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 and opportunity for questions and answers at the end. [Operator Instructions] 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 while 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 e-mail 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…

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. In particular, 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 continue to spend in 2022 helps us – helps illustrate that that macroeconomic volatility aside our value proposition to advertisers remain 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…

Thank you. [Operator Instructions] 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 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 where you – 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 certainly dive in if he wants to talk about in longer term view. So first on engagement, we were very pleased with the year-over-year growth and WAU, that 11% year-over-year growth to $40 million. And of course, for the year of 21% year-over-year growth, where we’re seeing strength and certainly in the U.S. but 85% of our U.S. verified neighbors came organically. And so one thing that is definitely driving growth top of the funnel, but then done into engagement is the fact that people are just coming to the platform through word of mouth. And that’s an incredible strength for Nextdoor that we can grow that rate organically. That’s actually higher than what we saw in 2021. Beyond that, if you look international, I actually see even higher growth there. So the engagement, 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 actually accelerating. Beyond that, I think you’re also asking about engagement further down the funnel. So once someone comes to us weekly, they’re coming back remember on average about four times a week. So our weekly actives are very active over 50% are daily, in fact. And then from that session growth, which is the natural link out to impression also continues to accelerate. So what we saw with session growth is it was faster than WAU growth. What’s driving that, is some of what I talked about in my prepared remarks. So it’s certainly a big investment in machine learning that’s been our fastest growing team in 2022. They’re building models around areas like notifications, so the right notifications are the right person at the right time and…

Yes. I just want to add on revenue contribution and growth rates going forward. I mean, just a reminder, I mean, we’re early in building our ad revenue business and really 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 that our advertisers are after and gives us the opportunity to work with them in a larger way, driving larger budgets and doing more with them on the platform. For us, that’s the most important piece to driving long-term monetization. But there are also several things that we are doing to help to accelerate the rate of revenue growth. First and foremost is the large investment we’re making in our own proprietary ad platform, allowing us to take advantage of our first party data, which will help to drive performance with advertisers, ultimately increasing ROI and CPMs. Really optimizing our supply as well, so driving fill rate of the supply we create, driving a greater mix of direct sold relationships with advertisers, which allows us to help them get the most out of the platform. Do things like shift budgets from brands to direct response where warranted and things like that. And then really thinking ahead several years is creating new use cases and ad surfaces that we can bring to the benefit of advertisers. We’ve talked in the – and in the past about our discover tab, our launch of events, groups. There are many ways that we can interact both with our members, our users and with advertisers and bring them really utility through the ad contact.

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 in what you’re seeing elements of spend per advertiser. How much of that you think is volatility driven by the overall mix of brand versus DR in your existing advertiser spend? And I think for a platform at your scale, I think the view would be that maybe you would outgrow some of the overall industry trends. So the second part of it would be, what are you seeing in the funnel of new advertisers and new budget coming to the platform and how should we thinking about that new advertiser funnel developing beyond just the macro volatility we might see over the next couple of quarters and as we get deeper into 2023? Thanks so much.

Thank you, Eric. Let me take that. So I think first and foremost, we’re really pleased with the performance we’re seeing in our ability to retain our top advertisers, as we mentioned, more than 90% retention of our top 50 advertisers. And that’s in an environment where they are often reducing spend per campaign, but really this is an indication of the value they’re seeing and working with us and reaching the neighbors on our platform. And the second is really on driving new logos. And so as you mentioned, that’s an important part. We’re early in our journey and bringing new advertisers onto the platform. We have roughly a 1,000 advertisers across enterprise and mid-market customers, and then anywhere from 30,000 to 35,000 SMB customers, paying customers in any particular period. So there’s just an enormous runway in front of us on building awareness amongst advertisers and getting them to leverage our platform. The flip side of adding new logos is also the performance we’re seeing in evergreen spend. And so those are – what we think about – we think about evergreen advertisers as those that are active on the platform five quarters in a row. And it is the majority of our advertising, so close to 60% evergreen spend and a number that’s continuing to tick up. So this gives us a stronger base of advertisers, more visibility into the revenue going forward as well. And so it’s a key metric that we look to.

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 sort of talked about the – when the priorities for 2023 to be really grow the advertiser base. Just sort of curious what – number one, can you just give us a couple examples of advertising verticals that you’re most focused on that you think can really drive significant upside to the business in 2023? And then secondly, are there any specific tools or ad offerings that have been resonating better with advertisers than others? Just as we’re trying to think through like what are the key competitive differentiators for Nextdoor? Is it compete in an increasingly competitive advertising market? Thanks.

Great. Thanks, Brian. I’ll start and then Mike can certainly add. I think, first of all, in terms of the type – the verticals, Mike’s spoke so well in his prepared remarks. If you look at where we’ve seen strength in Q4, tech and telco, government and healthcare, and this was really driven by a pivot mid-year to look to verticals that we deemed more recession resilience, so particularly healthcare and government. Of course, we have to drive brand awareness there, so that they get to know us. But I’m pleased with the momentum that the team has been making in terms of new logos in that space. Your question of why do people come to Nextdoor, why do advertisers come to Nextdoor? I’m going to answer two ways, because you’ve asked about formats, but I also want to speak more broadly about what differentiates Nextdoor. So first and foremost, we are of course the neighborhood network. We are all about local. So in some ways the simple answer to that is our audience. I’ll give you a couple of examples. When we talked about in our Shareholder Letter was [indiscernible] out of Europe. So there they wanted to target a unique audience of EV owners and particularly the household decision maker. What we could see is that 26% of the neighbors in the UK on Nextdoor are more likely to own an electrical – electric vehicle. And so they were able to do a campaign that both had much improved visibility – viewability of the ad itself but also the quality the people willing to stop and spend time on the ad was about 111% of the benchmark. So in that one I’m telling you if we have a unique audience, we have a household decision maker, and now…

Thank you.

Thank you.

[Operator Instructions] 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 that joined us and have questions today. We always appreciate your time and support. So in closing, while we beat Q4 revenue and EBITDA guidance and definitely built momentum in areas like mid-market sales, we know we have work to do to return to revenue growth and navigate through a period of more uncertain advertiser demand. But as I just said to Brian, Nextdoor is a unique platform. We are the only one doing vocal at any sort of 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. When we invest in this arena, it’s good for the business as well as just in good for the world. We know that neighbors want to engage more when they feel safe within their neighborhood. We also know that brands want to spend more with us when they can see brand safety. We’re laser focused on growing WAU and revenues first. We need to continue to beat the drum on the importance of local for neighbors, for businesses and agencies. We need to build brand awareness to make sure that that utility and community is coming across. Second, we will continue to invest in platform development initiatives that grow engagement things like maps, discover, events, ML and personalization, neighborhood faiths. And third and finally, we want to continue to iterate quickly on our monetization capabilities for advertisers of all sizes, making sure that Nextdoor is the ad platform that you come to and know that as you spend your money with us, we can track it and measure it so you’re getting exactly what you want. And then finally, in terms of near-term revenue and EBITDA variability, we’re very focused on returning to revenue growth and margin improvement in 2023, while also investing in the long-term opportunity of a global hyperlocal neighborhood network. So with that, thank you so much for your time and we look forward to talking to you through the quarter.

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

Go ahead. We love questions. Bring it on.

Jocelyn Hu [ph] from Evercore. Your line is now open.

Hi Jocelyn.

Hi, thank you for taking my questions. I really appreciate it. I guess is there any answer you can give in like maybe more specifically internationally? Because I feel the wild growth seems to be stronger internationally than U.S. If I needed numbers right, I guess just kind of talk about a momentum there and what’s your game plan for international rural outcome here like wage market will put the most focus on.

Yes. Great. Thank you, Jocelyn. I appreciate that. So as you know, Nextdoor is in 11 countries around the world. And you are right that when you look at overall WAU growth at the moment, it was – it 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 actually accelerated from 2021 by about 3 points. What’s driving it internationally is a lot of the same of what you see in the U.S., so it’s certainly when we invest in areas like ML and notifications, that’s a global investment. So it has positive ramifications everywhere. Similarly on the session side, we also see that outpacing of sessions outside the U.S. In terms of investments, our core markets that we’ve gone after beyond the U.S. are the UK, Canada and to some degree Australia. Western Europe kind of remains a little bit more in early [indiscernible] stages for us. And then within region, we continued to do things that can drive a particular country. For example, we did a partnership with Toronto FC Football Club. We knew that they were up and coming. We knew that the World Cup was potentially going to end up there in a couple of years and that was a great partnership that our country team came across that puts us front and center in a really important community for us. So our neighbor of the match has been a really interesting way for them to bring attention to Nextdoor and to drive growth. So it’s a combination I would say a broad platform investments that benefit the whole world as we roll them out combined with in-depth country level investment that can really help a particular city or a particular set of neighborhoods come alive. Yeah. And actually one more point before we leave international, which I think is important today 21% of our WAU is international, but only 5% of our revenue is international. So again, if you think about the future opportunity as we are able to kind of reach scale, bring advertisers on the platform globally, there’s a lot of pents-up or latent opportunity sitting outside the U.S. at the moment.

Thank you so much. I guess maybe on the Events Map with zero is there any update for his international rollout at all?

Of new countries? No, nothing to update on this call. Thank you.

Okay.

Events Map. Sorry. Yes. So on the events side in Q4, we launched both our re-architected events but then importantly Events Map. So really this is about our discover surface and making sure that beyond your Newsfeed, you can land on a surface like discover and immediately see everything around you that can be of interest. So events are certainly one of those elements where it’s great to be able to look at your neighborhood up close or even over a broader local area to say, okay, what’s happening around me? Of course, that’s also surface where you can find the businesses that have been recommended around you and even groups and what other neighbors are up to. So just think of it as one step in the broader nativization of map surfaces, some of which might be one day in a day at a time, we might pick a particular theme like Halloween and some of them may be ongoing where we’d always have them like our Help Map. Does that make sense?

Yes.

So thank you. And it is available internationally if you were asking was Events Map specifically available internationally? Yes, it’s 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 tenant and overall platform shopability? Thank you.

Sure. So maybe I’ll start on just for Sale & Free as a reminder of what the opportunity is, but then I’ll let Mike take the monetization piece. So on the earlier question we got asked why do people come to Nextdoor? So beyond recommendations, beyond kind of the give and get help, we absolutely see for Sale & Free as an area that tends to bring a lot of new users to the platform, but then also continue to engage the current users on the platform. And we see a significant dollar amount put fresh onto the platform every single month. We also view this as effectively our foray and future into social commerce because what is social commerce all about? It’s about being influenced by the commerce that’s around you by people that you trust. Nextdoor is the perfect overlap of that. People tend to have very high trust in their neighbors, what their neighbors are either selling or recommending. But it’s also comes at a local level, which again, no one else can really do. Let me talk – I’ll pass it to Mike as we think about future monetization.

Sure. So to date, our monetization’s really been just about the value to engagements that the For Sale & Free surface drives. So our marketplace experience is differentiated in that all of the neighbors on the platform are real name and real address verified. So high level of trust there’s certainly obviously a proximity component to exchanging goods and services. And importantly is the social capital aspect of helping out people in your neighborhood. As a result, it has been one of our highest use cases and really is a way for us to drive in sessions and engagement on the platform which we’re able to monetize those impressions through our general ad products. We have ad units in our – for Sale & Free product today and are working to make those ad units more contextual so that say for example, you are searching for a dining room table that you’re also then served in ad for a new dining room table with our ad partners. So there is an opportunity there to do that more directly with our own technology as well as working with partners to accelerate our path and driving more utility on that surface.

That’s helpful. Thank you.

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

Yes.

Thank you.