NerdWallet, Inc. — FY2022 Form 10-K
Reporting period: Fiscal year ended December 31, 2022. This is an annual filing; the provided text does not give standalone fourth-quarter results. Figures below are in U.S. dollars.
Business context
NerdWallet operates a consumer and small-business financial guidance and product-comparison platform. It earns substantially all revenue from financial-services partners for consumer actions, clicks, leads, and funded loans. The company reported an average of 20 million monthly unique users in 2022, up 4% year over year, and 14 million registered users at year-end. It serves eight financial verticals and operates in the U.S., UK, Canada, and Australia.
Financial performance and liquidity
| Metric | FY2022 | FY2021 |
|---|---|---|
| Revenue | $538.9 million | $379.6 million |
| Operating income (loss) | $(19.0) million | $(39.0) million |
| Net income (loss) | $(10.2) million | $(42.5) million |
| Adjusted EBITDA, non-GAAP | $67.1 million | $27.1 million |
| Cash from operating activities | $25.0 million | $7.2 million |
| Cash and cash equivalents, year-end | $83.9 million | $167.8 million |
- Revenue grew 42%. Credit-card revenue rose 70% to $210.3 million; other-vertical revenue rose 70% to $219.5 million; loans revenue fell 14% to $109.1 million.
- Mortgage revenue declined 44%, which management attributed primarily to higher interest rates and macroeconomic headwinds. Personal-loan revenue increased 72%; SMB and banking revenue increased 130% and 179%, respectively.
- Gross margin was approximately 92.6%, versus 92.5% in 2021. Operating margin was approximately (3.5%), versus (10.3%); net margin was approximately (1.9%), versus (11.2%). These margins are calculated from reported figures.
- Adjusted EBITDA margin was 12%, versus 7%. This non-GAAP measure excludes, among other items, stock-based compensation, depreciation and amortization, and acquisition-related items; it is not a substitute for GAAP results.
- Operating cash flow improved, but investing activities used $100.3 million, including $68.1 million for the OTB acquisition and $27.6 million of capitalized software development. Financing activities used $8.4 million. Cash declined by $83.9 million during the year.
- Year-end current assets were $189.2 million and current liabilities were $72.4 million. The company had no credit-facility borrowings at year-end. Its revolving facility provided up to $100 million, subject to conditions, and was scheduled to terminate December 2, 2023; $1.7 million of letters of credit reduced availability to $98.3 million.
- Total liabilities were $84.0 million. The company recorded a $30.9 million current contingent-consideration liability for Fundera earnout payments, payable over the following 12 months.
Material changes versus FY2021
- Higher credit-card and other-vertical revenue more than offset weaker loans revenue, reflecting sharply different trends across product categories.
- Total costs and expenses rose 33% to $557.9 million. Sales and marketing increased 38% to $375.6 million, approximately 70% of revenue; the company attributed the increase mainly to performance marketing and higher personnel costs.
- Net loss narrowed by 76%, while Adjusted EBITDA increased by $40.0 million. The reported tax benefit of $9.8 million in 2022, compared with a $4.8 million tax provision in 2021, included a $12.1 million benefit associated with the OTB acquisition and deferred-tax valuation allowance.
- Cash fell from $167.8 million to $83.9 million, primarily reflecting acquisition and software-development spending. Accounts receivable increased to $87.0 million from $57.6 million.
Outlook, risks, and unusual items
- Outlook: The filing provides no numerical revenue or earnings guidance. Management expects continued investment in personnel, product development, marketing, and expansion, and says these investments may reduce margins. It stated that cash, expected operating cash flow, and credit-facility access should meet liquidity needs for at least 12 months from the filing date.
- Macroeconomic exposure: Higher rates weakened mortgage demand; inflation, tighter credit, unemployment, and reduced partner marketing budgets could affect traffic, matches, and revenue. The company cautions that strength in some verticals may not offset weakness in others.
- Platform and customer risks: The business depends on financial-services partners and on search-engine traffic, particularly Google. Search algorithm changes, consumer demand, competition, partner underwriting standards, privacy or security incidents, and regulatory requirements could adversely affect results.
- Acquisition: NerdWallet acquired On the Barrelhead (OTB) in July 2022 for $118.2 million of purchase consideration, including $43.2 million in stock. It recorded $3.5 million of acquisition-related costs and said it could not separately quantify OTB’s contribution to 2022 revenue or operating loss because of integration.
- Taxes and contingencies: The company maintained a valuation allowance against U.S. deferred tax assets. It reported no material pending litigation accrual and said it was not aware of legal matters expected to materially affect its financial position, results, or cash flows.
- Ownership and dilution: Class B shares carry ten votes per share; the CEO and affiliated trusts held approximately 87.9% of voting power at year-end. Stock-based compensation was $34.4 million in 2022, and additional equity awards and annual plan share increases may dilute shareholders.
Important facts for investors to verify
- Whether credit-card, SMB, and banking growth can persist and offset mortgage and other loan-market weakness.
- Whether organic traffic and user engagement remain resilient to search-engine changes, including AI-assisted search.
- Cash-generation trends, working-capital needs, the Fundera earnout payment, and the status and terms of credit availability after the facility’s stated December 2023 termination date.
- OTB integration progress, associated costs and retention compensation, and the acquisition’s eventual contribution to revenue and profitability.
- The effects of stock-based compensation, share-plan increases, and concentrated voting control on per-share value and governance.
- Customer concentration: one customer represented 12% of 2022 revenue; two customers represented 15% and 12% of year-end receivables.