In connection with the IPO, the Company’s amended and restated certificate of incorporation became effective, which authorized the issuance of 10,000,000 shares of undesignated preferred stock with a par value of $0.00001 per share with rights and preferences, including voting rights, designated from time to time by the board of directors.

The Company has two classes of common stock: Class A common stock and Class B common stock. In connection with the IPO, the Company’s amended and restated certificate of incorporation authorized the issuance of 1,000,000,000 shares of Class A common stock and 500,000,000 shares of Class B common stock. The shares of Class A common stock and Class B common stock are identical, except with respect to voting, converting, and transfer rights. Each share of Class A common stock is entitled to one vote. Each share of Class B common stock is entitled to ten votes. Class A and Class B common stock have a par value of $0.00001 per share and are referred to as common stock throughout the notes to the condensed consolidated financial statements, unless otherwise noted. Holders of common stock are entitled to receive any dividends as may be declared from time to time by the board of directors.

Each share of Class B common stock is convertible at any time at the option of the holder into one share of Class A common stock. Any holder’s shares of Class B common stock will convert automatically to Class A common stock, on a one-to-one basis, upon the following: (i) sale or transfer of such share of Class B common stock, except for permitted transfers as described in the amended and restated certificate of incorporation; (ii) the death or incapacity of the Class B common stockholder (or nine months after the date of the death or incapacity if the stockholder is one of the Company’s founders); and (iii) on the final conversion date, defined as the earliest of (a) the date fixed by our board of directors that is no less than 61 days and no more than 180 days following the date on which the outstanding shares of Class B common stock represent less than 10% of the then outstanding shares of Class A and Class B common stock; (b) the last trading day of the fiscal year following the tenth anniversary of the Company’s IPO; or (c) the date specified by a vote of the holders of a majority of the outstanding shares of Class B common stock, voting as a single class.

In June 2021, the Company donated 250,000 shares of its Class A common stock to its charitable foundation, Confluent.org. The Company recognized charitable donation expense of $13.3 million during the three months ended June 30, 2021 within general and administrative expense based on the closing price of its Class A common stock on the date of donation.

The Company has reserved the following shares of common stock for future issuance:


	June 30, 2022		December 31, 2021
2014 Stock Plan:
Options outstanding		51,899,378		61,903,883
Restricted stock units outstanding		2,864,365		3,495,540
2021 Equity Incentive Plan:
Options outstanding		22,500		22,500
Restricted stock units outstanding		14,302,853		2,938,968
Remaining shares available for future issuance		36,782,187		32,797,245
2021 Employee Stock Purchase Plan		7,145,776		5,162,575
Total		113,017,059		106,320,711

In September 2014, the Company’s board of directors adopted and the Company’s stockholders approved the 2014 Stock Plan (the “2014 Plan”). The 2014 Plan was also amended and restated in March 2021 and June 2021. Under the 2014 Plan, the board of directors may grant stock options and other equity-based awards to eligible employees, directors, and consultants. The 2014 Plan was terminated in June 2021 in connection with the IPO, but continues to govern the terms of outstanding awards that were granted prior to the termination of the 2014 Plan. No further equity awards will be granted under the 2014 Plan. With the establishment of the 2021 Equity Incentive Plan (the “2021 Plan”), upon the expiration, forfeiture, cancellation, or reacquisition of any shares of Class B common stock underlying outstanding stock-based awards granted under the 2014 Plan, an equal number of shares of Class A common stock will become available for grant under the 2021 Plan. Equity-based awards granted under the 2014 Plan and the 2021 Plan generally vest over four years. All stock option grants expire ten years from the date of grant.

In April 2021, the Company’s board of directors adopted, and in June 2021, the Company’s stockholders approved, the 2021 Plan, which became effective at the time of the execution of the underwriting agreement related to the Company’s IPO. The 2021 Plan provides for the grant of incentive stock options, nonqualified stock options, stock appreciation rights, restricted stock awards, restricted stock units (“RSUs”) awards, performance awards, and other forms of awards to employees, directors, and consultants, including employees and consultants of the Company’s affiliates. A total of 25,812,876 shares of the Company’s Class A common stock have been reserved for future issuance under the 2021 Plan in addition to (i) the shares that remained available for grant of future awards under the 2014 Plan at the time the 2021 Plan became effective, (ii) shares underlying outstanding stock awards granted under the 2014 Plan that expire, or are forfeited, cancelled, or reacquired, as described above, and (iii) any automatic increases in the number of shares of Class A common stock reserved for future issuance under this plan.

In April 2021, the Company’s board of directors adopted, and in June 2021, the Company’s stockholders approved, the 2021 Employee Stock Purchase Plan (the “2021 ESPP”), which became effective at the time of the execution of the underwriting agreement related to the Company’s IPO. The 2021 ESPP authorizes the issuance of shares of Class A common stock pursuant to purchase rights granted to employees. A total of 5,162,575 shares of the Company’s Class A common stock have been reserved for future issuance under the 2021 ESPP, in addition to any automatic increases in the number of shares of Class A common stock reserved for future issuance under this plan.

Except for the initial offering period, the 2021 ESPP provides for 12-month offering periods beginning February 16 and August 16 of each year, and each offering period will consist of two six-month purchase periods. The initial offering period began on June 24, 2021 and will end on August 15, 2022. The initial offering consists of two purchase periods, with the first purchase period ending on February 15, 2022 and the second purchase period ending on August 15, 2022. The price at which Class A common stock is purchased under the 2021 ESPP is equal to 85% of the lesser of (1) the fair market value of the Company’s stock on the offering date or (2) the fair market value of the Company’s stock on the purchase date.

The following table summarizes stock equity award activity and activity regarding shares available for grant under the 2014 Plan and the 2021 Plan:


				Equity Awards Outstanding
	Shares Available for Grant			Outstanding Stock Options			Weighted-Average Exercise Price		Weighted-Average Remaining Contractual Term (in years)		Aggregate Intrinsic Value (in thousands)
Balance as of January 1, 2022		32,797,245			61,926,383		$	6.97		7.88	$	4,289,643
Increase in authorized shares		13,590,094			-		$	-
Stock options exercised		-			(7,695,923	)	$	3.31
Stock options forfeited or expired		2,308,582			(2,308,582	)	$	8.52
Repurchases of unvested common stock		130,845			-		$	-
RSUs granted		(12,688,748	)		-		$	-
RSUs forfeited or cancelled		644,169			-		$	-
Balance as of June 30, 2022		36,782,187			51,921,878		$	7.44		7.53	$	820,908
Vested as of June 30, 2022					24,848,276		$	5.31		6.99	$	445,825
Vested and expected to vest as of June 30, 2022					51,921,878		$	7.44		7.53	$	820,908

Aggregate intrinsic value represents the difference between the exercise price of the options to purchase common stock and the estimated fair value of the Company’s common stock. The intrinsic value of options exercised was $284.4 million and $216.1 million for the six months ended June 30, 2022 and 2021, respectively. No options were granted during the six months ended June 30, 2022 and the weighted-average grant-date fair value per share of options granted during the six months ended June 30, 2021 was $12.41.

All stock option holders have the right to exercise unvested options, which are subject to a repurchase right held by the Company at the original exercise price in the event of voluntary or involuntary termination of employment of the stockholder. As of June 30, 2022 and December 31, 2021, there were 1,079,122 and 2,164,577 shares that had been early exercised and were subject to repurchase, respectively. The proceeds related to early exercised options are recorded as liabilities until the options vest, at which point they are reclassified to equity. As of June 30, 2022 and December 31, 2021, the liabilities for early exercised options subject to repurchase were $6.8 million and $15.8 million, respectively, which were recorded as liability for early exercise of unvested stock options and other liabilities, non-current on the condensed consolidated balance sheets.

Shares issued for early exercised options are included in issued and outstanding shares as they are legally issued and outstanding, but are not deemed outstanding for accounting purposes until the shares vest.

The Company had granted 2,875,255 options with both a service-based vesting condition and a performance-based vesting condition prior to the IPO. No performance-based options were granted subsequent to the IPO. The performance-based vesting condition was not deemed probable until consummated, and therefore, stock-based compensation related to these options remained unrecognized prior to the effectiveness of the IPO. Upon the effectiveness of the IPO in June 2021, the performance-based vesting condition was satisfied, and therefore, the Company recognized cumulative stock-based compensation expense of $3.8 million to general and administrative expense using the accelerated attribution method for the portion of the awards for which the service-based vesting condition had been fully or partially satisfied.

The Company began granting RSUs in 2021. RSUs granted prior to the IPO had both service-based and performance-based vesting conditions. The service-based vesting condition for these awards is generally satisfied by rendering continuous service for four years, during which time the grants will vest quarterly. The performance-based vesting condition was satisfied upon the sale of the Company’s common stock in a firm commitment underwritten public offering. The performance-based vesting condition was not deemed probable until consummated, and therefore, stock-based compensation related to these RSUs remained unrecognized prior to the effectiveness of the IPO. RSUs granted after the IPO do not contain the performance-based vesting condition described above.

Upon the effectiveness of the IPO in June 2021, the performance-based vesting condition was satisfied, and therefore, the Company recognized cumulative stock-based compensation expense of $6.8 million using the accelerated attribution method for the portion of the awards for which the service-based vesting condition had been fully or partially satisfied.

The following table summarizes RSU activity under the 2014 Plan and the 2021 Plan:


	RSUs Outstanding
	Number of Shares			Weighted-Average Grant Date Fair Value
Unvested balance as of January 1, 2022		6,434,508		$	46.01
RSUs granted		12,688,748		$	34.80
RSUs vested		(1,311,869	)	$	44.21
RSUs forfeited or cancelled		(644,169	)	$	44.72
Unvested balance as of June 30, 2022		17,167,218		$	37.89

Total stock-based compensation expense was as follows (in thousands):


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Cost of revenue - subscription	$	6,018	$	2,172	$	11,331	$	3,147
Cost of revenue - services		2,328		1,055		4,190		1,599
Research and development		25,337		8,932		45,422		12,443
Sales and marketing		24,746		11,155		45,808		16,131
General and administrative		10,437		11,202		19,484		14,549
Stock-based compensation, net of amounts capitalized	$	68,866	$	34,516	$	126,235	$	47,869
Capitalized stock-based compensation		1,598		396		3,125		494
Total stock-based compensation	$	70,464	$	34,912	$	129,360	$	48,363

As of June 30, 2022, there was $789.6 million of unrecognized stock-based compensation expense, which is expected to be recognized over a weighted-average period of 3.1 years.