Good afternoon. Thank you for attending today's Nextdoor Q3 2024 Earnings Call. My name is Cole and I'll be the moderator for today's call. [Operator Instructions] I'd now like to hand it over to John Williams, Head of Investor Relations. Please go ahead.

Thank you, operator. I'm John T. Williams, Head of Investor Relations. Good afternoon and thank you for joining us to review Nextdoor's third quarter 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. Reconciliation of these measures to their most directly comparable GAAP financial measures can be found in the Q3 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 here with you today to discuss our third quarter 2024 financial results and outlook. Since I returned to CEO around six months ago, our team has done a lot to focus our strategy and business and we're stronger as a result. We're energized by the progress, but there's an enormous amount of work remaining and a long road ahead. That said, Q3 was a solid milestone on this journey as we improved user growth, revenue growth, and operational efficiency. Weekly Active Users or WAU, reached $45.9 million, up 13% year-over-year. Revenue of $66 million grew 17% year-over-year and adjusted EBITDA margin increased by 33 percentage points year-over-year and reflects improved revenue growth and employee productivity. We can certainly do more, but our results today reflect the progress I mentioned as we scale and evolve the business. Taking a higher level view, I'd like to highlight the three areas where we made significant strides in recent months. The first one is driving revenue growth. Advertisers using the Nextdoor Ads platform are benefiting from improved performance which is driving better revenue retention. In Q3, we saw this most clearly in our mid-market self-serve channel which continued to scale. Click Optimization, which improves advertiser performance by leveraging machine learning to make ad content more engaging and relevant, is driving much of this improvement today. In Q3, click optimization drove an 82% increase in click-through rates and a 16% reduction in cost per click for campaigns using the feature. We see exciting potential here and are confident that these types of product improvements on our ad platform not only strengthen our relationships with advertisers but also drive improved monetization and sustainable growth. The second area is improving operational discipline. Achieving sustainable growth requires…

Thank you, Nirav, and good afternoon, everyone. In Q3, millions of new users joined Nextdoor. Substantially all of those new verified neighbors joined organically, which helped drive Q3 WAU to $45.9 million, an increase of 13% year over year. U.S. WAU growth continued to be an area of strength, increasing 16% year-over-year. We must deliver more value for users, but Q3 showed we have a solid foundation and a strong ambition with NEXT. During the quarter, user growth reflected sustained progress on a few fronts. First, we engaged previously inactive users, allowing them to experience aspects of Nextdoor before logging in. Similar to what we saw in Q2, these users tended to engage, log in and then further explore the platform. Second, we continued using ML to deliver more personalized proximate content to neighbors using location as a key signal. This continues our efforts to bring the right content to the right user at the right time. Finally, timely content and notifications help users stay informed and safe when major storms and events affected local communities across the U.S. In short, Nextdoor remains a critical source for real-time local information for our users. Moving to Monetization. The Nextdoor Ads Platform is driving improved ease of use and better performance for advertisers, which in turn drove stronger financial results in the quarter. Q3 revenue of $66 million grew 17% year over year, reflecting continued momentum with self-serve advertisers, improved revenue retention across channels, a return to growth for enterprise advertisers, and better monetization of search activity. Within our self-serve channel, improved advertiser performance drove year-over-year increases in total advertisers and net revenue retention. Mid-market self-serve advertisers in particular saw strong gains as this cohort of advertisers has begun to adopt our click optimization features. Why? Because these capabilities are driving a…

[Operator Instructions] Our first question is from Jamesmichael Sherman-Lewis with Citi. Your line is now open.

Hi, Matt and Nirav. Thanks for taking my questions. Can you first talk a little bit about how you're balancing your organic insight-based growth strategies for verified neighbors against your paid marketing levers, particularly in context of these newer discovery-centric use cases coming online as well as your retention/retrenchment towards the U.S. Market? And then as we look to the second pillar of NEXT, the exchanging of goods and services, we'd love to hear your updated thoughts on the Nextdoor for Sale and Free Surface as well as the competitive differentiation versus marketplace -- Facebook Marketplace. Thank you very much.

Thank you for the questions, Jamesmichael, and let me just answer them in the order that you asked them. So on the first is, we are almost solely focused on organic mechanisms for user acquisition, so I would say, that our paid marketing efforts are minimal and decreasing overtime and we don't anticipate any change in that in the near term or even mid-term. On your second question, around investing in the For Sale & Free Surface and marketplaces more generally, that is an opportunity that we think is really vibrant for us, and we're obviously aware of what Facebook and others are doing in that space. The next set of priorities for us are around NEXT, and the focus for NEXT, as we talked about, was expanding intent to include Discovery. That will not include the marketplace's surface in the near term, but as we continue to make progress with NEXT, a future phase will certainly include more investment in For Sale & Free and a more vibrant set of marketplace experiences for our users.

Yes, I'll just add one thing to what Nirav mentioned on your first comment on our growth strategies for Neighbors. So substantially all of our Neighbors come organically, as you noted. That also has benefits though, as you think about our P&L so things like sales and marketing as a percent of revenue in Q3 it was down 14 points year over year. It's a function of a number of things, but one of the things that signals is the continued progress at scale we're having. So it's not just a signal of the health of the platform, but it also has downstream benefits in terms of our operating numbers.

Great. Thank you.

There are no further questions at this time. [Operator Instructions]

Since there are no more questions, I would love to make some closing remarks. Thanks again for joining us today for the call. Before we close, I just want to briefly recap and reinforce the things that matter most about where we are today and where we're going. First, we're driving growth. We grew WAU 13% year-over-year, revenue 17% year-over-year, that was Q3. Our Nextdoor Ads Platform is delivering measurably improved performance and value for advertisers. The second point is we are doing more with less. We posted 33 points of year-over-year, adjusted EBITDA margin improvement in Q3, and we've raised our full year revenue and adjusted EBITDA outlook. Number three, and most importantly, NEXT is the future of Nextdoor. We're going to widen our focus to increase the value proposition from intent to discovery. Intent and discovery, which is a powerful combination. It's certainly going to take time to show product progress because innovation is not straightforward, it's not linear, but the potential payoff is big and our ambition to build the indispensable local application for Neighbors everywhere is as strong as it's ever been. Thank you again for your interest in Nextdoor, and we look forward to speaking with you again very soon.

That concludes today's call. Thank you all for your participation. You may now disconnect your lines.