Q1 2024 NerdWallet Inc Earnings Call

April 25, 2024

Okay.

Operator: Good day, and thank you for standing by. Welcome to the NerdWallet, Inc. Q1 2024 Earnings Conference Call. At this time, all participants are in a listen-only mode.

Speaker Change: Good day and thank you for standing by welcome to the Nurse Wallet, Inc. Q1, 2024 earnings conference 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 the session you will need to press star one on your telephone you will.

Operator: 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 11 on your telephone. You will then hear an automated message advising you that your hand is raised.

Then here an automated message advising you your hand, just raised to withdraw your question. Please press star. One again. Please be advised today's conference is being recorded I would now like to hand, the conference over to your speaker today Kaitlyn Mcnamee Ma'am. Please go ahead.

Operator: To withdraw your question, please press star 11 again. Please be advised, today's conference is being recorded. I would now like to hand the conference over to your speaker today, Caitlin MacNamee. Madam, please go ahead.

Caitlin MacNamee: Thank you, Operator. Welcome to the NerdWallet Q1 2024 earnings call. Joining us today are co-founder and Chief Executive Officer Tim Chen and Chief Financial Officer Lauren St. Clair. Our 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 disclosure obligations under SEC Regulation FD from time to time.

Caitlin MacNamee: Thank you operator.

Caitlin MacNamee: Welcome to the Nerd, what Q1 2024 earnings call joining us today are co founder and Chief Executive Officer, Tim Chen and Chief Financial Officer, Lorne Sinclair, Our 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.

Caitlin MacNamee: 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.

Caitlin MacNamee: As a reminder, today's call is being webcast live and recorded. Before we begin today's 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 expressed or implied by these forward-looking statements as a result of various risks and uncertainties, including the risk factors discussed in reports filed or to be filed with the SEC. We urge you to consider these risk factors and remind you that we undertake no obligation to update the information provided on this call to reflect subsequent events or circumstances.

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

Caitlin MacNamee: 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.

Caitlin MacNamee: Actual results and performance may differ from those expressed or implied by these forward looking statements as a result of various risks and uncertainties, including the risk factors discussed in reports filed or to be filed with the SEC.

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

Caitlin MacNamee: 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, except where we are unable, without reasonable efforts, to calculate certain reconciling items with confidence. With that, I will now turn it over to Tim Chen, our co-founder and CEO. Thanks, Caitlin.

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

Caitlin MacNamee: 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, except where we are unable without reasonable efforts to calculate certain reconciling items with confidence.

Caitlin MacNamee: With that I will now turn it over to Tim Chen our co founder and CEO Tim.

Tim Chen: Thanks, Caitlin and late 2023, <unk> launched a new National brand campaign don't make future you hate you reminding consumers that the financial decisions. They make today can have an outsized effect on their future wellbeing and of course that they can turn to <unk> for trusted guidance as they make those decisions.

Tim Chen: In late 2023, Nerdwallet launched a new national brand campaign, Don't Make Your Future You Hate You, reminding consumers that the financial decisions they make today can have an outsized effect on their future well-being and, of course, that they can turn to Nerdwallet for trusted guidance as they make those decisions. In Q1, we saw this campaign achieve great results as our aided brand awareness reached record highs despite brand spend being down 30% year over year, reinforcing the resonance of our product offering.

Caitlin MacNamee: In Q1, we've seen this campaign achieve great results as our aided brand awareness reached record highs despite brand spend being down 30% year over year reinforcing the residents of our product offering.

Tim Chen: Similar to our guidance to consumers, we operate with a long-term orientation. We remain committed to improving our efficiency, so it's been great to see our brand marketing spend work harder for us relative to last year. In Q1, we more than doubled non-GAAP operating income year-over-year.

Caitlin MacNamee: Similar to our guidance for consumers, we operate with a long term orientation.

Caitlin MacNamee: We remain committed to improving our efficiency. So it's been great to see our brand marketing spend work harder for us relative to last year.

Caitlin MacNamee: In Q1, we more than doubled non-GAAP operating income year over year by continuing to bolster efficiency, we'll have more capital to reinvest in more resilience throughout the cycle.

Tim Chen: By continuing to bolster efficiency, we'll have more capital to reinvest and more resilience throughout the cycle. We're seeing our long-term orientation bear fruit. Our insurance category has faced inflationary headwinds for most of the past few years, but we continue to invest in improving our market. This work has paid off with record revenue in Q1, despite an end market that is yet to fully recover. These results are a great example of something I've said before; our business is cyclical, and over time, we know that headwinds and tailwinds will offset each other, so our priority is growing from cycle to cycle. We also continue to take share in a large and growing market, independent of macroeconomic factors.

Caitlin MacNamee: We're seeing our long term orientation bear fruit.

Caitlin MacNamee: Our insurance category has faced inflationary headwinds for most of the past few years, but we continue to invest in improving our marketplaces.

Caitlin MacNamee: This work has paid off with record revenue in Q1, despite an end market that has yet to fully recover. These results are a great example of something I've said before our business is cyclical and over time, we know that headwinds and tailwind will offset each other so our priority is growing from cycle to cycle.

Caitlin MacNamee: We also continue to take share in a large and growing market independent of macroeconomic factors, our primary addressable market U S financial services digital advertising is expanding with a 2023 four year CAGR of approximately 15% and <unk> share in this market has also increased with a four year revenue CAGR of 27 <unk>.

Caitlin MacNamee: In Q1, specifically, we are proud of our results.

Caitlin MacNamee: We exceeded guidance across revenue adjusted EBITDA and non-GAAP operating income, while growing monthly unique users by 25% year over year.

Tim Chen: Our primary addressable market, U.S. Financial Services Digital Advertising, is expanding, with a 2023 four-year CAGR of approximately 15%, and Nerdwallet's share in this market has also increased with a four-year revenue CAGR of 27%. In Q1, specifically, we are proud of our results. We exceeded guidance across revenue, adjusted EBITDA, and non-GAAP operating income while growing monthly unique users by 25% year-over-year. These results not only speak to our relentless self-improvement but also enable us to invest in NerdWallet's future. Our vision is to build a trusted financial ecosystem, or a single platform where consumers and SMBs can learn, shop, connect their data, and make decisions about their money.

Caitlin MacNamee: These results not only speak to our relentless self improvement, but also enable us to invest in <unk> future <unk>.

Caitlin MacNamee: Our vision is to build a trusted financial ecosystem or a single platform, where consumers and smbs can learn shop connect their data and make decisions about their money.

Caitlin MacNamee: In Q1, we drove progress across our growth pillars, and I feel confident that the decisions. We're making today will result in durable value for our consumers and our business. This quarter, we continued to leverage our trusted brand and playbook to land and expand efficiently a new markets and categories.

Caitlin MacNamee: Internationally, we scaled efforts across the UK, Canada, and Australia, collectively and user growth for these markets outpaced U S growth in Q1 at 31% year over year, giving us increased conviction in our ability to grow our international presence over the coming years.

Caitlin MacNamee: Meanwhile, our vertical expansion efforts significantly increased our velocity by repurposing existing assets versus building from scratch with extensive development time were able to launch and monetize new home services categories within weeks.

Tim Chen: In Q1, we drove progress across our group, and I feel confident that the decisions we're making today will result in durable value for our consumers and our business. This quarter, we continue to leverage our trusted brand and playbook to land and expand efficiently in new markets and categories. Internationally, we scaled efforts across the UK, Canada, and Australia. Collectively, MUU growth for these markets outpaced US growth in Q1 at 31% year over year, giving us increased conviction in our ability to grow our international presence over the coming year. Meanwhile, our vertical expansion efforts significantly increased our velocity.

Caitlin MacNamee: Still investing in other nascent categories like Medicare social security and estate planning.

Caitlin MacNamee: Vertical integration remains a key focus as we look to grow from cycle to cycle. These.

Caitlin MacNamee: These efforts <unk> trusted brand and reach with best in class consumer shopping experiences a combination that should drive improved monetization over time.

Caitlin MacNamee: This quarter, we focused on improving our services to cater to consumers, who want more human guidance, when making financial decisions.

Caitlin MacNamee: <unk> always seen tiered support options work effectively and SMB, which operates a hybrid model, including both digital and human assisted shopping experiences.

Caitlin MacNamee: In Q1 this team further efficiency by leveraging machine learning to more accurately route consumers to the right level of support for their circumstances.

Caitlin MacNamee: Overtime, we will seek to bring this hybrid model to more areas to help people make smarter financial decisions.

Caitlin MacNamee: As we've reached achieved record <unk> growth over the past several quarters, we've doubled down on our registration and data driven engagement efforts by registering users, we can more easily engage and reengage them overtime with thoughtful personalized cross sell opportunities increasing their loyalty to <unk> and making it a no brainer.

Tim Chen: By repurposing existing assets versus building from scratch with expensive development time, we are able to launch and monetize new home services categories within weeks, while still investing in other national categories like Medicare, Social Security, and estate. Vertical integration remains a key focus as we look to grow from cycle to cycle. These efforts pair Nerdwallet's trusted brand and reach with best-in-class consumer shopping experiences, a combination that should drive improved monetization over time.

Caitlin MacNamee: Consumers that turned to us directly for their financial product needs already we have seen that our active registered users visit us more than three times a month on average.

Caitlin MacNamee: Knowing the potential value of our registered user base.

Caitlin MacNamee: In Q1, we drove a significant increase in registered users, which we attribute to work in areas such as optimizing registration prompts as part of our larger insurance shopping funnel.

Caitlin MacNamee: We also continued to relentlessly improve how we re engage users over time much.

Tim Chen: This quarter, we focused on improving our services to cater to consumers who want more human guidance when making financial decisions. We've always seen tiered support options work effectively in SMB, which operates a hybrid model including both digital and human-assisted shopping experiences.

Caitlin MacNamee: Much like our vertical integration work and F&B seeks to route consumers to the right experience for them. Our CRM work is focused on increasingly personalized campaigns that matched registered users with content and offers tailored to their profiles.

Caitlin MacNamee: I am proud of our results in Q1, and the progress we've made toward our vision for consumers elevated delinquency rates and high interest rates are contributing to a tough learning environment. Despite seemingly positive economic indicators. We believe these are normal cyclical dynamics. So we are focused on the long term to grow from cycle to cycle.

Tim Chen: In Q1, this team furthered their efficiency by leveraging machine learning to more accurately route consumers to the right level of support for their circumstances. Over time, we'll seek to bring this hybrid model to more areas to help people make smarter financial decisions. As we've achieved record MEU growth over the past several quarters, we've doubled down on our registration and data-driven engagement efforts. By registering users, we can more easily engage and re-engage them over time with thoughtful, personalized cross-sell opportunities, increasing their loyalty to NerdWallet and making it a no-brainer for consumers that turn to us directly for their financial product needs.

Caitlin MacNamee: In the meantime, I'll pass it over to Loren to provide a financial update thanks.

Loren: Thanks, Tim we ended the quarter above the high end of our guidance range, delivering Q1 revenue of $162 million.

Loren: Down 5% year over year.

Loren: We remain in a cyclically depressed lending environment affecting interest rate sensitive areas, such as loans and balance transfer credit cards.

Loren: Our first quarter results showcase early signs of growth recovery being insight led by both insurance and SMB verticals.

Tim Chen: Already, we've seen that our active registered users visit us more than three times a month on average, signaling the potential value of our registered user base. In Q1, we drove a significant increase in registered users, which we attribute to work in areas such as optimizing registration prompts as part of our larger insurance shopping funnel. We also continue to relentlessly improve how we re-engage users over time. Much like our vertical integration work in SMB seeks to route consumers to the right experience for them, our CRM work is focused on increasingly personalized campaigns that match registered users with content and offers tailored to their profiles.

Loren: Let's take a deeper look at the revenue performance during the quarter within each category.

Loren: Credit cards delivered Q1 revenue of $50 million declining 19% year over year.

Loren: As we've spoken about previously last year's regional banking crisis drove increased balance sheet constraints and issuer conservatism.

Loren: We believe these dynamics are temporary rather than structural but they continue to weigh on our Q1 year over year results.

Loren: We still saw our seasonal cadence of a quarter over quarter increase from Q4 to Q1.

Caitlin MacNamee: While issuers remain conservative and balance sheet intensive areas, such as balance transfer cards consumer demand for products remains high.

Caitlin MacNamee: This gives us confidence that we will see an eventual recovery as issuer appetite returns.

Caitlin MacNamee: Loans generated Q1 revenue of $21 million declining 3% year over year.

Caitlin MacNamee: Our personal loans vertical grew 12% year over year during Q1, a deceleration versus Q4 as we have not yet fully recovered from the pullback that began last quarter, while we work through some of the growing pains and scaling with new audiences and partners.

Tim Chen: I am proud of our results in Q1 and the progress we've made toward our vision for consumers. Elevated delinquency rates and high interest rates are contributing to a tough winning environment despite seemingly positive economic indicators. However, we believe these are normal cyclical dynamics, so we are focused on the long term to grow from cycle to cycle. In the meantime, I'll pass it over to Lauren to provide a financial update. Thanks, Tim. We ended the quarter above the high end of our guidance range, delivering Q1 revenue of $162 million, down 5% year over year. We remain in a cyclically depressed lending environment, affecting interest rate sensitive areas such as loans and balance transfer credit cards.

Caitlin MacNamee: We still believe that there is a backlog of consumer demand in personal loans as high loan rates have reduced the incentive for consumers to refinance credit card debt.

Caitlin MacNamee: While we do not expect to return to revenue levels from last year in the near term, we will continue to invest in this vertical in anticipation of an improving lending environment.

Caitlin MacNamee: We expect that macro changes combined with leveraging our improving ability to align consumer demand more effectively with financial services providers will put us in a prime position to take advantage of demand as it surfaces.

Caitlin MacNamee: We are also optimistic that structural improvements we've made to our mortgage marketplaces will help us capture meaningful share when the housing market recovers.

Caitlin MacNamee: As a reminder from last quarter, we recently changed our revenue product category presentation and are now providing SMB products revenue as a separate disclosure.

Lauren St. Clair Waugh: Our first quarter results showcase early signs of growth recovery being in sight, led by both insurance and S&B verticals. Let's take a deeper look at the revenue performance during the quarter within each category. Credit cards delivered Q1 revenue of $50 million, declining 19% year over year.

Caitlin MacNamee: SMB products, consisting of loans credit cards, and other financial products and services intended for small and mid sized businesses delivered Q1 revenue of $3 million growing 21% year over year.

Caitlin MacNamee: SMB loans remained pressured by elevated rates and tighter underwriting, but we continue to drive growth with our diversified product offerings for small and mid sized businesses in areas such as credit cards banking and software.

Lauren St. Clair Waugh: As we've spoken about previously, last year's regional banking crisis drove increased balance sheet constraints and issuer conservatism. We believe these dynamics are temporal rather than structural, but they continue to weigh on our Q1 year-over-year results. We still saw our seasonal cadence of a quarter over quarter increase from Q4 to Q1. However, while issuers remain conservative in balance sheet intensive areas, such as balance transfer cards, consumer demand for products remains high. This gives us confidence that we will see an eventual recovery as issue or appetite returns. Loans generated Q1 revenue of $21 million, declining 3% year over year.

Caitlin MacNamee: We believe this serves as a further proof point that we have a substantial runway of additional subcategories outside of SMB loans that can provide tailwind over the long run.

Caitlin MacNamee: Finally, our emerging verticals, formerly named our other verticals revenue product category finished Q1 with revenue of $60 million declining 2% year over year.

Caitlin MacNamee: As a reminder, after the regrouping of SMB products revenue emerging verticals consist of areas such as banking insurance investing and international.

Caitlin MacNamee: Thinking declined 9% year over year as we lap our toughest comparison period in 2023 grew versus Q4, which we primarily attribute to our seasonal cadence.

Lauren St. Clair Waugh: Our personal loans vertical grew 12% year-over-year during Q1, a deceleration versus Q4, as we have not yet fully recovered from the pullback that began last quarter while we worked through some of the growing pains in scaling with new audiences and partners. We still believe that there is a backlog of consumer demand for personal loans as high loan rates have reduced the incentive for consumers to refinance credit card debt. While we do not expect to return to revenue levels from last year in the near term, we will continue to invest in this vertical in anticipation of an improving lending environment.

Caitlin MacNamee: Despite the recent moderation of consumer demand, we expect to eventually reach a new normal and our banking vertical as demand remains higher than it was in a zero interest rate environment.

Caitlin MacNamee: The decline in banking was partially offset by growth in investing due to recent stock market strength combined with the resurgence in our insurance vertical.

Caitlin MacNamee: Despite tough comps from the prior year insurance revenue grew 5% year over year in Q1.

Caitlin MacNamee: We remain optimistic that the end market will continue to improve assuming inflation remained stable.

Caitlin MacNamee: Moving on to investments and profitability during.

Caitlin MacNamee: During Q1, we earned nearly $11 million of non-GAAP operating income at a 7% margin a four point increase versus the prior year, primarily driven by leverage in brand marketing as we continue to optimize our investment levels, which began during the latter three quarters of 2012.

Lauren St. Clair Waugh: We expect that macro changes, combined with leveraging our improving ability to align consumer demand more effectively with financial services providers, will put us in a prime position to take advantage of demand as it surfaces. We are also optimistic that structural improvements we've made to our mortgage marketplaces will help us capture a meaningful share when the housing market recovers. As a reminder from last quarter, we recently changed our revenue product category presentation and are now providing S&B products revenue as a separate disclosure.

Caitlin MacNamee: Three.

Caitlin MacNamee: We also earned over $25 million of adjusted EBITDA at a 16% margin.

Caitlin MacNamee: In the first quarter, we had GAAP operating income of $3 $7 million and net income of $1 1 million.

Caitlin MacNamee: Which includes a $3 $7 million income tax provision.

Caitlin MacNamee: Similar to what we've mentioned in previous quarters, we expect to be a cash taxpayer for the foreseeable future. Please.

Lauren St. Clair Waugh: S&B products, consisting of loans, credit cards, and other financial products and services intended for small and mid-sized businesses, delivered Q1 revenue of $30 million, growing 21% year over year. SMB loans remain pressured by elevated rates and tighter underwriting, but we continue to drive growth with our diversified product offerings for small and mid-sized businesses in areas such as credit cards, banking, and software. We believe this serves as a further proof point that we have a substantial runway of additional subcategories outside of S&B loans that can provide tailwinds over the long run.

Caitlin MacNamee: Please refer to today's earnings press release for a full reconciliation of our GAAP to non-GAAP measures.

Caitlin MacNamee: Consumers continue to turn to the nurse for their money questions. We provided trustworthy guidance to 29 million average monthly unique users in Q1 up 25% year over year.

Caitlin MacNamee: Growth was the result of strength in many areas across nerd wallet, such as investing travel taxes and insurance.

Caitlin MacNamee: We are seeing consistently strong consumer demand for both our learn and shop content, though our learn content has been a larger portion of where consumer demand has more recently concentrated causing higher <unk> growth with some pressure on revenue per <unk>.

Caitlin MacNamee: Growth in areas, such as investing was bolstered by interest in the stock market as well as bitcoin strength and.

Caitlin MacNamee: And insurance saw rising premiums drive more consumers to look for the best options for them.

Lauren St. Clair Waugh: Finally, our Emerging Verticals, formerly named our Other Verticals Revenue Product Category, finished Q1 with revenue of $60 million, declining 2% year over year. As a reminder, after the regrouping of S&B products revenue, emerging verticals consist of areas such as banking, insurance, investing, and international. Banking declined 9% year over year as we lap our toughest comparison period in 2023, but it grew versus Q4, which we primarily attribute to our seasonal cadence.

Caitlin MacNamee: Despite these near term monetization pressures more and you use engaging with our learning content and coming to us during specific macro events builds our brand recognition and trust and compounds the value of our franchise overtime.

Caitlin MacNamee: Onto our financial outlook.

Caitlin MacNamee: Similar to what we discussed last quarter, we believe that we have line of sight to returning growth in Q2.

Caitlin MacNamee: We will continue providing quarterly guidance, along with a mix of quantitative and qualitative commentary for full year expectations.

Caitlin MacNamee: We.

Caitlin MacNamee: To deliver second quarter revenue in the range of $147 million to $152 million.

Caitlin MacNamee: Which at the midpoint with increased 4% versus prior year, but decreased sequentially, roughly 8% somewhat larger than our normal seasonal cadence.

Lauren St. Clair Waugh: Despite the recent moderation of consumer demand, we expect to eventually reach a new normal in our banking vertical as demand remains higher than it was in a zero interest rate environment. The decline in banking was partially offset by growth in investment due to recent stock market strengths combined with a resurgence in our insurance vertical. Despite tough comps from the prior year, insurance revenue grew 5% year-over-year in Q1.

Caitlin MacNamee: To give you more color on our Q2 expectations.

Caitlin MacNamee: The primary driver of the larger than normal seasonal decline from Q1 to Q2 is that banking demand continues to moderate.

Caitlin MacNamee: In addition, we are still facing tight lending conditions across both credit cards and loans.

Caitlin MacNamee: Given the material increase we've recently experienced in insurance revenue, we expect to see a return to much higher year over year growth in Q2 as comps get easier.

Caitlin MacNamee: We are also seeing continued momentum in SMB products.

Caitlin MacNamee: As we look to the rest of the year, we remain confident in our ability to return to double digit revenue growth at some point in the second half given recent recovery in SMB products and insurance.

Lauren St. Clair Waugh: We remain optimistic that the end market will continue to improve, assuming inflation remains stable. Moving on to investments and profitability, during Q1, we earned nearly $11 million of non-GAAP operating income at a 7% margin.

Caitlin MacNamee: But the timing of the recovery in areas such as balance transfer cards combined with how potential interest rate movements will impact inversely correlated demand in banking and loans remains uncertain and will ultimately influence how high those double digit growth rates will be.

Lauren St. Clair Waugh: A four-point increase versus the prior year, primarily driven by leverage and brand marketing, as we continue to optimize our investment levels, which began during the latter three quarters of 2023. We also earned over $25 million of adjusted EBITDA at a 16% margin. In the first quarter, we had GAAP operating income of $3.7 million and net income of $1.1 million, which includes a $3.7 million income tax provision.

Caitlin MacNamee: Moving to profitability we.

Caitlin MacNamee: We expect Q2 non-GAAP operating income in the range of negative one five to $1 5 million.

Caitlin MacNamee: We began to pull back on our brand investment during Q2 of 2023 and are not expecting to see the same level of year over year margin accretion during Q2 this year as previous quarters.

Caitlin MacNamee: We are still facing headwinds and monetizing portions of our organic traffic, including areas such as balance transfer credit cards, and as we start to see tailwind in areas such as insurance and F&B normalizing demand from financial services providers should result in more paid traffic.

Lauren St. Clair Waugh: Similar to what we've mentioned in previous quarters, we expect to be a cash taxpayer for the foreseeable future. Please refer to today's earnings press release for a full reconciliation of our gap to non-gap measures. Consumers continue to turn to the nerds for their money questions.

Caitlin MacNamee: Acquisition.

Caitlin MacNamee: As we've mentioned in the past, we view paid marketing as a means to an end and we will continue to spend in a disciplined manner with the aim to be paid back within the quarter in which we spend.

Lauren St. Clair Waugh: We provided trustworthy guidance to 29 million average monthly unique users in Q1, up 25% year over year. Growth was a result of strength in many areas across Nerdwallet, such as investing, travel, taxes, and insurance. We are seeing consistently strong consumer demand for both our LEARN and SHOP content, though our LEARN content has been a larger portion of where consumer demand has more recently concentrated, causing higher MUU growth with some pressure on revenue per MUU. Growth in areas such as investing was bolstered by interest in the stock market, as well as Bitcoin strength. And insurance saw rising premiums drive more consumers to look for the best options for them.

Caitlin MacNamee: Compared to Q1, non-GAAP Oi will be lower sequentially due to a larger than seasonal decline in revenue, partially offset by lower brand spend.

Caitlin MacNamee: We will also have planned increases in employee engagement costs, including a biannual employee event, which will have roughly at two point margin impact in the quarter.

Caitlin MacNamee: We are reiterating our full year guidance for 2020 for margin expectations.

Caitlin MacNamee: Given recent economic data, which indicates continued inflationary pressures, we believe where we fall in these ranges will depend on the pace of improvements in the lending environment.

Caitlin MacNamee: Aligned with our previous full year guidance, we expect non-GAAP Oi margin of approximately six 5% to 8% of revenue and adjusted EBITDA margin in the range of 18 to 19, 5% of revenue.

Lauren St. Clair Waugh: Despite these near-term monetization pressures, more MUUs engaging with our learned content and coming to us during specific macro events builds our brand recognition and trust, and compounds the value of our franchise over time. Now, to our financial outlook. Similar to what we discussed last quarter, we believe that we have a line of sight to returning growth in Q2. We will continue providing quarterly guidance along with a mix of quantitative and qualitative commentary for full-year expectations.

Caitlin MacNamee: We're proud of the results we've delivered so far this year and remain optimistic about the future.

Caitlin MacNamee: Our growing consumer mind share, which saw strong traffic and brand signals.

Speaker Change: Give us confidence that as macroeconomic conditions recover our ability to meet consumer needs will strengthen our long term positioning with that we're ready for questions operator.

Speaker Change: Thank you and as a reminder to ask a question at this time. Please press star one on your telephone and wait for your name to be announced to withdraw. Your question. Please press star one again, one moment, while we compile our Q&A roster.

Speaker Change: And our first question is going to come from the line of Justin Patterson with Keybanc. Your line is open. Please go ahead.

Justin Tyler Patterson: Great. Thank you very much.

Lauren St. Clair Waugh: We expect to deliver second-quarter revenue in the range of $147 to $152 million, which at the midpoint would increase 4% versus the prior year but decrease sequentially roughly 8%, somewhat larger than our normal seasonal cadence, to give you more color on our Q2 expectations. The primary driver of the larger-than-normal seasonal decline from Q1 to Q2 is that banking demand continues to moderate.

Justin Tyler Patterson: Lauren you had called out the growing small challenges within the balance transfer products I know last quarter, you had some growing pains matching Sabah near Prime consumers could you talk about just some of the efforts you're taking to mitigate those issues and how we should think about that recovery.

Justin Tyler Patterson: Yes, I'm actually going to hand that question over to Tim to talk a little bit more about personal loans.

Tim Chen: We're still working through the issues, we mentioned last quarter as we are scaling in the near and subprime market. So as I previously discussed when you go into a market sometimes it takes a few cycles to get their routing and matching rate. So we did rebuild some of these consumer experiences and we're scaling back up with some of the lenders in this space. So we want to get this right for consumers and lenders.

Lauren St. Clair Waugh: In addition, we are still facing tight lending conditions across both credit cards and loans. Given the material increase we've recently experienced in insurance revenue, we expect to see a return to much higher year-over-year growth in Q2 as comps get easier. We are also seeing continued momentum in S&B products. As we look to the rest of the year, we remain confident in our ability to return to double-digit revenue growth at some point in the second half, given the recent recovery in S&B products and insurance.

Justin Tyler Patterson: Create that win win and we feel we're on the right path here.

Justin Tyler Patterson: Got it linear with respect to just home services you called that out as an example of product velocity and Repurposing assets would love to hear a little bit more about just the efforts to scale that category and then get some new ones like social security Medicare up and running.

Justin Tyler Patterson: Yeah.

Justin Tyler Patterson: Yes.

Justin Tyler Patterson: We've got a playbook in our land and expand it tends to lead with creating quality content. In these categories and then really matching consumers with the best products out there so nothing too different.

Lauren St. Clair Waugh: But the timing of the recovery in areas such as balance transfer cards combined with how potential interest rate movements will impact inversely correlated demand for banking and loans remains uncertain and will ultimately influence how high those double-digit growth rates will be. Moving to Profitability, we expect Q2 non-GAAP operating income in the range of negative $1.5 to $1.5 million.

Justin Tyler Patterson: After we do this over and over again, we're getting more efficient.

Justin Tyler Patterson: Entering new verticals a bit more efficiently over time as.

Justin Tyler Patterson: <unk>.

Speaker Change: Alright, thank you.

Justin Tyler Patterson: Thanks.

Justin Tyler Patterson: Okay.

Speaker Change: Thank you and one moment as we move on to our next question.

Speaker Change: And it looks like our next question is going to come from the line of Ralph <unk> with William Blair. Your line is open. Please go ahead.

Ralph: Hey, good afternoon, Thanks for taking my question.

Ralph: First maybe a little bit more color if you could on the commentary around double digit growth in the second half.

Lauren St. Clair Waugh: We began to pull back on our brand investment during Q2 of 2023 and are not expecting to see the same level of year-over-year margin accretion during Q2 this year as in previous quarters. We are still facing headwinds in monetizing portions of our organic traffic, including areas such as balance transfer credit cards. And as we start to see tailwinds in areas such as insurance and S&B, normalizing demand from financial services providers should result in more paid traffic acquisition.

Ralph: Sort of like on a consolidated basis with each quarter grow double digit would it accelerate just any comments on that and then I have a follow up please.

Speaker Change: Sure I'll take that piece, so just to reiterate.

Speaker Change: First for the guide for Q2 revenue, we said that our expectations are $147 million to $152 million growing 4% year over year at the midpoint. We also said that we expect to return to double digit rates of growth at some point in the second half and this is led by the strength that we are.

Speaker Change: Seeing an SMB products and insurance. So we have not clarified exactly when we expect those double digit growth rates to kick in but we know given the strength in those two verticals in particular that we're confident that we will get there.

Lauren St. Clair Waugh: As we've mentioned in the past, we view paid marketing as a means to an end and will continue to spend in a disciplined manner, with the aim of being paid back within the quarter in which we spend. Compared to Q1, non-GAAP OI will be lower sequentially due to a larger than seasonal decline in revenue, partially offset by lower brand spend.

Speaker Change: I also did want to call out that the timing of recovery in areas such as balance transfer cards as well as any interest rate driven demand changes in banking in loans is going to influence how high those double digit growth rates will be.

Lauren St. Clair Waugh: We will also have planned increases in employee engagement costs, including a biannual employee event, which will have roughly a two-point margin impact in the quarter. We are reiterating our full year guidance for 2024 margin expectations. Given recent economic data, which indicates continued inflationary pressures, we believe where we fall in these ranges will depend on the pace of improvements in the lending environment. Aligned with our previous full-year guidance, we expect non-GAAP OI margin of approximately 6.5 to 8 percent of revenue and adjusted EBITDA margin of the range of 18 to 19.5 percent of revenue.

Speaker Change: Great. That's really helpful. Just on the brand campaign is doing really good results in <unk> spending was down about 30% from the letter is that sort of reshape your thought process on spending on brand campaign or is that sort of just a temporary phenomenon in 2023.

Speaker Change: I'm curious, how you're thinking about that spend going forward.

Speaker Change: Yes, so we're really proud of some of the learnings and efficiency, we've driven there.

Speaker Change: Yes naturally in an environment, where it's tougher to monetize we look at those return hurdles and we'll make some adjustments. So thats. Some of what you saw over the past couple of quarters.

Speaker Change: Yes, we're also still relatively new to this we're very data driven so given 2022 is the first full year. We ran brand campaigns, we're getting better at things like creative and which channels and so we're very ROI, driven there and we'll make adjustments up or down there as.

Lauren St. Clair Waugh: We're proud of the results we've delivered so far this year and remain optimistic about the future. Our growing consumer mindshare, with strong traffic and brand signals, gives us confidence that as macroeconomic conditions recover, our ability to meet consumer needs will strengthen our long-term positioning. Operator?

Speaker Change: As of now we would say that for the full year 2000 and for the guide it does assume a slightly lower amount of spend versus last year, but we're going to reserve the right to flex that up and down depending on a variety of factors.

Speaker Change: Great. Thanks, Tim Thanks, a lot.

Speaker Change: Thank you and one moment as we move on to our next question.

Operator: Thank you. As a reminder, to ask a question at this time, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again.

Speaker Change: And our next question comes from the line of James Fawcett with Morgan Stanley. Your line is open. Please go ahead.

Speaker Change: Hi, everyone. It's Michael on Fontana for James Thanks for taking our question.

Operator: One moment while we compile our Q&A roster. And our first question is going to come from the line of Justin Patterson with Key Bank. Your line is open. Please go ahead. Thank you very much.

Michael: Tim I know you called out elevated delinquency rates contributing to a tougher lending environment, but if I look at the pace of year over year deterioration in delinquencies across the card issuers and banks that we track it seems like it's slowing across the majority of those issuers I E getting slightly better.

Justin Tyler Patterson: Lauren, you've called out the growing challenges within the balanced transfer product. I know last quarter you had some growing pains, mashing subprime and your prime consumers. Could you talk about just some of the efforts you're taking to mitigate those issues and how we should think about that recovering? Yeah, I'm actually going to hand that question over to Tim to talk a little bit more about personal loans.

Speaker Change: So im curious how youre thinking about the time at which issuers may start to more aggressively wanted to acquire new customers.

Speaker Change: Yes, thanks for the question.

Speaker Change: It's a good question.

Speaker Change: We think that the delinquencies and ultimately.

Lauren St. Clair Waugh: Yeah, so we're still working through the issues we mentioned last quarter, as we scale in the near and subprime market. As I previously discussed, when you go into a market, sometimes it takes a few cycles to get the routing and matching right. So we did rebuild some of these consumer experiences, and we're scaling back up with some of the lenders in this space. So we want to get this right for consumers and lenders to create that win-win. And we feel we're on the right path here. Got it.

Tim Chen: Delinquencies are a leading indicator right in terms of when issuers should start getting more aggressive the vigor.

Tim Chen: Transfer players are also a bit balance sheet constrained beyond just the credit risk part of it and so we've been through a few cycles like this in the past surpassed experience tells us that this is pretty historically abnormal.

Tim Chen: For this to persist.

Tim Chen: To revert over time, so it's hard to call the exact timing on when that happens.

Tim Chen: Yes for US is really about investing through the cycle, we're still only single digit market share in overall card originations and see ample opportunity to grow that by doing things like registering more users re engaging them and increasing our conversion rates. So we're focusing on the long run.

Tim Chen: Then with respect to just home services, you called that out as an example of product philosophy and repurposing assets. We'd love to hear a little bit more about just the efforts to scale that category and then get some new ones like Social Security and Medicare up and running. Yeah, so we've got a playbook in our land and we're expanding it. It tends to lead with, you know, creating quality content in these categories and then really matching consumers with the best products out there. So nothing too different.

Speaker Change: I appreciate that that's helpful. And then maybe just on the <unk> card I know were obviously very early in the product journey, but this is obviously an important customer acquisition to a more broad based so I'm. Just curious if you could give us a little bit of color just in terms of how traction has trended thus far thanks.

Speaker Change: So for right now I'd say, it's early days, it's on the right track.

Tim Chen: We're, after we do this over and over again, we're getting more efficient at, you know, launching new verticals a bit more efficiently over time. So that's what we're calling out. All right, thank you. Thank you, and one moment as we move on to our next question. And it looks like our next question is going to come from the line of Ralph Schackart with William Blair. Your line is open. Please go ahead. Hey, good afternoon.

Speaker Change: Just want to reiterate the goal here is as you mentioned and help consumers build credit history engage them.

Speaker Change: And get them.

Speaker Change: Graduated into unsecured products.

Speaker Change: Yes, we're seeing improvements in things like credit scores were seeing good engagement and so we're pretty happy so far.

Speaker Change: Thanks, Tim.

Speaker Change: Yes.

Speaker Change: Thank you and one moment for our next question.

Speaker Change: And our next question is going to come from the line of Jed Kelly with Oppenheimer <unk> Co. Your line is open. Please go ahead.

Jed Kelly: Great Great. Thanks for taking my question just going.

Ralph Edward Schackart: Thanks for taking the question. Just first, maybe a little bit more color, if you could, on the commentary around double-digit growth in the second half. Is that sort of like on a consolidated basis? Would each quarter grow double-digit? You know, would it accelerate?

Jed Kelly: Going back to some of the pain.

Jed Kelly: Paid marketing comments.

Jed Kelly: Given that you are having a good brand awareness in all of the engagement we're having.

Jed Kelly: On the non monetize that traffic can you just talk about how we should think about sort of the cadence as you think about performance marketing.

Lauren St. Clair Waugh: Just any comments on that? And then I have a follow-up, please. Sure, I'll take that piece.

Jed Kelly: This year and then in.

Jed Kelly: In terms of the content that users that are reading content.

Lauren St. Clair Waugh: So just to reiterate, first, on the guide for Q2 revenue, we said that our expectations are 147 to 152 million, growing 4% year-over-year at the midpoint. We also said that we expect to return to double-digit rates of growth at some point in the second half, and this is led by the strength that we're seeing in S&B products and insurance. So we have not clarified exactly when we expect those double-digit growth rates to kick in, but we know, given the strength in those two verticals, in particular, that we're confident that we will get there.

Jed Kelly: Monetizing what type of products or what type of education and articles or they read it. Thank you.

Speaker Change: Sure I'll take the first piece of that around paid marketing. So first off we think both brand and paid and our organic channels. All complement one another and because 70% of our traffic comes through organic we've been able to reinvest and more acquisition channels like brand and performance.

Speaker Change: We operate performance marketing in a disciplined way aiming to be in quarter profitable, adding incremental non-GAAP Oi dollars.

Lauren St. Clair Waugh: We also wanted to call out that the timing of recovery in areas such as balance transfer cards, as well as any interest rate-driven demand changes in banking and loans, is going to influence how high those double-digit growth rates will be. Great, that's really helpful.

Speaker Change: And we've said this for a while but we really do think of performance marketing as a variable expense that we will dial up or down depending on returns and we also view this as a means to an end as part of our registration and engagement initiatives.

Speaker Change: So we'll continue to be prudent, but we see increased spend as a positive as performance marketing as a flexible lever to add incremental non-GAAP OE dollars, we get more folks the opportunity to register and it helps us to continue to take share.

Ralph Edward Schackart: Just on the brand campaign, you've seen really good results, and I think spending was down about 30% from the letter. Has that sort of reshaped your thought process on spending and the brand campaign? Or is that sort of just, you know, a temporary phenomenon in 2023?

Speaker Change: And then on the non monetizing <unk> you definitely have categories, where we're just a bit newer.

Speaker Change: Some of the new markets, we mentioned earlier, sometimes we havent really set up commercial relationships there yet.

Tim Chen: Just kind of curious how you think about that spend going forward. Yeah, so we're really proud of some of the learnings and efficiency we've driven there. Yeah, naturally, in an environment where it's tougher to monetize, we look at those return hurdles, and we'll make some adjustments. So that's some of what you saw over the past couple quarters. But yeah, we're also still relatively new to this.

Speaker Change: He is like travel and Texas, where we have a lot of informational content that doesn't necessarily monetize so it kind of varies.

Speaker Change: Especially through the new cycle when things like.

Speaker Change: Investing our crypto takeoff, there's parts of that content.

Speaker Change: So it doesn't monetize as well.

Speaker Change: Okay.

Speaker Change: And then just one follow up is your insurance segment.

Tim Chen: We're very data driven. So given 2022 is the first full year we ran brand campaigns, we're getting better at things like creative and which channels. And so we're very ROI-driven there, and we'll make adjustments up or down there. As of now, we'd say that, you know, for the full year 2024, the guy assumes a slightly lower amount of spend versus last year, but we're going to reserve the right to flex that up and down depending on a variety of factors. Thanks, Tim. Thanks, Lauren.

Speaker Change: Bigger your insurance revenue gets bigger can you give us any feedback on sort of the customer experience having relative to your other products.

Speaker Change: Yeah, I mean, I think what you maybe referring to is that sometimes in the industry. Some of the insurance experiences don't have.

Speaker Change: Great customer feedback square because of.

Speaker Change: So a number of things sold that multiple brokers.

Speaker Change: We really try to minimize that we're working hard to.

Speaker Change: People more crushing upfront really match them to the right provider.

Speaker Change: And so.

Speaker Change: It's a journey.

Speaker Change: It's very important for us to keep on investing in that and keep on improving that quarter after quarter.

Operator: Thank you, and one moment as we move on to our next question. And our next question comes from the line of James Faucette with Morgan Stanley. Your line is open. Please go ahead. Hi, everyone. It's Michael Infante. I'm on behalf of James.

Speaker Change: Thank you.

Speaker Change: Thank you and one moment for our next question.

Speaker Change: Our next question is going to come from the line of Peter Christiansen with Citi. Your line is open. Please go ahead.

Peter Corwin Christiansen: Thank you good afternoon. Thanks for the question.

Michael Nicholas Infante: Thanks for taking our question. Tim, I know you called out elevated delinquency rates contributing to a tougher lending environment, but if I look at the pace of year-over-year deterioration in delinquencies across the card issuers and banks that we track, it seems like it's slowing across the majority of those issuers, i.e. getting slightly better. So, I'm curious how you think about the time at which issuers may start to more aggressively want to acquire new customers. Yeah, thanks for the question. It's a good one.

Peter Corwin Christiansen: Just we'll go back to your thoughts on credit cycles, and recognize each credit cycle different.

Peter Corwin Christiansen: I guess in previous previous cycles.

Peter Corwin Christiansen: While you are still growing organic traffic when partners do come back they come back.

Speaker Change: <unk> levels that match.

Speaker Change: Your your traffic levels currently or is it really at their own pace do they did they start coming back.

Speaker Change: Follow up.

Speaker Change: Yes, I would say.

Speaker Change: Historically, you would tend to have partners on the credit card side, one all of the qualified lending demand.

Speaker Change: That you can give them.

Tim Chen: We think that delinquencies and, ultimately, or delinquencies are a leading indicator, right, in terms of when issuers should start getting more aggressive. You know, the bigger balance transfer players are also a bit balance sheet constrained, beyond just the credit risk part of it. And so, you know, we've been through a few cycles like this in the past. Past experience tells us that this is pretty historically abnormal for this to persist, and it tends to revert over time. So it's hard to call the exact timing when that happens.

Speaker Change: So because yes loan balances that are.

Speaker Change: High quality of our revenue rate so.

Speaker Change: Strictly that tends to be uncapped when you go into one of these credit crunches, sometimes you see people pull back on how much volume there.

Speaker Change: How much volume appetite they have and so we've been seeing some of that and so we think thats historically abnormal we would expect.

Speaker Change: At some point to return to a more normal dynamic there.

Speaker Change: Thank you that's helpful and then.

Speaker Change: Theres been some M&A on your partner side lately I know you guys are very very diversified on the partner side. So im not really asking about issues. There, but can you just walk through what you typically go through on that process do you have to kind of re when your contract with that with the new established partner.

Speaker Change: Or are there any other dynamics that we should be aware of.

Speaker Change: Yes, I'd say I mean, we don't have too much.

Speaker Change: Precedents for something like this but.

Speaker Change: Typically the products can be quite different especially across the prime portfolios quite complementary and so we think that there wouldn't really be a need to re win.

Michael Nicholas Infante: And then maybe just on the NerdUp card, I know we're obviously very early in the product journey, but this is obviously an important customer acquisition tool more broadly. So I'm just curious if you could give us a little bit of color just in terms of how traction has trended thus far. Thanks. So for right now, I'd say it's early days.

Speaker Change: Major issuer, we also tend to work with all the large players. So we have pretty good coverage I think our value proposition in terms of.

Speaker Change: Highly qualified consumers that understand the products is pretty compelling. So we tend to work with most people.

Tim Chen: It's on the right track. Just want to reiterate the goal here is, as you mentioned, to help consumers build credit history, engage them, and get them graduated into unsecured products. So yeah, we're seeing improvements in things like credit scores. We're seeing good engagement. And so we're pretty happy so far. Thanks, Tim.

Speaker Change: That's helpful. Thank you Tim.

Tim Chen: Thank you and I'm showing no further questions at this time I would like to hand, the conference back to management for closing remarks.

Speaker Change: Alright. Thank you all for the questions today and thank you also to the nerds, who commitment to our consumers and our vision delivers all of our results. So with that we will see everyone next quarter.

Operator: Thank you, and one moment for our next question. And our next question is going to come from the line of Jed Kelly with Oppenheimer and Co. Your line is open. Please go ahead.

Speaker Change: This concludes today's conference call. Thank you for participating you may now disconnect.

Jed Kelly: Hey, great, great. Thanks for taking my question. Just going back to some of the paid marketing comments, given that you're having good brand awareness and all the engagement you're having on the non-monetizable traffic, can you just talk about how we should think about sort of the cadence you think about performance marketing this year? And then, in terms of the content or the users that are reading content that's not monetizing, what type of products or what type of education and articles are they reading? Thank you.

Speaker Change: [music].

Speaker Change: Hum.

Speaker Change: Okay.

Speaker Change: Yes.

Speaker Change: Thank you.

Speaker Change:

Speaker Change: Okay.

Speaker Change: Yes.

Speaker Change: [music].

Speaker Change: Yes.

Speaker Change: Hum.

Lauren St. Clair Waugh: Sure, I'll take the first piece of that around paid marketing. First off, we think both brand and paid, and our organic channels all complement one another. And because 70% of our traffic comes through organic, we've been able to reinvest in more acquisition channels like brand and performance. We operate performance marketing in a disciplined way, aiming to be in-quarter profitable, adding incremental non-GAAP OI dollars. And we've said this for a while, but we really do think of performance marketing as a variable expense that we will dial up or down depending on returns.

Speaker Change: Okay.

Speaker Change: Sure.

Speaker Change: Yes.

Speaker Change: Okay.

Speaker Change: [music].

Lauren St. Clair Waugh: And we also view this as a means to an end as part of our registration and engagement initiative. So we'll continue to be prudent, but we see increased spend as a positive, as performance marketing is a flexible lever to add incremental non-GAPA-wide dollars; we get more folks the opportunity to register, and it helps us to continue to take share. Yeah, and then on the non-monetizing MEU piece, you definitely have categories where we're just a bit newer.

Lauren St. Clair Waugh: You know, some of the new markets we mentioned earlier, sometimes we haven't really set up commercial relationships there yet. There are areas like travel and taxes where we have a lot of informational content that doesn't necessarily monetize. So it kind of varies, especially through the new cycle. I mean, when things like investing or crypto take off, there's parts of that content that also don't monetize as well. And that's just one follow-up.

Tim Chen: As your insurance segment gets bigger, your insurance revenue gets bigger. Can you give us any feedback on, you know, sort of the customer experience it's having relative to your other products? Yeah, I mean, I think what you may be referring to is that, you know, sometimes in the industry, some of the insurance experiences don't have a great customer feedback score because of, you know, phone numbers being sold to multiple brokers. We really try to minimize that.

Tim Chen: We're working hard to ask people more questions up front and really match them to the right provider. And so, you know, it's a journey. But it's very important for us to keep on investing in that and keep on improving it quarter after quarter. Thank you.

Operator: Thank you, and one moment for our next question. Our next question is going to come from the line of Peter Christiansen with Citi. Your line is open. Please go ahead.

Peter Corwin Christiansen: Thank you, good afternoon. Thanks for the question. Tim, I just want to go back to your thoughts on credit cycles and recognize that each credit cycle is different. But I guess in previous cycles, while you're still growing organic traffic, when partners do come back, do they come back to spend levels that match? Your traffic levels currently, or is it you know really at their own pace, do they start coming back, and then I just had a quick follow-up Yeah, I'd say historically, you would tend to have partners on the credit card side want all of the qualified lending demand that you can give them. And so because, yeah, loan balances that are, https://www.nerdwallet.com, Thank you. That's helpful.

Tim Chen: And then there's been some M&A on your partner side lately. I know you guys are very, very diversified on the partner side, so I'm not really asking about issues there. But can you just walk through what you typically go through in that process?

Tim Chen: Do you have to kind of rewind your contract with that with the new established partner? Or are there any other dynamics that we should be aware of? Yeah, I'd literally say, I mean, we don't have too much precedent for something like this.

Tim Chen: But yeah, typically, their products can be quite different, especially across the prime portfolios, and quite complementary. And so, you know, we think that there wouldn't really be a need to rewind a major issuer. We also tend to work with all the large players, so we have pretty good coverage. I think our value proposition in terms of, you know, highly qualified consumers that understand the products is pretty compelling. So we tend to work with most people. That's helpful.

Peter Corwin Christiansen: Thank you, Tim. Thank you, and I'm showing no further questions at this time, and I would like to hand the conference back to management for closing remarks. All right, thank you all for the questions today, and thank you also to the nerds whose commitment to our consumers and our vision delivers all of our results. So with that, we'll see everyone next quarter.

Speaker Change: [music].

Operator: This concludes today's conference call. Thank you for participating. You may now disconnect. ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ?? ?? ?? ?? ?? ?? ?? ?? Good day and thank you for standing by.

Operator: Welcome to the NerdWallet, Inc. Q1 2024 Earnings Conference 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 * 11 on your telephone. You will then hear an automated message advising you that your hand is raised.

Caitlin MacNamee: To withdraw your question, please press star 11 again. Please be advised, today's conference is being recorded. I would now like to hand the conference over to your speaker today, Caitlin MacNamee. Madam, please go ahead.

Caitlin MacNamee: Thank you, operator. Welcome to the Nerdwallet Q1 2024 earnings call. Joining us today are co-founder and chief executive officer Tim Chen and chief financial officer Lauren St. Clair. Our 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 disclosure obligations under SEC Regulation FD from time to time.

Tim Chen: Thanks Caitlin. In late 2023, Nerdwallet launched a new national brand campaign, Don't Make Your Future You Hate You, reminding consumers that the financial decisions they make today can have an outsized effect on their future well-being, and, of course, that they can turn to Nerdwallet for trusted guidance as they make those decisions. In Q1, we saw this campaign achieve great results as our aided brand awareness reached record highs despite brand spend being down 30% year-over-year, reinforcing the resonance of our product offer.

Tim Chen: Similar to our guidance to consumers, we operate with a long-term orientation. We remain committed to improving our efficiency, so it's been great to see our brand marketing spin work harder for us relative to last year. In Q1, we more than doubled non-GAAP operating income year-over-year.

Speaker Change: [music].

Tim Chen: We also continue to take share in a large and growing market, independent of macroeconomic factors. Our primary addressable market, U.S. Financial Services Digital Advertising, is expanding with a 2023 four-year CAGR of approximately 15%, and Nerdwallet's share in this market has also increased with a four-year revenue CAGR of 27%.

Tim Chen: In Q1, specifically, we are proud of our results. We exceeded guidance across revenue, adjusted EBITDA, and non-GAAP operating income while growing monthly unique users by 25% year-over-year. These results not only speak to our relentless self-improvement but also enable us to invest in NerdWallet's future. Our vision is to build a trusted financial ecosystem, a single platform where consumers and SMBs can learn, shop, connect their data, and make decisions about their money.

Tim Chen: In Q1, we drove progress across our group, and I feel confident that the decisions we're making today will result in durable value for our consumers and our business. This quarter, we continue to leverage our trusted brand and playbook to land and expand efficiently in new markets and categories. Internationally, we scaled efforts across the UK, Canada, and Australia. Collectively, MUU growth for these markets outpaced U.S. growth in Q1 at 31% year over year, giving us increased conviction in our ability to grow our international presence over the coming year. Meanwhile, our vertical expansion efforts significantly increased our velocity.

Speaker Change: He knew your hand, just raised to withdraw your question. Please press star one again. Please be advised today's conference is being recorded I would now like to hand, the conference over to your speaker today Kaitlyn Mcnamee Ma'am. Please go ahead.

Caitlin MacNamee: Thank you operator welcome to the Nerd, what Q1 2024 earnings call joining us today are co founder and Chief Executive Officer, Tim Chen and Chief Financial Officer, Lauren. Thank Claire our press release and shareholder letter are available on our Investor Relations website and a replay of this update will also be available.

Caitlin MacNamee: Following the conclusion of today's call.

Tim Chen: In Q1, this team furthered their efficiency by leveraging machine learning to more accurately route consumers to the right level of support for their circumstances. Over time, we'll seek to bring this hybrid model to more areas to help people make smarter financial decisions. As we've achieved record MEU growth over the past several quarters, we've doubled down on our registration and data-driven engagement efforts. By registering users, we can more easily engage and reengage them over time with thoughtful, personalized cross-sell opportunities, increasing their loyalty to NerdWallet and making it a no-brainer for consumers that turn to us directly for their financial product needs.

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

Caitlin MacNamee: <unk> urge you to consider these risk factors and remind you that we undertake no obligation to update the information provided on this call to reflect subsequent events or circumstances.

Caitlin MacNamee: Be aware that these statements should not be considered a guarantee of future performance.

Caitlin MacNamee: With that I will now turn it over to Tim Chen our co founder and CEO Tim.

Speaker Change: In Q1, we've seen this campaign achieve great results as our aided brand awareness reached record highs despite brand spend being down 30% year over year reinforcing the residents of our product offering.

Speaker Change: Similar to our guidance for consumers, we operate with a long term orientation.

Speaker Change: We remain committed to improving our efficiency. So it's been great to see our brand marketing spend work harder for us relative to last year.

Speaker Change: In Q1, we more than doubled non-GAAP operating income year over year by continuing to bolster efficiency, we'll have more capital to reinvest in more resilience throughout the cycle.

Speaker Change: We're seeing our long term orientation bear fruit, our insurance category has faced inflationary headwinds for most of the past few years, but we continue to invest in improving our marketplaces. This.

Speaker Change: This work has paid off with record revenue in Q1, despite an end market that has yet to fully recover. These results are a great example of something I've said before our business is cyclical and over time, we know that headwinds and tailwind will offset each other so our priority is growing from cycle to cycle.

Speaker Change: We also continue to take share in a large and growing market independent of macroeconomic factors, our primary addressable market U S financial services digital advertising is expanding with a 2023 or four year CAGR of approximately 15% and <unk> share. In this market has also increased with a four year revenue CAGR of 27.

Lauren St. Clair Waugh: As we've spoken about previously, last year's regional banking crisis drove increased balance sheet constraints and issuer conservatism. We believe these dynamics are temporal rather than structural, but they continue to weigh on our Q1 year-over-year results. We still saw our seasonal cadence of a quarter over quarter increase from Q4 to Q1. However, while issuers remain conservative in balance sheet intensive areas, such as balance transfer cards, consumer demand for products remains high. This gives us confidence that we will see an eventual recovery as issuer appetite returns. Loans generated Q1 revenue of $21 million, declining 3% year over year.

Speaker Change: In Q1, specifically, we are proud of our results.

Speaker Change: We exceeded guidance across revenue adjusted EBITDA and non-GAAP operating income, while growing monthly unique users by 25% year over year.

Speaker Change: These results not only speak to our relentless self improvement, but also enable us to invest in <unk> future <unk>.

Speaker Change: Our vision is to build a trusted financial ecosystem or a single platform, where consumers and Smes can learn shop connect their data and make decisions about their money.

Speaker Change: In Q1, we drove progress across our growth pillars, and I feel confident that the decisions. We're making today will result in durable value for our consumers and our business. This quarter, we continued to leverage our trusted brand and playbook to land and expand efficiently a new markets and categories.

Speaker Change: Internationally, we scaled efforts across the UK, Canada, and Australia collectively in these new growth for these markets outpaced U S growth in Q1 at 31% year over year, giving us increased conviction in our ability to grow our international presence over the coming years.

Speaker Change: Meanwhile, our vertical expansion efforts significantly increased our velocity by repurposing existing assets versus building from scratch with expensive development time, we were able to launch and monetize new home services categories within weeks, while still investing in other nascent categories like Medicare social security and estate planning.

Speaker Change: Vertical integration remains a key focus as we look to grow from cycle to cycle.

Speaker Change: These efforts payer Nevertheless, trusted brand and reach with best in class consumer shopping experiences a combination that should drive improved monetization over time.

Speaker Change: This quarter, we focused on improving our services to cater to consumer.

Speaker Change: More human guidance, when making financial decisions.

Speaker Change: We've always seen tiered support options work effectively and SMB, which operates a hybrid model, including both digital and human assisted shopping experiences.

Speaker Change: In Q1 this team further efficiency by leveraging machine learning to more accurately around consumers to the right level of support for their circumstances.

Speaker Change: Overtime, we will seek to bring this hybrid model to more areas to help people make smarter financial decisions.

Speaker Change: As we've reached achieved record <unk> growth over the past several quarters, we've doubled down on our registration and data driven engagement efforts by registering users, we can more easily engage and reengage them overtime with thoughtful personalized cross sell opportunities increasing their loyalty to <unk> and making it a no brainer.

Lauren St. Clair Waugh: SMB loans remain pressured by elevated rates and tighter underwriting, but we continue to drive growth with our diversified product offerings for small and mid-sized businesses in areas such as credit cards, banking, and software. We believe this serves as a further proof point that we have a substantial runway of additional subcategories outside of S&B loans that can provide tailwinds over the long run. Finally, our Emerging Verticals, formerly named our Other Verticals Revenue Product Category, finished Q1 with revenue of $60 million, declining 2% year-over-year.

Speaker Change: For consumers that turned to us directly for their financial product news already we have seen that our active registered users visit us more than three times a month on average signaling the potential value of our registered user base.

Speaker Change: In Q1, we drove a significant increase in registered users, which we attribute to work in areas such as optimizing registration prompts as part of our larger insurance shopping funnel.

Speaker Change: We also continued to relentlessly improve how we re engage users over time much.

Speaker Change: Much like our vertical integration work and F&B seeks to route consumers to the right experience for them. Our CRM work is focused on increasingly personalized campaigns that matched registered users with content and offers tailored to their profiles.

Lauren St. Clair Waugh: As a reminder, after the regrouping of S&V products revenue, emerging verticals consist of areas such as banking, insurance, investing, and international. Banking declined 9% year over year as we lap our toughest comparison period in 2023, but it grew versus Q4, which we primarily attribute to our seasonal KDAB.

Speaker Change: I am proud of our results in Q1, and the progress we've made toward our vision for consumers.

Speaker Change: <unk> delinquency rates and high interest rates are contributing to a tough learning environment. Despite seemingly positive economic indicators. We believe these are normal cyclical dynamics. So we are focused on the long term to grow from cycle to cycle in the meantime, I'll pass it over to Loren to provide a financial update.

Lauren St. Clair Waugh: Despite the recent moderation of consumer demand, we expect to eventually reach a new normal in our banking vertical as demand remains higher than it was in a zero interest rate environment. The decline in banking was partially offset by growth in investment due to recent stock market strength combined with a resurgence in our insurance vertical. Despite tough comps from the prior year, insurance revenue grew 5% year-over-year in Q1.

Loren: Thanks, Tim we ended the quarter above the high end of our guidance range, delivering Q1 revenue of $162 million down 5% year over year.

Loren: We remain in a cyclically depressed lending environment affecting interest rate sensitive areas, such as loans and balance transfer credit cards.

Loren: Our first quarter results showcase early signs of growth recovery being insight led by both insurance and SMB verticals.

Loren: Let's take a deeper look at the revenue performance during the quarter within each category.

Loren: Credit cards delivered Q1 revenue of $50 million declining 19% year over year.

Loren: As we've spoken about previously last year's regional banking crisis drove increased balance sheet constraints and issuer conservatism.

Lauren St. Clair Waugh: A four-point increase versus the prior year, primarily driven by leverage and brand marketing as we continue to optimize our investment levels, which began during the latter three quarters of 2023. We also earned over $25 million of adjusted EBITDA at a 16% margin. In the first quarter, we had GAAP operating income of $3.7 million and net income of $1.1 million, which includes a $3.7 million income tax provision.

Loren: We believe these dynamics are temporary rather than structural but they continue to weigh on our Q1 year over year results.

Loren: We still saw our seasonal cadence of a quarter over quarter increase from Q4 to Q1.

Loren: While issuers remain conservative and balance sheet intensive areas, such as balance transfer cards consumer demand for products remains high.

Loren: This gives us confidence that we will see an eventual recovery as issuer appetite returns.

Loren: Loans generated Q1 revenue of $21 million declining 3% year over year.

Loren: Our personal loans vertical grew 12% year over year during Q1, a deceleration versus Q4 as we have not yet fully recovered from the pullback that began last quarter, while we work through some of the growing pains and scaling with new audiences and partners.

Loren: We still believe that there is a backlog of consumer demand in personal loans as high loan rates have reduced the incentive for consumers to refinance credit card debt.

Loren: While we do not expect to return to revenue levels from last year in the near term, we will continue to invest in this vertical in anticipation of an improving lending environment.

Loren: We expect that macro changes combined with leveraging our improving ability to align consumer demand more effectively with financial services providers will put us in a prime position to take advantage of demand as it surfaces.

Loren: We are also optimistic that structural improvements we've made to our mortgage marketplaces will help us capture meaningful share when the housing market recovers.

Loren: As a reminder from last quarter, we recently changed our revenue product category presentation and are now providing SMB products revenue as a separate disclosure.

Loren: SMB products, consisting of loans credit cards, and other financial products and services intended for small and mid sized businesses delivered Q1 revenue of $30 million growing 21% year over year.

Loren: SMB loans remained pressured by elevated rates and tighter underwriting, but we continue to drive growth with our diversified product offerings for small and mid sized businesses in areas such as credit cards banking and software.

Lauren St. Clair Waugh: Despite these near-term monetization pressures, more MUUs engaging with our learned content and coming to us during specific macro events builds our brand recognition and trust and compounds the value of our franchise over time. Now, to our Financial Outlook. Similar to what we discussed last quarter, we believe that we have a line of sight to returning growth in Q2. We will continue to provide quarterly guidance, along with a mix of quantitative and qualitative commentary for full-year expectations.

Loren: We believe this serves as a further proof point that we have a substantial runway of additional subcategories outside of SMB loans that can provide tailwind over the long run.

Loren: Finally, our emerging verticals, formerly named our other verticals revenue product category finished Q1 with revenue of $60 million declining 2% year over year.

Loren: As a reminder, after the regrouping of SMB products revenue emerging verticals consist of areas such as banking insurance investing and international.

Loren: Thinking declined 9% year over year as we lap our toughest comparison period in 2023 grew versus Q4, which we primarily attribute to our seasonal cadence.

Loren: Despite the recent moderation of consumer demand, we expect to eventually reach a new normal and our banking vertical as demand remains higher than it was in a zero interest rate environment.

Loren: The decline in banking was partially offset by growth in investing due to recent stock market strength combined with the resurgence in our insurance vertical.

Loren: Despite tough comps from the prior year insurance revenue grew 5% year over year in Q1.

Loren: We remain optimistic that the end market will continue to improve assuming inflation remained stable.

Loren: Moving on to investments and profitability during.

Loren: During Q1, we earned nearly $11 million of non-GAAP operating income at a 7% margin a four point increase versus the prior year, primarily driven by leverage in brand marketing as we continue to optimize our investment levels, which began during the latter three quarters of 2012.

Lauren St. Clair Waugh: But the timing of the recovery in areas such as balanced transfer cards, combined with how potential interest rate movements will impact inversely correlated demand in banking and loans, remains uncertain and will ultimately influence how high those double-digit growth rates will be. Moving to Profitability, we expect Q2 non-GAAP operating income in the range of negative $1.5 to $1.5 million.

Loren: Three.

Loren: We also earned over $25 million of adjusted EBITDA at a 16% margin.

Loren: In the first quarter, we had GAAP operating income of $3 $7 million and net income of $1 1 million.

Loren: Which includes a $3 $7 million income tax provision.

Loren: Similar to what we've mentioned in previous quarters, we expect to be a cash taxpayer for the foreseeable future. Please.

Loren: Please refer to today's earnings press release for a full reconciliation of our GAAP to non-GAAP measures.

Loren: Consumers continue to turn to the nurse for their money questions. We provided trustworthy guidance to 29 million average monthly unique users in Q1 up 25% year over year.

Loren: Growth was the result of strength in many areas across Nord wallet, such as investing travel taxes and insurance.

Loren: We are seeing consistently strong consumer demand for both our learn and shop content, though our learn content has been a larger portion of where consumer demand has more recently concentrated causing higher <unk> growth with some pressure on revenue per <unk>.

Loren: Growth in areas, such as investing was bolstered by interest in the stock market as well as bitcoin strength and.

Loren: And insurance saw rising premiums drive more consumers to look for the best options for them.

Loren: Despite these near term monetization pressures more and you use engaging with our learning content and coming to us during specific macro events builds our brand recognition and trust and compounds the value of our franchise overtime.

Loren: On to our financial outlook.

Loren: Similar to what we discussed last quarter, we believe that we have line of sight to returning growth in Q2.

Loren: We will continue providing quarterly guidance, along with a mix of quantitative and qualitative commentary for full year expectations.

Loren: We expect to deliver second quarter revenue in the range of $147 million to $152 million.

Loren: Which at the midpoint with increased 4% versus prior year, but decreased sequentially roughly 8%.

Loren: <unk> larger than our normal seasonal cadence.

Loren: To give you more color on our Q2 expectations.

Loren: The primary driver of the larger than normal seasonal decline from Q1 to Q2 is that banking demand continues to moderate.

Lauren St. Clair Waugh: We're proud of the results we've delivered so far this year and remain optimistic about the future. Our growing consumer mindshare with strong traffic and brand signals gives us confidence that as macroeconomic conditions recover, our ability to meet consumer needs will strengthen our long-term positioning. Operator?

Loren: In addition, we are still facing tight lending conditions across both credit cards and loans.

Loren: Given the material increase we've recently experienced in insurance revenue, we expect to see a return to much higher year over year growth in Q2 as comps get easier.

Loren: We are also seeing continued momentum in SMB products.

Loren: As we look to the rest of the year, we remain confident in our ability to return to double digit revenue growth at some point in the second half given recent recovery in SMB products and insurance.

Loren: But the timing of the recovery in areas such as balance transfer cards combined with how potential interest rate movements will impact inversely correlated demand in banking and loans remains uncertain and will ultimately influence how high those double digit growth rates will be.

Loren: Moving to profitability we.

Loren: We expect Q2 non-GAAP operating income in the range of negative one five to $1 5 million.

Loren: We began to pull back on our brand investment during Q2 of 2023 and are not expecting to see the same level of year over year margin accretion during Q2 this year as previous quarters.

Loren: We are still facing headwinds and monetizing portions of our organic traffic, including areas such as balance transfer credit cards, and as we start to see tailwind in areas such as insurance and F&B normalizing demand from financial services providers should result in more paid traffic.

Loren: Acquisition.

Loren: As we've mentioned in the past, we view paid marketing as a means to an end and we will continue to spend in a disciplined manner with the aim to be paid back within the quarter in which we spend.

Loren: Compared to Q1, non-GAAP Oi will be lower sequentially due to a larger than seasonal decline in revenue, partially offset by lower brand spend.

Loren: We will also have planned increases in employee engagement costs, including a biannual employee event, which will have roughly at two point margin impact in the quarter.

Loren: We are reiterating our full year guidance for 2020 for margin expectations.

Loren: Given recent economic data, which indicates continued inflationary pressures, we believe where we fall in these ranges will depend on the pace of improvements in the lending environment.

Loren: Aligned with our previous full year guidance, we expect non-GAAP Oi margin of approximately six 5% to 8% of revenue and adjusted EBITDA margin in the range of 18 to 19, 5% of revenue.

Loren: We're proud of the results we've delivered so far this year and remain optimistic about the future.

Loren: Our growing consumer mind share, which saw strong traffic and brand signals.

Speaker Change: And our first question is going to come from the line of Justin Patterson with Keybanc. Your line is open. Please go ahead.

Justin Tyler Patterson: Great. Thank you very much.

Justin Tyler Patterson: Lauren you had called out the growing small challenges within the balance transfer product I know last quarter, you had some growing pains smashing saw the near Prime consumers could you talk about just some of the efforts you're taking to mitigate those issues and how we should think about that recovery.

Lauren St. Clair Waugh: Just any comments on that, and then I have a follow-up. Please. Sure, I'll take that piece. So just to reiterate, first for the guide for Q2 revenue, we said that our expectations are 147 to 152 million, growing 4% year-over-year at the midpoint. We also said that we expect to return to double-digit rates of growth at some point in the second half, and this is led by the strength that we're seeing in S&B products and insurance.

Justin Tyler Patterson: Yes, I'm actually going to hand that question over to Tim to talk a little bit more about personal loans. So.

Lauren St. Clair Waugh: So we have not clarified exactly when we expect those double-digit growth rates to kick in, but we know, given the strength in those two verticals, in particular, that we're confident that we will get there. We also wanted to call out that the timing of recovery in areas such as balance transfer cards, as well as any interest rate-driven demand changes in banking and loans, is going to influence how high those double-digit growth rates will be. Great, that's really helpful.

Tim Chen: That win win and we feel we're on the right path here.

Speaker Change: Got it let them with respect to just home services you called that out as an example of product velocity and Repurposing assets would love to hear a little bit more about just the efforts to scale that category and then get some new ones like social security Medicare up and running.

Speaker Change: Yes.

Speaker Change: We've got a playbook in our land and expand it tends to lead with creating quality content. In these categories and then really matching consumers with the best products out there so nothing too different.

Speaker Change: After we do this over and over again, we're getting more efficient at launching new verticals a bit more efficiently over time.

Speaker Change: Is what we're calling out.

Speaker Change: Alright, thank you.

Speaker Change: Thanks.

Speaker Change: Thank you and one moment as we move on to our next question.

Speaker Change: And it looks like our next question is going to come from the line of Ralph <unk> with William Blair. Your line is open. Please go ahead.

Tim Chen: Just, just kind of curious how you think about that spend going forward? Yeah, so we're really proud of some of the learnings and efficiency we've driven there. Yeah, naturally, in an environment where it's tougher to monetize, we look at those return hurdles, and we'll make some adjustments. So that's some of what you saw over the past couple quarters.

Ralph: Hey, good afternoon. Thanks for taking my question, just first maybe a little bit more color. If you could on the commentary around double digit growth in the second half.

Ralph: Sort of like on a consolidated basis with each quarter grow double digit would it accelerate just any comments on that and then I have a follow up please.

Speaker Change: Sure I'll take that piece, so just to reiterate.

Tim Chen: But yeah, we're also still relatively new to this. We're very data driven. So given 2022 is the first full year we ran brand campaigns, we're getting better at things like creative and which channels to use. And so we're very ROI driven there. And we'll make adjustments up or down there. As of now, we'd say that, for the full year, 2024, the guide assumes a slightly lower amount of spend versus last year, but we're going to reserve the right to flex that up and down depending on a variety of factors. Great. Thanks, Tim. Thanks, Lauren.

Speaker Change: First for the guide for Q2 revenue, we said that our expectations are 147% to $152 million growing 4% year over year at the midpoint. We also said that we expect to return to double digit rates of growth at some point in the second half and this is led by the strength that we are.

Speaker Change: Great. That's really helpful. Just on the brand campaign, you're seeing really good results in <unk> spending was down about 30% from the letter is that sort of reshape your thought process on spending on brand campaign or is that sort of just a temporary phenomenon in 2023.

Speaker Change: I'm curious, how you're thinking about that spend going forward.

Speaker Change: Yes. So so we're really proud of some of the learnings and efficiency, we've driven there.

Speaker Change: Yes naturally in an environment, where it's tougher to monetize we look at those return hurdles and we'll make some adjustments. So that's some of what you saw over the past couple of quarters.

Michael Nicholas Infante: So, I'm curious about the time at which issuers may start to more aggressively want to acquire new customers. Yeah, thanks for the question. It's a good question.

Speaker Change: As of now we would say that for the full year 'twenty for the guide it does assume a slightly lower amount of spend versus last year, but we're going to reserve the right to flex that up and down depending on a variety of factors.

Speaker Change: Great. Thanks, Tim Thanks, a lot.

Tim Chen: We think that delinquencies and ultimately, or delinquencies are a leading indicator, right, in terms of when issuers should start getting more aggressive. You know, the bigger balance transfer players are also a bit balance sheet constrained beyond just the credit risk part of it. And so, you know, we've been through a few cycles like this in the past. Past experience tells us that this is pretty historically abnormal for this to persist, and it tends to revert over time. So it's hard to call the exact timing when that happens.

Speaker Change: Thank you and one moment as we move onto our next question.

Speaker Change: And our next question comes from the line of James Fawcett with Morgan Stanley. Your line is open. Please go ahead.

Speaker Change: Hi, everyone. It's Michael in Fontana for James Thanks for taking our question.

Speaker Change: So im curious how youre thinking about the time at which issuers may start to more aggressively wanted to acquire new customers.

Tim Chen: And yeah, for us, it's really about investing through the cycle. You know, we're still only in single digits in market share and overall card originations and see ample opportunity to grow that by doing things like registering more users, reengaging them, and increasing our conversion rates. So we're focusing on the long run. I appreciate that; that's helpful. And then maybe just on the NerdUp card, I know we're obviously very early in the product journey, but this is obviously an important customer acquisition tool more broadly. So I'm just curious if you could give us a little bit of color just in terms of how traction has trended thus far. Thanks.

Speaker Change: Yes, thanks for the question.

Speaker Change: It's a good question.

Speaker Change: We think that the delinquencies and ultimately.

Tim Chen: Delinquencies are a leading indicator right in terms of when issuers should start getting more aggressive.

Speaker Change: Bigger dollars.

Speaker Change: Transfer players are also a bit balance sheet constrained beyond just the credit risk part of it and so we've been through a few cycles like this in the past surpassed experience tells us that this is pretty historically abnormal for this to persist and it tends to revert over time. So it's.

Speaker Change: Hard to call the exact timing on when that happens.

Speaker Change: And yes for us, it's really about investing through the cycle, we're still only single digit market share in overall card originations and see ample opportunity to grow that by doing things like registering more users re engaging them and increasing our conversion rates. So we're focusing on the long run.

Speaker Change: I appreciate that that's helpful. And then maybe just on the <unk> card I know were obviously very early in the product journey, but this is obviously an important customer acquisition to a more broad basis. So I'm. Just curious if you could give us a little bit of color just in terms of how traction has trended thus far thanks.

Michael Nicholas Infante: So for right now, I'd say it's early days, but we're on the right track. You know, just want to reiterate the goal here is, as you mentioned, help consumers build credit history, engage them, and get them graduated into unsecured products. So yeah, we're seeing improvements in things like credit scores, we're seeing good engagement. And so we're pretty happy so far. Thanks, Tim.

Speaker Change: So for right now I'd say, it's early days, it's on the right track.

Speaker Change: Just want to reiterate the goal here is as you mentioned to help consumers build credit history engage them.

Speaker Change: And get them.

Speaker Change: Graduated into unsecured products.

Speaker Change: Yes, we're seeing improvements in things like credit scores were seeing good engagement and so we're pretty happy so far.

Speaker Change: Thanks, Tim.

Speaker Change: Yes.

Operator: Thank you, and one moment for our next question. And our next question is going to come from the line of Jed Kelly with Oppenheimer & Co. Your line is open. Please go ahead.

Speaker Change: Thank you and one moment for our next question.

Speaker Change: And our next question is going to come from the line of Jed Kelly with Oppenheimer <unk> Co. Your line is open. Please go ahead.

Jed Kelly: Great Great. Thanks for taking my question just.

Jed Kelly: Going back to some of the pain.

Jed Kelly: Paid marketing comments.

Jed Kelly: Given that you are having a good brand awareness in all of the engagement we're having.

Jed Kelly: On the non monetize that traffic can you just talk about how we should think about sort of the cadence as you think about performance marketing.

Jed Kelly: This year and then in.

Jed Kelly: In terms of the content that users that are reading content.

Jed Kelly: Monetizing what type of products or what type of education and articles or they read it. Thank you.

Lauren St. Clair Waugh: Sure, I'll take the first piece of that around paid marketing. So first off, we think both brand and paid, and our organic channels all complement one another. And because 70% of our traffic comes through organic, we've been able to reinvest in more acquisition channels like brand and performance. We operate performance marketing in a disciplined way, aiming to be in-quarter profitable, adding incremental non-GAAP OI dollars.

Speaker Change: We operate performance marketing in a disciplined way aiming to be in quarter profitable, adding incremental non-GAAP Oi dollars.

Lauren St. Clair Waugh: And we've said this for a while, but we really do think of performance marketing as a variable expense that we will dial up or down depending on returns. And we also view this as a means to an end as part of our registration and engagement initiatives. So we'll continue to be prudent, but we see increased spend as a positive, as performance marketing is a flexible lever to add incremental non-GAPA-wide dollars; we get more folks the opportunity to register, and it helps us to continue to take share.

Speaker Change: So we'll continue to be prudent, but we see increased spend as a positive as performance marketing as a flexible lever to add incremental non-GAAP of <unk> dollars, we get more folks the opportunity to register and it helps us to continue to take share.

Lauren St. Clair Waugh: And then on the non-monetizing MEU piece, you definitely have categories where we're just a bit newer, you know, some of the new markets we mentioned earlier; sometimes we haven't really set up commercial relationships there yet. There are areas like travel and taxes, where we have a lot of informational content that doesn't necessarily monetize. So it kind of varies, especially through the new cycle. I mean, when things like investing or crypto take off, there's parts of that content that also don't monetize as well.

Speaker Change: And then on the non monetizing <unk> you definitely have categories, where we're just a bit newer.

Jed Kelly: Some of the new markets, we mentioned earlier, sometimes we havent really set up commercial relationships there yet.

Jed Kelly: He is like travel and Texas, where we have a lot of informational content that doesn't necessarily monetize so it kind of varies.

Jed Kelly: Especially through the new cycle when things like.

Jed Kelly: Investing our crypto takeoff, there's parts of that content.

Tim Chen: And that's just one follow-up. As your insurance segment gets bigger, your insurance revenue gets bigger. Can you give us any feedback on, you know, sort of the customer experience it's having relative to your other products? Yeah, I mean, I think what you may be referring to is that, you know, sometimes in the industry, some of the insurance experiences don't have a great customer feedback score because of, you know, phone numbers being sold to multiple brokers. We really try to minimize that. We're working hard to ask people more questions up front and really match them to the right provider. And so, you know, it's a journey.

Jed Kelly: So it doesn't monetize as well.

Jed Kelly: Okay.

Speaker Change: And then just one follow up is your insurance segment.

Speaker Change: Bigger your insurance revenue gets bigger can you give us any feedback on sort of the customer experience having relative to your other products.

Speaker Change: Yes, I mean, I think what you maybe referring to is that sometimes in the industry. Some of the insurance experiences don't have.

Speaker Change: Great customer feedback square because of <unk>.

Speaker Change: So a number of things sold to multiple brokers.

Jed Kelly: We really try to minimize that we're working hard to.

Jed Kelly: People more crushing upfront really match them to the right provider.

Jed Kelly: And so.

Tim Chen: But it's very important for us to keep on investing in that and keep on improving it quarter after quarter. Thank you. Thank you, and one moment for our next question. Our next question is going to come from the line of Peter Christiansen with Citi. Your line is open. Please go ahead. Thank you. Good afternoon.

Jed Kelly: It's a journey.

Jed Kelly: It's very important for us to keep on investing in that and keep on improving that quarter after quarter.

Speaker Change: Thank you okay.

Speaker Change: Thank you and one moment for our next question.

Speaker Change: Our next question is going to come from the line of Peter Christiansen with Citi. Your line is open. Please go ahead.

Peter Corwin Christiansen: Thanks for the question. Tim, I just want to go back to your thoughts on credit cycles and recognize that each credit cycle is different, but I guess in previous cycles, while you're still growing organic traffic, when partners do come back, do they come back to spend levels that match? Your traffic levels currently, or is it, you know, really at their own pace, will they start coming back? And then I just had a quick follow-up.

Peter Corwin Christiansen: Thank you good afternoon. Thanks for the question.

Peter Corwin Christiansen: I'll just we'll go back to your thoughts on credit cycles recognize each credit cycle different.

Peter Corwin Christiansen: I guess in previous previous cycles.

Peter Corwin Christiansen: While you are still growing organic traffic when partners do come back they come back.

Peter Corwin Christiansen: <unk> levels that match.

Peter Corwin Christiansen: Your your traffic levels currently or is it really at their own pace.

Peter Corwin Christiansen: They start coming back and then I just had a quick follow up.

Tim Chen: Yeah, I'd say historically, you would tend to have partners on the credit card side want all of the qualified lending demand that you can give them. And so because, yeah, loan balances that are high quality or revenue, right? So, historically, that tends to be uncapped. But when you when you go into one of these credit crunches, sometimes you see people pull back on how much volume their how much volume appetite they have.

Speaker Change: Yes, I would say.

Speaker Change: Historically, you would tend to have partners on the credit card side, one all of the qualified lending demand.

Speaker Change: You can give them.

Peter Corwin Christiansen: Because yes loan balances that are.

Peter Corwin Christiansen: High quality of our revenue rate so.

Peter Corwin Christiansen: Correctly that tends to be uncapped when you go into one of these credit crunches, sometimes you see people pull back on how much volume or how.

Tim Chen: And so you know, we've been seeing some of that. And so we think that's historically abnormal; we'd expect, kind of, at some point, to return to a more normal dynamic there. Thank you, that's helpful.

Peter Corwin Christiansen: How much volume appetite they have and so we've been seeing some of that and so we think thats historically abnormal we would expect.

Peter Corwin Christiansen: Kind of at some point to return to a more normal dynamic there.

Speaker Change: Thank you that's helpful and then.

Peter Corwin Christiansen: And then there's been some M&A on your partner side lately. I know you guys are very, very diversified on the partner side, so I'm not really asking about issues there. But can you just walk through what you typically go through in that process? Do you have to kind of rewind your contract with that with the new established partner? Or are there any other dynamics that we should be aware of?

Speaker Change: Kind of re when your contract with that with the new established partner or are there any other dynamics that we should be aware of.

Tim Chen: Yeah, I'd literally say, I mean, we don't have too much precedent for something like this. But yeah, typically, their products can be quite different, especially across the prime portfolios, quite complementary. And so, you know, we think that there wouldn't really be a need to rewind a major issuer.

Speaker Change: Yes, I'd say I mean, we don't have too much.

Peter Corwin Christiansen: Precedents for something like this but.

Peter Corwin Christiansen: Typically the products can be quite different especially across the prime portfolios quite complementary and so we think that there wouldn't really be a need to re win.

Tim Chen: We also tend to work with all the large players, so we have pretty good coverage. I think our value proposition in terms of, you know, highly qualified consumers that understand the products is pretty compelling. So we tend to work with most people.

Peter Corwin Christiansen: Major issuer, we also tend to work with all the large players. So we have pretty good coverage I think our value proposition in terms of <unk>.

Peter Corwin Christiansen: Highly qualified consumers that understand the products is pretty compelling. So we tend to work with most people.

Operator: That's helpful. Thank you, Tim. Thank you, and I'm showing no further questions at this time, and I would like to hand the conference back to management for closing remarks. All right, thank you all for the questions today, and thank you also to the nerds whose commitment to our consumers and our vision delivers all of our results. So with that, we'll see everyone next quarter. This concludes today's conference call. Thank you for participating. You may now disconnect.

Speaker Change: That's helpful. Thank you Tim.

Tim Chen: Thank you and I'm showing no further questions at this time I would like to hand, the conference back to management for closing remarks.

Speaker Change: This concludes today's conference call. Thank you for participating you may now disconnect.

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