Condensed Consolidated Statements of Redeemable Convertible Preferred Stock and Stockholders’ (Deficit) Equity
The accompanying notes are an integral part of the condensed consolidated financial statements
The accompanying notes are an integral part of the condensed consolidated financial statements.
Notes to Condensed Consolidated Financial Statements (unaudited)
Description of Business
Poshmark, Inc. (the Company) was incorporated in the state of Delaware with headquarters in Redwood City, California, and has wholly-owned subsidiaries based in Chennai, India, Vancouver, Canada, New South Wales, Australia, and London, United Kingdom. The Company is a social marketplace that combines the human connection of a physical shopping experience with the scale, reach, ease, and selection benefits of eCommerce. In doing so, the Company brings the power of community to buying and selling online. Pairing technology with the inherent human desire to socialize, the Company creates passion and personal connections among users.
The accompanying unaudited condensed financial statements have been prepared assuming the Company will continue as a going concern. Since inception, the Company has incurred net losses. The Company generated net loss of $3.0 million for the three months ended June 30, 2021. The Company had an accumulated deficit of $204.0 million as of June 30, 2021. The Company has historically financed its operations primarily through the issuance and sale of redeemable convertible preferred stock and through the issuance of convertible debt. While the Company believes that its current cash, cash equivalents, and marketable securities are adequate to meet its needs for a one-year period from the date these condensed consolidated financial statements are issued, the Company may need to borrow funds or raise additional equity to achieve its longer-term business objectives.
Initial Public Offering
On January 19, 2021, the Company completed its initial public offering (IPO). In connection with the IPO, it authorized two new classes of common stock: Class A common stock and Class B common stock. The rights of the holders of Class A and Class B common stock are identical, except with respect to voting, conversion and transfer rights. Each share of Class A common stock is entitled to one vote per share and each share of Class B common stock is entitled to ten votes per share. Each share of Class B common stock is convertible at any time at the option of the stockholder into one share of Class A common stock and has no expiration date. The Class B common stock automatically converts to Class A common stock upon transfers or any sale. In its IPO, the Company issued and sold 6,600,000 shares of its Class A common stock at the public offering price of $42.00 per share, plus an additional 990,000 shares of common stock at the public offering price of $42.00 per share pursuant to the exercise of the underwriters’ option to purchase additional shares. The Company received net proceeds of $292.3 million after deducting underwriting discounts and commissions and offering expenses. Upon the closing of the IPO:
|
•
|
all 52,286,631 shares of the Company’s outstanding redeemable convertible preferred stock automatically converted into an equivalent number of shares of Class B common stock on a one-to-one basis;
|
|
•
|
convertible notes with an aggregate principal amount of $50.0 million automatically converted into 1,400,560 shares of our Class A common stock at a conversion price equal to 85% of the IPO price of $42.00 per share; and
|
|
•
|
redeemable convertible preferred stock warrants amounting to 85,583 automatically converted into Class B common stock warrants.
|
Upon completion of the IPO, $4.2 million of deferred offering costs were reclassified to additional paid-in capital and accounted for as a reduction of the IPO proceeds in the condensed consolidated balance sheets.
2.
|
Summary of Significant Accounting Policies
|
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements and condensed footnotes have been prepared in accordance with accounting principles generally accepted in the United States (U.S. GAAP) for interim financial information as well as the instructions to Form 10-Q and the rules and regulations of the U.S. SEC. Certain information and disclosures normally included in the financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations. The condensed consolidated balance sheet as of December 31, 2020, included herein, was derived from the audited financial statements as of that date but does not include all disclosures, including notes required by U.S. GAAP. In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all adjustments, which include only normal recurring adjustments, necessary for the fair statement of the financial position, results of operations and cash flows for the interim periods. The results of operations for the three and six months ended June 30, 2021 are not necessarily indicative of the results of operations expected for the entire year ending December 31, 2021 or for any other future annual or interim periods. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020, filed with the SEC on March 23, 2021.
10
For the foreign subsidiaries where the local currency is the functional currency, translation adjustments of foreign currency financial statements into U.S. dollars are recorded as a separate component of accumulated other comprehensive income (loss). Foreign currency transaction gains and losses have not been material for all periods presented.
Use of Estimates
The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires management to make certain estimates, judgments and assumptions that affect the reported amounts of assets and liabilities and the related disclosures of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of revenue and expenses during the periods presented. Estimates include the fair value of financial instruments, capitalization and estimated useful life of internal-use software, allowance for expected chargeback losses, estimates related to credits, incentives and refunds issued to customers, valuation of the convertible notes preceding its IPO, valuation of the redeemable convertible preferred stock warrant liability preceding its IPO, stock-based compensation, valuation of the Company’s common stock preceding its IPO, and valuation of deferred income tax assets and the uncertain tax position. To the extent there are material differences between these estimates, judgments or assumptions and actual results, the condensed consolidated financial statements will be affected.
The World Health Organization declared in March 2020 that the recent outbreak of the coronavirus disease (COVID-19) constituted a pandemic. The COVID-19 pandemic has caused general business disruption worldwide beginning in January 2020. The global impact of COVID-19 continues to rapidly evolve, and the Company will continue to monitor the situation and the effects on its business and operations closely. The Company does not yet know the full extent of potential impacts on its business or operations or on the global economy as a whole, particularly if the COVID-19 pandemic continues and persists for an extended period of time. Given the uncertainty, the Company cannot reasonably estimate the impact on its future results of operations, cash flows, or financial condition. As of the date of issuance of the condensed consolidated financial statements, the Company is not aware of any specific event or circumstance that would require it to update its estimates, judgments or the carrying value of its assets or liabilities. These estimates may change, as new events occur and additional information is obtained, and are recognized in the condensed consolidated financial statements as soon as they become known. Actual results could differ from those estimates, and any such differences may be material to the Company’s condensed consolidated financial statements.
Revenue Recognition
The Company recognizes revenue when it satisfies its performance obligations. The Company considers both sellers and buyers to be customers. The Company generates revenue from sellers for fees earned when sellers sell items they have listed on the Company’s platform to buyers. The Company generates revenue from buyers for fees earned when they purchase shipping labels used for delivery of the items purchased. The Company periodically reassesses its revenue recognition policies as new offerings become material, and business models evolve. The Company recognizes revenue net of estimated returns and cancellations based on its historical experience. Transactions may be cancelled by a buyer or seller in certain circumstances.
The Company enters into the Terms of Service (TOS) with buyers and sellers to use the Company’s technology platform. The TOS governs these parties’ use of the platform, including payment terms for the buyer and the seller and services to be provided by the Company. Under the TOS, upon the buyer’s purchase from the seller, the Company, buyer, and seller are committed to perform and enforceable rights and obligations are established.
Sellers
Sellers are able to list their items for sale on the Company’s platform at no charge. The Company charges a fee upon the sale of items listed on its platform. The fee is a fixed dollar amount for orders under a certain value, and a fixed percentage of the final sales price of the item for orders greater than that. The service that the Company provides to sellers includes the facilitation of the sale of their items as well as certain ancillary activities such as payment processing and authentication (for certain luxury items). These activities comprise a single performance obligation to sellers, which is to facilitate the sale of the listed items between sellers and buyers on the Company’s platform (sale facilitation).
The Company evaluates the presentation of revenue from sellers on a gross or net basis based on whether it acts as a principal or an agent in the sale of listed items between sellers and buyers. The Company does not control the listed items at any time prior to the transfer of such items to buyers. The Company acts as an agent in facilitating the sale of items from sellers to buyers by allowing them to connect and interact on the Company’s platform. The Company is not primarily responsible for fulfillment of purchased items, does not have inventory risk, and does not set the price for the listed item. As such, the Company reports revenue from sellers on a net basis to reflect the fees received from sellers.
11
Revenue is recognized at the point in time the Company satisfies its performance obligation to facilitate the sale of a listed item. This occurs when both the seller and the buyer agree to a sale and the payment is processed on the Company’s platform. For luxury items authenticated by the Company, sale facilitation revenue is recognized when the Company authenticates and arranges for shipment of the items to the buyer, as this is the point in time a sale is finalized and the Company has satisfied its performance obligation.
Buyers
When a sale is finalized, the buyer purchases a shipping label from United States Postal Service (USPS), or the relevant shipping provider for the Canada and Australia marketplace, through the Poshmark platform. The Company emails the shipping label to the seller and the seller ships the item to the buyer through the shipping provider. The Company does not purchase the shipping label on behalf of the buyer until after the buyer has purchased an item and has remitted payment. As a result, the Company has one performance obligation to buyers, which is to facilitate the sale of shipping labels to buyers for delivery of items purchased on the Company’s platform (shipping facilitation).
The Company evaluates the presentation of revenue from buyers on a gross or net basis based on whether it acts as a principal or an agent in shipment of listed items between sellers and buyers. The Company does not control the shipping service, which is provided by the shipping provider. The Company is not primarily responsible for shipping and it does not assume any of the risks for the items shipped such as risk of damage or loss during shipping. The Company acts as an agent of the buyer in facilitating the shipping. As such, the Company reports revenue on a net basis which is the difference between the shipping fee paid by the buyer and the cost of shipping labels paid to the shipping provider.
Revenue from shipping facilitation is recognized upon transfer of the shipping label to the seller on behalf of the buyer.
The Company estimates chargebacks based on historical collectability rates. The Company records a reserve for chargebacks in accrued expenses and other accrued liabilities with an offset to general and administrative expenses. Chargebacks have not been material for all periods presented.
Sales tax and other amounts collected on behalf of third parties are excluded from the transaction price.
Incentives
Under the referral program, an existing user (the referrer) earns an incentive (Posh Credit) when a new user (the referee) first buys an item on the Company’s platform. Posh Credits are not redeemable for cash and can only be applied for purchases on the Company’s platform. The Company records the incentive to the referrer, which is in exchange for a distinct referral service, as a liability at the time the incentive is earned by the referrer with a corresponding charge recorded to marketing expense in the condensed consolidated statements of operations. Credits and incentives issued to existing users for referring new users are contingent upon a new user completing an initial purchase on the Company’s platform and represent an incremental cost of obtaining a contract with a customer. The Company expenses such new user referral incentives as marketing expense when the referral incentives are earned because the amortization period would be one year or less.
The Company has several buyer incentive programs, which are offered to encourage buyer activity on the Company’s platform. These promotions reduce the fees for shipping facilitation charged by the Company. Accordingly, the Company records these incentives as a reduction to revenue from the buyer when the incentive is used by the buyer. Amounts in excess of cumulative shipping facilitation revenue earned are presented as marketing expense in the condensed consolidated statements of operations.
The Company participates in certain joint incentive programs with sellers that are recorded as a reduction to the fees received from the seller.
12
The Company may elect to issue incentives to buyers for customer satisfaction purposes or for refunds. These incentives (which are in the form of Posh Credits) can be applied towards future orders and, thereby, results in a reduced fee earned by the Company from the buyer, or redeemable credits that can also be redeemed for cash. In cases where the seller performed as required by the Company’s TOS, the Company reduces shipping facilitation revenue earned on the transaction and any cumulative revenue earned from the same buyer for Posh Credits and redeemable credits granted. If the amount of the incentive exceeds cumulative revenues from the buyer, then the excess is presented as operations and support expense in the consolidated statements of operations. If refunds are provided in a case where the seller did not perform and the amount cannot be recovered from the seller, the refund is presented as a reduction of revenue. Referral incentives, joint incentives, refunds and buyer incentives are recorded in the condensed consolidated statements of operations as follows for the periods indicated (in thousands):
|
|
Three Months Ended June 30,
|
|
|
Six Months Ended June 30,
|
|
|
|
2020
|
|
|
2021
|
|
|
2020
|
|
|
2021
|
|
Reduction to net revenue
|
|
$
|
1,455
|
|
|
$
|
2,087
|
|
|
$
|
2,774
|
|
|
$
|
4,291
|
|
Operations and support
|
|
|
1,496
|
|
|
|
1,469
|
|
|
|
2,789
|
|
|
|
3,484
|
|
Marketing
|
|
|
1,970
|
|
|
|
2,029
|
|
|
|
4,045
|
|
|
|
4,237
|
|
|
|
$
|
4,921
|
|
|
$
|
5,585
|
|
|
$
|
9,608
|
|
|
$
|
12,012
|
|
Cost of Net Revenue
Cost of net revenue consists of costs associated with credit card processing, order transaction fees and hosting expenses associated with operating the Company’s platform. Cost of net revenue does not include depreciation and amortization.
Stock-Based Compensation
The Company has granted stock-based awards consisting of stock options and restricted stock units (RSUs) to employees and consultants.
RSUs granted prior to the occurrence of a Qualified IPO vest upon the satisfaction of both time-based service and performance-based conditions. The time-based vesting condition for the majority of these awards is satisfied over four years. The performance-based vesting condition is satisfied upon the occurrence of a qualifying event, which is generally defined as a change in control transaction or the effective date of a Qualified IPO. Through December 31, 2020, no stock-based compensation expense had been recognized for RSUs with a liquidity event performance condition, as such qualifying event was not probable. Upon the completion of Company's IPO, the liquidity event performance condition was met. Accordingly, upon the effectiveness of the IPO, the Company recognized cumulative stock-based compensation expense determined using the grant-date fair values and the accelerated attribution method. The remaining stock-based compensation related to these awards will be recognized over the remaining time-based service over the remaining requisite service period using the accelerated attribution method. RSUs granted after the date of the Qualified IPO only include a time-based service condition. Accordingly, these awards will be measured using the grant date fair values and will be amortized on a straight-line basis over the requisite service period. Forfeitures for all stock-based awards are recognized as they occur.
The Company estimates the fair value of stock options granted to employees and directors using the Black-Scholes option-pricing model. The Black-Scholes model considers several variables and assumptions in estimating the fair value of stock-based awards. These variables include:
|
•
|
per share fair value of the underlying common stock;
|
|
•
|
risk-free interest rate;
|
|
•
|
expected annual dividend yield; and
|
|
•
|
expected stock price volatility over the expected term.
|
For all stock options granted, the expected term is calculated using the simplified method. The Company has no publicly available stock information and, therefore, uses the historical volatility of the stock price of similar publicly traded peer companies to estimate volatility of equity awards granted. The risk-free interest rate is based on the yield available on U.S. Treasury zero-coupon issues similar in duration to the expected term of the equity-settled award.
13
Prior to the completion of the IPO, the fair value of the shares of common stock underlying the stock options has been determined by the board of directors as there was no public market for the common stock. The board of directors determines the fair value of the Company’s common stock by considering a number of objective and subjective factors including: contemporaneous third-party valuations of the Company’s common stock, the valuation of comparable companies, sales of redeemable convertible preferred stock to unrelated third-parties, the Company’s operating and financial performance, the lack of liquidity of common stock, and general and industry specific economic outlook, amongst other factors. After the completion of the IPO, the fair value of the Company’s common stock is determined by the closing price, on the date of grant, of its common stock, which is traded on the Nasdaq Global Select Market.
Convertible Notes
As permitted under ASC 825, Financial Instruments (ASC 825), the Company has elected the fair value option to account for its convertible notes that were issued in September of 2020. In accordance with ASC 825, the Company records its convertible notes at fair value with changes in fair value recorded in the consolidated statement of operations in other expense, net, with the exception of changes in fair value due to instrument-specific credit risk which are required to be recognized in accumulated other comprehensive income (loss), a component of stockholders’ deficit. As a result of applying the fair value option, direct costs and fees related to the convertible notes were recognized in other expense, net, as incurred and were not deferred.
Concentrations of Risk
The Company currently uses one carrier to handle all shipments in each country in which it operates, two gateways to process payments and one third-party vendor to host the Company’s information technology environment. A significant disruption in the operations of one of more of these vendors could have an adverse effect on the Company’s business, financial condition, and results of operations.
The majority of the Company’s cash and cash equivalents are held by one high-credit quality financial institution within the United States with balances maintained in excess of the FDIC insurance limits.
No customer accounted for 10% or more of the Company’s net revenue as of and for the three and six months ended June 30, 2021 and 2020.
Recently Adopted Accounting Pronouncements
In August 2018, the FASB issued ASU 2018-15, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract. This standard aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. The implementation costs incurred in a hosting arrangement that is a service contract should be presented as a prepaid asset in the balance sheet and expensed over the term of the hosting arrangement to the same line item in the statement of operations as the costs related to the hosting fees. The Company adopted this new standard on January 1, 2021 on a prospective basis. The adoption of this standard did not have a material impact on its condensed consolidated financial statements and related disclosures.
In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. This amended guidance is intended to remove certain exceptions to the general principles in current U.S. GAAP, simplify areas such as franchise taxes, step-up in tax basis goodwill, separate entity financial statements and interim recognition of enactment of tax laws or rate changes. The Company early adopted the new standard effective January 1, 2021 on a prospective basis. The adoption of this guidance did not have a material impact on its condensed consolidated financial statements and related disclosures.
Recently Issued Accounting Pronouncements
In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) and since that date, has issued several ASUs to further clarify certain aspects of ASU 2016-02 and provide entities with practical expedients that may be elected upon adoption. This standard requires lessees to recognize all leases, including operating leases, on the balance sheet as a right-of-use (ROU) asset and lease liability, unless the lease is a short-term lease. In July 2018, the FASB issued ASU 2018-11, Targeted Improvements – Leases (Topic 842). This update provides an alternative transition method that allows entities to elect to apply the standard prospectively at its effective date, versus recasting the prior periods presented. In June 2020, the FASB issued ASU 2020-05, deferring the effective date for one year for all other entities. The Company plans to adopt this standard using the alternative transition method on January 1, 2022 and is currently evaluating the impact to the consolidated financial statements. At a minimum, total assets and total liabilities will increase upon adoption as the Company expects to record a ROU asset and a lease liability for its operating leases. The Company is currently evaluating the effect that implementation of this standard will have on its consolidated financial statements upon adoption.
14
In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. This standard amended guidance on reporting credit losses for assets held at amortized cost basis and available for sale debt securities. For available for sale debt securities, credit losses will be presented as an allowance rather than as a write-down. In November 2019, the FASB issued ASU 2019-10, amending the effective dates. This new standard will be effective for the Company for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years, with early adoption permitted. The Company is currently assessing the impact of adopting this standard on its consolidated financial statements and related disclosures.
In August 2020, the FASB issued ASU 2020-06, Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40). This standard eliminates the beneficial conversion and cash conversion accounting models for convertible instruments. It also amends the accounting for certain contracts in an entity’s own equity that are currently accounted for as derivatives because of specific settlement provisions. In addition, the new guidance modifies how particular convertible instruments and certain contracts that may be settled in cash or shares impact the diluted EPS computation. Additionally, the amended guidance requires the application of the if-converted method for calculating diluted earnings per share and the treasury stock method will be no longer available. This new standard will be effective for the Company for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years using the fully retrospective or modified retrospective method. Early adoption is permitted. The Company is currently evaluating the effect that implementation of this standard will have on its consolidated financial statements upon adoption.
3.Supplemental Financial Statement Information
Cash Equivalents and Marketable Securities
The following tables summarize the cost or amortized cost, gross unrealized gains, gross unrealized losses and fair value of the cash equivalents and marketable securities as of December 31, 2020 and June 30, 2021 (in thousands):
|
|
December 31, 2020
|
|
|
|
Cost or
Amortized
|
|
|
Unrealized
|
|
|
Estimated
Fair
|
|
|
|
Cost
|
|
|
Gains
|
|
|
Losses
|
|
|
Value
|
|
Cash equivalents(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Money market funds
|
|
$
|
46,436
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
46,436
|
|
Marketable securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial paper
|
|
|
6,090
|
|
|
|
—
|
|
|
|
—
|
|
|
|
6,090
|
|
Corporate bonds
|
|
|
4,972
|
|
|
|
1
|
|
|
|
(2
|
)
|
|
|
4,971
|
|
U.S. Treasury securities
|
|
|
15,176
|
|
|
|
1
|
|
|
|
—
|
|
|
|
15,177
|
|
Total
|
|
$
|
72,674
|
|
|
$
|
2
|
|
|
$
|
(2
|
)
|
|
$
|
72,674
|
|
(1) Included in cash and cash equivalents on the consolidated balance sheet as of December 31, 2020.
|
|
June 30, 2021
|
|
|
|
Cost or
Amortized
|
|
|
Unrealized
|
|
|
Estimated
Fair
|
|
|
|
Cost
|
|
|
Gains
|
|
|
Losses
|
|
|
Value
|
|
Cash equivalents(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Money market funds
|
|
$
|
66,626
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
66,626
|
|
Marketable securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury securities
|
|
|
6,069
|
|
|
|
—
|
|
|
|
—
|
|
|
|
6,069
|
|
Total
|
|
$
|
72,695
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
72,695
|
|
(1) Included in cash and cash equivalents on the consolidated balance sheet as of June 30, 2021.
The weighted-average remaining maturity of the marketable securities was less than one year and no individual security incurred continuous unrealized losses for greater than twelve months as of December 31, 2020 and June 30, 2021.
15
Property and Equipment, Net
Property and equipment, net consisted of the following as of the dates indicated (in thousands):
|
|
December 31,
2020
|
|
|
June 30,
2021
|
|
Computer equipment and software
|
|
$
|
1,254
|
|
|
$
|
1,501
|
|
Developed website and software
|
|
|
4,381
|
|
|
|
5,239
|
|
Furniture and fixtures
|
|
|
1,430
|
|
|
|
1,430
|
|
Leasehold improvements and incentives
|
|
|
7,277
|
|
|
|
7,279
|
|
Total property and equipment, gross
|
|
|
14,342
|
|
|
|
15,449
|
|
Less accumulated depreciation
|
|
|
(5,895
|
)
|
|
|
(7,503
|
)
|
Property and equipment, net
|
|
$
|
8,447
|
|
|
$
|
7,946
|
|
Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities consisted of the following as of the dates indicated (in thousands):
|
|
December 31,
2020
|
|
|
June 30,
2021
|
|
Accrued advertising
|
|
$
|
8,489
|
|
|
$
|
9,319
|
|
Accrued sales tax
|
|
|
8,073
|
|
|
|
7,614
|
|
Accrued compensation and benefits
|
|
|
6,842
|
|
|
|
6,380
|
|
Other accrued and other current liabilities
|
|
|
12,455
|
|
|
|
13,493
|
|
Accrued expenses and other current liabilities
|
|
$
|
35,859
|
|
|
$
|
36,806
|
|
4.
|
Fair Value Measurements
|
The following tables set forth the financial instruments that were measured at fair value on a recurring basis by level within the fair value hierarchy as of December 31, 2020 and June 30, 2021 (in thousands):
|
|
December 31, 2020
|
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash equivalents(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Money market funds
|
|
$
|
46,436
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
46,436
|
|
Marketable securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial paper
|
|
|
—
|
|
|
|
6,090
|
|
|
|
—
|
|
|
|
6,090
|
|
Corporate bonds
|
|
|
—
|
|
|
|
4,971
|
|
|
|
—
|
|
|
|
4,971
|
|
U.S. Treasury securities
|
|
|
—
|
|
|
|
15,177
|
|
|
|
—
|
|
|
|
15,177
|
|
Total
|
|
$
|
46,436
|
|
|
$
|
26,238
|
|
|
$
|
—
|
|
|
$
|
72,674
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Convertible notes
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
55,421
|
|
|
$
|
55,421
|
|
Redeemable convertible preferred stock warrant liability
|
|
|
—
|
|
|
|
—
|
|
|
|
3,494
|
|
|
|
3,494
|
|
Total
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
58,915
|
|
|
$
|
58,915
|
|
(1) Included in cash and cash equivalents on the condensed consolidated balance sheet as of December 31, 2020.
|
|
June 30, 2021
|
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash equivalents(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Money market funds
|
|
$
|
66,626
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
66,626
|
|
Marketable securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury securities
|
|
|
—
|
|
|
|
6,069
|
|
|
|
—
|
|
|
|
6,069
|
|
Total
|
|
$
|
66,626
|
|
|
$
|
6,069
|
|
|
$
|
—
|
|
|
$
|
72,695
|
|
16
(1) Included in cash and cash equivalents on the condensed consolidated balance sheet as of June 30, 2021.
There were no transfers of financial assets or liabilities into or out of Level 1, Level 2 or Level 3 for any of the periods presented. In January 2021, in connection with the Company’s IPO, all outstanding preferred stock warrants were automatically exercised into Class B common stock. As a result, the Company remeasured and reclassified the preferred stock warrant liability to additional paid-in capital upon the closing of its IPO.
5.
|
Commitments and Contingencies
|
Operating Leases
As of June 30, 2021, the Company’s future minimum lease payments under non-cancelable operating leases are as follows (in thousands):
2021 (remaining six months)
|
|
$
|
2,937
|
|
2022
|
|
|
5,800
|
|
2023
|
|
|
5,912
|
|
2024
|
|
|
2,676
|
|
Thereafter
|
|
|
—
|
|
Total minimum lease payments
|
|
$
|
17,325
|
|
Rent expense was $1.0 million for each of the three months ended June 30, 2021 and 2020. Rent expense was $2.0 million for each of the six months ended June 30, 2021 and 2020.
The Company has entered into various non-cancelable operating lease agreements for certain offices with contractual lease periods expiring between 2021 and 2024. Under the terms of certain leases, the Company is committed to pay for certain taxes, insurance, maintenance and management expenses. Certain of these arrangements have free rent periods or escalating rent payment provisions, and the Company recognizes rent expense under such arrangements on a straight-line basis.
Purchase Commitments
As of December 31, 2020 and June 30, 2021, the Company has non-cancelable contractual commitments of $9.7 million and $6.0 million, respectively, for network and cloud services in the ordinary course of business with varying expiration terms through October 31, 2022.
Litigation and Loss Contingencies
The Company accrues estimates for resolution of legal and other contingencies when losses are probable and estimable. From time to time, the Company may become a party to litigation and subject to claims incident to the ordinary course of business, including intellectual property claims, labor and employment claims, and threatened claims, breach of contract claims, tax and other matters. The Company currently has no material pending litigation as of December 31, 2020 and June 30, 2021.
Indemnifications
The Company enters into indemnification provisions under agreements with other parties in the ordinary course of business, including business partners, investors, contractors and the Company’s officers, directors and certain employees. The Company has agreed to indemnify and defend the indemnified party claims and related losses suffered or incurred by the indemnified party from actual or threatened third-party claim because of the Company’s activities or non-compliance with certain representations and warranties made by the Company. It is not possible to determine the maximum potential loss under these indemnification provisions due to the Company’s limited history of prior indemnification claims and the unique facts and circumstances involved in each particular provision. To date, losses recorded in the condensed consolidated statements of operations in connection with the indemnification provisions have not been material.
6.
|
Redeemable Convertible Preferred Stock
|
Upon the closing of the Company’s IPO on January 19, 2021, all outstanding redeemable convertible preferred stock converted into shares of common stock. As of June 30, 2021, there are no holders of the Company’s preferred stock.
17
Redeemable convertible preferred stock as of December 31, 2020, consisted of the following (in thousands, except share and per share data):
|
|
Shares
Authorized
|
|
|
Shares
Issued and
Outstanding
|
|
|
Liquidation
Preference
|
|
|
Issue Price
per Share
|
|
|
Carrying
Value
|
|
Series A
|
|
|
9,482,060
|
|
|
|
9,441,596
|
|
|
$
|
3,500
|
|
|
$
|
0.37
|
|
|
$
|
3,454
|
|
Series B
|
|
|
9,127,794
|
|
|
|
9,102,206
|
|
|
|
12,450
|
|
|
$
|
1.37
|
|
|
|
12,394
|
|
Series B-1
|
|
|
3,952,429
|
|
|
|
3,952,429
|
|
|
|
6,265
|
|
|
$
|
1.59
|
|
|
|
6,223
|
|
Series C
|
|
|
9,781,013
|
|
|
|
9,761,482
|
|
|
|
24,989
|
|
|
$
|
2.56
|
|
|
|
24,936
|
|
Series C-1
|
|
|
9,578,544
|
|
|
|
9,578,544
|
|
|
|
25,000
|
|
|
$
|
2.61
|
|
|
|
24,897
|
|
Series D
|
|
|
10,450,382
|
|
|
|
10,450,374
|
|
|
|
87,500
|
|
|
$
|
8.37
|
|
|
|
84,271
|
|
|
|
|
52,372,222
|
|
|
|
52,286,631
|
|
|
$
|
159,704
|
|
|
|
|
|
|
$
|
156,175
|
|
The holders of redeemable convertible preferred stock had various rights and preferences as follows:
Voting
Each share of redeemable convertible preferred stock had voting rights equal to an equivalent number of shares of common stock into which it was converted. Such holder had full voting rights and powers equal to the voting rights and powers of the holders of common stock, and was entitled to notice of any stockholders’ meeting in accordance with the bylaws of the Company, and was entitled to vote, together with holders of common stock, with respect to any question upon which holders of common stock had the right to vote, except as required by law.
Dividends
The holders of Series A, B, B-1, C, C-1 and D redeemable convertible preferred stock were entitled to receive noncumulative dividends at the per annum rate of $0.0297, $0.1094, $0.1268, $0.2048, $0.2088 and $0.6698, respectively, when and if declared by the board of directors. The holders of redeemable convertible preferred stock were entitled to participate in dividends on common stock, when and if declared by the board of directors, based on the number of shares of common stock held on an as-converted basis. No dividends on redeemable convertible preferred stock or common stock had been declared by the Company’s board of directors from inception through January 14, 2021.
Election of the Board of Directors
For so long as at least 25% of the initially issued shares of Series A, Series B, Series C-1, and Series D redeemable convertible preferred stock remained outstanding (as adjusted for stock splits, stock dividends, recapitalizations and the like), the holders of record of the shares of the Series A, Series B, Series C-1, and Series D redeemable convertible preferred stock, exclusively and as a separate class, were entitled to elect one director of the Company.
Liquidation
In the event of any liquidation, dissolution, or winding up of the Company, whether voluntary or involuntary, the holders of redeemable convertible preferred stock were entitled to receive on pari passu basis, an amount equal to the original issue price for such series of preferred stock, plus any declared but unpaid dividends prior and in preference to any distribution or payment to the holders of common stock. All remaining assets would then be distributed pro rata to holders of common stock. If the Company did not have enough assets and funds legally available for distribution to meet this requirement, all of the Company’s assets and funds available would be distributed ratably among the holders of redeemable convertible preferred stock in proportion to the preferential amount per share each such holder is otherwise entitled to receive. A liquidation event included a sale, transfer or license of all or substantially all of its assets, a merger or consolidation with another entity, the transfer of 50% or more of its voting stock, or a liquidation, dissolution or winding up of the Company.
Conversion
Each share of preferred stock was convertible, at the option of the holder, into the number of fully paid and non-assessable shares of common stock on a one-for-one basis. The conversion prices of the redeemable convertible preferred stock would be adjusted for specified dilutive issuances, stock splits, combinations, and non-cash dividends.
18
The outstanding shares of redeemable convertible preferred stock automatically converted into common stock immediately upon the closing of a Qualified IPO and on January 19, 2021, redeemable convertible preferred stock converted into 52,372,222 shares of Class B common stock.
7. Redeemable Convertible Preferred Stock Warrants
Warrants to purchase the Company’s redeemable convertible preferred stock as of December 31, 2020 consisted of the following:
Issuance Date
|
|
Expiration
Date
|
|
Issue Price
per Share
|
|
|
Number
of Shares
|
|
|
Class
of Shares
|
December 1, 2011
|
|
December 1, 2021
|
|
$
|
0.37
|
|
|
|
40,464
|
|
|
Series A
|
May 10, 2013
|
|
May 10, 2023
|
|
$
|
1.37
|
|
|
|
25,588
|
|
|
Series B
|
May 22, 2015
|
|
May 22, 2025
|
|
$
|
2.56
|
|
|
|
19,531
|
|
|
Series C
|
Refer to Note 2 for discussion of the significant inputs used to determine the fair value of the redeemable convertible preferred stock warrants.
On January 19, 2021, upon the closing of the IPO, 85,583 redeemable convertible preferred stock warrants automatically converted into common stock warrants and all of the warrants were exercised in February 2021. Accordingly, the fair value of the warrant liability was reclassified to additional paid-in capital in the Company’s condensed consolidated financial statements for the three months ended March 31, 2021.
8. Convertible Notes
On September 15, 2020, the Company entered into the Senior Unsecured Convertible Promissory Note Purchase Agreement (the Note Purchase Agreement) for the issuance of an aggregate of $50.0 million principal amount of senior unsecured convertible promissory notes (the convertible notes). The convertible notes did not accrue interest, except during the existence of an event of default related to non-payment of the obligations under the convertible notes at maturity or upon acceleration. Then at the option of the holders of the convertible notes, during the existence of such default, the outstanding principal amount would bear an interest rate equal to 20% per annum.
Upon a qualifying IPO of the common stock of the Company, the convertible notes would convert into shares of the Company’s common stock, subject to an applicable discount factor, which is expressed as a percentage which varies based on the period in which the conversion takes place (the Discount Factor), as follows:
|
•
|
Prior to the first anniversary of September 15, 2020 (the “Issuance Date”), 85%;
|
|
•
|
After the first anniversary but prior to the second anniversary of the Issuance Date, 80%;
|
|
•
|
On or after the second anniversary of the Issuance Date, 75%.
|
In addition, upon the consummation of certain change of control events, the Company would be required to prepay the convertible notes at par plus an applicable premium.
Unless earlier converted or redeemed, the convertible notes were to mature on September 14, 2023. The convertible notes could not be voluntarily redeemed by the Company prior to the maturity date. If the convertible notes were not converted or redeemed prior to the maturity date, the Company must pay the noteholders an exit fee equal to 33.3% of the outstanding principal balance of the convertible notes at maturity. If the convertible notes were accelerated following the occurrence and during the continuance of a standard event of default, the outstanding obligations under the convertible notes would be accelerated, and the Company would be required to pay an applicable premium.
Under the terms of the convertible notes, the Company was subject to certain covenants that restrict its ability to incur indebtedness or liens or other encumbrances, consummate a merger or acquisition, make certain dividends, distributions or other payments in respect of equity interests, engage in transactions with affiliates, make investments or consummate asset sales, in each case, subject to certain exclusions and exceptions.
Upon the closing of the Company’s IPO on January 19, 2021, which under the Note Purchase Agreement met the contractual conversion requirement of a qualified IPO, the Company issued 1,400,560 shares of its Class A common stock to the holders of the convertible notes. As a result of the conversion of its debt obligations under the Note Purchase Agreement, during the three months ended March 31, 2021, the Company recorded total charges in other expense, net, in the accompanying condensed consolidated statement of operations, amounting to $51.1 million which included $49.5 million due to the change in the fair value of the convertible notes based on the difference between the fair value measured on the contractual conversion and the net carrying value of the convertible
19
notes which was measured based on the fair value of the convertible notes at December 31, 2020, and $1.6 million related to instrument specific credit risk which had been recognized in accumulated other comprehensive income (loss), a component of stockholders’ (deficit) equity.
Common stock reserved for future issuance was as follows as of December 31, 2020 and June 30, 2021:
|
|
December 31,
2020
|
|
|
June 30,
2021
|
|
Conversion of redeemable convertible preferred stock
|
|
|
52,286,631
|
|
|
|
—
|
|
Conversion of convertible notes(1)
|
|
|
1,400,560
|
|
|
|
—
|
|
Warrants to purchase redeemable convertible preferred stock
|
|
|
85,583
|
|
|
|
—
|
|
2011 Stock Option and Grant Plan:
|
|
|
|
|
|
|
|
|
Options issued and outstanding
|
|
|
7,867,286
|
|
|
|
6,892,544
|
|
RSUs issued and outstanding
|
|
|
2,219,770
|
|
|
|
1,702,167
|
|
Shares available for future grants
|
|
|
450,010
|
|
|
|
—
|
|
2021 Stock Option and Grant Plan:
|
|
|
|
|
|
|
|
|
Options issued and outstanding
|
|
|
—
|
|
|
|
26,832
|
|
RSUs issued and outstanding
|
|
|
—
|
|
|
|
978,560
|
|
Shares available for future grants
|
|
|
—
|
|
|
|
9,056,903
|
|
Total shares of common stock reserved for
future issuance
|
|
|
64,309,840
|
|
|
|
18,657,006
|
|
(1)
|
Calculated as $50.0 million in principal, convertible at 85% of the $42.00 per share of common stock from the Company’s IPO.
|
10.
|
Stock-Based Compensation Plan
|
2011 Stock Option and Grant Plan
In 2011, the Company adopted the 2011 Stock Option and Grant Plan, or the 2011 Plan. The 2011 Plan provides for the granting of stock options and restricted shares to employees and non-employees (consultants) of the Company. Options granted under the 2011 Plan may be either incentive stock options or non-qualified stock options. Incentive stock options (ISO) may be granted only to the Company’s employees (including officers and directors who are also employees). Non-qualified stock options (NSO) may be granted to the Company’s employees and consultants.
Options issued under the 2011 Plan are granted at an exercise price of not less than 100% of the fair market value per share of the common stock on the grant date as determined by the board of directors. Options generally vest with respect to 25% of the shares one year after the options’ vesting commencement date, and the remainder vest in equal monthly installments over the following 36 months. Options have a maximum term of ten years. Restricted Stock Units (RSUs) issued under the 2011 Plan are subject to terms and conditions as determined by the Company’s board of directors, which may include the achievement of certain performance goals and/or continued employment with us through a specified vesting period.
The 2011 Plan has been replaced by the 2021 Plan as defined below.
2021 Stock Option and Incentive Plan
In connection with the Company’s IPO, the Company adopted the 2021 Stock Option and Incentive Plan, or the 2021 Plan, in January 2021. The 2021 Plan replaced the 2011 Plan, as the Company’s board of directors determined not to make additional awards under the 2011 Plan following the completion of the Company’s IPO. The Company has initially reserved 10,000,000 shares of Class A common stock for the issuance of awards under the 2021 Plan. The 2021 Plan provides that the number of shares reserved and available for issuance under the 2021 Plan will automatically increase each January 1, beginning on January 1, 2022, by 5% of the number of outstanding shares of Class A and Class B common stock on the immediately preceding December 31 or such lesser number of shares as determined by the Company’s compensation committee.
Options issued under the 2021 Plan are granted at an exercise price of not less than 100% of the fair market value per share of the common stock on the grant date as determined by the board of directors. Options generally vest with respect to 25% of the shares one year after the options’ vesting commencement date, and the remainder vest in equal monthly installments over the following 36 months. Options have a maximum term of ten years. RSUs granted under the 2021 Plan are subject to terms and conditions as determined by the
20
Company’s compensation committee, which may include the achievement of certain performance goals and/or continued employment with us through a specified vesting period.
Employee Stock Purchase Plan
In connection with the Company’s IPO, the Company adopted the 2021 Employee Stock Purchase Plan (ESPP) in January 2021. Under the ESPP, the Company will make one or more offerings to its employees to purchase shares under the ESPP. The first offering will begin and end on dates to be determined by the plan administrator. The Company has initially reserved 2,000,000 shares of Class A common stock for issuance under the 2021 ESPP. The reserve will automatically increase on January 1st of each calendar year for a period of up to ten years, commencing on January 1, 2022 and ending on (and including) January 1, 2031, in an amount equal to the lesser of (1) 1% of the total number of shares of Class A and Class B common stock outstanding on December 31st of the preceding fiscal year, (2) 3,000,000 shares of Class A common stock, and (3) a number of shares determined by our compensation committee. As of the date of this Quarterly Report on Form 10-Q, no offering periods have commenced.
Option to Purchase Common Stock
The following table summarizes option activity for the six months ended June 30, 2021:
|
|
Outstanding
Options
|
|
|
Weighted-
Average
Exercise
Price
|
|
|
Weighted-
Average
Remaining
Contractual
Term
(In Years)
|
|
|
Aggregate
Intrinsic
Value
(In Thousands)
|
|
Balances at December 31, 2020
|
|
|
7,660,786
|
|
|
$
|
5.09
|
|
|
|
6.4
|
|
|
$
|
282,735
|
|
Granted
|
|
|
26,832
|
|
|
|
42.00
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
(739,662
|
)
|
|
|
2.76
|
|
|
|
|
|
|
|
|
|
Forfeited and cancelled
|
|
|
(28,580
|
)
|
|
|
12.23
|
|
|
|
|
|
|
|
|
|
Balances at June 30, 2021
|
|
|
6,919,376
|
|
|
$
|
5.46
|
|
|
|
6.1
|
|
|
$
|
292,576
|
|
Vested and expected to vest as of June 30, 2021
|
|
|
6,919,376
|
|
|
$
|
5.46
|
|
|
|
6.1
|
|
|
$
|
292,576
|
|
Vested and exercisable as of June 30, 2021
|
|
|
5,426,778
|
|
|
$
|
4.03
|
|
|
|
5.7
|
|
|
$
|
237,196
|
|
The stock price per share that was used to determine the aggregate intrinsic value of outstanding stock options as of December 31, 2020 and June 30, 2021 was $42.00 and $47.74, respectively. As of June 30, 2021, the stock price per share that was used to determine both the vested and expected to vest options and vested and exercisable options was $47.74.
The fair value of the shares of common stock underlying the stock options has historically been determined by the board of directors as there was no public market for the common stock. The board of directors determines the fair value of the Company’s common stock by considering a number of objective and subjective factors including: contemporaneous third-party valuations of the Company’s common stock, the valuation of comparable companies, sales of redeemable convertible preferred stock to unrelated third-parties, the Company’s operating and financial performance, the lack of liquidity of common stock, and general and industry specific economic outlook, amongst other factors.
There were no stock options granted during the three months ended June 30, 2021. The total intrinsic value of options exercised during the three and six months ended June 30, 2021 was $6.5 million and $34.4 million, respectively.
The Company previously issued an option to purchase 206,500 shares of the Company’s common stock to a non-employee service provider outside of the Plan with an exercise price of $0.41 per share that vested prior to January 1, 2017. All the shares were exercised in January 2021.
Restricted Stock Units
RSUs issued prior to the IPO had both time-based service and performance-based conditions. The performance-based vesting condition is satisfied upon the occurrence of a qualifying event, which is generally defined as a change in control transaction or the effective date of a Qualified IPO. Upon the effectiveness of the IPO, the performance-based vesting condition was satisfied, and therefore, the Company recognized a one-time cumulative stock-based compensation expense of $15.6 million using the accelerated attribution method for the portion of the awards for which the service-based vesting condition has been fully or partially satisfied. Upon the IPO, shares were issued to satisfy the vesting of RSUs with a performance condition. To meet the related RSUs tax withholding
21
requirements, the Company withheld 32 thousand of the 95 thousand shares of common stock issued. Based on the IPO public offering price of $42.00 per share, the tax withholding obligation was $1.4 million.
RSUs granted to newly hired employees typically vest 25% on the first Company-established vest date after the first anniversary of the employee’s date of hire and ratably each quarter over the ensuing 12-quarter period for purposes of the service condition. The maximum term for RSUs granted under the Plan will not exceed seven years from the date of grant.
The following table summarizes RSU activity for the six months ended June 30, 2021:
|
|
Number of
Shares
|
|
|
Weighted-
Average
Grant Date
Fair Value
|
|
Nonvested as of December 31, 2020
|
|
|
2,219,770
|
|
|
$
|
20.20
|
|
Granted
|
|
|
1,066,185
|
|
|
|
40.96
|
|
Vested
|
|
|
(566,461
|
)
|
|
|
18.86
|
|
Forfeited and cancelled
|
|
|
(38,767
|
)
|
|
|
22.60
|
|
Nonvested as of June 30, 2021
|
|
|
2,680,727
|
|
|
$
|
28.71
|
|
As of June 30, 2021, the total unrecognized stock-based compensation expense related to unvested options and RSUs was $68.1 million, which will be recognized over a weighted-average period of 2.94 years.
Stock-Based Compensation
The assumptions used to value stock options granted for the periods indicated were as follows:
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
|
|
|
2020
|
|
2021
|
|
2020
|
|
2021
|
|
Expected dividend yield
|
|
—
|
|
—
|
|
—
|
|
—
|
|
Expected volatility
|
|
—
|
|
—
|
|
—
|
|
52.1%
|
|
Risk-free rate
|
|
—
|
|
—
|
|
—
|
|
0.5%
|
|
Expected term (in years)
|
|
—
|
|
—
|
|
—
|
|
5.5
|
|
Stock-based compensation expense is recorded in the condensed consolidated statements of operations as follows for the periods indicated (in thousands):
|
|
Three Months Ended June 30,
|
|
|
Six Months Ended June 30,
|
|
|
|
2020
|
|
|
2021
|
|
|
2020
|
|
|
2021
|
|
Operations and support
|
|
$
|
166
|
|
|
$
|
834
|
|
|
$
|
329
|
|
|
$
|
3,052
|
|
Research and development
|
|
|
540
|
|
|
|
3,096
|
|
|
|
1,076
|
|
|
|
13,737
|
|
Marketing
|
|
|
308
|
|
|
|
1,039
|
|
|
|
615
|
|
|
|
4,328
|
|
General and administrative
|
|
|
649
|
|
|
|
3,134
|
|
|
|
1,442
|
|
|
|
11,127
|
|
Total
|
|
$
|
1,663
|
|
|
$
|
8,103
|
|
|
$
|
3,462
|
|
|
$
|
32,244
|
|
11.
|
Net Income (Loss) Per Share Attributable to Common Stockholders
|
Basic and diluted net income (loss) per share attributable to common stockholders is presented in conformity with the two-class method required for participating securities. In connection with the IPO, the Company established two classes of authorized common stock: Class A common stock and Class B common stock. As a result, all then-outstanding shares of common stock were converted into shares of Class B common stock. Each share of Class A common stock is entitled to one vote per share and each share of Class B common stock is entitled to ten votes per share. Each share of Class B common stock is convertible at any time at the option of the stockholder into one share of Class A common stock.
The rights, including the liquidation and dividend rights, of the holders of Class A and Class B common stock were identical, except with respect to voting. As the liquidation and dividend rights were identical, the undistributed earnings were allocated on a proportionate basis and the resulting net loss per share attributable to common stockholders were, therefore, the same for both Class A and Class B common stock on an individual or combined basis.
22
The following table sets forth the computation of basic and diluted net income (loss) per share attributable to common stockholders for the periods indicated (in thousands, except share and per share data):
|
|
Three Months Ended June 30,
|
|
|
Six Months Ended June 30,
|
|
|
|
2020
|
|
|
2021
|
|
|
2020
|
|
|
2021
|
|
Numerator:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
21,120
|
|
|
$
|
(3,005
|
)
|
|
$
|
10,133
|
|
|
$
|
(77,527
|
)
|
Less: Undistributed earnings attributable to participating securities
|
|
|
(10,133
|
)
|
|
|
—
|
|
|
|
(10,133
|
)
|
|
|
—
|
|
Net income (loss) attributable to common stockholders
|
|
$
|
10,987
|
|
|
$
|
(3,005
|
)
|
|
$
|
—
|
|
|
$
|
(77,527
|
)
|
Denominator:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average shares used to compute net income (loss) per share attributable to common stockholders, basic
|
|
|
12,355
|
|
|
|
75,709
|
|
|
|
12,351
|
|
|
|
69,219
|
|
Dilutive effect of assumed conversion of options to purchase common stock
|
|
|
5,590
|
|
|
|
—
|
|
|
|
5,339
|
|
|
|
—
|
|
Weighted-average number of shares used to compute net income (loss) per share, diluted
|
|
|
17,945
|
|
|
|
75,709
|
|
|
|
17,690
|
|
|
|
69,219
|
|
Net income (loss) per share attributable to common stockholders, basic
|
|
$
|
0.89
|
|
|
$
|
(0.04
|
)
|
|
$
|
—
|
|
|
$
|
(1.12
|
)
|
Net income (loss) per share attributable to common stockholders, diluted
|
|
$
|
0.61
|
|
|
$
|
(0.04
|
)
|
|
$
|
—
|
|
|
$
|
(1.12
|
)
|
For the three and six months ended June 30, 2020, RSUs of $1.0 million and $1.5 million, respectively, were not assessed for inclusion in diluted net income per share and as such, any potential antidilutive shares were excluded from the table below because they are subject to performance conditions that were not achieved as of such date.
The following outstanding shares of potentially dilutive securities were excluded from the computation of diluted net (loss) income per share for the dates indicated because including them would have had an anti-dilutive effect (in thousands):
|
|
Three Months Ended June 30,
|
|
|
Six Months Ended June 30,
|
|
|
|
2020
|
|
|
2021
|
|
|
2020
|
|
|
2021
|
|
Redeemable convertible preferred stock
(on as if-converted basis)
|
|
|
52,287
|
|
|
|
—
|
|
|
|
52,287
|
|
|
|
—
|
|
Warrants to purchase redeemable convertible
preferred stock
|
|
|
86
|
|
|
|
—
|
|
|
|
86
|
|
|
|
—
|
|
RSUs
|
|
|
—
|
|
|
|
2,681
|
|
|
|
—
|
|
|
|
2,681
|
|
Stock options
|
|
|
398
|
|
|
|
6,919
|
|
|
|
398
|
|
|
|
6,919
|
|
Total
|
|
|
52,771
|
|
|
|
9,600
|
|
|
|
52,771
|
|
|
|
9,600
|
|
The following table summarizes the Company’s effective tax rate from loss for the periods presented (in thousands):
|
|
Three Months Ended June 30,
|
|
|
Six Months Ended June 30,
|
|
|
|
2020
|
|
|
2021
|
|
|
2020
|
|
|
2021
|
|
Income (loss) before income taxes
|
|
$
|
21,182
|
|
|
$
|
(2,965
|
)
|
|
$
|
10,253
|
|
|
$
|
(77,557
|
)
|
Provision (benefit) for income taxes
|
|
|
62
|
|
|
|
40
|
|
|
|
120
|
|
|
|
(30
|
)
|
Effective tax rate
|
|
|
0.29
|
%
|
|
|
(1.35
|
)%
|
|
|
1.17
|
%
|
|
|
0.04
|
%
|
The tax expense (benefit) for the three and six months ended June 30, 2021 was primarily attributable to pre-tax foreign earnings and changes in state income taxes. The tax expense for the three and six months ended June 30, 2020 was primarily attributable to pre-tax foreign earnings.
The Company’s effective tax rate for all periods presented differs from the U.S. statutory tax rate primarily due to valuation allowance recorded against domestic losses and the tax rate differences between the United States and foreign countries.
23
The Company has a full valuation allowance on its U.S. federal and state deferred tax assets. A valuation allowance is provided when it is more likely than not that some portion of the deferred tax assets will not be realized through future operations. As a result of the Company’s analysis of all available objective evidence, both positive and negative, as of December 31, 2020 and June 30, 2021, management believes it is more likely than not that the deferred tax assets will not be fully realizable. Accordingly, the Company has provided a full valuation allowance against its deferred tax assets.
On March 27, 2020, the President of the United States signed into law the Coronavirus Aid, Relief, and Economic Security Act (H.R. 748) (the CARES Act). Among the changes to the U.S. federal income tax rules, the Cares Act, restores net operating loss carryback that were eliminated by 2017 tax reform and increases the limit on the deduction for net interest expense. The tax provisions included within the CARES Act have been implemented in the determination of the Company’s income tax provision.
In July 2021, the Company registered a wholly owned subsidiary, Poshmark Online Marketplace Private Limited, in India.
In August 2021, the Company granted 165,488 RSUs with a weighted-average grant date fair value of $40.67 per share. The RSUs are subject to a service-based vesting condition, which is generally satisfied over four years. The Company also granted 8,739 options with a total fair value of $150,000 to a new non-employee board member in accordance with the Company's Non-Employee Director Compensation Policy.
24