filings.toolsItem 1. Financial Statements
91K characters. Original on sec.gov · Markdown
Item 1. Financial Statements
DOORDASH, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In millions, except share amounts which are reflected in thousands, and per share data)
(Unaudited)
| December 31, 2021 | June 30, 2022 | ||||||||||
| Assets | |||||||||||
| Current assets: | |||||||||||
| Cash and cash equivalents | $ | 2,504 | $ | 2,727 | |||||||
| Short-term marketable securities | 1,253 | 1,272 | |||||||||
| Funds held at payment processors | 320 | 246 | |||||||||
| Accounts receivable, net | 349 | 346 | |||||||||
| Prepaid expenses and other current assets | 139 | 242 | |||||||||
| Total current assets | 4,565 | 4,833 | |||||||||
| Long-term marketable securities | 650 | 495 | |||||||||
| Operating lease right-of-use assets | 336 | 426 | |||||||||
| Property and equipment, net | 402 | 529 | |||||||||
| Intangible assets, net | 61 | 809 | |||||||||
| Goodwill | 316 | 2,315 | |||||||||
| Non-marketable equity securities | 409 | 412 | |||||||||
| Other assets | 70 | 109 | |||||||||
| Total assets | $ | 6,809 | $ | 9,928 | |||||||
| Liabilities and Stockholders’ Equity | |||||||||||
| Current liabilities: | |||||||||||
| Accounts payable | $ | 161 | $ | 207 | |||||||
| Operating lease liabilities | 26 | 47 | |||||||||
| Accrued expenses and other current liabilities | 1,573 | 1,772 | |||||||||
| Total current liabilities | 1,760 | 2,026 | |||||||||
| Operating lease liabilities | 373 | 449 | |||||||||
| Other liabilities | 9 | 43 | |||||||||
| Total liabilities | 2,142 | 2,518 | |||||||||
| Commitments and contingencies (Note 8) | |||||||||||
| Stockholders’ equity: | |||||||||||
| Common stock, $0.00001 par value, 6,000,000 Class A shares authorized as of December 31, 2021 and June 30, 2022, 315,266 and 362,296 Class A shares issued and outstanding as of December 31, 2021 and June 30, 2022, respectively; 200,000 Class B shares authorized as of December 31, 2021 and June 30, 2022, 31,246 and 28,120 Class B shares issued and outstanding as of December 31, 2021 and June 30, 2022, respectively; 2,000,000 Class C shares authorized as of December 31, 2021 and June 30, 2022, zero Class C shares issued and outstanding as of December 31, 2021 and June 30, 2022 | — | — | |||||||||
| Additional paid-in capital | 6,752 | 10,028 | |||||||||
| Accumulated other comprehensive loss | (4) | (107) | |||||||||
| Accumulated deficit | (2,081) | (2,511) | |||||||||
| Total stockholders’ equity | 4,667 | 7,410 | |||||||||
| Total liabilities and stockholders’ equity | $ | 6,809 | $ | 9,928 |
The accompanying notes are an integral part of these condensed consolidated financial statements.
DOORDASH, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions, except share amounts which are reflected in thousands, and per share data)
(Unaudited)
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2021 | 2022 | 2021 | 2022 | ||||||||||||||||||||
| Revenue | $ | 1,236 | $ | 1,608 | $ | 2,313 | $ | 3,064 | |||||||||||||||
| Costs and expenses: | |||||||||||||||||||||||
| Cost of revenue, exclusive of depreciation and amortization shown separately below | 555 | 880 | 1,118 | 1,643 | |||||||||||||||||||
| Sales and marketing | 427 | 421 | 760 | 835 | |||||||||||||||||||
| Research and development | 100 | 205 | 182 | 353 | |||||||||||||||||||
| General and administrative | 216 | 294 | 385 | 539 | |||||||||||||||||||
| Depreciation and amortization | 37 | 81 | 66 | 140 | |||||||||||||||||||
| Total costs and expenses | 1,335 | 1,881 | 2,511 | 3,510 | |||||||||||||||||||
| Loss from operations | (99) | (273) | (198) | (446) | |||||||||||||||||||
| Interest income | — | 5 | 2 | 6 | |||||||||||||||||||
| Interest expense | (1) | (1) | (13) | (1) | |||||||||||||||||||
| Other (expense) income, net | — | (3) | — | 2 | |||||||||||||||||||
| Loss before provision for income taxes | (100) | (272) | (209) | (439) | |||||||||||||||||||
| Provision for (benefit from) income taxes | 2 | (9) | 3 | (9) | |||||||||||||||||||
| Net loss | $ | (102) | $ | (263) | $ | (212) | $ | (430) | |||||||||||||||
| Net loss per share, basic and diluted | $ | (0.30) | $ | (0.72) | $ | (0.64) | $ | (1.21) | |||||||||||||||
| Weighted-average number of shares outstanding used to compute net loss per share, basic and diluted | 334,707 | 363,961 | 331,280 | 356,630 |
The accompanying notes are an integral part of these condensed consolidated financial statements.
DOORDASH, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(In millions)
(Unaudited)
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2021 | 2022 | 2021 | 2022 | ||||||||||||||||||||
| Net loss | $ | (102) | $ | (263) | $ | (212) | $ | (430) | |||||||||||||||
| Other comprehensive loss, net of tax: | |||||||||||||||||||||||
| Change in foreign currency translation adjustments | — | (87) | — | (87) | |||||||||||||||||||
| Change in unrealized loss on marketable securities | — | (6) | — | (16) | |||||||||||||||||||
| Total other comprehensive loss | — | (93) | — | (103) | |||||||||||||||||||
| Comprehensive loss | $ | (102) | $ | (356) | $ | (212) | $ | (533) |
The accompanying notes are an integral part of these condensed consolidated financial statements.
DOORDASH, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(In millions, except share amounts which are reflected in thousands)
(Unaudited)
| Common Stock | Additional Paid-in Capital | Accumulated Deficit | Accumulated Other Comprehensive Income (Loss) | Total Stockholders’ Equity | ||||||||||||||||||||||||||||||||||
| Shares | Amount | |||||||||||||||||||||||||||||||||||||
| Balances as of December 31, 2020 | 318,503 | $ | — | $ | 6,313 | $ | (1,613) | $ | — | $ | 4,700 | |||||||||||||||||||||||||||
| Issuance of common stock upon settlement of restricted stock units | 1,836 | — | — | — | — | — | ||||||||||||||||||||||||||||||||
| Shares withheld related to net share settlement | (802) | — | (166) | — | — | (166) | ||||||||||||||||||||||||||||||||
| Issuance of common stock upon exercise of stock options | 5,989 | — | 13 | — | — | 13 | ||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | 118 | — | — | 118 | ||||||||||||||||||||||||||||||||
| Net loss | — | — | — | (110) | — | (110) | ||||||||||||||||||||||||||||||||
| Balances as of March 31, 2021 | 325,526 | — | 6,278 | (1,723) | — | 4,555 | ||||||||||||||||||||||||||||||||
| Issuance of common stock upon settlement of restricted stock units | 8,056 | — | — | — | — | — | ||||||||||||||||||||||||||||||||
| Shares withheld related to net share settlement | (44) | — | (6) | — | — | (6) | ||||||||||||||||||||||||||||||||
| Issuance of common stock upon exercise of stock options | 3,986 | — | 10 | — | — | 10 | ||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | 162 | — | — | 162 | ||||||||||||||||||||||||||||||||
| Net loss | — | — | — | (102) | — | (102) | ||||||||||||||||||||||||||||||||
| Balances as of June 30, 2021 | 337,524 | $ | — | $ | 6,444 | $ | (1,825) | $ | — | $ | 4,619 |
The accompanying notes are an integral part of these condensed consolidated financial statements.
DOORDASH, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(In millions, except share amounts which are reflected in thousands)
(Unaudited)
| Common Stock | Additional Paid-in Capital | Accumulated Deficit | Accumulated Other Comprehensive Income (Loss) | Total Stockholders’ Equity | ||||||||||||||||||||||||||||||||||
| Shares | Amount | |||||||||||||||||||||||||||||||||||||
| Balances as of December 31, 2021 | 346,512 | $ | — | $ | 6,752 | $ | (2,081) | $ | (4) | $ | 4,667 | |||||||||||||||||||||||||||
| Issuance of common stock upon settlement of restricted stock units | 1,915 | — | — | — | — | — | ||||||||||||||||||||||||||||||||
| Issuance of common stock upon exercise of stock options | 2,686 | — | 5 | — | — | 5 | ||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | 157 | — | — | 157 | ||||||||||||||||||||||||||||||||
| Other comprehensive loss | — | — | — | — | (10) | (10) | ||||||||||||||||||||||||||||||||
| Net loss | — | — | — | (167) | — | (167) | ||||||||||||||||||||||||||||||||
| Balances as of March 31, 2022 | 351,113 | — | 6,914 | (2,248) | (14) | 4,652 | ||||||||||||||||||||||||||||||||
| Issuance of common stock upon settlement of restricted stock units | 2,492 | — | — | — | — | — | ||||||||||||||||||||||||||||||||
| Shares issued related to the acquisition of Wolt | 35,780 | — | 2,842 | — | — | 2,842 | ||||||||||||||||||||||||||||||||
| Issuance of common stock upon exercise of stock options | 1,031 | — | 3 | — | — | 3 | ||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | 269 | — | — | 269 | ||||||||||||||||||||||||||||||||
| Other comprehensive loss | — | — | — | — | (93) | (93) | ||||||||||||||||||||||||||||||||
| Net loss | — | — | — | (263) | — | (263) | ||||||||||||||||||||||||||||||||
| Balances as of June 30, 2022 | 390,416 | $ | — | $ | 10,028 | $ | (2,511) | $ | (107) | $ | 7,410 |
The accompanying notes are an integral part of these condensed consolidated financial statements.
DOORDASH, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
(Unaudited)
| Six Months Ended June 30, | |||||||||||
| 2021 | 2022 | ||||||||||
| Cash flows from operating activities | |||||||||||
| Net loss | $ | (212) | $ | (430) | |||||||
| Adjustments to reconcile net loss to net cash provided by operating activities: | |||||||||||
| Depreciation and amortization | 66 | 140 | |||||||||
| Stock-based compensation | 235 | 360 | |||||||||
| Bad debt expense | 31 | — | |||||||||
| Reduction of operating lease right-of-use assets and accretion of operating lease liabilities | 23 | 35 | |||||||||
| Non-cash interest expense | 11 | — | |||||||||
| Other | 11 | 14 | |||||||||
| Changes in assets and liabilities, net of assets acquired and liabilities assumed from acquisitions: | |||||||||||
| Funds held at payment processors | 26 | 109 | |||||||||
| Accounts receivable, net | 14 | 20 | |||||||||
| Prepaid expenses and other current assets | 77 | (51) | |||||||||
| Other assets | (17) | (44) | |||||||||
| Accounts payable | 17 | 38 | |||||||||
| Accrued expenses and other current liabilities | 153 | (6) | |||||||||
| Payments for operating lease liabilities | (18) | (32) | |||||||||
| Other liabilities | 1 | (8) | |||||||||
| Net cash provided by operating activities | 418 | 145 | |||||||||
| Cash flows from investing activities | |||||||||||
| Purchases of property and equipment | (63) | (77) | |||||||||
| Capitalized software and website development costs | (45) | (73) | |||||||||
| Purchases of marketable securities | (1,112) | (1,078) | |||||||||
| Maturities of marketable securities | 292 | 992 | |||||||||
| Sales of marketable securities | — | 245 | |||||||||
| Other investing activities | (8) | — | |||||||||
| Net cash acquired in acquisitions | — | 71 | |||||||||
| Net cash (used in) provided by investing activities | (936) | 80 | |||||||||
| Cash flows from financing activities | |||||||||||
| Proceeds from exercise of stock options | 23 | 8 | |||||||||
| Deferred offering costs paid | (10) | — | |||||||||
| Repayment of convertible notes | (333) | — | |||||||||
| Taxes paid related to net share settlement of equity awards | (172) | — | |||||||||
| Net cash (used in) provided by financing activities | (492) | 8 | |||||||||
| Foreign currency effect on cash, cash equivalents, and restricted cash | — | (8) | |||||||||
| Net (decrease) increase in cash, cash equivalents, and restricted cash | (1,010) | 225 | |||||||||
| Cash, cash equivalents, and restricted cash | |||||||||||
| Cash, cash equivalents, and restricted cash, beginning of period | 4,345 | 2,506 | |||||||||
| Cash, cash equivalents, and restricted cash, end of period | $ | 3,335 | $ | 2,731 | |||||||
| Reconciliation of cash, cash equivalents, and restricted cash to the condensed consolidated balance sheets | |||||||||||
| Cash and cash equivalents | $ | 3,334 | $ | 2,727 | |||||||
| Restricted cash | 1 | 4 | |||||||||
| Total cash, cash equivalents, and restricted cash | $ | 3,335 | $ | 2,731 | |||||||
| Supplemental disclosure of cash flow information | |||||||||||
| Cash paid for interest | $ | 42 | $ | — | |||||||
| Non-cash investing and financing activities | |||||||||||
| Purchases of property and equipment not yet settled | $ | 21 | $ | 39 | |||||||
| Stock-based compensation included in capitalized software and website development costs | $ | 45 | $ | 66 | |||||||
| Holdback consideration for acquisition | $ | — | $ | 9 | |||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
DOORDASH, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Organization and Description of Business
DoorDash, Inc. (the “Company”), is incorporated in Delaware with headquarters in San Francisco, California. The Company operates a local commerce platform that enables local businesses to address consumers’ expectations of ease and immediacy and thrive in today’s convenience economy.
The Company operates a local commerce platform that connects merchants, consumers, and Dashers. The Company's primary offerings are the DoorDash Marketplace, which operates in four countries including the United States, and the Wolt Marketplace, which operates in 23 countries, most of which are in Europe. Both the DoorDash Marketplace and the Wolt Marketplace ("Marketplaces") provide a suite of services that enable merchants to establish an online presence, generate demand, seamlessly transact with consumers, and fulfill orders primarily through independent contractors who use the Company’s platform to deliver orders (“Dashers”). As part of the Marketplaces, the Company also offers Pickup, which allows consumers to place advance orders, skip lines, and pick up their orders conveniently with no consumer fees, as well as DoorDash for Work, which provides merchants on the Company’s platform with large group orders and catering orders for businesses and events. The DoorDash Marketplace also includes DashPass and the Wolt Marketplace includes Wolt+. DashPass and Wolt+ are the Company’s membership products, which provide members with unlimited access to eligible merchants with zero delivery fees and reduced service fees on eligible orders.
In addition to the Marketplaces, the Company offers Platform Services, which primarily includes DoorDash Drive and Wolt Drive ("Drive"), which are white-label delivery fulfillment services that enable merchants that have generated consumer demand through their own channels to fulfill this demand using the Company’s platform. Platform Services also includes DoorDash Storefront ("Storefront"), which enables merchants to create their own branded online ordering experience, providing them with a turnkey solution to offer consumers on-demand access to e-commerce without investing in in-house engineering or fulfillment capabilities, and BBot, which offers merchants solutions for their in-store and online channels, including in-store digital ordering and payments.
2. Summary of Significant Accounting Policies
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements include the accounts of DoorDash, Inc. and its wholly-owned subsidiaries and have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and the requirements of the U.S. Securities and Exchange Commission (the “SEC”) for interim reporting. All intercompany transactions have been eliminated in consolidation.
These unaudited condensed consolidated interim financial statements reflect all normal recurring adjustments that are, in the opinion of management, necessary to fairly present the information set forth herein. They should be read in conjunction with the audited consolidated financial statements and related notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021. Interim results are not necessarily indicative of the results for a full year.
Use of Estimates
The preparation of condensed consolidated financial statements in accordance with GAAP requires management to make certain estimates, judgments, and assumptions that affect the reported amounts of assets and liabilities and the related disclosures at the date of the financial statements, as well as the reported amounts of revenue and expenses during the periods presented. Estimates include, but are not limited to, revenue recognition, allowances for credit losses, gift card breakage, estimated useful lives of property and equipment, capitalized software and website development costs, intangible assets, valuation of stock-based compensation, valuation of investments and other financial instruments, valuation of acquired intangible assets and goodwill, the incremental borrowing rate applied in lease accounting, insurance reserves, loss contingencies, and income and indirect taxes. Actual results could differ from these estimates.
Significant Accounting Policies
There have been no material changes to the Company's significant accounting policies from its Annual Report on Form 10-K for the fiscal year ended December 31, 2021.
Recently Adopted Accounting Pronouncements
In October 2021, the Financial Accounting Standards Board (the "FASB") issued Accounting Standard Update ("ASU") 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, which requires an acquirer in a business combination to recognize and measure contract assets and contract liabilities in accordance with Accounting Standards Codification ("ASC") Topic 606, as if it had originated the contracts. Under the current business combinations guidance, such assets and liabilities are recognized by the acquirer at fair value on the acquisition date. ASU 2021-08 is effective for fiscal years beginning after December 15, 2022 and early adoption is permitted. The Company early adopted the guidance in 2022 and the impact of the adoption was not material.
3. Revenue
Disaggregated Revenue Information
All revenue recognized during the periods presented was related to the Company's core business, which is primarily comprised of the Company's Marketplaces and Platform Services.
Revenue by geographic area is determined based on the address of the merchant, or in the case of the Company's membership products, the address of the consumer. Revenue by geographic area was as follows (in millions):
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2021 | 2022 | 2021 | 2022 | ||||||||||||||||||||
| United States | $ | 1,230 | $ | 1,561 | $ | 2,302 | $ | 3,006 | |||||||||||||||
| International | 6 | 47 | 11 | 58 | |||||||||||||||||||
| Total revenue | $ | 1,236 | $ | 1,608 | $ | 2,313 | $ | 3,064 |
Contract Liabilities
The timing of revenue recognition may differ from the timing of invoicing to or collections from customers. The Company’s contract liabilities balance, which is included in accrued expenses and other current liabilities on the condensed consolidated balance sheets, is primarily comprised of unredeemed gift cards, prepayments received from consumers and merchants, certain consumer credits as well as other transactions for which the revenue is recognized over time. A summary of activities related to contract liabilities for the six months ended June 30, 2022 was as follows (in millions):
| Contract Liabilities | |||||
| Beginning balance | $ | 183 | |||
| Addition to contract liabilities | 818 | ||||
| Reduction of contract liabilities(1)(2) | (825) | ||||
| Ending balance | $ | 176 |
(1) Gift cards and certain consumer credits can be redeemed through the Marketplaces. When they are redeemed, revenue is recognized on a net basis as the difference between the amounts collected from consumers less amounts remitted to merchants and Dashers for those transactions. Therefore, the amount recognized as revenue related to the reduction of gift cards and certain consumer credits is less than the amount presented in the table above. Net revenue associated with gift cards and certain consumer credits is not tracked by the Company as it is impracticable to do so.
(2) Included in the beginning balance of contract liabilities was $68 million associated with unearned prepayments received by the Company, of which $50 million was recognized as revenue during the six months ended June 30, 2022.
Deferred Contract Costs
Deferred contract costs represent direct and incremental costs incurred to acquire or fulfill the Company’s contracts, consisting of sales commissions and costs related to merchant onboarding, which the Company expects to recover. Deferred contract costs are amortized on a straight-line basis over the expected period of benefit, which the Company determined by considering historical attrition rates and other factors. Deferred contract costs are recorded in prepaid expenses and other current assets and other assets on the condensed consolidated balance sheets. Amortization of deferred contract costs related to sales commissions is recognized in sales and marketing expense and amortization of deferred contract costs related to merchant onboarding is recognized in cost of revenue, exclusive of depreciation and amortization in the condensed consolidated statements of operations. A summary of activities related to deferred contract costs was as follows (in millions):
| Six Months Ended June 30, | |||||||||||
| 2021 | 2022 | ||||||||||
| Beginning balance | $ | 43 | $ | 62 | |||||||
| Addition to deferred contract costs | 14 | 27 | |||||||||
| Amortization of deferred contract costs | (10) | (14) | |||||||||
| Ending balance | $ | 47 | $ | 75 | |||||||
| Deferred contract costs, current | $ | 19 | $ | 29 | |||||||
| Deferred contract costs, non-current | 28 | 46 | |||||||||
| Total deferred contract costs | $ | 47 | $ | 75 |
Allowance for Credit Losses
The allowance for credit losses related to accounts receivable and changes were as follows (in millions):
| Six Months Ended June 30, | |||||||||||
| 2021 | 2022 | ||||||||||
| Beginning balance | $ | 13 | $ | 39 | |||||||
| Current-period provision for expected credit losses | 31 | (5) | |||||||||
| Writeoffs charged against the allowance | (1) | (7) | |||||||||
| Ending balance | $ | 43 | $ | 27 |
4. Acquisitions
Wolt Acquisition
On May 31, 2022, the Company completed the acquisition of 100 percent of the outstanding equity interests of Wolt Enterprise Oy (“Wolt”). The Company's aim is to accelerate its product development, increase its international scale, bring greater focus to its markets outside the United States, and improve the value provided to consumers, merchants, as well as Dashers around the world. The Company’s acquisition-related costs for the three and six months ended June 30, 2022 were $41 million and $48 million. All costs were recorded as general and administrative expenses on the Company’s condensed consolidated statements of operations during the period in which they were incurred. The acquisition date fair value of the consideration transferred for Wolt was $2,842 million, which consisted of the following (in millions):
| Fair Value | |||||
| DoorDash Class A common stock | $ | 2,709 | |||
| Stock-based compensation awards (DoorDash options, RSUs and revesting common stock) attributable to pre-combination services | 133 | ||||
| Total consideration | $ | 2,842 |
The fair value of 36 million shares of Class A common stock issued was determined on the basis of the closing market price of the Company’s Class A common stock on the acquisition date. The Company also issued certain stock-based compensation awards and their fair value was determined using a Black-Scholes option pricing model with the applicable
assumptions as of the acquisition date for options (1.7 million DoorDash options) and using the closing market price of the Company's Class A common stock on the acquisition date for RSUs (1.4 million DoorDash RSUs).
For certain Wolt employees, a portion of their total consideration transferred was restricted subject to revesting over a service period, including 568 thousand shares of the Company's Class A common stock. This restricted equity consideration is considered compensation for post-combination services and will be recognized as stock-based compensation expense over the next four years, based on the fair value of the shares using the closing market price of the Company's Class A common stock on the acquisition date.
The total purchase consideration of the Wolt acquisition was allocated to the tangible and intangible assets acquired, and liabilities assumed, based upon their respective fair values as of the date of the acquisition. The Company recorded $1,993 million of goodwill which represents the excess of the purchase price over the net assets acquired. Goodwill is primarily attributed to the assembled workforce of Wolt and anticipated synergies from the future growth and strategic advantages in the global local commerce industry. The goodwill recorded in connection with the acquisition of Wolt is not deductible for tax purposes. The fair value of assets acquired and liabilities assumed are based on management’s best estimate and assumptions, and are considered preliminary pending finalization of the valuation analysis pertaining to assets acquired and liabilities assumed, which primarily relate to acquired intangible assets. The Company expects to finalize the valuation as soon as practicable, but no later than one year from the acquisition date when the measurement period ends.
The following table summarizes the preliminary fair values of the assets acquired and liabilities assumed as of the acquisition date (in millions):
| May 31, 2022 | |||||
| Current assets | $ | 274 | |||
| Intangible assets | 772 | ||||
| Goodwill | 1,993 | ||||
| Other non-current assets | 82 | ||||
| Current liabilities | (198) | ||||
| Deferred tax liability, net | (32) | ||||
| Other non-current liabilities | (49) | ||||
| Total purchase price | $ | 2,842 |
The following table sets forth the components of intangible assets acquired (in millions) and their estimated useful life as of the date of acquisition (in years):
| Estimated Useful Life | May 31, 2022 | ||||||||||
| Merchant relationships | 11 | $ | 236 | ||||||||
| Trademark | 10 | 268 | |||||||||
| Existing technology | 6 | 150 | |||||||||
| Customer relationships | 3 | 107 | |||||||||
| Courier relationships | 1 | 11 | |||||||||
| Total acquired intangible assets | $ | 772 |
Existing technology represents the existing online and mobile Wolt platform for restaurant and grocery delivery and pickup orders. The merchant, customer, and courier relationships represent the fair value of the underlying relationships with merchants, such as restaurants and grocery stores, users of Wolt’s food and delivery services, and courier partners. The estimated fair values of merchant relationships, existing technology and trademarks were determined based on the present value of cash flows to be generated by those existing intangible assets. The fair values of the courier and customer relationships were determined using a replacement cost method. The Company expects to amortize the fair value of these intangible assets on a straight-line basis over their respective estimated useful lives.
The amount of revenue and net loss from Wolt included in the consolidated statements of operations for the month of June 2022 were $32 million and $45 million, respectively.
The following unaudited pro forma results presents the combined revenue and net loss as if the Wolt acquisition had been completed on January 1, 2021, the beginning of the comparable annual reporting period. The unaudited pro forma information is based on estimates and assumptions which the Company believes are reasonable and primarily reflects adjustments for the pro forma impact of additional amortization related to the fair value of acquired intangible assets and transaction costs. The unaudited pro forma results are presented for informational purposes only and are not necessarily indicative of what the actual results of operations of the combined company would have been if the acquisition had occurred at the beginning of the periods presented, nor are they indicative of future results of operations. The unaudited pro forma results are as follows (in millions):
| Three Months Ended June 30 | Six Months Ended June 30 | ||||||||||||||||||||||
| 2021 | 2022 | 2021 | 2022 | ||||||||||||||||||||
| Revenue | $ | 1,294 | $ | 1,672 | $ | 2,424 | $ | 3,216 | |||||||||||||||
| Net loss | (289) | (340) | (499) | (645) |
Bbot Acquisition
On March 1, 2022, the Company acquired Bbot, Inc., a hospitality technology company. The addition of Bbot's products and technology to the Company's platform will offer merchants more solutions for their in-store and online channels, including in-store digital ordering and payments. The acquisition was accounted for under the acquisition method of accounting. The total purchase consideration was approximately $88 million in cash, including a $9 million indemnification holdback, which was recorded in other liabilities.
The total purchase consideration was allocated to the tangible and intangible assets acquired, and liabilities assumed, based upon their respective fair values as of the date of the acquisition. The excess of the purchase price over the net assets acquired was recorded as goodwill. Goodwill is primarily attributable to the anticipated synergies from the future growth opportunities from the adoption of Bbot’s technology by the Company’s merchants. The fair value of assets acquired and liabilities assumed are based on management’s best estimate and assumptions, and are considered preliminary pending finalization of the valuation analyses pertaining to assets acquired and liabilities assumed, which primarily relate to acquired intangible assets. The measurement period will end no later than one-year from the acquisition date.
The following table summarizes the fair values of the assets acquired and liabilities assumed as of the acquisition date (in millions):
| March 1, 2022 | |||||
| Current assets | $ | 11 | |||
| Intangible assets | 18 | ||||
| Goodwill | 60 | ||||
| Other liabilities | (1) | ||||
| Total purchase price | $ | 88 |
The intangible assets acquired consisted of existing technology and customer relationships, which had estimated remaining useful lives of 5 and 3 years as of the date of the acquisition, respectively.
The acquisition was not material to the Company for the periods presented and therefore, pro forma information has not been presented.
5. Goodwill and Intangible Assets, Net
The changes in the carrying amount of goodwill during the six months ended June 30, 2022 were as follows (in millions):
| Total | ||||||||
| Balance as of December 31, 2021 | $ | 316 | ||||||
| Acquisitions | 2,053 | |||||||
| Effects of foreign currency translation | (54) | |||||||
| Balance as of June 30, 2022 | $ | 2,315 |
Intangible assets, net consisted of the following as of December 31, 2021 (in millions):
| Weighted-average Remaining Useful Life (in years) | Gross Carrying Value | Accumulated Amortization | Net Carrying Value | ||||||||||||||||||||
| Existing technology | 7.0 | $ | 71 | $ | (52) | $ | 19 | ||||||||||||||||
| Merchant relationships | 10.8 | 45 | (8) | 37 | |||||||||||||||||||
| Courier relationships | — | 1 | (1) | — | |||||||||||||||||||
| Customer relationships | 0.8 | 9 | (6) | 3 | |||||||||||||||||||
| Trade name and trademarks | 0.8 | 6 | (4) | 2 | |||||||||||||||||||
| Balance as of December 31, 2021 | $ | 132 | $ | (71) | $ | 61 |
Intangible assets, net consisted of the following as of June 30, 2022 (in millions):
| Weighted-average Remaining Useful Life (in years) | Gross Carrying Value | Accumulated Amortization | Net Carrying Value | ||||||||||||||||||||
| Existing technology | 5.4 | $ | 232 | $ | (61) | $ | 171 | ||||||||||||||||
| Merchant relationships | 10.8 | 275 | (11) | 264 | |||||||||||||||||||
| Courier relationships | 0.9 | 11 | (2) | 9 | |||||||||||||||||||
| Customer relationships | 2.9 | 116 | (11) | 105 | |||||||||||||||||||
| Trade name and trademarks | 9.9 | 268 | (8) | 260 | |||||||||||||||||||
| Balance as of June 30, 2022 | $ | 902 | $ | (93) | $ | 809 |
Amortization expense associated with intangible assets was $3 million and $19 million for the three months ended June 30, 2021 and 2022, respectively. Amortization expense associated with intangible assets was $7 million and $22 million for the six months ended June 30, 2021 and 2022, respectively.
The estimated future amortization expense of intangible assets as of June 30, 2022 was as follows (in millions):
| Year Ending December 31, | Amortization Expense | |||||||
| Remainder of 2022 | $ | 77 | ||||||
| 2023 | 118 | |||||||
| 2024 | 114 | |||||||
| 2025 | 92 | |||||||
| 2026 | 78 | |||||||
| Thereafter | 330 | |||||||
| Total estimated future amortization expense | $ | 809 |
6. Fair Value Measurements
The following tables set forth the Company’s cash equivalents and marketable securities that were measured at fair value on a recurring basis by level within the fair value hierarchy (in millions):
| December 31, 2021 | |||||||||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||
| Cash equivalents | |||||||||||||||||||||||
| Money market funds | $ | 544 | $ | — | $ | — | $ | 544 | |||||||||||||||
| U.S. Treasury securities | — | 50 | — | 50 | |||||||||||||||||||
| Short-term marketable securities | |||||||||||||||||||||||
| Commercial paper | — | 373 | — | 373 | |||||||||||||||||||
| Corporate bonds | — | 141 | — | 141 | |||||||||||||||||||
| U.S. government agency securities | — | 69 | — | 69 | |||||||||||||||||||
| U.S. Treasury securities | — | 670 | — | 670 | |||||||||||||||||||
| Long-term marketable securities | |||||||||||||||||||||||
| Corporate bonds | — | 114 | — | 114 | |||||||||||||||||||
| U.S. government agency securities | — | 49 | — | 49 | |||||||||||||||||||
| U.S. Treasury securities | — | 487 | — | 487 | |||||||||||||||||||
| Total | $ | 544 | $ | 1,953 | $ | — | $ | 2,497 |
| June 30, 2022 | |||||||||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||
| Cash equivalents | |||||||||||||||||||||||
| Money market funds | $ | 385 | $ | — | $ | — | $ | 385 | |||||||||||||||
| Commercial paper | — | 10 | — | 10 | |||||||||||||||||||
| U.S. Treasury securities | — | 52 | — | 52 | |||||||||||||||||||
| U.S. government agency securities | — | 4 | — | 4 | |||||||||||||||||||
| Short-term marketable securities | |||||||||||||||||||||||
| Commercial paper | — | 97 | — | 97 | |||||||||||||||||||
| Corporate bonds | — | 206 | — | 206 | |||||||||||||||||||
| U.S. government agency securities | — | 38 | — | 38 | |||||||||||||||||||
| U.S. Treasury securities | — | 903 | — | 903 | |||||||||||||||||||
| Mutual Funds | 28 | — | — | 28 | |||||||||||||||||||
| Long-term marketable securities | |||||||||||||||||||||||
| Corporate bonds | — | 26 | — | 26 | |||||||||||||||||||
| U.S. government agency securities | — | 47 | — | 47 | |||||||||||||||||||
| U.S. Treasury securities | — | 416 | — | 416 | |||||||||||||||||||
| Mutual Funds | 6 | — | — | 6 | |||||||||||||||||||
| Total | $ | 419 | $ | 1,799 | $ | — | $ | 2,218 |
The fair value of the Company’s Level 1 financial instruments is based on quoted market prices for identical instruments in active markets. The fair value of the Company’s Level 2 fixed income securities is obtained from independent pricing services, which may use quoted market prices for identical or comparable instruments in less active markets or model driven valuations using observable market data or inputs corroborated by observable market data.
There were no Level 3 assets or liabilities as of December 31, 2021 and June 30, 2022.
7. Balance Sheet Components
Cash Equivalents and Marketable Securities
The following tables summarize the cost or amortized cost, gross unrealized gain, gross unrealized loss, and fair value of the Company’s cash equivalents and marketable securities (in millions):
| December 31, 2021 | |||||||||||||||||||||||
| Cost or Amortized Cost | Unrealized | Estimated Fair Value | |||||||||||||||||||||
| Gains | Losses | ||||||||||||||||||||||
| Cash equivalents | |||||||||||||||||||||||
| Money market funds | $ | 544 | $ | — | $ | — | $ | 544 | |||||||||||||||
| U.S. Treasury securities | 50 | — | — | 50 | |||||||||||||||||||
| Short-term marketable securities | |||||||||||||||||||||||
| Commercial paper | 373 | — | — | 373 | |||||||||||||||||||
| Corporate bonds | 141 | — | — | 141 | |||||||||||||||||||
| U.S. government agency securities | 69 | — | — | 69 | |||||||||||||||||||
| U.S. Treasury securities | 671 | — | (1) | 670 | |||||||||||||||||||
| Long-term marketable securities | |||||||||||||||||||||||
| Corporate bonds | 115 | — | (1) | 114 | |||||||||||||||||||
| U.S. government agency securities | 49 | — | — | 49 | |||||||||||||||||||
| U.S. Treasury securities | 489 | — | (2) | 487 | |||||||||||||||||||
| Total | $ | 2,501 | $ | — | $ | (4) | $ | 2,497 |
| June 30, 2022 | |||||||||||||||||||||||
| Cost or Amortized Cost | Unrealized | Estimated Fair Value | |||||||||||||||||||||
| Gains | Losses | ||||||||||||||||||||||
| Cash equivalents | |||||||||||||||||||||||
| Money market funds | $ | 385 | $ | — | $ | — | $ | 385 | |||||||||||||||
| Commercial paper | 10 | 10 | |||||||||||||||||||||
| U.S. Treasury securities | 52 | — | — | 52 | |||||||||||||||||||
| U.S. government agency securities | 4 | — | — | 4 | |||||||||||||||||||
| Short-term marketable securities | |||||||||||||||||||||||
| Commercial paper | 97 | — | — | 97 | |||||||||||||||||||
| Corporate bonds | 209 | — | (3) | 206 | |||||||||||||||||||
| U.S. government agency securities | 38 | — | — | 38 | |||||||||||||||||||
| U.S. Treasury securities | 912 | — | (9) | 903 | |||||||||||||||||||
| Mutual Funds | 28 | — | — | 28 | |||||||||||||||||||
| Long-term marketable securities | |||||||||||||||||||||||
| Corporate bonds | 26 | — | — | 26 | |||||||||||||||||||
| U.S. government agency securities | 48 | — | (1) | 47 | |||||||||||||||||||
| U.S. Treasury securities | 423 | — | (7) | 416 | |||||||||||||||||||
| Mutual Funds | 6 | — | — | 6 | |||||||||||||||||||
| Total | $ | 2,238 | $ | — | $ | (20) | $ | 2,218 |
For marketable securities with unrealized loss positions, the Company does not intend to sell these securities and it is more likely than not that the Company will hold these securities until maturity or a recovery of the cost basis. No allowance for credit losses was recorded for these securities as of December 31, 2021, and June 30, 2022.
Property and Equipment, net
Property and equipment, net consisted of the following (in millions):
| December 31, 2021 | June 30, 2022 | |||||||||||||
| Equipment for merchants | $ | 160 | $ | 168 | ||||||||||
| Capitalized software and website development costs | 288 | 433 | ||||||||||||
| Leasehold improvements | 98 | 128 | ||||||||||||
| Computer equipment and software | 47 | 62 | ||||||||||||
| Office equipment | 25 | 38 | ||||||||||||
| Construction in progress | 31 | 50 | ||||||||||||
| Total | 649 | 879 | ||||||||||||
| Less: Accumulated depreciation and amortization | (247) | (350) | ||||||||||||
| Property and equipment, net | $ | 402 | $ | 529 |
Depreciation expenses were $20 million and $27 million for the three months ended June 30, 2021 and 2022, respectively. Depreciation expenses were $38 million and $54 million for the six months ended June 30, 2021 and 2022, respectively.
The Company capitalized $47 million and $78 million in capitalized software and website development costs during the three months ended June 30, 2021 and 2022, respectively. The Company capitalized $90 million and $145 million in capitalized software and website development costs during the six months ended June 30, 2021 and 2022, respectively. Capitalized software and website development costs are included in property and equipment, net on the condensed consolidated balance sheets. Amortization of capitalized software and website development costs was $14 million and $35 million for the three months ended June 30, 2021 and 2022, respectively. Amortization of capitalized software and website development costs was $21 million and $64 million for the six months ended June 30, 2021 and 2022, respectively. Construction in progress primarily included leasehold improvements on premises that are not ready for use and equipment for merchants that are not placed in service.
Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities consisted of the following (in millions):
| December 31, 2021 | June 30, 2022 | |||||||||||||
| Dasher and merchant payable | $ | 424 | $ | 447 | ||||||||||
| Accrued operations related expenses | 217 | 187 | ||||||||||||
| Contract liabilities | 183 | 176 | ||||||||||||
| Sales tax payable and accrued sales and indirect taxes | 167 | 163 | ||||||||||||
| Insurance reserves | 143 | 280 | ||||||||||||
| Litigation reserves | 107 | 18 | ||||||||||||
| Accrued advertising | 102 | 115 | ||||||||||||
| Other | 230 | 386 | ||||||||||||
| Total | $ | 1,573 | $ | 1,772 |
8. Commitments and Contingencies
Legal Proceedings
From time to time, the Company may be a party to litigation and subject to claims incidental to its business. Although the results of litigation and claims cannot be predicted with certainty, the Company currently believes that the final outcome of these matters will not have a material adverse effect on its business. Regardless of the outcome, litigation can have an adverse impact on the Company because of judgment, defense and settlement costs, diversion of management resources, and other factors. At each reporting period, the Company evaluates whether or not a potential loss amount or a potential range of loss is probable and reasonably estimable, requiring recognition of a loss accrual, or whether the potential loss is reasonably possible, requiring potential disclosure. Legal fees are expensed as incurred.
The Company has been and continues to be involved in numerous legal proceedings related to Dasher classification, and such proceedings have increased in volume since the California Supreme Court’s 2018 ruling in Dynamex Operations West, Inc. v. Superior Court (“Dynamex”). The California Legislature passed legislation (“AB 5”), that was signed into law in September 2019 and became effective on January 1, 2020. AB 5 codified the Dynamex standard regarding contractor classification, expanded its application and created numerous carve-outs, which may have an adverse effect on the Company’s business, financial condition, and results of operations, and may lead to increased legal proceedings and related expenses and may require the Company to significantly alter its existing business model and operations. Further, some jurisdictions are considering implementing standards similar to the test set forth in Dynamex to determine worker classification.
The Company is currently the subject of regulatory and administrative investigations, audits, and inquiries conducted by federal, state, or local governmental agencies concerning the Company’s business practices, the classification and compensation of Dashers, the DoorDash Dasher pay model, and other matters. For example, the Company is currently under audit by the Employment Development Department, State of California for payroll tax liabilities. The Company believes that Dashers are, and have been, properly classified as independent contractors, and thus plans to vigorously contest any adverse assessment or determination. The Company’s chances of success on the merits is uncertain.
In November 2019 the Company filed an agreement to pay $40 million with the representatives of Dashers that had filed certain actions in California and Massachusetts in settlement of claims under the Private Attorney General Act and class action claims alleging worker misclassification of Dashers against the Company. These actions were filed by and on behalf of Massachusetts Dashers that utilized the DoorDash platform since September 2014 and California Dashers that utilized the DoorDash platform since August 2016. The Company entered into several amended settlement agreements to increase the total amount to be paid by the Company, including a final settlement agreement in April 2021, which increased the total amount to be paid by the Company to $100 million. In January 2022, the settlement received final approval and the Company paid out all of the $100 million in settlement payments during the second quarter of 2022.
In June 2020, the San Francisco District Attorney filed an action in the Superior Court of California, County of San Francisco, alleging that the Company misclassified California Dashers as independent contractors as opposed to employees in violation of the California Labor Code and the California Unfair Competition Law, among other allegations. This action is seeking both restitutionary damages and a permanent injunction that would bar the Company from continuing to classify California Dashers as independent contractors. It is a reasonable possibility that a loss may be incurred; however, the possible range of losses is not estimable given the status of the case.
Indemnification
The Company enters into standard indemnification arrangements in the ordinary course of business. Pursuant to these arrangements, the Company indemnifies, holds harmless, and agrees to reimburse the indemnified parties for losses suffered or incurred by the indemnified party, in connection with any trade secret, copyright, patent, or other intellectual property infringement claim by any third-party with respect to its technology. The terms of these indemnification agreements are generally perpetual any time after the execution of the agreement. The maximum potential amount of future payments the Company could be required to make under these agreements is not determinable because it involves claims that may be made against the Company in the future, but have not yet been made. The Company has not incurred costs to defend lawsuits or settle claims related to these indemnification agreements.
The Company has entered into or will enter into indemnification agreements with its directors and officers that may require the Company to indemnify its directors and officers against liabilities that may arise by reason of their status or service as directors or officers, other than liabilities arising from willful misconduct of the individual.
No liability associated with such indemnifications was recorded as of December 31, 2021 and June 30, 2022.
Revolving Credit Facility and Letters of Credit
In November 2019, the Company entered into a revolving credit and guaranty agreement which provides for a $300 million unsecured revolving credit facility maturing on November 19, 2024. Loans under the credit facility bear interest, at the Company’s option, at (i) a base rate equal to the highest of (A) the prime rate, (B) the higher of the federal funds rate or a composite overnight bank borrowing rate plus 0.50%, or (C) an adjusted LIBOR rate for a one-month interest period plus 1.00%, or (ii) an adjusted LIBOR rate plus a margin equal to 1.00%. The Company is also obligated to pay other customary fees for a credit facility of this size and type, including letter of credit fees, an upfront fee, and an unused commitment fee of 0.10%. The credit agreement contains customary affirmative covenants, such as financial statement reporting requirements and restrictions on the use of proceeds, as well as customary negative covenants that
restrict its ability and its subsidiaries’ ability to, among other things, incur additional indebtedness, incur liens, declare cash dividends in the entirety or make certain other distributions, merge or consolidate with other companies or sell substantially all of its assets, make investments, loans and acquisitions, and engage in transactions with affiliates.
In August 2020, the Company amended and restated its existing revolving credit and guaranty agreement to provide for $100 million of incremental revolving loan commitments, effective upon the consummation of an initial public offering of the Company’s common stock on or prior to August 7, 2021, for total revolving commitments of $400 million. The amendment and restatement also extended the maturity date for the revolving credit facility from November 19, 2024 to August 7, 2025.
As of December 31, 2021 and June 30, 2022, the Company was in compliance with the covenants under the credit agreement. As of December 31, 2021 and June 30, 2022, no amounts were drawn from the credit facility.
The Company maintains letters of credit established primarily for real estate leases and insurance policies. As of December 31, 2021 and June 30, 2022, the Company had $60 million and $130 million of issued letters of credit outstanding, respectively, of which $39 million and $99 million, respectively, were issued from the revolving credit and guaranty agreement.
Sales and Indirect Tax Matters
The Company is under audit by various state, local, and foreign tax authorities with regard to sales and indirect tax matters. The Company records sales and indirect tax reserves when they become probable and the amount can be reasonably estimated. These reserves are included in accrued expenses and other current liabilities on the condensed consolidated balance sheets. The timing of the resolution of indirect tax examinations is highly uncertain, and the amounts ultimately paid, if any, upon resolution of the issues raised by the tax authorities may differ from the amounts accrued. It is reasonably possible that within the next twelve months the Company will receive additional assessments by various tax authorities in one or more jurisdictions. These assessments could result in changes to the Company's reserves related to positions on sales and indirect tax filings.
9. Common Stock
Stock Repurchase Program
In May 2022, the board of directors of the Company authorized the repurchase of up to $400 million of the Company’s Class A common stock. Repurchases may be made from time to time through open market repurchases or through privately negotiated transactions subject to market conditions, applicable legal requirements, and other relevant factors. Open market repurchases may be structured to occur in accordance with the requirements of Rule 10b-18. The Company may also, from time to time, enter into Rule 10b5-1 plans to facilitate repurchases of its Class A common stock under this authorization. The timing and actual number of shares repurchased may depend on a variety of factors, including price, general business and market conditions, and alternative investment opportunities.
During the three month period ended June 30, 2022, the Company did not repurchase any shares of Class A common stock under the stock repurchase program.
2014 Equity Incentive Plan
In March 2014, the Company adopted the 2014 Stock Option Plan, as amended (the "2014 Plan"), which provided for the granting of stock options to employees, consultants, and advisors of the Company. Options granted under the 2014 Plan are either incentive stock options or nonqualified stock options. Options under the 2014 Plan were granted at prices no less than 100% of the estimated fair value of the shares on the date of grant as determined by the Company’s board of directors; provided, however, that the exercise price of an incentive stock option granted to a greater than 10% stockholder could not be less than 110% of the estimated fair value of the shares on the date of grant. Options granted generally vest over four years.
The 2014 Plan allowed for the early exercise of options. Under the terms of the 2014 Plan, option holders, upon early exercise, were required to sign a restricted stock purchase agreement that gave the Company the right to repurchase any unvested shares, at the original exercise price, in the event the grantees’ employment terminated for any reason. The repurchase right lapses over time as the shares vest at the same rate as the original option vesting schedule. Stock-based
awards forfeited, cancelled, or repurchased generally were returned to the pool of shares of common stock available for issuance.
In connection with the Company's initial public offering (the "IPO"), the 2014 Plan was terminated effective immediately prior to the effectiveness of the 2020 Equity Incentive Plan (the "2020 Plan") and the Company ceased granting any additional awards under the 2014 Plan. All outstanding awards under the 2014 Plan at the time of the termination of the 2014 Plan remain subject to the terms of the 2014 Plan, and any shares underlying stock options that expire or terminate or are forfeited or repurchased by the Company under the 2014 Plan were automatically transferred to the 2020 Plan.
2020 Equity Incentive Plan
In November 2020, the Company's board of directors adopted, and the Company's stockholders approved, the 2020 Plan, which became effective one business day prior to the effective date of the Company's IPO registration statement. The 2020 Plan provides for the granting of nonstatutory stock options, restricted stock, restricted stock units ("RSUs"), stock appreciation rights, performance units, and performance shares for the Company's Class A common stock to the Company's employees, directors, and consultants. Stock-based awards under the 2020 Plan that expire or are forfeited, canceled, or repurchased generally are returned to the pool of shares of Class A common stock available for issuance under the 2020 Plan. In addition, the number of shares of the Company's Class A common stock reserved for issuance under the 2020 Plan will automatically increase on January 1 of each calendar year, starting on January 1, 2022 in an amount equal to the least of (i) 32,493,000 shares, (ii) five percent (5%) of the total number of all classes of common stock outstanding on December 31 of the fiscal year before the date of each automatic increase, or (iii) such other number of shares determined by the Company's board of directors prior to the applicable January 1.
The exercise price of the options granted under the 2020 Plan will at least be equal to the fair market value of the Company's Class A common stock on the date of grant. The options may be granted for a term of up to ten years (or five years if the option is an incentive stock option granted to a greater than 10% stockholder) and at prices no less than 100% of the fair market value of the shares on the date of grant, provided, however, that the exercise price of an incentive stock option granted to a greater than 10% stockholder will not be less than 110% of the estimated fair value of the shares on the date of grant. Options granted under the 2020 Plan generally vest over four years.
2022 Inducement Equity Incentive Plan
In May 2022, the Company's board of directors adopted the 2022 Inducement Equity Incentive Plan (the “Inducement Plan”), pursuant to which the Company reserved 9,760,000 shares of Class A common stock to be used exclusively for grants of equity-based awards to individuals who were not previously employees or directors of the Company, as a material inducement to the individual’s entry into employment with the Company. The Inducement Plan permits the grant of nonstatutory stock options, restricted stock, RSUs, stock appreciation rights, performance units and performance shares. Shares that actually have been issued under the Inducement Plan under any award will not be returned to the Inducement Plan and will not become available for future distribution under the Inducement Plan; provided, however, that if shares issued pursuant to awards of restricted stock, RSUs, performance shares or performance units are repurchased by the Company or are forfeited to the Company due to failure to vest, such shares will become available for future grant under the Inducement Plan. Shares used to pay the exercise price of an award or to satisfy the tax withholding obligations related to an award will become available for future grant or sale under the Inducement Plan. The exercise price, term, and any other terms and conditions of the options granted under the Inducement Plan will be determined by the administrator of the plan.
Stock option activity under the 2014 Plan, 2020 Plan and Inducement Plan is as follows (in millions, except share amounts which are reflected in thousands, and per share data):
| Options Outstanding | |||||||||||||||||||||||
| Shares subject to Options Outstanding | Weighted- Average Exercise Price Per Share | Weighted- Average Remaining Contractual Term (in years) | Aggregate Intrinsic Value | ||||||||||||||||||||
| Balance as of December 31, 2021 | 19,115 | $ | 2.60 | 4.59 | $ | 2,797 | |||||||||||||||||
| Assumed via acquisition | 1,710 | $ | 4.11 | ||||||||||||||||||||
| Granted | — | $ | — | ||||||||||||||||||||
| Exercised | (3,717) | $ | 2.19 | $ | 388 | ||||||||||||||||||
| Forfeited | (18) | $ | 3.98 | ||||||||||||||||||||
| Balance as of June 30, 2022 | 17,090 | $ | 2.83 | 4.04 | $ | 1,048 | |||||||||||||||||
| Exercisable as of June 30, 2022 | 16,291 | $ | 2.64 | 3.96 | $ | 1,003 | |||||||||||||||||
| Vested and expected to vest as of June 30, 2022 | 17,090 | $ | 2.83 | 4.04 | $ | 1,048 |
The aggregate intrinsic value disclosed in the above table is based on the difference between the exercise price of the stock option and the closing stock price of the Company's Class A common stock on the NYSE as of the respective period-end dates. The aggregate intrinsic value of stock options exercised during the six months ended June 30, 2021, and 2022 was $1.4 billion and $388 million, respectively. The weighted-average grant date fair value of stock assumed via acquisition during the six months ended June 30, 2022 was $72.99 per share. There were no stock options granted during the six months ended June 30, 2021.
The summary of RSU activity was as follows (in millions, except share amounts which are reflected in thousands, and per share data):
| Number of Shares | Weighted- Average Grant Date Fair Value Per Share | Aggregate Intrinsic Value | |||||||||||||||
| Unvested units as of December 31, 2021 | 27,518 | $ | 4,097 | ||||||||||||||
| Assumed via acquisition | 1,396 | $ | 76.91 | ||||||||||||||
| Granted | 17,303 | $ | 86.84 | ||||||||||||||
| Vested | (15) | $ | 92.83 | ||||||||||||||
| Vested and settled | (4,393) | $ | 81.46 | ||||||||||||||
| Forfeited | (1,699) | $ | 112.28 | ||||||||||||||
| Unvested units as of June 30, 2022 | 40,110 | $ | 2,574 |
The aggregate intrinsic value disclosed in the above table is based on the closing stock price of the Company's Class A common stock on the NYSE as of the respective period-end dates. The weighted-average fair value per share of RSUs granted and assumed via acquisition during the six months ended June 30, 2021 and 2022 was $156.10 and $86.10, respectively.
Stock-Based Compensation Expense
The Company estimated the fair value of stock options assumed via acquisition using the Black-Scholes option-pricing model. Key assumptions of the Black-Scholes valuation model are the risk-free interest rate, expected volatility, expected term and expected dividends. The Company determined the expected term of assumed in the money option awards considering vesting provisions, the expected exercise behavior, and contractual term of the awards. 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 stock option awards. The Company developed the expected volatility using the average volatility of its Class A common stock and the stocks of a peer group of similar publicly traded peer companies. The Company utilized a dividend yield of zero, as it had no history or plan of declaring dividends on its common stock.
There were no stock options granted during the three and six months periods ended June 30, 2021 and 2022, except for the options assumed via acquisition. The assumptions used to estimate the fair value of stock options assumed via acquisition for the periods presented were as follows:
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2021 | 2022 | 2021 | 2022 | ||||||||||||||||||||
| Expected volatility | — | 69.13% | —% | 69.13% | |||||||||||||||||||
| Risk-free rate | — | 2.29% | —% | 2.29% | |||||||||||||||||||
| Dividend yield | — | — | — | — | |||||||||||||||||||
| Expected term (in years) | — | 1.69 | — | 1.69 |
The Company recorded stock-based compensation expense in the condensed consolidated statements of operations as follows (in millions):
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2021 | 2022 | 2021 | 2022 | ||||||||||||||||||||
| Cost of revenue, exclusive of depreciation and amortization | $ | 13 | $ | 30 | $ | 21 | $ | 42 | |||||||||||||||
| Sales and marketing | 15 | 29 | 24 | 43 | |||||||||||||||||||
| Research and development | 46 | 95 | 82 | 150 | |||||||||||||||||||
| General and administrative | 64 | 77 | 108 | 125 | |||||||||||||||||||
| Total stock-based compensation expense | $ | 138 | $ | 231 | $ | 235 | $ | 360 |
As of June 30, 2022, there was $16 million of unrecognized stock-based compensation expense related to unvested stock options, which is expected to be recognized over a weighted-average period of 2.72 years.
In November 2020, the Company’s board of directors approved the grant of 10,379,000 RSUs to the Company's Chief Executive Officer (the “CEO Performance Award”). The CEO Performance Award vests upon the satisfaction of a service condition and achievement of certain stock price goals. As of June 30, 2022, unrecognized stock-based compensation expense related to the CEO Performance Award was $234 million, which is expected to be recognized over a period of 2.82 years.
As of June 30, 2022, there was $2.6 billion of unrecognized stock-based compensation expense related to unvested restricted stock and RSUs, excluding the unrecognized stock-based compensation expense associated with the CEO Performance Award granted in November 2020. The Company expects to recognize this expense over the remaining weighted-average period of 2.88 years.
2020 Employee Stock Purchase Plan
In November 2020, the Company's board of directors adopted, and the Company's stockholders approved, the 2020 Employee Stock Purchase Plan (the "ESPP"), which became effective on the business day immediately prior to the effective date of the Company's IPO registration statement. A total of 6,498,600 shares of Class A common stock were initially reserved for sale under the ESPP. The number of shares of Class A common stock available for issuance under the ESPP will be increased on the first day of each fiscal year beginning with the fiscal year following the fiscal year in which the first enrollment date (if any) occurs equal to the least of (i) 6,498,600 shares of Class A common stock, (ii) one and one-half percent (1.5%) of the outstanding shares of all classes of common stock on the last day of the immediately preceding fiscal year, or (iii) an amount determined by the administrator of the ESPP.
Subject to any limitations contained therein, the ESPP allows eligible employees to contribute (in the form of payroll deductions or otherwise to the extent permitted by the administrator) an amount established by the administrator from time to time in its discretion to purchase Class A common stock at a discounted price per share.
As of June 30, 2022, there had been no offering period or purchase period under the ESPP, and no such period will begin unless and until determined by the administrator.
10. Income Taxes
The Company’s tax provision for interim periods is determined using an estimate of its annual effective tax rate, adjusted for discrete items, if any, that arise 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 to tax expense or benefit in the period.
The Company recorded $2 million of provision for income taxes and $9 million of benefit from income taxes for the three months ended June 30, 2021 and 2022, respectively. The Company recorded $3 million of provision for income taxes and $9 million of benefit from income taxes for the six months ended June 30, 2021 and 2022, respectively. The provision or benefit from income taxes is primarily driven by the losses generated in non-U.S. jurisdictions for which a tax benefit can be realized, and the tax effects of deductible stock-based compensation for certain foreign jurisdictions, offset by state franchise taxes.
The Company regularly assesses the realizability of its deferred tax assets and establishes a valuation allowance if it is more-likely-than-not that some, or all, of its deferred tax assets will not be realized in the future. The Company evaluates and weighs all available evidence, both positive and negative, including its historic operating results, future reversals of existing deferred tax liabilities, as well as projected future taxable income. The Company will continue to regularly assess the realizability of its deferred tax assets. Changes in earnings performance and future earnings projections, among other factors, may cause the Company to adjust the valuation allowance on deferred tax assets, which could materially impact the income tax expense in the period the Company determines that these factors have changed. As of June 30, 2022, the Company maintains a full valuation allowance on its deferred tax assets except in certain foreign jurisdictions.
As of June 30, 2022, the Company had $77 million of unrecognized tax benefits, if recognized, the majority of which would result in adjustments to the valuation allowance. The Company is subject to income tax audits in the United States and foreign jurisdictions. The Company recorded liabilities related to uncertain tax positions and believes that the Company has provided adequate reserves for income tax uncertainties in all open tax years. To the extent the Company has tax attribute carryforwards, the tax years in which the attribute was generated may still be adjusted upon examination by the federal, state, or foreign tax authorities to the extent utilized in a future period.
In the event the Company experiences an ownership change within the meaning of Section 382 of the Internal Revenue Code (“IRC”), the Company's ability to utilize net operating losses, tax credits, and other tax attributes may be limited.
11. Net Loss per Share Attributable to Common Stockholders
The Company computes net loss per share attributable to common stockholders using the two-class method required for multiple classes of common stock and participating securities. The rights, including the liquidation and dividend rights, of the Class A common stock and Class B common stock are identical, other than voting rights. Accordingly, the Class A common stock and Class B common stock share equally in the Company’s net losses.
The following table sets forth the calculation of basic and diluted net loss per share attributable to common stockholders during the periods presented. RSUs that vested but have not been settled are included in the denominator in calculating
net loss per share for the three and six months ended June 30, 2022 (in millions, except share amounts which are reflected in thousands, and per share data):
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||||||||||||||||||||||||||
| 2021 | 2022 | 2021 | 2022 | ||||||||||||||||||||||||||||||||||||||||||||
| Class A | Class B | Class A | Class B | Class A | Class B | Class A | Class B | ||||||||||||||||||||||||||||||||||||||||
| Net loss | $ | (92) | $ | (10) | $ | (241) | $ | (22) | $ | (192) | (20) | $ | (393) | $ | (37) | ||||||||||||||||||||||||||||||||
| Weighted-average number of shares outstanding used to compute net loss per share, basic and diluted | 303,427 | 31,280 | 333,738 | 30,223 | 299,981 | 31,299 | 325,955 | 30,675 | |||||||||||||||||||||||||||||||||||||||
| Net loss per share, basic and diluted | $ | (0.30) | $ | (0.30) | $ | (0.72) | $ | (0.72) | $ | (0.64) | $ | (0.64) | $ | (1.21) | $ | (1.21) |
The following outstanding shares of potentially dilutive securities were excluded from the computation of diluted net loss per share because including them would have had an anti-dilutive effect, or issuance of such shares is contingent upon the satisfaction of certain conditions which were not satisfied at the end of the respective periods (in thousands):
| As of June 30, | |||||||||||
| 2021 | 2022 | ||||||||||
| Stock options to purchase common stock | 23,808 | 17,090 | |||||||||
| Unvested restricted stock and restricted stock units | 28,398 | 40,570 | |||||||||
| Escrow shares | — | 2,361 | |||||||||
| Total | 52,206 | 60,021 |
12. Subsequent Events
As of August 5, 2022, the Company repurchased 5.5 million shares of its Class A common stock at a weighted average price of $71.73. Cumulatively, the Company has returned $395 million to stockholders under the $400 million share repurchase program authorized in May 2022.
On June 3, 2022, the Company entered into contracts providing for a joint venture arrangement with a retail partner in Canada. The Company agreed to contribute cash and certain assets in connection with the formation of a joint venture. The joint venture was formed on July 1, 2022, and the Company owns a majority interest of the joint venture entity. The Company's aggregate capital commitment over the three years following the formation of the joint venture is $89 million Canadian dollars (approximately $69 million US dollars). The Company is currently assessing the accounting impact of this transaction on the Company's consolidated financial statements.
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