Nextdoor (NYSE:KIND) Posts Better-Than-Expected Sales In Q4 But Stock Drops 11.2%
Neighborhood social network Nextdoor (NYSE:KIND) beat Wall Street’s revenue expectations in Q4 CY2024, with sales up 17.4% year on year to $65.23 million. On the other hand, next quarter’s revenue guidance of $53 million was less impressive, coming in 13.7% below analysts’ estimates. Its GAAP loss of $0.03 per share was $0.01 above analysts’ consensus estimates.
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Nextdoor (KIND) Q4 CY2024 Highlights:
Company Overview
Helping residents figure out what's happening on their block in real time, Nextdoor (NYSE:KIND) is a social network that connects neighbors with each other and with local businesses.
Social Networking
Businesses 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 Growth
A company’s long-term sales performance is one signal of its overall quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years. Over the last three years, Nextdoor grew its sales at a mediocre 8.8% compounded annual growth rate. This was below our standard for the consumer internet sector and is a tough starting point for our analysis.
This quarter, Nextdoor reported year-on-year revenue growth of 17.4%, and its $65.23 million of revenue exceeded Wall Street’s estimates by 1.6%. Company management is currently guiding for flat sales next quarter.
Looking further ahead, sell-side analysts expect revenue to grow 13.9% over the next 12 months, an acceleration versus the last three years. This projection is admirable and implies its newer products and services will spur better top-line performance.
Software is eating the world and there is virtually no industry left that has been untouched by it. That drives increasing demand for tools helping software developers do their jobs, whether it be monitoring critical cloud infrastructure, integrating audio and video functionality, or ensuring smooth content streaming. .
Weekly Active Users
User 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 weekly active users, a key performance metric for the company, increased by 9.1% annually to 45.9 million in the latest quarter. This growth rate is solid for a consumer internet business and indicates people are excited about its offerings.
In Q4, Nextdoor added 4.1 million weekly active users, leading to 9.8% year-on-year growth. The quarterly print isn’t too different from its two-year result, suggesting its new initiatives aren’t accelerating user growth just yet.
Revenue Per User
Average revenue per user (ARPU) is a critical metric to track for social networking 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 fell over the last two years, averaging 1.1% annual declines. This isn’t great, but the increase in weekly active users is more relevant for assessing long-term business potential. We’ll monitor the situation closely; if Nextdoor tries boosting ARPU by taking a more aggressive approach to monetization, it’s unclear whether users can continue growing at the current pace.
This quarter, Nextdoor’s ARPU clocked in at $1.42. It grew by 6.8% year on year, slower than its user growth.
Key Takeaways from Nextdoor’s Q4 Results
We were impressed by how significantly Nextdoor blew past analysts’ EBITDA expectations this quarter. We were also happy its revenue and EPS outperformed Wall Street’s estimates. On the other hand, its number of weekly active users missed while its revenue and EBITDA guidance for next quarter fell short, making this a softer print. The stock traded down 11.2% to $2.21 immediately after reporting.
Nextdoor’s earnings report left more to be desired. Let’s look forward to see if this quarter has created an opportunity to buy the stock. What happened in the latest quarter matters, but not as much as longer-term business quality and valuation, when deciding whether to invest in this stock. We cover that in our actionable full research report which you can read here, it’s free .