Release Date: July 31, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Nerdwallet Inc (NRDS, Financial) achieved a 5% year-over-year revenue growth in Q2 2024, reaching $151 million.
- The insurance business saw a significant revenue increase of 196% year-over-year, highlighting the benefits of diversification.
- Monthly unique users grew by 7% year-over-year, indicating strong consumer engagement.
- The company made strategic improvements in its insurance marketplaces, leading to better performance marketing opportunities.
- Nerdwallet Inc (NRDS) launched new initiatives like NerdWallet+ and expanded its international presence, including a new credit card product in Australia and growth in Canada.
Negative Points
- Nerdwallet Inc (NRDS) faced headwinds in organic search traffic, impacting non-GAAP operating income.
- The banking market decelerated, with a 26% year-over-year decline in banking revenue.
- Credit card revenue declined by 10% year-over-year due to conservatism in balance sheet-intensive areas.
- Loans revenue decreased by 6% year-over-year, with personal loans specifically declining by 17%.
- The company completed a reduction in force, leading to approximately $30 million in annualized cost savings, indicating operational challenges.
Q & A Highlights
Q: Just wanted to touch on the search traffic commentary and as well as organic traffic. How much of that organic traffic has returned since the quarter?
A: During Q2, a major algorithm update created meaningful headwinds on our search ads and traffic. It's stabilized and started getting a little better. Given recent volatility, we've baked in some extra conservatism going forward and taken out about $30 million in annualized costs. Our past experience tells us that a period of testing like this tends to be followed by a long period of normalization.
Q: Just a follow-up on the cost savings. How much of this annualized savings do you expect to flow through the income statement versus opportunities for reinvestment?
A: We took down annual guidance for non-GAAP operating income, roughly offsetting some of the impact from search as well as the falloff in banking. Despite some of the savings, we will continue to invest in a disciplined way for the long term.
Q: Could you see any headwinds from AI overviews or any initial learnings around that product?
A: Not much of an impact. We haven't seen a share shift from Google's alternative platforms. If anything, there are signs that Google is actually gaining share. The AI overviews embedded in Google search results are interesting, but we don't see them having much of an impact right now.
Q: Should we be thinking about this as a mix shift toward more paid marketing over the near term?
A: Despite recent challenges in organic search traffic, over 70% of our traffic comes through organic channels. Our approach to performance marketing remains disciplined, aiming to be in-quarter profitable. We view performance marketing as a flexible lever to add incremental non-GAAP operating income dollars.
Q: How are you thinking about the backdrop for credit cards and loans given the improving delinquency rates?
A: Credit card revenue peaked in Q1 of '23. Since then, delinquencies have plateaued and are on the way down. Underwriting has tightened a lot, but budgets are starting to improve. Declining delinquencies and increasing budgets are good leading indicators.
Q: Can you talk about the NerdWallet+ membership and its rewards functionality?
A: NerdWallet+ is a paid membership that gives rewards for being smart with your money. We charge an annual fee of $49, and members can earn back up to $350. We think it's a great deal for consumers and will invest more to achieve our long-term vision.
Q: How can you fully take advantage of the insurance up cycle while maintaining site integrity?
A: We've been investing in product improvements, such as improving personalization, which has led to conversion improvements and opened up paid channels. We think we're gaining share and doing this without compromising site integrity. Medicare and homeowners insurance remain areas with substantial room to grow.
Q: Was the $30 million in cost reductions targeted to one product or broad-based?
A: The cost reductions were broad-based. We constantly look to be more efficient and will continue to invest in areas like NerdWallet+ and performance marketing when we see good returns.
Q: Do you see any pent-up demand given the potential Fed pivot?
A: Yes, particularly in personal loans. High delinquency rates and high-interest rates have reduced the incentive for consumers to refinance credit card debt. As rates come down, we expect a tailwind in areas like personal loans and mortgage refinancing.
Q: Can you give a broad sense of what areas you trimmed in the restructuring and your ability to flex back up?
A: The restructuring was broad-based. We will continue to invest in areas like NerdWallet+ and performance marketing. As the lending environment eases, we can reinvest behind those areas.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
