NerdWallet, Inc. Q2 FY2025 earnings call

Key Points

• Revenue was $187 million, up 24% YOY but below the prior guidance range due to a temporary disruption in the insurance shopping funnel during platform transition.
• Non-GAAP operating income was $21 million, above guidance, driven by improved operational efficiency, including lower employee costs post-restructuring and timing of brand spend.
• Expanded top of funnel through vertical integration and registered user experiences, overhauled vertical shopping experiences to capture more demand.
• Efficiency gains allow for investments in long-term vision, such as vertical integration initiatives like SMB loan sales concierge and acquisition of Next Door Lending.
• GAAP operating income for Q2 was $11 million, and over the last 4 quarters, adjusted free cash flow was $71 million, with a cash balance of $105 million at the end of Q2.

NerdWallet earned $187 million in revenue in Q2 2025, which is a 24% year-over-year increase. The insurance segment contributed $55 million in revenue, growing 86% year-over-year in Q2 but declining 26% quarter-over-quarter. Revenue from insurance was impacted by the transition to a new platform partner, though the transition wrapped up in mid-July and revenue has since rebounded to levels similar to last year.

Guidance

• Q3 revenue is expected to be in the range of $189 million to $197 million, with the midpoint showing a 1% year-over-year increase. Insurance is expected to have a small year-over-year decline due to the platform transition not being fully completed until mid-July.
• Q3 non-GAAP operating income is guided to be between $23 million and $27 million.
• Full year 2025 non-GAAP operating income is expected to be $71 million to $79 million, an increase of $14.5 million at the midpoint from previous guidance, driven by strategic investments and operational efficiency improvements.

Risks

• Organic search headwinds that have persisted over the past year and continue to impact performance.
• Temporary disruption to the insurance shopping funnel during the transition to a new platform partner, though the transition has been completed and revenue has rebounded.
• Macroeconomic uncertainties and market conditions that could affect the company's financial performance and growth prospects.

Q: Just with respect to the traffic headwinds that you called out or organic search headwinds you called out that a lot of companies are facing, including yourself. Any sense of just how this is trending? Is it getting incrementally better, incrementally worse? And then what type of success are you having right now in terms of just driving more nudges and getting more repeat users back onto the platform?

A: Yes. I'd say the story hasn't changed much since last quarter. Organic search is still pretty challenged. What's happened incrementally is we've seen AI overviews roll out to a much broader swath of queries in recent months, which is resulting in more people getting answers about ever clicking through to websites. However, this continues to mostly affect our learned content, which is why MAUs have been impacted far more than revenue. At the same time, we're also seeing early signs that LLMs are going to be a new organic channel for us. So the channel itself is obviously growing pretty quickly. And third-party data would suggest that we're leading the way there in terms of market share for financial queries. What's probably less obvious is that people who click through from LLMs have materially higher intent to transact than people who click through from search engines. So that -- while encouraging in terms of that being a new growth channel, it's still pretty small. And then I think to your question, we are definitely continuing to invest in our app and through vertical integration, our -- more soup to nuts financial services experiences. And yes, with those experiences, we gain a lot of information about the user and, of course, the nudges and personalization then become much more effective at reengaging them. So that's an important part of our strategy as well going forward.

Q: It's Michael. Tim, is there any data or qualitative commentary that you could share as to how registered user engagement has trended over the last, say, 6 months? I'm curious if you've seen any change in sort of usage pattern from that cohort, which obviously has been historically quite sticky from a usage perspective?

A: Yes, nothing to share. I mean we continue to see that 5x better LTV for our registered users. And yes, that LTV just goes up the more features of NerdWallet that people are using. So for sure, users of our app or if you look at our newer features like our cash management account or treasury or Robo, I mean, the usage is even higher. So I think the formula stays the same. It would just be helpful and then I encourage users to use more and more products over time.

Q: Just Tim, on your comment that people are clicking through -- the people that are clicking through OMs have higher intent. I know you said it's still pretty small, but just can you provide some perspective how this landscape may evolve and change if, obviously, if that trend continues? And then are you seeing any early-stage monetization there now? Again, I know it's early and small, but just sort of if you could provide some perspective on how you think that plays out and the monetization opportunity there?

A: I'll caveat by saying it's very early, but my -- the evidence we're seeing that it's higher intent is that for everyone who comes through, the monetization is materially higher than your average from other channels. And I think what's happening is people are kind of getting their preliminary questions out of the way. And then when they need the product, often these products require things like soft credit pools or some deeper kind of matching. And so as they come through, their intent tends to just be much higher, right? And so I think my bigger picture question is, are we able to activate more of the off-line demand that's traditionally going to direct mail or friends and family or just not making some of these decisions and sticking with what they have? And can we activate more of that online and take a share of that. So a lot of that remains to be answered.