NerdWallet, Inc. — 2023 Form 10-K
Reporting period: Fiscal year ended December 31, 2023. This is an annual filing; the supplied text does not provide a separate fourth-quarter income statement. NerdWallet operates a digital financial guidance and product-matching platform, earning substantially all revenue from fees paid by financial-services partners. Its platform averaged 23 million monthly unique users in 2023, up 15% from 2022.
Financial performance and liquidity
| Metric | 2023 | 2022 |
|---|---|---|
| Revenue | $599.4 million | $538.9 million |
| Operating income (loss) | $3.6 million | ($19.0 million) |
| Net loss | ($11.8 million) | ($10.2 million) |
| Net loss per share, diluted | ($0.15) | ($0.14) |
| Operating cash flow | $72.1 million | $25.0 million |
| Cash and cash equivalents at year-end | $100.4 million | $83.9 million |
- Revenue grew 11%. Product revenue was: credit cards $209.7 million (flat year over year); loans $101.6 million (down 7%); SMB products $101.2 million (up 11%); and emerging verticals $186.9 million (up 46%).
- GAAP operating margin improved to approximately 1% from negative 4%; net loss margin was approximately negative 2% in both years. Adjusted EBITDA was $97.6 million, up 45%, with a 16% margin versus 12%. These non-GAAP measures exclude specified costs, including stock-based compensation in adjusted EBITDA.
- Operating cash flow increased by $47.1 million. Investing activities used $29.5 million, including $28.8 million of capitalized software development costs; financing activities used $26.2 million, including $20.0 million of share repurchases. Cash increased by $16.5 million.
- Total assets were $418.6 million and total liabilities were $51.7 million at year-end. The company had no borrowings outstanding under its revolving credit facility; $123.7 million was available to borrow after letters of credit. The $125 million senior secured facility matures in 2028 and is secured by substantially all company assets.
Material changes versus 2022
- Emerging verticals led growth, especially banking revenue, up 74%, and insurance revenue, up 30%. Higher rates supported banking, while auto insurance contributed to insurance growth.
- Credit card revenue was nearly unchanged overall: first-quarter strength was offset by lower partner marketing spend amid more cautious underwriting and balance-sheet conservatism following 2023 regional bank failures.
- Loans revenue declined, chiefly as mortgage revenue fell 41% and student-loan revenue fell 23%, reflecting higher rates and weaker refinancing demand. Personal loans revenue rose 29%, partly reflecting the integration of On the Barrelhead (OTB).
- Operating expenses rose 7% to $595.8 million. Cost of revenue increased 36%, primarily due to software and acquired-intangible amortization and third-party service charges; sales and marketing increased 7%. The company recorded no earnout fair-value expense in 2023, compared with $6.7 million in 2022.
- Net loss increased 16% despite the return to positive operating income, mainly because the income-tax provision was $18.1 million versus a $9.8 million tax benefit in 2022. The 2022 benefit included a $12.1 million nonrecurring benefit related to OTB. The 2023 effective tax rate was 286.7%, affected by the deferred-tax-asset valuation allowance, state taxes, and capitalization of R&D expenses.
Outlook, risks, and unusual items
- Management said available cash, expected operating cash flows, and access to the credit facility should meet liquidity needs for the next 12 months and beyond. The filing gives no specific revenue, profit, EBITDA, or user-growth guidance.
- Management expects continued investment in product development, technology, marketing, new verticals, and geographic expansion; such investments may affect margins and cash flows, and their returns are uncertain.
- Key business risks include reliance on financial-services partners and their marketing budgets and underwriting standards; dependence on Google and organic search traffic; competition; macroeconomic and interest-rate changes; and the possibility that weakness across verticals will not be offset by strength elsewhere.
- Regulatory, privacy, and cybersecurity risks are significant given the company’s handling of sensitive financial data and operations across multiple jurisdictions. Management reported that no cybersecurity incident had materially affected, or was reasonably likely to materially affect, the company to date.
- The company recorded a $1.6 million impairment charge related to subleasing part of its San Francisco office. It repurchased 2.3 million shares for $20.0 million during 2023 and authorized an additional $30 million repurchase plan in October. No material pending litigation loss was accrued.
- A $40.1 million valuation allowance was maintained against U.S. deferred tax assets. Management noted that future profitability could support a release, but timing and amount are uncertain.
- The audited financial statements received an unmodified opinion. Management concluded disclosure controls and internal control over financial reporting were effective; the auditor did not attest to internal controls because NerdWallet is an emerging growth company.
Important facts for investors to verify
- Whether emerging-vertical growth can offset continued pressure in credit cards and loans, and whether partner spending and underwriting conditions improve.
- Whether reported cash generation is sustainable after considering capitalized software spending, stock-based compensation, working-capital movements, and future investment plans.
- The drivers of the unusually high 2023 tax provision, the recoverability of deferred tax assets, and any changes to the valuation allowance.
- Facility covenant headroom, secured-credit terms, and the company’s liquidity after repurchases and planned investment.
- Concentration of partner revenue: two partners each represented more than 10% of 2023 revenue, at 13% and 11%.
- Governance implications of the dual-class structure: Class B shares carry ten votes each, and the CEO and affiliated trusts held approximately 87.5% of voting power at year-end.