Nextdoor (NYSE:KIND) Misses Q3 Sales Targets

Max Juang /
2023/11/07 4:41 pm EST

Neighborhood social network Nextdoor (NYSE:KIND) fell short of analysts' expectations in Q3 FY2023, with revenue up 4% year on year to $56.1 million. Turning to EPS, Nextdoor made a GAAP loss of $0.10 per share, down from its loss of $0.09 per share in the same quarter last year.

Is now the time to buy Nextdoor? Find out in our full research report.

Nextdoor (KIND) Q3 FY2023 Highlights:

  • Revenue: $56.1 million vs analyst estimates of $56.3 million (small miss,┬ádriven by a miss in Total Weekly Active Users (WAU))
  • EPS: -$0.10 vs analyst estimates of -$0.11 (9.1% beat)
  • Free Cash Flow was -$18.4 million compared to -$12.4 million in the previous quarter
  • Gross Margin (GAAP): 80.9%, in line with the same quarter last year
  • Weekly Active Users (WAU): 40.4 million, up 2.1 million year on year

Helping residents figure out what's happening on their block in real time, Nextdoor (NYSE:KIND) is a social network that connects neighbors with each other and with local businesses.

Social Networking

Businesses must meet their customers where they are, which over the past decade has come to mean on social networks. In 2020, users spent over 2.5 hours a day on social networks, a figure that has increased every year since measurement began. As a result, businesses continue to shift their advertising and marketing dollars online.

Sales Growth

Nextdoor's revenue growth over the last three years has been strong, averaging 26.3% annually. This quarter, Nextdoor reported rather lacklustre 4% year-on-year revenue growth, missing analysts' expectations.

Nextdoor Total Revenue

Ahead of the earnings results, analysts covering the company were projecting sales to grow 18.3% over the next 12 months.

The pandemic fundamentally changed several consumer habits. There is a founder-led company that is massively benefiting from this shift. The business has grown astonishingly fast, with 40%+ free cash flow margins. Its fundamentals are undoubtedly best-in-class. Still, the total addressable market is so big that the company has room to grow many times in size. See it here.

Usage Growth

As a social network, Nextdoor generates revenue growth by increasing its user base and charging advertisers more for the ads each user is shown.

Over the last two years, Nextdoor's daily active users, a key performance metric for the company, grew 11.2% annually to 40.4 million. This is decent growth for a consumer internet company.

Nextdoor Weekly Active Users (WAU)

In Q3, Nextdoor added 2.1 million daily active users, translating into 5.5% year-on-year growth.

Key Takeaways from Nextdoor's Q3 Results

Although Nextdoor, which has a market capitalization of $666.3 million, has been burning cash over the last 12 months, its more than $539.7 million in cash on hand gives it the flexibility to continue prioritizing growth over profitability.

We struggled to find many strong positives in these results. Its revenue growth regrettably slowed and its revenue missed Wall Street's estimates, driven by a miss in Total Weekly Active Users (WAU), a key measure of volumes. Adjusted EBITDA was in line. Overall, the results could have been better. The company is down 4.9% on the results and currently trades at $1.73 per share.

Nextdoor may have had a tough quarter, but does that actually create an opportunity to invest right now? When making that decision, it's important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here.

One way to find opportunities in the market is to watch for generational shifts in the economy. Almost every company is slowly finding itself becoming a technology company and facing cybersecurity risks and as a result, the demand for cloud-native cybersecurity is skyrocketing. This company is leading a massive technological shift in the industry and with revenue growth of 50% year on year and best-in-class SaaS metrics it should definitely be on your radar.

The author has no position in any of the stocks mentioned in this report.