NerdWallet, Inc. (NRDS) Earnings

Management highlights

### Core Strategic Focus During AI Transition - The company is in the middle of an industry-wide AI transition shifting how consumers access financial information, and is prioritizing building owned audiences via vertical integration, improved user registration and re-engagement processes. - Management is confident in the company's position due to its existing trusted brand, large existing audience, and successful early vertical integration results across brokering and advisory lines of business.

Guidance

We expect third quarter revenue in the range of 244 to 260 million, up 17% year-over-year at the midpoint. In terms of profitability, we expect non-GAAP operating income in the range of 29 to 37 million. Our Q3 guidance reflects typical seasonality in our business as well as expected tailwinds from regulatory changes in student loans and the impact of our college finance acquisition in February. As a result, we expect our annual profitability to be more concentrated in the third quarter of this year than in prior years. For the full year, we're narrowing our NGOI expectation to a range of 90 to 105 million, maintaining the midpoint of our previous guidance. This guidance includes $15 to $20 million NGOI impact from customer acquisition spend with payback periods beyond the current year. At the midpoint, this spend implies an approximately five times increase year over year. We expect to continue generating meaningful adjusted free cash flow moving forward. From a capital allocation perspective, we'll continue to weigh organic investments in organic growth opportunities and share repurchases against one another to maximize long-term shareholder value.

Segment performance

Overall: Total Q2 2026 revenue is $197 million, a 6% year-over-year increase. 1. Consumer Segment: Revenue of $175 million, an 8% year-over-year increase, accounting for 88.8% of total Q2 revenue. Growth was driven by strong demand and expanded financial institution budgets for personal loans and deposit accounts, partially offset by declines in consumer credit cards due to ongoing organic search headwinds. The firm's largest auto insurance carrier relationship stabilized but has not recovered to early 2026 levels, and management is focusing on scaling partnerships with other leading carriers and expanding the in-house insurance agency. 2. SMB (Small and Medium Business) Segment: Revenue of $22 million, an 11% year-over-year decrease, accounting for 11.2% of total Q2 revenue. The decline was driven by organic search revenue declines in non-loan SMB products, partially offset by revenue growth in business loan originations.

Risks & headwinds

- Continued organic search headwinds are negatively impacting the consumer credit cards line and non-loan SMB products. - The company's largest auto insurance carrier relationship has not recovered to earlier 2026 revenue levels. - Forward-looking statements about investment returns and strategic growth are subject to material uncertainties, and actual results may differ from projections due to unforeseen risks, as detailed in SEC filings. - Longer payback periods for new customer acquisition investments introduce uncertainty around near-term profitability and return realization.

Analyst Q&A

• Q: What has given management confidence to scale up fivefold longer-payback IRR-based investments this year, and what framework is used to evaluate payback periods?

  A: Early investments in vertical integration have produced consumer cohorts with high retention and recurring revenue, making longer-duration IRR-aligned marketing spend a natural progression. Management maintains a high investment bar, tracks cohort performance closely, optimizes for LTV-to-CAC over longer time horizons, and requires these internal investments to outyield alternative uses of capital including current free cash flow opportunities and M&A.

• Q: How is LLM-driven traffic converting for NerdWallet, and what workarounds are being developed for AI-related search headwinds?

  A: LLM-driven traffic has very high transaction intent and converts well, though it still makes up only a small portion of the company's current business. It remains a key area of strategic investment and growth for the firm.

• Q: How does management view the importance of distribution in the AI-driven future of consumer finance, and how can NerdWallet capture value versus large LLM platforms, particularly regarding CAC trends?

  A: Distribution and brand trust are extremely valuable in the emerging AI landscape, which has already seen mass adoption of large LLMs. NerdWallet's existing trusted brand and large reach give it a durable advantage, especially for high-stakes financial guidance and marketplaces, which translates into lower customer acquisition costs. The company's vertical integration strategy is built specifically to leverage these competitive strengths.

• Q: What is the path to recovery for the declining SMB segment, and will management continue investing in SMB relative to consumer vertical integration?

  A: The SMB segment splits into two parts: business loan brokering, which is growing year-over-year and has a sticky owned audience that generates recurring returns, and traditional non-loan SMB recommendation products, which are facing ongoing search headwinds. Management continues to invest in improving brokering efficiency for the growing loan business, while expanding channels and upgrading CRM for the non-loan portion of the segment.