Q1 2022 Nextdoor Holdings Inc Earnings Call
And becoming increasingly active our product strategy in 2022 centered on strengthening engagement through building an active valued community. It's working in Q1 over 50% of Nabors weekly active and over half of weekly active users were active daily highlighting that as we move Navy.
<unk> from Onboarding to monthly to weekly they have a high propensity to make next door a daily use case, everyone is a neighbor our continued strength in international growth underscores that this is a global opportunity solidifying our competence and the opportunity ahead in Q1 international while grew 55% year.
Per year accelerating quarter over quarter from 47% in Q4 and year over year from 39% in Q1 of 2021.
And international engagement metrics surpassed even the U S was 55% of Nabors active weekly.
In 2022, we will remain focused on driving growth and engagement in our existing international markets.
One of our key product initiatives from 2022. Its connection Q1 was our first full quarter with connections launch between Nabors and we're pleased with the early momentum connections provides an important signal.
<unk>, allowing us to better personalize the news feed AD notifications and hence drive deeper engagement, it's awful long term growth driver Nabors and bike neighbors. They know who are not yet benefiting from the utility and community next door provides.
Looking ahead, we plan to expand connections to all neighborhoods stakeholders, starting with small and mid sized businesses F&B neighbors wanted to hear from and recommended organization, They know and trust and they value Smbs as important members of their community in fact neighbors have recommended over 5 million businesses.
And shared over $55 million business recommendations on next door. This drives business growth of one customer put it recently.
<unk> our dynamite.
Moving to our monetization efforts in Q1, we reached an important milestone with our proprietary campaign management platform next door at making it available to all U S SMB customers.
Extra adds is designed to provide advertisers of all sizes, including F&B with a simple hyper local self service advertising experience.
U S. Smbs now have an easy solution they can leverage to meet their business goals, such as increasing traffic to their website or the extra business page promoting a sale or a discount are communicating directly with warm local.
The enhanced dashboard enables performance tracking and over time, we plan to offer advice on what's working and not working across business verticals and across communities all with a differentiated hyper local and.
The second pillar of our AD platform investment in 2022 is next door AD manager, which is our proprietary AD serving platform. It will take the place of our existing third party solutions enrollment enable us to better utilize our first party data, we believe nabors will benefit from more engaging useful and actionable app.
And advertisers will benefit from a higher return on investment from their AD dollars.
Since the last time, we spoke we've made significant strides in solidifying the foundation of next door AD manager, which will enable us to scale with demand as we migrate advertisers throughout the year.
In addition to strengthening our AD Tech stack, we're also improving our measurement and targeting capabilities through our first third party tools delivering ever increasing value to advertisers. We see this in our revenue outcome in Q1, the farmers dog, leading pet food delivery service nearly doubled their spend quarter over quarter.
Given strong campaign performance, particularly on the conversion and cost per acquisition goals and have increased spend further in Q2.
We've made significant strides in Q1 that will set us up for continued success in the rest of 2022 are top priorities for the year remain growing engagement, while adding new neighbors to the Mexico platform and building products that deliver differentiated results for advertisers of all sizes.
I'll turn it over to Mike for financial highlights.
Thank you Sarah and good afternoon, everyone I'm pleased to report that we started 2022 on a strong note in Q1, we saw a third straight quarter of accelerating neighbor growth with while reaching $37 million up 33% year over year.
Total revenue was $51 million, which was an increase of 48% year over year.
Even through an uncertain macro and geopolitical environment.
Healthy demand from our advertisers, particularly on our U S news feed where neighbors spend the most time on next door.
Resilience in core verticals like home services, offset some softness in verticals like financial services.
We're still early on reaching new verticals and continue to see demand from advertisers at all levels of the funnel with a slight trend towards direct response, although we are still quite a balance between performance and brand awareness advertising.
Q1, global <unk> grew 12% year over year to $1 39.
Driven by higher assessment frequency as a result of deeper engagement amongst our neighbors.
We also saw strength in AD pricing in the quarter.
We continue to innovate to create new and useful AD formats, including keyword search ads, which we launched in the first quarter of 2022.
<unk> is running sponsored search today are getting three to four times better cost per click compared to your regular display AD on the news feed which is another strong indicator of next door's tie intense audience.
Adjusted EBITDA for Q1 was a loss of $20 million, representing a 10 point year over year improvement in adjusted EBITDA margin.
While Q1 is our seasonally lowest adjusted EBITDA quarter cash flow from operations was negative $6 million as we benefited from positive working capital trends.
Ill end with our outlook the high end of our full year revenue guidance remains unchanged at $256 million.
Given the macro environment, we are providing a wider range of $252 million to $256 million, which is a year over year growth rate of 32% at the midpoint of the range.
We expect full year 2022, adjusted EBITDA margin to be negative, 18% at five point year over year improvement consistent with our prior guidance.
For Q2, 2022, we are expecting revenue between 54 and $56 million a year over year growth rate of 20% at the midpoint of the range and an adjusted EBITDA loss of between 21 million to $19 million.
Excited about the scale of our opportunity and our ability to execute against that thank you for joining our earnings call today with that I'll turn it over to the operator for Q&A.
Thank you.
Like to ask a question. Please press star followed by one on your telephone keypad. If for any reason you would like to remove that question. Please press star followed by team again to ask a question Press Star one as a reminder, if you are using a speaker phone. Please remember to pick up your handset before asking your question, we will pause here briefly.
Questions are registered.
The first question is from Mark Mahaney with Evercore. Your line is open.
Okay. Thanks, I guess I just wanted to ask questions on the AD products mixed door ads and the keyword search ads. So could you describe.
The pace at which those are rolled out when will those be fully available to all marketers on on the platform and I think these are just rolled out in the U S is that right and then kind of the react I know you've already talked about a little bit, but maybe a little bit more detail on the kind of adoption you're seeing in with those AD units. What it's doing to is it is it material enough.
It actually cause spend per advertiser to increase thank you very much.
Great. Thank you Mark I'll start and I appreciate the question on the AD platform.
Start talking about next door at which I talked about a little in my prepared remarks as well. So that is the front end to our AD platform. It's a proprietary campaign management platform.
Milestones that we've been working through for the last several quarters, even longer perhaps is to get that out to all U S. SMB customers. So youre right. Its just launched in the U S and now we're turning our attention to rest of world, but the larger portion clearly of our SMB today are here in the U S. What does that giving them easy.
Do you really intuitive self serve platform and it allows F&B to now access next door's AD formats beyond local deals and neighborhood sponsorships. So now they're getting access to more visual option additional placements in the app itself and new Cta few calls to action and so with that we think.
It will continue to drive interest from small businesses on the platform as you know today about 30% of our revenue is coming from Smbs, but we do think that over time this can be even bigger.
In addition to what you see on the front end and what our neighbors get to see from those Smbs. We also now have a much more comprehensive dashboard for them with better and more detailed metrics for performance tracking.
And again this is a place where we think we can really differentiate ourselves from other platforms.
Because for example, we can tell you what are the search terms that are happening in the neighborhood right now in and around your business I was talking to an advertiser section fronts of our shareholder letter and the junk removal business not only did he want to know on the dashboard what were the metrics for the ads. He was putting out there but he was also interested in knowing what was search.
That was happening in that neighborhood, our neighbors actually looking for the types of offerings that he has so we think we can do something really different there.
In addition, so if we think about the.
For frontline next door at the back end is next door AD manager and Thats going to be a full year move for us to get back onto our proprietary backend away from some other third parties that we've worked with over the last several years, what that's going to allow us to do much much better use of that proprietary <unk>.
First party data apply data science and ml to it to make sure that the right AD going to the right person at the right time and when we can do that we know we're going to have much better performance for advertisers, but also a much better outcome for nabors. So next year as utility will really saying.
You mentioned search.
The neighbors are coming to next door, all the time to look for recommendations and making it easier for them to find that through much more enhanced search has been a key milestone for us as well.
Today, we are now running sponsored search for advertisers, although it's still in the early days, it's going to take us multiple quarters I think to really get that scale that was the data point, Mike mentioned, which when someone does sponsored search we get a three to four times better cost per click compared to regular display AD on the news feed.
And I think that's indicative of just the high intent audience that next door has so lots going on overall in the AD platform, but it really kind of underscore what a big milestone getting next year adds launched is for us and now we can really get back to focusing on the backend and how we serve.
Thank you Sir.
Thanks, Mike.
Thank you Mr Mahaney.
Next question is with Eric Sheridan with Goldman Sachs. Your line is open.
Thanks, so much for taking the question I hope everyone on the team as well I'd like to go back bigger picture, maybe to the user side of the accretion can you give us a more detailed update on what youre seeing in both in terms of international user growth in the international engagement.
Much of that Youre seeing from an organic nature versus maybe some of the investments you'd like to make and growing scale on the international user side and then the second part of the caution would be you've talked before about personalization getting that increasingly as we move from 'twenty to into future years can you talk a little bit about personalization and how you expect that to be a driver of.
We'll repeat activity and engagement on the platform overall, thank you.
Great. Thank you Eric and yes, we are we're doing fine. Although we recognize that this is a bumpy market that we're all looking for at the moment.
First of all on engagement overall, you saw the 33% year over year growth in Wow, a third consecutive quarter of accelerating <unk> growth and so we're very pleased that clearly the changes that we're making from a product standpoint.
And just as we grow we create more content, which creates more utility and more community for nabors going to international specifically, we saw a 55% year over year growth in international Wow, and accelerated year over year and quarter over quarter as well, so very very nice acceleration.
And the other thing I would note is that international neighbors, but from a weekly active perspective are actually higher than what we see in the U S. And you asked about 50% of our verified neighbors, our weekly active and in international it's 55%. So you actually see that uptick I think some of it may actually just be cultural for example in terms.
What we're doing to continue to drive that engagement.
It's really three things I would highlight the first is notifications. So we've talked about investing in our notification platform.
Whenever a poster is trending whenever there is something that we know that you would want to see from a personalization standpoint, we need to get that in front of you.
We've been doing a lot of investments I'm getting the data science and machine learning right in that space and it's paying dividends.
Second thing is connection so connections as much younger in its journey as you know we rolled it out really at the end of Q4. So Q1 was our first quarter I've seen connections and actions and thus far we're really pleased with the numbers that we're seeing.
Our thesis was that Nabors would want to connect to people that they knew in the neighborhoods and when they connect with people that they know they're getting a form of personalized content that will engage them more and of course, then that drives the flywheel of notification.
I'm here with connections, we see a couple of other ways to grow the platform. The first is to allow you to connect with other stakeholders. So we know that members want to connect to small businesses for local businesses for example.
That was particularly true during the pandemic, where they wanted to support local and we see that continuing as we get to the other side and start to see reopening happening broadly.
The other growth factor for connections is as I noted when you contact centers, our ability to then say hey, it looks like there. This number of people in your neighborhood that you know, but theyre not currently on next door would you like to invite them. So kind of I guess, you may now sort of action and we know that when people invite people.
They know they are more inclined to accept the invitation to come onto the platform. So connections have been wonderful flywheel, but both driving engagement and driving growth.
And then the third area I would point to is back to ads and I won't go through the whole conversation again of what we're doing from a product standpoint, but we know that went ads are great content and this is very particular to next door. Because we are a high utility platform. So seeing an AD for the plumber or seeing an AD for the class at home depot.
Bo about gardening at the moment in time, when you're actually thinking about it or maybe going to ask neighbors for recommendations.
A really high engagement high quality content, and so improving the AD platform will improve the content overall, so that I gave you the what's happening overall, what's happening in international and then of course, why it's happening and we think there's a lot of runway ahead.
Personalization was the second part of your question.
Just a lot to do there.
Frankly, we are just getting going from a machine learning standpoint on what we can do to really personalize that news feed.
We also want to make sure that we leave enough room for some of the serendipity too, but youll see us do more and more on how the app itself was unfolding clothing to create discover ability of groups that you might be interested in businesses that you might like and want to follow.
Once that are happening around you and of course, that's just yet another way to help personalize it based on either interest that you've told us or the propensity with what youre doing things on the App.
Thank you.
Thank you.
Thank you Mr. Sheridan.
The next question is from Brian Nowak with Morgan Stanley . Your line is open.
Hi, This is Chloe answer Brian we're supposed to I have a couple of questions. The first would be.
You've done a lot on product innovation, how are you seeing that.
Driving user engagement and the AD that you are generating how are you seeing that engagement.
<unk> and then the second question would just be on Opex, you pointed to some higher.
Gross their head count and personnel what what other he.
He tells me were you able to provide there and any color would be really appreciate it. Thank you.
Great. Thanks, Chloe why don't I start on the user engagement I think you're also asking about app engagement, so kind of that.
Performance and then I'll, let Mike take the second question on personal growth and so on and how that flowed through opex.
User engagement just to remind.
Third quarter of accelerating wild growth, we're really pleased with that and we think that continues to plague both improvements on the product overall, some notification connections evolution of the news feed and then better ads.
But also retention as well and we've not really talked about that on the call yet, but we continue to see really strong retention rates as well back at Investor Day last year. We gave you a retention rates. After three months, we see 75% retention of mouse after six months, 65% retention and after too.
So more than half of new neighbors are actively engaged and we know that that is kind of a world class.
Those trends have stayed consistent and in fact over the past three quarters, we're seeing increasing retention, especially for people who have been on the platform for more than a year. So that's always a great sign that users who have come to a fund value keep coming back for more and then I think the other point I would make there is actually our strongest retention trend.
Our amongst our daily active users. So this is also why it's important to keep moving people down that funnel from being a verified neighbor monthly active or weekly active daily active because when we get you to daily your ability to keep coming back your attempt of nuts is much higher.
On the AD side, what we're seeing is as we shift more and more of our own proprietary data into the platform.
Frankly, as we make the ability to self serve so it would be much more innovative with your creative and so on and make those ads more engaging we're starting to see better and better performance. It talks about the farmer stock during my prepared remarks, but that's a great example of a home delivery pet food company that came from extra to test than they want.
Full on and they've actually been greatly increasing their spend in Q2 over Q1 and really that's a result of much higher click through rates and really to the metrics that they measure.
Next are the platform.
That can both top of funnel for advertisers so in brand and awareness driving but also bottom of funnel direct response.
Out of 50, 50 split maybe Erin a little bit more into direct response right now and I think it's important that we can do both.
I'll pause there and maybe Mike do you want to take the question around headcount personnel growth and so on.
Sure. Thanks, Sarah.
To your question on Opex growth and I think indirectly on margins I mean, let me take that one.
Coming off of a year, where we started 18 points of margin improvement and we're guiding to another five points.
<unk> this year.
We recognize the shifting market dynamics, but we are.
We believe strongly in our investment plan.
Yes.
Appreciate that we're earlier in our product roadmap and our peers.
And our future growth is really driven by are innovating today.
We know the long term margins in our business are well established in <unk>.
So that we can we can get there and we can demonstrate margin improvement and that remains our plan over the next many years, but in the.
Near term, we're really focused on building the team.
Bringing great talent on early in the year, which allows us to do more this year and sets us up well for growth in 2023, and the same is true with with our marketing investments there is benefit from having engaged users on the platform early and so that's why we've continued to.
To invest behind our product roadmap here in the first half in 2022.
Great. Thank you.
And Kim Thank you.
The last question is from Ron Josey with Citi. Your line is open.
Yeah.
Hi, This is Jeff on for Ron Thanks for taking my questions.
First I was just wondering on the first party measurement solution.
What type of Oh are you.
Seeing advertisers and eager to adopt this.
Trend and are you nearing brought adoption or when do you think you could get to more broad adoption.
And the first party measurement side.
And then also from a macro perspective is there anything any color you can give us where you might be seeing what verticals you might be seeing weakness.
On the absence or if theres been any change in the quarter and what verticals might be weaker or stronger.
Okay. So maybe I'll take the first question on measurement and then we'll go back to Mike overall, what we're seeing broadly in the environment.
So first one measurement.
I would say, it's actually important to have both first party and third party measurement.
Advertisers need to be able to see that.
Campaign objective they put them in front of you are working but they also want to make sure youre not only creating your own homework. So it's definitely you need to see both.
But measurement is a really top priority for advertisers, particularly because theres a lot of noise out there in the environment overall because of things like idea for a.
Apple.
Fingerprinting right that's coming later in the year and for the both of those reasons, it's incredibly important right now.
Next door shows off the fact that we are a proprietary AD platform. Our users are logged in and we actually have a lot of our own first party data to be able to help advertisers target and so on.
Overall, if you're looking at.
From a measurement perspective, we have started to work on things such as dropping our own pixel into a particular AD. So that advertisers can track not just did a quick through happened on next door, but then talked about attribution more broadly.
We're seeing a lot of advertisers in the direct response category.
Have that pixel onto onto the app to check the performance.
So I wouldn't say, we're already quite well developed in terms of that happening.
Of course this point.
So why we're continuing to invest in our own AD serving platform on the backend because of our ability to add better and better data science and ultimately machine learning on top of that to drive performance is only going to get better and better as we go through the year.
Today over 50% of our what we call cost cost per acquisition advertisers use our pixel and that was about a 24% quarter over quarter increase in campaign adoption, so doing quite well on that front.
Now, let me turn it back to Mike to talk about the broader macro perspective as well Jeremy Thanks, Sarah So as we've commented in prior quarters.
Back to the pandemic and supply chain disruption privacy.
Are there other factors.
Youre seeing now in inflation and interest rates and geopolitical risk or are the latest part of the conversations that we have with advertisers and better understanding their.
Our objectives, but I think it's important to understand or just to reiterate the backdrop that we're in a very attractive industry digital advertising grew by 35% year over year last year and consensus is for double digit growth again, this year really driven by.
The growth in consumer time and attention spent in digital media channels.
And then specifically to each of our business. We've worked hard over the last few years to diversify our own revenue mix.
Reducing the concentration amongst vertical then advertisers and different campaign objectives and Thats resulted in a more resilient revenue base for us.
Today and also as of Sept.
Better to better understand the objectives of our advertisers and really be.
When they when they need us.
We are seeing a really strong performance in home services and real estate, new verticals for us like travel and entertainment are recovering and a couple of recovering broadly in them for us their new efforts for us to pick up advertisers.
I can see the performance that we can deliver on the platform.
We have seen some headwinds in things like financial services, but whether it's exciting for us is where he still been able to meet the needs of our advertisers buy.
By performing for them in a different stage different later in the in our marketing funnel and so thinking about shifting AD spend away from awareness and more lower in the funnel.
Performance, our conversion objectives, and still being able to to help advertisers with large budgets to spend on next door.
Yeah.
Great well. Thank you operator, any I don't think there are any other questions are there.
There are no additional questions waiting at this time.
Yeah.
I Wonder if Kim Thank you all.
Okay.
Go ahead, if you wanted to try again.
Again, if you would like to ask a question press star one.
There are no additional questions waiting at this time I will now pass the conference back over for any concluding remarks.
Okay. Thank you Tim and thanks, everyone for your questions today really appreciate it.
Appreciate that all of you have a lot going on in this environment too.
And I hope that you share how excited we are about our business but.
But also we want to make sure we're seeing realistic so with that thank you and happy to take any follow up questions. After the call take care take care.
That concludes the next door first quarter 2022 financial results. Thank you for your participation you may now disconnect your lines.