Good afternoon. My name is Elliot, and I will be your conference operator today. At this time, I would like to welcome everyone to Nextdoor's Fourth Quarter 2024 Earnings Conference Call. Operator Instructions. Thank you. You may now begin your conference.

Thank you, operator. I'm John T. Williams, Head of Investor Relations. Good afternoon, and thank you for joining us to review Nextdoor's fourth quarter and full year 2024 financial results. With us on the call today are Nirav Tolia, Chief Executive Officer; and Matt Anderson, 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 2024 shareholder letter released today. With that, I'd like to turn the call over to Nirav.

Thank you, John T. Good afternoon, everyone. I'm happy to be with you today to discuss our fourth quarter 2024 financial results and outlook. When we created Nextdoor, we did so with the belief that connected neighborhoods create stronger communities. Today, 14 years later, more than 100 million verified neighbors have joined our platform to improve their local lives. We've definitely made a real impact. At the same time, we haven't come close to fulfilling our potential, both as a business and more importantly, with our product. So about a year ago, I came back as CEO to drive complete transformation of our user experience we call it NEXT, a reimagined and significantly improved version of Nextdoor. Since my return, our team has worked hard to create a robust foundation for future growth. And while there is much more work to do, I'm encouraged by our progress and excited to share some specific details about the emergence of NEXT on today's call. But before setting the stage for what's next, let's talk about our Q4 and full year 2024 results. Q4 marked a strong finish to the year. Weekly active users increased 10% year-over-year, reaching 45.9 million. Revenue grew 17% year-over-year to $65 million. For the first time, we achieved positive adjusted EBITDA and operating cash flow, an important milestone. Throughout Q4 and really all of 2024, we showed that a disciplined balance between strategic investment and cost controls can drive sustained productivity gains. All of these results were made possible by an unwavering focus on execution and reinforce my most important belief about winning organizations: people are the core asset. Establishing the team was a key focus in 2024, and I'm confident that we now have the right talent in place across the organization to drive Nextdoor forward. This includes our addition of Georg Petschnigg from the New York Times as Chief Design Officer and our promotion of Michael Kiernan to Chief Revenue Officer. Our entire company has embraced the challenge of transforming Nextdoor and last year's financial and operational results are clear evidence that we're making progress. But the most important piece of the transformation is NEXT and our top priority is very clear: delivering a new and radically improved user experience. To do this right, we are moving away from incremental optimizations of our existing product and fully committing our focus and energy to iterating, refining and ultimately launching NEXT. While we expect the switchover will impact short-term results, it is a necessary step to secure our long-term success. So let's talk in a little bit more detail about NEXT. Our vision is to unlock the full promise of the neighborhood, and we've spoken to our users a lot over the last year to understand exactly how we can do that for them. They've told us that they want to use Nextdoor, but it needed to work better for them. Simply put, they want the local information to be more relevant, the interface to be more intuitive and the notifications to be more high value. NEXT is purpose-built to meet these needs, and it focuses on three key areas: richer local content, timely local alerts and community-powered local recommendations. These are the three pillars that comprise the foundation for our high-conviction strategy for NEXT and deliver on the core needs of keeping users informed, safe and smart. I would like to explain each of these in a little bit more detail. First, we are adding new sources of local content to help keep users informed. Richer local content means providing all of the news and information related to what is happening locally. In the past, user-generated content has been our primary source of local updates. NEXT will now integrate third-party non-neighbor publisher content alongside these neighbor discussions, creating a richer and more reliable local news experience that delivers daily and predictable value. Second, we are upgrading live local updates to help keep users safe. Weather, power, traffic—these are alerts that are essential for our users. In the past, these critical pieces of information might be hard to find or quickly become outdated. NEXT will deliver alerts in a more prominent design that prioritizes real-time delivery and accuracy, serving as an essential lifeline for neighbors during crises such as the recent L.A. fires or for everyday needs like the daily commute. Third and finally, we are surfacing community-powered local recommendations to help keep users smart. Neighbor recommendations are at the heart of Nextdoor and have always made up a significant portion of our posts. In the past, this knowledge lived only in the feed, making it difficult to find. NEXT will use AI and machine learning to centralize recommendations in a new neighborhood hub where we can showcase the most valuable evergreen content contributed by users over many years. In the last six months, we have prototyped and tested parts of NEXT in six markets around the country. We've seen some useful early signals and initial feedback gives us confidence in our strategy. Given these learnings, our product development teams have materially shifted their efforts during Q1 to prioritize NEXT-related development work, officially initiating the switchover to NEXT. I've said many times that the product transformation is not a straight line, and we have always anticipated the uncertainty in shifting from vision to execution. But we're now ready to embrace this uncertainty because NEXT allows us to directly address our users' core needs. Delivering a materially better product is the only way to build the successful business that we all envision for Nextdoor. With that in mind, we are intentionally making short-term trade-offs to prioritize long-term value. This may include things like focusing on existing users over acquiring new ones, reducing ad load to deepen engagement, or other strategic shifts that certainly will influence usage patterns. As a result, we do expect impacts on weekly active users and impressions, which will affect near-term business results. This is not a decision we take lightly, but we believe it is the right one. Embracing this switchover period of feedback and transition is essential to delivering a transformed product and ensuring Nextdoor's long-term success. With all that said, I'm pleased to share that we remain on track to launch NEXT as promised by mid-2025. We validated the product vision, built much of the technology and are now beginning the switchover process. While we expect some ups and downs in the coming quarters, this work is laying the foundation for our long-term success. Nextdoor has tremendous potential, and we look forward to keeping you updated on the rollout of NEXT in the months ahead. I'll now turn it over to Matt to discuss our financial results.

Thank you, Nirav, and good afternoon, everyone. In both Q4 and 2024, we saw progress across key measures of engagement, revenue and profitability. In Q4, nearly all of our new verified users joined organically. Among these new users, we saw the fastest growth from those aged 18 to 34. These younger users tend to have different usage habits when compared to our overall user base, but we believe that our expectations will increasingly align with the NEXT user experience. Q4 weekly active users of 45.9 million grew 10% year-over-year, driven by a few factors. First, new user acquisition remains strong, particularly in the U.S. Second, we improved notification delivery and relevance, prompting many previously inactive users to reengage. As we have noted in past quarters, when users come to the platform, they are engaging with more content in each session. These optimizations drove positive business impact, but we now look ahead to bolder transformation in 2025. Many verified users have joined Nextdoor, but are not as engaged as they could be. With NEXT, we see a big opportunity to reconnect with them through richer local content, timely local alerts and community-powered local recommendations. Now on to monetization. Q4 revenue of $65 million grew 17% year-over-year driven by growth from self-serve advertisers and improved revenue retention. Q4 average revenue per weekly active user, or ARPU, grew 7% year-over-year to $1.42, reflecting our ability to deliver more relevant ads to users. As a result, we delivered more ad impressions, more clicks and higher effective CPMs. Within our self-serve channel, revenue growth, account retention and net revenue retention were all strong. Self-serve advertisers, in particular, continue to embrace our click optimization capabilities, which delivered 47% lower cost per click compared to non-optimized campaigns and represented more than 40% of our self-serve revenue in Q4. As of Q4, 100% of our U.S. self-serve revenue was being delivered via our Nextdoor ad server. Many of our large managed advertisers have now migrated, gaining access to improved targeting and performance. Looking ahead, we also expect to scale those same benefits to some international advertisers later this year. Shifting to profitability: in Q4, we continued to be intentional in our resource allocation, driving to positive quarterly adjusted EBITDA and operating cash flow for the first time. Q4 adjusted EBITDA was $3 million, or a 5% margin, representing 30 percentage points of year-over-year improvement. Operating cash flow was $11 million, reflecting strong cash flow conversion given our asset-light model. Increasing revenue scale, lower sales and marketing and personnel expenses, and rigorous management of hosting and data-related expenses drove this improvement. We expect these efficiencies to sustain, providing us with a path to further leverage in the future. We ended the year with $427 million in cash, cash equivalents and marketable securities and zero debt. In 2024, we repurchased 31 million shares and reduced our fully diluted share count by 5% year-over-year. As a result, our fully diluted share count is now lower than at the time we went public in 2021. Our strong balance sheet provides strategic and financial flexibility and we remain committed to disciplined capital allocation, including through a more focused operating expense profile and share repurchases. Now on to our outlook and financial guidance. We started the year on solid footing, but we are also embracing changes that will affect our guidance. First, with our decision to move more ambitiously towards developing a transformed product, our revenue outlook reflects initial reductions in ad impression supply tied to our NEXT initiative rollout. This reflects shifting usage patterns and expected reductions in ad load as we redefine the user experience. Second, we have observed reduced spending among certain large advertisers as we progress through the quarter, partly tied to large advertisers shifting budgets towards programmatic ad buying. While our ad delivery is improving, our self-serve advertiser spending remains strong quarter-to-date. These are only part of the advertiser value equation. Ease of use is also critical, especially for large advertisers looking to buy through both direct and programmatic channels. In response, we have accelerated our efforts to integrate new supply-side and demand-side platform partners and expect these new partnerships to contribute to growth in late 2025 and beyond. We expect these two factors will reduce Q1 revenue growth by approximately $7 million, with a corresponding flow-through impact to adjusted EBITDA. We also expect year-over-year revenue growth in the first half of 2025 to be approximately flat. For Q1 2025 specifically, this translates to revenue of approximately $53 million and an adjusted EBITDA loss of approximately $13 million, implying approximately two percentage points of year-over-year margin improvement. As Nirav noted earlier, we remain on track to deliver NEXT by mid-2025. Now for a few final thoughts. We saw multiple signs of progress in 2024. We drove continued user growth over the course of the year. NEXT began to take shape. Our Nextdoor ad platform drove performance gains for advertisers, and our more focused resource allocation drove consistent productivity improvement. We expect many of the drivers of our improvement last year, including organic user acquisition and ad platform-driven growth to persist this year. In 2025, we are making the decisions we expect will drive durable growth for the long term. We know some of these decisions, including our efforts on NEXT, will affect our near-term results, but we are confident that our path is the right one. NEXT is already a key resource for users seeking everyday utility. With NEXT, we have the opportunity to reaffirm Nextdoor's role as the go-to resource for everything local. Thanks for joining our earnings call today. I'll now turn it over to the operator to begin Q&A. Thank you.

Operator Instructions. First question comes from Eric Sheridan with Goldman Sachs.

Maybe two, if I could. First, on the user side of the equation: maybe talk a little bit more about the decision process around focusing on going deeper on engagement with the current base of users or a subset of current users rather than investments on the growth side in stimulating the broader base of users, and how you think about what the output of that will look like for the platform as you look out over the next 12, 18, 24 months. And then one more, more micro question would just be on the ad impression headwind. It sounds like that's fully reflected in Q1. Does that remain a headwind, meaning do you expect to bring down ad impressions on a continuous basis deeper into the year? Or will that headwind mostly be absorbed by the time you exit Q1, just thinking about the supply side for the advertising business?

Eric, this is Nirav. Thank you for both questions. I'm going to take the first one on users, and then I'll let Matt comment on the ad impression question that you asked at the end. So when it comes to users, let me take a step back and tell you where we are in our process of launching NEXT. The way that internet software is developed is never a big bang. It's always a series of iterative movements where you learn, you listen, you get better and you improve. And then ultimately, you may do a PR event that signals a big launch, but you're shipping all along. That is the process that we've been in for some time now. As we mentioned in the letter, we actually have been testing in six markets around the U.S. It is best practice to cohort users that way and learn against the current base, and so this is a very standard thing that we're doing. Ultimately, we will get to the point where we flip the switch for everyone, and that's what we talk about when we say we're initiating the switchover for all users to NEXT. As it relates to engagement, particularly the question you asked around 12 to 18 months, what we're looking for is deepening engagement with an already sizable user base: over 100 million verified neighbors. What we need is more frequent and deeper engagement. Those are some of the North Star metrics for us. They can ultimately translate into more visits at a higher frequency and more time spent on those visits, whether it's a minutes metric or a number of stories read. That's the goal. We are very optimistic given the early things that we've seen, but this is going to be a process. That's why we talked about the idea that for the next few quarters, the optimal thing for us to do is to learn and optimize. And so that's where our focus is, and we're excited about where that takes us. I'll turn it over to Matt for the ad impression question.

Yes. Thanks, Eric. A couple of pieces. I'll start with where we came into 2025, which over the last several years has been a really strong and consistent supply growth. That's been the core driver of our growth as we've been building our ad platform. Now as we look internally and ahead to 2025 and beyond, our core discussion is: what do we need to do today to ensure that growth sustains for many years to come? That led us to the intentional action related to NEXT. Specifically, when we talk about the first half of this year, we're focused on ambitiously testing a number of different efforts that we think can give us signals we need to drive durable growth. As we look at the first half, we do expect limited supply growth relative to our current baseline because we're doing those tests with a deliberate focus on learning and understanding how those elements play out. NEXT really becomes launched as we get into midyear, and that's where we can expect to see and observe all the different things that we're focused on. We think that will play out in a number of ways, including early signals around increasing that frequency Nirav mentioned. But a lot of the supply dynamics we're talking about today are tied to NEXT and are tied to long-term growth.

We now turn to Jason Kreyer with Craig-Hallum.

So obviously, you're integrating with a bunch of different publishers to bring in that local community content. Just curious where you're at in that continuum of securing that kind of information across various markets across the country.

That's a great question. I want to remind everyone on the call that we have three pillars of NEXT: a local content pillar, an alerts pillar and a recommendations pillar. You are talking about the local content aspect. Specifically, for the first time, we are moving beyond primarily using user-generated content from neighbors as the news source to acquiring content and establishing distribution partnerships with existing third-party publishers. By our estimates, there are probably anywhere between 8,000 and 10,000 local news publishers across the U.S. We already have several thousand. So I don't think getting coverage is ultimately the long pole. The thing that we're going to do that we think is different and better and ultimately most useful for our users is not just show them the articles, but to bring them the articles and then allow them to have discussions with verified neighbors about the issues in those articles. If we take a step back, the hard thing here is not actually delivering the content to our users—the users can get the content today and it's not unique to Nextdoor. What is unique to Nextdoor is over 100 million verified neighbors who are thinking about the same things you are because they live in your local community. To have the content bolstered by the neighbor conversation, that's what we think is really special, and we're excited to show that to the world.

And then just going back to the comments you made on the moves by large advertisers, just wondering if there's additional detail you can provide or if there's feedback you've gotten from those advertisers and how you gain comfort that this is macro-related and not necessarily micro-related?

Yes, Jason. Happy to take that one. It really starts with a focus on the advertiser value equation. One thing we've talked about over the last couple of quarters is driving performance for advertisers—improving cost per click, retention and increasing self-serve. Now as we've entered the year, one of our big focuses is understanding how we better meet advertisers where they need to be, particularly larger advertisers. We have feedback from both current and potential advertisers that they want the option and ability to buy programmatically. We see that across our base of existing advertisers. It's a real opportunity to make it easier for them to buy and to have multiple channels. There are other factors as well, and I think it's too early to try and discern between macro and idiosyncratic customer-specific dynamics. But we are very much focused on making it easier, especially for our larger advertisers, to buy and come onto the platform. And as we move further towards NEXT, we think we have an opportunity to deliver more value to them.

We now turn to Jamesmichael Sherman-Lewis with Citi.

Nirav and Matt: first for me, with 10% year-over-year WAU growth and flat net adds sequentially, as we think about NEXT supporting session depth and retention, can we also revisit your leverage to drive top-of-funnel WAU growth as well as the impact of the newer notification delivery strategies, feed ranking models and how you're driving usage with younger users?

Jamesmichael, thanks. A lot of the growth we saw in Q4 among new verified neighbors was from a younger demographic, and that's an encouraging sign. We think much of what we've built with NEXT will broaden our value proposition across our existing base and also for younger and urban users—segments we historically have not served as well as we could. Regarding ad inventory, I want to be specific because this question has been asked a couple of times. We are in a phase for the next few quarters where we are optimizing for learning, specifically learning about engagement. As we learn more and drive more engagement, that gives us the opportunity to start to increase ad load or create new ad units or do other things to better serve advertisers. But that comes after we understand the best way to serve our consumer base. On new users versus existing users, we have a very large base familiar with Nextdoor. The first thing we want to do is understand how they compare before and after NEXT. We think the new experience is dramatically better and we want to learn how our existing users feel that as well. Within the existing user experience, there are opportunities for our users to take content on Nextdoor and share it with neighbors who are not yet on the platform. Social networks typically grow through virality, and we know that if we do a good job serving our existing user base, we will also drive new user growth. That is why we're focused on our existing base.

Jamesmichael, I'll add one other note to acknowledge your comment on Q4 specifically. Typically, in the fourth quarter, we see some seasonal flatness, particularly around the Christmas and New Year period when engagement tends to be lower. That's been obscured in past years, but ultimately I think the year-over-year growth is a good indicator of our progress in the quarter.

Very clear. I have a follow-up. It's encouraging to see the positive EBITDA inflection with leverage across expenses, but led by sales and marketing savings, particularly cuts in branded performance marketing. Can you shed some light on the strategic shift here in your customer and advertiser acquisition strategies?

Just to clarify, you were talking about operating leverage and sales and marketing expense—did I hear you correctly? There are a couple of pieces. I want to start with a broader comment: the leverage we've seen in the business, including the 30 points of year-over-year margin improvement in Q4, is broad-based across every function and every type of spend. That's important. As we think about how strategic decisions will flow through our model, sales and marketing is a good example. Part of the improvement reflects lower personnel costs across the company. But importantly, it reflects a shift toward organic growth. Substantially all of our new neighbors have been coming to the platform organically, so we haven't had to spend as much on paid acquisition. Over the last couple of years, that's been a real source of leverage. As we look forward, we focus on where we can apply that same approach by investing in a better product and scalable growth. For example, for SMBs we do spend on some paid channels to acquire customers on the platform, but we're shifting focus to invest in product so we can give SMBs better tools and a better organic presence. As we look to 2025 and beyond, we are focused on getting further leverage from product improvements that drive organic growth. The backward-looking improvement around paid acquisition is meaningful, and we also see equal opportunity as we look at SMBs over the next couple of years.

We now turn to Rohit Kulkarni with Roth Capital.

Just to kick things off on the short-term trade-offs versus long-term wins: any more color you can give, Nirav, on over the last six months what you are seeing that gives you greater confidence that the next six months of pain is going to lead to much bigger gains in the longer term with regards to users or advertisers? I'd love more color on the signals or learnings you're reading through the data as you prepare for the NEXT switchover. And then a finance question: on the first-half 2025 guide maybe Matt can provide more color on the drivers underlying that—be it number of advertisers, number of users, revenue per user—and as a sub-question, what can you do to get the large advertisers who are shifting towards programmatic back onto the platform? Are there specific go-to-market things or tech upgrades you need to re-engage that spend bucket?

Great question. When we look at feedback, we're pulling together three things. We have qualitative feedback directly from our users—our research team and product development organization listen to users to understand what we can do to better serve them. We have quantitative feedback—dashboards and metrics that show how the system is performing at scale. And then we have our intuition: when you create a new product vision, you're creating something you believe users need even if they haven't explicitly said they want it. It's balancing those three things. One early indicator that gives us confidence is that third-party publisher content has resulted in infrequent users using the platform more. That's one example. It's still early, and we can't fully quantify it given the size of the audiences we're experimenting against and the different types of content we're showing, but when we show more relevant local content, we see Nextdoor begin to become more habitual for users.

Happy to take the finance portion. Regarding the first half guide, it goes back to something we've discussed: total ad supply and inventory are tied to our user growth but also to product decisions around frequency, depth testing and ad load. We have historically grown supply through organic feed item views, and now we'll test different ways of influencing those dynamics that might affect supply—less frequent or more dynamic notifications, dynamically changing ad load, and similar adjustments. Those tests are intentional and will constrain growth more than if we had simply continued optimizing the current system. That is linked to the effort to have NEXT fully launched by mid-2025. As we move into the second half of the year, we'll look closely to see where those efforts start to drive supply growth and user growth. Regarding large advertisers, it's about making it easier for them to buy and continuing to deliver performance. We've been making progress to ensure larger advertisers, including those with active relationships, get benefits from our ad server just as self-serve advertisers have. Pair that with programmatic partnerships and an evolving go-to-market, and we think there's an opportunity to show progression over the course of the full year. It's not a one-quarter fix, but in conjunction with NEXT and the new ways of buying, we expect improvement.

Okay. I think we've taken all of the questions. Before we close, I'd like to briefly recap and reinforce the things that matter most about where we are today and where we're going. First, in Q4 and in 2024, the team executed well. We created a solid foundation. We were able to balance strategic investment with cost controls, and that's why you saw sustained productivity gains. Second, we are now intentionally going to make short-term trade-offs to prioritize the long term. This will impact metrics and performance in the near term, and it's not a decision we take lightly, but it is the right thing to do because we are building this company for long-term investors. Third and most importantly, we are moving very ambitiously on the switchover to NEXT. The three pillars of NEXT are: adding new sources of local content to help keep users informed; upgrading live local updates to help keep users safe; and surfacing community-powered recommendations to help keep users smart. We are excited to share more with you about NEXT in the coming months. We appreciate you joining the call, and thank you for your interest in Nextdoor.

Ladies and gentlemen, today's call has now concluded. We'd like to thank you for your participation. You may now disconnect your lines.