Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
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 consolidated financial statements and related notes that are included elsewhere in this Annual 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 Annual Report.
Discussions regarding our financial condition and results of operations for the year ended December 31, 2025 compared to the year ended December 31, 2024 are presented below. Discussions regarding our financial condition and results of operations for the year ended December 31, 2024 compared to the year ended December 31, 2023 are located in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the year ended December 31, 2024, filed with the SEC on February 27, 2025.
Overview
Nextdoor is the essential neighborhood network connecting over 105 million Verified Neighbors to the people, places, and information that matter most in their local communities. Operating in over 350,000 neighborhoods across 11 countries, Nextdoor fosters trusted, real-world utility through locally relevant content and services, including news, real-time safety alerts, neighbor recommendations, for sale and free listings, and events. This focus on practical local value drives genuine, high-intent local engagement and supports a diverse ecosystem of neighbors and partners seeking to connect with neighbors.
Key business metrics for the three months ended December 31, 2025 are as follows:
•Platform weekly active users (“Platform WAU”) was 21.0 million, a decrease of 5% compared to the three months ended December 31, 2024.
•Average revenue per platform weekly active user (“Platform ARPU”) was $3.31, an increase of 13% compared to the three months ended December 31, 2024.
Financial Results as of and for the year ended December 31, 2025 are as follows:
•Revenue was $257.6 million, an increase of 4% compared to 2024.
•Total costs and expenses were $329.6 million, a decrease of 11% compared to 2024.
•Net loss decreased 45% to $54.2 million in 2025, compared to $98.1 million in 2024.
•Adjusted EBITDA was positive $0.6 million in 2025, compared to a loss of $18.2 million in 2024.
•Cash, cash equivalents, and marketable securities were $404.8 million.
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 U.S. generally accepted accounting principles (“GAAP”), to Adjusted EBITDA.
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Restructuring
In August 2025, we announced a cost reduction plan intended to right size the business and align the workforce and other expenses with our business priorities. The execution of the cost reduction plan was substantially complete by the end of the third quarter of 2025.
The following table summarizes the restructuring charges in the consolidated statements of operations for the year ended December 31, 2025 (in thousands):
Severance and Related Charges Stock-Based Compensation Expense Total
In April 2024, we performed a restructuring intended to refocus the Company for future growth. The plan impacted 38 of our full-time employees. We incurred one-time charges of $2.8 million in connection with the plan, consisting primarily of cash expenditures for severance payments, employee benefits and related costs. The execution of the plan was substantially complete by the end of the second quarter of 2024. In addition, in June 2024 we ceased occupying and abandoned certain floors of our leased headquarters in San Francisco in order to adjust our office space footprint to better align with the needs of our work model. As a result, we recorded impairment charges of $22.8 million for the related operating lease right-of-use assets, leasehold improvements and furniture and fixtures.
The following table summarizes the restructuring charges in the consolidated statements of operations for the year ended December 31, 2024 (in thousands).
Office Space Reductions (1) Severance and Related Charges Total
Research and development $ — $ 250 $ 250
(1) Office space reductions are primarily non-cash and include impairment charges related to operating lease right-of-use assets, leasehold improvements and furniture and fixtures.
In the fourth quarter of 2023, we announced a cost reduction plan intended to right-size the business and align the workforce and other expenses with our near term revenue expectations and long term business priorities. The cost reduction plan included a reduction of full-time employee headcount by approximately 25%. The execution of the cost reduction plan was substantially complete by the end of the fourth quarter of 2023.
The following table summarizes the restructuring charges in the consolidated statements of operations for the year ended December 31, 2023 (in thousands):
Severance and Related Charges Stock-Based Compensation Expense Total
Refer to Note 13 to our consolidated financial statements for further information on our restructuring charges.
Key Business Metrics
In addition to the measures presented in our consolidated financial statements, we use the following key business metrics to evaluate our business, measure our performance, develop financial forecasts, and make strategic decisions:
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Platform Weekly Active Users (Platform WAU)
We define a Platform WAU as a Nextdoor user who opens our application or logs on to our website at least once during a defined 7-day period. We calculate average Platform WAU 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 Platform WAU 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.
Our Platform WAU for the three months ended December 31, 2025 and 2024 was 21.0 million and 22.2 million, respectively, which represents a 5% decrease period over period.
Quarterly Average Platform Weekly Active Users
(in millions)
Average Revenue per Platform Weekly Active User (Platform ARPU)
We generate revenue primarily from advertising. We measure monetization of our platform through our Platform ARPU metric. We define Platform ARPU as our total revenue during a period divided by the average of the number of Platform WAU during the same period.
Our Platform ARPU for the years ended December 31, 2025 and 2024 was $11.94 and $11.36, respectively.
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Quarterly Platform ARPU
Factors Affecting Our Performance
Macroeconomic Conditions. Macroeconomic conditions, whether in the advertising industry in general, among specific types of advertisers or within particular geographies, including but not limited to health epidemics or pandemics, actual or perceived instability in the global banking system, labor shortages, supply chain disruptions, the implementation of tariffs by the United States, China, or other governments, a potential recession, inflation, changing interest rates and fluctuations in foreign currency exchange rates, competition from other platforms and other risks and uncertainties have impacted, and all or some of these factors may continue to impact, advertiser demand, user growth, user engagement, and our business, operations and financial results. See "Risk Factors" and "Special Note Regarding Forward-Looking Statements” for additional details.
Growth in and Engagement of Users. We measure growth in, and engagement of, users by tracking Platform WAU. As the size and engagement of our user base grows, we believe the potential to increase our revenue grows.
We may face challenges increasing the size and engagement of our user base due to a number of factors including competition, challenges in acquiring and engaging users, or changes in regulations.
Growth in Monetization. Monetization trends, which are reflected in our Platform ARPU, are a key factor that affects our revenue and financial results. To increase monetization, we are focused on catering to businesses of all sizes, from small local businesses to large global brands across both self-serve and managed campaigns through our go-to-market approach. This approach combines the scale and efficiency of our proprietary ad stack with the expertise of a dedicated global sales team. We are also focused on increasing our user base and engagement in the United States and internationally, which will increase the opportunities for businesses to advertise on Nextdoor.
There are many variables that impact Platform ARPU, including the number of ad impressions shown on our platform and the price per ad, which depends on a number of factors including the engagement of our user base, the number and diversity of our customers, seasonality of advertising spend, our customers’ advertising objectives, advertising performance, the effectiveness of our advertising services, our ability to measure that effectiveness for our customer, and the effect of geographic differences on each of these factors.
While we continue to view international monetization as a long-term growth opportunity, our focus is on improving our product experience and aligning our operations to best serve users and advertisers in existing markets, primarily in the United States. Due to our decision to focus our earliest monetization efforts in the United States, we have less experience monetizing international markets and therefore may experience challenges scaling and monetizing these markets. The international advertising market is also less mature than the U.S. digital advertising market.
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Investment for Growth. We continually invest in technology to enhance our offerings for neighbors, businesses, and public agencies. At the core of our strategy is the use of AI and ML, which powers personalized content distribution and optimizes ad reach and performance. By leveraging our unique data set, we have developed AI-powered features to increase relevance, engagement, and utility for neighbors. We continue investing in our proprietary ad platform to deliver greater advertiser value, reduce advertiser effort, and enable businesses of all sizes to succeed on Nextdoor.
Investments in Platform. In 2025, we launched the new Nextdoor initiative, the first phase of a multi‐phase product transformation designed to create more engaging experiences for neighbors and partners and deliver enhanced value for advertisers. This evolution expands the platform beyond primarily neighbor-generated content to a dynamic feed enriched with timely, locally relevant information, including news and alerts, with AI and ML used to help surface and personalize content for neighbors. We have made and expect to continue to make investments in new products or enhancements to our platform. The success of the new Nextdoor initiative, and the return on our investments associated with the new Nextdoor initiative, will depend on the ability of these platform changes to drive additional users and user engagement on our platform and to provide value to advertisers.
International Expansion. We continue to assess opportunities to grow our international user base and expand monetization outside of the United States. While we believe that increased international monetization presents an important opportunity for long-term growth, our primary focus remains on improving our product experience and aligning our operations to best serve users and advertisers in our existing markets. We are taking a strategic and measured approach to international expansion, prioritizing investments in markets where we see the strongest potential for sustainable growth. Over time, we believe that international operations can expand meaningfully, and we see opportunities to increase monetization and Platform ARPU in these markets. Our investments in international expansion are targeted and align with our broader strategic priorities. The success of these initiatives will depend on our ability to drive engagement and monetization in international markets.
Seasonality. We typically observe seasonal improvements in advertising spend beginning in the second quarter, with those demand trends remaining stable through the fourth quarter. Periods of significant growth and changes in the macroeconomic environment have partially masked these trends in some historical periods.
Components of Results of Operations
Revenue
We generate a majority of our revenue from the delivery of advertising services. We recognize revenue only after transferring control of promised goods or services to the customer. Advertising services are typically sold on a cost per thousand (“CPM”) basis, a cost per click (“CPC”) basis, or on a subscription basis according to the service period. The majority of our revenue is generated in the United States.
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 services and credit card transaction fees related to processing customer transactions.
Research and Development
Research and development expenses consist primarily of personnel-related costs, including salaries, benefits, restructuring costs, 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.
Sales and Marketing
Sales and marketing expenses consist primarily of personnel-related and other costs which include salaries, commissions, benefits, restructuring costs, and stock-based compensation for employees engaged in sales and marketing activities as well as other costs including third-party consulting, public relations, and allocated overhead costs. Sales and marketing expenses also include brand and performance marketing for both user and local business acquisition, and neighbor services, which includes personnel-related costs for our neighbor support team, our outsourced neighbor support function, and verification costs.
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Performance marketing costs related to local business acquisition largely consists of digital advertising and, to a lesser extent, direct mail campaigns. Performance marketing costs related to user acquisition largely consist of digital advertising. 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.
General and Administrative
General and administrative expenses consist primarily of personnel-related costs, including salaries, benefits, restructuring costs, 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.
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 gains and losses on marketable securities and foreign currency transactions.
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 our U.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 consolidated financial statements and related notes thereto included elsewhere in this Annual Report. The following table sets forth our consolidated results of operations for the periods presented.
Year Ended December 31,
Costs and expenses(1):
Other income (expense), net 605 (99) (505)
__________________
(1)Includes stock-based compensation expense as follows:
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Year Ended December 31,
The following table sets forth the components of our consolidated statements of operations as a percentage of revenue for each of the periods presented:
Year Ended December 31,
Costs and expenses:
Research and development 52 52 69
General and administrative 24 37 35
Loss from operations (28) (49) (79)
Other income (expense), net — — —
Loss before income taxes (20) (39) (67)
Provision for income taxes 1 — —
Note: Certain figures may not sum due to rounding.
Comparison of the Years Ended December 31, 2025 and 2024
Revenue
Year Ended December 31, Change
(in thousands, except percentages) 2025 2024 $ %
Revenue increased by $10.4 million, or 4%, for the year ended December 31, 2025 compared to the year ended December 31, 2024. The increase was primarily due to increased advertiser spending, partially offset by a decrease in the number of active users, as measured by a 5% decrease in 2025 Platform WAU.
Cost of revenue
Year Ended December 31, Change
(in thousands, except percentages) 2025 2024 $ %
Cost of revenue decreased by $0.9 million, or 2%, for the year ended December 31, 2025 compared to the year ended December 31, 2024. The decrease was primarily due to a $1.1 million decrease in third-party costs associated with delivering and supporting our advertising services, a $1.0 million decrease in third-party hosting costs, partially offset by a $0.9 million increase in allocated personnel-related costs, and a $0.7 million increase in merchant processing fees.
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Research and development
Year Ended December 31, Change
(in thousands, except percentages) 2025 2024 $ %
Research and development expenses increased by $7.3 million, or 6%, for the year ended December 31, 2025 compared to the year ended December 31, 2024. The increase was primarily due to a $4.8 million increase in personnel-related costs, driven by restructuring costs partially offset by a decrease in average headcount, a $1.5 million increase in third-party software costs, and a $1.3 million increase in professional service fees.
Sales and marketing
Year Ended December 31, Change
(in thousands, except percentages) 2025 2024 $ %
Sales and marketing expenses decreased by $15.9 million, or 15%, for the year ended December 31, 2025 compared to the year ended December 31, 2024. The decrease was primarily due to a $9.4 million decrease in personnel-related costs, inclusive of restructuring costs, which was driven by a decrease in average headcount, a $3.7 million decrease in performance marketing costs for user acquisition, a $2.0 million decrease in performance marketing costs to attract local businesses, and a $0.8 million decrease in neighbor services.
General and administrative
Year Ended December 31, Change
(in thousands, except percentages) 2025 2024 $ %
General and administrative expenses decreased by $29.8 million, or 32%, for the year ended December 31, 2025 compared to the year ended December 31, 2024. The decrease was primarily due to $22.8 million of impairment costs related to office space reductions in 2024 and an $8.0 million decrease in personnel-related costs, inclusive of restructuring costs, which was driven by a decrease in average headcount, partially offset by a $2.7 million increase in professional service fees.
Interest income
Year Ended December 31, Change
(in thousands, except percentages) 2025 2024 $ %
Interest income decreased by $5.6 million, or 23%, for the year ended December 31, 2025 compared to the year ended December 31, 2024. The decrease was primarily driven by lower returns on marketable securities as a result of lower invested balances and lower interest rates.
Other income (expense), net
Year Ended December 31, Change
(in thousands, except percentages) 2025 2024 $ %
Other income (expense), net $ 605 $ (99) $ 704 NM
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Other income (expense), net increased by $0.7 million for the year ended December 31, 2025 compared to the year ended December 31, 2024. The increase was primarily due to the periodic re-measurement of monetary assets and liabilities denominated in non-functional currencies and gains and losses on marketable securities and foreign currency transactions.
Provision for income taxes
Year Ended December 31, Change
Provision for income taxes increased by $0.9 million, or 130%, for the year ended December 31, 2025 compared to the year ended December 31, 2024. The increase was primarily due to an increase in foreign income tax expenses.
Liquidity and Capital Resources
Since inception with the exception of the year ended December 31, 2025, 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 Business Combination, and payments received from our customers. We currently have no debt outstanding.
We have generated losses from our operations, as reflected in our accumulated deficit of $918.3 million as of December 31, 2025. 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 strategic expansion of our business.
As of December 31, 2025, we had $404.8 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 any future equity or debt financings. 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, the continuing market adoption of our platform, the number of shares repurchased under our Share Repurchase Program, and our ability to obtain equity or debt financing. Moreover, any actual or perceived instability in the U.S. or international banking systems may impact liquidity both in the short term and long term.
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.
On May 31, 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 on June 30, 2024. The timing of any repurchases will depend on market conditions and other investment opportunities, and will be made at our discretion. 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. On February 21, 2024, our Board of Directors authorized and approved an increase of $150.0 million to the Share Repurchase Program and extended the expiration date to March 31, 2026. During the year ended December 31, 2025, we repurchased and retired 10,874,916 shares of our Class A common stock at an average purchase price of $1.73 per share for an aggregate repurchase price of $18.8 million. As of December 31, 2025, we had $78.4 million available for future share repurchases under the Share Repurchase Program.
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Cash Flows
The following table summarizes our cash flows for the periods presented:
Year Ended December 31,
Operating activities
Cash provided by operating activities during the year ended December 31, 2025 was $6.5 million which resulted from a net loss of $54.2 million, adjusted for non-cash charges of $64.8 million and net cash outflows of $4.2 million from changes in operating assets and liabilities. Non-cash charges primarily consisted of $65.3 million of stock-based compensation expense, $1.9 million of depreciation and amortization expense, partially offset by $2.3 million of accretion on investments. The net cash outflows from changes in operating assets and liabilities were primarily due to an $8.5 million decrease in operating lease liabilities due to lease payments and a $3.2 million increase in accounts receivable. These amounts were partially offset by a $2.9 million decrease in operating lease right-of-use assets due to normal amortization, a $2.2 million increase in accounts payable, a $1.3 million increase in accrued expenses and other liabilities, and a $1.2 million increase in prepaid expenses and other assets.
Cash used in operating activities during the year ended December 31, 2024 was $20.2 million which resulted from a net loss of $98.1 million, adjusted for non-cash charges of $95.9 million and net cash outflows of $18.0 million from changes in operating assets and liabilities. Non-cash charges primarily consisted of $74.1 million of stock-based compensation expense, $22.8 million of non-cash impairment charges related to lease abandonment, and $3.9 million of depreciation and amortization expense, partially offset by $5.5 million of accretion on investments. The net cash outflows from changes in operating assets and liabilities were primarily due to a $8.1 million decrease in accrued expenses and other liabilities, a $6.9 million decrease in operating lease liabilities due to lease payments, a $5.1 million increase in accounts receivable, and a $1.6 million decrease in accounts payable. These amounts were partially offset by a $3.7 million decrease in operating lease right-of-use assets due to normal amortization.
Investing activities
Cash provided by investing activities for the year ended December 31, 2025 was $42.6 million, which consisted of proceeds from maturities of marketable securities of $193.4 million and proceeds from sales of marketable securities of $141.9 million. This was partially offset by purchases of marketable securities of $292.2 million and purchases of property and equipment of $0.6 million.
Cash provided by investing activities for the year ended December 31, 2024 was $86.4 million, which consisted of proceeds from maturities of marketable securities of $198.5 million and proceeds from sales of marketable securities of $185.6 million. This was partially offset by purchases of marketable securities of $289.8 million and a loan to Opportunity Finance Network of $7.5 million.
Financing activities
Cash used in financing activities for the year ended December 31, 2025 was $34.0 million, which consisted of tax withholdings on release of restricted stock units of $19.1 million and repurchases of common stock of $18.9 million, partially offset by proceeds from the issuance of common stock upon exercise of stock options of $2.6 million and proceeds from the issuance of common stock under the employee stock purchase plan of $1.3 million.
Cash used in financing activities for the year ended December 31, 2024 was $81.0 million, which consisted of repurchases of common stock of $75.5 million and $19.9 million of tax withholdings from stock-based awards, partially offset by $13.3 million of proceeds from the exercise of stock options and $1.1 million of proceeds from the issuance of common stock under the employee stock purchase plan.
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 any restructuring charges or acquisition-related costs.
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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.
The following is a reconciliation of net loss, the most comparable GAAP measure, to Adjusted EBITDA:
Year Ended December 31,
Critical Accounting Policies and Estimates
We prepare our consolidated financial statements in accordance with GAAP. Preparing 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.
The critical accounting policies requiring estimates, assumptions, and judgments that we believe have the most significant impact on our consolidated financial statements are described below.
Refer to Note 2 to our consolidated financial statements for further information on our other significant accounting policies.
Revenue Recognition
We generate a majority of our revenue from the delivery of advertising services. We recognize advertising revenue after satisfying our contractual performance obligation, which, for the majority of our advertising arrangements, is when an advertising impression is displayed to users. None of our arrangements contain minimum impression guarantees. We typically bill advertisers on a monthly basis and our payment terms vary by customer type and location. We have other advertising arrangements which are typically fixed-fee arrangements and revenue is recognized on a straight-line basis over the non-cancellable contractual term of the agreement, generally beginning on the date our service is made available to the customer. In certain advertising arrangements we require payment upfront from our customers. We record deferred revenue when we collect cash from customers in advance of revenue recognition.
Leases
At the inception of our contracts we determine if the contract is or contains a lease. A contract is or contains a lease if it conveys the right to control the use of an identified asset for a period of time in exchange for consideration. Operating leases consist of real estate leases and are included in operating lease right-of-use assets and operating lease liabilities on our consolidated balance sheets at commencement date based on the present value of remaining fixed lease payments.
When the discount rate implicit in the lease cannot be readily determined, we use the applicable incremental borrowing rate at lease commencement in order to discount lease payments to present value for purposes of performing lease classification tests and measuring the lease liability. The incremental borrowing rate is a hypothetical rate based on the rate of interest we would have to pay to borrow on a collateralized basis over a similar term and amount equal to the lease payments in a similar economic environment.
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Recently Issued Accounting Pronouncements
Refer toNote 2to our consolidated financial statements included elsewhere in this Annual Report for more information regarding recently issued accounting pronouncements.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
We are exposed to market risk in the ordinary course of our business. Market risk represents the risk of loss that may impact our financial condition due to adverse changes in financial market prices and rates. Our market risk exposure is primarily the result of fluctuations in interest rates and foreign currency exchange rates.
Interest Rate Risk
As of December 31, 2025, we had cash and cash equivalents of $63.3 million and marketable securities of $341.4 million. Our cash and cash equivalents consist of cash held in banks, demand deposits, money market funds, corporate bonds, and commercial paper. The primary objectives of our investment activities are to preserve principal and provide liquidity without significantly increasing risk. We do not enter into investments for trading or speculative purposes. Due to the relatively short-term nature of our investment portfolio, a hypothetical 100 basis point change in interest rates would not have a material effect on the fair value of our portfolio for the periods presented.
Foreign Currency Risk
The functional currency of our international subsidiaries is generally their local currency. Our sales are typically denominated in the local currency of the country in which the sale was made. The majority of our revenue is denominated in U.S. Dollars. As such, our revenue is not currently exposed to significant foreign currency risk. Our operating expenses are generally denominated in the currency of the countries in which the operations are located, and are subject to fluctuations due to changes in foreign currency exchange rates, particularly the British Pound, the Euro, Canadian Dollar, and the Australian Dollar. Our consolidated results of operations and cash flows are, therefore, subject to fluctuations due to changes in foreign currency exchange rates and may be adversely affected in the future due to changes in foreign exchange rates. We do not believe a 10% change in the relative value of the U.S. Dollar would have materially affected our consolidated financial statements for the periods presented. To date, we have not had a formal hedging program with respect to foreign currency, but we may do so in the future if our exposure to foreign currency should become more significant.
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Item 8. Financial Statements
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
Reports of Independent Registered Public Accounting Firm (PCAOB ID: 42) 60
Consolidated Balance Sheets 63
Consolidated Statements of Operations 64
Consolidated Statements of Comprehensive Loss 65
Consolidated Statements of Stockholders’ Equity 66
Consolidated Statements of Cash Flows 67
Notes to the Consolidated Financial Statements 68
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Report of Independent Registered Public Accounting Firm
To the Shareholders and the Board of Directors of Nextdoor Holdings, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Nextdoor Holdings, Inc. (the Company) as of December 31, 2025 and 2024, the related consolidated statements of operations, comprehensive loss, stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2025, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2025 and 2024, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2025, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated February 18, 2026 expressed an unqualified opinion thereon.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the account or disclosure to which it relates.
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Revenue Recognition
/s/ Ernst & Young LLP
We have served as the Company’s auditor since 2018.
San Francisco, California
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Report of Independent Registered Public Accounting Firm
To the Shareholders and the Board of Directors of Nextdoor Holdings, Inc.
Opinion on Internal Control Over Financial Reporting
We have audited Nextdoor Holdings, Inc.’s internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, Nextdoor Holdings, Inc. (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2025, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2025 and 2024, the related consolidated statements of operations, comprehensive loss, stockholders' equity and cash flows for each of the three years in the period ended December 31, 2025, and the related notes and our report dated February 18, 2026 expressed an unqualified opinion thereon.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management's annual report on internal control over financial reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.
Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ Ernst & Young LLP
San Francisco, California
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Nextdoor Holdings, Inc.
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share data)
As of December 31,
Assets
Current assets:
Prepaid expenses and other current assets 9,084 8,540
Liabilities and Stockholders' Equity
Current liabilities:
Operating lease liabilities, current 8,900 8,495
Accrued expenses and other current liabilities 20,550 19,200
Operating lease liabilities, non-current 23,351 32,251
Other liabilities, non-current 221 270
Commitments and contingencies (Note 7)
Stockholders' equity:
Accumulated other comprehensive income 1,563 917
Total liabilities and stockholders' equity $ 486,803 $ 513,953
The accompanying notes are an integral part of these consolidated financial statements.
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Nextdoor Holdings, Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
Year Ended December 31,
Costs and expenses:
Other income (expense), net 605 (99) (505)
The accompanying notes are an integral part of these consolidated financial statements.
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Nextdoor Holdings, Inc.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(in thousands)
Year Ended December 31,
Other comprehensive income (loss):
Foreign currency translation adjustments (53) 128 35
Total other comprehensive income (loss) 646 (26) 3,139
The accompanying notes are an integral part of these consolidated financial statements.
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Nextdoor Holdings, Inc.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(in thousands)
Shares Amount Shares Amount
Release of restricted stock units, net of tax withholdings 12,101 — — — — — — —
Tax withholdings on restricted stock units — — — — (273) — — (273)
Conversion from Class B to Class A common stock 17,569 2 (17,569) (2) — — — —
Vesting of early exercised stock options — — — — 174 — — 174
Other comprehensive income — — — — — 3,139 — 3,139
Release of restricted stock units, net of tax withholdings 15,516 — — — — — — —
Tax withholdings on restricted stock units — — — — (19,916) — — (19,916)
Conversion from Class B to Class A common stock 45,702 4 (45,702) (4) — — — —
Other comprehensive loss — — — — — (26) — (26)
Release of restricted stock units, net of tax withholdings 16,230 — — — — — — —
Tax withholdings on restricted stock units — — — — (19,065) — — (19,065)
Conversion from Class B to Class A common stock 30,453 3 (30,453) (3) — — — —
Other comprehensive income — — — — — 646 — 646
The accompanying notes are an integral part of these consolidated financial statements.
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Nextdoor Holdings, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Year Ended December 31,
Cash flows from operating activities
Adjustments to reconcile net loss to net cash used in operating activities:
Non-cash impairment charges related to lease abandonment — 22,760 —
Changes in operating assets and liabilities:
Net cash provided by (used in) operating activities 6,471 (20,202) (59,273)
Cash flows from investing activities
Purchases of property and equipment (580) (404) (267)
Loan to Opportunity Finance Network — (7,500) (2,500)
Cash flows from financing activities
Tax withholdings on release of restricted stock units (19,065) (19,916) (273)
Net cash provided by (used in) financing activities (33,990) (81,035) 8,916
Effect of exchange rate changes on cash and cash equivalents (53) 128 35
Total cash, cash equivalents, and restricted cash $ 71,720 $ 56,721 $ 71,404
Supplemental cash flow disclosures
Non-cash investing and financing activities:
Vesting of restricted stock and early exercised stock options $ — $ — $ 174
Lease liabilities arising from obtaining right-of-use assets $ — $ — $ 10,665
The accompanying notes are an integral part of these consolidated financial statements.
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Notes to the Consolidated Financial Statements
Note 1. Description of Business
Nextdoor Holdings, Inc. (“Nextdoor” or the “Company”) is headquartered in San Francisco, California. Nextdoor is the essential neighborhood network connecting over 105 million Verified Neighbors to the people, places, and information that matter most in their local communities. The Company reports its financial results based on a single reportable segment, which aligns with how the chief operating decision maker (“CODM”), who is its Chief Executive Officer (“CEO”), reviews financial information for purposes of making operating decisions, assessing financial performance, and allocating resources. See Note 12 - Segment and Geographical Information for further detail.
On November 5, 2021 (the “Closing”), the Company consummated the transactions contemplated by the Agreement and Plan of Merger, dated July 6, 2021, as amended on September 30, 2021, by and among Khosla Ventures Acquisition Co. II (“KVSB”), a special purpose acquisition company, Lorelei Merger Sub Inc., and Nextdoor, Inc. (“Legacy Nextdoor”), with Legacy Nextdoor surviving as a wholly owned subsidiary of KVSB (the “Merger” and, collectively with the other transactions that occurred in connection with the Merger, the “Reverse Recapitalization”). In connection with the Closing, KVSB was renamed to Nextdoor Holdings, Inc.
Note 2. Summary of Significant Accounting Policies
Basis of Presentation
The consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) and include the accounts of the Company and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. The Company’s fiscal year ends on December 31.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Estimates include, but are not limited to, valuation of financial instruments, valuation of stock-based awards, revenue recognition, collectability of accounts receivable, valuation of acquired intangible assets and goodwill, useful lives of intangible assets, useful lives of property and equipment, the incremental borrowing rate applied in lease accounting, income taxes and deferred income tax assets and associated valuation allowances. The Company bases these estimates and assumptions on historical experience and various other assumptions that it considers reasonable. The actual results could differ materially from these estimates.
Foreign Currency
The functional currency of the Company’s international subsidiaries is generally their local currency. The financial statements of these subsidiaries are translated into U.S. dollars using month-end exchange rates for assets and liabilities, historical exchange rates for equity, and average exchange rates for revenue and expenses. Translation gains and losses are recorded in accumulated other comprehensive income (loss) as a component of stockholders’ equity (deficit). Unrealized foreign exchange gains and losses due to the re-measurement of monetary assets and liabilities denominated in non-functional currencies and realized foreign exchange gains and losses on foreign exchange transactions are recorded in other income (expense), net in the consolidated statements of operations.
Cash and Cash Equivalents
Cash and cash equivalents consist of highly liquid investments with insignificant interest rate risk and original maturities of three months or less at the time of purchase. Cash and cash equivalents include cash held in banks, demand deposits, money market funds, corporate bonds, and commercial paper. Interest is accrued as earned. Cash and cash equivalents are recorded at cost, which approximates fair value.
Marketable Securities
The Company’s marketable securities are comprised of certificates of deposit, commercial paper, corporate bonds, U.S. Treasury securities, U.S. agency bonds, and asset-backed securities. The Company determines the appropriate classification of its investments at the time of purchase and reevaluates such designation at each balance sheet date. The Company has classified and accounted for its investments as available-for-sale securities as the Company may sell these securities at any time for use in its current operations or for other purposes, even prior to maturity. As a result, the Company classifies its investments, including securities with stated maturities beyond 12 months, within current assets on the consolidated balance sheets.
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Available-for-sale securities are recorded at fair value each reporting period. Unrealized gains and losses on these investments are reported as a separate component of accumulated other comprehensive income (loss) on the consolidated balance sheets until realized. Interest income is reported within interest income in the consolidated statements of operations. The Company periodically evaluates its marketable securities to assess whether those with unrealized loss positions are other-than-temporarily impaired. The Company considers various factors in determining whether to recognize an impairment charge, including the length of time the investment has been in a loss position, the extent to which the fair value is less than the Company’s cost basis, the financial condition and near-term prospects of the investee. Realized gains and losses are determined based on the specific identification method and are reported in other income (expense), net in the consolidated statements of operations. If the Company determines that the decline in an investment’s fair value is other than temporary, the difference is recognized as an impairment loss in the consolidated statements of operations. The Company did not consider any of its investments to be other-than-temporarily impaired for the years ended December 31, 2025 and 2024.
Fair Value Measurements
The Company accounts for certain assets and liabilities at fair value, which is the expected exchange price that would be received for an asset or an exit price paid to transfer a liability in an orderly transaction between market participants on the measurement date. Assets and liabilities measured at fair value are classified into the following categories based on the degree to which the inputs the Company uses to measure the fair values are observable in active markets. The Company uses the most observable inputs available when measuring fair value.
•Level 1: Observable inputs such as unadjusted quoted prices for identical assets or liabilities in active markets;
•Level 2: Observable inputs such as quoted prices for similar assets or liabilities in active markets, quoted prices for identical assets or liabilities in inactive markets, or inputs that are derived principally from or corroborated by observable market data or other means; and
•Level 3: Unobservable inputs that are supported by little or no market activity and are significant to the fair value of the assets or liabilities.
Accounts Receivable and Allowance for Doubtful Accounts
The Company records accounts receivable at the original invoiced amount. The Company maintains an allowance for doubtful accounts for any receivables it may be unable to collect and reduces the allowance when it determines that it will be unable to collect specific receivables. The Company determines the allowance based on its receivables’ age, the customers’ credit quality, and current economic conditions, among other factors that may affect the customers’ ability to pay.
Restricted Cash
The Company’s restricted cash balance is invested in a savings account and pledged as collateral for standby letters of credit as security deposits for the Company’s office leases.
Property and Equipment
Property and equipment are recorded at cost, less accumulated depreciation and amortization. Depreciation and amortization are computed using the straight-line method over the estimated useful lives of the assets as follows:
Estimated Useful Life
Computer equipment and software 3 years
Furniture and fixtures 5 years
Maintenance and repair costs are expensed as incurred.
Capitalized Internal-use Software
The Company capitalizes internal-use software costs when preliminary development efforts are successfully completed, management has authorized and committed project funding, and it is probable that the project will be completed, and the software will be used as intended. Costs related to preliminary project activities and post-implementation activities are expensed as incurred and costs related to the application development stage are capitalized. Capitalized costs are recorded as part of property and equipment, net. The
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capitalized costs related to internal-use software are amortized on a straight-line basis over an estimated useful life of two to three years. Management evaluates the useful lives of these assets on an annual basis and tests for impairment whenever events or changes in circumstances occur that could impact the recoverability of these assets. The Company did not capitalize any internal-use software costs for the years ended December 31, 2025 and 2024.
Goodwill and Other Acquired Intangible Assets
Goodwill represents the excess of the purchase price over the fair value of net assets acquired in connection with business combinations accounted for using the acquisition method of accounting. Goodwill is not amortized, but is tested for impairment at least annually, in the fourth quarter, or whenever events or changes in circumstances indicate that goodwill might be impaired. For all periods presented the Company had one reporting unit. The Company’s test for goodwill impairment starts with a qualitative assessment to determine whether it is necessary to perform the quantitative goodwill impairment test. If the Company determines, based on the qualitative factors, that the fair value of the reporting unit is more likely than not to be less than the carrying amount, then a quantitative goodwill impairment test is required. There was no impairment of goodwill recorded for the periods presented.
Intangible assets consist of identifiable intangible assets, including customer relationships and developed technology, resulting from the Company’s acquisitions. Acquired intangible assets are recorded at cost, net of accumulated amortization. Intangible assets are amortized on a straight-line basis over their estimated useful lives. Amortization costs are recorded in sales and marketing in the consolidated statements of operations.
Impairment of Long-Lived Assets
Property and equipment and other long-lived assets, such as finite-lived intangible assets, subject to amortization, are reviewed for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. Recoverability of these assets is measured by a comparison of the carrying amounts to the future undiscounted cash flows the assets are expected to generate. If impairment is indicated, an impairment loss is recognized as the amount by which the carrying amount exceeds the fair value.No impairment was recorded for long-lived assets for the year ended December 31, 2025. The Company recorded $2.9 million of impairment charges for property and equipment for the year ended December 31, 2024. For additional information, please see Note 13 - Restructuring.
Leases
The Company has various lease agreements related to real estate that are all classified as operating leases. At the inception of the Company’s contracts it determines if the contract is or contains a lease. A contract is or contains a lease if it conveys the right to control the use of an identified asset for a period of time in exchange for consideration. The Company has elected not to separate the lease and non-lease components within the contract. For leases that have greater than a 12-month lease term, right-of-use (“ROU”) assets and operating lease liabilities are recognized on the consolidated balance sheets at commencement date based on the present value of remaining fixed lease payments.
Certain of the Company’s leases include options to extend the lease, with renewal terms that can extend the lease term from one month to five years. If the Company is reasonably certain to exercise an option to extend a lease, the extension period is included as part of the ROU asset and the operating lease liability.
When the discount rate implicit in the lease cannot be readily determined, the Company uses its incremental borrowing rate at lease commencement in order to discount lease payments to present value for purposes of performing lease classification tests and measuring the lease liability. The Company’s incremental borrowing rate represents the rate of interest the Company would have to pay to borrow, on a collateralized basis, over a similar term an amount equal to the lease payments in a similar economic environment.
The operating lease ROU asset also includes accrued lease expense resulting from the straight-line accounting under prior accounting methods, which is now being amortized over the remaining life of the lease.
The Company’s lease payments are largely fixed. Variable lease payments exist in circumstances such as payments for property tax, insurance, and common area maintenance. Variable lease payments are recognized in operating expense in the period in which the obligation for those payments are incurred. Certain of the Company’s leases include an option to early terminate the lease. The Company’s leases may contain early termination options which may result in an early termination fee. The Company has a significant lease for its headquarters in San Francisco, California, which does not include an option to early terminate.
For the Company’s leases, it has elected to not apply the recognition requirements to leases of twelve months or less. These leases are expensed on a straight-line basis and no ROU asset or operating lease liability is recorded.
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Concentration of Credit and Customer Risks
Financial instruments that are exposed to concentrations of credit risk consist principally of cash and cash equivalents, marketable securities and accounts receivable. The Company maintains cash and cash equivalents and marketable securities with domestic and foreign financial institutions and at times may exceed federally insured limits. The Company performs periodic evaluations of the relative credit standing of these institutions. The Company maintains investments in U.S. government debt and agency securities, corporate debt securities, and commercial paper that carry high credit ratings and accordingly, minimal credit risk exists with respect to these balances.
No customer accounted for 10% or more of the Company’s accounts receivable as of December 31, 2025. One customer accounted for 14% of the Company’s accounts receivable as of December 31, 2024. No customer accounted for 10% or more of the Company’s total revenue for the years ended December 31, 2025, 2024 and 2023.
Revenue Recognition
The Company generates a majority of its revenue from the delivery of advertising services.
The Company determines revenue recognition through the following steps:
(1)Identification of the contract, or contracts, with a customer;
(2)Identification of the performance obligations in the contract;
(3)Determination of the transaction price;
(4)Allocation of the transaction price to the performance obligations in the contract; and
(5)Recognition of revenue when, or as, the Company satisfies a performance obligation.
The Company recognizes advertising revenue after satisfying its contractual performance obligation, which, for the majority of its advertising arrangements, is when an advertising impression is displayed to users. None of the Company’s arrangements contain minimum impression guarantees. The Company typically bills advertisers on a monthly basis and the payment terms vary by customer type and location. The Company has other advertising arrangements which are typically fixed-fee arrangements and revenue is recognized on a straight-line basis over the non-cancellable contractual term of the agreement, generally beginning on the date its service is made available to the customer.
Deferred Revenue
In certain advertising arrangements the Company requires payment upfront from its customers. The Company records deferred revenue when it collects cash from customers in advance of revenue recognition. As of December 31, 2025 and 2024, deferred revenue was $8.0 million and $6.8 million, respectively, and included within accrued expenses and other current liabilities on the consolidated balance sheets. For the years ended December 31, 2025 and 2024, revenue recognized from deferred revenue at the beginning of each year was $3.6 million and $5.9 million, respectively.
Practical Expedients and Exemptions
The Company expenses sales commissions as incurred because the expected period of benefit is less than one year. These costs are recorded within sales and marketing expenses in the consolidated statements of operations.
The Company does not disclose the value of unsatisfied performance obligations for (i) contracts with an original expected length of one year or less and (ii) contracts for which it recognizes revenue at the amount to which it has the right to invoice for services performed.
Cost of Revenue
Cost of revenue consists primarily of expenses associated with the delivery of the Company’s revenue generating activities, including the third-party cost of hosting its platform and allocated personnel-related costs, which include salaries, benefits, and stock-based compensation for employees engaged in development of its revenue generating products. Cost of revenue also includes third-party costs associated with delivering and supporting its advertising services and credit card transaction fees related to processing customer transactions.
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Research and Development
Research and development expenses consist primarily of personnel-related costs, including salaries, benefits, restructuring costs, and stock-based compensation for its 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.
Sales and Marketing
Sales and marketing expenses consist primarily of personnel-related costs and other costs which include salaries, commissions, benefits, restructuring costs, and stock-based compensation for employees engaged in sales and marketing activities as well as other costs including third-party consulting, public relations, and allocated overhead costs. Sales and marketing expenses also include brand and performance marketing for both user and local business acquisition, and neighbor services, which includes personnel-related costs for the Company's neighbor support team, its outsourced neighbor support function, and verification costs.
General and Administrative
General and administrative expenses consist primarily of personnel-related costs, including salaries, benefits, restructuring costs, 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.
Advertising Costs
Advertising costs which consist primarily of brand and performance marketing are expensed as incurred and are included in sales and marketing expense in the consolidated statements of operations. Total advertising costs incurred were $13.1 million, $18.9 million, and $18.1 million for the years ended December 31, 2025, 2024 and 2023, respectively.
Income Taxes
The Company accounts for income taxes using the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in the consolidated financial statements or in the Company’s tax returns. Deferred income taxes are recognized for tax carryforwards and differences between financial reporting and tax bases of assets and liabilities at the enacted statutory tax rates in effect for the years in which the temporary differences are expected to reverse. Management makes an assessment of the likelihood that the resulting deferred tax assets will be realized. A valuation allowance is provided when it is more likely than not that some portion or all of a deferred tax asset will not be realized. Due to the Company’s historical operating performance and the recorded cumulative net losses in prior fiscal periods, the U.S. net deferred tax assets have been fully offset by a valuation allowance.
The Company operates in various tax jurisdictions which are subject to audit by various tax authorities. The Company recognizes a tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such positions are then measured based on the largest benefit that has a greater than 50% cumulative likelihood of being realized upon settlement. The Company recognizes interest and penalties related to unrecognized tax benefits in the income tax provision in the consolidated statements of operations and income tax liabilities on the consolidated balance sheets.
Net Loss Per Share Attributable to Common Stockholders
The Company presents net loss per share attributable to common stockholders in conformity with the two-class method required for multiple classes of common stock and participating securities. Under the two-class method, net loss is attributed to common stockholders and participating securities based on their participation rights. The rights, including the liquidation and dividend rights, of the Class A common stock and Class B common stock are substantially identical, other than voting rights. Accordingly, the Class A common stock and Class B common stock share proportionately in the Company’s net losses. The Company considers its unvested restricted stock to be participating securities and contractually entitles the holders of such shares to participate in dividends but does not contractually obligate the holders of such shares to participate in the Company’s losses. As such, net losses for the periods presented were not allocated to these securities.
The Company computes basic net loss per share attributable to common stockholders by dividing the net loss attributable to common stockholders by the weighted average number of shares of common stock outstanding during the period, adjusted for outstanding shares that are subject to repurchase. Diluted net loss per share attributable to common stockholders is computed by giving effect to all
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potentially dilutive securities outstanding for the period. For periods in which the Company reports net losses, diluted net loss per share attributable to common stockholders is the same as basic net loss per share attributable to common stockholders, because all potentially dilutive securities are anti-dilutive.
Stock-Based Compensation
Stock-based compensation expense for stock-based awards granted to employees and non-employees is measured based on the grant date fair value of the awards and recognized in the consolidated statements of operations on a straight-line basis over the period during which services are provided in exchange for the award, generally, the vesting period of the award. The grant date fair value of stock options granted is estimated using the Black-Scholes option pricing model. The grant date fair value of awards with a market condition is estimated using a Monte Carlo simulation valuation model. Forfeitures are accounted for as they occur.
Recently Adopted Accounting Pronouncements
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which expands income tax disclosures primarily related to an entity’s rate reconciliation and information on income taxes paid. The Company adopted this standard during the year ended December 31, 2025 and the guidance was applied prospectively, resulting in additional disclosures related to the Company’s income taxes. See Note 11 - Income Taxes for further detail. The adoption of this ASU did not have an impact on the Company’s consolidated financial statements.
Recently Issued Accounting Pronouncements Not Yet Adopted
In November 2024, the FASB issued ASU 2024-03, Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses, which requires incremental disclosures to disaggregate income statement expense items. ASU 2024-03 is effective for annual periods beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027 with early adoption permitted. The Company is currently evaluating the impact of this standard on its consolidated financial statements and related disclosures.
Note 3. Cash Equivalents and Marketable Securities
The amortized costs, unrealized gains and losses, and estimated fair values of the Company’s cash equivalents and marketable securities were as follows (in thousands):
AmortizedCost UnrealizedGain UnrealizedLoss EstimatedFair Value
Cash equivalents:
Marketable securities:
Certificates of deposit 905 — — 905
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AmortizedCost UnrealizedGain UnrealizedLoss EstimatedFair Value
Cash equivalents:
Marketable securities:
All marketable securities are designated as available-for-sale securities as of December 31, 2025 and 2024.
The following table summarizes the fair value and gross unrealized losses aggregated by category and the length of time that individual securities have been in a continuous unrealized loss position.
Less than Twelve Months Twelve Months or Greater Total
Less than Twelve Months Twelve Months or Greater Total
Certificates of deposit $ 1,229 $ (1) $ — $ — $ 1,229 $ (1)
Commercial paper $ 2,258 $ (1) $ — $ — $ 2,258 $ (1)
The following tables present the contractual maturities of the Company’s marketable securities (in thousands):
AmortizedCost EstimatedFair Value
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AmortizedCost EstimatedFair Value
Note 4. Fair Value Measurements
The Company’s financial assets and liabilities measured at fair value on a recurring basis are classified by level within the fair value hierarchy. There were no financial assets or liabilities measured using Level 3 inputs as of December 31, 2025 and 2024. The following tables present information about the Company’s financial assets that are measured at fair value on a recurring basis (in thousands):
Level 1 Level 2 Total
Cash equivalents:
Marketable securities:
Certificates of deposit — 905 905
Level 1 Level 2 Total
Cash equivalents:
Marketable securities:
The Company classifies its cash equivalents and marketable securities within Level 1 or Level 2 because it determines their fair values using quoted market prices or alternative pricing sources and models utilizing market observable inputs. There were no transfers between levels of the fair value hierarchy during the years ended December 31, 2025 and 2024.
Assets and Liabilities Measured at Fair Value on a Recurring Basis
The carrying amounts of certain financial instruments, including cash held in banks, accounts receivable, and accounts payable approximate fair value due to their short-term maturities and are excluded from the fair value table above.
Financial Instruments, Assets, and Liabilities Not Recorded at Fair Value
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Opportunity Finance Network Loan Agreement
On June 2022, the Company entered into a credit agreement with Opportunity Finance Network (“OFN”) to lend up to an aggregate of $15.0 million, unsecured, over the course of 24 months. As of December 31, 2025, the note receivable from OFN totaled $15.0 million and is recorded under other assets on the consolidated balance sheets.
The following tables present the fair value hierarchy of assets not recorded at fair value (in thousands):
Carrying Amount Level 1 Level 2 Level 3 Fair Value
Assets
Carrying Amount Level 1 Level 2 Level 3 Fair Value
Assets
As of December 31, 2025 and 2024, there were no other financial instruments or liabilities that were not recorded at fair value.
Note 5. Other Balance Sheet Components
Property and Equipment, net
Property and equipment, net consisted of the following (in thousands):
As of December 31,
Computer equipment and software $ 3,915 $ 4,629
Capitalized internal-use software 2,123 2,123
Less: accumulated depreciation and amortization (11,345) (10,940)
Property and equipment, net $ 1,639 $ 2,748
Depreciation and amortization expense was $1.7 million, $2.9 million and $4.0 million for the years ended December 31, 2025, 2024 and 2023, respectively.
Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities consisted of the following (in thousands):
As of December 31,
Employee stock purchase plan liability 471 708
Other accrued and current liabilities 7,895 7,971
Accrued expenses and other current liabilities $ 20,550 $ 19,200
Note 6. Leases
The Company has entered into various non-cancellable office facility leases in various locations with original lease periods expiring between 2020 and 2029, with its primary office location in San Francisco, California. The Company entered into a lease consisting of multiple floors for its San Francisco headquarters in 2019, with a lease term through 2029. On January 30, 2023, the Company entered into a lease amendment for its headquarters lease. The lease amendment extended the lease term through April 30, 2032, and resulted
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in an increase to right-of-use assets and operating lease liabilities. During the second quarter of 2024, the Company determined it was no longer reasonably certain that the optional renewal period would be exercised resulting in a reduction in the lease term and a decrease to its right-of-use assets and operating lease liabilities. In addition, as part of a restructuring plan, the Company decided to vacate and abandon certain floors of its leased headquarters in San Francisco in order to streamline operations and optimize its office space. The Company ceased occupying the floors in June 2024 and, as a result, the Company recorded impairment charges for the related operating lease right-of-use assets, leasehold improvements and furniture and fixtures in the second quarter of 2024. See Note 13 - Restructuring for further details. The Company's lease agreements generally do not contain any material residual value guarantees or material restrictive covenants.
The components of lease costs were as follows (in thousands):
Year Ended December 31,
Other information related to the Company’s operating leases was as follows (in thousands):
Year Ended December 31,
Cash paid for amounts included in the measurement of lease liabilities:
The weighted average remaining lease term (years) and discount rate related to operating leases were as follows:
As of December 31,
Weighted average remaining lease term (years) 3.3 4.3
Weighted average discount rate 6.9 % 6.9 %
As of December 31, 2025, future minimum lease payments under operating leases were as follows (in thousands):
Total lease payments 36,003
Less: imputed interest (3,752)
Present value of lease liabilities 32,251
Less: current operating lease liabilities (8,900)
Long-term operating lease liabilities $ 23,351
The table above does not include lease payments that were not fixed at commencement or lease modification.
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Note 7. Commitments and Contingencies
Commitments
As of December 31, 2025, the Company had non-cancellable purchase commitments with certain service providers primarily related to the provision of cloud computing services as follows (in thousands):
Legal matters
In addition to the litigation discussed below, from time to time, the Company is a party to a variety of claims, lawsuits, and proceedings which arise in the ordinary course of business, including claims of alleged infringement of intellectual property rights. The Company records a liability when it believes that it is probable that a loss will be incurred and the amount of loss or range of loss can be reasonably estimated. The Company discloses potential losses when they are reasonably possible. In the Company’s opinion, resolution of such pending matters is not likely to have a material adverse impact on its consolidated results of operations, cash flows, or its financial position. Given the unpredictable nature of legal proceedings, the Company bases its estimate on the information available at the time of the assessment. As additional information becomes available, the Company reassesses the potential liability and may revise the estimate. There were no such material matters as of December 31, 2025.
The matters discussed below summarize the Company’s current significant ongoing pending legal proceedings as of December 31, 2025.
Securities and Derivative Litigation
On February 28, 2024, a securities class action complaint was filed against the Company and certain of its former executive officers (collectively, the “Defendants”) in the U.S. District Court for the Northern District of California. The lawsuit alleges that Defendants violated the Securities Exchange Act of 1934, as amended, by making materially false and misleading statements about the Company’s business and prospects for future growth in the period between July 6, 2021 and November 8, 2022. Motions for the lead plaintiff were filed on April 29, 2024 and the court appointed a lead plaintiff on July 12, 2024. The lead plaintiff filed the amended complaint on September 10, 2024. The Company filed a Motion to Dismiss on November 12, 2024. On May 19, 2025, the court granted the Motion to Dismiss in its entirety, but also granted the lead plaintiff leave to amend the complaint. On June 16, 2025, the lead plaintiff filed a second amended complaint that (i) brought claims solely against the Company and Sarah Friar, (ii) limited the challenged statements to a single statement, and (iii) narrowed the putative class period to May 10, 2022 through November 7, 2022. The Company’s Motion to Dismiss the second amended complaint was filed on July 31, 2025, and the lead plaintiff filed its opposition to the motion on September 15, 2025. The Company filed its reply brief on October 15, 2025. On November 20, 2025, the court granted the Company’s motion to dismiss with prejudice and entered judgment in favor of Defendants. The lead plaintiff did not appeal the order.
On July 26, 2024, a purported shareholder derivative complaint was filed in the U.S. District Court for the Northern District of California. The complaint named as defendants certain of the Company’s former and current officers and directors, as well as the Company as nominal defendant, and asserted state and federal claims based on some of the same alleged misstatements as the securities class action complaint described above. The complaint sought unspecified damages, attorneys’ fees, and other costs. On January 7, 2026, the lawsuit was dismissed.
Class Action Litigation
On October 28, 2024 and October 29, 2024, two class action complaints were filed in the Delaware Court of Chancery against the Company, certain of the Company’s former officers, certain of the former officers and directors of the special purpose acquisition company KVSB into which the Company merged on November 5, 2021, the sponsor of the Company’s special purpose acquisition merger Khosla Ventures SPAC Sponsor II LLC (the “Sponsor”), and certain entities allegedly related to the Sponsor. The two complaints were consolidated on December 6, 2024 and the plaintiffs filed a consolidated complaint on December 26, 2024. The consolidated complaint is brought on behalf of a class of KVSB stockholders who could have, but did not, choose to redeem their KVSB shares in connection with the November 5, 2021 merger between KVSB and the Company. The consolidated complaint alleges that defendants breached various duties to KVSB stockholders by making false or misleading statements and/or aided and abetted such breaches. The consolidated complaint also alleges claims for unjust enrichment. The consolidated complaint seeks damages, disgorgement, attorneys’ fees, and other costs. Defendants answered the consolidated complaint on February 10, 2025, following
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which discovery commenced. Defendants’ motion for judgment on the pleadings is currently pending before the Court. The Company intends to vigorously defend against the claims in these actions. Given the procedural posture and the nature of such litigation matters, the Company is currently unable to estimate the reasonably possible loss or range of loss, if any, that may result from these matters. Any litigation is inherently uncertain, and any judgment or injunctive relief entered against the Company or any adverse settlement could materially and adversely impact its business, results of operations, financial condition, and prospects.
Indemnification
In the ordinary course of business, the Company often includes standard indemnification provisions in its arrangements with its customers, partners, suppliers, and vendors. Pursuant to these provisions, the Company may be obligated to indemnify such parties for losses or claims suffered or incurred in connection with its service, breach of representations or covenants, intellectual property infringement, or other claims made against such parties. These provisions may limit the time within which an indemnification claim can be made. It is not possible to determine the maximum potential amount under these indemnification obligations due to the limited history of prior indemnification claims and the unique facts and circumstances involved in each particular agreement. For the years ended December 31, 2025, 2024 and 2023, the Company did not incur material costs to defend lawsuits or settle claims related to these indemnifications. The Company believes the fair value of these liabilities is not material and accordingly has no liabilities recorded for these agreements as of December 31, 2025 and 2024.
Note 8. Stockholders’ Equity
Preferred Stock
The Company's amended and restated certificate of incorporation authorizes the issuance of 50,000,000 shares of preferred stock with a par value of $0.0001 per share with such designations, voting, and other rights and preferences as may be determined from time to time by the Company's Board of Directors. As of December 31, 2025 and 2024, there were no shares of preferred stock issued or outstanding.
Common Stock
The Company was authorized to issue 2,500,000,000 shares of Class A common stock and 500,000,000 shares of Class B common stock as of December 31, 2025 and 2024. The rights, including the liquidation and dividend rights, of the Class A common stock and Class B common stock are substantially identical, other than voting and conversion rights. The holder of each share of Class A common stock is entitled to one vote per share and the holder of each share of Class B common stock is entitled to ten votes per share. Shares of Class B common stock are convertible into an equivalent number of shares of Class A common stock at the option of the holder or upon certain events upon the terms and conditions described in the Company’s amended and restated certificate of incorporation. Class A common stock and Class B common stock are referred to, collectively, as common stock throughout the notes to these consolidated financial statements, unless otherwise indicated. Shares of common stock reserved for future issuance on an as-converted basis were as follows (in thousands):
As of December 31,
Unvested restricted stock units (RSUs) 47,101 42,891
Shares reserved for future award issuances 35,424 39,730
Equity Incentive Plans
2021 Equity Incentive Plan
In November 2021, the Company’s Board of Directors and stockholders approved the Company’s 2021 Equity Incentive Plan (the “2021 Plan”) as a successor to the 2018 Equity Incentive Plan (the “2018 Plan”), with the purpose of granting stock-based awards to employees, directors, officers, and consultants, including stock options, restricted stock awards, and RSUs.
The Company initially reserved for issuance under the 2021 Plan (a) 46,008,885 shares of Class A common stock, plus (b) shares that are subject to issuance upon exercise of options granted under the 2018 Plan prior to the Closing but which, after the Closing, cease to be subject to the option for any reason other than exercise of the option, (c) shares that are subject to awards granted under the 2018 Plan prior to the Closing that, after the Closing, are forfeited or are repurchased by the Company at the original issue price, (d) shares
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that are subject to awards granted under the 2018 Plan prior to the Closing that, after the Closing, otherwise terminate without such shares being issued, and (e) shares that, after the Closing, are used to pay the exercise price of a stock option issued under the 2018 Plan prior to the Closing or are withheld to satisfy the tax withholding obligations related to any award issued under the 2018 Plan prior to the Closing. The number of shares available for grant and issuance under the 2021 Plan will increase automatically on January 1 of each of 2022 through 2031 by the number of shares equal to the lesser of (i) five percent (5%) of the number of shares (rounded down to the nearest whole share) of Class A common stock and Class B common stock issued and outstanding on each December 31 immediately prior to the date of increase, or (ii) such number of shares determined by the Company’s Board of Directors.
2021 Employee Stock Purchase Plan
In November 2021, the Company’s Board of Directors and stockholders approved the Company’s 2021 Employee Stock Purchase Plan (the “2021 ESPP”). Over a series of offering periods, each of which may consist of one or more purchase periods, eligible employees will be offered the option to purchase shares of Class A common stock at 85% of the lesser of the fair market value of Class A common stock on (i) the first business day of the applicable offering period and (ii) the date of purchase. Under the 2021 ESPP, the Company initially reserved 8,901,159 shares of Class A common stock for issuance, and the aggregate number of shares reserved will increase automatically on January 1 of each of 2022 through 2031 by the number of shares equal to the lesser of (i) one percent (1%) of the total number of outstanding shares of Class A common stock and Class B common stock as of the immediately preceding December 31, or (ii) a number of shares as may be determined by the Company’s Board of Directors. The aggregate number of shares issued over the term of the 2021 ESPP, subject to adjustments for stock-splits, recapitalizations, or similar events, may not exceed 89,011,590 shares. In February 2022, the Company commenced its first offering period under the 2021 ESPP. During the years ended December 31, 2025 and 2024, 798,985 and 709,637 shares of Class A common stock were purchased under the 2021 ESPP, respectively.
Share Repurchase Program
On May 31, 2022, the Company’s Board of Directors authorized and approved a share repurchase program (the “Share Repurchase Program”) to repurchase up to $100.0 million in aggregate of the Company’s Class A common stock, with the authorization to expire on June 30, 2024. Repurchases of Class A common stock under the Share Repurchase Program may be made from time to time, on the open market, in privately negotiated transactions or by other methods, and in accordance with the limitations set forth in Rule 10b-18 promulgated under the Securities Exchange Act of 1934, as amended, and other applicable legal requirements. The timing of any repurchases will depend on market conditions and other investment opportunities, and will be made at the Company’s discretion. The Share Repurchase Program does not obligate the Company to repurchase any dollar amount or number of shares, and the program may be extended, modified, suspended, or discontinued at any time. On February 21, 2024, the Company’s Board of Directors authorized and approved an increase of $150.0 million to the Share Repurchase Program and extended the expiration date to March 31, 2026.
When the Company repurchases shares under the Share Repurchase Program, it reduces the common stock component of stockholders’ equity by the par value of the repurchased shares. The excess of the repurchase price over par value is recorded to additional paid-in capital. All repurchased shares are retired and become authorized and unissued shares.
During the year ended December 31, 2025, the Company repurchased and retired 10,874,916 shares of Class A common stock at an average purchase price of $1.73 per share for an aggregate repurchase price of $18.8 million. During the year ended December 31, 2024, the Company repurchased and retired 30,969,572 shares of Class A common stock at an average purchase price of $2.44 per share for an aggregate repurchase price of $75.5 million. As of December 31, 2025, the Company had $78.4 million available for future share repurchases under the Share Repurchase Program.
Stock Options and RSUs
The Company may grant options to acquire shares of Class A common stock to employees, directors, officers, and consultants at a price not less than the fair market value of the shares at the date of grant. Options granted to a person who, at the time of the grant, owns more than 10% of the voting power of all classes of stock shall be at no less than 110% of the fair market value and expire five years from the date of grant. All other options generally have a contractual term of ten years. Options granted generally vest on a monthly basis over two to three years. RSUs granted for Class A common stock generally vest on a quarterly basis over two to three years.
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A summary of the Company’s stock option activity for the year ended December 31, 2025 and related information is as follows (in thousands, except per share data):
Options granted — $ —
Options forfeited or expired (6,746) $ 2.83
The intrinsic value is calculated as the difference between the exercise price of the underlying common stock option award and the fair value of the Company’s common stock as of the respective balance sheet date. No options were granted during the year ended December 31, 2025. The weighted average grant date fair value of options granted was $1.23 per share and $1.32 per share during the years ended December 31, 2024 and 2023, respectively.
The intrinsic value of the options exercised was $0.6 million, $10.8 million and $2.2 million for the years ended December 31, 2025, 2024 and 2023, respectively.
A summary of the Company’s RSU activity for the year ended December 31, 2025 and related information is as follows (in thousands, except per share data):
Number of Shares Weighted Average Grant Date Fair Value
Market-based PSUs
In April 2024, the Company granted its Chief Executive Officer a market-based performance stock unit (“PSU”) award of 5,010,020 shares of the Company’s Class A common stock. In March 2025, the Company granted its Chief Executive Officer a similar market-based PSU award of 722,005 shares. In August 2025, the Company granted another market-based PSU award of 947,867 shares to an executive officer with the same performance metrics and vesting conditions as the March 2025 PSU. For all awards, the PSUs will vest based on stock price targets achieved over a four-year period, and any PSUs that have not vested at the end of the applicable performance period will be forfeited. Vesting is subject to the grantees’ continuous employment with the Company, as well as other customary provisions pursuant to the Company’s 2021 Plan. The aggregate grant date fair value of the 2025 and 2024 PSUs was $2.6 million and $9.3 million, respectively, calculated using a Monte Carlo simulation model and recognized over the respective derived service periods using the graded-vesting method. Compensation cost is not adjusted in future periods for subsequent changes in the expected outcome of market-related conditions. For the year ended December 31, 2025, the Company recognized $4.1 million of stock-based compensation expense in connection with these awards.
Valuation Assumptions
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The following assumptions were used to calculate the fair value of market-based PSUs made during the following periods:
Year Ended December 31,
Expected term (in years) 4.4 - 4.9 5.0 0.0
Risk-free interest rate 3.6% - 4.1% 4.3% —%
Expected dividend yield — — —
Stock-Based Compensation
The Company recorded stock-based compensation expense in the consolidated statements of operations as follows (in thousands):
Year Ended December 31,
As of December 31, 2025, there was $72.3 million of unrecognized stock-based compensation expense, which is expected to be recognized over a weighted average period of 2.0 years.
Note 9. Net Loss Per Share Attributable to Common Stockholders
The following table sets forth the computation of basic and diluted net loss per share attributable to common stockholders (in thousands, except per share data):
Year Ended December 31,
Class A Class B Class A Class B Class A Class B
The following potentially dilutive securities outstanding have been excluded from the computations of diluted net loss per share because such securities have an anti-dilutive impact due to losses reported (in thousands):
Year Ended December 31,
Shares issuable pursuant to the employee stock purchase plan 661 1,368 1,828
Note 10. Employee Benefit Plan
The Company has a 401(k) plan (the “401(k) Plan”) covering all eligible employees in the United States. The Company is allowed to make discretionary profit sharing and qualified non-elective contributions as defined by the 401(k) Plan and as approved by the Board of Directors. The Company matches a portion of eligible participants’ 401(k) contributions. The Company’s match totaled $1.4
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million, $1.2 million and $1.7 million for the years ended December 31, 2025, 2024 and 2023, respectively. No discretionary profit-sharing contributions have been made to date.
Note 11. Income Taxes
Loss before income taxes were as follows (in thousands):
Year Ended December 31,
Provision for income taxes was as follows (in thousands):
Year Ended December 31,
Current:
Federal $ — $ — $ —
Deferred:
Federal — — —
State — — —
Total deferred income tax expense (benefit) 847 (64) (639)
Total income tax expense (benefit) $ 1,625 $ 706 $ 756
The table below provides the updated requirements of ASU 2023-09 for the year ended December 31, 2025. See Note 2. Summary of Significant Accounting Policies—Recent accounting pronouncements for additional details on the adoption of ASU 2023-09.
Income tax expense (benefit) differed from the amount computed by applying the federal statutory income tax rate to pretax loss for the year ended December 31, 2025 as a result of the following (in thousands, except percentages):
State and local income tax, net of federal benefit(1) 187 0.4
U.S. Federal:
Research and development tax credits (2,832) (5.4)
Non-taxable or non-deductible items:
Executive and equity compensation 3,997 7.6
Changes in valuation allowance 9,747 18.5
Foreign tax effects 468 0.9
Unrecognized tax benefit and related items 532 1.0
Total tax provision and effective tax rate $ 1,625 3.1 %
(1) State taxes in Texas made up the majority of this category.
The Company's effective tax rate of 3.1% for the year ended December 31, 2025 was primarily driven by the full valuation allowance, stock-based compensation, research and development credits, and foreign tax effects.
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As previously disclosed for the years ended December 31, 2024 and 2023, prior to the adoption of ASU 2023-09, the effective income tax rate differs from the statutory Federal income tax rate as follows:
Year Ended December 31,
Statutory rate (21.0) % (21.0) %
Stock-based compensation 9.2 5.8
Research and development tax credits (3.7) (3.2)
Changes in valuation allowance 15.7 18.0
Effective tax rate 0.7 % 0.5 %