NerdWallet - Earnings Call - Q1 2025

Executive Summary

• Q1 revenue grew 29% YoY to $209.2M and 14% QoQ, driven by Insurance and banking; GAAP op inc was $0.7M, Non-GAAP op inc $9.3M, and Adjusted EBITDA $21.1M.
• NerdWallet materially beat its prior Q1 revenue guidance of $187–$193M with $209.2M actual, and exceeded its non-GAAP profitability guide (prior: $(3)–$0M NGOI; actual: $9.3M); management cited stronger second-half-of-quarter seasonality and Insurance/banking strength as drivers.
• Versus S&P Global consensus, revenue of $209.2M beat $189.9M estimate by ~$19.3M (≈10%), and Primary EPS of $0.02* beat $(0.11)* by ~$0.12*; Street FY25 revenue estimate is ~$823M* [GetEstimates].
• FY25 profitability guidance was raised: GAAP OI to $25–$38M (from $21–$31M), non-GAAP OI to $55–$66M (from $50–$60M), and Adj. EBITDA to $108–$119M (from $106–$116M).

What Went Well and What Went Wrong

• What Went Well

  • Insurance revenue +246% YoY to $74.0M as carrier budgets expanded; management expects growth to normalize later in 2025 but remains positive on share gains and vertical integration strategy.
  • Banking remained strong; management highlighted durable demand for high-yield savings and robust partner appetite in Q1.
  • Early traction in vertical integration: Next Door Lending integration and the NerdWallet Mortgage Expert “concierge” experience are improving unit economics; NDL added ~1 point to overall Q1 revenue growth.

• What Went Wrong

  • Credit cards revenue fell 24% YoY to $38.0M due to ongoing organic search headwinds; MUUs continue to be pressured YoY despite improving stability in AI search overlays.
  • SMB products declined 5% YoY to $28.9M amid tight underwriting and trade policy uncertainty dampening demand.
  • Profitability mixed: GAAP income from operations dropped to $0.7M (from $3.7M YoY), and non-GAAP op income fell 12% YoY to $9.3M, reflecting higher brand spend (partly offset by Q3’24 restructuring savings).

Transcript

Operator (participant)

Good day, and thank you for standing by. Welcome to the NerdWallet, Inc first 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 one one on your telephone. You will then hear an automated message advising that your hand is raised. To withdraw your question, please press star one one again. 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 (VP of Finance and Head of Investor Relations)

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 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.

Tim Chen (Co-Founder and CEO)

Thanks, Caitlin. In Q1, NerdWallet grew revenue 29% year-over-year to $209 million while delivering $9 million in non-GAAP operating income. 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 end market normalizes and as the improvements we've made to our shopping experiences enable us to take share cycle-over-cycle. 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 in other areas of the business that have been challenged, such as personal loans, where we saw a return to growth after declining 51% year-over-year in Q4 2024, and mortgages, where our acquisition of Next Door Lending contributed significantly to our 23% year-over-year increase in revenue, even as mortgage rates remained elevated. With all that said, we know questions have arisen about evolving trade policy and its potential implications across many industries, including ours. 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. However, in a scenario with sustained inflation, a material spike in unemployment, or a material decline in business confidence, we'd expect to be impacted as consumers and financial institutions go into a risk-off mode.

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. 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. Internally, our focus is on the quality of relationships we're building, especially through vertical integration, rather than the sheer number of users. That said, as we noted last quarter, we still expect MUUs to decline year-over-year in the near term, and this continued in Q1.

However, after search engines significantly increased the presence of AI-enhanced search modules in the second half of 2024, we're beginning to see more stability that, if sustained, suggests we are in a position to re-baseline and return to growth in early 2026. 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. We are taking share in a growing market with a 25% five-year CAGR versus the U.S. financial services digital ad spend market's 16%. While it can be tempting to over-index to short-term dynamics, whether positive or negative, we're focused instead on relentlessly improving NerdWallet through the cycle.

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 SMBs, in turn making it a no-brainer for them to shop with NerdWallet. In Q1, examples included progress across our three growth pillars. Land & Expand refers to efforts to increase the breadth and depth of the guidance we provide, whether in new categories, new audiences, or new geographies. 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. Specifically, we began publishing our new TravelNerd newsletter and leveraging our previous success with the Smart Money podcast, launching our new Smart Travel podcast, which debuted at number one on Apple Podcasts' Places and Travel chart. Vertical integration, our second pillar, is an area where we are particularly focused.

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-funnel unit economics. In Q1, we made further progress integrating Next Door Lending, building on the launch of our NerdWallet Mortgage Expert experience in January. 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. Registration and data-driven engagement encompasses efforts to build other experiences and programs that encourage users to come back to NerdWallet for all their financial questions.

We ended Q1 with a cumulative registered user base of over 26 million and saw another quarter of 2x year-over-year growth in our CRM channel, which allows us to re-engage these members with personalized offers and smart nudges. With that, I will hand it over to John, who joined us as CFO in mid-March, to speak to our financial results and outlook.

John Lee (CFO)

Thanks, Tim. I'm thrilled to be here and to partner with all of you as we drive towards our long-term vision. There is significant opportunity ahead, and my focus will be on sustainable growth, disciplined capital allocation with an increased emphasis on free cash flow generation and building long-term value for our consumers and shareholders. With that, let's get into our Q1 results. We exceeded the high end of both our revenue and profitability guidance ranges, delivering $209 million in revenue, up 29% year-over-year, and achieving $9 million in non-GAAP operating income. By and large, we attribute our revenue and profitability results this quarter to continued strength in our insurance and banking businesses, where we saw a stronger second half of the quarter compared to typical seasonal trends. Let's take a deeper look at the revenue performance during the quarter within each category.

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. Loans generated Q1 revenue of $24 million, growing 12% year-over-year. This was driven by growth across our loan portfolio in both personal loans, where we returned to growth, and mortgages from our acquisition of Next Door Lending. Meanwhile, SMB products delivered Q1 revenue of $29 million, declining 5% year-over-year, as underwriting remained tight and trade policy uncertainty dampened demand. Insurance delivered $74 million in revenue, growing 246% year-over-year in Q1. These results reflect sustained strength in the end markets. However, we expect our year-over-year growth rate to normalize in the second half of the year as we compare against H2 2024 levels.

Finally, our emerging verticals finished Q1 with revenue of $44 million, growing 15% year-over-year, primarily driven by banking, as we saw partner appetite remain robust while consumers looked for lower-risk options to hold their cash. Moving on to profitability, during Q1, we delivered $9.3 million of non-GAAP operating income above our Q1 guidance range. Non-GAAP operating income declined 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. In the quarter, we earned GAAP operating income of $0.7 million. Additionally, in the last four quarters, we generated $58 million of adjusted free cash flow and ended the quarter with $92 million of cash on hand.

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. Please refer to today's earnings press release for a full reconciliation of our GAAP to non-GAAP measures. On to our financial outlook. First, for context, so far, we have not seen any significant impact to our business as a result of tariffs beyond weakened demand in SMB, and as Tim shared, we believe our exposure is limited. 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 may look like. 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.

To that end, we plan to continue providing quarterly revenue and non-GAAP profit guidance, and we will also provide annual profit guidance. While our guidance currently assumes that tariffs will continue to have a minimal direct impact on our business, the potential for indirect impacts has been contemplated with a slightly wider range of outcomes for the full year. In Q2, we expect to deliver revenue in the range of $192 million-$200 million, which at the midpoint would increase 30% versus prior year, based on the assumptions that the broader environment stays relatively stable from today's levels. The midpoint would indicate a quarter-over-quarter decline that is mainly due to seasonality. In terms of profitability, we expect Q2 non-GAAP operating income results in the range of $14 million-$18 million.

Our non-GAAP operating income outlook assumes investment in our performance marketing capabilities at similar levels to previous quarters, but a decline in brand expenses both year-over-year and quarter-over-quarter as we wrap up our first-half brand campaign. As shared last quarter, we expect to spend less on brand than the prior year for Q2 through Q4 combined, all in all, netting to a moderate full-year increase in our brand investment. Additionally, at this time, we're increasing the full-year 2025 targets we provided last quarter. We now expect to generate full-year 2025 non-GAAP operating income of approximately $55 million-66 million. 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, we remain optimistic about 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. With that, we'll open up for questions, Operator.

Operator (participant)

Thank you. At this time, we will conduct the question-and-answer session. As a reminder, to ask a question, you will need to press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. Please stand by while we compile the roster. First question comes from Justin Patterson with KeyBanc. Please go ahead.

Justin Patterson (Managing Director and Equity Research Analyst of Internet)

Great. Thanks for taking the question. First, on AI overviews, could you put a finer point just around your learnings on AI-enhanced search modules and what is driving more stability in traffic? Is that more actions you have taken or something else? I will have a follow-up.

Tim Chen (Co-Founder and CEO)

Thanks for the question, Justin. I'll take that one. Yeah, as a reminder, organic search took a bit of a haircut over the past year. 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 in search results over the past year, really. We've hit a point where we've stabilized a bit from there. The story really has not changed that much quarter-over-quarter. After a few challenging quarters, we're seeing some stability right now. That gives us more confidence if this holds. As we go into 2026, we should really start lapping that.

Justin Patterson (Managing Director and Equity Research Analyst of Internet)

Got it. That's helpful. For the follow-up, Next Door Lending looks like it's off to a solid start. How far along are you with vertically integrating that asset? How are you thinking about other opportunities for either vertical integration or landing and expanding this year? Thank you.

Tim Chen (Co-Founder and CEO)

Yeah. I'd say the integration is going well. Being a mortgage broker has opened up direct and recurring relationships with consumers while improving our unit economics. As a reminder, this acquisition falls squarely in our vertical integration growth pillar, which we think of as pairing our brand and reach with a concierge experience so consumers can now compare 60+ wholesale lenders with someone really holding their hand throughout the process. We're already seeing it drive the bulk of our mortgage growth in the past quarter with the 2x upfront unit economics and an opportunity to earn more in the future as consumers refi. Really pleased so far. In terms of future vertical integration, really thinking along the lines of anywhere where there's a stressful, complex decision to be made with advisors and brokers, we want to be involved there.

Justin Patterson (Managing Director and Equity Research Analyst of Internet)

Great. Thank you.

Operator (participant)

Yeah. For our next question. Next question comes from the line of Jed Kelly with Oppenheimer. Please go ahead.

Jed Kelly (Managing Director and Senior Analyst of Online Travel and Internet)

Hey, great. Thanks for taking my question. Just on that last comment, Tim, would that be fair to assume something when you're trying to look more at vertical integration, something with potentially insurance or financial advisors? 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.

Tim Chen (Co-Founder and CEO)

Yeah. On the first part of the question, in terms of future vertical integration, I mean, I think both of those areas seem, yeah, like very complex decisions where you see a lot of human assistance really helping people along. You see a lot of recurring characteristics. So they're definitely candidates. In terms of technology investment, I mean, I think first and foremost, it's really about providing a great user experience, helping consumers see their options and moving them along. A lot of that stuff really comes down to good routing, having a good panel of carriers. Those are things we're starting to think about more as we try to segment out our audience and serve them better at different points in the segments.

Jed Kelly (Managing Director and Senior Analyst of Online Travel and Internet)

Got it. And then just to follow up on the brand campaign, seeing NerdWallet all over the NBA playoffs, seeing some exciting games. Can you just talk about how your brand's doing? I think the ratings are up for the playoffs and just how are you happy with the ROI in your brand advertising? Thanks.

Tim Chen (Co-Founder and CEO)

Yeah. In terms of the brand advertising, we're always going to be a little bit coy about this kind of thing for competitive reasons. But yeah, we're pretty quantitative. Brand is our biggest asset. We just try to get smarter every year in terms of our creative and where we're spending money. I think we're making incremental improvement every year. We've learned a lot. In 2024, as a reminder, brand was down 19% year-over-year. A lot of those metrics that we track underlying our brand health continue to improve. We feel really good about that.

Jed Kelly (Managing Director and Senior Analyst of Online Travel and Internet)

Thank you.

Tim Chen (Co-Founder and CEO)

Yep.

Operator (participant)

Thank you. One moment for our next question. The next question comes from the line of Ross Sandler with Barclays. Please go ahead. Your line is open.

Ross Sandler (Managing Director and Senior Equity Research Analyst of Internet)

Hey, guys. 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, within those segments, auto, life, and pet, I would guess the vast majority of what's going on is in the first one and maybe a little bit in the second one rather than the mighty pet insurance market. Could you just clarify a little bit on that? We lapped most of the uptick, I believe, in the third quarter. What's a reasonable kind of base case to think about how fast the segment's going to grow? Just steady state. I mean, Google's flagged this as something that they're about to comp as well.

Just any color there on the hypergrowth going into the tough comp with insurance. Thanks a lot.

Tim Chen (Co-Founder and CEO)

I'll take that one. Insurance revenue, just as a reminder, it's up 246% year-over-year this quarter or in Q1, rather. We really attribute that to, yeah, some of the improvements we made in our funnel. From a macro perspective, things are normalizing. Yeah, you're certainly right moving forward that that trend should really normalize. In terms of that growth rate, I mean, we're pretty early in this vertical. 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 have exposure to the direct channel, which is taking share from the agent channel. We're not all the way back yet in terms of some of this home and auto. Auto is mostly back to normal, but there's still a few corners there where there's some opportunity.

Yeah, hopefully that helps provide some high-level direction in terms of steady-state growth. In terms of the breakout between auto, life, and pet, it is disproportionately auto right now. We do think we have some opportunity in home as we scale up areas like Next Door Lending and just within our insurance vertical as well. Yeah, I am pretty excited about those opportunities, and we are investing in those now.

John Lee (CFO)

To add here.

Ross Sandler (Managing Director and Senior Equity Research Analyst of Internet)

I'm sorry. Go ahead.

John Lee (CFO)

No, just wanted to add. As mentioned in our remarks, we did raise our full-year NGOI to be in the range of $55 million-$66 million. As you can see from our Q2 guidance, the largest year-over-year improvement in NGOI dollars occurs in Q2. Given the existing uncertainty in the market, we believe this range is realistic and accounts for a couple of scenarios. Just given your question around insurance, I think you can apply kind of what we're assuming in the second half as well.

Ross Sandler (Managing Director and Senior Equity Research Analyst of Internet)

I was just going to ask a quick follow-up, but I would guess, given that this is like a new category and it's ripping as much as it is, that the intensity of performance marketing relative to revenue here versus other verticals is probably quite high. Is it also fair to assume that as we kind of lap big quarters and start to decelerate, we could see some performance marketing leverage as a result as this kind of gets mature and you get repeat visitors, etc.? Thoughts on that?

Tim Chen (Co-Founder and CEO)

Yeah. We generally strive to be in quarter profitable on performance marketing. Yeah, certainly in some instances, for example, home and auto bundles, we're looking to build deeper relationships with people in various ways. There could be some of that. I wouldn't consider that to be a material impact as we lap this.

Ross Sandler (Managing Director and Senior Equity Research Analyst of Internet)

Thank you.

Operator (participant)

Thank you. One moment for our next question. The next question comes from the line of Ralph Schackart with William Blair. Go ahead. Your line is open.

Ralph Schackart III (Research Analyst of Technology, Media, and Communications)

Good afternoon. Thanks for taking the question. You talked about some green shoots both in the letter and the call in areas such as personal loans, where historically it's been a little bit challenging, and I think mortgages as well. You called out just maybe some perspective if you can on how you think these products progress throughout 2025. I know you don't guide to specific line items, but just sort of qualitatively, how should we think about that? Tim, I think you also called out travel and rewards, sort of a new vertical or channel in the prepared remarks as well. Just love your perspective on how you think that vertical or category plays out. Thank you.

Tim Chen (Co-Founder and CEO)

Yeah. With personal loans, I'd say we applied some of what we learned in terms of growing insurance to personal loans and have started seeing some success there. That was really around adapting our funnel to be more personalized and improve our matching and building up the lender panel as we did that. I think there's similar opportunities in mortgages, certainly, and especially as we have improved unit economics with the mortgages we're actually brokering. 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 the interest rate environment remaining a little bit unfriendly there. In terms of travel rewards, this is all about building more audiences.

That effort right now is some combination of content, podcast, social, and excited to continue to invest in that.

Ralph Schackart III (Research Analyst of Technology, Media, and Communications)

Great. Thank you.

Operator (participant)

One moment for our next question. The next question comes from the line of Youssef Squali with Truist Securities. Go ahead. Your line is open.

Youssef Squali (Managing Director and Head of Internet and Digital Media Research Group)

Awesome. Thank you so much. I have a couple of questions, and they may actually be related. Tim, you talked earlier in your prepared remarks about return to growth in MUUs potentially in early 2026. Can you maybe unpack that a little bit, talk about the drivers and what gives you confidence in the return to MUUs? Just generally speaking, with the rise of AI-driven search, historically, you guys have been more SEO-driven just because of the power and the quality of your content. Maybe talk to us a little bit about how you see your ability to maybe SEO around these AI platforms. Some of them are starting to carry ads, although they're just testing them at this point.

What is your ability, or how do you see is there an opportunity for you guys to be able to crack the code on being able to have a strong presence within those new search platforms? Thank you.

John Lee (CFO)

Thank you for the question. Let me just take a part of that question. As a reminder, last quarter, we made the decision to retire our official MUU disclosure because we do not believe it is the right metric to understand our business, given MUU growth has been inversely correlated with revenue for the past year. Because internally, we're much more focused on the quality of our relationships than the quantity. Having said that, as we shared last quarter, though, in the near term, we do expect MUU to continue to decline year-over-year. Given the improved stability we're seeing in the search landscape, we anticipate some normalization and return to growth in early 2026 if that stability holds. As it relates to Q1, I just want to provide a little bit more context. MUUs were up 7% versus Q4 levels, but down 29% year-over-year.

With that, I'll turn it over to Tim.

Tim Chen (Co-Founder and CEO)

Yeah. I think as we think ahead to channels beyond Google Search, for example, I'd say top of mind for us is the factors that have historically driven success in areas like Google Search seem to be carrying over to other AI-driven search engines. It's early days here, but compared to our competitive set, NerdWallet receives a really high share of referral traffic from AI sources. I think big picture, the way I think about it is AI, at its best, helps you find a great answer quickly without a bunch of effort or spam. In areas with simple answers, AI is going to meet that user need really well. Where it's more complex, what's important is to offer the best user experience.

As we invest in offering more concierge-like experiences, especially in mortgage brokering, small business loan brokering, and more areas, we're going to serve our 26 million registered users better and better. That will be very synergistic with all forms of future user acquisition, including things like LLMs.

Youssef Squali (Managing Director and Head of Internet and Digital Media Research Group)

Okay. Thank you. Maybe one last for John. I think you said mortgage was up 23%, but I think that is inclusive of the acquisition, Next Door Lending. What was the growth ex the acquisition? What was the organic growth in that line?

John Lee (CFO)

Yeah. We're not breaking out that piece, but what we could say is that for the overall business, NDL added about one point of growth in Q1. Without NDL, the loan business would have grown modestly in Q1.

Youssef Squali (Managing Director and Head of Internet and Digital Media Research Group)

Okay. That's helpful. Thank you both.

Operator (participant)

I'm showing no further questions at this time. I would now like to turn the call back to Tim and management for closing remarks.

Tim Chen (Co-Founder and CEO)

Thanks all for your questions today. As always, I'd like to thank the Nerds for their continued hard work over Q1. I'm looking forward to sharing our Q2 results with you in a couple of months. Thank you.

Operator (participant)

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.