The following discussion and analysis provides information which our management believes is relevant to an assessment and understanding of our consolidated results of operations and financial condition. The discussion should be read together with our unaudited condensed consolidated financial statements and related notes that are included elsewhere in this Quarterly Report. This discussion may contain forward-looking statements based upon current expectations that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under "Special Note Regarding Forward-Looking Statements" and "Risk Factors" or in other parts of this Quarterly Report. Overview AtNextdoor , our purpose is to cultivate a kinder world where everyone has a neighborhood they can rely on. Neighbors around the world turn toNextdoor to receive trusted information, give and get help, get things done, and build real world connections with those nearby - neighbors, businesses, and public services. By fostering these connections, both online and in the real world,Nextdoor builds stronger, more vibrant, and more resilient neighborhoods. As ofJune 30, 2022 ,Nextdoor was in more than 295,000 neighborhoods around the world and in nearly 1 in 3 households inthe United States .
Key business metrics for the three months ended
•Weekly Active Users ("WAUs") were 36.9 million, an increase of 26% compared to
the three months ended
•Average revenue per weekly active user ("ARPU") was
Financial Results as of and for the three and six months ended
•Revenue for the three months endedJune 30, 2022 was$54.5 million , an increase of 19% compared to the three months endedJune 30, 2021 . Revenue for the six months endedJune 30, 2022 was$105.5 million , an increase of 32% compared to the six months endedJune 30, 2021 . •Total costs and expenses for the three months endedJune 30, 2022 were$92.8 million , an increase of 38% compared to the three months endedJune 30, 2021 . Total costs and expenses for the six months endedJune 30, 2022 were$177.0 million , an increase of 40% compared to the six months endedJune 30, 2021 . •Net loss for the three months endedJune 30, 2022 increased 71% to$(36.8) million , compared to$(21.5) million for the three months endedJune 30, 2021 . Net loss for the six months endedJune 30, 2022 increased 50% to$(69.8) million , compared to$(46.6) million for the six months endedJune 30, 2021 . •Adjusted EBITDA loss for the three months endedJune 30, 2022 increased 78% to$(20.0) million , compared to$(11.3) million for the three months endedJune 30, 2021 . Adjusted EBITDA loss for the six months endedJune 30, 2022 increased 42% to$(40.0) million , compared to$(28.1) million for the six months endedJune 30, 2021 .
•Cash, cash equivalents, and marketable securities were
See "Non-GAAP Financial Measure" below for more information and for a
reconciliation of net loss, the most directly comparable financial measure
calculated and presented in accordance with
Recent Developments
Closing of Transactions
OnNovember 5, 2021 , we consummated the Business Combination and thePIPE Investment (as described in the unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report) (collectively, the "Reverse Recapitalization"). Reported results from operations included herein prior to the Reverse Recapitalization are those of Legacy Nextdoor. Each share of Legacy Nextdoor common stock that was issued and outstanding immediately prior to the Closing Date, after giving effect to the conversion of all issued and outstanding shares of Legacy Nextdoor preferred stock to Legacy Nextdoor common stock, was canceled and converted into a number of shares ofNextdoor Class B common stock equal to the exchange ratio of 3.1057 as calculated in accordance with the Merger Agreement ("Exchange Ratio") multiplied by the number of shares of Legacy Nextdoor common stock. The Merger was accounted for as a reverse recapitalization in accordance with GAAP. Under this method of accounting, KVSB was treated as the "acquired" company for financial reporting purposes. Accordingly, the financial statements ofNextdoor represent the 22
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continuation of the financial statements of Legacy Nextdoor, with the Merger reflected as the equivalent ofNextdoor issuing common stock for the net assets of KVSB, accompanied by a recapitalization. The net assets of KVSB were recognized as of the Closing at historical cost, with no goodwill or other intangible assets recorded. Operations prior to the Merger are those of LegacyNextdoor and Legacy Nextdoor's operations are the only ongoing operations ofNextdoor . Key Business Metrics In addition to the measures presented in our unaudited condensed consolidated financial statements, we use the following key business metrics to evaluate our business, measure our performance, develop financial forecasts, and make strategic decisions:
Weekly Active Users (WAUs)
We define a WAU as aNextdoor user who opens our application, logs on to our website, or engages with an email with monetizable content at least once during a defined 7-day period.1 We calculate average WAUs for a particular period by calculating the count of unique users, on a rolling basis for the past seven days, for each day of that period, and dividing that sum by the number of days in that period. We assess the health of our business by measuring WAUs because we believe that weekly usage best captures the cadence at which we expect a healthy user base to engage with, and derive the most utility from our platform, and by extension their neighborhood. We also present WAUs by geography because we are more advanced in engagement and monetization inthe United States than internationally. InSeptember 2021 , Apple released changes to the Apple email client available on its operating systems, including iOS 15 and iPadOS 15, which limit our ability to measure user engagement with emails containing monetizable content for users that use the Apple email client. The introduction of these changes impacts our ability to accurately calculate a portion of WAUs for periods following the adoption of the updated operating systems. Following this introduction, we use estimates for these user engagement numbers based on historical data sets, as well as data from users who engage withNextdoor's monetizable content on email clients other than Apple email. Our WAU for the three months endedJune 30, 2022 and 2021 were 36.9 million and 29.2 million, respectively, which represents 26% growth period over period. As illustrated below, our international WAUs have generally grown at a faster rate than ourU.S. WAUs, and we expect this international growth to continue to outpaceU.S. growth in the near term. 1 Emails with monetizable content are emails with a primary purpose to regularly inform users about topics that are relevant to them, and are therefore appropriate for delivering ads to users. These emails comprise almost all of the emails that we send our users and include, but are not limited to, new, trending and top posts, weekly and anytime digests, welcome emails and urgent and emergency alerts. We earn revenue from delivery of ad impressions in emails with monetizable content on either a cost per thousand ("CPM") basis, a cost per click ("CPC") basis or on a fixed-fee basis. While we have the ability to serve ads in all emails with monetizable content, we currently only do so on a portion of the total. 23
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T able of Contents Quarterly Average Weekly Active Users (in millions) [[Image Removed: kvsb-20220630_g1.jpg]]
[[Image Removed: kvsb-20220630_g2.jpg]][[Image Removed: kvsb-20220630_g3.jpg]]
Average Revenue per Weekly Active User (ARPU)
We generate revenue primarily from advertising. We measure monetization of our platform through our ARPU metric. We define ARPU as our total revenue in that geography during a period divided by the average of the number of WAUs in that geography during the same period. We present ARPU on aU.S. and international basis because we are more advanced in our monetization inthe United States than internationally.
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geography is apportioned to each region based on a determination of the location of the account where the revenue-generating activities occur. Our ARPU for the three months endedJune 30, 2022 and 2021 was$1.48 and$1.57 , respectively. Our ARPU reflects the seasonality of our advertising revenue, with the fourth quarter typically being the strongest quarter of each year. Quarterly ARPU [[Image Removed: kvsb-20220630_g4.jpg]]
[[Image Removed: kvsb-20220630_g5.jpg]][[Image Removed: kvsb-20220630_g6.jpg]]
Components of Results of Operations
Revenue
We generate substantially all of our revenue from the delivery of advertisements on our platform which includes the delivery of advertising impressions sold on a CPM basis and CPC basis, as well as on a fixed-fee basis. The majority of our revenue is generated inthe United States . 25
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Cost of Revenue
Cost of revenue consists primarily of expenses associated with the delivery of our revenue generating activities, including the third-party cost of hosting our platform and allocated personnel-related costs, which include salaries, benefits, and stock-based compensation for employees engaged in development of our revenue generating products. Cost of revenue also includes third-party costs associated with delivering and supporting our advertising products and credit card transaction fees related to processing customer transactions. We expect cost of revenue will increase on an absolute dollar basis as neighbor activity on our platform increases. While we expect to realize scale benefits over time, our cost of revenue as a percentage of revenue may vary from period-to-period and is expected to increase modestly over the near and medium term as we invest in new products and features to further increase platform engagement.
Research and Development
Research and development expenses consist primarily of personnel-related costs, including salaries, benefits, and stock-based compensation for our employees engaged in research and development, as well as costs for consultants, contractors and third-party software. In addition, allocated overhead costs, such as facilities, information technology, and depreciation are included in research and development expenses.
We expect research and development expenses will increase on an absolute dollar basis due to investments that we are making in our platform. We expect that research and development expenses as a percentage of revenue will vary from period-to-period over the short term and decrease over the long term.
Sales and Marketing
Sales and marketing expenses consist of personnel-related and other costs which include salaries, commissions, benefits, and stock-based compensation for employees engaged in sales and marketing activities as well as other costs including third-party consulting, public relations, allocated overhead costs, and amortization of acquired intangible assets. Sales and marketing expenses also include brand and performance marketing for both user and small and mid-sized customer acquisition, and neighbor services, which includes personnel-related costs for our neighbor support team, our outsourced neighbor support function, and verification costs. Performance marketing costs related to user acquisition largely consist of the distribution of mailed invitations and, to a lesser extent, digital advertising. Performance marketing costs related to small and mid-sized customer acquisition largely consists of digital advertising and, to a lesser extent, direct mail campaigns. Fluctuations in our performance marketing expenses are driven by a variety of factors, including but not limited to: our target geographies, whether we are acquiring users or businesses, assessment of return on investment of marketing spend, strategic priorities, and seasonal factors. We expect sales and marketing expenses will increase on an absolute dollar basis due to continued investment in sales activities, increased investment in marketing to acquire users, small and mid-sized customers, and further investment in international expansion. We expect sales and marketing expenses as a percentage of revenue will vary from period-to-period over the short term and decrease over the long term. General and Administrative General and administrative expenses consist primarily of personnel-related costs, including salaries, benefits, and stock-based compensation for certain executives, finance, legal, information technology, human resources, and other administrative employees. In addition, general and administrative expenses include fees and costs for professional services, including consulting, third-party legal and accounting services, and allocated overhead costs. We expect general and administrative expenses will increase on an absolute dollar basis for the foreseeable future to support our growth as well as due to additional costs associated with legal, accounting, compliance, investor relations, and other costs as a result of operating as a public company. We expect general and administrative expenses as a percentage of revenue will vary from period-to-period over the short term and decrease over the long term.
Interest Income
Interest income consists of interest earned on our cash, cash equivalents, and marketable securities.
Other Income (Expense), Net
Other income (expense), net consists primarily of unrealized gains and losses from the re-measurement of monetary assets and liabilities denominated in non-functional currencies, and foreign currency transaction gains and losses.
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Provision for Income Taxes
The provision for income taxes consists primarily of income taxes related to foreign and state jurisdictions in which we conduct business. We maintain a full valuation allowance on ourU.S. federal and state deferred tax assets as we have concluded that it is more likely than not that the deferred tax assets will not be realized. Results of Operations The results of operations presented below should be reviewed in conjunction with our unaudited condensed consolidated financial statements and related notes thereto included elsewhere in this Quarterly Report. The following table sets forth our unaudited condensed consolidated results of operations for the periods presented. Three Months Ended June 30, Six Months Ended June 30, (in thousands) 2022 2021 2022 2021 Revenue$ 54,541 $ 45,778 $ 105,541 $ 80,165 Costs and expenses(1): Cost of revenue 10,187 6,600 19,242 12,937 Research and development 32,699 23,331 61,659 44,151 Sales and marketing 32,627 26,356 63,688 49,250 General and administrative 17,283 10,959 32,433 20,288 Total costs and expenses 92,796 67,246 177,022 126,626 Loss from operations (38,255) (21,468) (71,481) (46,461) Interest income 2,153 25 2,644 65 Other income (expense), net (708) (26) (893) (174) Loss before income taxes (36,810) (21,469) (69,730) (46,570) Provision for income taxes 33 30 61 69 Net loss$ (36,843) $ (21,499) $ (69,791) $ (46,639) __________________
(1)Includes stock-based compensation expense as follows:
Three Months Ended June 30, Six Months Ended June 30, (in thousands) 2022 2021 2022 2021 Cost of revenue $ 494
9,874 4,880 16,509 8,274 Sales and marketing 3,000 1,473 4,996 2,750 General and administrative 4,176 2,480 7,234 4,757 Total$ 17,544 $ 9,167 $ 29,688 $ 16,379 27
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The following table sets forth the components of our unaudited condensed consolidated statements of operations as a percentage of revenue for each of the periods presented:
Three Months Ended June 30, Six Months Ended June 30, (as a percentage of total revenue) 2022 2021 2022 2021 Revenue 100 % 100 % 100 % 100 % Costs and expenses: Cost of revenue 19 14 18 16 Research and development 60 51 58 55 Sales and marketing 60 58 60 61 General and administrative 32 24 31 25 Total costs and expenses 170 147 168 158 Loss from operations (70) (47) (68) (58) Interest income 4 - 3 - Other income (expense), net (1) - (1) - Loss before income taxes (67) (47) (66) (58) Provision for income taxes - - - - Net loss (68) % (47) % (66) % (58) %
Note: Certain figures may not sum due to rounding.
Comparison of the Three and Six Months Ended
Revenue Three Months Ended June 30, Change Six Months Ended June 30, Change (in thousands, except percentages) 2022 2021 $ % 2022 2021 $ % Revenue$ 54,541 $ 45,778 $ 8,763 19 %$ 105,541 $ 80,165 $ 25,376 32 % Revenue increased by$8.8 million , or 19%, for the three months endedJune 30, 2022 compared to the three months endedJune 30, 2021 . The increase was primarily due to increased advertiser demand across our product offerings, and increased user engagement as measured by a 26% increase in Q2 WAUs. ARPU decreased 6% in the three months endedJune 30, 2022 compared to the three months endedJune 30, 2021 , as WAU growth outpaced the increase in the number of impressions delivered, which was partially offset by an increase in the price per delivered impression. Revenue increased by$25.4 million , or 32%, for the six months endedJune 30, 2022 compared to the six months endedJune 30, 2021 . The increase was primarily due to increased advertiser demand across our product offerings, and increased user engagement as measured by a 30% increase in WAUs. Year-to-date ARPU increased 2% in the six months endedJune 30, 2022 compared to the six months endedJune 30, 2021 , primarily due to an increase in the price per delivered impression. Cost of revenue Three Months Ended June 30, Change Six Months Ended June 30, Change
(in thousands, except percentages) 2022 2021 $ % 2022 2021 $ % Cost of revenue$ 10,187 $ 6,600 $ 3,587 54 %$ 19,242 $ 12,937 $ 6,305 49 % Cost of revenue increased by$3.6 million , or 54%, for the three months endedJune 30, 2022 compared to the three months endedJune 30, 2021 . The increase was primarily due to$2.0 million higher third-party hosting costs due to increased user growth and engagement, a$0.7 million increase in allocated personnel-related costs, and a$0.5 million increase in third-party costs associated with delivering and supporting our advertising products. 28
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Cost of revenue increased by$6.3 million , or 49%, for the six months endedJune 30, 2022 compared to the six months endedJune 30, 2021 . The increase was primarily due to$3.6 million higher third-party hosting costs due to increased user growth and engagement, a$1.2 million increase in allocated personnel-related costs, and a$0.9 million increase in third-party costs associated with delivering and supporting our advertising products.
Research and development
Three Months Ended June 30, Change Six Months Ended June 30, Change (in thousands, except percentages) 2022 2021 $ % 2022 2021 $ % Research and development$ 32,699 $ 23,331 $ 9,368 40 %$ 61,659 $ 44,151 $ 17,508 40 % Research and development expenses increased by$9.4 million , or 40%, for the three months endedJune 30, 2022 compared to the three months endedJune 30, 2021 . The increase was primarily due to a$7.9 million increase in personnel-related costs primarily driven by an increase in headcount, a$1.0 million increase in third-party software costs, and a$0.3 million increase in allocated overhead costs reflecting an increase in headcount. Research and development expenses increased by$17.5 million , or 40%, for the six months endedJune 30, 2022 compared to the six months endedJune 30, 2021 . The increase was primarily due to a$14.2 million increase in personnel-related costs primarily driven by an increase in headcount, a$1.7 million increase in third-party software costs, and a$0.8 million increase in allocated overhead costs reflecting an increase in headcount. Sales and marketing Three Months Ended June 30, Change Six Months Ended June 30, Change (in thousands, except percentages) 2022 2021 $ % 2022 2021 $ % Personnel-related and other$ 20,760 $ 14,246 $ 6,514 46 %$ 38,104 $ 26,862 $ 11,242 42 % Brand and performance marketing 8,696 9,302 (606) (7) % 19,466 16,450 3,016 18 % Neighbor services 3,171 2,808 363 13 % 6,118 5,938 180 3 % Total sales and marketing$ 32,627 $ 26,356 $ 6,271 24 %$ 63,688 $ 49,250 $ 14,438 29 % Sales and marketing expenses increased by$6.3 million , or 24%, for the three months endedJune 30, 2022 compared to the three months endedJune 30, 2021 . The increase was primarily due to a$6.5 million increase in personnel-related and other costs, which was driven by an increase in headcount, a$0.3 million increase in performance marketing costs to attract small and mid-sized customers, partially offset by a$0.9 million decrease in performance marketing costs for user acquisition. Sales and marketing expenses increased by$14.4 million , or 29%, for the six months endedJune 30, 2022 compared to the six months endedJune 30, 2021 . The increase was primarily due to an$11.2 million increase in personnel-related and other costs, which was driven by an increase in headcount, a$2.7 million increase in performance marketing costs to attract small and mid-sized customers, and a$0.3 million increase in performance marketing costs for user acquisition.
General and administrative
Three Months Ended June 30, Change Six Months Ended June 30, Change (in thousands, except percentages) 2022 2021 $ % 2022 2021 $ % General and administrative$ 17,283 $ 10,959 $ 6,324 58 %$ 32,433 $ 20,288 $ 12,145 60 % General and administrative expenses increased by$6.3 million , or 58%, for the three months endedJune 30, 2022 compared to the three months endedJune 30, 2021 . The increase was primarily due to a$3.7 million increase in personnel-related costs which was 29
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driven by an increase in headcount, a
General and administrative expenses increased by$12.1 million , or 60%, for the six months endedJune 30, 2022 compared to the six months endedJune 30, 2021 . The increase was primarily due to a$5.7 million increase in personnel-related costs which was driven by an increase in headcount, a$3.4 million increase in insurance expenses, and a$2.0 million increase in professional fees primarily related to operating as a public company.
Interest income
Three Months Ended June 30, Change Six Months Ended June 30, Change (in thousands, except percentages) (NM = Not Meaningful) 2022 2021 $ % 2022 2021 $ % Interest income$ 2,153 $ 25 $ 2,128 NM$ 2,644 $ 65 $ 2,579 NM Interest income increased by$2.1 million for the three months endedJune 30, 2022 compared to the three months endedJune 30, 2021 . The increase was primarily driven by an increase in marketable securities and an improvement in interest rates. Interest income increased by$2.6 million for the six months endedJune 30, 2022 compared to the six months endedJune 30, 2021 . The increase was primarily driven by an increase in marketable securities and an improvement in interest rates. Other income (expense), net Three Months Ended June 30, Change Six Months Ended June 30, Change (in thousands, except percentages) (NM = Not Meaningful) 2022 2021 $ % 2022 2021 $ % Other income (expense), net$ (708) $ (26) $ (682) NM$ (893) $ (174) $ (719) NM Other expense increased by$0.7 million for the three months endedJune 30, 2022 compared to the three months endedJune 30, 2021 . The increase was primarily due to the periodic re-measurement of monetary assets and liabilities denominated in non-functional currencies. Other expense increased by$0.7 million for the six months endedJune 30, 2022 compared to the six months endedJune 30, 2021 . The increase was primarily due to the periodic re-measurement of monetary assets and liabilities denominated in non-functional currencies. Provision for income taxes Three Months Ended June 30, Change Six Months Ended June 30, Change (in thousands) 2022 2021 $ % 2022 2021 $ % Provision for income taxes$ 33 $ 30 $ 3 10 % $ 61$ 69 $ (8) (12) % Provision for income taxes increased by less than$0.1 million for the three months endedJune 30, 2022 compared to the three months endedJune 30, 2021 . The increase was primarily due to foreign income tax expenses.
Provision for income taxes decreased by less than
Liquidity and Capital Resources
Since inception, we have generated negative cash flows from operations and have primarily financed our operations from net proceeds received from the sale of equity securities, proceeds from the Reverse Recapitalization, and payments received from our customers. We currently have no debt outstanding. 30
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We have generated losses from our operations, as reflected in our accumulated deficit of$550.1 million as ofJune 30, 2022 . We incurred operating losses and cash outflows from operations by supporting the growth of our business. We expect these losses and operating cash outflows to continue for the foreseeable future. We also expect to incur significant research and development, sales and marketing, and general and administrative expenses over the next several years in connection with the continued development and expansion of our business. As ofJune 30, 2022 , we had$666.3 million in cash, cash equivalents, and marketable securities. We anticipate satisfying our short term cash requirements, including meeting our working capital and capital expenditure requirements, with our existing cash, cash equivalents, and marketable securities. In the long term, we may satisfy our cash requirements with cash, cash equivalents, and marketable securities on hand or with proceeds from a future equity or debt financing. Our ability to support our requirements and plans for cash, including working capital and capital expenditure requirements, will depend on many factors, including the rate of our revenue growth, the timing and extent of spending on research and development efforts and other business initiatives, the expansion of sales and marketing activities, the introduction of new and enhanced product offerings and features, and the continuing market adoption of our platform, the number of shares repurchased under our share repurchase program (the "Share Repurchase Program"), and our ability to obtain equity or debt financing. To the extent existing cash, cash equivalents, and marketable securities are insufficient to fund our working capital and capital expenditure requirements, or should we require additional cash for other purposes, we may attempt to raise additional capital through the sale of equity or debt securities. If we raise additional funds through the issuance of equity or debt securities, those securities may have rights, preferences, or privileges senior to the rights of our Class A and Class B common stock, and our stockholders may experience dilution. Any future indebtedness we incur may result in terms that could also be unfavorable to our equity investors. There can be no assurances that we will be able to raise additional capital on terms we deem acceptable, or at all. The inability to raise additional capital as and when required would have an adverse effect, which could be material, on our results of operations, financial condition, and ability to achieve our business objectives. OnJune 1, 2022 , our Board of Directors authorized and approved the Share Repurchase Program to repurchase up to$100.0 million in aggregate of our Class A common stock, with the authorization to expire onJune 30, 2024 . The timing of any repurchases will depend on market conditions and other investment opportunities, and will be made at our discretion. We currently anticipate that the Share Repurchase Program will extend throughJune 30, 2024 , or such shorter period if$100.0 million in aggregate of shares of our Class A common stock have been repurchased. The Share Repurchase Program does not obligate us to repurchase any dollar amount or number of shares, and the program may be extended, modified, suspended, or discontinued at any time. During the three months endedJune 30, 2022 , we repurchased and retired 3,061,092 shares of Class A common stock at an average purchase price of$3.43 per share for an aggregate repurchase price of$10.5 million . Subsequent toJune 30, 2022 and throughAugust 9, 2022 , we repurchased and retired an additional 4,547,680 shares of Class A common stock at an average purchase price of$3.63 per share for an aggregate repurchase price of$16.5 million , of which$14.5 million was funded by a prepayment made as ofJune 30, 2022 .
Off-Balance Sheet Arrangements
We did not have during the periods presented, and we do not currently have, any commitments or obligations, including contingent obligations, arising from arrangements with unconsolidated entities or persons that have or are reasonably likely to have a material current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, cash requirements, or capital resources.
Cash Flows
The following table summarizes our cash flows for the periods presented:
Six Months Ended June 30, (in thousands) 2022 2021 Net cash used in operating activities$ (28,121) $ (25,593) Net cash provided by (used in) investing activities$ (435,600) $ 12,865 Net cash provided by (used in) financing activities$ (18,397) $ 7,457 Operating activities Cash used in operating activities during the six months endedJune 30, 2022 was$28.1 million which resulted from a net loss of$(69.8) million , adjusted for non-cash charges of$31.0 million and net cash inflows of$10.7 million from changes in operating assets and liabilities. Non-cash charges primarily consisted of$29.7 million of stock-based compensation expense and$2.7 million of depreciation and amortization expense. The net cash inflows from changes in operating assets and liabilities were primarily due to a 31
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$4.3 million increase in accrued expenses and other current liabilities, a$3.7 million decrease in accounts receivable, a$3.5 million decrease in prepaid expenses and other current assets, and a$3.4 million decrease in operating lease right-of-use assets due to normal amortization. These amounts were partially offset by a$3.5 million decrease in operating lease liabilities due to lease payments and a$0.8 million decrease in accounts payable. Cash used in operating activities during the six months endedJune 30, 2021 was$25.6 million which resulted from a net loss of$(46.6) million , adjusted for non-cash charges of$18.7 million and net cash inflows of$2.4 million from changes in operating assets and liabilities. Non-cash charges primarily consisted of$16.4 million of stock-based compensation expense and$2.2 million of depreciation and amortization expense. The net cash inflow from changes in operating assets and liabilities was primarily the result of a$3.3 million decrease in operating lease right-of-use assets due to normal amortization, a$1.6 million increase in accrued expenses and other current liabilities, and a$0.9 million increase in accounts payable. These amounts were partially offset by a$2.5 million decrease in operating lease liabilities due to lease payments and a$1.4 million decrease in prepaid expenses and other current assets.
Investing activities
Cash used in investing activities for the six months endedJune 30, 2022 was$435.6 million , which consisted of purchases of marketable securities of$482.7 million and the purchase of property and equipment of$1.3 million . This was partially offset by proceeds from maturities of marketable securities of$46.6 million and proceeds from sales of marketable securities of$1.7 million .
Cash provided by investing activities for the six months ended
Financing activities
Cash used in financing activities for the six months endedJune 30, 2022 was$18.4 million , which included prepayment under the Share Repurchase Program of$14.5 million , repurchases of common stock of$10.5 million , tax withholdings on release of restricted stock units of$0.7 million , and payment of deferred transaction costs of$0.3 million , partially offset by$7.6 million of proceeds from the exercise of stock options, net of repurchases. Cash provided by financing activities for the six months endedJune 30, 2021 was$7.5 million , which reflected$7.9 million of proceeds from the exercise of stock options, net of repurchases. This was partially offset by the payment of deferred transaction costs of$0.4 million .
Non-GAAP Financial Measure
Adjusted EBITDA
Adjusted EBITDA is a non-GAAP financial measure that represents our net loss adjusted for depreciation and amortization, stock-based compensation, net interest income, provision for income taxes, and acquisition-related costs.
We use Adjusted EBITDA in conjunction with GAAP measures as part of our overall assessment of our performance, including the preparation of our annual operating budget and quarterly forecasts, to evaluate the effectiveness of our business strategies and to communicate with our Board of Directors concerning our financial performance. We believe Adjusted EBITDA is also helpful to investors, analysts, and other interested parties because it can assist in providing a more consistent and comparable overview of our operations across our historical financial periods. Adjusted EBITDA has limitations as an analytical tool, however, and you should not consider it in isolation or as a substitute for analysis of our results as reported under GAAP. Because of these limitations, you should consider Adjusted EBITDA alongside other financial performance measures, including net loss and our other GAAP results. In evaluating Adjusted EBITDA, you should be aware that in the future we may incur expenses that are the same as or similar to some of the adjustments in this presentation. Our presentation of Adjusted EBITDA should not be construed to imply that our future results will be unaffected by the types of items excluded from the calculation of Adjusted EBITDA. Adjusted EBITDA is not presented in accordance with GAAP and the use of this term varies from others in our industry. 32
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The following is a reconciliation of net loss, the most comparable GAAP measure, to Adjusted EBITDA:
Three Months Ended June 30, Six Months Ended June 30, (in thousands) 2022 2021 2022 2021 Net loss$ (36,843) $ (21,499) $ (69,791) $ (46,639) Depreciation and amortization 1,374 1,072 2,704 2,155 Stock-based compensation 17,544 9,167 29,688 16,379 Interest income (2,153) (25) (2,644) (65) Provision for income taxes 33 30 61 69 Adjusted EBITDA$ (20,045) $ (11,255) $ (39,982) $ (28,101)
Critical Accounting Policies and Estimates
We prepare our condensed consolidated financial statements in accordance with GAAP. Preparing condensed consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, expenses, and related disclosures. We evaluate our estimates and assumptions on an ongoing basis. Our estimates are based on historical experience and various other assumptions that we believe to be reasonable under the circumstances. Our actual results could differ from these estimates.
There have been no material changes to our critical accounting policies
requiring estimates, assumptions, and judgments as compared to the critical
accounting policies and estimates as described in our Annual Report on Form 10-K
for the year ended
JOBS Act Accounting Election
We are currently an "emerging growth company" as defined in Section 2(a) of the Securities Act, and have elected to take advantage of the benefits of the extended transition period for complying with new or revised accounting standards. We expect to use this extended transition period for complying with new or revised accounting standards until the earlier of the date we (a) are no longer an emerging growth company or (b) affirmatively and irrevocably opt out of the extended transition period provided for in the JOBS Act. This may make it difficult or impossible to compare our financial results with the financial results of another public company that is either not an emerging growth company or is an emerging growth company that has chosen not to take advantage of the extended transition period exemptions because of the potential differences in accounting standards used. In addition, we intend to rely on the other exemptions and reduced reporting requirements provided by the JOBS Act. Subject to certain conditions set forth in the JOBS Act, as an emerging growth company, we are not required to, among other things: (a) provide an auditor's attestation report on our system of internal control over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act; (b) provide all of the compensation disclosure that may be required of non-emerging growth public companies under the Dodd-Frank Wall Street Reform and Consumer Protection Act; and (c) disclose certain executive compensation-related items such as the comparison of the Chief Executive Officer's compensation to median employee compensation. Because the market value of our common stock held by non-affiliates as ofJune 30, 2022 , exceeded$700 million , we will lose emerging growth company status under the JOBS Act as ofDecember 31, 2022 .
Recently Issued Accounting Pronouncements
Refer to Note 2 to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report for more information regarding recently issued accounting pronouncements.
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