NerdWallet - Q2 2023

Transcript

Operator (participant)

Good day, and thank you for standing by. Welcome to the NerdWallet, Inc. Q2 2023 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 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 speaker today, Caitlin MacNamee. Please go ahead.

Caitlin MacNamee (Director of Investor Relations)

Thank you, operator. Welcome to the NerdWallet Q2 2023 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. 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 of NerdWallet. Tim?

Tim Chen (CEO)

Thanks, Caitlin. NerdWallet's mission is to provide clarity for all of life's financial decisions. We operate within the larger financial services market, our strategy is to supply consumers and SMBs with the most trusted guidance to grow our share of this market cycle to cycle. Achieving this requires a long-term vision for success, doing right by our users to build our brand affinity in the long run, rather than operating solely to maximize profits in the short run. Today, we'll be sharing quarterly results in the context of short-term cyclical headwinds and tailwinds. We expect headwinds to outweigh tailwinds through at least the second half of this year.

If I could ask you to remember one thing today and in the years to come, is that those headwinds and tailwinds offset each other over time, and independent of these external macro factors, we are taking share in a large and growing market in a durable, sustainable way. Our primary addressable market, US financial services digital advertising, is expanding with a 2022 three-year CAGR of approximately 23%. NerdWallet's share in this growing market has also increased, with a three-year CAGR of 33%, driven by robust top-of-funnel gains and all-time highs in aided brand awareness. In Q2, our brand's resonance with consumers and SMBs across verticals helped mitigate severe cyclical headwinds in consumer loans and carrier profitability challenges in insurance driven by inflation. As a result, we achieved year-over-year revenue and Adjusted EBITDA growth in spite of those factors.

We attribute our growing market share to our track record of providing the most trusted financial guidance. Across verticals, including those experiencing headwinds, we continue to provide trusted financial guidance for all of consumers' questions. We've seen significant consumer engagement in credit cards, travel, home, investing, and SMB. At the same time, our team has recognized the new ways many consumers find financial information. We are growing the audience of our Smart Money podcast, which has been downloaded over 1.5 million times so far this year. We are also developing content for platforms like TikTok, Instagram, and YouTube. We are embracing emerging technologies. In late Q2, we launched a beta of Nerd AI, a chatbot trained on NerdWallet content, to give our consumers a new way to engage with our guidance.

Increasing our consumer mind share will fuel our long-term vision, a trusted financial ecosystem or a single platform where consumers and SMBs can learn, shop, and make decisions about their money. In Q2, we made meaningful progress across our three growth pillars: land and expand, vertical integration, and registration and data-driven engagement. In addition to the strong traffic we've seen across verticals this quarter, we leveraged our re-reach and brand to further our expansion in emerging verticals and serve more consumers. In Canada, we launched a number of new consumer experiences and grew MUUs over 150% year-over-year. For US consumers, we've made progress in building out our auto loans, Medicare, and Social Security verticals, and we launched an estate planning marketplace. These land and expand wins cross-pollinate our other strategic objectives.

They not only grow our overall traffic, they also contribute to our registration goals, with recent emerging vertical content, a top driver of registrations. Vertical integration refers to the alchemy we achieve by pairing NerdWallet's brand and reach with best-in-class consumer experiences. In Q2, our On the Barrelhead integration continued, with a focus on cross-sell. The loans team, where OTB is primarily integrated, is able to leverage OTB's technology to identify when a personal loans customer would be better served by a balance transfer credit card, funneling these consumers to our credit cards experience instead. Meanwhile, our SMB team has begun testing experiences that direct business owners who may not qualify for traditional business loans to our personal loans product. In doing this, we believe we can provide consumers with improved outcomes.

They can explore alternative products that may be better for them or that they wouldn't have considered, while laying the groundwork for more effective monetization. We look forward to relentlessly improving these cross-sell experiences and bringing our learnings to other NerdWallet shopping funnels. As we grow our percentage of consumer mind share, we are also motivated to register and engage NerdWallet users. This will allow us to build relationships with our consumers that ensure they turn and return to NerdWallet for all their money questions. In Q2, we drove a 37% year-over-year increase in our cumulative number of registered users. At the same time, we have invested in enhanced consumer experiences that give our users a reason to return to us again and again. We launched additional search and categorization functionality in our app, allowing users to better track their financial health over time.

As a result of this work, we have driven improvements to our user engagement. In a moment, our CFO, Lauren StClair, will provide more insight into our financial performance this past quarter. While I am proud of our results, especially given the current climate, I am particularly energized by the focus and velocity our Nerds have brought to executing on our strategy this quarter. We are leveraging our competitive advantage and consumer trust to find new ways to serve and delight our customers, to reach new consumers, and to relentlessly improve our business. With that, I'll pass it over to Lauren.

Lauren StClair (CFO)

Thanks, Tim. We're proud of the quarter that we achieved in the face of a tough lending and insurance environment, delivering Q2 revenue of $143 million, up 14% year-over-year and above the high end of our guidance. Since last quarter, we've seen that credit quality and unemployment outlooks seem to be trending better than was previously feared, this should improve sub and near-prime lending first. Banks are still taking a conservative approach to balance sheet lending. This conservatism is driven by uncertainty around possible rate hikes, the impacts of upcoming Basel III revisions, and the stickiness of their deposit base as consumers spend the last of their excess savings from the pandemic. We'll take a deeper look at the revenue performance during the quarter within each category.

Credit cards delivered Q2 revenue of $51 million, declining 6% year-over-year. As we mentioned last quarter, we're facing headwinds in our credit cards vertical, and the partner tightening that increased during Q1 by extending to prime consumer-related products led to a larger than typical seasonal quarter-over-quarter decline. Consumer demand remains healthy, and we believe that the strength we've seen in matches with our financial partners indicates we are still taking share in the market, though challenges in balance sheet-intensive areas, such as balance transfer cards, is more than offsetting this. Partner behavior was relatively consistent throughout the quarter, and while we believe that current trends will persist during the second half of the year, we should see tailwinds when card issuers regain confidence in expanding their balance sheets. Loans generated Q2 revenue of $23 million, declining 4% year-over-year.

Our mortgage vertical, while still declining on a year-over-year basis as the market faces significant headwinds, is now starting to comp slightly easier time periods from 2022, which we expect to continue throughout the rest of this year. On the back of our progress integrating the acquisition of OTB and personal loans, we saw accelerating growth during Q2 as we were able to match consumer demand at a better rate with our partners. Just to reiterate what we mentioned last quarter, we are committed to making investments in key loans technologies to set us up to take market share when the macro environment recovers. Finally, other verticals finished Q2 with revenue of $69 million, growing 48% year-over-year.

Banking growth, while still above 100% year-over-year, decelerated versus previous quarters as we begin to compare to last year's high growth levels, combined with signs of softening consumer demand as interest rate increases slow. As mentioned last quarter, we believe we've been overearning a bit in our banking vertical, and as consumer interest starts to moderate, growth should slow further. Our insurance vertical had a strong quarter despite persistent inflationary headwinds, with revenue growth of 41% year-over-year, as recent product improvements allowed us to gain share in a challenging environment. SMB revenue grew 13% year-over-year, as we are still seeing conservative underwriting for SMBs impact our growth rates.

We still expect near-term growth rates to be at more muted levels compared to last year. The long-term opportunity in SMB and the benefit of our vertical integration strategy has years of tailwinds remaining. Moving on to investments and profitability. During Q2, we earned $20.7 million of Adjusted EBITDA at a 14% margin, a 4-point increase versus last year. We had a GAAP net loss of $10.7 million, which includes a $7.1 million income tax provision. Similar to what we mentioned last quarter, we expect to be in a tax expense position for the remainder of the year. Please refer to today's earnings press release for a full reconciliation of our GAAP to non-GAAP measures. Consumers continue to turn to the Nerds for their money questions.

We provided trustworthy guidance to 22 million average Monthly Unique Users in Q2, up 9% year-over-year. Growth was a result of strength in many areas across NerdWallet, such as banking, insurance, and travel, as well as the impact of our acquisition of OTB. We're still seeing similar year-over-year headwinds from mortgages as the macro environment for both refinance and purchase has yet to recover. Given current revenue pressure, combined with consistent consumer demand for our learn and shop content, we now expect that MUU growth should outpace revenue growth during Q3. On to our financial outlook. As we look forward to the remainder of 2023, we remain in a challenging macro environment for many of our verticals and expect recent headwinds to persist. We plan to continue providing quarterly guidance and will also provide qualitative commentary for full year expectations.

For the Q3, we expect to deliver revenue in the range of $142 million-$147 million, which at the midpoint would grow 1% versus prior year. We expect to see continued, albeit slowing growth from banking, as well as slightly easier comps in our loans verticals, with minimal expected near-term changes in the macro outlook. Our typical seasonal increase of high single digits from Q2 to Q3 will be more muted this year, given the partner conservatism we're seeing. Insurance is expected to decline year-over-year during the second half, as we believe it will still take several quarters for the industry to digest the latest profitability issues.

We continue to see partners value the quality of our consumers, putting us in a position of relative strength, and while consumer fundamentals and demand still seem relatively healthy, we will face a tougher comparison from the second half of last year, when deposit demand was extremely strong and underwriting was a bit looser across the board, especially in prime consumer products. This all lends to an expectation that revenue growth levels will remain lower than what we delivered in Q2 for the remainder of the year. Moving to profitability. We expect Q3 Adjusted EBITDA in the range of $18 million-$20 million, or approximately 13% of revenue at the midpoint, a 3-point increase versus prior year. Our dedication to delivering year-over-year margin improvement in the face of significant revenue deceleration showcases the benefit of our organic traffic, as well as the flexibility of our business model.

We are still running a large-scale brand campaign during the 3rd quarter, so we expect to have another period of reduced spend versus last year. Aligned with how we've previously described our approach to our performance marketing lever, we will lean into verticals where we're seeing positive momentum to deliver profitable growth. Given our similar quarterly brand cadence to last year, we still expect relative Adjusted EBITDA margins to be lower during the 1st 3 quarters of the year compared to Q4. We are also reconfirming that we plan to deliver a year-over-year increase in our annual Adjusted EBITDA margin for yet another year, and now expect that full year 2023 Adjusted EBITDA margin should be over 15%, resulting in roughly 3 points of incremental margin versus 2022.

I also want to take a moment to discuss the new metric disclosure that we provided within our earnings press release and shareholder letter today. We are now disclosing non-GAAP operating income or Adjusted EBITDA less stock-based compensation and internally developed software costs, which were capitalized during the period. We will continue to report on both non-GAAP OI as well as Adjusted EBITDA and make progress towards improved levels of profitability in both. We expect to deliver approximately 2% non-GAAP OI margin for the full year 2023, as well as mid-single-digit margin for 2024. We believe we are getting closer to a mature annualized run rate per employee for stock-based compensation.

We believe that the additional expenses included in the newly disclosed metric are a part of doing business and hold ourselves accountable, both internally as well as with you, our fellow shareholders, for the efficiency of those investments. Delivering on our financial commitments, even during challenging conditions, reinforces the resilience of our business model. We remain a key destination for consumers to navigate their financial questions during uncertain economic times, and believe that our mission to provide clarity for all of life's financial decisions and relentless dedication to consumer-first experiences will help us grow across credit cycles. With that, we're ready 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 Q&A roster. Our first question comes from the line of Justin Patterson with KeyBanc. Please proceed with your question.

Justin Patterson (Analyst)

Great. Thank you, and good afternoon. Lauren, I wanted to stick with where you just ended, the non-GAAP operating margin. That sounds like great progress in the next year, mid-single digit for the target. I'm curious, just given all the moving parts in the macro environment, what's giving the confidence behind just that progression into next year? Is there any assumption of just getting past some of these revenue headwinds to, to achieve that target? For Tim, in the letter, you did talk a little bit about a Nerd AI chatbot beta. Would love to hear a little bit more about just how you think that, that a chatbot could change how consumers and advertisers engage with NerdWallet over time. Thank you.

Lauren StClair (CFO)

Thanks, Justin. I'll take the first part here. So I'll just remind everyone, given the operating leverage that we have as a result of our organic traffic, we feel confident that we can continue to show margin accretion in both Adjusted EBITDA margins as well as our newly disclosed non-GAAP Operating Income metric, regardless of what type of macro environment we're in. As you've seen over the past couple quarters, we're continuing to show nice leverage in areas like R&D, as we're more efficient with our use of headcount and the investments in product and engineering. We've also talked about being incredibly disciplined about our sales and marketing spend. We've, you know, proactively reduced some of our brand spend, as you can see this year.

Then we really see performance marketing as a variable cost that we can lever up or pull back on as needed. Then we talked a little bit about in our G&A, you know, as the result of becoming a public company, you see sort of a step-up in cost, and we don't expect those to step up any further. So you can see how we've been showing that leverage over the last couple quarters, and we expect all those, those same things to happen as we move into the short term and into the new year as well. In addition, we've talked a little bit in the prepared remarks around stock-based compensation and how we're seeing us reach more mature levels on a per head basis. So that will also help with margin accretion from a non-GAAP OI perspective.

Tim Chen (CEO)

Yeah, and I, I can speak a bit to the 2024, you know, big picture macro, before I dive into AI. You know, generally speaking, on the consumer demand side, we continue to grow our reach and increase the value of our franchise. We, we hit records in just about every traffic and brand metric we tracked during the first half. You know, things like brand awareness, MUU, brand affinity. I'd say what changed over the last quarter, right, like, the credit default risk and unemployment outlook seem to be trending better than what was previously feared. As Lauren mentioned in her remarks, there's a bit of conservatism and balance sheet management happening at the banks post SVB. As, you know, consumers work through their excess deposits, deposits are a bit flightier.

There might be a few more rate hikes coming, and the regulatory rules are, are kind of finalizing. That means in consumer lending, you have a dynamic where near-prime lending has probably found a floor, but prime lending appetite is lagging a bit as banks manage their balance sheets. You know, prime being subdued versus, say, second half of 22, and a recovery there will probably follow a recovery in near prime. You're seeing this show up as personal loans is growing sequentially, whereas in credit cards, you know, you've got areas like balance transfer that are facing headwinds relative to the second half of last year. Anyway, as, as we look into 2024, I'd say there's a few possible scenarios next year, right?

In a soft landing scenario, we'd probably look back in a few years and say that 2023 was below our normalized revenue growth rate, and exiting 2024, we were above it because of those recoveries in cards, loans, and insurance. If the Fed needs to hike rates materially more than people are expecting in order to fight off inflation, that could lead to another step down, a longer period and a more dramatic recovery on the back end. We think in either scenario, we've got our game plan, and we're pushing internally on being efficient. In terms of AI, yeah, you know, we remain excited by the possibilities here. Nerd AI is a chatbot trained on NerdWallet content. It's giving our consumers a new way to engage with our financial guidance.

Feel free to play around with it. It's on a lot of our personal finance pages. It can do things like summarize an article or help you navigate to the next relevant article. You know, Beta is live now, like all product features, we see these things as hypotheses to be iterated on over time. Yeah, excited to have this one live.

Operator (participant)

One moment for our next question. Our next question comes from the line of Youssef Squali from Truist. Please proceed with your question.

Robert Zeller (Analyst)

Hi, this is Robert Zeller on for Youssef Squali. Thanks for taking the questions. On your guys' ad spend, it looks like brand was down year-over-year. Performance was up based on our estimates. I'm just curious why that was. On the new channels, like short-form video, are you guys taking spend off of different channels, or is this incremental spend? Thanks.

Lauren StClair (CFO)

Yeah, I can, I can take that. Just as a reminder, in the shareholder letter as well as in the Q, we do provide a breakdown of our sales and marketing spend, and you can see the percentage splits between our three big investment areas, which we call out as organic, performance marketing, and brand. You can see those in there. As we've mentioned, on the last call as well, we are reducing brand spend while still, you know, investing in large-scale campaigns, things like that. We're adjusting to be nimble and flexible based on the macro conditions that we're seeing, and we are being proactive in that area. Performance marketing, we think about slightly differently. We really see this as variable costs that we can dial up or pull back as needed.

In areas where we're seeing nice returns, we'll continue to lean in, and in areas where we're not seeing the returns, either because of consumer behavior changing and/or partner, you know, demand changing, we can easily pull back as well. You'll-- you can expect us to do that. The other thing I'll mention on performance marketing, we see it almost as a means to an end as well. It's a way for us to get folks to the site, get them registered when it makes sense, and then we can reach out to them and proactively nudge them when it's time to come back and make a smart money move or to reengage them with new things. Again, we see it variable costs, but also see it as a means to an end by getting more registrations.

Tim Chen (CEO)

Yeah, I'll-

Robert Zeller (Analyst)

Okay.

Tim Chen (CEO)

I'll just add on to that. Yeah, I mean, I think it's exciting to see record brand awareness in the first half and record MUUs along with 37% growth in cumulative registrations, despite pulling back a bit on, on our brand. I think, you know, we're relatively new to this, right? 2022 is our first full year of spending on brand campaigns, and we learned some things, and that means we're going to get smarter about our creative and where we spend, and hopefully, we can get a bigger bang for our buck each ensuing year. Yeah, we'll, we'll keep on making adjustments up and down as we get more info.

Robert Zeller (Analyst)

Okay, thanks. If I could just ask one more on Nerd AI, I thought that was very interesting. I just want to clarify if this if the AI chatbot is through a partnership or if you guys are building it out in-house, and what the cost impact will be, you know, over the next year or so. If that's related to the breakout of the non-GAAP operating income, if that's responsible for expectations of software development costs increasing going forward, and that, and that's all is what tied into the non-GAAP operating disclosure from AI, or if I'm thinking about that wrong, feel free to let me know. Thanks.

Tim Chen (CEO)

Yeah, I'd, I'd say we're, we're leveraging, third parties, I mean, OpenAI. It's really not a big operating expense on a variable basis. The training set is our own content. That's really the secret sauce behind this thing. You know, from a consumer perspective, I think it can really help, you know, summarize things as well as get people to the right content on our site more effectively. Again, yeah, not, not a huge impact on costs.

Lauren StClair (CFO)

Yeah, I can comment on the non-GAAP OI question as it relates to, to AI. You know, AI, we're looking at it's still early days, but we don't see this very different than we see other initiatives that we're doing. We're continuing to invest for the long term while getting more efficient in areas like R&D. Again, we treat AI similar to other initiatives. Your question around non-GAAP OI, no, that's not the reason why we disclosed the new metric this quarter. Again, it's part of the way we think about all of our investments. Our need to disclose or our want to disclose the, the non-GAAP OI metric was really around aligning how we operate things internally and providing that clarity for investors as well.

As Tim's talked about in the past, you know, stock-based compensation as well as capitalized software, are true costs of doing business, whether they're cash or non-cash. We felt that the increased disclosure was something that shareholders should hold us accountable for.

Robert Zeller (Analyst)

Okay, thank you.

Operator (participant)

One moment for our next question. Our next question comes from the line of James Faucette, Morgan Stanley. Please proceed with your question.

Michael Infante (Analyst)

Hi, everyone. It's Michael Infante on for James. Thanks for taking our question. Lauren, Tim, I'm curious if you could help us sort of decompose the mix between lead pricing versus volume of matches. Just sort of trying to understand, you know, while volume of matches might be migrating lower, sort of how is pricing evolving, and are both decelerating?

Tim Chen (CEO)

Yeah. I, I'd characterize this as having similar dynamics to, say, in 2020, right? The core underlying franchise value to me is really around matches and match volume. That, that's actually quite healthy, right? What's really happening is that the financial institutions are pulling back on how much lending they wanna do right now in some areas, especially in those areas that are more balance sheet intensive, like we mentioned, balance transfer, right? Imagine you're really subsidizing 0% interest for a year or more, and that, that can be kind of a consideration given all the other stuff that's happening right now, with deposit stickiness and interest rate hikes and regulatory changes. We just think that's a bit of conservatism. We think it's temporal, and it's very similar to, yeah, past cycles.

Michael Infante (Analyst)

Understood. Maybe just on the other verticals in particular, you know, obviously understand sort of the high yield savings account tailwinds over the last several quarters. How are you guys sort of thinking about the back half and sort of what that's ultimately gonna mean for near-to-medium-term rev growth as we get some normalization there?

Tim Chen (CEO)

Right. Well, specific to banking, just, just a reminder for everyone on the call, it's part of our other verticals category, and it, yeah, more than doubled in Q2. Yeah, we're starting to see a bit of deceleration. If rates stay where they are, we'd expect to see a higher new normal in banking, though probably a little lower than where we are currently. The macro really depends on where rates go. Like, if we revert back to a zero rate environment, we'd go back to levels we probably saw a few years ago. Conversely, we'd also expect a pickup in our mortgages business that offsets this. Big picture, with banking, we really wanna make hay while the sun shines.

One of our growth pillars is register and engage, I'd note that this is a bit of a different audience than, for example, personal loan shoppers. It's a great opportunity to register a broader audience and expand our reach.

Michael Infante (Analyst)

Thanks, Tim.

Tim Chen (CEO)

Yep.

Operator (participant)

One moment for our next question. Our next question comes from the line of Jed Kelly with Oppenheimer. Please proceed with your question.

Jed Kelly (Analyst)

Hey, great. Just wanna talk about on, on two verticals where it looks like you're, you're driving a more share-- more share gains relative to your competitors. One, just on personal loans, can, can you sort of talk about what, what's working there? Then on the strength you've called out in insurance, obviously, the underwriting headwinds are, are, are pretty self-explanatory, but, you know, what is going on with your carrier relationships that's allowing you, or your consumers, that's allowing you to drive growth in both those segments? Thanks.

Tim Chen (CEO)

Yeah, I'll, I'll take those one at a time. In terms of personal loans, we've got two underlying factors that drive the broader industry, and then I'll, I'll talk about our market share in a second. Yeah, the broader factors are credit quality trends and demand pull-through. In terms of credit quality, we, you know, we've seen three-plus quarters of tightening, and we're finding a floor. I'd say there haven't been major surprises on the credit quality side. Things are tracking roughly where lenders expected them to be. As a reminder, a lot of lenders were expecting unemployment close to 6% exiting 2023, and they're factoring that into their underwriting the past couple of quarters, and that's proving pretty conservative. I think that's causing a bit of loosening up there, though still, still near pretty trough levels.

On the demand side, I think there's some pretty good long-term tailwinds there because personal loan demand is driven by mostly people consolidating credit card debt, and we're seeing a demand tailwind in terms of rising credit card balances. I think in terms of our market share there, we, we mentioned last quarter we've managed to double our match rate on people looking for personal loans by integrating the OTB technology and then iterating from there. It's everything from a more comprehensive marketplace to, you know, asking people the right questions and better matching technology on the back end. That's, that's definitely helping us, you know, serve the consumers better, but also gain a little bit on the top of funnel. In terms of insurance, yeah, it's, it's rough.

I mean, even though we're up 41% year over year, you know, there's carrier profitability headwinds. Their carriers are probably losing money in half the states right now in terms of writing new policies. There's just really low visibility there. I think what ultimately causes this to pass is, you know, inflation calming down and then carriers getting a chance to reset pricing. In terms of relative market share, I think we, we talked a bit last quarter about, you know, a more personalized marketplace experience, and we think that's really driving the share gains there and are really excited to continue investing there, despite this being a hard market.

Jed Kelly (Analyst)

Got it. Just, just a follow-up. Given that when you look at your results, you're obviously operating from a position of strength, and, and a lot of smaller competitors are, you know, facing tough times, how should we view the acquisition environment right now and how you're thinking about it? Thank you.

Tim Chen (CEO)

Yeah, more broadly speaking, right? you know, we think about capital allocation as having a few outlets, right? It's everything from returning capital to investing in organic growth to inorganic growth. you know, we're we just gotta be opportunistic. we care a lot about pricing and relative value. so, yeah, unsurprisingly, it's a, you know, there, there's definitely a lot of activity out there, in terms of, potential acquisitions. So we're trying to be disciplined and, think hard about what makes a ton of sense and where we can have a pretty good margin for error as we, as we execute.

Jed Kelly (Analyst)

Thank you.

Operator (participant)

One moment for our next question. Our next question comes from the line of Ralph Schackart from William Blair. Please proceed with your question.

Ralph Schackart (Analyst)

Good afternoon. Thanks for taking the question. Two, if I could, please. First, on the strong, I think, 37% growth that you had year-over-year in registered users, you know, what are some of the top factors driving that?

In terms of other verticals, you know, you might index more towards non-bank lenders and mortgage, or Fintechs and personal loans. You know, less of an obvious impact there, probably how I'd characterize it.

Tim Chen (CEO)

That's fair. Thank you. Then, I thought it was interesting, your, your comment earlier, you know, saying perhaps we're, we're at the bottom on the personal loan issuance side. I'm just curious if we could just dig into that comment a little bit, and what gives you confidence that, you know, you think you know, that vertical can improve, at least from here, or at least not go down further?

Right. you know, internally, we're seeing, you know, sequential growth in personal loans. Things seem to have stabilized. It seemed like, you know, ever since the middle of 2022, it was incremental tightening every quarter, more talk of this impending spike in unemployment. I, I feel like more recently that tune has changed a little bit. Even some of the personal lending partners out there, you know, they, they don't lend from their own balance sheet in some cases, and, you know, their access to capital seems to be improving a little bit, too. It's just a general sense that things are stabilizing a bit there, and people are starting to look for volume again.

Ralph Schackart (Analyst)

That, that's helpful. I'm sorry, just one more from me. Just curious if you've seen any heightened activity around the student loan news that's been out recently, and do you think that's been a driver of some of your traffic?

Tim Chen (CEO)

Right. In student loans, you know, high level, there's been the Supreme Court ruling, followed by the Biden administration putting out several initiatives for forgiveness, though applicable to a smaller subset of borrowers. At this point, we're really waiting for the outcome of the current forgiveness proposals, and just taking into account the frequent litigation and policy changes, which all in all, gives us pretty low visibility in terms of predicting the timing or outcome of political and legal activities in play, right? From a forecasting perspective, we're really not expecting much of a change in 2023.

Ralph Schackart (Analyst)

Okay. That, that's helpful. Thank you very much.

Tim Chen (CEO)

Yep.

Operator (participant)

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

Tim Chen (CEO)

All right. Thanks, everyone. Before we wrap up, I really wanted to give a sincere thanks to our nerds for their hard work during the quarter. Through this credit cycle and the next, we remain committed to executing on our strategy by investing opportunistically in our business and building on our significant reach to capture more consumer mind share in our growing market. I look forward to sharing more highlights and examples of our relentless improvements in Q3.

Operator (participant)

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