Nextdoor Holdings, Inc. (KIND)·Q2 2024 Earnings Summary

Executive Summary

• Q2 delivered accelerating topline and user growth with improved operating leverage: revenue $63.3M (+11% y/y) on WAU of 45.1M (+8% y/y), while adjusted EBITDA loss narrowed to $(6.0)M (–9% margin, +23ppt y/y) .
• Management raised the 2024 outlook on profitability: now targeting adjusted EBITDA margin improvement approaching 20ppt y/y (prior +15ppt) and reaffirmed positive quarterly free cash flow in Q4’24; Q3 guide: revenue ≈$62M and adjusted EBITDA ≈$(8)M .
• Commercial mix improved: self‑serve reached 49% of Q2 revenue (39% in Q2’23), top‑50 advertiser retention hit 96%, ARPU rose 3% to $1.40, and mid‑market spend/retention improved, aided by the Nextdoor Ads Platform .
• Strategic context: CEO underscored a full product transformation (“NEXT”) to drive long‑term growth; meaningful product‑related progress is not expected until mid‑2025, a key medium‑term narrative driver .
• Capital allocation supportive: $457M cash and securities, zero debt, repurchased 18M shares in Q2 ($44M, $2.42 avg), with $119M authorization remaining; fully diluted share count reduced ~5% in Q2 .

What Went Well and What Went Wrong

• What Went Well

  • User and revenue momentum: WAU +8% y/y to 45.1M and revenue +11% y/y to $63.3M; U.S. WAU +12% y/y, with engagement depth improving .
  • Monetization mix shift: self‑serve rose to 49% of revenue (39% in Q2’23); ARPU increased 3% y/y to $1.40 on better usage and retention; top‑50 advertiser retention reached 96% .
  • Operating leverage: adjusted EBITDA loss improved to $(6.0)M (–9% margin), a 23ppt y/y margin improvement; revenue per employee improved >50% y/y; stock‑based comp down 25% .

• What Went Wrong

  • GAAP loss widened y/y due to restructuring: net loss $(42.8)M vs $(35.4)M y/y, including $25.5M restructuring (primarily office space reductions) recognized in Q2 .
  • Operating expense mix still heavy on G&A under GAAP in Q2 (restructuring), despite non‑GAAP reductions across functions, highlighting continued transition toward a leaner model .
  • Near‑term product payoff deferred: management reiterated meaningful benefits from the “NEXT” transformation are not expected until mid‑2025, extending the timeline for product‑led acceleration .

Financial Results

KPIs and Commercial Mix

Notes:

• Q2 GAAP loss includes $25.5M restructuring (office space and workforce reduction). Excluding onetime charges, total costs/expenses declined 12% y/y in Q2, per CFO .
• No reportable segments; all revenue from Nextdoor’s ad and platform activities.

Guidance Changes

Management notes it has not reconciled adjusted EBITDA/FCF guidance to GAAP due to variability in excluded items .

Earnings Call Themes & Trends

Management Commentary

• “We reported an 8% year‑over‑year increase in WAU and 11% growth in revenue as advertisers are benefiting from improved functionality and performance on our Nextdoor Ads Platform.” — CEO Nirav Tolia .
• “Adjusted EBITDA was $(6)M, improving by 23 percentage points year‑over‑year… Productivity, as measured by revenue per employee, improved more than 50% year‑over‑year.” — Shareholder Letter .
• “Transforming a product is a complex and time‑consuming process… we do not expect to see meaningful signs of product‑related progress until mid‑2025.” — CEO Nirav Tolia .
• “We ended the quarter with $457 million in cash… and 0 debt… we repurchased 18 million shares for $44 million… authorization had $119 million remaining.” — CFO Matt Anderson .
• “For Q3, we expect revenue of approximately $62 million and an adjusted EBITDA loss of approximately $8 million… We continue to expect to generate positive free cash flow in Q4.” — CFO Matt Anderson .

Q&A Highlights

• Macro and sustainability: Management emphasized focusing on controllables vs macro; reiterated discipline/do‑more‑with‑less while prioritizing growth via product (NEXT). CFO clarified Q4 positive free cash flow considers interest income; no specific FY’25 outlook provided .
• Local vs national budgets and growth levers: Nextdoor aims to deliver “local at national scale,” serving SMB to enterprise with reach and ROAS; user growth is largely word‑of‑mouth/unpaid, with neighbor acquisition spend “nearly 0,” supporting marketing leverage .
• Vertical dynamics: Home services showing positive momentum; early rebound in financial services; diversification into emerging verticals continues .

Estimates Context

• S&P Global consensus (EPS, revenue, EBITDA, target price, recommendation) was unavailable via our tool due to a mapping issue for KIND; therefore, we cannot provide an estimates vs. actuals comparison for Q2’24 or outlook. We attempted to retrieve: Primary EPS Consensus Mean, Revenue Consensus Mean, EBITDA Consensus Mean, Target Price Consensus Mean, and Consensus Recommendation (Text) for Q1–Q3’24 and FY’24–’25, but no data returned. Values were unavailable from S&P Global via our tool.

Key Takeaways for Investors

• Momentum building: WAU and revenue growth accelerated sequentially with improved ARPU and advertiser retention; self‑serve mix is rising, a structural tailwind for margins .
• Profitability trajectory firming: Adj. EBITDA margin improvement now “approaching 20ppt” y/y and positive Q4 free cash flow remain central catalysts into year‑end; Q3 guide embeds modest sequential revenue downtick after strong Q2 .
• Non‑GAAP normalization ahead: Q2 GAAP loss was inflated by $25.5M restructuring; excluding onetime items, opex down 12% y/y—supports operating leverage story into 2H .
• Product inflection is 2025 story: “NEXT” transformation is the long‑term growth unlock but won’t show “meaningful” product‑related progress until mid‑2025—investors should weigh near‑term execution on ads platform/efficiency vs. medium‑term product payoff .
• Capital return and balance sheet: $457M cash, no debt, active buyback with $119M remaining; fully diluted share count reduced ~5% in Q2—helps mitigate dilution and signal confidence .
• Watchlist catalysts: Continued self‑serve uptake and performance features (e.g., click optimization, video, lead gen) that lift advertiser ROI; sustained WAU/session depth; execution vs. Q3 guide and 4Q FCF milestone .
• Risk checks: Execution risk on product overhaul; ad demand variability by vertical; timing of enterprise migration to the Ads Platform; and dependence on engagement depth to drive ARPU .

Other relevant Q2 press releases:

• Board strengthening: Elisa Steele appointed to Board (adds public‑company/marketing expertise) .
• Community utility features: Integration with PowerOutage.us for localized outage alerts, augmenting platform relevance and engagement .

All figures and quotations sourced from the company’s Q2’24 press release, 8‑K (Shareholder Letter and exhibits), and earnings call transcript, as cited.