NEXTDOOR, INC.
INDEX TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Nextdoor, Inc.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except per share data)
(unaudited)
| | | | | | | | | | | |
| As of September 30, | | As of December 31, |
| 2021 | | 2020 |
| Assets | | | |
| Current assets: | | | |
| Cash and cash equivalents | $ | 66,320 | | | $ | 83,642 | |
| Marketable securities | 40,239 | | | 53,341 | |
| Accounts receivable, net of allowance of $382 and $313 as of September 30, 2021 and December 31, 2020, respectively | 26,784 | | | 21,818 | |
| Prepaid expenses and other current assets | 11,746 | | | 5,453 | |
| Restricted cash, current | — | | | 1,101 | |
| Total current assets | 145,089 | | | 165,355 | |
| Property and equipment, net | 12,294 | | | 5,718 | |
| Operating lease right-of-use assets | 61,090 | | | 37,776 | |
| Intangible assets, net | 5,298 | | | 6,987 | |
| Goodwill | 1,211 | | | 1,211 | |
| Other assets | 4,961 | | | 700 | |
| Total assets | $ | 229,943 | | | $ | 217,747 | |
| Liabilities, Redeemable Convertible Preferred Stock and Stockholders’ Deficit | | | |
| Current liabilities: | | | |
| Accounts payable | $ | 4,360 | | | $ | 3,354 | |
| Operating lease liabilities, current | 6,978 | | | 3,348 | |
| Liability for unvested restricted stock | 6,194 | | | 10,483 | |
| Accrued expenses and other current liabilities | 20,960 | | | 14,998 | |
| Total current liabilities | 38,492 | | | 32,183 | |
| Operating lease liabilities, non-current | 63,448 | | | 36,254 | |
| Total liabilities | 101,940 | | | 68,437 | |
| Commitments and contingencies (Note 7) | | | |
| Redeemable convertible preferred stock, $0.0001 par value; 61,332 shares authorized, issued, and outstanding as of September 30, 2021 and December 31, 2020; aggregate liquidation preference of $447,890 as of September 30, 2021 and December 31, 2020 | 447,166 | | | 447,166 | |
| Stockholders’ deficit: | | | |
| Common stock, $0.0001 par value; 126,700 shares authorized as of September 30, 2021 and 121,000 shares authorized as of December 31, 2020; 36,362 and 33,415 shares issued and outstanding as of September 30, 2021 and December 31, 2020, respectively | 3 | | | 3 | |
| Additional paid-in capital | 132,371 | | | 87,952 | |
| Accumulated other comprehensive loss | (521) | | | (797) | |
| Accumulated deficit | (451,016) | | | (385,014) | |
| Total stockholders’ deficit | (319,163) | | | (297,856) | |
| Total liabilities, redeemable convertible preferred stock and stockholders’ deficit | $ | 229,943 | | | $ | 217,747 | |
The accompanying notes are an integral part of these condensed consolidated financial statements.
Nextdoor, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
| | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, |
| | 2021 | | 2020 | | 2021 | | 2020 |
| Revenue | $ | 52,705 | | | $ | 31,826 | | | $ | 132,870 | | | $ | 83,167 | |
| Costs and expenses: | | | | | | | |
| Cost of revenue | 7,371 | | | 5,346 | | | 20,308 | | | 15,177 | |
| Research and development | 25,461 | | | 18,759 | | | 69,612 | | | 50,570 | |
| Sales and marketing | 27,448 | | | 20,111 | | | 76,698 | | | 58,136 | |
| General and administrative | 11,505 | | | 7,087 | | | 31,793 | | | 20,539 | |
| Total costs and expenses | 71,785 | | | 51,303 | | | 198,411 | | | 144,422 | |
| Loss from operations | (19,080) | | | (19,477) | | | (65,541) | | | (61,255) | |
| Interest income | 21 | | | 61 | | | 86 | | | 682 | |
| Other income (expense), net | (277) | | | 284 | | | (451) | | | 397 | |
| Loss before income taxes | (19,336) | | | (19,132) | | | (65,906) | | | (60,176) | |
| Provision for income taxes | 27 | | | 34 | | | 96 | | | 122 | |
| Net loss | $ | (19,363) | | | $ | (19,166) | | | $ | (66,002) | | | $ | (60,298) | |
| Net loss per share attributable to common stockholders, basic and diluted | $ | (0.57) | | | $ | (0.65) | | | $ | (2.00) | | | $ | (2.10) | |
| Weighted average shares used in computing net loss per share attributable to common stockholders, basic and diluted | 34,256 | | 29,306 | | 33,003 | | 28,707 |
The accompanying notes are an integral part of these condensed consolidated financial statements.
Nextdoor, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(in thousands)
(unaudited)
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
| 2021 | | 2020 | | 2021 | | 2020 |
| Net loss | $ | (19,363) | | | $ | (19,166) | | | $ | (66,002) | | | $ | (60,298) | |
| Other comprehensive income (loss): | | | | | | | |
| Foreign currency translation adjustments | 175 | | | (261) | | | 279 | | | (458) | |
| Change in unrealized gain (loss) on available-for-sale marketable securities | (5) | | | 5 | | | (3) | | | (28) | |
| Total other comprehensive income (loss) | $ | 170 | | | $ | (256) | | | $ | 276 | | | $ | (486) | |
| Comprehensive loss | $ | (19,193) | | | $ | (19,422) | | | $ | (65,726) | | | $ | (60,784) | |
The accompanying notes are an integral part of these condensed consolidated financial statements.
Nextdoor, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ DEFICIT
(in thousands)
(unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, 2021 |
| Redeemable Convertible
Preferred Stock | | | Common Stock | | Additional
Paid-in
Capital | | Accumulated
Other
Comprehensive Income (Loss) | | Accumulated
Deficit | | Total
Stockholders’
Deficit |
| Shares | | Amount | | | Shares | | Amount | | | | |
| Balances as of June 30, 2021 | 61,332 | | | $ | 447,166 | | | | 35,474 | | | $ | 3 | | | $ | 115,302 | | | $ | (691) | | | $ | (431,653) | | | $ | (317,039) | |
| Issuance of common stock upon exercise of stock options, net of repurchases of unvested common stock | — | | | — | | | | 888 | | | — | | | 4,930 | | | — | | | — | | | 4,930 | |
| Vesting of early exercised stock options | — | | | — | | | | — | | | — | | | 118 | | | — | | | — | | | 118 | |
| Vesting of restricted stock | — | | | — | | | | — | | | — | | | 1,429 | | | — | | | — | | | 1,429 | |
| Stock-based compensation | — | | | — | | | | — | | | — | | | 10,592 | | | — | | | — | | | 10,592 | |
| Other comprehensive income | — | | | — | | | | — | | | — | | | — | | | 170 | | | — | | | 170 | |
| Net loss | — | | | — | | | | — | | | — | | | — | | | — | | | (19,363) | | | (19,363) | |
| Balances as of September 30, 2021 | 61,332 | | | $ | 447,166 | | | | 36,362 | | | $ | 3 | | | $ | 132,371 | | | $ | (521) | | | $ | (451,016) | | | $ | (319,163) | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, 2020 |
| Redeemable Convertible
Preferred Stock | | | Common Stock | | Additional
Paid-in
Capital | | Accumulated
Other
Comprehensive Income (Loss) | | Accumulated
Deficit | | Total
Stockholders’
Deficit |
| Shares | | Amount | | | Shares | | Amount | | | | |
| Balances as of June 30, 2020 | 61,332 | | | $ | 447,166 | | | | 32,226 | | | $ | 3 | | | $ | 67,890 | | | $ | (195) | | | $ | (350,912) | | | $ | (283,214) | |
| Issuance of common stock upon exercise of stock options, net of repurchases of unvested common stock | — | | | — | | | | 241 | | | — | | | 1,015 | | | — | | | — | | | 1,015 | |
| Vesting of early exercised stock options | — | | | — | | | | — | | | — | | | 89 | | | — | | | — | | | 89 | |
| Vesting of restricted stock | — | | | — | | | | — | | | — | | | 1,429 | | | — | | | — | | | 1,429 | |
| Stock-based compensation | — | | | — | | | | — | | | — | | | 6,163 | | | — | | | — | | | 6,163 | |
| Other comprehensive loss | — | | | — | | | | — | | | — | | | — | | | (256) | | | — | | | (256) | |
| Net loss | — | | | — | | | | — | | | — | | | — | | | — | | | (19,166) | | | (19,166) | |
| Balances as of September 30, 2020 | 61,332 | | | $ | 447,166 | | | | 32,467 | | | $ | 3 | | | $ | 76,586 | | | $ | (451) | | | $ | (370,078) | | | $ | (293,940) | |
The accompanying notes are an integral part of these condensed consolidated financial statements.
Nextdoor, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ DEFICIT
(in thousands)
(unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Nine Months Ended September 30, 2021 |
| Redeemable Convertible
Preferred Stock | | | Common Stock | | Additional
Paid-in
Capital | | Accumulated
Other
Comprehensive Income (Loss) | | Accumulated
Deficit | | Total
Stockholders’
Deficit |
| Shares | | Amount | | | Shares | | Amount | | | | |
| Balances as of December 31, 2020 | 61,332 | | | $ | 447,166 | | | | 33,415 | | | $ | 3 | | | $ | 87,952 | | | $ | (797) | | | $ | (385,014) | | | $ | (297,856) | |
| Issuance of common stock upon exercise of stock options, net of repurchases of unvested common stock | — | | | — | | | | 2,940 | | | — | | | 12,836 | | | — | | | — | | | 12,836 | |
| Issuance of common stock in connection with acquisition | — | | | — | | | | 7 | | | — | | | — | | | — | | | — | | | — | |
| Vesting of early exercised stock options | — | | | — | | | | — | | | — | | | 324 | | | — | | | — | | | 324 | |
| Vesting of restricted stock | — | | | — | | | | — | | | — | | | 4,288 | | | — | | | — | | | 4,288 | |
| Stock-based compensation | — | | | — | | | | — | | | — | | | 26,971 | | | — | | | — | | | 26,971 | |
| Other comprehensive income | — | | | — | | | | — | | | — | | | — | | | 276 | | | — | | | 276 | |
| Net loss | — | | | — | | | | — | | | — | | | — | | | — | | | (66,002) | | | (66,002) | |
| Balances as of September 30, 2021 | 61,332 | | | $ | 447,166 | | | | 36,362 | | | $ | 3 | | | $ | 132,371 | | | $ | (521) | | | $ | (451,016) | | | $ | (319,163) | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Nine Months Ended September 30, 2020 |
| Redeemable Convertible
Preferred Stock | | | Common Stock | | Additional
Paid-in
Capital | | Accumulated
Other
Comprehensive Income (Loss) | | Accumulated
Deficit | | Total
Stockholders’
Deficit |
| Shares | | Amount | | | Shares | | Amount | | | | |
| Balances as of December 31, 2019 | 61,332 | | | $ | 447,166 | | | | 31,483 | | | $ | 3 | | | $ | 52,446 | | | $ | 35 | | — | | $ | (309,780) | | | $ | (257,296) | |
| Issuance of common stock upon exercise of stock options, net of repurchases of unvested common stock | — | | | — | | | | 1,253 | | | — | | | 3,207 | | | — | | | — | | | 3,207 | |
| Cancellation of restricted stock and unvested common stock issued in connection with acquisition | — | | — | | — | | | — | | (269) | | | — | | | — | | | — | | | — | | | — | |
| Vesting of early exercised stock options | — | | | — | | | | — | | | — | | | 435 | | | — | | | — | | | 435 | |
| Vesting of restricted stock | — | | | — | | | | — | | | — | | | 4,288 | | | — | | | — | | | 4,288 | |
| Stock-based compensation | — | | | — | | | | — | | | — | | | 16,210 | | | — | | | — | | | 16,210 | |
| Other comprehensive loss | — | | | — | | | | — | | | — | | | — | | | (486) | | | — | | | (486) | |
| Net loss | — | | | — | | | | — | | | — | | | — | | | — | | | (60,298) | | | (60,298) | |
| Balances as of September 30, 2020 | 61,332 | | | $ | 447,166 | | | | 32,467 | | | $ | 3 | | | $ | 76,586 | | | $ | (451) | | | $ | (370,078) | | | $ | (293,940) | |
The accompanying notes are an integral part of these condensed consolidated financial statements.
Nextdoor, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
| | | | | | | | | | | |
| Nine Months Ended September 30, |
| 2021 | | 2020 |
| Cash flows from operating activities: | | | |
| Net loss | $ | (66,002) | | | $ | (60,298) | |
| Adjustments to reconcile net loss to net cash used in operating activities: | | | |
| Depreciation and amortization | 3,202 | | | 2,084 | |
| Stock-based compensation | 26,971 | | | 16,210 | |
| Bad debt expense | 76 | | | 98 | |
| Other | 294 | | | 121 | |
| Changes in operating assets and liabilities: | | | |
| Accounts receivable, net | (5,042) | | | (202) | |
| Prepaid expenses and other current assets | 426 | | | 1,141 | |
| Operating lease right-of-use assets | 4,938 | | | 3,330 | |
| Other assets | 330 | | | (828) | |
| Accounts payable | 221 | | | 1,231 | |
| Operating lease liabilities | (4,147) | | | (2,973) | |
| Accrued expenses and other current liabilities | 5,453 | | | 4,807 | |
| Net cash used in operating activities | (33,280) | | | (35,279) | |
| Cash flows from investing activities: | | | |
| Purchases of property and equipment | (8,089) | | | (3,167) | |
| Purchases of marketable securities | (40,251) | | | (55,720) | |
| Sales of marketable securities | 2,411 | | | 21,826 | |
| Maturities of marketable securities | 50,645 | | | 81,420 | |
| Net cash provided by investing activities | 4,716 | | | 44,359 | |
| Cash flows from financing activities: | | | |
| Proceeds from exercise of vested and unvested stock options, net of repurchases | 12,836 | | | 3,207 | |
| Payment of deferred transaction costs | (2,973) | | | — | |
| Net cash provided by financing activities | 9,863 | | | 3,207 | |
| Effect of exchange rate changes on cash, cash equivalents, and restricted cash | 278 | | | (458) | |
| Net increase (decrease) in cash, cash equivalents, and restricted cash | (18,423) | | | 11,829 | |
| Cash, cash equivalents, and restricted cash at beginning of period | 84,743 | | | 83,984 | |
| Cash, cash equivalents, and restricted cash at end of period | $ | 66,320 | | | $ | 95,813 | |
| Reconciliation of cash, cash equivalents, and restricted cash to the condensed consolidated balance sheets: | | | |
| Cash and cash equivalents | $ | 66,320 | | | $ | 94,712 | |
| Restricted cash | — | | | 1,101 | |
| Total cash, cash equivalents, and restricted cash | $ | 66,320 | | | $ | 95,813 | |
| Supplemental cash flow disclosures: | | | |
| Cash paid for taxes | $ | 296 | | | $ | 30 | |
| Non-cash investing and financing activities: | | | |
| Vesting of restricted stock and early exercised stock options | $ | 4,612 | | | $ | 4,723 | |
| Lease liabilities arising from obtaining right-of-use assets | $ | 34,971 | | | $ | 40,791 | |
| Unpaid deferred transaction costs | $ | 1,617 | | | $ | — | |
The accompanying notes are an integral part of these condensed consolidated financial statements.
Notes to the Condensed Consolidated Financial Statements
(unaudited)
Note 1. Description of Business
Nextdoor, Inc. (“Nextdoor” or the “Company”), was incorporated in Delaware in 2007 and is headquartered in San Francisco, California. Nextdoor’s purpose is to cultivate a kinder world where everyone has a neighborhood they can rely on. That purpose enables the Company’s mission to be the neighborhood hub for trusted connections and the exchange of helpful information, goods, and services.
On July 6, 2021, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Lorelei Merger Sub Inc. (“Merger Sub”), a wholly owned subsidiary of Khosla Ventures Acquisition Co. II (“KVSB”), a special purpose acquisition company, where Merger Sub will merge with the Company, with the Company surviving as a wholly owned subsidiary of KVSB. The transactions contemplated by the Merger Agreement are referred to herein as the “Transactions”. Upon the completion of the Transactions on November 5, 2021 (the “Closing”), KVSB was renamed to Nextdoor Holdings, Inc. See Note 13—Subsequent Events.
Note 2. Summary of Significant Accounting Policies
Basis of Presentation
The unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) and include the accounts of the Company and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. The Company’s fiscal year ends on December 31.
The condensed consolidated balance sheet as of December 31, 2020 included herein was derived from the audited financial statements as of that date. The Company has condensed or omitted certain information and note disclosures normally included in financial statements prepared in accordance with GAAP pursuant to the applicable required disclosures and regulations of the U.S Securities and Exchange Commission (“SEC”). As such, these unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the related notes thereto, as of and for the year ended December 31, 2020, included in the Proxy Statement/Prospectus filed with the SEC on October 21, 2021.
In management’s opinion, the unaudited condensed consolidated financial statements have been prepared on the same basis as the annual financial statements and reflect all adjustments, which include only normal recurring adjustments necessary for the fair statement of the Company’s financial position, results of operations, and cash flows. The results for the three and nine months ended September 30, 2021 are not necessarily indicative of the results to be expected for the full year ending December 31, 2021 or any other future interim or annual period.
Use of Estimates
The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. Estimates include, but are not limited to, valuation of financial instruments, valuation of common stock and stock-based awards, revenue recognition, collectability of accounts receivable, valuation of acquired intangible assets and goodwill, useful lives of intangible assets, useful lives of property and equipment, the incremental borrowing rate applied in lease accounting, income taxes and deferred income tax assets and associated valuation allowances. The Company bases these estimates and assumptions on historical experience and various other assumptions that it considers reasonable. The actual results could differ materially from these estimates.
Significant Accounting Policies
There have been no changes to the Company’s significant accounting policies disclosed in Note 2 to the consolidated financial statements as of and for the year ended December 31, 2020 that have had a material impact on the Company’s condensed consolidated financial statements and related notes, except as noted below.
Deferred Transaction Costs
Deferred transaction costs, which consist of direct incremental legal, accounting, consulting, and other fees incurred by the Company related to the Transactions are capitalized in other assets on the condensed consolidated balance sheets. The deferred transaction costs will be charged to stockholders’ equity upon the completion of the Transactions. Deferred transaction costs as of September 30, 2021 were $4.6 million. There were no deferred transaction costs recorded as of December 31, 2020.
Note 3. Deferred Revenue
In certain advertising arrangements the Company requires payment upfront from its customers. The Company records deferred revenue when it collects cash from customers in advance of revenue recognition. As of September 30, 2021 and December 31, 2020, deferred revenue was $4.6 million and $2.6 million, respectively, and included within accrued expenses and other current liabilities on the condensed consolidated balance sheets.
For the nine months ended September 30, 2021 and 2020, revenue recognized from deferred revenue at the beginning of each period was $2.2 million and $0.6 million, respectively.
Note 4. Fair Value Measurements
The following table presents information about the Company’s financial assets that are measured at fair value on a recurring basis by level within the fair value hierarchy (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | |
| Fair Value Measurement as of September 30, 2021 |
| Level 1 | | Level 2 | | Level 3 | | Total |
| Assets: | | | | | | | |
| Cash equivalents: | | | | | | | |
| Money market funds | $ | 18,014 | | | $ | — | | | $ | — | | | $ | 18,014 | |
| Marketable securities: | | | | | | | |
| Commercial paper | — | | | 26,573 | | | — | | | 26,573 | |
| Corporate securities | — | | | 5,493 | | | — | | | 5,493 | |
| U.S. Treasury securities | — | | | — | | | — | | | — | |
| Asset-backed securities | — | | | 8,173 | | | — | | | 8,173 | |
| Total marketable securities | — | | | 40,239 | | | — | | | 40,239 | |
| Total cash equivalents and marketable securities | $ | 18,014 | | | $ | 40,239 | | | $ | — | | | $ | 58,253 | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Fair Value Measurement as of December 31, 2020 |
| | Level 1 | | Level 2 | | Level 3 | | Total |
| Assets: | | | | | | | |
| Cash equivalents: | | | | | | | |
| Money market funds | $ | 28,371 | | | $ | — | | | $ | — | | | $ | 28,371 | |
| Marketable securities: | | | | | | | |
| Commercial paper | — | | | 27,473 | | | — | | | 27,473 | |
| Corporate securities | — | | | 6,938 | | | — | | | 6,938 | |
| U.S. Treasury securities | — | | | 16,158 | | | — | | | 16,158 | |
| Asset-backed securities | — | | | 2,772 | | | — | | | 2,772 | |
| Total marketable securities | — | | | 53,341 | | | — | | | 53,341 | |
| Total cash equivalents and marketable securities | $ | 28,371 | | | $ | 53,341 | | | $ | — | | | $ | 81,712 | |
The Company classifies its cash equivalents, marketable securities, and restricted cash within Level 1 or Level 2 because it determines their fair values using quoted market prices or alternative pricing sources and models utilizing
market observable inputs. There were no transfers between levels of the fair value hierarchy during the periods presented.
Assets and Liabilities Measured at Fair Value on a Recurring Basis
The carrying amounts of certain financial instruments, including cash held in banks, accounts receivable, and accounts payable approximate fair value due to their short-term maturities and are excluded from the fair value table above.
Note 5. Other Balance Sheet Components
Property and Equipment, net
Property and equipment, net consisted of the following (in thousands):
| | | | | | | | | | | |
| As of September 30, | | As of December 31, |
| 2021 | | 2020 |
| Computer equipment and software | $ | 2,957 | | | $ | 2,002 | |
| Furniture and fixtures | 2,170 | | | 1,174 | |
| Capitalized internal-use software | 1,842 | | | 1,842 | |
| Leasehold improvements | 8,942 | | | 2,850 | |
| Property and equipment, gross | 15,911 | | | 7,868 | |
| Less: accumulated depreciation and amortization | (3,617) | | | (2,150) | |
| Property and equipment, net | $ | 12,294 | | | $ | 5,718 | |
Depreciation and amortization expense was $0.5 million and $0.2 million for the three months ended September 30, 2021 and 2020, respectively, and $1.5 million and $0.5 million for the nine months ended September 30, 2021 and 2020, respectively.
Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities consisted of the following (in thousands):
| | | | | | | | | | | |
| As of September 30, | | As of December 31, |
| 2021 | | 2020 |
| Accrued compensation | $ | 6,372 | | | $ | 6,888 | |
| Liability for early exercise of unvested stock options | 808 | | | 1,133 | |
| Taxes payable | 597 | | | 516 | |
| Deferred revenue | 4,568 | | | 2,585 | |
| Other accrued and current liabilities | 8,615 | | | 3,876 | |
| Accrued expenses and other current liabilities | $ | 20,960 | | | $ | 14,998 | |
Note 6. Leases
The Company has entered into various non-cancellable office facility leases in various locations with original lease periods expiring between 2020 and 2029, with its primary office location in San Francisco, California. Future lease payments of $40.9 million related to the second and final portion of the Company’s San Francisco headquarters lease, which commenced in January 2021, were recorded on the Company’s condensed consolidated balance sheet as of September 30, 2021 but were not recorded on the Company’s consolidated balance sheet as of December 31, 2020. The facility lease agreements generally provide for escalating rental payments. The Company’s lease agreements generally do not contain any material residual value guarantees or material restrictive covenants.
The components of lease costs were as follows (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
| 2021 | | 2020 | | 2021 | | 2020 |
| Operating lease cost | $ | 2,469 | | | $ | 2,565 | | | $ | 7,376 | | | $ | 4,261 | |
| Short-term lease cost | 108 | | | 56 | | | 253 | | | 360 | |
| Variable lease cost | 118 | | | 84 | | | 248 | | | 376 | |
| Total | $ | 2,695 | | | $ | 2,705 | | | $ | 7,877 | | | $ | 4,997 | |
Other information related to the Company’s operating leases was as follows (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
| 2021 | | 2020 | | 2021 | | 2020 |
| Cash paid for amounts included in the measurement of lease liabilities: | | | | | | | |
| Operating cash flows from operating leases | $ | 2,474 | | | $ | 2,003 | | | $ | 6,585 | | | $ | 3,720 | |
| Right-of-use assets obtained in exchange for lease obligations: | | | | | | | |
| Operating leases | $ | — | | | $ | — | | | $ | 28,252 | | | $ | 39,664 | |
Lease terms and discount rates for operating leases were as follows:
| | | | | | | | | | | |
| As of September 30, | | As of December 31, |
| 2021 | | 2020 |
| Weighted average remaining lease term (years) | 7.6 | | 8.2 |
| Weighted average discount rate | 4.5 | % | | 5.3 | % |
As of September 30, 2021, future minimum lease payments under operating leases were as follows (in thousands):
| | | | | |
| Years Ending December 31, | Amount |
| 2021 (remaining three months) | $ | 2,474 | |
| 2022 | 10,045 | |
| 2023 | 10,347 | |
| 2024 | 10,657 | |
| 2025 | 10,977 | |
| Thereafter | 39,003 | |
| Total lease payments | 83,503 | |
| Less: imputed interest | (13,077) | |
| Present value of lease liabilities | 70,426 | |
| Less: current operating lease liabilities | (6,978) | |
| Long-term operating lease liabilities | $ | 63,448 | |
The table above does not include lease payments that were not fixed at commencement or lease modification.
Note 7. Commitments and Contingencies
Commitments
As of September 30, 2021, the Company had non-cancellable purchase commitments with certain service providers primarily related to the provision of cloud computing services as follows (in thousands): | | | | | |
| Total Commitments |
| Years Ending December 31, | |
| 2021 (remaining three months) | $ | 3,568 | |
| 2022 | 18,978 | |
| 2023 | 22,528 | |
| 2024 | 10,417 | |
| Thereafter | — | |
| Total | $ | 55,491 | |
Legal matters
From time to time, the Company is a party to a variety of claims, lawsuits, and proceedings which arise in the ordinary course of business, including claims of alleged infringement of intellectual property rights. The Company records a liability when it believes that it is probable that a loss will be incurred and the amount of loss or range of loss can be reasonably estimated. The Company discloses potential losses when they are reasonably possible. In the Company’s opinion, resolution of pending matters is not likely to have a material adverse impact on its condensed consolidated results of operations, cash flows, or its financial position. Given the unpredictable nature of legal proceedings, the Company bases its estimate on the information available at the time of the assessment. As additional information becomes available, the Company reassesses the potential liability and may revise the estimate. There were no such material matters as of September 30, 2021 and December 31, 2020.
Indemnification
In the ordinary course of business, the Company often includes standard indemnification provisions in its arrangements with its customers, partners, suppliers, and vendors. Pursuant to these provisions, the Company may be obligated to indemnify such parties for losses or claims suffered or incurred in connection with its service, breach of representations or covenants, intellectual property infringement, or other claims made against such parties. These provisions may limit the time within which an indemnification claim can be made. It is not possible to determine the maximum potential amount under these indemnification obligations due to the limited history of prior indemnification claims and the unique facts and circumstances involved in each particular agreement. For the nine months ended September 30, 2021 and 2020, the Company did not incur material costs to defend lawsuits or settle claims related to these indemnifications. The Company believes the fair value of these liabilities is not material and accordingly has no liabilities recorded for these agreements as of September 30, 2021 and December 31, 2020.
Note 8. Common Stock and Stockholders’ Deficit
Common Stock
The Company was authorized to issue 126,700,000 shares of common stock as of September 30, 2021 and 121,000,000 shares of common stock as of December 31, 2020. Shares of common stock reserved for future issuance on an as-converted basis were as follows (in thousands):
| | | | | | | | | | | |
| As of September 30, | | As of December 31, |
| 2021 | | 2020 |
| Redeemable convertible preferred stock | 61,332 | | | 61,332 | |
| Stock options outstanding | 19,511 | | | 15,125 | |
| Unvested restricted stock units (RSUs) | 209 | | | — | |
| Shares reserved for future award issuances | 2,266 | | | 4,044 | |
| Total | 83,318 | | | 80,501 | |
Common Stock Subject to Repurchase
Certain stock option grant agreements permit exercise prior to vesting. Upon termination of service of an employee, the Company has the right to repurchase any unvested, but issued, common stock at the original purchase price. The consideration received for an exercise of an option is accounted for as a deposit of the exercise price and is recorded as a liability. Upon vesting of the shares pursuant to the grant agreements, the shares and related liability are reclassified into stockholders’ deficit. As of September 30, 2021 and December 31, 2020, the Company had $0.8 million and $1.1 million recorded in accrued expenses and other current liabilities related to 159,167 and 223,136 unvested shares of common stock subject to repurchase, respectively.
Restricted Stock Subject to Repurchase
In 2018, an executive of the Company purchased 4,961,279 shares of restricted stock, subject to time-based service requirements, which vest over a forty-eight month period. The shares issued upon the purchase of restricted stock are considered to be legally issued and outstanding on the date of purchase and the executive has full voting rights. Upon termination of service, the Company may repurchase unvested shares acquired at a price equal to the price per share paid upon the exercise. Upon vesting of the shares pursuant to the grant agreements, the shares and related liability are reclassified into stockholders’ deficit. As of September 30, 2021, the Company had $6.2 million recorded in deposits related to 1,343,680 unvested shares of common stock subject to repurchase. As of December 31, 2020, the Company had $10.5 million recorded in deposits related to 2,273,919 unvested shares of common stock subject to repurchase. For the three months ended September 30, 2021 and 2020 and for the nine months ended September 30, 2021 and 2020, the Company recorded stock-based compensation expense of $1.1 million, $1.1 million, $3.4 million, and $3.4 million, respectively, related to this restricted stock.
2018 Equity Incentive Plan
As of September 30, 2021 and December 31, 2020, the Company had reserved 2,266,432 shares and 4,043,637 shares, respectively, of its common stock for future issuance under the 2018 Equity Incentive Plan (“the 2018
Plan”). A summary of the Company’s stock option activity under the 2018 Plan and related information was as follows (in thousands, except per share data):
| | | | | | | | | | | | | | | | | | | | | | | |
| Number of Options | | Weighted- Average Exercise Price | | Weighted Average Remaining Contractual Term (years) | | Aggregate Intrinsic Value |
| Balances at December 31, 2020 | 15,125 | | | $ | 5.58 | | | 7.8 | | $ | 28,467 | |
| Options granted | 8,134 | | | $ | 9.44 | | | | | |
| Options exercised | (2,940) | | | $ | 4.35 | | | | | |
| Options forfeited or expired | (808) | | | $ | 7.48 | | | | | |
| Balances at September 30, 2021 | 19,511 | | | $ | 7.22 | | | 8.4 | | $ | 410,039 | |
| Options vested and exercisable at September 30, 2021 | 6,215 | | | $ | 4.93 | | | 6.3 | | $ | 145,292 | |
The intrinsic value is calculated as the difference between the exercise price of the underlying common stock option award and the estimated fair value of the Company’s common stock. The weighted average grant date fair value of options granted was $11.54 per share and $7.41 per share for the nine months ended September 30, 2021 and 2020, respectively.
The total number of shares vested during the nine months ended September 30, 2021 and 2020 was 3,887,187 and 3,095,000, respectively. The weighted average grant-date fair value of options vested was $6.15 per share and $4.94 per share during the nine months ended September 30, 2021 and 2020, respectively. The intrinsic value of the options exercised was $22.8 million and $6.0 million for the nine months ended September 30, 2021 and 2020, respectively.
The Company granted 6,324 options to non-employees during the nine months ended September 30, 2021.
The table above includes 743,184 options granted to the Company’s Chief Executive Officer during the nine months ended September 30, 2021 which are subject to a performance-based vesting condition that will be satisfied in full upon the first to occur of: (i) a Qualified IPO, (ii) a direct listing, or (iii) the closing by the Company of a transaction with a publicly traded special purpose acquisition company (“SPAC”) in which the common stock is publicly listed on a securities exchange. The options will vest in a single installment upon the satisfaction of the performance-based vesting condition subject to the Chief Executive Officer’s continuous employment through such date. As the performance-based vesting condition of these options is not deemed probable until consummated, no stock-based compensation expense is recorded related to these options until the performance-based vesting condition becomes probable of occurring. If the performance-based vesting condition had been satisfied on September 30, 2021, the Company would have recognized stock-based compensation expense of $8.5 million and would have no unrecognized stock-based compensation expense related to these options as of September 30, 2021.
The 2018 Plan allows the Company to grant RSUs. Generally, RSUs are subject to a four-year vesting period and vest quarterly. A summary of the Company’s RSU activity under the 2018 Plan and related information was as follows (in thousands, except per share data):
| | | | | | | | | | | |
| Number of Shares | | Weighted Average Grant Date Fair Value |
| Unvested at December 31, 2020 | — | | | $ | — | |
| RSUs granted | 209 | | | $ | 23.45 | |
| RSUs vested | — | | | $ | — | |
| RSUs forfeited | — | | | $ | — | |
| Unvested at September 30, 2021 | 209 | | | $ | 23.45 | |
Valuation Assumptions
The following assumptions were used to calculate the fair value of employee and non-employee stock option grants made during the following periods:
| | | | | | | | | | | |
| Nine Months Ended September 30, |
| 2021 | | 2020 |
| Expected volatility | 53.7% - 54.5% | | 48.8% - 53.4% |
| Expected term (years) | 6.3 | | 6.0 |
| Risk-free interest rate | 1.1% | | 0.6% |
| Expected dividend yield | — | | — |
| Fair value of common stock per share | $15.27-$21.20 | | $12.06-$12.28 |
Stock-Based Compensation
The Company recorded stock-based compensation expense in the condensed consolidated statements of operations as follows (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, |
| | 2021 | | 2020 | | 2021 | | 2020 |
| Cost of revenue | $ | 383 | | | $ | 247 | | | $ | 981 | | | $ | 680 | |
| Research and development | 5,680 | | | 2,839 | | | 13,954 | | | 7,373 | |
| Sales and marketing | 1,711 | | | 1,072 | | | 4,461 | | | 2,190 | |
| General and administrative | 2,818 | | | 2,005 | | | 7,575 | | | 5,967 | |
| Total | $ | 10,592 | | | $ | 6,163 | | | $ | 26,971 | | | $ | 16,210 | |
As of September 30, 2021, there was $128.5 million of unrecognized stock-based compensation expense, which is expected to be recognized over a weighted average period of 2.5 years.
Note 9. Net Loss Per Share Attributable to Common Stockholders
The following table sets forth the computation of basic and diluted net loss per share attributable to common stockholders (in thousands, except per share data):
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
| 2021 | | 2020 | | 2021 | | 2020 |
| Net loss attributable to common stockholders | $ | (19,363) | | | $ | (19,166) | | | $ | (66,002) | | | $ | (60,298) | |
| Weighted average shares used in computing net loss per share attributable to common stockholders, basic and diluted | 34,256 | | 29,306 | | 33,003 | | 28,707 |
| Net loss per share attributable to common stockholders - basic and diluted | $ | (0.57) | | | $ | (0.65) | | | $ | (2.00) | | | $ | (2.10) | |
The following potentially dilutive securities outstanding at the end of the period have been excluded from the computations of diluted net loss per share because such securities have an anti-dilutive impact due to losses reported (in thousands):
| | | | | | | | | | | |
| Three and Nine Months Ended September 30, |
| 2021 | | 2020 |
| Redeemable convertible preferred stock | 61,332 | | | 61,332 | |
| Outstanding stock options | 19,511 | | | 15,909 | |
| Unvested RSUs | 209 | | — |
| Unvested early exercised stock options subject to repurchase | 159 | | | 240 | |
| Unvested restricted stock | 1,344 | | | 2,584 | |
| Contingently issuable shares | 58 | | | 82 | |
| Total | 82,613 | | | 80,147 | |
Note 10. Employee Benefit Plan
The Company has a 401(k) plan (“the Plan”) covering all eligible employees in the United States. The Company is allowed to make discretionary profit sharing and qualified non-elective contributions as defined by the Plan and as approved by the Board of Directors. As of January 1, 2021, the Company began matching a portion of eligible participants’ 401(k) contributions. No discretionary profit-sharing contributions have been made to date.
Note 11. Income Taxes
The Company’s provision for income taxes for interim periods was determined using an estimate of its annual effective tax rate, adjusted for discrete items, if any, that arose during the period. Each quarter, the Company updates its estimate of the annual effective tax rate, and if the estimated annual effective tax rate changes, the Company makes a cumulative adjustment in such period.
The Company’s quarterly tax provision, and estimate of its annual effective tax rate, is subject to variation due to several factors, including variability in pretax income (or loss), the mix of jurisdictions to which such income (or loss) relates, tax law developments and changes in how the Company does business, such as acquisitions, intercompany transactions, or the Company’s corporate structure.
The Company recorded an income tax expense for the nine months ended September 30, 2021 and 2020, neither of which were material and both were primarily driven by foreign taxes.
Note 12. Geographical Information
Revenue disaggregated by geography based on the customers’ location was as follows (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
| 2021 | | 2020 | | 2021 | | 2020 |
| United States | $ | 50,751 | | | $ | 30,861 | | | $ | 126,885 | | | $ | 80,887 | |
International(1) | 1,954 | | | 965 | | | 5,985 | | | 2,280 | |
| Total | $ | 52,705 | | | $ | 31,826 | | | $ | 132,870 | | | $ | 83,167 | |
__________________
(1)No individual country made up 10% or more of total revenue for any period presented.
Substantially all of the Company’s long-lived assets are located in the United States.
Note 13. Subsequent Events
The Company has performed an evaluation of subsequent events through November 12, 2021, the date these condensed consolidated financial statements were available to be issued.
On October 20, 2021, the Company granted restricted stock units (“RSUs”) for 660,682 shares of common stock with an estimated aggregate grant date fair value of $18.7 million to eligible employees. The RSUs contain a service-based condition, generally met over four years, to vest in the underlying common stock.
On November 2, 2021, KVSB held a special meeting of stockholders and approved the Transactions with Nextdoor. Following the Closing on November 5, 2021, KVSB was renamed to Nextdoor Holdings, Inc. and its Class A common stock, par value $0.0001 per share (“Class A Common Stock”) began trading on the New York Stock Exchange under the ticker symbol “KIND” on November 8, 2021.
Pursuant to the terms of the Merger Agreement, each share of Nextdoor common stock that was issued and outstanding immediately prior to the Closing, after giving effect to the conversion of all issued and outstanding shares of Nextdoor redeemable convertible preferred stock to Nextdoor common stock, was canceled and converted into the right to receive a number of shares of Nextdoor Holdings, Inc. Class B common stock equal to the number of shares of Nextdoor common stock multiplied by the exchange ratio of 3.1057. In addition, all outstanding equity awards of Nextdoor were converted into equity awards of Nextdoor Holdings, Inc. Class B common stock with the same terms and vesting conditions adjusted by the exchange ratio of 3.1057.
In connection with the Transactions, KVSB completed the sale and issuance of 27,000,000 shares of Nextdoor Holdings, Inc. Class A common stock in a fully committed common stock private placement (“PIPE”) at a purchase price of $10.00 per share. In addition, upon the Closing of the Transactions the performance-based vesting condition for a stock option to purchase 743,184 shares of Nextdoor common stock granted to Nextdoor's Chief Executive Officer and President in March 2021 was satisfied, which resulted in the recognition of stock-based compensation expense of $8.5 million. The option vested in a single installment upon the Closing subject to her continuous employment through such date.
Net proceeds from the Transactions totaled approximately $626.7 million which included funds held in KVSB’s trust account (after giving effect to redemptions) and proceeds from the PIPE investment and was net of transaction costs.
