NerdWallet Inc. (NASDAQ: NRDS) has reported a 6% year-over-year decline in Q4 2023 revenue, totaling $134 million, during its recent earnings call. This downturn has been ascribed to weaker performances in credit cards and personal loans, as well as a challenging macroeconomic climate. Despite these headwinds, the company has achieved $29 million in adjusted EBITDA with a 22% margin for the quarter and remains cautiously optimistic about the macroeconomic outlook and partner sentiments, expecting a recovery to begin soon. For Q1 2024, NerdWallet anticipates revenue between $155 to $160 million, which represents a 7% decline year-over-year but an 18% increase quarter-over-quarter, with an expected non-GAAP operating income of $5 to $8 million.
Key Takeaways
- NerdWallet's Q4 revenue saw a 6% year-over-year decline, with total earnings of $134 million.
- Adjusted EBITDA for Q4 stood at $29 million, maintaining a 22% margin.
- The company predicts a Q1 revenue between $155 to $160 million, a year-over-year decrease but a quarter-over-quarter increase.
- Non-GAAP operating income for Q1 is projected to be around 4% of revenue, with full-year margins increasing to between 6.5% and 8%.
- CEO Tim Chen expects a peak in credit card delinquencies by mid-year, with a subsequent recovery.
- NerdWallet is focusing on growth strategies like land and expand, vertical integration, and data-driven engagement.
- The company anticipates double-digit revenue growth in the second half of the year.
Company Outlook
- Cautiously optimistic about the macroeconomic outlook and partner sentiment.
- Recovery expected to begin soon, with focus on growth strategies.
Bearish Highlights
- Decline in student loans vertical due to seasonal impact.
- Insurance vertical declined due to carrier profitability pressures.
- Anticipates a challenging year-over-year comparison in Q1 revenue.
Bullish Highlights
- Growth observed in the SMB products vertical in Q4 and the full year.
- Banking vertical within emerging markets showed growth.
- Strong user growth and engagement with financial content noted.
Misses
- Revenue decline in Q4 attributed to headwinds in credit cards and personal loans.
- Refinance demand remains low.
Q&A Highlights
- Delinquencies in credit card business have exceeded 2019 levels.
- Balance transfer offerings constrained by balance sheet limitations.
- Recovery in credit cards and other areas dependent on underwriting adjustments and interest rates.
In summary, NerdWallet is navigating a period of contraction with strategic initiatives aimed at driving growth and recovery. The company's leadership has articulated a clear focus on expanding its offerings and improving engagement, with the expectation of turning the tide in the coming months.
InvestingPro Insights
NerdWallet Inc. (NASDAQ: NRDS) has faced challenges in its most recent quarter, but the InvestingPro data and tips provide an intriguing perspective on the company's current standing and future outlook. With a market capitalization of $1.26 billion and a substantial gross profit margin of 91.38% in the last twelve months as of Q3 2023, NerdWallet demonstrates a strong ability to generate revenue relative to the cost of goods sold.
The InvestingPro Tips highlight that analysts are predicting net income growth for NerdWallet this year, which aligns with the company's own cautiously optimistic outlook. Additionally, the company has seen a significant return over the last week, month, and three months, with a remarkable 84.62% price total return over the last six months. This suggests a positive trend in investor sentiment and market performance despite the recent downturn in revenue.
While the company does not pay dividends, which may be a consideration for income-focused investors, the strong return figures could be appealing for growth-oriented shareholders. Moreover, the liquid assets of the company exceed its short-term obligations, providing a cushion for operational flexibility and investment in growth strategies.
InvestingPro offers even more insights, with a total of 9 tips available for NerdWallet, which can be accessed for those looking to delve deeper into the company's financial health and market potential. To benefit from these additional insights, readers can use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription at InvestingPro.
In summary, while NerdWallet navigates a challenging economic climate, the InvestingPro data and tips suggest that the company is positioned to grow and potentially become profitable within the year, supported by its strong market performance and solid financial footing.
Full transcript - Nerdwallet (NRDS) Q4 2023:
Operator: Good day and thank you for standing by. Welcome to the NerdWallet, Inc. Q4 2023 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' 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.
Caitlin MacNamee: Thank you, operator. Welcome to the NerdWallet Q4 2023 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?
Tim Chen: Thanks, Caitlin. In 2023 headwinds outweighed tailwinds in our business. In the spring we faced increasing macroeconomic headwinds following the regional banking crisis as well as ongoing rate hikes. This affected several verticals, including loans, credit cards and SMB and they have not all fully recovered yet. In addition, the strong insurance rebound we saw in Q1 of 2023 was premature. The industry pulled back through the remainder of the year while the rising rate environment did create tailwinds in areas like banking which continued to outperform our expectations through the end of the year. This did not offset the headwinds in our other verticals. We did not meet our revenue or adjusted EBITDA outlook in Q4 and this is the first time as a public company when we have fallen short of our outlook. We attribute our Q4 miss to underperformance in credit cards and personal loans. While consumer demand remained strong for balance transfer products incremental underwriting tightening and balance sheet constraints limited issuer appetite. We also encountered unexpected growing pains with matching sub and near-prime users with the best products which required us to take a step back. But we believe we're making progress in writing these consumers to the right offers. Our business is cyclical. While I believe there are positive signals to suggest that conditions will improve in 2024 we know that headwinds and tailwinds offset each other over time. So our priority is growing from cycle to cycle. We continue to take share across the cycle in a large and growing market independent of macroeconomic factors. Our primary addressable market US financial services digital advertising is expanding with a 2023 four-year CAGR of approximately 15%. And normalized share in this market has also increased with a four year revenue CAGR of 27% and in Q4 we achieved record monthly unique users up 24% year-over-year suggesting a significant opportunity for revenue growth as monetization improves. Also critical to my mind are the structural improvements we made to our business in 2023 we are dedicated to relentlessly improving our operations and increasing our efficiency. This past year we made our brand spend work harder and we also efficiently managed R&D expense growth while still launching several new product initiatives including Nerdy AI and Nerdup by NerdWallet. As a result full year non-GAAP operating income increased $27 million versus the prior year. And in Q4 we maintained relatively similar margins despite our declining year-over-year revenue. This work should set us up for improved margin leverage as growth returns. We build NerdWallet with a long-term orientation. And this means relentlessly improving while executing our strategy to create a trusted financial ecosystem or single platform where consumers and SMBs can learn shop, connect their data and make decisions about their money. I continue to believe that this is the right path forward for our consumers, partners and business, driven by the meaningful progress we made against our growth pillars in 2023. I'd like to provide you with more insight into these pillars, the progress we've made toward them this year, and how I think they can accelerate our business. As a reminder, land and expand initiatives extend NerdWallet’s guidance to new markets, categories and audiences. While we cover a range of topics today, we know the financial landscape is fast and there's still plenty of territory to explore. In 2023, we strengthened our presence in Canada and Australia, and in topics including medicare, social security, estate planning and auto loans. Looking specifically at Q4, our land and expand efforts have shown particularly strong results in Canada as MAUs were up 56% year-over-year last quarter. Similarly, Q4 saw continued acceleration in our Medicare category. Our traffic was up over 150% year-over-year as we built out our library and enhanced our marketplace to serve more consumers during the open enrollment period. Vertical integration pairs our competitive advantages and top of funnel and brand with best-in-class user experiences, and throughout 2023, this is a significant focus for NerdWallet. We pursued vertical integration via continued integration of On the Barrelhead, including introducing their pre-qualification technology to our credit cards vertical, as well as through several key organic initiatives. Our hypothesis is that investing in best-in-class user experiences will not only provide consumers with new more personalized ways to shop for products but will also increase our monetization and re-engagement capabilities, ultimately setting us up to capitalize more effectively on our growing audience from cycle-to-cycle. In Q4, we focused on two organic initiatives. Early in Q4, we launched NerdWallet’s first branded product, NerdUp by NerdWallet, which is the secured card designed to provide no file, thin file and sub-prime consumers with an option to build their credit, while also benefiting our partners. Meanwhile, our team has recently launched NerdWallet Taxes, a tax preparation software, in partnership with Column Tax. This product seeks to capitalize on the significant organic traffic to our taxes category, which previously went largely unmonetized by leveraging our unit economics to offer consumers a fixed-fee option for preparing their tax returns. We also continued to integrate On the Barrelhead’s technology, extending their personalized experience to mortgages in anticipation of increased demand when interest rates decrease. Land and expand and vertical integration support our registrations and data-driven engagement strategy. They drive more MAUs to convert to registered users and give consumers reasons to register and connect their data. At the same time, we invest in specific registration and data-driven engagement efforts to help foster loyalty-based relationships with consumers. As a result, our registered user base ended the year growing 37%. In 2023, this work included introducing and optimizing new product features as well as upleveling our CRM capabilities to more effectively nudge our registered users with targeted insights. Our registered users have five times the lifetime value of visitors. So expanding our Registrations and Data-driven Engagement work to furnish more cross-sell opportunities and build loyalty-based relationships with consumers, presents significant growth potential for the business. Our Registrations and Data-driven Engagement work in Q4 included a significant focus on developing our cross-sell capabilities. We launched several campaigns to surface personalized product recommendations to registered users based on their data and we plan to continue developing this program in the quarters to come. By now, 2024 is well underway and I'm looking forward to sharing our results with you over the next four quarters as we continue to execute our strategy. As in 2023, we will embrace relentless self-improvement, a long-term orientation and our commitment to consumers to drive results. In the meantime, I'll pass it over to Lauren to provide a financial update.
Lauren StClair: Thanks Tim. We delivered Q4 revenue of $134 million, down 6% year-over-year and we finished the year with $599 million in revenue, an 11% increase versus prior year. We remain in a cyclically depressed macroeconomic environment, particularly in interest-rate sensitive areas such as loans, as well as balance sheet intensive prime lending. We also ended 2023 with a bit more headwinds in credit cards and personal loans than originally anticipated, causing us to deliver revenue below our previous outlook for the quarter. But we are cautiously optimistic about the macro outlook, as well as partner sentiments and we believe that the beginning of recovery is within sight. Let's take a deeper look at the revenue performance during the quarter within each category. Credit cards delivered Q4 revenue of $43 million declining 18% year-over-year. As we've spoken about previously, the regional banking crisis in the spring of 2023 drove increased balance sheet constraints and issuer conservatism. We believe these dynamics are temporal rather than structural, and are weighing on our year-over-year results. During Q4, we experienced a higher than usual seasonal decline versus Q3 and slightly worse than our expectations driven by moderately increased levels of issuer conservatism in balance sheet intensive areas such as balance transfer cards. We will continue to leverage our strong top of funnel and maintain the discipline to lean back into profitable paid acquisition, once we see issuer demand and monetization recover. For the full year, credit cards delivered $210 million of revenue roughly flat to the prior year. Loans generated Q4 revenue of $24 million growing 5% year-over-year. Q4 delivered a larger than normal seasonal decline from Q3, primarily driven by incremental lenders tightening as delinquency rates continue to rise and personal loans as well as coming off a strong Q3 in student loan originations. We believe that at this part of the credit cycle. There is a backlog of consumer demand and personal loans as high loan rates have reduced the incentive for consumers to refinance credit card debt. A declining rate environment, combined with leveraging our improved ability to align consumer demand more effectively, with financial service providers will put us in prime position to take advantage of that demand as it surfaces. While our mortgage vertical remains pressured by the high interest rate environment, we continue to believe that structural improvements we've made to our marketplaces will help us capture meaningful share when the market returns. We also saw a material quarter-over-quarter decline in our student loans vertical as we lapped the back-to-school seasonal impact of loan originations from Q3, and have yet to see a significant pickup in refinance demand. For the full year, loans delivered $102 million of revenue declining 7% year-over-year. Beginning this quarter, we have changed our revenue product category presentation and are now providing SMB products revenue as a separate disclosure. SMB products consist of loans, credit cards and other financial products and services intended for small and midsized businesses, previously SMB products was a component of our other verticals revenue disclosure. But given the relative size and long-term opportunity you will see us break out their revenue contribution separately, please refer to our earnings press release for historical revenue data. SMB products delivered Q4 revenue of $28 million growing 6% year-over-year. While we continue to face some underwriting challenges in our loans category, renewals have started to rebound, signaling a path to a recovering macro environment and validating our vertical integration strategy with the reoccurring nature of our funnel. Outside of loans, we have also been scaling our additional product offerings for small and mid-sized businesses, including credit cards, banking and software, to drive overall revenue growth for the quarter. For the full year, SMB products delivered $101 million of revenue growing 11% year-over-year. Finally, our emerging verticals formerly named our other verticals revenue product category finished Q4 with revenue of $39 million declining 3% year-over-year. As a reminder, after the regrouping of SMB products revenue Emerging Verticals consists of areas such as banking, insurance, investing and International. Banking grew 5% year-over-year decelerating versus previous quarters as we lapped our toughest prior year comparison period, combined with continuing signs of moderating consumer demand. And while we previously mentioned that moderating consumer demand would cause near term year-over-year declines. Demand remained a bit more robust than we had previously anticipated in Q4. Growth in Emerging Verticals was more than offset by headwinds in insurance, which declined 22% year over year. Carrier driven profitability pressures continued through most of the quarter, but we're optimistic that the positive momentum we saw at the end of last year and so far into Q1, means that carriers are willing to increase customer acquisition budgets for the upcoming quarters. For the full year, emerging verticals delivered $187 million of revenue growing 46% year-over-year. Moving on to investments and profitability, during Q4 we earned $29 million of adjusted EBITDA at a 22% margin, roughly flat versus the prior year. For the full year we earned $98 million of adjusted EBITDA at a 16% margin, roughly a four point increase versus 2022 as we were able to deliver leverage across the majority of our cost base. In the fourth quarter, we also earned over $12 million of non-GAAP operating income at a 9% margin. For the full year, we earned $26 million of non-GAAP operating income at a 4% margin. In the fourth quarter, we had a GAAP net loss of $2.3 million which includes a 7.6 million income tax provision. Similar to what we've mentioned in previous quarters, we expect to be in a tax expense position for the year and also expect to be a cash tax payer for the foreseeable future. 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 many questions. We provided trustworthy guidance to 24 million average monthly unique users in Q4, up 24% year-over-year. Growth was a result of strength in many areas across NerdWallet, such as travel, personal loans and insurance. We are seeing consistently strong consumer demand for both our, learn and shop content. So our learning content has been a larger portion of where consumer demand has more recently concentrated, causing higher MAU growth with some pressure on revenue per MAUs. Despite these near-term monetization pressures, we think this helps fuel our ecosystem. In the long run for MAUs engaging with our learning content, builds our brand recognition and trust and that creates an asset that will ultimately pay dividends. Onto our Financial Outlook, as we enter 2024 we believe that we have line of sight to recovering growth in our business. So some level of uncertainty remains. We plan to continue providing quarterly guidance and will also provide qualitative commentary for full year expectations. We expect to deliver first quarter revenue in the range of $155 to $160 million, which at the midpoint would decline 7% versus prior year, but increased sequentially roughly 18%, indicating the step-up we typically see from Q4 to Q1. To give you more color on our Q1 expectations, we're still facing headwinds related to balance transfer credit cards, while banking demand continues to moderate. We expect a material quarter-over-quarter increase in insurance, and we are also seeing positive momentum in SMB products. But just as a reminder, we'll have a tough Q1 comps and insurance. As we look to the rest of the year, we expect to return to double-digit revenue growth during the second half, given recent recovery in SMB products and insurance. The timing of the recovery in areas such as balance transfer cards, combined with how interest rate decreases will impact inversely correlated demand in banking and loans will influence how high those double-digit growth rates will be. But we're confident that we see signs of progress towards growth reacceleration and as we experience additional monetization unlocks from our partners, we will lean back into profitable growth acquisition channel. Moving to profitability, we expect Q1 non-GAAP operating income in the range of five to $8 million or approximately 4% of revenue at the midpoint, roughly a two point increase versus prior year. Consistent with what we've mentioned previously, we anticipate that the cadence of our brand spend will be similar to 2023 where the majority of spend will occur during the first three quarters with reduced spend during the fourth. But with this being said, our Q1 brand investments will be lower than last year. For the full year, we plan to deliver increasing margins as a result of falling growth in our cost base and roughly similar spend -- brand spend to 2023, resulting in approximately 6.5% to 8% of revenue for full year 2024 non-GAAP OI margin. And while our main profitability metric will be non-GAAP OI moving forward, as a continuation of our previous disclosures and commitments, we expect a full year 2024 adjusted EBITDA margin in the range of 18% to 19.5% of revenue aligned with our previous commitments. This outlook range would have us return to 2019 adjusted EBITDA margin levels, while strategically investing in our long-term vision. As you may have read in our shareholder letter posted today, on March 4th, we are planning to release a video presentation for investors sharing more detail on our business and vision for nerd wallet as well as our mid to long-term financial goals. The video will be available on our Investor Relations website and we look forward to hearing your feedback. We entered this year optimistic about the future, while pragmatic on the gradually improving macroeconomic environment. We know we have a responsibility to our users to help them navigate their financial questions, all while maintaining our long-term view, prioritizing trust, and continuing to diversify and improve our product experiences from cycle-to-cycle. With that we're ready for questions. Operator?
Operator: Thank you. [Operator Instructions] Our first question comes from James Faucette with Morgan Stanley. You may proceed.
James Faucette: Sorry about that. I was online with the mute button. I wanted to ask quickly it sounds like you're seeing some indications that things can improve and specifically you mentioned small medium-sized business and insurance and seem pretty confident about that. Can you just describe like what is driving your confidence in that particularly for the second half of the year? And I'll just tie on my second question which is kind of related in the broader credit market. We've seen lots of comments around prime and subprime, credit, performance, et cetera. Seems like there may be some improvements there. But in your conversations with your partners, how do you usually see that communicated to you and what kinds of things should we be tracking to see if the potential for so the credit part of the market to contribute to the second half growth as they materialize? Thanks.
Tim Chen: Thanks. Yes, thanks for the question. So, I'll take those one piece at a time. I guess in terms of insurance, the inflation driven insurance industry headwinds continued through throughout all of last year, right, and into Q4. So, we saw a 22% decline on a year-over-year basis. We started to see a recovery at the end of last year and into Q1, which is represented in our outlook for Q1. Exiting Q1 carriers seem to be expecting a pretty broad-based and durable recovery throughout 2024. So, for some context large parts of the US population today still aren't being served from the perspective of carriers wanting to write home and auto policies. So, you can imagine that as this resolves itself, there will be a medium term tailwind as those markets open back up. And so that's one of the main drivers in terms of our 2024 outlook where we're expecting double-digit year-over-year growth in the back half really that -- yes that recovery from the worst insurance hard market in a few decades. And then in terms of small business, I'd say with that when we saw a lot of progress, we just crossed the three-year anniversary of integrating Pandora (OTC:PANDY). We more than tripled revenue, a lot of success in vertical integration, and land and expand within SMB. So, really happy with that. That being said, we're still in a really tough macro right now. A lot of the underwriting is a bit tighter than what we've seen historically. And so we do expect at some point for that to become a tailwind as there's a macro recovery. The timing on that one is a little bit harder to call and then yeah you're certainly right on that. And the commentary around prime consumers, we're hearing the same thing both in the credit card and the personal lending markets. I'd say what we saw is going into Q4 and throughout probably starting the middle of Q4, there is a bit of a upside surprise in some of the delinquencies in the prime part of the market, given how strong the employment market was I think that caught a few people off guard. And so what I'd say here is that card issuers have pretty robust predictive models, right? Like the good ones can predict almost within minutes of the first payment due date, how delinquencies are going to trend a few quarters out. So what we see in terms of underwriting timing is really a reaction to that. And it's been pretty present the majority of the last seven quarters. And so, we definitely saw that impacting cards. I'll say that while delinquencies have overshot 2019 levels, issues are largely calling out that this is expecting normalization and that we've already either seen a peak in delinquencies or that they're kind of expecting a peak by the middle of the year and are kind of in wait-and-see mode in terms of when to get aggressive again. So that could be a tailwind at some point in the future. I will say also on the balance transfer side and things are still a little bit balance sheet constrained. So there's some caps there. So that's another potential tailwind at some point down the road.
James Faucette: Great. Thanks for that, Tim.
Tim Chen: Yeah.
Operator: One moment for questions. Our next question comes from Ralph Schackart with William Blair. You may proceed.
Ralph Schackart: Good afternoon. Thanks for taking the question. Just on credit cards. Just maybe talk about I think recoveries might be saying that can I have called out maybe some early signs. So any color on that and spending kind of broader just from the credit card issuers you know what are they sharing with you just in terms of what they're watching for before they may return back to kind of more normalized levels that you've seen historically? Then I have a follow-up.
Tim Chen: Sure. Yeah. I think it's largely around -- there's two factors happening, right? Like so, in some prime areas like say data transfer that are a bit more balance sheet intensive. I mean I think there's non-credit related factors, just kind of affecting how many units of demand that balance sheets can handle, right. So I think some of that will resolve itself as we move through the cycle of it. And then from a credit specific perspective, I think it's really tracking these early delinquency trends and making sure that they've adjusted underwriting appropriately to be comfortable with some of the trajectories there. So I'd really point to this quarter quite a lot of commentary from card issuers, if you're feeling a little bit more optimistic there and ICE4 and in terms of a recovery.
Ralph Schackart: Great. And just maybe a follow-up to that. As we think about credit cards and sort of modeling that for I guess Q1, what's sort of contemplated in guidance. And I know you can't give specific numbers, but just maybe kind of think -- help us think through some of the puts and takes as we sort of recalibrate our models? Thank you.
Tim Chen: Sure.
Lauren StClair: Yeah, let me take that, Tim. I can go over Q1 guidance specifically. So -- and your question around credit cards and what's contemplated. First, I'll just remind everyone that the guide for Q1 for revenue is $155 million to $160 million, which at the midpoint would be declining 7% year-over-year, but up 18% quarter-over-quarter. And some context on that from Q4 to Q1, we would typically expect to see a material increase quarter-over-quarter, which in a normal year is driven primarily by consumer demand at the start of the new year supported by our brand efforts. Last year was a fairly typical Q1 for us, and while we are seeing our typical Q4 to Q1 step-up this year, we are still facing many of the headwinds from prior quarters, and so becomes a tougher comp year-over-year. So to your question, we are still experiencing headwinds in credit cards, but we have called out that we're starting to see a recovery in areas like insurance and also SMB products. But just as a reminder, insurance is still going to have a tough comp in Q1. So even though we expect a material increase quarter-over-quarter, the comp on a year-over-year basis will be tough.
Tim Chen: Yeah. And I'll add on, I guess credit card specific, as we look at our 2024 outlook, it's kind of hard to call exactly when underwriting start solution again. So we're being relatively conservative about that. I would definitely encourage you to look at 2019 seasonality and cards as being kind of a more normal historical year. We saw some pretty unusual patterns in the years following as we recovered from COVID. But yet in 2019 you saw had a pretty large sequential decline from Q3 to Q4 and then I think that matches more of a normal seasonality pattern.
Ralph Schackart: Thanks, Tim. Thanks, Lauren.
Operator: Thank you. One moment for question. Our next question comes from Ross Sandler with Barclays. You may proceed.
Ross Sandler: Tim you mentioned the challenges in matching the credit card business that you realized in the fourth quarter. Can you just elaborate a little bit more on that? Was this technical issue on your side or something external? And did you leave any money on the table as a result of this? And kind of can you just walk us through? When do you think that will be resolved?
Tim Chen: Sure. So right, I describe us as being matchmaker is right. So we just got some things wrong in Q3 and over earned in terms of our matching algorithm for near and subprime consumers and extrapolated incorrectly from there. But we want to get this right for consumers and financial institutions. So, we basically hit pause and rebuild things from the ground up and this is not the first time this has happened, right? When you go into a new market sometimes it takes a few cycles and some feedback to get that matching rate. But we feel like we're back on the right path now. So we are encouraged going forward.
Lauren StClair: Yes maybe I just wanted to clarify, the commentary around challenges with matching was not in credit cards. It is in personal loan to Tim's commentary right now it's about personal loans not card.
Operator: One moment for question. Our next question comes from Jed Kelly with Oppenheimer. You may proceed.
Jed Kelly: Hey, great. Thanks for taking my questions. Just two on, can you talk about how we should think about margins if marketer demand comes back and how you would lean into it I assume you would you wouldn't mind sacrificing some margin at the gross profit dollars. Makes sense. And then how should we think about the overall opportunity in insurance? It's a huge market, but the customer service isn't always the best. So how do you think about leaning into that market and trying to grow your percentage of the overall carrier budget? Thanks.
Lauren StClair: Great. I'll take the first part of your question and then I'll hand it off to Tim for the insurance piece. I'll just to your question around margins. I'll just remind everyone that Timberland or wallet for the long-term and this is also how we think about margins, we've been working towards margin accretion that would get us back to and eventually surpass our 2019 adjusted EBITDA levels, which in the range of our outlook for full year 2024, we would get back to this year. And we've worked to achieve this through getting leverage in the portion of our cost base that is relatively fixed in nature. That includes one, hitting a logical ceiling on our brand spend; two, no longer having the step change in G&A expenses as a result of becoming a public company; and three, continuing to gain leverage in areas such as R&D and the organic portion of our sales and marketing. We're really proud that we've been able to deliver consistent margin accretion on an annual basis since our IPO in late 2021 even in difficult macroeconomic environment. And our outlook showcases our commitment to continuing this trend. So if the top line picks up faster than what we are currently contemplating. We will clearly lean in on things like variable expenses that we've talked about. So when it's profitable and period, we will lean into things like performance marketing, you could expect those costs to come up. But for the fixed and a portion of our cost base, I would expect to get leverage out of those over the long-term.
Tim Chen: And it's a great question on insurance, if it is a big strategic question that we're constantly trying to work our way towards, you're right, it's a huge market there. And there are a lot of challenges in terms of providing consumers with a sensible experience there. And all I can say is that we're trying to be creative and exploring a bunch of different avenues and hope to have something to talk about in the coming years there. But it's going to be a long investment.
Jed Kelly: Thank you.
Operator: [Operator Instructions] Our next question comes from Youssef Squali with Truist Securities. You may proceed.
Youssef Squali: Hi. Thank you. Couple of questions. One for Lauren – maybe for Lauren. You talked about for full year adjusted EBITDA margin, the 18% to 19.5% of revenues. And so thanks for that. And now the obvious question is kind of what's your base case on to get either to the low end or the high end and that in terms of growth, I'm assuming it's a mix and kind of the – the acceleration in the second half. But any kind of guardrails you can you can kind of share that for that would be helpful. And kind of related to that, is that also kind of related somehow to changes in the rate environment? Just maybe Tim, what's your – what's your some kind of base case for further rate environment as we go through it because obviously, it's been very, very fluid in the last four weeks.
Lauren StClair: So the first part of your question Youssef, in terms of full year adjusted EBITDA. As we said before, we're really proud of the margin accretion that we've been able to continue to show for full year even despite some volatility in the macro. But what we're expecting in terms of full year on the top line, we said that we currently expect to return to double-digit rates of revenue growth starting in the second half. This would be led by SMB product and insurance. And I will reiterate what I said in my remarks though that the exact timing of the recovery, especially in areas such as balance transfer cards as well as any interest rate driven demand changes in both banking and loans will influence how high those double-digit growth rates will be and by wind.
Tim Chen: Yes. And in terms of the base case, we're trying to be – it's hard to call exact timing on a lot of these things. So we're definitely trying to be conservative. I will paint the overall macro picture just as being, if there is a soft landing scenario that would be pretty ideal for us because what would happen is you'd see, easing headwinds in credit cards and loans businesses, balance sheet constraints in underwriting loosen and you'd also see an increase in refi demand across all lending areas as rates decline. And then we'd also see easing headwinds in our insurance business as inflation continues to moderate and carriers get back on their feet as this pricing flows through, so should we experience more of a hard landing scenario? You should expect revenue recovery to take a bit longer possibly even getting more challenged in the near-term and all we'll be prudent with our expense management in order to deliver on our margin commitments. The timing of any material changes in the macro environment could impact shorter term progress in some of those margin efforts.
Youssef Squali: Thank you. Just one quick clarification maybe Lauren, when you talk about same brand spend levels in 2020 as in 2023. Is that on a percentage base or is that in aggregate dollars?
Lauren StClair: That's for the full year in absolute dollars.
Youssef Squali: Absolute dollars, okay. Great. Thank you both.
Operator: Thank you. Our next question comes from Justin Patterson with KeyBanc. You may proceed.
Justin Patterson: Hi. Thank you very much. Good afternoon. Tim, could you talk about some of your top priorities each year across your big three growth pillars but what we expect around land and expand, vertical integration and engagement initiatives? And then I'll have a follow-up to Lauren.
Tim Chen: Yes. Thanks for the question. So those are three growth pillars, right? I'd say, land and expand is really more of our tried-and-true playbook. I mean we're always pushing on that in terms of the as stuff that's going to be a bit more novel over the coming several years. I think it's really in terms of the vertical integration and the registration and data-driven engagement. So we're thinking really hard about where there's still gaps and customer experiences, where we can uniquely play on NerdUp is a great example of that. But also things like we've launched late drive like a Nerd. We've launched NerdWallet Advisors. So there's a lot of different thought processes that were explaining a lot of hypotheses that we're eager to evaluate.
Justin Patterson: Got it. Thanks. And then the follow-up for Lauren. I appreciate the details you gave around just the revenue growth in the second half of the year. I wanted to confirm was that double-digit growth on the second half as a whole or on a quarterly basis? And then as you're thinking about just the growth vectors in there, how should we think about the puts and takes between user growth versus just brand spend or advertiser spend starting to improve again, thank you.
Lauren StClair: Sure. So the first part of your question Justin was around revenue growth. So what we said was that we expect to return to double digit rates of growth for revenue year-over-year starting in the second half. And then, the second part of the question was, I believe around MAU growth and user growth as well as brand spend. Is that correct?
Q – Justin Patterson: Yes. Just thinking about the buckets in there, user growth is obviously, well above total revenue growth right now. So just wondering, if there's any views off of, how users persist versus say pricing recovery that's driving that reacceleration?
Lauren StClair: Yes. Let's talk a little bit about a new use, and we're really proud of that growth in Q4, we grew roughly 24% year-over-year from strength in many verticals both from high levels of consumer intent, as well as our success in landing and expanding similar to areas where we saw growth in revenue. We see growth in MUU. You can think of banking and personal loans, and we also saw high consumer interest in areas like travel and investing. As we expected to your point and MUU grew faster than revenue again in Q4. This trend gives us confidence that consumer demand remains healthy despite ongoing partner conservatism, and we expect that this outperformance of MUU versus revenue. We expect that to continue into Q1, as we see really strong engagement, with our learning content as consumers are continuously looking for unbiased guidance and financial content during this complex, macroeconomic times and despite some of the near term revenue pressure, we expect that the strength in MUU combined with our ability to match consumers, with our financial service providers will accelerate our growth as the macro environment improves.
Q – Justin Patterson: Yes.
Tim Chen: I guess just to add on about there? Yes, in past cycles right as the macro recovers, you definitely get this tailwind is you know, partners are loosening underwriting. They're getting more aggressive around acquisition. So, and pricing should definitely be a tailwind as well.
Q – Justin Patterson: Got it. Thank you.
Operator: Thank you. One moment for questions. Our next question comes from Pete Christiansen with Citi. You may proceed.
Q – Pete Christiansen: Thanks. Good evening. And appreciate you asking answering questions here on Tom. I know you called out prime as an issue earlier, and we've heard it in other areas as well. I'm just curious, what you're seeing on the subprime side in terms of partner willingness to extend offers or to invest there? While I understand the delinquencies kind of peak there already things are kind of stabilizing, at least on the subprime, near prime area. Just curious, if you're seeing any improving activity there.
Tim Chen: So, I think then certainly subprime is more stable that we had limited surprises there. I think really the timing there started probably the middle of 2022, probably 2Q 3Q and kind of incrementally got tighter and tighter. I think that feels like it's on more of a more of a floor.
Q – Pete Christiansen: And then Tim and comment real quick just curious, you called that trial will still be a nice growth vertical there within card. I'm just curious, if you can put some color on that in terms of travel related products, and how they're faring on the platform.
Lauren StClair: And maybe I'll clarify with that one. So to the commentary around travel was the travel sort of vertical as a whole, not related specifically to credit cards although that is a piece of it. But the commentary was around the user growth and MUU growth specifically, in Q4 and where areas where we saw strength, one of those areas was travel.
Q – Pete Christiansen: Okay. Yes.
Tim Chen: So we've got a lot of great and great content, and insights around travel. And I think it's a amazing way to get in front of users and introduce from an inner voice and reengagement as well.
Q – Pete Christiansen: That's super helpful. Thank you, both.
Operator: Thank you. I would now like to turn the call back over to management for any closing remarks.
Tim Chen: Thanks all for your questions today. And as always, I'd like to thank the Nerds for their hard work in 2023 their efforts to drive progress towards our vision last year. I mean, we are well set up for 2024 and beyond to learn more about NerdWallet business condition mark your calendars for March 4 when we plan to release a new Investor video on our IR website, and looking forward to hearing your thoughts. With that, we'll see you next quarter.
Operator: Thank you for your participation. You may now disconnect.
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