Nextdoor Holdings, Inc. — Q1 2022 Form 10-Q
Reporting period: Three months ended March 31, 2022; filed May 10, 2022. Comparisons are with Q1 2021. Following the November 2021 business combination, the statements continue Legacy Nextdoor’s operations under reverse-recapitalization accounting.
Business context and operating performance
Nextdoor operates a neighborhood-based platform and generates substantially all revenue from advertising. At quarter-end, it was available in more than 290,000 neighborhoods across 11 countries, including the U.S., and in nearly one in three U.S. households. Average weekly active users (WAUs) were 36.7 million, up 33% year over year; average revenue per WAU (ARPU) was $1.39, up 12%.
Key financial metrics
| Metric | Q1 2022 | Q1 2021 |
|---|---|---|
| Revenue | $51.0 million | $34.4 million |
| Cost of revenue | $9.1 million | $6.3 million |
| Total costs and expenses | $84.2 million | $59.4 million |
| Operating loss | $33.2 million | $25.0 million |
| Net loss | $32.9 million | $25.1 million |
| Adjusted EBITDA loss (non-GAAP) | $19.9 million | $16.8 million |
| Net cash used in operating activities | $5.5 million | $8.8 million |
Revenue grew 48%, primarily on higher advertiser demand, sales capacity, and engagement. Management attributed the 12% ARPU increase to 35% more ad impressions delivered and a 15% increase in price per impression. Total costs and expenses rose 42%. As a percentage of revenue, operating loss improved to 65% from 73%, and net loss to 65% from 73%.
Stock-based compensation was $12.1 million, up from $7.2 million, and was a significant non-cash expense. Q1 2022 comprehensive loss was $34.5 million, including a $1.6 million unrealized loss on available-for-sale securities.
Financial position and cash flow
At March 31, 2022, cash and cash equivalents were $208.0 million and marketable securities were $503.9 million, totaling $711.9 million. Current assets were $745.7 million and current liabilities $34.8 million. Total liabilities were $94.5 million, primarily operating lease liabilities; the company reported no debt outstanding. Accumulated deficit was $513.3 million.
Cash used in operations improved to $5.5 million from $8.8 million. Investing activities used $311.5 million, mainly reflecting purchases of marketable securities ($318.2 million), partly offset by maturities ($7.3 million); this largely reflects a shift from cash into investments rather than operating cash burn. Financing provided $3.1 million. Cash and cash equivalents declined by $313.8 million during the quarter.
Outlook, risks, and notable items
No quantified revenue or earnings guidance is provided. Management expects operating losses and operating cash outflows to continue for the foreseeable future, with continued investment in research and development, sales and marketing, and general and administrative functions. It expects these expense categories to increase in absolute dollars; it anticipates short-term cash needs can be met from existing cash, cash equivalents, and marketable securities.
Key risks include reliance on advertising revenue, competition, the ability to sustain user growth and engagement and increase monetization, international expansion, privacy and advertising-measurement changes, cybersecurity and platform availability, and macroeconomic conditions. The company said Apple email-client changes affect its ability to measure some email engagement; WAUs partly rely on estimates and may be less precise. Advertising revenue is seasonal, typically strongest in Q4. Management reported disclosure controls were effective as of March 31, 2022, with no material changes in internal control identified during the quarter. No material pending legal matters were reported.
The filing also notes that a substantial number of shares became eligible for resale after lock-up restrictions ended May 4, 2022. The dual-class structure gives Class B shares ten votes each versus one vote for Class A shares, concentrating voting power.
Investor verification priorities
- Assess whether WAU growth and ARPU gains persist, including the impact of Apple email measurement estimates and advertising seasonality.
- Track advertising demand, impression volume and pricing, and the effect of privacy or platform-policy changes on ad targeting and measurement.
- Monitor operating expense growth, net losses, adjusted EBITDA losses, and stock-based compensation and resulting dilution.
- Distinguish operating cash burn from investment-portfolio purchases and review liquidity, securities maturities, and the lack of debt.
- Check post-lock-up share sales and consider the voting concentration created by the dual-class stock structure.