Nextdoor Holdings, Inc. — 2023 Form 10-K
Reporting period: Fiscal year ended December 31, 2023. The filing also reports fourth-quarter user metrics. Nextdoor operates a neighborhood social platform and generates substantially all revenue from advertising. At year-end, it reported 88 million global Verified Neighbors and presence in more than 325,000 neighborhoods.
Financial and operating results
| Metric | 2023 | 2022 | Change |
|---|---|---|---|
| Revenue | $218.3 million | $212.8 million | Up 3% |
| Total costs and expenses | $390.6 million | $357.0 million | Up 9% |
| Operating loss | $172.3 million | $144.2 million | Loss widened |
| Net loss | $147.8 million | $137.9 million | Loss widened 7% |
| Adjusted EBITDA loss | $74.1 million | $75.5 million | Loss narrowed 2% |
| Cash used in operating activities | $59.3 million | $60.5 million | Cash use decreased |
| Cash, cash equivalents and marketable securities | $531.1 million | $583.3 million | Down $52.2 million |
Fourth-quarter WAUs were 41.8 million, up 5% year over year; fourth-quarter ARPU was $1.33, flat year over year. Full-year WAUs grew 9%, while full-year ARPU fell 6% to $5.25, as user growth outpaced revenue growth. Revenue was $206.5 million in the U.S. and $11.8 million internationally. No customer represented 10% or more of annual revenue.
Costs and expenses were 179% of revenue in 2023 versus 168% in 2022. Cost of revenue was $41.6 million; the resulting gross margin was approximately 81% (calculated as revenue less cost of revenue). Stock-based compensation was $83.0 million, up from $64.4 million. The company reported no debt outstanding. Year-end current assets were $566.9 million and current liabilities were $35.4 million. The company reported an accumulated deficit of $766.0 million.
Material changes and unusual items
- Revenue rose modestly, while total expenses grew faster, primarily reflecting higher research and development and general and administrative costs. Higher interest income—$25.8 million versus $9.3 million—partly offset the larger operating loss.
- A fourth-quarter cost reduction plan included an approximately 25% workforce reduction and was substantially complete by year-end. Restructuring charges were $11.1 million, including $9.9 million of severance and related charges; $1.8 million of related liabilities remained at year-end.
- No shares were repurchased in 2023. The board increased the repurchase authorization by $150 million and extended its term to March 31, 2026; the program is discretionary and does not require repurchases.
- After year-end, the company announced that co-founder Nirav Tolia would return as CEO, President and Chairperson, with the transition expected in the second quarter of 2024.
- Cash from investing activities was $66.5 million, largely reflecting marketable-security maturities and sales net of purchases. Financing activities provided $8.9 million, mainly from stock-option exercises and employee stock-plan issuances.
Outlook, risks and contingencies
The filing provides no specific revenue or earnings guidance. Management expects operating losses and operating cash outflows to continue for the foreseeable future, while investing in product and advertising technology, sales, user engagement, and international expansion. It expects international ARPU to remain below U.S. ARPU and notes that international growth will require investment.
Key risks include dependence on advertising revenue and advertiser demand; competition and uncertainty in growing user engagement and monetization; privacy, data-protection and content-regulation requirements; changes to third-party tracking and advertising policies; cybersecurity and service-provider dependence; and the execution risks of AI initiatives and international expansion. The company notes that WAU calculations partly rely on estimates because of changes to Apple email measurement. It also describes market and macroeconomic uncertainty and seasonal strength in fourth-quarter advertising.
The company reported no legal proceedings expected to have a material adverse effect and no cybersecurity threats identified in 2023 that materially affected, or were reasonably likely to materially affect, the business. Ernst & Young issued unqualified opinions on the financial statements and internal control over financial reporting. The auditor identified revenue recognition as a critical audit matter because of the volume of advertising transactions and the complexity of related systems.
Important facts for investors to verify
- Whether revenue growth and improving user metrics translate into stronger monetization, particularly as full-year ARPU declined.
- Whether expense reductions and the workforce restructuring produce durable savings without impairing product execution, sales capacity or engagement.
- The pace of operating cash use and how long the $531.1 million of cash, cash equivalents and marketable securities can support planned investment and any repurchases.
- How much of the expanded repurchase authorization is actually used, and its effect on liquidity and share count.
- Progress on advertiser measurement, privacy-related platform changes, international monetization and the CEO transition.
- The treatment and potential usability of tax attributes: the filing reports substantial NOL carryforwards but a full valuation allowance on U.S. net deferred tax assets.