NerdWallet, Inc. Class A Common Stock 2026 Q2 Earnings Call

Welcome to the NerdWallet Q2 2026 earnings call. Joining us today are Co-founder and CEO, 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 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. 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 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, Zach. We reported revenue of $197 million for the second quarter, up 6% year-over-year.

Non-GAAP operating income, or NGOI, of $12 million, was above the midpoint of our guidance range. We are in the middle of an AI transition that is changing how people get their answers to their money questions, making now an important time to check in on our long-term objectives. We are investing in building owned audiences by vertically integrating in some areas and by improving how we register and re-engage with users and others. While the story is still being written, we are confident because of the assets we have in place: a trusted brand, a large audience, healthy financials, and a strong team on an important mission.

The success we are seeing in vertical integration plays across our brokering and advisory business lines is giving us conviction to start investing incremental marketing dollars based on internal rate of return or IRR targets, rather than solely on in-quarter profitability. For the full year 2026, we expect to grow this incremental investment fivefold versus 2025. Despite the longer payback periods associated with these investments, the recurring nature of the relationships produce highly attractive IRRs. We continue to optimize for positive in-quarter profitability for most of our business lines, but in the future, we envision extending these IRR-based investments more broadly across our business. In our more traditional marketplace business, we continue to deliver more relevant and personalized offers to consumers while helping financial institutions meet their growth objectives. We are making it easier for consumers to find the financial products that best meet their needs.

Thanks, Tim. As Tim mentioned, total revenue in Q2 was $197 million, up 6% year-over-year. Consumer revenue was $175 million, up 8% year-over-year, driven by personal loans and deposit accounts as consumer demand remained strong and financial institutions expanded budgets. This was partially offset by a decline in consumer credit cards, primarily due to continued organic search headwinds. Our largest auto insurance carrier relationship has stabilized but not yet returned to levels seen earlier in the year. As we continue to explore ways to grow with that carrier, we remain focused on scaling with other leading auto insurance carriers and expanding our in-house insurance agency, an example of our growth in owned audiences. SMB revenue was $22 million, down 11% year-over-year, driven primarily by organic search revenue declines in SMB products, partially offset by revenue growth in business loan originations. Moving to profitability.

Thanks, Tim. As Tim mentioned, total revenue in Q2 was $197 million, up 6% year-over-year. Consumer revenue was $175 million, up 8% year-over-year, driven by personal loans and deposit accounts as consumer demand remained strong and financial institutions expanded budgets. This was partially offset by a decline in consumer credit cards, primarily due to continued organic search headwinds. Our largest auto insurance carrier relationship has stabilized but not yet returned to levels seen earlier in the year. As we continue to explore ways to grow with that carrier, we remain focused on scaling with other leading auto insurance carriers and expanding our in-house insurance agency, an example of our growth in owned audiences. SMB revenue was $22 million, down 11% year-over-year, driven primarily by organic search revenue declines in SMB products, partially offset by revenue growth in business loan originations. Moving to profitability. Q2 GAAP operating income was $7 million.

NGOI was $12 million at a 6% margin above the midpoint of our guidance range of $6 million-$14 million.

Q2 adjusted EBITDA was $23 million, in line with our guidance range of $19 million to $27 million. Turning to cash flow and capital allocation. Our trailing 12-month adjusted free cash flow grew 100% year-over-year to $141 million, a new record. As a reminder, we were not a cash payer of federal corporate taxes during this period and received $9 million of tax refunds. We do not expect to be a federal corporate taxpayer in 2026, but expect to return to normalized corporate taxes in Q2 or Q3 of 2027. During the quarter, we repurchased $23 million of Class A common stock, bringing our repurchases over the past 12 months to $160 million. Our Q2 weighted average diluted share count was down 14% year-over-year due to our share repurchase activity.

As of June 30th, we had $62 million of cash and cash equivalents, up from $56 million at the end of Q1, with $67 million remaining under our share repurchase authorization. Turning to guidance, we expect to deliver third quarter revenue in the range of $244 million to $260 million, up 17% year-over-year at the midpoint. In terms of profitability, we expect non-GAAP operating income in the range of $29 million to $37 million. Our Q3 guidance reflects typical seasonality in our business, as well as expected tailwinds from regulatory changes in student loans and the impact of our College Finance acquisition in February. As a result, we expect our annual profitability to be more concentrated in the third quarter this year than in prior years. For the full year, we're narrowing our NGOI expectation to a range of $90 million to $105 million, maintaining the midpoint of our previous guidance.

This guidance includes $15 million to $20 million NGOI impact from customer acquisition spend, with payback periods beyond the current year. At the midpoint, this spend implies an approximately five times increase year-over-year. We expect to continue generating meaningful adjusted free cash flow going forward. From a capital allocation perspective, we'll continue to weigh organic investments and organic growth opportunities and share repurchases against one another to maximize long-term shareholder value. With that, we'll open up for Q&A.