NerdWallet, Inc. — 2021 Form 10-K
Business context and reporting period. This annual report covers the fiscal year ended December 31, 2021, compared primarily with 2020. NerdWallet operates a digital financial-guidance and product marketplace, earning substantially all revenue from financial-services partners when users click, submit leads, take specified actions, or fund loans. Its platform spans eight financial verticals and the U.S., UK and Canada. The company completed its IPO in November 2021.
Financial performance and liquidity
| Metric | 2021 | 2020 |
|---|---|---|
| Revenue | $379.6 million | $245.3 million |
| Net income (loss) | $(42.5) million | $5.3 million |
| Operating income (loss) | $(39.0) million | $1.9 million |
| Adjusted EBITDA (non-GAAP) | $27.1 million | $24.4 million |
| Net cash from operating activities | $7.2 million | $15.4 million |
| Cash and cash equivalents at year-end | $167.8 million | $83.4 million |
- Revenue grew 55%. Credit cards generated $123.8 million (+58%), loans $126.4 million (+55%), and other verticals $129.4 million (+51%).
- Gross margin was approximately 92.5%, versus 91.3% in 2020. Operating margin was approximately (10.3%), versus 0.8%; net margin was approximately (11.2%), versus 2.2%. Adjusted EBITDA margin fell to 7% from 10%.
- Sales and marketing expense rose 88% to $271.3 million, or 71% of revenue, as the company increased brand and performance marketing. Stock-based compensation rose to $17.9 million from $6.4 million.
- Investing activities used $23.0 million, primarily for capitalized software development; financing activities provided $100.2 million, principally from the IPO. The company had no outstanding borrowings at year-end and reported $94.7 million available under its $100 million credit facility, net of letters of credit.
- Current assets were $242.8 million and current liabilities were $65.8 million. The balance sheet included $54.7 million of contingent-consideration liabilities, of which $30.5 million was current.
Material changes versus 2020
- Revenue accelerated as activity recovered from pandemic-related disruption, with growth across all three reporting categories. Personal-loan and home-mortgage revenue increased 94% and 56%, respectively; other-vertical results benefited from Fundera and UK acquisition-related revenue.
- Higher marketing and other operating costs, along with an $18.1 million expense from remeasurement of acquisition earnouts, contributed to a shift from 2020 net income to a 2021 net loss.
- Operating cash flow declined by $8.2 million. The filing attributes this to the net loss and increased cash use from working-capital changes, partly offset by higher non-cash charges.
- The IPO generated $140.0 million of net proceeds after underwriting discounts and commissions. NerdWallet repaid $28.5 million of subordinated notes and accrued interest; the debt repayment also generated a $1.5 million gain on extinguishment.
Outlook, commentary and risks
- The filing provides no specific numeric revenue or earnings guidance. Management expects continued investment in personnel, product development, technology, marketing and expansion; these investments may pressure margins, and returns are uncertain.
- Management stated that cash, expected operating cash flow and access to the credit facility should cover ongoing needs for at least 12 months from the filing date. The credit facility includes financial and operating covenants; NerdWallet reported compliance at year-end.
- Management cited recovery in partner activity and consumer demand, while noting that COVID-19 developments and macroeconomic conditions remain uncertain. Expected 2022 interest-rate increases could weigh on mortgage refinancing and loan demand.
- Key risks include reliance on financial-services partners and Google/search traffic; competition and marketing efficiency; consumer-finance and macroeconomic volatility; privacy, security and financial regulation; and execution of product and international expansion.
- Earnout fair values rely on significant unobservable assumptions and are remeasured through operating results; changes may create earnings volatility. Management reported no pending legal matters expected to materially affect the company and no accrual for potential legal losses.
- The dual-class structure gives Class B shares ten votes per share. The CEO and affiliated trusts held approximately 90% of voting power at year-end. NerdWallet is a controlled company and uses certain Nasdaq governance exemptions.
Important facts for investors to verify
- Whether revenue growth can translate into sustained operating profitability and stronger operating cash flow, given the elevated marketing spend.
- How the $54.7 million acquisition earnout liability, including $30.5 million classified as current, is settled and affects future earnings and cash needs.
- Whether user growth and engagement remain durable: average monthly unique users were 19 million in 2021, but the company notes its metric is based on device identifiers and has measurement limitations.
- How partner demand, search-engine changes, interest rates and consumer-credit conditions affect revenue by vertical.
- The continuing effect of stock-based compensation and dilution, and the implications of the dual-class voting control and governance exemptions.