Nextdoor Holdings, Inc.

Good afternoon. My name is Jordan and I'll be your conference operator today. At this time, I'd like to welcome everyone to Nextdoor's third quarter 2025 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you'd like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you'd like to withdraw your question, Press the pound key. Thank you.

You may begin the conference. Thank you, operator. Good afternoon, everyone, and welcome to Nextdoor's third quarter 2025 earnings conference call and webcast. I'm John T. Williams, Nextdoor's head of investor relations. With me today is Nirav Tolia, our chief executive officer. As a reminder, 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 statements. 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. Reconciliation of these measures to their most directly comparable GAAP financial measures can be found in the Q3 2025 Next Door Investor Update released today. And now, I'll turn it over to Nirav.

Thank you, John, and good afternoon, everyone. I'm Nirav Toli, a co-founder and CEO of Nextdoor. Q3 was a quarter of steady execution, and our results are consistent with the plan we've communicated. We delivered our highest quarterly revenue ever and generated positive Q3 adjusted EBITDA. In addition, we are on track for positive adjusted EBITDA in Q4 and are reaffirming our expectation for full year 2026 break-evens. Let's talk more about Q3. Revenue grew to $69 million, up 5% year-over-year, and reflecting strong demand from self-serve advertisers who continue to be drawn to our Nextdoor ads platform. ARPU improved 8% year-over-year, even amidst reduced ad load. On the large customer front, we delivered on our commitment to complete our programmatic supply integrations, enabling deeper collaboration with scaled parties who are looking to reach audiences on Nextdoor more efficiently. Our self-serve channel continues to be a growth engine. Q3 self-serve revenue grew 33% year-over-year and made up roughly 60% of total revenue. Advertisers saw meaningful gains, including higher click-through rates and lower cost per click. We also grew our active customer base and associated net new advertiser spend. In short, our ad stack investments are delivering results. and we expect the introduction of new ad formats and deeper AI integration over the coming months may further improve monetization. Q3 Platform WOW, defined as users who engage directly on the Nextdoor app or website, was 21.6 million, a modest sequential decline. This was driven by an intentional decision to reduce notification and email volumes, reflecting our focus on engagement, quality over quantity. In the short term, Platform WOW may continue to fluctuate due to seasonality and our continued commitment to delivering the best user experience. As I've said many times before, we will deliberately make tradeoffs, even if they are difficult, all in the interest of driving long-term and sustainable growth. Continuing, Q3 gap net loss was $13 million. Q3 adjusted EBITDA was $4 million, a positive 6% margin, representing eight points of year-over-year improvement. This reflects our strong revenue performance and continued focus on operating the company as efficiently as possible. Further, revenue per employee has now increased 21% year-to-date. And at quarter end, we had $403 million in cash, cash equivalents, and marketable securities, along with zero debt. Now let's move on to our financial outlook. We expect Q4 revenue between $67 and $68 million, and adjusted EBITDA in a range between $3.5 and $4.5 million. This implies full-year 2025 revenue growth of 3% to 4% and an approximately $3 million adjusted EBITDA loss. We do continue to expect full-year adjusted EBITDA break-even in 2026. Here are some key factors to consider related to our Q4 outlook. Our Q4 guidance reflects normal seasonality and a full quarter of savings from our recent workforce reduction, partially offset by incremental platform investments. We do not plan to increase ad load in Q4 or into 2026 as we continue to prioritize the best user experience. Consistent with this approach, we also expect to intentionally reduce new user acquisition efforts during Q4. Those are the numbers, and now I'm excited to go into more detail about our product, the true driver of long-term value. The first phase of our transformation, marked by the launch of the new Nextdoor, rebuilt our foundation. We reset our expense base, strengthened our team, and instilled greater operating discipline. At the same time, we enriched the platform by pairing user-generated content with trusted third-party local information that drives meaningful conversations and real-world utility. At quarter end, more than 4000 local publishers are live on next door and local news now accounts for approximately 7% of total feed content. We also created a real time local alert system to help neighbors stay informed and safe during high impact local events such as fires, inclement weather and utility outages. New integrations include Waze's real time traffic and road updates and instant earthquake alerts from the US Geological Survey. Looking ahead, we will continue leveraging third-party content to reinforce Nextdoor as the neighborhood's go-to source for what's happening nearby. This foundational work has helped clarify what users truly value and has given us a stronger and more sustainable baseline for growth. That said, the takeaway is clear. We must continue to dramatically increase high-quality content and distribute it more effectively to the right users at the right times. So now we're entering the next phase. We're moving beyond the content feed to build a stronger neighborhood ecosystem, grounded in a vibrant, useful, and trusted local community. Community-driven content has always been part of our DNA. Our opportunity now is to modernize how we surface and connect it, focusing on the interactions that drive real-world outcomes, providing utility for neighbors and visibility for local businesses. Authenticity is what matters, and we have a material opportunity to invest further in neighbor recommendations. Neighbors want to know why a business is trusted. Real recommendations from verified neighbors build that trust, and we know that's what sets Nextdoor apart. With this in mind, we plan to reinvent our recommendations ecosystem to turn authentic word of mouth into actionable insights that help neighbors make smart decisions and help local businesses thrive. We believe these efforts can meaningfully improve engagement and monetization all across our platform. Ultimately, our goal is to create more relevant and trusted connections that reflect how neighbors engage in the real world with each other and with local businesses. The first phase gave us stability and insight. The current phase is where we take bold swings and begin to see the results. As we move forward, we'll focus on a few key indicators. quality and quantity of content, depth of engagement, and the value we create for advertisers. We will avoid chasing short-term metrics in favor of investing in durable, compounding growth initiatives. Transformation takes focus, it takes courage, and it takes time. It is not a straight line and is neither predictable nor immediate, but it represents the best path for us to unlock the next phase of growth for Nextdoor and create lasting value for our users, advertisers, and shareholders. Before wrapping up, I'd like to share an important leadership update. I'm pleased to announce that we've hired our next chief financial officer. Indrajit Panambalam will be joining next door as CFO, effective December 1st, 2025. Indrajit brings more than two decades of experience leading high-performing finance and operations teams. most recently as CFO at Premion, an industry-leading connected TV advertising platform, and prior to that at Maps Group, Time Warner Cable, and AOL. He has a proven track record of driving growth, of achieving operational excellence, and financial rigor at scale, and we are thrilled to have him on board. In closing, we remain laser focused on building a platform that makes neighborhoods more vibrant, more connected, and more useful. At our core, Nextdoor is about real local connections that create value every day. That vision will continue to guide us in everything we do. Thanks for joining our earnings call today. I'll now turn it over to the operator to begin Q&A.