Nextdoor (KIND) 9 May 232023 Q1 Earnings call transcript

Good afternoon, and thank you for attending today's Nextdoor Q1 2023 Earnings Call. My name is Jason, and I'll be the moderator for today's call. [Operator Instructions]

I would now like to pass the conference over to our host, Matt Anderson, Head of Investor Relations.

Thank you, Jason. you XXXX us financial thank Nextdoor's to and quarter First results. afternoon, for today joining review Good With us Officer. on Chief Executive the call today and Doyle, are Mike Chief Financial Officer; Sarah Friar,

related During we and variety forward-looking under They guarantees securities this federal of are uncertainties. not business These are future may statements risks statements statements call, laws. of that to make subject are our performance. a to

expectations from Our actual in forward-looking statements. differ results reflected any materially could

factors the filings website For Investor affect risks earnings SEC's material that a and important refer SEC could of as actual other our website of risks today's the available release. other please results, our discussion as Relations section the our factors and important in the well and to in on discussed

discussed QX financial measures today's released shareholder of directly measures A reconciliation their be the measures financial today. comparable GAAP non-GAAP in call. XXXX will these found conference to most letter be on can Additionally,

turn call to With that, the over I'd Sarah. to like

from join, US to neighbors utility connect, million WAU and quarter-over-quarter. contribute, verified platform. Thank growth over transact by Over we're seeing everyone. you, sequentially demonstrating growing and business the the across and range where a intent on X the WAU XX% strong and progress in outcomes. finding This year-over-year healthy We with XX of a with the Nextdoor neighbors QX, grew Matt, added engagement. we X% started with million meaningful was value quarter neighbors, XXXX led in unique and high Starting net and community come hello offered thus to

discover base and product Nextdoor and organizations driving new types We've building deepening content as through conversation engagement feed we the such content work have In momentum and focusing and invites better been on through on client events. been personalization and sharing. on neighbors XXXX of growing

to our Nextdoor's local target for audience and progress making businesses ability from benefit ad the [high-intent] all sizes Finally, to we platform neighborhoods are on of everywhere.

the AI of engagement. in growth. returns, seen in investments leading driver ML including have strong particularly is WAU deepening Our this QX, In

notifications to more continue in the personal, timely and acceptable personalize enabling to use be a based neighbor. to making We newsfeed case. to on We're relevant more focus content area widely XXXX the be by each

you a example, neighbor provider locally is an growth looking on view revenue and and neighbors a when Nextdoor a potential that to For see AI a the matter of of neighborhoods and important may much to or unlocks is want This a searching lost increasingly outcome. narrower broader when weekend at to product scratched platform service view you. Nextdoor for who the but as over do surface pet. we've connect local something that for the greater allows use across only its to network to the already the integral part experiences WAU

We platform on possibilities are foundation AI neighbors. by local to is the labeled explore content excited for often built of the generative applications knowledge already that on unique and graph our our

moderating, and is this a April, use AI, what feature neighbors are the more constructive. by [open] that on. on content for. this so and outcomes are on lost that and example, This is assistance the neighbors works an achieve a is data found kind, this that write to helps offered engaging, item, post our that based Nextdoor For of looking posts well launched Leveraging is API recommendation, chatGPT potentially we post in

of for delight conversations best [full and coming content. park share help engagement business to to or about bell. For come other driving example, younger finding we the quarters. and a helping through needs making product getting updates groups a the neighbor in word here that [place deepen garden or to kids recommendation QX, community features out diversity local several and In our local] a] kind a also that the We'll continue the launched volume together

format helping calls, experience and access a example, high-intent for to organizations them including for types nearby businesses ability events, agencies connect and local the and creating we with increased neighbors. better videos. launched audiences For all posting This from has

introducing share QX. the platform. We external the like posting private We also in can more from viral network. added more which is and These driven places another launched to important Nextdoor's to XX% partner Verified year-over-year step and posters our grew directly neighbors have in Nextdoor post new a across progress our in invites bring new loops. kit, through organizations growth so [Patch] We've initiatives and local a on of to users sharing. and organically logo US areas This made GoFundMe neighbors at content of shift sites sites Nextdoor.

plan Today traction features [by] help to sync neighbors shared of updated we like launch January platforms. booked is new the invite with of content XX% our API and that and a other seeing be platform. positive year. with other QX, the we businesses to content content we're by In features in business to inviters In content growing the coming introduced as anyone so can were features since each this our neighbors, quarters, for flagged partners number

more This SEO the specific our our of draws cases picked then platform. by neighbors local raises be as content they brand can awareness use which up in and discover

completed of our make on on to work QX, In our offerings of platform sizes. platform. all we unified majority the for progress continue the also ad We advertisers

of adding that original capabilities experience SMBs, advanced we maintaining available, and tools the be while the such reporting as flexible self-serve more a not simplicity previously targeting. also were For will location

time onboard ad. manager ads larger and to an launch to will takes it For the and Nextdoor create advertisers, reduce Nextdoor

into beauty app the the local to engaged the platform interested to when reach ran most neighbors of predictive give them retailer order who to an campaign in they intent to shoppers local leveraged success drive the on of a for Nextdoor example were drive targeting beauty its me and We an shop products store. Let you in international stores. from

an was resulted ad on Our that return times the approximately Foursquare campaign study found so XX in spend. it successful

to better continue our have and and by will on sustained us executing priorities. study our return ad Moat rates. remain [proper] started base revenue are found top driving three closing, campaign our We organizations, related benchmark Nextdoor, In also and excited analytics we we strong to that outcomes on platform. and interaction a for partnering growth and XXXX efforts Growing enable confident to on in XXXX. margin categories enabling far our proprietary on that engagement, deepening The industry improvement by growth neighbors campaigns. of revenue advertiser the exceeded us spring with to Oracle spend continued rate note summer like and in brands attention performance Another

over more on for I'll Mike to our it turn now financials. details

guidance Sarah, range in and you, the revenue came represented Thank above in quarter. upward of rate. million demonstrated QX of good growth sequential an afternoon, Despite midpoint in revenue X% trajectory progress the and a year-over-year the $XX QX everyone. X% decline, our

revenue of Mid-market year-over-year and build areas spend ease continued move comparisons an customers. with strength per expect to saw We be We to for customer through several growth in area with demonstrated XXXX. relationships growing we we as value average QX. of revenue as

QX. top We've reached shifted recession-resilient XXXX. and seeing brought also agency in in to our and another quarter seeing International logos, in presence of to strength increase retention are advertising our on board and expanded year-over-year also our us verticals which more success diversity an our and to strategy with high Several a are revenue advertisers in users total were and revenue growing of with healthcare. relationships. more weekly large priority building allows verticals through relationships activate area market from We from on like the focus of efficiently agencies, new customers, sales was we strategy of we U.K. benefits as all-time active the

top QX demand reflects the of QX adjusted campaign of outpaced objectives and campaigns, for year-over-year in costs than a bottom primarily combined engagement was of EBITDA the a from across EBITDA negative a advertiser grows. spend spend $XX managed accounted XX% with XX% healthy the million, in personnel result as loss We in neighbor with decrease in trend which deleveraging ARPU ad revenue, of reduction $X.XX in the towards costs made the in The margin period. growth and year-over-year, adjusted WAU, more the which margin. XX% growing hosting direct representing both saw of declined mix continuing quarter. progress the response-focused funnel

benefited Our efficiencies. we past at working X% operating income. In loss through close expense cash burn We focus dynamics holding of increased quarters. year-over-year three operating interest primarily and over EBITDA just from $XX rate the million as customer positive better on efficiency, than largely held total was continued stable we adjusted our growth operating expenses acquisition our operational capital QX,

with QX on and deliver that will $XXX are product cash to and cash, go-to-market expense with in to continue We We marketable ensuring initiatives. ended we balance our long-term million securities. equivalents, management resourced

allocation outlook. opportunities with to looking capital I'll continue will We close forward. evaluate our our

million, to QX Our rate of XXXX $XX of minus a range. midpoint million X% at guidance the the year-over-year revenue is $XX growth

trends revenue are with date, growth progress revenue expect we our some return] April. to budgets to advertiser some -- we in see return to improving, While year-over-year uncertainty continue Based on in XXXX. [reflective

EBITDA. adjusted to Turning

implies midpoint adjusted We the EBITDA this million flat approximately an $XX range, to adjusted margin minus expect million. At $XX sequentially. EBITDA QX is to that of the loss be minus

Thank are WAU you of look and half remain we and pleased We expect today. margins. sustained highly XXXX, improvements focused driving second for joining our EBITDA growth, our As QX call year-on-year with to we we progress. in the on earnings revenue

that, turn for With it I'll the operator over Q&A. to

question Instructions] with Eric [Operator Sachs. first Sheridan from Goldman is Our

further about the comments ad update Mike the where now diversity maybe deployed the back and as to learned an multi-parter. out monetization, platform type should to about will driver come fully either to on advertiser want of either be to ad I of between both a medium term. the mix move the that vertical, as terms on think particular, 'XX the to by how of platform, driving but a not be of new we ask of and/or 'XX pointed based as to healthcare platform end you've informing out, and density what verticals, give respect in 'XX, the in promoting thinking of and Can rollout and advertiser timeline we us the long and year only advertisers you the like in with your ad over

Great. Eric appreciate it.

see the platform guided. it on just well doing and [indiscernible] in So relative revenue how as why itself, as QX, reason we you to really that's the the good ad momentum

self-serve same ad And in Nextdoor so all that, -- to iterate platform. platform. working itself, of the every off of customer Manager now intuitive the unified that is we continue on we On that size QX, easy-to-use any

by so products simplifies creating that one And all around. self-serve just option

so business, is also it are but new on easy-to-use example, look that what it you my like, element, prepared keeps the that about if and some talked adding at performance If for remarks. you in I a meant, of same the on targeting self-serve small facets

you're that there's way all can ad agency, as larger means something it enterprise ad even a an doing long self-service mid-market, large, you a create that place as a If and the up formats. that to now

back our first-party On use audiences end, ad ad the ability increase our data. And optimize understand help where server, unlocking better delivery, ad better, advertisers the relevance. their that's we and targeting will to Nextdoor and are that

with So time content Nextdoor very right efficient. it's the also on utility, right very, ad, platform that's like intent [searches]. a the It's very the for high right great advertiser and high like person but the at very, great

we we're pleased with to where move of terms progress. in that. forward We're in QX, the on continuing So are

our year, the we our any way, have We're in the as then the to our and don't So look the ultimately slowly do wisely is goal the towards front. into we mid-market, upset of and all moving on this on want going to, expect to towards current momentum enterprise. large half revenue to platform SMBs because back up

So it tests a and with of we'll lot iterations. do

it's just It's like also ad course, things platform that measurement. about Of itself. about not

was we our of because we example, high did Pixel, the and to measurement one the parties but like As the performance to quarterly so platform. so Lucid, [indiscernible] give Moat, Neustar, across Oracle more continued third also more reasons an add are around on mix, our that new folks into the [Thesis] first likely rates why the that they been have retention stick show around. can them, the advertisers That's can Foursquare, we

adds targeting the time a of like in verticals have quite market, done and of In last vertical, because way. of improves. in definitely of as that financial mix the we headed Those back real kind type by when year, by ad we are they Nextdoor to tougher into customers estate were the on well hyper-local environment exposed come will often phenomenally services, a advertisers terms

and pivoted pent-up of demand there's said, to could went see That lot verticals. So in a we those opportunity. places think we we where

we areas example, So really for continued government tech did more like for invest QX. well telco healthcare, in to that verticals and us like in have and recession-resilient

our And out sales then can we build mid-market team.

go large of So that they're [indiscernible] really not about improves. fact ad the smallest the now funnel, but finally, talked of often type the of just kind more balance back of to work in environment balanced, all towards multistate. the response. way Mike more of brands often the after come national, the the able consideration direct [ad but then be they're tending but And se] from mid-market, that to we're advertisers SMBs, served] not or as the environment, being terms we to [per are we direct across into that response more Clearly, to I'd expect because frankly,

just now about it. power to able be of They to lot there's put right marketing. know the We of brand numbers CMOs with behind want debate a

able utilize good? digital what we you doing, and to behind doing being put you the -- density? it's anything on want add platform Or lot are allows a why Do of to want so you to why the And it, numbers you're you're to effective.

opportunity And given Maybe ad of a ad because about the segments, so the segments specifically where the segments. composition change has and with are question large in one. each I penetration don't all Yes. in platform your our there's advertisers we for retail and huge we of opportunity the expect in each much a of impact the with the benefit like just on platform do new feel connects those

accelerate of So three we thinking testing across to and ability access target objectives, improve campaigns different enterprise data benefits targeting, campaign about accrue business, to Those to first-party audiences. to all have experiment and able be to mid-market to segment the in budgets SMBs, think that use growth will between creatives are segments. self-serve each for we'll to to all the shift

Our next comes question from with Youssef Truist. Squali

for ask of on AI. Robert is I regard Youssef. questions to just wanted This to Hi. in a couple

you're seems it So investing heavily AI. in now more

is R&D the Or from question nearby that what larger relation neighborhoods. that now? neighborhoods for it expand the up in is to is versus that? So far content prior now? radius then my explains previously of it showing than And investment second much is show and How what did increasing distance Curious neighborhood what step the it in a you you was content and periods?

Okay.

-- [thank Robert]. So why don't I start you,

to about all, First flip talk our then why do question the R&D about AI, not start question, investment in the I'll talking of I and back Radius to I'm Mike. going cost

So from perspective, been definitely clear and we've that to want multiple care hearing years. we make for sure you're loud an investing message AI the

that to And came So it's Nextdoor. thing the for of a have. we Nextdoor new one because is not reasons I [data access] the of

build-out for with is our areas effectively of have great ninth [indiscernible] WAU you're big local personal, do a really which growth fastest-growing right, data like more quarter we that's right? And graph, excited continue neighbors why labeling we're fact. invested And explore that We of interesting. unique, the It was the in really seeing notifications, team. making possibilities. the in XXXX, in for year that that, our us growth, was and consecutive newsfeed definitely team. that we've that Super we to so to more shown, knowledge and are see In that AI

how Maybe the for is we use invitations, neighbors businesses helping use that which to do more to the how loop. do new we better platform, example, drive or For coming it's having data [inside] AI new to a us, platform. to neighbors neighbor-to-neighbor, with close investment

degenerative -- AI. talked the about In we've recently, most

then as Tuesday, of our into announcement some also launch last addition AI feature the assistant vitality and generative about the our of made well. of areas our we So

user-generated We in content. the are business of

do, excited And so more them platform assistant very that helping helping get but effectively. even to fit therefore the to neighbors natural thing the using coming really has here. anything the is done super What hopefully a generative, me is AI they're do gets we're it about with

So from data. Nextdoor on training that model we're OpenAI,

response our it's that to neighbor platform So giving what on platform. the and a our works related is

they're of And garden, engaging because much it asking to them getting use core, [bell and more to I've platform. but the it's we're neighbors, itself post a create really Nextdoor in there. of posting they're for trying help, I the myself to for their the a about, as of it is helping It's talked that maybe recommendation, So a into as easy the what puts aggregate maybe community is giving enjoyed they're hands right control lot users. see by]

place platforms implement and vitality to this constructive. leading kindness their point, media a the slowed to is really We that large XXXX reminder other on first edge reminds But really just we this down them relative the option space. been then a we've even And to edit have where given social the [I feel were people I more side, in in the be up to think] to really posts.

of Now or ask done. even create of increase do edit offer get can neighborhoods, we vein we we more customers same a things think of because how that get suggestion that to know be I better want to in done continues can Nextdoor just And how vitality constructive. that the they that to helps help them overall we

shifted of at the I you radius end XXXX, the content. called recall, think neighborhoods, to [anyone] On we if back something of

And content on allowed anyone is. fine we neighbors useful this their is I'm so this it to time going the to depending say, and with first tag content how

in personal on a post I want right, you of like you've them know post that's bigger, sometimes pest away note, were living those to know where when again saying asking more the the this to a wanted is interesting about a in this I from that because [let] this happening. lost personalized. very move content something fires play you still to person travel distance? on, because just sometimes neighborhood to what the and it extent really -- the to content the to maybe about place but want but going immediately, a was sometimes neighbors to and be interesting wanted fires much much setting on make here but that wanted miles West question, still So I off even what if not this to Coast Instead, because going able can to were about and help content was on comes hundreds hard is better fact, to it is rigid AI boundaries making it's only want it's we

people, seeing may only things want some For others, building. care their see state that line. about across something whole for county, they to they And across the literally the even are maybe in might

where And this we to powerful the like. will very feed when is it user marry that AI allow look become starts the personalize so to data what to to itself

cost? R&D the Mike Okay, on

Yes, want AI to generally. expense Robert, and more operating up pick I on management then there just

the are this we deeply in true just for is certainly, impact, given in So that R&D investing and the area potential generally. business, of

managed OpEx sequential the line seeing we're tightly growth and over R&D headcount. quarters, about true basically several flat We as three over have the That's within last very costs the quarters. well thinking last

targeted I leaning in come. rest But capabilities, quarters to are in on development to little see Going being are of in the very the AI our where resources. in we performance we investments year, we selectively really with a management are team. bit and forward, adding really you'll in incremental the and will that of include product

making tailwind be the P&L very additional our investments is out calling XX% business. where a have these down cost most area just impact worthwhile We cost can just worth it unlocking And wanted quarter that standards. other AI us to The margin. compute driving hosting seasonally. engagement on We of very the in And here. the gross I business. the a first, margins this that is and cost. revenue are And for about AI are point to at in the industry to The gross included margin important quarter, learning AI have fact we gross margin high gross call finished great is remains impacts more be by costs out and our think

next with Evercore. Our Hung from question is Jocelyn

to XX quarters Hi, XX%. us about disclosure six this is first, Maybe three earnings around Jocelyn on you give [indiscernible] you of ago, advertiser think retained update XX% months, advertisers. and Mike. an asking retention a labor XX% several then probably call, then top I retention And for months rate? and some there could last you were question mentioned due your

on just anything there is front? share can wondering So you that

I question. appreciate Yes. the

is over [indiscernible] from class XX% is it a and fact is then been at way years. see XX% we that no one still in Investor all the we that average back think I see investment we to meaningful come neighbors you our durability DAU I the is XX-XX-XX times XX% say to incredibly in folks than Internationally That's bit to a on retention fast from XXXX basis. I and you in so about -- who XX% our strong A a our want weekly two in of I business, perspective, continue more come to WAU give the little week. that engaged really and neighbor gave rate best our to there's actually back would they then about return industry. continue after Day our a third where that's back it actually the high, verified on the four think weekly the way neighbors change

on Nextdoor of Rate what because indicates the the to see bringing a And way that on build we community. and enduring to we're neighborhood so neighbors. retention great that utility

the advertisers On of that top quarter our side, told XX% in last retained. you been XX advertiser XXXX had we

advertisers revenue how to proud that a Again build base market. it's and think with we and can has to and change have, great value, XX%. we're the So to LTM of if platform, because about we keep that been there It's because continuing again, the around we're staying in in for out the us trend. no we're speaking are very remained of something going advertisers to builds the growth coming finding we that fact

the I agencies. mid vertical, towards talked relationships building pivoting recession-resilient towards deeper market, about with pivoting ad

that be the we All coming, customers. find within each advertisers we'll we of then to of We typically new net course the additive should top those a on foothold Great is to and example. is high. the their example an telco QX percent quite XXXX of here our XXX% ability tech provider QX we the go hundreds continue are grow since of logos that 'XX in look then that has of to of get spend already and have, once grown of deeper as revenue in

So, both good rates about we our marketplace. very feel retention on sides of

And then session rate. follow-up one you on the there growth? quick comparing can rate versus -- anything especially session Is growth just the provide, WAU

content you The grow faster session WAU than the happening? were platform, to to that kind go to And that is but really Why you're the your Number is if seeing we're the to they So back newsfeed, reasons more then giving asking why relevant more feed. the we're growth. is people growth going continues of deeper. are using you're bringing them again, one you. deeper? because personalizing rate The we're

more finding of businesses. you're who seeing someone if recommendations loves probably local So local you're business, a you're

mover, seeing If your of you're might may neighborhood know -- about. new that yet a you things not you in to places examples be do some are

feed particularly example. If things around summer, summer do might things demographic for more as seeing a in I'm Nextdoor, my we an be kids, the you're head with like into a key a millennial camps lot of local as to parent, seeing stuff now you

in I important them about is like sell it go we deeper impressions which ultimately audience feels neighbors and coming where bring we to high-intent that revenue. value to all done. more high other So that is -- get loop increases back, newsfeeds talked But things the those be really creating XX-XX-XX help Discover should just in done to our the can surfaces in it if Nextdoor advertisers, and to that's that why we durability, a to

questions. no are There Instructions] [Operator

the So with I'll to back call Sarah remarks. pass Friar closing over

Thank you so Great. much.

call. the are appreciate and stakeholders great questions, have line. and in asking we of we other this of also for As time a everyone ever, we but support lot analysts know dialing The on investors your

As from tell really XXXX. you entered how pleased we've our quarter, we're can with

control what We continue to control. we can

first Sessions neighbors driving the more about talked and platform, growth to to we as foremost, revenue improvement. growth, are both So progress continuing on see XX% year-over-year up and to margin I and they're of just to Jocelyn, show real again, XX% continues Nextdoor. joining our on more that, because value neighbors are also the finding U.S. organically QX. verified Over in to of platform organically. And came that users while

need We're to label partnerships optimistic tech like areas verticals to and the our ad will continuing we're in estate and strength stack. relevance done real proprietary out like helping services see hear that financial revenue, to better continue course, return to and us. types mid-market, in us invitations telco Nextdoor revenue, once perform and build are -- whether new that spending, local We're that, they thrive continuing driving or well of graph, growth, you'll on well it's agency driving laser-focused creating actually tech it's our and about to ad data, and discover content absolutely because for where feed neighbors get [top whether is they on our] our because then, again we're Nextdoor. what a get done should because products of place We're investing and AI. knowledge This of and of talk and growing that

growth in to the we a and to while really excited we're track revenue have. margin also neighbor, to to that opportunity Nextdoor improvement them. finally, Everyone's then we're on bring in long-term investing return and And XXXX

so forward for thank much to that, and you your today, to with we time So talking look you through the quarter.

participation. concludes for you the call. Thank That your conference

disconnect now your lines. may You