NERDWALLET, INC. Q3 FY2024 earnings call

Management Statement and Operational Highlights

• Q3 Performance: Exceeded revenue and non-GAAP operating income outlooks despite organic search and lending headwinds. Gained share in insurance and SMB, with insurance business growing 6x vs 2021 peak.
• Investments and Acquisitions: Acquired Next Door Lending to enhance mortgage offerings, expecting 1-2 percentage points of revenue boost in Q4 2024. Invested in vertical integration, NerdWallet+, and Smart Money Podcast; Smart Money Podcast monthly average downloads scaled to 250,000. Registered users over 23 million; NerdWallet+ launched insurance assistant and treasury bills account.
• Strategic Pillars: Focus on land and expand, vertical integration, and registrations/data-driven engagement. Launched Australia comparison shopping marketplace; enhanced insurance shopping flows drove registered user growth.

Segment Performance

• Credit cards: Q3 revenue was $45 million, declining 16% year-over-year. Attributed to underwriting constraints and organic traffic pressure in certain subcategories.
• Loans: Q3 revenue was $24 million, declining 28% year-over-year. Personal loans declined 49% year-over-year, but mortgages saw accelerating growth due to rate reductions and strength in home equity products.
• SMB products: Q3 revenue was $28 million, growing 12% year-over-year. Driven by renewals portfolio despite headwinds in SMB loans originations.
• Emerging verticals (formerly Other): Q3 revenue was $94 million, growing 129% year-over-year. Insurance revenue grew 916% year-over-year, offsetting a 26% year-over-year decline in banking. Insurance growth was due to improved demand and product experience; banking decline was tied to falling interest rates.

Guidance

• Revenue: Q4 revenue guidance is $164 million to $172 million, with the midpoint up 26% year-over-year. Driven by insurance, with slightly easier year-over-year comps in personal loans.
• Profitability: Q4 non-GAAP operating income expected to be in the range of $8 million to $11 million. Anticipate margin accretion in 2025 as revenue scales and cost discipline is maintained.
• Capital Allocation: Continue acquisitive strategy when opportune, with a new $25 million share repurchase authorization approved.

Risks

• Organic search headwinds: Impacted non-monetizing learning-oriented content, leading to a 7% year-over-year decline in Monthly Unique Users (MUUs). Search engines integrating their own answers affected education-oriented traffic.
• Macro environment: Tough SMB loans market; cyclical nature of business; potential impact of federal funds rate changes on interest rate-sensitive areas.

Question and Answer

Q: Follow-up on organic traffic share and initiatives?

A: Search visibility improved on shopping pages but education-oriented traffic worsened due to search engines integrating their own answers. Focus on delivering consumer value to mitigate impact.

Q: Insurance strength persistence?

A: Yes, insurance revenue up 10x year-over-year, driven by share gains and a super cycle in premiums. Diversifying into home, life, and NerdWallet+ insurance assist.

Q: Performance marketing guardrails and new products?

A: Performance marketing is disciplined, aiming for in-quarter profitability. New products like NerdWallet+ show positive cohort data, focusing on deeper consumer relationships.

Q: Credit card segment issues and Q4 conservatism?

A: Issuer balance sheet conservatism post-SVB is reversing. Q4 guidance assumes normal seasonality with better than seasonal insurance strength offsetting credit card headwinds.