NerdWallet, Inc.

Good day and thank you for standing by. Welcome to the NerdWallet Q1 2023 earnings call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 1 on your telephone. You'll then hear an automated message advising that your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Katherine McNamee, head of investor relations.

Please go ahead. Thank you, operator. Welcome to the NerdWallet Q1 2023 earnings call. Joining us today, our co-founder and chief executive officer, Tim Chen, and Chief Financial Officer Lauren St. Clair. Our press release and shareholder letter are available on our Investor Relations website, and a replay of this update will also be available following the conclusion of today's call. We intend to use our Investor Relations website as a means of disclosing certain material information and complying with disclosure obligations under SEC Regulation FD from time to time. As a reminder, today's call is being webcast live and recorded. Before we begin today's remarks and question and answer session, I would like to remind you that certain statements made during this call may relate to future events and expectations, and as such, constitute forward-looking statements. Actual results and performance may differ from those expressed or implied by these forward-looking statements as a result of various risks and uncertainties, including the risk factors discussed in reports filed or to be filed with the SEC. We urge you to consider these risk factors and remind you that we undertake no obligation to update the information provided on this call to reflect subsequent events or circumstances. You should be aware that these statements should not be considered a guarantee of future performance. Furthermore, during this call, we will present both GAAP and non-GAAP financial measures. A reconciliation of GAAP to non-GAAP measures is included in today's earnings press release. With that, I will now turn it over to Tim Chen, our co-founder and CEO of NerdWallet. Tim?

Thanks, Caitlin. We've started the year off strong here at NerdWallet, despite continued macroeconomic volatility. From uncertainty around student loan forbearance to rising interest rates to first and second order effects from regional bank failures. In Q1, we reported revenue growth at the high end of our guidance range and exceeded our guidance on adjusted EBITDA. Given the current economic climate, I'd like to take a few moments today to reiterate NerdWallet's approach to building our business and creating durable value for consumers and shareholders. Historically, we've taken a long term view. To us, this means prioritizing consumer trust while continuing to diversify and improve our product experiences throughout the credit cycle, even in verticals facing headwinds. This is aligned with our relentless self-improvement value or our shared commitment to continuously raise the bar for ourselves, our consumers, and our shareholders. Over time, this approach has established our brand as a trusted one-stop shop, which in turn has lowered our volatility across the cycle. In this period of heightened uncertainty, we will maintain our long-term orientation. Practically, this means we'll invest both in areas with immediate payback, like banking, and in areas with future payoff, like loans and brand marketing. but we will right-size these investments to stay flexible in a lower visibility macro environment. For instance, we still expect to run brand campaigns with a similar cadence to last year, though we now expect our full-year investment to be less than it was in 2022. The improved profitability will give us more flexibility to be opportunistic. We achieved our Q1 results despite underlying volatility across our verticals. The macro pressures impacting some verticals were offset by growth in others, a testament to our diversification and ability to execute against our strategy. We saw inverse correlation in certain verticals with over 200% year-over-year growth in banking due in part to high consumer and partner demand driven by the rising interest rate environment. We do believe we are currently over-earning in banking given the attractive environment for seeking products like high-yield savings accounts. That being said, we are simultaneously under-earning across loans, so we see these verticals as somewhat offsetting each other. Insurance performed well this quarter, and despite some recent industry slowdown, our product improvements are helping us to take market share. We also started the year strong with growth in credit cards. Though we have seen progressive partner tightening extend to prime consumers, this also coincides with some deceleration of growth in SMB due to credit tightening. While we anticipate cyclical pressures in individual verticals, our diversification and execution position us for lower company level volatility while maintaining strong cycle over cycle growth. As we make disciplined decisions around expenses to improve profitability We will continue to invest efficiently in making progress towards our vision of becoming a trusted financial ecosystem, or a single trusted platform where consumers and SMBs can learn, shop, connect their data, and make decisions about their money. In Q1, we continued to execute our three growth pillars, land and expand, vertical integration, and registrations and data-driven engagement. Not only to meet current consumer demand for financial guidance, but also to serve our long-term vision. Through our land and expand pillar, we leverage our trusted brand to expand into new topics and markets and engage with new audiences. In Q1, we focused on meeting consumers where they are by increasing the breadth and depth of our financial guidance across our verticals and acquisition channels. We developed new tools like our social security calculator and built new partnerships to serve more sub and near prime consumers as well as prime consumers. Additionally, we extended our brand reach on new platforms and social channels to meet consumer demand for trending topics including tax season, investing, and home buying in the current climate. Our vertical integration efforts, in which we matched NerdWild's brand and reach with best-in-class consumer experiences, continued in Q1 as we further integrated On the Barrelhead, or OTB. our loans vertical, where the OTB integration has been primarily focused, has been challenged by tightening underwriting and rising interest rates. In keeping with our long-term orientation, we drove relentless improvements, leveraging learnings and expertise from the OTB team that position our loans business to succeed when the cycle rebounds. Meanwhile, we continue to see opportunities to leverage, land, and expand within our vertical integration efforts. Over the past year, we invested in diversifying our SMB business and expanding our organic playbook to grow our TAPA funnel to enhance our digital concierge service for sustainable long-term growth. Beyond vertical integration, we are building and optimizing consumer experiences that drive registrations and data-driven engagement, both of which are crucial to achieving our vision for a trusted financial ecosystem. This quarter, we saw a 39% year-over-year increase in our registered user base, in part driven by our ongoing efforts to personalize our user experiences. In Q1, we also drove relentless improvements to user retention with investments in our registered user experience, including higher quality nudges, insights, and tools. I am proud of what NerdWallet has accomplished in Q1. We drove better outcomes for consumers and SMBs while delivering solid financial results in a volatile economic climate. We know there's uncertainty ahead, but we will drive relentless improvements and invest efficiently across our business, even in verticals that are currently more challenged, because we believe this will pay off in the long run. With that, I'll hand it over to Lauren St. Clair, NerdWald's CFO, to share more about our financial performance in Q1.

Thanks, Tim. While there may be some near-term macro pressures, within certain verticals of our business, we once again saw that our diversification and execution have provided us meaningful growth tailwinds. We delivered Q1 revenue of $170 million, up 31% year over year, and at the high end of our guidance. Now let's take a deeper look at the revenue performance during the quarter within each category. Credit cards delivered Q1 revenue of $61 million, growing 36% year over year. Our credit cards vertical had a good start to the year, capitalizing on strength that we typically see coming out of the holiday season, combined with our best of awards, as well as our Q1 brand campaign. We also saw a continuation of the partner tightening that began in the second half of 2022 as a more cautious sub and near prime underwriting environment. This conservatism has started extending to products typically targeted to prime consumers as well, as card issuers approach the second order impacts of regional bank failures with caution. We feel confident in our ability to continue to deliver high quality matches to our partners through, though consistent with what we said last quarter, We expect to see growth deceleration this year. Loans generated Q1 revenue of $22 million, declining 36% year over year. Our mortgage vertical saw another quarter pressured by the heightened interest rate environment as we're lapping what was still a relatively strong period during the first quarter of 2022. And while we are still seeing the benefit of the acquisition of OTB in personal loans, the current macro environment has shown further credit tightening pressures. As a result, we've seen decelerating growth from our partners combined with lower consumer demand as interest rates rise. We will continue to be disciplined in our growth levers within challenged verticals, but remain committed to making investments in key loan technologies. While these investments may not immediately drive outsized revenue gains, they will set us up to take market share when the macro environment recovers. Finally, other verticals finished Q1 with revenue of $86 million, growing 74% year over year. Banking had its third quarter in a row of over 200% year over year growth as we saw strength in consumer and partner demand driven by the rising interest rate environment. For the second quarter in a row, the growth we saw in banking was nearly twice the corresponding decline in mortgages. But as Tim mentioned previously, we currently believe that we're over-earning in our banking vertical and anticipate that as consumer interest wanes, year-over-year growth should slow as we enter a more normalized environment. Our insurance vertical had another strong quarter supported by the industry macro beginning to normalize, with revenue growth of over 100% year-over-year, primarily driven by auto insurance. However, we now believe that recent industry profitability concerns may put pressure on growth. Our S&B vertical saw revenue growth decelerate in the first quarter as we had previously discussed we expected to occur. While still growing at 19% year-over-year, we are seeing the continued tightening of credit boxes for small and medium businesses impact our growth rates, combined with rising interest rate pressure on loan demand. Though we expect near-term growth rates to be at more muted levels compared to last year, we believe that the long-term opportunity in SMB and the benefit of our vertical integration strategy has years of tailwinds remaining. Moving on to investments and profitability. During Q1, we earned $20.9 million of adjusted EBITDA at a 12% margin, a five-point increase versus last year. We had GAAP net income of $1.7 million, which includes a $1.8 million income tax benefit that was primarily the result of discrete tax items during the quarter. We expect that our Q1 tax benefit will be more than offset by significant tax expenses for the full year 2023. Please refer to today's earnings press release for a full reconciliation of our GAAP to non-GAAP measures. Consumers continue to turn to the nerds for their money questions. We provided trustworthy guidance to 23 million average monthly unique users in Q1, up 7% year-over-year. Growth was a result of the impact of our acquisition of OTB combined with strength in many areas across NerdWallet, such as banking and travel. We're still seeing similar year-over-year headwinds from investing and mortgages, though investing has seen some stabilization given recent market conditions. As we mentioned last quarter, we continue to expect that revenue growth will outpace MUU growth. On to our financial outlook. As we look forward to the remainder of 2023, we know that uncertainty remains for many of our verticals and the broader macro environment for financial services. We plan to continue providing quarterly guidance and will also provide qualitative commentary for full year expectations. For the second quarter, we expect to deliver revenue in the range of $134 million to $141 million, which at the midpoint represents 10% growth year-over-year. We expect to see continued strong growth from banking as well as slightly easier comps in mortgages. However, our typical low single-digit seasonal decline from Q1 to Q2 is more significant this year, driven primarily by pressure in credit cards and insurance. Currently anticipate the proactive conservatism that we are seeing from our partners will result in credit cards being the largest component of our quarter-over-quarter revenue decline. We continue to see partners value the quality of our consumers, putting us in a position of relative strength during this time of caution. And we have seen in the past that we tend to be one of the first they turn to when ramping back up. Insurance is still expected to grow at healthy year-over-year levels as our recent product improvements help us gain market share. But we anticipate that the re-emerging carrier profitability constraints will cause quarter-over-quarter decline in insurance revenue. For the full year, I'll reiterate that we expect our diversification to help us weather macroeconomic challenges, though we believe revenue growth levels will remain lower than what we delivered in 2022 and Q1. Moving to profitability. We expect Q2 adjusted EBITDA in the range of $17 million to $19 million, or approximately 13% of revenue at the midpoint, a three-point increase versus prior year. Our ability to continue to deliver year-over-year margin improvement in the face of what we expect to be a significant revenue growth rate decline, showcases the benefit of our organic traffic, as well as the flexibility of our business model. We still expect to run large-scale brand campaigns during the second and third quarters of the year, though we are proactively planning to reduce spend versus last year in light of the uncertain macro environment. We are also pulling back on performance marketing spend versus Q1 of 2023, aligned with how we've previously described our approach to this lever, reducing the investment in short order while we weather the regional banking and other macro pressures. Given our similar quarterly brand cadence to last year, we still expect relative adjusted EBITDA margins to be lower during the first three quarters of the year compared to Q4. We are also reconfirming that we plan to deliver a year-over-year increase in our annual adjusted EBITDA margin for yet another year. We will remain agile and disciplined in evaluating all investment opportunities as we weather this more uncertain environment. Regarding some of the recent banking news and our own relationships, the regional banking crisis has not had a material first-order impact on our business because our partner revenue concentration is weighted towards large national banks, internet banks, and fintechs. That being said, we are keeping a close eye on second-order impacts of continued rate hikes and their effect on metrics that could lead to broader-based credit tightening. While uncertainty feels a bit higher right now, we are focused on what we can control, including our near-term investment levers such as marketing. while leaning on the diversification that we've built. By pulling back on brand investments in the short term, we should deliver a bit more profitability now in order to give ourselves flexibility, while remaining dedicated to our long-term goal to get back to and eventually exceed 2019 adjusted EBITDA margin rates. As far as our corporate banking relationships, we have been and remain a customer of Silicon Valley Bank though I will point to a few items that have been disclosed in our recent SEC filings. First, our line of credit, which remains in place, allows us access to roughly $100 million of capital as needed. And second, as stated in both our 10-K filing as well as for Q1 quarter end, we invested the majority of our cash and cash equivalents in money market funds in the custody of multiple financial institutions. We believe that diversification is important not only across our verticals, but also in our own corporate operations, and we'll continue to look to expand on that diversification where appropriate. I also want to provide you with an update to our capital allocation philosophy. We announced today that our board of directors authorized a $20 million stock repurchase plan with no expiration date. We remain dedicated to investing in our organic business to grow our top of funnel as well as deliver better engagement and registration opportunities for consumers as this is critical to our long-term success. We will also be opportunistic in deploying capital for either acquisitions or repurchase of our stock. We take a pragmatic and data-driven approach to determining when we believe the appropriate time is to deploy capital for any of these three capital allocation options, and you should expect us to continue to balance between them during macroeconomic and idiosyncratic situations. We feel proud that we're able to deliver on our financial commitments, even during the uncertain times that we continue to face. We also know that we have a responsibility to consumers to help them navigate their financial questions during challenging economic times and believe that our mission to provide clarity for all of life's financial decisions, combined with our strong organic traffic, will provide us with growth tailwinds for years to come. With that, we're ready for questions. Operator?

Thank you. At this time, we will conduct the question and answer session. As a reminder, to ask a question, you will need to press star 1 1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1 1 again.

Please stand by while we compile the question and answer roster.

Our first question today comes from the line of James from Morgan Stanley. Your line is open.

Thank you very much. Thanks for the questions here and all the detail. I guess first thing is that if we think about the overall macro environment and clearly like what's happening with some of your partners, How much of an impact are you seeing from a reduced to your outlook and the way that you're trying to manage the business? Are you seeing from kind of just reduced demand for accounts versus pricing? So just trying to get a handle on what the different components of that are.

Yeah, I'll take that one. So on the partner side, you know, Well, I'll start off on the consumer side, actually. Things are robust. We're seeing record brand awareness, strong MUU trends. On the partner side, lenders had already been tightening throughout the second half of 2022. So going into Q1, the environment was already pretty tight. That was pretty much across the board, both in terms of pricing and tighter underwriting. After the regional bank failures in March, we saw a step up in that tightening. So we don't think The tightening we're seeing here is driven by a step up in credit deterioration. It's really more related to increasing concerns that capital is going to be harder to come by for banks, which is leading to a lot of caution. And so, you know, in terms of capital being harder to come by it's things like, you know, we just had a recent round of bank earnings. There's caution around what reduced regional bank lending does to the broader economy. There's also concerns with regards to commercial real estate exposure. Both large and regional banks are expecting regulators to increase capital requirements in the future. And all of this is creating an environment where banks are more cautious about deploying capital in May than they were in February. And so that's kind of where you're seeing, you know, both underwriting and pricing affected a bit. There's a wide range of possible outcomes as we look forward. You know, we could see a snapback. We could see things stay weak for longer if the regional banking issues persist for a long time. If unemployment is worse than expected, say, you know, it's largely expected that we're going to reach 5% exiting 2023, if you talk to lenders, right, then that could create more incremental tightening. So overall, I'd say we're facing headwinds, but have the flexibility to navigate a wide variety of scenarios.

Got it. Appreciate that. And then, Tim, I want to ask you, you've always been, you know, really forward thinking in terms of how to deal with you know, changing markets and technology, et cetera, with the rise in awareness of things like chat, GBT, et cetera, how do you think about that both as risk as well as potential benefit to NerdWallet and how you try to both inform consumers and work with your financial partners?

Yeah, so we talked a little bit about this last time. Nothing materially different. I'd say, you know, the two areas we think a lot about are first how it might be used to evolve search engines. And then the second is how it will enable consumer innovations like democratizing access to personalized financial guidance. How do we make our products better, right? So in terms of the search engines and how they evolve, we think generative AI will make search better and extend its capabilities. So the two will blend together, taking the best from both. I think AI is going to really improve the bespoke and frequently asked questions, whereas search is going to be pretty hard to beat for simple factual questions. And then I think we'll continue to see highly specialized apps and marketplaces for things that require personalization and real-time pricing, like looking for a loan. From a consumer product standpoint, what we're really excited about is how AI will help us improve our user experience. So, you know, as I mentioned last quarter, you need to have hundreds of thousands of dollars in investable assets that justify a financial advisor's time. So an AI trained on our first-party data, our marketplace data, and our house views can really help us democratize access for a lot more people.

That's great, Kyle. I appreciate that, Tim.

Thank you for your question.

Our next question comes from Jed Kelly from Oppenheimer Company and Incorporated. Your line is open. Hey.

Great, great. Thanks for taking my question. Just can you touch on how we should think in this environment where we see tighter underwriting, sort of how your performance marketing margins should work. I would imagine there'd be less marketing competition. So would we actually see your performance marketing margins go up? And then just on insurance, it seems like you're less impacted than some of your competitors. Can you just talk about the outlook on how you think about insurance? I mean, we recently saw an insurance company did acquire. Just can you talk about the outlook for that segment? Thank you.

Thanks, Jed. I'll start with your question around performance marketing, and then I'll hand it off to Tim to answer your question around insurance. So for performance marketing, I'll just take a step back and remind everyone, 70% of our traffic comes through organic channels. And over time, this has actually allowed us to diversify into new channels, such as performance marketing. And we really think about performance marketing as a variable expense that we can dial up or we can pull back as needed depending on return. And we also think about performance marketing as a means to an end as part of our registration and engagement initiatives. And as we create more seamless registration experiences and start connecting more first-party data, we're able to proactively nudge our users to make smart money move. So in Q1, we saw that we're able to continue our pace of investing and growing users through these channels. And we'll continue to lean in in 2023 as we see opportunities. At the same time, we're also able to dial back in short order as needed. And so I think there's really sort of two stories here, Jed. I think on the first one, yes, as we see less consumer demand, we'll absolutely pull back as well. And as we see potentially different dynamics with partners or competition, that can also help us determine the returns that we're getting. But in other areas, we will continue to lean in where we see good returns. And so net-net will continue to be disciplined in how we think about our performance marketing, and we'll make sure that we're getting the returns that we expect.

Yeah, so the two questions are at least a little bit related. You know, in insurance, when we improve our products for our consumers. When we increase that personalization, it helps us out in performance marketing as well. In terms of this quarter in insurance, we were able to grow revenue over 100% year-over-year. It was really driven by the industry starting to normalize, but also due to that new auto insurance marketplace we talked about. Going into Q2, yeah, some of the profitability concerns from carriers resurfaced. So it's creating some short-term headwinds. And so we're expecting quarter-over-quarter declines going from Q1 to Q2. And we call this out in our revenue guidance along with cards as the revenue headwind. We don't have great visibility into how long these headwinds last. What we're really focused on is continuing to invest in that better user experience so that we can capitalize as carriers work through these issues and return to market.

got it and then just as a follow-up um you know you're implementing the stock buyback can you just talk about how you're balancing you know share repurchases versus potential attractive m a given if valuations come down thank you yep thanks jed so i'll just remind everyone as capital allocators we're always evaluating opportunities for long-term value creation

We can decide between internal organic investments, M&A, and also now returning capital to shareholders. And we believe that giving ourselves the flexibility to make the best decisions for capital allocation is the right choice for NerdWallet as well as shareholders today. And the authorization that we just put in place provides us that optionality to be opportunistic during the right conditions. You know, we've mentioned in the past that price is a key factor in any decision we make, and we'll take that same pragmatic approach with any of the levers that we're able to deploy when it comes to allocation, and that includes both M&A and now share repurchase.

Thank you.

Thank you for your question. Our next question comes from the line of Justin Patterson with KBank Capital Markets. Your line is now open.

Great, thanks. Two if I can. First for Tim, how do you think about the right levels of investment to just continue gaining share and coming out of this period stronger for when market conditions normalize? And then Lauren, as a follow-up to that, how should we think about the guardrails that are in place to ensure EBITDA margin expands to this year? Thank you.

Yeah, thanks for the question, Justin. In terms of the right investment level, I'd say we've got irons in the fire. We're investing in quite a number of longer-term ventures. We're investing in brand marketing. These are all investments that don't necessarily optimize for in-quarter payback, right? So I think it's absolutely essential that any company operating wall balances between more short-term investments versus venture investments on an ongoing basis and funds those venture investments from core operations.

Yeah, and on your question on adjusted EBITDA margins, we're really proud that the business that we have has a ton of operating leverage and that's allowed us to opportunistically invest in many areas of the business. We're also able to be flexible in what we're investing in. And so in the short term, You know, we said that we expect to continue to spend on brand, but that we will pull back relative to last year slightly as we go through some of this more uncertain times. We'll also be very prudent in our use of performance marketing. And as we said, we'll lean in when we see great returns, but we can also pull back in short order when we see consumer demand or partner demand changing. Over the long term, though, you know, we've talked a lot about, you know, how much leverage the business has and that we, our expectations are that we're going to return to and eventually surpass our 2019 levels. And I'll just remind everyone again on a couple of the levers that we have. So one, over time we believe we hit a logical ceiling in our brand spend and so that becomes a true fixed cost. The second is around our registered users and overall engagement on the site and how that will make all of our acquisition channels more effective. We also don't expect to have to step up change in expenses as a result of becoming a public company. And then we've talked about more recently continuing to gain leverage as a result of our maturing cost base. And we said that in areas like R&D over time.

Thank you. Thank you for your question.

Our next question. Excuse me. Our next question comes from Yusef Squally from Truist Securities. Your line is open.

Great. Thank you very much. Good afternoon, guys. So maybe a couple of questions. But for starters, can you maybe just provide a little more color on the linearity of demand throughout the quarter? I think when you reported Q4, it was early to mid-February back then. I think you hadn't seen the tightening that you're not talking about. Was SVB kind of the catalyst that you felt um kind of turn things around in terms of maybe uh demand obviously with the backdrop of rising rates or was there anything else and kind of how how did april uh trend for you uh yeah so i'll take that one i mean short answer is is yes svb uh was a major catalyst for a step up in uh some of that tightening uh i think

you know, definitely saw at that point what I perceive to be some partners really reevaluating their internal priorities. And so, hence, you know, yeah, the timeline you outlined, you know, in March, a real step up in tightening. Sounds right.

Okay. And then I'm assuming that continues, obviously, into April. Maybe just a quick follow-up to you, Lauren. Within that 10% growth that you've outlined for Q2, I was wondering if maybe you can unpack that a little bit and help us kind of gauge your expectation for growth in credits versus loans versus others.

Yeah, sure. I'll give a little bit more color. So, one of the things that I did call out in my prepared remarks is that from Q1 to Q2, we tend to see a low single-digit decline quarter over quarter, and that's part of the normal seasonality. And for this Q2, as you can see in our top line guide, we're anticipating outsized deceleration in a couple areas. So first one I'll call out is credit cards. So we expected slower growth for the rest of 2023 as a result of tougher comps from recovery and pricing. We're now seeing more partner conservatism, which we expect to impact both pricing and a bit of tightening of the risk model. The second area I'll call out insurance and we still expect growth but as Tim mentioned the carrier profitability issues are arising again and so we think that that's going to put more pressure as we think about q2 into the rest of the year we talked a little bit about banking that continues to perform but given we're in unchartered territory we do expect things to start slowing and then lastly we don't expect much change across the loans category in But given that comps will start getting easier, we do expect slightly better growth, but we don't expect material changes to that business overall.

Great. That's helpful. Thank you both.

Thank you for your question.

Our next question comes from Ross Sandler with Barclays. Your line is open.

Great. Just to follow up to the next question just asked. So it seems like banking and deposit revenues are north of $30 million at this point in the first quarter. And so even though that's growing very strongly, it's not large enough to offset these declines that you're going to see in credit card and insurance in the 2Q. So I guess if that's the case, like two questions. One, Why would deposit or banking demand slow down, as you just said, when it seems like consumers are still freaking out about where to put their money every day? And then second, what would it take to see the big one, the credit card weakness, start to turn up? I think you talk about unemployment as a kind of indicator for willingness to acquire new customers or not from your credit card issuer partners, but we're in a different dynamic now. So is it just going to be like loosening of credit conditions sometime down the road or what would be like early signals that credit card could start to turn up for you guys? And then I got one follow-up.

Yeah. Okay. So in terms of banking, you know, we're, we're in uncharted territory. So, Really, I mean, we're 14 years old and until last year, the cost of capital has been pretty dirt cheap for banks. So, I mean, to your point, yeah, in 2023, if you're paying 0% for a savings account, you're going to lose a lot of depositors. So, you know, if it stays like that, even if rates come in a little bit, we'd expect a healthy ongoing business relative to prior years as deposits become more valuable to banks. If we go back into a world of zero rates again, then yeah, we'd expect more of a reversion to prior levels, but there'd also be that big offsetting pickup in things like refi, right? So I guess I just say we're in uncharted territory there, so trying to apply that lens to how we're looking at the future. On the second question on credit card weakness, I think a lot of this skittishness is just really hard to forecast, right? So we're seeing what we think are partners walking away from business they would normally be excited to underwrite. I think some of it is being driven by things like the scarcity of capital or being unsure what's going to happen with banking regulations on capital ratios as we go forward, right? So I think it's possible that we see a snapback. It's also possible that we see things drag on a bit longer. So those are kind of how we think about those dynamics.

Got it. That's helpful. And then on the cost side, so the proactive reduction in brand and performance marketing that you talked about, do you feel like that's going to actually have any impact on traffic given the heightened kind of organic awareness that's going on right now around NerdWallet? And then do you feel like that marketing reduction is sufficient enough to sustain these margins going up for 23 like you just guided to? Or is there other things that need to come into the fray later this year? That's it for me. Thanks a lot.

Yeah, so in terms of the reduction in brand investment, I'll just sort of remind everyone, we're still spending quite a bit on brand. And so we feel good about the level and investment awareness and all the other positive signals that we get from our spend in that area. So while we are reducing it, we are still spending. And so we think, you know, that's the right appropriate amount of investment. In terms of sort of throughout the year, and we do feel like there is flexibility, and we do feel like we have all the levers at our disposal to help to maintain those margins, despite some of the uncertainty on the top line.

I mean, I'd also call out, you know, cycles are inevitable, and we've always planned accordingly. I think for us, it's always meant staying disciplined when things are really good. And it also means maintaining dry powder so that we can be opportunistic. So, you know, if you look back, you'll see that we have a lot of agility on our costs. You know, second half of 20, for example, we were able to scale back our marketing investments and drive 10% adjusted EBITDA margin in a really rough period post-pandemic. So, yeah, feeling overall pretty good that we should be able to adapt to these conditions.

Thank you.

Thank you for your question. Our next question is from Ralph Shackert with William Blair.

Your line is open.

Great, thanks. Maybe just an extension of Ross's question on expenses. Tim, I think you talked about, you know, still wanting to lean in and invest in some projects during the downturn to be stronger for when the macro eventually turns. But I also wanted to ask, are there certain projects now that you've scaled back on and or have, I guess, maybe put to the side waiting for a bigger macro environment or better macro environment to also kind of help offset, you know, the reduced outlook on the top line? And then just to follow up, Lauren, I think you talked about growth being lower than 2022 and certainly lower than Q1. And then you had some comments about 2023. Would you mind just sort of repeating, I guess, what you said on growth for 2023? Thank you.

Yeah, so short answer is we really haven't scaled back on any of our venture projects. You know, the area we pulled back on brand, you know, has a longer-term payoff, so it gives us a lot of short-term flexibility. So haven't felt that need.

Yeah, in terms of the 2023 revenue growth. So as I mentioned, we're not providing full year guidance, but because of our diversification, we're confident in our ability to execute. And so we feel good as we think about 2023, despite some of the uncertainty that we talked about. What we did say, though, for full year 2023, more qualitatively, is that we are still committed to um to improving our adjusted evidem margins on a full year basis relative to the prior year okay thank you thank you for your question our next question is from pete christiansen with city your line is open uh good afternoon thanks for the question um i'm curious uh

I guess when banks are tightening, when product providers are tightening their standards, that translates into a lower match rate or, you know, bounty rate, I guess. I'm not sure if you've experienced this level of degree of tightness before, but does that in any way manifest into attrition on the MUU front at all if you're seeing...

people being rejected for products that they're applying for does that is that a potential factor for attrition uh yeah so the short answer is no uh we yeah we're seeing record levels of everything from brand awareness emus are growing healthy those those trends are really positive um on the margin you know some Some group of people who previously would have qualified for one product might be trading down to another in terms of their option set, whether we're talking about consumer or SMB. But that need for financing remains and is real. So for us, it's just most important for us to give people the best possible option that they can get at that point in time. So that's really what we're focused on.

Yeah, and I'll also just add, as we think about users coming to our site, they come for a number of reasons. Tim talked about they're coming to shop for financial product. There's a lot of folks, though, that come to the site to learn and to educate themselves, especially during uncertain times. And so some of the dynamics with our partners right now, we're not seeing that on our consumer demand or trends in terms of traffic to site and MUs.

Thank you both for clearing that up. Just one last one. Lauren, you commented that overall revenue growth should outpace MUU growth in the year, which I think makes sense. But aside from mix, can you talk about some of the, at least qualitatively, some of the dynamics you expect to see throughout the year in terms of match rate and, I guess, overall ASPs or pricing? Is it match rates decline, but pricing, I guess, relatively stable or down less?

Yeah, so I'll just maybe go back and remind everyone, you know, what we said last quarter is that MOUs, you know, are still growing, but we expected them to grow slower than revenue as we continue to see the benefits of conversion improvements and then also pricing, although pricing to a lesser extent as we move throughout this year. And so, as we just talked about, consumer demand still remains healthy and traffic to our site remains healthy. And, you know, Tim talked about some of the dynamics with tightening that we're seeing in some of our partners. We do anticipate that will, you know, impact some of the conversion rates and things like that and also potentially pricing as well.

Okay, okay. Thanks for clearing that up. Appreciate it. Thank you.

And our next question comes from James from Morgan Stanley. Your line is open.

Hey, thanks for the follow-up question. I just want to ask a quick follow-up on the qualitative commentary for the rest of 23. I know that you just repeated that you expect to be able to show EBITDA improvement in the second half of the year. Make sure I understood that that's on a year-over-year basis. in each quarter in the second half. And did you make a comment around revenue and revenue growth? I thought I heard in a prepared remarks that maybe you were targeting something, you were targeting growth, but maybe less growth than you saw in the first quarter. Can you just make sure I understood those things correctly?

Yeah, sure. Let me start with the revenue piece. So yes, what we said is that we expected revenue growth to decelerate relative to last year as well as to Q1 of this year. And then in terms of adjusted EBITDA, what we said is that we expect to show margin accretion for adjusted EBITDA for the full year of 2023 relative to 2022. And we also gave a little bit more color around a little bit of the quarterly variability. So we said we still expect to continue to spend on brand, although pulled back a little bit, but spending on brand in Q1, Q2, and Q3, and therefore we expect the adjusted EBITDA margins to be lower than those in Q4.

Got it. And then just on that, I guess now second half of the year, even though you're expecting deceleration from what we saw in the first quarter, should we take from that that you expect, though, to still be able to grow in the second half of the year, or is that still a little tough to say and instead you're just kind of planning on managing expenses to make sure that you hit your EBITDA objectives?

Yeah. So we haven't guided to the full year on revenue. As Tim mentioned, we do have lower visibility now than we've had in the past. So we are really focusing on areas that we can control. And so we'll continue to invest for the long term, but also manage for the right level of investment in the short term as well.

Great. Thanks for that clarification. Really helpful. Absolutely.

Thank you very much for your questions. I would now like to turn it back to management for closing remarks.

Great. Well, thanks all. Before we wrap up, I want to thank our nerds for their hard work this quarter. While certain macroeconomic conditions are inevitable in the near term, we will remain flexible positioning NerdWallet to find opportunities to serve our consumers and SMBs. grow our business, and move closer to our vision of being a trusted financial ecosystem.

Thank you. Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.