Good afternoon. My name is Joel, and I will be your conference operator today. At this time, I would like to welcome everyone to Nextdoor's First Quarter 2025 Earnings Conference Call. [Operator Instructions] You may now begin your conference.

Thank you, operator. I'm John T. Williams, Nextdoor's Head of Investor Relations. Good afternoon, and thank you for joining us to review Nextdoor's First quarter 2025 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 Q1 2025 Nextdoor investor update 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 first quarter 2025 financial results and provide a preview of NEXT, our initiative to transform the Nextdoor product. Before diving into that preview, here are some brief comments on our Q1 results. Weekly active users grew 6% year-over-year to 46.1 million. Revenue rose 2% year-over-year to $54 million. We maintain expense discipline, achieving continued year-over-year adjusted EBITDA margin improvement. That said, our most significant progress in Q1 was product related as we furthered the transition to NEXT and continue to make its upcoming launch our top priority. This means that any short-term trade-offs we have made and continue to make are intentional and aligned with our plan to maximize long-term value. Okay. So let's get to that top priority the NEXT Nextdoor. For just about a year now, you heard me talk about how we need a better product to unlock our full potential as a company. And since I returned as CEO, that has been our primary focus to build a substantially enhanced offering, one that delivers greater value to our neighbors, advertisers and ultimately, our shareholders. NEXT is more than a redesign. It's a re-founding of our vision, an opportunity to take the core elements that once defined our success and bring them to life in a more powerful and future-ready way. I'm excited to show our vision to you today. But first, let me outline 3 clear goals each building on the last for this first version of the NEXT Nextdoor. It starts with connecting neighbors to the most timely and relevant local content. That's what brings people back more often leading to deeper and more frequent usage. As engagement grows, it opens the door to more supply as well…

Thank you, Nirav, and good afternoon, everyone. During Q1, we continued to make progress ahead of our upcoming NEXT rollout. Q1 WAU of 46.1 million grew 6% year-over-year, reflecting steady new U.S. user acquisition. Many of those new verified neighbors will experience the new version of Nextdoor during their early days on the platform, creating an opportunity to reset user expectations and engagement. Additionally, in Q1, extreme weather events drove increased usage, reinforcing Nextdoor's value as a real-time local resource. While we have shown progress growing well, the introduction of NEXT creates an opportunity for us to align our key external metrics with our strategic and operational focus. Beginning in Q2, we will fully transition to platform WAU as our primary user metric. Platform WAU includes users who engage directly on the Nextdoor app or website. Unlike WAU is currently reported, this figure does not include users who only engage with e-mails with monetizable content. We are making this update for 3 primary reasons. First, it aligns with changes in consumer expectations towards in-app experiences and away from e-mail. We will meet users where they want through channels they expect with content they need. Second, it aligns with our strategic focus to deliver richer, more engaging content across surfaces, delivering more value for users and advertisers. Third, it aligns with where NEXT delivers value. This is true for both users and advertisers since substantially all monetization will happen on platform. Ultimately, NEXT is about building a better user experience. With a focus on the features and metrics that best reflect that experience, we can also build a better system, one built around structured, timely and high utility content that can increase frequency across all cohorts and make growth durable. With that in mind, Q1 platform WAU of 22.5 million grew…

[Operator Instructions] The first question is from the line of Eric Sheridan with Goldman Sachs.

Maybe two, if I could. When you think about the rollout of NEXT and how to think about the duration of some of these initiatives impacting the business, how should we be thinking about the different duration over which NEXT will have an impact on user growth and engagement growth as opposed to monetization growth as you think about the maybe multiple steps in the 12 to 18 months ahead.

Okay. Eric. That's a great question. Thank you. And I would say that, obviously, the monetization needs to follow any growth in usage and engagement, right? So the usage growth and engagement growth is what we're going to look for first. And then that ultimately should translate into a stronger story on the monetization front. We expect that by the end of July, as we've said, we will have released NEXT to everyone in the U.S., and I think that we are also releasing it to the other U.S.-speaking countries where Nextdoor is live. And so by the end of July, we will have a pretty good sense of what you first said, which is the disruption or potential disruption, right? From there, we'll actually just be looking at what we're seeing in terms of green shoots. And what we're seeing in terms of things that make us optimistic about the future. We expect that we'll be able to come to the next earnings call with a lot of that information. Certainly, when you talk about 12-month time frame, I would say this is version 1.0. It's a starting point. It's not the endpoint. And so we'll be working through, I would say, the rest of this year to understand really how to optimize the good things that we see. I wouldn't put the time frame as extended as 18 months, as you said, in terms of when we expect to see some real legitimate business results here, right? But we'll know a lot more at the next earnings call. Because until the thing is completely released and all of our users have it in its full entirety, we won't really have the full picture. It's just a guess.

The next question is from Jason Kreyer with Craig-Hallum.

Wonderful. I'm just curious, how are you thinking about monetization differently in a post-NEXT world relative to kind of just the traditional ad impressions we're seeing on the platform today?

That's a great question. And I would say that there are kind of 3 ways that we think about it. The first is with more engagement, which is the #1 goal of NEXT, we should actually have more supply, right? So we should be able to take our existing monetization mechanism and generate more revenue, right? That's the very, very simple kind of one plus one equals two, right? If you have more supply, you should be able to sell more ads that should generate more revenue. But I think we're probably a little more excited and interested in is that we believe that NEXT will ultimately give us more surfaces to monetize. And so to give you a very specific example, we never had a dedicated space for alerts. Alerts only showed up in the news feed. Now we have a more dedicated area. And in speaking with a number of CMOs that are existing clients of ours, they have expressed interest in exploring what would it be like to think about advertising in that area versus just the simple in-feed advertising. So that's the second category, and that's really thinking about not just more supply but new ad opportunities, new ad surfaces. And then I think the third area, and it's probably the one that is least developed is when we showed you the AI implementation of the local AI agent, that's something that as you think about the entire industry of AI starting to move towards task completion versus just market making, we think there will be some opportunities there for us as well because it's our belief that consumers are ultimately going to want to ask a question to the agent and then have the agent deliver the solution, instead of having to go several hops to find that solution. And that's very different than just scrolling a news feed and seeing advertising. It's the furthest out because it is the most trailblazing from our perspective, but we think there's a lot of potential there. So number one, more supply. Number two, more advertising surfaces. And number three, using that faves section and the way that people are starting to interact with our local AI agents to think about a complete closing of the loop on local needs.

Appreciate that. A follow-up for me on the programmatic side. Just any changes that you've seen on that side over the last couple of months since we last spoke? And then as you look to roll out something on the programmatic side, does that happen in parallel what you're doing? Like do you have to get all of the NEXT rollout along the way? And does that kind of become a phase 2 implementation to open up that programmatic thing?

Yes. Thanks very much for that. So on the first point, I'd say it's very similar to our update in February, which is we've got clear demand, we've gotten clear feedback from customers, and we're acting on it. And so we are in the process of standing up relationships with a few [ third ] parties. We're executing as expected. And as we referenced previously, we expect this can contribute to growth as we get to the later in the year. Now NEXT is going to be the most important driver overall. But that gets to your second question, which is, this is something that we can advance in parallel. We can continue to enhance not just the programmatic capabilities we have, but all aspects of our ad serving and ad delivery. So we'll be doing that in parallel as we roll out.

The next question is from Jamesmichael Sherman-Lewis with Citi.

Encouraging to see the early look here at the NEXT platform. Two, if I may. On alerts, can you help us understand this new hyper-local alert strategy and how it can strengthen usage? Do you focus more on session count or over usage per session as Nextdoor become this daily use case? And how do alerts impact your previous [ edification ] strategy given the strategic focus on platform WAUs?

It's a great question because the new alert surface is really at the heart of the value that Nextdoor has always provided, which is that lifeline in times of crisis. But we will be implementing it in a way that we believe will give users and advertisers more leverage. So very, very specific example. Typically, what happens on Nextdoor is there is a user-generated post that's submitted by a neighbor, and that's hitting a neighborhood or a series of proximate neighborhoods. With the alerts platform, we now have the ability to define a region which we can notify versus an entire neighborhood. So for example, with a power outage, before someone may have posted to the entire neighborhood, hey neighbors, my power is out, how about yours. And that's going to a lot of people that may actually be also experiencing the power outage, but it may also be going to a lot of people that have perfectly fine power. Now because we're getting authoritative content from the utility itself, we know the region of the neighborhood that is being directly affected by the outage. And we can message directly to them. We expect that to be a much higher performing notification. You can imagine a notification that says, is the power out and how that performs versus a notification that says, we know the power is out at your house, and then someone clicking through to find out what our neighbors saying about it, when do they think the outage is going to come back online, et cetera. Now how does that affect sessions and WAU and all of those things? We haven't thought so deeply about that because it's really about just delivering more hyper-local content, making it as relevant as possible. And we have a core belief…

Yes. And Jamesmichael, I'll make a more general comment as it relates to platform WAU. It's not about looking back at something that's transpired over the last several quarters. As you've seen the data, it's relatively consistent relationship with WAU. It's really about looking forward and capturing all of the elements that we just talked about. So the feedback from customers, feedback from consumers. And ultimately, this is where the value on the platform is being created. This is where the usage is. This is where usage is going to be growing. And then ultimately, this is where we'll be monetizing. So as we look forward, more and more of this work as it starts to unfold, will be present in the platform WAU, and that's why we think this is the right time to introduce that.

Very helpful. My follow-up is on recommendations, the 30% of those today. Walk us through your vision for the balance of user-generated content, publisher content, and seeing generative AI with the Ask a Neighbor natively integrated. How does that core recommendation function evolve as you integrate more voices?

That's a great question as well. So let me be very clear. The publisher content is not something that's actually being fed into the LLMs that generate the AI responses. So there's been a lot of talk in the AI world about licensing content, ownership of content, et cetera. What we're using to generate our AI results is our proprietary content that we own that no one else has access to. So that's maybe the first thing. When we talk about 30% of our conversations being around recommendations, that is over the last 14 years of our existence in neighbor user-generated content that is proprietary owned by us what are people talking about? And the neighbors are asking each other for recommendation. So that's what we mean by the 30%. What the AI enables us to do is to take multiple conversations and string them together into 1 response, which is actually quite powerful because in the past, you could come to Nextdoor if you were looking for a trusty plumber and you could post and you would wait for responses, but it might be a question that had already been asked even a day before or you could search. If you searched, you would see a variety of results that all related to individual conversation threads, and you would have to read each one of them and then you would do the work that the AI is now doing, which is you would take all the different results, you would figure out a way to interpolate them and then you would decide which plumber to call. The AI essentially takes it from I'm looking for a plumber to here's a summary of what my neighbors believe is the best recommendation for that plumber and does it based on our proprietary content. So it's nothing from the outside. It's all things that neighbors have already said. And it comes to you so quickly, if you want to drill into that summary, of course, the summary can be broken down into all of the different conversations and a user can read every single one of those. So you're not losing anything. You're just gaining something more. And we think, ultimately, that will actually end up creating more user-generated content as well because when someone does the local AI query and then they read the answer, they may want to ask a follow-up question, which in some cases, may be answered by the AI that we have or in some cases, it may result in another post to the feed. So we think this is part of the overall viral loop inside Nextdoor of content creation and will be very powerful because it's instant results and it's summarizing over a decade of valuable content in a way that is immediately usable.

The next question is from the line of Youssef Squali with Truist Securities.

Great. So maybe as the -- take forward to end of July, Nirav, how would you see your ability to drive awareness of the new UI? Of the new functionality? And does that come at a short-term marketing cost? Does it basically -- do you just use a worth of mouth to try to drive it? Just help us think through how you guys are thinking about it at this point?

Yes, that's a great question, and it's something that we think about a lot because we're obviously trying to be as disciplined as possible in terms of our spending. And so we do not anticipate a large marketing expense. I'll start there. The second thing is we have 100 million verified neighbors. And as we reported, 1/4 of them are active on the platform. That means 75 million we should be able to message to and bring back to the platform in some way. We already have a line of communication to them because the basic construct of Nextdoor is one where notifications are a core part of the experience. In addition to what we do with our internal audience, we do expect to have a lot of public relations. So what we would think of as earned media. We are not doing an advertising campaign. We're not spending marketing dollars in some outsized way, but it will be very important for us to get the word out. And ultimately, the way that we'll get the word out is what we believe to be the most powerful way, which is we'll deliver better notifications. And so it's not just a big bang that happens at the end of July. If you think about this alert surface, if there's a power outage that affects you, and that's something that cycles around the country, all of the time, you will get a notification from Nextdoor that looks different, it feels different, that acts different. And so whether you've heard about this thing NEXT, which is not even probably a term we're going to use, whether you've read any of the articles whether you've been reactivated during July, it really doesn't matter because you'll get better content from the platform, and you will experience it. And that's the best way ultimately for us to drive the awareness of the new product.

Okay. That's helpful. And then, Matt, can you just remind us again why the new disclosures around the WAUs, the ones with e-mail and the ones without in the context of NEXT?

Yes, certainly. So as I mentioned, this is really about looking forward. So it's 3 key things. We want to be better aligned with consumer expectations and that really is moving towards in-app and away from e-mail and those experiences that Nirav described. It aligns with our strategic focus to all of the different elements that we discuss here are going to live on platform. And that's ultimately what we want to capture in terms of our tracking. And ultimately, it's where NEXT will deliver value, both for users and for advertisers. And so we expect that more and more of the progress we're making will show up in the platform WAU metric. So that's really the core of our focus is aligning those 3 areas.

Does that potentially hurt your standing with advertisers as they see that maybe your scale is not -- is half of what they thought maybe? Or have they always known the breakdown on their end?

Yes. I think Nirav mentioned it earlier, but really, what we hear from advertisers is they want to be advertising in the types of experiences that NEXT brings. They want to be against more professional content in a more structured experience with a new look and feel is contemporary. And so those are the things that we're hearing in terms of customer feedback. And that really -- it wasn't the core driver in terms of thinking about this level of disclosure because ultimately, our goal will be to bring more and more of activity on the platform, which will also deliver more value to advertisers.

There are no further questions in the queue. I'll turn the call back over to the management team for any concluding remarks.

Okay. Thank you, everyone, for listening. And before we close, I just want to take a quick minute to reinforce the things that matter most about where we are today and where we're going. Q1 was all about product progress, about enabling the launch of NEXT, and we remain laser-focused on developing that better product experience. And of course, AI is going to play a vital role in that. We did drive operating leverage in Q1 even during this period of change, but really NEXT is the future of Nextdoor. It's on track. Version 1.0 is going to launch to all U.S. users by late July 2025. And and will significantly improve the product, we believe, for users, advertisers and ultimately, shareholders. We hope you enjoyed the preview. Thank you for joining the call, and thank you for your interest in Nextdoor.

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