Nextdoor Holdings, Inc. (NYSE:KIND) is a neighborhood-focused platform that has seen significant institutional ownership, with 34% of the shares held by institutions. This large stake suggests that institutional investors see potential in the company and are closely monitoring its performance.

Business Overview

Nextdoor's purpose is to cultivate a kinder world where everyone has a neighborhood they can rely on. The company's mission is to be the neighborhood hub for trusted connections and the exchange of helpful information, goods, and services. Nextdoor operates in over 335,000 neighborhoods around the world, reaching 1 in 3 households in the United States.

The company generates substantially all of its revenue from advertising, with a focus on local businesses and organizations. Nextdoor's platform allows neighbors to connect, share information, and engage with their local community. This creates valuable audience data and engagement metrics that the company can leverage to attract advertisers.

Geographic Breakdown

Nextdoor's revenue is primarily generated in the United States, which accounted for $49.9 million, or 94%, of the company's total revenue in the first quarter of 2024. International markets contributed the remaining $3.2 million, or 6%, of revenue during the same period.

The company has noted that its focus is increasingly on the U.S. market, where it is seeing stronger user growth and engagement. Nextdoor has been gradually scaling back its go-to-market efforts in international markets, as it believes the U.S. represents the greatest growth opportunity.

Revenue Breakdown and Trends

Nextdoor's revenue is primarily generated from advertising, with the company's self-serve customers, including small and medium-sized businesses (SMBs) and about half of its mid-market customers, contributing nearly 50% of total revenue in the first quarter of 2024.

The company has seen positive trends in several key verticals, with home services and financial services showing strong growth in the first quarter. Nextdoor's efforts to improve its advertising platform, including the migration to its proprietary ad server and the introduction of AI-powered features, have also contributed to revenue growth and improved advertiser outcomes.

Financials

In the fiscal year 2023, Nextdoor reported annual revenue of $218.3 million, a decrease from the previous year's revenue of $247.5 million. The company's net loss for the year was $147.8 million, compared to a net loss of $134.2 million in the prior year. Nextdoor's annual operating cash flow was -$59.3 million, and its annual free cash flow was -$59.5 million.

For the first quarter of 2024, Nextdoor reported revenue of $53.1 million, a 7% increase compared to the same period in the prior year. The company's net loss for the quarter was $28.3 million, an improvement from the $33.7 million net loss in the first quarter of 2023. Nextdoor's quarterly operating cash flow was -$13.6 million, and its quarterly free cash flow was -$13.6 million.

Quarterly Performance and Guidance

Nextdoor's weekly active users (WAUs) grew to 43.4 million in the first quarter of 2024, up 2% year-over-year and 4% sequentially. The company's average revenue per weekly active user (ARPU) increased by 4% year-over-year to $1.22, reflecting both increased engagement and advertiser spending levels.

For the full year 2024, Nextdoor expects revenue in the range of $229 million to $235 million. The company also expects its adjusted EBITDA margin to improve by approximately 15 percentage points year-over-year, compared to its prior expectation of a 10 percentage point improvement. Additionally, Nextdoor now expects to generate positive free cash flow in the fourth quarter of 2024, a full year earlier than its previous guidance.

Risks and Challenges

Nextdoor faces several risks and challenges, including its ability to continue attracting and retaining users, maintaining and scaling its technical infrastructure, and effectively monetizing its platform. The company also operates in a highly competitive environment, with larger technology companies vying for advertising dollars and user attention.

Additionally, Nextdoor is subject to various regulatory and legal risks, including those related to data privacy, content moderation, and intellectual property. The company's ability to navigate these challenges will be crucial to its long-term success.

Liquidity

As of March 31, 2024, Nextdoor had $497.8 million in cash, cash equivalents, and marketable securities, and no debt. The company's strong cash position provides it with the financial flexibility to invest in growth initiatives, pursue strategic opportunities, and weather potential economic downturns.

Nextdoor has also implemented a share repurchase program, which it has been actively utilizing. As of the end of the first quarter of 2024, the company had $163 million remaining under its current authorization for share repurchases.

Conclusion

Nextdoor Holdings, Inc. (NYSE:KIND) is a neighborhood-focused platform that has garnered significant institutional ownership, with 34% of its shares held by institutions. The company's financial performance has been mixed, with revenue growth in the first quarter of 2024 but continued net losses and negative cash flow.

Nextdoor's focus on the U.S. market, where it is seeing stronger user growth and engagement, as well as its efforts to improve its advertising platform, have contributed to its recent performance. However, the company faces various risks and challenges, including competition, regulatory hurdles, and the ability to effectively monetize its platform.

Nextdoor's strong cash position and share repurchase program provide it with the financial flexibility to navigate these challenges and invest in growth initiatives. As the company continues to execute on its strategy and address its operational and financial hurdles, investors will be closely watching to see if Nextdoor can unlock the full potential of its neighborhood-focused platform.