Nextdoor (NYSE:KIND) Q1 Sales Beat Estimates, Next Quarter Sales Guidance Is Optimistic

Petr Huřťák /
2023/05/09 4:35 pm EDT
Add to Watchlist

Neighborhood social network Nextdoor (NYSE:KIND) reported Q1 FY2023 results topping analyst expectations, with revenue down 2.41% year on year to $49.8 million. On top of that, guidance for next quarter's revenue was surprisingly good, being $53.5 million at the midpoint, 3.22% above what analysts were expecting. Nextdoor made a GAAP loss of $33.7 million, down on its loss of $32.9 million, in the same quarter last year.

Is now the time to buy Nextdoor? Access our full analysis of the earnings results here, it's free.

Nextdoor (KIND) Q1 FY2023 Highlights:

  • Revenue: $49.8 million vs analyst estimates of $45.9 million (8.34% beat)
  • Revenue guidance for Q2 2023 is $53.5 million at the midpoint, above analyst estimates of $51.8 million
  • Free cash flow was negative $13.8 million, compared to negative free cash flow of $20.7 million in previous quarter
  • Gross Margin (GAAP): 80.1%, down from 82.2% same quarter last year
  • Weekly Active Users (WAU): 42.4 million, up 5.7 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.

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 very strong, averaging 31.3% annually. This quarter, Nextdoor beat analyst estimates but reported a rather lacklustre 2.41% year on year revenue decline.

Nextdoor Total Revenue

Nextdoor is guiding for revenue to decline next quarter 1.91% year on year to $53.5 million, reverse on the 19.1% year-over-year increase in revenue the company had recorded in the same quarter last year. Ahead of the earnings results the analysts covering the company were estimating sales to grow 8.7% over the next twelve months.

In volatile times like these we look for robust businesses with strong pricing power. Unknown to most investors, this company is one of the highest-quality software companies in the world, and their software products have been the default standard in critical industries for decades. The result is an impressive business that is up an incredible 18,152% since the IPO. You can find it on our platform for free.

Usage Growth

As a social network, Nextdoor can generate revenue growth by increasing user numbers, and by charging more for the ads each user is exposed to.

Over the last two years the number of Nextdoor's daily active users, a key usage metric for the company, grew 13.3% annually to 42.4 million. This is a solid growth for a consumer internet company.

Nextdoor Weekly Active Users (WAU)

In Q1 the company added 5.7 million daily active users, translating to a 15.5% growth year on year.

Key Takeaways from Nextdoor's Q1 Results

Since it has still been burning cash over the last twelve months it is worth keeping an eye on Nextdoor’s balance sheet, but we note that with a market capitalization of $767.8 million and more than $574.8 million in cash, the company has the capacity to continue to prioritise growth over profitability.

We were impressed by how strongly Nextdoor outperformed analysts’ revenue expectations this quarter. Weekly Average Users, the key volume metric, also beat. We were also glad that the revenue guidance for the next quarter exceeded analysts' expectations. On the other hand, it was less good to see that the revenue growth was somewhat weak. Overall, this quarter's results seemed pretty positive and shareholders can feel optimistic. The company is up 4.43% on the results and currently trades at $2.12 per share.

Should you invest in Nextdoor right now? It is important that you take into account its valuation and business qualities, as well as what happened in the latest quarter. We look at that in our actionable report which you can read here, it's free.

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 70% 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.