Good day, and thank you for standing by. Welcome to the NerdWallet, Inc. Q4 2024 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. [Operator Instructions] Please be advised that today’s conference is being recorded. I would now like to hand the conference over to your speaker today, Caitlin MacNamee, Investor Relations. Please go ahead.

Thank you, Operator. Welcome to the NerdWallet Q4 2024 earnings call. Joining us today are Co-Founder and Chief Executive Officer, Tim Chen; and Chief Financial Officer, Lauren StClair. 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. 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. 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. Tim?

Thanks, Caitlin. At NerdWallet, we closed 2024 strong. In Q4, we exceeded our expectations, growing revenue 37% year-over-year to $184 million, and delivering $17 million in non-GAAP operating income. We attribute our performance to our ability to deliver on continued consumer and partner demand in Insurance, which grew over 800% year-over-year. We also saw 5% year-over-year growth in banking products, despite declining savings accounts rates as our funnel improvements drove outsized impact versus our expectations. These wins in Insurance and banking more than offset softness in other parts of our business. As 10-year rates rose throughout the quarter, we saw headwinds across both consumer and SMB lending. While we grew our mortgage business 4% year-over-year, separate from our acquisition of Next Door Lending, the nearly 80 basis point increase in 30-year mortgage rates since the beginning of Q4 has tempered our growth expectations for this area of our business. At the same time, our personal loans business ended the year down 51% year-over-year as we focused our efforts on Insurance. However, as we shifted resources exiting the year to capture increased partner and consumer demand, early results suggest a return to year-over-year growth in Q1. With lending remaining tight, we also saw revenue decline year-over-year in SMB, but we expect to see recovery when the broader lending environment improves. The end of the year is a natural time to reflect on what we have learned and where we go next. In previous letters, I have written to you about NerdWallet’s work to build direct, engaged relationships with consumers and SMBs in our Trusted Financial Ecosystem. We are prioritizing driving more engaged users, not more users, and our internal operational focus is aligned with this goal. As we embark on a new year, we are evolving how we talk about our…

Thanks, Tim. We ended the quarter above our revenue guidance range, delivering Q4 revenue of $184 million, up 37% year-over-year. We also delivered full year revenue of $688 million, a 15% increase versus prior year. Our revenue growth was primarily driven by another quarter of significant strength in our Insurance vertical, as well as a return to growth in banking, though, we continue to face a cyclically depressed lending environment. Let’s take a deeper look at the revenue performance during the quarter within each category. Credit Cards delivered Q4 revenue of $35 million, declining 19% year-over-year. As we mentioned last quarter, we have seen recovery in organic search traffic in most areas of our business with the exception of Credit Cards and personal loans, and we expect to see this trend continue. We are projecting continued downward pressure during the first part of the year. For the full year, Credit Cards delivered $176 million of revenue, declining 16% versus the prior year. Loans generated Q4 revenue of $18 million, declining 26% year-over-year. Our personal loans vertical declined 51% year-over-year, as we had yet to see a material recovery in our revenue despite a rapidly improving macro environment. As Tim mentioned, the renewed focus on this vertical as we enter 2025 has resulted in early improvements suggesting a return to year-over-year growth in Q1. Partially offsetting the declines in personal loans was growth in mortgages. Q4 saw mortgage revenue growth primarily driven by the inclusion of our acquisition of Next Door Lending, which contributed over 1 point of growth to overall company revenue this quarter. As we look forward, with the recent rise in mortgage rates, as well as the vast majority of household mortgages reported at under 5% rates, we have muted expectations in the near-term. The growth in mortgages…

Thank you. [Operator Instructions] And our first question comes from Ross Sandler of Barclays. Your line is open.

Hey Tim. Hey Lauren. Just two quick questions for me. So first on Insurance, I mean, this segment’s basically gone from nothing a year-ago to now your largest segment by a decent amount. So, I guess, how much of that is from kind of changing the flow of traffic patterns through the site, like you mentioned, collecting more information and maybe tweaking the direct or organic traffic patterns versus just running lots of incremental performance marketing to insurance landing pages. Could you talk about how you’re like kind of balancing that with in the future of other sectors, other categories start to kind of pick back up again? Can you kind of rebalance things accordingly? That’s the first question kind of high level. And then the second one, Lauren, the 1Q guide assumes a pretty hefty amount of margin contraction. And, I know you’re not guiding to margins anymore, but is that the Super Bowl commercial plus other factors, just any additional color on the 1Q, I guess, OI or OI margin either way? Thanks a lot.

Sure. I’ll kick it off. Ross, I think you’re spot on. We have improved the flows to the site. We’re personalizing the user experiences more. And that’s really tight to enabling us to be more proficient in performance marketing. I think it’s worth calling out to the end market is also growing. Auto insurance costs are up over 50% over the last 5 years as inflation and rising risk drive up premiums. And this means the end market is expanding as well. And then the last thing to think about there too is, the direct channel where we primarily play is taking share from the agent channel, which is also another structural tailwind for us. In terms of the durability of that consumer demand in auto insurance, depending on which data source you’re looking at, new policies in 2024 were about 20% to 30% higher than in 2023. And 2023 was an easy comp, because it was a hard market. So, there weren’t a lot of options to switch back then. And that gives us confidence that these current trends are sustainable. And so, looking ahead, we see far lower growth rates and insurance as we lap the hard market, but really encouraged by the level of positive feedback we’re getting from partners about the quality of shoppers coming from NerdWallet. So, we think our brand is a real differentiator here. To the point about how this affects things when other verticals pick up, not a ton. It does make me very optimistic, though, that like insurance, a lot of lending verticals have risk-based pricing. So, growing our top-of-funnel there can sometimes be dependent on more personalization and serving routing customers to the right options for them. So, we think that some of the things we’ve learned and improved on over the cycle will apply to areas like personal loans and mortgages as well over the next cycle.

Perfect. And before I get to the Q1 margin guide, Ross, I just wanted to point out again like as we’ve been scaling our paid monetizing traffic, where we see really strong returns, and as you rightly called out, we certainly see those in Insurance right now. We’re going to continue to be disciplined. We do this with all of our performance marketing spend versus a means to achieve certain revenue expectations. So, we’re going to lean in where we see good returns. So, now, to answer your second question around the Q1 guide on margin. So as a reminder, the Q1 guide was a $3 million loss to breakeven. The midpoint implies we’ll see 7 points of margin degradation versus the prior year. And this is the result of two big things. We’re spending more year-over-year in Brand, and the mix of performance marketing has become a larger part of the business. So, real quick on year-over-year, while we expect to grow revenue year-over-year, we’ll continue to have a larger portion of that revenue coming from paid marketing, as we will continue to scale, especially in areas like Insurance. And, we’re also seeing impacts from the organic traffic headwinds that intensified during the second half of last year.

Thank you. Our next question comes from Justin Patterson of KeyBanc. Your line is open.

Great. Thank you very much. And best of luck with the new opportunity, Lauren. I was hoping you could put a finer point on this shift in traffic strategy. What did you observe among new MUUs or an ROI from marketing channels that drove this decision to focus more on quality of the relationships? And then how does this change your view of the long-term growth profile you outlined around this time last year? Thank you.

Yeah. So, maybe I’ll just reiterate some of the comments around our choice to shift from the metric of MUU. And then, Tim, if you want to add some thoughts on that, and then we can talk a little bit about sort of the longer-term. But, over the past few quarters, growth has been inversely correlated between MUUs and revenues, so MUUs have not been a good proxy. And as Tim did mention in remarks, given our focus on quality over quantity through Vertical Integration, we do not believe that MUUs are the best measure of our progress in these areas. We were able to prioritize and show meaningful MUU growth, while we were solely focused on our digital marketplaces. But, as we’re shifting resources to longer-term priorities, we’re now goaling our internal management teams on non-GAAP OI and not MUUs.

Yeah, speaking to the longer-term growth profile, I mean, so we’ve got three growth pillars, right? The second one and third one, Vertical Integration and Registration & Data-Driven Reengagement. So, yeah, the bang for our buck in terms of getting a lot of our existing users into deeper relationships is just so high relative to just growing the top-of-funnel. So, yeah, in my prepared remarks, I talked about the Next Door Lending example. I mean, you think about, someone coming in and reading about mortgage rates being quite less valuable than someone who we actually get on the phone with and broker a transaction with, right, and yet those are equivalent MUUs. So, the operational focus has really turned to doing better with the MUUs we have.

Yeah. And to your sort of last point, the shift away from MUUs does not change our perspective on the long-term revenue targets. As you know, our Q4 performance and our Q1 guidance shows that we’ve gotten back to and expect to continue to deliver double-digit growth. And that’s still in the face of an extremely challenging end market for many of our verticals still, including Credit Cards and loans.

Got it. Thank you.

Thank you. Our next question comes from Ralph Schackart of William Blair. Your line is open.

Good afternoon. Thanks for taking the question. One for Lauren and one for Tim. Lauren, I think the last quarter or two, you talked about implying a little bit more conservatism in your outlook to guidance or maybe your approach to guidance. Just curious, as you thought about Q1 and the 2025 and 2026 new targets, what sort of conservatism was implied there, as you’ve applied sort of historically? That’s my first question and I have a follow-up for Tim.

Yeah, perfect. So, yeah, we talked about over the last couple of quarters, one, we’re still facing a ton of headwinds across many of our verticals. And then, we’ve also talked about a little bit of volatility that we’re seeing in some of the things like our organic search traffic. We remain committed to disciplined spending. We haven’t changed the game plan that we have and we will continue to represent our guidance with sort of the best estimates of what we’re seeing today and where we believe we can execute and deliver.

Right. And then, Tim, throughout the many years on the Internet, there’s been a lot of algo changes at Google and the market has responded. And, I guess, as you are sitting here today and sort of operating this business, obviously for a while here, how different do you think these changes are to the business with AI overviews and some digital buyers are saying that the ads that are generated from Gen AI are actually performing better than some of the organic results. So just kind of curious, what’s your confidence that this is something you’ll be able to navigate longer-term versus your previous history? Thanks a lot.

Yeah. So, I’ll split it up between kind of the shorter-term stuff we’re seeing and longer-term thoughts. I mean, in the near-term, there’s two drivers here, right, which is one is more ads and modules on top of the search results. And the other factor is rank, where in the very recent past financial institutions and some government websites are winning in some areas where they traditionally haven’t, which as I’ve alluded to in past calls is a bit of a head scratcher when considering consumer intent. So, we do think this period of frenetic testing will eventually stabilize and when that happens, it should play to our favor. Longer-term, I do think that it’s important to look at broader industry trends, right? So, first AI search engines or chatbots, are they taking share from traditional search engines? I mean, from what we can tell, not really. If you like tops down, more people are using search engines than they did last year, but you also see triple-digit growth in AI usage, which says to me that people are basically just asking more questions that they weren’t asking before. And second, the things like AI overviews, how is that affecting the ecosystem? So, I know we’re not focusing on MUUs operationally, but it’s helpful to understand that if simple questions have simple answers, and if a search engine can serve that up in a faster way that consumers prefer, then that’s good for the ecosystem. And for us, we’re seeing these features do a really good job of answering simple educational questions, and that’s affecting traffic to some of our non-commercial pages. That has not been the case yet for our monetizing pages, which are fundamentally just a little more complicated, right? Like if you need to shop for a mortgage, for instance, you really need to go through a marketplace experience. So, yeah, on balance, we think that this period of frenetic testing will stabilize. We’ve seen a few things like this in the past, and we can grow from there.

Okay. That’s really helpful. Thanks, Tim.

Yeah.

Thank you. Our next question comes from Pete Christiansen of Citi. Your line is open.

Thank you. Good evening. Tim, I guess now with the revised traffic strategy, which makes a ton of sense, engagement wise, all that, but how are you thinking about competitive share and how important is that still a factor for a lot of your partners when they’re evaluating spending on one platform versus another? Just love to hear your thoughts there on competitive market share.

Yeah. So high level, I think, of partners as being quite quantitative and analytical. When they’re looking at partners like us, it comes down to what’s the LTV of the customer that they’re driving through. And, anecdotally, we have consistently gotten very positive feedback in many different verticals that our customers understand the products, they understand why this is a great choice for them, and that leads to good outcomes for both the partners and for NerdWallet. So, in terms of share, I don’t really think of it as a zero-sum game between different partners. I think, a financial institution is basically making LTV to CAC calculation and wants as many customers as they can get typically, and we tend to be a preferred channel there.

That’s helpful. So the deeper engagement is now being, I guess, more valued by your partners rather than just straight up top-of-funnel share. That’s helpful.

Right.

Thank you. Our next question comes from Michael Infante of Morgan Stanley. Your line is open.

Hey, guys. Thanks for taking my question. Tim, I just wanted to get your high level perspectives on what you’ve seen in the marketplace from a competitive perspective post the TCPA implementation. I know you’re more insulated than others just given the lack of lead resale, but it would be great to get your thoughts on broader pricing trends in the industry and whether or not some of the per unit pricing can insulate some of the lower lead volume? Thanks.

Yeah, I’d say given that a lot of that implementation has been stayed, we haven’t seen much of an impact flow through. From a consumer perspective, I’m obviously a little disappointed that we haven’t gone down that path, but yeah, not a huge impact that’s visible to us.

Okay. That’s helpful. Maybe just on personal loans in particular, if I look at some proxies of broader personal loan providers in the space and what they grew volumes in 2024, they were either up quite a lot or effectively flat and I think you mentioned your personal loans business was down about 50. So does that imply that in periods of lower unit volume, the second derivative from a pricing perspective is lagged and perhaps more pronounced than the volume reduction?

Well, so that’s not my agreed. I think what’s really going on is like you’re saying the macro has markedly improved, the market is back, lenders are seeing good underwriting results, capital is slowing back in. We just haven’t been focused here. So, we’ve reapplied focus especially exiting Q4 and beginning of Q1 and are starting to see really big improvements. I mean if you look at our Q4 performance here like you’re saying down 51% year-over-year and we’re expecting the up year-over-year in Q1, so you can kind of gather that we’ve made a ton of improvements to our tunnel.

Helpful. Thanks.

Thank you. Our next question comes from Jed Kelly of Oppenheimer & Co. Your line is open.

Hi, this is Josh on for Jed. Thanks for taking our questions. Could you just talk about some of the opportunities for Vertical Integration? How we should be thinking about if it’s more of a one-time opportunity like mortgages or are you thinking of a higher LTV product like financial advising?

A short answer is yes. I mean anywhere where there’s a sticky customer relationship where financial guidance is helpful to consumers and there’s sometimes this element of I don’t know who I can trust that those attributes are they make a category prime candidates for us to vertically integrate.

Great. And then, I guess, about the Brand spend, could you just talk about some of the efficiencies you’re seeing given the spend around sports over the past few months?

So, big picture on Brand spend, I’d say we’re very quantitative when it comes to thinking about our spend and we feel good about our process. Obviously, we strive to get smarter each year with both our creative and where we spend money. So, you can assume that’s our goal here. I mean, you’ll notice some of our patterns have changed over the past few years. We’re heavier in areas like sports as an example, but it’s something that we just try to get a little bit better at every in-swing year.

Great. Thank you.

Thank you. Our next question comes from Youssef Squali of Truist Securities. Your line is open.

Awesome. Thank you for taking the question. So I have two, Tim, on the sustainability of strength in insurance. Obviously, growing 800% is really impressive. The only issue is you’re going to comp that at some point. So, when we start comping that, which I’m assuming is sometime very late this year and then early next year, what do you think is the steady state growth in Insurance? In other words, with all the things that you’re doing beyond just the market improving, what do you think a steady state growth rate in Insurance? And then on the adjusted EBITDA guide, particularly beyond Q1, can you maybe double click on areas of investments beyond Brand and beyond performance marketing, which my understanding from what you said is that it’s going to be materially up. What about the other line items on the P&L? Will they also be up or is most of the increase in that spend and the decrease in margin driven by the Brand and the performance marketing spend? Thank you.

Thanks for the question. On Insurance, clearly, this is an early part of our growth curve here at NerdWallet. So, yeah, in the very long-term, I think within the insurance market, the drivers are something like GDP plus risk plus take rate, right? And so, I think you’d expect some slightly above GDP growth there. I mean, historically, you’ve seen long periods of price competition and you’ve seen in the past 5 years’ periods of huge price increases. So, I think that affects the market. And the last thing I’d think about there is just direct carriers are taking share from agents. So that’s been another structural tailwind for the digital market. So, putting all those things together, I think it’s hard to come up with an exact number, but those are the factors to consider.

Yeah, on your full year margin question, I’ll just go back to some of the commentary around non-GAAP operating income. We expect full year non-GAAP OI to be in the range of $50 million to $60 million. And as you can see from the Q1 guide, which was a $3 million loss to breakeven, the non-GAAP OI dollars are going to be produced during Q2 through Q4. And the largest driver of this flip to income dollars versus the Q1 guide is primarily coming from lower seasonal Brand spend versus Q1 levels. And keep in mind, we plan to invest less in Brand on a year-over-year basis for those remaining quarters. I know you asked about adjusted EBITDA, so I’ll just remind everyone, as we’ve mentioned previously, non-GAAP OI will be the performance metric that we hold ourselves accountable to going forward. And, I just want to call out that adjusted EBITDA and non-GAAP OI, some of the biggest differences between those are that in non-GAAP OI some of the savings we’re delivering will come through stock-based compensation, which is not incorporated into our adjusted EBITDA metric.

And, I think, I heard something in there, too, about just the cost-based growth. We’re fairly mature there and strive to keep non-variable costs growing at a slower rate.

Got it. Okay. Thank you both.

Thank you. I’m showing no further questions at this time. I’d like to hand it back to management for closing remarks.

All right. Thanks all for your questions. As always, I want to thank the Nerds for their hard work and commitment to our consumers and our business. Reflecting on the past year and the opportunities ahead, I’m incredibly energized by how we have passed the way to build direct engaged relationships with consumers and SMBs. While 2024 was not without its challenges, we tested and learned at a rapid rate, made key investments, and remain committed to relentless improvement. There’s more to come. Thanks, everyone.

This concludes today’s conference call. Thank you for participating, and you may now disconnect.