Nerdwallet (NRDS) Q3 2026 earnings call transcript

Thank you, Operator. Welcome to the NerdWallet Q3 2026 earnings call. Joining us today, our co-founder and CEO, Tim Chen, Chief Financial Officer, John Lee. 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, except for we are unable, without unreasonable efforts, to calculate certain reconciling items with confidence.

With that, I will now turn it over to Tim Chen, our co-founder and CEO. Tim?

Thanks, Rob. We delivered revenue of $240 million in the third quarter with non-GAAP operating income, or NGOI, of $30 million. Revenue grew 11% year-over-year, so it was below our guidance range due to a $17 million year-over-year decrease in auto insurance revenue. As a result, NGOI came in at the low end of our guidance range. We're our own harshest critics, and we are disappointed by our underperformance in auto insurance, especially with the tailwinds the overall industry is experiencing. We are relatively early in the development of our auto insurance carrier network, which has limited our ability to monetize traffic relative to our peers. We are committed to expanding our network of insurance carrier and third-party agent relationships.

Unfortunately, this takes time to build, and in hindsight, we were overly optimistic on partnership timelines. Although we expect these auto insurance dynamics to continue to impact our results for the remainder of the year, we are confident that we will secure these partnerships over time. From an owned audience standpoint, we are excited by and continue to invest in vertical integration plays across our brokering and advisory businesses with payback periods beyond the current year. Our full-year NGOI guidance range includes $15 to $20 million of negative impact associated with these investments, consistent with our outlook from last quarter. AI also gives us new ways to build and deliver services to consumers and SMBs. In our vertically integrated businesses, we are using AI-assisted development to improve the software our in-house agents use to manage customer relationships.

Looking ahead, we are exploring ways for our licensed agents to support consumers shopping through AI assistance. And now, I will pass it over to John to cover our financial results in more detail.

Thanks, Dan. As Tim mentioned, total revenue in Q3 was $240 million, up 11% year-over-year and below our guidance range of $244 to $260 million. Consumer revenue was $215 million of 12% year-over-year driven by growth and student loans, personal loans, and deposit accounts Personal loan revenue increased as we expanded our marketplace to serve more borrowers and deposit account revenue growth was driven by expanded partner budgets These increases were partially offset by a 17 million year-over-year decline in auto insurance. SMB revenue was 25 million up 6% year-over-year. Strong loan originations and renewals supported growth while organic surge traffic continued to pressure other SMB products.

Moving to profitability, Q3 GAAP operating income was 19 million and NGOI was 30 million at a 13% margin. Beginning this quarter, our NGOI definition excludes certain accelerated stock-based compensation. This quarter, this definition change resulted in a $3.9 million add back to NGOI related to a previous acquisition. Adjusted EBITDA was $40 million at a 17% margin. Turn to cash flow and capital allocation. We generated $129 million of adjusted free cash flow over the trailing 12 months, a 51% year-over-year increase. During this quarter we repurchased approximately 11 million of Class A common stock, bringing our repurchases over the trailing 12 months to approximately 151 million.

Our weighted average diluted share count was 64.7 million, down 16% year-rear. As of September 30th, we had $74 million of cash and cash equivalents, with approximately 57 million remaining under our share repurchase authorization.

Turning to guidance, we expect fourth quarter revenue in the range of $191 to $203 million and NGOI in the range of $9 to $15 million. For the full year, this implies that we expect NGOI in the range of $85 to $91 million.

Looking forward, although we're still in the 2027 planning process, we expect to increase revenue year-over-year in 2027, but growing in Q1 will be a challenge as it will be our toughest year-over-year comp.

On expenses, we plan to increase our investments in longer payback, vertical integration, and AI-related projects next year. Although these investments will have a negative impact on NGOI in the near term, we believe that will help us build a stronger business and set us up for sustainable long-term revenue growth. Our cash generation gives us flexibility to invest in the business, pursue acquisitions, and return capital to shareholders. We'll continue to weigh these opportunities against one another with a focus on long-term shareholder value.

With that, we'll open up for Q&A. As a reminder, to ask a question, you will need to press star 1 and 1 on your telephone and wait for your name to be announced. To withdraw your question, please press star one and one again. Please stand by as we compile a Q&A roster.

Thanks for the question. So in terms of SEO, organic search has become a fraction of what it was for us after three and a half years of rapid declines. That being said, the pace of declines has stabilized a bit in recent months. So just as a reminder, educational content has been severely impacted as Google puts AI summaries and search results. However, with product marketplaces like insurance, it's been more insulated.

I mean, there is an impact, but you can't, for example, summarize a marketplace. There's inventory, dynamic pricing, underwriting, eligibility, and a host of other factors that do require that marketplace. So I say SEO is much smaller than it was before and it stabilizing a bit In terms of insurance you know I guess to give a little more color there we mentioned in our prepared remarks right that our partner network is too narrow So we have direct relationships with a few of the top 10 carriers, including one that was running laps around everyone during the last few years coming out of the hard market. So that allowed us to be very competitive in acquiring customers in 2024 and 2025.

So what happened this year is the rest of the top 10 carriers are starting to get way more competitive in acquiring customers, which is awesome for the industry.

But, yeah, you have to be able to monetize. So ultimately, we need to get more competitive. And, yeah, carrier relationships take time to build. They don't really want to work with you until you're at a certain volume or have established your reputation in the market. And even after that happens, it can take quarters to establish that direct relationship.

So it's a little hard to predict, frustrating for us, but the good news is, you know, we have the volume, we're talking, but it's hard to say exactly, you know, when we secure those relationships. At some point, we'll get it done, and it'll be pretty obvious when that happens, but we don't expect to resolve the problem in Q4.

Thank you.

Yeah, Robert, thank you for that question. So we really have a multi-channel marketplace generating a ton of NGUI focused on end-month earnings, right? But we also have multiple long-term bets that we've been discussing over the last few quarters. So I would break out our business in the following categories, which is, as you mentioned, we have our SEO-led content business. that has been declining, but it's a lot smaller today than it was a couple years ago.

We have our paid marketing marketplace that has been growing meaningfully year over year, and you could track the increase in our marketing spend that we disclose, and we've been pretty clear that we are focused on end-month profit, positive profit in that business. And we also have our vertical integration bets, which is negative to NGUI, which is this 15 to 20 million dollars that we've highlighted for 2026 that we're excited about and it is really a big part of our owned audio strategy. And then we have our long-term bets. They're more AI related as you could imagine now and they're not contributing to the top line today but does hit our op-ex and so far. So I would really think about it in those four terms.

And going back to your original question, yes, SEO content business, although big, it has been declining and is much smaller today than two years ago. On the agentic traffic question, I mean, I think it's a little bit hard to predict where that goes. I think it's going to vary a lot by vertical. As an example, I would speculate that in auto insurance, it's going to really come down to whether carriers play ball. And then you have to think about some of the things they're worried about, right? So first is churn. If you have customers who are shopping via an agent, are they going to reshop in six months? And that's going to really impact LTV pretty linearly and make it a less attractive channel.

And then the second piece you got to think about is just like the cost. even quoting I mean it costs us a few bucks to run a quote and then it costs the carriers a multiple of that to give a quote from an underwriting perspective so that ratio of empty calorie quoting versus people who actually become customers it going to matter a lot and I think without you know without the major carriers playing ball it just not really going to function as a market so that being said we investing in it I think everyone going to experiment with it and see where it goes but it's kind of hard to say exactly how big it'll be okay great thanks we will now take our next question please stand by our next question comes from the line of Michael Infante, Morgan Stanley.

Yeah, I think for us, a big piece of this is the marketplace dynamic. Consumers have to often make complex decisions, especially areas like insurance, personal loans, mortgages where there's risk-based pricing. And in order to do that in a compliant manner, you really need a trusted marketplace that has the inventory, the pricing that's going to send you to the right place. And so that's where we're in conversations with both the model companies as well as constantly with consumers. And I think there's an opportunity to do that in an agentech world. Now, exactly what shape that takes, I think it's still being sorted out in terms of how the economics work. I think it's going to be much more liquid in some verticals and not going to change that much in others.

But we want to be ready for all eventualities there. So we're definitely making the investment today.

Yeah, I mean, it's related to, I mean, the one big area that we just talked about is all the initiatives we're doing on insurance, right? So having a broader carrier network and having a healthy distribution network is an area that we're very focused on. In terms of ROAS, we're highly focused on making sure that we are in quarter positive in our marketplace and that performance marketing isn't just SEO. There are multiple different channels that we are developing, including social and other channels that we're highly focused on it. And then the other part of this is that in the math that you're doing, Michael, a lot of our NGOI investments are actually flowing through there as well.

So, some of the lift you're not seeing there is because the NGUI investment, sorry, the IR investments that we're making, a lot of that $15 to $20 million is also flowing there, which it does show like that it's not as being efficient, but you just need to factor that in as you're thinking about our efficiency going forward.

Thanks, everyone, for your questions. Our mission of providing clarity for all of life's financial decisions continues to guide us. I want to thank our NERDS for their dedication to that mission and our shareholders for your continued support. We're encouraged by the progress we're making and excited about the opportunity ahead, earning the trust of the consumers and small businesses we serve and keeping them coming back to NerdWire. Thank you.