Nextdoor, the essential neighborhood network, has been on a transformative journey over the past 14 years, aiming to unlock the full potential of local communities. Founded in 2011 by Nirav Tolia and Sarah Leary, Nextdoor has grown to over 100 million verified neighbors across more than 340,000 neighborhoods worldwide.
Business Overview and History
Nextdoor's journey began in 2010 when Nirav Tolia and Sarah Leary founded the company with the belief that connected neighborhoods create stronger communities. The platform officially launched in 2011, aiming to provide a space for neighbors to connect, share information, and build community. In its early years, Nextdoor focused on expanding its user base across the United States, reaching 40 million verified neighbors by 2015.
Initially, the company faced challenges in monetizing its platform as it worked to balance user growth and engagement with introducing advertising products. In 2016, Nextdoor began supporting its platform with advertising, generating revenue from advertisers looking to reach its growing user base. This marked a significant shift in the company's business model and set the stage for future growth.
Over the following years, Nextdoor continued to scale its operations and improve its advertising products and infrastructure. However, the company also had to navigate industry changes that impacted its ability to measure and target advertising, such as modifications made by Apple to its mobile operating system.
A major milestone in Nextdoor's history came in 2021 when the company went public through a merger with a special purpose acquisition company. This move provided Nextdoor with additional capital to fund its growth initiatives. However, the company continued to face challenges, including the impact of macroeconomic conditions on advertising spend.
In response to these challenges, Nextdoor implemented restructuring efforts in 2023 and 2024 to optimize its operations and cost structure. These efforts culminated in a significant achievement for the company, as it reached positive adjusted EBITDA and operating cash flow for the first time in the fourth quarter of 2024.
Financial Overview
Nextdoor's financial performance has been marked by consistent user growth and revenue expansion, though the company has yet to achieve sustained profitability. As of the third quarter of 2024, Nextdoor reported 45.9 million weekly active users (WAUs), representing a 13% year-over-year increase. Revenue for the same period grew 17% year-over-year to $66 million, driven by growth in self-serve advertisers and improved revenue retention.
Financials
Despite these topline improvements, Nextdoor has continued to report net losses, recording a GAAP net loss of $15 million in Q3 2024. However, the company has made progress in driving operational efficiencies, achieving positive adjusted EBITDA of $3 million in the fourth quarter of 2024 and generating $11 million in operating cash flow.
For the third quarter of 2024, Nextdoor reported revenue of $65,228,000, representing a 17% year-over-year increase. The net loss for the quarter was $12,123,000. The company generated operating cash flow of $11,756,000 and free cash flow of $11,667,000 during the same period.
The increase in revenue was primarily due to increased advertiser spending as well as increased user engagement, as measured by the 13% increase in Q3 weekly active users (WAUs). Average revenue per user (ARPU) increased 3% in the third quarter compared to the prior year period, reaching $1.43, reflecting year-over-year growth in both revenue and WAUs.
For the nine months ended September 30, 2024, Nextdoor reported total revenue of $182.05 million, up 12% compared to the same period in 2023. The company reported a net loss of $85.94 million for the first nine months of 2024, though this represented a 20% improvement compared to the $107.23 million net loss in the prior year period.
Liquidity
Nextdoor's balance sheet remains solid, with $427 million in cash, cash equivalents, and marketable securities as of the end of 2024, and no outstanding debt. The company has also been actively repurchasing shares, reducing its fully diluted share count by 5% year-over-year as of the end of 2024.
As of September 30, 2024, Nextdoor had $424.7 million in cash, cash equivalents, and marketable securities. The company has no debt, resulting in a strong liquidity position. Nextdoor's current ratio and quick ratio both stand at 16.70, indicating a robust ability to meet short-term obligations.
Transformation and the NEXT Initiative
In 2023, Nextdoor's co-founder Nirav Tolia returned as CEO, spearheading a comprehensive transformation of the platform, dubbed the "NEXT" initiative. This strategic shift is aimed at delivering a significantly improved user experience and unlocking Nextdoor's full potential as the essential neighborhood network.
The NEXT initiative focuses on three key pillars: 1) Providing richer local content to keep users informed, 2) Upgrading live local alerts to enhance user safety, and 3) Surfacing community-powered local recommendations to help users make informed decisions. These enhancements are designed to make Nextdoor a more valuable and engaging platform for both users and advertisers.
To execute on this vision, Nextdoor has made strategic hires, including the appointment of Georg Petschnigg as Chief Design Officer, who previously led a successful redesign at The New York Times. The company has also shifted its near-term focus towards learning, testing, and optimizing the NEXT experience, even if it means accepting short-term trade-offs in user metrics and financial performance.
Nextdoor has begun the rollout of NEXT in select markets, and the company remains on track to launch the transformed platform company-wide by mid-2025. While the transition may result in near-term headwinds, Nextdoor is confident that the long-term benefits of a significantly improved user experience will outweigh the short-term challenges.
Platform and Products
Nextdoor operates a single reportable segment focused on its neighborhood-based social networking platform. The platform connects users, businesses, and public agencies within local communities, allowing neighbors to share information, ask questions, give recommendations, and engage with one another on a variety of neighborhood-relevant topics and issues.
Key features of the Nextdoor platform include:
- Verified Neighbors: Nextdoor requires users to verify their identity and home address to ensure the platform consists of real people within the same local neighborhood. - Neighborhood Feed: Neighbors can post updates, ask questions, and share information that is then displayed in a chronological feed for their local neighborhood. - Local Deals and Services: Businesses and organizations can post special offers, promotions, and information about their products and services to reach local customers. - Nextdoor Groups: Neighbors can create and join special interest groups within their local community to connect around shared hobbies, causes, or neighborhood initiatives. - Nextdoor for Public Agencies: Government and public agencies can use the platform to share important updates, emergency information, and community resources with local residents.
Risks and Outlook
As Nextdoor navigates its transformation, the company faces several risks and uncertainties. The successful execution of the NEXT initiative is critical, as any delays or shortcomings could impact user engagement and the company's ability to attract and retain advertisers. Additionally, Nextdoor operates in a highly competitive landscape, with larger tech giants and local platforms vying for users and advertising dollars.
Despite these challenges, Nextdoor remains optimistic about its long-term prospects. The company's focus on delivering a more valuable and engaging platform for local communities, coupled with its strong balance sheet and disciplined capital allocation, position it well for future growth. As Nextdoor continues to refine and rollout its NEXT initiative, investors will closely monitor the company's ability to drive sustained user engagement, revenue growth, and ultimately, profitability.
Nextdoor primarily sells in the United States, as a small-cap company. The company does not break out performance by geographic market. Nextdoor has invested significantly in growth initiatives, including expanding its platform features and functionality through its "NEXT" initiative, as well as in sales and marketing efforts to drive user acquisition and engagement. While these investments have resulted in continued net losses, the company maintains a strong cash position, which should provide runway to continue investing in its growth strategy.
Overall, Nextdoor remains focused on scaling its neighborhood-based social networking platform, growing its user base, and enhancing its monetization capabilities, though it continues to prioritize investments for future growth over near-term profitability. The company's ability to execute on its NEXT initiative and drive increased user engagement and monetization will be crucial factors in determining its long-term success in the competitive social networking landscape.