NerdWallet, Inc. — Q1 2022 Form 10-Q
Reporting period: Three months ended March 31, 2022; comparisons are to Q1 2021 unless stated otherwise. NerdWallet operates a consumer finance advice and comparison platform connecting consumers and small and mid-sized businesses with financial product providers in the U.S., U.K. and Canada. Amounts below are in U.S. dollars; financial statement amounts are in millions except per-share data.
Financial performance and liquidity
| Metric | Q1 2022 | Q1 2021 / comparison |
|---|---|---|
| Revenue | $129.1 | $90.0; up 43% |
| Operating loss | $9.1 | $13.2 loss |
| Net loss | $10.5; $0.16 per share | $12.9; $0.27 per share |
| Adjusted EBITDA (non-GAAP) | $8.9; 7% margin | $3.2; 4% margin |
| Operating cash flow | $1.6 provided | $3.6 used |
| Investing cash flow | $8.5 used | $5.4 used |
| Cash and cash equivalents | $161.6 at March 31 | $167.8 at December 31, 2021 |
Cost of revenue was $7.7 million, implying gross profit of $121.4 million and a gross margin of approximately 94% (versus approximately 93% in Q1 2021). Operating loss margin improved to approximately 7% from 15%; net loss margin improved to approximately 8% from 14%. These margins are calculated from reported figures.
At March 31, 2022, current assets were $253.3 million and current liabilities were $77.2 million. The company had no outstanding borrowings under its credit facility, which allows up to $100 million subject to conditions. Total liabilities included $58.6 million of acquisition-related contingent consideration, of which $30.5 million was classified as current. Cash declined $6.2 million during the quarter.
Material changes and operating trends
- Credit card revenue rose 97% to $45.2 million; loans revenue increased 6% to $34.3 million; other verticals grew 43% to $49.6 million.
- Management attributed credit card growth to macroeconomic recovery, audience intent and partner alignment. Personal loan revenue rose 78% and student loan revenue 24%; mortgage revenue fell 15%, which management attributed to rising interest rates. SMB products revenue rose 164%, while investing revenue declined 24% against unusually high prior-year engagement.
- Average monthly unique users (MUUs) were 22 million, down 3% year over year. Management cited abnormally high prior-year investing engagement as more than offsetting strength in SMB products and credit cards.
- Total costs and expenses increased 34% to $138.2 million. Sales and marketing rose 40% to $96.1 million, and research and development rose 43% to $17.4 million, as the company continued investing in growth. Stock-based compensation increased to $6.5 million from $2.3 million.
- Adjusted EBITDA increased 179% to $8.9 million, but it excludes items including stock-based compensation, depreciation and amortization, and earnout remeasurement; it is a non-GAAP measure.
Outlook, risks and unusual items
- The filing provides no specific numerical revenue, profit or MUU guidance. Management expects to invest in personnel and the business and says investment timing may vary with growth, financial condition and the economic environment.
- Management stated that cash, expected operating cash flows and access to the credit facility should be sufficient for at least 12 months from the filing date. Future capital needs could differ; additional financing, if needed, may not be available on favorable terms.
- Risks highlighted include fluctuating consumer behavior and macroeconomic conditions, marketing investment returns, competition, partner relationships, platform security and availability, regulatory compliance, and the ability to attract and retain talent. The filing also identifies interest-rate and foreign-currency exposure.
- Q1 included a $3.9 million expense from remeasurement of acquisition earnout consideration, using Level 3 assumptions including estimated volatility and discount rates. Management reported no legal matter expected to have a material financial effect and recorded no litigation loss accrual.
- The company adopted expected-credit-loss and business-combination accounting updates in Q1; management said adoption did not affect financial condition or results.
Important facts for investors to verify
- Whether revenue growth and marketing spend translate into durable user engagement and profitable growth, particularly given MUUs declined 3%.
- The sustainability and comparability of Adjusted EBITDA, including the effect of recurring stock-based compensation and other excluded costs.
- Earnout payment amounts and timing, and sensitivity of the $58.6 million contingent consideration valuation to its Level 3 assumptions.
- Cash conversion and investment needs, including capitalized software development costs and the company’s stated 12-month liquidity assessment.
- How rising interest rates, consumer demand and federal student-loan forbearance affect mortgage, banking, student-loan and other vertical results.