Nextdoor Holdings, Inc.

Hello, everyone. Thank you for attending today's Nextdoor second quarter 2023 earnings call. My name is Sierra and I'll be your moderator today. All lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end. If you would like to ask a question, press star one on your telephone keypad. I would now like to pass the conference over to our host, Matt Anderson, head of investor relations with Nextdoor. Please proceed.

Thank you, Sarah. Good afternoon, and thank you for joining us today to review Nextdoor's second quarter 2023 financial results. With us on the call today are Sarah Fryer, Chief Executive Officer, and Mike Doyle, 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. They are subject to a variety of risks and uncertainties. Our actual results could differ materially from expectations reflected in any forward-looking statement. For discussion of the material risks and other important factors that could affect our actual results, please refer to our SEC filings available on the SEC's website and in the investor relations section of our website, as well as the risks and other important factors discussed in today's earnings release. Additionally, non-GAAP financial measures will be discussed on today's conference call. The reconciliation of these measures to the most directly comparable GAAP financial measures can be found in the Q2 2023 shareholder letter released today. With that, I'd like to turn the call over to Sarah.

Thank you, Matt. Q2 was a strong quarter for us as we delivered year-over-year growth across our key metrics of weekly active users, or WOW, and revenue, as well as adjusted EBITDA margin improvement. Starting with neighbors, WOW rose 13% year-over-year to $41.6 million globally. While WOW declined slightly sequentially, we added 1.6 million WOW in the first half of the year. We also saw strength in underlying engagement trends, most notably session depth, which has increased 24% since the end of 2022. We are successfully executing on our 2023 product initiative to increase the number of neighbors and organizations on the platform, deepen engagement by driving content creation and personalization, and enable sustainable advertiser and revenue growth through ad platform development. We continue to bring new neighbors and organizations to Nextdoor through invites, content sharing, and brand awareness initiatives. In Q2, we launched our seventh annual Neighborhood Saves campaign, where neighbors voted for their favorite local businesses. This brand-building campaign benefits businesses. Winners receive almost five times more clicks on their next-door ads and six times more recommendations on their business pages. It also benefits neighbors, 94% of whom value recommendations from other neighbors. During the campaign, neighbors voted for almost 2.5 million businesses on the platform, creating a virtuous cycle of support and interaction between neighbors and businesses. With over 60 million business faves and recommendations and nearly 4.1 million acclaimed business pages on the platform relative to just over 2 million when we went public less than two years ago, we create a strong presence for local businesses and deliver value by providing reach to a high-intent audience of real people in neighborhoods everywhere. Last month, we had the opportunity to celebrate the 2023 Neighborhood Fate winners with beloved local businesses like Boonie Cafe, Brooklyn Blooms, and Foley Hardware as they rang the opening bell at the NYSE. We know that when small businesses like these thrive, neighborhoods thrive. In the quarter, we accelerated our API initiative to share next-door content on and off the platform and to make this process more seamless for neighbors. including through partnerships with Axios and Reddit. We're also in the very early days of partnering with the BBC to bring more local news content to Nextdoor. These initiatives help drive engagement and raise awareness of Nextdoor as the platforms get things done locally. We're seeing results with over 90% of global verified neighbors coming to Nextdoor organically in the quarter. We are well positioned to explore the possibilities for AI and generative AI applications because of our unique and highly dynamic local knowledge graph. Our graph benefits from real-time tagging. In other words, neighbors are already telling us if their post is a business recommendation or an event or a for sale item. We can use this information to train our ML models and ultimately help neighbors more easily meet their needs on Nextdoor. including finding the most up-to-date local information or exchanging goods and services. We are excited for AI's potential to drive both WOW and revenue outcomes. AI, especially ML, continues to play a critical role across our product initiatives to drive engagement in Q2. We implemented AI in the new speed to help content travel based on the number of neighbors in the neighborhood. As a result, neighborhoods with fewer neighbors are seeing more content, which has driven greater session depth, comments, hosting, and even revenue. Using AI to customize the newsfeed for neighborhood characteristics like population and engagement level is a precursor to personalizing the newsfeed for neighbor characteristics like interest. We continue to roll out the generative AI assistance we started testing late last quarter. Assistance for posts helps neighbors create posts in a way that are kinder and more engaging, and we've seen strong adoption. The majority of neighbors who see the assistant generated suggestions are choosing to integrate them, leading to more productive and positive posts. We've seen particularly high traction from those creating business posts or recommendations, highlighting the strong use case for our two-sided network, businesses connecting to neighbors and vice versa on the platform. In addition, we have integrated assistance with our kindness reminder to suggest ways to rephrase comments that are potentially hurtful. This work accelerates our ongoing efforts to foster neighborhood vitality. Earlier this month, we were honored to participate as the NAACP National Convention Closing Plenary Keynote with NAACP President and CEO Derek Johnson on the theme of thriving together. In working with trusted advisors and partners such as President Johnson, Dr. Jennifer Eberhardt and the Stanford Spark Lab, and Julianne Holt-Lunstad, founding scientific chair and board member for the U.S. Foundation for Social Connection and the Global Initiative on Loneliness and Connection, we are creating a welcoming platform that enables all neighbors to thrive. While there is more to do, features like the generative AI assistant and kindness reminder are an integral part of our growth and engagement strategy. Beyond AI, we launched several other product features designed to enhance the next-door user experience and drive engagement and ultimately revenue. For example, contextually relevant ads on our classified surface for sale and free through our partnership with Microsoft Bain. Now, when neighbors search for an item, for example, a bike, they see neighbor posts for bikes as well as relevant ads for bikes. Contextually relevant ads create a better neighbor experience and provide strong advertiser value. One of the most significant areas of progress in Q2 was on our ad platform. Over the past several quarters, we've been building the foundation for our improved self-serve ad experience, designed to reduce advertiser effort, as well as our proprietary ad server, designed to improve advertiser outcomes. Our self-serve ad experience, the Nextdoor Ads Manager, is now available to new advertisers of any size. Additionally, we have started migrating existing advertisers to the improved experience, and we're seeing positive results. One newly migrated solar company in Arizona said they greatly appreciate how our ad creation tool allows them to serve ads to specific zip codes in a uniquely local and hyper-targeted way. It is a testament to the ease and functionality of the Nextdoor Ads Manager, as well as proximity and place as some of our key differentiators. The Nextdoor Ads Server is now delivering 100% of US SMB demand. The server is already offering a more powerful advertising experience, including faster loading times and better distribution of ad impressions. Over time, the Nextdoor Ads Server will provide better targeting and optimization capabilities benefiting customers and neighbors alike. In closing, we are pleased with the progress we've made year-to-date on many key product initiatives and business metrics, and we're excited to continue executing on our top priorities, growing our base of neighbors and organizations, deepening engagement, and driving revenue growth by supporting advertisers through our ad platform. We returned to revenue growth and adjusted EBITDA margin expansion in Q2, and we remain confident that we will continue to generate revenue growth and margin improvement in 2023 overall and beyond. And with that, I'll turn it over to Mike.