Q4 2021 Nextdoor Holdings Inc Earnings Call
Yeah.
[music].
Good afternoon. Thank you for attending today's next door Q4, 2021 earnings call. My name is <unk> and I'll be your moderator for today's call all lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end of you would like to ask a question. Please press star one.
On your telephone keypad I would now like to pass the conference over to our hope that Anderson head of Investor Relations. Please go ahead.
Thank you Tony.
I'm, Matt <unk> head of Investor Relations.
Good afternoon, and thank you for joining us today to review next Door's fourth quarter 2021 financial results.
With us on the call today are Sapphire, Chief Executive Officer, and Mike Doyle, <unk> Chief Financial Officer.
During this call we may make statements related to our business that are forward looking statements under federal Securities laws.
These statements are not guarantees of future performance.
Subject to a variety of risks and uncertainties.
Our actual results could differ materially from expectations reflected in any forward looking statements.
For a discussion of the material risks and other important factors that could affect our actual results.
Please refer to our SEC filings available on SEC's website, and in the Investor Relations section environment side as well as the breadth and other important factors discussed in today's earnings release.
non-GAAP financial measures will be discussed on today's conference call. A reconciliation of these measures to their most directly comparable GAAP financial measures can be found in today's earnings release.
I'd like to turn the call over to Jack.
Thank you, Matt and Hello, everyone Q4 rounded out a strong 2021 for next door. We go significantly neighbor growth at scale meaningfully increased engagement on the platform welcomed businesses of all sizes with that delivered exceptional revenue growth.
Also successfully completed a public offering growing our cash balance over 700 million.
Putting us in a position of strength to continue investing for long term growth.
In Q4, we delivered strong revenue growth of 48% year over year and drove 32% year over year growth and weekly active users are wow with $36 million.
Total revenue growth for 2021, 56% and accelerated by seven points year over year from 49% in 2020.
Our strategy centered on building, an active valued community and working while growth is driven by both new neighbors joining in finding value on next door, but also from current neighbors, becoming increasingly more assets in Q4, while as a percent of total neighbors increased five percentage points year over year.
It's a 52% which represents an all time high.
One of our key product in expense in Q4 with the global launch of connection between neighbors. When you connect with another neighbor you both have a more engaging personalized experience on the platform.
Looking ahead, we plan to expand connections to all neighborhood stakeholders.
I'll start by enabling neighbors to connect with small and medium sized business sales in the first half of 2022 and will follow with the ability to connect with large brands public agencies and other local organization and service providers.
This follow on Nabors secured from organizations, they care about and that will enable organizations to create meaningful connections with a uniquely engaged local audience. We believe connections will drive deeper engagement with next door because neighbors wants to hear from neighbors and organization that they know and trust.
We continue to drive innovation to ensure that next door is it time welcoming platform. This is a central both to achieving our purpose and also to building a platform, where all field space and are actively contributing.
Our just launched transparency report a first for next door highlighted our unique approach to moderation. This approach. This multifaceted combining proactive guidance through our good neighbor <unk>, leading edge machine learning technology and human review.
As a reminder, less than 2% of all content on next door is actually reported for moderation, but today, we have over 230000 volunteer community moderators, who in 2021 reviewed almost 87% of all reported content and under five hours from the time of the report.
As well as an internal neighborhood operations back.
Our moderators high speed of engagement underscores the strength of the community on next door.
Next our Timeless reminder, utilize this technology to detect language may be harmful and newspapers consider exiting their post or comments before it goes live in 2021 Nabors encounter as a kind of reminder, editors are even withheld their coaster comment over one third of the time.
On the international front engagement metrics surpassed even U S engagement, giving us confidence in our global opportunity.
For the year was to increase penetration in four key markets, Australia, Canada, the Netherlands, and the UK in Q4 total while in these focused markets grew almost 50% year over year and.
58% almost three out of every five verified neighbors returns weekly.
Turning to advertisers in Q4, we continued to make progress scaling our proprietary AD platform next door is uniquely positioned to be the platform that advertisers can rely on to connect them actively engaged local audience.
For advertisers our value proposition is simple.
We provide access to a unique audience. According to fourth quarter 2021 U S data from GWI, 76% of neighbors, who visit next door at least once per month.
Visit snap, 69% don't visit tick tock, and 58% up visit Twitter.
Second <unk> come with high intent from our Q4 insights series, we see that 24% are more likely than the average social media user to click on sponsored posts.
Third we can deliver a highly localized methods and this drives results on next door localized messaging.
8% higher AD engagement and non localized messaging.
In Q4, we pregnant with Hershey's on our 2021 treat map with July let Hubert Mark if they were planning to celebrate our handout Kennedy.
The campaign was successful in generating incremental sales for hershey's and expanding its footprint in the households, having purchased Kennedy in the past year clearly not might have.
They are the best ones on our proprietary <unk> platform is ensuring we can better utilize the first party data from our fully locked in audience.
Hence we can serve ads that are relevant to the neighborhood that people live and on our users find them engaged.
Aging useful and actionable.
In a world that is increasingly shifting towards cookie look browsing nextera and value is becoming more and more differentiated.
For all advertising objective from brand awareness through direct response, we continue to improve our measurement and targeting capabilities for.
For example, the majority of our cost per acquisition or CPA focused advertisers have now adopted our proprietary conversion pixel, which improved ad relevance and attribution.
<unk> SaaS is one such advertiser, who saw their average new CPA improved by 25% over the course of 2021, given them confidence to meaningfully scale their spend on next door.
Finally, we are enhancing our self serve capabilities with the neighborhood add center on Mac.
Increasingly enables us to serve a wider range of advertisers and ad agencies.
<unk> is only available for an initial subset of mid market customers today, but our focus on building the platform and the early success customers are experiencing gives us confidence for a rollout to advertisers of all sizes in 2022.
We're excited by our progress and our 2023 strategy, which is designed to increase growth in engagement for all neighborhood stakeholders and deliver a richer experience for our advertisers ultimately driving sustainable long term growth in our business and with that I'll turn it over to Mike for our financial highlights.
Thank you Sarah and good afternoon, everyone I'm pleased to report that we ended 2021 on a strong note in Q4, we saw a second straight quarter of accelerating neighbor growth with well, reaching $36 million up 32% year over year, an increase from 20% year over year growth in Q3.
Total revenue was $59 million.
Which was an increase of 48% year over year, and a 13 and 13% quarter over quarter.
We saw healthy demand across advertiser sizes objectives geographies and verticals. Our revenue continues to be fairly evenly split between direct response and brand marketing and in Q4, we saw demand at all levels of the funnel.
Our Q4, our advertisers came to us for creative impactful relevant campaigns that meet the moment. In addition to the treat map that Sarah mentioned, we had campaigns like our holiday cheer map Thanksgiving cookbook and veterans day campaign with veterans United.
Q4, global <unk> grew 12% year over year to $1 65.
Driven by increased engagement among our neighbors.
Also continued to build on our efforts from earlier in 2021 to better optimize our yield and improve our direct relationships with advertisers.
While international is only a small part of our revenue today of less than 5%. We are continuing to grow and prove out our model and advertiser value proposition and non U S markets.
In Q4 International Advertiser count grew 74% year over year.
Adjusted EBITDA for Q4 was a loss of $8 million the six point year on year improvement in adjusted EBITDA margins.
Shows that we can remain in investment mode. While also building towards long term profitable growth.
I'll end with our outlook for full year, our full year revenue guidance is $254 million to $256 million a year over year growth rate of 33% at the midpoint of the range and an increase from our last full year 2022 revenue guide of $252 million.
We expect full year 2022, adjusted EBITDA margins to be minus 18% consistent with our prior guidance.
For Q1, 2022, we are expecting revenue of $48 million a year over year growth rate of 40% and an adjusted EBITDA loss of $23 million.
We are excited by the scale of our opportunity and our ability to execute against it and we're going to continue to invest.
Thank you for joining our earnings call today with that I'll turn it over to the operator for Q&A.
Operator, thank you.
Thank you if you'd like to ask a question. Please press star followed by one of your telephone keypad. If for any reason we would like to turn that question. Please press star followed by two again to ask a question Press Star one as a reminder of your units.
Speaker phone, please remember to pick up your handset before asking your question, we will pause briefly ask questions registered.
The first question is from the line of Eric Sheridan with Goldman Sachs. Your line is open.
Thank you so much for taking the questions and I hope everyone on the team there is doing well maybe coming back to the comments on advertiser momentum as you leave 21 and move into 'twenty. Two can you quantify or give us a sense of some of the momentum around advertiser diversity advertiser budget or how measurement and all of that.
<unk> continues to evolve as you move from one calendar year to the next in terms of measuring some of the efficacy of some of the changes investments you've made and how that means potential tailwind to the advertising revenue in 'twenty, two and beyond thanks, so much.
Alright. Thank you for the questions really appreciate it I'm going to start just overall.
First and foremost.
As we went through 2021, we began that shifts over a tire on a proprietary ad platform.
If you recall next door has a fully logged in audience, we're not having to in France, where you are were not following you around the web with cookies and with that we have a lot of data that helps advertisers targets unclear late get outcomes, that's keeping them pretty.
Whether it's for brand awareness or the whole way down into direct response in terms of our investments here as I talked about in my prepared remarks first and foremost.
AD survey.
South what we call <unk>, so that's the way in and the big shift there to bring more.
As of course opening up.
From a small micro merchants, we need to create and add all imply probably would put some floods are probably super busy and not very sophisticated all the way out system.
Most sophisticated advertisers in the world, including AD agencies, one of the really nimble with say at creative and so on.
On the backend the main investment there is how do we serve the fact that to the best neighbor off the best time for them and some of them really are often content.
We're very high utility platform.
People are coming and we're looking for the plumber. They are looking for maybe some of them to help them do their job, they're somewhat moment theyre looking for great financial advisor and that makes next door.
Really performed well across the hall from gamut of different advertisers and.
So in terms of the different cuts you might kick off a quarterly scale. We can go from small to large.
We plan to fund all we can go from brand awareness to Hawaii are spaced about evenly split and.
And then clearly there is diversity in terms of the types of advertisers.
On services home run for US financial services, we're starting to see some green shoots in areas like travel and entertainment as neighbors wanted to get out and about and then TV.
<unk> is an area that we've put a lot of investment in sales and starting to see some really good outcome Hershey's is a great example.
Mike do you want to take how it relates upheld.
Guidance on Peanuts.
Sure so the momentum with with advertisers.
<unk>.
The most important part.
Is there interest in scaling up their campaign and taking advantage of.
Our larger engaged audience and the ability we have to offer more targeting and a larger targeted groups, which ultimately help them to drive performance.
We've also made significant investment in our.
And our measurement ecosystem tiers to increase spend and.
Being able to see results on the other side.
So over the course of all of our 2021, we saw increased retention and more evergreen, we spend which helps us to have.
A more visibility into our 2022 book of business.
Now us to to build on a larger base.
Thanks, so much.
Thank you Mr. Sheridan.
The next question is from the line of Brian Nowak with Morgan Stanley . Your line is open.
Great. Thanks for taking the questions I want.
Ill go back to the advertising question, a little bit warmer the self serve maybe any any nuggets of what the what the AD spending growth through the AD spending trends look like for advertisers.
There's a little bit about what the U S.
So the North America, while trends look like how quickly are those growing in sort of.
What are the neighborhoods, where youre seeing the most growth and what's what's driving that thanks.
Sure. So let me start with the <unk>.
Advertiser question.
And what we're what we're seeing there so.
First of all that.
The demonstration of the results on the platform and.
And.
Measurements.
Okay capability.
Our proprietary <unk> platform are demonstrated with multiple and our revenue growth.
And so we're seeing advertisers an.
An increased number of advertisers.
And a greater spend per advertiser as a demonstration of the value that they are seeing your questions in particular about.
Early early indications from our proprietary AD platform, we're very early in that migration.
And we're working across all different segments of the advertising from enterprise mid market and F&B to make sure of that.
They're onboard it in a way of that.
As you can.
Constructive to the campaigns that Theyre surveying.
And ultimately opens up the increased spend but.
But we are.
Early in that journey, and so I think the company.
Comment on them.
In future periods.
<unk>.
The overall.
Perfect.
Building, a proprietary AD platform and that's having a unified base of our inventory and getting access to.
And the supply we have on the platform to all advertisers so that it can be best optimized.
Across campaigns down to a single neighborhood or whether it's something much much broader.
That investment is relevant for for all different segments of the advertisers.
It's one that reflects.
The lines of habit with advertisers over time and exactly what they want from.
From our platform.
Second question was about.
And about <unk> trends.
So as we've talked about the $36 million.
In the period, I think 32% year on year growth.
We're very proud of our product roadmap is focused on driving engagement.
Thanks, Matt.
We have talked about in the past the reason we have that.
We focused on weekly active users because we know there's a huge opportunity to bring now on our platform and convert them into out and increase their session frequency.
Drive utility and in Peru.
Hey.
Yes.
The number of titles and then back to the platform as well as the content that they are creating an engaging with when they're on the platform.
Yes.
And on the back of that last question. Thank you Brian for Us so.
In North America U S. In particular overall, while growth of 32% year over year up to 36 million, but if you look at you asked while growth single cell the largest portion of our base grew 30% year over year fulfill a really healthy clip.
When we are in one in three households, what Youre seeing is there is not a particular neighborhood that I would point to that's driving growth, it's really growth across the board and one of the things that remains I think.
A really strong part of the next our story is how many of our new neighbors come to us organically that.
That will stay and I realized that.
First in class sort of range and continues to be the case in fact, when we looked at 2022, what you see is shifting a little bit more of our paid marketing spend into international because we feel really good about what the product pipeline is doing to build growth and engagement in the U S. In particular and that product pipeline a couple of areas that I would Matt.
Number one connection we went pretty deep on it in our shareholder letter, it's not really impacting results as yet.
Backward look we're not seeing a lot of impact to that only launched in Q4, but we definitely believe it will have a lot of impact to growth and engagement as we look forward.
Second thing I'd mention is that AD platform, while it's great for advertisers and it's great for driving monetization also great for nabors, because the REIT and better we get at that and then finally, we have put a lot of emphasis on investment into the evolution of the feed itself, we want to make sure that it's super easy to pulse. So that you can be an accent.
Part of an active valued community, we want to make sure. It feels personalize do you feel like you belong and we think those are some other things of reasons why even current neighbors are getting more engaged at the moment. One is the data point to probably liked it but current neighbors. If you look in the last year I've actually gotten more engaged.
So we're seeing that.
But we all love to see scale.
Great. Thank you both.
Thank you.
Mr Novak.
As a reminder, if you would like to ask a question. Please press star one. The next question is from Brian Fitzgerald with Wells Fargo. Your line is open.
Thanks, guys.
The letter you noted some benefits from improved advertising store rates. Just wondering if you could talk a little bit about where you are in terms of the storage say in any sense for how budgets could expand as you continue to improve fulfillment maybe in a similar vein being.
The engagement metrics, while the neighbors really nice uptick movement. There I'm wondering if you could talk a little bit about the key factors, there and where you think those can go over time as well and then maybe one last one is just on we've heard from some other companies over the quarter that the housing market is really tight I'm wondering if you could.
If youre seeing any dynamic in terms of relation to a tight housing market too.
Uptick or look for certain services related to new houses or not being in new houses those type of things.
Yes, Okay, maybe I'll start on the engagement some hunter Marquette new members.
Okay.
Mike apprehensive fill rates and so on so on overall engagement first and foremost, yes, zebra and the fact that the second quarter also engage in grout.
Growth drivers one top of the funnel.
So <unk> grew about 20% year over year in <unk>. So.
We have new neighbors come on all the time, but then importantly, those neighborhoods are becoming more and more access so it's a two part new neighbors.
And then currently does become a more active.
The other way that you can see that as the depth of engagement is the fact that while as a percent of total neighbor.
Is it 52% globally that grew five points year over year, and so that underscore that point that new neighborhoods are becoming more and more assets overall.
I'd also take you back to the chart that we showed in our Investor day.
If you recall after three months, 75% of our mouths are coming back after six months, 65% for two years, you still see more than half of new neighbors.
Nextera actively engaged this is world class and I would remind everyone that even a weekly access is coming back on average four times per week. So the great News is once we get you from verified neighbor now Wow your capacity to take over it could be about is very very high on the downside.
What we're seeing there beginning in 2020.
Since the beginning of 2020 for three months or six months or 12 months 24 months Dow cohorts have all seen right.
And again, we view that a really great outcome of the investments we've been making on the product side. So that innovation on connections probably an accurate value community. The AD platform and content and then even though simple feed experience. So that's what's driving that while uptick on the housing market I mean, what tends to benefit.
For us it's definitely universe.
One huge use case for next door. When you first move into the neighborhood. We are the way you kind of standard feet you find here all of the service providers you need we all know that when people move into our house.
And some things like that don't quote me.
But over half of the total fan Youll put on house you spend in the first 12 months of being in it.
And so we are at the perfect platform to find from your neighbors, who are the best service providers for example, but even beyond that we're also the way that you find your community and we know that as people have the comp maybe a little bit more nomadic maybe that's moved to a different place to work and so on helping them find in real life. Their community is a huge part of <unk>.
And we're the only platform that can do that because we're all about that power. Our proximity. So maybe it's some running growth that might be a new moms growth maybe it's the veterans growth frankly can go across the whole landscape.
So the good news is there's lots of growth overall top of the funnel lots of growth and engagement.
A lot of impression growth.
And that tracks revenue I'll pass it to Mike to talk about how we felt against a lot of that increase in supply.
So first I wanted to just talk about really the three types of levers we have to drive monetization.
And really for US it is and there is efforts behind it. So the first and most importantly is driving deeper engagement. So it's creating incrementally more supply. So we can attract more advertisers greater budgets and have larger targeted audiences for those advertisers. The second is in supply optimization and this is where our fill rate.
Coming to play that's where the mix of direct sold comes into play it's making sure that we are serving the right out at the right time to improve yields for advertisers, which ultimately.
It's monetizing.
Differentiated surfaces that we have things like maps.
Our classifieds.
Surface, where there is.
Opportunity to.
To drive value for for the Akers is ecosystem it doesn't necessarily require incremental expansion of our supply let me come back to the second bucket, which is your question Phil.
And this is one where we had tremendous success in 2021.
And that is it's driving higher Q4 is seasonally our best quarter. So there's a tremendous amount of demand for our inventory, but what we saw was increasingly fill rates and year over year in all of the quarters.
In 2021, and importantly, with the vertical version of our sales force getting closer to the advertisers and knowing deeply the industries that they cover.
Is.
It is allowing us to increase the mix of direct sales campaigns and not having to rely on.
Bye bye.
<unk> partners to fulfill unsold supply, we do not partnerships nonetheless, but it is a key metric for us to drive that percentage higher where we're proving real value to the advertisers directly and also.
Where there is higher yield.
So thats.
And Thats something we will continue our focus on all three of those categories of levers in 2022, but we had.
Continuing to refine the prioritization of each and I would say the biggest opportunity for us in 2022 is on the first bucket which is.
It's driving higher engagement.
Thanks, guys.
Okay.
Thank you Mr Fitzgerald.
There are no additional questions waiting at this time I will now turn the call back to Matt Anderson.
Okay.
Excuse me there is an additional question from Mark Mahaney with Evercore. Your line is open.
Okay. Thanks.
Let's see I wanted to ask about.
Relative engagement levels of international versus the U S.
Do those trends look relatively similar to the cohort trends you've seen international markets kind of followed the pattern that you saw in the U S. And then I have a follow up please.
Great. Thanks, Mark we were wondering where you where we wanted to question.
So.
So I think actually.
Vaccine positively right now, we see even better engagement outside the U S.
Even though we think our engagement in the new App is already quite fast in glass and so if you look at the four markets that we really went after in 2021, So Canada, Australia, Netherlands, and the UK, we saw almost 50% year over year, while growth but.
The way members engaged to 58% of neighbors are coming back with <unk> and as I said like our average weekly users coming back up to four times, a week and I think on site in the UK is even a little bit more than that.
Another data point I gave you in the UK, we're now up to one in five household and in London that is one and four and Thats important because London is such a big advertiser market that we need to have density that we can do to sort of targeting that a particular advertiser needs. So we're really.
Upbeat and excited about what we see going on outside the us as a growth lever for multiple years to come in 2022, we're going to focus a little bit more deeply into western Europe , France, Italy, Spain and Sweden.
Those are all very large AD market. So we know if we can get the members on board is definitely a high monetization ability and those markets have been the same for us in many ways. We see the same sort of neighbourliness. The good news is everyone is a neighbor and we know that next door can be our global platform.
International revenue today is still only about 5% of total.
So it is I would say more of a future growth lever in 2022, and even much more into 2023 and beyond.
But we are going to tip, our investments more strongly outside the U S. In 2022 really because we're still confident in the growth that we're seeing in the U S organic growth still very very strong and.
And we know there's a network effect so now when more than one in three households, or just kind of a natural sustained growth rate that doesn't needs kind of paid marketing and so on to keep it all starts.
Okay. Thanks, and then I want to ask you about connections.
So you launched this and I know you talked about it in the shareholder letter you launched this can you talk about what impact that's had on engagement in the communities, where it's been launched so far and then what's the use case.
Basic use case for enabling neighbors to connect with small and mid size businesses like how widely.
How widely adopted do you think that will be.
Yes, so connections rolled out in Q4 globally, but really towards the end of the quarter. So you are not seeing really any impact outlet and different thoughts that we just put in front of you, which I think is the good news back side, because we do expect that to start having an impact on engagement that they get into the back half here why in glass well one thing we know.
How is that.
We know our neighbours now talking about things you care about clearly there I don't care as much about the human value human more than they do just pure interest so we're leaning into that insight.
I know as neighbors connect southern neighbours, theyre going to get a more personalised speed and we think thats up overall engagement feeds into our notification platform. Our notification platform is getting more intelligence that should have a really good flywheel.
Youre going we want of course connections to not 50 neighbor to neighbor, we want us to be Nabors business small business mid size business large brand ultimately public agency and the other neighborhood organization on the business front, what gets very interesting for the business as you know have someone actually putting their hand up to.
I care about this business I Trust this business I want to make sure I am hearing from them. So it also opens up a direct line of communication.
Not so much one to one a bit more one to many but one of them. We absolutely know on our platform as many of our neighbors are also business owners. So they are there because of course they want their end business.
When you, but they are also there because.
What they care about their community and I think what they find when I talk to them or anecdotally is the more they create a sense of community around their business and more effective they become with advertisers.
If I think about like the small business is actually a farmer and his business is selling to beef lamb and so on but keep them probably the majority of the time talking more about what's going on in the far right.
Spring has sprung a planning season.
Cheers.
We're now on factor for him and his business and just.
Okay.
Sure are you still there.
One moment, while we reconnect the speaker.
Sure.
Again, please remain holding while we reconnect the speaker.
Everyone else has left the call.
No one else is going to join this call.
Goodbye.
Yeah.
Again, please remain holding while we reconnect the speaker.
Hey, Brian It was good to hear your voice earlier hope you're doing well.
One moment, our speakers have rejoined shortly.
Sure.
Our speakers have rejoined.
Okay.
Okay.
Sarah are you all out there.
Excuse me one moment they are having difficulties in placed and again.
Again, please remain holding all yours.
The speakers are connected.
I think it does.
Let me.
Excuse me the speakers have rejoined the conference call. You May proceed with the Q&A session.
Okay.
Okay.
Okay.
Sure.
Yes.
Sure.
That concludes the next door Q4 2021 earnings call. Thank you for your participation you may now disconnect your lines.
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