Thank you for attending today’s Nextdoor Fourth Quarter and Full Year 2022 Earnings conference call. My name is Jason, and I’ll be the 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. I’d now like to pass the conference over to our host, Matt Anderson, Head of Investor Relations.

Thank you, Jason. Good afternoon, and thank you for joining us today to review Nextdoor’s fourth quarter and full year 2022 financial results. With us on the call today are Sarah Friar, 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 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 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. A reconciliation of these measures to their most directly comparable GAAP financial measures can be found in the Q4 2022 Shareholder Letter released today. With that, I’d like to turn the call over to Sarah.

Thank you, Matt, and hello, everyone. Q4 marked the end of a challenging year for many neighbors and customers. Against this backdrop, we remain focused on providing value to neighbors and organizations and driving results in the areas we can more directly control. On the neighbor front, platform engagement is high with weekly active users growing 11% year-over-year and 4% sequentially in Q4. This growth was led by the U.S. where we added over 1 million net WAU quarter-over-quarter. Q4 WAU grew sequentially for the eighth quarter in a row, and over the past two years, WAU has grown by 42%, demonstrating the community, utility, and durable value Nextdoor offers. In conjunction with WAU growth, we are also growing at the top of the funnel indicating a clear opportunity for sustained growth. Today, we have almost 80 million verified neighbors on Nextdoor. 2022 was a year of product innovation and execution. We made substantial progress on deploying machine learning to enhance the neighbor experience, drive engagement, and platform growth. In Q4, we advanced our email and push notifications by optimizing not just for sessions, but for sessions from neighbors who are most likely to become long-term users based on their activity. Moreover, in the quarter, we laid the groundwork for a more personalized and more engaging next Newsfeed by incorporating data points from neighbor interactions on the platform to capture interest and preferences. This latter work stream is still at an early stage, but we expect that it will become a prominent driver of neighbor growth and engagement in 2023 and beyond as our models become more powerful and work at greater scale and velocity. In the year, we also significantly updated our app, optimizing our user interface for the way we believe neighbors will derive the most value in the long term. We placed the posting function front and center and simplified the navigation bar to highlight the highest engagement services. We also launched the discover surface to help neighbors find groups, other neighbors and businesses nearby. In Q4, we ended the year on a high note with the launch of the new and improved events function and the events map within the location-forward discover surface, further leaning into our value proposition of local at scale. With these launches, we are deepening engagement by creating more ways for neighbors and organizations to interact, engage, and share useful content. In addition, we continue to innovate in neighborhood vitality. Our recently launched transparency report highlighted a 35% reduction year-over-year in harmful content to just 0.2% of total user-generated content. Our community is active. Over 210,000 volunteer community moderators in neighborhoods around the world reviewed 92% of all reported content and reported content was removed at industry-setting speeds with a median time of 5.1 hours from time of report to removal. And this is an area where we’ve used ML and AI to launch new features such as constructive conversations and appeals and improved features such as our kindness reminder. We also continued to make progress on our multi-year ad platform build. Our top priorities are to create a unified self-serve option for customers of all sizes, particularly for SMBs, and to prepare our proprietary backend ad server to host large-scale customer demand. On the revenue front, 2022 growth of 11% year-over-year tells a tale of two halves. While we started off the year on a strong note with 32% year-over-year growth in the first half, we saw advertisers start to spend with increased caution in the second half of the year as macroeconomic conditions became more uncertain. Q4 revenue declined 10% year-over-year to $53 million driven by reduced advertising spend from the financial services, home services and real estate verticals and an overall reduction in spend per customer. Importantly, however, in 2022, we retained 90% of our top 50 customers reflecting the sustained results advertisers are seeing on Nextdoor. In Q4, we were focused on operational efficiency, holding operating expenses approximately constant year-over-year. We’ve held headcount approximately flat over the past three quarters, actively managing performance and selectively hiring in only the most critical areas: product, engineering, ML and AI, design and sales. Going into 2023, we remain focused on growing WAU and revenue with an emphasis on increasing productivity. We will continue to balance expense management while ensuring that we are resourced to deliver on our long-term product and go-to-market initiatives. In closing, with community and utility at the forefront, our platform is a unique resource for neighbors and businesses of all sizes. We are as excited as ever about the product roadmap we have in place to execute on our top three priorities: growing our base of neighbors and organizations, deepening engagement, and driving long-term revenue growth above 2022 levels. While there may be continued uncertainty ahead, we have a strong team in place and are well capitalized to execute against our strategy. We’re committed to our purpose to cultivate a kinder world where everyone has a neighborhood to rely on and remain confident that our efforts will enable us to return to sustained revenue growth and margin improvement in 2023. With that, let me turn it over to Mike for more details on our financials.

Thank you, Sarah, and good afternoon, everyone. As Sarah noted, in Q4 WAU grew to 40 million. This growth reflects our strategy to build an active, valued community where neighbors and organizations can join, connect, contribute, and transact with one another across over 305,000 neighborhoods around the world. We are proud of the way we delivered an unparalleled combination of utility and community to both neighbors and organizations in the quarter. From working with agencies to support communities impacted by East Coast storms and California flooding to helping neighbors organize local events and stay informed about them through timely, relevant notifications, and driving sales for our global toothpaste brand that ran a successful campaign promoting its products the day after our Halloween Treat Map. Turning to revenue, while 2022 revenue grew 11% year-over-year to $213 million, Q4 revenue was $53 million, a decrease of 10% year-over-year. In the quarter, we saw continued weakness in advertising spend, particularly in three historically strong verticals: financial services, home services, and real estate. As advertisers have experienced uncertainties in their own businesses, they have moderated spend. That said, we are pleased to see that even in light of lower per-customer budgets, many advertisers are choosing to still spend on Nextdoor. As Sarah noted earlier, the fact that the vast majority of our top customers continued to spend in 2022 helps illustrate that, macroeconomic volatility aside, our value proposition to advertisers remains strong. In addition to retaining customers in an uncertain environment, we were also bringing new customers on board. We saw strong growth in mid-market accounts added, which drove 18% year-over-year growth in total accounts managed by our sales team to an all-time high in Q4. Bringing new customers to Nextdoor will remain a top priority in 2023. Other areas of resilience in Q4 included the tech and telco, healthcare and government verticals, which continue to grow year-over-year. This reflects a shift in sales strategy we made earlier in 2022 to increase focus on recession-resilient verticals and customers. Consistent with our full-funnel approach, we saw a healthy mix of spend across both top and bottom of funnel objectives with a continued trend towards direct response campaigns, which accounted for more than 60% of managed spend in the quarter. U.S. CPMs also remained relatively stable year-over-year, another indicator of the value Nextdoor delivers. Q4 ARPU declined 19% year-over-year to $1.33. This is the result of progress made in growing sessions and supply, which outpaced advertiser demand in the period. Q4 adjusted EBITDA loss was $17 million, representing a negative 32% margin. The year-over-year decrease in adjusted EBITDA margin primarily reflects deleveraging from the reduction in revenue and growth in personnel cost and hosting cost as neighbor engagement grows. As with revenue, our margin profile changed significantly over 2022. In the first half, our adjusted EBITDA margin was nearly constant year-over-year as revenue growth supported early hiring for critical new roles. In the second half, the revenue decline led to margin contraction even as we reduced operating expense growth by 28 points from the first half to the second half of the year. We ended Q4 with $583 million in cash, cash equivalents and marketable securities. This is after we repurchased $77 million of our Class A common stock in 2022, allowing us to repurchase less than 1% of shares outstanding in the year. We will continue to evaluate our capital allocation opportunities looking forward. I’ll end with our outlook. Our Q1 2023 revenue guidance is $46 million to $47 million, a year-over-year growth rate of minus 9% at the midpoint of the range. In the near term, this reflects the continuation of the revenue trends we observed in Q4. Turning to margin, we expect expenses to increase from Q4 to Q1, reflecting the hiring during 2022, as well as a seasonal increase in expense, primarily driven by payroll taxes. As a result, we anticipate Q1 adjusted EBITDA loss to be minus $27 million to minus $26 million. For the full year 2023, we expect to return to year-over-year revenue growth and margin expansion. Given current variability in advertising budgets and lower forward visibility as a result, we’re not providing full year revenue or EBITDA ranges at this time. Overall, our Q4 results reflect key areas of progress, most notably in neighbor growth and engagement. We remain highly focused on driving sustained WAU and revenue growth. Thank you for joining our earnings call today. With that, I’ll turn it over to the operator for Q&A.

Thank you. Our first question is from Youssef Squali with Truist. Your line is now open.

Hi. This is Robert Zeller on for Youssef. Thanks for taking the questions. So first on the map, I just wanted to ask what engagement looks like today, given the recent launch you did in the quarter, and then compared to where engagement was a year or two ago and where you think it could be like five years from now. And what levels of revenue contribution you think you could reach through map. And then I think in the letter you mentioned your most consistently engaged base of neighbors grew. I’m just curious what the use case is for your most consistently engaged base of neighbors versus those that don’t engage as consistently and what you think the difference is and why. Thank you.

Great. Thank you, Robert. A lot in there. I’ll start and then I’ll let Mike dive in if he wants to talk about a longer-term view. So first on engagement, we were very pleased with the year-over-year growth in WAU, that 11% year-over-year growth to 40 million. And of course, for the year, 21% year-over-year growth, where we’re seeing strength certainly in the U.S. but 85% of our U.S. verified neighbors came organically. One thing that is definitely driving growth at the top of the funnel, and then leading into engagement, is the fact that people are coming to the platform through word of mouth. That’s an incredible strength for Nextdoor; we can grow that rate organically. That’s actually higher than what we saw in 2021. Beyond that, internationally I see even higher growth. Our WAU growth internationally was 42% year-over-year in 2022. That was 3 points higher than what we saw in 2021, so it’s accelerating. Beyond that, if you look further down the funnel, once someone is a weekly active user they’re very engaged — on average they come back about four times a week. Over 50% of weekly actives are daily in fact. Session growth, which is the natural link out to impressions, also continues to accelerate. Session growth was faster than WAU growth, driven by what I talked about in my prepared remarks: a big investment in machine learning, which was our fastest-growing team in 2022. They’re building models around areas like notifications — the right notification to the right person at the right time varies by neighbor and can make a big difference in how many people come back to the platform. They’re also improving top-of-funnel growth by making invites smarter so more people accept and return to the platform. You asked about five years out; I’ll let Mike address revenue contribution and longer-term growth. On the use cases for people who come back consistently, the top use cases on Nextdoor tend to be recommendations — either looking for recommendations or sharing recommendations. I was literally checking Nextdoor before this call and someone was asking where to find a great spa, which is a very typical ask on the platform. Today, we’ve seen over 60 million recommendations against 6 million businesses. The second reason people come is to give and get trusted information. That’s why we work with public agencies and why we can be there in times of crisis like flooding or snowstorms, and also to help organize community events. The third area is buying and selling: our For Sale & Free platform tends to be very engaging. It’s often a reason people come for the first time and they have that moment of delight when they find a buyer or give something away. It works well because we’re local so items don’t need to be shipped, we’re trusted so people are comfortable inviting neighbors to their home, and there’s a strong sense of community — for example, parents putting sports clothes on the platform for other parents. Those are the three big areas: recommendations, trusted information, and local social commerce. With that, Mike, do you want to comment on long-term revenue contribution?

Yes. I’ll add on revenue contribution and growth rates going forward. We’re early in building our ad revenue business and the most important piece is driving that engaged base of weekly active users and helping them find real utility on the platform that generates the supply advertisers want and gives us the opportunity to work with them in a larger way, driving larger budgets and doing more with them. There are several things we are doing to accelerate revenue growth. First is the large investment in our proprietary ad platform, allowing us to take advantage of our first-party data to drive performance with advertisers and ultimately increasing ROI and CPMs. We’re also optimizing our supply, driving fill rate of the supply we create, increasing the mix of direct-sold relationships with advertisers so we can help them get the most out of the platform and shift budgets where warranted. Looking several years ahead, we’re creating new use cases and ad surfaces — for example, discover, events, and groups — many ways to interact with users and advertisers and bring true utility through ad context.

Thank you, Robert.

Thank you.

Our next question is from Eric Sheridan with Goldman Sachs. Your line is now open.

Thanks so much for taking the questions. Maybe just coming back to the broader advertising environment, I’d love to dig a little bit deeper into what you’re seeing in elements of spend per advertiser. How much of that you think is volatility driven by the overall mix of brand versus direct response in your existing advertiser spend? And I think for a platform at your scale, one might think you could outgrow some of the overall industry trends. The second part is: what are you seeing in the funnel of new advertisers and new budget coming to the platform and how should we think about that new advertiser funnel developing beyond just the macro volatility we might see over the next couple of quarters as we get deeper into 2023? Thanks so much.

Thank you, Eric. We’re pleased with the performance we’re seeing in retaining our top advertisers — more than 90% retention of our top 50 advertisers — even in an environment where they are often reducing spend per campaign, which indicates the value they see working with us to reach neighbors. On driving new logos, we have roughly 1,000 advertisers across enterprise and mid-market customers, and then anywhere from 30,000 to 35,000 SMB customers paying in any particular period. So there’s a large runway for building awareness among advertisers and getting them to leverage our platform. The flip side of adding new logos is the performance we’re seeing in evergreen spend. We define evergreen advertisers as those active on the platform five quarters in a row, and evergreen spend is the majority of our advertising — close to 60% — and that number continues to tick up. This gives us a stronger base of advertisers and more visibility into future revenue. It’s a key metric for us.

Thank you.

Our next question is from Brian Nowak with Morgan Stanley. Your line is now open.

Great. Thanks for taking my questions. Maybe Mike, can you talk about priorities for 2023 to really grow the advertiser base. Can you give a couple examples of advertising verticals you’re most focused on that you think can drive significant upside in 2023? And secondly, are there any specific tools or ad offerings that have been resonating better with advertisers than others? As we think about the key competitive differentiators for Nextdoor in an increasingly competitive advertising market, what should we be focused on? Thanks.

Great. Thanks, Brian. I’ll start and then Mike can add. First, in terms of verticals, as Mike noted in his prepared remarks, we saw strength in Q4 in tech and telco, government and healthcare. That was driven by a mid-year pivot to focus on recession-resilient verticals such as healthcare and government. We’ve made good momentum on new logos in that space. On why advertisers come to Nextdoor and the formats that resonate: first and foremost, we’re the neighborhood network and local is central to our differentiation. For example, in our Shareholder Letter we highlighted a campaign with a European automaker targeting a unique audience of EV owners. On Nextdoor we could see that 26% of neighbors in the UK were more likely to own an electric vehicle, and the campaign resulted in both improved viewability and higher engagement — time spent on the ad was about 111% of benchmark. That shows when we have a unique audience and can provide measurable performance, advertisers respond. Another example is Thumbtack’s new mover kit: we know when someone moves because they come to the platform or update their address, so new mover solutions are a strong product for us and this was the eighth consecutive quarter where we’ve sold out that kit. Treat Map is another example where a national brand like Purina sponsored our Treat Map and saw a 3.4x more positive brand sentiment during the campaign. That demonstrates the power of native, location-forward ad surfaces. In terms of formats, we sell the usual formats — video, carousel — and have a format around dynamic local advertising where taking a national brand message down to a local level can be significantly more performant — we’ve seen around a 58% improvement in performance in some cases. We’re focused on local audiences, household decision makers or purchase influencers, and slicing those audiences in unique ways to bring advertisers performance and utility. We’re getting started, but those are the differentiators: unique local audience, trusted environment, and ad formats that leverage local context.

Thank you.

There are no additional questions. So I’ll pass the call back over to Sarah Friar, the CEO.

Wonderful. Thank you so much, Jason, and thank you, everyone who joined and asked questions today. We always appreciate your time and support. In closing, while we beat Q4 revenue and EBITDA guidance and built momentum in areas like mid-market sales, we know we have work to do to return to revenue growth and navigate a period of more uncertain advertiser demand. Nextdoor is a unique platform. We are the neighborhood network at scale. Users largely come to us organically — three out of four in this particular period. We are real neighbors at real addresses. We’ve also taken the time to invest in vitality. We believe we differentiate ourselves and when we invest in this arena it’s good for the business as well as good for the world. Neighbors want to engage more when they feel safe within their neighborhood, and brands want to spend more with us when they can see brand safety. We’re laser-focused on growing WAU and revenues. We need to beat the drum on the importance of local for neighbors, businesses and agencies, and build brand awareness to make sure that utility and community come through. Second, we will continue to invest in platform development initiatives that grow engagement: maps, discover, events, ML and personalization, neighborhood vitality. Third, we will iterate quickly on monetization capabilities for advertisers of all sizes, making sure Nextdoor is the ad platform where advertisers know they can track and measure spend to get the outcomes they want. In terms of near-term revenue and EBITDA variability, we’re focused on returning to revenue growth and margin improvement in 2023 while investing in the long-term opportunity of a global hyperlocal neighborhood network. Thank you again for your time and we look forward to talking to you through the quarter.

We do have one more person queued up for a question.

Go ahead. We love questions. Bring it on.

Jocelyn Hu from Evercore. Your line is now open.

Hi, thank you for taking my questions. I really appreciate it. Could you speak more specifically about international performance? Growth seems to be stronger internationally than the U.S. If I have the numbers right, could you talk about momentum there and what’s your game plan for international rollout — which markets will you focus on?

Yes. Great, thank you, Jocelyn. As you know, Nextdoor is in 11 countries around the world. You are right that overall WAU growth remains stronger internationally, partially because we have many countries and neighborhoods that are just getting going. We saw 42% year-over-year WAU growth in 2022 internationally and that accelerated from 2021 by about 3 points. What’s driving it internationally is a lot of the same things you see in the U.S. — when we invest in ML and notifications those are global investments and have positive effects everywhere. On sessions, we also see outpacing growth outside the U.S. Our core markets beyond the U.S. are the U.K., Canada and to some degree Australia. Western Europe remains a bit earlier in its development for us. Within regions we continue to do country-level partnerships that drive local attention. For example, we did a partnership with Toronto FC which put us front and center in an important community and helped drive growth. So it’s a combination of broad platform investments that benefit the whole world as we roll them out, combined with country-level investments that help specific cities or neighborhoods come alive. One more point: today 21% of our WAU is international, but only 5% of our revenue is international. So if you think about future opportunity as we reach scale and bring advertisers on the platform globally, there is substantial latent opportunity outside the U.S. at the moment.

Thank you so much. Maybe on the Events Map, is there any update on its international rollout at all?

On the events side in Q4, we launched both our re-architected events and the Events Map. This is part of our discover surface so that beyond your Newsfeed you can land on Discover and immediately see everything around you that may be of interest. Events are one of those elements where you can look at your neighborhood up close or over a broader local area and see what’s happening around you. That’s also a surface where you can find businesses that have been recommended around you and groups and what other neighbors are up to. Events Map is part of a broader nativization of map surfaces; some themes may be temporary and seasonal, and others may be ongoing like our Help Map. To answer your direct question: Events Map is available internationally as part of a broad-based global rollout.

Got it. Thanks.

And we have another question from Ron Josey with Citi. Your line is now open.

Hi, this is James Michael on for Ron Josey. What role does Nextdoor play in its For Sale & Free offering? Is there a greater monetization opportunity here? And then how does user shopping behavior on Nextdoor differ from other platforms? Does integration with maps also play a role in capturing commerce and overall platform shopability? Thank you.

Sure. On For Sale & Free, the opportunity is significant. For Sale & Free tends to bring many new users to the platform and keeps current users engaged. We see a significant dollar amount put fresh onto the platform every month. We view this as our foray into social commerce because social commerce is about being influenced by people you trust — neighbors — and Nextdoor is the perfect overlap of local plus trusted relationships. People tend to have high trust in their neighbors and high intent when they transact locally. I’ll pass it to Mike on monetization.

To date our monetization has been largely driven by the engagement For Sale & Free generates, which we monetize through our general ad products. Our marketplace is differentiated because neighbors are real-name and address-verified, which creates trust and proximity for exchanging goods and services. Importantly, the social capital of helping your neighbors drives engagement. We have ad units in the For Sale & Free surface today and are working to make those ad units more contextual so, for example, if you’re searching for a dining room table you might be served an ad for a new dining room table from an advertiser. There is an opportunity to do more directly with our own technology as well as with partners to accelerate utility on that surface.

That’s helpful. Thank you.

There are no further questions. This concludes the conference call. Thank you for your participation. You may now disconnect your lines.

Yes.

Thank you.