NerdWallet (NRDS) Q1 2026 Earnings Transcript

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DATE

Wednesday, May 6, 2026 at 4:30 p.m. ET

CALL PARTICIPANTS

• Chief Executive Officer — Tim Chen
• Chief Financial Officer — John Lee

TAKEAWAYS

• Total Revenue -- $222 million, up 6% year over year, with new segment reporting for consumer and SMB categories implemented this quarter.
• Consumer Revenue -- $198 million, increasing 10% year over year, driven by banking and personal loans, partially offset by consumer credit cards due to organic search headwinds.
• SMB Revenue -- $25 million, down 15% year over year, primarily impacted by organic search revenue declines, with loan originations providing partial offset.
• Non-GAAP Operating Income (NGOI) -- $34 million at a 15% margin, above the $28-$32 million guidance range, supported by lower other marketing expenses from reduced brand spend.
• Adjusted EBITDA -- $45 million, setting a new Q1 record.
• GAAP Operating Income -- $27 million, compared to $1 million in the prior-year quarter.
• Cash and Equivalents -- $56 million at quarter end, down from $98 million at 2025 year end, reflecting $40 million generated in adjusted free cash flow, $17 million used for the College Finance acquisition, and $66 million for share repurchases (components do not sum to net change).
• Share Count -- Diluted weighted average share count declined 9% year over year due to share repurchase activity.
• Share Repurchase Authorization -- $90 million remaining as of March 31, 2026.
• Q2 2026 Revenue Guidance -- Expected range of $186 million to $2[inaudible] million, projecting 4% year-over-year growth at the midpoint.
• Q2 2026 NGOI Guidance -- Expected range of $6 million to $14 million, reflecting seasonality and planned vertical integration investments.
• Full-Year 2026 NGOI Guidance -- Updated range of $85 million to $110 million, reaffirming the upper end, while reducing the low end to reflect ongoing auto insurance monetization weakness and increased investment.
• Full-Year Revenue Growth -- Management projects mid- to high-single-digit year-over-year growth.
• Auto Insurance Monetization -- Management noted a large partner's monetization "started running below our expectations," affecting Q1 and expected to have a greater impact in Q2.
• Cost Discipline -- NGOI guidance assumes ongoing corporate G&A cost management accompanies continued revenue growth.
• Segment Reporting Change -- Consumer revenue now includes insurance, credit cards, loans, and emerging verticals; SMB reporting remains unchanged.

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RISKS

• Auto insurance segment faces declining monetization from a major partner, with management warning this headwind "is expected to have a greater impact in Q2."
• SMB revenue dropped 15%, which "driven primarily by organic search revenue declines in SMB products."
• Lower end of NGOI guidance reflects uncertainty, as management stated, "we assume that we are not able to offset the insurance weakness for the entire year and we continue to invest further into our vertical integration strategy."
• High carrier and channel concentration in insurance exposed the company to partner pullback risk, as described: "we have a lot of concentration towards a few carriers currently and a few channels."

SUMMARY

NerdWallet (NASDAQ:NRDS) delivered 6% revenue growth as consumer segment strength offset SMB and credit card headwinds. Management initiated new segment reporting, clarifying that consumer includes insurance, credit cards, loans, and emerging verticals. The firm established new Q1 records for adjusted EBITDA and NGOI, with profitability improvements driven by marketing expense discipline. Auto insurance monetization shortfalls from a key partner caused management to revise the low end of profit guidance, although the upper end remains unchanged due to operational leverage and diversified investment. Planned vertical integration investments, especially in insurance agent channels and technology integration, will incrementally pressure margins in upcoming quarters.

• College Finance acquisition closed in February with immaterial first-quarter revenue or operating income contribution.
• Adjusted free cash flow for the trailing twelve months per share increased 125% year over year, noted as a business model strength.
• Management characterized current investment window as "unique," given shifting cost structures and the company's distribution advantage, supporting near-term capital allocation toward both internal development and corporate development opportunities.
• Investments in insurance vertical are anticipated to be a "multi-quarters" effort, focused on routing calls to agents and expanding agent-centric capacity.
• Management stated, "We are dominant when it comes to LLM share in financial services or money questions," but emphasized that LLM traffic remains a small revenue contributor at this stage.
• Brand marketing spend decreased due to not repeating a prior Super Bowl ad campaign, highlighting potential quarterly fluctuations linked to campaign timing.

INDUSTRY GLOSSARY

• SMB: Small and mid-sized business segment, encompassing products and services targeting those enterprises.
• NGOI: Non-GAAP Operating Income, a profitability measure excluding specific accounting and non-cash items.
• LLM: Large Language Model—AI-based systems that respond to user queries and generate text relevant to financial product searches.
• Adjusted Free Cash Flow: Cash flow measure adjusted for significant one-time items, used to gauge ongoing business cash generation.

Full Conference Call Transcript

Tim Chen, and Chief Financial Officer, John Lee. Our press release and shareholder letter are available on our Investor Relations website; 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 to 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, except where we are unable, without reasonable efforts, to calculate certain reconciling items in confidence. With that, I will now turn it over to Tim Chen.

Tim Chen: Thanks, Robb. We reported revenue of 222 million for the first quarter, up 6% year over year. Within our consumer vertical, we saw continued year-over-year growth in banking, driven by robust demand for savings accounts. Personal loans revenue was also significantly higher in Q1 year over year. These positives were partially offset by a year-over-year decline in credit cards. Within our SMB vertical, we saw year-over-year declines driven by organic search headwinds. Non-GAAP operating income of 34 million and adjusted EBITDA of 45 million set new Q1 records, driven by strong operating leverage on our fixed cost base and lower other marketing spend.

As we look ahead, we are affirming the high end of our full-year NGOI guidance range but taking a more conservative view on the lower end of the range to reflect two dynamics that are adding uncertainty to near-term results. First, in auto insurance, monetization from one of our large partners started running below our expectations, which impacted our Q1 results and is expected to have a greater impact in Q2. While this business can be volatile on a quarter-to-quarter basis, we are encouraged by the strong macro outlook for auto insurance customer acquisition spend.

Against this healthy backdrop, we are deepening our technology integrations with several auto insurance carriers and expanding our offering with agent-centric carrier partners through phone-based referrals. We are also investing to build out our branded agency, NerdWallet, Inc. Insurance Experts. We believe that these investments will create a more diversified and resilient base from which we will grow in the future. Second, we have decided to be more aggressive in placing our long-term bets. We believe our brand and distribution moats represent a growing advantage as less powerful brands struggle to reach consumers efficiently, while AI simultaneously reduces the cost of offering financial products. This is creating a unique investment window for NerdWallet, Inc.

While this environment is increasingly challenging for newer entrants and single-product companies, our trusted brand leaves us in a strong position to capitalize on our massive consumer reach and distribution network. Whether we are evaluating corp dev opportunities or building offerings like NerdWallet, Inc. Insurance Experts, we believe we are in a sweet spot to generate attractive long-term returns on these investments. And now I will pass it over to John Lee to cover our financial results in more detail.

John Lee: Thanks, Tim. Before I walk through the results in detail, a quick reminder on the reporting we discussed last quarter, which took effect today. Beginning this quarter, we are presenting revenue in two categories: consumer and SMB. Consumer combines what we previously reported as insurance, credit cards, loans, and emerging verticals. SMB remains unchanged. Prior-period amounts have been restated under this new presentation. Turning to the top line, total revenue in Q1 was 222 million, up 6% year over year. Consumer revenue was 198 million, up 10% year over year, driven by banking and personal loans and partially offset by consumer credit cards, primarily due to organic search headwinds.

SMB revenue was 25 million, down 15% year over year, driven primarily by organic search revenue declines in SMB products, partially offset by revenue growth in loan originations. Moving to profitability, Q1 GAAP operating income was 27 million, compared to 1 million in the prior-year quarter. NGOI was 34 million at a 15% margin, up from 9 million at a 4% margin in Q1 2025 and above our guidance range of 28 million to 32 million. The year-over-year improvement was primarily driven by lower other marketing expenses on lower brand spend, partially offset by higher performance marketing spend.

Recall that we did not repeat a Super Bowl ad this year, which was the primary cause of the decline in our other marketing spend year over year. As we have seen in the past quarters, brand spend tends to fluctuate quarter over quarter and is dependent on timing of brand campaigns and market conditions. Q1 adjusted EBITDA was 45 million. Turning to cash flow and capital allocation, we ended the quarter with 56 million of cash and cash equivalents, down from 98 million at year-end 2025.

During the quarter, we generated 40 million of adjusted free cash flow, offset by 17 million of cash consideration for the College Finance acquisition that closed in February 2026, as well as 66 million of share repurchases in the quarter. Please note that the contributions from College Finance were not material to first-quarter revenue or operating income. Our trailing twelve-month adjusted free cash flow of $1.31 was up 125% year over year, a testament to the strong cash flow characteristics of our business model. Our diluted weighted average share count was down 9% year over year due to our share repurchase activity, and we will continue to evaluate share repurchases alongside other uses of capital.

As of March 31, 2026, we had 90 million remaining under our share repurchase authorization. Turning to guidance, we expect to deliver second-quarter revenue in the range of 186 million to 2[inaudible] million, up 4% year over year at the midpoint. In terms of profitability, we expect non-GAAP operating income in the range of 6 million to 14 million. As a reminder, Q2 is typically our seasonally softest quarter, and our guidance reflects this as well as our deliberate increase in vertical integration investments to drive long-term growth. For the full year, we are guiding to an NGOI between 85 million and 110 million.

We are reaffirming the upper end of our previously issued guidance range with the expectation that we will continue to grow revenue year over year in each of the remaining quarters of 2026, supported by continued performance marketing-led growth in banking, personal loans, and other products, resulting in full-year revenue growth in the mid- to high-single digits year over year. In addition to top-line growth, we expect NGOI to be supported by ongoing corporate G&A expense discipline. However, we are reducing the low end of the range, which now reflects planned investments to accelerate our vertical integration strategy, and reflects uncertainty as it relates to monetization with one of our large auto insurance partners.

As Tim mentioned, we are increasingly confident that these investments not only have the potential to accelerate our growth and generate attractive returns for our shareholders, but to create a more diversified and resilient NerdWallet, Inc. over time. We will now open the call for questions.

Operator: As a reminder, to ask a question, you will need to press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Our first question comes from the line of Justin Patterson with KeyBanc Capital Markets. Go ahead. Your line is open.

Analyst: Great. Thank you. This is Miles Jakubiak on for Justin. I wanted to dive deeper on the acceleration of investments in the vertical integration. Could you give more context around what you saw or what changed that led you to want to push the pedal on more investment in these areas? And then any more context you can provide around where these dollars are going within the vertical integration strategy would be helpful. Thank you.

Tim Chen: Thanks for the question, Miles. High level, the cost of launching financial products is decreasing rapidly, as everything from software to call centers to capital markets is getting more efficient. Meanwhile, the cost of distribution is going up. That means now more than ever, distribution is king. As a result, a lot of bright entrepreneurs, whether internal to NerdWallet, Inc. or external, are seeing NerdWallet, Inc. as a great place to build. So we have a really unique investment window. From the corp dev side, we are seeing a lot of people coming to us who value our distribution and who have built great products. We are also considering building a lot of things ourselves as well.

Robb Ferris: Great. Thank you.

Operator: Stand by for our next question. The next question comes from the line of Michael Aravante with Morgan Stanley.

Analyst: Hey, two ones for me. I will ask them both at the same time. Are you able to parse how much of the full-year low-end NGOI reduction is driven by the monetization dynamics versus the incremental investments? And then, Tim, on the incremental investment—you obviously gave some commentary there—we are in the middle of a significant structural profitability change in the business with the mix shift towards performance marketing. Can you walk us through the work that you have done internally to get comfortable with the returns that you intend to deliver here? Thank you.

John Lee: Thank you for the question. On the full-year NGOI guidance, we are reaffirming the upper end of our previously issued guidance range with the expectation that we will continue to grow revenue year over year in each of the remaining quarters. In terms of the low end of the range, we assume that we are not able to offset the insurance weakness for the entire year and we continue to invest further into our vertical integration strategy, whereas the high end of the range represents that we are able to offset the insurance weakness in the second half of the year while identifying fewer investment opportunities in our vertical integration strategy.

Tim Chen: I will take the second part of that, and I will give a little more color on insurance as well. One of our large carriers pulled back in March, and we have a lot of concentration towards a few carriers currently and a few channels. Taking a step back, even after growing our insurance business several fold over the past few years, we are still a relatively new player in this market and have a pretty high concentration. We are investing in growing additional carriers, and we are also starting to sell directly to agents. That is a new business for us.

That rounds out our core click offerings with calls and leads, and it enables us to open up additional channels. In terms of the IRR analysis, we obviously want to exceed our cost of capital when we are doing things like vertical integration—and our cost of capital is pretty high. If you look at our free cash flow yield versus our market cap and our growth rate, that is a pretty high hurdle to get over. What is unique for us is we have that big top of funnel.

When we are looking at things from a corp dev perspective, we can do commercial testing with partners and get a pretty good sense of how that is going to shake out. When we are building internally, with all the new tools and infrastructure that are available now, you can do incredible stuff with pretty small teams. Both of those are affecting the cost side of the IRR calculation.

Analyst: Helpful. Thanks, guys.

Operator: One moment for the next question. Our next question comes from Ralph Schackart with William Blair. Go ahead. Your line is open.

Analyst: Maybe piggybacking off that last question on insurance, can you give us a better understanding of the investment needed in terms of the dollars and the duration of this investment? Is this going to be a multi-quarter cycle, or something that you think could be quickly built to add that additional carrier capacity? And then maybe just an update on the LLM traffic—what you have observed or learned since the last call. Any sense how cannibalistic this is or how that traffic is shaking out? Thank you.

Tim Chen: On the insurance buildout, we are definitely talking multi-quarters. We are standing up a system where we are routing calls to agents—both independent agents as well as captive agents. That takes time. We have to build that out from both an operational side as well as a BD side, demonstrate our value, and follow the playbook over time. I would expect more of a slower ramp there. We are going to try to do it efficiently, but that is an incremental investment. In terms of LLM traffic, it is pretty much the same story as last quarter. We are dominant when it comes to LLM share in financial services or money questions based on the third-party data we have seen.

We do see people coming through, and we see high conversion rates. It is just a very small piece of our overall pie right now from a revenue perspective.

Analyst: Great. Thanks, Tim.

Robb Ferris: Thank you.

Operator: I am showing no further questions at this time. I will now turn it back to management for closing remarks.

Tim Chen: Thanks, everyone, for your questions today. This quarter we made meaningful progress against our strategic pillars. I am proud of what the Nerds delivered and remain confident in where we are headed. Our focus is clear: making NerdWallet, Inc. the first place consumers turn to for financial products. Thank you.

Operator: Thank you for your participation in today's conference. This concludes the program. You may now disconnect.

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