Business context and reporting period
Nextdoor Holdings, Inc. filed this Form 10-K for the fiscal year ended December 31, 2021. The company operates a neighborhood social network supported primarily by advertising. At year-end, its platform covered more than 285,000 neighborhoods in 11 countries; fourth-quarter global Verified Neighbors totaled 69 million. On November 5, 2021, Nextdoor completed its SPAC business combination, accounted for as a reverse recapitalization; reported pre-combination operations are those of Legacy Nextdoor.
Financial and operating metrics
| Metric | 2021 | 2020 | Change |
|---|---|---|---|
| Revenue | $192.2 million | $123.3 million | +56% |
| Total costs and expenses | $287.0 million | $199.9 million | +44% |
| Operating loss | $(94.8) million | $(76.7) million | Loss widened |
| Net loss | $(95.3) million | $(75.2) million | Loss widened 27% |
| Adjusted EBITDA loss (non-GAAP) | $(43.7) million | $(50.2) million | Loss narrowed 13% |
| Cash used in operating activities | $(51.3) million | $(41.6) million | Outflow increased |
Operating margin was approximately -49% of revenue and net margin approximately -50%. Q4 weekly active users (WAUs) were 35.9 million, up 32% year over year; Q4 ARPU was $1.65, up 12%. Full-year ARPU was $6.13, versus $4.62 in 2020. Management attributed revenue growth to advertiser demand, salesforce expansion and user engagement; delivered ad impressions increased 40% and price per impression 7%.
At December 31, 2021, cash and cash equivalents were $521.8 million and marketable securities were $194.0 million, or approximately $715.8 million combined. The company reported no debt outstanding. Current assets were $761.7 million versus current liabilities of $33.5 million. Accumulated deficit was $480.3 million. Contractual commitments included $81.0 million of operating leases and $51.9 million of non-cancellable purchase commitments, primarily cloud hosting.
Material changes versus the prior comparable period
Revenue grew substantially, while costs and expenses also increased. Research and development rose 40%, sales and marketing 32%, and general and administrative expense 90%. The latter included an $8.5 million one-time stock-based compensation charge triggered by the business combination and higher public-company costs. Total stock-based compensation was $47.5 million, compared with $22.6 million in 2020. Net loss increased, although Adjusted EBITDA loss narrowed. Operating cash outflow rose, and investing cash outflow reflected purchases of marketable securities and property and equipment. The combination generated $628.5 million of financing proceeds as reported in the cash-flow discussion.
Outlook, management commentary, risks and unusual items
The filing provides no quantified revenue, earnings or cash-flow guidance. Management plans to invest in advertising products and measurement, sales capacity, user growth and international expansion, and expects operating losses and operating cash outflows to continue for the foreseeable future. It expects international WAUs to grow faster than U.S. WAUs in the near term, but international ARPU to remain below U.S. ARPU; expansion investment may weigh on near-term results. Advertising revenue is seasonal, typically strongest in Q4.
Key risks include reliance on advertising for substantially all revenue; competition for users and advertiser budgets; uncertain user engagement as pandemic-related patterns change; privacy and platform-policy changes that may constrain ad targeting or measurement; dependence on third parties including AWS and Google Ad Manager; cybersecurity, content moderation and regulatory exposure; and execution risks in international growth. Apple email-client changes may impair measurement of email engagement and WAUs; the company uses estimates for affected users. The filing also describes potential stock-price volatility and dilution, including the expected availability for resale of substantial shares after lock-up restrictions expire.
The company reported a $95.3 million net loss and expects continued losses; it recorded a full valuation allowance against U.S. deferred tax assets. It disclosed no legal matter expected to have a material adverse effect. The financial statements received an unqualified audit opinion. Management said disclosure controls were effective at year-end and that the SPAC predecessor’s identified control weakness did not exist after the combination; the filing includes no management ICFR assessment or auditor attestation, citing the newly public company transition and emerging-growth-company exemptions.
Most important facts an investor should verify
- Whether WAU and ARPU growth, including WAUs estimated following Apple email changes, is sustained and translates into advertising revenue.
- Whether advertiser demand, impression growth and pricing can offset privacy-related measurement limits and competitive pressure.
- Whether rising operating expenses and substantial stock-based compensation can be controlled as the company pursues growth and profitability.
- How quickly international markets can be monetized relative to their required investment and lower expected ARPU.
- Cash deployment, operating cash burn and contractual commitments; confirm the reported $715.8 million combines cash, cash equivalents and marketable securities.
- Potential share dilution and selling pressure, dual-class voting control, and the status of internal financial controls as a newly public company.