Nextdoor Holdings, Inc. (KIND)·Q3 2024 Earnings Summary

Executive Summary

• Q3 revenue was $65.6M (+17% YoY) with WAU of 45.9M (+13% YoY); adjusted EBITDA loss improved to $1.3M (−2% margin), a ~33ppt YoY margin improvement. Revenue rose from $63.3M in Q2 and WAU rose from 45.1M, demonstrating improving growth and monetization while losses narrowed materially .
• Management raised FY24 outlook to revenue of $245M (~12% YoY) and adjusted EBITDA margin improvement approaching 25ppt; Q4 guide is revenue ≈$63M, adjusted EBITDA loss ≈$2M, and positive free cash flow, citing seasonality in home services .
• Advertiser performance improved: click optimization drove +82% CTR and −16% CPC; mid‑market saw ~2x campaign performance; search retargeting delivered >10x ROAS vs standard campaigns; enterprise spend returned to YoY growth, supporting channel breadth and retention .
• Balance sheet and capital allocation remain supportive: $425M cash/marketable securities, zero debt; repurchased 8M shares in Q3 (30M YTD), reducing fully diluted share count by ~6% YTD, with ~$100M repurchase authorization remaining—setting up a buyback‑supported path to FCF .

What Went Well and What Went Wrong

What Went Well

• Self-serve and mid-market momentum: “Mid‑market self‑serve advertisers… began to adopt our click optimization features… driving a 2x improvement in campaign performance,” boosting net revenue retention and spend; enterprise advertisers also returned to growth .
• Measurable ad performance lift: “Click optimization drove an 82% increase in click‑through rates and a 16% reduction in cost per click” while search retargeting campaigns achieved “over 10x” ROAS vs standard campaigns .
• Strong operating leverage: adjusted EBITDA margin improved ~33ppt YoY; CFO cited revenue per employee up 60%+ YoY and S&M as a percent of revenue down 14 points YoY, evidencing “owner’s mindset” execution .

What Went Wrong

• Profitability still negative: GAAP net loss was $14.9M (−23% margin) and adjusted EBITDA was −$1.3M (−2% margin); sustained stock‑based comp remains a significant recurring expense .
• Near‑term topline seasonality and Q4 step down: Q4 revenue guided to ~$63M vs Q3 $65.6M due to “natural seasonality related to home services,” implying sequential softness despite improved fundamentals .
• Long road to product transformation (NEXT): management does “not expect to see meaningful signs of product‑related progress until mid‑2025,” which may defer product‑led revenue acceleration .

Financial Results

KPI and Balance Sheet

Segment breakdown: Not provided; revenue primarily from advertising solutions across channels (enterprise, mid‑market, self‑serve) as reflected in qualitative disclosures .

Guidance Changes

Note: Q2 provided Q3 guidance (rev ≈$62M; adj. EBITDA ≈$(8)M); actual Q3 outperformed both revenue and profitability vs that intra‑quarter guide .

Earnings Call Themes & Trends

Management Commentary

• “Q3 was a solid milestone… we improved user growth, revenue growth and operational efficiency… WAU reached 45.9 million, up 13% YoY. Revenue of $66 million grew 17% YoY” – CEO Nirav Tolia .
• “Mid‑market self‑serve… began to adopt our click optimization features… driving a 2x improvement in campaign performance,” highlighting durable monetization levers – CFO Matt Anderson .
• “We do not expect to see meaningful signs of product‑related progress until mid‑2025,” underscoring a realistic timeline for NEXT .
• “Productivity, as measured by revenue per employee, increased by more than 60% year‑over‑year… [and] sales and marketing as a percent of revenue… was down 14 points year‑over‑year” – CFO .
• “We ended Q3 with $425M in cash… zero debt… repurchased 8M shares… YTD… 30M shares… authorization had approximately $100M remaining” – Shareholder Letter .

Q&A Highlights

• Growth levers and marketplace strategy: Management emphasized that neighbor acquisition is “almost solely… organic” with minimal paid marketing; marketplace surfaces (for sale/free) are an opportunity but not near‑term within NEXT, which first prioritizes discovery use cases .
• Operating leverage clarity: CFO added that S&M as % of revenue fell 14 points YoY, reflecting scale benefits and focus, reinforcing margin trajectory alongside self‑serve gains .
• Strategic focus: Continued retrenchment to U.S. market and organic growth channels to maximize ROI and feed the flywheel, while deferring broader marketplace investment to later NEXT phases .

Estimates Context

• S&P Global consensus EPS and revenue estimates were unavailable via our tool for KIND at this time; as a result, we cannot classify Q3 results as a beat/miss versus Wall Street consensus and cannot present estimate variances. We will update if S&P Global mapping becomes available.
• As a proxy for performance versus internal expectations, KIND exceeded its intra‑quarter Q3 guidance from August (rev ≈$62M; adj. EBITDA ≈$(8)M) by delivering $65.6M revenue and $(1.3)M adjusted EBITDA .

Key Takeaways for Investors

• Execution is improving: sequential revenue growth, faster WAU growth, and substantial YoY margin improvement point to a healthier core while NEXT remains a mid‑2025+ catalyst .
• Monetization engines working: self‑serve scale, mid‑market adoption, click optimization (82% CTR lift; −16% CPC) and >10x ROAS search retargeting suggest sustainable ARPU/retention tailwinds .
• Capital return + balance sheet support: $425M cash/marketable securities, no debt, and ongoing buybacks (30M YTD; ~$100M authorization left) provide downside support and dilution control into an FCF‑positive Q4 .
• Near‑term setup: Q4 guide embeds seasonal step‑down (home services), but management still expects positive FCF and continued operating leverage—potentially a stock catalyst if execution remains tight .
• Medium‑term thesis: If NEXT succeeds in shifting from intent to discovery and elevating UX (new CDO hire), engagement and monetization could inflect higher, expanding TAM and accelerating growth in 2025/26 .
• Watch items: pace of enterprise migration to ads platform, sustained ROAS improvements, U.S. WAU momentum, and tracking of OpEx discipline (particularly S&M and SBC) to preserve margin gains .
• Trend evidence: Q3 outperformance vs Q2 intra‑quarter guide strengthens management credibility; consistent guidance raises (FY revenue growth and margin improvement) support estimate revisions if/when consensus is available .