Q4 2021 Nerdwallet Inc Earnings Call

February 24, 2022

Ladies and gentlemen, thank you for spending by welcome to the nurse while at Q4 2021 earnings call. At this time all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question. During this session you will need to press star one on your own.

Allophone, if you require any further assistance. Please press Star then zero I would like to hand, the conference over to your speaker Mr.

Nicolas Please go ahead Sir.

Thank you operator welcome to the <unk> Q4, 2021 earnings call.

Joining us today are co founder and Chief Executive Officer, Tim Chen and Chief Financial Officer, Laura and St. Clair.

Press release and shareholder letter are available on our Investor Relations website and a replay of this update will also be available following the conclusion of today's call.

We intend to use our investor relations website as a means of disclosing certain material information and complying with the disclosure obligations under SEC regulation FD from time to time.

As a reminder, today's call is being webcast live and recorded.

Before we begin todays remarks, and question and answer session I would like to remind you that certain statements made during this call may relate to future events and expectations and as such constitute forward looking statements.

Actual results and performance may differ from those forward looking statements as a result of the factors discussed in our prospectus dated November three 2021 and in other reports filed or to be filed with the SEC.

We urge you to consider these factors and remind you that we undertake no obligation to update the information provided on this call to reflect subsequent events or circumstances.

You should be aware that these statements should not be considered a guarantee of future performance.

Furthermore, during this call we will present, both GAAP and non-GAAP financial measures a reconciliation of GAAP to non-GAAP measures is included in today's earnings press release.

With that I will now turn it over to Tim Chen our co founder and CEO of Newark wallet Tim.

Thanks, Jack and good afternoon, and thanks for being here I'm excited to share our results for the first time as a public company.

<unk> mission is to provide clarity for all of life's financial decisions today.

Today more than ever financial decisions are relevant and important in People's lives as the pandemic has made economic situations difficult for many.

Being a public company gives us a stronger platform and more resources to achieve our vision of a world where everyone makes financial decisions with confidence.

We strive to make this vision a reality by empowering consumers and smbs with trustworthy and knowledgeable of financial guidance, while helping our financial services partners cost effectively reach well informed consumers who are a great match for their products.

To accomplish this we focus on three key areas first landing and expanding in new verticals and geographies.

Deepening our integration within existing verticals and lastly, engaging our consumers.

We're happy to say that efforts in these areas are paying off 2021 was a year of sustained momentum at herbalife, culminating an unseasonably high Q4 revenue, while COVID-19 impacted our business in 2020, we saw several positive signs of recovery last year, both in our financial performance and in our ability to make.

Progress on several initiatives.

There were plenty of accomplishments to celebrate in 2021.

To name a few.

We drove an average of 19 million monthly unique users or and you use to our platform and we continued our efforts to register and engage those meus ending the year with over 10 million registered users.

Grew across every revenue category and credit cards loans and other verticals all posted over 50% growth in 2021 generating $380 million in total revenue.

We continued the integration of <unk> <unk>, resulting in strong engagement and SMB loans with a net dollar repeat rate for our Q1, 'twenty, one cohort exceeding 65%, which is even better than our pre COVID-19 cohorts and we followed our 2020 launch of <unk> U K with the launch of <unk>.

In July 2021, leveraging our extensible organic playbook to bring trusted financial guidance to our second international market.

We're excited about our Q4 results in particular in the fourth quarter, we achieved strong year over year revenue and <unk> growth and generated positive adjusted EBITDA, while investing both in our trusted brand and in our nerds.

Our vertical integration of <unk> continued to gain momentum during the second half of the year, we launched two new SMB marketplaces, one for payment processors and one for insurance providers. Both of these marketplaces enables small business owners to get qualified for and match with multiple for writers at once.

Putting the power to make the right financial decision in their hands.

We believe that product developments like these play an important role in driving the momentum of our other verticals.

And increasing our share of revenue from existing customers.

At the end of Q4, we launched our unlock your dreams brand campaign, highlighting how <unk> financial guidance tools and products enable consumers to reach their dreams.

The campaign has already appeared across a variety of notable media spots and will also be featured on new to nearby marketing channels, such as Tictac HBO Max and Peacock.

We believe these investments will continue to build our brand awareness and establish <unk> as the trusted source consumers turn to and returned to for all their money questions.

Between stock market volatility rising inflation and the extension of student loan forbearance, the financial complexities confronting consumers today are unprecedented to.

To help them navigate these challenges and cultivate user engagement are nerds in disseminating high quality guidance across all of these timely topics and more on various channels, including our smart money podcasts.

Graham Youtube as well as in our CRM newsletter.

Additionally, we made a key leadership higher in John Kane, our new Chief product officer to accelerate our product development and deliver even more engaging product experiences.

John has over 20 years of experience in building scaling and optimizing consumer products across desktop and mobile we're confident that John will help us build products that better serve our consumers and also drive improvements in our conversion and monetization.

Looking ahead, we will build on the momentum we saw in 2021 by finding new ways to engage our users, helping more consumers and smbs and serving our financial services partners, even more effectively.

We're confident that the investments we're making in these areas will enable us to address significant market opportunities ahead.

At the same time.

For the past several years has made it clear how critical it is for <unk> to do our part in creating a more equitable world.

And doing all the work necessary to achieve our vision of a world where everyone makes financial decisions with confidence.

With that I'm going to hand, it over to Loren Sinclair, our CFO , who will discuss our Q4 and 2021 full year results. Lauren. Thanks, Tim we are proud to have closed out 2021 with a strong fourth quarter reflective of our diversification efforts and the strong brand that we've built with.

Consumers.

We delivered Q4 revenue of $100 million.

75% year over year.

We recognize that the high year over year growth rate is partially driven by lapping the fourth quarter of 2020, which was significantly impacted by COVID-19.

Given this we also look at our two year revenue CAGR, which had roughly 30% is consistent with our historical growth.

In addition to strong year over year growth Q.

Q4 also grew quarter over quarter.

Which we attribute to the momentum that we are experiencing as we emerge from the lows of 2020.

We were also buoyed by a number of onetime events, which I'll cover shortly.

Quarter over quarter growth is not our typical seasonality and we do not expect a similar trend this year.

For the full year, we finished on a high note delivering $380 million of revenue growing 55% year over year.

Now, let's take a deeper look at the revenue performance within each category.

Credit cards delivered Q4 revenue of $35 million growing 109% year over year.

This substantial growth stems from multiple quarters of continued category recovery.

As the year came to a close we were happy to see our credit card partners back on the site.

<unk> pricing outpacing pre pandemic levels.

And consumer demand continuing to improve.

For the full year credit cards delivered $124 million of revenue growing 58% year over year.

Loans generated Q4 revenue of $30 million growing 46% year over year across all verticals.

Personal loans grew significantly as we saw reinvigorated consumer demand and the loosening of lenders approval criteria.

Mortgages posted encouraging growth amidst a favorable but increasing interest rate environment.

Student loans revenue grew despite refinance demand being impacted by the federal government's forbearance program.

We saw a one time boost and student loans as consumers locked in rates in anticipation of the Endo forbearance before it was extended to may of this year.

Across our loans businesses, we continue to deepen our partner relationships.

Prove our user targeting in the form of Prequalification and focus on content pretty evolving needs of our consumers.

For the full year loans generated $126 million of revenue growing 55% year over year.

Finally, other verticals delivered Q4 revenue at $35 million growing 76% year over year.

SMB products grew across all major sub verticals. Most importantly in loans, where we are seeing strong repeat revenue.

Our investing and banking verticals growth exceeded our expectations driven by additional partners launched in the second half of the year and limited time offers.

Those are the verticals, we're able to offset the headwinds we faced in insurance as a result of carrier profitability constraints.

For the full year other verticals delivered $129 million of revenue growing 51% year over year.

Moving on to investments and profitability.

Earned $13 million of adjusted EBITDA in Q4 at a 14% margin.

For the full year, we earned $27 million of adjusted EBITDA at a 7% margin as we consciously leaned in and invested heavily in marketing to capitalize on the continuing shift from offline to online and the proliferation of choice for consumers.

Please refer to today's earnings press release for reconciliations of our GAAP net loss of $8 million for the quarter and $43 million for the full year, two our non-GAAP adjusted EBITDA figures.

Consumer demand for our financial guidance remains stronger than ever.

We provided trustworthy guidance to 18 million average monthly unique users in Q4 at 22% increase year over year and in line with our annual growth.

As a reminder, in the first quarter of 2021, we experienced abnormally high user engagement in our investing vertical stemming from the social media driven means stock phenomenon.

As we look to Q1 of this year, we do not expect to see year over year <unk> growth as we lap this atypical event.

Onto our financial outlook.

We exited 2021 on a high note thanks to our strong execution and earlier than expected seasonal ramp and certain one time events that we mentioned in student loans and investing.

Q4 positions us well for 2022 and in the first quarter, we expect revenue in the range of $122 million to $125 million, which at the midpoint represents 37% growth year over year, but.

The time being our plan is to provide quarterly guidance.

We also expect Q1 adjusted EBITDA in the range of 3 million to $6 million as we continue to invest heavily in our long term strategy to drive sustainable top of funnel growth with the launch of our latest brand campaign.

Our investments in brand are based on the best times to reach consumers and we will not be consistent across our fiscal quarters.

While these investments will create variability in our quarterly margins over the short term, we do expect year over year accretion and our 2020 to annual adjusted EBITDA margin.

And over the long term as we reach our awareness goals and our brand spend hits, a logical ceiling and becomes a fixed cost we expect adjusted EBITDA margins to get back to historical highs and ultimately exceed those levels.

We're proud of the progress we made in 2021 and are confident about the journey ahead of US operator, we're now ready for questions.

Okay. At this time I would like to remind everyone in order to ask a question you will need to press star one on your telephone.

Again to ask a question you will need to press star one on your telephone.

Our first question is coming from the line of Justin Patterson.

Key bank.

Sir your line is open.

Great. Thank you very much.

Tim You mentioned, the addition of John Kane as Chief product Officer, what are some of the key product initiatives for the year that could benefit engagement conversion and monetization and then Loren how should we think about the puts and takes around accretion potential the 2022 EBITDA. Thank you.

Thanks for the question yes.

We think hard about driving member engagement is one of our core vectors of growth.

So along those lines, we've got a number of initiatives across the company in China is really helping to get us aligned and executing well against those initiatives.

Okay.

Great and I'll take the second part of that question around some of the puts and takes on EBITDA margins. So if I take a step back and look at the past couple of years.

There is two big dynamics that have impacted our margins. So the first one is around pricing, which put downward pressure on margins and we see that as a result of the COVID-19 impact both in 2020 and in the early parts of 2021.

And then the second dynamic is really about our conscious investment into more top of the funnel channels like our brand spend and so as I think about going into 2022, we see that pricing as we've talked about is recovering from the lows of 2020, and so I would expect that to be.

Some of the help and margin accretion, but at the same time, we are staying the course and we're going to continue to invest in our marketing initiatives, specifically brand, which we know will put downward pressure on margins in the short term, but over the long term and that becomes a fixed cost. We know that we will get some leverage over that and I'll just remind everyone.

One that we did say that we do expect a bit of margin accretion in 2022 on a full year basis relative to 2021.

Great. Thank you.

Next question from the line of.

Youssef Squali.

Through his securities.

Your line is open.

Excellent. Thank you, so much Tim and Lauren and Jack and the gang congratulations on a strong quarter out of the IPO gate. So just two questions here, maybe starting with you Lauren just as a follow up to what you were talking about in terms of guidance trying to understand kind of the puts and takes around maybe and you use versus kind of.

Pricing I think you mentioned in your prepared remarks.

Kind of maybe onetime or.

Disproportionate impact to Q1 <unk> growth, maybe you can just speak to how you are seeing.

That metric in particular.

Throughout 2022, and then Tim maybe just kind of.

Stepping back and looking at Q4 relative to kind of your original expectations.

Can you maybe just speak to what what kind of surprised you. The most across your various product offerings and what gives you kind of that confidence as you kind of go through.

To start a new year.

Yes.

Thanks, Youssef I'll start with the first one in terms of <unk> growth and how we think about it. So just as a reminder, we were growing consistently last year at over 20% year over year.

Similar to revenue, we typically see an increase from Q4 into Q1, we expect that same seasonality quarter over quarter. This year.

However, we know that we had a large benefit in Q1 of 'twenty one from the mean stock phenomenon that drove a ton of user engagement to our investing vertical which is going to make our year over year comp much tougher, but we are seeing that normal seasonal pickup in traffic from Q4 into the early parts of Q1, which we think set us up.

Well for the full year.

Sure and I'll take the other part in terms of what surprised us. The most in Q4 I mean, historically Q4 has typically been seasonally weak. So we spoke to some of the factors that were driving a lot of strength in Q4, I mean part of it was our continued recovery from Covid.

But also we saw consumers getting more proactive in terms of repositioning their finances ahead of.

Interest rate increases student loan forbearance et cetera.

I'll also double click into SMB I mean, we saw some real strength, there closing out the year and I'm going to zoom out a bit since this is our first earnings call that we expect SMB to be one of our fastest growing verticals in 2022 and beyond the team is absolutely killing it.

Things are going well both in terms of user acquisition and retention. So in terms of user acquisition were up materially and loan originations from pre COVID-19 levels. So that means a ton of new smbs are coming into our ecosystem and then in terms of re engagement our pre COVID-19 loan cohorts, we're generating ltvs is two.

Two five times the initial transaction over four years and our recent cohorts are doing better than that.

And so while it's early this is really better than our pre COVID-19 cohorts and we think that's a great leading indicator.

I'll just close out with one quick anecdote there we have smbs that had been with us since 2015 that monetize more than ever last year and so this is an inherently sticky business as smbs need our help with their money year after year and as we continue to bulk up our offerings in that.

Area, we think that this will just get better and better in terms of engagement.

That's great great to hear thank you.

Yeah.

Next question is from the line of Nat Schindler of Bank of America. Your line is open.

Yes, hi, guys.

I was wondering if you could give us any detail or any thoughts on how the banks have been responding to rising interest rates.

Particularly in the mortgage market.

<unk>.

Both the consumer demand on your portal, but as well as the demand for those leads from banks.

Yes, absolutely I'll take that so yeah.

As you mentioned, it's a rising rate environment, and we expect more increases throughout 2022.

So that makes refinancing less attractive for consumers and.

Industry estimates with all point to shrinking refinance volumes.

This theres a few things going on so first we're taking share we're actually confident that we can grow our overall wounds category during the year of which mortgages the biggest component.

And the other thing that you got to understand is that we've historically actually over indexed to purchase as opposed to refi because we have really popular educational guidance and calculators geared towards helping first time homebuyers.

So purchase was the bulk of our mix in Q4, and so that also means that we are less affected by some of the boom and bust cycles of refi.

Yeah.

Makes sense.

Bank demand for leads look like though.

Is there a shift as.

People are less likely is it hard to win it.

Fewer people were refined or even doing purchase regardless of how that's being affected by the rising rate environment does that drive.

Additional interest by the banks to buy leads or does it not change in those environments.

So it actually is.

It does so we see pricing tailwind.

In times like these banks are getting more aggressive and competitive in terms of getting high quality referrals.

And then.

Anything that you could give us any more detail and I know you mentioned personal loans in the B.

In your letter and earlier, but could you give us a little more detail on personal loans and how the environment was affected by stimulus checks.

And really low credit card balances and how that is changing particularly as we see it in Q1.

So, yes, but personal loans are doing well pricing recovered throughout last year.

We haven't seen any major shifts going into Q1, so yes, we're pretty consistent with the trends exiting in the year.

Great. Thank you.

Okay.

Next question from the line of James Faucette of Morgan Stanley . Your line is open.

Great. Thank you kind of following up on on kind of how your customers and partners are reacting on you made the comment that they are looking to be a bit more aggressive can you give us some detail there firstly and secondly, I realize that it is.

Very dynamic environment, and you gave some outlook in terms of how 'twenty one impacted your visibility, but how should we think about the potential growth in <unk> and.

What you're planning for in and modeling for beyond the first quarter, even if it's just.

Ranges are directionally et cetera.

Thanks.

Yeah. Thanks for the question I'll kick off with the first part.

Just some color there routing consumers getting more proactive.

There is expectation broadly both in the industry and by consumers that student loan for bands within in January over the holidays.

It was announced that was extended to may but in December we actually saw quite an uptick.

People, who are interested in refinancing ahead of this this event. So we saw a bit of a tick up in December .

Also I would say I think there is quite a bit of expectation of rising rates throughout the year and the mortgage industry. So.

That can drive people to get more proactive on things like refinance as well. So we think there was some marginal.

Productivity and pulling in December .

And I'll take the question about how we think about long term growth. So as a reminder, we feel really proud we've had a history of consistent growth and as we talked about we look at our two year CAGR and we see roughly 30%, which is consistent with past trends.

And then as we think about moving through the rest of the year.

Mentioned, we're not going to guide for the full year at this point, but what we see is lots of headroom across all the vertical Tim's talked about some of the tailwind we talked about little bit of some of the headwinds that we're still seeing but we think theres lots of room to grow in terms of product improvements and things like that but we also think there is still a ton of opportunity as we look at.

The addressable market as we see that continued shift from offline to online, it's really will only increase the whole size of the pie.

And so we feel really good about the outlook for the rest of the year and even beyond and I will just remind everyone. Our Q1 guidance on revenue implies a 30% growth at the midpoint.

Thanks for that Tim Thanks Lorne.

Next question from the line of.

Ross Sandler of Barclays. Your line is open.

Hey, everybody.

We've covered a lot already but.

One area I wanted to drill in on us.

Sales and marketing so performance marketing spend has been down for two quarters in a row.

Traffic and revenue continues to scale nicely. So can you just talk about the relationship between your performance marketing and revenue as we kind of progress through 'twenty, two and then stepping back from the near term.

Lauren you stated that there is a cap on brand advertising at some point here, we've probably also assuming around editorial spend or organic.

Silver marketing.

How do you think about.

The level of sales and marketing intensity long term relative to revenue and the business. Thanks a lot.

Yeah. Thanks Ross.

Given it's our first as Tim said, our first earnings call as a public company I think it might be helpful. If I just take a step back for everyone and talk about how we think about sales and marketing and then I'll address your very specific questions. Ross. So first off we think about sales and marketing as three main areas of investment we break it down into organic.

Brand and then performance marketing.

If we look at organic this is really head count when you think about the editorial team that provides a great trusted and comprehensive guidance. This includes some of the sales and commercial teams and what we see here is we invest early on and then we get leverage over the longer term. So as we are entering a new vertical well staff up and.

We will spend in this area are as we're integrating a newly acquired company will also run our organic playbook and we will ramp spend here, but over the long term that spend doesn't need to scale with revenue and so that's how we think about getting leverage over the long term with organic.

In terms of brand, we're actually really excited about this channel because we have the unique ability to leverage brand spend given that all of our vertical under one brand as opposed to under a consideration of brands.

And we do think about brand as a fixed cost over time like we've talked about in most recent years, we've been leaning in and investing we're testing the right times to reach our consumers. So you can expect us to continue to invest in that area, but over the mid to long term, we do really think theres, a logical ceiling of spend and at that point it to fixed.

Cost and you get a ton of leverage there.

And then performance marketing, we really see this as a variable cost.

Aimed to be in quarter profitable and we use this channel is a lever that we can dial up or down as needed.

And as we think about brand overall, we think this brings a halo effect to some of the other channels as we go.

And to answer your question about performance marketing I will just remind everyone that over 70% of our traffic today comes organically through direct or unpaid channels and so we really look about when you look at performance marketing as a way to open up top of the funnel even more so it is not our main lever for driving traffic to the site but.

It is something that we think does drive incremental traffic.

Okay.

Alright next question from the line of Rob Scott.

Kurt.

Of William Blair.

Your line is open the question great. Thanks for taking the question on international It seems like you're having some good success in both UK and Canada, maybe sort of walk us through the international strategy and in particular, how is the brand resonating outside of the United States.

And then maybe some perspective on your thoughts or ability to enter new markets either.

By acquisitions organic.

Thanks for the question.

Just for some context setting are ordinal priority as the U S market. We've got this huge brand and reach here and it gives us a big opportunity to land and expand and vertically integrated like in the case of small business, but that being said, we're super excited about international.

In both the UK and Canada.

Executing our playbook that we're very familiar with we call it land and expand and we lead with content, we deliver consumers really trusted guidance and with that we build up.

Our base over time, and so between Canada and the U K. We now have two proof points that show that our organic playbook is extensible to other markets. So as we think about markets beyond UK and Canada, we're going to we're going to take it.

One market at a time and we've got to weigh that against just really great opportunities in the U S. As well so thats kind of how we think about it internally.

Great and if I could just add one more on the new unlock your dreams brand campaign, just curious sort of what the.

Response has been relative to your expectations.

Is it simply just to drive awareness as it also introducing consumers products, just perhaps give us a sense, how thats going how.

You thought it would go at this point thanks.

Yes, we're very pleased with the results of the campaign, it's got a few different goals, where we're always targeting increasing brand awareness, but we also care about brand affinity metrics.

Our <unk> wide showing up is.

The place you can turn to for all of your money questions and so we do yes, we do all sorts of evaluation internally regarding those things and feel good about the progress there.

Okay, great. Thanks, Tim.

Again, the question you will need to press star one on your telephone.

Next question from the line of Jed Kelly of open <unk>. Your line is open.

Hey, great great. Thanks for taking my questions just a.

Circling back on credit cards.

Can you sort of talk about marketers appetites.

Selenium in more to credit card marketing as we get the benefit of some of the reopening, particularly on travel and then assuming we get back to a more normalized spending environment here in 'twenty two.

As consumers build up the revolving loan balances how should we think about your personal loans business.

In the back half of 'twenty two.

Great I'll take the first part of that and credit cards, and then I'll hand, it off to Tim for the second part of the question about personal loans.

So first maybe I'll just.

Remind everyone Q4 in Q4 credit cards grew 109% year over year and for the full year, 58% and so as a reminder, credit card pricing was hit the hardest.

During COVID-19 , so we're really happy to see the recovery throughout 2021, and then we saw that in a couple places. So obvious one is with pricing and partner budgets. We also saw the loosening of some of our partners risk modeling and application criteria and then we also started to see consumer demand.

Returning so we feel great about performance to date, we think that as we head into the new year here in Q1, given that pricing was still depressed from the early part of 2021, we would expect to see continued recovery in that area.

And as you mentioned before we do see consumer demand coming back in terms of travel in particular.

We do see and we read the reports as well we see domestic travel back I think there's been some good reports from companies over the last couple of days in terms of increasing travel how much of that is international we don't know so there could be some mix shift within the types of products and the types of cards that are consumers are looking for but overall, we feel really good.

That we have room to grow the business between both consumer demand and traffic, but also pricing.

In terms of personal loans.

We're not forecasting anything super unusual going into the back half of the year Youre absolutely right in the sense that the number one use case for personal loans is refinancing credit card debt so as those balances.

Buildup.

There will be strong pull from consumers.

Thank you.

Again to ask a question you will need to press star one on your telephone.

There are no further question at this time I would like to turn the call over to management to wrap up the call.

Alright, well. Thank you for all the questions today, we really appreciate everyone. Joining our first earnings call and for your continued confidence and support and also just wanted to extend a big thank you to our nurse for executing throughout the year without all of your hard work. None of this would be possible theres a lot to be excited about at <unk>, we delivered strong.

Stronger than expected Q4 results and as we look ahead.

We've got SMB exceeding expectations and demonstrating strong repeat revenue and the diversification of our business continues to help us grow despite challenging and uncertain environments. We are optimistic about the opportunities ahead, our future growth and the strides we're making towards achieving our vision of a world where everyone makes financial decisions with confidence.

Okay.

And that concludes today's conference. Thank you everyone for participating you may now all disconnect.

Great.

Okay.

[music].

Yes.

Ladies and gentlemen, thank you for standing by welcome to the nurse wallet Q4 2021 earnings call. At this time all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session. So that's a question during the session you will need to press star one on your telephone.

If you require any further assistance. Please press Star then zero I would like to hand, the conference over to your speaker Mr.

Jack Nicholas Please go ahead Sir.

Thank you operator welcome to the <unk> Q4, 2021 earnings call joining us today are co founder and Chief Executive Officer, Tim Chen and Chief Financial Officer, Laura St. Clair Our press release and shareholder letter are available on our Investor Relations website and a replay of this update will also be.

Alible following the conclusion of today's call.

We intend to use our investor relations website as a means of disclosing certain material information and complying with disclosure obligations under SEC regulation FD from time to time.

As a reminder, today's call is being webcast live and recorded.

Before we begin todays remarks and question and answer session.

I'd like to remind you that certain statements made during this call may relate to future events and expectations and as such constitute forward looking statements.

We urge you to consider these factors and remind you that we undertake no obligation to update the information provided on this call to reflect subsequent events or circumstances.

You should be aware that these statements should not be considered a guarantee of future performance.

Furthermore, during this call we will present, both GAAP and non-GAAP financial measures a reconciliation of GAAP to non-GAAP measures is included in today's earnings press release.

With that I will now turn it over to Tim Chen our co founder and CEO of Newark wallet, Tim. Thanks.

Thanks, Jack and good afternoon, and thanks for being here I'm excited to share our results for the first time as a public company <unk>.

<unk> mission is to provide clarity for all of life's financial decisions today.

Today more than ever financial decisions are relevant and important in People's lives as the pandemic has made economic situations difficult for many.

Being a public company gives us a stronger platform and more resources to achieve our vision of a world where everyone makes financial decisions with confidence.

To accomplish this we focus on three key areas first landing and expanding in new verticals and geographies.

Deepening our integration within existing verticals and lastly, engaging our consumers.

<unk> on several initiatives.

There were plenty of accomplishments to celebrate in 2021.

To name a few.

Grew across every revenue category and credit cards loans and other verticals all posted over 50% growth in 2021 generating $380 million in total revenue.

In July 2021, leveraging our extensible organic playbook to bring trusted financial guidance to our second international market.

Vertical integration of <unk> continued to gain momentum during the second half of the year, we launched two new SMB market places one for payment processors and one for insurance providers.

Both of these marketplaces enables small business owners to get qualified for and matched with multiple for writers at once putting the power to make the right financial decision in their hands.

We believe that product developments like these play an important role in driving the momentum of our other verticals.

And increasing our share of revenue from existing customers.

At the end of Q4, we launched our unlike your dreams brand campaign, highlighting how <unk> financial guidance tools and products enable consumers to reach their dreams. The campaign has already appeared across a variety of notable media spots and will also be featured on new to nearby marketing channels, such as Tic Tac HBO Max and Peacock.

We believe these investments will continue to build our brand awareness and establish <unk> as the trusted source consumers turn to and return to for all of their money questions beats.

Between stock market volatility rising inflation and the extension of student loan forbearance. The financial complexity is confronting consumers today are unprecedented to.

To help them navigate these challenges and cultivate user engagement are nerds and disseminating high quality guidance across all of these timely topics and more on various channels, including our smart money podcasts Instagram Youtube as well as in our CRM newsletter.

Additionally, we made a key leadership higher in John Kane, our new Chief product officer to accelerate our product development and deliver even more engaging product experiences.

Looking ahead, we will build on the momentum we signed in 2021 by finding new ways to engage our users, helping more consumers and smbs and serving our financial services partners, even more effectively.

We're confident that the investments we're making in these areas will enable us to address significant market opportunities ahead.

At the same time the events of the past several years has made it clear how critical it is for <unk> to do our part in creating a more equitable world.

To that end, we will be investing in the growth of our nerds, helping to provide underserved communities with access to equitable financial products and services through our corporate social responsibility program and doing all of the work necessary to achieve our vision, a world where everyone makes financial decisions with confidence with that I'm going to hand, it over to Loren St.

<unk>, our CFO , who will discuss our Q4 and 2021 full year results Lauren.

Thanks, Tim we are proud to have closed out 2021, with a strong fourth quarter reflective of our diversification efforts and the strong brand that we've built with consumers.

We delivered Q4 revenue of $100 million.

75% year over year.

We recognize that the high year over year growth rate is partially driven by lapping the fourth quarter of 2020, which was significantly impacted by COVID-19.

Given this we also look at our two year revenue CAGR, which at roughly 30% is consistent with our historical growth.

In addition to strong year over year growth Q4 also grew quarter over quarter, which we attribute to the momentum that we are experiencing as we emerge from the lows of 2020.

We were also buoyed by a number of onetime events, which I'll cover shortly.

Quarter over quarter growth is not our typical seasonality and we do not expect a similar trend this year.

For the full year, we finished on a high note delivering $380 million of revenue growing 55% year over year.

Now, let's take a deeper look at the revenue performance within each category.

Credit cards delivered Q4 revenue of $35 million growing 109% year over year.

This substantial growth stems from multiple quarters of continued category recovery.

As the year came to a close we were happy to see our credit card partners back on the site.

<unk> pricing outpacing pre pandemic levels and consumer demand continuing to improve.

For the full year credit cards delivered $124 million of revenue growing 58% year over year.

Loans generated Q4 revenue of $30 million growing 46% year over year across all verticals.

Personal loans grew significantly as we saw reinvigorated consumer demand and the loosening of lenders approval criteria.

Mortgages posted encouraging growth amidst a favorable but increasing interest rate environment.

Student loans revenue grew despite refinance demand being impacted by the federal government's forbearance program.

We saw a one time boost and student loans as consumers locked in rates in anticipation of the end of forbearance before it was extended to may of this year.

Across our loans businesses, we continue to deepen our partner relationships improve our user targeting in the form of Prequalification and focus on content for the evolving needs of our consumers.

For the full year loans generated $126 million of revenue growing 55% year over year.

Finally.

Other verticals delivered Q4 revenue of $35 million growing 76% year over year.

SMB products grew across all major sub verticals. Most importantly in loans, where we are seeing strong repeat revenue.

Our investing and banking verticals growth exceeded our expectations driven by additional partners launched in the second half of the year and limited time offers.

Those verticals were able to offset the headwinds we faced in insurance as a result of carrier profitability constraints.

For the full year other verticals delivered $129 million of revenue growing 51% year over year.

Moving on to investments and profitability.

We earned $13 million of adjusted EBITDA in Q4 at a 14% margin.

Please refer to today's earnings press release for reconciliations of our GAAP net loss of $8 million for the quarter and $43 million for the full year, two our non-GAAP adjusted EBITDA figures.

Consumer demand for our financial guidance remains stronger than ever.

We provided trustworthy guidance to 18 million average monthly unique users in Q4 of 22% increase year over year and in line with our annual growth.

As a reminder, in the first quarter of 2021, we experienced abnormally high user engagement in our investing vertical stemming from the social media driven means stock phenomenon.

As we look to Q1 of this year, we do not expect to see year over year <unk> growth as we lap this atypical events.

Onto our financial outlook.

We exited 2021 on a high note thanks to our strong execution.

An earlier than expected seasonal ramp and certain one time events that we mentioned in student loans and investing.

Q4 positions us well for 2022 and in the first quarter, we expect revenue in the range of $122 million to $125 million, which at the midpoint represents 37% growth year over year.

For the time being our plan is to provide quarterly guidance.

Our investments in brand are based on the best times to reach consumers and will not be consistent across our fiscal quarters.

While these investments will create variability in our quarterly margins over the short term, we do expect year over year accretion in our 2022 annual adjusted EBITDA margin.

And over the long term as we reach our awareness goals and our brand spend has a logical ceiling and becomes a fixed cost we expect adjusted EBITDA margins to get back to historical highs and ultimately exceed those levels.

We're proud of the progress we made in 2021 and are confident about the journey ahead of US operator, we're now ready for questions.

Okay. At this time I would like to remind everyone in order to ask a question you will need to press star one on your telephone.

Again to ask a question you will need to press star one on your telephone.

Our first question is coming from the line of Justin Patterson.

Key bank.

Sir your line is open.

Great. Thank you very much.

Thanks for the question.

We think hard about driving member engagement is one of our core vectors of growth.

So along those lines, we've got a number of initiatives across the company in China is really helping to get us aligned and executing well against those initiatives.

Great and I'll take the second part of that question around some of the puts and takes on EBITDA margin. So if I take a step back and look at the past couple of years.

Two big dynamics that have impacted our margins. So the first one is around pricing, which put downward pressure on margins and we see that as a result of the COVID-19 impact both in 2020 and in the early parts of 2021.

And then the second dynamic is really about our conscious investment into more top of the funnel channels like our brand spend.

And so as I think about going into 2022, we see that pricing as we've talked about is recovering from the lows of 2020, and so I would expect that to be.

One that we did say that we do expect a bit of margin accretion in 2022 on a full year basis relative to 2021.

Great. Thank you.

Next question is from the line of.

Youssef Squali.

Through his securities.

Your line is open.

Excellent. Thank you, so much Tim and Lauren and Jack and the gang congratulations on a strong quarter out of the IPO. So just two questions here, maybe starting with you Lauren just as a follow up to what you were talking about in terms of guidance.

To understand kind of the puts and takes around maybe <unk>.

You use versus kind of pricing I think you mentioned in your prepared remarks.

Kind of a maybe a one time or.

Disproportionate impact to Q1 <unk> growth, maybe you can just speak to how you are seeing.

That metric in particular.

Throughout 2022, and then Tim maybe just kind of stepping.

Stepping back and looking at Q4 relative to kind of your original expectations.

Can you maybe just speak to what kind of surprised you. The most across your various product offerings and what gives you kind of that confidence as you kind of go through.

To start a new year.

Yes.

Thank you, Jeff I'll start with the first one in terms of <unk> growth and how we think about it. So just as a reminder, we were growing consistently last year at over 20% year over year.

And similar to revenue, we typically see an increase from Q4 into Q1, we expect to that same seasonality quarter over quarter. This year.

Well for the full year.

But also we saw consumers getting more proactive in terms of repositioning their finances ahead of.

Interest rate increases student loan forbearance et cetera.

Things are going well both in terms of user acquisition and retention. So in terms of user acquisition were up materially and loan originations from pre COVID-19 levels. So that means a ton of new smbs are coming into our ecosystem and then in terms of reengagement or pre COVID-19 loan cohorts, we're generating ltvs us too.

Two five times the initial transaction over four years and our recent cohorts are doing better than that.

And so while it's early this is really better than our pre COVID-19 cohorts and we think that's a great leading indicator.

I'll just close out with one quick anecdote there we have smbs that had been with us since 2015 that monetized more than ever last year and so this is an inherently sticky business as smbs need our help with their money year after year and as we continue to bulk up our offerings in that.

Area, we think that this will just get better and better in terms of engagement.

That's great great to hear thank you.

Next question is from the line of Nat Schindler of Bank of America. Your line is open.

Yes, hi, guys.

I was wondering if you could give us any detail or any thoughts on how the banks have been responding to rising interest rates.

Particularly in the mortgage market.

Yes.

Both the consumer demand on your portal, but as well as the.

The demand for those leads from banks.

Yes, absolutely I'll take that so yes.

As you mentioned, it's a rising rate environment, and we expect more increases throughout 2022.

So that makes refinancing less attractive for consumers and.

Industry estimates with all point to shrinking refinance volumes.

This theres a few things going on so first we're taking share we're actually confident that we can grow our overall loans category during the year of which mortgages the biggest component.

So purchase was the bulk of our mix in Q4, and so that also means that we are less affected by some of the boom and bust cycles of refi.

Makes sense.

Bank demand for weeds look like though.

Is there a shift as.

People are less likely is it hard to do.

Fewer people are refi ing or even doing purchase regardless of how that's being affected by the rising rate environment does that drive.

Additional interest by the banks to buy leads or does it not change in those environments.

So it actually is.

It does so we see pricing tailwind.

In times like these banks are getting more aggressive and competitive in terms of getting high quality referrals.

And then.

But anything that you could give us any more detail and I know you mentioned personal loans in the B.

In your letter and earlier, but could you give us a little more detail on personal loans and how the environment was affected by stimulus checks.

And really low credit card balances and how that is changing particularly as we see it in Q1.

So, yes, but personal loans are doing well pricing recovered throughout last year.

We haven't seen any major shifts going into Q1, so yes, we're pretty consistent with the trends exiting the year.

Great. Thank you.

Okay.

Next question from the line of James Faucette of Morgan Stanley . Your line is open.

Great. Thank you kind of following up on on kind of how your customers and partners are reacting on you made the comment that they are looking to be a bit more aggressive can you give some detail there firstly.

And secondly, I realize that it is a very dynamic environment and you gave some outlook in terms of how 'twenty one impacted your visibility, but how should we think about the potential growth in and what you're planning for in and modeling for beyond the first quarter, even if it's just.

Ranges are directionally et cetera.

Thanks.

Yeah. Thanks for the question I'll kick off with the first part.

Just some color there routing consumers getting more proactive.

There is an expectation broadly both in the industry and by consumers that student loan for bands within in January over the.

Holidays. It was announced that was extended to may but in December we actually saw quite an uptick as people who are interested in refinancing ahead of this this event. So we saw a bit of a pick up in December .

Also I would say.

There's quite a bit of expectation of rising rates throughout the year and the mortgage industry. So.

It can drive people to get more proactive on things like refinance as well. So we think there was some marginal.

Productivity and pull in in December .

And then as we think about moving through the rest of the year as.

As I mentioned, we're not going to guide for the full year at this point, but what we see is lots of headroom across all the vertical Tim's talked about some of the tailwind we talks about a little bit of some of the headwinds that we're still seeing but we think theres lots of room to grow in terms of product improvements and things like that but we also think theres still a ton of opportunity as we look.

At the addressable market as we see that continued shift from offline to online is really will only increase the whole size of the pie and so we feel really good about the outlook for the rest of the year and even beyond and I'll just remind everyone. Our Q1 guidance on revenue implies a 30% growth at the midpoint.

Thanks for that Tim Thanks Lorne.

Next question from the line of Ross Sandler of Barclays. Your line is open.

Hey, everybody.

We've covered a lot already but.

One area I wanted to drill in on us.

Sales and marketing so performance marketing spend has been down for two quarters in a row and your traffic and revenue continues to scale nicely. So can you just talk about the relationship between your.

Performance marketing and revenue as we kind of progress through 'twenty, two and then stepping back from the near term.

Lauren you stated that there is a cap on brand advertising at some point here, we'll probably also assuming around editorial spend or organic.

Sales and marketing.

How do you think about.

The level of sales and marketing intensity long term relative to revenue and the business. Thanks a lot.

Yes, Thanks Ross.

Given it's our first Pheno as Tim said, our first earnings call as a public company I think it might be helpful. If I just take a step back for everyone and talk about how we think about sales and marketing and then I'll address your very specific questions Ross.

First off we think about sales and marketing as three main areas of investment we break it down into organic brand and then performance marketing. We look at organic this is really head count when you think about the editorial team that provides a great trusted and comprehensive guidance. This includes some of the sales in.

<unk> teams.

We see here is we invest early on and then we get leverage over the longer term. So as we are entering a new vertical we will staff up and we'll spend in this area are as we're integrating a newly acquired company will also run our organic playbook and we will ramp spend here, but over the long term that spend doesn't need to scale with revenue and so that's how we think.

About getting leverage over the long term with organic.

In terms of brand, we're actually really excited about this channel because we have the unique ability to leverage brand spend given that all of our vertical sit under one brand as opposed to under a consideration of brands.

And we do think about brand as a fixed cost over time like we've talked about in most recent years, we've been leaning in and investing we're testing the right times to reach our consumers. So you can expect us to continue to invest in that area, but over the mid to long term. We do really think there is a logical ceiling of spend and at that point into fixed.

Cost and you get a ton of leverage there.

And then performance marketing, we really see this as a variable cost.

Aimed to be in quarter profitable and we use this channel is a lever that we can dial up or down as needed.

And as we think about brand overall, we think this brings a halo effect to some of the other channels as we go.

And to answer your question about performance marketing I will just remind everyone that over 70% of our traffic today comes organically through direct or unpaid channels and so we really look about look at performance marketing as a way to open up top of the funnel even more so it is not our main lever for driving traffic to the site but.

It is something that we think does drive incremental traffic.

Alright next question from the line of Rob Scott Kirk.

William Blair.

Your line is open for taking the question.

Great. Thanks for taking the question on international it seems like you're having some good success in both the UK and Canada, maybe sort of walk us through the international strategy in particular, how is the brand resonating outside the United States.

And then maybe some perspective on your thoughts or ability to enter new markets either.

By acquisitions or organic.

Thanks for the question.

In both the UK and Canada.

Executing our playbook that we're very familiar with we call it land and expand and we lead with content, we deliver to consumers really trusted guidance and with that we build up.

One market at a time and we've got to weigh that against just really great opportunities in the U S. As well so thats kind of how we think about it internally.

Great and if I could just add one more on the new unlock their dreams brand campaign, just curious sort of what the.

Response has been relative to your expectations.

Is it simply just to drive awareness as it also introducing consumers products, just perhaps give us a sense how thats going.

Thought it would go at this point thanks.

Yes, we're very pleased with the results of the campaign.

Got a few different goals were.

We're always targeting increasing brand awareness, but we also care about brand affinity metrics.

Or is <unk>, what's showing up is.

The place you turn to for all of your money questions and so we do yes, we do all sorts of evaluation internally regarding those things and feel good about the progress there.

Okay, great. Thanks, Tim.

Again to ask a question you will need to press star one on your telephone next.

Next question from the line of Jed Kelly of Oppenheimer. Your line is open.

Hey, great great. Thanks for taking my questions just a.

Circling back on credit cards.

Can you sort of talk about marketers appetites.

As consumers build up the revolving loan balances how should we think about your personal loans business.

In the back half of 'twenty two.

Great I'll take the first part of that and credit cards, and then I'll hand, it off to Tim for the second part of the question about personal loans.

So first maybe I'll just.

Remind everyone Q4 in Q4 credit cards grew 109% year over year and for the full year, 58% and so as a reminder, credit card pricing was hit the hardest.

Average, earning so we feel great about performance to date, we think that as we head into the new year here and in Q1, given that pricing was still depressed from the early part of 2021, we would expect to see continued recovery in that area.

And as you mentioned before we do see consumer demand coming back in terms of travel in particular.

That we have room to grow the business between both consumer demand and traffic, but also pricing.

In terms of personal loans.

Buildup.

There will be strong pull from consumers.

Thank you.

Again to ask a question you will need to press star one on your telephone.

There are no further question at this time I would like to turn the call over to management to wrap up the call.

Alright, well. Thank you for all the questions today, we really appreciate everyone. Joining our first earnings call and for your continued confidence and support and also just wanted to extend a big thank you to our nurses for executing throughout the year without all of your hard work. None of this would be possible. There is a lot to be excited about at <unk>, we delivered strong.

Stronger than expected Q4 results and as we look ahead.

Got SMB exceeding expectations and demonstrating strong repeat revenue and the diversification of our business continues to help us grow despite challenging and uncertain environments. We are optimistic about the opportunities ahead, our future growth and the strides we're making towards achieving our vision of a world where everyone makes financial decisions with confidence.

Okay.

And that concludes today's conference. Thank you everyone for participating you may now all disconnect.

Q4 2021 Nerdwallet Inc Earnings Call

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