XML 32 R17.htm IDEA: XBRL DOCUMENT
v3.22.0.1

Stockholders' Equity (Deficit) | 12 Months Ended
--- | ---
Dec. 31, 2021
Stockholders' Equity Note [Abstract] |
Stockholders' Equity (Deficit) | 1 0. Stockholders’ Equity (Deficit) Convertible Founder Stock In 2014, the Company issued an aggregate of 7,920,000 shares of convertible founder stock and 71,280,000 shares of common stock to the Company’s founders (as adjusted for any stock splits), with each receiving 2,640,000 shares of convertible founder stock and 23,760,000 shares of common stock. Each share of convertible founder stock had a par value of $0.00001. Each share of founder stock was convertible into redeemable convertible preferred stock if purchased by an investor in conjunction with a round of preferred stock financing; if otherwise transferred or sold, each share of founder stock was convertible into common stock. In exchange for the shares of convertible founder stock that were fully vested upon issuance, each founder contributed certain technology and intellectual property and other tangible personal property. The shares of common stock were subject to a requisite service period of four years. Upon the sale of the Company’s convertible founder stock in July 2020 pursuant to a tender offer (see below within Note 10), all 7,284,182 shares of the Company’s founder stock that were sold were immediately converted into shares of Series E redeemable convertible preferred stock on a one-for-one basis. Immediately prior to the closing of the IPO, all shares of the Company’s convertible founder stock outstanding, totaling 635,818, were automatically converted into an equal number of shares of Class B common stock. As of December 31, 2021, there were no shares of convertible founder stock issued and outstanding. Preferred Stock In connection with the IPO, the Company’s amended and restated certificate of incorporation became effective, which authorized the issuance of 10,000,000 shares of undesignated preferred stock with a par value of $0.00001 per share with rights and preferences, including voting rights, designated from time to time by the board of directors. Common Stock The Company has two classes of common stock: Class A common stock and Class B common stock. In connection with the IPO, the Company’s amended and restated certificate of incorporation authorized the issuance of 1,000,000,000 shares of Class A common stock and 500,000,000 shares of Class B common stock. The shares of Class A common stock and Class B common stock are identical, except with respect to voting, converting, and transfer rights. Each share of Class A common stock is entitled to one vote. Each share of Class B common stock is entitled to ten votes. Class A and Class B common stock have a par value of $0.00001 per share and are referred to as common stock throughout the notes to the consolidated financial statements, unless otherwise noted. Holders of common stock are entitled to receive any dividends as may be declared from time to time by the board of directors. Each share of Class B common stock is convertible at any time at the option of the holder into one share of Class A common stock. Any holder’s shares of Class B common stock will convert automatically to Class A common stock, on a one-to-one basis, upon the following: (i) sale or transfer of such share of Class B common stock, except for permitted transfers as described in the amended and restated certificate of incorporation; (ii) the death or incapacity of the Class B common stockholder (or nine months after the date of the death or incapacity if the stockholder is one of the Company’s founders); and (iii) on the final conversion date, defined as the earliest of (a) the date fixed by our board of directors that is no less than 61 days and no more than 180 days following the date on which the outstanding shares of Class B common stock represent less than 10% of the then outstanding shares of Class A and Class B common stock; (b) the last trading day of the fiscal year following the tenth anniversary of the Company’s IPO; or (c) the date specified by a vote of the holders of a majority of the outstanding shares of Class B common stock, voting as a single class. In June 2021, the Company donated 250,000 shares of its Class A common stock to its charitable foundation, Confluent.org. The Company recognized charitable donation expense of $13.3 million within general and administrative expense based on the closing price of its Class A common stock on the date of donation. Common Stock Reserved for Future Issuance The Company has reserved the following shares of common stock for future issuance:
| December 31, 2021 |  |  | December 31, 2020 |
Series A redeemable convertible preferred stock |  | - |  |  |  | 34,911,252 |
Series B redeemable convertible preferred stock |  | - |  |  |  | 24,948,780 |
Series C redeemable convertible preferred stock |  | - |  |  |  | 18,657,756 |
Series D redeemable convertible preferred stock |  | - |  |  |  | 12,106,303 |
Series E redeemable convertible preferred stock |  | - |  |  |  | 24,653,759 |
Convertible founder stock |  | - |  |  |  | 635,818 |
2014 Stock Plan: |  |  |  |  |
Options outstanding |  | 61,903,883 |  |  |  | 71,213,150 |
Restricted stock units outstanding |  | 3,495,540 |  |  |  | - |
Remaining shares available for future issuance under the 2014 Plan |  | - |  |  |  | 4,722,481 |
2021 Equity Incentive Plan: |  |  |  |  |
Options outstanding |  | 22,500 |  |  |  | - |
Restricted stock units outstanding |  | 2,938,968 |  |  |  | - |
Remaining shares available for future issuance under the 2021 Plan |  | 32,797,245 |  |  |  | - |
2021 Employee Stock Purchase Plan |  | 5,162,575 |  |  |  | - |
Total |  | 106,320,711 |  |  |  | 191,849,299 |
Equity Incentive Plans In September 2014, the Company’s board of directors adopted and the Company’s stockholders approved the 2014 Stock Plan (the “2014 Plan”). The 2014 Plan was also amended and restated in March 2021 and June 2021. Under the 2014 Plan, the board of directors may grant stock options and other equity-based awards to eligible employees, directors, and consultants. The 2014 Plan was terminated in June 2021 in connection with the IPO, but continues to govern the terms of outstanding awards that were granted prior to the termination of the 2014 Plan. No further equity awards will be granted under the 2014 Plan. With the establishment of the 2021 Equity Incentive Plan (the “2021 Plan”), upon the expiration, forfeiture, cancellation, or reacquisition of any shares of Class B common stock underlying outstanding stock-based awards granted under the 2014 Plan, an equal number of shares of Class A common stock will become available for grant under the 2021 Plan. Equity-based awards granted under the 2014 Plan and the 2021 Plan generally vest over four years. All stock option grants expire ten years from the date of grant. In April 2021, the Company’s board of directors adopted, and in June 2021, the Company’s stockholders approved, the 2021 Plan, which became effective at the time of the execution of the underwriting agreement related to the Company’s IPO. The 2021 Plan provides for the grant of incentive stock options, nonqualified stock options, stock appreciation rights, restricted stock awards, RSUs, performance awards, and other forms of awards to employees, directors, and consultants, including employees and consultants of the Company’s affiliates. A total of 25,812,876 shares of the Company’s Class A common stock have been reserved for future issuance under the 2021 Plan in addition to (i) the shares that remained available for grant of future awards under the 2014 Plan at the time the 2021 Plan became effective, (ii) shares underlying outstanding stock awards granted under the 2014 Plan that expire, or are forfeited, cancelled, or reacquired, as described above, and (iii) any automatic increases in the number of shares of Class A common stock reserved for future issuance under this plan. In April 2021, the Company’s board of directors adopted, and in June 2021, the Company’s stockholders approved, the 2021 Employee Stock Purchase Plan (the “2021 ESPP”), which became effective at the time of the execution of the underwriting agreement related to the Company’s IPO. The 2021 ESPP authorizes the issuance of shares of Class A common stock pursuant to purchase rights granted to employees. A total of 5,162,575 shares of the Company’s Class A common stock have been reserved for future issuance under the 2021 ESPP, in addition to any automatic increases in the number of shares of Class A common stock reserved for future issuance under this plan. Except for the initial offering period, the 2021 ESPP provides for 12-month offering periods beginning February 16 and August 16 of each year, and each offering period will consist of two six-month purchase periods. The initial offering period began on June 24, 2021 and will end on August 15, 2022. The initial offering consists of two purchase periods, with the first purchase period ending on February 15, 2022 and the second purchase period ending on August 15, 2022. The price at which Class A common stock is purchased under the 2021 ESPP is equal to 85% of the lesser of (1) the fair market value of the Company’s stock on the offering date or (2) the fair market value of the Company’s stock on the purchase date. Equity Awards Outstanding The following table summarizes stock equity award activity and activity regarding shares available for grant under the 2014 Plan and the 2021 Plan:
|  |  |  |  | Equity Awards Outstanding |
|  | Shares Available for Grant |  |  | Outstanding Stock Options |  |  | Weighted-Average Exercise Price |  |  | Weighted-Average Remaining Contractual Term (in years) |  |  | Aggregate Intrinsic Value (in thousands) |
Balance as of January 1, 2019 |  |  | 5,645,652 |  |  |  | 48,361,074 |  |  | $ | 1.12 |  |  |  | 8.71 |  |  | $ | 98,241 |
Increase in authorized shares |  |  | 23,873,281 |  |  |  | - |  |  | $ | - |  |  |  |  |  |  |
Stock options granted |  |  | (32,867,335 | ) |  |  | 32,867,335 |  |  | $ | 3.24 |  |  |  |  |  |  |
Stock options exercised |  |  | - |  |  |  | (9,228,205 | ) |  | $ | 1.47 |  |  |  |  |  |  |
Stock options forfeited or expired |  |  | 4,413,648 |  |  |  | (4,413,648 | ) |  | $ | 1.78 |  |  |  |  |  |  |
Repurchases of unvested common stock |  |  | 167,628 |  |  |  | - |  |  | $ | - |  |  |  |  |  |  |
Balance as of December 31, 2019 |  |  | 1,232,874 |  |  |  | 67,586,556 |  |  | $ | 2.06 |  |  |  | 8.54 |  |  | $ | 202,315 |
Increase in authorized shares |  |  | 17,927,565 |  |  |  | - |  |  | $ | - |  |  |  |  |  |  |
Stock options granted |  |  | (22,829,471 | ) |  |  | 22,829,471 |  |  | $ | 6.20 |  |  |  |  |  |  |
Stock options exercised |  |  | - |  |  |  | (10,865,786 | ) |  | $ | 1.58 |  |  |  |  |  |  |
Stock options forfeited or expired |  |  | 8,337,091 |  |  |  | (8,337,091 | ) |  | $ | 2.65 |  |  |  |  |  |  |
Repurchases of unvested common stock |  |  | 54,422 |  |  |  | - |  |  | $ | - |  |  |  |  |  |  |
Balance as of December 31, 2020 |  |  | 4,722,481 |  |  |  | 71,213,150 |  |  | $ | 3.39 |  |  |  | 8.26 |  |  | $ | 677,503 |
Increase in authorized shares |  |  | 48,412,876 |  |  |  | - |  |  | $ | - |  |  |  |  |  |  |
Stock options granted |  |  | (17,232,871 | ) |  |  | 17,232,871 |  |  | $ | 16.38 |  |  |  |  |  |  |
Stock options exercised |  |  | - |  |  |  | (22,730,337 | ) |  | $ | 3.13 |  |  |  |  |  |  |
Stock options forfeited or expired |  |  | 3,789,301 |  |  |  | (3,789,301 | ) |  | $ | 5.31 |  |  |  |  |  |  |
Repurchases of unvested common stock |  |  | 188,460 |  |  |  | - |  |  | $ | - |  |  |  |  |  |  |
RSUs granted |  |  | (7,215,043 | ) |  |  | - |  |  | $ | - |  |  |  |  |  |  |
RSUs forfeited or cancelled |  |  | 132,041 |  |  |  | - |  |  | $ | - |  |  |  |  |  |  |
Balance as of December 31, 2021 |  |  | 32,797,245 |  |  |  | 61,926,383 |  |  | $ | 6.97 |  |  |  | 7.88 |  |  | $ | 4,289,643 |
Vested as of December 31, 2021 |  |  |  |  |  | 22,294,417 |  |  | $ | 3.25 |  |  |  | 6.88 |  |  | $ | 1,627,213 |
Vested and expected to vest as of December 31, 2021 |  |  |  |  |  | 61,926,383 |  |  | $ | 6.97 |  |  |  | 7.88 |  |  | $ | 4,289,643 |
Aggregate intrinsic value represents the difference between the exercise price of the options to purchase common stock and the estimated fair value of the Company’s common stock. The intrinsic value of options exercised was $976.5 million, $60.8 million, and $16.3 million for the years ended December 31, 2021, 2020, and 2019, respectively. The weighted-average grant-date fair value per share of options granted during the years ended December 31, 2021, 2020, and 2019 was $12.43, $4.43, and $1.80, respectively. The total grant-date fair value of stock options vested was $63.6 million, $29.2 million and $15.4 million during years ended December 31, 2021, 2020, and 2019, respectively. Early Exercised Options Holders of stock options governed by the 2014 Plan have the right to exercise unvested options, which are subject to a repurchase right held by the Company at the original exercise price in the event of voluntary or involuntary termination of employment of the stockholder. As of December 31, 2021 and December 31, 2020, there were 2,164,577 and 2,338,945 shares that had been early exercised and were subject to repurchase, respectively. The proceeds related to early exercised options are recorded as liabilities until the options vest, at which point they are reclassified to equity. As of December 31, 2021 and December 31, 2020, the liabilities for early exercised options subject to repurchase were $15.8 million and $6.9 million, respectively, which were recorded as liability for early exercise of unvested stock options and other liabilities, non-current on the consolidated balance sheets. Shares issued for early exercised options are included in issued and outstanding shares as they are legally issued and outstanding, but are not deemed outstanding for accounting purposes until the shares vest. Performance-Based Options As of December 31, 2020, the Company had granted 2,875,255 options with both a service-based vesting condition and a performance-based vesting condition. No performance-based options were granted during the year ended December 31, 2021. The performance-based vesting condition was not deemed probable until consummated, and therefore, stock-based compensation related to these options remained unrecognized prior to the effectiveness of the IPO. Upon the effectiveness of the IPO, the performance-based vesting condition was satisfied, and therefore, the Company recognized cumulative stock-based compensation expense of $3.8 million to general and administrative expense using the accelerated attribution method for the portion of the awards for which the service-based vesting condition had been fully or partially satisfied. RSUs During the year ended December 31, 2021, the Company began granting RSUs to its employees. RSUs granted prior to the IPO had both service-based and performance-based vesting conditions. The service-based vesting condition for these awards is generally satisfied by rendering continuous service for four years, during which time the grants will vest quarterly. In November 2021, the Company’s board of directors modified the terms of the RSUs. Prior to the modification, the RSUs vested either quarterly or with a cliff vesting period of one year and continued vesting quarterly thereafter. The modification removed the requirement of the cliff vesting period of one year and did not have a material impact to the consolidated financial statements for the year ended December 31, 2021. All other significant terms of the service-based RSUs remained unchanged. The performance-based vesting condition is satisfied upon the sale of the Company’s common stock in a firm commitment underwritten public offering. The performance-based vesting condition was not deemed probable until consummated, and therefore, stock-based compensation related to these RSUs remained unrecognized prior to the effectiveness of the IPO. Upon the effectiveness of the IPO, the performance-based vesting condition was satisfied, and therefore, the Company recognized cumulative stock-based compensation expense of $6.8 million using the accelerated attribution method for the portion of the awards for which the service-based vesting condition had been fully or partially satisfied. The following table summarizes RSU activity under the 2014 Plan and the 2021 Plan:
|  | Number of Shares |  |  | Weighted-Average Grant Date Fair Value |
Unvested balances as of January 1, 2021 |  |  | - |  |  | $ | - |
RSUs granted |  |  | 7,215,043 |  |  | $ | 44.87 |
RSUs vested |  |  | (648,494 | ) |  | $ | 34.25 |
RSUs forfeited or cancelled |  |  | (132,041 | ) |  | $ | 41.51 |
Unvested balances as of December 31, 2021 |  |  | 6,434,508 |  |  | $ | 46.01 |
The total grant-date fair value of RSUs vested was $22.2 million during the year ended December 31, 2021. Determination of Fair Value The Company estimates the fair value of stock options using the Black-Scholes option-pricing model, which is dependent upon several variables, such as the fair value of the Company’s common stock, the expected option term, expected volatility of the Company’s stock price over the expected term, expected risk-free interest rate over the expected option term, and expected dividend yield. Fair Value of Common Stock: Prior to the completion of the IPO, the board of directors had determined the fair value of common stock by considering a number of objective and subjective factors, including but not limited to contemporaneous independent third-party valuations of the Company’s common stock, market performance of comparable publicly traded companies, sales of the Company’s redeemable convertible preferred stock and common stock to unrelated third parties, operating and financial performance, the lack of marketability of the Company’s common stock, general and industry-specific economic outlook, and the likelihood of achieving a liquidity event, such as an initial public offering, a merger, or acquisition of the Company given prevailing market conditions. 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 Class A common stock, which is traded on the Nasdaq Global Select Market. Expected Term: For option grants subject to service-based vesting conditions only, the expected term represents the period that the Company’s stock options are expected to be outstanding and is calculated using the simplified method for options that have only service-based vesting conditions. The simplified method deems the term to be the average of the time-to-vesting and the contractual life of the options. For other option grants, the Company estimates the expected term using historical data on employee exercises and post-vesting employment termination behavior, considering the contractual life of the award. Expected Volatility: Since the Company does not have a sufficient trading history of its common stock, the expected volatility was derived from the average historical stock volatilities of public companies within the Company’s industry that it considers to be comparable to its business, over a period equivalent to the expected term of the stock options. Risk-Free Interest Rate: The Company bases the risk-free interest rate on the implied yield available on U.S. Treasury zero-coupon notes with maturities equivalent to the option’s expected term. Expected Dividend Yield: The Company has not issued any dividends in its history and does not expect to issue dividends over the life of the options and therefore has estimated the dividend yield to be zero. The fair value of stock options granted was estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions:
| Year Ended December 31, |
| 2021 |  |  | 2020 |  |  | 2019 |
Expected term (in years) |  | 6.17 |  |  |  | 6.17 |  |  |  | 6.04 |
Expected volatility |  | 66.3 | % |  |  | 68.3 | % |  |  | 59.0 | %
Risk-free interest rate |  | 1.1 | % |  |  | 0.5 | % |  |  | 1.8 | %
Expected dividend yield |  | 0 | % |  |  | 0 | % |  |  | 0 | %
The fair value of employee stock purchase rights for the initial offering period under the 2021 ESPP was estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions:
| Year Ended December 31, 2021
Expected term (in years) | 0.63 - 1.12
Expected volatility | 54.6% - 56.7%
Risk-free interest rate | 0.1%
Expected dividend yield | 0%
Stock-Based Compensation Expense Total stock-based compensation expense was as follows (in thousands):
| Year Ended December 31, |
| 2021 |  |  | 2020 |  |  | 2019 |
Cost of revenue - subscription | $ | 12,571 |  |  | $ | 2,572 |  |  | $ | 1,161 |
Cost of revenue - services |  | 5,418 |  |  |  | 1,745 |  |  |  | 994 |
Research and development |  | 49,051 |  |  |  | 33,755 |  |  |  | 6,268 |
Sales and marketing |  | 55,506 |  |  |  | 14,734 |  |  |  | 6,545 |
General and administrative |  | 33,078 |  |  |  | 90,535 |  |  |  | 3,649 |
Stock-based compensation, net of amounts capitalized | $ | 155,624 |  |  | $ | 143,341 |  |  | $ | 18,617 |
Capitalized stock-based compensation |  | 2,625 |  |  |  | 547 |  |  |  | 69 |
Total stock-based compensation | $ | 158,249 |  |  | $ | 143,888 |  |  | $ | 18,686 |
As of December 31, 2021, there was $518.7 million of unrecognized stock-based compensation expense, which is expected to be recognized over a weighted-average period of 3.2 years. Tender Offer In July 2020, the Company facilitated a tender offer whereby certain investors purchased shares of the Company’s convertible founder stock and common stock from certain stockholders. As a result, certain directors, employees, and non-employees of the Company sold an aggregate of 7,284,182 shares of the Company’s convertible founder stock and 1,883,233 shares of the Company’s common stock to entities affiliated with new and existing investors at a purchase price of $14.9687 per share for an aggregate purchase price of $137.2 million. Upon the sale of the Company’s stock, 7,284,182 shares of convertible founder stock were converted into shares of Series E redeemable convertible preferred stock. The purchase price in this tender offer transaction was in excess of the fair value of such shares at the time of the transaction. As a result, during the year ended December 31, 2020, the Company recorded the excess of the purchase price over fair value of $76.3 million as stock-based compensation expense. Secondary Sales In September 2020, a director of the Company sold an aggregate of 2,632,747 shares of the Company’s common stock to entities affiliated with an existing investor at a purchase price of $14.9687 per share for an aggregate purchase price of $39.4 million. Also in September 2020, a director and an employee of the Company sold an aggregate of 2,142,900 shares of the Company’s common stock to entities affiliated with a new investor at a purchase price of $14.00 per share for an aggregate purchase price of $30.0 million. The purchase prices in both of these secondary transactions were in excess of the fair value of such shares. As a result, during the year ended December 31, 2020, the Company recorded the excess of the purchase price over fair value of $35.6 million as stock-based compensation expense.

X
- Definition The entire disclosure for shareholders' equity and share-based payment arrangement. Includes, but is not limited to, disclosure of policy and terms of share-based payment arrangement, deferred compensation arrangement, and employee stock purchase plan (ESPP). + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 505 -URI http://asc.fasb.org/topic&trid=2208762 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 718 -URI http://asc.fasb.org/topic&trid=2228938 + Details
Name: | us-gaap_ShareholdersEquityAndShareBasedPaymentsTextBlock
Namespace Prefix: | us-gaap_
Data Type: | dtr-types:textBlockItemType
Balance Type: | na
Period Type: | duration

X
- References No definition available. + Details
Name: | us-gaap_StockholdersEquityNoteAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration