NerdWallet, Inc. — Q1 2024 Form 10-Q
Reporting period: Three months ended March 31, 2024. NerdWallet provides consumer and SMB financial guidance and connects users with financial-product providers. Results are unaudited and in U.S. dollars unless noted.
Financial performance
| Metric | Q1 2024 | Q1 2023 |
|---|---|---|
| Revenue | $161.9 million | $169.6 million |
| Operating income (loss) | $3.7 million | ($0.8) million |
| Net income | $1.1 million | $1.7 million |
| Diluted EPS | $0.01 | $0.02 |
| Operating cash flow | $22.7 million | $16.4 million |
| Adjusted EBITDA (non-GAAP) | $25.5 million; 16% margin | $20.9 million; 12% margin |
| Non-GAAP operating income | $10.6 million; 7% margin | $3.8 million; 2% margin |
Revenue declined 5% year over year. GAAP operating margin was approximately 2% versus a small operating loss in the prior-year quarter; net margin was approximately 1% in both periods. Income tax provision was $3.7 million, compared with a $1.8 million tax benefit a year earlier; the reported effective tax rate was 76.2%.
Revenue mix and material changes
| Product category | Q1 2024 | Year-over-year change |
|---|---|---|
| Credit cards | $50.0 million | Down 19% |
| Loans | $21.4 million | Down 3% |
| SMB products | $30.4 million | Up 21% |
| Emerging verticals | $60.1 million | Down 2% |
Credit-card revenue fell as financial-services partners reduced marketing amid cautious underwriting and balance-sheet conservatism. Loans were affected by lower mortgage revenue amid higher interest rates and lower student-loan revenue, partly offset by personal-loan growth. SMB growth reflected business credit cards and banking. Emerging verticals included growth in investing and insurance, offset by lower banking revenue.
Total expenses decreased 7% to $158.2 million. Sales and marketing fell $13.8 million, primarily from lower brand marketing; research and development increased $1.2 million, mainly due to personnel costs. Revenue softness was more than offset at the operating-income level by lower expenses. Net income nevertheless declined $0.6 million, largely reflecting the swing from a tax benefit to a tax provision.
Cash, liquidity, debt, and other items
- Cash and cash equivalents were $110.9 million at March 31, 2024, up from $100.4 million at year-end.
- Operating cash flow was $22.7 million; investing cash outflow was $13.5 million, including an $8.1 million strategic equity investment and $5.4 million of capitalized software development costs. Financing cash inflow was $1.3 million. Cash increased $10.5 million during the quarter.
- No borrowings were outstanding under the $125 million revolving credit facility. Availability was $123.7 million after $1.3 million of letters of credit; the facility matures in September 2028. The company reported covenant compliance.
- Management believes cash, expected operating cash flow, and credit-facility access will cover liquidity needs for the next 12 months and beyond. No shares were repurchased in the quarter; $30 million of authorization remained.
- The $8.1 million private-company investment is carried under the measurement alternative; no impairment or carrying-value change was recorded in the quarter.
- Average monthly unique users were 29 million, up 25% year over year. The company cited engagement in investing, travel, taxes, and insurance.
Outlook, risks, and contingencies
The filing provides no specific quarterly or full-year revenue or earnings guidance. Management expects monthly unique users to grow over time, while noting the metric may fluctuate with economic conditions, consumer behavior, and marketing decisions. The company plans continued investment in personnel and its business, funded principally by operating cash flow and existing cash. Management notes such investment may precede benefits and could affect liquidity and cash flows.
Key exposures include macroeconomic uncertainty, interest rates and credit conditions, partner marketing budgets and underwriting, competition, user engagement and monetization, platform security and availability, regulatory compliance, and the ability to maintain partner relationships. A full valuation allowance remains against deferred tax assets; management said a release of some or all of it may be possible within nine months, depending on profitability, but timing and amount are uncertain. The company reported no legal matter expected to have a material effect and no material litigation accrual.
Important facts for investors to verify
- Whether credit-card partner spending and revenue recover, and how higher rates and cautious underwriting affect loans.
- Whether 25% user growth converts into partner matches, revenue, and sustained profitability.
- Whether SMB and investing growth can offset softness in other product categories.
- How the deferred-tax-asset valuation allowance changes and what that means for reported tax expense.
- Performance and valuation of the $8.1 million strategic investment, and future use of the remaining repurchase authorization.
- Cash-flow sustainability, including working-capital movements and ongoing software-development spending.