Stock Story -
Neighborhood social network Nextdoor (NYSE:KIND) reported results ahead of analysts' expectations in Q4 FY2023, with revenue up 4.3% year on year to $55.56 million. On top of that, next quarter's revenue guidance ($50.5 million at the midpoint) was surprisingly good and 6.1% above what analysts were expecting. It made a GAAP loss of $0.10 per share, down from its loss of $0.04 per share in the same quarter last year.
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Nextdoor (KIND) Q4 FY2023 Highlights:
- Reminder that company released preliminary results last week in conjunction with announcement of CEO stepping down
- Revenue: $55.56 million vs analyst estimates of $51.18 million (8.6% beat)
- EPS: -$0.10 vs analyst estimates of -$0.12 (16.7% beat)
- Revenue Guidance for Q1 2024 is $50.5 million at the midpoint, above analyst estimates of $47.59 million
- Free Cash Flow was -$14.94 million compared to -$18.42 million in the previous quarter
- Gross Margin (GAAP): 81%, in line with the same quarter last year
- Weekly Active Users (WAU): 41.8 million, up 1.8 million year on year
- Market Capitalization: $785.7 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 strong, averaging 24.5% annually. This quarter, Nextdoor beat analysts' estimates but reported lacklustre 4.3% year-on-year revenue growth.
Guidance for the next quarter indicates Nextdoor is expecting revenue to grow 1.5% year on year to $50.5 million, improving on the 2.4% year-on-year decline it recorded in the same quarter last year.
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 daily active users, a key performance metric for the company, grew 9.9% annually to 41.8 million. This is decent growth for a consumer internet company.
In Q4, Nextdoor added 1.8 million daily active users, translating into 4.5% 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 8.8%. 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 declined 0.2% year on year to $1.33 per user.
Key Takeaways from Nextdoor's Q4 Results As a reminder, the company released preliminary Q4 results last week in conjunction with the announcement that the CEO Sarah Friar (CEO since 2018) is stepping down, to be replaced by founder Nirav Tolia. Aside from that, we were impressed by Nextdoor's revenue guidance for next quarter, which blew past analysts' expectations. We were also excited its revenue outperformed Wall Street's estimates. On the other hand, its revenue growth regrettably slowed. Overall, we think this was a strong quarter that should satisfy shareholders. The stock is up 2.2% after reporting and currently trades at $2.09 per share.