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Neighborhood social network Nextdoor (NYSE:KIND) beat analysts' expectations in Q2 CY2024, with revenue up 11.3% year on year to $63.29 million. On top of that, next quarter's revenue guidance ($62 million at the midpoint) was surprisingly good and 3.9% above what analysts were expecting. It made a GAAP loss of $0.11 per share, down from its loss of $0.09 per share in the same quarter last year.
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Nextdoor (KIND) Q2 CY2024 Highlights:
- Revenue: $63.29 million vs analyst estimates of $58.51 million (8.2% beat)
- Revenue Guidance for Q3 CY2024 is $62 million at the midpoint, above analyst estimates of $59.66 million
- The company lifted its revenue guidance for the full year from $232 million to $239.8 million at the midpoint, a 3.4% increase
- Gross Margin (GAAP): 83.8%, up from 81.7% in the same quarter last year
- EBITDA Margin: -9.4%, up from -32.7% in the same quarter last year
- Free Cash Flow was -$5.46 million compared to -$13.65 million in the previous quarter
- Weekly Active Users: 45.1 million, up 3.5 million year on year
- Market Capitalization: $999.1 million
Social NetworkingBusinesses must meet their customers where they are, which over the past decade has come to mean on social networks. In 2020, users spent over 2.5 hours a day on social networks, a figure that has increased every year since measurement began. As a result, businesses continue to shift their advertising and marketing dollars online.
Sales GrowthNextdoor's revenue growth over the last three years has been mediocre, averaging 16.8% annually. This quarter, Nextdoor beat analysts' estimates but reported mediocre 11.3% year-on-year revenue growth.
Guidance for the next quarter indicates Nextdoor is expecting revenue to grow 10.5% year on year to $62 million, improving from the 4% year-on-year increase it recorded in the comparable quarter last year. Ahead of the earnings results, analysts were projecting sales to grow 12% over the next 12 months.
Usage Growth As a social network, Nextdoor generates revenue growth by increasing its user base and charging advertisers more for the ads each user is shown.
Over the last two years, Nextdoor's monthly active users, a key performance metric for the company, grew 9.6% annually to 45.1 million. This is decent growth for a consumer internet company.
In Q2, Nextdoor added 3.5 million monthly active users, translating into 8.4% year-on-year growth.
Revenue Per UserAverage revenue per user (ARPU) is a critical metric to track for consumer internet businesses like Nextdoor because it measures how much the company earns from the ads shown to its users. ARPU can also be a proxy for how valuable advertisers find Nextdoor's audience and its ad-targeting capabilities.
Nextdoor's ARPU has declined over the last two years, averaging 6.2%. Although the company's users have continued to grow, it's lost its pricing power and will have to make improvements soon. This quarter, ARPU grew 2.4% year on year to $1.40 per user.
Key Takeaways from Nextdoor's Q2 ResultsWe were impressed by how significantly Nextdoor blew past analysts' revenue expectations this quarter. We were also glad next quarter's revenue guidance came in higher than Wall Street's estimates. On the other hand, its revenue growth regrettably stalled. Overall, we think this was still a solid quarter with some key areas of upside. The stock traded up 5.6% to $2.65 immediately following the results.
