Q1 2025 NerdWallet Inc Earnings Call
Good day and thank you for standing by.
Speaker Change: Welcome to the Nerdwallet Inc. 1st quarter, 2025 earnings call. At this time, all participants are in a listen only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising that your hand is raised.
To withdraw your question, please press star 1-1 again.
Speaker Change: Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Caitlin MacNamee. Please go ahead.
Caitlin MacNamee: Thank you, operator. Welcome to the Nerdwallet Q1 2025 earnings call. Joining us today are co-founder and chief executive officer Tim Chen and chief financial officer John Lee. Our press release and shareholder letter are available on our investor relations website and the 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. As a reminder, today's call is being webcast live and reported.
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: 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 Gap and non-GAAP financial measures.
Caitlin MacNamee: A reconciliation of gaps in on- 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 , Tim.
Tim Chen: Thanks, Caitlin. In Q1, Nerdwallet Group revenue 29% year of year to $209 million while delivering $9 million and non-GAAP operating income.
Tim Chen: These results build off many of the dynamics we've discussed with you over the past several quarters. We continue to see particular strength in our insurance business as the unmarket normalizes and as the improvements we've made to our shopping experiences enable us to take shares, cycle over cycle.
Tim Chen: Additionally, banking has continued to perform well, with products like high-yield savings accounts showing durable demand three years removed from a zero interest rate environment. At the same time, this quarter we saw some green shoots and other areas of the business that have been challenged.
Tim Chen: Such as personal loans, where we saw a return to growth after declining 51% Eurovere and Q424. And mortgages, where our acquisition of next-door lending contributed significantly to our 23% Eurovere increase in revenue, even as mortgages rates remained elevated.
Tim Chen: With all that said, we know questions have arisen about evolving trade policy and its potential implications across many industries including ours.
Tim Chen: Based on what we know today, we do not expect tariffs to have a material first order impact on our business and we currently see minimal second order effects.
Tim Chen: However, in a scenario with sustained inflation, a material spike in unemployment or material decline in business competence, we'd expect to be impacted as consumers and financial institutions go into a risk off mode.
Tim Chen: Through this period of uncertainty, we remain focused on serving our consumers and relentlessly improving our operational efficiency while investing opportunistically to further our vision.
Tim Chen: Last quarter we decided to retire our official MUU disclosure. While every KPI has some value, we no longer believe MUUs are the most relevant metric to understand our business, as MUU growth has been inversely correlated with revenue for some time now.
Tim Chen: Internally, our focus is on the quality of relationships we're building, especially through vertical integration rather than the sheer number of users.
Tim Chen: That said, as we noted last quarter, we still expect MEU's to decline year-of-year in the near-term, and this continued in Q1.
Tim Chen: However, after search engines significantly increase the presence of AI enhanced search modules in the second half of 2024, we are beginning to see more stability that assistance suggests we are in a position to rebase line and return to growth in early 2026.
Tim Chen: As a reminder, our business is cyclical, and over time, headwinds and tailwinds will offset each other, so our priority is growing from cycle to cycle. We have seen this most recently in insurance, but it's also true of our overall business.
Tim Chen: We are taking chair in a growing market with a 25% 5-year cager versus the U.S. Financial Services Digital Adspend Markets, 16%.
Tim Chen: While it can be tempting to over-index to short-term dynamics whether positive or negative or focused, instead, on relentlessly improving Nerdwallet through the cycle.
Tim Chen: By relentless improvement, we mean that we are focused on enhancing our core business with new capabilities and experiences that create more direct, engaged relationships with consumers and SMB's. In turn, making it a no-brainer for them to shop with nerd log.
and Q1 examples included progress across our three growth pillars.
Tim Chen: Land and Expand refers to efforts to increase the breadth and depth of the guidance we provide, whether in new categories, new audiences or new geographies.
Tim Chen: This quarter we invested in expanding our footprint in the Travel Rewards category, as well as diversifying our top of funnel with new organic channels.
Tim Chen: Specifically, we began publishing our new Travelner newsletter and leveraging our previous success with the Smart Money Podcast, launching our new Smart Travel Podcast, which debuted at number one on Apple Podcast Places and Travel Chart.
Tim Chen: Vertical integration our second pillar is an area where we are particularly focused.
Tim Chen: Vertical integration is the process by which we pair Nerdwallet's brand and reach with best-in-class shopping experiences, enabling us to better serve consumers through some of life's most stressful financial decisions, while improving monetization and capturing more down-fun all-unit economics.
Tim Chen: In Q1 we made further progress in integrating next-door lending, building on the launch of our Nerdwallet Mortgage Expert Experience in January .
Tim Chen: This new offering allows shoppers who prefer a do-it-for-me approach to connect directly with one of our mortgage experts for a concierge level experience while finding a great rate on mortgages.
Tim Chen: registration and data driven engagement and compasses efforts to build other experiences and programs that encourage users to come back to Nerdwallet for all their financial questions.
Tim Chen: We ended Q1 with a cumulative registered user base of over 26 million and saw another quarter of 2x year of year growth in our CRM channel which allows us to re-engage these members with personalized offers and smart nudges.
Tim Chen: With that, I will hand it over to John who joined us as CFO in mid-March to speak to our financial results and not like.
John Lee: Thanks Tim. I'm thrilled to be here and to partner with all of you as we drive towards our long-term vision.
John Lee: They're a significant opportunity ahead and my focus will be on sustainable growth, discipline, capital allocation with an increased emphasis on free casual generation.
and building long-term value for our consumers and shareholders.
John Lee: With that, let's get into our Q1 results. We seated behind of both our revenue and profitability guidance ranges.
John Lee: Delivering $209 million in revenue up 29% year-over-year and achieving $9 million in non-GAAP operating income.
John Lee: By and large, we attribute our revenue and profitability results this quarter to continued strength in our insurance and banking businesses.
John Lee: Where we saw a stronger second half of the quarter compared to typical seasonal trends.
John Lee: But let's take a deeper look at the revenue performance during the quarter within each category.
John Lee: Credit cards deliver Q1 revenue of $38 million, declining 24% year-over-year. Our Q1 results were in line with our expectation of continued downward pressure in organic search during the first part of the year.
John Lee: Loans generated Q1 revenue of $24 million, growing 12% year by year. This was driven by growth across our loan portfolio in both personal loans where we return to growth and mortgages from our acquisition of next-door lending.
John Lee: Meanwhile, SMB products deliver Q1 revenue of $29 million, declining 5% over year, as underwriting remained tight, and trade policy uncertainty damper demand.
John Lee: Insurance delivered $74 million in revenue, growing 246% in year-over-year in Q1.
These results reflect sustained strength in the end market.
John Lee: However, we expect our year-over-year growth rates to normalize in the second half of the year as we compare against H22024 levels.
John Lee: Finally, our emerging verticals finish Q1 with revenue of $44 million, growing 15% year-to-year, primarily driven by banking as we saw a partner appetite remain robust, while consumers look for lower risk options to hold their cash.
John Lee: Moving on to profitability, during Q1, we delivered $9.3 million of non-GAAP operating income above our Q1
John Lee: Non-Gab operating income decline versus Q1 of 2024, largely driven by increased investments in brand marketing costs that were only partially offset by decreased employee costs following our restructuring in Q3 of last year.
John Lee: Additionally, in the last four quarters we generated $58 million of adjusted free cashflow and ended a quarter of with $92 million of cash on hand.
John Lee: Going forward, we plan to disclose trailing 12 months of adjusted free cash flow on a quarterly basis as we continue to hold ourselves accountable for consistent free cash flow generation and growth.
John Lee: Please refer to today's earnings press release for a full reconciliation of our gap to non-GAAP measures .
John Lee: That said, we realize that we have lower visibility into how these policies will play out over the coming months, including how they may affect our partners or what the second order impacts that may look like.
John Lee: We will remain vigilant, make adjustments as needed, and continue to leverage our diversified product base and flexibility to navigate short-term uncertainty and deliver long-term growth.
John Lee: To that end, we plan to continue providing quarterly revenue and non-depth profit guidance, and we will also provide annual profit guidance.
John Lee: While our guidance currently assumes that tariffs will continue to have a minimal direct impact on our business, the potential for indirect impact has been contemplated with a slightly wider range of outcomes for the full year.
John Lee: NQ2, we expect to deliver revenue in the range of $192-$200 million, which at the midpoint would increase 30% versus prior year, based on the assumptions that the broader environment
John Lee: The midpoint would indicate a quarter over quarter decline that is mainly due to seasonality.
John Lee: In terms of profitability, we expect Q2 non-GAAP operating income results and the range of $14 to $18 million.
John Lee: Our non-GAAP operating income outlook assumes investment in our performance marketing capabilities at similar levels to previous quarters, but at decline in brand expenses both year-over-year and quarter-over-quarter as we wrap up our first half brand campaign.
John Lee: Ed shared last quarter, we expect to spend less on brand than the prior year for Q2 through Q4 combined, all in all, then until a moderate, full year increase in our brand investment.
John Lee: We now expect to generate full-year 2025 non-GAAP operating income of approximately $55 to $66 million.
John Lee: In this uncertain economic policy climate, the wider range accounts for the possibility of some indirect impacts later in 2025, while incorporating the better than expected Q1 performance.
After a strong start of the year.
John Lee: We remain optimistic of our ability to continue to improve the business through both peaks and troughs to deliver cycle to cycle growth in the long term, regardless of what the short-term may hold. Would that will open up for questions, operator?
Speaker Change: Thank you. At this time, we will conduct the question in the answer session. As a reminder, to ask a question, you will need to press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by while we compile the ruster.
Justin Patterson: First question comes from Justin Patterson with Keybank. Please go ahead.
Speaker Change: Thanks for the question, Justin, I'll take that one. So, yeah, as a reminder, organic search took a bit of a haircut over the past year. So...
Speaker Change: The two drivers, one you mentioned, which is AI overviews, the other factor is rank. With AI overviews, we saw really increasing instances of those and search results over the past.
Speaker Change: You're really, and you know, we've hit a point where we've stabilized a bit from there, so the story really hasn't changed that much quarter of recorder.
Speaker Change: We're after a few challenging quarters, we're seeing some stability right now so that gives us more confidence if you know this holds and as we go into 2026 we should really start laughing that so that's what we're going to do.
Speaker Change: You got it. That's helpful. Med for the follow-up. Next door London looks like it's off to a solid start. How far along are you with vertically integrating that asset, and how are you thinking about other opportunities for either vertical integration or landing expanding this year? Thank you.
Speaker Change: Yeah, so I'd say the integration is going well. Being a mortgage broker has opened up direct and reoccurring relationships with consumers while improving our unit economics. And as a reminder, right, this acquisition falls squarely in our vertical integration growth
Speaker Change: We think of as pairing our brand and reach with a concierge experience, so consumers can now compare 60 plus wholesale lenders with someone really holding their hand throughout the process.
Speaker Change: and so we're already seeing it drive the bulk of our mortgage growth in the past quarter, you know, with the 2X upfront unit economics and an opportunity to earn more and the future is consumers' refi.
Speaker Change: So, really, really pleased so far. You know, in terms of future vertical integration, really thinking along the lines if anywhere where there's a stressful, complex decision to be made with advisors and brokers, we want to be involved there.
Great. Thank you.
Speaker Change: Next question comes from the line of Jed Kelly with Oppenheimer. Please go ahead.
Speaker Change: Hey, great, great, thanks, thanks for taking my question. Just on that last comment, Tim, would that be fair to assume something in, you know, when you're trying to look more vertical at integration something with potentially insurance.
Speaker Change: or financial advisors, and then just given the overall insurance market, how do you think about investing more into your own technology to kind of grow share where there's a big opportunity for a lot of financial service marketplaces. Thank you.
Speaker Change: Yeah, on the first part of the question in terms of future vertical integration, I mean, I think both of those areas seem...
Speaker Change: Yeah, very complex decisions where you see a lot of human assistance really helping people along. You see a lot of reoccurring characteristics, so they're definitely candidates.
in terms of...
Speaker Change: providing a great user experience, helping consumers see their options and moving them along so a lot of that stuff really comes down to...
Speaker Change: And then just to follow up on the brand campaign, you know, seeing Nerdwallet all over the NBA playoffs, you know, seems some exciting games. Can you just talk about how your brand is doing? I think the ratings are up for the playoffs and just how are you happy with the ROI, your brand advertising. Thanks.
Speaker Change: Yeah, in terms of the brand advertising, we're all just going to be a little bit...
Speaker Change: Koi about this kind of thing for Confederate reasons, but yeah, we're pretty quantitative. Brand is our biggest asset, so...
Speaker Change: So we've learned a lot in 2024 as a reminder, our brand was down 19% year over year and a lot of those metrics that we track underlying our brand health continues to improve so we feel that we feel really good about that.
Speaker Change: Thank you.
Speaker Change: Yes.
Speaker Change: Thank you one moment for our next question.
Speaker Change: The next question comes from the line of Ross Sandler with Barclays. Please go ahead. Your line is open.
Speaker Change: Hey, guys.
Ross Sandler: I just had a question about how the insurance vertical is going to play out over the coming few quarters I know, we're not really guiding beyond the June quarter, but could you just maybe help us with.
Pat: Within those segments auto life, and Pat I would guess.
Ross Sandler: The vast majority of what's going on is in the first one.
Maybe a little bit in the second one rather than the Mighty pet insurance market, but.
Ross Sandler: Yes could you just clarify a little bit on that and then.
Ross Sandler: We lap most of the uptick I believe in the third quarter. So what's a reasonable kind of base continues to think about how fast. This segment is going to grow just steady state and Google's flag. This is something that the robot to comp as well. So just any color there on the high.
Ross Sandler: The pro growth going into the tough comp with insurance. Thanks a lot.
Ross Sandler: I'll take that one insurance revenue just as a reminder was up to 146% year over year this quarter.
Ross Sandler: In Q1, rather and we really attribute that yes. Some of the improvements we've made in our funnel from a macro perspective things are things are normalizing and so yes, youre certainly right moving forward that that trend should really normalized.
Ross Sandler: In terms of that growth rate I mean.
Ross Sandler: Sure.
Ross Sandler: We're pretty early in this vertical and so I would really be speculating I do think that premiums will continue to grow faster than GDP and that will continue to take share. We also had exposure to the direct channel, which is taking share from the agent channel.
Ross Sandler: And we're not all the way back yet in terms of some of this home and auto.
Ross Sandler: And it's it's auto is.
Ross Sandler: Mostly back to normal.
Ross Sandler: Still a few corners, there where there is some opportunity so yes.
Ross Sandler: Hopefully that helps provide some high level direction.
Ross Sandler: In terms of steady state growth.
Ross Sandler: And in terms of the break out between auto license. It's just.
Ross Sandler: Proportionately auto right now we do think we have some opportunity in home.
Ross Sandler: We.
Ross Sandler: Scale up areas like Nextera lending.
Ross Sandler: No.
Ross Sandler: Just within our insurance.
Ross Sandler: Vertical as well.
Ross Sandler: So, yes, I'm pretty excited about those opportunities and we are investing in those.
Ross Sandler: And then just.
Ross Sandler: Sure.
Ross Sandler: All right.
Ross Sandler: Just wanted to add so as mentioned in our remarks, we did raise our full year and July to be in the range of $55 to $66 million.
Ross Sandler: As you can see from our Q2 guidance the largest year over year improvement in June and July occur in Q2.
Ross Sandler: Given the existing uncertainty in the market. We believe this range is realistic and account for.
Ross Sandler: A couple of scenarios, but just given your question Ryan insurance I think it could imply kind of what we're assuming in the second half as well.
Ryan: Oh I was going to ask a quick follow up.
Speaker Change: I would guess tuna this is like a new category.
Ryan: It's ramping as much as it is.
Speaker Change: The.
Speaker Change: Intensity of performance marketing.
Speaker Change: Relative to revenue here versus other verticals is probably quite high and so is it also fair to assume that as we like kind of.
Speaker Change: Big quarters and start to decelerate that we could see.
Speaker Change: So in performance marketing leverage.
Speaker Change: As a result, because it was kind of gets more churn.
Speaker Change: You get repeat visits.
Speaker Change: Users et cetera.
Speaker Change: On that.
Speaker Change: Yeah. So we generally started to be in quarter profitable on performance marketing.
Speaker Change: Yes, certainly.
Speaker Change: In some instances we for example home in auto bundles, we're looking to build deeper relationships with people in various ways. So there could be some of that but I wouldn't consider that to be a material impact as we lap. This.
Speaker Change: Thank you.
Speaker Change: Thank you one moment for our next question.
Speaker Change: The next question comes from the line of Ralph <unk> with William Blair Go ahead. Your line is open.
Speaker Change: Good afternoon, and thanks for taking the question.
Talk about some green shoots spoken about in the call in areas such as personal loans, where you historically, it's been a little bit challenged and I think mortgages as well you called out just maybe some perspective on how you think these products progressed throughout 2025, I know you don't guide to specific line items, but just sort of qualitatively how should we think about that.
Speaker Change: I think you also called out travel rewards of a new vertical or channel.
Speaker Change: In the prepared remarks as well just love your perspective on how you think that that vertical or category plays out. Thank you.
Speaker Change: Yes, so with personal loans.
Speaker Change: I'd say, we applied some of them, we learned in terms of growing insurance to personal loans.
Speaker Change: <unk> started seeing some success there so that was really around adapting our funnel to be more personalized and.
Speaker Change: Improve our matching and building up the lender panel as we did that so I think there are similar opportunities in mortgages certainly.
Speaker Change: Especially as we have improved unit economics with mortgages were actually brokering. So I do think that there are some potential upsides there, though I think as we mentioned in our prepared remarks, we've got pretty muted expectations from a macro perspective with <unk>.
Speaker Change: Interest rate environment remaining a little bit unfriendly there.
Speaker Change: In terms of travel rewards.
Speaker Change: This is all about building more audiences.
Speaker Change: That effort right now is some combination of content podcast, social and excited to continue to invest in that.
Speaker Change: Alright, thank you.
Speaker Change: One moment for our next question.
Speaker Change: The next question comes from the line of Youssef Squali with choice Securities Go ahead. Your line is open.
Speaker Change: Awesome. Thank you so much so I have a couple of questions in EMEA actually the Lady.
Speaker Change: So.
Speaker Change: Can you talk earlier in your prepared remarks about return to growth in your us potentially in early 2026 can you maybe.
Speaker Change: <unk> got a little bit talk about the drivers.
Speaker Change: What gives you confidence.
Speaker Change: And turning to <unk> and then just generally speaking with the rise of AI Google search.
Speaker Change: Historically, you guys have been more SCO driven.
Speaker Change: Because of the power of.
Speaker Change: And the quality of your content.
Speaker Change: Talk to us a little bit about how you see your ability to maybe SCO round.
Speaker Change: Yeah.
Speaker Change: Hi.
Speaker Change: Platforms.
Speaker Change: All of them are starting to carry ads. Although they are just testing them at this point, but what is your ability or how do you see there.
Opportunity for you guys to be able to crack the code on being able to.
Speaker Change: <unk> has a strong presence within those new.
Speaker Change: Search platforms.
Speaker Change: Yes.
Thank you for the question, let me just take a part of that question. So as a reminder, last quarter. We made the decision to retire artificial Amin your disclosure because we do not believe it is the right metric to understand our business given <unk> growth has been inversely correlated with revenue for the past year and <unk>.
Speaker Change: If a internally we're much more focused on the quality of our relationships than the quantity.
Speaker Change: Having said that as we shared last quarter, though.
Speaker Change: In the near term, we do expect to continue to decline year over year, but given the improved stability, we're seeing in the search landscape.
Speaker Change: We anticipate some normalization and returned to growth in early 2026.
Speaker Change: If that stability holds and as it relates to Q1, just wanted to provide a little bit more context.
Speaker Change: <unk> were up 7% versus Q4 levels.
Speaker Change: Down 29% year over year.
Tim Chen: With that I'll turn it over to Tim.
Speaker Change: Yes.
Speaker Change: I think as we think ahead to.
Speaker Change: Ed.
Speaker Change: Channels beyond Google search for example, I'd say top of mind for Us is.
Speaker Change: The factors that has historically driven success in.
Speaker Change: Areas like Google search seemed to be carrying over to other.
Speaker Change: Driven search engines. So it's early days here, but compared to our competitive set and <unk> receives a really high sheriff referral traffic from AI sources. So I think big picture the way I think about it as AI at its best helps you find a great answer it quickly without a bunch of effort or spam and <unk>.
Speaker Change: In areas with simple answers AI is going to meet that user need really well.
Speaker Change: But where it's more complex what's important is to offer the best user experience and as we invest in offering more concierge like experiences, especially in mortgage brokering small business loan brokering in more areas, we're going to serve our 26 million registered users better and better and that will be very synergistic with all forms of.
Speaker Change: Future user acquisition, including things like LMS.
Speaker Change: Mhm, Okay. Thank you and maybe one last for.
Speaker Change: John.
Speaker Change: I think you said mortgage was up 23%, but I think that is inclusive.
Speaker Change: The acquisition next door lending.
Speaker Change: What was the growth ex the acquisition what was the organic growth milling.
Speaker Change: Yes, so we're not breaking out that piece, but what we can say is that for.
Speaker Change: The overall business <unk> added about one point of growth in Q1.
Speaker Change: And without <unk>.
Speaker Change: <unk>.
Speaker Change: Load business would have grown.
Speaker Change: Modestly in Q1.
Okay. That's helpful. Thank you Bill.
Okay.
Speaker Change: Im showing no further questions at this time.
Tim Chen: I would now like to turn the call back to Tim and management for closing remarks.
Speaker Change: Okay.
Speaker Change: Thanks, all for your questions today as always I'd like to thank the <unk> for their continued hard work over Q1, and I'm looking forward to sharing our Q2 results with you in a couple of months.
Speaker Change: Thank you.
Speaker Change: Thank you for your participation in today's conference. This does conclude the program you may now disconnect.
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