$ 0.02 
$ (0.39)
$ (0.10)
$ (0.31)
$ (2.36)
$ (2.27)
$ (0.27)
$ (1.48)
 
 
 
Schedule II - Valuation and Qualifying Accounts (Details) (Allowance for Doubtful Accounts, USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Allowance for Doubtful Accounts
 
 
 
Movement in Valuation Allowances and Reserves [Roll Forward]
 
 
 
Balance at Beginning of Year
$ 317 
$ 502 
$ 241 
Additions Charged to Expenses/ Other Accounts
234 
206 
502 
Net (Deductions) Recoveries
8 
(391)
(241)
Balance at End of Year
$ 559 
$ 317 
$ 502